201420142014
Annual Report
Annual Report
Annual Report
Table of Contents
Message to Shareholders
…….…………………………………………………………………….Page 2
Alain Bouchard, President & CEO
Operations Review
…………………………………………………………………………………….Page 6
Brian Hannasch, Chief Operating Officer
Financial Review
…………………………………………………………………………………….Page 10
Raymond Paré, Vice President & Chief Financial Officer
Management’s Discussion and Analysis
…...…………………………………………………..Page 12
Management’s Report
……………………………………………………………………………..Page 43
Independent Auditor’s Report
.……………………………………………………………………Page 45
Consolidated Financial Statements
..…………………………………………………………….Page 47
Alain Bouchard
President & Chief Executive Officer
Building momentum
I am proud of our annual results that provide us with our sixth straight year of record earnings. Our
convenience stores and service stations in North America and Europe continue to build momentum in the
face of challenging market conditions. Our same-store merchandise sales on both continents improved in
fiscal year 2014, gaining market share in the majority of our markets. And while fuel volumes across the
industry are generally flat or slightly declining our best-performing stores grew their volumes while we
continued to gain fuel market share.
The numbers speak for themselves
For the sixth year in a row our net earnings have increased,
amounting to $812.2 million for fiscal 2014, up 41.8% over
fiscal 20131. Excluding non-recurring gains and costs, net
earnings for fiscal 2014 would have been approximately
$766.0 million or $1.35 per share on a diluted basis, an
increase of 23.3% compared with fiscal 2013. EBITDA for fiscal
2014 was $1,640.2 million, an increase of $264.6 million or
19.2% compared with fiscal 2013, including a contribution from
acquisitions (net of acquisition costs recorded to earnings) of
$153.0 million.
Since the acquisition of Statoil Fuel & Retail, we estimate that
total realized annual synergies and cost savings amount to
approximately $85.0 million, before income taxes. These
savings were in part offset by investments related to the
continued rollout of our new Enterprise Resource Planning
(ERP) systems and other key strategic convenience and fuel
initiatives. Our ERP replacement roll-out in Europe is now
complete.
Our work in the area of costs savings and synergy identification
continues. We maintain our goal for annual synergies as
previously announced.
Winning on all fronts
The strong results for fiscal year 2014 can be attributed to the performance of both the convenience and fuel
aspects of our business.
We saw strong growth in same-store sales from merchandise this year. Our North American operations
delivered an increase in same-store merchandise revenues of 3.8% in the U.S. and 1.9% in Canada. This is
attributable to effective merchandising strategies, investments in the enhancement of our service and
1 Note that the scale of the increases stated in this report are, in part, due to 2014 being the first full year of incorporating our European
operations into the Corporation’s financial results.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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product offerings, and pricing strategies aimed at boosting in-store traffic, as well as food service in several
of our markets.
According to current NACS State of the Industry data, Couche-Tard outperformed the US market with an
increase of 3.8% in same-store sales year-on-year, as opposed to the 2.4% reported in total industry
merchandise sales2.
Our European operations continued to perform well, helped by new and sustainable merchandising
strategies. Strong food service and coffee sales have driven growth in these markets. Our European
business units delivered a 1.6% increase in same-store merchandise revenues compared with the same
period last year, despite a still-challenging European convenience market. Initiatives such as a “coin offer” -
a permanent campaign which promises customers they can always purchase a hot dog for a coin - and the
continent-spanning “XL summer” campaign promoting a longer summer, XL offers and XL service, aimed at
improving price perception, a significant step-up in merchandising, and new products in fresh food all proved
effective.
Food in focus
Our people can be proud of our fresh food initiatives in North
America and Europe. Customers are buying food at our stores
in increasing numbers, not only because of the convenience
factor but also because we offer a broader menu selection and
the improved quality and taste they demand.
For example, in North America, our five fresh food pilot markets
are delivering very encouraging early results, which show our
customers really care about food quality. In Europe, thanks to
an increased focus on the category, our hot dog sales have
seen double-digit growth - in a category that has been
essentially flat over the last few years.
Social investment
Millions of customers visit our stores and stations across North
America and Europe every day. This puts Couche-Tard in a
powerful position to mobilize its surrounding communities. We
are proud to say there are dozens of organizations across
North America and Europe that have benefitted from our
corporate
over
$11.7 million, from our awareness-building activities and our
employee volunteers.
contributions,
customer
totaling
and
Fresh food pilots in North America are delivering very
encouraging early results
Our North American business units build awareness and raise funds for an array of local community causes
through powerful fund drives. This Spring, our Midwest and Great Lakes business units asked our
customers to “Put Their Money Where The Miracles Are”, raising over $1.3 million in just three weeks for
Children’s Miracle Network Hospitals (CMN). CMN is a care facility that provides approximately $6,500
worth of charity care every minute.
2 Convenience Stores Hit Record In-Store Sales in 2013 - NACS Online, April 3 2014
Annual Report © 2014 Alimentation Couche-Tard Inc.
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Our European group has aligned its social investments in eight countries around the theme of “youth at risk”.
Less than one year into its collaboration with BRIS (“Barnens Rätt i Samhället” or “Children’s Rights in
Society”), an organization that assists vulnerable children and young people with advice and support, our
Swedish business unit was named their “most creative partner”.
Senior management changes
In March, we announced my decision to take on a new role as
Founder and Executive Chairman of the Board of Directors with
effect from the date of Couche-Tard’s 2014 shareholders’
annual meeting. At the same time, it was announced that our
Chief Operating Officer, Brian Hannasch, would be promoted to
the position of President and Chief Executive Officer.
After more than three decades with the same President and
CEO, this change is an evolutionary one for our corporation. In
my new role, I will be focusing on acquisitions and new industry
opportunities while continuing to take part in results reviews
and the budgeting process. I will also continue to engage in our
strategic discussions and serve as a mentor and coach to our
next generation of leaders.
We have an exceptional senior leadership team, and Brian
Hannasch is the right person to lead it. He has been intimately
involved in developing our strategy and improving our business.
He has played a pivotal role in the material acquisitions we
made over the last thirteen years, including our largest and
most recent, Statoil Fuel & Retail in Europe. His decisive
leadership, management skills and deep experience across the
entire value chain of our business uniquely qualify him to step
into this role.
Outlook
In Fiscal 2014 we have made great progress in growing our
business and we are particularly pleased with the performance
of our new-to-industry sites. As has been the case in the past, we have made great progress in deleveraging
our balance sheet and in this respect we are currently ahead of our plans. We will further increase our focus
on new builds in the coming year, aided by our great land bank on both continents.
International
Alain Bouchard accepting NACS
Convenience Leader of the Year 2014 from award sponsor
Cary Crook, Vice President/General Manager International
Sales at PepsiCo
Insight
In my new role, I will focus on our ongoing expansion into new markets and new opportunities - at the right
time and on the right terms. I look forward to continuing the Couche-Tard journey, full steam ahead with
Brian at the helm and our 80,000 talented, committed, skilled and experienced people, propelling Couche-
Tard to even greater heights.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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Thank you
Renewal is a prerequisite for success in today’s fast-moving, ever-more-competitive retail landscape. I am
impressed by the ability of our people around the world to strive for continuous improvement each and every
day. I thank them all for their endless energy and commitment.
Alain Bouchard
President & Chief Executive Officer
Annual Report © 2014 Alimentation Couche-Tard Inc.
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Brian Hannasch
Chief Operating Officer
BWe care for your time
No matter which of our brands is on the store or service station you walk into, as a Couche-Tard customer
you can rest assured that “we care for your time”. Whether we are helping our customers on their way as
quickly as possible, or giving them an efficient time-out in an active day, we seek to make the lives of time-
starved consumers a little easier. This approach seems to be making our stores more appealing. Customers
continue to show a preference for our brands, accessible locations, convenient hours of operation, extended
food offering, variety of merchandise, quality fuels and friendly service.
Convenience trends indicate that consumers are on a quest to
create more leisure time as well as to secure convenient,
healthful and satisfying food for themselves and their families.
As experienced merchants, we pride ourselves on rising to
meet these demands through product innovation, technology
and service.
BOne strong family of merchants
Over the last year, the integration of Statoil Fuel & Retail into
the Couche-Tard family has been completed. It is no longer
“us” and “them” - now it is just “us”. Extensive cross-border
work has been going on in all areas of our business throughout
the year, leveraging the growing breadth and depth of
knowledge in our global family of merchants.
Leadership exchanges initiated last year between our North
American and European divisions have delivered significant
results. One of the best examples is the “merchandizing step-
up” carried out in our European business units. During the year
we have refreshed three quarters of our stores in Europe,
based on merchandising best practices derived from our North
American operations. That refresh has delivered noticeable top
line growth in same-store merchandise sales in the otherwise
declining European convenience market.
Through quarterly updates, market tours and annual vice
president meetings, we have seen our business unit leaders regularly sharing the results of pilot projects,
identifying best practices and aligning on proven concepts. Internationally, a centralized procurement
function has ensured that we work as closely and effectively as possible with our many global partners.
Brian Hannasch sharing ideas with a colleague in Poland
during the launch of their Summer campaign
Equally important, we have seen real evidence of a single, shared culture throughout our global
organization. Vice presidents across the business have worked together to capture the essence of our
company, coalescing it into what we call our family DNA. This provides a common language and a set of
guidelines and expectations that can be applied across continents and the business, from the boardroom to
the shop floor.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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0
B
0
1
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1
BEye-opening Offerings
In North America we have rolled out fresh food pilots in five markets. Customers are reacting well to these
trials, delivering encouraging results in all locations and categories. Proprietary foods designed to cover
eating occasions from early morning to late evening are planned for further trials across the U.S. and
Canada.
Simply Great Coffee, our new European coffee concept, has been rolled out in most of our markets in
Europe. It is creating a growing movement among coffee lovers on the road in these markets. Sites with the
new offer have typically shown double-digit coffee sales growth.
Also in Europe, we have turned our attention to reviving the
humble hot dog. Building on a trend for gourmet hot dogs,
customers now find our Statoil hot dog on menu boards with
flavors and
local varieties, smothered with
personalized with premium
sales
significantly, this reinvigorated offer has successfully increased
both sales and margins in an otherwise stagnant category.
condiments. Lifting
regional
BFueling growth
In general terms, road transportation fuel markets have been
flat, slightly decreasing in Europe and showing only small
increases in the U.S. and in Canada, largely as a result of
increasing fuel efficiency and challenging macroeconomic
conditions. Despite that, in most of our markets we have seen
our same-store transportation fuel volumes improving and our
market share growing.
Our proprietary fuel brand, milesTM, which was launched last
year, has now been rolled out in five of our eight markets in
Europe. The promise that “milesTM takes you further at no extra
cost” has quickly gained traction in the markets where it has
been introduced.
In April 2014, we introduced a replacement for the JET brand,
previously licensed from a third party for our automat stations in
Sweden and Denmark. Building on the customer promise that
has been so successful for the JET brand - “Quick and easy” -
INGO is attracting crowds with its unveiling in each region. The message for customers is “New name, same
low price”, and it is generating promising customer feedback. Rebranding our existing JET stations to INGO
in these markets is expected to be complete by the third quarter of fiscal 2015.
EVP Scandinavia Hans‐Olav Høidahl with Danish business
unit leader Pia Bach Henriksen at our most recent miles™
fuel brand launch
BNetwork expansion
We have realized another strong year of organic growth. Altogether, a net total of 113 stores have been
added to our network in 2014. 25 new stores were built and 166 acquired in North America and Europe.
Under an existing agreement with ExxonMobil dating from June 2011, we acquired 60 stores operated by
independent operators. In addition, we acquired 9 stores in Illinois from Baron-Huot Oil Company; 23 stores
in New Mexico from Albuquerque Convenience and Retail LLC; 11 stores in Florida and Georgia from Publix
Super Markets Inc. and 10 additional company-operated stores through distinct transactions.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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B
2
3
B
3
4
B
4
Our International Franchise Group has enabled our Circle K brand to be seen in three new markets during
the year including Honduras, Malaysia and the Philippines. In addition our Mexican operator, Circulo K,
under its licensing agreement, has reached an agreement to acquire 878 stores in Mexico.
BMarketing a cause
A recent international survey found that 62% of consumers
appreciate and want to support companies that donate to
important social causes. Our stores and stations are delivering
on that today.
For the last ten years, in Canada, Couche-Tard has been a
proud supporter of “Le Club des Petits Déjeuners” or “Breakfast
Club of Canada.” “Le Club des Petits Déjeuners” is a non-profit
organisation that aims to help vulnerable children by making
sure they receive a nutritious breakfast at school and by
creating an atmosphere and projects that feed the children’s
self-esteem. Around 130,000 students in 1,300 schools across
Canada have access to a nutritious breakfast each morning,
thanks to this organisation. Each year we organize campaigns
selling coffee mugs from September to November across all our
545 Couche-Tard stores in the Province of Québec. We work
closely with the Breakfast Club to design a different mug each
year. All proceeds from the sale go to the Club; in 2014 we sold
115,000 mugs, raising $212,465.
In Europe, we joined forces with the Norwegian Cancer Society
to raise funds for the Pink Ribbon campaign for breast cancer
research. We supported the campaign with NOK 50 per
premium car wash. 37,500 washes were sold in the campaign,
triggering a donation of over NOK 2 million, or around
$335,000. As a side-effect of the one month campaign, our
Norwegian business unit experienced a significant increase in
its car wash conversion rate (from normal to premium washes)
and is now leading our European organisation in terms of premium car wash sales. Extensive national
media exposure enhanced our brand profile and employee pride increased notably. Plans are already in
place for continuing this win/win exercise in the current fiscal year, including extending it to other European
markets.
Couche‐Tard proudly supports the Breakfast Club of Canada
BReducing our carbon footprint
Through programs focused on both behavioral change and the upgrade or installation of new technical
solutions at our facilities in North America, we have attained our overall goal of decreasing our energy
consumption by 3% in Fiscal Year 2014 compared to Fiscal Year 2013. Our actions to reduce energy
consumption also result in a positive benefit to reducing our carbon emissions. We are rolling out similar
energy initiatives in Europe and we expect to continue significant investment in reducing energy
consumption and our carbon foot-print in coming years.
Our commitment to driving down energy consumption and emissions is good for the environment and at the
same time reduces costs. To further this initiative we have signed new global lighting contracts which are
expected to further reduce our overall consumption and emissions by the end of Fiscal Year 2015.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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B
5
6
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6
BFull steam ahead
With the rest of our executive leadership team, I share a strong belief in the DNA of Couche-Tard. Our
stores are our livelihood. The customer experience we deliver is what generates value for our stakeholders.
Every day, each one of us - whether we are on the shop floor or in a boardroom - must challenge ourselves
to think like customers and act like owners to be competitive.
We are succeeding in every aspect of our business, in sales, margins and costs. Our strategies are proven
and effective and we have an experienced management team that has shown it can deliver, time after time.
We plan to continue our disciplined approach to cost, further strengthening our platform for growth both
organically and through carefully-selected acquisitions in the coming years.
Together with the incredible teams around the world that make up the Couche-Tard family, I am proud to
continue contributing to the company’s success.
Brian Hannasch
Chief Operating Officer
Annual Report © 2014 Alimentation Couche-Tard Inc.
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Raymond Paré
Vice President & Chief Financial Officer
Building and improving resilience
Business continuity is often described as “just common sense”. It is about taking responsibility for your
business and enabling it to stay on course for the long run. At Couche-Tard, building and improving
business resilience is our focus in everything we do. This past year we have been in a process of attaining
close and seamless coordination between several departments, groups, organizations, and systems in the
integration of our European organisation. We have made great headway in streamlining our operations
globally and reduced overhead as well as personnel costs, while keeping our eye on the ball of daily
business and meeting our customers’ needs in all our markets.
As a result, Couche-Tard completed its sixth straight year of
record earnings in 2014 and double-digit growth. Adjusted net
earnings and cash flows from operations both grew by more
than 23%. On a normalized basis, expenses increased by only
0.2%, return on capital employed reached 13.3% and return on
equity 22.6%. And in a bit more than two years, our share has
tripled in price.
Out-performing the Competition
It has been a year of growth for all aspects of our business. We
have out-performed our fuel competitors, increasing volumes
and gaining market share in generally flat fuel markets. We
have out-performed our convenience competitors on same-
store merchandise sales, also while gaining market share and
we have achieved all this while working to drive down costs and
realising further synergies.
Overall, excluding effect from currency translation, merchandise
and service sales
increased by about 5.8%. Road
transportation fuel volume growth was strong, with an increase
of 7.8% in the U.S., 3.6% in Canada and 16.6% in Europe. The
growth in revenues was not at the expense of margin: excluding
the effect from currency translation, total merchandise and
service gross profit increased by 4.4%, thanks to a growing contribution from our fresh food offering. Fuel
margins increased in Europe and Canada and, once again, our teams were successful at keeping costs
under control. All of this, taken together, allowed us to record an adjusted EBITDA of $1,590.9 million, an
increase of $205.1 million or 14.8% over fiscal 2013, despite the slight decrease in U.S. fuel margins net of
the electronic mode of payment and unfavorable currency translation effect. Last but not least, net cash from
operating activities for fiscal 2014 was $1,429.3 million, an increase of 23.1% over fiscal 2013, reflecting our
strong earnings as well as efficient management of working capital. Note that the scale of the increases for
our European operations stated here are in part due to 2014 being the first full year of incorporating those
operations into the Corporation’s financial results.
Annual Report © 2014 Alimentation Couche-Tard Inc.
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Discipline is the Key
Our disciplined approach to profitable growth and optimization continues to play a central role in our
success. We can look back on a year of significant and steady development in our net earnings, against a
backdrop of competitive market conditions in both North America and Europe.
These factors enabled us to significantly improve our balance sheet. In fiscal 2014, we reduced our adjusted
net debt on EBITDAR (Earnings Before Interest, Taxation, Depreciation and Rentals) from 3.06 to 2.44. With
our strong cash flows and our strong balance sheet, we were able to increase our quarterly dividend for the
third time this year, an increase of 60%.
Leveraging our Global Family
In the past year, our operational momentum has continued to build. This is no small achievement in an
organization where integration activities have been in full swing. Our experienced management team
successfully walked the line between planning and analysis, and delivering on the daily demands of
satisfying customers.
The implementation of our ERP system in Europe is complete and we are well into working as one team with
one culture. Our work in the area of costs savings and synergy identification continues. We maintain our
goal for annual synergies as previously announced.
Our benchmarking activities across the group paved the way for successful collaboration in fiscal 2014. We
are leveraging our intellectual capital in concept development and operational excellence globally, as well as
coordinating procurement and training. Our focus on lean operations - eliminating waste, optimizing labor
utilization and focusing marketing spend - in all our stores contributed to these efforts. The result: increased
product innovation, more satisfied customers and cost savings for the company as a whole.
Discipline Today, Discipline Tomorrow
We continue to balance our debt structure while developing our revolving credit facilities. We do this to
maintain the health of our balance sheet and optimize our options for growth. The discipline this demands
has resulted in an improvement of our return on capital employed (ROCE) by 230 basis points in just one
year. Looking ahead, we see opportunities to improve our financial performance still further and retain our
investment-grade rating in the markets.
Raymond Paré
Vice President & Chief Financial Officer
Annual Report © 2014 Alimentation Couche-Tard Inc.
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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 ending April 27, 2014. 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”) as issued by the International Accounting
Standards Board (“IASB”). 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 2014 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 our
website at www.couche-tard.com/corporate.
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”, “could”, “should”, “intend”, “expect”, “estimate”, “assume” 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 7, 2014, which are not guarantees of the 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, monetization, 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 2014 Annual Report as well as
other risks detailed from time to time in reports filed by Couche-Tard with securities regulators in Canada.
Our Business
We are the leader in the Canadian convenience store industry. In the United States, we are the largest independent
convenience store operator in terms of number of company-operated stores. In Europe, we are a leader in convenience store
and road transportation fuel in Scandinavian countries and in the Baltic States while we have a growing presence in Poland.
As of April 27, 2014, our network comprises 6,241 convenience stores throughout North America, including 4,756 stores with
road transportation fuel dispensing. Our North-American network consists of 13 business units, including nine in the United
States covering 39 states and the District of Columbia and four in Canada covering all ten provinces. More than 60,000 people
are employed throughout our network and at the service offices in North America.
In Europe, we operate a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia,
Latvia, Lithuania) and Russia with 2,258 stores as at April 27, 2014, the majority of which offer road transportation fuel and
convenience products while the others are unmanned automated service-stations which offer road transportation fuel only. We
also offer other products, including stationary energy, marine fuel, aviation fuel, lubricants and chemicals. We operate key fuel
Annual Report © 2014 Alimentation Couche-Tard Inc.
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terminals and fuel depots in eight countries. Including employees at Statoil branded franchise stations, about 17,500 people
work in our retail network, terminals and service offices across Europe.
In addition, under licensing agreements, about 4,600 stores are operated under the Circle K banner in 12 other countries
worldwide (China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia, Mexico, Philippines, Vietnam and
United Arab Emirates) which brings to slightly more than 13,100 the number of sites in our network.
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, road transportation 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
In the United States, 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 as well as by improving our
offering. In Europe and Canada, the convenience store sector is often dominated by a few major players, including integrated
oil companies. Some of these integrated oil companies are in the process of selling or are expected to sell their retail assets.
We intend to study investment opportunities that might come to us through this process.
However, despite this context, acquisitions have to be concluded at reasonable conditions in order to create value for our
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 and in the selling by integrated oil companies of their retail assets, it
has to be noted that in recent years, organic contribution has 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, prior to the acquisition
of Statoil Fuel & Retail. 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.
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 the significant portion of our debt denominated in US dollars.
The following table sets forth information about exchange rates based upon closing rates expressed as US dollars per
comparative currency unit:
Average for period
Canadian Dollar (1)
Norwegian Krone (2)
Swedish Krone (2)
Danish Krone (2)
Zloty (2)
Euro (2)
Lats (3)
Litas (2)
Ruble (2)
12-week periods ended
April 27, 2014
April 28, 2013
52-week periods ended
April 27, 2014
April 28, 2013
53-week periods ended
April 29, 2012
0.9045
0.1659
0.1542
0.1845
0.3289
1.3770
-
0.3989
0.0280
0.9821
0.1749
0.1554
0.1757
0.3156
1.3104
1.8703
0.3796
0.0325
0.9439
0.1665
0.1533
0.1805
0.3200
1.3466
1.9002
0.3897
0.0300
0.9966
0.1737
0.1513
0.1730
0.3117
1.2893
1.8481
0.3735
0.0320
1.0051
-
-
-
-
-
-
-
-
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Period end
Canadian Dollar
Norwegian Krone (4)
Swedish Krone (4)
Danish Krone (4)
Zloty (4)
Euro (4)
Lats (3)
Litas (4)
Ruble (4)
As at April 27, 2014
As at April 28, 2013
0.9061
0.1681
0.1537
0.1858
0.3301
1.3870
-
0.4018
0.0281
0.9834
0.1734
0.1543
0.1766
0.3163
1.3170
1.8822
0.3814
0.0322
(1)
(2)
Calculated by taking the average of the closing exchange rates of each day in the applicable period.
Average rate for the period from February 1st, 2014 to April 30, 2014 for the 12-week period ended April 27, 2014, from May 1st, 2013 to April 30, 2014 for the 52-week period
ended April 27, 2014, from February 1st, 2013 to April 30, 2013 for the 12-week period ended April 28, 2013 and from June 20, 2012 to April 30, 2013 for the 52-week period ended
April 28, 2013. Calculated using the average exchange rate at the close of each day for the stated period.
(3) On January 1, 2014, Latvia changed its currency from Lats to Euro. The average rate is for the period from May 1st, 2013 to December 31, 2013 for the 52-week period ended
April 27, 2014, from February 1st, 2013 to April 30, 2013 for the 12-week period ended April 28, 2013 and from June 20, 2012 to April 30, 2013 for the 52-week period ended
April 28, 2013. Calculated using the average exchange rate at the close of each day for the stated period.
As at April 30, 2014.
(4)
On January 1, 2014, Latvia changed its official currency from the Lats to Euro. Results from the Latvian operations prior to the
conversion date were converted using the Lats exchange rates as described in footnote 3 above while results from the Latvian
operations following this date were converted using Euro exchange rates. Balance sheet items from Latvian operations as at
April 27, 2014 were converted using the Euro exchange rate. This change in currency did not materially affect our consolidated
financial statements.
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, European and corporate operations are translated into
US dollars using the average rate for the period. Unless otherwise indicated, variances and explanations related to variations
in the foreign exchange rate and the volatility of the Canadian dollar and European currencies which we discuss in the present
document are therefore related to the translation in US dollars of our Canadian, European and corporate operations results.
Fiscal 2014 Overview
On March 11, 2014, the Corporation’s Board of Directors approved a three-for-one split of all of the Corporation’s issued and
outstanding Class “A” and “B” shares. This share split has been approved by regulatory authorities and was effective on
April 14, 2014. Accordingly, all per share amounts in this document are presented on a comparable basis.
Net earnings amounted to $812.2 million for fiscal 2014, up 41.8% over fiscal 2013. Some items affected the results of
fiscal 2014, mainly negative goodwill of $48.4 million, a non-recurring income tax recovery of $21.6 million over a foreign
exchange loss only deductible and recognized for tax purposes, a net foreign exchange loss of $10.1 million, a $6.8 million
impairment charge over a non-operational lubricant plant in Poland, an income tax recovery of $6.6 million over the decrease
in the income tax rate in Norway and Denmark, as well as a curtailment gain on pension plans obligation. On the other hand,
the results of fiscal 2013 included a non-recurring loss of $102.9 million on foreign exchange forward contracts, a non-
recurring income tax recovery of $34.7 million, restructuring expenses of $34.0 million, a curtailment gain on pension plans
obligation of $19.4 million, negative goodwill of $4.4 million as well as a net foreign exchange gain of $3.2 million.
