Couche-Tard
2012
2012
Annual Report
Table of contents
Message to Shareholders
Page 3
Alain Bouchard
President & CEO
Operations Review
Brian Hannasch
Chief Operating Officer
Financial Review
Raymond Paré
Chief Financial Officer
Management’s Discussion
& Analysis
Management’s Report
Page 9
Page 13
Page 16
Page 41
Independent Auditor’s Report
Page 42
Consolidated Financial Statements
Page 44
Alain Bouchard
President & Chief Executive Officer
Growth, Innovation and New Horizons
It’s been another milestone year for the Couche-Tard family.
Once again we achieved record profitability, we continued to innovate and respond to
challenges of the market, we grew the network strategically in North America and took the
biggest step of our career as we ventured offshore into new international markets.
First, the numbers
We not only broke through a new barrier in 2012 with earnings of $457.6 million, but have now
more than doubled our pre-2008 profits. Growth of 23.9% over fiscal 2011 marked the fourth
straight year of double digit increase since we began a massive review and analysis of costs
and processes back in 2008.
Revenues increased $4.4 billion to reach $23.0 billion in 2012, aided by a 53rd week in fiscal
2012.
Merchandise and service revenues, which increased by $415.4 million, included $84.0 million
from acquired stores. Organic growth, as measured by same-store merchandise revenues, grew
2.7% in the U.S. and 2.8% in Canada on a 52-week comparative basis.
Motor fuel revenues increased dramatically by $4 billion, or 32.6%, due primarily to $1.1 billion
from newly acquired assets as well as $2.5 billion from higher average prices at the pump as
crude oil prices took wild swings for the fourth straight year. On a 52-week comparative same-
store basis, fuel volume growth was negative in Canada and flat in the U.S., where our
performance remains satisfactory when measured against the accompanying decline in miles
driven.
The financial position of the Corporation is excellent. Total assets at year-end reached $4.5
billion, an increase of $527.0 million due primarily to the North American acquisitions made
Alimentation Couche-Tard Inc. / 3
during the fiscal year. Return on capital employed stands at 19.0% and return on equity at
22.0%.
New Horizons
Network expansion and acquisition are fundamental strategies in the growth of our business. I’d
have to go a long way back to think of a year when we did not put one of our three brands on
new stores.
But this year is different. It is truly a landmark in our 32-year history, as we step off the shores of
North America for the first time with our own equity investment, as opposed to our usual license
agreement.
The acquisition of approximately 2,300 stores and gas stations in Northern Europe, mainly
Scandinavia, was concluded in our current fiscal year, marking the culmination of a process that
began in November of 2011.
In fact, the decision to seek new global markets goes back five years. After having successfully
absorbed 2,279 Circle K stores in the U.S. and almost doubled our network, it became clear that
our model could be successful in other markets.
We have built a world-class network incrementally through a disciplined and efficient
management system, empowered employees and a dedication to best practices in all aspects of
our business.
Scandinavia feels familiar already. Major oil companies in northern Europe are divesting
themselves of their retail operations, just as they have been doing in North America over the
past decade. We are a seasoned, successful acquirer and make an ideal partner, as our $2.6
billion agreement with Statoil attests.
Statoil Fuel & Retail (“SFR”) is the #1 Convenience and Fuel Retailer in Scandinavia with
approximately 2,300 stations, approximately 69% of which are company owned. The bulk of
revenues are earned in the three Scandinavian countries of Norway, Sweden and Denmark but
the company actually operates in eight countries. It is the market leader in five, almost six, and
enjoys a strong growth potential.
The pro-forma scenario projects revenues of approximately $36.4 billion, EBITDA to $1.5 billion
and total store count to 12,442, including our 3,990+ licensed stores around the globe.
Alimentation Couche-Tard Inc. / 4 It’s as close to a perfect fit as I can imagine. We bring leadership in marketing, cost
management and benchmarking; the SFR organization is well managed, skilled and successful
especially in fresh food services, our current strategic priority.
We plan to keep the management structure pretty well intact and operate SFR as a stand-alone
entity.
The transaction also includes 211 gas stations branded Jet. These are fully automatic and self-
standing, a valuable asset strategically and a model we will study for possible expansion.
The deal was also made under excellent financial terms. My colleague Raymond Paré, our
CFO, led the negotiations and talks more of this in his report.
Marketing Takes a New Direction
Meanwhile, back here in North America, we were tackling frontiers of a different kind.
Although total sales on an industry level declined in the past year, tobacco products remain the
biggest single component of in-store revenues. At the start of the fiscal year, a major
manufacturer modified its supply terms and pricing structure, placing significant pressure on the
sales and retail margins of this category.
Our same-store merchandise sales growth in the U.S. was 2.7% in 2012. Excluding sales of
tobacco products, they increased by 5.3%.
Our strategy is thus to acquire our own leverage through product control. This has resulted in
Crown, our own new private value brand which we launched in the U.S. in January 2012.
Customers like it: at the end of the fiscal year, we were approaching our market share goal well
ahead of schedule.
Brand Building
The Crown experience leads me to the broader issue of brand ownership and awareness.
Historically, convenience stores were as the name implies -- the corner store where you could
get basics at short notice but to whom you owed little, if any, allegiance.
Today, we carry thousands of items of inventory, including national and proprietary brands, and
we compete head-to-head with major food retailers for service, quality and price. It’s no longer a
Alimentation Couche-Tard Inc. / 5 drop-in business; our challenge is to continually exceed customer expectations and create
repeat business. In other words: branding.
On a macro scale, we have been a leader in aligning our corporate brands to the point where a
satisfied Couche-Tard, Mac’s or Circle K customer will enter another store of the same brand
expecting a certain experience – and obtaining it. On a merchandising level, our intense
benchmarking identifies best-of-breed products and services that we roll out across the network.
This past year has seen all our business units aligned with two national beverage offerings –
same equipment, same brand, same offer. One is our coffee. We have extended the product
line with such items as flavoured coffees, iced cappuccino and iced tea.
We have done the same with our fountain drink offer, aligning all business units under one
brand offering called Polar Pop. My colleague Brian Hannasch, our Chief Operating Officer,
talks more about this in the following pages.
The Power of Green
Brian also talks about our participation in the green movement, of which we are proud.
Most companies contribute by becoming profitable: we and thousands of other organizations
contribute major amounts to help others in the community. “Going green” makes it possible for
companies to become profitable by doing well.
In our case, I remember very well how it started: the internal notes from employees and the
letters from shareholders and others, urging the Corporation to take steps to reduce our carbon
footprint. I am proud of the amazing effort being made and extremely satisfied with the results
we are beginning to see.
Succession Planning
Ensuring a known, qualified line of future managers is a corporate priority. Demographic change
is making talented people hard to find and harder to recruit and I believe that continuity is an
important element in creating and maintaining the entrepreneurial culture that sets us apart.
In recent years, our growth has created new leadership positions in the business units and we
have lost some veteran managers to scheduled retirement. Accordingly, we decided to “top up”
the talent supply stream from both internal and external sources.
Alimentation Couche-Tard Inc. / 6 I’m pleased to inform you that we have a number of very promising newcomers in the
management training program. With this reinforcement of our internal bench strength, the
management of the Corporation will remain in excellent hands.
Board Changes
I would like to welcome Mrs. Nathalie Bourque to our Board of Directors, following the death last
year of our former Board colleague Roger Longpré who served the Corporation and our
shareholders well. Mrs. Bourque is Vice-President, Public Affairs and Global Communications at
CAE.
After three years as Chairman of the Board, Richard Fortin has handed the reins to Réal
Plourde. I am grateful to Richard for his steady hand at the helm and his strong contribution to
our very high standards of governance. Richard remains a member of the Board and of the
Executive Committee.
Réal, along with Richard and Jacques D’Amours, is one of the group of four that founded
Couche-Tard. He is also responsible for the decentralized business model that has proved to be
so successful for the Corporation. I welcome him as our new Chairman.
The Outlook
It may surprise some to know that convenience stores make up the largest single retail sector –
35% of the retail universe in the U.S. according to the Association for Convenience & Fuel
Retailing. Despite a difficult economic environment in the U.S., our industry has returned to a
growth pattern, whereas in Canada, we continue to experience a good performance.
The appeal of convenience stores is changing and increasing in popularity and Couche-Tard is
among the leaders of that change. Competitive data is difficult to ascertain but in most of the
key metrics which we can reliably measure, the Corporation is well out in front.
The reasons are deep-rooted, an established part of our DNA. We place the customer first, we
work hard with renewed initiatives to please the customer, and we manage cost and value to an
extraordinary degree. The results are seen in the last several years of business performance
and in the financial strength that has enabled an exciting and highly promising $2.6 billion
acquisition.
Alimentation Couche-Tard Inc. / 7 Given our financial and market positioning, we enter our new fiscal year with high expectations
for continued achievement and success.
Finally, thank you all
There is no doubt that 2012 has been a momentous year. It would not have been so without the
hard work, enthusiasm, and dedication of many, many people.
I hope everyone who has contributed so much will also take great satisfaction, as I do, in
watching our Corporation grow, prosper and lead.
As I have said many times before, it is our people who make Couche-Tard the company it is
today. And what we are is a great organization to work for, one that empowers its people,
welcomes initiative, is willing to learn from its mistakes, and where every single person is
working towards improving the experience of our customers. Around here we often say “we
operate a one-store chain”.
I want to express my thanks, and those of the Board of Directors, to all our employees as well
as to our shareholders and many supporters for their extraordinary contribution this year. I
would like to add a special welcome to our new colleagues across the sea at SFR; we are
looking forward to working closely together as we extend our frontiers.
Alain Bouchard
President & Chief Executive Officer
Alimentation Couche-Tard Inc. / 8
Brian Hannasch
Chief Operating Officer
A Living Network is more than Numbers
Our planned entry into the European market took over the spotlight during the last quarter of
2012 and set the seal on another strong year of growth and achievement across the
Corporation. We welcome the employees of Statoil Fuel & Retail into the Couche-Tard family
and look forward to working with the team to combine these two great companies
It was an important year for the continued expansion of the North American and Worldwide
Franchise networks as well as for advances in core operating practices, food services and the
pursuit of sustainable energy.
Busy year for deals
Altogether, 439 stores were acquired during the fiscal year, 313 of which were integrated by
year-end. Another 28 new stores were constructed. It was one of the busiest expansion years
since the transformational acquisition of Circle K nine years ago.
Network expansion, however, is not just about numbers. Each year, net growth is inevitably less
than the total acquisitions due to the constant pruning of underperforming stores. This steady
scrutiny plays a major role in the above average profitability of the Corporation.
Two important transactions during the year were with ExxonMobil, which has become a leading
partner both in the US and Canada. We have enjoyed a solid relationship with ExxonMobil in
Canada but did not have a large relationship in the U.S. This past year, we purchased all of its
assets in Louisiana (Bâton Rouge and New Orleans) as well as Southern California for a total of
341 sites. We are also branding additional Circle K sites to the Mobil fuel brand in California.
In the process, we have become ExxonMobil’s largest customer in North America in total
gallons sold and hope to find additional opportunities to grow together.
Alimentation Couche-Tard Inc. / 9
Creating the perfect sandwich
Food service is one of the fastest growing and most profitable sectors of the convenience store
business. On an industry-wide basis, the food service category in the U.S. for the calendar year
2011 grew 10.5% over the previous year.
We have been talking about food service for some time and in the last three years have begun
to get some traction around it. We have aligned the business units behind our leading hot and
cold beverage brands and we are making promising progress into the provision of fresh food
items.
Making fresh food available, attractive, and profitable is one of the biggest challenges in our
business, something of a holy grail. It makes the highest contribution to the gross margin and is
very popular. It is also very hard to do and, as a result, is not done well very often.
Our two poster children are Arizona and Great Lakes. These two business units have been
experimenting extensively and successfully with managing hot and fresh foods and have
established a set of best practices. The logistical challenge can be seen in the line-up: fresh
sandwiches made daily, fresh pastries and rolls baked every day, fresh whole fruit, fresh cut
fruit, and a variety of hot snacks.
We still face the challenge of being able to expand the menu, which entails combinations of
product deliveries from different sources, and then replicating a successful solution across the
network.
Beverages are a core part of our food service strategy and in 2012 we completed the alignment
of our two main products across all our stores. We had done this earlier with coffee and
completed last year the process with Polar Pop, our leading cold fountain drink area.
Ensuring the same product, same offer, and same equipment in each store has superior cost
efficiency and also creates, as Alain pointed out, the drawing power of a recognized brand. We
are achieving good traction with both lines.
This is helping to establish food services as one of our fastest growing and most profitable
components with double digit annual growth for the past three years.
Alimentation Couche-Tard Inc. / 10
Better ways to power the network
Energy costs are our largest single expense outside of the payroll. Encouraged initially by the
green movement, we have been looking with increasing intensity into better ways to power the
network.
We took tiny steps at first. But, as technology made more things possible, doing the “right thing”
for the planet quickly became also the right thing for reducing costs.
In fiscal 2011, we formed an Energy Team under Geoff Haxel, Senior Vice-President
Operations, with representation from each Business Unit. The team is tasked with monitoring
and benchmarking energy use in approximately 6,000 stores in climates that range from
southern deserts to the long, dark winters of northern Canada.
Many improvements come from changing behaviour, raising awareness of energy waste and
encouraging conservation in setting temperature levels and turning power on and off.
The energy usage patterns for every store are now detailed, costed, and tracked. Innovations
include simple motion detectors to operate lights in bathrooms and back rooms, right-sizing
heating and air conditioning units and replacing all the high wattage lights in the fuel canopies
with LED lighting.
The early returns are impressive. We reduced our electricity consumption by 4% last year – the
second year of reductions -- and have targeted another 5% this year.
This would apparently equate to taking almost 10,000 cars off the road. More important, it is a
first step on our journey to make energy conservation a part of our culture.
How can we help you?
After three intense years of cost analysis and benchmarking, our focus today is very much on
who walks in the door, what he or she wants and how satisfied they are when they leave.
We compete against many other channels including dollar stores, drug stores, groceries and
bulk goods warehouses and quick serve restaurants. And what we compete with is time. From
store location to display and service at the cash, we undertake to provide the customer with a
quality product and a pleasant experience in the shortest time.
Alimentation Couche-Tard Inc. / 11 With the slowdown of the economy in North America, consumers have more time available to
make choices on where to shop. We have to sharpen our focus on ensuring we provide the right
level of value for our customers.
This means measuring speed and quality of service in a more rigorous and uniform fashion than
ever. Here, we have an important advantage. We are the largest company-operated network, so
we are able to implement and measure processes in certain parts of the business that others
may find difficult.
As we move forward, this data becomes of increasing value in keeping our brands in leading
positions in widely different markets across the continent.
Brian Hannasch
Chief Operating Officer
Alimentation Couche-Tard Inc. / 12
Raymond Paré
Vice-President & Chief Financial Officer
Business Building Starts with Financial Foundation
There is an old saying that “one swallow doesn’t make a summer”. It’s also true that one good
year doesn’t make a profitable company. But four years in a row of double digit growth?
Couche-Tard completed its fourth straight year of record earnings in 2012, still against a
backdrop of economic uncertainty although the industry as a whole completed a second year of
revenue growth.
Our total revenues grew by 24.0% and net earnings by 23.9%. Expenses increased 6.1%, but
only 1.9% after excluding specific items (details are in the MD&A). Return on capital employed
reached 19.0% and return on equity 22.0%.
Not only is this the fourth straight year of double digit earnings growth, but the 10th straight year
of sales increase, nine of which also improved the bottom line. This is a good time, then, to take
in a wider view of how the Corporation is improving on an ongoing basis.
Strategies to build value
The Corporation’s ongoing performance testifies to the success of many strategies to create
value. Our principal strategies are to be a disciplined acquirer of assets, to develop the network
organically, to share best practices among business units and stores, to benefit from centralized
purchasing, to continuously improve customer service, and to manage expenses, tax and
capital with both discipline and imagination.
Four years ago, we made a case for Return on Capital Employed (ROCE) as the focal measure
of performance. Average ROCE for the convenience store industry in the U.S. in 2011 was
10.88%. Our return on capital employed has climbed from 12.7% in 2008 to 19% at the end of
fiscal 2012.
Alimentation Couche-Tard Inc. / 13
At this level we surpass all of our peers in the c-store industry and almost all other major retail
channels.
Advantageous financing
Financial management plays an important role in the ongoing pursuit of profitability. The
financing of our $2.6 billion acquisition of Statoil Fuel & Retail (SFR) is a good example.
Before making an offer we had $4.2 billion in available cash and credit agreements. In the third
quarter, we had renewed our revolving five-year facility, at conditions better than market. Three
days before our voluntary offer, we secured a new, three-year credit agreement of $3.2 billion,
specifically for the SFR acquisition.
As a result, we were able to close the deal without the customary resort to bridge financing with
its attendant cost and additional risk exposure.
Couche-Tard undertakes its own financing arrangements. For the SFR financing, we
researched and closed arrangements with a consortium of international banks and obtained
considerable advantages and flexibility.
Not only do we save syndication fees normally charged by a lead institution but we also enable
a more competitive environment, resulting in the best possible rates and terms.
It starts with the balance sheet
This kind of advantageous financing is made possible by a strong balance sheet.
Couche-Tard has always focused on balance sheet strength. Our operating costs are among
the lowest in our industry and we are a highly disciplined acquirer. In the case of SFR, for
example, we resisted considerable pressure to raise our bid and thus maximize the value that
we will create for our shareholders.
In 2003 we made a similarly transformational acquisition when we acquired Circle K from
ConocoPhillips for $804 million. This deal doubled our network overnight to 4,672 stores, almost
tripled sales to $6.4 billion, and established the base for our network in the United States.
Nine years later, we have built our balance sheet to the point where we can undertake an
acquisition of $2.6 billion and become a global convenience store operator with a lower adjusted
leverage than for Circle K.
Alimentation Couche-Tard Inc. / 14 Now the work begins
An important element of our financial strategy is to reduce the leverage as rapidly as possible
following a major acquisition.
This is in order to protect our investment grade ratings (BBB- "Investment Grade") and also to
return to a position from which we can follow up on new opportunities as they arise.
The work, in fact, has begun and as soon as the deal looked like it was closing, our line
managers were already focusing on cash flow and working capital. The added cash flow from
SFR will be further maximized through benchmarking against our own network, improving the
customer offer, the buying conditions, the working capital required and administrative expenses
on both sides.
This will help us to regain our usual flexibility as rapidly as possible.
We are excited by the potential of this acquisition taken on its own and also by the future
opportunities available to us because of this new platform. A big thanks goes out to my team
who took the internal leadership on many aspect of the SFR transaction, and to the financial
partners and other collaborators who supported us in the last year.
I also extend a warm welcome to our new colleagues from Statoil Fuel & Retail.
Raymond Paré
Vice-President & Chief Financial Officer
Alimentation Couche-Tard Inc. / 15
Management’s Discussion and Analysis
The purpose of this Management’s Discussion and Analysis (“MD&A”) is, as required by regulators, to explain
management’s point of view on Alimentation Couche-Tard Inc.’s (“Couche-Tard”) financial condition and results of
operations as well as its performance during the fiscal year ended April 29, 2012. More specifically, it aims to let the
reader better understand our development strategy, performance in relation to objectives, future expectations and how
we address risk and manage our financial resources. This MD&A also provides information to improve the reader’s
understanding of the consolidated financial statements and related notes. It should therefore be read in conjunction
with those documents. By “we”, “our”, “us” and “the Corporation”, we refer collectively to Couche-Tard and its
subsidiaries.
Except where otherwise indicated, all financial information reflected herein is expressed in United States dollars
(“US dollars”) and determined on the basis of International Financial Reporting Standards ("IFRS"). We also use
measures in this MD&A that do not comply with IFRS. When such measures are presented, they are defined and the
reader is informed. This MD&A should be read in conjunction with the annual consolidated financial statements and
related notes included in our 2012 Annual Report, which, along with additional information relating to Couche-Tard,
including the most recent Annual Information Form, is available on SEDAR at www.sedar.com and on the our website
at www.couche-tard.com/corporate.
International Financial Reporting Standards
Our consolidated financial statements of fiscal year 2012 are our first annual consolidated financial statements
reported under IFRS. Consequently, we have applied the requirements of IFRS 1, First-Time Adoption of International
Financial Reporting Standards, to establish these consolidated financial statements. Unless otherwise indicated, all
financial information presented in the consolidated financial statements and in this MD&A were established based on
IFRS, including comparative figures which have been restated to be in accordance with IFRS.
Previously, we prepared our consolidated financial statements in accordance with Canadian Generally Accepted
Accounting Principles (“GAAP”). The reader must take into account the explanations of how the transition to IFRS has
affected our Consolidated Statements of Earnings, Consolidated Statements of Changes in Shareholders’ Equity and
Consolidated Balance Sheets as provided in Note 29 of the consolidated financial statements of fiscal year 2012.
Forward-Looking Statements
This MD&A includes certain statements that are “forward-looking statements” within the meaning of the securities laws
of Canada. Any statement in this MD&A that is not a statement of historical fact may be deemed to be a forward-
looking statement. When used in this MD&A, the words “believe”, “intend”, “expect”, “estimate” and other similar
expressions are generally intended to identify forward-looking statements. It is important to know that the forward-
looking statements in this MD&A describe our expectations as at July 10, 2012, which are not guarantees of future
performance of Couche-Tard or its industry, and involve known and unknown risks and uncertainties that may cause
Couche-Tard’s or the industry’s outlook, actual results or performance to be materially different from any future results
or performance expressed or implied by such statements. Our actual results could be materially different from our
expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be
inaccurate. A change affecting an assumption can also have an impact on other interrelated assumptions, which could
increase or diminish the effect of the change. As a result, we cannot guarantee that any forward-looking statement will
materialize and, accordingly, the reader is cautioned not to place undue reliance on these forward-looking statements.
Forward-looking statements do not take into account the effect that transactions or special items announced or
occurring after the statements are made may have on our business. For example, they do not include the effect of
sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs
or other charges announced or occurring after forward-looking statements are made.
Unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise the
forward-looking statements, whether as a result of new information, future events or otherwise.
The foregoing risks and uncertainties include the risks set forth under “Business Risks” in our 2012 Annual Report as
well as other risks detailed from time to time in reports filed by Couche-Tard with securities regulators in Canada.
Alimentation Couche-Tard Inc. / 16
Our Business
We are the leader in the Canadian convenience store industry. In North America, we are the largest independent
convenience store operator (whether integrated with a petroleum corporation or not) in terms of number of company-
operated stores.
As of April 29, 2012, our network comprises 5,803 convenience stores throughout North America, including 4,216
stores with motor fuel dispensing. At the same date, we had agreements for the supply of motor fuel to 350 sites
operated by independent operators. Our network consists of 13 business units, including nine in the United States
covering 42 states and the District of Columbia and four in Canada covering all ten provinces. In addition, under
licensing agreements, about 3,990 stores are operated under the Circle K banner in nine other countries worldwide
(China, Guam, Hong Kong, Indonesia, Japan, Macau, Mexico, Vietnam and United Arab Emirates). More than 60,000
people are employed throughout our network and at the service offices in North America.
Our mission is to offer our clients a quick and outstanding service by developing a customized and friendly relationship
while still finding ways to surprise them on a daily basis. In this regard, we strive to meet the demands and needs of
our clientele based on their regional requirements. To do so, we offer consumers food and beverage items, motor fuel
and other high-quality products and services designed to meet clients’ demands in a clean and welcoming
environment. Our positioning in the industry stems primarily from the success of our business model, which is based
on a decentralized management structure, an ongoing comparison of best practices and operational expertise that is
enhanced by our experience in the various regions of our network. Our positioning is also a result of our focus on in-
store merchandise, as well as our continued investments in our stores.
Value creation
The convenience store sector is fragmented and in a consolidation phase. We are participating in this process through
our acquisitions and the market shares we gain when competitors close sites and by improving our offering. However,
despite this context, acquisitions have to be concluded at reasonable conditions in order to create value for the
Corporation and its shareholders. Therefore, we do not favour store count growth to the detriment of profitability. In
addition to our participation in the consolidation phase of our sector, it has to be noted that in recent years, the organic
contribution played an important role in the growth of our net earnings. The on-going improvement of our offer,
including fresh products, supply terms and efficiency of our business has been a highlight, especially with the absence
of significant acquisitions and net growth in store count in the recent years. During this same period, it has also often
been more advantageous for us to repurchase back our own shares at a lower multiple than some store networks that
were offered to us. Thus, all these elements contributed to the growth in net earnings and to value creation for our
shareholders and other stakeholders. We intend to continue in this direction.
Fiscal 2012 Overview
Net earnings amounted to $457.6 million for fiscal 2012, up 23.9% over fiscal 2011 chiefly due to the increased
contribution of merchandise and service sales, the contribution from acquisitions, higher motor fuel margins, lower
financial expenses, our sound management of our expenses, a pre-tax gain of $17.0 million on derivative financial
instruments related to the acquisition of Statoil Fuel & Retail as well as to the $6.9 million pre-tax negative goodwill
recorded to earnings of fiscal 2012. These items, which contributed to the growth in net earnings, were partially offset
by the rise in expenses related to electronic payment modes stemming from the higher average retail price of motor
fuel as well as by the non-recurring acquisition costs recorded to earnings following the new IFRS guidelines.
It should also be noted that in fiscal 2011, following our decision not to renew our public tender offer for the acquisition
of Casey’s shares, we had expensed the related fees, a negative impact of $7.0 million on net earnings for fiscal 2011.
Excluding from fiscal 2012 earnings the non-recurring gains on derivative financial instruments, acquisition costs as
well as the negative goodwill and excluding acquisition costs from fiscal 2011 earnings, the fiscal 2012 net earnings
would have been approximately $444.7 million ($2.42 per share on a diluted basis) compared to $377.1 million ($2.00
per share on a diluted basis) for fiscal 2011, an increase of $67.6 million, or 17.9%.
Acquisition of Statoil Fuel & Retail ASA ("Statoil Fuel & Retail")
Subsequent to the end of fiscal 2012, between June 19, 2012 and June 29, 2012, we acquired 98.9% of the issued
and outstanding shares of Statoil Fuel & Retail (SFR/Oslo Børs) for a cash consideration of 51.20 Norwegian Kroners
(“NOK”) per share for a total amount of NOK15.2 billion or approximately $2.6 billion. Having reached a shareholding
of more than 90%, on June 29, 2012, in accordance with Norwegian laws, we initiated a compulsory acquisition
process to buyback the participation of the remaining minority shareholders and ensure that Statoil Fuel & Retail
becomes our wholly-owned subsidiary.
Alimentation Couche-Tard Inc. / 17
Statoil Fuel & Retail is a leading Scandinavian road transport fuel retailer with over 100 years of operations in the
region. Statoil Fuel & Retail operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland,
the Baltics (Estonia, Latvia, Lithuania), and Russia with approximately 2,300 stores, the majority of which offer full and
convenience products while the others are automated (fuel only) stations. Statoil Fuel & Retail has a leading position
in several countries where it does business and owns the land for over 900 sites and buildings for over 1,700 sites.
Statoil Fuel & Retail's other products include stationary energy, marine fuel, aviation fuel, lubricants and chemicals. In
Europe, Statoil Fuel & Retail owns and operates 12 key terminals as well as 38 depots in eight countries while it also
operates approximately 400 road tankers.
