201520152015
Annual Report
Annual Report
Annual Report
Table of Contents
People and Places ................................................................................................................................ Page 2
Performance Highlights ....................................................................................................................... Page 3
A Hunger for Sustainable Growth ...................................................................................................... Page 4
Alain Bouchard, Founder & Executive Chairman of the Board
Delivering Results That Matter ........................................................................................................... Page 7
Brian Hannasch, President & Chief Executive Officer
Management’s Discussion & Analysis ............................................................................................ Page 12
Management’s Report ........................................................................................................................ Page 44
Independent Auditor’s Report .......................................................................................................... Page 46
Consolidated Financial Statements ................................................................................................. Page 48
People and Places
As of April 26, 2015, Couche-Tard’s network comprised 7,848 convenience stores throughout North
America, including 6,404 stores offering road transportation fuel. About 80,000 people are employed
throughout its network and service offices in North America.
In Europe, Couche-Tard operates a broad retail network across Scandinavia, Poland, the Baltics and
Russia, which comprised 2,230 stores as at April 26, 2015, 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. Including employees at Statoil-branded franchise stations, about 19,000 people
work in its retail network, terminals and service offices across Europe.
In addition, about 4,700 stores are operated by independent operators under the Circle K banner in 12 other
countries or regions worldwide (China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia,
Mexico, the Philippines, the United Arab Emirates and Vietnam) which brings to more than 14,700 the
number of sites in Couche-Tard’s network..
International
4,600
Europe
2,258
2014
~13,100
Sites
North
America
6,241
International
4,700
2015
>14,700
Sites
North
America
7,848
Europe
Europe
2,230
2015
~100,000
People
North
America
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 2 of 82
Performance Highlights
Growth of Same-Store Merchandise Revenues:
Growth of Same-Store Road Transportation Fuel Volumes:
US: 3.9%*
Europe: 2.0%
Canada: 3.4%
US: 3.4%*
Europe: 2.4%
Canada: -0.1%
Merchandise and
Service Gross Profit**
Road Transportation
*
Fuel Gross Profit**
Adjusted EBITDA
Adjusted Diluted
Earnings Per Share
$2,899.8
$2,236.6
$2,699.3
+$200.5
+7.4%
$1,888.4
+$348.2
+18.4%
$1,590.9
$1,913.0
+$322.1
+20.2%
$1.35
$1.80
+$0.45
+33.3%
FY2014
FY2015
FY2014
FY2015
FY2014
FY2015
FY2014
FY2015
Return on Capital
Employed (ROCE)
***
16.2%
13.3%
Return on Equity
***
Adjusted Net
Interest-Bearing
Debt/Adjusted
EBITDAR***
24.9%
2.44
22.6%
2.17
Adjusted Free
Cash Flows
$857.8
$1,037.6
+$179.8
+21.0%
FY2014
FY2015
FY2014
FY2015
FY2014
FY2015
FY2014
FY2015
All dollar figures are in USD millions, except per-share amounts which are in USD.
*
Includes results for The Pantry stores since the acquisition date.
** Adjusted for the negative impact from the translation of our European and Canadian operations into US dollars.
*** These ratios are presented on a pro forma basis following the acquisition of The Pantry.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Alain Bouchard
Founder & Executive Chairman of the Board
Development is in the DNA of this corporation. Since starting out with a single store in 1980, the dream has
always been of creating a genuinely big network of convenience and fuel retail locations.
A Hunger for Sustainable Growth - the Strategic View
From that first store, our network has grown to include more than 10,000
corporate stores and almost 100,000 people, spanning two continents and
serving around six million customers every day. Even further afield, licensing
takes our brands to over a dozen more countries and to customers around
the world. Our business is no longer small - but there is still ample room for
further growth. We have built a reputation for smart, disciplined acquisitions,
spotting the right opportunities and striking the right deals at the right price.
As Executive Chairman of the Board, continued, sustainable network
development is my primary focus.
In the convenience and fuel retail industry, the landscape can vary
significantly from country to country and from continent to continent. In the
U.S., the convenience store sector is fragmented and in a consolidation
phase. We continue to actively participate in this process through our
acquisitions, through gaining customers from competitors including when
they close their sites, through newly constructed sites and through growing
A Kangaroo Express-branded store from
The Pantry, part of the Couche-Tard family
our customer base by improving our own offering.
In Europe and in Canada, the convenience store sector has been dominated
by a few major players, including integrated oil companies and regional
refiners. Some of those companies are selling, or are expected to sell, their
retail assets. We continually look out for the right investment opportunities
that might come up as a result.
Robust Finances Fuel Growth
In Fiscal 2015, our strong cash flows - from excellent results - enabled us to
carry on the rapid reduction in our debt levels. We improved our return on
capital employed, bringing it to 16.2% at the end of the fiscal year - up from
12.6% following the acquisition of Statoil Fuel & Retail in 2012. Couche-Tard
is in robust financial health. That in turn enables us to continue the organic
growth of our network and to be on the lookout for interesting investment
opportunities.
A newly-constructed site under the
Circle K banner in Tampa, Florida.
In March we acquired The Pantry, a leading convenience store operator in the southeastern United States
and one of the country’s largest independently operated convenience store chains. The Pantry operates
nearly 1,500 stores in 13 states, mostly under the “Kangaroo Express” brand. Days after closing on The
Pantry deal, we entered into an agreement with A/S Dansk Shell to acquire their Danish retail business
(comprising 315 service stations, their commercial fuel business and their aviation fuel business in
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 4 of 82
Denmark). This transaction is currently subject to the standard regulatory approvals and closing conditions,
though we expect it to close before the end of Fiscal 2016.
In Vilnius, capital of Lithuania, we have for the first time opened a “standalone” (non-fuel) convenience store.
This pilot store, opened in February 2015, will be operated for at least a year before any conclusions are
drawn - but the initial performance is encouraging.
This year we also entered into agreements to license our Circle K brand in
two new countries: Costa Rica in Central America and Egypt in the Middle
East, taking the total number of countries touched by the Circle K brand to
14.
In last year’s report we declared that we would further increase our focus on
the construction of new sites and the relocation and reconstruction of
existing sites as well as the acquisition of individual stores. In Fiscal 2015 we
acquired 32 company-operated stores through distinct transactions and
completed the construction, relocation or reconstruction of 72 stores - not
just reaching our target of 80-100 stores but slightly exceeding it, delivering
a significant increase over the previous year.
Customers enjoying a break outside our first
standalone convenience store in Europe
Altogether (including multiple-site acquisitions) a total of 1,655 corporate
stores have been added to our network in Fiscal 2015. 52 new stores were
built and 1,603 corporate stores were acquired in North America and in Europe.
Focus on Customers On-The-Go
In addition to acquiring new sites and enhancing existing ones, the
sustainable growth of our business relies on our ability to react to pressures
and opportunities from our customers, suppliers, partners and in the wider
markets in which we operate. In sales we focus on key categories including
food, coffee, cold beverages, fuel and car wash for customers on-the-go.
The evidence shows that we have developed excellent teams with the right
expertise and technology to recognize and respond to the trends in our
markets. It also shows that we are out-performing much of the opposition -
but our hunger for growth means we will never be complacent; we will never
stop looking for improvement.
Looking ahead
Modern machines that are cost-efficient to
maintain and easy for customers to use:
Simply Great Coffee for customers on the go
Completing the integration of The Pantry’s operations into the Couche-Tard
family is a clear priority for Fiscal 2016. In Europe, working with the competition authorities to achieve a
successful conclusion to the A/S Dansk Shell acquisition will attract a similar focus.
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 a significant improvement in our return on capital employed (ROCE) by 290 basis points in
just one year. Looking ahead, we see opportunities to further improve our investment grade rating.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Across the entire business we will continue to be vigilant for further opportunities for growth. We will ensure
we retain our reputation for smart choices and financial discipline, while further accelerating our efforts in
store construction, reconstruction and individual store acquisitions.
Alain Bouchard
Founder & Executive Chairman
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 6 of 82
Brian Hannasch
President & Chief Executive Officer
We aspire to be the world’s preferred destination for convenience and fuel. In the past year we have moved
closer to this goal, expanding our network through both acquisitions and newly-constructed sites, while
continually improving our business. In Fiscal 2015 our teams have successfully created more products and
services that are relevant for our customers. At the same time they have sharpened our retail execution,
improved our operational efficiency and reduced our costs.
Delivering Results That Matter
We have delivered our seventh straight year of record earnings. Our net earnings have increased to
$933.5 million, up 14.9% over Fiscal 2014. Excluding non-recurring items, net earnings for Fiscal 2015
would have been approximately $1,022.0 million, or $1.80 per share on a diluted basis - an increase of
33.4% compared with Fiscal 2014. On an adjusted basis, EBITDA for Fiscal 2015 was $1,913.0 million, an
increase of $322.1 million or 20.2% compared with Fiscal 2014, including a contribution from acquisitions
(net of acquisition costs recorded to earnings) of $43.0 million.
We continue to actively work in all our operations to identify and implement synergies and realize cost
reduction opportunities. In parallel we are working to improve our top line, simultaneously driving up same-
store merchandising figures and increasing fuel volumes. Further opportunities are promising, as we have
established effective processes for both controlling costs and sharing best practices across our network. We
maintain our goal of annual synergies with Europe of up to $200 million before the end of December 2015.
Impressive Potential
With the recent acquisition of The Pantry in the South-Eastern United
States, we look at the year ahead with ongoing enthusiasm. This latest
addition to our worldwide network has impressive potential for contributing
to the growth of the Corporation. We are already working on the integration
of The Pantry’s stores into our existing network. We anticipate that this
integration effort will result in the realization of cost reductions of at least
$85.0 million over the next 24 months. In addition, we expect to grow fuel
the exchange and
this region
and convenience sales
implementation of best practice from both companies as well as through
improved supply conditions.
through
in
Fueling Performance
Business unit leader Tom Graven-Lauritzen
filling up with miles™ brand fuel after
launching it in his Polish market
In Fiscal 2015, average retail prices for road transportation fuel decreased. In this environment, we
successfully delivered an increase in fuel volumes and margins across both North America and Europe. We
owe this to solid performance on fuel retailing in the U.S. and the further expansion of our proprietary
miles™ fuel brand in Europe, where it continues to gain traction and perform well against the market. Today
our miles™ brand fuel can be found in seven of our eight European markets: Norway, Sweden, Denmark
and the Baltic countries plus the most recent national roll-out in Poland, just after the close of Fiscal 2015.
Today we have a total of 1,688 stations selling miles™ with international approval from our customers and
increased market share right across our Scandinavia and Central & Eastern Europe business areas.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Overall, premium fuels were our fastest-growing product this year. Increased
customer demand is driven by car manufacturers’ fuel recommendations on
their newer models, as well as the general desire of car lovers for the benefits
of premium fuels, including improved fuel consumption, extended engine life
and enhanced performance.
We are also proud to report that, at the same time, our Swedish and Danish
fuel customers have responded enthusiastically to the conversion in Fiscal
2015 of nearly all our unmanned service stations in these Scandinavian
markets to our own INGO brand. Customer retention through the rebranding
program was 100% and in fact INGO has already attracted additional
customers.
Performing in Convenience
In addition to growing fuel volumes, our same-store merchandise sales delivered solid results on both
continents, led by the U.S. which delivered its strongest results since 2007. More than ever, time-starved
customers are seeking an enjoyable and efficient experience. We seek to give them exactly what they are
looking for - and more. Making our customers’ lives easier means offering them the products and services
they want in a friendly and efficient manner that fits into their busy day. We prioritize our strategy, tactics and
investment to make this a reality. With around 10,000 stores and almost 100,000 employees, each
improvement we make has the potential for making a profound impact on the nearly six million customers
who visit us every day, as well as on our suppliers, partners and other stakeholders.
Fiscal 2015 has been characterized by strong contributions from organic growth in merchandise sales. One
great example has been the roll out of our Simply Great Coffee program in Europe, delivering black coffee,
espressos, lattés and cappuccinos as well as rich hot chocolate. This range of high quality drinks is based
on a unique blend of beans for each country and uses fresh milk. The program is generating positive results,
with the product ranked #1 in brand awareness in six of the seven business
units measured. In total we have rolled out Simply Great Coffee to 700
stations in Europe and we are piloting it at 71 locations in North America.
In Europe, the revival of the hot dog is going strong. In Fiscal 2015 we sold
12 million more hot dogs at Statoil stations than we did in Fiscal 2013. That
represents a 26% growth. The key driving factor is our permanent product
promotion, known as our “Coin offer”, which was introduced in 2013. Through
this promotion, customers can always come into one of our stores to
purchase “a hot dog for a coin” at Statoil. Taking a cue from this successful
product, we are currently testing a new Real Hot Dog concept in two
European markets. This concept is built around the idea of a gourmet hot
dog offer with specialized toppings and is already delivering encouraging
results.
Brian Hannasch (left) with foodvenience
store manager James Clark in Texas, USA
In North America, we are also responding to our customers’ desire for a fresh and convenient food offer. In
Texas we took our “foodvenience” (food prepared on-site + convenience) offer to the next level, opening our
first purpose-built store in February, which will act as the prototype for our future foodvenience
developments. This type of innovation, along with the hard work of our teams, gives us great organic growth
in our merchandise and service sales.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Merchandising has Stepped Up
We have seen that focusing on a step-change in merchandising has improved our performance in Europe.
We have refreshed floor plans and improved product placement across the network. We have expanded
product categories, increased focus on private label products and introduced new hardware and marketing
materials, as well as implementing best practices in category management training and merchandising
principles. Together these efforts have delivered a 3.2% growth in Gross Margin and a 2.0% growth in
same-store merchandise sales for the European network.
Private Label
In the last year we have accelerated our efforts in private label. We have spent time, energy and effort to
ensure that the products we develop - carrying the Circle K brand in the U.S., the Made To Go and Statoil
brands in Europe and in Canada the Favorites brand (or Nos Favoris in French) - are at the right quality and
a reasonable price. Our intent is to use private label products to build customer loyalty and increase brand
equity while increasing profits.
Since May 2014 in North America we have introduced 111 private label items. Our efforts are paying off on
both continents, where private label is one the fastest growing of our merchandise product categories. We
will continue to focus on developing this segment.
Private label products offer customers good value while generating attractive margins
Corporate Responsibility
Our most important corporate responsibility is to provide our products and services in a socially,
environmentally and ethically responsible way. However, corporate responsibility does not end there. In the
Couche-Tard family we look to create win-win situations in all the communities and markets in which we
operate.
To ensure we can focus our efforts and make a real impact, we are concentrating on three areas of
Corporate Responsibility: people, community and the environment.
Annual Report 2015 Alimentation Couche-Tard Inc.
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People
We are committed to providing a safe and stimulating work environment for
all our people. We strive to offer competitive compensation, training and
opportunities for advancement to every employee. In both North America and
Europe we have our own academies dedicated to improving our people’s
business skills. We invest almost 2.5% of our total annual salaries to the
training and professional development of our employees.
Community
This year, our community efforts resulted in over US$20 million in donations
for organizations ranging from national bodies like the American Red Cross
to local centers for homeless children and programs for youth at risk.
In addition to our larger programs and campaigns, great effort goes into
supporting dozens of organizations at a smaller scale in both North America
and Europe. These initiatives have spanned in-store campaigns, the sale of
charity calendars and other articles, and a wide range of fundraising
activities. We are proud of, and grateful for, the energy, enthusiasm and commitment our people show as
they actively engage in these causes across the globe.
Circle K has supported Capstone Adaptive
Learning & Therapy Centers for more than
25 years. This year sees the 5th annual
Circle K 5k Run/Walk benefitting Capstone
at Pensacola Beach, FL.
You can find out much more about our community efforts, including details of a wide range of individual
programs in ten countries, at www.couche-tard.com.
Environment
In North America we are in the fifth year of a continuing journey to reduce
energy consumption in our stores, offices and other facilities. Over the last
three years we have driven down electrical consumption by 11.4% or almost
one billion kilowatt hours. In Fiscal 2016 one of our focus areas will be to
ensure all our programs - including those in The Pantry and our European
operations - are aligned and working towards the same goals.
Our current efforts in this area across all our operations include increasing
the use of LED lighting solutions, occupancy sensors, lighting controllers and
HVAC optimizers. These infrastructure improvements are accompanied by
employee engagement programs aimed at raising awareness of energy
consumption. Actions as simple as turning off unused lights can add up to
significant savings. Together, these initiatives allow us to reduce both
maintenance and energy costs without negatively impacting the experience we offer our customers.
Increasing use of long-life and LED lighting
creates a bright solution for welcoming
customers and reducing emissions
Couche-Tard is one of the largest retail blenders of renewable fuels in North America including Ethanol
blending and biodiesel. Biofuels are part of our customer offer across all our European markets, while in our
larger markets, including Sweden and Norway, we also provide charging stations for electric cars.
You can find out much more about our environmental efforts, including details of a wide range of
environmental partnerships and other programs, at www.couche-tard.com.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Outlook
As the global economies slowly continue to improve in the U.S. and fuel prices decline globally, consumers
will find more disposable income in their pockets. To be better positioned to compete for our share of our
customers’ wallets in the coming year, we will further strengthen our efforts to meet their demand for a “more
modern convenience store”. This means continually improving our range of products, the ease of shopping
and the selection of fresh foods we offer. It means identifying and exploiting the right network growth
opportunities, and it means motivating and empowering our family of 100,000 people that engage with our
customers every day so they can deliver the best possible customer experience.
