ALIMENTATION COUCHE-TARD INC.
INC.
2018
AN N U AL REP O RT
Table
of Contents
This Year’s Successes
People and Sites
Highlights
Message from the Founder
and Executive Chairman of the Board
Message from the President
and Chief Executive Officer
Our Team
Growing the Business
Key Categories
Corporate Social Responsibility
Our Fourth Transformation
A Bright Future Ahead
Management Discussion and Analysis
Management’s Report
Management Report on Internal Control
over Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial
Statements
2
4
5
6
7
8
10
14
20
24
29
30
69
70
71
73
78
Alimentation Couche-Tard Inc.
Annual Report © 2018
This Year’s
Successes
Cold Beverages
The Biggest
Company in Canada
Fueling Our Schools
Froster®
Froster
Brian Hannasch,
Bonnie Birollo,
Acquisition
Jeff Burrell,
Darrell Davis,
Acquisition
Hurricanes in Texas
Rick Johnson,
Will Rice,
Paul Rodriguez,
Annual Report © 2018
Artificial Intelligence
Food
Norway Lab
Alimentation Couche-Tard Inc.
Janette Fjeldstad,
Christoffer Sundby,
Kai Realo,
Worldwide Franchises
Fresh Pastries in
Québec
Matt McCure,
Sophie Provencher,
Energy and Carbon
Footprint Reduction
myVOICE
Global Brands
Geoffrey Haxel,
Ina Strand,
Michal Ciszek,
Yuri Bryantsev,
Annual Report © 2018
People
2018
~ 130,000
Europe
North America
Sites
2018
~ 16,000
International
Europe
North America
Annual Report © 2018
Highlights
Alimentation Couche-Tard Inc.
2018
Growth of Same-Store
Merchandise Revenues
Growth of Same-Store
Road Transportation Fuel Volume
US
EUROPE
CANADA
US
EUROPE
CANADA
Merchandise and
Service Gross Profit
Road Transportation
Fuel Gross Profit
+$787.1
+21.4%
+$731.1
+19.9%
+$799.7
+30.9%
+$734.7
+28.4%
EBITDA and Adjusted EBITDA(3)
Diluted net earnings per share
and adjusted diluted net
earnings per share
Net earnings attributable to shareholders of
the Corporation and adjusted net earnings
attributable to shareholders of the
Corporation
+$583.8
+$558.5
+24.4%
+23.1%
+$0.83
+$0.39
+39.2%
+17.6%
+$464.7
+$219.0
+38.4%
+17.4%
Return on Capital
Employed
Return
on Equity
Adjusted
Leverage Ratio
Adjusted
Free Cash Flow
,0%
+$359.4
+$39.3%
All dollar figures are in USD millions, except per-share amounts which are in USD.
Annual Report © 2018
Alimentation Couche-Tard Inc.
ALAIN
BOUCHARD
Annual Report © 2018
BRIAN
HANNASCH
Alimentation Couche-Tard Inc.
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Our Team
Our Team
We know that deeper engagement results
in better service and more loyal customers,
as well as higher employee satisfaction.
We have introduced several initiatives to
support our unique culture and our people.
myVOICE: Everyone Has A Say
Annual Report © 2018
“Our declaration wall makes a huge statement
for the Irish business! Located at the entrance
to our office, it promotes and drives our
company mission to ‘Make it Easy’. We are
delighted to say that it has become quite the
talking point for visitors to Circle K House in
Dublin!”
– Niall Anderton, Ireland
Global Intranet
Our Team |
Alimentation Couche-Tard Inc.
“As project lead of a strong team overseeing
the development, pilot and launch of our new
global Intranet, Inner Circle, I have seen its
immediate impact. Our people are realizing
that they can participate directly and
creatively, as we forge one strong global
company with one common culture. This
platform powers our ability to be super-local
and super-global—a huge competitive
advantage.”
– Marie-Noëlle Cano, Inner Circle Project Lead
Our People: Engaged, Entrepreneurial,
Energetic
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Growing the Business
Growing
the Business
Acquisitions and integrations
A REBRANDING
ACHIEVEMENT
Annual Report © 2018
Growing the Business |
Alimentation Couche-Tard Inc.
CST: STRONG
SYNERGIES
CST and CAPL
Couche-Tard
INGO
Circle K
Statoil
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Growing the Business
A WEALTH OF
BEST PRACTICES
Holiday
Annual Report © 2018
Growing the Business |
Alimentation Couche-Tard Inc.
EXCITING NEW
DEVELOPMENTS
Growth Opportunities
Rick Johnson
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Key Categories
Key
Categories
As a global retailer, we have diverse
resources and the capacity to run with new
ideas. Our proprietary product portfolio is
the result of continuous innovation and
research. Unique food and beverage
offerings build customer loyalty, and all
our key product categories contribute to
our success. Across Europe we have
advanced rapidly with robust food
offerings.
Food
Simply Great Coffee
Polar Pop
Our goal:
Annual Report © 2018
Key Categories |
Alimentation Couche-Tard Inc.
SUCCESSFUL LAUNCH OF
A VEGETARIAN FOOD
CONCEPT IN SWEDEN
The Vego-Vägar Success Story
Super-local,
super-global food:
—
—
—
—
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Key Categories
Hot dogs
DOGS
Real HOT
Real HOT DOGS
Hot Beverages
Simply Great Coffee
Simply Great Coffee
Annual Report © 2018
Key Categories |
Alimentation Couche-Tard Inc.
Cold Dispensed Beverages
Polar Pop
Froster
Polar Pop
Froster
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Key Categories
Car Wash
Annual Report © 2018
INGO
Fuels
miles
milesPLUS
Key Categories |
Alimentation Couche-Tard Inc.
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Corporate Social Responsibility
Corporate Social
Responsibility
Sustainable Development
Annual Report © 2018
Corporate Social Responsibility |
Alimentation Couche-Tard Inc.
Efficiencies Achieved in
North America, 2018:
enough to power 4,300 homes.