Excluding these items as well acquisition costs from both periods, fiscal 2014 net earnings would have been approximately
$766.0 million ($1.35 per share on a diluted basis) compared to $621.0 million ($1.11 per share on a diluted basis) for
fiscal 2013, an increase of $145.0 million, or 23.3%. This strong increase is mainly attributable to the contribution from
acquisitions, to the growth in both same-store merchandise revenues and road transportation fuel volumes, to higher road
transportation fuel margins in Europe and in Canada as well as to our continuous focus on our costs. These items, which
contributed to the growth in net earnings, were partially offset by a lower road transportation fuel margin in the United States,
the negative net impact from the translation of revenues and expenses from our Canadian and European operations into the
United States dollar following the appreciation of the United States dollar, namely against the Canadian dollar and the
Norwegian Krone as well as by lower revenues following the divesture of our Liquid Petrolum Gas (“LPG”) business in
December 2012.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 14 of 81
Statoil Fuel & Retail
Period results
Our results for the 12 and 52-week periods ended April 27, 2014 include those of Statoil Fuel & Retail for the period beginning
February 1st, 2014 and ending April 30, 2014 and for the period beginning May 1st, 2013 and ending April 30, 2014,
respectively. Our results for the 12 and 52-week periods ended April 28, 2013 include those of Statoil Fuel & Retail for the
period beginning February 1st, 2013 and ending April 30, 2013 and for the period beginning June 20, 2012 and ending
April 30, 2013, respectively. Thus, our results of the 52-week periods ended April 27, 2014 and April 28, 2013 include those of
Statoil Fuel & Retail for a period of 365 and 315 days, respectively.
Our consolidated balance sheet and store count as of April 27, 2014 include Statoil Fuel & Retail’s balance sheet and store
count as of April 30, 2014, as adjusted for significant transactions, if any, which occurred between those two dates.
The following table provides an overview of Statoil Fuel & Retail’s accounting periods that will be incorporated in our upcoming
consolidated financial statements:
Couche-Tard Quarters
Statoil Fuel & Retail Equivalent Accounting Periods
From May 1st, 2014 to July 20, 2014
Statoil Fuel & Retail Balance
Sheet Date (1)
June 30, 2014
12-week period ending July 20, 2014
(1st quarter of fiscal 2015)
12-week period ending October 12, 2014
(2nd quarter of fiscal 2015)
From July 21, 2014 to October 12, 2014
September 30, 2014
16-week period ending February 1st, 2015
(3rd quarter of fiscal 2015)
From October 13, 2014 to October 31, 2014, November and December
2014 and January 2015
12-week period ending April 26, 2015
(4th quarter of fiscal 2015)
February, March and April 2015
January 31, 2015
April 30, 2015
(5) The consolidated balance sheet will be adjusted for significant transactions, if any, occurring between Statoil Fuel & Retail balance sheet date and Couche-Tard balance sheet date.
We expect that the work toward the alignment of Statoil Fuel & Retail’s accounting periods with those of Couche-Tard should
start once we have finalized replacing Statoil Fuel & Retail financial systems, which is now scheduled to be completed at the
beginning of fiscal 2015.
Synergies and cost reduction initiatives
Since the acquisition of Statoil Fuel & Retail, we have been actively working on identifying and implementing available
synergies and cost reduction opportunities. Our analysis shows that opportunities are numerous and promising. Some can be
implemented immediately while others may take more time to implement since they require rigorous analysis and planning.
The optimization of our new ERP system in Europe will also be required before we can put in place some of the identified
opportunities. The goal is to find the right balance in order not to jeopardize ongoing activities and projects already underway.
During the 12-week period ended April 27, 2014, we recorded synergies and cost savings we estimated at approximately
$21.0 million, before income taxes. These synergies and cost reductions mainly impacted operating, selling, administrative
and general expenses as well as the cost of sales. Since the acquisition, we estimate that total realized annual synergies and
cost savings amount to approximately $85.0 million, before income taxes. We believe these amounts do not necessarily
represent the full annual impact of all of our initiatives.
These synergies and cost reductions came from a variety of sources including cost reductions following the delisting of Statoil
Fuel & Retail, the renegotiation of certain agreements with our suppliers, the reduction of in-store costs and the restructuring of
certain departments.
Our work for the identification and implementation of available synergies and cost reduction opportunities is far from over. Our
teams continue to work actively on various projects that seem promising and which, along with the implementation of new
systems, should allow us to achieve our objectives. We therefore maintain our goal of annual synergies ranging from
$150.0 million to $200.0 million before the end of December 2015.
As our goal previously stated is considered a forward looking statement, we are required pursuant to securities laws, to clarify
that our synergies and cost reductions estimate is based on a number of important factors and assumptions. Among other
things, our synergies and cost savings objective is based on our comparative analysis of organizational structures and current
level of spending across our network as well as on our ability to bridge the gap, where relevant. Our synergies and cost
reduction objective is also based on our assessment of current contracts in Europe and North America and how we expect to
be able to renegotiate these contracts to take advantage of our increased purchasing power. In addition, our synergies and
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 15 of 81
cost reduction objective assumes that we will be able to establish and maintain an effective process for sharing best practices
across our network. Finally, our objective is also based on our ability to implement effectively and timely a new ERP system. A
significant change in these facts and assumptions could significantly impact our synergies and cost reductions estimate.
Issuance of Canadian dollar denominated senior unsecured notes
On August 21, 2013, we issued Canadian dollar denominated senior unsecured notes totalling CA$300.0 million, maturing
August 21st, 2020 and bearing interest at a rate of 4.214%. Interest is payable semi-annually on August 21st and February 21st
of each year and notional amount will be repaid at maturity.
In addition to allowing us to spread the maturities of a portion of our long-term debt, this issuance allows us to secure the
interest rate of a portion of our long-term debt at favourable rates. The net proceeds from the issuance, which were
approximately CA$298.3 million ($285.6 million), were used to repay a portion of our acquisition facility.
Impairment
During fiscal 2014, we recorded an impairment charge of $6.8 million for a non-operational lubricant production plant located in
Ostroweic, Poland, due to challenging market conditions for this type of asset.
Network growth
Completed transactions
In June 2013, under the June 2011 agreement with ExxonMobil, we acquired 60 stores operated by independent operators
along with the related road transportation fuel supply agreements and for which we own the land and building for all sites.
Additionally, we were transferred 53 road transportation fuel supply agreements in connection with this same agreement. This
transaction consisted of the last stage to close the June 2011 agreement with ExxonMobil. A negative goodwill of $41.6 million
was recorded in relation with this transaction during fiscal 2014. Historically, those sites sold annually approximately
162.0 million gallons of road transportation fuel.
In September 2013, we acquired nine stores operating in Illinois, United States from Baron-Huot Oil Company. Eight of these
stores are company-operated and one is operated by an independent operator. We own the land and building for eight sites
while we lease these assets for the other site.
In December 2013, we completed the acquisition, from Publix Super Markets Inc., of 11 company-operated stores, nine of
which are located in Florida and the other two in Georgia, United States. We own the land and buildings for eight sites and
lease these assets for the other three sites.
In December 2013, we also completed the acquisition of 23 company-operated stores operating in New Mexico, United States
from Albuquerque Convenience and Retail LLC. We own the land and buildings for all sites.
In June 2014, subsequent to fiscal year 2014, we acquired 15 company operated-stores operating in South Carolina, United
States from Garvin Oil Company. We own the land and buildings for all sites.
In addition, during fiscal 2014, we acquired ten additional company-operated stores through distinct transactions.
Available cash was used for these acquisitions.
Store construction
We completed the construction of 25 new stores and razed and rebuilt 14 stores during fiscal 2014. As of April 27, 2014,
14 stores were under constructions and should open in the upcoming quarters.
Additional changes to our network
During the first quarter of fiscal 2014, we, along with a third-party, formed a new corporation, Circle K Asia LLC (“Circle K
Asia”), in which both parties hold a 50% interest. During the 12-week period ended July 21, 2013, each party made a capital
contribution of $13.2 million. The total contribution was used to purchase a portion of Circle K’s international franchise
agreements as well as a master franchise in Asia. Under the contract signed between the parties, we, under certain
circumstances, may repurchase all of the other party’s shares in Circle K Asia. Consequently, the new corporation was fully
consolidated in our consolidated financial statements and the third party’s interest was recorded under “Non-controlling
interest” in the consolidated statements of earnings, changes in equity and consolidated balance sheet. Furthermore, we must,
under certain circumstances, repurchase all of the third-party’s shares in Circle K Asia. Consequently, a redemption liability
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 16 of 81
was recorded in our consolidated balance sheet. Circle K Asia should contribute to the expansion of our licensee’s network in
Asia. We do not expect this transaction to have a significant impact on our financial performance.
In February, 2014, our Mexican operator, Circulo K, under its licensing agreement, has reached an agreement to acquire
878 stores in Mexico. We do not expect that this transaction will have a significant impact on our consolidated financial
statements. As of April 27, 2014, this transaction has not been completed.
In May 2014, subsequent to fiscal 2014, we have completed, through Circle K Asia, a Circle K Master license agreement in
India with RJ Corp for 25 years. The Circle K Master license addresses the four major Regions of India, including the major
cities of Deli, Mumbai, Goa, Gujarat, Bangalore and Madras.
Summary of changes in our stores network during the fourth quarter and fiscal 2014
The following table presents certain information regarding changes in our stores network over the 12-week period ended
April 27, 2014 (1):
Type of site
Number of sites, beginning of period
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Store conversion
Number of sites, end of period
Number of automated service stations included in the
period end figures (6)
Company-
operated (2)
6,234
3
17
(23)
5
6,236
912
12-week period ended April 27, 2014
CODO (3)
614
DODO (4)
534
-
1
(2)
(4)
609
-
-
3
(7 )
(1 )
529
27
Franchised and
other affiliated (5)
1,102
-
44
(21)
-
Total
8,484
3
65
(53)
-
1,125
8,499
-
939
The following table presents certain information regarding changes in our stores network over the 52-week period ended
April 27, 2014 (1):
Type of site
Number of sites, beginning of period
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Store conversion
Number of sites, end of period
52-week period ended April 27, 2014
Company-
operated (2)
CODO (3)
DODO (4)
Franchised and
other affiliated (5)
6,235
51
41
(117)
26
6,236
579
61
6
(11)
(26)
609
478
54
28
(29 )
(2 )
529
1,094
-
135
Total
8,386
166
210
(106)
(263)
2
1,125
-
8,499
(1)
(2)
(3)
(4)
(5)
(6)
These figures include 50% of the stores operated through RDK, a joint venture.
Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service-stations) are operated by
Couche-Tard or one of its commission agent.
Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service-stations) are operated by an
independent operator in exchange for rent and to which Couche-Tard supplies road transportation fuel through supply contracts. Some of these sites are subject to a franchise
agreement, licensing or other similar agreement under one of our main or secondary banners.
Sites controlled and operated by independent operators to which Couche-Tard supplies road transportation fuel through supply contracts. Some of these sites are subject to a
franchise agreement, licensing or other similar agreement under one of our main or secondary banners.
Stores operated by an independent operator through a franchising, licensing or another similar agreement under one of our main or secondary banners.
These sites sell road transportation fuel only.
In addition, under licensing agreements, about 4,600 stores are operated under the Circle K banner in 12 other countries
worldwide (China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia, Mexico, Philippines, Vietnam and
United Arab Emirates) which brings to more than 13,100 the number of sites in our network.
Dividends
The Board of Directors (“the Board”) decided to increase the quarterly dividend by CA0.67¢ per share to CA4.0¢ per share, an
increase of 20.0%.
During its July 7, 2014 meeting, the Board of Directors declared a quarterly dividend of CA4.0¢ per share for the fourth quarter
of fiscal 2014 to shareholders on record as at July 16, 2014 and approved its payment for July 30, 2014. This is an eligible
dividend within the meaning of the Income Tax Act of Canada.
During fiscal 2014, the Board declared total dividends CA13.6¢ per share.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 17 of 81
Outstanding shares and stock options
As at July 4, 2014, Couche-Tard had 148,101,840 Class A multiple voting shares and 417,655,558 Class B subordinate voting
shares issued and outstanding. In addition, as at the same date, Couche-Tard had 3,505,905 outstanding stock options for the
purchase of Class B subordinate voting shares.
Statement of Earnings Categories
Merchandise and Service Revenues. In-store merchandise revenues are comprised primarily of the sale of tobacco products,
fresh food products, including quick service restaurants, beer/wine, grocery items, candy, snacks and various beverages.
Merchandise sales in Europe also include wholesale of merchandise and goods to certain independent operators and
franchisees made from our distribution center. 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.
Road Transportation Fuel Revenues. We include in our revenues the total dollar amount of road transportation fuel sales,
including any embedded taxes when they are included in the purchase price, if we take ownership of the road transportation
fuel inventory. In the United States and in Europe, in some instances, we purchase road transportation 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
road transportation fuel revenues. Where we act as a selling agent for a petroleum distributor, only the commission we earn is
recorded as revenue.
Other Income. Other income includes the sale of stationary energy, marine and aviation fuel, lubricants and chemical products.
Other income also includes rent revenue from operating leases for certain land and buildings we own as well as car rental
revenues.
Gross Profit. Gross profit consists mainly of revenues less the cost of merchandise and road transportation fuel sold. Cost of
sales is mainly comprised of the specific cost of merchandise and road transportation 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 road transportation fuel, it is generally determined using the average cost method. The
road transportation fuel gross 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 “Analysis of consolidated results for the fiscal
year ended April 27, 2014 - Other Operating Data”, are merchandise and service gross margin, growth of same-store
merchandise revenues, road transportation fuel gross margin and growth of same-store road transportation fuel volume, return
on equity and return on capital employed.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 18 of 81
Summary analysis of consolidated results for the fourth quarter of fiscal 2014
The following table highlights certain information regarding our operations for the 12-week periods ended April 27, 2014 and
April 28, 2013.
(In millions of US dollars, unless otherwise stated)
12-week period ended
April 27, 2014
12-week period ended
April 28, 2013
Change %
Revenues
Operating income
Net earnings
Selected Operating Data:
Merchandise and service gross margin (1):
Consolidated
United States
Europe
Canada
Growth of same-store merchandise revenues (2) (3):
United States
Europe
Canada
Road transportation fuel gross margin:
United States (cents per gallon) (3)
Europe (cents per litre) (4)
Canada (CA cents per litre) (3)
Growth (decrease) of same-store road transportation fuel volume (3):
United States
Europe
Canada
8,952.3
154.3
145.1
34.4%
33.1%
42.9%
32.5%
4.4%
2.5%
1.6%
14.85
10.54
5.86
2.8%
3.2%
1.7%
8,776.0
154.6
146.4
34.3%
32.7%
43.7%
33.1%
0.1%
-
0.9%
19.30
9.83
6.01
1.1%
-
(1.4%)
2.0
14.0
(0.9)
0.1
0.4
(0.8)
(0.6)
(23.1)
7.2
(2.5)
Includes other revenues derived from franchise fees, royalties and rebates on some purchases made by franchisees and licensees.
(1)
(2) Does not include services and other revenues (as described in footnote 1 above). Growth in Canada and Europe is calculated based on local currencies.
(3) For company-operated stores only.
(4) Total road transportation fuel.
Revenues
Our revenues were $9.0 billion in the fourth quarter of fiscal 2014, up $176.3 million, an increase of 2.0%, mainly attributable
to the contribution from acquisitions as well as by the nice growth in same-store merchandise revenues and road
transportation fuel volume in both North America and Europe. These items contributing to the growth in revenues were partly
offset by lower road transportation fuel average retail prices in the United States, by the negative net impact from the
translation of revenues from our Canadian and European operations into US dollars as well as by the divesture and closure of
stores as part of our continuous work to improve the quality of our network.
More specifically, the growth of merchandise and service revenues for the fourth quarter of fiscal 2014 was $26.3 million or
1.5%. Excluding the negative impact from the translation of our European and Canadian operations into US dollars, which was
approximately $32.0 million, consolidated merchandise and service sales increased by $58.3 million. This increase is
attributable to the contribution from acquisitions which amounted to approximately $10.0 million as well as to strong organic
growth. Same-store merchandise revenues increased by 4.4% in the United States and by 1.6% in Canada. Our performance
in the United States is noteworthy when compared to the performance of the convenience store industry and is attributable to
our dynamic merchandising strategies as well as to the investments we made to enhance service and the offering of products
in our stores. Our performance in the United States is even more impressive considering we were able to increase store traffic
without investing as much in our margins as in previous quarters. In Europe, the exchange of best practices, the
implementation of new and sustainable merchandising strategies as well as the investments made through extensive
marketing campaigns to promote in-store offering allowed us to turn around the negative sales trend that existed when we
acquired Statoil Fuel & Retail. Consequently, for a sixth consecutive quarter, same-store merchandise revenues in Europe
posted a growth which was of 2.5% for the fourth quarter, driven by strong fresh food services and coffee sales.
Road transportation fuel revenues increased by $145.9 million or 2.3% in the fourth quarter of fiscal 2014. Excluding the
negative net impact from the translation of revenues from our Canadian and European operations into US dollars, which
amounted to approximately $59.0 million, road transportation fuel revenues increased by $204.9 million or 3.2%. This increase
was mainly attributable to the contribution from acquisitions of approximately $156.0 million and to organic growth. In the
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 19 of 81
United States and in Canada, same-store road transportation fuel volume increased by 2.8% and 1.7%, respectively. This was
also the sixth consecutive quarter during which same-store road transportation fuel volume showed positive development in
Europe where same-store road transportation fuel volume increased by 3.2% which represents a strong improvement over the
trend our that European network was posting before we acquired Statoil Fuel & Retail. Our new fuel brand “milesTM” which we
launched in some of our European markets is delivering encouraging results and was again a nice contributor to this quarter
performance. Organic growth and the contribution from acquisitions were partly offset by lower average road transportation
fuel retail price in the United States.
On a consolidated basis, the variations in average road transportation fuel prices had a negative impact on revenues of
approximately $100.0 million. The impact of the lower average retail price of road transportation fuel in the United States was
partly offset by the impact of the higher average price in Europe and in Canada as shown in the following table, starting with
the first quarter of the fiscal year ended April 28, 2013:
Quarter
52-week period ended April 27, 2014
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
52-week period ended April 28, 2013
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
1st
3.51
100.72
114.53
3.49
-
112.62
2nd
3.45
103.25
117.05
3.65
103.96
117.41
3rd
3.24
107.49
113.11
3.35
104.71
110.43
4th
3.47
104.11
118.74
3.61
103.80
115.65
Weighted
average
3.41
104.38
115.63
3.51
104.21
113.77
Other revenues were quite stable with a slight increase of $4.1 million in the fourth quarter of fiscal 2014.
Gross profit
In the fourth quarter of fiscal 2014, the consolidated merchandise and service gross margin was $616.0 million, an increase of
$10.1 million or 1.7% compared with the corresponding quarter of fiscal 2013. Excluding the negative impact from the
translation of our European and Canadian operations into US dollars, which was approximately $11.0 million, consolidated
merchandise and service gross margin increased by $21.1 million or 3.5%. This increase is attributable, in part, to the
contribution from acquisitions which amounted to approximately $3.0 million. In the United States, the gross margin was up
0.4% from 32.7% to 33.1% while it decreased by 0.6% in Canada, to 32.5% and by 0.8% in Europe to 42.9%. Overall, this
performance reflects changes in the product-mix, the modifications we brought to our supply terms as well as our
merchandising strategy in line with market competitiveness and economic conditions within each market. More specifically, in
the United States, the increase in gross margin as a percentage of sales mainly reflects the impact of the shift of revenues
toward higher margin categories, including a strong growth in fresh food. In Canada, in addition to the impact of our pricing
strategies aimed at increasing store traffic, the decrease in margin as a percentage of sales was caused by changes in our
product mix. In Europe, the margin as a percentage of sales was negatively impacted by lower carwash sales due to
challenging weather in Scandinavia compared to the previous year, to changes in our product mix as well as to the impact of
our pricing strategies to improve the value perception by our customers.
In the fourth quarter of fiscal 2014, the road transportation fuel gross margin for our company-operated stores in the United
States decreased by 4.45 ¢ per gallon, from 19.30 ¢ per gallon last year to 14.85 ¢ per gallon this year. In Canada, the gross
margin slightly decreased to CA5.86 ¢ per litre compared with CA6.01 ¢ per litre for the fourth quarter of fiscal 2013. In
Europe, the total road transportation fuel gross margin was 10.54 ¢ per litre for the fourth quarter of fiscal 2014, an increase of
0.71 ¢ per litre compared with 9.83 ¢ per litre for the fourth quarter of fiscal 2013. The road transportation 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 28, 2013, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 27, 2014
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 28, 2013
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
19.42
4.99
14.43
23.20
4.97
18.23
2nd
21.56
5.04
16.52
15.20
5.15
10.05
3rd
17.02
4.79
12.23
17.80
4.79
13.01
4th
14.85
4.98
9.87
19.30
5.03
14.27
Weighted
average
18.11
4.94
13.18
18.77
4.97
13.80
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 20 of 81
As demonstrated by the table above, although road transportation fuel margin can be volatile from a quarter to another, they
tend to normalize on an annual basis.
Operating, selling, administrative and general expenses
For the fourth quarter of fiscal 2014, operating, selling, administrative and general expenses increased by 0.8% compared with
the fourth quarter of fiscal 2013 and increased by 1.5% if we exclude certain items, as demonstrated by the following table:
Total variance as reported
Subtract:
Increase from incremental expenses related to acquisitions
Increase from higher electronic payment fees, excluding acquisitions
Decrease from the net impact of foreign exchange translation
Remaining variance
12-week period ended
April 27, 2014
0.8%
0.7%
0.3%
(1.7%)
1.5%
The variance for the fourth quarter of fiscal 2014 is mainly due higher expenses to support our organic growth and normal
inflation. We continue to favour a tight control of our costs throughout the organization while making sure to maintain the
quality of the service we offer our clients.
In Europe, expense level is still affected by the implementation of a new IT infrastructure and the rollout of an ERP system.
Our IT costs should continue to go down progressively over the course of the next quarters.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and adjusted EBITDA
During the fourth quarter of fiscal 2014, EBITDA increased by 1.5% compared to the corresponding period of the previous
fiscal year, reaching $300.2 million. Net of acquisition costs recorded to earnings, acquisitions contributed approximately
$7.0 million to EBITDA, while the variation in exchange rates had a negative impact of approximately $5.0 million.
Excluding the restructuring expenses, the curtailment gain on certain defined benefits pension plans obligation as well as the
negative goodwill from both comparable periods, the fourth quarter of fiscal 2014 adjusted EBITDA decreased by $7.5 million
or 2.4% compared to the corresponding period of the previous fiscal year, totalling $300.0 million.
It should be noted that EBITDA and adjusted EBITDA are not performance measures defined by IFRS, but we, as well as
investors and analysts, use these measures to evaluate the Corporation’s financial and operating performance. Note that our
definition of these measures may differ from the one used by other public corporations:
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial expenses
Depreciation and amortization and impairment of property and equipment and other assets
EBITDA
Remove:
Restructuring costs
Curtailment gain on pension plan obligation
Negative goodwill
Adjusted EBITDA
12-week period ended
April 27, 2014
145.1
April 28, 2013
146.4
(13.8 )
26.9
142.0
300.2
-
-
(0.2 )
300.0
(9.5)
20.7
138.1
295.7
34.0
(19.4)
(2.8)
307.5
Depreciation, amortization and impairment of property and equipment and other assets
For the fourth quarter of fiscal 2014, depreciation, amortization and impairment expense increased due to investments made
through acquisitions, replacement of equipment, addition of new stores and ongoing improvement of our network.
Net financial expenses
The fourth quarter of fiscal 2014 shows net financial expenses of $26.9 million, an increase of $6.2 million compared to the
fourth quarter of fiscal 2013. Excluding the net foreign exchange loss of $8.7 million and the net foreign exchange gain of
$6.8 million recorded respectively in the fourth quarter of fiscal 2014 and in the fourth quarter of fiscal 2013, the decrease in
net financial expenses is $9.3 million. The decrease is mainly attributable to the reduction of our long-term debt following
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 21 of 81
repayments we made on our revolving and acquisition facilities partly offset by the higher average effective interest rate of our
senior unsecured notes compared with the average effective rate of our acquisition facility. With respect to the net foreign
exchange loss of $8.7 million, it is mainly due to the impact of the exchange rate fluctuations on certain inter-company
balances and external long term debt as well as to the impact of exchange rates fluctuations on US dollars denominated sales
made by our European operations.
Income taxes
The fourth quarter of fiscal 2014 shows an income tax recovery of $13.8 million, compared to an income tax recovery of
$9.5 million for the corresponding quarter of the previous year. The income tax recovery in the fourth quarter of fiscal 2014
emanated mainly from a foreign loss only deductible and recognized for tax purposes as well as from the effect on deferred
income taxes of a decrease in our statutory income tax rate in Norway and in Denmark. The income tax recovery in the fourth
quarter of fiscal 2013 emanated mainly from the effect on deferred income taxes of a decrease in our statutory income tax rate
in Sweden.
Excluding those items, the income tax rate for the fourth quarter of fiscal 2014 would have been 11.0% compared to a rate of
18.4% for the fourth quarter of the previous fiscal year.