During its fiscal year ended December 31, 2011, Statoil Fuel & Retail recorded sales of NOK73,691 million and gross
profits of NOK10,035 million, of which NOK5,103 million were from the sale of motor fuel and NOK2,815 million were
from the sale of convenience products. EBITDA stood at NOK3,037 million, of which over 90% were generated by
operations in Scandinavia, an economically very strong region. Net earnings of Statoil Fuel & Retail amounted to
NOK1,080 million while its assets totaled NOK22,825 million as at December 31, 2011. During this same period,
Statoil Fuel & Retail sold 8,416 million litres of motor fuel, recording a gross margin of NOK0.606 per litre.
Including employees at Statoil branded franchise stations, about 18,500 people work in Statoil Fuel & Retail’s retail
network across Europe, in its corporate headquarters, in its eight regional offices, in its terminals and in its depots.
More information about Statoil Fuel & Retail is available on their website at www.statoilfuelretail.com.
This transaction has been financed using our new acquisition facility described below.
New credit facility for the funding of Statoil Fuel & Retail acquisition
On April 16, 2012, we entered into a new 3-year credit agreement of $3.2 billion consisting of an unsecured non-
revolving acquisition credit facility (the “acquisition facility”). The acquisition facility is available exclusively to fund,
directly or indirectly, the acquisition of Statoil Fuel & Retail and related transactions costs and the repayment of any
indebtedness of Statoil Fuel & Retail and its subsidiaries. The acquisition facility is available (i) in Canadian dollars, by
way of prime rate loans or the issuance of banker’s acceptance and (ii) in US dollars, by way of US base rate loans or
Libor loans. Borrowings under the acquisition facility bear interest, depending on the form and the currency of the
loan, at variable rates based on the Canadian prime rate, the banker’s acceptance rate, the US base rate or LIBOR
plus a variable margin determined based on the level of one of our leverage ratios.
Under the new credit agreement, we must maintain certain financial ratios and respect certain restrictive provisions.
Foreign exchange forward contracts
As described above, the acquisition of Statoil Fuel & Retail is denominated in NOK whereas our acquisition facility is
denominated in US dollars. We have therefore determined that there was a risk related to fluctuations in the exchange
rate between the US dollar and the NOK as the hypothetical weakening of the US dollar against the NOK would have
increased our US dollars cash requirements in order to close the acquisition of Statoil Fuel & Retail. To mitigate this
risk and because of the lack of liquidity in the currency market for the NOK, we entered into foreign exchange forward
contracts (hereinafter, « forwards ») with reputable financial institutions allowing us to predetermine a significant
portion of the disbursement we planned to make in US dollars for the acquisition of Statoil Fuel & Retail:
As at April 29, 2012, we had forwards requiring us to deliver, at various dates, US$2.22 billion in exchange
for NOK12.82 billion, representing a weighted average rate of NOK5.7879 per US dollar. On that same date,
the unrealized gain on these forwards amounted to $17.0 million and was recorded to earnings of the fourth
quarter of fiscal 2012.
Subsequent to the end of fiscal 2012, we entered into additional forwards requiring us to deliver, at various
dates, US$1.25 billion in exchange for NOK7.32 billion, representing a weighted average rate of NOK5.8530
per US dollar.
In total, we have entered into forwards requiring us to deliver US$3.47 billion in exchange for NOK20.14 billion,
representing a weighted average rate of NOK5.8114 per US dollar which is a favorable rate compared to the rate of
5.75 in effect as at April 18, 2012, the date our offer was announced.
Subsequently, we modified the original maturity dates of certain forwards to make them coincide with the actual
disbursement dates for the payment of Statoil Fuel & Retail shares. Thus, between June 15 and June 25, 2012, we
settled a significant portion of the forwards contract with a value of $2,570.1 million to pay for Statoil Fuel & Retail
shares while the remaining NOK at our disposal as well as the NOK that we will receive upon settlement of forwards
Alimentation Couche-Tard Inc. / 18
that have not yet been settled will be used for the purchase of the remaining shares and to refinance a significant
portion of Statoil Fuel & Retail existing long-term debt, which is denominated in NOK.
Based on accounting standards, since we could not apply hedge accounting, we will record our investment in Statoil
Fuel & Retail in our consolidated balance sheet based on the exchange rates prevailing on the settlement dates of the
acquisition transaction while the changes in fair value of forwards will be recorded to earnings. Cash flow wise, the
sum of these two amounts is equivalent, in all material respect, to the U.S. dollars amount we would have paid, had
the transaction taken place on April 18, 2012, the date our offer was announced, or more specifically, at the average
rate of NOK5.8114 that we secured with this strategy. The impact on cash is therefore the one we had predetermined
by securing the exchange rate at a favorable level compared to our modeling of the acquisition and compared to the
rate at the time our offer was announced.
As at July 10, 2012, according to forwards that were settled and exchange rates prevailing at the time of settlement of
these, we estimate that an accounting loss of approximately $87.1 million will be recorded to our next quarter earnings
while the unrealized accounting loss on forwards that have not been settled totaled approximately $28.7 million as at
July 10, 2012 and may fluctuate until their settlement based on changes in the exchange rate.
New credit agreement and reduction of previous credit agreements
On December 9, 2011, we entered into a new credit agreement consisting of a non-revolving unsecured facility of an
initial maximum amount of $1.0 billion with an initial term of five years. The credit facility is available in the following
form:
A term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars, iii) in the form
of Canadian dollar bankers’ acceptances, with stamping fees and iv) in the form of standby letters of credit
not exceeding $100.0 million or the equivalent in Canadian dollars, with applicable fees. Depending on the
form and the currency of the loan, the amounts borrowed bear interest at variable rates based on the
Canadian prime rate, the bankers’ acceptance rate, the US base rate or LIBOR plus a variable margin; and
An unsecured line of credit in the maximum amount of $50.0 million, available in Canadian or US dollars,
bearing interest at variable rates based, depending on the form and currency of the loan, on the Canadian
prime rate, the US prime rate or the US base rate plus a variable margin.
Standby fees, which vary based on a leverage ratio of the Corporation, apply to the unused portion of the credit
facility. Stamping fees, standby letters of credit fees and the variable margin used to determine the interest rate
applicable to amount borrowed are determined according to a leverage ratio of the Corporation.
Under the new credit agreement, we must maintain certain financial ratios and respect certain restrictive provisions.
Considering this new agreement, the amounts available under the previously existing credit agreements were
adjusted as follows:
Operating credit A initial amount of $650.0 million was reduced to $326.0 million; and
Operating credit B initial amount of $310.0 million was reduced to $154.0 million.
The used portion of these facilities in excess of the reduced initial amounts was transferred to the new credit facility.
The previous agreements remain in effect until September 22, 2012. All other conditions pertaining to the previous
agreements remain unchanged.
Network growth
June 2011 agreement with ExxonMobil
In June 2011, we signed an agreement with ExxonMobil for 322 stores and the motor fuel supply agreements for
another 65 stores. All stores are operated in Southern California, United States. At the date of the signature of the
agreement, 72 sites were operated by ExxonMobil (company-operated stores), 85 sites for which ExxonMobil leased
the land and owned the building were operated by independent operators while 165 sites for which ExxonMobil owned
both the land and the buildings were operated by independent operators. Under the laws of California, the transfer to
Couche-Tard of these 165 sites was conditional to ExxonMobil’s obligation to submit a bona fide offer to the
independent operators of these sites. As of July 10, 2012, this offering process was not yet finalized.
The following table summarizes progress made in relation to this agreement and the steps that still must be
completed.
Alimentation Couche-Tard Inc. / 19
Company-operated stores
Sites operated by independant operators
(land leased by the Corporation and
building owned by Corporation)
Sites operated by independant operators
(real estate owned by the Corporation)
Fuel supply agreements
During the 12-week
period ended
October 9, 2011
1
-
During the 16-week
period ended
January 29, 2012
73 (1)
83 (2)
During the 13-week
period ended
April 29, 2012
-
-
Stores not yet integrated
-
-
-
63 (4)
-
-
8
13 (5)
126 (3)
18 (5)
(1)
(2)
(3)
(4)
(5)
Two of these sites were operated by independent operators at the time of the original agreement.
Two of the 85 sites provided under the original agreement have been converted into company-operated stores by ExxonMobil prior to their transfer to Couche-Tard.
Subject to ExxonMobil’s obligation to submit a bona fide offer to the independent operators. Should the independent operator accept the offer, only fuel supply
agreements would be transferred to us.
Two fuel supply agreements provided under the original agreement have not been renewed by the independent operators.
For these sites, the independent operators have accepted the bona fide offer ExxonMobil has submitted them. Therefore, only the fuel supply agreements for the
sites have been (will be) transferred to us.
Other completed acquisition transactions
In May 2011, we acquired 11 company-operated stores located in Ontario, Manitoba, Saskatchewan, Alberta and
British-Columbia, Canada from Shell Canada Products. We own the land and buildings for seven sites and lease
these same assets for four sites.
In May 2011, we acquired five company-operated stores operating under the Gas City banner of which one is located
in Arizona and four in the Chicago area, United States. The four sites in the Chicago area were acquired through our
RDK joint venture. We own the land and buildings for three of these sites and lease the others.
In October 2011, we acquired from Chico Enterprises Inc., 26 company-operated stores operating in northern West
Virginia, United States, an area contiguous to our operations in Ohio. We own the real estate for 25 sites and we own
the building and lease the land for the other site.
In November 2011, through our RDK joint venture, we acquired from Supervalu Inc., 27 stores operating in the
Chicago area, Illinois, United States. The agreement also includes the transfer to RDK of two vacant land parcels. Out
of the 27 stores, 14 are company-operated while the other 13 are operated by independent operators. RDK owns the
real estate for 24 sites as well as the two vacant land parcels and it leases the real estate for the three other sites.
In November 2011, we acquired from ExxonMobil, 33 company-operated stores operating under the "On the Run"
banner in Louisiana, United States. We own the buildings for 33 sites as well as land for 25 sites and we lease the
land for the other eight sites.
In December 2011, we acquired from Neighbors Stores Inc., 11 company-operated stores operating in North Carolina,
United States. We own the buildings for eight sites as well as the land for nine sites and we lease theses same assets
for the other sites.
In April 2012, we acquired from Dead River Company, 17 company-operated stores operating in Maine, United States.
Two stand-alone quick-service restaurants were also transferred to us. We own the real estate for 16 sites while we
lease the other three sites.
In addition, fiscal year 2012, we acquired 18 additional company-operated stores through distinct transactions.
In May 2012, subsequent to the end of the fiscal 2012, we acquired 20 company-operated stores operating in Texas,
United States from Signature Austin Stores. We lease the real estate for all sites.
Available cash and credit facilities were used for these acquisitions.
Store construction
During fiscal year 2012, we completed the construction of 28 new stores.
Alimentation Couche-Tard Inc. / 20
Summary of changes in our stores during the fourth quarter and fiscal year ended April 29, 2012
The following table presents certain information regarding changes in our store network over the 13 and 53-week
periods ended April 29, 2012 (1):
13-week period ended April 29, 2012
53-week period ended April 29, 2012
Company-
operated
stores (2)
Affiliated
stores (3)
Company-
operated
stores (2)
Total
Affiliated
stores (3)
Total
Number of stores, beginning of period
4,522
1,295
5,817
4,401
1,394
5,795
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Conversion into company operated stores
21
14
(19)
1
-
30
(60)
(1)
21
44
(79)
-
200
37
(100)
1
-
64
(193)
(1)
200
101
(293)
-
Number of stores, end of period
4,539
1,264
5,803
4,539
1,264
5,803
Stores for which we control real estate but that are operated by independent operators to which we supply motor fuel
through supply contracts
Stores to which we supply motor fuel through supply contracts
International licensed stored
Total number of stores in the Couche-Tard network
161
189
3,990
10,143
(1)
(2)
(3)
These figures include 50% of the stores operated through RDK.
Stores we operate under one of our main banners (Couche-Tard, Mac’s, Circle K).
Stores operated by an independent operator through a franchise or similar agreement under one of our main or secondary banner.
Share repurchase programs
Program which expired on October 24, 2011
We had a share repurchase program which allowed us to repurchase up to 2,685,335 Class A multiple voting shares
and up to 11,621,801 Class B subordinate voting shares. The program expired on October 24, 2011. The following
table summarizes share repurchases made under this program.
13-week period ended
April 29, 2012
Number of
shares
repurchased
Weighted
average cost
per share
Class A multiple voting shares
Class B subordinate voting
shares
-
-
-
-
53-week period ended
April 29, 2012
Number of
shares
repurchased
2,700
Weighted
average cost
per share
CA$29.44
Since implementation of the
program
Number of
shares
repurchased
14,700
Weighted
average cost
per share
CA$26.08
4,559,900
CA$28.81
7,328,200
CA$27.40
Having made these repurchases, the number of Class A multiple voting shares and of Class B subordinate voting
shares in circulation was reduced and the proportionate interest of all remaining shareholders in the Corporation’s
share capital was increased on a pro rata basis. All shares repurchased under the share repurchase program were
cancelled upon repurchase.
Program effective October 25, 2011 expiring no later than October 24, 2012
We implemented a new share repurchase program which allows us to repurchase up to 2,684,420 of the 53,688,412
Class A multiple voting shares and up to 11,126,400 of the 111,264,009 Class B subordinate voting shares issued
and outstanding as at October 11, 2011 (representing 5.0% of the Class A multiple voting shares issued and
outstanding and 10.0% of the Class B subordinate voting shares of the public float, as at that date, respectively, as
defined by applicable rules). In accordance with Toronto Stock Exchange requirements, we can repurchase a daily
maximum of 1,000 Class A multiple voting shares and of 82,118 Class B subordinate voting shares. When making
such repurchases, the number of Class A multiple voting shares and of Class B subordinate voting shares in
circulation is reduced and the proportionate interest of all remaining shareholders in the Corporation’s share capital is
increased on a pro rata basis. The share repurchase period will end no later than October 24, 2012. All shares
repurchased under the share repurchase program are cancelled upon repurchase. The following table summarizes
share repurchases made under this program since its implementation.
Alimentation Couche-Tard Inc. / 21
13-week period ended
April 29, 2012
Number of
shares
repurchased
Weighted
average cost
per share
Class A multiple voting shares
Class B subordinate voting
shares
-
-
-
-
53-week period ended
April 29, 2012
Number of
shares
repurchased
1,000
Weighted
average cost
per share
CA$30.50
Since implementation of the
program
Number of
shares
repurchased
1,000
Weighted
average cost
per share
CA$30.50
2,409,300
CA$30.19
2,409,300
CA$30.19
Dividends
During its July 10, 2012 meeting, the Corporation’s Board of Directors (the “Board”) declared a quarterly dividend of
CA$0.075 per share for the fourth quarter of fiscal 2012 to shareholders on record as at July 19, 2012 and approved
its payment for August 2, 2012. This is an eligible dividend within the meaning of the Income Tax Act of Canada.
During fiscal 2012, the Board declared total dividends averaging CA$0.275 per share.
Board of Directors changes
On September 6, 2011, after three years as Chairman of the Board, Mr. Richard Fortin handed over this responsibility
to Mr. Réal Plourde. Mr. Fortin continues to play an active role within the Corporation since he remained a member of
the Board and of the Executive Committee. In addition to his new role, Mr. Plourde remains an active member of the
Executive Committee.
On March 13, 2012, following the death of former Board member Mr. Roger Longpré earlier in 2011, Mrs. Nathalie
Bourque was nominated as a new member on the Board. She also replaces Mr. Richard Fortin as member on the
Human resources and Corporate Governance committee. Mrs. Bourque is Vice President, Public Affairs and Global
Communications at CAE Inc.
Outstanding shares and stock options
As at July 6, 2012, Couche-Tard had 53,651,712 Class A multiple voting shares and 125,404,932 Class B subordinate
voting shares issued and outstanding. In addition, as at the same date, Couche-Tard had 3,481,564 outstanding stock
options for the purchase of Class B subordinate voting shares.
Exchange rate data
We use the US dollar as our reporting currency which provides more relevant information given the predominance of
our operations in the United States and our debt largely dominated in US dollars.
The following table sets forth information about exchange rates based upon the Bank of Canada closing rates
expressed as US dollars per CA$1.00:
Average for period (a)
Period end
13-week period
ended
April 29, 2012
1.0053
1.0194
12-week period
ended
April 24, 2011
1.0240
1.0485
53-week period
ended
April 29, 2012
1.0051
1.0194
52-week periods
ended
April 24, 2011
0.9861
1.0485
April 25, 2010
0.9296
1.0009
(a) Calculated by taking the average of the closing exchange rates of each day in the applicable period.
Considering we use the US dollar as our reporting currency, in our consolidated financial statements and in the
present document, unless indicated otherwise, results from our Canadian and corporate operations are translated into
US dollars using the average rate for the period. Variances and explanations related to fluctuations in the foreign
exchange rate and the volatility of the Canadian dollar which we discuss in the present document are therefore related
to the translation in US dollars of our Canadian and corporate operations results and do not have a true economic
impact on our performance since most of the Corporation’s consolidated revenues and expenses are received or
denominated in the functional currency of the markets in which it does business. Accordingly, our sensitivity to
variations in foreign exchange rates is economically limited.
Alimentation Couche-Tard Inc. / 22
Statement of Earnings Categories
Merchandise and Service Revenues. In-store merchandise revenues are comprised primarily of the sale of tobacco
products, fresh food offerings, including quick service restaurants (QSRs), beer/wine, grocery items, candy, snacks
and various beverages. Service revenues include fees from automatic teller machines, sales of calling cards and gift
cards, revenues from car washes, the commission on sale of lottery tickets and issuance of money orders, fees for
cashing cheques as well as sales of postage stamps and bus tickets. Service revenues also include franchise fees,
license fees from affiliates and royalties from franchisees.
Motor Fuel Revenues. We include in our revenues the total dollar amount of motor fuel sales, including any imbedded
taxes, if we take ownership of the motor fuel inventory. In the United States, in some instances, we purchase motor
fuel and sell it to certain independent store operators at cost plus a mark-up. We record the full value of these
revenues (cost plus mark-up) as motor fuel revenues. Where we act as a selling agent for a petroleum distributor, only
the commission we earn is recorded as revenue.
Gross Profit. Gross profit consists mainly of revenues less the cost of merchandise and motor fuel sold. Cost of sales
is mainly comprised of the specific cost of merchandise and motor fuel sold, including applicable freight less vendor
rebates. For in-store merchandise, the cost of inventory is generally determined using the retail method (retail price
less a normal margin), and for motor fuel, it is determined using the average cost method. The gross motor fuel
margin for stores generating commissions corresponds to the sales commission.
Operating, Selling, Administrative and General Expenses. The primary components of operating, selling,
administrative and general expenses are labour, net occupancy costs, electronic payment modes fees, commissions
to dealers and overhead.
Key performance indicators used by management, which can be found under “Selected Consolidated Financial
Information - Other Operating Data”, are merchandise and service gross margin, growth of same-store merchandise
revenues, motor fuel gross margin and growth of same-store motor fuel volume, return on equity and return on capital
employed.
Summary analysis of consolidated results for the fourth quarter of
fiscal 2012
The following table highlights certain information regarding our operations for the 13 and 12-week periods ended
April 29, 2012 and April 24, 2011, respectively:
(In millions of US dollars, unless otherwise stated)
13-week period ended
April 29, 2012
6,063.2
137.4
117.8
12-week period ended
April 24, 2011
4,737.0
82.8
64.5
Revenues
Operating income
Net earnings
Selected Operating Data:
Merchandise and service gross margin (1):
Consolidated
United States
Canada
Growth (decrease) of same-store merchandise revenues (2) (3) (4):
United States
Canada
Growth of same-store motor fuel volume (3) (4):
United States
Canada
Motor fuel gross margin (3):
United States (cents per gallon)
Canada (CA cents per litre)
(1)
(2) Does not include services and other revenues (as described in footnote 1 above). Growth in Canada is calculated based on Canadian dollars.
(3)
(4) On 12-weeks period normalized basis.
Includes other revenues derived from franchise fees, royalties and rebates on some purchases by franchisees and licensees.
For company-operated stores only.
33.6%
33.5%
33.6%
32.8%
32.8%
32.9%
3.6%
(2.1%)
14.06
5.01
0.3%
1.8%
16.98
5.60
0.2%
0.1%
3.4%
5.4%
Change
%
28.0
65.9
82.6
(0.8)
(0.7)
(0.7)
20.8
11.8
Revenues
Our revenues were $6.1 billion in the fourth quarter of fiscal 2012, up $1.3 billion, an increase of 28.0%, mainly
attributable to acquisitions, to the increase in motor fuel sales due to higher average retail prices at the pump, to the
growth of same-store merchandise and service sales in the United States and Canada as well as to the impact of the
thirteenth week in the fourth quarter of fiscal 2012. These items contributing to the growth in revenues were partially
offset by a weaker Canadian dollar.
Alimentation Couche-Tard Inc. / 23
More specifically, the growth of merchandise and service revenues for the fourth quarter of fiscal 2012 was
$212.5 million or 15.1%, of which approximately $42.0 million was generated by acquisitions. As for internal growth,
on a 12-week comparable basis, same-store merchandise revenues increased by 3.4% in the United States and 5.4%
in Canada. For the Canadian and U.S. markets, the variance in same-store merchandise sales is attributable to our
merchandising strategies, to the economic conditions in each of our markets as well as to the investments we made to
enhance service and the offering of products in our stores. In the United States, a cigarette manufacturer modified its
supply terms and price structure, at the beginning of the first quarter of fiscal 2012, in order to encourage retailers to
decrease or maintain low unit prices on certain of its products, which has put a deflationary pressure on our cigarettes
sales. Thus, we estimate that excluding tobacco products sales, our same-store merchandise sales in the United
States increased by 6.1% on a 12-week comparable basis. As for the weaker Canadian dollar, it had an unfavourable
impact of approximately $8.0 million on merchandise and service revenues of the fourth quarter of fiscal 2012.
Motor fuel revenues increased by $1.1 billion or 33.4% in the fourth quarter of fiscal 2012, of which approximately
$527.0 million stems from acquisitions. The still fragile economy and higher retail prices at the pump have continued
to put pressure on motor fuel consumption, which can explain the weak growth in same-store motor fuel volume in
Canada and in the United States which amounted to 0.1% and 0.2%, respectively on a 12-weeks comparable basis.
The higher average retail price of motor fuel generated an increase in revenues of approximately $276.0 million as
shown in the following table, starting with the first quarter of fiscal year ended April 24, 2011:
Quarter
53-week period ended April 29, 2012
United States (US dollars per gallon)
Canada (CA cents per litre)
52-week period ended April 24, 2011
United States (US dollars per gallon)
Canada (CA cents per litre)
1st
2nd
3rd
4th
Weighted
average
3.67
114.08
2.72
91.46
3.50
112.90
2.67
90.47
3.32
109.88
2.89
97.76
3.74
117.05
3.44
108.53
3.54
113.27
2.92
96.91
As for the weaker Canadian dollar, it had an unfavourable impact of approximately $10.0 million on motor fuel sales of
the fourth quarter of fiscal 2012.
Gross profit
The consolidated merchandise and service gross margin grew by $59.4 million or 12.6% in the fourth quarter of fiscal
2012. The consolidated margin was 32.8%, a reduction of 0.8% compared with the same quarter of fiscal 2011. In the
United States, the gross margin is down 0.7% to 32.8% while in Canada, it fell by 0.7% to 32.9%. This performance
reflects changes in the product-mix, the improvements we brought to our supply terms as well as our merchandising
strategy in line with market competitiveness and economic conditions within each market. More precisely, these
margin reductions reflect more aggressive promotions in certain categories to protect store traffic as well as increases
in the cost of certain of our products which we absorbed without passing it on to consumers. However, in terms of
absolute dollars, the increase in same-store merchandise sales more than offset the decrease in margin percentage of
these products, demonstrating that our strategies paid off.
In the fourth quarter of fiscal 2012, the motor fuel gross margin for our company-operated stores in the United States
increased by 2.92¢ per gallon, from 14.06¢ per gallon last year to 16.98¢ per gallon this year. In Canada, the gross
margin increased to CA5.60¢ per litre compared with CA5.01¢ per litre for the fourth quarter of fiscal 2011. The motor
fuel gross margin of our company-operated stores in the United States as well as the impact of expenses related to
electronic payment modes for the last eight quarters, starting with the first quarter of fiscal year ended April 24, 2011,
were as follows:
(US cents per gallon)
Quarter
53-week period ended April 29, 2012
1st
2nd
3rd
4th
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
52-week period ended April 24, 2011
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
19.95
5.29
14.66
18.83
4.15
14.68
17.04
5.20
11.84
16.84
4.16
12.68
14.84
4.74
10.10
13.12
4.36
8.76
16.98
5.06
11.92
14.06
4.93
9.13
Weighted
average
16.99
5.04
11.95
15.54
4.40
11.14
Alimentation Couche-Tard Inc. / 24
Operating, selling, administrative and general expenses
For the fourth quarter of fiscal 2012, operating, selling, administrative and general expenses rose by 10.9% compared
with the fourth quarter of fiscal 2011, but increased by only 5.9%, if we exclude certain items, as demonstrated by the
following table:
Total variance as reported
Subtract:
Increase from incremental expenses related to stores acquired
Increase from higher electronic payment fees
Negative goodwill recognized to earnings of fiscal 2012
Decrease from the weakening of the Canadian dollar
Acquisition costs recognized to earnings of fiscal 2012
Remaining variance, including additional week in the fourth quarter of fiscal 2012
13-week period ended
April 29, 2012
10.9%
4.5%
1.8%
(1.2%)
(0.6%)
0.5%
5.9%
The increase in electronic payment fees stems mainly from the rise in the average retail price of motor fuel. The
remaining variance is mainly due to the impact of the thirteenth week in the fourth quarter of fiscal 2012 and, to a
lesser extent, the additional expenses necessary to support growth in same-store merchandise sales as well as to the
normal increase in costs due to inflation.
Moreover, excluding expenses related to electronic payment modes and acquisitions costs for both comparable
periods as well as the negative goodwill recorded to earnings of the fourth quarter of fiscal 2012, expenses in
proportion to merchandise and services sales represented 29.1% of sales during the fourth quarter of fiscal 2012,
compared to 30.5% during the fourth quarter of fiscal 2011. This indicator has been constantly improving for the last
13 quarters. This performance reflects our constant efforts to find ways to improve our efficiency while ensuring that
we maintain the quality of the service we offer our clients.
Earnings before interests, taxes, depreciation and amortization (EBITDA)
During the fourth quarter of fiscal 2012, EBITDA increased by 48.9% compared to the corresponding period of the
previous fiscal year, reaching $203.0 million. Net of acquisition costs recorded to earnings, acquisitions contributed
$13.6 million to EBITDA, while the exchange rate variation had a negative impact of approximately $1.0 million.
It should be noted that EBITDA is not a performance measure defined by IFRS, but we, as well as investors and
analysts, use this measure to evaluate the Corporation’s financial and operating performance. Note that our definition
of this measure may differ from the one used by other public corporations:
(in millions of US dollars)
Net earnings, as reported
Add:
13-week period ended
April 29, 2012
117.8
12-week period ended
April 24, 2011
64.5
Income taxes
Net financial (revenues) expenses
Depreciation and amortization of property and equipment and other assets
EBITDA
36.5
(13.5)
62.2
203.0
18.3
2.6
50.9
136.3
Depreciation and amortization of property and equipment and other assets
For the fourth quarter of fiscal 2012, depreciation expense increased due to the investments made through
acquisitions, replacement of equipment, addition of new stores and ongoing improvement of our network. Since the
second quarter of fiscal 2012, depreciation and amortization expense includes amortization of intangible assets
related to the fuel supply contracts acquired from ExxonMobil.