This is our recipe for increasing traffic, capturing new customers and bringing our existing customers back
more often.
Brian Hannasch
President & Chief Executive Officer
Annual Report 2015 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 26, 2015. 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 2015 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 http://corpo.couche-tard.com/.
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 14, 2015, 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 2015 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 countries while we have a significant presence in
Poland.
As of April 26, 2015, our network comprises 7,848 convenience stores throughout North America, including 6,404 stores
offering road transportation fuel. Our North-American network consists of 14 business units, including ten in the United States
covering 41 states and four in Canada covering all ten provinces. About 80,000 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 2,230 stores as at April 26, 2015, the majority of which offer road transportation fuel and
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 12 of 82
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, lubricants and chemicals and we operate key fuel terminals
and fuel depots in six countries. Including employees at Statoil branded franchise stations, about 19,000 people work in our
retail network, terminals and service offices across Europe.
In addition, about 4,700 stores are operated by independent operators under the Circle K banner in 12 other countries or
regions worldwide (China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia, Mexico, the Philippines, the
United Arab Emirates and Vietnam) which brings the total network to over 14,700 stores.
Our mission is to offer our customers a quick and outstanding service by developing a customized and friendly relationship
with them while still finding ways to pleasantly surprise them on a daily basis. In this regard, we strive to meet the demands
and needs of our customers based on their regional requirements. To do this, we offer food and beverage items, road
transportation fuel and other high-quality products and services designed to meet or exceed customers’ demands in a clean
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 investment in our people and 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 and 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.
No matter the 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 potentially in the acquisition of integrated oil companies’ retail assets,
it has to be noted that organic contribution has played an important role in the recent 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 and The Pantry . 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 (4)
Ruble (2)
12-week periods ended
52-week periods ended
April 26, 2015
April 27, 2014 April 26, 2015
April 27, 2014
April 28, 2013
0.7993
0.1277
0.1174
0.1471
0.2673
1.0980
-
-
0.0170
0.9045
0.1659
0.1542
0.1845
0.3289
1.3770
-
0.3989
0.0280
0.8708
0.1454
0.1333
0.1656
0.2959
1.2431
-
0.3790
0.0213
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
Annual Report 2015 Alimentation Couche-Tard Inc.
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Period end
Canadian Dollar
Norwegian Krone
Swedish Krone
Danish Krone
Zloty
Euro
Litas
Ruble
As at April 26, 2015
As at April 27, 2014
0.8217
0.1286
0.1159
0.1457
0.2697
1.0875
-
0.0196
0.9061
0.1681
0.1537
0.1858
0.3301
1.3870
0.4018
0.0281
(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, 2015 to April 30, 2015 for the 12-week period ended April 26, 2015, from May 1st, 2014 to April 30, 2015 for the 52-week period
ended April 26, 2015, 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 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 1st, 2014, Latvia changed its currency from the Lats to the 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 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.
(4) On January 1st, 2015, Lithuania changed its currency from the Litas to the Euro. The average rate is for the period from May 1st, 2014 to December 31, 2014 for the 52-week period
ended April 26, 2015, from February 1st, 2014 to April 30, 2014 for the 12-week period ended April 27, 2014 and from May 1st, 2013 to April 30, 2014 for the 52-week period ended
April 27, 2014. Calculated using the average exchange rate at the close of each day for the stated period.
On January 1st, 2015, Lithuania changed its official currency from the Litas to the Euro. Results from the Lithuanian operations
prior to the conversion date were converted using the Litas exchange rates as described in footnote 4 above while results
following this date were converted using Euro exchange rates. Balance sheet items from Lithuanian operations as at
April 26, 2015 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 otherwise indicated, 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 regarding changes 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 into US dollars of our Canadian, European and corporate operations results.
Fiscal 2015 Overview
Net earnings amounted to $933.5 million for fiscal 2015. Fiscal 2015 results were affected by restructuring and integration
costs of $30.3 million in connection with the acquisition of The Pantry and restructuring activities in Europe, a net foreign
exchange loss of $22.7 million, a non-recurring $41.8 million tax expense related to an internal reorganization, an $11.0 million
loss from the disposal of our aviation fuel business, a curtailment gain on defined benefits pension plans obligation of
$2.6 million as well as a negative goodwill of $1.2 million. On the other hand, the results of fiscal 2014 included a negative
goodwill of $48.4 million, a non-recurring income tax recovery of $28.2 million, a net foreign exchange loss of $10.1 million, a
$6.8 million impairment charge over a non-operational lubricant plant in Poland, as well as a $0.9 million curtailment gain on
pensions plan obligation.
Excluding these items as well as acquisition costs from both periods, fiscal 2015 net earnings would have been approximately
$1,022.0 million ($1.80 per share on a diluted basis) compared with $766.0 million ($1.35 per share on a diluted basis) for
fiscal 2014, an increase of $256.0 million, or 33.4%. This significant growth in net earnings is attributable to higher road
transportation fuel margins, to the continuous strong organic growth from merchandise and services and road transportation
fuel, to the contribution from acquisitions as well as to the decrease in financial expenses following the repayment of a
significant portion of our debt during the first three quarters. These items, which contributed to the growth in net earnings, were
partially offset by the negative net impact from the translation of revenues and expenses from our Canadian and European
operations into the US dollar and by a higher tax rate.
Acquisition of The Pantry Inc. (“The Pantry”)
On March 16, 2015, we acquired 100% of the outstanding shares of The Pantry, a leading convenience store operator in the
southeastern United States and one of the largest independently operated convenience store chains in the United States,
through an all-cash transaction valued at $36.75 per share or $850.7 million. During the 52-week periods ended
April 26, 2015, we recorded to earnings transaction costs of $0.9 million, in connection with this acquisition.
The Pantry operates approximately 1,500 convenience stores in 13 states under select banners, including Kangaroo
Express®, its primary operating banner. The Pantry's stores offer a broad selection of merchandise and other services
Annual Report 2015 Alimentation Couche-Tard Inc.
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designed to appeal to the convenience needs of its customers. In addition, the majority of its stores dispense road
transportation fuel.
We financed this transaction using our existing credit facilities, for which the limit has been increased for the purpose of this
transaction. More details on our credit facilities are available under the section “Liquidity and Capital Resources”.
Our results for the 12 and 52-week periods ended April 26, 2015 include those of The Pantry for the period beginning
March 16, 2015 and ending April 26, 2015. Our consolidated balance sheet as of April 26, 2015 includes The Pantry’s balance
sheet at that date. As the acquisition closed shortly before the end of fiscal 2015 and given the size of the transaction, we have
not completed our fair value assessment of the assets acquired, the liabilities assumed and the goodwill for this transaction.
Consequently, the balance sheet for The Pantry includes the net book values from The Pantry’s accounting records at that
date, adjusted to be in line with the Corporation’s accounting policies. The difference between the purchase price and the net
book value related to this acquisition was included in goodwill in the preliminary purchase price allocation and the fair values of
assets acquired and liabilities assumed will be adjusted during fiscal 2016.
Synergies and cost reduction initiatives
We are already working on realizing the identified synergies and cost reduction opportunities. We estimate achieving a
minimum of $85.0 million1 in cost reductions over the 24 months following the acquisition in addition to growing in-store sales
and fuel volumes in this geographic area through the improvement of our operations and a better brand combination by
sharing our business awareness, each company’s best practices and better supply conditions.
Since the acquisition, we have already taken actions that should allow us to record cost reductions we estimate to
approximately $45.0 million before income taxes on an annual basis. These cost reductions should mainly reduce operating,
selling, administrative and general expenses as thus are mainly related to the reduction of overhead costs.
The Pantry’s debt
On March 16, 2015, we repaid The Pantry’s senior secured term loan for an amount of $250.6 million, comprising the principal
amount, accrued interests and related fees. Additionally, on April 15, 2015, we redeemed 35% of The Pantry’s senior
unsecured notes at 108% of the nominal value and the remaining 65% of the senior unsecured notes were redeemed on
April 16, 2015 at 114% of their nominal value for a total amount of $280.0 million plus accrued interests. These premiums
include contractual prepayment penalties. The term loan repayment and redemption of the bonds have been made using our
existing credit facilities.
The decision to repay The Pantry’s senior unsecured notes was made in light of Couche-Tard’s financing conditions being
significantly more favorable.
Outstanding transactions
On March 17, 2015, we entered into an agreement with A/S Dansk Shell, to acquire their retail business, comprising
315 service stations, their commercial fuel business and their aviation fuel business. The service stations are located in
Denmark and comprise 225 full service-stations, 75 unmanned automated fuel stations and 15 truck stops. Of the 315 sites
140 are owned by Shell, 115 are leased from third parties and 60 are dealer-owned. We are already operating a strong
network in Denmark and we believe this new acquisition would complement it very well. This transaction is subject to standard
regulatory approvals and closing conditions and we expect it will close before the end of fiscal year 2016. We expect to finance
this transaction with our available cash and existing credit facilities.
1 As our previously stated goal 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 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 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
integrate Pantry’s system with ours. An important change in these facts and assumptions could significantly impact our synergies and cost reductions estimate as well as the timing of the
implementation of our different initiatives.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Statoil Fuel & Retail
Period results
Our results for the 12 and 52-week periods ended April 26, 2015 include those of Statoil Fuel & Retail for the period beginning
February 1st, 2015 and ending April 30, 2015 and for the period beginning May 1st, 2014 and ending April 30, 2015,
respectively. 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 26, 2015 and April 27, 2014 include
those of Statoil Fuel & Retail for a period of 365 days while our results of the 52-week period ended April 28, 2013 include
those of Statoil Fuel & Retail for a period of 315 days.
Our consolidated balance sheet and store count as of April 26, 2015 include Statoil Fuel & Retail’s balance sheet and store
count as of April 30, 2015, 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, 2015 to July 19, 2015
Statoil Fuel & Retail Balance
Sheet Date (1)
June 30, 2015
12-week period ending July 19, 2015
(1st quarter of fiscal 2016)
12-week period ending October 11, 2015
(2nd quarter of fiscal 2016)
16-week period ending January 31, 2016
(3rd quarter of fiscal 2016)
12-week period ending April 24, 2016
(4th quarter of fiscal 2016)
From July 20, 2015 to October 11, 2015
September 30, 2015
From October 12, 2015 to January 31, 2016
January 31, 2016
From February 1, 2016 to April, 30 2016
April 30, 2016
(1) 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.
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.
During fiscal 2015, we recorded synergies and cost savings we estimated at approximately $71.0 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
$160.0 million, before income taxes, which allows us to exceed the lower range of synergies and cost reduction objectives that
we had set following the acquisition. 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 around the identification and implementation of available synergies and cost reduction opportunities is not over. Our
analysis show that several promising opportunities still exist. Our teams continue to work actively on various projects which,
along with the implementation and optimization of new information systems, should allow us to achieve our goal of annual
synergies of up to $200.0 million before the end of December 20151.
1 As our previously stated goal 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 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 optimize our newly implemented ERP system in Europe. An important change in these facts and assumptions could significantly impact our synergies and cost reductions estimate as well
as the timing of the implementation of our different initiatives.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Network growth
Completed transactions
On June 23, 2014, we acquired 13 company operated-stores and two non-operating sites in South Carolina, United States
from Garvin Oil Company. We own the land and buildings for all sites.
On October 8, 2014, we acquired 55 stores in Illinois and Indiana, United States from Tri Star Marketing Inc. Among these, 54
are company-operated and one is operated by an independent operator. We own the land and buildings for 54 sites and lease
the land and own the building for the remaining site. Through this transaction, we also acquired three biodiesel blending
facilities.
In addition, during fiscal 2015, we acquired 32 additional company-operated stores through distinct transactions.
Available cash was used for these acquisitions.
Store construction
We completed the construction, relocation or reconstruction of 72 stores during fiscal 2015. As of April 26, 2015, 26 stores
were under construction and should open in the upcoming quarters.
Consequently, in fiscal year 2015, we were able to add to or improve our existing network with a total of 104 stores through the
construction of new stores, the relocation or reconstruction of existing stores and the acquisition of single stores. This
represents a significant increase compared with the previous fiscal year and exceeded our objective of 80 to 100 stores
established for fiscal 2015.
Transaction subsequent to fiscal year-end
On June 2, 2015, subsequently to year-end, we acquired from Cinco J, Inc., Tiger Tote Food Stores, Inc., and their affiliates,
21 company-operated stores in the US States of Texas, Mississippi and Louisiana. We own the land and buildings for 18 sites
and lease the land and own the buildings for the remaining three sites. As part of this agreement we also acquired 141 dealer
fuel supply agreements and five development properties in addition to acquiring customer relations for 124 dealer sites.
Summary of changes in our stores network during the fourth quarter and fiscal 2015
The following table presents certain information regarding changes in our stores network over the 12-week period ended
April 26, 2015 (1):
12-week period ended April 26, 2015
Type of site
Number of sites, beginning of period
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Conversions into Company-operated stores
Conversions into affiliated stores
Number of sites, end of period
Number of automated service-stations included in the
period end figures (6)
Company-
operated (2)
6,288
1,515
16
(36)
6
(2)
7,787
904
CODO (3)
573
-
1
(7)
(3)
(5)
559
-
DODO (4)
Franchised and
other affiliated (5)
542
56
3
(6)
(2)
7
600
26
Total
8,547
1,571
44
(84)
-
-
1,144
-
24
(35)
(1)
-
1,132
10,078
-
930
Annual Report 2015 Alimentation Couche-Tard Inc.
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The following table presents certain information regarding changes in our stores network over the 52-week period ended
April 26, 2015 (1):
Type of site
Number of sites, beginning of period
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Conversions into Company-operated stores
Conversions into affiliated stores
Number of sites, end of period
52-week period ended April 26, 2015
Company-
operated (2)
CODO (3)
DODO (4)
Franchised and
other affiliated (5)
6,236
1,603
52
(119)
21
(6)
7,787
609
-
1
(21)
(13)
(17)
559
529
57
23
(25)
(7)
23
600
Total
8,499
1,660
183
(264)
-
-
1,125
-
107
(99)
(1)
-
1,132
10,078
(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, about 4,700 stores are operated by independent operators under the Circle K banner in 12 other countries or
regions worldwide (China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia, Mexico, the Philippines,
Vietnam and the United Arab Emirates) which brings to more than 14,700 the number of sites in our network.
Credit Rating on our Canadian dollar denominated unsecured notes
In August 2014 and in September 2014, Moody's Corporation and Standard & Poor Rating Services, credit rating agencies,
both improved the credit rating on our Canadian dollar denominated unsecured notes, raising it to Baa2 and BBB, respectively,
in recognition of our ability to generate strong cash flows and of the efforts we have made to exceed our debt reduction
objective following our acquisition of Statoil Fuel & Retail in June 2012.
Disposal of the aviation fuel business
On December 31, 2014, we closed the sale of our aviation fuel business through a share purchase agreement pursuant to
which BP Global Investments Ltd. acquired 100% of all issued and outstanding shares of Statoil Fuel & Retail Aviation AS for
total proceeds of $107.4 million including an amount of $91.4 million for intercompany debt assumed by the buyer and of
which $12.3 million is receivable as at April 26, 2015. We recognized a preliminary loss on disposal of $11.0 million as well as
a preliminary curtailment gain on defined benefits pension plans obligation of $2.6 million in relation to this sale transaction.
The disposal also resulted in a $1.9 million cumulated loss on translation adjustments being reclassified to earnings and
included in the loss on disposal. These preliminary figures are subject to change until final closing adjustments. The total
impact of this transaction on net earnings of fiscal 2015 was a net loss of approximately $6.8 million (net of income taxes of
$1.6 million).
Restructuring and integration costs
As part of our cost reduction initiatives and the search for synergies aimed at improving our efficiency, we made the decision
to proceed with the restructuring of certain activities of our European operations. As such, an additional restructuring provision
of $8.3 million was recorded during fiscal 2015 in line with our plans and the budget process.
Additionally, in connection with the acquisition of The Pantry, we incurred integration costs for an amount of $22.0 million.
Those costs are mainly related to severance and termination payments and provisions and the remaining is related to bonus
and retention payments.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Hedge of the net investment in foreign operations
As of October 13, 2014, we designated our entire US dollar denominated long-term debt as a foreign exchange hedge of our
net investment in our US operations. Accordingly, since the designation, the gains or losses arising from the translation of the
US dollar denominated debt are recognized in Other comprehensive income, counterbalancing gains and losses arising from
translation of our net investment in our US operations. Should a portion of the hedging relationship become ineffective, the
ineffective portion would be recorded in the consolidated statement of earnings under Financial expenses. During fiscal 2015,
an exchange loss of $15.4 million before income taxes was recorded to Other comprehensive income in line with this hedge.
Dividends
During its July 14, 2015 meeting, the Corporation’s Board of Directors declared a quarterly dividend of CA5.5¢ per share for
the fourth quarter of fiscal 2015 to shareholders on record as at July 23, 2015 and approved its payment for August 6, 2015.
This is an eligible dividend within the meaning of the Income Tax Act of Canada.
During fiscal 2015, the Board declared total dividends of CA19.0¢ per share.
Issuance of Canadian dollar denominated senior unsecured notes
On June 2, 2015, subsequent to the end of fiscal 2015, we proceeded with the issuance of Canadian dollar denominated
senior unsecured notes totaling CA$700.0 million with a coupon rate of 3.6% and maturing on June 2, 2025. Interest is
payable semi-annually on June 2nd and December 2nd of each year. The net proceeds from the issuance were mainly used to
repay a portion of our term revolving unsecured operating credit facility.