Net earnings
We closed the fourth quarter of fiscal 2014 with net earnings of $145.1 million, compared to $146.4 million for the fourth
quarter of the previous fiscal year. Diluted net earnings per share stood at $0.25, compared to $0.26 for the previous year. The
translation of revenues from our Canadian and European operations into the US dollars had a negative impact of
approximately $3.0 million on net earnings of the fourth quarter of fiscal 2014.
Excluding from the fourth quarter of fiscal 2014 earnings the non-recurring income tax recovery on a foreign loss only
deductible and recognized for tax purposes and from the decrease in our statutory tax rate in Norway and in Denmark, the net
foreign exchange loss, the negative goodwill as well as acquisition costs and excluding from the fourth quarter of fiscal 2013
earnings the restructuring costs, the curtailment gain on defined benefits pension plans obligation, acquisition costs, the non-
recurring income tax recovery from the decrease in our statutory income tax rate in Sweden, the negative goodwill as well as
the net foreign exchange gain, the fourth quarter of fiscal 2014 net earnings would have been approximately $123.0 million,
compared to $116.0 million, an increase of $7.0 million. Adjusted diluted net earnings per share were $0.22 for the fourth
quarter of fiscal 2014 compared to $0.20 for the corresponding period of fiscal 2013, an increase of 10%.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 22 of 81
Summary analysis of consolidated results for fiscal 2014
The following table highlights certain information regarding our operations for the 52-week periods ended April 27, 2014 and
April 28, 2013 and for the 53-week period ended April 29, 2012. The figures for the 52-week periods ended April 28, 2013
include those of Statoil Fuel & Retail for the period beginning June 20, 2012 and ending April 28, 2013.
(In millions of US dollars, unless otherwise stated)
2014
52-weeks
2013
52-weeks
2012
53-weeks
Statement of Operations Data:
Merchandise and service revenues (1):
United States
Europe
Canada
Total merchandise and service revenues
Road transportation fuel revenues:
United States
Europe
Canada
Total road transportation fuel revenues
Other revenues (2):
United States
Europe
Canada
Total other revenues
Total revenues
Merchandise and service gross profit (1):
United States
Europe
Canada
Total merchandise and service gross profit
Road transportation fuel gross profit:
United States
Europe
Canada
Total road transportation fuel gross profit
Other revenues gross profit (2):
United States
Europe
Canada
Total other revenues gross profit
Total gross profit
Operating, selling, administrative and general expenses
Restructuring costs
Curtailment gain on defined benefits pension plans obligation
Negative goodwill
Depreciation, amortization and impairment of property and equipment
and other assets
Operating income
Net earnings
Other Operating Data:
Merchandise and service gross margin (1):
Consolidated
United States
Europe
Canada
Growth of same-store merchandise revenues (3) (4):
United States
Europe
Canada
Road transportation fuel gross margin :
United States (cents per gallon) (4)
Europe (cents per litre) (5)
Canada (CA cents per litre) (4)
Volume of road transportation fuel sold (5):
United States (millions of gallons)
Europe (millions of litres)
Canada (millions of litres)
Growth of (decrease in) same-store road transportation fuel volume (4):
United States
Europe
Canada
Per Share Data:
Basic net earnings per share (dollars per share)
Diluted net earnings per share (dollars per share)
4,818.9
1,046.8
2,081.5
7,947.2
15,493.3
8,824.9
2,890.6
27,208.8
14.7
2,784.8
1.1
2,800.6
37,956.6
1,575.8
437.4
689.3
2,702.5
796.1
928.8
163.5
1,888.4
14.7
384.6
1.1
400.4
4,991.3
3,423.1
-
(0.9 )
(48.4)
583.2
1,034.3
812.2
34.0%
32.7%
41.8%
33.1%
3.8%
1.6%
1.9%
18.11
10.94
5.98
4,611.5
8,488.4
2,920.9
1.7%
2.5%
1.3%
1.44
1.43
4,548.6
866.1
2,181.7
7,596.4
14,872.6
7,537.9
2,860.8
25,271.3
6.6
2,668.6
0.5
2,675.7
35,543.4
1,505.9
359.6
733.0
2,598.5
782.5
719.1
162.6
1,664.2
6.6
339.8
0.5
346.9
4,609.6
3,239.6
34.0
(19.4 )
(4.4 )
521.1
838.7
572.8
34.2%
33.1%
41.5%
33.6%
1.0%
-
2.0%
18.77
9.88
5.84
4,276.2
7,281.1
2,819.9
0.6%
-
0.0%
1.03
1.02
4,408.0
-
2,190.9
6,598.9
13,650.5
-
2,724.9
16,375.4
5.5
-
0.5
6.0
22,980.3
1,452.6
-
729.8
2,182.4
637.9
-
148.8
786.7
5.5
-
0.5
6.0
2,975.1
2,162.5
-
-
(6.9)
239.8
579.7
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% )
0.85
0.83
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 23 of 81
Balance Sheet Data:
Total assets
Interest-bearing debt
Shareholders’ equity
Indebtedness Ratios:
Net interest-bearing debt/total capitalization (6)
Net interest-bearing debt/Adjusted EBITDA (7)
Adjusted net interest bearing debt/Adjusted EBITDAR (9)
Returns:
Return on equity (10)
Return on capital employed (11)
April 27, 2014
April 28, 2013
April 29, 2012
10,545.0
2,606.4
3,962.4
0.35 : 1
1.32 : 1
2.44 : 1
22.6%
13.3%
10,546.2
3,605.1
3,216.7
0.48 : 1
1.99 : 1 (8)
3.06 : 1 (8)
21.5% (8)
11.0% (8)
4,376.8
665.2
2,174.6
0.14 : 1
0.43 : 1
2.11 : 1
22.0%
19.0%
(1)
(2)
Includes revenues derived from franchise fees, royalties, suppliers rebates on some purchases made by franchisees and licensees as well as merchandise wholesale.
Includes revenues from rental of assets, from sale of aviation and marine fuel, heating oil, kerosene, lubricants, chemicals and Liquefied Petroleum Gas (“LPG”)’s operations. LPG
operations were sold in December 2012.
(3) Does not include services and other revenues (as described in footnote 1 above). Growth in Canada is calculated based on Canadian dollars. Growth in Europe is calculated based
on Norwegian Krones.
(4) For company-operated stores only.
(5) Total road transportation fuel.
(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, Amortization and
Impairment) adjusted for restructuring expenses, curtailment gain on certain defined benefits pension plans obligation and negative goodwill. 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 on a pro forma basis. It includes Couche-Tard’s results for fiscal year ended April 28, 2013 as well as Statoil Fuel & Retail’s results for the 12-month period
ended April 30, 2013. Statoil Fuel & Retail balance sheet and earnings have been adjusted to make their presentation in line with Couche-Tard’s policies and for fair value
adjustments to assets acquired, including goodwill, and to liabilities assumed.
(9) 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, Impairment and Rent expense) adjusted for restructuring costs, curtailment gain on certain defined benefits pension plans obligation as well as
negative goodwill. 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: net earnings
divided by average equity for the corresponding period. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures
presented by other public corporations.
(11) 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 for the corresponding period. 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.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 24 of 81
Revenues
Our revenues were $38.0 billion in fiscal 2014, up $2.4 billion, an increase of 6.8%, mainly attributable to the contribution from
acquisitions as well as by the growth in same-store merchandise revenues and road transportation fuel volume in both North
America and Europe. These items contributing to the growth in revenues were partly offset by the divestiture of our European
Liquefied Petroleum Gas (“LPG”) business in December 2012, to lower average road transportation fuel retail prices in the
United States as well as to the negative net impact from the translation of revenues from our Canadian and European
operations into US dollars.
More specifically, the growth of merchandise and service revenues for fiscal 2014 was $350.8 million or 4.6%. Excluding the
negative impact from the translation of our European and Canadian operations into US dollars, which was approximately
$91.0 million, consolidated merchandise and service sales increased by $441.8 million. This increase is attributable to the
contribution from acquisitions which amounted to approximately $309.0 million as well as to organic growth. Same-store
merchandise revenues increased by 3.8% in the United States and 1.9% in Canada. Those increases in same-store
merchandise sales are attributable to our merchandising strategies, to the economic conditions in each of these two markets
as well as to the investments we made to enhance service and the offering of products in our stores. For a large part of the
fiscal year, we favoured pricing strategies aimed at boosting in-store traffic which helped us gain momentum in terms of
transactions count while the fresh food category continued to post a nice growth in several of our markets. In Europe, the
exchange of best practices, the implementation of new and sustainable merchandising strategies as well as the investments
made through extensive marketing campaigns to promote in-store offering allowed us to turn around the negative sales trend
that existed when we acquired Statoil Fuel & Retail. As a consequence, same-store merchandise revenues in Europe posted a
growth of 1.6% for fiscal 2014, driven by strong fresh food and coffee sales.
Road transportation fuel revenues increased by $1.9 billion or 7.7% in fiscal 2014. Excluding the negative net impact from the
translation of revenues from our Canadian and European operations into US dollars which amounted to approximately
$110.0 million, road transportation fuel revenues increased by $2.0 billion or 8.1%. Acquisitions contributed to an increase in
revenues of approximately $2,563.0 million while same-store road transportation fuel volume increased by 1.7% in the United
States, by 2.5% in Europe and by 1.3% in Canada. In Europe, this same-store road transportation fuel volume increase is a
strong improvement over the trend our European network was posting before we acquired Statoil Fuel & Retail. Our new fuel
brand “milesTM” which we launched in some of our European markets is delivering encouraging results and was a nice
contributor to this fiscal year performance. Items that contributed to the increase were partly offset by the lower average retail
price of road transportation fuel in the United States as well as by the divesture and closure of stores as part of our continuous
work to improve the quality of our network. Overall, the variations in road transportation fuel average prices had a negative
impact on revenues of approximately $372.0 million. The impact of the lower average retail price of road transportation fuel in
the United States was partly offset by the impact of the higher average price in Europe and in Canada as shown in the
following table, starting with the first quarter of the fiscal year ended April 28, 2013:
Quarter
52-week period ended April 27, 2014
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
52-week period ended April 28, 2013
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
1st
3.51
100.72
114.53
3.49
-
112.62
2nd
3.45
103.25
117.05
3.65
103.96
117.41
3rd
3.24
107.49
113.11
3.35
104.71
110.43
4th
3.47
104.11
118.74
3.61
103.80
115.65
Weighted
average
3.41
104.38
115.63
3.51
104.21
113.77
Other revenues increased by $124.9 million in fiscal 2014, mostly attributable to the contribution from acquisitions, partially
offset by the divesture of our European LPG business in December 2012.
Gross profit
In fiscal 2014, the consolidated merchandise and service gross margin was $2,702.5 million, an increase of $104.0 million or
4.0% compared with fiscal 2013. Excluding the negative impact from the translation of our European and Canadian operations
into US dollars, which was approximately $11.0 million, consolidated merchandise and service gross margin increased by
$115.0 million. This increase is attributable to the contribution from acquisitions which amounted to approximately
$118.0 million, partly offset by the impact of our pricing strategies. In the United States, the gross margin was down 0.4% to
32.7% while it decreased by 0.5% in Canada, to 33.1%. Gross margin increased by 0.3% in Europe to 41.8%. Overall, this
performance reflects changes in the product-mix, the modifications we brought to our supply terms as well as our
merchandising strategy in line with market competitiveness and economic conditions within each market. In North America, the
decrease in the margin as a percentage of sales mainly reflects the impact of our pricing strategies aimed at increasing store
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 25 of 81
traffic which had a favourable impact on revenues but brought the margin percentage down. However, on a net basis, this
strategy had an overall positive impact since the merchandise and service gross profit shows a healthy increase. In Europe,
the increase in margin as a percentage of sales is the result of changes in our product mix as well as to the impact of our
pricing strategies to improve the value perception by our customers.
The road transportation fuel gross margin for our company-operated stores in the United States decreased by 0.66 ¢ per
gallon, from 18.77 ¢ per gallon during fiscal 2013 to 18.11 ¢ per gallon in fiscal 2014. In Canada, the gross margin was
CA5.98¢ per litre for fiscal 2014 compared with CA5.84 ¢ per litre for fiscal 2013. In Europe, the total road transportation fuel
gross margin was 10.94 ¢ per litre for fiscal 2014, a strong increase of 1.07 ¢ per litre compared with 9.88 ¢ per litre for
fiscal 2013. The road transportation 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 28, 2013, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 27, 2014
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 28, 2013
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
19.42
4.99
14.43
23.20
4.97
18.23
2nd
21.56
5.04
16.52
15.20
5.15
10.05
3rd
17.02
4.79
12.23
17.80
4.79
13.01
4th
Weighted
average
14.85
4.98
9.87
19.30
5.03
14.27
18.11
4.94
13.18
18.77
4.97
13.80
As demonstrated by the table above, although road transportation fuel margin can be volatile from a quarter to another, they
tend to normalize on an annual basis.
Operating, selling, administrative and general expenses
For fiscal 2014, operating, selling, administrative and general expenses increased by 5.7% compared with fiscal 2013, but
increased by only 0.2% if we exclude certain items, as demonstrated by the following table:
Total variance as reported
Subtract:
Increase from incremental expenses related to acquisitions
Decrease from divesture of LPG business
Increase from higher electronic payment fees, excluding acquisitions
Decrease from the net impact of foreign exchange translation
Acquisition costs recognized to earnings of fiscal 2013
Remaining variance
5.7%
6.6%
(0.1%)
0.3%
(1.2%)
(0.1%)
0.2%
The remaining variance for fiscal 2014 comes from higher expenses to support our organic growth and normal inflation, partly
offset by sound management of our expenses across our operations as well as from the impact of synergies. We continue to
favour a tight control of our costs throughout the organization while making sure to maintain the quality of the service we offer
our clients.
In Europe, expense level is still affected by the implementation of a new IT infrastructure and the rollout of an ERP system.
Our IT costs should continue to go down progressively over the course of the next quarters.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and adjusted EBITDA
During fiscal 2014, EBITDA increased by 19.2% compared to the previous fiscal year, reaching $1,640.2 million. Net of
acquisition costs recorded to earnings, acquisitions contributed approximately $153.0 million to EBITDA, while the variation in
exchange rates had a negative impact of approximately $11.0 million.
Excluding the restructuring expenses, the curtailment gain on certain defined benefits pension plans obligations as well as the
negative goodwill from both comparable periods, fiscal 2014 adjusted EBITDA increased by $205.1 million or 14.8% compared
to the corresponding period of the previous fiscal year, reaching $1,590.9 million.
It should be noted that EBITDA and adjusted EBITDA are not performance measures defined by IFRS, but we, as well as
investors and analysts, use these measures to evaluate the Corporation’s financial and operating performance. Note that our
definition of these measures may differ from the one used by other public corporations:
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 26 of 81
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial expenses
Depreciation and amortization and impairment of property and equipment and other assets
EBITDA
Remove:
Restructuring costs
Curtailment gain on pension plan obligation
Negative goodwill
Adjusted EBITDA
52-weeks periods ended
April 27, 2014
812.2
April 28, 2013
572.8
134.2
110.6
583.2
1,640.2
-
(0.9 )
(48.4 )
1,590.9
73.9
207.8
521.1
1,375.6
34.0
(19.4)
(4.4)
1,385.8
Depreciation, amortization and impairment of property and equipment and other assets
For fiscal 2014, depreciation, amortization and impairment expense increased due to an impairment charge of $6.8 million on
a non-operational lubricant production plant as well as to investments made through acquisitions, replacement of equipment,
addition of new stores and ongoing improvement of our network.
During fiscal 2014, we have completed the analysis of the remaining useful lives of Statoil Fuel & Retail property and
equipment in order to modify the depreciation periods accordingly. Based on our analysis, we concluded that the modification
of depreciation periods would reduce the depreciation expense but the final results are not significantly different from the
preliminary estimates reflected in the depreciation expense of the previous year.
Net financial expenses
For fiscal 2014, we recorded net financial expenses of $110.6 million compared to $207.8 million for the comparable period of
fiscal 2013. Excluding the net foreign exchange loss of $10.1 million and the net foreign gain of $3.2 million recorded
respectively in fiscal 2014 and in fiscal 2013 as well as the $102.9 million non-recurring loss on foreign exchange forward
contracts recorded in fiscal 2013, fiscal 2014 posted net financial expenses of $100.5 million, down $7.6 million compared to
fiscal 2013. The decrease is mainly due to the reduction in our long-term debt following repayments we made on our acquisition
facility partly offset by the higher average effective interest rate of our senior unsecured notes compared with the average effective
rate of our acquisition facility as well as by the fact that fiscal 2013 did not include a complete year of the financing costs related
to the acquisition of Statoil Fuel & Retail.
Income taxes
The income tax rate for fiscal 2014 was 14.2%, compared to 11.4% for the previous fiscal year. The income tax rate for
fiscal 2014 was impacted by the effect on deferred taxes of a foreign loss only deductible and recognized for tax purposes as
well as by a decrease in our statutory income tax rates in Norway and in Denmark. The income tax rate for fiscal 2013 was
impacted by the effect on deferred income taxes of a decrease in our statutory income tax rate in Sweden. Excluding those
non-recurring items, as well as the negative goodwill recorded in the first quarter of fiscal 2014, the income tax rate for fiscal
2014 would have been 15.5% compared to an income tax rate of 16.8% for fiscal 2013.
Net earnings
We closed fiscal 2014 with net earnings of $812.2 million, compared to $572.8 million for the previous fiscal year, an increase
of $239.4 million or 41.8%. Diluted net earnings per share stood at $1.43 compared to $1.02 the previous year, an increase of
40.2%. The translation of revenues from our Canadian and European operations into the US dollars had a negative impact of
approximately $8.0 million on net earnings of fiscal 2014.
Excluding from net earnings of fiscal 2014 the negative goodwill, the net foreign exchange loss, the non-recurring income tax
recovery on a foreign exchange loss only deductible and recognized for tax purposes and from the decrease in income tax
rate in Norway and Denmark, the impairment charge on a non-operational lubricant plant in Poland, the curtailment gain on
pension plans obligation as well as acquisition costs and excluding from net earnings of fiscal 2013 the non-recurring loss on
forwards, the non-recurring income tax recovery over the decrease in income tax rate in Sweden, the restructuring expense,
the curtailment gain on pension plans obligation, the net foreign exchange gain, the negative goodwill as well as acquisition
costs, net earnings would have stood at approximately $766.0 million, up $145.0 million or 23.3%, while diluted earnings per
share would have stood at approximately $1.35, an increase of 21.6%.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 27 of 81
Financial Position as at April 27, 2014
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 $10.5 billion as at April 27, 2014, a decrease of $1.2 million over the balance as at
April 28, 2013. This decrease stems primarily from the negative impact of the net appreciation of the US dollar compared to
the functional currencies of our operations in Canada and Europe at the balance sheet date, partly offset by the overall rise in
assets resulting from the acquisitions we made during fiscal 2014 as well as from the increase in accounts receivable.
During the 52-week period ended on April 27, 2014, we recorded a return on capital employed of 13.3%1.
Significant balance sheet variations are explained as follows:
Accounts receivable
Accounts receivable increased by $110.4 million, from $1,616.0 million as at April 28, 2013 to $1,726.4 million as at
April 27, 2014. The increase mainly stems from timing effects and increased road transportation fuel sales to third parties.
Long-term debt and current portion of long-term debt
Long-term debt decreased by $998.7 million, from $3,605.1 million as at April 28, 2013 to $2,606.4 million as at April 27, 2014,
partly as a result of the impact of the weakening of the Canadian dollar against the United States dollar, which was
approximately $92.0 million. Excluding the foreign exchange impact, our long-term debt decreased by approximately
$906.7 million. In August 2013, we issued CA$300.0 million Canadian dollar denominated senior unsecured notes for net
proceeds of US$285.6 million. Subsequently, we repaid approximately $1,200.0 million of our acquisition and revolving
facilities from the net proceeds of this issuance as well as from available cash. As a result, our debt, net of cash and cash
equivalents, amounted to $2,095.3 million as at April 27, 2014, a reduction of $851.5 million compared to the balance as at
April 28, 2013.
Other financial liabilities
Other financial liabilities increased by $53.5 million, from $20.4 million as at April 28, 2013 to $73.9 million as at April 27, 2014.
The increase stems from the change in fair value of our cross-currency interest rate swaps, which is determined based on
market rates obtained from our financial institutions for similar financial instruments. Change in fair value of this financial
instrument is recorded in other comprehensive income and partly offset the impact of the conversion of our Canadian
denominated long-term debt.
Shareholders’ Equity
Shareholders’ equity amounted to $4.0 billion as at April 27, 2014, up $745.7 million compared to April 28, 2013, mainly
reflecting net earnings of fiscal 2014, partly offset by dividends declared and other comprehensive loss. For the 52-week
period ended April 27, 2014, we recorded a return on equity of 22.6% 2.
Liquidity and Capital Resources
Our principal sources of liquidity are our net cash provided by operating activities and our credit facilities. Our principal uses of
cash are to reimburse our debt, finance our acquisitions and capital expenditures, pay dividends, as well as provide for
working capital. We expect that cash generated from operations and borrowings available under our revolving unsecured
credit facilities will be adequate to meet our liquidity needs in the foreseeable future.
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. It includes Couche-Tard’s results for the four quarters of fiscal
year ending April 27, 2014.
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. It
includes Couche-Tard’s results for the four quarters of fiscal year ending April 27, 2014.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 28 of 81
Our revolving credit facilities are detailed as follow:
US dollar term revolving unsecured operating credit D, maturing in December 2017
Credit agreement consisting of a revolving unsecured facility of a maximum amount of $1,275.0, with an initial term of five
years. On November 4, 2013, we extended the term of this agreement by one year. As at April 27, 2014, $793.5 million of our
revolving unsecured operating credit D had been used. As at the same date, the effective interest rate was 1.19% and standby
letters of credit in the amount of CA$2.3 million and $29.4 million were outstanding.
On May 16, 2014, subsequent to the end of the year, we amended our term revolving unsecured operating credits D to
increase the maximum amount available from $1,275.0 million to $1,525.0 million, an increase of $250.0 million, without
incurring additional fee. All other terms remain unchanged.
Term revolving unsecured operating credit E, maturing in December 2016
Credit agreement consisting of a revolving unsecured facility of an initial maximum amount of $50.0 with an initial term of
50 months. The credit facility is available in the form of a revolving unsecured operating credit, available in US dollars. The
amounts borrowed bear interest at variable rates based on the US base rate or the LIBOR rate plus a variable margin. As at
April 27, 2014, the term revolving unsecured operating credit E was unused.
Available liquidities
As at July 4, 2014, following the amended to our term revolving unsecured operating credits D, a total of approximately
$750.0 million were available under our revolving unsecured credit facilities 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 approximately
$1.3 billion through our available cash and revolving unsecured operating credit agreements.
Selected Consolidated Cash Flow Information
(In millions of US dollars)
Operating activities
Net cash provided by operating activities
Investing activities
Purchase of property and equipment and other assets, net of proceeds from the disposal of
property and equipment and other assets
Business acquisitions
Proceeds from sale and lease back transaction
Net settlement of foreign exchange forward contracts
Other
Net cash used in investing activities
Financing activities
Repayment of the acquisition facility
Net increase (decrease) in other debt
Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs
Dividends
Issuance of shares upon exercise of stock-options
Borrowings under the acquisition facility, net of financing costs
Repayment of non-current debt assumed on business acquisition
Issuance of shares on public offering, net of issuance costs
Net cash (used in) provided by financing activities
Credit rating
Standard and Poor’s
Moody’s (1)
(1) Moody’s credit rating for Couche-Tard’s senior unsecured notes
Operating activities
52-week periods ended
April 28,
April 27,
2013
2014
Variation
1,429.3
1,161.4
267.9
(459.0 )
(159.6 )
-
-
20.6
(598.0 )
(486.9 )
(2,644.6 )
30.3
(86.4)
1.1
(3,186.5)
(1,648.0 )
431.3
285.6
(64.6 )
9.4
-
-
-
(986.3 )
BBB-
Baa3
(995.5)
(314.5)
997.5
(55.6)
8.1
3,190.2
(800.5)
333.4
2,363.1
BBB-
Baa3
28.0
2,485.0
(30.3)
86.4
19.4
2,588.5
(652.5)
745.8
(711.9)
(9.0)
1.3
(3,190.2)
800.5
(333.4)
(3,349.4)
During fiscal 2014, net cash from our operations reached $1,429.3 million, up $267.9 million compared to fiscal year 2013,
mainly due to higher net earnings not taking into account non-cash items, including depreciation, amortization and impairment
of property and equipment and other assets, as well as negative goodwill.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 29 of 81
Investing activities
During fiscal 2014, investing activities were primarily for net investment in property and equipment and other assets which
amounted to $459.0 million and for acquisitions for an amount of $159.6 million. Following the closing of the business
acquisition transaction with ExxonMobil, an amount of $20.6 million placed in escrow was repaid to us during fiscal 2014.
Net investments in property and equipment and other assets were primarily for the replacement of equipment in some of our
stores in order to enhance our offering of products and services, the addition of new stores, the ongoing improvement of our
network as well as for information technology.
Financing activities
During fiscal 2014, we repaid an amount of $1,648.0 million under our acquisition facility using amounts drawn from our
operating credits, the net proceeds from the issuance of Canadian dollar denominated senior unsecured notes as well as
available cash. During fiscal year, an amount of $903.0 million was drawn from our operating credit, of which, $455.0 million
was repaid using available cash, for a net increase of $448.0 million. During the same period, we paid $64.6 million in
dividends.