Financial expenses, net
For the fourth quarter of fiscal 2012, we recorded net financial revenues of $13.5 million compared to net financial
expenses of $2.6 million for the fourth quarter of fiscal 2011. Excluding the $17.0 million gain recorded on forwards,
the fourth quarter of fiscal 2012 posted net financial expenses of $3.5 million, up $0.9 million compared to the fourth
quarter of fiscal 2011.
Income taxes
The income tax rate for the fourth quarter of fiscal 2012 is 23.7% compared to a rate of 22.1% for the corresponding
quarter of the previous fiscal year.
Alimentation Couche-Tard Inc. / 25
Net earnings
We closed the fourth quarter of fiscal 2012 with net earnings of $117.8 million, compared to $64.5 million the previous
fiscal year, an increase of $53.3 million or 82.6%. Diluted net earnings per share stood at $0.65 compared to $0.35
the previous year, an increase of 85.7%. The exchange rate variation did not have a significant impact on net earnings
of the fourth quarter of fiscal 2012.
Excluding from net earnings of the fourth quarter of fiscal 2012 the non-recurring gain on forwards, acquisition costs
as well as negative goodwill, net earnings would have stood at approximately $102.4 million ($0.57 per share on a
diluted basis), up $37.9 million, or 58.8%.
Alimentation Couche-Tard Inc. / 26
Selected Consolidated Financial Information
The following table highlights certain information regarding our operations for the 53-week period ended April 29, 2012 and for the
52-week periods ended April 24, 2011 and April 25, 2010:
(In millions of US dollars, unless otherwise stated)
2012 – 53 weeks
IFRS
2011 – 52 weeks
IFRS
2011 – 52 weeks
GAAP
2010 – 52 weeks
GAAP
Statement of Operations Data:
Merchandise and service revenues (1):
United States
Canada
Total merchandise and service revenues
Motor fuel revenues:
United States
Canada
Total motor fuel revenues
Total revenues
Merchandise and service gross profit (1):
United States
Canada
Total merchandise and service gross profit
Motor fuel gross profit:
United States
Canada
Total motor fuel gross profit
Total gross profit
Operating, selling, administrative and general expenses
Depreciation and amortization of property and equipment
and other assets
Operating income
Net earnings
Other Operating Data:
Merchandise and service gross margin (1):
Consolidated
United States
Canada
Growth of same-store merchandise revenues (2) (3) (4):
United States
Canada
Motor fuel gross margin (3):
United States (cents per gallon):
Canada (CA cents per litre)
Volume of motor fuel sold (5):
United States (millions of gallons)
Canada (millions of litres)
Growth of (decrease in) same-store motor fuel volume (3) (4):
United States
Canada
Per Share Data:
Basic net earnings per share (dollars per share)
Diluted net earnings per share (dollars per share)
Balance Sheet Data:
Total assets
Interest-bearing debt
Shareholders’ equity
Indebtedness Ratios:
Net interest-bearing debt/total capitalization (6)
Net interest-bearing debt/EBITDA (7)
Adjusted net interest bearing debt/EBITDAR (8)
Returns:
Return on equity (9)
Return on capital employed (10)
4,408.0
2,190.9
6,598.9
13,673.8
2,724.8
16,398.6
22,997.5
1,452.6
729.8
2,182.4
637.9
148.8
786.7
2,969.1
2,151.7
239.8
577.6
457.6
33.1%
33.0%
33.3%
2.7%
2.8%
16.99
5.45
3,896.2
2,713.5
0.1%
(0.9%)
2.54
2.49
4,453.2
665.2
2,174.6
0.14 :1
0.43 :1
2.10 :1
22.0,%
19.0,%
4,133.6
2,049.9
6,183.5
10,218.7
2,148.2
12,366.9
18,550.4
1,369.8
702.9
2,072.7
537.3
135.7
673.0
2,745.7
2,028.9
213.7
503.1
369.2
33.5%
33.1%
34.3%
4.2%
1.8%
15.54
5.38
3,517.7
2,565.4
0.7%
3.9%
2.00
1.96
3,926.2
501.5
1,979.4
0.09 :1
0.26 :1
2.09 :1
20.3%
18.1%
4,171.8
2,050.0
6,221.8
10,595.8
2,148.3
12,744.1
18,965.9
1,381.7
702.9
2,084.6
564.9
135.7
700.6
2,785.2
2,050.4
216.3
518.5
370.1
33.5%
33.1%
34.3%
4.2%
1.8%
15.79
5.38
3,649.1
2,565.1
0.7%
3.9%
2.00
1.97
3,999.6
526.4
1,936.1
0.10 :1
0.28 :1
2.10 :1
20.8%
17.9%
3,986.0
1,895.5
5,881.5
8,819.8
1,738.3
10,558.1
16,439.6
1,308.1
638.3
1,946.4
488.7
118.2
606.9
2,553.3
1,906.7
204.5
442.1
302.9
33.1%
32.8%
33.7%
2.9%
4.8%
14.51
5.31
3,484.8
2,395.5
1.0%
3.0%
1.64
1.60
3,696.7
741.2
1,614.3
0.24 :1
0.80 :1
2.69 :1
Includes other revenues derived from franchise fees, royalties and rebates on some purchases by franchisees and licensees.
Includes volume of franchisees and dealers as well as the volume of motor fuel sold to independent operators under fuel supply agreements.
(1)
(2) Does not include services and other revenues (as described in footnote 1 above). Growth in Canada is calculated based on Canadian dollars.
(3) For company-operated stores only.
(4) On 52-week normalized basis.
(5)
(6) This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term
interest-bearing debt, net of cash and cash equivalents and temporary investments, divided by the addition of shareholders’ equity and long-term debt, net of cash and cash equivalents
and temporary investments. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
(7) This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term
interest-bearing debt, net of cash and cash equivalents and temporary investments, divided by EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization). It does not have a
standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
(8) This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term
interest-bearing debt plus the product of eight times rent expense, net of cash and cash equivalents and temporary investments, divided by EBITDAR (Earnings Before Interest, Tax,
Depreciation, Amortization and Rent expense). It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other
public corporations.
(9) This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: net earnings
divided by average equity. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
(10) This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: earnings before
income taxes and interests divided by average capital employed. Capital employed represents total assets less short-term liabilities not bearing interests. It does not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
Alimentation Couche-Tard Inc. / 27
Analysis of consolidated results for the fiscal year ended April 29, 2012
Revenues
Our revenues were $23.0 billion in fiscal 2012, up $4.4 billion, or 24.0%, mainly attributable to an increase in motor
fuel sales due to higher average retail prices at the pump, to acquisitions, to the growth of same-store merchandise
and service sales in the United States and Canada, to the growth of same-store motor fuel volume in the United
States as well as the fifty-third week in fiscal 2012.
More specifically, the growth of merchandise and service revenues for fiscal 2012 was $415.4 million or 6.7%, of
which approximately $84.0 million was generated by acquisitions. As for internal growth, on a 52-week comparable
basis, same-store merchandise revenues increased by 2.7% in the United States and 2.8% in Canada. For the
Canadian and U.S. markets, the variance in same-store merchandise sales is attributable to our merchandising
strategies, to the economic conditions in each of our markets as well as to the investments we made to enhance
service and the offering of products in our stores. In the United States, a cigarette manufacturer modified its supply
terms and price structure, at the beginning of the first quarter of fiscal 2012, in order to encourage retailers to
decrease or maintain low unit prices on certain of its products, which has put a deflationary pressure on our cigarettes
sales. Thus, we estimate that excluding tobacco products sales, our same-store merchandise sales in the United
States increased by 5.3% on a 52-week comparable basis. As for the stronger Canadian dollar, it had a favourable
impact of approximately $40.0 million on merchandise and service revenues of fiscal 2012.
Motor fuel revenues increased by $4.0 billion or 32.6% in fiscal 2012, of which approximately $1.1 billion stems from
acquisitions. The still fragile economy and higher retail prices at the pump have continued to put pressure on motor
fuel consumption, which can explain the almost flat same-store motor fuel volume growth on a 52-week comparable
basis in the United States as well as the slight decrease of 0.9% in Canada.
The higher average retail price of motor fuel generated an increase in revenues of approximately $2.5 billion as shown
in the following table, starting with the first quarter of the fiscal year ended April 24, 2011:
Quarter
53-week period ended April 29, 2012
United States (US dollars per gallon)
Canada (CA cents per litre)
52-week period ended April 24, 2011
United States (US dollars per gallon)
Canada (CA cents per litre)
1st
2nd
3rd
4th
Weighted
average
3.67
114.08
2.72
91.46
3.50
112.90
2.67
90.47
3.32
109.88
2.89
97.76
3.74
117.05
3.44
108.53
3.54
113.27
2.92
96.91
As for the stronger Canadian dollar, it had a favourable impact of approximately $41.0 million on motor fuel sales of
fiscal 2012.
Gross profit
The consolidated merchandise and service gross margin grew by $109.7 million or 5.3% in fiscal 2012. The
consolidated margin was 33.1%, a reduction of 0.4% compared with fiscal 2011. In the United States, the gross
margin is down by only 0.1% to 33.0% while in Canada, it fell by 1.0% to 33.3%. This performance reflects changes in
the product-mix, the improvements we brought to our supply terms as well as our merchandising strategy in line with
market competitiveness and economic conditions within each market. More precisely, these margin reductions reflect
more aggressive promotions in certain categories to protect store traffic as well as increases in the cost of certain of
our products which we absorbed without passing it on to consumers. However, in terms of absolute dollars, the
increase in same-store merchandise sales more than offset the decrease in margin percentage of these products,
demonstrating that our strategies paid off.
In fiscal 2012, the motor fuel gross margin for our company-operated stores in the United States increased by 1.45¢
per gallon, from 15.54¢ per gallon in fiscal 2011 to 16.99¢ per gallon in fiscal 2012. However, taking into consideration
expenses related to electronic payment modes, the net margin per gallon increased by only 0.81¢ per gallon. In
Canada, the gross margin rose slightly to CA5.45¢ per litre compared with CA5.38¢ per litre for fiscal 2011. The motor
fuel gross margin of our company-operated stores in the United States as well as the impact of expenses related to
electronic payment modes for the last eight quarters, starting with the first quarter of fiscal year ended April 24, 2011,
were as follows:
Alimentation Couche-Tard Inc. / 28
(US cents per gallon)
Quarter
53-week period ended April 29, 2012
1st
2nd
3rd
4th
Weighted
average
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
52-week period ended April 24, 2011
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
19.95
5.29
14.66
18.83
4.15
14.68
17.04
5.20
11.84
16.84
4.16
12.68
14.84
4.74
10.10
13.12
4.36
8.76
16.98
5.06
11.92
14.06
4.93
9.13
16.99
5.04
11.95
15.54
4.40
11.14
Operating, selling, administrative and general expenses
For fiscal 2012, operating, selling, administrative and general expenses rose by 6.1% compared with fiscal 2011, but
increased by only 1.9% if we exclude certain items, as demonstrated by the following table:
Total variance as reported
Subtract:
Increase from incremental expenses related to stores acquired
Increase from higher electronic payment fees
Increase from the strengthening of the Canadian dollar
Acquisition costs recognized to earnings of fiscal 2011
Acquisition costs recognized to earnings of fiscal 2012
Negative goodwill recognized to earnings of fiscal 2012
Remaining variance, including additional in fiscal 2012
6.1%
2.1%
2.0%
0.6%
(0.5%)
0.3%
(0.3%)
1.9%
The increase in electronic payment fees stems mainly from the rise in the average retail price of motor fuel. The
remaining variance is mainly due to the impact of the fifty-third week in fiscal 2012 and, to a lesser extent, to additional
expenses necessary to support growth in same-store merchandise sales as well as to the normal increase in costs
due to inflation.
Moreover, excluding expenses related to electronic payment modes and acquisitions costs for both comparable
periods as well as the negative goodwill recorded to earnings of fiscal 2012, expenses in proportion to merchandise
and services sales represented 28.8% of sales during fiscal 2012, compared to 29.4% during fiscal 2011. This
indicator has been constantly improving for the last 13 quarters. This performance reflects our constant efforts to find
ways to improve our efficiency while ensuring that we maintain the quality of the service we offer our clients.
Earnings before interests, taxes, depreciation and amortization (EBITDA)
During fiscal 2012, EBITDA increased by 14.4% compared to fiscal 2011, reaching $839.0 million. Net of acquisition
costs recorded to earnings, acquisitions contributed approximately $26.0 million to EBITDA while the exchange rate
variation had a positive impact of $4.5 million.
It should be noted that EBITDA is not a performance measure defined by IFRS, but we, as well as investors and
analysts, use this measure to evaluate the Corporation’s financial and operating performance. Note that our definition
of this measure may differ from the one used by other public corporations:
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial (revenues) expenses
Depreciation and amortization of property and equipment and other assets
EBITDA
Fiscal 2012
53 weeks
457.6
Fiscal 2011
52 weeks
369.2
146.3
(4.7)
239.8
839.0
121.2
29.6
213.7
733.7
Depreciation and amortization of property and equipment and other assets
For fiscal 2012, depreciation expense increased due to the investments made through acquisitions, replacement of
equipment, addition of new stores and ongoing improvement of our network. Since the second quarter of fiscal 2012,
depreciation and amortization expense includes amortization of intangible assets related to the fuel supply contracts
acquired from ExxonMobil.
Alimentation Couche-Tard Inc. / 29
Financial expenses, net
For fiscal 2012, we recorded net financial revenues of $4.7 million compared to net financial expenses of $29.6 million
in fiscal 2011. Excluding the $17.0 million gain recorded on forwards, fiscal 2012 posted net financial expenses of
$12.3 million, down $17.3 million compared to fiscal 2011, mainly because of the early redemption of our
$350.0 million subordinated unsecured debt during the third quarter of fiscal 2011, which contributed to decrease the
average interest rate on our borrowings. Moreover, following the early redemption of our subordinated unsecured
debt, we recorded a non-recurring charge of $3.0 million to fiscal 2011 results. The reduction in financial expenses
from the lower average interest rate was partially offset by the slight increase in our indebtedness attributable to
amounts disbursed for share repurchases and acquisitions.
Income taxes
The income tax rate for fiscal 2012 is 24.2% compared to a rate of 24.7% for fiscal 2011.
Net earnings
We closed fiscal 2012 with net earnings of $457.6 million, compared to $369.2 million the previous fiscal year, an
increase of $88.4 million or 23.9%. Diluted net earnings per share stood at $2.49 compared to $1.96 the previous
year, an increase of 27.0%. The exchange rate variation did not have a significant impact on net earnings of fiscal
2012.
Excluding from fiscal 2012 net earnings the non-recurring gain on forwards, acquisition costs as well as negative
goodwill and excluding acquisition costs from earnings of fiscal 2011, net earnings for fiscal 2012 would have stood at
approximately $444.7 million ($2.42 per share on a diluted basis) compared to $377.1 million ($2.00 per share on a
diluted basis) for fiscal 2011, up $67.6 million, or 17.9%.
Financial Position as at April 29, 2012
As shown by our indebtedness ratios included in the “Selected Consolidated Financial Information” section and our
net cash provided by operating activities, our financial position is excellent.
Our total consolidated assets amounted to $4.5 billion as at April 29, 2012, an increase of $527.0 million over the
balance as at April 24, 2011. This increase stems primarily from the overall rise in assets resulting from the
acquisitions we made during fiscal year 2012, partially offset by the weakening of the Canadian dollar compared to the
US dollar at the balance sheet date.
For fiscal 2012, we recorded a return on capital employed of 19.0%1.
Shareholders’ equity amounted to $2.2 billion as at April 29, 2012, up $195.2 million compared to April 24, 2011,
mainly reflecting net earnings of fiscal 2012, partially offset by shares repurchased, dividends declared and the
decrease in accumulated other comprehensive income following the weakening of the Canadian dollar as at the
balance sheet date. For fiscal 2012, we recorded a return on equity of 22.0%2.
Liquidity and Capital Resources
Our principal sources of liquidity are net cash provided by operating activities and our credit facilities. Our principal
uses of cash are to finance our acquisitions and capital expenditures, pay dividends, meet debt service requirements,
provide for working capital as well as for our share repurchase programs. We expect that cash generated from
operations, borrowings available under our revolving unsecured credit facilities as well as under our acquisition facility
will be adequate to meet our liquidity needs in the foreseeable future.
We have three credit agreements consisting of revolving unsecured credit facilities, each having a maximum amount
of $326.0 million, $154.0 million and $40.0 million. These credit facilities will mature September 22, 2012 and are
available in the form of a term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars,
iii) in the form of Canadian dollars bankers’ acceptances, with stamping fees and iv) in the form of standby letters of
credit not exceeding $50.0 million or the equivalent in Canadian dollars, with applicable fees. Depending on the form
and the currency of the loan, the amounts borrowed bear interest at variable rates based on the Canadian prime rate,
the banker’s acceptance rate, the US base rate or the LIBOR rate plus a variable margin.
1 This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: earnings before
income taxes and interests divided by average capital employed. Capital employed represents total assets less short-term liabilities not bearing interests. It does not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
2 This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: net earnings divided
by average equity. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations.
Alimentation Couche-Tard Inc. / 30
We also have a $1.0 billion credit agreement consisting of a revolving unsecured facility with an initial term of five
years. This credit facility will mature in December 2016 and is available in the following forms:
A term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars, iii) in the form
of Canadian dollar bankers’ acceptances, with stamping fees and iv) in the form of standby letters of credit
not exceeding $100.0 or the equivalent in Canadian dollars, with applicable fees. Depending on the form and
the currency of the loan, the amounts borrowed bear interest at variable rates based on the Canadian prime
rate, the bankers’ acceptance rate, the US base rate or LIBOR plus a variable margin; and
An unsecured line of credit in the maximum amount of $50.0, available in Canadian or US dollars, bearing
interest at variable rates based, depending on the form and currency of the loan, on the Canadian prime rate,
the US prime rate or the US base rate plus a variable margin.
Under theses credit facilities, the Corporation must maintain certain financial ratios and respect certain restrictive
provisions.
As at April 29, 2012, $649.3 million of our credit facilities had been used ($576.0 million for the US dollars portion and
$73.3 million for the Canadian dollars portion). As at the same date, the weighted average effective interest rate was
0.82% for the US dollars portion and 1.95% for the Canadian dollars portion. In addition, standby letters of credit in the
amount of CA$1.4 million and $28.5 million were outstanding as at April 29, 2012.
As at April 29, 2012, excluding the acquisition facility, $840.7 million were available under the credit agreements and
we were in compliance with the restrictive covenants and ratios imposed by the credit agreements at that date. Thus,
at the same date, we had access to more than $1.1 billion through our available cash and credit agreements.
Selected Consolidated Cash Flow Information
(In millions of US dollars)
Operating activities
Cash flows
Other
Net cash provided by operating activities
Investing activities
Business acquisitions
Purchase of property and equipment and other assets, net of
proceeds from the disposal of property and equipment and other
assets
Restricted cash
Proceeds from sale and leaseback transactions
Net cash used in investing activities
Financing activities
Net increase in borrowings
Share repurchase
Issuance of shares
Dividends
Early redemption of subordinated unsecured debt
Net cash used in financing activities
Company credit rating
Standard and Poor’s
Fiscal 2012
53 weeks
$
691.3
72.5
763.8
Fiscal 2011
52 weeks
$
601.5
6.8
608.3
(380.3)
(288.8)
(22.7)
-
(691.8)
157.1
(201.1)
19.2
(49.8)
-
(74.6)
BBB-
(37.8)
(198.1)
-
5.1
(230.8)
132.7
(69.1)
11.4
(32.8)
(332.6)
(290.4)
BBB-
Variation
$
89.8
65.7
155.5
(342.5)
(90.7)
(22.7)
(5.1)
(461.0)
24.4
(132.0)
7.8
(17.0)
332.6
215.8
Operating activities
During fiscal 2012, net cash from the operation of our stores reached $763.8 million, up $155.5 million compared to
fiscal year 2011, mainly due to a more favourable change in working capital and to higher net earnings.
Investing activities
During fiscal 2012, investing activities were primarily for the acquisition of 1911 company-operated stores, 911 stores
operated by independent operators (including related motor fuel supply agreements) and motor fuel supply
agreements for 76 stores for a total amount of $380.3 million, as well as for net capital expenditures and other assets
for an amount of $288.8 million. Our capital investments were primarily for the replacement of equipment in some of
our stores to enhance our offering of products and services, the addition of new stores as well as the ongoing
improvement of our network. We also made an escrow deposit of $22.7 million for pending acquisitions.
1 The number of stores differs from that presented in the "Changes in the Store Network" table because it excludes stores related to the RDK joint venture. The latter being accounted for using
the equity method, the amount paid by RDK for its investing activities do not appear in our investing activities.
Alimentation Couche-Tard Inc. / 31
Financing activities
During fiscal 2012, the increase in debt amounted to $157.1 million while we paid $201.1 million under our share
repurchase program and $49.8 million in dividends. We also collected $19.2 million following the issuance of shares
upon exercise of stock options.
Contractual Obligations and Commercial Commitments
Set out below is a summary of our material contractual cash obligations as at April 29, 2012 (1):
Long-term debt (2)
Capital lease obligations
Operating lease obligations
Total
(1)
(2)
The summary does not include the payments required under defined benefit pension plans.
Does not include future interest payments.
2013
480.6
4.3
266.6
751.5
2014
0.4
3.9
243.3
247.6
2015
(in millions of US dollars US)
2016
2017
Thereafter
Total
0.4
2.9
224.8
228.1
0.4
1.8
204.4
206.6
169.5
1.3
185.9
356.7
1.6
0.4
1,252.0
1,254.0
652.9
14.6
2,377.0
3,044.5
Long-Term Debt. As at April 29, 2012, our long-term debt reached $665.2 million, the details of which are as follows:
i) Borrowings of $649.3 million under our term revolving unsecured operating credits. The weighted average
effective interest rate is 0.95% as at April 29, 2012. Standby letters of credit in the amount of CA$1.4 million
and $28.5 million were outstanding as at April 29, 2012.
ii) Other long-term debts of $15.9 million, including some obligations under capital leases.
Capital Lease Obligations. Some capital leases were assumed in connection with certain acquisitions and we had to
assume some more capital leases during the previous fiscal years. These obligations and related assets are included
in our consolidated balance sheets.
Operating Lease Obligations. We lease an important portion of our real estate using conventional operating leases.
Generally our real estate leases in Canada are for primary terms of five to ten years and in the United States, they are
for ten to 20 years, in both cases, with options to renew. These obligations and related assets are not included in our
consolidated balance sheets. Under certain of the store leases, we are subject to additional rentals based on store
revenues as well as future escalations in the minimum lease amount.
Contingencies. In the normal course of business, we are involved in many legal disputes and claims regarding the
manner in which we conduct our business. We believe that such claims and disputes are unfounded. It is our opinion
that any disbursement resulting from such proceedings will not significantly impact the Corporation’s results and
financial position.
We are covered by insurance policies that have significant deductibles. At this time, we believe that we are adequately
covered through the combination of insurance policies and self-insurance. Future losses which exceed insurance
policy limits or, under adverse interpretations, are excluded from coverage would have to be paid out of general
corporate funds. In association with our workers' compensation policies, we issue letters of credit as collateral for
certain policies.
We also issue surety bonds for a variety of business purposes, including bonds for taxes, lottery sales, wholesale
distribution and alcoholic beverage sales. In most cases, a municipality or state governmental agency, as a condition
of operating a store in that area, requires the surety bonds.
Off-Balance Sheet Arrangements
In the normal course of business, we finance some of our off-balance sheet activities through operating leases for
properties on which we conduct our retail business. Our future commitments are included under “Operating Lease
Obligations” in the table above.
Alimentation Couche-Tard Inc. / 32
Selected Quarterly Financial Information
The Corporation’s 52-week reporting cycle is divided into quarters of 12 weeks each except for the third quarter, which
comprises 16 weeks. When a fiscal year, such as fiscal 2012, contains 53 weeks, the fourth quarter comprises
13 weeks. The following is a summary of selected consolidated financial information derived from the Corporation’s
interim consolidated financial statements for each of the eight most recently completed quarters.
(In millions of US dollars except for per
share data)
Quarter
Weeks
Revenues
Earnings before depreciation and
amortization of property and equipment
and other assets, financial expenses and
income taxes
Depreciation and amortization of property
and equipment and other assets
Operating income
Share of earnings of a joint venture
accounted for using the equity method
Net financial (revenues) expenses
Net earnings
Net earnings per share
Basic
Diluted
53-week period ended April 29, 2012
4th
13 weeks
6,063.2
3rd
16 weeks
6,604.1
2nd
12 weeks
5,152.6
1st
12 weeks
5,177.6
52-week period ended April 24, 2011
4th
12 weeks
4,737.0
3rd
16 weeks
5,486.9
2nd
12 weeks
4,149.1
1st
12 weeks
4,177.4
199.6
62.2
137.4
3.4
(13.5)
117.8
$0.66
$0.65
185.9
75.7
110.2
7.0
4.0
86.8
$0.49
$0.48
200.2
52.4
147.8
5.2
2.1
113.5
$0.62
$0.61
231.7
49.5
182.2
6.0
2.7
139.5
$0.76
$0.75
133.7
163.5
199.0
50.9
82.8
2.6
2.6
64.5
66.1
97.4
3.8
11.2
69.6
$0.35
$0.35
$0.38
$0.37
49.3
149.7
4.8
8.2
108.2
$0.58
$0.57
220.6
47.4
173.2
5.7
7.6
126.9
$0.68
$0.67
The influence of the volatility of motor fuel gross margin and seasonality has an impact on the variability of our
quarterly net earnings. Given the acquisitions in recent years and higher retail prices at the pump, motor fuel revenues
have become a more significant segment of our business and therefore our quarterly results are more sensitive to the
volatility of motor fuel gross margins. However, motor fuel margins tend to be less volatile when considered on an
annual basis or a longer term. With that said, the majority of our operating income is still derived from merchandise
and service sales.
Analysis of consolidated results for the fiscal year ended April 24, 2011
(based on Canadian GAAP before transition to IFRS)
Revenues
Our revenues amounted to $19.0 billion in fiscal 2011, up $2.5 billion, an increase of 15.4%, mainly attributable to the
increase in motor fuel sales arising from the higher average retail price of motor fuel and to the increase in same-store
motor fuel volume, to acquisitions, to the stronger Canadian dollar as well as to the growth in same-store merchandise
revenues.
More specifically, the growth of merchandise and service revenues for fiscal 2011 was $340.3 million or 5.8%, of
which approximately $115.1 million was generated by a stronger Canadian dollar and $32.6 million comes from
acquisitions. Internal growth, as measured by the growth in same-store merchandise revenues, was 4.2% in the
United States while it stood at 1.8% in Canada. For the Canadian and U.S. markets, growth of same-store
merchandise sales is attributable to our merchandising strategies, to the economic conditions in each of our market as
well as to the investments we made to enhance service and the offering of products in our stores.