3.1%
or 204 Olympic swimming pools.
8.6%
Site Security
Food Safety
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Corporate Social Responsibility
Biofuels
2018 Milestones
—
— miles
—
Annual Report © 2018
— milesBIO®
— milesPLUS
Sustainable Beverages
Diversity
Corporate Social Responsibility |
Alimentation Couche-Tard Inc.
A CULTURE
OF GENEROSITY
Community Involvement and Donations
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Our Fourth Transformation
Our Fourth
Transformation
In our fourth transformation, we are
speeding up innovation and infusing digital
technologies wherever they create value,
with a focus on making life easier for our
customers.
Norway as a lab
Number of Circle K quick charging
sites in cooperation with partners
Norway: 56
Sweden: 37
Denmark: 17
Ireland: 18
IONITY partnership
Annual Report © 2018
Our Fourth Transformation |
Alimentation Couche-Tard Inc.
New Food Concepts
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Our Fourth Transformation
CIRCLE K ØKERN:
NORWAY’S BEST
HEALTHY FAST-FOOD
AWARD
Grab and Go
Consumer Insight and Craveability
Annual Report © 2018
Our Fourth Transformation |
Alimentation Couche-Tard Inc.
Loyalty programs
Annual Report © 2018
Alimentation Couche-Tard Inc.
| Our Fourth Transformation
DEEPENING
ENGAGEMENT WITH
DIGITAL TECHNOLOGIES
Artificial Intelligence
Annual Report © 2018
A Bright
Future
A Bright Future |
Alimentation Couche-Tard Inc.
Annual Report © 2018
Management Discussion and Analysis
The purpose of this Management Discussion and Analysis (“MD&A”) is, as required by regulators, to explain management’s
point of view on the financial condition and results of the operations of Alimentation Couche-Tard Inc. (“Couche-Tard”) as well
as its performance during the fiscal year ended April 29, 2018. 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 Couche-Tard’s 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. Where 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 2018 Annual Report, which, along with additional information relating to
Couche-Tard, including the most recent Annual Information Form, is available on SEDAR at http://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 9, 2018, 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 2018 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 the number of company-operated stores. In Europe, we are a leader in convenience store and road
transportation fuel retail in the Scandinavian countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia
and Lithuania), as well as in Ireland and we also have an important presence in Poland.
As of April 29, 2018, our network comprised 10,015 convenience stores throughout North America, including 8,705 stores with
road transportation fuel dispensing. Our North American network consists of 19 business units, including 15 in the United States
covering 48 states and 4 in Canada covering all 10 provinces. Approximately 105,000 people are employed throughout our
network and at our service offices in North America. In addition, through CrossAmerica Partners LP, we supply road
transportation fuel under various brands to approximately 1,300 locations in the United States.
In Europe, we operate a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through ten business
units. As of April 29, 2018, our network comprised 2,725 stores, the majority of which offer road transportation fuel and
convenience products while the others are unmanned automated fuel stations which only offer road transportation fuel. We also
offer other products, including stationary energy, marine fuel and aviation fuel. Including employees at branded franchise stores,
approximately 25,000 people work in our retail network, terminals and service offices across Europe.
30
Annual Report © 2018 Alimentation Couche-Tard Inc.
In addition, under licensing agreements, more than 2,000 stores are operated under the Circle K banner in 14 other countries
and territories (China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Malaysia, Mexico, the Philippines,
Saudi Arabia, the United Arab Emirates and Vietnam), which brings our worldwide total network to more than 16,000 stores.
Our mission is to offer our customers fast and friendly service by developing a warm and customized relationship with them,
while finding ways to pleasantly surprise them on a daily basis. To this end, we strive to meet the demands and needs of people
on the go. We offer fresh food, hot and cold beverages, car wash services, road transportation fuel and other high quality
products and services designed to meet or exceed customers’ demands in a clean, welcoming and efficient 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 enhanced by our experience in the
various regions of our network. Our positioning is also a result of our focus on in-store merchandise and on 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, 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, to create value for our Corporation and its shareholders, acquisitions have to be concluded at reasonable
conditions. Therefore, we do not necessarily favor store count growth to the detriment of profitability. In addition to acquisitions,
the contribution from organic growth has played an important role in the recent growth of our net earnings. Highlights have
included the on-going improvements we have made to our offer, including fresh products, to our supply terms and to our
efficiency. All these elements, in addition to our strong balance sheet, have contributed to the growth in our 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.
The following table sets forth information about exchange rates based upon closing rates expressed as US dollars per
comparative currency unit:
Average for period(1)
Canadian dollar
Norwegian krone
Swedish krone
Danish krone
Zloty
Euro
Ruble
12-week period
ended
April 29, 2018
13-week period
ended
April 30, 2017
52-week period
ended
April 29, 2018
53-week period
ended
April 30, 2017
52-week period
ended
April 24, 2016
0.7840
0.1280
0.1212
0.1654
0.2940
1.2319
0.0171
0.7518
0.1181
0.1121
0.1436
0.2495
1.0681
0.0173
0.7826
0.1241
0.1205
0.1587
0.2800
1.1810
0.0172
0.7598
0.1194
0.1144
0.1468
0.2512
1.0920
0.0161
0.7607
0.1203
0.1188
0.1486
0.2606
1.1085
0.0153
Annual Report © 2018 Alimentation Couche-Tard Inc.
31
Period end
Canadian dollar
Norwegian krone
Swedish krone
Danish krone
Zloty
Euro
Ruble
As at April 29, 2018 As at April 30, 2017
0.7763
0.1250
0.1148
0.1620
0.2863
1.2070
0.0160
0.7329
0.1172
0.1135
0.1469
0.2589
1.0930
0.0176
(1)
Calculated by taking the average of the closing exchange rates of each day in the applicable period.
As we use the US dollar as our reporting currency in our consolidated financial statements and in this document, unless indicated
otherwise, results from our Canadian, European and corporate operations are translated into US dollars using the average rate
for the period. Unless otherwise indicated, variances and explanations 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 2018 Overview
Financial results
Net earnings amounted to $1.7 billion for fiscal 2018 compared with $1.2 billion for fiscal 2017. Diluted net earnings per share
stood at $2.95, compared with $2.12 for the previous year.