Cross-currency interest rate swaps
Between June 12, 2015 and June 19, 2015, following the issuance of notes detailed above, we entered into cross-currency
interest rate swap agreements for a total notional amount of CA$700.0 million, allowing us to synthetically convert a portion of
our Canadian dollar denominated debt into US dollars.
Receive – Notional
CA$175.0
CA$175.0
CA$100.0
CA$100.0
CA$100.0
CA$50.0
Receive – Rate
3.6%
3.6%
3.6%
3.6%
3.6%
3.6%
Pay – Notional
US$142.2
US$142.7
US$81.2
US$81.2
US$81.2
US$41.3
Pay – Rate
3.8099%
3.8650%
3.8540%
3.8700%
3.8570%
3.8230%
Maturity
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
Outstanding shares and stock options
As at July 10, 2015, Couche-Tard had 148,101,840 Class A multiple voting shares and 419,265,459 Class B subordinate
voting shares issued and outstanding. In addition, as at the same date, Couche-Tard had 2,514,271 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 the 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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 19 of 82
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 fuel, aviation fuel (until December 31, 2014),
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 labor, 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 26, 2015 - 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.
Summary analysis of consolidated results for the fourth quarter of fiscal 2015
The following table highlights certain information regarding our operations for the 12-week periods ended April 26, 2015 and
April 27, 2014. This data includes results from The Pantry, starting from March 16, 2015, the acquisition date.
(In millions of US dollars, unless otherwise stated)
12-week period ended
April 26, 2015
12-week period ended
April 27, 2014
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 of same-store road transportation fuel volume (3):
United States
Europe
Canada
7,285.5
186.2
129.5
34.1%
33.4%
42.1%
32.5%
5.2%
3.0%
3.8%
15.46
8.55
6.18
6.4%
3.7%
1.5%
8,954.1
154.3
145.1
34.3%
33.1%
42.3%
32.4%
4.4%
2.5%
1.6%
14.85
10.54
5.86
2.8%
3.2%
1.7%
Change %
(18.6)
20.6
(10.8)
(0.2)
0.3
(0.2)
0.1
4.1
(18.9)
5.5
Includes other revenues derived from franchise fees, royalties and rebates on some purchases made by franchisees and licensees as well as merchandise wholesale.
(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. Includes results for The Pantry
stores since the acquisition date.
(3) For company-operated stores only. Includes results for The Pantry stores since the acquisition date.
(4) Total road transportation fuel.
Revenues
Our revenues were $7.3 billion in the fourth quarter of fiscal 2015, down $1.7 billion, a decrease of 18.6%, mainly attributable
to lower road transportation fuel average selling prices, to the negative net impact from the translation of revenues of our
Annual Report 2015 Alimentation Couche-Tard Inc.
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Canadian and European operations into US dollars and to the sale of our aviation fuel business. Those items contributing to
the reduction in total revenues were partly offset by 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.
More specifically, the growth of merchandise and service revenues for the fourth quarter of fiscal 2015 was $222.3 million.
Excluding the negative net impact from the translation of our European and Canadian operations into US dollars, which was
approximately $105.0 million, consolidated merchandise and service sales increased by $327.3 million or 18.2%. This
increase is attributable to the contribution from acquisitions which amounted to approximately $245.0 million as well as to
strong organic growth. Same-store merchandise revenues increased by 5.2% in the United States, by 3.8% in Canada and by
3.0% in Europe. Our performance is attributable to our dynamic merchandising strategies, our competitive offer as well as to
our expanded fresh food offer which is attracting more customers in our stores.
Road transportation fuel revenues decreased by $1.4 billion in the fourth quarter of fiscal 2015. Excluding the negative net
impact from the translation of revenues from our Canadian and European operations into US dollars, which amounted to
approximately $476.0 million, road transportation fuel revenues decreased by $914.4 million or 14.2%. This decrease was
mainly attributable to lower road transportation fuel average selling prices, which had a negative impact of approximately
$1.7 billion as well as to the impact on our European wholesale business of the non-renewal of low return fuel supply
contracts. These items contributing to the reduction in road transportation fuel revenues were partly offset by the contribution
from acquisitions amounting to approximately $563.0 million, by the contribution from our recently opened stores as well as by
organic growth. Same-store road transportation fuel volume increased by 6.4% in the United States, by 3.7% in Europe and by
1.5% in Canada due to amongst other things, the perfecting of our pricing strategies as well as the contribution of “milesTM” in
Europe.
The following table shows the average selling price of road transportation fuel in our markets, starting with the first quarter of
the fiscal year ended April 27, 2014. Average prices for Europe are also impacted by the translation into US dollars.
Quarter
52-week period ended April 26, 2015
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
52-week period ended April 27, 2014
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
1st
3.59
101.53
121.64
3.51
100.72
114.53
2nd
3.36
95.18
117.00
3.45
103.25
117.05
3rd
2.54
73.99
96.27
3.24
107.49
113.11
4th
2.34
66.51
93.63
3.47
104.11
118.74
Weighted
average
2.89
83.53
106.59
3.41
104.38
115.63
Other revenues decreased by $500.5 million in the fourth quarter of fiscal 2015. This decrease is mainly attributable to the
disposal of our aviation fuel business, to the negative net impact from the translation of revenues of our European operations
into US dollars, as well as to the decrease in marine fuel and heating oil revenues due to lower selling prices and volume.
Gross profit
In the fourth quarter of fiscal 2015, the consolidated merchandise and service gross margin was $688.6 million, an increase of
$73.9 million compared with the corresponding quarter of fiscal 2014. Excluding the negative net impact from the translation of
our European and Canadian operations into US dollars, which was approximately $40.0 million, consolidated merchandise and
service gross margin increased by $113.9 million or 18.5%, attributable to the contribution from acquisitions which amounted
to approximately $84.0 million as well as to organic growth. In the United States, the gross margin was up 0.3% from 33.1% to
33.4% and up 0.1% in Canada from 32.4% to 32.5% while it decreased by 0.2% in Europe to 42.1%. Overall, this performance
reflects changes in the product-mix, the improvements we brought to our supply terms as well as our merchandising strategy
in line with market competitiveness and economic conditions within each market.
In the fourth quarter of fiscal 2015, the road transportation fuel gross margin for our company-operated stores in the
United States increased by 0.61 ¢ per gallon, from 14.85 ¢ per gallon last year to 15.46 ¢ per gallon this year. In Canada, the
gross margin increased to CA6.18¢ per litre compared with CA5.86 ¢ per litre for the fourth quarter of fiscal 2014. In Europe,
the total road transportation fuel gross margin was 8.55 ¢ per litre for the fourth quarter of fiscal 2015, a decrease of 1.99 ¢ per
litre compared with 10.54 ¢ per litre for the fourth quarter of fiscal 2014. This decrease is entirely attributable to the impact of
the translation of our European results into US dollars. In local currencies, the margin in Europe was higher than that of the
fourth quarter of fiscal 2014. 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 27, 2014, were as follows:
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 21 of 82
(US cents per gallon)
Quarter
52-week period ended April 26, 2015
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 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
1st
23.08
5.27
17.81
19.42
4.99
14.43
2nd
3rd
24.17
5.03
19.14
21.56
5.04
16.52
24.93
4.33
20.60
17.02
4.79
12.23
4th
15.46
4.12
11.34
14.85
4.98
9.87
Weighted
average
21.74
4.63
17.11
18.11
4.94
13.18
As demonstrated by the table above, road transportation fuel margin in the United States are volatile from a quarter to another.
Expenses related to electronic payment modes and associated volatility are not as significant in Europe and in Canada.
Operating, selling, administrative and general expenses
For the fourth quarter of fiscal 2015, operating, selling, administrative and general expenses increased by 1.6% compared with
the fourth quarter of fiscal 2014 and increased by 2.2% 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 the net impact of foreign exchange translation
Decrease from divestment of the aviation fuel business
Increase from revision of estimates and other non-recurring expenses
Decrease from lower electronic payment fees, excluding acquisitions
Acquisition costs recognized to earnings of fiscal 2015
Remaining variance
12-week period ended
April 26, 2015
1.6%
11.0%
(10.2%)
(2.4%)
1.9%
(1.0%)
0.1%
2.2%
The remaining variance for the fourth quarter of fiscal 2015 is mainly due to normal inflation, as well as to higher expenses
needed to support our strong organic growth. We continue to favor tight control of costs throughout the organization while
making sure to maintain the quality of service we offer to our customers.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and adjusted EBITDA
During the fourth quarter of fiscal 2015, EBITDA increased by 6.3% compared with the corresponding period of the previous
fiscal year, reaching $319.2 million.
Excluding the restructuring and integration costs, the loss on disposal of the aviation fuel business as well as the negative
goodwill from both comparable periods, the fourth quarter of fiscal 2015 adjusted EBITDA increased by $41.9 million or 14.0%
compared with the corresponding period of the previous fiscal year, totalling $341.9 million. Net of acquisition, restructuring
and integration costs recorded to earnings, acquisitions contributed approximately $27.0 million to adjusted EBITDA, while the
variation in exchange rates had a negative net impact of approximately $28.0 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, amortization and impairment of property and equipment and other assets
EBITDA
Remove:
Restructuring and integration costs
Loss on disposal of the aviation fuel business
Negative goodwill
Adjusted EBITDA
12-week period ended
April 26, 2015
129.5
45.5
15.6
128.6
319.2
22.2
0.6
(0.1 )
341.9
April 27, 2014
145.1
(13.8 )
26.9
142.0
300.2
-
-
(0.2 )
300.0
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 22 of 82
Depreciation, amortization and impairment of property and equipment and other assets
For the fourth quarter of fiscal 2015, depreciation, amortization and impairment expense decreased by $13.4 million mainly
due to the net impact from the translation of our European and Canadian operations into US dollars, partially offset by the
impact of 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 2015 shows net financial expenses of $15.6 million, a decrease of $11.3 million compared with the
fourth quarter of fiscal 2014. Excluding the net foreign exchange gain of $3.5 million and the net foreign exchange loss of
$8.7 million recorded respectively in the fourth quarter of fiscal 2015 and in the fourth quarter of fiscal 2014, the net financial
expenses increased by $0.9 million. This increase is mainly attributable to the increase of our long term debt following the
acquisition of The Pantry , including the interest expense on The Pantry’s debt we assumed until its repayment as well as fees
related to the reimbursement of The Pantry’s senior secured term loan. The net foreign exchange gain of $3.5 million is mainly due
to the impact of the exchange rate fluctuations on certain bank balances denominated in US dollars in our European divisions.
Income taxes
The fourth quarter of fiscal 2015 shows an income tax expense of $45.5 million, corresponding to a tax rate of 26.0%,
compared with an income tax recovery of $13.8 million for the corresponding quarter of the previous year and a tax rate of
29.3% for the third quarter of fiscal 2015. 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.
Excluding those items, the income tax rate for the fourth quarter of fiscal 2014 would have been 11.0%. The remaining
increase is attributable to the higher proportion of our taxable income recorded in the United States, where the tax rates are
higher and to the reimbursement of a large portion of our external debt before the acquisition of The Pantry.
Net earnings
We closed the fourth quarter of fiscal 2015 with net earnings of $129.5 million, compared with $145.1 million for the fourth
quarter of the previous fiscal year. Diluted net earnings per share stood at $0.23, compared with $0.25 for the previous year.
The translation of revenues from our Canadian and European operations into the US dollars had a negative net impact of
approximately $8.6 million on net earnings of the fourth quarter of fiscal 2015.
Excluding from the fourth quarter of fiscal 2015 earnings restructuring and integration costs of $22.2 million, the net foreign
exchange gain of $3.5 million, acquisition costs of $1.2 million, the $0.6 million loss from the disposal of our aviation fuel
business as well as the negative goodwill of $0.1 million and excluding from the fourth quarter of fiscal 2014 earnings the non-
recurring income tax recovery, the net foreign exchange loss, the negative goodwill as well as acquisition costs, the fourth
quarter of fiscal 2015 net earnings would have been approximately $142.0 million, compared with $123.0 million for the fourth
quarter of fiscal 2014, an increase of $19.0 million or 15.4%. Adjusted diluted net earnings per share were $0.25 for the fourth
quarter of fiscal 2015 compared with $0.22 for the corresponding period of fiscal 2014, an increase of 13.6%.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 23 of 82
Summary analysis of consolidated results for fiscal 2015
The following table highlights certain information regarding our operations for the 52-week periods ended April 26, 2015,
April 27, 2014 and April 28, 2013. The
those of
Statoil Fuel & Retail for the period beginning June 20, 2012 and ending April 28, 2013. This data includes results from
The Pantry, starting from March 16, 2015, the acquisition date.
the 52-week period ended April 28, 2013
include
figures
for
(In millions of US dollars, unless otherwise stated)
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 and integration costs
Loss on disposal of the aviation fuel business
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)
2015
52-weeks
2014
5,311.0
990.4
1,974.4
8,275.8
14,599.0
7,111.0
2,571.9
24,281.9
16.0
1,955.7
0.5
1,972.2
34,529.9
1,748.4
408.2
649.2
2,805.8
1,093.3
870.9
164.4
2,128.6
16.0
317.1
0.5
333.6
5,268.0
3,376.9
30.3
11.0
(2.6 )
(1.2 )
530.4
1,323.2
933.5
33.9%
32.9%
41.2%
32.9%
3.9%
2.0%
3.4%
21.74
10.33
6.35
5,118.9
8,428.5
2,987.6
3.4%
2.4%
(0.1% )
1.65
1.64
4,821.7
1,048.4
2,082.7
7,952.8
15,493.3
8,824.9
2,890.6
27,208.8
14.7
2,784.7
1.1
2,800.5
37,962.1
1,575.8
434.2
689.3
2,699.3
796.1
928.8
163.5
1,888.4
14.7
384.6
1.1
400.4
4,988.1
3,419.9
-
-
(0.9 )
(48.4 )
583.2
1,034.3
812.2
33.9%
32.7%
41.4%
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
2013
4,551.8
867.5
2,182.9
7,602.2
14,872.6
7,537.9
2,860.8
25,271.3
6.6
2,668.6
0.5
2,675.7
35,549.2
1,505.9
357.1
733.0
2,596.0
782.5
719.1
162.6
1,664.2
6.6
339.8
0.5
346.9
4,607.1
3,237.1
34.0
-
(19.4 )
(4.4 )
521.1
838.7
572.8
34.1%
33.1%
41.2%
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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 24 of 82
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 (10)
Returns:
Return on equity (11)
Return on capital employed (12)
April 26, 2015
April 27, 2014
April 28, 2013
10,837.8
3,074.6
3,892.6
0.39 : 1
1.18 : 1(9)
2.17 : 1(9)
24.9%(9)
16.2%(9)
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)
(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. Aviation operations were sold in December 2014.
(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 Kroner. Includes results from The Pantry stores since the acquisition date.
(4) For company-operated stores only. Includes results from The Pantry stores since the acquisition date.
(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 on a pro forma basis. It includes Couche-Tard’s results for fiscal year ended April 26, 2015 as well as The Pantry’s results for the 52-week period ended
April 26, 2015. The Pantry’s earnings and balance sheet figures have been adjusted to make their presentation in line with Couche-Tard’s policies. Given the size and the timing of
the transaction, we have not completed the fair value assessment of the assets acquired, the liabilities assumed and the goodwill for this transaction. Consequently, the pro forma
ratio has not been adjusted for fair value adjustments.
(10) 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.
(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: 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.
(12) 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 2015 Alimentation Couche-Tard Inc.
Page 25 of 82
Revenues
Our revenues were $34.5 billion in fiscal 2015, down $3.4 billion, a decrease of 9.0%, mainly attributable to lower road
transportation fuel average retail prices, to the negative net impact from the translation of revenues of our Canadian and
European operations into US dollars and to the sale of our aviation fuel business. Those items contributing to the reduction in
total revenues were partly offset by the continued growth in same-store merchandise revenues and road transportation fuel
volume in both North America and Europe as well as by the contribution from acquisitions.
More specifically, the growth of merchandise and service revenues for fiscal 2015 was $323.0 million. Excluding the negative
net impact from the translation of our European and Canadian operations into US dollars, which was approximately
$253.0 million, consolidated merchandise and service sales increased by $576.0 million or 7.2%. This increase is attributable
to the contribution from acquisitions which amounted to approximately $304.0 million as well as to organic growth. Same-store
merchandise revenues increased by 3.9% in the United States, by 3.4% in Canada and by 2.0% in Europe. Those increases in
same-store merchandise sales are attributable to our dynamic merchandising strategies, our competitive offer as well as to our
expanded fresh food offer which is attracting more customers into our stores.
Road transportation fuel revenues decreased by $2.9 billion in fiscal 2015. Excluding the negative net impact from the
translation of revenues from our Canadian and European operations into US dollars which amounted to approximately
$971.0 million, road transportation fuel revenues decreased by $2.0 billion or 7.2%. This decrease was mainly attributable to
the lower average selling price of road transportation fuel which generated a decrease in revenues of approximately
$3.4 billion, partially offset by acquisitions which contributed to an increase in revenues of approximately $854.0 million as well
as by organic growth. Same-store road transportation fuel volume increased by 3.4% in the United States, by 2.4% in Europe,
while it decreased by 0.1% in Canada due to amongst other things, the perfecting of our pricing strategies as well as the
contribution of “milesTM” in Europe.