Motor fuel revenues increased by $2.2 billion or 20.7% in fiscal 2011, of which $463.0 million stem from acquisitions
and from additional volume derived from a growing number of sites offering motor fuel while a $106.0 million increase
in revenues was generated from the appreciation of the Canadian dollar against its U.S. counterpart. Same-store
motor fuel volume grew by 0.7% in the United States and 3.9% in Canada. The higher average retail price of motor
fuel generated an increase in revenues of approximately $1.4 billion as shown in the following table, starting with the
first quarter of the fiscal year ended April 25, 2010:
Quarter
52-week period ended April 24, 2011
United States (US dollars per gallon)
Canada (CA cents per litre)
52-week period ended April 25, 2010
United States (US dollars per gallon)
Canada (CA cents per litre)
1st
2.72
91.46
2.41
88.80
2nd
2.67
90.47
2.48
89.24
3rd
2.89
97.76
2.59
90.00
4th
Weighted
average
3.44
108.53
2.71
92.36
2.93
96.91
2.55
90.07
Alimentation Couche-Tard Inc. / 33
Gross profit
The consolidated merchandise and service gross margin was 33.5% in fiscal 2011, up 0.4%. In the United States, the
gross margin was 33.1% while it was 34.3% in Canada, a 0.3% and 0.6% increase, respectively. These increases
reflect a more favourable product-mix, the improvements we brought to our supply terms as well as our merchandising
strategy in tune with market competitiveness and economic conditions within each market.
As for the motor fuel margin net of expenses related to electronic payment modes for our company-operated stores in
the United States, it increased by 0.72¢ per gallon, from 10.68¢ per gallon in fiscal 2010 to 11.40¢ per gallon this year,
a 6.8% increase. In Canada, the gross margin also increased, reaching CA5.38¢ per litre compared with CA5.31¢ per
litre in fiscal 2010. The motor fuel gross margin of our company-operated stores in the United States as well as the
impact of expenses related to electronic payment modes for the last eight quarters, starting with the first quarter of
fiscal year ending April 25, 2010, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 24, 2011
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
52-week period ended April 25, 2010
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
1st
19.12
4.17
14.95
15.43
3.56
11.87
2nd
17.12
4.17
12.95
15.78
3.79
11.99
3rd
13.38
4.36
9.02
12.88
3.85
9.03
4th
Weighted
average
14.24
4.87
9.37
14.42
4.14
10.28
15.79
4.39
11.40
14.51
3.83
10.68
Operating, selling, administrative and general expenses
For fiscal 2011, operating, selling, administrative and general expenses rose by 7.5% compared with fiscal 2010.
These expenses increased by 1.8% because of the stronger Canadian dollar, by 1.7% because of the increase in
electronic payment modes expenses and by 0.8% because of acquisitions. In addition, during fiscal 2011, following
the non-renewal of our public tender offer for the acquisition of Casey’s, we recorded to earnings related fees that had
previously been deferred, which made expenses increase by 0.5%. As for the gain from disposal of Casey’s shares
and the non-recurring reversal of provisions both recorded in fiscal 2010, they account for a variation of 1.0% in
expenses. Excluding all of these items, expenses increased by only 1.7% which reflects the increase in hours worked
in stores in order to support the increase in merchandise and service sales, minimum wage increases in certain
regions as well as the normal increase in expenses caused by inflation. Moreover, excluding fees related to Casey’s
for fiscal 2011, the gain from disposal of Casey’s shares and the non-recurring reversal of provisions for fiscal 2010 as
well as expenses related to electronic payment modes for both comparable periods, expenses in proportion to
merchandise and services sales represented 29.4% during fiscal 2011, compared to 29.8% during fiscal 2010.
This performance reflects our constant efforts to find ways to improve our efficiency while making certain that we
maintain the quality of the service we offer our clients. Our decentralized business model as well as our organizational
culture are clearly factors allowing us to be one of the most efficient operators of our industry.
Earnings before interests, taxes, depreciation and amortization (EBITDA)
EBITDA was $734.8 million, up $88.2 million or 13.6% compared with fiscal 2010. Acquisitions accounted for $4.6
million of this amount. Excluding the non-recurring amounts of fiscal 2010 EBITDA, that is the gain from disposal of
Casey’s shares and the reversal of provisions and excluding fees related to our public tender offer for the acquisition
of Casey’s from fiscal 2011 EBITDA, the increase in EBITDA would have been $116.4 million or 18.5%.
It should be noted that EBITDA is not a performance measure defined by Canadian GAAP, but we, as well as
investors and analysts, use this measure to evaluate the Corporation’s financial and operating performance. Note that
our definition of this measure may differ from the one used by other public companies:
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Financial expenses
Depreciation and amortization of property and equipment and other assets
EBITDA
52-week periods ended
April 24, 2011
April 25, 2010
370.1
122.1
26.3
216.3
734.8
302.9
109.3
29.9
204.5
646.6
Alimentation Couche-Tard Inc. / 34
Depreciation and amortization of property and equipment and other assets
For fiscal year 2011, the depreciation expense increased due to the investments made through acquisitions,
replacement of equipment, addition of stores and the ongoing improvement of our network.
Financial expenses
Financial expenses were down $3.6 million compared with fiscal 2010. This decrease is chiefly the result of the lower
average interest rate due, amongst other things, to the early redemption of our subordinated unsecured debt of
$350.0 million during the third quarter of fiscal 2011 and to the decrease in average borrowings. These factors
contributing to the decrease in financial expenses were partially offset by a non-recurring charge of $3.0 million
recorded as part of the early redemption of our subordinated unsecured debt. However, it has to be noted that the
decrease in financial expenses generated by the lower average interest rate more than offset this non-recurring
charge.
Income taxes
The income tax rate for fiscal year 2011 is 24.8% compared to 26.5% for fiscal 2010.
Net earnings
We closed fiscal 2011 with net earnings of $370.1 million, which equals $2.00 per share or $1.97 per share on a
diluted basis compared with $302.9 million the previous fiscal year ($1.60 per share on a diluted basis), an increase of
$67.2 million or 22.2%. The appreciation of the Canadian dollar against its US counterpart had a favourable impact of
approximately $8.0 million on net earnings. Excluding the gain from disposal of Casey’s shares and the non-recurring
reversal of provisions from fiscal 2010 net earnings and excluding the fees related to our public tender offer for the
acquisition of Casey’s shares from fiscal 2011 net earnings, the increase in net earnings for fiscal 2011 would have
been $89.2 million or 31.0%, an increase of $0.47 per share on a diluted basis.
Internal Controls
We maintain a system of internal controls over financial reporting designed to safeguard assets and ensure that
financial information is reliable. We undertake ongoing evaluations of the effectiveness of internal controls over
financial reporting and implement control enhancements, when appropriate. As at April 29, 2012, our management
and our external auditors reported that these internal controls were effective.
We also maintain a system of disclosure controls and procedures designed to ensure the reliability, completeness and
timeliness of the information we disclose in this MD&A and other public disclosure documents, also taking into account
materiality. Disclosure controls and procedures are designed to ensure that information required to be disclosed by
the Corporation in reports filed with securities regulatory agencies is recorded and/or disclosed on a timely basis, as
required by law, and is accumulated and communicated to the Corporation’s management, including its Chief
Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. As at April 29, 2012, our management, following their assessment, certifies the design and operating
effectiveness of disclosure controls and procedures.
Critical Accounting Policies and Estimates
Estimates. This MD&A is based on our consolidated financial statements, which have been prepared in accordance
with IFRS. These standards require us to make certain estimates and assumptions that affect our financial position
and results of operations as reflected in our consolidated financial statements. On an ongoing basis, we review our
estimates, including those relating to supplier rebates, environmental costs, income taxes, lease accounting and asset
retirement obligations based on available information. These estimates are based on our best knowledge of current
events and actions that the Corporation may undertake in the future. Actual results may differ from the estimates.
Inventory. Our inventory is comprised mainly of products purchased for resale including tobacco products, grocery
items, beverages, packaged and fresh food products, other products and services and motor fuel. Inventories are
valued at the lesser of cost and net realizable value. Cost of merchandise - distribution centres is determined
according to the first-in first-out method, the cost of merchandise - retail is valued based on the retail price less a
normal margin and the cost of motor fuel inventory is determined according to the average cost method. Inherent in
the determination of margins are certain management judgments and estimates, which could affect ending inventory
valuations and results of operations.
Impairment of Long-lived Assets. Property and equipment are tested for impairment should events or circumstances
indicate that their book value may not be recoverable, as measured by comparing their net book value to the
estimated undiscounted future cash flows generated by their use and eventual disposal. Should the carrying amount
Alimentation Couche-Tard Inc. / 35
of long-lived assets exceed their fair value, an impairment loss in the amount of the excess would be recognized. Our
evaluation of the existence of impairement indicators is based on market conditions and our operational performance.
The variability of these factors depends on a number of conditions, including uncertainty about future events. These
factors could cause us to conclude that impairment indicators exist and require that impairment tests be performed,
which could result in determining that the value of certain long-lived assets is impaired, resulting in a write-down of
such long-lived assets.
Goodwill and Other Intangibles Assets. Goodwill and other intangibles assets are evaluated for impairment annually,
or more often if events or changes in circumstances indicate that the value of certain goodwill or intangibles may be
impaired. For the purpose of this impairment test, management uses estimates and assumptions to establish the fair
value of our reporting units and intangible assets. If these assumptions and estimates prove to be incorrect, the
carrying value of our goodwill or other intangible assets may be overstated. Our annual impairment test is performed
in the first quarter of each fiscal year.
Environmental Matters. We provide for estimated future site remediation costs to meet government standards for
known site contamination when such costs can be reasonably estimated. Estimates of the anticipated future costs for
remediation activities at such sites are based on our prior experience with remediation sites and consideration of other
factors such as the condition of the site contamination, location of sites and the experience of the contractors that
perform the environmental assessments and remediation work.
In each of the U.S. states in which we operate, with the exception of Michigan, Iowa, Florida, Arizona, Texas and
Washington State, there is a state fund to cover the cost of certain environmental remediation activities after
applicable trust fund deductible is met, which varies by State. These state funds provide insurance for motor fuel
facilities operations to cover some of the costs of cleaning up certain contamination to the environment caused by the
usage of underground motor fuel equipment. Underground motor fuel storage tank registration fees and/or a motor
fuel tax in each of the states finance the trust funds. We pay the annual registration fees and remit the sales taxes to
the applicable states where we are a member of the trust fund. Insurance coverage is different in the various states.
Income Taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences
attributable to temporary differences between the financial statement carrying values of assets and liabilities and their
respective income tax bases. Defered income tax assets or liabilities are measured using enacted or substantively
enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The calculation of current and deferred income taxes requires management to
make estimates and assumptions and to exercise a certain amount of judgment regarding the financial statement
carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the
interpretation of income tax legislation across various jurisdictions, expectations about future operating results and the
timing of reversal of temporary differences and possible audits of tax fillings by the regulatory authorities. Management
believes it has adequately provided for income taxes based on current available information.
Changes or differences in these estimates or assumptions may result in changes to the current or deferred income tax
balances on the consolidated balance sheets, a charge or credit to income tax expense in the consolidated statement
of earnings and may result in cash payments or receipts.
Insurance and Workers' Compensation. We use a combination of insurance, self-insured retention, and self-insurance
for a number of risks including workers' compensation (in certain states), property damages, and general liability
claims. Accruals for loss incidences are made based on our claims experience and actuarial assumptions followed in
the insurance industry. A material revision to our liability could result from a significant change to our claims
experience or the actuarial assumptions of our insurers. Actual losses could differ from accrued amounts. Workers'
compensation is covered by government-imposed insurance in Canada and by third-party insurance in our United
States operations, except in certain states where we are self-insured. With respect to the third-party insurance in the
United States, independent actuarial estimates of the aggregate liabilities for claims incurred serve as a basis for our
share of workers' compensation losses.
Recently Issued Accounting Standards
Revised Standards
Financial Statement Presentation
In June 2011, the International Accounting Standards Board (“IASB”) issued amendments to International Accounting
Standard (“IAS”) 1 “Presentation of Financial Statements”. The amendments govern the presentation of Other
Comprehensive Income (“OCI”) in the financial statements, primarily by requiring OCI items that may be reclassified to
the statement of earnings to be presented separately from those that remain in equity.
Alimentation Couche-Tard Inc. / 36
These changes are applicable for fiscal years beginning on or after July 1st, 2012. We will apply these changes for our
first quarter of fiscal year 2014 and are still evaluating their impact on our consolidated financial statements.
Employee Benefits
In June 2011, the IASB issued a revised version of IAS 19 “Employee Benefits” to modify accounting rules for defined
benefits pension plans. The revised version of the standard contains multiple modifications, including the elimination
of the corridor approach, which allowed deferring part of the actuarial gains and losses, as well as enhanced guidance
on measurement of plan assets and defined benefit obligations, streamlining the presentation of changes in assets
and liabilities arising from defined benefit plans and the introduction of enhanced disclosures for defined benefit plans.
These changes are applicable for fiscal years beginning on or after January 1st, 2013. We are in the process of
determining when we will apply these changes and we are still evaluating their impact on our consolidated financial
statements.
Financial Instruments – Presentation and disclosure
In December 2011, the IASB issued revised versions of IFRS 7 “Financial Instruments: Disclosures” and IAS 32
“Financial Instruments: Presentation”. The modifications clarify the offsetting rules and state new disclosure
requirements for offsetting of financial assets and liabilities on the balance sheet.
The changes applied to IFRS 7 are applicable for fiscal years beginning on or after January 1st, 2013 while changes
applied to IAS 32 are applicable for fiscal years beginning on or after January 1st, 2014. We will apply these changes
for our first quarter of fiscal years 2014 and 2015, respectively and we are still evaluating their impact on our
consolidated financial statements.
New standards
Financial Instruments
In November 2009, the IASB issued a new standard, IFRS 9 “Financial Instruments” which is the first phase of the
IASB’s three-phase project to replace IAS 39 “Financial Instruments: Recognition and Measurement”. The standard
provides guidance on the classification and measurement of financial liabilities and requirements for the derecognition
of financial assets and financial liabilities.
IFRS 9 is applicable for fiscal years beginning on or after January 1st, 2015. We will apply these new standards for our
first quarter of fiscal year 2016 and we are still evaluating the impact on our consolidated financial statements.
Consolidated financial statements
In May 2011, the IASB issued a new standard, IFRS 10 “Consolidated Financial Statements” which requires an entity
to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is
required when an entity has the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. IFRS 10 replaces SIC-12 “Consolidation—Special Purpose Entities” and parts of IAS 27
“Consolidated and Separate Financial Statements”.
Joint Arrangements
In May 2011, the IASB issued a new standard, IFRS 11 “Joint Arrangements” which requires a venturer to classify its
interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity
method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities,
revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately
consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31 “Interests in Joint Ventures”,
and SIC-13 “Jointly Controlled Entities—Non-monetary Contributions by Venturers”.
Disclosure of Interest in Other Entities
In May 2011, the IASB issued a new standard, IFRS 12 “Disclosure of Interest in Other Entities”. IFRS 12 establishes
disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose
vehicles and off balance sheet vehicles. The standard includes existing disclosures and also introduces significant
additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other
entities.
Alimentation Couche-Tard Inc. / 37
Fair Value Measurement
In May 2011, the IASB issued a new standard, IFRS 13 “Fair Value Measurement”. IFRS 13 is a comprehensive
standard for fair value measurement and disclosure requirements for use across all IFRS. The new standard clarifies
that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction
between market participants, at the measurement date. It also establishes disclosures about fair value measurement.
Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards
requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent
disclosures.
IFRS 10, 11, 12 and 13 are all applicable for fiscal years beginning on or after January 1st, 2013. We will apply these
new standards for our first quarter of fiscal year 2014 and we are still evaluating their impact on our consolidated
financial statements.
Business Risks
We are constantly looking to control and improve our operations. In this perspective, identification and management of
risks are key components of such activities. We have identified and assessed key risk factors that could negatively
impact the Corporation’s objectives and its ensuing performance.
We manage risks on an ongoing basis and implement a series of measures designed to mitigate key risks described
in the above section and their financial impact.
Motor fuel. Our results are sensitive to the changes in the motor fuel retail price and gross margin. Factors beyond our
control such as changing supply terms, motor fuel price fluctuations due, amongst other things, to general political and
economic conditions, as well as the market’s limited ability to absorb motor fuel retail price fluctuations are all factors
that could influence the motor fuel retail price and related gross margin. During fiscal 2012, motor fuel sales accounted
for approximately 71.0% of our total revenue, yet the motor fuel gross margin represented only about 26.5% of our
overall gross profits. In fiscal 2012, a change of one cent per gallon would have resulted in a change of approximately
$46.0 million in the motor fuel gross profit, with a corresponding approximate impact on net earnings of $0.19 per
share on a diluted basis. To react as promplty as possible to motor fuel retail price fluctuations, we implemented a
price management policy and entered into commercial agreements that guarantee supply consistency to a certain
extent.
Electronic payment modes. We are exposed to significant fluctuations in expenses related to electronic payment
modes resulting from large changes in motor fuel retail prices particularly in our U.S. markets because the majority of
this expense is based on a percentage of the retail prices of motor fuel. For example, for fiscal 2012, for each ten-cent
fluctuation in the retail price of a gallon of motor fuel, the expense associated with electronic payment modes would
have varied by approximately $5.9 million, with a corresponding approximate impact on net earnings of $0.02 per
share on a diluted basis. We regularly analyze various opportunities that would allow us to mitigate the risks
associated with expenses related to electronic payment modes.
Seasonality and natural disasters. Weather conditions can have an impact on our revenues as historical purchase
patterns indicate that our customers increase their transactions and also purchase higher margin items when weather
conditions are favourable. Accordingly, we keep apprised of client needs and maintain an innovative approach to
marketing and promotional campaigns. We have operations in the Southeast and Westcoast regions of the United
States and although these regions are generally known for their mild weather, these regions are susceptible to severe
storms including hurricanes as well as earthquakes in the Westcoast region and other natural disasters.
Economic conditions. Our revenues may be negatively influenced by changes in regional or local economic variables
and consumer confidence. Changes in economic conditions could adversely affect consumer spending patterns, travel
and tourism in certain of our market areas. While it is not feasible to determine the breadth or length of recessions, we
adjust our merchandising strategies to economic conditions and promote constant innovation in commercial practices
while maintaining tight control over our expenses and balance sheet.
Tobacco products. Tobacco products represent our largest product category of merchandise and service revenues.
For fiscal 2012, revenues of tobacco products were approximately 36.5% of total merchandise and service revenues.
Significant increases in wholesale cigarette costs and a tax increase on tobacco products, as well as current and
future legislation and national and local campaigns to discourage smoking in the United States and Canada, may have
an adverse impact on the demand for tobacco products, and therefore affect our revenues and profits in light of the
competitive landscape and consumer sensitivity to the price of such products.
Alimentation Couche-Tard Inc. / 38
In addition, we sell brands of cigarettes that are manufactured to be sold by the Corporation on an exclusive basis and
we could be sued for health problems caused by the use of tobacco products. In fact, various health-related legal
actions, proceedings and claims arising out of the sale, distribution, manufacture, development, advertising and
marketing of cigarettes have been brought against vendors of tobacco products. Any unfavourable verdict against us
in an health-related suit could adversely affect our financial condition and ability to pay interest and principal on our
debts. As per accounting standards, we have not established any reserves for the payment of expenses or adverse
results related to any potential health-related litigation.
Competition. The industries and geographic areas in which we operate are highly competitive and marked by a
constant change in terms of the number and type of retailers offering the products and services found in our stores.
We compete with other convenience store chains, independent convenience stores, gas station operators, large and
small food retailers, local pharmacies and pharmacy chains. Over the years, we expanded our network by selecting
choice locations while developing an expertise in our market niche, namely by investing in the improvement of our
stores, further supported by merchandising strategies tailored to our various markets. These strategies are driven by a
diversified selection of proprietary brand products, loyalty progams for clients as well as special focus on customer
service in order to secure a competitive advantage. Accordingly, we keep a close eye on competitors, changes in
market trends and our market share towards reacting in a timely manner and maintaining our competitive position. We
believe the choice location of our stores make it more difficult for new competitors to penetrate our markets.
Environment. Our operations are subject to a variety of environmental laws and regulations, including those relating to
emissions to the air, discharges into water, releases of hazardous and toxic substances and remediation of
contaminated sites. Under various federal, provincial, state and local laws and regulations, we may, as the owner or
operator, be liable for the costs of removal or remediation of contamination at our current stores or our former stores,
whether or not we knew of, or were responsible for, the presence of such contamination. In this respect, we
proactively seek means to limit the environmental impact of our activities and adopt sustainable processes. We
regularly monitor our facilities for environmental contamination and take reserves on our financial statements to cover
potential environmental remediation and compliance costs, as we consider appropriate.
In each of the US states in which we operate, except Michigan, Iowa, Florida, Arizona, Texas and Washington State,
there is a state fund to cover the cost of certain rehabilitation and removing of motor fuel tanks. These state funds
provide insurance for motor fuel facilities operations to cover the cost of cleaning up contamination to the environment
caused by the usage of underground motor fuel equipment. Underground motor fuel storage tank registration fees and
a motor fuel tax in each of the states finance the trust funds. We pay the registration fees and remit the sales taxes to
the states where we are a member of the trust fund. Insurance coverage is different in the various states.
Acquisitions. Acquisitions have been a significant part of our growth strategy. We expect to continue to selectively
seek strategic acquisitions in the future. Our ability to consummate and to integrate effectively any future acquisitions
on terms that are favourable to us may be limited by the number of attractive acquisition targets, internal demands on
our resources and, to the extent necessary, our ability to obtain financing on satisfactory terms for larger acquisitions,
if at all. Although we have historically performed a due diligence investigation of the businesses or assets that we
acquire and anticipate continuing to do so for future acquisitions, there may be liabilities of the acquired business or
assets that we fail or are unable to uncover during our due diligence investigation and for which we, as a successor
owner, may be responsible. When feasible, we seek to minimize the impact of these types of potential liabilities by
obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment
of a portion of the purchase price.
Legislative and regulatory requirements. Our business and properties are subject to governmental laws and
regulations including, but not limited to, employment laws and regulations, regulations governing the sale of alcohol
and tobacco, minimum wage requirements and other laws and regulations such as applicable tax laws and
regulations. Any change in the legislation or regulations described above that is adverse to our properties and us
could affect our operating and financial performance.
Interest rates. The Corporation is exposed to interest rate fluctuations associated with changes in the short-term
interest rate. We carry a debt with a portion of approximately $650.0 million which bears interest at floating rates. By
applying interest rates as they were in effect on April 29, 2012 to our current debt, our total interest expense would be
approximately $7.2 million. A one-percentage point increase in interest rates would increase our total annual interest
expense by $6.5 million or $0.03 per share on a diluted basis. We do not currently use derivative instruments to
mitigate this risk. However, we regularly analyze our interest rate exposure. Various scenarios are simulated, including
refinancing, the renewal of existing positions, alternative loans and hedges as well as our ability to deal with interest
rate fluctuations.
Alimentation Couche-Tard Inc. / 39
Liquidity. Liquidity risk is the risk that we will encounter difficulties in meeting our obligations associated with financial
liabilities and lease commitments. We are exposed to this risk mainly through our long-term debt, accounts payable
and accrued expenses and our lease agreements. Our liquidities are provided mainly by cash flows from operating
activities and borrowings available under our revolving credit facilities.
On an ongoing basis, we monitor rolling forecasts of our liquidity reserve on the basis of expected cash flows taking
into account operating needs, tax situation and capital requirements and ensure that we have sufficient flexibility under
our available liquidity resources to meet our obligations. As at April 29, 2012, we had $304.3 million in cash while $1.5
billion were available under our credit facilities of which approximatly $840.7 million were unused. A $520.0 million
tranche of our credit facilities will expire in September 2012 while the other tranche of $1.0 billion will mature in
December 2016.
Lawsuits. In the ordinary course of business, Couche-Tard is a defendant in a number of legal proceedings, suits, and
claims common to companies engaged in retail business. We mitigate this risk through available insurance coverage,
among others. We regularly monitor lawsuits and create reserves, as needed, in our financial results to cover potential
estimated cost.
Insurance. We carry comprehensive liability, fire and extended coverage insurance on most of our facilities, with policy
specifications and insured limits customarily carried in our industry for similar properties. Some types of losses, such
as losses resulting from wars, acts of terrorism, or natural disasters, generally are not insured because they are either
uninsurable or not economically practical. To cover the potential cost of this risk, we provide reserves, as needed, in
our financial statements for the portion of losses that is uninsured or whose deductible is very high.
Acts of war or terrorism. Acts of war and terrorism could impact general economic conditions and the supply and price
of crude oil. Such events could impact our revenues, operating results and financial situation.
Exchange rate. Most of our consolidated revenues and expenses are received or denominated in the functional
currency of the markets in which we do business. Accordingly, our sensitivity to variations in foreign exchange rates is
economically limited.
We are also exposed to foreign currency risk with respect to a portion of our long-term debt denominated in US
dollars. As at April 29, 2012, everything else being equal, a hypothetical variation of 5.0% of the US dollar against the
Canadian dollar would have had a net impact of $21.5 million on other comprehensive income.
Furthermore, as at April 29, 2012 we were exposed to foreign currency risk with respect to our potential acquisition of
Statoil Fuel & Retail ASA for which the purchase price would be denominated in Norwegian kroners (“NOK”) and
would be financed using our acquisition facility denominated in US dollars. As at April 29, 2012, we had forwards
requiring us to deliver US dollars in exchange for NOK. As at April 29, 2012, with all other variables held constant, a
hypothetical variation of 1.0% of the NOK against the US dollar would have had an impact of approximately $16.5 on
net earnings.
Outlook
During fiscal year 2013, we expect to pursue our investments with caution in order to, amongst other things, improve
our network. We also intend to keep an ongoing focus on our sales, supply terms and operating expenses while
keeping an eye on growth opportunities that may be available to us.
We will pay special attention to the integration of Statoil Fuel & Retail. To do this, we have formed a multidisciplinary
team that will ensure an effective integration and will identify opportunities for improvement, including available
synergies. Within this framework, we will also put in place strategies that will enable us to reduce our debt levels in
order to regain our financial flexibility and maintain the quality of our credit profile.
Finally, in line with our business model, we intend to continue to focus our resources on the sale of fresh products and
on innovation, including the introduction of new products and services, in order to satisfy the needs of our large
clientele.
July 10, 2012
Alimentation Couche-Tard Inc. / 40
MANAGEMENT’S REPORT
The consolidated financial statements of Alimentation Couche-Tard Inc. and the financial information contained in this
Annual Report are the responsibility of management. This responsibility is applied through a judicious choice of
accounting procedures and principles, the application of which requires the informed judgment of management. The
consolidated financial statements were prepared according to International Financial Reporting Standards and were
approved by the Board of Directors. In addition, the financial information included in the Annual Report is consistent with
the consolidated financial statements.
Alimentation Couche-Tard Inc. maintains accounting and administrative control systems which, in the opinion of
management, ensure reasonable accuracy, relevance and reliability of financial information and well-ordered, efficient
management of the Corporation’s affairs.
The Board of Directors is responsible for approving the consolidated financial statements included in this Annual Report,
primarily through its Audit Committee. This Committee, which holds periodic meetings with members of management as
well as with the external auditors, reviewed the consolidated financial statements of Alimentation Couche-Tard Inc. and
recommended their approval to the Board of Directors.
The consolidated financial statements for the fiscal years ended April 29, 2012 and April 24, 2011, as well as the April 26,
2010 opening balance sheet were audited by PricewaterhouseCoopers LLP, chartered professional accountants, and
their report indicates the extent of their audit and their opinion on the consolidated financial statements.