Contractual Obligations and Commercial Commitments
Set out below is a summary of our material contractual obligations as at April 27, 2014 (1):
Long-term debt (2)
Finance lease obligations
Operating lease obligations
Total
2015
2016
2017
2018
2019
Thereafter
Total
1.8
19.6
321.4
342.8
555.0
32.5
294.3
881.8
(in millions of US dollars)
2.5
11.5
269.6
283.6
1,065.3
5.9
243.4
1,314.9
2.2
5.4
214.2
221.8
906.1
28.6
1.060.6
1,995.3
2,532.9
103.5
2,403.8
5,040.2
(1) The summary does not include the payments required under defined benefit pension plans.
(2) Does not include future interest payments.
Long-Term Debt. As at April 27, 2014, our long-term debt reached $2,606.4 million, the details of which are as follows:
i.
Borrowing of $552.3 million under our acquisition facility denominated in US dollars, maturing in June 2015. The
effective interest rate was 2.38% as at April 27, 2014.
ii.
Canadian dollar denominated senior unsecured notes totalling $1,172.7 million, divided into four tranches:
a. Tranche 1 with a notional amount of CA$300.0 million, maturing on November 1st, 2017, bearing interest at
2.861%
b. Tranche 2 with a notional amount of CA$450.0 million, maturing on November 1st, 2019 bearing interest at 3.319%
c. Tranche 3 with a notional amount of CA$250.0 million, maturing on November 1st, 2022 bearing interest at
3.899%.
d. Tranche 4 with a notional amount of CA$300.0 million, maturing on August 21st, 2020 bearing interest at 4.214%.
US Dollar denominated borrowings of $793.5 million under our revolving unsecured operating credits denominated in
US dollars, maturing in December 2017. The effective interest rate was 1.19% as at April 27, 2014. Standby letters of
credit in the amount of CA$2.1 million and $29.4 million were outstanding as at April 27, 2014.
Floating-rate bonds denominated in NOK totalling $2.5 million, maturing in February 2017. As at April 27, 2014, the
effective interest rate was 5.04%.
Fixed-rate bonds denominated in NOK totalling $2.2 million, maturing in February 2019, bearing interest at 5.75%.
Other long-term debts of $83.2 million, including obligations related to building and equipment under finance leases.
iii.
iv.
v.
vi.
Finance Leases and Operating Leases Obligations. We lease an important portion of our real estate using conventional
operating leases and finance leases mainly for the rental of stores, land, equipment and office buildings. 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, usually with options to renew. In Europe, the lease terms range from short-term contracts to contracts with maturities
up to 100 years and most lease contracts include options to renew at market prices. When leases are determined to be
operating leases, obligations and related assets are not included in our consolidated balance sheets. Under certain of the
store leases, we are subject to additional rent based on store revenues as well as future escalations in the minimum lease
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 30 of 81
amount. When leases are determined to be finance leases, obligations and related assets are included in our consolidated
balance sheets. When possible, we will favor purchasing our assets rather than leasing them.
Contingencies. Various claims and legal proceedings have been initiated against us in the normal course of our operations
and through acquisitions. Although the outcome of such matters is not predictable with assurance, we have no reason to
believe that the outcome of any such current matter could reasonably be expected to have a materially adverse impact on our
financial position, results of operations or the ability to carry on any of our business activities.
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.
Guarantees. We assigned a number of lease agreements for premises to third parties. Under some of these agreements, we
retain ultimate responsibility to the landlord for payment of amounts under the lease agreements should the sub lessees fail to
pay. As at April 27, 2014, the total future lease payments under such agreements are approximately $2.1 million and the fair
value of the guarantee is not significant. Historically, we have not made any significant payments in connection with these
indemnification provisions. In Europe, we have issued guarantees to third parties and on behalf of third parties for maximum
undiscounted future payments totalling $20.3 million. These guarantees primarily relate to financial guarantee commitments for
car rental agreements and on behalf of retailers in Sweden. Guarantees on behalf of retailers in Sweden comprise items such
as guarantees towards retailer's car washes, store inventory, in addition to guarantees towards suppliers of electricity and
heating. The carrying amount and fair value of the guarantee commitments recognized in the balance sheet at April 27, 2014
were not significant.
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.
Other commitments. We have entered into various product purchase agreements which require us to purchase minimum
amounts or quantities of merchandise and road transportation fuel annually. We have generally exceeded such minimum
requirements in the past and expect 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.
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.
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
Operating income before depreciation, amortization and
impairment of property and equipment and other assets
Depreciation, amortization and impairment of property and
equipment and other assets
Operating income
Share of earnings of joint ventures and associated companies
accounted for using the equity method
Net financial expenses (revenues)
Net earnings
Net earnings per share
Basic
Diluted
52-week period ended April 27, 2014
4th
3rd
12 weeks 16 weeks 12 weeks 12 weeks 12 weeks 16 weeks
8,776.0 11,467.0
11,093.2
8,901.2
9,009.9
8,952.3
2nd
3rd
1st
2nd
12 weeks
9,287.7
1st
12 weeks
6,012.6
52-week period ended April 28, 2013
4th
296.3
420.5
457.3
443.4
292.7
391.4
142.0
154.3
3.9
26.9
145.1
$0.26
$0.25
186.0
234.5
4.6
21.8
182.3
$0.32
$0.32
129.3
328.0
5.5
50.2
229.8
$0.41
$0.40
125.9
317.5
8.7
11.7
255.0
$0.45
$0.45
138.1
154.6
3.0
20.7
146.4
$0.26
$0.26
182.5
208.9
3.9
49.4
142.2
$0.25
$0.25
365.6
134.3
231.3
3.7
15.9
181.3
$0.33
$0.32
310.0
66.1
243.9
5.2
121.8
102.9
$0.19
$0.19
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 31 of 81
The volatility of road transportation fuel gross margin and seasonality both have an impact on the variability of our quarterly net
earnings. Given acquisitions made in recent years and higher retail prices at the pump, road transportation fuel revenues have
become a more significant segment of our business and therefore our quarterly results are more sensitive to the volatility of
road transportation fuel gross margins. However, road transportation 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 28, 2013
Revenues
Our revenues were $35.5 billion in fiscal 2013, up $12.6 billion, or 54.7%, mainly attributable to acquisitions and to the
increase in same-stores merchandise revenues and road transportation fuel volumes, partially offset by the effect of the
53rd week of fiscal year 2012, by the impact of a decrease in road transportation fuel sales due to lower average retail prices at
the pump, unfavourable weather conditions during the fourth quarter in many of our markets as well as by the weaker
Canadian dollar.
More specifically, the growth of merchandise and service revenues for fiscal 2013 was $997.5 million or 15.1%, of which
approximately $1,049.0 million was generated by acquisitions, partially offset by the negative impact of the additional week in
fiscal 2012. As for internal growth, on a 52-week comparable basis, same-store merchandise revenues increased by 1.0% in
the United States and 2.0% 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. More specifically, in the U.S., for the cigarettes
category, the changes made to the supply terms of the industry and to our pricing strategies as well as the competitive
environment had an unfavourable impact on our sales for that product category because of their deflationary effect. Thus, we
estimate that excluding tobacco products sales, our same-store merchandise revenues in the United States increased by 3.4%
on a 52-week comparable basis, the negative impact in the cigarettes category having been more than offset by the strong
performance in fresh products. The growth in sales was partially offset by the effect of the additional week in fiscal year 2012.
As for the weaker Canadian dollar, it had an unfavourable impact of approximately $19.0 million on merchandise and service
revenues of fiscal 2013.
Road transportation fuel revenues increased by $8.9 billion or 54.3% in fiscal 2013, of which approximately $9.1 billion stems
from acquisitions, partially offset by the negative impact of the additional week in fiscal 2012. The still fragile economy has
continued to put pressure on road transportation fuel consumption, which can explain the flat same-store road transportation
fuel volume in Canada as well as the modest increase of 0.6% in the United States. Volume growth in the United States is
satisfactory when compared with data from the U.S. Federal Highway Administration’s Traffic Volume Trends reports which
indicate that, from May 2012 to April 2013, traffic on the roads and streets decreased by 0.1% compared with the
corresponding prior period. These items contributing to the growth in revenues were partially offset by the impact of the
additional week in fiscal 2012 as well as by the lower average road transportation fuel price at the pump.
The lower average retail price of road transportation fuel generated a decrease in revenues of approximately $68.0 million as
shown in the following table, starting with the first quarter of the fiscal year ended April 29, 2012:
Quarter
52-week period ended April 28, 2013
United States (US dollars per gallon)
Canada (CA cents per litre)
53-week period ended April 29, 2012
United States (US dollars per gallon)
Canada (CA cents per litre)
1st
2nd
3rd
4th
3.49
112.62
3.67
114.08
3.65
117.41
3.49
112.90
3.35
110.43
3.31
109.88
3.61
115.65
3.73
117.05
Weighted
average
3.51
113.77
3.54
113.27
As for the weaker Canadian dollar, it had an unfavourable impact of approximately $23.0 million on road transportation fuel
sales of fiscal 2013.
Other income showed an increase of $2.7 billion for fiscal 2013, entirely due to acquisitions. Other revenues include revenues
derived from the rental of assets, the sale of aviation and marine fuel, the sale of liquid petroleum gas ("LPG"), heating oil,
kerosene, lubricants and chemicals. We sold our LPG operations in December 2012.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 32 of 81
Gross profit
The consolidated merchandise and service gross margin grew by $438.1 million or 20.1% in fiscal 2013. In the United States,
the gross margin is up by 0.1% to 33.1% while in Canada, it increased by 0.3% to 33.6%. This performance reflects the shift in
our product-mix toward higher margin categories, including fresh products, the modifications we brought to our supply terms
as well as our merchandising strategy in line with market competitiveness and economic conditions within each market. In the
United States, the improvement in margin as a percentage of sales was partially offset by our price strategies in the cigarettes
category. In Europe, the margin was 44.1%, which is consistent with our expectations and historical margins recorded by
Statoil Fuel & Retail. The higher merchandise and services gross margin as a percentage of sales in Europe reflects price and
cost structures as well as a product-mix that are different from those in North America.
In fiscal 2013, the road transportation fuel gross margin for our company-operated stores in the United States increased by
1.78¢ per gallon, from 16.99¢ per gallon in fiscal 2012 to 18.77¢ per gallon in fiscal 2013. In Canada, the road transportation
fuel gross margin reached CA 5.84¢ per liter in fiscal 2013 compared to CA 5.45¢ in fiscal 2012. The road transportation 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 29, 2012, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 28, 2013
1st
2nd
3rd
4th
Weighted
average
Before deduction of expenses related to electronic payment modes
23.20
15.20
17.80
19.30
18.77
Expenses related to electronic payment modes
4.97
5.15
4.79
5.03
4.97
After deduction of expenses related to electronic payment modes
18.23
10.05
13.01
14.27
13.80
53-week period ended April 29, 2012
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
17.04
5.20
11.84
14.84
4.74
10.10
16.98
5.06
11.92
16.99
5.04
11.95
Operating, selling, administrative and general expenses
For fiscal 2013, operating, selling, administrative and general expenses rose by 50.1% compared with fiscal 2012, but
decreased by 0.9% if we exclude certain items, as demonstrated by the following table:
Total variance as reported
Subtract:
Increase from incremental expenses related to acquisitions
Decrease from lower electronic payment fees (excluding acquisitions)
Decrease from the weakening of the Canadian dollar
Acquisition costs recognized to earnings of fiscal 2012
Acquisition costs recognized to earnings of fiscal 2013
Negative goodwill recognized to earnings of fiscal 2012
Negative goodwill recognized to earnings of fiscal 2013
Remaining variance, including the impact of the additional week in fiscal 2012
50.1%
51.4%
(0.1%)
(0.3%)
(0.3%)
0.2%
0.3%
(0.2%)
(0.9%)
The decrease in electronic payment fees stems mainly from the lower average retail price of road transportation fuel. The
remaining variance is mainly due to the impact of the 53rd week in fiscal 2012. We continue to favour a tight control of our
costs throughout the organization while making sure to maintain the quality of the service we offer our clients.
In Europe, the decrease in expenses recorded in relation with our cost reduction initiatives were more than offset by costs
incurred for projects aimed at creating value, including the implementation of a new IT infrastructure and the rollout of an
Enterprise Resource Planning ("ERP") system. Our IT costs should go down progressively along with the completion of these
projects over the course of the next quarters. Fiscal 2013 expenses also include marketing costs to support our sales
initiatives to boost sales, including "milesTM", our new signature fuel brand as well as "Coin Offer", a new in-store program to
promote our value fresh food offering.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 33 of 81
Restructuring costs
During fiscal 2013, we recorded restructuring expenses of $34.0 million in line with the planned restructuring of Statoil Fuel &
Retail’s operations.
Curtailment gain on certain defined benefits pension plans obligation
During fiscal 2013, in connection with the planned restructuring of Statoil Fuel & Retail’s, we recorded to earnings a
$19.4 million non-recurring curtailment gain related to certain defined benefits pension plans with a corresponding offset to the
defined benefit plan obligation.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and Adjusted EBITDA
During fiscal 2013, EBITDA increased by 63.5% compared to fiscal 2012, reaching $1,375.6 million. Net of acquisition costs
recorded to earnings, acquisitions contributed approximately $450.0 million to EBITDA while the exchange rate variation had a
negative impact of approximately $2.0 million.
Excluding from fiscal 2013 the negative goodwill, restructuring costs and the curtailment gain on certain defined benefits
pension plans obligation and excluding negative goodwill from fiscal 2012, adjusted EBITDA increased by $551.6 million or
66.1% compared to fiscal 2012, reaching $1,385.8 million.
It should be noted that EBITDA and Adjusted EBITDA are not performance measures defined by IFRS, but we, as well as
investors and analysts, use these measures to evaluate the Corporation’s financial and operating performance. Note that our
definition of these measures may differ from the one used by other public corporations:
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial expenses (revenues)
Depreciation, amortization and impairment of property and equipment and other assets
EBITDA
Add:
Negative goodwill
Restructuring costs
Curtailment gain on defined benefits pension plans obligation
Adjusted EBITDA
52-week period ended
April 28, 2013
53-week period ended
April 29, 2012
572.8
73.9
207.8
521.1
1,375.6
(4.4)
34.0
(19.4)
1,385.8
457.6
146.3
(2.6)
239.8
841.1
(6.9)
-
-
834.2
Depreciation, amortization and impairment of property and equipment and other assets
For fiscal 2013, depreciation expense increased due to the investments made through acquisitions, replacement of equipment,
addition of new stores and ongoing improvement of our network.
In addition, following the acquisition of Statoil Fuel & Retail, we have undertaken an analysis of the remaining useful lives of
Statoil Fuel & Retail property and equipment in order to modify the depreciation periods accordingly. Based on our preliminary
analysis, we concluded that the modification of depreciation periods would reduce the depreciation expense, which was
reflected in the depreciation expense for fiscal 2013. However, given the volume of assets to process, our analytical work has
not been completed yet. Additional changes to the depreciation expense could be made.
Net financial expenses (revenues)
For fiscal 2013, we recorded net financial expenses of $207.8 million compared to net financial revenues of $2.6 million in
fiscal 2012. Excluding the non-recurring loss of $102.9 million on foreign exchange forwards contracts and the net foreign
exchange gain of $3.2 million recorded during fiscal 2013, as well as excluding the $17.0 million gain recorded on foreign
exchange forwards contracts in fiscal 2012, net financial expenses posted an increase of $93.7 million compared to fiscal
Annual Report © 2014 Alimentation Couche-Tard Inc.
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year 2012, mainly due to the additional debt required to finance the acquisition of Statoil Fuel & Retail and debt assumed
through its acquisition. With respect to the net foreign exchange gain of $3.2 million, it is mainly due to a gain from the impact
of the exchange rate fluctuations on certain inter-company balances, a non-recurring foreign exchange gain of $7.4 million
recorded on our NOK cash held by our U.S. operations in connection with the financing of the acquisition of Statoil Fuel &
Retail partially offset by the impact of exchange rates fluctuations on U.S. dollars denominated sales made by our European
operations.
Income taxes
The income tax rate for fiscal 2013 is 11.4%. The decrease is partly due to the effect on deferred income taxes of a decrease
in our statutory income tax rate in Sweden. Excluding this non-recurring item, the income tax rate for fiscal 2013 would have
been 16.8% compared to a rate of 24.2% for fiscal 2012.
Net earnings
We closed fiscal 2013 with net earnings of $572.8 million, compared to $457.6 million the previous fiscal year, an increase of
$115.2 million or 25.2%. Diluted net earnings per share stood at $1.02 compared to $0.83 the previous year, an increase of
22.9%. The exchange rate variation did not have a significant impact on net earnings of fiscal 2013.
Excluding from fiscal 2013 net earnings the non-recurring loss on foreign exchange forward contracts, restructuring costs, the
non-recurring curtailment gain on certain defined benefits pension plan, the net foreign exchange gain, the non-recurring
income tax recovery, acquisition costs as well as the negative goodwill and excluding the non-recurring gain on foreign
exchange forward contracts, acquisition costs and the negative goodwill from earnings of fiscal 2012, net earnings for fiscal
2013 would have stood at approximately $620.9 million ($1.11 per share on a diluted basis) compared to $444.7 million
($0.81 per share on a diluted basis) for fiscal 2012, up $176.2 million, or 39.6%, despite the negative impact of the additional
week in fiscal 2012.
Internal Controls
We maintain a system of internal controls over financial reporting designed to safeguard assets and ensure that financial
information is reliable. 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 27, 2014, our management, following their assessment, certifies the design and operating effectiveness of disclosure
controls and procedures.
We undertake ongoing evaluations of the effectiveness of internal controls over financial reporting and implement control
enhancements, when appropriate. As at April 27, 2014, our management and our external auditors reported that these internal
controls were effective.
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. These
estimates are based our best knowledge of current events and actions that we may undertake in the future. Actual results
could differ from those estimates. The most significant accounting judgments and estimates that we have made in the
preparation of the consolidated financial statements are discussed along with the relevant accounting policies when applicable
and relate primarily to the following topics: Vendor rebates, determination of the useful lives of tangible and intangible assets,
income taxes, leases, employee future benefits, provisions, impairment and business combinations.
Inventory. Our inventory is comprised mainly of products purchased for resale including tobacco products, fresh goods, beer
and wine, grocery items, candies and snacks, other beverages and road transportation fuel. Inventories are valued at the
lesser of cost and net realizable value. Cost of merchandise is generally valued based on the retail price less a normal margin
and the cost of road transportation fuel inventory is generally determined according to the average cost method. The cost of
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lubricant inventory and aviation fuel is determined using the first in first out 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 their recoverable amount,
which corresponds to the higher of fair value less costs to sell and value in use. Should the carrying amount 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 impairment 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 with indefinite-life 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.
Asset retirement obligations. Asset retirement obligations relate to estimated future costs to remove underground road
transportation fuel storage tanks and are based on our 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 present 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
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.
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, West Virginia,
Maryland 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 road transportation fuel
facilities operations to cover some of the costs of cleaning up certain contamination to the environment caused by the usage of
underground road transportation fuel equipment. Underground road transportation fuel storage tank registration fees and/or a
road transportation 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. Deferred 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.
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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.
Employee future benefits. We accrue our obligations under employee pension plans and the related costs, net of plan assets.
We have 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 our best estimate of 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 our obligations;
Plan assets are valued at fair value;
Actuarial gains and losses arise from increases or decreases in the present value of the defined benefit obligation because
of changes in actuarial assumptions and experience adjustments. Actuarial gains and losses are recognized immediately in
Other comprehensive income with no impact on net earnings;
Past service costs are recorded to earnings at the earlier of the following dates:
- When the plan amendment or curtailment occurs;
- When we recognize related restructuring costs or termination benefits;
Net interest on the defined benefit liability (asset) represents the net defined benefit liability (asset), multiplied by the
discount rate and is recorded in financial expenses.
The pension cost recorded in net earnings for the defined contribution plans is equivalent to the contribution which we are
required to pay in exchange for services provided by the employees.
The present value of pension obligations depends on a number of factors that are determined on an actuarial basis using a
number of assumptions. Any changes in these assumptions will impact the carrying amount of pension obligations. We
determine the appropriate discount rate at the end of each fiscal year. This is the rate that should be used to determine the
present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the
appropriate discount rate, we consider the interest rates of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension obligation.
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 U.S. 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 in Europe 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.
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Recently Issued Accounting Standards
Revised Standards
Financial Statement Presentation
On April 29, 2013, we adopted 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 consolidated statements of earnings to be presented separately
from those that will not be reclassified. We have adopted this presentation and there was no other significant impact on our
consolidated financial statements.
Consolidated financial statements
On April 29, 2013, we adopted the 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 previous IFRS, consolidation was required when an
entity had 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”. The adoption of this standard had no impact on our consolidated financial statements.
Joint Arrangements
On April 29, 2013, we adopted the 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 must be accounted for using the equity
method of accounting whereas for a joint operation the venturer must recognize its share of the assets, liabilities, revenue and
expenses of the joint operation. Under previous IFRS, entities had 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”. The adoption of this standard had no impact on our consolidated
financial statements as we were already accounting for our joint ventures using the equity method.
Disclosure of Interest in Other Entities
On April 29, 2013, we adopted the 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. The adoption of this
standard had no impact on our consolidated financial statements. The required disclosures under IFRS 12 were included in
our consolidated financial statements.
Fair Value Measurement
On April 29, 2013, we adopted the new standard IFRS 13, “Fair Value Measurement”. IFRS 13 is a comprehensive standard
for fair value measurement and disclosure requirements for use across essentially 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 previous IFRS,
guidance on measuring and disclosing fair value was dispersed among the specific standards requiring fair value
measurements and in many cases did not reflect a clear measurement basis or consistent disclosures. The adoption of this
standard had no impact on our consolidated financial statements with respect to measurement but has required additional
disclosures.
Impairment of Assets
On April 29, 2013, we early-adopted amendments to IAS 36 requiring additional disclosures about the recoverable amount of
impaired non-financial assets if that amount is based on fair value less costs to sell. The adoption of these amendments had
no impact on our consolidated financial statements.
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Offsetting financial assets and financial liabilities
On April 29, 2013, we early-adopted amendments to IAS 32 “Financial Instruments - Presentation” which was amended to
clarify the requirements for offsetting financial assets and financial liabilities. We also early-adopted amendments to IFRS 7
“Financial Instruments - Disclosures” which was amended to improve disclosures on offsetting of financial assets and financial
liabilities. These amendments did not impact our consolidated financial statements, but additional information is disclosed.
Recently issued accounting standards not yet implemented
Classification and measurement of financial assets and financial liabilities
In November 2009, the IASB issued IFRS 9, “Financial Instruments”, which will replace the various rules of IAS 39, “Financial
Instruments: Recognition and Measurement” with a single approach to determine whether a financial asset is measured at
amortized cost or fair value. In October 2010, the IASB revised IFRS 9, adding requirements for classification and
measurement of financial liabilities. In November 2013, the IASB incorporated a new hedge accounting model into IFRS 9 to
enable financial statement users to better understand an entity’s risk exposure and its risk management activities. Also, the
IASB deferred mandatory application of IFRS 9 to an unspecified date with early adoption permitted. We will assess, in due
course, the impact of IFRS 9 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
present section and their financial impact.
Road Transportation Fuel. Our results are sensitive to the changes in road transportation fuel retail price and gross margin.
Factors beyond our control such as market-driven changes in supply terms, road transportation fuel price fluctuations due to,
amongst other things, general political and economic conditions, as well as the market’s limited ability to absorb road
transportation fuel retail price fluctuations, are factors that could influence road transportation fuel retail price and related gross
margin. During fiscal 2014, road transportation fuel revenues accounted for approximately 72.0% of our total revenue, yet the
road transportation fuel gross margin represented only about 38.0% of our overall gross profits. In fiscal 2014, a change of one
cent per gallon (26 cents per litre) would have resulted in a change of approximately $76.0 million in road transportation fuel
gross profit, with a corresponding impact on net earnings of approximately $0.09 per share on a diluted basis.
Electronic Payment Modes. We are exposed to significant fluctuations in expenses related to electronic payment modes
resulting from large changes in road transportation 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 road transportation fuel. For fiscal 2014, a variation of 10% in our
expenses associated with electronic payment modes would have had an impact on net earnings of approximately $0.07 per
share on a diluted basis.
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. We have operations in the Southeast and West coast regions of the United States and, although these regions are
generally known for their mild weather, these regions are susceptible to severe storms, hurricanes, earthquakes and other
natural disasters.
Economic Conditions. Our revenues may be negatively influenced by changes in global, national, regional and/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.
For several years, the global capital and credit markets and the global economy have experienced significant uncertainty,
characterized by the bankruptcy, failure, collapse or sale of various financial institutions, the European sovereign debt crisis
and a considerable level of intervention from governments around the world. These conditions may, in particular, adversely
affect the demand for our products. As the contraction of the global capital and credit markets spreads throughout the broader
economy, major markets around the world have experienced very weak or negative economic growth. Although there may be
signs of economic recovery, the markets remain fragile and could again enter periods of negative economic growth. There can
be no assurance that our business will not be affected by adverse global economic conditions.
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Tobacco Products. Tobacco products represent our largest product category of merchandise and service revenues. For
fiscal 2014, revenues of tobacco products were approximately 38.0% 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, Canada and Europe, may have an adverse impact
on the demand for tobacco products, and may therefore adversely affect our revenues and profits in light of the competitive
landscape and consumer sensitivity to the price of such products.