The following table shows the average selling price of road transportation fuel in our markets, starting with the first quarter of
the fiscal year ended April 27, 2014. Average prices for Europe are also impacted by the translation into US dollars.
Quarter
52-week period ended April 26, 2015
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
52-week period ended April 27, 2014
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
1st
3.59
101.53
121.64
3.51
100.72
114.53
2nd
3.36
95.18
117.00
3.45
103.25
117.05
3rd
2.54
73.99
96.27
3.24
107.49
113.11
4th
2.34
66.51
93.63
3.47
104.11
118.74
Weighted
average
2.89
83.53
106.59
3.41
104.38
115.63
Other revenues decreased by $828.3 million in fiscal 2015, mostly attributable to the disposal of the aviation fuel business, the
negative net impact from the translation of revenues of our European operations into US dollars and to the decrease in marine
fuel and heating oil revenues due to lower selling prices and volumes.
Gross profit
In fiscal 2015, the consolidated merchandise and service gross margin was $2.8 billion, an increase of $106.5 million
compared with fiscal 2014. Excluding the negative net impact from the translation of our European and Canadian operations
into US dollars, which was approximately $94.0 million, consolidated merchandise and service gross margin increased by
$201.0 million or 7.4%. This increase is attributable to the contribution from acquisitions which amounted to approximately
$103.0 million and to organic growth. In the United States, the gross margin was up 0.2% to 32.9% while it decreased by 0.2%
in both Canada and Europe to reach 32.9% and 41.2% respectively. Overall, this performance reflects changes in the product-
mix, the improvements we brought to our supply terms as well as our merchandising strategy in line with market
competitiveness and economic conditions within each market.
The road transportation fuel gross margin for our company-operated stores in the United States increased by 3.63 ¢ per
gallon, from 18.11 ¢ per gallon during fiscal 2014 to 21.74 ¢ per gallon in fiscal 2015. In Canada, the gross margin increased
to CA6.35 ¢ per litre for fiscal 2015 compared with CA5.98 ¢ per litre for fiscal 2014. In Europe, the total road transportation
fuel gross margin was 10.33 ¢ per litre for fiscal 2015, a decrease of 0.61 ¢ per litre compared with 10.94 ¢ per litre for
fiscal 2014. This decrease is entirely attributable to the impact of the translation of our European results into US dollars. In
local currencies, the margin in Europe was higher than that of fiscal 2014. The road transportation fuel gross margin of our
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 26 of 82
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 27, 2014, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 26, 2015
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 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
1st
23.08
5.27
17.81
19.42
4.99
14.43
2nd
3rd
24.17
5.03
19.14
21.56
5.04
16.52
24.93
4.33
20.60
17.02
4.79
12.23
4th
15.46
4.12
11.34
14.85
4.98
9.87
Weighted
average
21.74
4.63
17.11
18.11
4.94
13.18
As demonstrated by the table above, road transportation fuel margins in the United States are volatile from one quarter to
another. Expenses related to electronic payment modes and associated volatility are not as significant in Europe and in
Canada.
Operating, selling, administrative and general expenses
For fiscal 2015, operating, selling, administrative and general expenses decreased by 1.3% compared with fiscal 2014, but
increased by 0.8% if we exclude certain items, as demonstrated by the following table:
Total variance as reported
Subtract:
Decrease from the net impact of foreign exchange translation
Increase from incremental expenses related to acquisitions
Decrease from divesture of the aviation fuel business
Increase from revision of estimates for provisions and other non-recurring expenses
Decrease from lower electronic payment fees, excluding acquisitions
Acquisition costs recognized to earnings of fiscal 2015
Remaining variance
(1.3%)
(5.2%)
3.3%
(0.7%)
0.6%
(0.2%)
0.1%
0.8%
We continue to favor tight control of costs throughout the organization while being sure to maintain the quality of service we
offer to our customers.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and adjusted EBITDA
During fiscal 2015, EBITDA increased by 14.3% compared with the previous fiscal year, reaching $1,875.5 million.
Excluding restructuring and integration costs, the loss on disposal of the aviation fuel business, the curtailment gain on
pension plan obligations and the negative goodwill from both comparable periods, fiscal 2015 adjusted EBITDA increased by
$322.1 million or 20.2% compared with the corresponding period of the previous fiscal year, reaching $1,913.0 million. Net of
acquisition, restructuring and integration costs recorded to earnings, acquisitions contributed approximately $43.0 million to
adjusted EBITDA, while the variation in exchange rates had a negative net impact of approximately $68.0 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, amortization and impairment of property and equipment and other assets
EBITDA
Remove:
Restructuring and integration costs
Loss on disposal of the aviation fuel business
Curtailment gain on pension plan obligation
Negative goodwill
Adjusted EBITDA
52-weeks periods ended
April 26, 2015
933.5
April 27, 2014
812.2
306.2
105.4
530.4
1,875.5
30.3
11.0
(2.6 )
(1.2 )
1,913.0
134.2
110.6
583.2
1,640.2
-
-
(0.9 )
(48.4 )
1,590.9
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 27 of 82
Depreciation, amortization and impairment of property and equipment and other assets
For fiscal 2015, depreciation, amortization and impairment expense decreased by $52.8 million. Excluding the impairment
charge of $6.8 million on a non-operational lubricant production plant recorded in fiscal 2014, depreciation, amortization and
impairment expense decreased by $46.0 million. This decrease is mainly attributable to the net impact from the translation of
our European and Canadian operations into US dollars, partially offset by the impact of investments made through
acquisitions, replacement of equipment, addition of new stores and ongoing improvement of our network.
Net financial expenses
For fiscal 2015, we recorded net financial expenses of $105.4 million compared with $110.6 million for fiscal 2014. Excluding
the net foreign exchange loss of $22.7 million and the net foreign loss of $10.1 million recorded respectively in fiscal 2015 and
in fiscal 2014, fiscal 2015 posted net financial expenses of $82.7 million, down $17.8 million compared with fiscal 2014. This
decrease is mainly attributable to the reduction of our long-term debt following repayments made on our revolving and
acquisition facilities in the first half of fiscal 2015. The net foreign exchange loss of $22.7 million is mainly due to the impact of
the exchange rate fluctuations on certain inter-company balances and loans.
Income taxes
For fiscal 2015, the income tax rate is 24.7% compared with a rate of 14.2% for the previous fiscal year. Fiscal 2015 was
affected by an internal reorganization which increased the income tax expense by $41.8 million. Had this reorganization not
been implemented, the income tax rate would have been approximately 21.3%. 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. Excluding those non-recurring items, the income tax
rate for fiscal 2014 would have been 15.5%.The remaining increase is attributable to the higher proportion of our results
coming from the United States, where the tax rates are higher and to the reimbursement of a portion of our debt before the
acquisition of The Pantry.
Net earnings
We closed fiscal 2015 with net earnings of $933.5 million, compared with $812.2 million for the previous fiscal year, an
increase of $121.3 million. Diluted net earnings per share stood at $1.64 compared with $1.43 the previous year. The
translation of earnings from our Canadian and European operations into the US dollars had a negative net impact of
approximately $28.0 million on net earnings of fiscal 2015.
Excluding from net earnings of fiscal 2015 the loss on disposal of our aviation fuel business, restructuring and integration
costs, the non-recurring tax expense of $41.8 million, the curtailment gain, the negative goodwill, the net foreign exchange loss
as well as acquisition costs and excluding from net earnings of fiscal 2014 the negative goodwill, the net foreign exchange
loss, the non-recurring income tax recovery, the impairment charge on a non-operational lubricant plant in Poland, the
curtailment gain as well as acquisition costs, fiscal 2015 net earnings would have stood at approximately $1,022.0 million, up
$256.0 million or 33.4% compared to fiscal 2014, while fiscal 2015 diluted earnings per share would have stood at
approximately $1.80, an increase of 33.3%.
Financial Position as at April 26, 2015
As shown by our indebtedness ratios included in the “Summary analysis of consolidated results for fiscal 2015” section and
our net cash provided by operating activities, our financial position is excellent.
Our total consolidated assets amounted to $10.8 billion as at April 26, 2015, an increase of $292.8 million over the balance as
at April 27, 2014. This increase stems primarily from the overall rise in assets resulting from the acquisitions we made during
fiscal 2015 partly offset by the negative net impact of the appreciation of the US dollar compared to the functional currencies of
our operations in Canada and Europe at the balance sheet date as well as by the sale of our aviation fuel business.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 28 of 82
During the 52-week period ended on April 26, 2015, we recorded a return on capital employed of 16.2%1, taking into
consideration the recent acquisition of The Pantry.
Significant balance sheet variations are explained as follows:
Accounts receivable
Accounts receivable decreased by $531.6 million, from $1.7 billion as at April 27, 2014 to $1.2 billion as at April 26, 2015. The
decrease mainly stems from the net negative impact of exchange rates variation at the balance sheet date, which was
approximately $294.0 million, lower road transportation fuel selling prices, as well as from the disposal of the aviation fuel
business. The decrease was partly offset by the increase resulting from acquisitions.
Goodwill
Goodwill increased by $728.6 million, from $1.1 billion as at April 27, 2014 to $1.8 billion as at April 26, 2015, mainly as a
result of the acquisition of The Pantry . As the acquisition was closed shortly before the end of fiscal 2015 and given the size of
the transaction, we have not completed our fair value assessment of the assets acquired, the liabilities assumed and the
goodwill for this transaction. Consequently, the balance sheet for The Pantry includes the net book values from The Pantry’s
accounting records at that date as adjusted to be in line with the Corporation’s accounting policies. The difference between the
purchase price and the net book value related to this acquisition was included in goodwill in the preliminary purchase price
allocation and the fair values of assets acquired and liabilities assumed will be adjusted during fiscal 2016. The increase in
goodwill related to The Pantry acquisition was partly offset by the negative net impact of the exchange rates variation at the
balance sheet date, which was approximately $145.0 million.
Long-term debt, bank loans and current portion of long-term debt
Long-term debt and bank loans increased by $468.2 million, from $2.6 billion as at April 27, 2014 to $3.1 billion as at
April 26, 2015. Long term debt increased by approximately $1.5 billion as a result of the acquisition of The Pantry on
March 16, 2015 which was financed entirely through debt, including assumed finance lease obligations. This increase was
partly offset by the impact of the weakening of the Canadian dollar against the United States dollar, which was approximately
$126.0 million and by the debt repayments of approximately $900.0 million we made using available cash during fiscal 2015.
Shareholders’ Equity
Shareholders’ equity amounted to $3.9 billion as at April 26, 2015, down $70.1 million compared with April 27, 2014, mainly
due to other comprehensive loss associated with translation adjustments and to dividends declared, partly offset by net
earnings of fiscal 2015. For the 52-week period ended April 26, 2015, we recorded a return on equity of 24.9%2 taking into
consideration the recent acquisition of The Pantry.
Liquidity and Capital Resources
Our principal sources of liquidity are our net cash provided by operating activities and borrowings available under our term
revolving unsecured credit facilities. Our principal uses of cash are to repay our debt, finance our acquisitions and capital
expenditures, pay dividends, as well as to 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.
Our revolving credit facilities are detailed as follows:
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. The ratio is presented on a pro forma basis and it includes
Couche-Tard’s results for the four quarters of fiscal year ending April 26, 2015 and The Pantry’s results for the 52-week period ended April 26, 2015, as adjusted to be in line with the
Corporation’s accounting policies.
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.
The ratio is presented on a pro forma basis and it includes Couche-Tard’s results for the four quarters of fiscal year ending April 26, 2015 and The Pantry’s results for the 52-week period
ended April 26, 2015, as adjusted to be in line with the Corporation’s accounting policies.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 29 of 82
US dollar term revolving unsecured operating credit D, maturing in December 2018 (“operating credit D”)
On May 16, 2014, we amended operating credit D to increase the maximum amount available from $1,275.0 million to
$1,525.0 million, an increase of $250.0 million over the limit as of April 27, 2014. On March 16, 2015, we amended this credit
facility once again in order to increase the maximum amount available from $1,525.0 million to $2,525.0 million, to extend its
maturity from December 2017 to December 2018 and to include an accordion feature allowing the Corporation to have access
to an additional $350.0 million, if required. No upfront fees were incurred in connection with those amendments. No other
terms were changed significantly.
As at April 26, 2015, $1,837.2 million of our revolving unsecured operating credit D had been used. As at the same date, the
effective interest rate was 1.04% and standby letters of credit in the amount of CA$2.3 million and $54.4 million were
outstanding.
During the month of June 2015, subsequent to the end of the fiscal year, we repaid an amount of $561.0 million on our term
revolving unsecured operating credit D using the net proceeds of our Canadian dollar denominated senior unsecured notes
issuance.
Term revolving unsecured operating credit E, maturing in December 2016 (“operating credit E”)
Credit agreement consisting of a revolving unsecured facility of an initial maximum amount of $50.0 million with an initial term
of 50 months. Operating credit E 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 26, 2015, operating credit E was unused.
Available liquidities
As at April 26, 2015, a total of approximately $283.0 million was available under our operating credits 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 $859.0 million through our available cash and revolving unsecured operating credit
agreements.
As at July 10, 2015, following the partial repayment made on our operating credit D, a total of approximately $1.3 billion was
available under our operating credits. Thus, at the same date, we had access to more than $1.8 billion through our available
cash and operating credits.
Selected Consolidated Cash Flow Information
(In millions of US dollars)
Operating activities
Net cash provided by operating activities
Investing activities
Business acquisitions
Purchase of property and equipment and other assets, net of proceeds from the disposal of
property and equipment and other assets
Proceeds from sale of the aviation fuel business
Restricted cash
Net cash used in investing activities
Financing activities
Net increase in other debt
Repayment of the acquisition credit facility
Repayment of debt assumed on business acquisition
Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs
Net decrease in other debt
Cash dividends paid
Issuance of shares upon exercise of stock-options
Net cash used in financing activities
Credit rating
Standard and Poor’s
Moody’s (1)
(1) Moody’s credit rating for Couche-Tard’s senior unsecured notes
52-week periods ended
April 26,
April 27,
2015
2014
Variation
1,714.5
1,429.3
285.2
(929.4 )
(159.6 )
(769.8 )
(562.9 )
94.6
(1.1 )
(1,398.8 )
1,043.7
(555.0 )
(529.1 )
-
(18.0 )
(86.9 )
3.8
(141.5 )
BBB
Baa2
(459.0 )
-
20.6
(598.0 )
448.0
(1,648.0 )
-
285.6
(16.7 )
(64.6 )
9.4
(986.3 )
BBB-
Baa3
(103.9 )
94.6
(21.7 )
(800.8 )
595.7
1,093.0
(529.1 )
(285.6 )
(1.3 )
(22.3 )
(5.6 )
844.8
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 30 of 82
Operating activities
During fiscal 2015, net cash from our operations reached $1,714.5 million, up $285.2 million compared with fiscal year 2014,
mainly due to higher net earnings.
Investing activities
During fiscal 2015, investing activities were primarily for acquisitions for an amount of $929.4 million as well as for net
investment in property and equipment and other assets which amounted to $562.9 million. These items were partly offset by
the proceeds from the sale of the aviation fuel business, which amounted to $94.6 million.
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 construction of new stores, the relocation and
reconstruction of existing stores, the ongoing improvement of our network as well as for information technology.
Financing activities
During fiscal 2015, we repaid the outstanding balance of $555.0 million on our acquisition facility related to the acquisition of
Statoil Fuel and Retail, of which $360.0 million was drawn from our operating credit D and $195.0 million was made using
available cash. During the same period, an amount of $1.4 billion was drawn from our operating credit D for the acquisition of
The Pantry and the repayment of its long term debt. This increase was offset by repayments totalling approximately
$900.0 million on our operating credit D using available cash, for a net increase of approximately $1.0 billion. During
fiscal 2015, we also paid $86.9 million in dividends.
Contractual Obligations and Commercial Commitments
Set out below is a summary of our material contractual obligations as at April 26, 2015 (1):
Long-term debt (2)
Finance lease obligations
Operating lease obligations
Total
2016
2017
2018
2019
2020
Thereafter
Total
0.5
38.6
384.0
423.1
2.4
50.8
359.5
412.7
(in millions of US dollars)
300.5
29.7
332.7
662.9
2,238.1
26.9
299.0
2,564.0
450.3
24.9
264.6
739.8
550.1
148.4
1,122.9
1,821.4
3,541.9
319.3
2,762.7
6,623.9
(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 26, 2015, our long-term totalled $3,074.6 million, the details of which are as follow:
i. Canadian dollar denominated senior unsecured notes totalling $1,064.2 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%.
ii. US dollar denominated borrowings of $1,837.2 million under our revolving unsecured operating credits denominated in
US dollars, maturing in December 2018. The effective interest rate was 1.04% as at April 26, 2015.
iii. Other long-term debts of $173.2 million, including obligations related to building and equipment under finance leases.
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 2015 Alimentation Couche-Tard Inc.