July 10, 2012
Alain Bouchard
President and
Chief Executive Officer
Raymond Paré
Vice-President and
Chief Financial Officer
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting for
Alimentation Couche-Tard Inc, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934
(United States) and Canadian securities regulations. With our participation management carried out an evaluation of the
effectiveness of our internal control over financial reporting, as of the end of our fiscal year ended April 29, 2012. The
framework on which such evaluation was based is contained in the report entitled Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). This
evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of
the operating effectiveness of controls and a conclusion on this evaluation. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on this evaluation,
management concluded that Alimentation Couche-Tard Inc.’s internal control over financial reporting was effective as at
April 29, 2012.
PricewaterhouseCoopers LLP, chartered professional accountants, audited Alimentation Couche-Tard Inc.’s internal
control over financial reporting as at April 29, 2012 and have issued their unqualified opinion thereon, which is included
herein.
July 10, 2012
Alain Bouchard
President and
Chief Executive Officer
Raymond Paré
Vice-President and
Chief Financial Officer
Alimentation Couche-Tard Inc. / 41
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Alimentation Couche-Tard Inc.
July 10, 2012
We have completed an integrated audit of Alimentation Couche-Tard Inc and its subsidiaries consolidated financial
statements for the fiscal year ended April 29, 2012 and its internal control over financial reporting as at April 29, 2012 and
an audit of their consolidated financial statements for the fiscal year ended April 24, 2011. Our opinions, based on our
audits, are presented below.
Consolidated financial statements
We have audited the accompanying consolidated financial statements of Alimentation Couche-Tard Inc. and its
subsidiaries, which comprise the consolidated balance sheets as at April 29, 2012, April 24, 2011 and April 26, 2010 and
the consolidated statements of earnings, comprehensive income, changes in shareholders’ equity and cash flows for the
fiscal years ended April 29, 2012 and April 24, 2011, and the related notes, which comprise a summary of significant
accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply
with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion on the consolidated financial statements.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Alimentation Couche-Tard Inc. and its subsidiaries as at April 29, 2012, April 24, 2011 and April 26, 2010 and their
financial performance and their cash flows for fiscal years ended April 29, 2012 and April 24, 2011 in accordance with
International Financial Reporting Standards.
Report on internal control over financial reporting
We have also audited the effectiveness of Alimentation Couche-Tard Inc. and its subsidiaries internal control over
financial reporting as at April 29, 2012.
Management’s responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control Over Financial Reporting.
Alimentation Couche-Tard Inc. / 42
Auditor’s responsibility
Our responsibility is to express an opinion, based on our audit, on whether the company’s internal control over financial
reporting was effectively maintained in accordance with criteria established in Internal Control - Integrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We conducted our audit in accordance with the standard for audits of internal control over financial reporting set out in the
CICA Handbook – Assurance. This standard requires that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the
circumstances.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Definition of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
Canadian generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with Canadian generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Opinion
In our opinion, Alimentation Couche-Tard Inc. and its subsidiaries maintained, in all material respects, effective internal
control over financial reporting as at April 29, 2012 in accordance with criteria established in Internal Control - Integrated
Framework, issued by COSO.
Inherent limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may
deteriorate.
PricewaterhouseCoopers LLP1
Montreal, Canada
1 CPA auditor, CA, public accountancy permit No. A119427
Alimentation Couche-Tard Inc. / 43
CONSOLIDATED STATEMENTS OF EARNINGS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars (Note 2), except per share amounts)
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses (Note 6)
Depreciation and amortization of property and equipment and other assets
Operating income
Share of earnings of a joint venture accounted for using the equity method (Note 5)
Financial expenses (Note 8)
Financial revenues (Note 8)
Gain on foreign exchange forward contracts (Note 24)
Net financial (revenues) expenses (Note 8)
Earnings before income taxes
Income taxes (Note 9)
Net earnings
Net earnings per share (Note 10)
Basic
Diluted
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars (Note 2), except per share amounts)
Net earnings
Other Comprehensive income
Changes in cumulative translation adjustments (1)
Change in fair value of a financial instrument designated as a cash flow hedge (2)
Gain realized on a financial instrument designated as a cash flow hedge transferred to earnings (3)
Gain realized on the disposal of an available-for-sale financial instrument transferred to earnings (4)
Net actuarial losses (Note 23) (5)
Other comprehensive income
Comprehensive income
2012
(53 weeks)
$
22,997.5
20,028.4
2011
(52 weeks)
$
18,550.4
15,804.7
2,969.1
2,745.7
2,151.7
239.8
2,391.5
577.6
21.6
13.5
(1.2)
(17.0)
(4.7)
603.9
146.3
457.6
2.54
2.49
2,028.9
213.7
2,242.6
503.1
16.9
31.4
(1.8)
-
29.6
490.4
121.2
369.2
2.00
1.96
2012
(53 weeks)
$
457.6
2011
(52 weeks)
$
369.2
(26.4)
5.9
(5.1)
(0.6)
(4.9)
(31.1)
426.5
40.1
2.0
(1.3)
-
(1.2)
39.6
408.8
(1)
(2)
(3)
(4)
(5)
For the fiscal years ended April 29, 2012 and April 24, 2011 these amounts include a loss of $10.5 and a gain of $17.2, respectively,
arising from the translation of US dollar denominated long-term debt designated as a foreign exchange hedge of the Corporation’s net
investment in its US operations (net of income taxes of $1.6 and $2.5, respectively).
For the fiscal years ended April 29, 2012 and April 24, 2011 these amounts are net of income taxes of $1.9 and $0.6, respectively.
For the fiscal years ended April 29, 2012 and April 24, 2011 these amounts are net of income taxes of $1.6 and $0.4, respectively.
This amount is net of income taxes.
For the fiscal years ended April 29, 2012 and April 24, 2011 these amounts are net of income taxes of $1.7 and $0.6, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
Alimentation Couche-Tard Inc. / 44
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars (Note 2))
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive income
Total comprehensive income
Dividends
Stock option-based compensation expense (Note 22)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Repurchase and cancellation of shares (Note 21)
Excess of acquisition cost over book value of Class A
multiple voting shares and Class B subordinate voting
shares repurchased and cancelled
Capital
stock
$
323.8
Contributed
surplus
$
19.3
0.4
(1.8)
1.8
19.2
(23.8)
Balance, end of year
321.0
17.9
Accumulated
other
comprehensive
income (1)
$
40.0
(31.1)
Retained
earnings
$
1,596.3
457.6
(49.8)
2012
(53 weeks)
Shareholders’
equity
$
1,979.4
457.6
(31.1)
426.5
(49.8)
0.4
-
19.2
(23.8)
(177.3)
1,826.8
8.9
(177.3)
2,174.6
(1) The year-end balance comprises $13.1 for cumulative translation adjustments, $1.9 for the cumulative fair value variation of a financial
instrument designated as a cash flow hedge (net of income taxes of $0.6) and $6.1 for cumulative net actuarial losses (net of income
taxes of $2.3).
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive income
Total comprehensive income
Dividends
Stock option-based compensation expense (Note 22)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Repurchase and cancellation of shares (Note 21)
Excess of acquisition cost over book value of Class A
multiple voting shares and Class B subordinate voting
shares repurchased and cancelled
Capital
stock
$
319.5
Contributed
surplus
$
20.4
1.1
(2.2)
2.2
11.4
(9.3)
Balance, end of year
323.8
19.3
Accumulated
other
comprehensive
income (2)
$
0.4
39.6
Retained
earnings
$
1,319.7
369.2
(32.8)
2011
(52 weeks)
Shareholders’
equity
$
1,660.0
369.2
39.6
408.8
(32.8)
1.1
-
11.4
(9.3)
(59.8)
1,596.3
40.0
(59.8)
1,979.4
(2) The year-end balance comprises $40.1 for cumulative translation adjustments, $1.1 for the cumulative fair value variation of a financial
instrument designated as a cash flow hedge (net of income taxes of $0.4) and $1.2 for cumulative net actuarial losses (net of income
taxes of $0.4).
The accompanying notes are an integral part of the consolidated financial statements.
Alimentation Couche-Tard Inc. / 45
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars (Note 2))
Operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization of property and equipment and other assets, net of
amortization of deferred credits
Deferred income taxes
Gain on foreign exchange forward contracts (Note 24)
Share of earnings (net of dividends received) of a joint venture accounted for using
the equity method (Note 5)
Deferred credits
Loss on disposal of property and equipment and other assets
Negative goodwill (Note 4)
Deemed interest on repayment of subordinated unsecured debt (Note 18)
Gain on early redemption of subordinated unsecured debt (Note 18)
Other
Changes in non-cash working capital (Note 11)
Net cash provided by operating activities
Investing activities
Business acquisitions (Note 4)
Purchases of property and equipment and other assets
Proceeds from disposal of property and equipment and other assets
Restricted cash
Proceeds from sale and leaseback transactions
Net cash used in investing activities
Financing activities
Repurchase of shares (Note 21)
Net increase in other debt (Note 18)
Cash dividends paid
Issuance of shares
Early redemption of subordinated unsecured debt (Note 18)
Net cash used in financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information:
Interest paid
Interest and dividends received
Income taxes paid
Cash and cash equivalents components :
Cash and demand deposits
Liquid investments
The accompanying notes are an integral part of the consolidated financial statements.
2012
(53 weeks)
$
2011
(52 weeks)
$
457.6
199.7
24.2
(17.0)
(16.8)
10.7
9.8
(6.9)
-
-
17.8
84.7
763.8
(380.3)
(316.6)
27.8
(22.7)
-
(691.8)
(201.1)
157.1
(49.8)
19.2
-
(74.6)
(2.8)
(5.4)
309.7
304.3
7.3
6.1
91.1
253.5
50.8
304.3
369.2
188.5
57.9
-
(6.1)
0.7
4.7
-
(17.4)
(1.4)
22.4
(10.2)
608.3
(37.8)
(220.1)
22.0
-
5.1
(230.8)
(69.1)
132.7
(32.8)
11.4
(332.6)
(290.4)
6.9
94.0
215.7
309.7
31.8
12.5
93.0
258.1
51.6
309.7
Alimentation Couche-Tard Inc. / 46
CONSOLIDATED BALANCE SHEETS
as at April 29, 2012, April 24, 2011 and April 26, 2010
(in millions of US dollars (Note 2))
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable (Note 12)
Inventories (Note 13)
Prepaid expenses
Foreign exchange forward contracts (Note 24)
Income taxes receivable
Property and equipment (Note 14)
Goodwill (Note 15)
Intangible assets (Note 15)
Other assets (Note 16)
Investment in a joint venture (Note 5)
Deferred income taxes (Note 9)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 17)
Provisions (Note 20)
Income taxes payable
Current portion of long-term debt (Note 18)
Long-term debt (Note 18)
Provisions (Note 20)
Deferred credits and other liabilities (Note 19)
Deferred income taxes (Note 9)
Shareholders’ equity
Capital stock (Note 21)
Contributed surplus
Retained earnings
Accumulated other comprehensive income
The accompanying notes are an integral part of the consolidated financial statements.
On behalf of the Board,
Alain Bouchard
Director
Réal Plourde
Director
2012
$
304.3
22.7
420.7
543.9
28.6
17.2
-
1,337.4
2,248.3
502.9
217.0
68.2
65.0
14.4
4,453.2
1,025.7
50.1
6.6
484.4
1,566,8
180.8
107.5
161.4
262.1
2,278.6
321.0
17.9
1,826.8
8.9
2,174.6
4,453.2
2011
$
309.7
-
349.1
526.0
21.0
-
36.4
1,242.2
1,935.4
440.9
188.6
58.0
48.2
12.9
3,926.2
936.5
36.3
-
4.6
977.4
496.9
88.7
139.5
244.3
1,946.8
323.8
19.3
1,596.3
40.0
1,979.4
3,926.2
2010
$
215.7
-
280.8
469.9
20.0
-
17.7
1,004.1
1,914.9
425.3
188.2
55.8
42.1
8.6
3,639.0
821.7
31.4
-
4.4
857.5
711.9
87.7
128.0
193.9
1,979.0
319.5
20.4
1,319.7
0.4
1,660.0
3,639.0
Alimentation Couche-Tard Inc. / 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
1. Governing statutes and nature of operations
Alimentation Couche-Tard Inc. (the “Corporation”) is incorporated under the Business Corporations Act (Quebec). The Corporation’s head office is located in
Laval, at 4204 Boulevard Industriel, Quebec, Canada.
As at April 29, 2012, the Corporation owns and licenses 5,803 convenience stores across North America, of which 4,539 are company-operated, and
generates income primarily from the sales of tobacco products, grocery items, beverages, fresh food offerings, including quick service restaurants, other
products and services and motor fuel.
2. Basis of presentation
Year-end date
The Corporation’s year-end is the last Sunday of April of each year. The fiscal years ended April 29, 2012 and April 24, 2011 are referred to as 2012 and
2011. The fiscal year ended April 29, 2012 had 53 weeks (52 weeks in 2011).
Basis of presentation
The Corporation prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles as set out in the
Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International
Financial Reporting Standards (“IFRS’’), and requires publicly accountable enterprises to apply such standards effective for fiscal years beginning on or
after January 1, 2011. In these consolidated financial statements, the term “Canadian GAAP” refers to Canadian Generally Accepted Accounting
Principles before the adoption of IFRS.
These consolidated financial statements are the Corporation’s first annual consolidated financial statements prepared in accordance with IFRS, as issued by
the International Accounting Standards Board (“IASB”). The Corporation adopted IFRS in accordance with IFRS 1 “First-time Adoption of International
Financial Reporting Standards”. In accordance with IFRS, the Corporation has:
-
-
-
provided comparative financial information;
applied the same accounting policies throughout all reporting periods presented (except for certain exemptions applicable for first-time IFRS
adopters applied and disclosed in Note 29); and
retrospectively applied all IFRS standards issued as of July 10, 2012 (with an effective date before April 29, 2012), the date on which the Board
of Directors approved the consolidated financial statements.
The Corporation's consolidated financial statements were previously prepared in accordance with Canadian GAAP. Canadian GAAP differs in some areas
from IFRS. In preparing these consolidated financial statements in accordance with IFRS, management has amended certain accounting, measurement and
consolidation methods previously applied in its consolidated financial statements prepared under Canadian GAAP. Note 29 presents line-by-line
reconciliations of the comparative balance sheet as at April 24, 2011 and the opening balance sheet as at April 26, 2010, a reconciliation of net earnings
and comprehensive income for the fiscal year ended April 24, 2011, as well as a description of the effect of the transition from Canadian GAAP to IFRS
on these items.
Reporting currency
The parent corporation’s functional currency is the Canadian dollar. However, the Corporation uses the US dollar as its reporting currency to provide more
relevant information considering its predominant operations in the United States and its debt largely denominated in US dollars.
Approval of the financial statements
The Corporation’s consolidated financial statements were approved on July 10, 2012 by the board of directors who also approved their publication.
3. Accounting policies
Use of estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, management reviews its estimates, including
those relating to supplier rebates, provisions, income taxes, lease accounting and purchase price allocation, based on available information. These estimates
are based on management’s best knowledge of current events and actions that the Corporation may undertake in the future. Actual results could differ from
those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries, all of which are wholly owned. They also include the
Corporation’s share of earnings of a joint venture accounted for using the equity method. All intercompany balances and transactions have been
eliminated on consolidation.
Subsidiaries are entities over which the Corporation has control, where control is defined as the power to govern financial and operating policies. The
Corporation has directly or indirectly a shareholding of 100% of the voting rights in its subsidiaries. The effect of potential voting rights that are currently
exercisable is considered when assessing whether control exists. These criteria are reassessed regularly and subsidiaries are fully consolidated from
the date control is transferred to the Corporation, and are deconsolidated from the date control ceases.
Alimentation Couche-Tard Inc. / 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Foreign currency translation
Functional currency
The functional currency of the parent corporation and its Canadian operations is the Canadian dollar while that of the US operations is the US dollar.
Foreign currency transactions
Transactions denominated in foreign currencies are translated into the relevant functional currency as follows: Monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date and revenues and expenses are translated at the average exchange rate on a 4-
week period basis. Non-monetary assets and liabilities are translated at historical rates or at the rate on the date they were valued at fair value. Gains
and losses arising from such translation, if any, are reflected in the consolidated statement of earnings except when deferred in equity as qualifying net
investment hedge.
Consolidation and foreign operations
The consolidated financial statements are consolidated in Canadian dollars using the following procedure: Assets and liabilities of the US operations are
translated into Canadian dollars using the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average
exchange rate on a 4-week period basis. Gains and losses arising from such translation are included in Accumulated other comprehensive income in
Shareholders’ equity.
Reporting currency
The Corporation has adopted the US dollar as its reporting currency. The Canadian dollar consolidated financial statements are translated into the
reporting currency using the procedure described above. Capital stock, Contributed surplus and Retained earnings are translated using historical rates.
Non-monetary assets at fair value are translated at the rate on the date on which their fair value was determined. Gains and losses arising from
translation are included in Accumulated other comprehensive income in Shareholders' equity.
Net earnings per share
Basic net earnings per share is calculated by dividing the net earnings available to Class A and Class B shareholders by the weighted average number
of Class A and Class B shares outstanding during the year. Diluted net earnings per share is calculated using the average weighted number of shares
outstanding plus the weighted average number of shares that would be issued upon the conversion of all potential dilutive stock-options into common
shares.
Revenue recognition
For its two major product categories, merchandise and services and motor fuel, the Corporation recognizes revenue at the point of sale. Merchandise sales
primarily comprise the sale of tobacco products, grocery items, candy and snacks, beverages, beer, wine and fresh food offerings, including quick service
restaurants.
Service revenues include the commission on sale of lottery tickets and issuance of money orders, fees from automatic teller machines, sales of calling cards
and gift cards, fees for cashing cheques, sales of postage stamps and bus tickets and car wash revenues. These revenues are recognized at the time of the
transaction. Service revenues also include franchise and license fees, which are recognized in revenues over the period of the agreement to which the fees
relate as well as royalties from franchisees and licensees, which are recognized periodically based on sales reported by franchise and license operators.
Cost of sales and vendor rebates
Cost of sales mainly comprise the cost of merchandise and motor fuel sold including applicable freight less vendor rebates.
The Corporation records cash received from vendors related to vendor rebates as a reduction in the price of the vendors’ products and reflects them as a
reduction of cost of sales and related inventory in its consolidated statements of earnings and balance sheets when it is probable that they will be received.
Amounts received but not yet earned are presented in deferred credits.
Operating, selling, administrative and general expenses
The main items comprising Operating, selling, administrative and general expenses are labour, building occupancy costs, credit and debit card fees and
overhead.
Cash and cash equivalents
Cash includes cash and demand deposits. Cash equivalents include highly liquid investments that can be readily converted into cash for a fixed amount and
that mature less than three months from the date of acquisition.
Restricted cash
Restricted cash comprises escrow deposits for pending acquisitions.
Inventories
Inventories are valued at the lesser of cost and net realizable value. Cost of merchandise - distribution centres is determined according to the first-in, first-out
method, the cost of merchandise - retail is valued based on the retail price less a normal margin and the cost of motor fuel inventory is determined according
to the average cost method.
Alimentation Couche-Tard Inc. / 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Income taxes
The income tax expense recorded to earnings is the sum of the deferred income taxes and current income taxes that are not recognized in Other
comprehensive income or directly to Shareholders’ equity.
The Corporation uses the balance sheet liability method to account for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the carrying amounts and tax bases of assets and liabilities using enacted or substantively enacted tax rates
and laws, as appropriate, at the date of the consolidated financial statements for the years in which the temporary differences are expected to reverse.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be
realized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and interests in joint ventures,
except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only
recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Corporation intends to settle its current tax assets and liabilities on a net basis.
Property and equipment, depreciation and amortization and impairment
Property and equipment are stated at cost less accumulated depreciation and are depreciated over their estimated useful lives using the straight-line
method based on the following periods:
Buildings and building components
Equipment
Buildings under finance leases
Equipment under finance leases
3 to 40 years
3 to 40 years
Lease term
Lease term
Building components include air conditioning and heating systems, plumbing and electrical fixtures. Equipment includes signage, fuel equipment and in-
store equipment.
Leasehold improvements and property and equipment on leased properties are amortized and depreciated over the lesser of their useful lives and the
term of the lease.
Property and equipment are tested for impairment should events or circumstances indicate that their book value may not be recoverable, as measured
by comparing their net book value to their recoverable amount which corresponds to the higher of fair value less costs to sell and value in use of the
asset or cash-generating unit. Should the carrying amount of property and equipment exceed their recoverable amount, an impairment loss in the
amount of the excess would be recognized.
The Corporation performs an annual evaluation of residual values, estimated useful lives and depreciation methods used for property and equipment
and any change resulting from this evaluation is applied prospectively by the Corporation.
Goodwill
Goodwill is the excess of the cost of an acquired business over the fair value of underlying net assets acquired from the business at the time of
acquisition. Goodwill is not amortized. Rather it is tested for impairment annually during the Corporation’s first quarter, or more frequently should events
or changes in circumstances indicate that it might be impaired. Should the carrying amount of a cash-generating unit’s goodwill exceed its recoverable
amount, an impairment loss would be recognized.
Intangible assets
Intangible assets mainly comprise trademarks, motor fuel supply agreements and licenses. Trademarks and licenses have indefinite lives since they do
not expire, are recorded at cost, are not amortized and are tested for impairment annually during the first quarter, or more frequently should events or
changes in circumstances indicate that they might be impaired. Motor fuel supply agreements are recorded at cost and are amortized using the straight-
line method over the term of the agreements. Other intangible assets are amortized using the straight-line method over a period of five to ten years.
Deferred charges
Deferred charges are mainly expenses incurred in connection with the analysis and signing of the Corporation’s revolving unsecured operating credits
amortized using the straight-line method over the period of the corresponding contract. Deferred charges also include expenses incurred in connection
with the analysis and signing of operating leases which are deferred and amortized on a straight-line basis over the lease term. Other deferred charges
are amortized on a straight-line basis over periods of five to seven years.
Alimentation Couche-Tard Inc. / 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Rent expense
The Corporation accounts for finance leases in instances where it has acquired substantially all the benefits and risks incidental to ownership of the
leased property. In some cases, the lease transaction is not always conclusive, and management uses judgment in determining whether the lease is a
finance lease arrangement that transfers substantially all the risks and benefits incidental to ownership. The cost of assets under finance leases
represents the present value of minimum lease payments or the fair value of the leased property, whichever is lower, and is amortized on a straight-line
basis over the term of the lease or useful life of the asset, whichever is shorter. Assets under finance leases are presented under Property and
equipment in the consolidated balance sheet.
Leases that do not transfer substantially all the benefits and risks incidental to ownership of the property are accounted for as operating leases. When a
lease contains a predetermined fixed escalation of the minimum rent, the Corporation recognizes the related rent expense on a straight-line basis over
the term of the lease and, consequently, records the difference between the recognized rental expense and the amounts payable under the lease as
deferred rent expense.
The Corporation also receives tenant allowances, which are amortized on a straight-line basis over the term of the lease or useful life of the asset,
whichever is shorter.
Gains and losses resulting from sale and leaseback transactions are recorded in the consolidated statements of earnings at the transaction date except
if:
the sale price is below fair value and the loss is compensated for by future lease payments below market price, in which case it shall be deferred
and amortized in proportion to the lease payments over the period during which the asset is expected to be used; or
the sale price is above fair value, in which case the excess shall be deferred and amortized over the period during which the asset is expected to
be used.
Financing costs
Financing costs related to term loans are included in the initial carrying amount of the corresponding debt and are amortized using the effective interest rate
method that is based on the estimated cash flow over the expected life of the liability. Financing costs related to revolving loans are included in other assets
and are amortized using the straight-line method over the expected life of the underlying agreement.
Stock-based compensation and other stock-based payments
Stock-based compensation costs are measured at the grant date of the award based on the fair value method for all transactions entered into starting in
fiscal year 2003.
The fair value of stock options is recognized over the vesting period of each respective vesting portion as compensation expense with a corresponding
increase in contributed surplus. When stock options are exercised, the corresponding contributed surplus is transferred to capital stock.
The Phantom Stock Units (“PSU”) compensation cost and the related liability are recorded on a straight-line basis over the corresponding vesting period
based on the fair market value of Class B shares and the best estimate of the number of PSUs that will ultimately be paid. The recorded liability is
adjusted periodically to reflect any variation in the fair market value of the Class B shares and revisions to the estimated number of PSUs that will
ultimately be paid.
Employee future benefits
The Corporation accrues its obligations under employee pension plans and the related costs, net of plan assets. The Corporation has adopted the following
accounting policies with respect to the defined benefit plans:
The accrued benefit obligations and the cost of pension benefits earned by active employees are actuarially determined using the projected unit
credit method pro-rated on service and pension expense is recorded in earnings as the services are rendered by active employees. The
calculations reflect management’s best estimate of expected plan investment performance, salary escalation and retirement ages of employees;
The discount rate on the benefit obligation is equal to the yield at the measurement date on high quality corporate bonds that have maturity dates
approximating the terms of the Corporation’s obligations;
For the purpose of calculating the expected return on plan assets, those assets are valued at fair value;
Actuarial gains and losses arise from the difference between the actual long-term rate of return on plan assets for a period and the expected
long-term rate of return on plan assets for that period or from changes in actuarial assumptions used to determine the accrued benefit obligation.
Actuarial gains and losses are recognized in Other comprehensive income without impact on net earnings;
Past service costs are amortized on a straight-line basis over the average remaining period until the benefits become vested.
The pension cost recorded in net earnings for the defined contribution plan is equivalent to the contribution which the Corporation is required to pay in
exchange for services provided by the employees.
Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive) as a result of a past event, it is probable that the Corporation
will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best
estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.
Alimentation Couche-Tard Inc. / 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist where the
Corporation has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it. In order to determine the initial recorded liability, the present value of estimated future cash flows is calculated using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the liability.
Environmental costs
The Corporation provides for estimated future site remediation costs to meet government standards for known site contaminations when such costs can be
reasonably estimated. Estimates of the anticipated future costs for remediation activities at such sites are based on the Corporation’s prior experience with
remediation sites and consideration of other factors such as the condition of the site contamination, location of sites and experience with contractors that
perform the environmental assessments and remediation work. In order to determine the initial recorded liability, the present value of estimated future cash
flows was calculated using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Asset retirement obligations
Asset retirement obligations relate to estimated future costs to remove underground motor fuel storage tanks and are based on the Corporation’s prior
experience in removing these tanks, estimated tank useful life, lease terms for those tanks installed on leased properties, external estimates and
governmental regulatory requirements. A discounted liability is recorded for the fair value of an asset retirement obligation with a corresponding increase to
the carrying value of the related long-lived asset at the time an underground storage tank is installed. To determine the initial recorded liability, the future
estimated cash flows are discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
liability. The amount added to property and equipment is amortized and an accretion expense is recognized in connection with the discounted liability over
the remaining life of the tank or lease term for leased properties.
Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased to reflect the passage of time and then
adjusted for variations in the current market-based discount rate or the scheduled underlying cash flows required to settle the liability.
Obligations related to general liability and workers’ compensation
In the United States, the Corporation is self-insured for certain losses related to general liability and workers’ compensation. The expected ultimate cost for
claims incurred as of the balance sheet date is discounted and is recognized as a liability. This cost is estimated based on analysis of the Corporation’s
historical data and actuarial estimates. In order to determine the initial recorded liability, the present value of estimated future cash flows is calculated using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Financial instruments recognition and measurement
The Corporation has made the following classifications for its financial assets and liabilities:
Financial assets and liabilities
Cash and cash equivalents
Restricted cash
Accounts receivable
Investments in publicly-traded securities Available for sale
Bank indebtedness and long-term debt Other financial liabilities
Accounts payable and accrued liabilities Other financial liabilities
Classification
Loans and receivables
Loans and receivables
Loans and receivables
Subsequent measurement (1)
Amortized cost
Amortized cost
Amortized cost
Fair value
Amortized cost
Amortized cost
Classification of gains and losses
Net earnings
Net earnings
Net earnings
Other comprehensive income
Net earnings
Net earnings
(1) Initial measurement of all financial assets and liabilities is at fair value.