In addition, we sell brands of cigarettes that are manufactured to be sold by Couche-Tard 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 a health-related suit could adversely
affect our business, financial condition and results of operations. In conformity with 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, quick
service restaurants, local pharmacies and pharmacy chains and dollar stores. There can be no assurance that we will be able
to compete successfully against our competitors. Our business may also be adversely affected if we do not sustain our ability
to meet customer requirements relative to price, quality, customer service and service offerings.
Environmental Laws and Regulations. Our operations, particularly those relating to the storage, transportation and sale of fuel
products, are subject to numerous environmental laws and regulations in the countries in which we operate, including laws and
regulations governing the quality of fuel products, ground pollution and emissions and discharges into air and water, the
implementation of targets regarding the use of certain bio-fuel or renewable energy products, the handling and disposal of
hazardous wastes, the use of vapour reduction systems to capture fuel vapour, and the remediation of contaminated sites.
Our operations expose us to certain risks, particularly at our terminals and other storage facilities, where large quantities of
fuel are stored, and at our fuel stations. These risks include equipment failure, work accidents, fires, explosions, vapour
emissions, spills and leaks at storage facilities and/or in the course of transportation to or from our or a third party’s terminals,
fuel stations, airports or other sites. In addition, we are also exposed to the risk of accidents involving the tanker trucks used in
our fuel product distribution system. These types of hazards and accidents may cause personal injuries or the loss of life,
business interruptions and/or property, equipment and environmental contamination and damage. Further, we may be subject
to litigation, compensation claims, governmental fines or penalties or other liabilities or losses in relation to such incidents and
accidents and may incur significant costs as a result. Under various national, 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 or former
sites, whether or not we knew of, or caused, the presence of such contamination. Such incidents and accidents may also
affect our reputation or our brands, leading to a decline in the sales of our products and services and may adversely impact
our business, financial condition and results of operations.
Acquisitions. Acquisitions have been and will continue to be a significant part of our growth strategy. Our ability to identify
strategic acquisitions in the future may be limited by the number of attractive acquisition targets with motivated sellers, internal
demands on our resources and, to the extent necessary, our ability to obtain financing on satisfactory terms for larger
acquisitions, if at all.
Achieving anticipated benefits and synergies of an acquisition will depend in part on whether the operations, systems,
management and cultures of our corporation and the acquired business can be integrated in an efficient and effective manner
and whether the presumed bases or sources of synergies produce the benefits anticipated. We may not be able to achieve
anticipated synergies and cost savings for an acquisition for many reasons, including contractual constraints, an inability to
take advantage of expected synergistic savings and increased operating efficiencies, loss of key employees, or changes in tax
laws and regulations. The process of integrating an acquired business may lead to greater than expected operating costs,
significant one-time write-offs or restructuring charges, customer loss and business disruption (including, without limitation,
difficulties in maintaining relationships with employees, customers, or suppliers). Failure to successfully integrate an acquired
business may have an adverse effect on our business, financial condition and results of operations.
Although we perform a due diligence investigation of the businesses or assets that we acquire, there may be liabilities or
expenses of the acquired business or assets that we do not uncover during our due diligence investigation and for which we,
as a successor owner, may be responsible. The discovery of any material liabilities relating to an acquisition could have a
material adverse effect on our business, financial condition and results of operations.
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Legislative and Regulatory Requirements. As discussed above under “Environmental Laws and Regulations”, our operations
are subject to numerous environmental laws and regulations. In addition, convenience store operations are subject to
extensive regulations, including regulations relating to the sale of alcohol and tobacco products, various food safety and
product quality requirements, minimum wage laws, and tax laws and regulations. We currently incur substantial operating and
capital costs for compliance with existing health, safety, environmental and other laws and regulations applicable to our
operations. If we fail to comply with any laws and regulations or permit limitations or conditions, or fail to obtain any necessary
permits or registrations, or to extend current permits or registrations upon expiry of their terms, or to comply with any restrictive
terms contained in our current permits or registrations, we may be subject to, among other things, civil and criminal penalties
and, in certain circumstances, the temporary or permanent curtailment or shutdown of a part of our operations. In addition, the
laws and regulations applicable to our operations are subject to change and it is expected that, given the nature of our
business, we will continue to be subject to increasingly stringent health, safety, environmental laws and regulations and other
laws and regulations that may increase the cost of operating our business above currently expected levels and require
substantial future capital and other expenditures. As a result, there can be no assurance that the effect of any future laws and
regulations or any changes to existing laws and regulation, or their current interpretation, on our business, financial condition
and results of operations would not be material.
Our business may also be affected by laws and regulations addressing global climate change and the role in it played by fossil
fuel combustion and the resulting carbon emissions. Some jurisdictions in which we operate have enacted measures to limit
carbon emissions, and such measures increase the costs of petroleum-based fuels above what they otherwise would be and
may adversely affect the demand for road transportation fuel. Similarly, adoption of other environmental protection measures
affecting the petroleum supply chain, such as more stringent requirements applicable to the exploration, drilling, and
transportation of crude oil and to the refining and transportation of petroleum products, may also increase the costs of
petroleum-based fuels with similar effects on demand for road transportation fuel. The impact of such developments,
individually or in combination, could adversely affect our sales of road transportation fuel.
Interest Rates. We are exposed to interest rate fluctuations associated with changes in the short-term interest rate. Borrowings
under our credit facilities bear interest at variable rates, and other debt we incur could likewise be variable-rate debt. As of
April 27, 2014, we carried variable rate debt of approximately $1,352.0 million. Based on the amount of our variable rate debt
as at April 27, 2014, a one percentage point increase in interest rates would increase our total annual interest expense by
approximately $10.0 million or $0.02 per share on a diluted basis. If market interest rates increase, variable-rate debt will
create higher debt service requirements, which could adversely affect our cash flow. We do not currently use derivative
instruments to mitigate this risk.
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.
Litigation. In the ordinary course of business, we are a defendant in a number of legal proceedings, suits, and claims common
to companies engaged in our business and an adverse outcome in such proceedings could adversely affect our business,
financial condition and results of operations.
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. There can be no assurance that we
will be able to continue to obtain such insurance on favourable terms or at all. 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.
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 adversely impact our business, financial condition and results of operations.
Exchange Rate. Our functional currency is the Canadian dollar. As such, our investments in our U.S. and European operations
are exposed to net changes in currency exchange rates. Should changes in currency exchange rates occur, the amount of our
net investment in our U.S. and European operations could increase or decrease. From time to time, we use cross-currency
interest rate swap agreements to hedge a portion of this risk.
We are also exposed to foreign currency risk with respect to a portion of our long-term debt denominated in U.S. dollars and
certain intercompany loans. As at April 27, 2014, all else being equal, a hypothetical variation of 5.0% of the U.S. dollar
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against the Canadian dollar would have had a net impact of $12.5 million on net earnings. We do not currently use derivative
instruments to mitigate this risk.
We use the U.S. dollar as our reporting currency. As such, changes in currency exchange rates could materially increase or
decrease our foreign currency-denominated net assets on consolidation which would increase or decrease, as applicable,
shareholders’ equity. In addition, changes in currency exchange rates will affect the translation of the revenue and expenses of
our Canadian and European operations and will result in lower or higher net earnings than would have occurred had the
exchange rate not changed.
In addition to currency translation risks, we incur a currency transaction risk, mostly in Europe, whenever one of our
subsidiaries enters into a revenue contract with a different currency than its functional currency. Given the volatility of
exchange rates, we may not be able to manage our currency transaction and/or translation risks effectively, and volatility in
currency exchange rates could have an adverse effect on our business, financial condition and results of operations.
Credit Risk. We are exposed to credit risk arising from our embedded total return swaps and cross-currency interest rate
swaps when these swaps result in a receivable from financial institutions. We do not currently use derivative instruments to
mitigate this risk.
Dependence on Third Party Suppliers. Our fuel business is dependent upon the supply of refined oil products from a relatively
limited number of suppliers and upon a distribution network serviced principally by third-party tanker trucks. In the case of our
key suppliers, an event causing disruptions to any of these suppliers’ supply chains or refineries could have a significant effect
on our ability to receive refined oil products for sale or raw materials for use in the production of our lubricants, or result in us
paying a higher cost to obtain such products.
Accounts Receivable. We are exposed to risk relating to the creditworthiness and performance of our customers, suppliers
and contract counterparties. At April 27, 2014, we had outstanding accounts receivable totaling $1,726.4 million. This amount
primarily consists of credit card receivables, vendor rebates due from our suppliers and receivables arising from the sale of
fuel to independent, franchised or licensed gas station operators as well as to other industrial and commercial clients.
Contracts with longer payment cycles or difficulties in enforcing contracts or collecting accounts receivables could lead to
material fluctuations in our cash flows and could adversely impact our business, financial condition and results of operations.
Long-Term Changes in Customer Behaviour. In the road transportation fuel and convenience business sector, customer traffic
is generally driven by consumer preferences and spending trends, growth rates for automobile and truck traffic and trends in
travel and tourism. A decline in the number of potential customers using our fuel stations and convenience stores due to
changes in consumer preferences, changes in discretionary consumer spending or modes of transportation could adversely
impact our business, financial condition and results of operations.
Global Operations. We have significant operations in multiple jurisdictions throughout the world. Some of the risks inherent in
the scope of our international operations include: the difficulty of enforcing agreements and collecting receivables through
certain foreign legal systems; more expansive legal rights of foreign labor unions and employees; foreign currency exchange
rate fluctuations; the potential for changes in local economic conditions; potential tax inefficiencies in repatriating funds from
foreign subsidiaries; and exchange controls and restrictive governmental actions, such as restrictions on transfer or
repatriation of funds and trade protection matters, including prohibitions or restrictions on acquisitions or joint ventures. Any of
these factors could materially and adversely affect our business, financial condition and results of operations.
Outlook
During fiscal year 2015, we expect to pursue our investments with caution in order to, amongst other things, improve our
network and build additional stores. 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.
We will continue to pay special attention to the realization of Statoil Fuel & Retail’s synergies and to the reduction of our debt
level in order to improve our financial flexibility and hopefully improve the quality of our credit rating.
Finally, in line with our business model, we intend to continue focussing 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 7, 2014
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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 generally accepted accounting principles in Canada as set out in Part I of the
Chartered Professional Accountants of Canada (CPA Canada) Handbook - Accounting, which incorporates International
Financial Reporting Standards (“IFRS’’), as issued by the International Accounting Standards Board (“IASB”) 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 27, 2014 and April 28, 2013 were audited by
PricewaterhouseCoopers LLP, a partnership of chartered professional accountants, and their report indicates the extent of
their audit and their opinion on the consolidated financial statements.
July 7, 2014
/s/ Alain Bouchard
Alain Bouchard
President and
Chief Executive Officer
/s/ Raymond Paré
Raymond Paré
Vice-President and
Chief Financial Officer
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 43 of 81
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 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 27, 2014. The framework on which such evaluation was based is contained in the report entitled Internal Control -
Integrated Framework (1992) 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 27, 2014.
PricewaterhouseCoopers LLP, a partnership of chartered professional accountants, audited the effectiveness of Alimentation
Couche-Tard Inc.’s internal control over financial reporting as at April 27, 2014 and have issued their unqualified opinion
thereon, which is included herein.
July 7, 2014
/s/ Alain Bouchard
Alain Bouchard
President and
Chief Executive Officer
/s/ Raymond Paré
Raymond Paré
Vice-President and
Chief Financial Officer
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 44 of 81
Independent Auditor’s Report
To the Shareholders of
Alimentation Couche-Tard Inc.
July 7, 2014
We have completed integrated audits of Alimentation Couche-Tard Inc. and its subsidiaries’ consolidated financial statements
for the fiscal year ended April 27, 2014 and April 28, 2013 and its internal control over financial reporting as at April 27, 2014.
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 27, 2014 and April 28, 2013 and the consolidated statements of
earnings, comprehensive income, changes in shareholders’ equity and cash flows for the fiscal years ended April 27, 2014
and April 28, 2013, 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 27, 2014 and April 28, 2013 and their financial performance and
their cash flows for fiscal years ended April 27, 2014 and April 28, 2013 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 27, 2014.
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.
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 (1992),
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 45 of 81
We conducted our audit in accordance with the standard for audits of internal control over financial reporting set out in the
CPA Canada 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. 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 27, 2014 in accordance with criteria established in Internal Control - Integrated Framework
(1992), issued by COSO.
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.
Montreal, Canada
1 CPA auditor, CA, public accountancy permit No. A119427
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 46 of 81
Consolidated Statements of Earnings
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars (Note 2), except per share amounts)
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses (Note 7)
Negative goodwill (Note 4)
Curtailment gain on defined benefits pension plans obligation (Note 26)
Restructuring costs (Note 22)
Depreciation, amortization and impairment of property and equipment, intangibles and other assets
Operating income
Share of earnings of joint ventures and associated companies accounted for using the equity
method (Note 5)
Financial expenses
Financial revenues
Foreign exchange loss (gain) from currency conversion
Loss on foreign exchange forward contracts (Note 27)
Net financial expenses (Note 9)
Earnings before income taxes
Income taxes (Note 10)
Net earnings
Net earnings attributable to:
Shareholders of the Corporation
Non-controlling interest (Note 6)
Net earnings
Net earnings per share (Note 11)
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
2014
$
37,956.6
32,965.3
4,991.3
3,423.1
(48.4 )
(0.9 )
-
583.2
3,957.0
1,034.3
22.7
111.4
(10.9 )
10.1
-
110.6
946.4
134.2
812.2
811.2
1.0
812.2
1.44
1.43
2013
$
35,543.4
30,933.8
4,609.6
3,239.6
(4.4)
(19.4)
34.0
521.1
3,770.9
838.7
15.8
118.0
(9.9)
(3.2)
102.9
207.8
646.7
73.9
572.8
572.8
-
572.8
1.03
1.02
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 47 of 81
Consolidated Statements of Comprehensive Income
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars (Note 2), except per share amounts)
Net earnings
Other comprehensive income
Items that may be reclassified to earnings
Translation adjustments
Changes in cumulative translation adjustments (1)
Change in fair value of financial instruments designated as a hedge of the Corporation’s net investment
in its U.S. operations (2)
Net interest on financial instruments designated as a hedge of the Corporation’s net investment
in its U.S. operations (3)
Cash flow hedges
Change in fair value of financial instruments (4) (Note 27)
Gain realized on financial instruments transferred to earnings (5) (Note 27)
Items that will never be reclassified to earnings
Net actuarial gain (Note 26) (6)
Other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interest
Comprehensive income
2014
$
811.2
42.4
(45.7 )
2.6
2.8
(1.1 )
0.1
1.1
812.3
811.3
1.0
812.3
2013
$
572.8
183.3
(16.9)
1.8
7.6
(7.8)
1.0
169.0
741.8
749.7
(7.9)
741.8
(1) For the fiscal year ended April 28, 2013 this amount includes a gain of $20.7, arising from the translation of US dollar denominated long-term debt which was previously designated as a
foreign exchange hedge of the Corporation’s net investment in its US operations (net of income taxes of $3.2).
(2) For the fiscal years ended April 27, 2014 and April 28, 2013 these amounts are net of income taxes of $7.8 and $3.4, respectively.
(3) For the fiscal years ended April 27, 2014 and April 28, 2013 these amounts are net of income taxes of $0.9 and $0.8, respectively.
(4) For the fiscal years ended April 27, 2014 and April 28, 2013 these amounts are net of income taxes of $1.0 and $2.6, respectively.
(5) For the fiscal years ended April 27, 2014 and April 28, 2013 these amounts are net of income taxes of $0.4 and $2.8, respectively.
(6) For the fiscal years ended April 27, 2014 and April 28, 2013 these amounts are net of income taxes of $0.2 and $0.3, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 48 of 81
2014
Total equity
$
3,216.7
812.2
1.1
813.3
(64.6)
13.2
(13.2)
1.8
-
9.4
3,976.6
2013
Total equity
$
2,174.6
572.8
169.0
741.8
(55.6)
487.2
Consolidated Statements of Changes in Shareholders’ Equity
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars (Note 2))
Capital
stock
$
670.4
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive income
Comprehensive income
Dividends
Addition to non-controlling interest (Note 6)
Redemption liability (Note 6)
Stock option-based compensation expense
(Note 24)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Balance, end of year
6.7
9.4
686.5
Attributable to shareholders of the Corporation
Accumulated
other
comprehensive
income
Contributed
surplus
Retained
earnings
$
$
$
Total
$
16.5
2,344.0
185.8
3,216.7
811.2
(64.6)
(13.2)
1.1
1.8
(6.7)
11.6
3,077.4
186.9
811.2
1.1
812.3
(64.6 )
-
(13.2 )
1.8
-
9.4
3,962.4
Non-
controlling
interest
$
-
1.0
1.0
13.2
14.2
Attributable to shareholders of the Corporation
Capital
stock
$
321.0
Contributed
surplus
Retained
earnings
$
$
17.9
1,826.8
Accumulated
other
comprehensive
income
$
Non-
controlling
interest
$
Total
$
8.9
2,174.6
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive income (loss)
Comprehensive income
Dividends
Acquisition of control of Statoil Fuel & Retail
ASA (Note 4)
Acquisition of non-controlling interest in
Statoil Fuel & Retail ASA (Note 4)
Class B subordinate voting shares issued for
cash on public offering, net of transaction
costs (1) (Note 23)
Stock option-based compensation expense
(Note 24)
337.2
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Balance, end of year
4.1
8.1
670.4
572.8
(55.6)
176.9
2.7
(4.1)
16.5
2,344.0
185.8
572.8
176.9
749.7
(55.6 )
-
-
337.2
2.7
-
8.1
3,216.7
(7.9)
(7.9)
487.2
(479.3)
(479.3)
337.2
2.7
-
8.1
3,216.7
-
(1) This amount is net of transaction costs which are net of a related income tax benefit of $3.8.
The accompanying notes are an integral part of the consolidated financial statements.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 49 of 81
Consolidated Statements of Cash Flows
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars (Note 2))
Operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation, amortization and impairment of property and equipment, intangible and other assets, net
of amortization of deferred credits
Deferred income taxes
Negative goodwill (Note 4)
Deferred credits
Share of earnings of joint ventures and associated companies accounted for using the equity method,
net of dividends received (Note 5)
Loss on disposal of property and equipment and other assets
Curtailment gain on defined benefits pension plans obligation (Note 26)
Loss on foreign exchange forward contracts (Note 27)
Restructuring costs (Note 22)
Other
Changes in non-cash working capital (Note 12)
Net cash provided by operating activities
Investing activities
Purchases of property and equipment and other assets
Business acquisitions (Note 4)
Proceeds from disposal of property and equipment and other assets
Restricted cash
Net settlement of foreign exchange forward contracts
Proceeds from sale and leaseback transactions
Net cash used in investing activities
Financing activities
Repayment under the unsecured non-revolving acquisition credit facility (Note 19)
Net increase (decrease) in other debt (Note 19)
Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs (Note 19)
Cash dividends paid
Issuance of shares upon exercise of stock-options
Borrowings under the unsecured non-revolving acquisition credit facility, net of financing costs (Note 19)
Repayment of non-current debt assumed on business acquisition
Issuance of shares on public offering, net of transaction costs (Note 23)
Net cash (used in) provided by 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, cash equivalents and bank overdraft end of year
Bank overdraft, end 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.
2014
$
812.2
553.9
(60.9 )
(48.4 )
11.4
9.8
7.6
(0.9 )
-
-
30.0
114.6
1,429.3
(529.4 )
(159.6 )
70.4
20.6
-
-
(598.0 )
(1,648.0 )
431.3
285.6
(64.6 )
9.4
-
-
-
(986.3 )
6.0
(149.0 )
658.3
509.3
1.8
511.1
78.5
41.3
172.3
484.5
26.6
511.1
2013
$
572.8
486.3
(122.1)
(4.4)
17.3
(9.6)
8.3
(19.4)
102.9
34.0
26.4
68.9
1,161.4
(537.3)
(2,644.6)
50.4
1.1
(86.4)
30.3
(3,186.5)
(995.5)
(314.5)
997.5
(55.6)
8.1
3,190.2
(800.5)
333.4
2,363.1
16.0
354.0
304.3
658.3
-
658.3
76.9
11.7
172.3
619.2
39.1
658.3
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 50 of 81
Consolidated Balance Sheets
As at April 27, 2014 and April 28, 2013
(in millions of US dollars (Note 2))
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable (Note 13)
Inventories (Note 14)
Prepaid expenses
Income taxes receivable
Property and equipment (Note 15)
Goodwill (Note 16)
Intangible assets (Note 16)
Other assets (Note 17)
Investment in joint ventures and associated companies (Note 5)
Deferred income taxes (Note 10)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 18)
Provisions (Note 22)
Income taxes payable
Current portion of long-term debt (Note 19)
Long-term debt (Note 19)
Provisions (Note 22)
Pension benefit liability (Note 26)
Other financial liabilities (Note 20)
Deferred credits and other liabilities (Note 21)
Deferred income taxes (Note 10)
Equity
Capital stock (Note 23)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (Note 25)
Equity attributable to shareholders of the Corporation
Non-controlling interest
The accompanying notes are an integral part of the consolidated financial statements.
On behalf of the Board,
/s/ Alain Bouchard
Alain Bouchard
Director
/s/ Réal Plourde
Réal Plourde
Director
2014
$
511.1
1.0
1,726.4
848.0
60.0
68.4
3,214.9
5,131.0
1,088.7
823.5
159.8
75.4
51.7
10,545.0
2,510.3
102.4
29.8
20.3
2,662.8
2,586.1
390.5
119.8
73.9
169.5
565.8
6,568.4
686.5
11.6
3,077.4
186.9
3,962.4
14.2
3,976.6
10,545.0
2013
$
658.3
21.6
1,616.0
846.0
57.8
81.6
3,281.3
5,079.9
1,081.0
834.7
136.3
84.2
48.8
10,546.2
2,351.1
96.5
70.0
620.8
3,138.4
2,984.3
358.8
109.7
20.4
156.7
561.2
7,329.5
670.4
16.5
2,344.0
185.8
3,216.7
-
3,216.7
10,546.2
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 51 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(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 governed by the Business Corporations Act (Quebec). The Corporation’s head office is
located in Laval, at 4204 Boulevard Industriel, Quebec, Canada.
As at April 27, 2014, the Corporation operates and licenses 8,499 convenience stores across North America, Scandinavia (Norway, Sweden
and Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania), and Russia, of which 6,236 are company-operated, and generates income
primarily from the sales of tobacco products, grocery items, beverages, fresh food offerings, including quick service restaurants, car wash
services, other retail products and services, road transportation fuel, stationary energy, marine and aviation fuel, lubricants and chemicals.
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 27, 2014 and April 28, 2013 are referred to as
2014 and 2013.
Basis of presentation
The Corporation prepares its consolidated financial statements in accordance with generally accepted accounting principles in Canada as set
out in Part I of the CPA Canada Handbook - Accounting, which incorporates International Financial Reporting Standards (“IFRS’’), as issued
by the International Accounting Standards Board (“IASB”).
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 7, 2014 by the board of directors who also approved their
publication.
3.
ACCOUNTING POLICIES
Change in accounting policies
Financial Statement Presentation
On April 29, 2013, the Corporation adopted 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 consolidated statements of earnings to be presented separately from those that will not be
reclassified. The Corporation adopted this presentation and there was no other significant impact on the Corporation’s consolidated financial
statements.
Consolidated financial statements
On April 29, 2013, the Corporation adopted the 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 previous IFRS, consolidation was required when an entity had 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”. The adoption of this standard had no impact on the
Corporation’s consolidated financial statements.
Joint Arrangements
On April 29, 2013, the Corporation adopted the 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 must be accounted for using the equity method of accounting
whereas for a joint operation the venturer must recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under
previous IFRS, entities had 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”. The adoption of this
standard had no impact on the Corporation’s consolidated financial statements as the Corporation was already accounting for its joint ventures
using the equity method.
Disclosure of Interest in Other Entities
On April 29, 2013, the Corporation adopted the 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. The adoption of this standard had no impact on the Corporation’s
consolidated financial statements. The required disclosures under IFRS 12 were included by the Corporation in these consolidated financial
statements.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 52 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Fair Value Measurement
On April 29, 2013, the Corporation adopted the new standard IFRS 13, “Fair Value Measurement”. IFRS 13 is a comprehensive standard for
fair value measurement and disclosure requirements for use across essentially 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 previous IFRS, guidance on measuring and disclosing fair value
was dispersed among the specific standards requiring fair value measurements and in many cases did not reflect a clear measurement basis
or consistent disclosures. The adoption of this standard had no impact on the Corporation’s consolidated financial statements with respect to
measurement but has required additional disclosures.
Impairment of Assets
On April 29, 2013, the Corporation early-adopted amendments to IAS 36 requiring additional disclosures about the recoverable amount of
impaired non-financial assets if that amount is based on fair value less costs to sell. The adoption of these amendments had no impact on the
Corporation’s consolidated financial statements.
Offsetting financial assets and financial liabilities
On April 29, 2013, the Corporation early-adopted amendments to IAS 32 “Financial Instruments - Presentation” which was amended to clarify
the requirements for offsetting financial assets and financial liabilities. The Corporation also early-adopted amendments to IFRS 7 “Financial
Instruments - Disclosures” which was amended to improve disclosures on offsetting of financial assets and financial liabilities. These
amendments did not impact the Corporation's consolidated financial statements, but additional information is disclosed in notes 13 and 18.
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. 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. The most significant accounting judgments and estimates that the Corporation has
made in the preparation of the consolidated financial statements are discussed along with the relevant accounting policies when applicable
and relate primarily to the following topics: Vendor rebates, determination of the useful lives of tangible and intangible assets, income taxes,
leases, employee future benefits, provisions, impairment and business combinations.