Results for fiscal 2018 were affected by a net tax benefit of $288.3 million, of which $18.2 million is attributable to non-controlling
interests, following the approval of the new U.S. federal income tax legislation (“U.S. Tax Cuts and Jobs Act”), pre-tax
restructuring costs of $56.9 million, of which $5.2 million is attributable to non-controlling interests, a $48.4 million pre-tax net
foreign exchange loss, a $19.0 million pre-tax accelerated depreciation and amortization expense and pre-tax incremental costs
of $3.0 million, both in connection with our global brand initiative, a $13.4 million tax benefit following an internal reorganization,
pre-tax acquisition costs of $11.8 million, an $11.5 million pre-tax gain on the disposal of a terminal, an $8.8 million pre-tax gain
on the investment we held in CST, pre-tax incremental expenses caused by hurricanes totaling $6.6 million, as well as a pre-tax
negative goodwill of $2.8 million.
In addition to exceptionally including 53 weeks, results for fiscal 2017 included a $27.1 million pre-tax accelerated depreciation
and amortization expense in connection with our global brand initiative, pre-tax acquisition costs of $21.0 million, a $9.6 million
pre-tax net foreign exchange loss, pre-tax restructuring charges of $8.1 million, as well as a pre-tax curtailment gain on defined
benefits pension plan obligation of $3.9 million.
Excluding these items from both fiscal years, net earnings for fiscal 2018 would have been approximately $1.5 billion ($2.60 per
share on a diluted basis) compared with $1.3 billion ($2.21 per share on a diluted basis) for fiscal 2017, an increase of
$219.0 million, or 17.4%. This increase is attributable to the contribution from acquisitions, to our continued organic growth, to
higher fuel margins, as well as to a lower income tax rate, partly offset by higher financing expenses following our recent
acquisitions and by one less week in fiscal 2018 compared with fiscal 2017.
Network growth
Multi-site acquisitions 1
CST Brands Inc.
On June 28, 2017, we completed the acquisition of all the issued and outstanding shares of CST Brands Inc. (“CST”) through
an all-cash transaction valued at $48.53 per share, with a total enterprise value of approximately $4.4 billion including net debt
assumed. CST is based in San Antonio, Texas and, before the closing of the acquisition, it employed more than 14,000 people
at over 2,000 locations throughout the Southwestern U.S., with an important presence in Texas, the Southeastern U.S., the
State of New York and Eastern Canada.
On the same day, we sold to Parkland Fuel Corporation a significant portion of CST’s Canadian assets for approximately
CA $986.0 million ($752.5 million). The disposed assets were mainly comprised of CST’s independent dealers and commission
agents’ network, its heating-oil business, 159 company-operated sites, as well as its Montreal head office. As a result, we
retained 157 of CST’s company-operated sites in Canada. Also, on September 6, 2017, as per the requirements of the U.S.
1 A multi-site acquisition is defined as an acquisition of seven stores or more.
32
Annual Report © 2018 Alimentation Couche-Tard Inc.
Federal Trade Commission, we sold 70 CST U.S. company-operated sites to Empire Petroleum Partners, LLC (“Empire”) for a
total consideration of $143.0 million. No gain or loss was recognized on these sales transactions. The disposed assets and
associated liabilities are presented as held for sale in the fair value of assets acquired and liabilities assumed and are recorded
at their respective fair value less costs of disposal.
Taking into consideration the sale transactions subsequent to the CST acquisition, on a net basis we have added 1,263 sites to
our North American network, for a net value of approximately $3.7 billion.
CrossAmerica Partners LP
Pursuant to the acquisition of CST, we also acquired the general partner of CrossAmerica Partners LP (“CAPL”), own 100% of
CAPL’s Incentive Distribution Rights (“IDRs”) and, as at April 29, 2018, held a 21.4% equity investment in it (20.5% as at
June 28, 2017). CAPL supplies road transportation fuel under various brands to approximately 1,300 locations in the United
States. The combination of CAPL with our existing wholesale network of more than 700 stores makes us a leading wholesaler
of road transportation fuel in the U.S.
Following our evaluation of our relationship with CAPL, we concluded that we control the partnership’s operations and activities
even though we do not have a majority ownership of CAPL’s outstanding common units. As a result, we fully consolidate CAPL
in our consolidated financial statements.
All transactions between Couche-Tard and CAPL are eliminated from our consolidated financial statements. These transactions
consist of a mark-up on motor fuel purchased and sold between us and CAPL, rent charged by CAPL to us, earnings from
CAPL’s equity ownership interest in CST Fuel Supply, a subsidiary of ours, our portion of CAPL’s common unit distributions and
our revenues from CAPL’s incentive distribution rights . Additionally, we provide management and corporate support services to
CAPL and charge CAPL a management fee under the terms of the Amended and Restated Omnibus Agreement, as well as an
allocation of certain incentive compensation.
CAPL is a publicly traded Delaware limited partnership and its common units are listed for trading on the New York Stock
Exchange under the symbol “CAPL.” As a result, CAPL is required to file reports with the United States Securities and Exchange
Commission (“SEC”), where additional information about its results of operations can be found.
Financing
In order to finance exclusively, directly or indirectly, the acquisition of CST as well as the repayments of CST’s outstanding debt,
we entered into a new credit agreement consisting of an unsecured non-revolving acquisition credit facility of an aggregate
maximum amount of $4.3 billion, which was available exclusively to finance the acquisition of CST and the repayment of any of
CST’s and its subsidiaries’ outstanding debt (“acquisition facility”). As of April 29, 2018, a total amount of $412.1 million was
outstanding under this acquisition facility and the effective interest rate was 3.358%.