Page 31 of 82
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 26, 2015, the total future lease payments under such agreements are approximately $1.8 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 $13.4 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 and 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 26, 2015
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, changes in the 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
Net earnings
Net earnings per share
52-week period ended April 26, 2015
4th
3rd
12 weeks 16 weeks 12 weeks 12 weeks 12 weeks 16 weeks
8,954.1 11,094.6
9,190.3
7,285.5
9,107.8
8,946.3
2nd
1st
3rd
2nd
12 weeks
9,011.0
1st
12 weeks
8,902.4
52-week period ended April 27, 2014
4th
314.7
128.6
186.1
4.4
15.6
129.5
536.8
510.0
492.0
296.3
420.5
457.3
443.4
152.4
384.4
7.7
41.2
248.1
122.7
387.3
5.1
18.6
286.4
126.7
365.3
4.7
30.0
269.5
142.0
154.3
186.0
234.5
3.9
26.9
145.1
4.6
21.8
182.3
129.3
328.0
5.5
50.2
229.8
125.9
317.5
8.7
11.7
255.0
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 32 of 82
(In millions of US dollars except for per share data)
Quarter
Weeks
Basic
Diluted
52-week period ended April 26, 2015
4th
3rd
3rd
12 weeks 16 weeks 12 weeks 12 weeks 12 weeks 16 weeks
$0.32
$0.32
$0.48
$0.47
$0.44
$0.44
$0.51
$0.50
$0.26
$0.25
$0.23
$0.23
2nd
1st
2nd
12 weeks
$0.41
$0.40
1st
12 weeks
$0.45
$0.45
52-week period ended April 27, 2014
4th
The volatility of road transportation fuel gross margin, mostly in the United States, and seasonality both have an impact on the
variability of our quarterly net earnings. With that said, the majority of our operating income is derived from merchandise and
service sales.
Analysis of consolidated results for the fiscal year ended April 27, 2014
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 to 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 $350.6 million or 4.6%. Excluding the
negative net 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 $441.9 million. This increase was 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 were 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
fiscal 2014, 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 our in-store offerings 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
was 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 delivered encouraging results and was a nice
contributor to this fiscal 2014 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 net
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
Weighted
average
3.47
104.11
118.74
3.61
103.80
115.65
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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 33 of 82
Gross profit
In fiscal 2014, the consolidated merchandise and service gross margin was $2 699,3 million, an increase of $103.3 million or
4.0% compared with fiscal 2013. Excluding the negative net 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 $114.3 million. This increase was 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 0.2% in Europe to 41.4%.
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
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 showed 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 pricing
strategies aimed at improving 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 and 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, road transportation fuel margins in the United States are volatile from one quarter to
another. Expenses related to electronic payment modes and associated volatility are not as significant in Europe and in
Canada.
Operating, selling, administrative and general expenses
For fiscal 2014, operating, selling, administrative and general expenses increased by 5.6% compared with fiscal 2013, but
increased by only 0.1% 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
5.6%
6.6%
(0.1%)
0.3%
(1.2%)
(0.1%)
0.1%
The remaining variance for fiscal 2014 came 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.
In Europe, fiscal 2014 expense level was still affected by the implementation of a new IT infrastructure and the rollout of an
ERP system.
Earnings before interests, taxes, depreciation, amortization and impairment (EBITDA)
and adjusted EBITDA
During fiscal 2014, EBITDA increased by 19.2% compared with the previous fiscal year, reaching $1,640.2 million.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 34 of 82
Excluding restructuring costs, 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 with
fiscal year 2013, reaching $1,590.9 million. Net of acquisition costs recorded to earnings, acquisitions contributed
approximately $153.0 million to adjusted EBITDA, while the variation in exchange rates had a negative net impact of
approximately $11.0 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
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, the replacement of
equipment, addition of new stores and ongoing improvement of our network.
Net financial expenses
For fiscal 2014, we recorded net financial expenses of $110.6 million compared with $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 with
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 with 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 with an income tax rate of 16.8% for fiscal 2013.
Net earnings
We closed fiscal 2014 with net earnings of $812.2 million, compared with $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 with $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 net 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, 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
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non-recurring income tax recovery in connection with 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, fiscal 2014 net earnings would have stood at approximately $766.0 million, up $145.0 million or 23.3%, while fiscal 2014
diluted earnings per share would have stood at approximately $1.35, an increase of 21.6%.
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
its
Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As at April 26, 2015, our management, following its assessment, certifies the design and operating effectiveness of disclosure
controls and procedures.
is accumulated and communicated
the Corporation’s management,
law, and
including
to
We undertake ongoing evaluations of the effectiveness of our internal controls over financial reporting and implement control
enhancements, when appropriate. As at April 26, 2015, 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 on 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, 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
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 primarily 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.
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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, Georgia, Arizona, Texas, West
Virginia and Maryland, 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.
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;
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- 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.
Changes in Accounting Standards
Revised Standards
Levies
On April 28, 2014, we adopted the new interpretation IFRIC 21, “Levies”. The interpretation identifies the obligating event for
the recognition of a liability for a levy imposed by a government and provides guidance on when to recognize the liability. The
adoption of this interpretation did not have a significant impact on the Corporation's consolidated financial statements.
Recently issued accounting standards not yet implemented
Classification and measurement of financial assets and financial liabilities
In July 2014, the IASB completed IFRS 9, “Financial Instruments” in its three-part project to replace 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. The Standard includes requirements for recognition and measurement, impairment, derecognition
and general hedge accounting. The standard is effective for fiscal years beginning on or after January 1st, 2018. The
Corporation will assess, in due course, the impact of this standard on its consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, “Revenue from Contracts with Customers”, to specify how and when to recognize
revenue as well as requiring the provision of more informative and relevant disclosures. IFRS 15 supersedes IAS 18,
"Revenue”, IAS 11, “Construction Contracts”, and other revenue related interpretations. This standard is effective for annual
reporting periods beginning on or after January 1st, 2017 with earlier adoption permitted. The Corporation will assess, in due
course, the impact of this standard on its consolidated financial statements.
Presentation of financial statements
In December 2014, the IASB issued amendments to IAS 1, “Presentation of Financial Statements”, to clarify materiality,
aggregation and disaggregation of items presented in the balance sheet, statement of earnings and statement of
comprehensive income as well as order of notes to financial statements. These amendments shall be applied to fiscal years
beginning on or after January 1st, 2016 with earlier adoption permitted. The Corporation will assess, in due course, the impact
of this standard on its consolidated financial statements.
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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 prices 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
prices fluctuations, are factors that could influence road transportation fuel selling price and related gross margin. During
fiscal 2015, road transportation fuel revenues accounted for approximately 70.0% of our total revenue, yet the road
transportation fuel gross margin represented only about 40.0% of our overall gross profits. In fiscal 2015, a change of one cent
per gallon (approximately 0.26 cents per litre) would have resulted in a change of approximately $81.0 million in road
transportation fuel gross profit, with a corresponding impact of approximately $0.10 on earning 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 2015, a variation of 10% in our
expenses associated with electronic payment modes would have had an impact of approximately $0.04 on earning per share
on a diluted basis.
Tobacco Products. Tobacco products represent our largest product category of merchandise and service revenues. For
fiscal 2015, revenues of tobacco products were approximately 41.0% of total merchandise and service revenues. Significant
increases in wholesale cigarette costs, 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 unfavorable 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 vapor reduction systems to capture fuel vapor, 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 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,
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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 should 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.
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 resale 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 related to the creditworthiness and performance of our customers, suppliers and
contract counterparties. As of April 26, 2015, we had outstanding accounts receivable totaling $1,194.8 million. This amount
primarily consists of credit card receivables, vendor rebates due from our suppliers and receivables arising from the sale of
fuel and other products 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.
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
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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.
Exchange Rate. The functional currency of our parent Company 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 26, 2015, all else being equal, a hypothetical variation of 5.0% of the U.S. dollar
against the Canadian dollar would have had a net impact of $85.5 million on other comprehensive income. 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, 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.
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 bear interest at variable rates.
As of April 26, 2015, we carried variable rate debt of approximately $1,839.0 million. Based on the amount of our variable rate
debt as at April 26, 2015, a one percentage point increase in interest rates would decrease our earnings per share by $0.02 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, our cross-currency swap agreements,
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. Effectively, convenience store businesses and other foodservices operators can
be adversely affected by litigation and complaints from customers or government agencies resulting from food quality, illness,
or other health or environmental concerns or operating issues stemming from one or more locations. Lack of fresh food
handling experience among our workforce increases the risk of food borne illness resulting in litigation and reputational
damage. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by
discouraging customers from purchasing fuel, merchandise or food at one or more of our convenience stores. We could also
incur significant liabilities if a lawsuit or claim results in a decision against us. Even if we are successful in defending such
litigation, our litigation costs could be significant, and the litigation may divert time and money away from our operations and
adversely affect our performance or our ability to continue operating branded quick service restaurants under franchise
agreements.
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
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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.
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.
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.
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 of road 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. Additionally, negative publicity or perception surrounding fuel suppliers could
adversely affect their reputations and brand image which may negatively affect our fuel sales and gross profits. Similarly
advanced technology and increased use of “green” automobiles (i.e. those automobiles that do not use petroleum-based fuel
or that run on hybrid fuel sources) could drive down demand for fuel.
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.
Technological changes and scientific developments. Developments regarding climate change and the effects of greenhouse
gas emissions on climate change and the environment may decrease the demand for our major product, petroleum-based
fuel. Attitudes toward our product and its relationship to the environment and the “green movement” may significantly affect our
sales and ability to market our product. New technologies developed to steer the public toward non-fuel dependant means of
transportation may create an environment with negative attitude toward fuel, thus affecting the public’s attitude toward our
major product and potentially having a material effect on our business, financial condition and results of operations. Further,
new technologies developed to improve fuel efficiency or governmental mandates to improve fuel efficiency may result in
decreased demand for petroleum-based fuel, which could have a material effect on our business, financial condition and
results of operation.
Sensitive information – data protection. In the normal course of our business as a fuel and merchandise retailer, we obtain
large amounts of personal data, including credit and debit card information from our customers. While we have invested
significant amounts in the protection of our information technology and maintain what we believe are adequate security
controls over individually identifiable customer, employee and vendor data provided to us, a breakdown or a breach in our
systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless
occur and have a material effect on our reputation, operating results and financial condition. Such a breakdown or breach
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 42 of 82
could also materially increase the costs we incur to protect against such risks. Also, a material failure on our part to comply
with regulations relating to our obligation to protect such sensitive data or to the privacy rights of our customers, employees
and others could subject us to fines or other regulatory sanctions and potentially to lawsuits.
Information technology systems. We depend on information technology systems (“IT systems”) to manage numerous aspects
of our business transactions and to provide information to management. Our IT systems are an essential component of our
business and growth strategies, and a serious disruption to out IT systems could significantly limit our ability to manage and
operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power
loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic
loss of data, security breaches, computer viruses and laws and regulations necessitating mandatory upgrades and timelines
with which we may not be able to comply. Any serious disruption could cause our business and competitive position to suffer
and adversely affect our operating results.
Outlook
During fiscal year 2016, we are looking forward to work on the integration of The Pantry stores into our network and to
materializing associated synergies in addition to continuing our work around value creation in Europe. We will also continue
working at improving and expanding our network, including the construction of new stores and the relocation and
reconstruction of existing stores. We also intend to maintain our ongoing focus on sales, supply terms and operating expenses
while keeping an eye on growth opportunities that may be available in our various markets.
Similar to prior years, we will pay special attention to the reduction of our debt level in order to continue to improve our
financial flexibility and further improve the quality of our credit rating, allowing us to be adequately positioned to realize
potential acquisition opportunities.
Finally, in line with our business model, we intend to continue focusing 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 customers.
July 14, 2015
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 43 of 82
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 26, 2015 and April 27, 2014 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 14, 2015
/s/ Brian Hannasch
Brian Hannasch
President and
Chief Executive Officer
/s/ Raymond Paré
Raymond Paré
Vice-President and
Chief Financial Officer
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 44 of 82
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 26, 2015. The framework on which such evaluation was based is contained in the report entitled Internal Control -
Integrated Framework (2013) 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. On March 16, 2015, the Corporation acquired The Pantry Inc.
(“The Pantry”). Management excluded from its evaluation of the effectiveness of our internal control over financial reporting,
The Pantry’s internal control over financial reporting. The Pantry’s results since the acquisition date are included in the
Corporation’s consolidated financial statements and constituted approximately 17.0% of total consolidated assets as of
April 26, 2015, approximately 2.0% of consolidated revenues and 1.0% of consolidated net earnings for the fiscal year then
ended. Refer to note 4 to the consolidated financial statements for a discussion on this acquisition. Based on this evaluation,
management concluded that Alimentation Couche-Tard Inc.’s internal control over financial reporting was effective as at
April 26, 2015.
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 26, 2015 and have issued their unqualified opinion
thereon, which is included herein.
July 14, 2015
/s/ Brian Hannasch
Brian Hannasch
President and
Chief Executive Officer
/s/ Raymond Paré
Raymond Paré
Vice-President and
Chief Financial Officer
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 45 of 82
Independent Auditor’s Report
To the Shareholders of
Alimentation Couche-Tard Inc.
July 14, 2015
We have completed integrated audits of Alimentation Couche-Tard Inc. and its subsidiaries’ consolidated financial statements for
the fiscal years ended April 26, 2015 and April 27, 2014 and its internal control over financial reporting as at April 26, 2015. Our
opinions, based on our audits, are presented below.
Report on the consolidated financial statements
We have audited the consolidated financial statements of Alimentation Couche-Tard Inc. and its subsidiaries, which comprise the
consolidated balance sheets as at April 26, 2015 and April 27, 2014 and the consolidated statements of earnings, comprehensive
income, changes in shareholders’ equity and cash flows for the fiscal years then ended, 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 audit 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 entity’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 26, 2015 and April 27, 2014 and their financial performance and their cash flows
for the fiscal years then ended 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 26, 2015.
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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 46 of 82
Auditor’s responsibility
Our responsibility is to express an opinion, based on our audit, on whether the Corporation’s internal control over financial
reporting was effectively maintained in accordance with criteria established in Internal Control – Integrated Framework (2013),
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We conducted our audit in accordance with the standard for audits of internal control over financial reporting set out in the
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 considered necessary in the circumstances.
Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include
the internal controls of The Pantry Inc., a recent acquisition included in the 2015 consolidated financial statements of
Alimentation Couche-Tard Inc., which constituted approximately 17.0% of total assets as of April 26, 2015, and approximately
2.0% of revenue and 1.0% of net earnings for the fiscal year ended April 26, 2015. Our audit of internal control over financial
reporting of Alimentation Couche-Tard Inc. also did not include an evaluation of the internal control over financial reporting of
The Pantry Inc.
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
International Financial Reporting Standards. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the entity’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 26, 2015, based on criteria established in Internal Control – Integrated Framework (2013),
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 2015 Alimentation Couche-Tard Inc.
Page 47 of 82
Consolidated Statements of Earnings
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars (Note 2), except per share amounts)
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses (Note 8)
Restructuring and integration costs (Notes 4 and 23)
Loss on disposal of aviation fuel business (Note 5)
Curtailment gain on defined benefits pension plans obligation (Notes 5 and 27)
Negative goodwill (Note 4)
Depreciation, amortization and impairment of property and equipment, intangible assets and other assets
Operating income
Share of earnings of joint ventures and associated companies accounted for using the equity
method (Note 6)
Financial expenses
Financial revenues
Foreign exchange loss from currency conversion
Net financial expenses (Note 10)
Earnings before income taxes
Income taxes (Note 11)
Net earnings
Net earnings attributable to:
Shareholders of the Corporation
Non-controlling interest (Note 7)
Net earnings
Net earnings per share (Note 12)
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
2015
$
34,529.9
29,261.9
5,268.0
3,376.9
30.3
11.0
(2.6 )
(1.2 )
530.4
3,944.8
1,323.2
21.9
91.8
(9.1 )
22.7
105.4
1,239.7
306.2
933.5
932.8
0.7
933.5
1.65
1.64
2014
$
37,962.1
32,974.0
4,988.1
3,419.9
-
-
(0.9 )
(48.4 )
583.2
3,953.8
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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 48 of 82
Consolidated Statements of Comprehensive Income
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars (Note 2), except per share amounts)
Net earnings
Other comprehensive income
Items that may be reclassified subsequently to earnings
Translation adjustments
Changes in cumulative translation adjustments (1)
Cumulative translation adjustments reclassified to earnings (Note 5)
Change in fair value of cross-currency interest rate swaps designated as a hedge of the Corporation’s net
investment in its US operations
Net interest on cross-currency interest rate swaps designated as a hedge of the Corporation’s net
investment in its US operations (2)
Cash flow hedges
Change in fair value of financial instruments (3) (Note 28)
Gain realized on financial instruments transferred to earnings (4) (Note 28)
Items that will never be reclassified to earnings
Net actuarial (loss) gain (Note 27) (5)
Other comprehensive (loss) income
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interest
Comprehensive income
2015
$
933.5
(803.4 )
1.9
(99.3 )
-
16.4
(14.3 )
(26.8 )
(925.5 )
8.0
7.3
0.7
8.0
2014
$
812.2
42.4
-
(45.7 )
2.6
9.7
(8.0 )
0.1
1.1
813.3
812.3
1.0
813.3
(1) For the fiscal year ended April 26, 2015 this amount includes a loss of $13.3, arising from the translation of US dollar denominated long-term debt designated as a foreign exchange hedge of
the Corporation’s net investment in its US operations (net of income taxes of $2.1).
(2) For the fiscal year ended April 27, 2014 this amount is net of income taxes of $0.9.
(3) For the fiscal years ended April 26, 2015 and April 27, 2014 these amounts are net of income taxes of $5.7 and $3.5, respectively.
(4) For the fiscal years ended April 26, 2015 and April 27, 2014 these amounts are net of income taxes of $5.2 and $2.9, respectively.