Hedging and derivative financial instruments
Embedded total return swap
The Corporation uses an investment contract which includes an embedded total return swap to manage current and forecasted risks related to changes in
the fair value of the PSUs granted by the Corporation. The embedded total return swap is recorded at fair value on the consolidated balance sheet under
other assets.
The Corporation has documented and designated the embedded total return swap as a cash flow hedge of the anticipated cash settlement transaction
related to the granted PSUs. The Corporation has determined that the embedded total return swap is an effective hedge at the time of the establishment of
the hedge and for the duration of the embedded total return swap. The changes in the fair value of the total return swap are initially recorded in consolidated
other comprehensive income and subsequently reclassified to consolidated net earnings in the same period that the change in the fair value of the PSUs
affects consolidated net earnings. Should it become probable that the hedged transaction will not occur, any gains, losses, revenues or expenses associated
with the hedging item that had previously been recognized in other comprehensive income as a result of applying hedge accounting will be recognized in the
reporting period's net earnings under Operating, selling, administrative and general expenses.
Hedge of the net investment in foreign operations
The Corporation has designated its entire US dollar denominated long-term debt as a foreign exchange hedge of its net investment in its foreign operations.
Accordingly, the portion of the gains or losses arising from the translation of the US dollar denominated debt that is determined to be an effective hedge is
recognized in Other comprehensive income, counterbalancing gains and losses arising from translation of the Corporation’s net investment in its foreign
subsidiaries. Should a portion of the hedging relationship become ineffective, the ineffective portion would be recorded in the consolidated statement of
earnings under Operating, selling, administrative and general expenses.
Alimentation Couche-Tard Inc. / 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Foreign exchange forward contracts
The Corporation uses foreign exchange forward contracts (“forwards”) to manage the currency fluctuation risk associated with forecasted cash
disbursements in foreign currency. Forwards are recorded at fair value on the consolidated balance sheet. Changes in the fair value of Forwards are
recorded in net financial (revenues) expenses.
Guarantees
A guarantee is defined as a contract or an indemnification agreement contingently requiring a Corporation to make payments to a third party based on future
events. These payments are contingent on either changes in an underlying or other variables that are related to an asset, liability, or an equity security of the
indemnified party or the failure of another entity to perform under an obligating agreement. It could also be an indirect guarantee of the indebtedness of
another party. Guarantees are initially recognized at fair value and subsequently revaluated when the loss becomes probable.
Business combinations
Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the aggregate of the fair values (at
the date of acquisition) of assets given, liabilities incurred or assumed, and equity instruments issued by the Corporation in exchange for control of the
acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 “Business Combinations”
are recognized at their fair values at the acquisition date. Direct acquisition costs are recorded in earnings when incurred.
Goodwill arising from business combinations is recognized as an asset and initially measured at cost, being the excess of the cost of the business
combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess (“Negative goodwill”) is recognized
immediately to earnings.
Earnings from the businesses acquired are included in the consolidated statements of earnings from their respective dates of acquisition.
Recently issued accounting standards not yet implemented
Revised Standards
Financial Statement Presentation
In June 2011, the IASB issued amendments to International Accounting Standards (“IAS”) 1 “Presentation of Financial Statements”. The amendments
govern the presentation of Other Comprehensive Income (“OCI”) in the financial statements, primarily by requiring OCI items that may be reclassified to the
statement of earnings to be presented separately from those that remain in equity.
These changes are applicable for fiscal years beginning on or after July 1st, 2012. The Corporation will apply these changes for its first quarter of fiscal year
2014 and is still evaluating their impact on its consolidated financial statements.
Employee Benefits
In June 2011, the IASB issued a revised version of IAS 19 “Employee Benefits” to modify accounting rules for defined benefits pension plans. The revised
version of the standard contains multiple modifications, including the elimination of the corridor approach, which allowed deferring part of the actuarial gains
and losses, as well as enhanced guidance on measurement of plan assets and defined benefit obligations, streamlining the presentation of changes in
assets and liabilities arising from defined benefit plans and the introduction of enhanced disclosures for defined benefit plans.
These changes are applicable for fiscal years beginning on or after January 1st, 2013. The Corporation is in the process of determining when it will apply
these changes and is still evaluating their impact on its consolidated financial statements.
Financial Instruments – Presentation and disclosure
In December 2011, the IASB issued revised versions of IFRS 7 “Financial Instruments: Disclosures” and IAS 32 “Financial Instruments: Presentation”. The
modifications clarify the offsetting rules and state new disclosure requirements for offsetting of financial assets and liabilities on the balance sheet.
The changes applied to IFRS 7 are applicable for fiscal years beginning on or after January 1st, 2013 while changes applied to IAS 32 are applicable for fiscal
years beginning on or after January 1st, 2014. The Corporation will apply these changes for its first quarter of fiscal years 2014 and 2015, respectively and is
still evaluating their impact on its consolidated financial statements.
New standards
Financial Instruments
In November 2009, the IASB issued a new standard, IFRS 9 “Financial Instruments” which is the first phase of the IASB’s three-phase project to replace IAS
39 “Financial Instruments: Recognition and Measurement”. The standard provides guidance on the classification and measurement of financial liabilities and
requirements for the derecognition of financial assets and financial liabilities.
IFRS 9 is applicable for fiscal years beginning on or after January 1st, 2015. The Corporation will apply these new standards for its first quarter of fiscal year
2016 and is still evaluating the impact on its consolidated financial statements.
Alimentation Couche-Tard Inc. / 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
3. Accounting policies (continued)
Consolidated financial statements
In May 2011, the IASB issued a new standard, IFRS 10 “Consolidated Financial Statements” which requires an entity to consolidate an investee when it is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. IFRS 10 replaces SIC-12 “Consolidation—Special Purpose Entities” and parts of IAS 27 “Consolidated and Separate
Financial Statements”.
Joint Arrangements
In May 2011, the IASB issued a new standard, IFRS 11 “Joint Arrangements” which requires a venturer to classify its interest in a joint arrangement as a joint
venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize
its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or
equity account for interests in joint ventures. IFRS 11 supersedes IAS 31 “Interests in Joint Ventures”, and SIC-13 “Jointly Controlled Entities—Non-monetary
Contributions by Venturers”.
Disclosure of Interest in Other Entities
In May 2011, the IASB issued a new standard, IFRS 12 “Disclosure of Interest in Other Entities”. IFRS 12 establishes disclosure requirements for interests in
other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard includes existing disclosures
and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities.
Fair Value Measurement
In May 2011, the IASB issued a new standard, IFRS 13 “Fair Value Measurement”. IFRS 13 is a comprehensive standard for fair value measurement and
disclosure requirements for use across all IFRS. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to
transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value
measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value
measurements and in many cases does not reflect a clear measurement basis or consistent disclosures.
IFRS 10, 11, 12 and 13 are all applicable for fiscal years beginning on or after January 1st, 2013. The Corporation will apply these new standards for its first
quarter of fiscal year 2014 and is still evaluating their impact on its consolidated financial statements.
4. Business acquisitions
The Corporation has made the following business acquisitions:
2012
In May 2011, the Corporation purchased 11 company-operated stores located in Ontario, Manitoba, Saskatchewan, Alberta and British
Columbia from Shell Canada Products. The Corporation leases the land and buildings for four sites and owns both these assets for the other
sites.
In June 2011, the Corporation signed an agreement with ExxonMobil for 322 stores and motor fuel supply agreements for another 65 stores.
All stores are operated in Southern California, United States. The transaction is scheduled to close in stages: the first stages occurred during
the month of August 2011. The transaction is subject to standard regulatory approvals and closing conditions. The following is a summary of
progress made during the 2012 fiscal year and steps that should be completed subsequently:
In August 2011, the Corporation purchased one company-operated store for which it owns the land and building and it acquired
the motor fuel supply agreements for 63 other stores;
In October 2011, the Corporation acquired one company-operated store for which it owns the land and building as well as 83
stores operated by independent operators for which the Corporation owns the buildings and leases the land;
At end of October 2011 and beginning of November 2011, the Corporation acquired 72 company-operated stores for which it
owns the land and buildings for 37 stores and leases the land and owns the building for the other stores;
Between January 29, 2012 and April 29, 2012, the Corporation acquired eight stores operated by independent operators for
which the real estate is owned by the Corporation along with the related motor fuel supply agreements. Additionally, during this
time period, 13 independent operators elected to accept ExxonMobil’s bona fide offer. Consequentially, 13 fuel supply
agreements were transferred to the Corporation during this period;
Subsequent to fiscal year 2012 and consequentially not reflected into the purchase price allocation table below :
As at April 29, 2012, 144 sites operated by independent operators along with related motor fuel supply agreements
remained to be integrated to the Corporation’s network. However, the sale to the Corporation by ExxonMobil of real
estate for these sites is conditional to ExxonMobil’s obligation to submit a bona fide offer to each independent
operator. If the offer is accepted by the independent operator than only the motor fuel supply agreement is
transferred to the Corporation.
The Corporation expects to acquire 126 stores operated by independent operators and for which the real estate
should be owned by the Corporation and expects 18 fuel supply agreements to be transferred to the Corporation.
On October 13, 2011, the Corporation acquired from Chico Enterprises Inc., 26 company-operated stores operating in northern West
Virginia, United States. The Corporation owns the real estate for 25 sites and owns the building and leases the land for the other site.
Alimentation Couche-Tard Inc. / 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
4. Business acquisitions (continued)
On November 16 and 17, 2011, the Corporation acquired from ExxonMobil, 33 company-operated stores operating under the "On the Run"
banner in Louisiana, United States. The Corporation owns the buildings for 33 sites as well as land for 25 sites and leases the land for the
other eight sites.
On December 12, 2011, the Corporation acquired from Neighbors Stores Inc., 11 company-operated stores operating under the "Neighbors"
banner in North Carolina, United States. The Corporation owns the buildings for eight sites as well as land for nine sites and leases theses
same assets for the other sites.
On April 11, 2012, the Corporation acquired from Dead River Company, 17 company-operated stores operating in Maine, United States.
Two quick service restaurants were also transferred to the Corporation. The Corporation owns the buildings and land for 16 sites and leases
these same assets for the other three sites.
During fiscal year 2012, the Corporation also acquired 19 other stores through distinct transactions. The Corporation leases the land and
buildings for 11 sites and owns both these assets for the other sites.
Acquisition costs in the amount of $6.8 are included in Operating, selling, administrative and general expenses in connection with these and other
unrealized acquisitions.
These acquisitions were settled for a total cash consideration of $380.3. Since the Corporation has not completed its fair value assessment of the net
assets acquired for all transactions, the preliminary allocations of certain acquisitions are subject to adjustments to the fair value of the assets and liabilities
until the process is completed. Purchase price allocations based on the estimated fair value on the dates of acquisition are as follows:
Tangible assets acquired
Inventories
Property and equipment
Other assets
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Negative goodwill recorded to Operating, selling, administrative and general expenses
Total consideration paid
$
19.2
281.4
5.5
306.1
1.3
30.9
32.2
273.9
45.8
67.5
(6.9)
380.3
The Corporation expects that approximately $4.8 of the goodwill related to these transactions will be deductible for tax purposes.
These acquisitions were concluded in order to expand the Corporation’s market share and to increase its economies of scale. These acquisitions
generated goodwill in the amount of $67.5 mainly due to the location of stores which is favorable to the Corporation’s operations: accessible location,
limited competition, proximity to target clientele. Since the date of acquisition, revenues and net earnings from these stores amounted to $1,254.3 and
$5.8, respectively. Considering the nature of these acquisitions, the available financial information does not allow for the accurate disclosure of pro-
forma Revenues and Net earnings had the Corporation concluded these acquisitions at the beginning of the year.
On May 11, 2011, the Corporation, through its RDK Ventures LLC (“RDK”) joint venture, purchased four company-operated stores located in the
Chicago area, United States, from Gas City, Ltd. RDK leases the land and buildings for one site and owns both these assets for the other sites.
On November 8, 9 and 10, 2011, the Corporation, through the RDK joint venture, acquired from Supervalu Inc., 27 stores operating in the Chicago area,
Illinois, United States. The agreement also includes the transfer to RDK of two vacant land parcels. Out of the 27 stores, 14 are company-operated
while the other 13 are operated by independent operators. RDK owns the real estate for 24 sites as well as the two vacant land parcels, owns the
building and leases the land for two sites and leases both these assets for the remaining site.
2011
On September 9, 2010, the Corporation acquired ten company-operated stores from Compac Food Stores Inc. Nine of the stores are located in
the greater Mobile, Alabama area and one is located in Pensacola, Florida. The Corporation owns all buildings while it leases the land for four
stores and owns the other six.
On September 30, 2010, the Corporation acquired 12 company-operated stores located in central Indiana from Crystal Flash Petroleum, LLC.
The Corporation owns the land and building for one site, leases those same assets for ten sites and owns the building and leases the land for
another site.
During fiscal year 2011, the Corporation also acquired 25 other stores through 21 distinct transactions. The Corporation owns the land and
buildings for 15 sites and it leases both these assets for the other ten sites.
Alimentation Couche-Tard Inc. / 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
4. Business acquisitions (continued)
Acquisition costs in the amount of $10.4 are included in Operating, selling, administrative and general expenses in connection with these and other
unrealized acquisitions.
These acquisitions were settled for a total cash consideration of $37.8. Purchase price allocations based on the fair value on the dates of acquisition
are as follows:
Tangible assets acquired
Inventories
Property and equipment
Other assets
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Total liabilities
Net tangible assets acquired
Goodwill
Total consideration paid
$
2.5
29.4
0.2
32.1
0.3
1.0
1.3
30.8
7.0
37.8
Approximately $2.3 of the goodwill related to these transactions was deductible for tax purposes.
These acquisitions were concluded in order to expand the Corporation’s market share and to increase its economies of scale. These acquisitions
generated goodwill in the amount of $7.0 mainly due to the location of stores which is favorable to the Corporation’s operations: accessible location,
limited competition, proximity to target clientele.
5. Interest in a joint venture
The Corporation owns a 50.01% interest in a joint venture, RDK, which operates convenience stores located in the greater Chicago metropolitan area of
the United States.
The Corporation’s investment in RDK is recorded according to the equity method. The following amounts represent the Corporation’s share of RDK’s
assets, liabilities, revenues, expenses, net earnings and cash flows.
Balance sheets
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Statements of earnings
Revenues
Expenses
Net earnings
Statements of cash flows
Operating activities
Investing activities
Financing activities
2012
$
25.1
81.7
22.9
18.9
2011
$
22.6
68.5
17.5
25.4
2012
(53 weeks)
$
2011
(52 weeks)
$
546.1
524.5
21.6
25.1
(19.7)
(11.3)
415.5
398.6
16.9
20.6
(4.4)
(10.7)
Alimentation Couche-Tard Inc. / 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
6. Supplementary information relating to expenses
Cost of sales
Selling expenses
Administrative expenses
Includes rent expense of $237.1 ($228.7 in 2011), net of sub-leasing income of $26.5 ($20.0 in 2011).
Employee benefit charges
Salaries
Fringe benefits and other employer contributions
Employee future benefits (Note 23)
Stock-based compensation and other stock-based payments (Note 22)
Termination benefits
7. Compensation of key management personnel
Salaries and other current benefits
Stock-based compensation and other stock-based payments
Employee future benefits (Note 23)
Key management personnel comprises Members of the Board of Directors and senior management.
8. Net financial expenses
Financial expenses
Interest expense
Interest on long-term debt
Interest on finance lease liabilities
Interest on bank overdrafts and bank loans
Accretion of provisions (Note 20)
Amortization and write off of fair value gain on interest rate swaps designated as a cash-flow hedge
Amortization and write off of deferred financing fees
Premium paid on early redemption of subordinated unsecured debt
Other finance costs
Financial revenues
Interest on bank deposits
Other financial revenues
Gain on foreign exchange forward contracts
Net financial (revenues) expenses
2012
(53 weeks)
$
20,028.4
1,944.2
207.5
22,180.1
2011
(52 weeks)
$
15,804.7
1,824.2
204.7
17,833.6
2012
(53 weeks)
$
2011
(52 weeks)
$
776.6
79.0
50.3
4.8
1.5
912.2
2012
(53 weeks)
$
5.9
2.3
2.1
10.3
731.4
76.6
50.9
3.8
1.3
864.0
2011
(52 weeks)
$
6.5
1.8
1.7
10.0
2012
(53 weeks)
$
2011
(52 weeks)
$
5.5
0.6
-
5.9
-
-
-
1.5
13.5
0.2
1.0
1.2
17.0
(4.7)
20.1
0.6
0.1
5.4
(9.7)
8.0
4.4
2.5
31.4
0.2
1.6
1.8
-
29.6
Alimentation Couche-Tard Inc. / 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
9. Income taxes
Current income taxes
Deferred income taxes
2012
(53 weeks)
$
122.1
24.2
146.3
2011
(52 weeks)
$
63.3
57.9
121.2
The principal items which resulted in differences between the Corporation's effective income tax rates and the combined statutory rates in Canada are
detailed as follows:
Combined statutory income tax rate in Canada (a)
Impact of tax rate changes
Other permanent differences
Effective income tax rate
2012
%
27.91
0.11
(3.79)
24.23
(a)
The Corporation’s combined statutory income tax rate in Canada includes the appropriate provincial income tax rates.
The components of deferred income tax assets and liabilities are as follows:
2011
%
29.43
0.14
(4.86)
24.71
2012
Deferred income tax assets
Expenses deductible during the following years
Tax attributes
Deferred credits
Property and equipment
Goodwill
Asset retirement obligations
Unrealized exchange gain
Other
Deferred income tax liabilities
Expenses deductible during the following years
Tax attributes
Revenues taxable during the following years
Deferred credits
Property and equipment
Intangible assets
Goodwill
Asset retirement obligations
Unrealized exchange gain
Other
Balance as at
April 24, 2011
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income or
equity
$
Balance as at
April 29, 2012
$
7.2
1.1
(0.8)
0.1
0.1
-
3.8
1.4
12.9
(49.0)
(4.2)
21.2
(10.3)
208.6
68.8
24.1
(21.5)
10.2
(3.6)
244.3
4.8
1.2
(0.8)
(1.9)
(0.7)
1.5
(9.3)
2.0
(3.2)
(6.2)
3.0
(17.3)
0.1
45.4
(0.8)
2.1
(0.3)
(5.1)
0.1
21.0
(0.5)
-
-
-
-
-
3.2
2.0
4.7
-
-
-
-
-
-
-
-
(3.2)
-
(3.2)
11.5
2.3
(1.6)
(1.8)
(0.6)
1.5
(2.3)
5.4
14.4
(55.2)
(1.2)
3.9
(10.2)
254.0
68.0
26.2
(21.8)
1.9
(3.5)
262.1
Alimentation Couche-Tard Inc. / 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
9. Income taxes (continued)
Deferred income tax assets
Expenses deductible during the following years
Capital and non-capital losses
Deferred credits
Property and equipment
Goodwill
Unrealized exchange gain
Other
Deferred income tax liabilities
Expenses deductible during the following years
Capital and non-capital losses
Revenues taxable during the following years
Deferred credits
Property and equipment
Intangible assets
Goodwill
Asset retirement obligations
Unrealized exchange gain
Other
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
Deferred tax asset to be recovered in more than 12 months
Deferred tax asset to be recovered within 12 months
Deferred tax liabilities:
Deferred tax liabilities to be recovered in more than 12 months
Deferred tax liabilities to be recovered within 12 months
Balance as at
April 26, 2010
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income or equity
$
2011
Balance as at
April 24, 2011
$
5.7
2.2
(0.3)
0.3
0.1
-
0.6
8.6
(40.5)
(2.8)
7.5
(12.5)
163.2
65.2
20.2
(19.3)
18.3
(5.4)
193.9
1.5
(1.1)
(0.5)
(0.2)
-
-
0.6
0.3
(8.1)
(1.4)
13.7
2.2
45.4
3.6
3.9
(2.2)
-
1.1
58.2
2012
$
15.2
(0.8)
14.4
281.1
(19.0)
262.1
-
-
-
-
-
3.8
0.2
4.0
(0.4)
-
-
-
-
-
-
-
(8.1)
0.7
(7.8)
2011
$
12.9
-
12.9
259.9
(15.6)
244.3
7.2
1.1
(0.8)
0.1
0.1
3.8
1.4
12.9
(49.0)
(4.2)
21.2
(10.3)
208.6
68.8
24.1
(21.5)
10.2
(3.6)
244.3
2010
$
8.6
-
8.6
215.9
(22.0)
193.9
Deferred income tax liabilities that would be payable on the retained earnings of certain subsidiaries have not been recognized because such amounts
are not expected to materialize in the foreseeable future. Temporary differences related to these investments amounted to $383.2 ($198.1 in 2011).
10. Net earnings per share
The following table presents the information for the computation of basic and diluted net earnings per share:
Net earnings available to Class A and B shareholders
Weighted average number of shares (in thousands)
Dilutive effect of stock options (in thousands)
Weighted average number of diluted shares (in thousands)
Basic net earnings per share available for Class A and B shareholders
Diluted net earnings per share available for Class A and B shareholders
2012
(53 weeks)
$
457.6
180,420
3,163
183,583
2.54
2.49
2011
(52 weeks)
$
369.2
184,637
3,577
188,214
2.00
1.96
In calculating diluted net earnings per share for 2012, no stock options (438,035 excluded stock options in 2011) are excluded due to their antidilutive effect.
During its July 10, 2012 meeting, the Corporation’s Board of Directors (the “Board”) declared a dividend of CA$0.075 per share to shareholders on record as
at July 19, 2012 and approved its payment for August 2, 2012.
During fiscal 2012, the Board declared total dividends averaging CA$0.275 per share.
Alimentation Couche-Tard Inc. / 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
11. Supplementary information relating to the consolidated statements of cash flows
The changes in non-cash working capital are detailed as follows:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
12. Accounts receivable
Trade accounts receivable and vendor rebates receivable
Credit and debit cards receivable
Environmental costs receivable (Note 20)
Other accounts receivable
13. Inventories
Merchandise – retail
Motor fuel
Merchandise – distribution centres
2012
(53 weeks)
$
(24.5)
(3.7)
(5.7)
87.0
31.6
84.7
2011
(52 weeks)
$
(41.8)
(45.1)
(0.7)
105.0
(27.6)
(10.2)
2012
$
169.0
206.2
2.1
43.4
420.7
2012
$
362.4
161.0
20.5
543.9
2011
$
120.3
195.2
3.3
30.3
349.1
2011
$
329.4
178.2
18.4
526.0
2010
$
117.2
135.5
3.1
25.0
280.8
2010
$
320.8
129.4
19.7
469.9
Alimentation Couche-Tard Inc. / 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
14. Property and equipment
As at April 26, 2010
Cost
Accumulated depreciation and
amortization
Net book amount
Portion related to finance leases
Year ended April 24, 2011
Net book amount, beginning
Effect of exchange rate variations
Additions
Business acquisitions
Disposals
Depreciation expense
Transfers
Net book amount, end
As at April 24, 2011
Cost
Accumulated depreciation and
amortization
Net book amount
Portion related to finance leases
Year ended April 29, 2012
Net book amount, beginning
Effect of exchange rate variations
Additions
Business acquisitions
Disposals
Depreciation expense
Transfers
Net book amount, end
As at April 29, 2012
Cost
Accumulated depreciation and
amortization
Net book amount
Portion related to finance leases
Land
$
551.1
-
551.1
551.1
2.4
15.1
11.4
(9.9)
-
-
570.1
570.1
-
570.1
570.1
(1.4)
13.3
113.6
(12.3)
-
-
683.3
683.3
-
683.3
Building and
building
components
$
Equipment
$
Leasehold
improvements
$
548.7
(140.3)
408.4
0.2
408.4
3.8
30.2
10.7
(9.3)
(33.7)
(13.6)
396.5
564.8
(168.3)
396.5
0.2
396.5
(2.1)
22.8
63.1
(9.3)
(36.5)
-
434.5
631.7
(197.2)
434.5
0.1
1,412.3
(655.8)
756.5
7.7
756.5
8.3
134.6
7.3
(12.2)
(140.1)
30.7
785.1
1 576.3
(791.2)
785.1
11.2
785.1
(4.7)
218.0
88.6
(16.4)
(146.3)
0.7
925.0
1,812.4
(887.4)
925.0
12.1
389.3
(190.4)
198.9
198.9
3.0
37.7
-
(2.0)
(36.8)
(17.1)
183.7
401.1
(217.4)
183.7
183.7
(1.8)
50.6
16.1
(2.1)
(40.3)
(0.7)
205.5
454.4
(248.9)
205.5
Total
$
2,901.4
(986.5)
1,914.9
7.9
1,914.9
17.5
217.6
29.4
(33.4)
(210.6)
-
1,935.4
3 112.3
(1,176.9)
1,935.4
11.4
1,935.4
(10.0)
304.7
281.4
(40.1)
(223.1)
-
2,248.3
3,581.8
(1,333.5)
2,248.3
12.2
Alimentation Couche-Tard Inc. / 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
15. Goodwill and Intangible assets
Goodwill
$
Trademarks
Fuel supply
agreements
Licenses
425.3
-
425.3
425.3
9.2
-
7.0
(0.6)
-
440.9
440.9
-
440.9
440.9
(5.5)
-
67.5
-
-
502.9
502.9
-
502.9
154.7
-
154.7
154.7
-
-
-
-
-
154.7
154.7
-
154.7
154.7
-
-
-
-
-
154.7
154.7
-
154.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45.8
(0.1)
(15.8)
29.9
45.5
(15.6)
29.9
18.8
-
18.8
18.8
-
0.5
-
-
-
19.3
19.3
-
19.3
19.3
-
0.2
-
(0.1)
-
19.4
19.4
-
19.4
As at April 26, 2010
Cost
Accumulated amortization
Net book amount
Year ended April 24, 2011
Net book amount, beginning
Effect of exchange rate variations
Additions
Business acquisitions
Disposals
Depreciation expense
Net book amount, end
As at April 24, 2011
Cost
Accumulated amortization
Net book amount
Year ended April 29, 2012
Net book amount, beginning
Effect of exchange rate variations
Additions
Business acquisitions
Disposals
Depreciation expense
Net book amount, end
As at April 29, 2012
Cost
Accumulated amortization
Net book amount
16. Other assets
Investment contract including an embedded total return swap (Note 24)
Environmental costs receivable (Note 20)
Deferred charges, net
Deposits
Other
17. Accounts payable and accrued liabilities
Accounts payable and accrued expenses
Taxes payable
Salaries and related benefits
Deferred credits
Other
2012
$
13.4
13.0
9.1
7.3
25.4
68.2
2012
$
812.7
91.1
74.3
14.7
32.9
1,025.7
Other
$
44.0
(29.3)
14.7
14.7
0.4
4.7
-
(1.0)
(4.2)
14.6
48.2
(33.6)
14.6
14.6
(0.2)
3.4
-
(0.1)
(4.7)
13.0
51.7
(38.7)
13.0
2011
$
10.0
14.8
7.4
2.0
23.8
58.0
2011
$
701.7
109.7
78.8
13.4
32.9
936.5
Total
$
217.5
(29.3)
188.2
188.2
0.4
5.2
-
(1.0)
(4.2)
188.6
222.2
(33.6)
188.6
188.6
(0.2)
3.6
45.8
(0.3)
(20.5)
217.0
271.3
(54.3)
217.0
2010
$
3.5
17.6
9.4
1.6
23.7
55.8
2010
$
618.2
87.4
69.3
14.7
32.1
821.7
Alimentation Couche-Tard Inc. / 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
18. Long-term debt
US dollar term revolving unsecured operating credit A, maturing in September 2012 (a)
Canadian dollar term revolving unsecured operating credit A, maturing in September
US dollar term revolving unsecured operating credit B, maturing in September 2012 (a)
Canadian dollar term revolving unsecured operating credit B, maturing in September
US dollar term revolving unsecured operating credit D, maturing in December 2016 (b)
Canadian dollar term revolving unsecured operating credit D, maturing in December
2012 (a)
2012 (a)
2016 (b)
Subordinated unsecured debt, at amortized cost (d)
Note payable, secured by the assets of certain stores, 8.75%, repayable in monthly
instalments, maturing in 2019
Obligations related to buildings and equipment under finance leases, rates varying
from 0.44% to 12.28%, payable on various dates until 2019
Current portion of long-term debt
(a) Term revolving unsecured operating credits A, B and C
2012
$
312.7
13.6
147.3
6.7
116.0
53.0
-
3.6
12.3
665.2
484.4
180.8
2011
$
330.4
-
155.6
-
-
-
-
3.9
11.6
501.5
4.6
496.9
2010
$
185.6
52.4
87.4
24.6
-
-
351.7
4.2
10.4
716.3
4.4
711.9
As at April 29, 2012, the Corporation has credit agreements consisting of three revolving unsecured facilities of initial maximum amounts of $650.0
(Operating credit A), $310.0 (Operating credit B) and $40.0 (Operating credit C) each, with initial terms of five years, 51 months and 42 months respectively.