On June 28, 2017, we repaid all of CST’s outstanding borrowings under its revolving credit facilities for an amount of
$498.8 million and, on July 28, 2017, we repaid all of CST’s outstanding senior notes for an amount of $577.1 million from
amounts drawn from our acquisition facility.
Initial investment in CST
At the acquisition date, we owned an investment in CST which, through the closing of the acquisition, we disposed of. As a
consequence, we recognized an $8.8 million pre-tax gain to our earnings of fiscal 2018.
CST Integration
We expect that our synergies associated with the CST acquisition will reach $215.01 million over the 3 years following the
transaction. These synergies should mainly result from reductions in operating, selling, administrative and general expenses, as
well as from improvements in road transportation fuel and merchandise distribution and supply costs. As of April 29, 2018, our
annual synergies run rate for the CST acquisition reached approximately $153.0 million.
CST’s results, balance sheet and cash flows are included in our consolidated financial statements from June 28, 2017.
1 As our previously stated goal is considered a forward looking statement, we are required, pursuant to securities laws, to clarify that our synergies estimate is based
on a number of important factors and assumptions. Among other things, our synergies 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 objective is also based on our assessment
of current contracts and how we expect to be able to renegotiate these contracts to take advantage of our increased purchasing power. In addition, our synergies
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 our acquired companies’ systems with ours. An important change in these facts and assumptions could significantly impact our
synergies estimate as well as the timing of the implementation of our different initiatives.
Annual Report © 2018 Alimentation Couche-Tard Inc.
33
CAPL’s results, balance sheet and cash flows are also fully consolidated in our financial statements, however, CAPL’s
accounting periods do not coincide with our accounting periods. The consolidated statement of earnings, comprehensive income,
changes in equity and cash flows for fiscal 2018 include those of CAPL for the period beginning June 28, 2017 and ending
March 31, 2018, adjusted for significant transactions, if any. The consolidated balance sheet as at April 29, 2018 includes CAPL’s
balance sheet as at March 31, 2018, adjusted for significant transactions, if any.
Approximately 78.3% of CAPL’s operating results are attributable to other unit holders, which are presented as earnings
attributable to non-controlling interests for fiscal 2018. Therefore, a substantial portion of the operating results of CAPL are not
earned by our shareholders.
During the fourth quarter of fiscal 2018, we adjusted and finalized our assessment of the fair value of the assets acquired, the
liabilities assumed and the goodwill for the transaction. The adjustments we made had the following impact on our previously
reported net earnings:
12-week period ended
October 15, 2017
24-week period ended
October 15, 2017
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses
Depreciation, amortization and impairment of property and
equipment, intangible assets and other assets
Operating income
Net financial expenses
Earnings before income taxes
Income taxes
Net earnings
Net earnings attributable to non-controlling interests
Net earnings attributable to shareholders of the
Corporation
12,140.6
10,096.9
2,043.7
1,198.2
205.0
641.3
89.6
560.0
123.7
436.3
(1.0)
435.3
-
-
-
-
4.3
(4.3)
-
(4.3)
(1.5)
(2.8)
-
(2.8)
12,140.6
10,096.9
2,043.7
1,198.2
209.3
637.0
89.6
555.7
122.2
433.5
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses
Depreciation, amortization and impairment of property and
equipment, intangible assets and other assets
Operating income
Net financial expenses
Earnings before income taxes
Income taxes
Net earnings
(1.0)
Net earnings attributable to non-controlling interests
432.5
Net earnings attributable to shareholders of the
Corporation
21,987.8
18,205.3
3,782.5
2,229.5
375.3
1,152.1
148.8
1,020.2
224.4
795.8
4.2
800.0
-
-
-
-
4.3
(4.3)
-
(4.3)
(1.5)
(2.8)
-
(2.8)
21,987.8
18,205.3
3,782.5
2,229.5
379.6
1,147.8
148.8
1,015.9
222.9
793.0
4.2
797.2
16-week period ended
February 4, 2017
40-week period ended
February 4, 2017
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses
Depreciation, amortization and impairment of property and
equipment, intangible assets and other assets
Operating income
Net financial expenses
Earnings before income taxes
Income taxes
Net earnings
Net earnings attributable to non-controlling interests
Net earnings attributable to shareholders of the
Corporation
15,791.8
13,473.8
2,318.0
1,593.0
282.9
432.0
110.9
330.3
(140.5)
470.8
(6.9)
463.9
-
-
-
-
5.7
(5.7)
-
(5.7)
(25.4)
19.7
-
19.7
15,791.8
13,473.8
2,318.0
1,593.0
288.6
426.3
110.9
324.6
(165.9)
490.5
(6.9)
483.6
Revenues
Cost of sales
Gross profit
Operating, selling, administrative and general expenses
Depreciation, amortization and impairment of property and
equipment, intangible assets and other assets
Operating income
Net financial expenses
Earnings before income taxes
Income taxes
Net earnings
Net earnings attributable to non-controlling interests
Net earnings attributable to shareholders of the
Corporation
37,779.6
31,679.1
6,100.5
3,822.5
658.2
1,584.1
259.7
1,350.5
83.9
1,266.6
(2.7)
-
-
-
-
10.0
(10.0)
-
(10.0)
(26.9)
16.9
-
37,779.6
31,679.1
6,100.5
3,822.5
668.2
1,574.1
259.7
1,340.5
57.0
1,283.5
(2.7)
1,263.9
16.9
1,280.8
Holiday Stationstores, LLC
On December 22, 2017, we acquired all the membership interest of Holiday Stationstores, LLC and certain affiliated companies
(“Holiday”) for a total cash consideration of approximately $1.6 billion. Holiday is an important convenience store and fuel player
in the U.S. Midwest region. As of the closing of the transaction, Holiday’s network was composed of 516 sites, of which 373 were
operated by Holiday and 143 were operated by franchisees, and of 27 dealer contracts. Holiday also operates a strong car wash
business with 234 locations at the closing date, 2 food commissaries and a fuel terminal in Newport, Minnesota. Its stores are
located in Minnesota, Wisconsin, Washington State, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and
Alaska. This acquisition was financed using our available cash and existing credit facilities. From December 22, 2017, Holiday’s
results, balance sheet and cash flows are included in our consolidated financial statements.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
We expect that our synergies associated with the Holiday acquisition will range from $50.0 to $60.01 million over the 3 to 4 years
following the close of the transaction. These synergies should mainly result from reductions in operating, selling, administrative
and general expenses, from improvements in road transportation fuel and merchandise distribution and supply costs, as well as
from retail pricing optimization.