(5) For the fiscal years ended April 26, 2015 and April 27, 2014 these amounts are net of income taxes of $9.9 and $0.2, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 49 of 82
Consolidated Statements of Changes in Shareholders’ Equity
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars (Note 2))
Capital
stock
$
686.5
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive loss
Comprehensive income
Reduction of non-controlling interest
Dividends declared
Stock option-based compensation expense
(Note 25)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Balance, end of year
6.9
3.8
697.2
Attributable to shareholders of the Corporation
Accumulated
other
comprehensive
income (loss)
(Note 26)
Contributed
surplus
Retained
earnings
$
$
$
Total
$
11.6
3,077.4
186.9
3,962.4
932.8
(86.9 )
(925.5 )
6.0
(6.9 )
10.7
3,923.3
(738.6 )
932.8
(925.5 )
7.3
-
(86.9 )
6.0
-
3.8
3,892.6
Attributable to shareholders of the Corporation
Contributed
surplus
Retained
earnings
Accumulated other
comprehensive
income (Note 26)
$
$
$
Total
$
16.5
2,344.0
185.8
3,216.7
Capital
stock
$
670.4
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive income
Comprehensive income
Dividends declared
Addition to non-controlling interest (Note 7)
Redemption liability (Note 7)
Stock option-based compensation expense
(Note 25)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Balance, end of year
6.7
9.4
686.5
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
2015
Non-
controlling
interest
Total equity
$
14.2
0.7
0.7
(0.6 )
(0.4 )
13.9
$
3,976.6
933.5
(925.5 )
8.0
(0.6 )
(87.3 )
6.0
-
3.8
3,906.5
2014
Non-
controlling
interest
$
-
1.0
1.0
13.2
14.2
Total equity
$
3,216.7
812.2
1.1
813.3
(64.6 )
13.2
(13.2 )
1.8
-
9.4
3,976.6
The accompanying notes are an integral part of the consolidated financial statements.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 50 of 82
Consolidated Statements of Cash Flows
For the fiscal years ended April 26, 2015 and April 27, 2014
(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 assets and other assets, net of
amortization of deferred credits
Deferred income taxes
Deferred credits
Loss on disposal of aviation fuel business (Note 5)
Share of earnings of joint ventures and associated companies accounted for using the equity method, net of
dividends received (Note 6)
(Gain) loss on disposal of property and equipment and other assets
Curtailment gain on defined benefits pension plans obligation (Note 5 and 27)
Negative goodwill (Note 4)
Other
Changes in non-cash working capital (Note 13)
Net cash provided by operating activities
Investing activities
Business acquisitions (Note 4)
Purchases of property and equipment, intangible assets and other assets
Proceeds from disposal of aviation fuel business (Note 5)
Proceeds from disposal of property and equipment and other assets
Restricted cash
Net cash used in investing activities
Financing activities
Net increase in US dollar term revolving unsecured operating credit (Note 20)
Repayments under the unsecured non-revolving acquisition credit facility (Note 20)
Repayment of debt assumed on business acquisition (Note 4)
Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs (Note 20)
Net decrease in other debt (Note 20)
Cash dividends paid
Issuance of shares upon exercise of stock-options
Net cash used in financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents and bank overdraft, 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.
2015
$
933.5
454.5
(72.5 )
17.1
11.0
7.4
(1.5 )
(2.6 )
(1.2 )
17.2
351.6
1,714.5
(929.4 )
(634.5 )
94.6
71.6
(1.1 )
(1,398.8 )
1,043.7
(555.0 )
(529.1 )
-
(18.0 )
(86.9 )
3.8
(141.5 )
(107.7 )
66.5
509.3
575.8
-
575.8
62.7
21.6
279.1
553.7
22.1
575.8
2014
$
812.2
553.9
(60.9 )
11.4
-
9.8
7.6
(0.9 )
(48.4 )
30.0
114.6
1,429.3
(159.6 )
(529.4 )
-
70.4
20.6
(598.0 )
448.0
(1,648.0 )
-
285.6
(16.7 )
(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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 51 of 82
Consolidated Balance Sheets
As at April 26, 2015 and April 27, 2014
(in millions of US dollars (Note 2))
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable (Note 14)
Inventories (Note 15)
Prepaid expenses
Income taxes receivable
Property and equipment (Note 16)
Goodwill (Note 17)
Intangible assets (Note 17)
Other assets (Note 18)
Investment in joint ventures and associated companies (Note 6)
Deferred income taxes (Note 11)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 19)
Provisions (Note 23)
Income taxes payable
Bank loans and current portion of long-term debt (Note 20)
Long-term debt (Note 20)
Provisions (Note 23)
Pension benefit liability (Note 27)
Other financial liabilities (Note 21)
Deferred credits and other liabilities (Note 22)
Deferred income taxes (Note 11)
Equity
Capital stock (Note 24)
Contributed surplus
Retained earnings
Accumulated other comprehensive (loss) income (Note 26)
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/ Brian Hannasch
Brian Hannasch
Director
/s/ Alain Bouchard
Alain Bouchard
Director
2015
$
575.8
2.1
1,194.8
859.6
64.3
10.5
2,707.1
5,328.5
1,817.3
623.2
222.2
75.6
63.9
10,837.8
2,220.7
135.6
37.4
21.3
2,415.0
3,053.3
417.9
126.6
161.6
214.6
542.3
6,931.3
697.2
10.7
3,923.3
(738.6 )
3,892.6
13.9
3,906.5
10,837.8
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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 52 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(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 26, 2015, the Corporation operates and licenses 10,078 convenience stores across North America, Scandinavia (Norway, Sweden
and Denmark), Poland, the Baltics (Estonia, Latvia and Lithuania), and Russia, of which 7,787 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 fuel, lubricants and chemicals.
In addition, about 4,700 stores are operated by independent operators under the Circle K banner in 12 other countries or regions worldwide
(China, Guam, Honduras, Hong Kong, Indonesia, Japan, Macau, Malaysia, Mexico, the Philippines, the United Arab Emirates and Vietnam)
which brings the total network to over 14,700 stores worldwide.
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 26, 2015 and April 27, 2014 are referred to as
2015 and 2014.
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 14, 2015 by the Board of Directors who also approved their
publication.
Comparative figures
Certain comparative figures of the consolidated financial statements have been reclassified to comply with the presentation adopted in the
fiscal year ended April 26, 2015:
Direct car wash expenses were previously recorded as a reduction of revenue or as operating, selling, administrative and general
expenses This is no longer the case and car wash revenue is now presented at its gross amount and all direct expenses are
recorded in cost of sales. For fiscal 2014, this change resulted in an increase in revenue of $5.5, a decrease in gross profit of $3.2
and a decrease in operating, selling, administrative and general expenses of $3.2.
Following an analysis of certain fixed assets in European cash generating units (“CGUs”), the goodwill related to the Lubricants
CGU of $8.1 was reallocated to the Scandinavia CGU.
3.
ACCOUNTING POLICIES
Changes in accounting policies
Hedge of the net investment in foreign operations
As of October 13, 2014, the Corporation designated its entire US dollar denominated long-term debt as a foreign exchange hedge of its net
investment in its US operations. Accordingly, since this designation, the gains or losses arising from the translation of the US dollar denominated
debt that are determined to be an effective hedge are recognized in Other comprehensive income, counterbalancing gains and losses arising from
translation of the Corporation’s net investment in its US operations. Should a portion of the hedging relationship become ineffective, the ineffective
portion would be recorded in the consolidated statement of earnings under financial expenses.
Annual Report 2015 Alimentation Couche-Tard Inc.
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Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
Levies
On April 28, 2014, the Corporation adopted the new interpretation IFRIC 21, “Levies”. The interpretation identifies the obligating event for the
recognition of a liability for a levy imposed by a government and provides guidance on when to recognize the liability. The adoption of this
interpretation did not have a significant impact on the Corporation's consolidated financial statements.
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, 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 using the exchange rate in effect at the balance sheet date and revenues and expenses are translated using the average
exchange rate on a 4-week period basis. Non-monetary assets and liabilities are translated using historical rates or using 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 statements of earnings
except for the Corporation’s US dollar denominated long-term debt designated as a foreign exchange hedge of the Corporation’s net
investment in its US operations for which gains and losses arising from such translation are included in Accumulated other comprehensive
income in Shareholders' equity.
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 using the average
exchange rate on a 4-week period basis. Individual transactions with a significant impact on the consolidated statements 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 statements
of 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 using 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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 54 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 excise
duties. 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.
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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 55 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 judgment 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
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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 56 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 characterization 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. Judgment 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 lease payments receivable 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 rent received under the lease as rent receivable.
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.
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;
Annual Report 2015 Alimentation Couche-Tard Inc.
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Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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.
Asset retirement obligations
Asset retirement obligations primarily 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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 58 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
A detailed formal plan usually includes:
identifying the concerned business or part of the business;
the principal locations affected;
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
Fair value
Effective hedging instruments
Amortized cost
Amortized cost
Amortized cost
losses
Net earnings
Net earnings
Net earnings
Net earnings
Other comprehensive income
subject to reclassification to
net earnings
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.
Amortized cost
Amortized cost
Net earnings
Net earnings
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 the hedged transaction no longer be expected to 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.
US dollar denominated long-term debt
The Corporation designates its entire 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 that is determined to be an effective
hedge are recognized in Other comprehensive income, counterbalancing gains and losses arising from translation of the Corporation’s net
investment in its US operations.
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. The Corporation designates these cross currency swaps 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 cross currency swaps that are
determined to be an effective hedge are recognized in Other comprehensive income, counterbalancing gains and losses arising from
translation of the Corporation’s net investment in its US operations.
Commodity futures
The Corporation, from time to time, used commodity futures to manage the price fluctuation risk associated with forecasted purchases of
aviation fuel. Changes in their fair value were recorded in financial expenses.
Guarantees
A guarantee is defined as a contract or an indemnification agreement contingently requiring a Corporation to make payments to a third party
based on future events. These payments are contingent on either changes in an underlying or other variables that are related to an asset,
liability, or an equity security of the indemnified party or the failure of another entity to perform under an obligating agreement. It could also be
an indirect guarantee of the indebtedness of another party. Guarantees are initially recognized at fair value and subsequently revaluated when
the loss becomes probable.
Business combinations
Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the aggregate of
the fair values (at the date of acquisition) of assets given, liabilities incurred or assumed, and equity instruments issued by the Corporation in
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 59 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 judgment 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 intangible assets with
indefinite useful lives 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 July 2014, the IASB completed IFRS 9, “Financial Instruments” in its three-part project to replace 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. The
Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The standard is
effective for fiscal years beginning on or after January 1, 2018 with earlier adoption permitted. The Corporation will assess, in due course, the
impact of this standard on its consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, “Revenue from Contracts with Customers”, to specify how and when to recognize revenue as well as
requiring the provision of more informative and relevant disclosures. IFRS 15 supersedes IAS 18, "Revenue”, IAS 11, “Construction
Contracts”, and other revenue-related interpretations. This standard is effective for annual reporting periods beginning on or after
January 1, 2017 with earlier adoption permitted. The Corporation will assess, in due course, the impact of this standard on its consolidated
financial statements.
Presentation of financial statements
In December 2014, the IASB issued amendments to IAS 1, “Presentation of Financial Statements”, to clarify materiality, aggregation and
disaggregation of items presented in the balance sheet, statement of earnings and statement of comprehensive income as well as order of
notes to financial statements. These amendments shall be applied to fiscal years beginning on or after January 1, 2016 with earlier adoption
permitted. The Corporation will assess, in due course, the impact of this standard on its consolidated financial statements.
4.
BUSINESS ACQUISITIONS
The Corporation has made the following business acquisitions:
2015
Acquisition of The Pantry Inc. (“The Pantry”)
On March 16, 2015, the Corporation acquired 100% of the outstanding shares of The Pantry through an all-cash transaction valued at $36.75
per share. The Corporation financed this transaction using its existing credit facility, as modified on May 16, 2014, December 1, 2014 and
March 16, 2015. The Pantry operates over 1,500 convenience stores in 13 US states, the majority of which dispense road transportation fuel.
The Corporation owns the land and buildings for 409 sites, leases the land and owns the buildings for 52 sites and leases these same assets
for the remaining sites.
Acquisition costs of $0.9 in connection with this acquisition are included in Operating, selling, administrative and general expenses.
This acquisition was settled for a total cash consideration of $850.7. Given the size and timing of the transaction, the Corporation has not
completed its fair value assessment of the assets acquired, the liabilities assumed and the goodwill for this transaction. Consequently, the fair
value adjustments related to this acquisition are included in goodwill in the preliminary purchase price allocation. Our preliminary work has
identified the following intangible assets which have not yet been valued in this preliminary allocation: customer relations, software, franchise
agreements and a trademark. This preliminary allocation is subject to adjustments to the fair value of the assets, liabilities and goodwill until the
process is completed. Purchase price allocation based on available information as at the date of authorisation of these consolidated financial
statements is as follows:
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 60 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Income taxes receivable
Property and equipment
Identifiable intangible assets
Other assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Current portion of finance lease obligations
Current portion of long-term debt
Finance lease obligations
Provisions
Other liabilities
Deferred income taxes
Net identifiable assets
Acquisition goodwill
Consideration paid in cash
Cash and cash equivalents acquired
Net cash flow for the acquisition
$
93.8
60.9
135.7
25.8
0.4
316.6
660.8
11.8
67.7
1,056.9
219.7
22.5
7.6
529.1
778.9
97.6
116.2
16.4
44.8
1,053.9
3.0
847.7
850.7
93.8
756.9
The Corporation expects that none of the goodwill related to this transaction will be deductible for tax purposes.
This acquisition was concluded in order to expand the Corporation’s market share, to penetrate new markets and to increase its economies of
scale. Since the date of acquisition, revenues and net earnings from these stores amounted to $729.3 and $5.8, respectively. The following
summary presents the pro-forma consolidated results of the Corporation for fiscal year 2015 under the assumption that The Pantry was
acquired on April 28, 2014. These amounts do not include the potential synergies that could result from the acquisition. This information is
provided for illustrative purposes only and does not necessarily reflect actual or future consolidated results of the Corporation after the
combination nor does it reflect the impact of future purchase price allocation adjustments. This information was also adjusted to exclude non-
recurring acquisition costs related to this transaction.
Revenues
Net earnings
$
6,896.2
30.4
Subsequently to the acquisition, the current portion of long-term debt was paid in full using the Corporation’s term revolving unsecured
operating credit D. The Corporation also incurred integration and restructuring costs of $22.0 in regards to this acquisition.
Other acquisitions
On June 23, 2014, the Corporation acquired 13 company-operated stores and two non-operating stores in South Carolina, United States
from Garvin Oil Company. The Corporation owns the land and buildings for all sites.
On October 8, 2014, the Corporation acquired 55 stores in Illinois and Indiana, United States from Tri Star Marketing Inc. Of these, 54
are company-operated and one is operated by an independent operator. The Corporation owns the land and buildings for 54 sites and
leases the land and owns the building for the remaining site. Through this transaction, the Corporation also acquired three biodiesel
blending facilities.
During fiscal year 2015, the Corporation also acquired 32 other stores through distinct transactions. The Corporation owns the land and
buildings for 23 sites and leases these same assets for the remaining nine.
Acquisition costs of $1.8 in connection with these acquisitions and other unrealized acquisitions are included in Operating, selling,
administrative and general expenses.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 61 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
These acquisitions were settled for a total cash consideration of $172.5. 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 authorisation of
these consolidated financial statements is as follows:
Tangible assets acquired
Inventories
Property and equipment
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Deferred credits and other liabilities
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Negative goodwill recorded to earnings
Total cash consideration paid
$
10.4
143.1
153.5
2.0
1.2
5.0
8.2
145.3
1.3
27.1
(1.2 )
172.5
The Corporation expects that $12.9 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 $285.9 and $6.7, 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.
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 10 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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 62 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
These acquisitions were settled for a total cash consideration of $159.6. 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
Approximately $3.0 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 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.
5.
DISPOSAL OF AVIATION FUEL BUSINESS
On December 31, 2014, the Corporation closed the sale of its aviation fuel business through a share purchase agreement pursuant to which
BP Global Investments Ltd. acquired 100% of all issued and outstanding shares of Statoil Fuel & Retail Aviation AS for total proceeds of
$107.4 including an amount of $91.4 for intercompany debt assumed by the buyer and of which $12.3 is receivable as at April 26, 2015. The
Corporation recognized a loss on disposal of $11.0 and a curtailment gain on defined benefits pension plans obligation of $2.6 in relation to
this sale transaction. The disposal also resulted in a $1.9 cumulated loss on translation adjustments being reclassified to earnings and
included in the loss on disposal. These preliminary figures are subject to change until final closing adjustments.
6.
INVESTMENT IN JOINT VENTURES AND ASSOCIATED COMPANIES
Investment in joint ventures
Investment in associated companies
2015
$
73.9
1.7
75.6
2014
$
72.9
2.5
75.4
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
2015
$
21.9
-
21.9
2014
$
22.0
0.7
22.7
7.
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 and changes in shareholders’ equity and the
consolidated balance sheets. 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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 63 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
8.
SUPPLEMENTARY INFORMATION RELATING TO EXPENSES
Cost of sales
Selling expenses
Administrative expenses
Operating expenses
2015
$
29,261.9
3,239.1
512.5
193.2
33,206.7
2014
$
32,974.0
3,118.1
592.1
243.6
36,927.8
The above expenses include rent expense of $323.6 ($322.5 in 2014), net of sub-leasing income of $23.1 ($24.5 in 2014).