Principles of consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries, which are generally wholly owned. They
also include the Corporation’s share of earnings of joint ventures and associated companies 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 generally has a direct or indirect shareholding of 100% of the voting rights in its subsidiaries. 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.
The Corporation holds contracts with franchisees. These franchisees manage their store and are responsible for merchandising and financing
their inventory. The franchised stores' financial statements are not included in the Corporation's consolidated financial statements.
Foreign currency translation
Functional currency
The functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the parent
corporation and its Canadian operations is the Canadian dollar. The functional currency of foreign subsidiaries is generally their local currency,
mainly the US dollar for US operations and various other European currencies for operations in Europe.
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 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. Individual transactions with a significant impact on the consolidated statement of earnings are
translated using the transaction date exchange rate.
Gains and losses arising from such translation are included in Accumulated other comprehensive income in Shareholders’ equity. The
translation difference derived from each foreign subsidiary, associated company or joint venture is transferred to the consolidated statement of
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 53 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
earnings as part of the gain or loss arising from the divestment or liquidation of such a foreign entity when there is a loss of control, joint
control or significant influence, respectively.
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 three major product categories, merchandise and services, road transportation fuel and other, the Corporation generally recognizes
revenue at point of sales for convenience operations. 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. Merchandise sales in Europe also
include sale of merchandise and goods to certain independent operators and franchisees made from the Corporation’s distribution center
which are generally recognized on the passing of possession of the goods and when the transfer of the associated risk is made.
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.
In markets where refined oil products are purchased excluding excise duties, revenues from sales to customers are reported net of duties
taxes. In markets where refined oil products are purchased including excise duties, revenues and costs of goods sold are reported including
these duties.
Other revenues include sale of stationary energy, marine fuel, aviation fuel, lubricants and chemicals which are generally recognized on the
passing of possession of the goods and when the transfer of the associated risk is made. Other revenues also include rental income from
operating leases, which is recognized on a straight-line basis, over the term of the lease.
Cost of sales and vendor rebates
Cost of sales mainly comprises the cost of finished goods, input materials and transportation costs when they are incurred to bring products to
the point of sale. For the Corporation's own production, such as production of lubricants, the cost of goods sold also includes direct labour
costs, production overheads, and production facility operating costs.
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. The Corporation estimates the probability based on the consideration of a variety of factors, including quantities of
items sold or purchased, market shares and other conditions specified in the contracts. The accuracy of the Corporation’s estimates can be
affected by many factors, some of which are beyond its control, including changes in economic conditions and consumer buying trends.
Historically, the Corporation has not experienced significant differences in its estimates compared with actual results. 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, net occupancy costs, credit and debit card
fees, overhead as well as transportation costs incurred to bring products to the final customer.
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. The cost of merchandise is generally valued based on the retail price less
a normal margin. The cost of road transportation motor fuel inventory is generally determined according to the average cost method. The cost
of lubricant products and aviation fuel is determined according to the first-in, first-out method.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 54 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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.
The Corporation is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision
for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Corporation
recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets
and liabilities in the period in which such determination is made.
Property and equipment, depreciation, 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 3 to 40 years
3 to 40 years
Equipment
Lease term
Buildings under finance leases
Lease term
Equipment under finance leases
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 (“CGU”). 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 or if necessary due to the timing of acquisitions. Should the
carrying amount of a CGU’s goodwill exceed its recoverable amount, an impairment loss would be recognized.
Intangible assets
Intangible assets mainly comprise trademarks, franchise agreements, customer relationships, motor fuel supply agreements, software and
licenses. Licenses and trademarks that 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 or if necessary due to the timing of acquisitions. Motor fuel supply agreements, franchise agreements and trademarks with finite lives
are recorded at cost and are amortized using the straight-line method over the term of the agreements they relate to. Customer relationships,
software and other intangible assets are amortized using the straight-line method over a period of 3 to 15 years.
Deferred charges
Deferred charges are mainly expenses incurred in connection with the analysis and signing of the Corporation’s revolving unsecured operating
credits and are amortized using the straight-line method over the period of the corresponding contract. Deferred charges also include
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 55 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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.
Leases
Determining whether an arrangement contains a lease
At inception of an arrangement, the Corporation analyzes whether an arrangement is or contains a lease by assessing if:
fulfilment of the arrangement is dependent on the use of a specified asset or assets; and
the arrangement conveys a right to use the asset or assets.
The Corporation has assessed that some arrangements with franchisees contain embedded lease agreements and accordingly, accounts for
a portion of those agreements as lease agreement.
The Corporation distinguishes between lease contracts and capacity contracts. Lease contracts provide the right to use a specific asset for a
period of time. Capacity contracts confer the right to and the obligation to pay for availability of certain capacity volumes related primarily to
transportation. Such capacity contracts that do not involve specified single assets or that do not involve substantially all the capacity of an
undivided interest in a specific asset are not considered to qualify as leases for accounting purposes. Capacity payments are recognized in the
consolidated statements of earnings in Operating, selling, administrative and general expenses.
Lease arrangements in which the Corporation is a lessee
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 characterisation of a lease transaction is not always evident, 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 to
the Corporation. Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic
life of the leased asset, whether or not to include renewal options in the lease term and determining an appropriate discount rate to calculate
the present value of the minimum lease payments. The Corporation’s activities involve a considerable number of lease agreements, most of
which are determined to be operational in nature. 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 sheets.
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.
Lease arrangements in which the Corporation is a lessor
Leases in which the Corporation transfers substantially all the risks and rewards of ownership of an asset to a third party are classified as
finance leases. The Corporation recognizes assets held under a finance lease in the consolidated balance sheets and presents them as
accounts receivable. Lease payments received under finance leases are apportioned between financial revenues and reduction of the
receivable.
Leases that do not transfer substantially all the benefits and risks incidental to ownership of the property to a third party are accounted for as
operating leases. When a lease contains a predetermined fixed escalation of the minimum rent, the Corporation recognizes the related rent
revenue on a straight-line basis over the term of the lease and, consequently, records the difference between the recognized rental revenue
and the amounts receivable under the lease as deferred rent revenue.
Financing costs
Financing costs related to term loans and debt securities 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.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 56 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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 salary escalation and retirement ages of employees;
Plan assets are valued at fair value;
Actuarial gains and losses arise from increases or decreases in the present value of the defined benefit obligation because of
changes in actuarial assumptions and experience adjustments. Actuarial gains and losses are recognized immediately in Other
comprehensive income with no impact on net earnings;
Past service costs are recorded to earnings at the earlier of the following dates:
o When the plan amendment or curtailment occurs;
o When the Corporation recognizes related restructuring costs or termination benefits;
Net interest on the defined benefit liability (asset) represents the net defined benefit liability (asset), multiplied by the discount rate
and is recorded in financial expenses.
The pension cost recorded in net earnings for the defined contribution plans is equivalent to the contribution which the Corporation is required
to pay in exchange for services provided by the employees.
The present value of pension obligations depends on a number of factors that are determined on an actuarial basis using a number of
assumptions. Any changes in these assumptions will impact the carrying amount of pension obligations. The Corporation determines the
appropriate discount rate at the end of each fiscal year. This is the rate that should be used to determine the present value of estimated future
cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Corporation
considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that
have terms to maturity approximating the terms of the related pension obligation.
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.
The present value of provisions depends on a number of factors that are assessed on a regular basis using a number of assumptions,
including the discount rate, the expected cash flow to settle the obligation and the number of years until the realization of the provision. Any
changes in these assumptions or in governmental regulations will impact the carrying amount of provisions. Where the actual cash flows are
different from the amounts that were initially recorded, such differences will impact earnings in the period in which the payment is made.
Historically, the Corporation has not experienced significant differences in its estimates compared with actual results.
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.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 57 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Asset retirement obligations
Asset retirement obligations relate to estimated future costs to remove road transportation 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 present value of an asset retirement
obligation with a corresponding increase to the carrying value of the related long-lived asset at the time a 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.
Restructuring
Restructuring provisions are recognized only when a detailed formal plan for the restructuring exists and the plan has either commenced or
the plan’s main features have been announced to those affected by it. In order to determine the initial recorded liability, the present value of
estimated future cash flows are calculated using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the liability.
identifying the concerned business or part of the business;
the principal locations affected;
A detailed formal plan usually includes:
details regarding the employees affected;
the restructuring’s timing; and
the expenditures that will have to be undertaken.
Financial instruments recognition and measurement
The Corporation has made the following classifications for its financial assets and financial liabilities:
Financial assets and financial
liabilities
Cash and cash equivalents
Restricted cash
Accounts receivable
Derivative financial instruments
Derivative financial instruments
designated as hedges
Classification
Subsequent measurement (1) Classification of gains and
Loans and receivables
Loans and receivables
Loans and receivables
Financial assets at fair value through profit or loss Fair value
Financial assets at fair value through other
Amortized cost
Amortized cost
Amortized cost
losses
Net earnings
Net earnings
Net earnings
Net earnings
Fair value
Amortized cost
Amortized cost
Other comprehensive income
Net earnings
Net earnings
comprehensive income
Other financial liabilities
Bank indebtedness and long-term debt
Accounts payable and accrued liabilities Other financial liabilities
(1)
Initial measurement of all financial assets and financial 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 sheets 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 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.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 58 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Hedge of the Corporation’s net investment in its US operations
Until November 1, 2012, the Corporation had designated its entire US dollar denominated long-term debt as a foreign exchange hedge of its
net investment in its US operations. Accordingly, the portion of the gains or losses arising from the translation of the US dollar denominated
debt that was determined to be an effective hedge was recognized in Other comprehensive income, counterbalancing gains and losses arising
from translation of the Corporation’s net investment in its US operations. Since November 1, 2012, the Corporation no longer designates its
US dollar denominated long-term debt as a foreign exchange hedge of its net investment in its US operations. Accordingly, the gains or losses
arising from the translation of the US dollar denominated debt are now recorded in the consolidated statements of earnings under Financial
expenses.
As of November 1, 2012, the Corporation has documented and designated its cross-currency interest rate swap agreements (Note 20) as a
foreign exchange hedge of its net investment in its US operations. The Corporation has determined that the cross-currency interest rate swap
is an effective hedge at the time of the establishment of the hedge and for the duration of the cross-currency interest rate swap. The gains or
losses arising from the fair value variation of the cross-currency interest rate swaps are recognized in Other comprehensive income along with
the difference between interests received and interests paid. Should a portion of the hedging relationship become ineffective, the ineffective
portion would be recorded in the consolidated statements of earnings under financial expenses.
Foreign exchange forward contracts
The Corporation, from time to time, uses foreign exchange forward contracts (“forwards”) to manage the currency fluctuation risk associated
with forecasted cash disbursements denominated in foreign currencies. The Corporation is exposed to foreign currency risk with respect to a
portion of its aviation fuel operations for which purchases and sales are denominated in different currencies. Forwards are recorded at fair
value on the consolidated balance sheets. Changes in the fair value of forwards are recorded in financial expenses.
Cross currency swaps
The Corporation, from time to time, uses cross currency swaps to manage the currency fluctuation risk associated with forecasted cash
disbursements in foreign currency. Cross currency swaps are recorded at fair value on the consolidated balance sheets. Changes in their fair
value are recorded in financial expenses.
Commodity futures
The Corporation, from time to time, uses commodity futures to manage the price fluctuation risk associated with forecasted purchases of
aviation fuel. Commodity futures are recorded at fair value on the consolidated balance sheets. Changes in their fair value are recorded in cost
of sales.
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 to 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.
Determination of the fair value of the acquired assets and liabilities requires judgement and the use of assumptions that, if changed, may
affect the consolidated statements of earnings and consolidated balance sheets.
For purchase price allocation and impairment testing purposes, goodwill and other intangible assets with indefinite useful lives are allocated to
CGUs based on the lowest level at which management reviews the results which is not higher than the operating segment. The allocation is
made to those CGUs which are expected to benefit from the business combination and in which the goodwill and trademarks arose.
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
Classification and measurement of financial assets and financial liabilities
In November 2009, the IASB issued IFRS 9, “Financial Instruments”, which will replace the various rules of IAS 39, “Financial Instruments:
Recognition and Measurement” with a single approach to determine whether a financial asset is measured at amortized cost or fair value. In
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 59 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
October 2010, the IASB revised IFRS 9, adding requirements for classification and measurement of financial liabilities. In November 2013, the
IASB incorporated a new hedge accounting model into IFRS 9 to enable financial statement users to better understand an entity’s risk
exposure and its risk management activities. Also, the IASB deferred mandatory application of IFRS 9 to an unspecified date with early
adoption permitted. The Corporation will assess, in due course, the impact of IFRS 9 on its consolidated financial statements.
4.
BUSINESS ACQUISITIONS
The Corporation has made the following business acquisitions:
2014
On December 13, 2013, the Corporation acquired 23 company-operated stores operating in New Mexico, United States from Albuquerque
Convenience and Retail LLC. The Corporation owns the land and buildings for all sites.
On December 10, 2013, the Corporation acquired, from Publix Super Markets Inc., 11 company-operated stores, nine of which are located
in Florida and the other two in Georgia, United States. The Corporation owns the land and buildings for eight sites and leases the land and
owns the building for the other three sites.
On September 24, 2013, the Corporation acquired nine stores located in Illinois, United States from Baron-Huot Oil Company. Eight of
these stores are company-operated and one is operated by an independent operator. The Corporation owns the real estate for eight sites
and leases the land and building for one site.
During fiscal year 2014, under the June 2011 agreement with ExxonMobil, the Corporation acquired 60 stores operated by independent
operators along with the related road transportation fuel supply agreements. The Corporation owns the real estate for all sites. Also, an
additional 53 road transportation fuel supply agreements were acquired by the Corporation during this period.
During fiscal year 2014, the Corporation also acquired ten other stores through distinct transactions. The Corporation leases the land and
buildings for five sites, leases the land and owns the building for one site and owns these same assets for the other sites.
Acquisition costs of $1.3 in connection with these acquisitions and other unrealized acquisitions are included in Operating, selling,
administrative and general expenses.
These acquisitions were settled for a total cash consideration of $159.6. Since the Corporation has not completed its fair value assessment of
the assets acquired, the liabilities assumed and goodwill for all transactions, the preliminary allocations of certain acquisitions are subject to
adjustments to the fair value of the assets, liabilities and goodwill until the process is completed. Purchase price allocations based on the
estimated fair value on the date of acquisition and available information as at the date of publication of these consolidated financial statements
is 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 earnings
Total cash consideration paid
$
4.6
162.3
14.3
181.2
0.4
19.6
20.0
161.2
30.8
16.0
(48.4 )
159.6
The Corporation expects that $3.0 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, to penetrate new markets and to increase its
economies of scale. These acquisitions generated goodwill mainly due to the strategic location of stores acquired and negative goodwill due to
the difference between the acquisition price and the fair value of net assets acquired. Since the date of acquisition, revenues and net earnings
from these stores amounted to $504.0 and $4.2, 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 its fiscal year.
2013
Acquisition of Statoil Fuel & Retail ASA (“Statoil Fuel & Retail”)
On June 19, 2012, the Corporation acquired 81.2% of the 300,000,000 issued and outstanding shares of Statoil Fuel & Retail for a cash
consideration of 51.20 Norwegian Kroners (“NOK”) per share for a total amount of NOK 12.47 billion or approximately $2.10 billion through a
voluntary public offer (the “offer”). From June 22, 2012 to June 29, 2012, the Corporation acquired 53,238,857 additional shares of Statoil Fuel
& Retail for a cash consideration of NOK 51.20 per share, totalling NOK 2.73 billion or approximately $0.45 billion, increasing the
Corporation’s participation to 98.9%. Having reached a shareholding of more than 90%, on June 29, 2012, in accordance with Norwegian
laws, the Corporation initiated the compulsory acquisition of all of the remaining Statoil Fuel & Retail shares not deposited under the offer from
the holders thereof and, as a result, since such date, the Corporation owns 100% of the issued and outstanding shares of Statoil Fuel & Retail.
The NOK 51.20 per share cash consideration for the compulsory acquisition of all of the remaining shares of Statoil Fuel & Retail not
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 60 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
deposited under this offer was paid on July 11, 2012. The Oslo Børs Stock Exchange confirmed the delisting of the Statoil Fuel & Retail
shares effective as of the close of markets in Norway on July 12, 2012. The acquisition of the 300,000,000 issued and outstanding shares of
Statoil Fuel & Retail was therefore made for a total cash consideration of NOK 15.36 billion, or $2.58 billion. The Corporation determined the
acquisition date to be June 19, 2012.
Statoil Fuel & Retail is a leading Scandinavian road transportation 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 sites, the majority of which offer road transportation fuel and convenience products while the others are
unmanned automated service-stations (offering road transportation fuel only). 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 and aviation fuel, lubricants and chemicals. In Europe, Statoil Fuel &
Retail operates key fuel terminals as well as fuel depots in eight countries.
During fiscal year 2013, the Corporation recorded transaction costs of $1.8 million, in Operating, selling, administrative and general expenses,
in connection with this acquisition, which adds to transaction costs of $0.8 million recorded in earnings for the year ended April 29, 2012.
The Corporation financed this acquisition through borrowings under its acquisition facility (Note 19).
Purchase price allocation based on the estimated fair value on the date of acquisition is as follows:
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable
Inventories
Prepaid expenses
Income taxes receivable
Property and equipment
Identifiable intangible assets
Other assets
Investment in associated companies
Deferred income taxes
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Income taxes payable
Bank loans and current portion of long-term debt
Long-term debt
Provisions
Pension benefit liability
Other liabilities
Deferred income taxes
Non-controlling interest
Net identifiable assets
Acquisition goodwill
Consideration paid in cash on June 19, 2012 for the acquisition of control (81.2%)
Consideration paid in cash for shares held by non-controlling shareholders
Cash and cash equivalents acquired
Bank overdraft assumed
Net cash flow for the acquisition
Fair value
accounted for at the
acquisition date
$
193.7
0.8
1,597.3
283.4
10.4
3.7
2,089.3
2,576.8
616.5
36.6
7.4
22.1
5,348.7
1,680.1
25.2
17.6
845.3
2,568.2
53.6
197.8
80.1
5.5
346.2
3,251.4
487.2
1,610.1
493.9
2,104.0
479.3
(193.7)
34.1
2,423.7
None of the acquired goodwill was deductible for tax purposes.
The Corporation acquired Statoil Fuel & Retail with the aim of diversifying its operations geographically. This acquisition generated goodwill in
the amount of $493.9 mainly due to future growth potential of establishing a platform in Europe as well as an assembled and trained
workforce.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 61 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Statoil Fuel & Retail’s fiscal year does not coincide with the Corporation’s fiscal year. The Corporation’s consolidated statements of earnings,
comprehensive income, changes in equity and cash flows include those of Statoil Fuel & Retail for the period beginning May 1, 2013 and
ending April 30, 2014 for fiscal year 2014 and the period beginning June 20, 2012 and ending April 30, 2013 for fiscal year 2013. The
Corporation’s consolidated balance sheets as at April 27, 2014 and April 28, 2013 include the balance sheets of Statoil Fuel & Retail as at
April 30, 2014 and April 30, 2013, respectively.
The Corporation expects that the work toward the alignment of Statoil Fuel & Retail’s accounting periods with those of Couche-Tard should
start once replacing Statoil Fuel & Retail financial systems is finalized, which is now scheduled to be completed at the beginning of fiscal 2015.
Other acquisitions
On May 8, 2012, the Corporation purchased 20 company-operated stores located in Texas, United States from Signature Austin
Stores. The Corporation leases the land and buildings for all sites.
On August 27, 2012, the Corporation purchased 29 company-operated stores located in Florida, United States from Florida Oil
Holdings, LLC. The Corporation owns the land and buildings for 24 sites while it leases the land and owns the buildings for the other
sites. The Corporation was also transferred a road transportation fuel supply agreement for one store owned and operated by an
independent operator.
On November 2, 2012, the Corporation acquired, from Sun Pacific Energy, 27 company-operated stores operating in Washington
State, United States. The Corporation owns the land and buildings for 26 sites while it leases these assets for the other site.
On November 28, 2012, the Corporation acquired, from Davis Oil Company, seven company-operated stores operating in Georgia,
United States. The Corporation owns the land and buildings for all sites.
On December 31, 2012, the Corporation acquired, from Kum & Go, L.C., seven company-operated stores operating in Oklahoma,
United States. The Corporation leases the land and buildings for all sites.
On February 11, 2013, the Corporation acquired 29 company-operated stores located in the states of Illinois, Missouri and
Oklahoma in the United States from Dickerson Petroleum Inc. The Corporation owns the land and building for 25 sites while it
leases the land and owns the buildings for the other sites. In addition, 21 road transportation fuel supply agreements were acquired
by the Corporation, 20 of which are for sites owned and operated by independent operators while one site is leased by the
Corporation.
During fiscal year 2013, under the June 2011 agreement with ExxonMobil, the Corporation acquired four stores operated by
independent operators for which the real estate is owned by the Corporation along with the related road transportation fuel supply
agreements. Additionally, 23 road transportation fuel supply agreements were transferred to the Corporation during this period.
During fiscal year 2013, the Corporation also acquired 32 other stores through distinct transactions. The Corporation leases the land
and owns the building for one site, leases the land and buildings for ten sites and owns these same assets for the other sites.
Acquisition costs in connection with these acquisitions and other unrealized acquisitions of $2.3 are included in Operating, selling,
administrative and general expenses.
These acquisitions were settled for a total cash consideration of $220.9. Purchase price allocations based on the estimated fair value on the
date of acquisition and available information as at the date of publication of these consolidated financial statements is as follows:
Tangible assets acquired
Inventories
Property and equipment
Other assets
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Deferred credit and other liabilities
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Negative goodwill recorded to earnings
Total cash consideration paid
$
14.2
159.0
0.4
173.6
2.1
7.6
3.8
13.5
160.1
3.0
62.2
(4.4)
220.9
Approximately $44.5 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, to penetrate new markets and to increase its
economies of scale. These acquisitions generated goodwill in the amount of $62.2 mainly due to the strategic location of stores acquired.
Disposal of the liquefied petroleum gas sales (“LPG”) operations
On December 7, 2012, the Corporation sold Statoil Fuel & Retail’s LPG operations for NOK 130.0 (approximately $23.0). No gain or loss was
generated from this disposal.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 62 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
5.
INTEREST IN JOINT VENTURES AND ASSOCIATED COMPANIES
Investment in joint ventures
Investment in associated companies
2014
$
72.9
2.5
75.4
2013
$
81.7
2.5
84.2
The Corporation’s investment in joint ventures and associated companies are recorded according to the equity method. The following amounts
represent the Corporation’s share of the joint ventures’ and associated companies’ net earnings and comprehensive income:
Joint ventures
Net earnings and comprehensive income
Associated companies
Net earnings and comprehensive income
2014
$
22.0
0.7
22.7
2013
$
15.8
-
15.8
6.
NON-CONTROLLING INTEREST
During fiscal year 2014, the Corporation, along with another party, established a new corporation: Circle K Asia s.à.r.l. (“Circle K Asia”), in
which both parties hold a 50% interest. Subsequently, each party made a capital contribution of $13.2. Under the agreement signed between
the parties, the Corporation, under certain circumstances, may repurchase all of the other party’s shares in Circle K Asia. Consequently,
Circle K Asia was fully consolidated in the Corporation’s financial statements and the other party’s interest in Circle K Asia was recorded under
“Non-controlling interest” in the consolidated statements of earnings, comprehensive income, changes in equity and consolidated balance
sheet. Under other circumstances, the Corporation must repurchase all of the other party’s shares in Circle K Asia. Consequently, a
redemption liability was recorded against shareholders’ equity. Subsequent changes to this liability are recorded to Operating, selling,
administrative and general expenses.
7.
SUPPLEMENTARY INFORMATION RELATING TO EXPENSES
Cost of sales
Selling expenses
Administrative expenses
Operating expenses
2014
$
32,965.3
3,121.3
592.1
243.6
36,922.3
2013
$
30,933.8
2,992.5
562.7
215.7
34,704.7
The above expenses include rent expense of $322.5 ($322.7 in 2013), net of sub-leasing income of $24.5 ($31.6 in 2013).
Employee benefit charges
Salaries
Fringe benefits and other employer contributions
Employee future benefits (Note 26)
Termination benefits
Curtailment gain on defined benefits pension plans obligation (Note 26)
Stock-based compensation and other stock-based payments (Note 24)
8.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Salaries and other current benefits
Stock-based compensation and other stock-based payments
Employee future benefits (Note 26)
2014
$
1,231.9
170.0
85.6
1.2
(0.9)
7.4
1,495.2
2014
$
10.5
4.4
3.3
18.2
2013
$
1,239.4
185.4
77.4
34.8
(19.4)
5.9
1,523.5
2013
$
9.9
2.7
3.1
15.7
Key management personnel comprise Members of the Board of Directors and senior management.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 63 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
9.
NET FINANCIAL EXPENSES
Financial expenses
Interest expense
Interest on long-term debt
Interest on finance lease obligations
Interest on bank overdrafts and bank loans
Net interest on defined benefit plans (Note 26)
Accretion of provisions (Note 22)
Other finance costs
Financial revenues
Interest on bank deposits
Other financial revenues
Foreign exchange loss (gain)
Loss on foreign exchange forward contracts
Net financial expenses
10.