Following the new credit agreement signed and described below in (b), the maximum amounts available were reduced to $326.0 for Operating credit A and
$154.0 for Operating credit B. The amount available for Operating credit C remained the same. The used portion of the revolving facilities in excess of the
reduced initial amounts was transferred to the new credit facility described below in (b).
The credit facilities are available in the form of a term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars, iii) in the form of
Canadian dollar bankers’ acceptances, with stamping fees and iv) in the form of standby letters of credit not exceeding $50.0 or the equivalent in Canadian
dollars, with applicable fees. Depending on the form and the currency of the loan, the amounts borrowed bear interest at variable rates based on the
Canadian prime rate, the bankers’ acceptance rate, the US base rate or the LIBOR rate plus a variable margin;
Standby fees, which vary based on a leverage ratio and on the utilization rate of the credit facilities, apply to the unused portion of the credit facilities.
Stamping fees, standby letters of credit fees and the variable margin used to determine the interest rate applicable to amounts borrowed are determined
according to a leverage ratio of the Corporation.
Under the credit agreements, the Corporation must maintain certain financial ratios and respect certain restrictive provisions.
(b) Term revolving unsecured operating credit D
On December 9, 2011, the Corporation entered into a new credit agreement consisting of a revolving unsecured facility of an initial maximum amount of
$1,000.0 (Operating credit D) with an initial term of five years. The credit facility is available in the following forms:
A term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars, iii) in the form of Canadian dollar bankers’
acceptances, with stamping fees and iv) in the form of standby letters of credit not exceeding $100.0 or the equivalent in Canadian dollars,
with applicable fees. Depending on the form and the currency of the loan, the amounts borrowed bear interest at variable rates based on the
Canadian prime rate, the bankers’ acceptance rate, the US base rate or LIBOR plus a variable margin; and
An unsecured line of credit in the maximum amount of $50.0, available in Canadian or US dollars, bearing interest at variable rates based,
depending on the form and currency of the loan, on the Canadian prime rate, the US prime rate or the US base rate plus a variable margin.
Standby fees, which vary based on a leverage ratio and on the utilization rate of the credit facility, apply to the unused portion of the credit facility. Stamping
fees, standby letters of credit fees and the variable margin used to determine the interest rate applicable to amount borrowed are determined according to a
leverage ratio of the Corporation.
Under the credit agreement, the Corporation must maintain certain financial ratios and respect certain restrictive provisions.
(c) Unsecured non-revolving acquisition credit facility
On April 16, 2012, the Corporation entered into a new credit agreement consisting of an unsecured non-revolving acquisition credit facility of an initial
maximum amount of $3,200.0 (“acquisition facility”) with an initial term of three years. The acquisition facility is available exclusively to finance, directly or
indirectly, the acquisition of Statoil Fuel & Retail ASA and the related acquisition costs or the repayment of any of Statoil Fuel & Retail ASA and its
subsidiaries’ outstanding debt. The acquisition facility is available i) in Canadian dollars by the way of prime rate loans or bankers’ acceptances, ii) in US
dollars by the way of US base rate loans or LIBOR loans. Depending on the form and the currency of the loan, the amounts borrowed bear interest at
variable rates based on the Canadian prime rate, the bankers’ acceptance rate, the US base rate or LIBOR plus a variable margin.
Alimentation Couche-Tard Inc. / 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
18. Long-term debt (continued)
Under the credit agreement, the Corporation must maintain certain financial ratios and respect certain restrictive provisions. The acquisition facility was
unused as at April 29, 2012.
As at April 29, 2012, the weighted average effective interest rate for Operating credits A, B, C and D is 0.82% (0.75% in 2011 and 0.86% in 2010) for the US
dollar portion and 1.95% (1.05% in 2010) for the Canadian dollar portion. In addition, CA$1.4 (CA$0.6 in 2011 and CA$0.9 in 2010) and $28.5 ($29.4 in 2011
and $26.6 in 2010) are used for standby letters of credit. As at April 29, 2012, April 24, 2011 and April 26, 2010, the available lines of credit were unused and
the Corporation was in compliance with the restrictive provisions and ratios imposed by the credit agreements. As at April 29, 2012, April 24, 2011 and April
26, 2010, Operating credit C was unused.
(d) Subordinated unsecured debt
During fiscal 2011, the Corporation proceeded to the early redemption of its Subordinated unsecured debt (the “debt”) at a price of 101.25% of the
principal amount. The total amount disbursed for the redemption was $354.4, consisting of the nominal value of $350.0 plus the premium of $4.4. At
time of redemption, the debt had a book value of $351.4. Therefore, a pre-tax negative net impact of $3.0 was recorded to earnings. This negative net
impact comprises the $4.4 premium paid, net of a $1.4 gain which represents the difference between the debt’s book value of $351.4 and the nominal
value of $350.0. The debt of a nominal amount of $350.0 initially matured on December 15, 2013 and bore interest at a nominal rate of 7.5% (effective
rate of 7.35%). The debt agreement imposed restrictions on certain transactions.
As for the consolidated cash flows presentation, the total amount disbursed of $354.4 is divided in three distinct amounts:
1.
2.
3.
A premium of $4.4 paid for the early redemption. This amount is included in operating activities.
An amount of $17.4 which represents financing fees paid at the issuance of the debt during fiscal year 2004. This amount is presented as
Deemed interest on repayment of long-term debt under operating activities.
An amount of $332.6, which represents the net amount received at the issuance of the debt during fiscal year 2004, which is the nominal
value of $350.0 less financing fees of $17.4. The amount of $332.6 is presented under financing activities.
Instalments on long-term debt for the next fiscal years are as follows:
2013
2014
2015
2016
2017
2018 and thereafter
Interest expense included in minimum lease payments
19. Deferred credits and other liabilities
Deferred rent expense
Accrued pension benefit liability (Note 23)
Deferred branding credits
Deferred credits
Other liabilities
Obligations
related to
buildings and
equipment
under finance
leases
$
4.3
3.9
2.9
1.8
1.3
0.4
14.6
2.3
12.3
Other loans
denominated in
US dollars
$
460.3
0.4
0.4
0.4
116.5
1.6
Other loans
denominated in
Canadian dollars
CA$
19.9
-
-
-
52.0
-
2012
$
41.2
39.5
13.8
4.6
62.3
161.4
2011
$
34.2
32.3
12.6
8.0
52.4
139.5
2010
$
27.0
27.2
14.5
12.6
46.7
128.0
Alimentation Couche-Tard Inc. / 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
20. Provisions
The reconciliation of the Corporation’s main provisions is as follows:
Asset retirement
obligations
(a)
$
60.8
0.7
(1.5)
4.8
2.1
-
-
(0.4)
66.5
56.4
0.5
(1.6)
4.5
0.4
-
-
0.6
60.8
2012
Balance, beginning of year
Liabilities incurred
Liabilities settled
Accretion expense
Business acquisitions
Reversal of provisions
Change in estimates
Effect of exchange rate
variations
Balance, end of year
Current portion of provisions
Long-term portion of provisions
2011
Balance, beginning of year
Liabilities incurred
Liabilities settled
Accretion expense
Business acquisitions
Reversal of provisions
Change in estimates
Effect of exchange rate
variations
Balance, end of year
Current portion of provisions
Long-term portion of provisions
Provision for
site restoration
costs
(b)
Provision for
workers’
compensation
(c)
$
$
Provision for
general liability
(c)
$
Other
provisions
$
25.5
8.9
(7.8)
0.3
28.8
(3.1)
(0.2)
(0.1)
52.3
26.6
7.7
(6.2)
0.3
0.6
(3.8)
-
0.3
25.5
25.0
14.3
(14.3)
0.7
-
-
-
-
25.7
23.3
15.7
(14.4)
0.5
-
(0.1)
-
-
25.0
13.7
5.5
(6.3)
0.1
-
-
0.1
-
13.1
12.0
9.0
(7.4)
0.1
-
(0.1)
0.1
-
13.7
-
-
-
-
-
-
-
-
-
0.8
-
(0.8)
-
-
-
-
-
-
Total
$
125.0
29.4
(29.9)
5.9
30.9
(3.1)
(0.1)
(0.5)
157.6
50.1
107.5
119.1
32.9
(30.4)
5.4
1.0
(4.0)
0.1
0.9
125.0
36.3
88.7
(a) The total undiscounted amount of estimated cash flows to settle the asset retirement obligations is approximately $148.8 and is expected to be
incurred over the next 40 years. Should changes occur in estimated future removal costs, tank useful lives, lease terms or governmental
regulatory requirements, revisions to the liability could be made.
(b) Site restoration costs should be incurred over the next 20 years.
(c) Workers’ compensation and general liability indemnities should be disbursed over the next five years.
Environmental costs
The Corporation is subject to Canadian and US legislations governing the storage, handling and sale of motor fuel and related products. The Corporation
considers that it is compliant with all important aspects of the current environmental legislations.
The Corporation has an ongoing training program for its employees on environmental issues and performs preventive site testing and site restoration in
cooperation with regulatory authorities. The Corporation also examines its motor fuel equipment annually.
In each of the US states in which the Corporation operates, with the exception of Michigan, Iowa, Florida, Arizona, Texas, West Virginia and Washington
State, there is a state fund to cover the cost of certain environmental remediation activities after the applicable trust fund deductible is met, which varies by
state. These state funds provide insurance for motor fuel facilities operations to cover some of the costs of cleaning up certain contamination to the
environment caused by the usage of underground motor fuel equipment. Underground motor fuel storage tank registration fees and/or a motor fuel taxes in
each of the states finance the trust funds. The Corporation pays annual registration fees and remits sales taxes to applicable states. Insurance coverage is
different in the various states.
In order to provide for the above-mentioned restoration costs, the Corporation has recorded a $52.3 provision for environmental costs as at April 29, 2012
($25.5 as at April 24, 2011 and $26.6 as at April 26, 2010). Of this amount, $19.6 ($11.5 as at April 24, 2011 and $10.1 as at April 26, 2010) is included in
current provisions and the remainder is included in long-term provisions. Furthermore, the Corporation has recorded an amount of $15.1 for environmental
costs receivable from trust funds as at April 29, 2012 ($18.1 as at April 24, 2011 and $20.7 as at April 26, 2010), of which $2.1 ($3.3 as at April 24, 2011 and
$3.1 as at April 26, 2010) is included in Accounts receivable and the remainder is included in Other assets.
Alimentation Couche-Tard Inc. / 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
21. Capital stock
Authorized
Unlimited number of shares without par value
First and second preferred shares issuable in series, non-voting, ranking prior to other classes of shares with respect to dividends and payment of
capital upon dissolution. The Board of Directors is authorized to determine the designation, rights, privileges, conditions and restrictions relating to each
series of shares prior to their issuance.
Class A multiple voting and participating shares, ten votes per share except for certain situations which provide for only one vote per share, convertible
into Class B subordinate voting shares on a share-for-share basis at the holder’s option. Under the articles of amendment, no new Class A multiple
voting shares may be issued.
Class B subordinate voting and participating shares, convertible automatically into Class A multiple voting shares on a share-for-share basis upon the
occurrence of certain events.
The order of priority for the payment of dividends is as follows:
first preferred shares;
second preferred shares; and
Class B subordinate voting shares and Class A multiple voting shares, ranking pari passu.
Issued and fully paid
The changes in number of outstanding shares are as follows:
Class A multiple voting shares
Balance, beginning of year
Repurchase and cancellation of shares (a) (b)
Conversion into Class B shares
Balance, end of year
Class B subordinate voting shares
Balance, beginning of year
Repurchase and cancellation of shares (a) (b)
Issued as part of a previous acquisition
Issued on conversion of Class A shares
Stock options exercised
Balance, end of year
2012
2011
53,694,712
(3,700)
(4,600)
53,686,412
129,899,045
(6,969,200)
992
4,600
2,431,159
125,366,596
53,706,712
(12,000)
-
53,694,712
129,942,597
(2,768,300)
304
-
2,724,444
129,899,045
(a) On October 25, 2011, the Corporation implemented a share repurchase program to repurchase up to 2,684,420 of the 53,688,412 Class A
multiple voting shares and up to 11,126,400 of the 111,264,009 Class B subordinate voting shares issued and outstanding as at October 11,
2011 (representing 5.0% of the Class A multiple voting shares issued and outstanding and 10.0% of the Class B subordinate voting shares of the
public float, as at that date, respectively, as defined by applicable rules). In accordance with Toronto Stock Exchange requirements, the
Corporation can repurchase a daily maximum of 1,000 Class A multiple voting shares and of 82,118 Class B subordinate voting shares. When
making such repurchases, the number of Class A multiple voting shares and of Class B subordinate voting shares in circulation is reduced and
the proportionate interest of all remaining shareholders in the Corporation’s share capital is increased on a pro rata basis. All shares repurchased
under the share repurchase program are cancelled upon repurchase. The share repurchase period will end no later than October 24, 2012.
(b) From October 25, 2010 to October 24, 2011, the Corporation had a share repurchase program to repurchase up to 2,685,335 of the 53,706,712
Class A multiple voting shares and up to 11,621,801 of the 116,218,014 Class B subordinate voting shares issued and outstanding as at October
20, 2010 (representing 5.0% of the Class A multiple voting shares issued and outstanding and 10.0% of the Class B subordinate voting shares of
the public float, as at that date, respectively, as defined by applicable rules). In accordance with Toronto Stock Exchange requirements, the
Corporation could repurchase a daily maximum of 1,000 Class A multiple voting shares and of 83,622 Class B subordinate voting shares. When
making such repurchases, the number of Class A multiple voting shares and of Class B subordinate voting shares in circulation has been
reduced and the proportionate interest of all remaining shareholders in the Corporation’s share capital was increased on a pro rata basis. All
shares repurchased under the share repurchase program were cancelled upon repurchase
22. Stock-based compensation and other stock-based payments
Stock option plan
The Corporation has a stock option plan (the “Plan”) under which it has authorized the grant of up to 16,892,000 stock options for the purchase of its Class B
subordinate voting shares.
Stock options have up to a ten-year term, vest 20.0% on the date of the grant and cumulatively thereafter on each anniversary date of the grant and are
exercisable at the designated market price on the date of grant. The grant price of each stock option shall not be set below the weighted average closing
price for a board lot of the Class B shares on the Toronto Stock Exchange for the five days preceding the grant. Each stock option is exercisable into one
Class B share of the Corporation at the price specified in the terms of the stock option. During fiscal 2012, to allow option holders to proceed with a cashless
exercise of their options, an agreement with a broker was put in place to allow them to receive a number of subordinate shares equivalent to the difference
between the number of underlying subordinate shares required to settle the exercise of the options.
Alimentation Couche-Tard Inc. / 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
22. Stock-based compensation and other stock-based payments (continued)
The table below presents the status of the Corporation’s stock option plan as at April 29, 2012 and April 24, 2011 and the changes therein during the years
then ended:
Outstanding, beginning of year
Exercised
Forfeited
Outstanding, end of year
Number of
stock options
5,957,180
(2,460,676)
(8,000)
3,488,504
2012
Weighted
average exercise
price
CA$
11.25
8.15
16.35
13.42
Number of stock
options
8,697,098
(2,724,444)
(15,474)
5,957,180
2011
Weighted
average
exercise price
CA$
9.07
4.24
19.71
11.25
Exercisable stock options, end of year
3,352,964
13.29
5,672,530
10.97
For 2012, the weighted average share price at the date of exercise for options exercised was CA$30.25 (CA$21.16 in 2011).
The following table presents information on the stock options outstanding and exercisable as at April 29, 2012:
Range of
exercise prices
CA$
6 – 8
8 – 12
12 – 16
16 – 20
20 – 26
Number of
stock options
outstanding as at
April 29, 2012
Options outstanding
Weighted average
remaining
contractual life
(years)
1,032,200
897,500
192,500
917,060
449,244
3,488,504
0.28
1.48
6.35
4.45
4.51
Weighted
average
exercise price
CA$
7.36
10.22
13.98
17.70
24.74
13.42
Number of
stock options
exercisable as at
April 29, 2012
Options exercisable
Weighted
average
exercise price
1,032,200
897,500
140,740
833,280
449,244
3,352,964
CA$
7.36
10.22
13.99
17.65
24.74
13.29
For 2012, compensation cost charged to the consolidated statements of earnings amounts to $0.4 ($1.1 in 2011).
Deferred Share Unit Plan
The Corporation has a Deferred Share Unit Plan for the benefit of its external directors allowing them, at their option, to receive all or a portion of their annual
compensation and directors’ fee in the form of Deferred Share Units (“DSUs”). A DSU is a notional unit, equivalent in value to the Corporation’s Class B
share. Upon leaving the Board of Directors, participants are entitled to receive the payment of their cumulated DSUs either a) in the form of cash based on
the price of the Corporation’s Class B shares as traded on the open market on the date of payment, or b) in Class B shares bought by the Corporation on the
open market on behalf of the participant.
The DSU expense and the related liability are recorded at the grant date. The liability is adjusted periodically to reflect any variation in the market value of the
Class B shares. As at April 29, 2012, the Corporation has a total of 80,723 DSUs outstanding (80,704 as at April 24, 2011 and 66,444 as at April 26, 2010)
and an obligation of $3.5 ($2.2 as at April 24, 2011 and $1.2 as at April 26, 2010) is recorded in deferred credits and other liabilities. The compensation cost
amounts to $1.8 in 2012 and $0.8 in 2011.
Phantom Stock Units
The Corporation has a Phantom Stock Units (“PSU”) Plan allowing the Board of Directors, through its Human Resources and Corporate Governance
Committee, to grant PSUs to the officers and selected key employees of the Corporation (the “Participants”). A PSU is a notional unit whose value is based
on the weighted average reported closing price for a board lot of the Corporation’s Class B subordinated voting share (the “Class B share”) on the Toronto
Stock Exchange for the five trading days immediately preceding the grant date. The PSU provides the Participant with the opportunity to earn a cash award
based on the weighted average reported closing price for a board lot of the Corporation’s Class B subordinated voting share (the “Class B share”) on the
Toronto Stock Exchange for the five trading days immediately preceding the vesting date of the PSU. Each PSU initially granted vests no later than one day
prior to the third anniversary of the grant date subject namely to the achievement of performance objectives of the Corporation, based on external and
internal benchmarks, over a three-year performance period. PSUs are not dilutive since they are payable solely in cash.
During 2012, the Corporation granted a total of 140,626 PSUs (192,799 in 2011) while it cancelled 61,257 PSUs (13,054 in 2011) and paid 11,103 (1,082 in
2011). As at April 29, 2012, 435,883 PSUs are outstanding (367,617 as at April 24, 2011 and 188,954 as at April 26, 2010) and an obligation of $5.7 is
recorded in accounts payable and accrued liabilities and $6.4 is recorded in deferred credits and other liabilities ($5.0 as at April 24, 2011 and $1.1 as at April
26, 2010). For 2012, the compensation cost amounts to $2.6 ($1.9 for 2011).
Alimentation Couche-Tard Inc. / 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
23. Employee future benefits
The Corporation has a number of funded and unfunded defined benefit and defined contribution plans that provide retirement benefits to certain employees.
Defined benefit plans
The Corporation measures its accrued benefit obligation and the fair value of plan assets for accounting purposes on the last Sunday of April of each year.
The most recent actuarial valuation of the pension plans for funding purposes was as at December 31, 2011 and the next required valuation will be as at
December 31, 2012.
Information about the Corporation's defined benefit plans, in aggregate, is as follows:
Accrued benefit obligation
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial losses
Effect of exchange rate fluctuations
Balance, end of year
Plans’ assets
Fair value, beginning of year
Expected return on plans’ assets
Actuarial gains
Employer contributions
Benefits paid
Effect of exchange rate fluctuations
Fair value, end of year
2012
$
58.0
1.5
2.9
(3.3)
6.9
(1.5)
64.5
2012
$
25.5
1.1
0.3
0.9
(2.1)
(0.7)
25.0
Reconciliation of the funded status of the benefit plans to the amount recorded in the consolidated financial statements:
Accrued benefit obligation
Fair value of plans’ assets
Funded status of plan - deficit
Unamortized past service cost
Accrued benefit liability
2012
$
(64.5)
25.0
(39.5)
-
(39.5)
2011
$
(58.0)
25.5
(32.5)
0.2
(32.3)
2011
$
50.9
1.4
2.8
(2.2)
2.5
2.6
58.0
2011
$
23.3
1.2
0.7
0.5
(1.4)
1.2
25.5
2010
$
(50.9)
23.3
(27.6)
0.4
(27.2)
As at April 29, 2012, the accrued benefit obligation for unfunded pension plans amounts to $38.9 ($31.1 as at April 24, 2011 and $26.5 as at April 26, 2010).
The accrued benefit liability is included in deferred credits and other liabilities.
As at the measurement date, plans’ assets consist of:
Asset category
Equity securities
Debt securities and cash
Total
2012
%
30.8
69.2
100.0
Percentage of plans’ assets
2011
%
29.9
70.1
100.0
2010
%
27.1
72.9
100.0
The expected global rate of return on plans’ assets is based on the weighted average of expected returns of the various assets in the plans. Expected returns
on plans’ assets estimated by the plans’ administrator are based on historical returns and analysts’ market predictions concerning these assets for the next
12 months.
For fiscal 2012, the effective return on plans’ assets amounts to $1.4 ($1.9 in 2011). No individual investment is greater than 5% of plans’ total asset value.
The Corporation’s pension benefit expense for the fiscal year is determined as follows:
Current service cost, net of employee contributions
Interest cost
Expected return on plans’ assets
Past service cost
Pension expense for the year
2012
$
1.5
2.9
(1.1)
0.2
3.5
2011
$
1.4
2.8
(1.1)
0.2
3.3
The expense for the year is included in Operating, selling, administrative and general expenses in the consolidated statement of earnings.
Alimentation Couche-Tard Inc. / 68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
23. Employee future benefits (continued)
The amount recognized in Other comprehensive income for the fiscal year is determined as follows:
Actuarial losses
Less: deferred taxes
Amount recognized in Other comprehensive income
2012
$
(6.6)
1.7
(4.9)
2011
$
(1.8)
0.6
(1.2)
The accumulated amounts recognized in Other comprehensive income for actuarial gains and losses are described as follows:
Balance, beginning of 2011
Actuarial losses recognized in 2011
Balance, end of 2011
Actuarial losses recognized in 2012
Balance, end of 2012
$
-
(1.8)
(1.8)
(6.6)
(8.4)
The Corporation expects to make a contribution of $2.5 to the defined benefit plans during the next financial year.
The significant weighted average actuarial assumptions which management considers the most likely to determine the accrued benefit obligations and the
pension expense are the following:
Accrued benefit obligation
Discount rate
Rate of compensation increase
Pension expense
Discount rate
Expected rate of return on plans’ assets
Rate of compensation increase
2010
%
5.50
4.00
2012
%
4.80
3.90
2012
%
5.25
4.75
4.00
2011
%
5.25
4.00
2011
%
5.50
5.00
4.00
Experience adjustments are as follows (amounts prior to the date of transition are not presented as the Corporation applies the exemption provided in
IFRS 1):
Present value of defined benefit obligation
Fair value of plans’ assets
Deficit
Experience adjustments on plans’ liabilities –
Actuarial loss
Experience adjustments on plans’ assets –
Actuarial gain
Defined contribution plans
2010
$
(50.9)
23.3
(27.6)
2012
$
(64.5)
25.0
(39.5)
(6.9)
0.3
2011
$
(58.0)
25.5
(32.5)
(2.5)
0.7
The Corporation’s total pension expense under its defined contribution plans and mandatory governmental plans for 2012 is $46.8 ($46.1 in 2011).
Deferred compensation plan – United States operations
The Corporation sponsors a deferred compensation plan that allows certain employees in its US operations to defer up to 25.0% of their base salary and
100.0% of their cash bonuses for any given year. Interest accrued on the deferral and amounts due to the participants are generally payable on retirement,
except in certain limited circumstances. Obligations under this plan amount to $15.0 as at April 29, 2012 ($13.2 as at April 24, 2011 and $9.6 as at April 26,
2010) and are included in Deferred credits and other liabilities.
Alimentation Couche-Tard Inc. / 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
24. Financial instruments and capital risk management
Financial risk management objectives and policies
The Corporation’s activities expose it to a variety of financial risks: foreign currency risk, interest rate risk, credit risk, liquidity risk and price risk. The
Corporation uses forwards to hedge certain risk exposures, primarily foreign currency and price risk.
Foreign currency risk
Most of the Corporation’s consolidated revenues and expenses are received or denominated in the functional currency of the markets in which it does
business. Accordingly, the Corporation’s sensitivity to variations in foreign exchange rates is economically limited.
The Corporation is exposed to foreign currency risk with respect to a portion of its long-term debt denominated in US dollars.
As at April 29, 2012, with all other variables held constant, a hypothetical variation of 5.0% of the US dollar against the Canadian dollar would have had a net
impact of $21.5 on Other comprehensive income.
As at April 29, 2012, the Corporation was also exposed to foreign currency risk with respect to its potential acquisition of Statoil Fuel & Retail ASA for which
the purchase price would be denominated in Norwegian kroners (“NOK”) and would be financed using the Corporation’s acquisition facility denominated in
US dollars. As at April 29, 2012, the Corporation had forwards requiring it to deliver, at various dates until July 26, 2012, US$2.22 billion in exchange for
NOK12.82 billion, representing a weighted average rate of NOK5.7879 per US dollar. Variations in the fair value of the forwards are recorded to earnings. As
at April 29, 2012, the unrealized gain on these forwards amounted to $17.0 million and was recorded to earnings of fiscal 2012. Thus, as at April 29, 2012,
with all other variables held constant, a hypothetical variation of 1.0% of the NOK against the US dollar would have had an impact of approximately $16.5 on
Net earnings.