Other transactions
On May 30, 2017, we acquired 53 company-operated sites located in Louisiana, United States from American General
Investments, LLC and North American Financial Group, LLC. These convenience stores operate under the Cracker Barrel brand.
We own the land and building for 47 sites and assume the leases for the remaining 6 locations. On the same date, we closed
seven of those stores.
On July 7, 2017, we acquired, from Empire, 53 fuel supply contracts with independent operators in the Atlanta, GA metro area.
As part of this transaction, we also acquired real estate for two sites.
On November 28, 2017, we acquired certain assets from Jet Pep, Inc., including a fuel terminal, associated trucking equipment
and 18 retail sites located in Alabama. In addition, through a distinct transaction, CAPL purchased other assets from Jet Pep,
Inc. consisting of 101 commission operated retail sites, including 92 owned sites, 5 leased sites and 4 independent commission
accounts.
Single-site acquisitions
During fiscal 2018, we acquired 11 company-operated stores through distinct transactions. Available cash was used for these
transactions.
Store construction
We completed the construction, relocation or reconstruction of 88 stores during fiscal 2018.
As of April 29, 2018, 29 stores were under construction and should open in the upcoming quarters.
Summary of changes in our store network during the fourth quarter of fiscal 2018 and fiscal 2018
The following table presents certain information regarding changes in our store network over the 12-week period ended
April 29, 2018(1):
Type of site
Number of sites, beginning of period
Acquisitions
Openings / constructions / additions
Closures / disposals / withdrawals
Store conversion
Number of sites, end of period
CAPL network
Circle K branded sites under licensing agreements
Total network
Number of automated fuel stations included in the period-
end figures(6)
12-week period ended April 29, 2018
Company-
operated(2)
9,723
4
21
(33 )
3
9,718
CODO(3)
715
-
1
(4 )
10
722
DODO(4)
1,058
-
6
(10 )
(3 )
1,051
Franchised and
other affiliated(5)
1,254
-
25
(20 )
(10 )
1,249
Total
12,750
4
53
(67 )
-
12,740
1,346
2,022
16,108
972
-
6
-
978
1 As our previously stated goal is considered a forward looking statement, we are required, pursuant to securities laws, to clarify that our synergies estimate is based
on a number of important factors and assumptions. Among other things, our synergies 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 objective is also based on our assessment
of current contracts and how we expect to be able to renegotiate these contracts to take advantage of our increased purchasing power. In addition, our synergies
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 our acquired companies’ systems with ours. An important change in these facts and assumptions could significantly impact our
synergies estimate as well as the timing of the implementation of our different initiatives.
Annual Report © 2018 Alimentation Couche-Tard Inc.
35
The following table presents certain information regarding changes in our store network over the 52-week period ended
April 29, 2018(1):
Type of site
Number of sites, beginning of period
Acquisitions(7)
Openings / constructions / additions
Closures / disposals / withdrawals
Store conversion
Number of sites, end of period
CAPL network
Circle K branded sites under licensing agreements
Total network
52-week period ended April 29, 2018
Company-
operated(2)
8,011
1,711
86
(124 )
34
9,718
CODO(3)
756
6
3
(10 )
(33 )
722
DODO(4)
1,010
74
36
(77 )
8
1,051
Franchised and
other affiliated(5)
1,092
143
107
(84 )
(9 )
1,249
Total
10,869
1,934
232
(295 )
-
12,740
1,346
2,022
16,108
(1)
(2)
(3)
(4)
(5)
(6)
(7)
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 agents.
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 sometimes provides 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.
Exclude CST stores sold to Parkland Fuel Corporation and to Empire as well as the Cracker Barrel stores closed at the acquisition date.
Outstanding transactions
On November 27, 2017, we reached an agreement to sell 100% of our shares in Statoil Fuel & Retail Marine AS to St1 Norge
AS. The transaction is subject to the customary regulatory approvals and closing conditions and is expected to close during
calendar year 2018.
Issuance of Canadian- and US-dollar-denominated senior unsecured notes
On July 26, 2017, we issued Canadian-dollar-denominated senior unsecured notes totaling CA $700.0 million (approximately
$558.0 million) as well as US-dollar-denominated senior unsecured notes totaling $2.5 billion, divided as follows:
Tranche 6
Tranche 7
Tranche 8
Tranche 9
Notional amount
$1,000.0 million
CA $700.0 million
$1,000.0 million
$500.0 million
Maturity
July 26, 2022
July 26, 2024
July 26, 2027
July 26, 2047
Coupon rate
2.700%
3.056%
3.550%
4.500%
Effective rate as at
April 29, 2018
2.819%
3.133%
3.642%
4.576%
Interest is payable semi-annually on January 26 and July 26 of each year.
The net proceeds from those issuances, which were approximately $3.0 billion, were mainly used to repay a portion of our
acquisition facility and of our term revolving unsecured operating credit facility.
Interest rate locks
During fiscal 2018, we extended our interest rate locks that were effective as at April 30, 2017, and entered into new interest
rate locks at the following conditions:
Notional amount
$250.0 million
$250.0 million
Interest lock term
5 years
10 years
Rate
From 1.951% to 1.955%
From 2.392% to 2.393%
Maturity date
July 28, 2017
July 28, 2017
On July 20, 2017, prior to their maturity, we settled all our interest rate locks. As at the same date, the total cumulative loss since
we first entered into interest rate locks was $14.7 million. This loss has been transferred to Accumulated other comprehensive
loss and will be amortized over the term of the related US-dollar-denominated senior unsecured notes issued on July 26, 2017.