INCOME TAXES
Current income taxes
Deferred income taxes
2014
$
80.5
4.1
0.6
3.9
16.3
6.0
111.4
2.9
8.0
10.9
10.1
-
110.6
2014
$
195.1
(60.9)
134.2
2013
$
85.8
3.2
3.1
2.8
13.1
10.0
118.0
0.5
9.4
9.9
(3.2)
102.9
207.8
2013
$
196.0
(122.1)
73.9
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 other jurisdictions’ tax rates
Impact of tax rate changes
Other permanent differences
Effective income tax rate
(a) The Corporation’s combined statutory income tax rate in Canada includes the appropriate provincial income tax rates.
2014
%
26.90
(9.82)
(0.83)
(2.07)
14.18
2013
%
26.90
(11.91)
(6.23)
2.67
11.43
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 64 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
The components of deferred income tax assets and liabilities are as follows:
Balance as at
April 28, 2013
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income or equity
$
Transfer from
income taxes
payable
$
Recognized
through
business
acquisitions
$
2014
Balance as at
April 27, 2014
$
Deferred income tax assets
Property and equipment
Expenses deductible during the
following years
Goodwill
Deferred charges
Tax attributes
Asset retirement obligations
Deferred credits
Unrealized exchange (gain) loss
Other
Deferred income tax liabilities
Property and equipment
Goodwill
Expenses deductible during the
following years
Intangible assets
Asset retirement obligations
Tax attributes
Deferred charges
Deferred credits
Revenues taxable during the following
years
Unrealized exchange gain
Other
28.2
17.1
(9.6 )
6.6
4.1
3.7
(2.1 )
(0.8 )
1.6
48.8
524.7
145.7
(87.9 )
64.6
(64.6 )
(46.7 )
28.9
(12.2 )
3.6
1.0
4.1
561.2
1.7
2.8
0.3
(4.0)
(2.7)
-
0.1
12.7
(3.1)
7.8
21.4
(39.8)
(10.1)
(3.7)
(0.4)
(31.3)
(38.0)
2.2
50.3
15.5
(19.1)
(53.0)
-
(0.6)
-
-
(0.2)
-
(0.6)
(3.4)
(0.1)
(4.9)
(0.7)
12.0
0.2
-
0.2
0.2
-
-
-
(4.6)
(0.3)
7.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50.6
-
-
-
-
-
50.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29.9
19.3
(9.3)
2.6
1.2
3.7
(2.6)
8.5
(1.6)
51.7
545.4
117.9
(97.8)
60,9
(64.8)
(27.2)
(9.1)
(10.0)
53.9
11.9
(15.3)
565.8
2013
Balance as at
April 29, 2012
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income or equity
$
Transfer from
income taxes
payable
$
Recognized
through business
acquisitions
$
Balance as at
April 28, 2013
$
Deferred income tax assets
Property and equipment
Expenses deductible during the
following years
Goodwill
Deferred charges
Tax attributes
Asset retirement obligations
Deferred credits
Unrealized exchange gain
Other
Deferred income tax liabilities
Property and equipment
Goodwill
Expenses deductible during the
following years
Intangible assets
Asset retirement obligations
Tax attributes
Deferred charges
Deferred credits
Revenues taxable during the following
years
Unrealized exchange gain
Other
(1.8 )
11.5
(0.6 )
3.3
2.3
1.5
(1.6 )
(2.3 )
2.1
14.4
254.0
26.2
(55.2 )
68.0
(21.8 )
(1.2 )
2.3
(10.2 )
3.9
1.9
(5.8 )
262.1
4.3
(2.4)
(0.6)
3.3
1.2
2.2
(0.4)
3.7
(2.3)
9.0
(32.9)
(22.4)
17.6
(6.4)
(12.8)
(72.7)
26.6
(2.0)
(0.3)
(0.1)
(7.7)
(113.1)
0.7
3.4
(0.2)
-
-
-
(0.1)
(2.2)
1.7
3.3
17.6
3.8
(2.2)
3.0
(1.9)
(2.6)
-
-
-
(0.8)
5.6
22.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43.5
-
-
-
-
-
43.5
25.0
4.6
(8.2 )
-
0.6
-
-
-
0.1
22.1
286.0
138.1
(48.1 )
-
(28.1 )
(13.7 )
-
-
-
-
12.0
346.2
28.2
17.1
(9.6)
6.6
4.1
3.7
(2.1)
(0.8)
1.6
48.8
524.7
145.7
(87.9)
64.6
(64.6)
(46.7)
28.9
(12.2)
3.6
1.0
4.1
561.2
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 65 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
Deferred tax assets to be recovered in more than 12 months
Deferred tax assets to be recovered within 12 months
Deferred tax liabilities:
Deferred tax liabilities to be settled in more than 12 months
Deferred tax liabilities to be settled within 12 months
2014
$
47.1
4.6
51.7
609.7
(43.9)
565.8
2013
$
45.6
3.2
48.8
581.5
(20.3)
561.2
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 $1,015.8
($709.0 in 2013).
11.
NET EARNINGS PER SHARE
The following table presents the information for the computation of basic and diluted net earnings per share, adjusted for the share split
described in note 23:
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
2014
$
811.2
564,511
3,629
568,140
1.44
1.43
2013
$
572.8
555,083
5,484
560,567
1.03
1.02
In calculating diluted net earnings per share for 2014, no stock options are excluded due to their antidilutive effect (105,000 excluded stock
options in 2013).
During fiscal 2014, the Board declared total dividends of CA$0.136 per share.
12.
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
13.
ACCOUNTS RECEIVABLE
Trade accounts receivable and vendor rebates receivable (a)
Provision for doubtful accounts
Trade accounts receivable and vendor rebates receivable - net
Credit and debit cards receivable
Other accounts receivable
2014
$
(53.4)
(9.0)
(2.1)
154.9
24.2
114.6
2014
$
932.2
(27.6)
904.6
718.7
103.1
1,726.4
2013
$
372.5
8.1
(17.2)
(319.1)
24.6
68.9
2013
$
966.5
(31.1)
935.4
572.5
108.1
1,616.0
(a) This amount is presented net of an amount of $162.5 presented in reduction of Accounts payables and accrued expenses due to netting
arrangements.
The following details the aging of trade accounts receivable and vendor rebates receivable that are not impaired:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91 days and over
2014
$
803.6
44.2
11.8
15.8
29.2
904.6
2013
$
827.2
80.2
6.7
7.8
13.5
935.4
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 66 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Movements in the provision for doubtful accounts are as follows:
Balance, beginning of year
Business acquisitions
Provision for doubtful accounts, net of unused beginning balance
Receivables written off during the year
Effect of exchange rate variations
Balance, end of year
2014
$
31.1
-
7.2
(11.7)
1.0
27.6
2014
$
455.2
329.0
36.6
23.0
4.2
848.0
2013
$
1.6
30.1
6.9
(9.2)
1.7
31.1
2013
$
446.4
329.5
34.9
31.6
3.6
846.0
Land
$
1,379.4
26.4
99.0
(17.5)
(0.3)
(7.8)
(23.3)
(8.8)
1,447.1
1,456.5
(9.4)
1,447.1
34.0
683.3
93.6
615.8
(46.5)
(0.4)
-
-
33.6
1,379.4
1,379.9
(0.5)
1,379.4
30.8
Building and
building
components
$
Equipment
$
Leasehold
improvements
$
1,805.9
66.0
30.8
(13.9)
(116.5)
(1.0)
(9.2)
0.9
1,763.0
2,219.1
(456.1)
1,763.0
31.6
434.5
169.4
1,247.9
(8.5)
(97.8)
-
0.4
60.0
1,805.9
2,095.9
(290.0)
1,805.9
32.1
1,692.1
344.3
32.5
(49.6)
(298.8)
(2.9)
32.2
(14.2)
1,735.6
3,073.4
(1,337.8)
1,735.6
43.4
925.0
180.6
870.2
(41.6)
(277.3)
(2.5)
(0.2)
37.9
1,692.1
2,808.1
(1,116.0)
1,692.1
41.4
202.5
31.5
-
(2.3)
(41.9)
-
0.3
(4.8)
185.3
484.3
(299.0)
185.3
-
205.5
42.5
1.9
(1.9)
(43.1)
-
(0.2)
(2.2)
202.5
481.0
(278.5)
202.5
-
Total
$
5,079.9
468.2
162.3
(83.3)
(457.5)
(11.7)
-
(26.9)
5,131.0
7,233.3
(2,102.3)
5,131.0
109.0
2,248.3
486.1
2,735.8
(98.5)
(418.6)
(2.5)
-
129.3
5,079.9
6,764.9
(1,685.0)
5,079.9
104.3
14.
INVENTORIES
Merchandise
Road transportation fuel
Lubricant products
Aviation fuel
Other products
15.
PROPERTY AND EQUIPMENT
Year ended April 27, 2014
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Depreciation and amortization expense
Impairment expense
Transfers
Effect of exchange rate variations
Net book amount, end
As at April 27, 2014
Cost
Accumulated depreciation, amortization and impairment
Net book amount
Portion related to finance leases
Year ended April 28, 2013
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Depreciation and amortization expense
Impairment expense
Transfers
Effect of exchange rate variations
Net book amount, end
As at April 28, 2013
Cost
Accumulated depreciation, amortization and impairment
Net book amount
Portion related to finance leases
During the year ended April 27, 2014, the Corporation recorded an impairment charge of $6.8 on a non-operational lubricant production plant
located in Ostroweic, Poland, due to challenging market conditions for this type of asset. The fair value measurement of this asset is
categorized as level 3 as it is based on purchase offers received by the Corporation. The fair value less cost to sell of this asset was
determined to be $4.5.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 67 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
16.
GOODWILL AND INTANGIBLE ASSETS
Goodwill
Net book amount, beginning of year
Business acquisitions (Note 4)
Effect of exchange rate variations
Net book amount, end of year
2014
$
1,081.0
16.0
(8.3)
1,088.7
2013
$
502.9
556.1
22.0
1,081.0
Trademarks
$
Franchise
agreements
$
Software (a)
$
Customer
relationships
$
Licenses
$
Fuel supply
agreements
$
Intangible assets
Year ended April 27, 2014
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Depreciation and amortization
expense
Effect of exchange rate variations
Net book amount, end
As at April 27, 2014
Cost
Accumulated depreciation and
amortization
Net book amount
Year ended April 28, 2013
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Depreciation and amortization
expense
Effect of exchange rate variations
Net book amount, end
As at April 28, 2013
Cost
Accumulated depreciation and
amortization
Net book amount
429.7
-
-
-
(19.9 )
1.6
411.4
132.0
-
-
-
(19.6)
(2.3)
110.1
131.5
86.0
-
(1.2)
(10.3)
(4.1)
201.9
447.9
146.3
253.2
(36.5 )
411.4
154.7
-
275.3
-
(15.8 )
15.5
429.7
(36.2)
110.1
-
-
141.8
-
(15.9)
6.1
132.0
(51.3)
201.9
12.7
76.7
44.7
(0.2)
(5.6)
3.2
131.5
445.9
148.5
173.7
(16.2 )
429.7
(16.5)
132.0
(42.2)
131.5
97.1
-
-
-
(45.6)
2.6
54.1
139.4
(85.3)
54.1
-
-
144.3
(11.6)
(39.3)
3.7
97.1
136.9
(39.8)
97.1
19.6
-
5.0
-
-
(0.1)
24.5
24.5
-
24.5
19.4
0.2
-
-
-
-
19.6
19.6
-
19.6
Other
$
12.8
0.2
0.1
(0.2)
(1.7)
-
11.2
Total
$
834.7
86.2
30.8
(7.8)
(118.1)
(2.3)
823.5
12.0
-
25.7
(6.4 )
(21.0 )
-
10.3
58.0
15.7
1,085.0
(47.7 )
10.3
(4.5)
11.2
(261.5)
823.5
29.9
-
0.8
(0.1 )
(18.6 )
-
12.0
0.3
0.5
12.6
-
(0.9)
0.3
12.8
217.0
77.4
619.5
(11.9)
(96.1)
28.8
834.7
45.9
15.8
986.3
(33.9 )
12.0
(3.0)
12.8
(151.6)
834.7
(a) The net book amount as at April 27, 2014 includes $40.6 related to software in progress ($113.7 as at April 28, 2013).
Goodwill and intangible assets with indefinite useful lives are allocated to CGUs based on the geographical location of the acquired stores.
Allocation as at April 27, 2014 and April 28, 2013 is as follows:
CGU
Canada
United States
Scandinavia
Central and Eastern Europe
Aviation
Lubricants
Trademarks with
indefinite useful lives
-
154.7
83.4
33.2
2.0
5.6
278.9
2014
Goodwill
178.5
374.5
523.9
2.0
1.7
8.1
1,088.7
Trademarks with
indefinite useful lives
$
-
154.7
83.6
32.0
2.0
5.7
278.0
2013
Goodwill
$
194.0
361.2
514.2
1.9
1.5
8.2
1,081.0
The trademark with indefinite useful life for the United States CGU is the Circle K trademark and is the droplet logo for Scandinavia, Central
and Eastern Europe (“CEE”), Aviation and Lubricants CGUs. The Scandinavia CGU, includes the activities of Norway, Sweden and Denmark
while the CEE CGU includes the activities of Poland, Latvia, Lithuania, Estonia and Russia. For the annual impairment test, the recoverable
amount of the CGU has been determined based on fair value less costs to sell and the Corporation uses an approach based on earnings to
determine this value. Under this method, the cash flows of the CGU for a 3-year period were used. The key assumptions on which
management has based its determination of fair value less costs to sell are the discount rate, the growth rate and the exchange rate. These
assumptions primarily reflect past experience. For the Scandinavia CGU, the main assumptions used are as follows:
Discount rate before taxes
Growth rate
NOK-USD exchange rate
2014
12.8%
1.0%
0.1687
2013
12.8%
1.0%
0.1687
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 68 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
These assumptions represent management’s best estimate given current market conditions and risks specific to each of these assets.
The recoverable amounts of the United States and Canada CGUs were determined on the basis of their fair value less costs to sell and the
Corporation uses an approach based on EBITDA multiples of comparable corporations to determine these values.
17.
OTHER ASSETS
Pension benefit asset (Note 26)
Investment contract including an embedded total return swap (Note 27)
Environmental costs receivable (Note 22)
Deposits
Deferred charges, net
Other
18.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued expenses (a)
Sales and excise taxes
Salaries and related benefits
Deferred credits
Other
2014
$
30.0
25.1
11.8
8.5
7.1
77.3
159.8
2014
$
1,547.3
639.9
191.0
17.4
114.7
2,510.3
2013
$
22.1
19.1
11.7
7.7
8.1
67.6
136.3
2013
$
1,386.1
633.6
178.9
18.4
134.1
2,351.1
(a) This amount is presented net of an amount of $162.5 from Trade accounts receivable and vendor rebates receivable due to netting arrangements.
19.
LONG-TERM DEBT
Canadian dollar denominated senior unsecured notes (a)
US dollar term revolving unsecured operating credit D, maturing in December 2017 (b)
Unsecured non-revolving acquisition credit facility, maturing in June 2015 (c)
NOK floating-rate bonds, 5.04%, maturing in February 2017
NOK fixed-rate bonds, 5.75%, maturing in February 2019
Note payable, secured by the assets of certain stores, 8.75%, repayable in monthly instalments, maturing in 2019
Borrowing under bank overdraft facilities, maturing at various dates
Obligations related to buildings and equipment under finance leases, rates varying from 1.42% to 12.28%, payable
on various dates until 2080
Bank loans and current portion of long-term debt
2014
$
1,172.7
793.5
552.3
2.5
2.2
1.8
1.8
79.6
2,606.4
20.3
2,586.1
2013
$
978.7
345.5
2,197.3
2.6
2.3
2.0
-
76.7
3,605.1
620.8
2,984.3
(a)
Canadian dollar denominated senior unsecured notes
As at April 27, 2014, the Corporation had Canadian dollar denominated senior unsecured notes totalling CA$1.3 billion, divided as follows:
Tranche 1 - November 1, 2012 issuance
Tranche 2 - November 1, 2012 issuance
Tranche 3 - November 1, 2012 issuance
Tranche 4 - August 21, 2013 issuance
Notional amount
CA$300.0
CA$450.0
CA$250.0
CA$300.0
Maturity
November 1, 2017
November 1, 2019
November 1, 2022
August 21, 2020
Coupon rate
2.861%
3.319%
3.899%
4.214%
Effective rate as at
April 27, 2014
3.0%
3.4%
4.0%
4.3%
The net proceeds from their issuance, which were approximately $285.6 (CA$298.3) for fiscal 2014 and $997.5 (CA$995.0) for fiscal 2013,
were mainly used to repay a portion of the Corporation’s unsecured non-revolving acquisition credit facility. Notes issued on
November 1, 2012 are subject to cross-currency interest rate swaps (Note 20).
(b)
Term revolving unsecured operating credit D
As at April 27, 2014, the Corporation has a credit agreement consisting of a revolving unsecured facility of an initial maximum amount of
$1,275.0, with an initial term of five years. On November 4, 2013, the Corporation extended the term of this agreement by one year, which
brings its maturity to December 2017. 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
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 69 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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 borrowed
amounts 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.
As at April 27, 2014, the effective interest rate is 1.19% (1.75% in 2013). In addition, as at April 27, 2014, CA$2.3 (CA$2.2 in 2013) and $29.4
($28.4 in 2013) are used for standby letters of credit. As at April 27, 2014 and April 28, 2013, the available line of credit was unused and the
Corporation was in compliance with the restrictive provisions and ratios imposed by the credit agreement.
On May 16, 2014 the Corporation increased the maximum amount of this credit facility form $1,275.0 to $1,525.0. All other conditions related
to this agreement remain unchanged.
(c)
Unsecured non-revolving acquisition credit facility
As at April 27, 2014, the Corporation has a 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 was 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 was 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. Having reached the maximum amount that can be borrowed under the acquisition
facility, and given its non-revolving nature, the Corporation can no longer borrow additional amounts under this facility. Under the credit
agreement, the Corporation needs to maintain certain financial ratios and respect certain restrictive provisions.
As at April 27, 2014, the effective interest rate is 2.38% (rate of 1.94% on borrowed amounts) and the Corporation was in compliance with the
restrictive provisions and ratios imposed by the credit agreement.
Term revolving unsecured operating credit E
As at April 27, 2014, the Corporation has a credit agreement consisting of a revolving unsecured facility of an initial maximum amount of $50.0
with an initial term of 50 months. The credit facility is available in the form of a revolving unsecured operating credit, available in US dollars.
The amounts borrowed bear interest at variable rates based on 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 facility, apply to the unused portion of the credit
facility. The variable margin used to determine the interest rate applicable to amounts borrowed is 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.
As at April 27, 2014 and April 28, 2013, operating credit E was unused.
Bank overdraft facilities
The Corporation has access to bank overdraft facilities totalling approximately $271.5 ($336.0 in 2013). As at April 27, 2014, they were used in
the amount of $1.8 (unused as at April 28, 2013).
Obligations related to finance leases
Instalments on obligations related to finance leases for the next fiscal years are as follows:
2015
2016
2017
2018
2019
2020 and thereafter
Interest expense included in minimum lease payments
Obligations related to
buildings and equipment
under
finance leases
$
19.6
32.5
11.5
5.9
5.4
28.4
103.3
23.7
79.6
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 70 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
20.
CROSS-CURRENCY INTEREST RATE SWAPS
The Corporation has entered into cross-currency interest rate swap agreements for a total notional amount of CA$1.0 billion, allowing it to
synthetically convert its Canadian dollar denominated debt into US dollars.
Receive – Notional
CA$300.0
CA$125.0
CA$20.0
CA$305.0
CA$125.0
CA$125.0
Receive – Rate
2.861%
3.319%
3.319%
3.319%
3.899%
3.899%
Pay – Notional
US$300.7
US$125.4
US$20.1
US$305.9
US$125.4
US$125.4
Pay – Rate
2.0340%
2.7325%
2.7325%
2.7400%
3.4900%
3.4925%
Maturity
November 1, 2017
November 1, 2019
November 1, 2019
November 1, 2019
November 1, 2022
November 1, 2022
Total other financial liabilities
Fair value as at
April 27, 2014 (Note 27)
$24.5
$9.0
$1.5
$22.1
$8.5
$8.3
$73.9
Fair value as at
April 28, 2013 (Note 27)
$5.1
$2.6
$0.4
$6.8
$2.9
$2.6
$20.4
The cross-currency interest rate swap agreements were designated as a foreign exchange hedge of the Corporation’s net investment in its US
operations.
21.
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred rent expense
Deferred branding credits
Deferred credits
Other liabilities
2014
$
50.0
18.0
15.9
85.6
169.5
2013
$
47.4
16.2
16.4
76.7
156.7
22.
PROVISIONS
The reconciliation of the Corporation’s main provisions is as follows:
2014
Balance, beginning of year
Business acquisitions (Note 4)
Liabilities incurred
Liabilities settled
Accretion expense
Reversal of provisions
Change in estimates
Effect of exchange rate variations
Balance, end of year
Current portion
Long-term portion
2013
Balance, beginning of year
Business acquisitions (Note 4)
Liabilities incurred
Liabilities settled
Accretion expense
Reversal of provisions
Change in estimates
Effect of exchange rate variations
Balance, end of year
Current portion
Long-term portion
Asset
retirement
obligations
(a)
$
Provision for
site restoration
costs
(b)
$
Restructuring
provision
(c)
$
Provision for
workers’
compensation
(d)
$
Provision for
general
liability
(d)
$
Other
provisions
$
269.9
1.9
1.1
(3.7 )
15.4
-
(0.7 )
(0.7 )
283.2
34.8
248.4
66.5
166.5
3.7
(3.3 )
12.5
(0.1 )
15.6
8.5
269.9
30.0
239.9
101.0
17.7
19.6
(24.1)
0.5
(4.1)
0.4
(0.3)
110.7
32.8
77.9
52.3
58.9
9.6
(19.6)
0.3
(4.2)
0.5
3.2
101.0
34.8
66.2
34.1
-
-
(2.9)
-
-
-
(0.6)
30.6
15.3
15.3
-
-
34.0
-
-
-
-
0.1
34.1
10.1
24.0
28.0
-
16.1
(15.7)
0.3
-
(0.1)
-
28.6
8.5
20.1
25.7
-
15.7
(14.6)
0.3
-
0.9
-
28.0
10.9
17.1
15.2
-
14.1
(11.8 )
0.1
-
-
-
17.6
5.6
12.0
13.1
-
10.7
(8.8 )
-
-
0.2
-
15.2
5.3
9.9
7.1
-
16.7
(1.0)
-
(0.4)
0.1
(0.3)
22.2
5.4
16.8
-
5.2
1.3
(0.2)
-
-
-
0.8
7.1
5.4
1.7
Total
$
455.3
19.6
67.6
(59.2)
16.3
(4.5)
(0.3)
(1.9)
492.9
102.4
390.5
157.6
230.6
75.0
(46.5)
13.1
(4.3)
17.2
12.6
455.3
96.5
358.8
(a)
The total undiscounted amount of estimated cash flows to settle the asset retirement obligations is approximately $515.8 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.
Site restoration costs should be disbursed over the next 20 years.
Restructuring costs should be settled over the next two years.
(b)
(c)
(d) Workers’ compensation and general liability indemnities should be disbursed over the next five years.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 71 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Environmental costs
The Corporation is subject to Canadian, US and European legislations governing the storage, handling and sale of road transportation fuel
and other petroleum-based 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, Maryland 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 of the environment caused by the usage of road transportation fuel
equipment. Road transportation fuel storage tank registration fees and/or a motor fuel tax 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 $110.7 provision for environmental costs as at
April 27, 2014 ($101.0 as at April 28, 2013). Furthermore, the Corporation has recorded an amount of $13.6 for environmental costs
receivable from trust funds as at April 27, 2014 ($13.9 as at April 28, 2013), of which $1.8 ($2.2 as at April 28, 2013) is included in Accounts
receivable and the remainder is included in Other assets.
23.
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
Conversion into Class B shares
Balance, end of year
Class B subordinate voting shares
Balance, beginning of year
Issued on public offering (a)
Issued as part of a previous acquisition
Issued on conversion of Class A shares
Stock options exercised
Balance, end of year
2014
2013
148,101,840
-
148,101,840
161,059,236
(12,957,396 )
148,101,840
414,606,183
-
4,440
-
3,035,449
417,646,072
376,099,788
21,907,500
528
12,957,396
3,640,971
414,606,183
(a) On August 14, 2012, the Corporation issued 21,907,500 Class B subordinate voting shares at a price of CA$15.75 per share, for gross proceeds of
approximately CA$345.0 ($347.9). The net proceeds of the issuance, approximately CA$330.0 ($333.4), were mainly used to repay a portion of the
Corporation’s revolving unsecured operating credits then outstanding.
On March 11, 2014, the Corporation’s Board of Directors approved a three-for-one split of all the Corporation’s issued and outstanding Class
“A” and “B” shares. This share split was approved by regulatory authorities and occurred on April 14, 2014. All share and per-share
information in these consolidated financial statements has been adjusted retroactively to reflect this stock split.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 72 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
24.
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
Stock option plan
All information related to stock-based compensation and other stock-based payments has been adjusted retroactively to reflect the stock split
described in Note 23.
The Corporation has a stock option plan (the “Plan”) under which it has authorized the grant of up to 50,676,000 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. To allow option holders to proceed with a cashless exercise of their options, the Plan allows them to elect to receive a
number of subordinate shares equivalent to the difference between the total number of subordinate shares underlying the options
exercised and the number of subordinate shares required to settle the exercise of the options.