Interest rate risk
The Corporation is exposed to interest rate risk through the portion of its long-term debt bearing interest at a variable rate. The Corporation’s policy is to
maintain a large portion of its borrowings in variable rate instruments using interest rate swaps when necessary.
The Corporation’s fixed rate long-term debt is exposed to a risk of change in its fair value due to changes in interest rates. During fiscal year 2011, the
Corporation proceeded with the early redemption of its subordinated unsecured debt. Therefore, the Corporation exposure to the risk of change in fair value
is minimal since most of its long-term debt bears interest at a variable rate.
The Corporation is exposed to a risk of change in cash flows due to changes in interest rates on its variable rate long-term debt and does not currently hold
any derivative instruments that mitigate this risk. The Corporation analyzes its interest rate risk exposure on an ongoing basis. Various scenarios are
simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Corporation
calculates the impact on net earnings of a defined interest rate shift. Based on variable rate long-term debt balances as at April 29, 2012, the impact on net
earnings of a 1.0% shift would have been $4.3.
Credit risk
The Corporation is exposed to credit risk with respect to Cash and cash equivalents, Trade accounts receivable and vendor rebates receivable, Credit and
debit cards receivable and the investment contract including an embedded total return swap.
Credit risk related to Trade accounts receivable and vendor rebates receivable is limited considering the nature of the Corporation’s activities and its
counterparties. As at April 29, 2012, no single creditor accounted for over 10.0% of total Trade accounts receivable and vendor rebates receivable and the
related maximum credit risk exposure corresponds to their carrying amount.
The Corporation mitigates the credit risk related to Cash and cash equivalents and Credit and debit cards receivable by dealing with major financial
institutions that have very low or minimal credit risk. As at April 29, 2012, the maximum credit risk exposure related to Cash and cash equivalents and Credit
and debit cards receivable corresponds to their carrying amount.
The Corporation is exposed to credit risk arising from its embedded total return swap when this swap results in a receivable from the financial institutions. In
accordance with its risk management policy, to reduce this risk, the Corporation has entered into this swap with a major financial institution with a very low
credit risk.
The Corporation is exposed to credit risk arising from its forwards when these contracts result in an asset. In accordance with its risk management policy, to
reduce this risk, the Corporation has entered into these contracts with major financial institutions with very low credit risk.
Alimentation Couche-Tard Inc. / 70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
24. Financial instruments and capital risk management (continued)
Liquidity risk
Liquidity risk is the risk that the Corporation will encounter difficulties in meeting its obligations associated with financial liabilities and lease commitments. The
Corporation is exposed to this risk mainly through its Long-term debt, Accounts payable and accrued expenses and lease agreements. The Corporation’s
liquidity is provided mainly by cash flows from operating activities and borrowings available under its revolving credit facilities.
On an ongoing basis, the Corporation monitors rolling forecasts of its liquidity reserve on the basis of expected cash flows taking into account operating
needs, tax situation and capital requirements and ensures that it has sufficient flexibility under its available liquidity resources to meet its obligations.
The contractual maturities of financial liabilities as at April 29, 2012 are as follows:
Non-derivative financial liabilities (1)
Accounts payable and accrued
liabilities (2)
Term revolving unsecured operating
credit A
Term revolving unsecured operating
credit B
Term revolving unsecured operating
credit D
Other long-term debt
Carrying
amount
$
Contractual
cash flows
$
Less than
one year
$
Between one
and two
years
$
Between two
and five
years
$
More than
five years
$
916.0
326.3
154.0
169.0
15.9
1,581.2
916.0
327.1
154.4
180.0
19.4
1,596.9
916.0
327.1
154.4
2.4
5.0
1,404.9
-
-
-
2.4
4.5
6.9
-
-
-
175.2
7.8
183.0
-
-
-
-
2.1
2.1
(1) Based on spot rates, as at April 29, 2012, for balances in Canadian dollars and balances bearing interest at variable rates.
(2) Excludes deferred credits as well as statutory accounts payable and accrued liabilities such as sales taxes, excise taxes, property taxes and
certain payroll benefits.
Price risk
The Corporation is exposed to price risk with respect to its obligation related to its PSU Plan which fluctuates in part with the fair value of the Corporation’s
Class B shares. To mitigate this risk, the Corporation has entered into a financial arrangement with an investment grade financial institution which includes an
embedded total return swap with an underlying representing Class B shares recorded at fair market value on the consolidated balance sheet under Other
assets. The financial arrangement is adjusted as needed to reflect new awards, adjustments and/or settlements of PSUs. As at April 29, 2012, the impact on
net earnings or shareholders’ equity of a 5.0% shift of the value of the contract would not have been significant.
Fair values
The fair value of Trade accounts receivable and vendor rebates receivable, Credit and debit cards receivable and Accounts payable and accrued liabilities is
comparable to their carrying amount given their short maturity and the carrying value of the Term revolving unsecured operating credits approximates their
fair value given that their credit spread is similar to the credit spread the Corporation would obtain in similar conditions at the reporting date.
The following methods and assumptions were used to determine the estimated fair value of each class of financial instruments:
The fair value of the investment contract including an embedded total return swap is based on the fair market value of the Corporation’s Class B
shares;
The fair value of the forwards was determined by comparing the original rates of the contracts with rates prevailing at the revaluation date for
contracts having similar values and maturities.
The fair value of the subordinated unsecured debt was estimated based on the discounted cash flows of the debt at the Corporation’s estimated
incremental borrowing rates for debt of the same remaining maturities. As at April 26, 2010, the subordinated unsecured debt’s had a carrying
amount of $351.7 and a fair value of $357.0.
Fair value hierarchy
Fair value measurements recognized in the consolidated balance sheet are categorized in accordance with the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 but that are observable for the asset or liability, either directly or indirectly; and
Level 3: inputs for the asset or liability that are not based on observable market data.
The Corporation categorized the fair value measurement of the Instrument including an embedded total return swap and the forwards in Level 2, as they
are primarily derived from observable market inputs, that are, quoted market prices.
Alimentation Couche-Tard Inc. / 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
24. Financial instruments and capital risk management (continued)
Capital risk management
The Corporation’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce its cost of capital. The Corporation’s capital
comprises total Shareholders’ equity and net interest-bearing debt. Net interest-bearing debt refers to Long-term debt and its current portion, net of
Cash and cash equivalents and temporary investments, if any.
In order to maintain or adjust the capital structure, the Corporation may issue new shares, redeem its shares, sell assets to reduce debt or adjust the amount
of dividends paid to shareholders (Notes 18 and 21).
In its capital structure, the Corporation considers its stock option, PSU and DSU plans (Note 22). The Corporation’s share repurchase program is also one of
the tools it uses to achieve its objectives (Note 21).
The Corporation monitors capital on the basis of the net interest-bearing debt to total capitalization ratio and also monitors its credit ratings as determined by
third parties. As at the consolidated balance sheet date, the net interest-bearing debt to total capitalization ratio was as follows:
Current portion of long-term debt
Long-term debt
Less: Cash and cash equivalents
Net interest-bearing debt
Shareholders’ equity
Net interest-bearing debt
Total capitalization
Net interest-bearing debt to total capitalization ratio
2012
$
484.4
180.8
304.3
360.9
2,174.6
360.9
2,535.5
14.2%
2011
$
4.6
496.9
309.7
191.8
1,979.4
191.8
2,171.2
8.8%
2010
$
4.4
711.9
215.7
500.6
1,660.0
500.6
2,160.6
23.2%
Under its term revolving unsecured operating credits, the Corporation must meet the following ratios on a consolidated basis:
A leverage ratio, which is the ratio of total Long-term debt less Cash and cash equivalents to EBITDA for the four most recent quarters. EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization) is a non-IFRS measure;
A fixed charge coverage ratio, which is the ratio of EBITDAR for the four most recent quarters to the total interest expense and the rent payments
in the same periods. EBITDAR is a non-IFRS measure and is calculated as EBITDA plus rent payments.
The Corporation monitors these ratios regularly and is in compliance with these covenants.
The Corporation is not subject to any other significant externally imposed capital requirement.
25. Contractual obligations
Minimum lease payments
As at April 29, 2012, the Corporation has entered into operating lease agreements expiring on various dates until 2032 which call for aggregate minimum
lease payments of $1,555.0 in the United States and of CA$806.4 in Canada for the rental of commercial space, equipment and a warehouse. Several of
these leases contain renewal options and certain sites are subleased to third parties. The minimum lease payments for the next fiscal years are as follows:
Less than one year
One to five years
More than five years
United States
$
169.9
577.9
807.2
Canada
CA$
94.9
275.2
436.3
As at April 29, 2012, the total amount of future minimum sublease payments expected to be received under sublease agreements related to these operating
leases is $40.5.
Purchase commitments
The Corporation has entered into various product purchase agreements that require it to purchase minimum amounts or quantities of merchandise and
motor fuel annually. The Corporation has generally exceeded such minimum requirements in the past and expects to continue doing so for the foreseeable
future. Failure to satisfy the minimum purchase requirements could result in termination of the contracts, change in pricing of the products, payments to the
applicable providers of a predetermined percentage of the commitments and repayments of a portion of rebates received.
Alimentation Couche-Tard Inc. / 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
26. Contingencies and guarantees
Contingencies
Various claims and legal proceedings have been initiated against the Corporation in the normal course of its operations. In management's opinion, these
claims and proceedings are unfounded. Management estimates that any payments resulting from their outcome are not likely to have a substantial negative
impact on the Corporation’s results and financial position.
Guarantees
The Corporation assigned a number of lease agreements for premises to third parties. Under some of these agreements, the Corporation retains ultimate
responsibility to the landlord for payment of amounts under the lease agreements should the sublessees fail to pay. As at April 29, 2012, the total future lease
payments under such agreements are approximately $1.3 and the fair value of the guarantee is not significant. Historically, the Corporation has not made
any significant payments in connection with these indemnification provisions.
27. Segmented information
The Corporation operates convenience stores in the United States and Canada. It essentially operates in one reportable segment, the sale of goods for
immediate consumption and motor fuel through corporate stores or franchise operations. It operates a convenience store chain under three main banners,
Couche-Tard, Mac’s and Circle K. Revenues from outside sources fall mainly into two categories: merchandise and services and motor fuel.
Information on the principal revenue classes as well as geographic information is as follows:
External customer revenues (a)
Merchandise and services
Motor fuel
Gross profit
Merchandise and services
Motor fuel
Total long-term assets (b)
External customer revenues (a)
Merchandise and services
Motor fuel
Gross profit
Merchandise and services
Motor fuel
Total long-term assets (b)
US
$
4,408.0
13,673.8
18,081.8
1,452.6
637.9
2,090.5
2,454.3
US
$
4,133.6
10,218.7
14,352.3
1,369.8
537.3
1,907.1
2,070.3
Canada
$
2,190.9
2,724.8
4,915.7
729.8
148.8
878.6
633.7
Canada
$
2,049.9
2,148.2
4,198.1
702.9
135.7
838.6
590.8
2012
(53 weeks)
Total
$
6,598.9
16,398.6
22,977.5
2,182.4
786.7
2,969.1
3,088.0
2011
(52 weeks)
Total
$
6,183.5
12,366.9
18,550.4
2,072.7
673.0
2,745.7
2,661.1
(a) Geographic areas are determined according to where the Corporation generates operating income (where the sale takes place) and according to
the location of the long-term assets.
(b) Excluding financial instruments, deferred tax assets and post-employment benefit assets.
28. Subsequent events
Subsequent to the end of fiscal 2012, between June 19, 2012 and June 29, 2012, the Corporation acquired 98.9% of the issued and outstanding shares of
Statoil Fuel & Retail (SFR/Oslo Børs) for a cash consideration of 51.20 Norwegian Kroners (“NOK”) per share for a total amount of NOK15.2 billion or
approximately $2.6 billion. Having reached a shareholding of more than 90%, on June 29, 2012, in accordance with Norwegian laws, the Corporation
initiated a compulsory acquisition process to buyback the participation of the remaining minority shareholders and ensure that Statoil Fuel & Retail becomes
a wholly-owned subsidiary.
Statoil Fuel & Retail is a leading Scandinavian road transport fuel retailer with over 100 years of operations in the region. Statoil Fuel & Retail operates a
broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania), and Russia with approximately 2,300
stores, the majority of which offer fuel and convenience products while the others are automated (fuel only) stations. Statoil Fuel & Retail does business in
several countries and owns the land for over 900 sites and buildings for over 1,700 sites. Statoil Fuel & Retail's other products include stationary energy,
marine fuel, aviation fuel, lubricants and chemicals. In Europe, Statoil Fuel & Retail owns and operates 12 key terminals as well as 38 depots in eight
countries while it also operates approximately 400 road tankers.
Alimentation Couche-Tard Inc. / 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
28. Subsequent events (continued)
This transaction has been financed using the new acquisition facility (Note 18).
Subsequent to the end of fiscal 2012, the Corporation entered into additional forwards requiring it to deliver, at various dates, US$1.25 billion in exchange for
NOK7.32 billion, representing a weighted average rate of NOK5.8530 per US dollar.
In total, the Corporation has entered into forwards requiring it to deliver US$3.47 billion in exchange for NOK20.14 billion, representing a weighted average
rate of NOK5.8114 per US dollar which is a favorable rate compared to the rate of 5.75 in effect as at April 18, 2012, the date the offer was announced.
Subsequently, the Corporation modified the original maturity dates of certain forwards to make them coincide with the actual disbursement dates for the
payment of Statoil Fuel & Retail shares. Thus, between June 15 and June 25, 2012, the Corporation used a significant portion of the forwards with a value of
$2,570.1 million to pay for Statoil Fuel & Retail shares while the remaining NOK at its disposal as well as the NOK that will be received upon settlement of
forwards that have not yet been settled will be used for the purchase of the remaining shares and to refinance a significant portion of Statoil Fuel & Retail
existing long-term debt, which is denominated in NOK.
In May 2012, subsequent to the end of the fiscal 2012, the Corporation acquired 20 company-operated stores operating in Texas, United States from
Signature Austin Stores. The Corporation leases the real estate for all sites.
29. First-time adoption of IFRS
These are the first annual consolidated financial statements of the Corporation prepared in accordance with IFRS as issued by the IASB. The date of the
Corporation’s transition to IFRS is April 26, 2010.
The Corporation’s IFRS accounting policies presented in note 3 have been applied in preparing the consolidated financial statements for the year ended
April 29, 2012, for the comparative information and for the opening consolidated balance sheet as at the date of transition except for certain mandatory
exceptions and elected exemptions listed below.
The Corporation has applied IFRS 1 First-time Adoption of International Financial Reporting Standards in preparing its first IFRS consolidated financial
statements. The effects of the transition to IFRS on the consolidated balance sheet, consolidated equity, consolidated earnings and comprehensive
income and consolidated cash flows are presented in this section and are further explained in the explanatory notes that accompany the tables.
First-time adoption exemptions
Upon transition, IFRS 1 imposes certain mandatory exceptions and permits certain exemptions from full retrospective application. The Corporation has
applied the mandatory exceptions and the following optional exemptions:
Mandatory exceptions applied by the Corporation:
Financial assets and liabilities that had been de-recognized before April 26, 2010 under Canadian GAAP have not been recognized under
IFRS.
The Corporation has only applied hedge accounting in the opening consolidated balance sheet where all the requirements in IAS 39 were
met at the date of transition.
The estimates previously established under Canadian GAAP have not been revised following the adoption of IFRS, unless it was necessary
to take into account differences in accounting policies.
Other optional exemptions adopted by the Corporation:
The Corporation has elected not to apply IFRS 3 “Business Combinations” retrospectively to business combinations that occurred before the
date of transition (April 26, 2010), including business acquisitions made by the joint venture. See note g) for an explanation of the effect of
this exemption.
For all its employee future benefits plans, the Corporation has elected to recognize all cumulative actuarial gains and losses existing at the
transition date in retained earnings. See note d) for an explanation of the effect of this exemption. Furthermore, the Corporation has elected
to use the exemption not to disclose the defined benefit plan surplus/deficit and experience gains and losses before the date of transition.
The Corporation has elected not to retrospectively recognize the effect on the assets of the variances related to its existing asset retirement
obligation and similar liabilities, which may have occurred before the transition date.
The Corporation elected to use facts and circumstances existing as at April 26, 2010 to determine whether an arrangement signed before
April 26, 2004 contains a lease. The arrangements signed after that date were evaluated under Canadian GAAP and were not analyzed in
detail since this analysis would have given similar conclusions as per IAS 17 and IFRIC 4.
The Corporation elected to avail itself of the exemption provided under IFRS 1 and applied IFRS 2 for all equity instruments granted after
April 29, 2002.
The Corporation elected to reset all cumulative translation adjustments to zero in opening retained earnings at its transition date.
Alimentation Couche-Tard Inc. / 74
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Alimentation Couche-Tard Inc. / 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
29. First-time adoption of IFRS (continued)
Explanatory notes related to the reconciliation
a) Recognition of deferred gains on sale and leaseback transactions
Under Canadian GAAP: CICA Handbook Section 3065 “Leases” required that any profit or loss arising from a sale and leaseback transaction be
deferred and amortized over the lease term. A loss was recognized in earnings immediately when, at the time of the transaction, the fair value of the
property was less than its carrying value.
Under IFRS: IAS 17 “Leases” requires the immediate recognition of all profits or losses arising from a sale and leaseback transaction except if:
the sale price is below fair value and the loss is compensated for by future lease payments below market price, in which case it shall be
deferred and amortized in proportion to the lease payments over the period during which the asset is expected to be used;
the sale price is above fair value, in which case the excess shall be deferred and amortized over the period during which the asset is
expected to be used.
Considering this difference, the Corporation analyzed all deferred gains existing as at the transition date. When the transactions were concluded at fair
value, the deferred gains in the consolidated balance sheet at the transition date were reversed and recognized in retained earnings. The amortization
of the deferred gains recognized in 2011 was reversed and all deferred gains from sale and leaseback transactions realized in 2011 were reclassified
and recognized directly in earnings.
b) Discounting of provisions
Under Canadian GAAP: The only provision that needed to be discounted was the asset retirement obligation provision and changes in the discount rate were
not applied retroactively.
Under IFRS: IAS 37 “Provisions, contingent liabilities and contingent assets” states that where the effect of the time value of money is material, the
amount of a provision shall be the present value of the expenditures expected to be required to settle the obligation.
Considering this difference, the Corporation reviewed all provisions recorded in its consolidated balance sheet as at the transition date and discounted
those for which the time value of money had a significant impact. This resulted in the reduction of the provision balances in the consolidated balance
sheet as at the transition date. For fiscal 2011, new expenses recognized in earnings related to these provisions have been reduced to reflect their
discounting and an accretion expense has been recorded in earnings.
c) Onerous contracts
Under Canadian GAAP: Provisions were not recognized for onerous contracts.
Under IFRS: As per IAS 37 “Provisions, contingent liabilities and contingent assets”, if an entity has a contract that is onerous, the present obligation
under the contract shall be recognized and measured as a provision. An onerous contract is a contract in which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least
net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.
Considering this difference, the Corporation has reviewed its existing contracts as at the transition date to identify onerous contracts. This resulted in the
recognition of a provision for onerous contracts as at April 26, 2010. This provision was recognized in earnings, reversed as the contracts progressed
and entirely reversed as at April 24, 2011. This led to a decrease in Operating, selling, administrative and general expenses for fiscal 2011 following the
amortization of the provision.
d) Employee future benefits
i) Actuarial gains and losses
Under Canadian GAAP: Under CICA Handbook Section 3461 “Employee future benefits”, for a defined benefit plan, an entity had to use the “corridor”
approach and recognize amortization of actuarial gains and losses in a period in which, as of the beginning of the period, the unamortized net actuarial
gain or loss exceeded 10% of the greater of:
a)
b)
the accrued benefit obligation at the beginning of the year; or
the fair value, or market-related value, of plan assets at the beginning of the year.
Under IFRS: As per IAS 19 “Employee benefits”, an entity may choose to use the corridor approach involving the non-recognition of a portion of the
actuarial gains or losses, or elect to recognize actuarial gains or losses directly in equity.
The Corporation has decided to modify its accounting method and has elected to recognize all actuarial gains and losses directly in equity in Other
comprehensive income. Moreover, under IFRS 1, a first-time adopter may elect to recognize all cumulative actuarial gains and losses at the date of
transition to IFRS. Therefore, the Corporation elected to reverse unamortized actuarial gains and losses to retained earnings on April 26, 2010. The
actuarial losses for 2011 were recognized directly to Other comprehensive income and the amortization amount recognized in earnings under Canadian
GAAP was reversed.
Alimentation Couche-Tard Inc. / 78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
29. First-time adoption of IFRS (continued)
ii) Past service costs
Under Canadian GAAP: Under CICA Handbook Section 3461 “Employee future benefits”, an entity amortized past service costs arising from a plan
initiation or amendment by assigning an equal amount to each remaining service period up to the full eligibility date of each employee active at the date
of the plan initiation or amendment who was not yet fully eligible for benefits at that date.
Under IFRS: As per IAS 19 “Employee benefits”, an entity shall recognize past service costs as an expense on a straight-line basis over the average
period until the benefits become vested.
Considering this difference, the Corporation reversed fully vested unamortized past service costs to retained earnings on April 26, 2010. The
amortization amount of the past service costs for fiscal 2011 was calculated considering the IFRS adjusted balances and the amortization amount
recognized in earnings under Canadian GAAP was reversed.
e) Stock-based compensation
Under Canadian GAAP: CICA Handbook Section 3870 “Stock-based compensation and other stock-based payments” stated that, when stock-based
awards granted vest gradually, it was possible to recognize the compensation cost using the straight-line method when a method different than the
gradual vesting method was used in calculating the fair value. As the Corporation was not anticipating any significant difference between the expected
lives of each group of options, the straight-line method was previously used.
Under IFRS: IFRS 2 “Share-based payment”, does not provide such an exception. Thus, when options granted vest gradually, an entity must consider
each portion as a distinct grant and amortize the corresponding expense distinctly for each portion.
Considering this difference, the Corporation modified its expense amortization model related to stock option vesting to consider the different dates of
rights acquisition and stopped using the straight-line method. The total cumulative additional expense that should have been recorded from the
inception of the plans as at April 26, 2010 based on IFRS was recorded in retained earnings with an equivalent adjustment to contributed surplus. The
expense recognized in earnings in 2011 under Canadian GAAP has been adjusted to reflect the difference between the two amortization methods.
f) Joint Venture
Under Canadian GAAP: CICA Handbook Section 3055 “Interests in Joint Ventures” required the proportionate consolidation method. It did not allow the
use of the equity method to account for investments in joint ventures.
Under IFRS: IAS 31 “Interests in Joint Ventures” offers the possibility of applying either the equity method or the proportionate consolidation method to
investments in joint ventures.
Considering this difference, the Corporation opted to record its investment in RDK using the equity method as at the IFRS transition date. Since the
Corporation was using the proportionate consolidation method under Canadian GAAP to recognize its RDK investment, 50.01% of the values of all of
the joint venture’s accounts were included in the consolidated balance sheet and consolidated statement of earnings. These amounts have been
removed through the reconciliation with IFRS. The value of the investment in the joint venture was recorded on the consolidated balance sheet under
the item Investment in a joint venture and the Corporation’s proportionate interest of RDK’s income for fiscal 2011 was presented in the consolidated
statement of earnings under Share of earnings of a joint venture accounted for using the equity method.
g) Business combinations - Direct acquisition costs
Under Canadian GAAP: As per previous CICA Handbook Section 1581 “Business Combinations” (section applicable before the IFRS transition), direct
acquisition costs were part of the acquisition cost.
Under IFRS: As per IFRS 3 “Business Combinations”, direct acquisition costs are recognized in earnings when they are incurred.
Because the Corporation has decided to use the exemption in IFRS 1 which allows not restating all business combinations prior to the transition date,
no restatement occurred on April 26, 2010. Business combinations that occurred during fiscal 2011 were restated to reflect this difference. As a result,
direct acquisition costs that occurred during fiscal 2011 were recognized in earnings on the consolidated financial statement adjusted for IFRS.
h) Presentation differences
Some amounts have been reclassified to reflect the following classification differences:
i) Deferred income taxes:
Under Canadian GAAP: As per CICA Handbook Section 3465 “Income Taxes”, current income tax liabilities and current income tax assets had to be
presented separately from non-current portions.
Under IFRS: As per IAS 12 “Income Taxes”, income tax liabilities and income tax assets should all be presented under long-term assets and liabilities.
Considering IAS 12, all deferred income taxes were reclassified to long-term on the Corporation’s consolidated balance sheet.
ii) Current definition
Under Canadian GAAP: As per CICA Handbook Section 1510 “Current Assets and Current Liabilities”, current assets and liabilities included those
items ordinarily realizable or payable within one year from the date of the balance sheet or within the normal operating cycle, when that was longer than
a year.
Alimentation Couche-Tard Inc. / 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended April 29, 2012 and April 24, 2011
(in millions of US dollars, except share and stock option data)
29. First-time adoption of IFRS (continued)
Under IFRS: As per IAS 1 “Presentation of financial statements”, an entity shall disclose the amount expected to be recovered or settled after more than
twelve months for each asset and liability line item that combines amounts expected to be recovered or settled:
a)
no more than twelve months after the reporting period; and
b) more than twelve months after the reporting period.
The definition under IFRS being more directive, this resulted in a reclassification of some long-term amounts previously presented as current on the
Corporation’s consolidated balance sheet.
iii) Provision presentation
Under Canadian GAAP: There was no specific indication concerning the presentation of provisions.
Under IFRS: IAS 1 “Presentation of financial statements” states in paragraph 54 l) that, as a minimum, the balance sheet shall include some items,
including provisions.
Considering this difference, the current portion of provisions has been removed from Accounts payable and accrued liabilities, and the long-term portion
has been removed from Deferred credits and other liabilities on the consolidated balance sheet to be presented distinctively under Provisions.
iv) Accretion expense
Under Canadian GAAP: CICA Handbook Section 3110 “Asset Retirement Obligations” stated that the expense related to the passage of time had to be
classified as an operating item in the statement of earnings, not as interest expense.
Under IFRS: As per IFRIC 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities”, the periodic unwinding of the discount shall be
recognized in earnings as a finance cost as it occurs. Also, as per IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, where discounting
is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized as finance cost.
Considering this difference, accretion expense has been reclassified under Financial expenses on the Corporation’s consolidated statement of earnings
for fiscal 2011.
i) Reversal of the cumulative translation adjustments
Retrospective application of IFRS would require the Corporation to determine cumulative currency translation differences in accordance with IAS 21, ‘’The
Effects of Changes in Foreign Exchange Rates’’, from the date a subsidiary or equity method investee was formed or acquired. IFRS 1 permits cumulative
translation gains and losses to be reset to zero at the transition date. The Corporation elected to reset all cumulative translation gains and losses to zero in
opening retained earnings at its transition date.
Cash flow statement
The only significant adjustment to the statement of cash flows is the change of accounting method for the joint venture, from the proportionate consolidation
under Canadian GAAP to the equity method under IFRS. The total cash flow amounts for each category that was previously consolidated in the cash flows
statement for the joint venture and that are now excluded from the cash flows statement under IFRS for 2011 are as follows:
Cash and cash equivalents beginning of year
Operating activities
Investing activities
Financing activities
Cash and cash equivalents end of year
2011
$
5.2
9.9
(4.4)
-
10.7
Alimentation Couche-Tard Inc. / 80
www.couche-tard.com
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Alimentation Couche-Tard Inc. / 81