The amortization will be recognized in the consolidated statements of earnings as a financial expense and will adjust the effective
interest on the US-dollar-denominated-senior unsecured notes issued on July 26, 2017.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
Cross-currency interest rate swaps
On July 20, 2017, we entered into a cross-currency interest rate swap agreement, allowing us to synthetically convert our newly
issued Canadian-dollar denominated senior unsecured notes into US dollars. This agreement became effective on July 26, 2017.
Receive – Notional
CA $700.0 million
Receive – Rate
3.056%
Pay – Notional
US $577.4 million
Pay – Rate
From 3.226% to 3.334%
Maturity
July 26, 2024
This agreement is designated as a foreign exchange hedge of our net investment in our operations in the United States.
Issuance of US-dollar-denominated senior unsecured notes
On December 14, 2017, we issued US-dollar-denominated senior unsecured notes totaling $900.0 million, divided as follows:
Tranche 10
Tranche 11
Notional amount
$600.0 million
$300.0 million
Maturity
December 13, 2019
December 13, 2019
Coupon rate
2.350%
Three-month LIBOR plus 0.500%
Effective rate as at
April 29, 2018
2.557%
2.791%
The net proceeds from those issuances, which were $893.8 million, were mainly used to repay a portion of our term revolving
unsecured operating credit facility and of our acquisition facility.
Interest rate swap
On December 7, 2017, we entered into fixed-to-floating interest rate swap agreements, allowing us to synthetically convert our
newly issued fixed interest rate US-dollar-denominated senior unsecured notes into floating interest rate US-dollar-denominated
senior unsecured notes. These agreements became effective on December 14, 2017, and all mature on December 13, 2019.
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Notional amount
$150.0 million
$150.0 million
$150.0 million
$150.0 million
Rate
Three-month LIBOR plus 0.353%
Three-month LIBOR plus 0.355%
Three-month LIBOR plus 0.350%
Three-month LIBOR plus 0.350%
These agreements were designated as fair value hedges of our US-dollar-denominated senior unsecured notes issued on
December 14, 2017.
U.S. Tax Cuts and Jobs Act
During fiscal 2018, following the finalization of our analysis of the impacts of the “U.S. Tax Cuts and Jobs Act”, we recorded net
tax benefits of $288.3 million, of which $18.2 million relates to non-controlling interests. These net tax benefits are mostly derived
from the remeasurement of our deferred income tax balances using the new U.S. statutory federal income tax rate, which
decreased from 35.0% to 21.0%, partly offset by the Deemed Repatriation Transition Tax (“Transition tax”).
Sale of a terminal
During fiscal 2018, we disposed of our 50% share in a fuel terminal in Ireland for a total cash consideration of $18.1 million and
recognized to earnings a gain of $11.5 million on the disposal.
Restructuring
During fiscal 2018, as part of our cost reduction initiatives, the search for synergies aimed at improving our efficiency as well as
in relation with the CST integration, we made the decision to proceed with the restructuring of certain of our European and U.S.
operations. As a result, restructuring costs of $56.9 million were recorded during the year, of which $5.2 million relates to non-
controlling interests.
Annual Report © 2018 Alimentation Couche-Tard Inc.
37
Events outside of the normal course of business
During the year, our store network was impacted by two major hurricanes, Harvey in Texas and Irma in Florida. Our stores were
impacted mainly through the loss of sales, fuel supply disruptions and incremental expenses, including property damages,
inventory losses and clean-up costs. Overall, 1,300 of our stores were affected at various levels and as a consequence, we lost
approximately 3,000 store days in merchandise and service sales and 5,700 store days in road transportation fuel sales.
Incremental expenses reached approximately $6.6 million during fiscal 2018.
Global Circle K brand
On September 22, 2015, we announced the creation of a new global convenience brand, Circle K. The new brand is replacing
our existing Circle K, Statoil, Mac’s, Kangaroo Express, Cornerstore, On the Run, and Topaz brands on stores and service
stations across Canada (except in Quebec), the United States and Europe.
In connection with this project, we incurred additional capital expenditures and other expenses in order to replace and upgrade
various existing assets. As a result of our plan for the replacement and upgrade of existing assets, we have accelerated the
depreciation and amortization of these assets, including but not limited to, store signage and the Statoil trade name and, more
recently, store signage for the Topaz sites in Ireland. Consequently, an accelerated depreciation and amortization expense and
incremental costs from our global brand initiatives of $19.0 million and of $3.0 million, respectively, were recorded to earnings
during fiscal 2018.
As of April 29, 2018, more than 3,350 stores in North America and close to 1,650 stores in Europe had been rebranded to our
new global convenience brand Circle K.
Share repurchase and conversion
On October 11, 2017, we reached an agreement to repurchase 4,372,923 Class B subordinate voting shares held by Metro
Canada Holdings Inc., a wholly owned subsidiary of Metro Inc., for a net amount of $193.1 million. The Class A shares held by
Metro Canada Holdings Inc. were converted into an equivalent number of Class B shares before the repurchase. The transaction
closed on October 17, 2017, and all shares repurchased were cancelled at the same date. The dividend deemed to have been
paid to Metro Canada Holdings Inc. as a result of this repurchase is an eligible dividend within the meaning of the Income Tax
Act (Canada) and the Taxation Act (Quebec).
Additionally, on October 11, 2017, 11,369,599 Class A shares were converted to Class B shares.
Outstanding shares and stock options
As at July 6, 2018, Couche-Tard had 132,023,873 Class A multiple-voting shares and 432,198,664 Class B subordinate voting
shares issued and outstanding. In addition, as at the same date, Couche-Tard had 1,721,382 outstanding stock options for the
purchase of Class B subordinate voting shares.
Dividends
During its July 9, 2018 meeting, the Corporation’s Board of Directors (the “Board”) approved an increase in the quarterly dividend
of CA 1.0¢ per share, bringing it to CA 10.0¢ per share, an increase of 11.1%.