Employee benefit charges
Salaries
Fringe benefits and other employer contributions
Employee future benefits (Note 27)
Termination benefits
Stock-based compensation and other stock-based payments (Note 25)
Curtailment gain on defined benefits pension plans obligation (Note 27)
9.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Salaries and other current benefits
Stock-based compensation and other stock-based payments
Employee future benefits (Note 27)
Key management personnel comprise members of the Board of Directors and senior management.
10.
NET FINANCIAL EXPENSES
Financial expenses
Interest expense
Interest on long-term debt
Interest on finance lease obligations
Net interest on defined benefit plans (Note 27)
Change in fair value of derivative financial instrument
Interest on bank overdrafts and bank loans
Accretion of provisions (Note 23)
Other finance costs
Financial revenues
Interest on bank deposits
Other financial revenues
Foreign exchange loss
Net financial expenses
11.
INCOME TAXES
Current income taxes
Deferred income taxes
2015
$
1,206.0
164.9
82.3
18.4
13.8
(2.6 )
1,482.8
2015
$
9.2
7.6
2.4
19.2
2015
$
57.9
6.1
3.4
2.5
1.1
16.0
4.8
91.8
3.1
6.0
9.1
22.7
105.4
2015
$
378.7
(72.5 )
306.2
2014
$
1,231.9
170.0
85.6
1.2
7.4
(0.9 )
1,495.2
2014
$
10.5
4.4
3.3
18.2
2014
$
80.5
4.1
3.9
(0.5 )
0.6
16.3
6.5
111.4
2.9
8.0
10.9
10.1
110.6
2014
$
195.1
(60.9 )
134.2
The principal items which resulted in differences between the Corporation's effective income tax rates and the combined statutory rates in
Canada are detailed as follows:
Combined statutory income tax rate in Canada(a)
Impact of other jurisdictions’ tax rates
Impact of tax rate changes
Other permanent differences
Effective income tax rate
2015
%
26.90
(2.96 )
(0.02 )
0.78
24.70
2014
%
26.90
(9.82 )
(0.83 )
(2.07 )
14.18
(a) The Corporation’s combined statutory income tax rate in Canada includes the appropriate provincial income tax rates.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 64 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(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 27, 2014
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income or equity
$
Transfer from
income taxes
payable
$
Recognized
through
business
acquisitions
$
2015
Balance as at
April 26, 2015
$
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 loss (gain)
Other
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
(48.5 )
5.0
(24.6 )
5.4
53.1
12.7
(0.7 )
(0.3 )
22.5
24.6
(29.5 )
(96.2 )
(2.2 )
57.1
10.6
(32.1 )
(0.7 )
8.9
25.6
(11.1 )
21.7
(47.9 )
-
1.1
-
-
-
-
(0.6 )
(12.9 )
-
(12.4 )
(48.2 )
(17.8 )
7.2
-
10.5
14.4
0.4
(0.2 )
(17.8 )
0.7
(1.7 )
(52.5 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32.1
-
-
-
-
-
32.1
-
-
-
-
-
-
-
-
-
-
38.5
57.3
-
(7.2 )
(10.2 )
(13.4 )
-
(15.4 )
-
-
(4.8 )
44.8
(18.6 )
25.4
(33.9 )
8.0
54.3
16.4
(3.9 )
(4.7 )
20.9
63.9
506.2
61.2
(92.8 )
110.8
(53.9 )
(26.2 )
(9.4 )
(16.7 )
61.7
1.5
(0.1 )
542.3
2014
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
$
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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 65 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(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
2015
$
54.9
9.0
63.9
581.5
(39.2 )
542.3
2014
$
47.1
4.6
51.7
609.7
(43.9 )
565.8
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 $552.7
($1,015.8 in 2014).
12.
NET EARNINGS PER SHARE
The following table presents the information for the computation of basic and diluted net earnings per share:
Net earnings available to Class A and B shareholders
Weighted average number of shares (in thousands)
Dilutive effect of stock options (in thousands)
Weighted average number of diluted shares (in thousands)
Basic net earnings per share available for Class A and B shareholders
Diluted net earnings per share available for Class A and B shareholders
2015
$
932.8
566,013
2,698
568,711
1.65
1.64
2014
$
811.2
564,511
3,629
568,140
1.44
1.43
In calculating diluted net earnings per share for 2015, 651,274 stock options are excluded due to their antidilutive effect (no excluded stock
options in 2014).
During fiscal 2015, the Board declared total dividends of CA$0.19 per share.
13.
SUPPLEMENTARY INFORMATION RELATING TO CHANGES IN NON-CASH WORKING CAPITAL
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
14.
ACCOUNTS RECEIVABLE
Credit and debit cards receivable (a)
Trade accounts receivable and vendor rebates receivable (a)
Provision for doubtful accounts
Credit and debit cards receivable and trade accounts receivable and vendor
rebates receivable - net
Other accounts receivable
2015
$
315.2
30.1
14.2
(110.2 )
102.3
351.6
2015
$
600.3
513.2
(27.1 )
1,086.4
108.4
1,194.8
2014
$
(53.4 )
(9.0 )
(2.1 )
154.9
24.2
114.6
2014
$
718.7
932.2
(27.6 )
1,623.3
103.1
1,726.4
(a) These amounts are presented net of an amount of $130.5 presented in reduction of Accounts payable and accrued expenses due to netting arrangements ($162.5 as
at April 27, 2014).
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 66 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
The following details the aging of credit and debit cards receivable and trade accounts receivable and vendor rebates receivable that are not
impaired:
2015
$
1,012.3
50.5
12.4
6.2
5.0
1,086.4
2015
$
27.6
0.4
14.4
(8.5 )
(6.8 )
27.1
2015
$
556.0
274.0
26.9
-
2.7
859.6
2014
$
1,470.6
73.8
13.9
16.9
48.1
1,623.3
2014
$
31.1
-
7.2
(11.7 )
1.0
27.6
2014
$
455.2
329.0
36.6
23.0
4.2
848.0
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91 days and over
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
15.
INVENTORIES
Merchandise
Road transportation fuel
Lubricant products
Aviation fuel (Note 5)
Other products
16.
PROPERTY AND EQUIPMENT
Year ended April 26, 2015
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 (a)
As at April 26, 2015
Cost
Accumulated depreciation, amortization and impairment
Net book amount (a)
Portion related to finance leases
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 (a)
As at April 27, 2014
Cost
Accumulated depreciation, amortization and impairment
Net book amount (a)
Portion related to finance leases
Land
$
1,447.1
50.3
183.1
(44.4 )
(0.7 )
-
5.8
(143.9 )
1,497.3
1,502.9
(5.6 )
1,497.3
23.3
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
Buildings and
building
components
$
Equipment
$
Leasehold
improvements
$
1,763.0
111.5
262.1
(38.8 )
(129.8 )
(2.1 )
(5.5 )
(292.8 )
1,667.6
2,178.9
(511.3 )
1,667.6
155.9
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
1,735.6
421.6
300.7
(52.7 )
(265.1 )
(0.8 )
0.2
(202.8 )
1,936.7
3,351.3
(1,414.6 )
1,936.7
38.9
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
185.3
33.8
58.0
(2.3 )
(42.1 )
-
(0.5 )
(5.3 )
226.9
545.9
(319.0 )
226.9
-
202.5
31.5
-
(2.3 )
(41.9 )
-
0.3
(4.8 )
185.3
484.3
(299.0 )
185.3
-
Total
$
5,131.0
617.2
803.9
(138.2 )
(437.7 )
(2.9 )
-
(644.8 )
5,328.5
7,579.0
(2,250.5 )
5,328.5
218.1
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
(a) The net book amount as at April 26, 2015 includes $317.7 related to construction in progress ($246.3 as at April 27, 2014).
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 67 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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.
17.
GOODWILL AND INTANGIBLE ASSETS
Goodwill
Net book amount, beginning of year
Business acquisitions (Note 4)
Disposal of aviation fuel business
Effect of exchange rate variations
Net book amount, end of year
2015
$
1,088.7
874.8
(1.9 )
(144.3 )
1,817.3
2014
$
1,081.0
16.0
-
(8.3 )
1,088.7
Intangible assets
Year ended April 26, 2015
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 26, 2015
Cost
Accumulated depreciation and
amortization
Net book amount
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
Trademarks
$
Franchise
agreements
$
Software (a)
$
Customer
relationships
$
Licenses
$
Fuel supply
agreements
$
411.4
-
-
(5.3 )
(17.6 )
(54.9 )
333.6
110.1
-
-
-
(18.6 )
(22.2 )
69.3
201.9
26.6
7.4
-
(18.0 )
(43.9 )
174.0
376.2
111.6
233.7
(42.6 )
333.6
429.7
-
-
-
(19.9 )
1.6
411.4
(42.3 )
69.3
132.0
-
-
-
(19.6 )
(2.3 )
110.1
(59.7 )
174.0
131.5
86.0
-
(1.2 )
(10.3 )
(4.1 )
201.9
447.9
146.3
253.2
(36.5 )
411.4
(36.2 )
110.1
(51.3 )
201.9
54.1
-
0.3
(3.2 )
(39.1 )
(6.0 )
6.1
98.1
(92.0 )
6.1
97.1
-
-
-
(45.6 )
2.6
54.1
139.4
(85.3 )
54.1
24.5
-
-
-
-
-
24.5
24.5
-
24.5
19.6
-
5.0
-
-
(0.1 )
24.5
24.5
-
24.5
Other
$
11.2
-
5.4
(0.9 )
(1.1 )
(2.0 )
12.6
Total
$
823.5
26.6
13.1
(9.6 )
(101.4 )
(129.0 )
623.2
10.3
-
-
(0.2 )
(7.0 )
-
3.1
54.2
17.8
916.1
(51.1 )
3.1
(5.2 )
12.6
(292.9 )
623.2
12.0
-
25.7
(6.4 )
(21.0 )
-
10.3
12.8
0.2
0.1
(0.2 )
(1.7 )
-
11.2
834.7
86.2
30.8
(7.8 )
(118.1 )
(2.3 )
823.5
58.0
15.7
1,085.0
(47.7 )
10.3
(4.5 )
11.2
(261.5 )
823.5
(a)
The net book amount as at April 26, 2015 includes $22.7 related to software in progress ($40.6 as at April 27, 2014).
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 26, 2015 and April 27, 2014 is as follows:
CGU
Canada
United States
Scandinavia
Central and Eastern Europe
Aviation (Note 5)
Lubricants
Trademarks with
indefinite useful lives
-
154.7
63.6
26.2
-
4.3
248.8
2015
Goodwill
162.0
1,246.9
406.9
1.5
-
-
1,817.3
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
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. The value of the Kangaroo Express trademark in
the United States has not been determined yet as part of the preliminary purchase price allocation for the acquisition of The Pantry. 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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 68 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
uses an approach based on earnings to determine this value. Under this method, the cash flows of the CGU for a three-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
2015
12.8%
1.0%
2014
12.8%
1.0%
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 (Earnings Before Interest, Taxes, Depreciation and Amortization) multiples of comparable
corporations to determine these values.
18.
OTHER ASSETS
Pension benefit asset (Note 27)
Environmental costs receivable (Note 23)
Investment contract including an embedded total return swap (Note 28)
Deposits
Deferred charges, net
Other
19.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued expenses (a)
Sales and excise taxes
Salaries and related benefits
Deferred credits
Other
2015
$
17.8
81.4
32.6
10.1
5.3
75.0
222.2
2015
$
1,348.8
545.3
197.8
19.1
109.7
2,220.7
2014
$
30.0
11.8
25.1
8.5
7.1
77.3
159.8
2014
$
1,547.3
639.9
191.0
17.4
114.7
2,510.3
(a)
This amount is presented net of an amount of $110.5 from Credit and debit cards receivable and $20.0 from Trade accounts receivable and vendor rebates receivable due to
netting arrangements ($127.6 and $34.9, respectively as at April 27, 2014).
20.
LONG-TERM DEBT
US dollar term revolving unsecured operating credit D, maturing in December 2018 (b)
Canadian dollar denominated senior unsecured notes (a)
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
US dollar denominated unsecured non-revolving acquisition credit facility (c)
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
2015
$
1,837.2
1,064.2
1.9
1.7
1.5
-
-
168.1
3,074.6
21.3
3,053.3
2014
$
793.5
1,172.7
2.5
2.2
1.8
552.3
1.8
79.6
2,606.4
20.3
2,586.1
(a)
Canadian dollar denominated senior unsecured notes
As at April 26, 2015, 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
Principal 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 26, 2015
3.0%
3.4%
4.0%
4.3%
The net proceeds from their issuance 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 21).
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 69 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
(b)
Term revolving unsecured operating credit D
As at April 26, 2015, the Corporation has a credit agreement consisting of a revolving unsecured facility. As at April 27, 2014 this facility had a
maximum amount of $1,275.0 and a term of four years. The following amendments have been made to this operating credit during fiscal year
2015:
On May 16, 2014, the maximum amount available was increased from $1,275.0 to $1,525.0.
On December 1, 2014, the maturity was extended from December 2017 to December 2018.
On March 16, 2015, the maximum amount available was increased from $1,525.0 to $2,525.0.
No other terms were changed significantly. 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 $150.0 or the equivalent
in Canadian dollars, with applicable fees. Depending on the form and the currency of the loan, the amounts borrowed bear
interest at variable rates based on the Canadian prime rate, the bankers’ acceptance rate, the US base rate or LIBOR plus a
variable margin; and
An unsecured line of credit in the maximum amount of $50.0, available in Canadian or US dollars, bearing interest at variable rates
based, depending on the form and currency of the loan, on the Canadian prime rate, the US prime rate or the US base rate plus a
variable margin.
Standby fees, which vary based on a leverage ratio and on the utilization rate of the credit facility, apply to the unused portion of the credit
facility. Stamping fees, standby letters of credit fees and the variable margin used to determine the interest rate applicable to 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 26, 2015, the effective interest rate is 1.04% (1.19% as at April 27, 2014). In addition, as at April 26, 2015, CA$2.3 (CA$2.3 as at
April 27, 2014) and $54.4 ($29.4 as at April 27, 2014) are used for standby letters of credit. As at April 26, 2015 and April 27, 2014, the
available line of credit was unused and the Corporation was in compliance with the restrictive provisions and ratios imposed by the credit
agreement.
(c)
Unsecured non-revolving acquisition credit facility
As at April 27, 2014, the Corporation had 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. Under the credit agreement, the Corporation needed to maintain certain financial
ratios and respect certain restrictive provisions.
This credit facility was fully repaid on July 23, 2014.
Term revolving unsecured operating credit E
As at April 26, 2015, 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 26, 2015 and April 27, 2014, operating credit E was unused.
Bank overdraft facilities
The Corporation has access to bank overdraft facilities totalling approximately $202.7 ($271.5 in 2014). As at April 26, 2015, they were not
used while they were used in the amount of $1.8 as at April 27, 2014.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 70 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
Obligations related to finance leases
Instalments on obligations related to finance leases for the next fiscal years are as follows:
2016
2017
2018
2019
2020
2021 and thereafter
Interest expense included in minimum lease payments
Obligations related to buildings
and equipment under
finance leases
$
38.6
50.8
29.7
26.9
24.9
148.4
319.3
151.2
168.1
21.
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 a portion of 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 26, 2015 (Note 28)
$50.0
$19.6
$3.2
$48.6
$20.1
$20.1
$161.6
Fair value as at
April 27, 2014 (Note 28)
$24.5
$9.0
$1.5
$22.1
$8.5
$8.3
$73.9
The cross-currency interest rate swap agreements are designated as a foreign exchange hedge of the Corporation’s net investment in its US
operations.
22.
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred rent expense
Deferred credits
Deferred branding credits
Other liabilities
2015
$
64.0
21.5
32.9
96.2
214.6
2014
$
50.0
15.9
18.0
85.6
169.5
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 71 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
23.
PROVISIONS
The reconciliation of the Corporation’s main provisions is as follows:
2015
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
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
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
$
283.2
39.3
0.6
(3.7 )
14.6
(3.2 )
(18.3 )
(45.4 )
267.1
39.1
228.0
269.9
1.9
1.1
(3.7 )
15.4
-
(0.7 )
(0.7 )
283.2
34.8
248.4
110.7
75.3
24.1
(28.3 )
0.9
(2.8 )
2.3
(11.7 )
170.5
29.8
140.7
101.0
17.7
19.6
(24.1 )
0.5
(4.1 )
0.4
(0.3 )
110.7
32.8
77.9
30.6
-
13.5
(14.0 )
-
-
-
(6.2 )
23.9
19.4
4.5
34.1
-
-
(2.9 )
-
-
-
(0.6 )
30.6
15.3
15.3
28.6
14.3
16.7
(16.1 )
0.4
-
(0.6 )
-
43.3
17.2
26.1
28.0
-
16.1
(15.7 )
0.3
-
(0.1 )
-
28.6
8.5
20.1
17.6
11.0
15.3
(13.3 )
0.1
-
(0.7 )
-
30.0
13.9
16.1
15.2
-
14.1
(11.8 )
0.1
-
-
-
17.6
5.6
12.0
22.2
-
0.6
(2.7 )
-
-
-
(1.4 )
18.7
16.2
2.5
7.1
-
16.7
(1.0 )
-
(0.4 )
0.1
(0.3 )
22.2
5.4
16.8
Total
$
492.9
139.9
70.8
(78.1 )
16.0
(6.0 )
(17.3 )
(64.7 )
553.5
135.6
417.9
455.3
19.6
67.6
(59.2 )
16.3
(4.5 )
(0.3 )
(1.9 )
492.9
102.4
390.5
(a)
The total undiscounted amount of estimated cash flows to settle the asset retirement obligations is approximately $622.3 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.