The table below presents the status of the Corporation’s stock option plan as at April 27, 2014 and April 28, 2013 and the changes therein
during the years then ended:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Number of
stock options
6,758,280
-
(3,167,925)
(11,550)
3,578,805
2014
Weighted average
exercise price
CA$
5.48
-
3.95
6.74
6.83
Number of
stock options
10,465,512
105,000
(3,810,972 )
(1,260 )
6,758,280
2013
Weighted average
exercise price
CA$
4.47
15.87
3.00
5.52
5.48
Exercisable stock options, end of year
3,515,805
6.67
6,540,690
5.34
For options exercised in fiscal 2014, the weighted average share price at the date of exercise was CA$21.84 (CA$16.05 in 2013).
The following table presents information on the stock options outstanding and exercisable as at April 27, 2014:
Range of
exercise prices
CA$
3 – 4
4 – 5
5 – 6
6 – 9
9 – 16
Number of
stock options
outstanding as at
April 27, 2014
Options outstanding
Weighted average
remaining
contractual life
(years)
9,900
224,535
1,724,490
1,514,880
105,000
3,578,805
0.12
4.46
1.52
3.12
8.26
Options exercisable
Weighted
average
exercise price
CA$
3.86
4.62
5.76
7.77
15.87
6.83
Number of
stock options
exercisable as at
April 27, 2014
9,900
224,535
1,724,490
1,514,880
42,000
3,515,805
Weighted
average
exercise price
CA$
3.86
4.62
5.76
7.77
15.87
6.67
The fair value of stock options granted is estimated at the grant date using the Black-Scholes option pricing model on the basis of the following
weighted average assumptions for the stock options granted during the year:
Expected dividends (per share)
Expected volatility
Risk-free interest rate
Expected life
2013
CA$0.10
30.00%
1.55%
8 years
No stock options were granted in 2014. The weighted average fair value of stock options granted was CA$5.57 in 2013.
Compensation cost charged to the consolidated statements of earnings amounts to $0.3 ($0.5 in 2013).
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 (“DSU”). 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 27, 2014, the Corporation has a total of 221,551 DSUs outstanding (201,975 as at
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 73 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
April 28, 2013) and an obligation of $6.1 ($4.0 as at April 28, 2013) is recorded in deferred credits and other liabilities. The obligation is subject
to an embedded total return swap (Note 17). The compensation cost amounts to $2.6 in 2014 ($1.7 in 2013).
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. 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.
The table below presents the status of the Corporation’s PSU plan as at April 27, 2014 and April 28, 2013 and the changes therein during the
years then ended in number of units:
Outstanding, beginning of year
Granted
Paid
Cancelled
Outstanding, end of year
2014
2013
1,507,935
274,740
(326,904)
(204,234)
1,251,537
1,307,649
652,884
(405,363 )
(47,235 )
1,507,935
As at April 27, 2014, an obligation of $7.5 is recorded in accounts payable and accrued liabilities ($6.8 in 2013) and $11.4 is recorded in
Deferred credits and other liabilities ($7.7 as at April 28, 2013). The obligation is subject to an embedded total return swap (Note 17). For
2014, the compensation cost amounts to $4.5 ($3.7 for 2013).
25.
ACCUMULATED OTHER COMPREHENSIVE INCOME
As at April 27, 2014
Balance, before income taxes
Less: Income taxes
Balance, net of income taxes
As at April 28, 2013
Attributable to shareholders of the Corporation
Items that may be reclassified to earnings
Net interest on
investment
hedge
$
Net investment
hedge
$
Cumulative
translation
adjustments
$
Will never be
reclassified to
earnings
Cash flow
hedge
$
Cumulative net
actuarial loss
$
Accumulated other
comprehensive
income
$
6.1
1.7
4.4
(73.9)
(11.3)
(62.6)
246.7
-
246.7
4.4
1.0
3.4
(6.8 )
(1.8 )
(5.0 )
176.5
(10.4)
186.9
Attributable to shareholders of the Corporation
Net interest on
investment
hedge
$
Items that may be reclassified to earnings
Cumulative
translation
adjustments
$
Net investment
hedge
$
Will never be
reclassified to
earnings
Cash flow
hedge
$
Cumulative net
actuarial loss
$
Accumulated other
comprehensive
income
$
Balance, before income taxes
Less: Income taxes
Balance, net of income taxes
2.6
0.8
1.8
(20.4)
(3.5)
(16.9)
204.3
-
204.3
2.1
0.4
1.7
(7.1 )
(2.0 )
(5.1 )
181.5
(4.3)
185.8
26.
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 defined benefit obligation and the fair value of plan assets for accounting purposes on the last Sunday
of April of each year.
The Corporation has defined benefit plans in Canada, the United States, Norway and Sweden. Those plans provide benefits based on
average earnings at retirement, or based on the years with the highest salaries, and the number of years of service. The most recent actuarial
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 74 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
valuation of the pension plans for funding purposes was as at December 31, 2013 and the next required valuation will be as at
December 31, 2014.
Some plans include benefits adjustments in line with the consumer price index whereas most of them do not provide such adjustments. The
majority of the benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where the
Corporation meets the benefit payment obligation as it falls due. Plan assets held in trusts are governed by local regulations and practice in
each country, as is the nature of the relationship between the Corporation and the trustees and their composition. Responsibility for
governance of the plans, investment decisions and contribution schedules lies jointly with the plan committees and the Corporation.
Information about the Corporation’s defined benefit plans, in aggregate, is as follows:
Present value of accrued defined benefit obligation
Balance, beginning of year
Business acquisition
Current service cost
Interest cost
Benefits paid
Loss from change in demographic assumptions
Gain from change in financial assumptions
Experience gains
Curtailment gain
Effect of exchange rate fluctuations
Balance, end of year
Plans’ assets
Fair value, beginning of year
Business acquisition
Interest income
Return on assets (excluding amounts included in interest income)
Employer contributions
Benefits paid
Administrative expenses
Effect of exchange rate fluctuations
Fair value, end of year
2014
$
458.6
-
18.7
17.2
(24.0 )
5.3
(1.1 )
(7.3 )
(0.9 )
(13.8 )
452.7
371.0
-
13.3
(2.8 )
11.8
(21.3 )
(0.3 )
(8.8 )
362.9
Reconciliation of the funded status of the benefit plans to the amount recorded in the consolidated financial statements:
Present value of defined benefit obligation for funded pension plans
Fair value of plans’ assets
Funded status of plans – surplus
Present value of defined benefit obligation for unfunded pension plans
Accrued pension benefit liability
2014
$
(347.5 )
362.9
15.4
(105.2 )
(89.8 )
2013
$
64.5
408.7
15.5
13.2
(20.3)
37.4
(52.6)
(2.8)
(19.4)
14.4
458.6
25.0
342.2
10.4
(16.7)
10.7
(14.2)
(0.6)
14.2
371.0
2013
$
(352.4)
371.0
18.6
(106.2)
(87.6)
The pension benefit asset of $30.0 ($22.1 as at April 28, 2013) is included in Other assets and the pension benefit liability of $119.8 ($109.7
as at April 28, 2013) is presented separately in the consolidated balance sheets.
The defined benefit obligation and plan assets are composed by country as follows:
2014
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – surplus (deficit)
2013
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – surplus (deficit)
As at the measurement date, plans’ assets consist of:
Canada
$
(62.8)
24.9
(37.9)
United States
$
(6.4)
-
(6.4)
(65.9)
25.7
(40.2)
(5.7)
-
(5.7)
Norway
$
(261.2 )
198.8
(62.4 )
(263.9 )
209.0
(54.9 )
Sweden
$
(122.3)
139.2
16.9
(123.1)
136.3
13.2
Cash and cash equivalents
Equity securities
Debt instruments
Government
Corporate
Real estate
Other assets
Total
Quoted
$
11.0
96.3
Unquoted
$
-
6.1
86.2
51.7
-
6.2
251.4
-
78.9
21.4
5.1
111.5
Total
$
11.0
102.4
86.2
130.6
21.4
11.3
362.9
2014
%
3.0
28.2
23.8
36.0
5.9
3.1
100.0
Quoted
$
8.0
87.3
106.6
93.5
-
14.9
310.3
Unquoted
$
-
6.5
5.9
10.9
30.1
7.3
60.7
Total
$
8.0
93.8
112.5
104.4
30.1
22.2
371.0
Total
$
(452.7)
362.9
(89.8)
(458.6)
371.0
(87.6)
2013
%
2.2
25.3
30.3
28.1
8.1
6.0
100.0
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 75 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
The Corporation’s pension benefit expense for the fiscal year is determined as follows:
Current service cost, net of employee contributions
Administrative expenses
Pension expense for the year
Net interest expense
Curtailment gain
Amount recognized in earnings for the year
2014
$
19.6
0.3
19.9
3.9
(0.9)
22.9
2013
$
15.5
0.6
16.1
2.8
(19.4)
(0.5)
The pension expense for the year is included in Operating, selling, administrative and general expenses in the consolidated statement of
earnings. The curtailment gain is presented separately in the consolidated statement of earnings while the net interest expense is included in
Financial expenses.
The amount recognized in Other comprehensive income for the fiscal year is determined as follows:
Loss from change in demographic assumptions
Gain from change in financial assumptions
Experience gain
Return on asset (excluding amounts included in interest income)
Amount recognized in Other comprehensive income
2014
$
5.4
(1.1)
(7.3)
2.7
(0.3)
2013
$
37.4
(52.6)
(2.8)
16.7
(1.3)
The Corporation expects to make a contribution of $10.7 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:
Discount rate
Rate of compensation increase
Rate of benefit increase
Rate of social security base amount
increase (G-amount)
Canada
%
4.35
3.70
2.25
United States
%
4.35
4.00
2.25
Norway
%
3.75
3.50
0.75
2014
Sweden
%
3.50
2.75
1.50
Canada
%
3.95
3.70
2.25
United States
%
3.95
4.00
2.25
Norway
%
4.00
3.75
0.75
2013
Sweden
%
3.25
2.50
1.50
-
-
3.25
2.75
-
-
3.50
2.50
The Corporation uses mortality tables provided by regulatory authorities and actuarial associations in each country. In 2013, a new mortality
table was issued by The Financial Supervisory Authority of Norway. This had an impact on the defined benefit obligation in Norway. In 2014, a
new mortality table was published by The Canadian Institute of Actuaries affecting the defined benefit obligation in North America. The G-
amount is the expected increase of pensions paid from the state. In some European countries, the Corporation is responsible for the
difference between what the pensioners receive from the state and the entitled pension based on their salary at the time of retirement.
The weighted average duration of the defined benefit obligation of the Corporation is 19 years.
The sensitivity of the defined benefit obligation to changes in the weighted principal actuarial assumptions is as follows:
Discount rate
Rate of compensation increase
Rate of benefit increase
Increase of life expectancy
Change in assumption
%
0.50
0.50
0.50
1 year
Increase in assumption
Decrease in assumption
Decrease by 8.4%
Increase by 3.0%
Increase by 6.9%
Increase by 3.6%
Increase by 9.7%
Decrease by 2.8%
Decrease by 7.0%
-
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely
to occur, because changes in some of the assumptions may be correlated. When calculating the above sensitivity analyses, the same method
has been applied as when calculating the pension liability recognized in the consolidated balance sheet.
Through its defined benefit pension plans, the Corporation is exposed to the following risks:
Asset returns: The value of the plans’ defined benefit obligations is calculated using a discount rate set with reference to corporate bond
yields. If plan assets underperform this yield, this will create a deficit. All of the capitalized plans hold a significant proportion of equities, which
are expected to outperform corporate bonds in the long term. Furthermore, the Corporation actively monitors the performance of the assets to
ensure the expected return. To mitigate the risks of assets underperforming, investment policies require a diversified portfolio that spreads risk
across different types of instruments.
Changes in bond yields: A decrease in corporate bond yields will increase plan defined benefit obligations. However, this same decrease will
increase existing bond values held by the various plans.
Change in demographic assumptions: A change in demographic assumptions (rate of salary increase or pension increase, change in mortality
table) will increase or decrease the obligation.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 76 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
For funded plans, the individual plans have investment policy objectives to have investment average length in line with the average expected
life of the obligation and scheduled benefits payments. The Corporation and the trustees actively monitor the duration and the expected yield
of the investments to ensure they match the expected cash outflows arising from the pension benefits payments. Also, as presented above, to
mitigate the risks, the investments are well diversified. The Corporation does not use derivatives to offset its risk and has not changed the
processes from previous fiscal year.
In Europe, it is the Corporation’s responsibility to make contributions or not to the defined benefit plans. The Corporation contributes to these
plans except when they are overcapitalized. The majority of funded plans in Europe are currently in surplus position. For the other funded
plans, the Corporation makes payments based on the actuaries’ recommendations and existing regulations. In Canada, only one plan is
funded and currently runs a deficit. The Corporation is committed to making special payments in the coming years to eliminate the deficit.
These contributions have no significant impact on the Corporation’s cash flows. The Corporation does not have a funded plan in the United
States.
The Corporation recorded a curtailment gain on its pension obligation on some of its defined benefit pension plans. This planned curtailment
results from Statoil Fuel & Retail’s restructuring.
Defined contribution plans
The Corporation’s total pension expense under its defined contribution plans and mandatory governmental plans for 2014 is $66.9 ($61.9 in
2013).
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 $22.6 as at April 27, 2014 ($18.3 as at
April 28, 2013) and are included in Deferred credits and other liabilities.
27.
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 forward contracts to hedge certain risk exposures, primarily foreign currency and price risk as well as a cross
currency interest rate swap to hedge its foreign currency risk related to its net investment in its US operations.
Foreign currency risk
A large portion 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 aviation fuel operations for which purchases and sales are
denominated in different currencies. To mitigate this risk, the Corporation holds foreign exchange forward contracts.
The Corporation is also exposed to foreign currency risk with respect to a portion of its long-term debt denominated in US dollars and certain
intercompany loans. As at April 27, 2014, 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 $12.5 on net earnings. As at April 27, 2014, the Corporation did not hold any other derivative
instruments to mitigate this risk.
The Corporation was also exposed to foreign currency risk with respect to its acquisition of Statoil Fuel & Retail for which the purchase price
was denominated in Norwegian kroners (“NOK”) and was financed using the Corporation’s acquisition facility denominated in US dollars. The
hypothetical weakening of the US dollar against the NOK would have increased the Corporation’s US dollar cash requirements in order to
close the acquisition of Statoil Fuel & Retail. To mitigate this risk, the Corporation entered into foreign exchange forward contracts (hereinafter,
“forwards”) with reputable financial institutions allowing it to predetermine a significant portion of the disbursement it planned to make in US
dollars for the acquisition of Statoil Fuel & Retail.
In total, from April 10, 2012 to June 12, 2012, the Corporation entered into forwards requiring it to deliver US$3.47 billion in exchange for
NOK 20.14 billion, representing a weighted average rate of NOK 5.8082 per US dollar which is a favorable rate compared to the rate of
NOK 5.75 per US dollar in effect on April 18, 2012, date of the announcement of the offer to acquire Statoil Fuel & Retail.
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 and the repayment of certain of Statoil Fuel & Retail’s debts. Thus, from June 15, 2012 to
August 24, 2012, the Corporation settled all of the forwards to pay for Statoil Fuel & Retail shares and certain of its debts.
During fiscal 2013, the Corporation recorded to earnings losses of $102.9, in relation with these forwards.
Interest rate risk
The Corporation’s fixed rate long-term debt is exposed to a risk of change in fair value due to changes in interest rates. As at April 27, 2014,
the Corporation did not hold any derivative instruments to mitigate this risk.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 77 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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. As at
April 27, 2014, the Corporation did not hold any derivative instruments to mitigate this risk. The Corporation analyzes its cash flow 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 27, 2014, the impact on net earnings of a 1.0% shift in interest rates would have been $9.9.
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, the investment contract including an embedded total return swap and the cross-currency interest
rate swaps.
Key elements of the Corporation’s credit risk management approach include credit risk policies, credit mandates, an internal credit rating
process, credit risk mitigation tools and continuous monitoring and management of credit exposures. Prior to entering into transactions with
new counterparties, the Corporation’s credit policy requires counterparties to be formally identified, approved, and assigned internal credit
ratings as well as exposure limits. Once established, counterparties are re-assessed according to policy and monitored continuously.
Counterparty risk assessments are based on a quantitative and qualitative analysis of recent financial statements, when available, and other
relevant business information. In addition, the Corporation evaluates any past payment performance, the counterparties’ size and business
diversification, and the inherent industry risk. The internal credit ratings reflect the Corporation’s assessment of the counterparties’ credit risk.
The Corporation has maximum credit exposures for individual counterparties. The Corporation monitors outstanding balances and individual
exposures against limits on a regular basis.
Credit risk related to Trade accounts receivable and vendor rebates receivable related to convenience stores’ operations is limited considering
the nature of the Corporation’s activities and its counterparties. As at April 27, 2014, 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 27, 2014, the maximum credit risk exposure related to Cash and cash
equivalents and Credit and debit cards receivable corresponds to their carrying amount in addition to the credit risk exposure related to the
Statoil/MasterCard credit cards as described below.
In some European markets, customers can settle their purchases by the use of a combined Statoil/MasterCard credit card. The Corporation
has entered into agreements whereby the risks and rewards related to the credit cards, such as fee income, administration expenses and bad
debt, are shared between the Corporation and external banks. Outstanding balances are charged to the customer monthly. The Corporation’s
exposure as at April 27, 2014 relates to receivables of $245.9, of which $116.0 was interest bearing. These receivables are not recognized in
the Corporation’s consolidated balance sheet. For fiscal 2014, the expensed losses were not significant. In light of accurate credit
assessments and continuous monitoring of outstanding balances, the Corporation believes that the credits do not represent any significant
risk. The income and risks related to these arrangements with the banks are reported, settled and accounted for on a monthly basis.
The Corporation is exposed to credit risk arising from its embedded total return swap and cross-currency interest rate swaps when these
swaps result in a receivable from the financial institutions. In accordance with its risk management policy, to reduce this risk, the Corporation
has entered into these swaps with major financial institutions with a very low credit risk.
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 liquidities are 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 and their related interest as at April 27, 2014 are as follows:
Non-derivative financial liabilities (1)
Accounts payable and accrued liabilities (2)
Unsecured non-revolving acquisition credit
facility
Senior unsecured notes
Term revolving unsecured operating credit D
NOK fixed-rate bonds
NOK floating-rate bonds
Bank overdraft facilities
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
$
1,826.8
552.3
1,172.7
793.5
2.2
2.5
1.8
81.4
4,433.2
1,826.8
567.6
1,389.2
827.2
2.7
2.8
1.8
106.3
4,724.4
1,826.8
10.8
41.6
9.4
0.1
0.1
1.8
20.2
1,910,8
-
556.8
41.6
9.4
0.1
0.1
-
33.0
641.0
-
-
384.9
808.4
2.5
2.6
-
24.3
1,222.7
-
-
921.1
-
-
-
-
28.8
949.9
(1) Based on spot rates, as at April 27, 2014, for balances in Canadian dollars, in NOK 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.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 78 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
Price risk
The Corporation’s sales of refined oil products, which include road transportation fuel, stationary energy, aviation fuel and lubricants, constitute
a material share of its gross profit. As a result, its business, financial position, results of operation and cash flows are affected by changes in
the commodity prices of such products. The Corporation seeks to pass on any changes in purchase prices to its customers by adjusting sales
prices to reflect changes in refined oil products prices. The time lag between a change in refined oil products prices and a change of prices of
fuel sold by the Corporation can impact the gross margin on sales of these products. The Corporation holds commodity futures to mitigate this
risk for its purchases of aviation fuel. As at April 27, 2014, the Corporation did not hold any other derivative instruments to mitigate this risk
and the impact on net earnings or shareholders’ equity of a 5.0% shift of the value of the futures would not have been significant.
The Corporation is exposed to price risk with respect to its obligation related to its PSU Plan as well as with respect to its obligation related to
its DSU Plan which fluctuate 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 sheets under Other assets. The financial arrangement
is adjusted as needed to reflect new awards, adjustments and/or settlements of PSUs and DSUs. As at April 27, 2014, 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. The fair value of Obligations related to
buildings and equipment under finance leases is comparable to its carrying amount given that rent is generally at market value. The
carrying value of the Term revolving unsecured operating credits and Unsecured non-revolving acquisition credit 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.
As at April 27, 2014, the fair value of the senior unsecured notes is $1,191.5 ($1,002.6 as at April 28, 2013).
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 senior unsecured notes is based on observable market data.
The fair value of the cross-currency interest rate swaps is determined based on market rates obtained from the Corporation’s financial
institutions for similar financial instruments.
The fair value of the foreign exchange forward contracts is 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 commodity futures is determined by quoted market prices.
Fair value hierarchy
Fair value measurements 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 commodity futures in Level 1 as they are traded in active markets and
categorized the fair value measurement of the instrument including an embedded total return swap, the senior unsecured notes, the
cross currency interest rate swap and the forwards in Level 2, as they are primarily derived from observable market inputs that are,
quoted market prices.
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 its 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 19 and 23).
In its capital structure, the Corporation considers its stock option, PSU and DSU plans (Note 24). From time to time, the Corporation uses
share repurchase programs to achieve its capital management objectives.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 79 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
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
2014
$
20.3
2,586.1
511.1
2,095.3
3,962.4
2,095.3
6,057.7
34.6%
2013
$
620.8
2,984.3
658.3
2,946.8
3,216.7
2,946.8
6,163.5
47.8%
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.
28.
CONTRACTUAL OBLIGATIONS
Minimum lease payments
As at April 27, 2014, the Corporation has entered into operating lease agreements expiring on various dates until 2040 which call for
aggregate minimum lease payments of $2,403.8 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
$
321.4
1,021.8
1,060.6
As at April 27, 2014, the total amount of future minimum sublease payments expected to be received under sublease agreements related to
these operating leases is $44.1.
Purchase commitments
The Corporation has entered into various product purchase agreements which require it to purchase minimum amounts or quantities of
merchandise and road transportation 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.
29.
CONTINGENCIES AND GUARANTEES
Contingencies
Various claims and legal proceedings have been initiated against the Corporation in the normal course of its operations and through
acquisitions. Although the outcome of such matters is not predictable with assurance, the Corporation has no reason to believe that the
outcome of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation’s financial position,
results of operations or the ability to carry on any of its business activities.
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 27, 2014, the total future lease payments under such agreements are approximately $2.1 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.
Also, in Europe, the Corporation has issued guarantees to third parties and on behalf of third parties for maximum undiscounted future
payments totalling $20.3. These guarantees mainly relate to commitments under financial guarantees for car rental agreements and on behalf
of retailers in Sweden. Guarantees on behalf of retailers in Sweden comprise items such as guarantees towards retailers’ car washes and
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 80 of 81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 27, 2014 and April 28, 2013
(in millions of US dollars, except share and stock option data)
store inventory, in addition to guarantees towards suppliers of electricity and heating. The carrying amount and fair value of the guarantee
commitments recognized in the consolidated balance sheet as at April 27, 2014 were not significant.
30.
SEGMENTED INFORMATION
The Corporation operates convenience stores in the United States, Europe and Canada. It essentially operates in one reportable segment, the
sale of goods for immediate consumption, road transportation fuel and other products mainly through corporate stores and franchise
operations. The Corporation operates its convenience store and road transportation fuel retailing chain under several banners, including
Circle K, Statoil, Couche-Tard and Mac’s. Revenues from external customers fall mainly into three categories: merchandise and services, road
transportation fuel and other.
Information on the principal revenue classes as well as geographic information is as follows:
External customer revenues(a)
Merchandise and services
Road transportation fuel
Other
Gross profit
Merchandise and services
Road transportation fuel
Other
US
$
4,818.9
15,493.3
14.7
20,326.9
1,575.8
796.1
14.7
2,386.6
Europe
$
1,046.8
8,824.9
2,784.8
12,656.5
437.4
928.8
384.6
1,750.8
Canada
$
2,081.5
2,890.6
1.1
4,973.2
689.3
163.5
1.1
853.9
2014
Total
$
7,947.2
27,208.8
2,800.6
37,956.6
2,702.5
1,888.4
400.4
4,991.3
US
$
4,548.6
14,872.6
6.6
19,427.8
1,505.9
782.5
6.6
2,295.0
Europe
$
866.1
7,537.9
2,668.6
11,072.6
359.6
719.1
339.8
1,418.5
Canada
$
2,181.7
2,860.8
0.5
5,043.0
733.0
162.6
0.5
896.1
2013
Total
$
7,596.4
25,271.3
2,675.7
35,543.4
2,598.5
1,664.2
346.9
4,609.6
Total long-term assets(b)
2,862.2
3,769.9
591.2
7,223.3
2,678.3
3,861.0
635.6
7,174.9
(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.
31.
SUBSEQUENT EVENTS
Acquisition
On June 23, 2014, the Corporation acquired, from Garvin Oil Company, 15 company-operated stores operating in South Carolina, United
States. The Corporation owns the land and buildings for all sites. Since the Corporation has not completed its fair value assessment of the
assets acquired, the liabilities assumed and goodwill for this transaction, its preliminary purchase price allocation is not presented.
Dividends
During its July 7, 2014 meeting, the Corporation’s Board of Directors (the “Board”) declared a dividend of CA$0.04 per share to shareholders
on record as at July 16, 2014 and approved its payment for July 30, 2014.
Term revolving unsecured operating credit D
On May 16, 2014, the Corporation increased the maximum amount of this credit facility form $1,275.0 to $1,525.0. All other conditions related
to this agreement remain unchanged.
Annual Report © 2014 Alimentation Couche-Tard Inc.
Page 81 of 81
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