During the same meeting, the Board declared a quarterly dividend of CA 10.0¢ per share for the fourth quarter of fiscal 2018 to
shareholders on record as at July 18, 2018, and approved its payment for August 1, 2018. This is an eligible dividend within the
meaning of the Income Tax Act (Canada).
During fiscal 2018, the Board declared total dividends of CA 37.0¢ per share.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
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 also include the wholesale of merchandise and goods to certain independent operators and franchisees
made from our distribution centers and commissaries, 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 fees from automatic teller machines, sales of
calling cards and gift cards, revenues from car washes, the commission on the issuance of lottery tickets and money orders,
fees for cashing checks as well as sales of postage stamps and bus tickets.
Service revenues also include franchise fees, license fees from affiliates, royalties from franchisees and commissions from
agents.
Road transportation fuel revenues. We include in our revenues the total dollar amount of road transportation fuel sales, including
any embedded taxes when they are included in the purchase price, if we take ownership of the road transportation fuel inventory.
In the United States and in Europe, in some instances, we purchase road transportation fuel and sell it to certain independent
store operators at cost plus a mark-up. We record the full value of these revenues (cost plus mark-up) as road transportation
fuel revenues. Where we act as a selling agent for a petroleum distributor, only the commission we earn is recorded as revenue.
Other revenues. Other revenues include sales of stationary energy, marine fuel, aviation fuel, and lubricants (until
September 30, 2015). Other revenues also include rental income 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 goods sold. Cost of goods sold 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 agents and
overhead.
Key performance indicators used by management, which can be found under “Summary analysis of consolidated results of fiscal
2018 - Other Operating Data”, are merchandise and service gross margin, growth of same-store merchandise revenues, road
transportation fuel gross margin and growth of same-store road transportation fuel volume, return on equity and return on capital
employed.
Annual Report © 2018 Alimentation Couche-Tard Inc.
39
Summary analysis of consolidated results for the fourth quarter of fiscal 2018
The following table highlights certain information regarding our operations for the 12-week period ended April 29, 2018 and
13-week period ended April 30, 2017:
(in millions of US dollars, unless otherwise stated)
Revenues
Operating income
Net earnings attributable to shareholders of the Corporation
Selected Operating Data – excluding CAPL:
Merchandise and service gross margin(1):
Consolidated
United States
Europe
Canada
Growth of (decrease in) same-store merchandise revenues(2)(4):
United States(3)
Europe
Canada(3)
Road transportation fuel gross margin:
United States (cents per gallon)(3)
Europe (cents per litre)
Canada (CA cents per litre)(3)
Growth of (decrease in) same-store road transportation fuel volume(4):
United States(3)
Europe
Canada(3)
12-week period ended
April 29, 2018
13-week period ended
April 30, 2017
13,614.8
467.0
392.7
34.9%
33.6%
44.0%
34.4%
1.8%
4.3%
3.6%
17.29
8.72
9.44
(0.1% )
0.1%
(2.9% )
9,622.6
360.0
277.6
34.7%
33.3%
44.0%
34.7%
1.6%
2.7%
(0.9% )
15.47
7.83
8.05
1.7%
0.7%
(0.2% )
Change %
41.5
29.7
41.5
0.2
0.3
-
(0.3)
11.8
11.4
17.3
Includes revenues derived from franchise fees, royalties, suppliers rebates on some purchases made by franchisees and licensees as well as from wholesale merchandise.
(1)
(2) Does not include services and other revenues (as described in footnote 1 above). Growth in Canada and Europe is calculated based on local currencies.
(3) For company-operated stores only.
(4) Presented on a comparable basis of 12 weeks.
Revenues
Our revenues were $13.6 billion for the fourth quarter of fiscal 2018, up by $4.0 billion, an increase of 41.5% compared with the
corresponding quarter of fiscal 2017, mainly attributable to the contribution from acquisitions, to a higher average road
transportation fuel selling price, to organic growth, as well as to the positive net impact from the translation of revenues of our
Canadian and European operations into US dollars, partly offset by one less week during the fourth quarter of fiscal 2018
compared with the fourth quarter of fiscal 2017.
More specifically, total merchandise and service revenues for the fourth quarter of fiscal 2018 were $3.2 billion, an increase of
$648.8 million compared with the corresponding quarter of fiscal 2017. Excluding CAPL’s revenues, as well as the positive net
impact from the translation of our Canadian and European operations into US dollars, merchandise and service revenues
increased by approximately $572.0 million or 22.1%. This increase is attributable to the contribution from acquisitions, which
amounted to approximately $676.0 million, as well as to organic growth, partly offset by one less week during the fourth quarter
of fiscal 2018 compared with the fourth quarter of fiscal 2017. Same-store merchandise revenues increased by 1.8% in the
United States, a clear improvement over the trend of the last quarters. Same-store merchandise revenues increased by 1.6% in
our CST US stores network, thanks to all of our teams still at work to continue the implementation of some of our key programs
and the sharing of best practices. In Europe, same-store merchandise revenues increased by 4.3%, driven by the success of
our rebranding activities and the rollout and improvements of our food programs. In Canada, same-store merchandise revenues
increased by 3.6%, a strong improvement over the trend of the last few quarters, driven by our tactics to increase traffic, higher
taxes on tobacco products, as well as by the improvement in our CST Canada sites, which posted same-store merchandise
revenue growth of 2.9%.
Total road transportation fuel revenues for the fourth quarter of fiscal 2018 were $10.0 billion, an increase of $3.3 billion
compared with the corresponding quarter of fiscal 2017. Excluding CAPL’s revenues, as well as the net positive impact from the
translation of revenues of our Canadian and European operations into US dollars, road transportation fuel revenues increased
by approximately $2.6 billion or 38.8%. This increase was attributable to the contribution from acquisitions, which amounted to
approximately $2.0 billion, as well as to the impact of a higher average road transportation fuel selling price, which had a positive
impact of approximately $752.0 million, partly offset by one less week during the fourth quarter of fiscal 2018 compared with the
fourth quarter of fiscal 2017. Same-store road transportation fuel volumes in the US decreased by 0.1%. In our CST U.S. network,
same-store road transportation fuel volumes decreased by only 0.6%, continuing on the positive trend of improving results from
40
Annual Report © 2018 Alimentation Couche-Tard Inc.
quarter to quarter. In Europe, same-store road transportation fuel volumes increased by 0.1%, while in Canada same-store road
transportation fuel volumes decreased by 2.9%, as a result of continued strategy aimed at growing overall profitability.