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 perfor ms 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, Georgia, Arizona, Texas,
W est Virginia and Maryland, 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 $170.5 provision for environmental costs as at
April 26, 2015 ($110.7 as at April 27, 2014). Furthermore, the Corporation has recorded an amount of $85.3 for environmental costs
receivable from trust funds as at April 26, 2015 ($13.6 as at April 27, 2014), of which $3.9 ($1.8 as at April 27, 2014) is included in Accounts
receivable and the remainder is included in Other assets.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 72 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
24.
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 and end of year
Class B subordinate voting shares
Balance, beginning of year
Issued as part of a previous acquisition
Stock options exercised
Balance, end of year
2015
2014
148,101,840
148,101,840
417,646,072
2,376
1,613,807
419,262,255
414,606,183
4,440
3,035,449
417,646,072
25.
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
Stock option plan
The Corporation has a stock option plan (the “Plan”) under which it has authorized the grant of up to 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 26, 2015 and April 27, 2014 and the changes therein
during the years then ended:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Number of
stock options
3,578,805
669,415
(1,730,309 )
-
2,517,911
2015
Weighted average
exercise price
CA$
6.83
34.36
5.88
-
14.80
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
Exercisable stock options, end of year
1,940,379
9.38
3,515,805
6.67
For options exercised in fiscal 2015, the weighted average share price at the date of exercise was CA$47.88 (CA$21.84 in 2014).
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 73 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
The following table presents information on the stock options outstanding and exercisable as at April 26, 2015:
Range of
exercise prices
CA$
4 – 5
5 – 6
6 – 9
9 – 16
16 – 35
Number of
stock options
outstanding as at
April 26, 2015
Options outstanding
Weighted average
remaining contractual
life (years)
187,205
561,000
995,291
105,000
669,415
2,517,911
3.45
4.19
1.59
7.27
9.42
Weighted
average
exercise price
CA$
4.61
5.98
8.43
15.87
34.36
14.80
Options exercisable
Number of
stock options
exercisable as at
April 26, 2015
187,205
561,000
995,291
63,000
133,883
1,940,379
Weighted
average
exercise price
CA$
4.61
5.98
8.43
15.87
34.36
9.38
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
2015
CA$0.18
29.03%
1.68%
8 years
The weighted average fair value of stock options granted was CA$11.55 in 2015. No stock options were granted in 2014.
For 2015, compensation cost charged to the consolidated statements of earnings amounts to $3.0 ($0.3 in 2014).
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 26, 2015, the Corporation has a total of 240,961 DSUs outstanding (221,551 as at
April 27, 2014) and an obligation of $9.6 ($6.1 as at April 27, 2014) is recorded in deferred credits and other liabilities. The obligation is subject
to an embedded total return swap (Note 28). The compensation cost amounts to $4.3 in 2015 ($2.6 in 2014).
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 26, 2015 and April 27, 2014 and the changes therein during the
years then ended in number of units:
Outstanding, beginning of year
Granted
Paid
Cancelled
Outstanding, end of year
2015
2014
1,251,537
334,278
(273,819 )
(99,364 )
1,212,632
1,507,935
274,740
(326,904 )
(204,234 )
1,251,537
As at April 26, 2015, an obligation of $21.9 is recorded in accounts payable and accrued liabilities ($7.5 in 2014) and $9.5 is recorded in
Deferred credits and other liabilities ($11.4 as at April 27, 2014). The obligation is subject to an embedded total return swap (Note 28). For
2015, the compensation cost amounts to $6.5 ($4.5 for 2014).
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 74 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
26.
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
As at April 26, 2015
Attributable to shareholders of the Corporation
Items that may be reclassified to earnings
Cumulative
translation
adjustments
$
Net investment
hedge
$
Net interest on
net investment
hedge
$
Will never be
reclassified to
earnings
Cash flow
hedge
$
Cumulative net
actuarial loss
$
Accumulated other
comprehensive loss
$
(554.8 )
-
(554.8 )
(161.6 )
0.3
(161.9 )
6.1
1.7
4.4
7.0
1.5
5.5
(43.5 )
(11.7 )
(31.8 )
(746.8 )
(8.2 )
(738.6 )
Attributable to shareholders of the Corporation
Balance, before income taxes
Less: Income taxes
Balance, net of income taxes
As at April 27, 2014
Cumulative
translation
adjustments
$
Items that may be reclassified to earnings
Net interest on
net investment
hedge
$
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
246.7
-
246.7
(73.9 )
(11.3 )
(62.6 )
6.1
1.7
4.4
4.4
1.0
3.4
(6.8 )
(1.8 )
(5.0 )
176.5
(10.4 )
186.9
27.
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
valuation of the pension plans for funding purposes was as at December 31, 2014 and the next required valuation will be as at
December 31, 2015.
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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 75 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
Information about the Corporation’s defined benefit plans, in aggregate, is as follows:
Present value of accrued defined benefit obligation
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Loss from change in demographic assumptions
Loss (gain) from change in financial assumptions
Experience gains
Curtailment gain
Disposal of business
Effect of exchange rate fluctuations
Balance, end of year
Plans’ assets
Fair value, beginning of year
Interest income
Return on assets (excluding amounts included in interest income)
Employer contributions
Benefits paid
Administrative expenses
Disposal of business
Effect of exchange rate fluctuations
Fair value, end of year
2015
$
452.7
15.8
14.9
(23.0 )
0.4
93.0
(23.0 )
(2.6 )
(8.1 )
(107.5 )
412.6
362.9
11.5
33.7
10.3
(19.8 )
(0.1 )
(6.6 )
(88.1 )
303.8
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
Net funded status of funded plans – net (deficit) surplus
Present value of defined benefit obligation for unfunded pension plans
Net accrued pension benefit liability
2015
$
(311.3 )
303.8
(7.5 )
(101.3 )
(108.8 )
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
2014
$
(347.5 )
362.9
15.4
(105.2 )
(89.8 )
The pension benefit asset of $17.8 ($30.0 as at April 27, 2014) is included in Other assets and the pension benefit liability of $126.6 ($119.8
as at April 27, 2014) is presented separately in the consolidated balance sheets.
The defined benefit obligation and plan assets are composed by country as follows:
2015
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – (deficit) surplus
2014
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – (deficit) surplus
As at the measurement date, plans’ assets consist of:
Canada
$
(61.6 )
23.7
(37.9 )
United States
$
(10.7 )
-
(10.7 )
(62.8 )
24.9
(37.9 )
(6.4 )
-
(6.4 )
Norway
$
(218.8 )
145.6
(73.2 )
(261.2 )
198.8
(62.4 )
Sweden
$
(121.5 )
134.5
13.0
(122.3 )
139.2
16.9
Cash and cash equivalents
Equity securities
Debt instruments
Government
Corporate
Real estate
Other assets
Total
Quoted
$
-
92.9
Unquoted
$
-
4.4
82.5
53.3
-
5.9
234.6
-
46.3
16.6
1.9
69.2
Total
$
-
97.3
82.5
99.6
16.6
7.8
303.8
2015
%
-
32.0
27.2
32.8
5.5
2.5
100.0
Quoted
$
11.0
96.3
86.2
51.7
-
6.2
251.4
Unquoted
$
-
6.1
-
78.9
21.4
5.1
111.5
Total
$
11.0
102.4
86.2
130.6
21.4
11.3
362.9
Total
$
(412.6 )
303.8
(108.8 )
(452.7 )
362.9
(89.8 )
2014
%
3.0
28.2
23.8
36.0
5.9
3.1
100.0
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 76 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(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
2015
$
15.8
0.1
15.9
3.4
(2.6 )
16.7
2014
$
19.6
0.3
19.9
3.9
(0.9 )
22.9
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
Loss (gain) from change in financial assumptions
Experience gain
Return on asset (excluding amounts included in interest income)
Amount recognized in Other comprehensive income
2015
$
0.4
93.0
(23.0 )
(33.7 )
36.7
2014
$
5.4
(1.1 )
(7.3 )
2.7
(0.3 )
The Corporation expects to make a contribution of $9.1 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
%
3.75
3.70
2.00
United States
%
3.75
4.00
2.00
Norway
%
2.50
2.75
0.55
2015
Sweden
%
2.00
2.75
1.50
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
-
-
2.50
2.75
-
-
3.25
2.75
The Corporation uses mortality tables provided by regulatory authorities and actuarial associations in each country. 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 20 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
Increase in assumption
Decrease in assumption
0.50%
0.50%
0.50%
1 year
Decrease by 9.5%
Increase by 3.2%
Increase by 9.2%
Increase by 3.9%
Increase by 11.0%
Decrease by 3.0%
Decrease by 8.7%
-
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 sheets.
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.
For funded plans, the individual plans have investment policy objectives to have investment average duration 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
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 77 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 the 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. For funded plans that are running a deficit, the Corporation makes payments based on the
actuaries’ recommendations and existing regulations. 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 curtailment results
from the Corporation’s European segment’s planned restructuring and from the disposal of the aviation fuel business (Note 5).
Defined contribution plans
The Corporation’s total pension expense under its defined contribution plans and mandatory governmental plans for 2015 is $66.4 ($66.9 in
2014).
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 $26.6 as at April 26, 2015 ($22.6 as at
April 27, 2014) and are included in Deferred credits and other liabilities.
28.
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 its long-term debt denominated in US dollars and the cross currency
interest rate swaps, all of which are designated as net investment hedges. As at April 26, 2015, 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 $84.2 on other comprehensive
income. Given the Corporation has adopted the US dollar as its reporting currency; these impacts are compensated by the translation of the
Canadian dollar consolidated financial statements to the US dollar.
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 26, 2015,
the Corporation did not hold any derivative instruments to mitigate this risk.
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 26, 2015, 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 26, 2015, the annual impact on net earnings of a 1.0% shift in interest rates would have been
$13.4 ($9.9 based on balances as at April 27, 2014).
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 when their fair value is favorable to the Corporation.
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 26, 2015, 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.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 78 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 26, 2015, 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 26, 2015 relates to receivables of $183.0, of which $90.4 was interest bearing. These receivables are not recognized in
the Corporation’s consolidated balance sheets. For fiscal 2015, 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 the financial instrument containing an embedded total return swap and from the cross-
currency interest rate swaps when these swaps are favorable to the Corporation. 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 26, 2015 are as follows:
Non-derivative financial liabilities (1)
Accounts payable and accrued liabilities (2)
Senior unsecured notes
Term revolving unsecured operating credit D
NOK fixed-rate bonds
NOK floating-rate bonds
Other long-term debt
Cross-currency interest rate swaps to pay
Cross-currency interest rate swaps to receive
Carrying
amount
$
Contractual
cash flows
$
Less than one
year
$
Between one
and two years
$
Between two
and five years
$
More than five
years
$
1,656.3
1,064.2
1,837.2
1.7
1.9
169.6
-
-
4,730.9
1,656.3
1,257.2
1,905.6
2.0
2.1
322.5
1,140.2
(1,133.6 )
5,152.3
1,656.3
37.7
19.1
0.1
0.1
39.1
27.2
(27.3 )
1,752.3
-
37.7
19.1
0.1
2.0
51.3
27.2
(27.3 )
110.1
-
706.0
1,867.4
1.8
-
82.7
812.6
(808.6 )
2,661.9
-
475.8
-
-
-
149.4
273.2
(270.4 )
628.0
(1) Based on spot rates, as at April 26, 2015, 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 and property taxes.
Price risk
The Corporation’s sales of refined oil products, which include road transportation fuel, stationary energy 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. As at April 26, 2015, the Corporation did not hold any
derivative instruments to mitigate this risk.
The Corporation’s obligations related to its PSU Plan and DSU Plan create a form of price risk as the recorded amounts of the related
liabilities 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 26, 2015, 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 (as at April 27, 2014)
approximate their respective fair values given that their credit spread is similar to the credit spr ead the Corporation would obtain in
similar conditions at the reporting date.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 79 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
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 estimated fair value of each class of financial instruments, the methods and assumptions that were used to determine it and their fair
value hierarchy are as follows:
The fair value of the investment contract including an embedded total return swap, which is mainly based on the fair market value of
the Corporation’s Class B shares is $54.7 as at April 26, 2015 ($36.6 as at April 27, 2014) (Level 2);
The fair value of the senior unsecured notes, which is based on observable market data, is $1,128.8 as at April 26, 2015 ($1,191.5
as at April 27, 2014) (Level 2);
The fair value of the cross-currency interest rate swaps, which is determined based on market rates obtained from the Corporation’s
financial institutions for similar financial instruments is $161.6 as at April 26, 2015 ($73.9 as at April 27, 2014) (Level 2). They are
presented as other financial liabilities on the consolidated balance sheets.
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 20 and 24).
In its capital structure, the Corporation considers its stock option, PSU and DSU plans (Note 25). From time to time, the Corporation uses
share repurchase programs to achieve its capital management objectives.
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 sheets 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
2015
$
21.3
3,053.3
575.8
2,498.8
3,892.6
2,498.8
6,391.4
39.1%
2014
$
20.3
2,586.1
511.1
2,095.3
3,962.4
2,095.3
6,057.7
34.6%
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 is a non-IFRS measure;
An interest coverage ratio, which is the ratio of EBITDA for the four most recent quarters to the total interest paid in the same periods.
EBITDA is a non-IFRS measure.
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.
29.
CONTRACTUAL OBLIGATIONS
Minimum lease payments
As at April 26, 2015, the Corporation has entered into operating lease agreements expiring on various dates until 2040 which call for
aggregate minimum lease payments of $2,762.7 for the rental of commercial space, equipment and a war ehouse. 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
$
384.0
1,255.8
1,122.9
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 80 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
As at April 26, 2015, the total amount of future minimum sublease payments expected to be received under sublease agreements related to
these operating leases is $57.1.
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.
30.
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 26, 2015, the total future lease payments under such agreements are approximately $1.8 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 $13.4. 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
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 26, 2015 were not significant.
31.
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, Kangaroo Express, 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
$
Europe
$
Canada
$
5,311.0
14,599.0
16.0
19,926.0
990.4
7,111.0
1,955.7
10,057.1
1,748.4
1,093.3
16.0
2,857.7
408.2
870.9
317.1
1,596.2
1,974.4
2,571.9
0.5
4,546.8
649.2
164.4
0.5
814.1
2015
Total
$
8,275.8
24,281.9
1,972.2
34,529.9
2,805.8
2,128.6
333.6
5,268.0
US
$
4,821.7
15,493.3
14.7
20,329.7
Europe
$
1,048.4
8,824.9
2,784.7
12,658.0
Canada
$
2,082.7
2,890.6
1.1
4,974.4
2014
Total
$
7,952.8
27,208.8
2,800.5
37,962.1
1,575.8
796.1
14.7
2,386.6
434.2
928.8
384.6
1,747.6
689.3
163.5
1.1
853.9
2,699.3
1,888.4
400.4
4,988.1
Total long-term assets(b)
4,686.2
2,773.6
556.6
8,016.4
2,862.2
3,769.9
591.2
7,223.3
(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.
32.
SUBSEQUENT EVENTS
Acquisition
On June 2, 2015, the Corporation acquired from Cinco J, Inc., Tiger Tote Food Stores, Inc., and their affiliates 21 company-operated stores in
the US states of Texas, Mississippi and Louisiana. The Corporation owns the land and buildings for 18 sites and leases the land and owns the
buildings for the remaining three sites. As part of this agreement, the Corporation also acquired 141 dealer fuel supply agreements and five
development properties in addition to acquiring customer relations for 124 dealer sites.
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 81 of 82
Notes to the Consolidated Financial Statements
For the fiscal years ended April 26, 2015 and April 27, 2014
(in millions of US dollars, except share and stock option data)
Dividends
During its July 14, 2015 meeting, the Corporation’s Board of Directors (the “Board”) declared a dividend of CA$0.055 per share to
shareholders on record as at July 23, 2015 and approved its payment for August 6, 2015.
Issuance of Canadian dollar denominated senior unsecured notes
On June 2, 2015, the Corporation proceeded with the issuance of Canadian dollar denominated senior unsecured notes totaling CA$ 700.0 with a
coupon rate of 3.6% and maturing on June 2, 2025. Interest is payable semi-annually on June 2nd and December 2nd of each year. The net
proceeds from the issuance were mainly used to repay a portion of the Corporation’s term revolving unsecured operating credit facility.
Cross-currency interest rate swaps
Between June 12, 2015 and June 19, 2015, following the issuance of notes detailed above, the Corporation entered into cross-currency interest
rate swap agreements for a total notional amount of CA$700.0, allowing it to synthetically convert a portion of its Canadian dollar denominated
debt into US dollars.
Receive – Notional
CA$175.0
CA$175.0
CA$100.0
CA$100.0
CA$100.0
CA$50.0
Receive – Rate
3.6%
3.6%
3.6%
3.6%
3.6%
3.6%
Pay – Notional
US$142.2
US$142.7
US$81.2
US$81.2
US$81.2
US$41.3
Pay – Rate
3.8099%
3.8650%
3.8540%
3.8700%
3.8570%
3.8230%
Maturity
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
June 2, 2025
Annual Report 2015 Alimentation Couche-Tard Inc.
Page 82 of 82
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