The following table shows the average selling price of road transportation fuel in our various markets, starting with the first
quarter of the fiscal year ended April 30, 2017:
Quarter
52-week period ended April 29, 2018
United States (US dollars per gallon) – excluding CAPL
Europe (US cents per litre)
Canada (CA cents per litre)
53-week period ended April 30, 2017
United States (US dollars per gallon) – excluding CAPL
Europe (US cents per litre)
Canada (CA cents per litre)
1st
2.21
61.39
99.81
2.20
58.65
92.66
2nd
3rd
4th
2.47
68.23
101.46
2.10
58.01
90.36
2.30
71.19
108.11
2.18
61.87
94.67
2.51
78.32
110.39
2.25
62.46
97.20
Weighted
average
2.37
70.52
102.85
2.18
60.40
94.35
Total other revenues for the fourth quarter were $367.9 million. Excluding CAPL’s revenues, other revenues increased by
$82.0 million. The impact of acquisitions for the fourth quarter was approximately $5.0 million.
Gross profit
Our gross profit was $2.0 billion for the fourth quarter of fiscal 2018, up by $474.6 million, an increase of 30.9% compared with
the corresponding quarter of fiscal 2017, mainly attributable to the contribution from acquisitions, to higher fuel margins, to
organic growth, to the net positive impact from the translation of operations of our Canadian and European operations into
US dollars, as well as to the contribution from CAPL, partly offset by one less week during the fourth quarter of fiscal 2018
compared with the fourth quarter of fiscal 2017.
In the fourth quarter of fiscal 2018, our merchandise and service gross profit was $1.1 billion, an increase of $226.6 million
compared with the corresponding quarter of fiscal 2017. Excluding CAPL’s gross profit, as well as the net positive impact from
the translation of our Canadian and European operations into US dollars, merchandise and service gross profit increased by
approximately $200.0 million or 22.2%. This increase is attributable to the contribution from acquisitions, which amounted to
approximately $224.0 million, and to our organic growth, partly offset by one less week during the fourth quarter of fiscal 2018
compared with the fourth quarter of fiscal 2017. Our gross margin increased by 0.3% in the United States to 33.6%. Excluding
our CST and Holiday stores networks, which have a different revenue mix and cost structure, our merchandise and service gross
margin in the U.S. was 33.8%, an increase of 0.5%. Our gross margin remained steady in Europe at 44.0%, while in Canada,
our gross margin decreased by 0.3% to 34.4%, mainly as a result of the conversion of certain Esso agent sites to company-
operated stores.
In the fourth quarter of fiscal 2018, our road transportation fuel gross profit was $818.8 million, an increase of $236.9 million
compared with the corresponding quarter of fiscal 2017. Excluding CAPL’s gross profit, as well as the net positive impact from
the translation of our Canadian and European operations into US dollars, our fourth quarter of fiscal 2018 road transportation
fuel gross profit increased by approximately $187.0 million or 32.1%. Our road transportation fuel gross margin was 17.29¢ per
gallon in the United States, an increase of 1.82¢ per gallon. In Europe, the road transportation fuel gross margin was US 8.72¢
per litre, an increase of US 0.89¢ per litre, favorably impacted by the sale of Compulsory Stock Obligation inventory in Sweden.
In Canada, the road transportation fuel gross margin was CA 9.44¢ per litre, an increase of CA 1.39¢ per litre still driven by the
inclusion of the CST stores in our network and different pricing strategies.
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 the fiscal year ended
April 30, 2017, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 29, 2018
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
53-week period ended April 30, 2017
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
20.75
3.79
16.96
20.86
4.08
16.78
2nd
24.70
4.21
20.49
19.87
3.99
15.88
3rd
15.66
3.73
11.92
18.33
3.99
14.34
4th
17.29
3.62
13.67
15.47
4.12
11.35
Weighted
average
19.39
3.82
15.57
18.56
4.04
14.52
Annual Report © 2018 Alimentation Couche-Tard Inc.
41
As demonstrated by the table above, road transportation fuel margins in the United States can be volatile from one quarter to
another but tend to be relatively stable over longer periods. Margin volatility and expenses related to electronic payment modes
are not as significant in Europe and Canada.
In the fourth quarter, other revenues gross profit was $65.1 million an increase of $11.1 million compared with the corresponding
period of fiscal 2017. Excluding CAPL’s gross profit, other revenues gross profit increased by $2.0 million.
Operating, selling, administrative and general expenses (“expenses”)
For the fourth quarter of fiscal 2018, expenses increased by 29.9%, compared with the fourth quarter of fiscal 2017, but were
stable if we exclude certain items as demonstrated by the following table:
Total variance, as reported
Adjusted for:
Increase from incremental expenses related to acquisitions
Increase from the net impact of foreign exchange translation
CAPL’s expenses for fiscal 2018
Acquisition costs recognized to earnings of fiscal 2017
Acquisition costs recognized to earnings of fiscal 2018
Increase from higher electronic payment fees, excluding acquisitions
Remaining variance
12-week period ended April 29, 2018
29.9%
(24.8%)
(3.2%)
(2.3%)
0.6%
(0.1%)
(0.1%)
0.0%
The expense level was impacted by higher minimum wages in certain regions, normal inflation, higher advertising and marketing
activities in connection with our global brand project, higher expenses needed to support our organic growth, the conversion of
CODO stores into company-operated stores and by proportionally higher operational expenses in our recently built stores, as
these stores generally have a larger footprint and higher sales than the average of our existing network, partly offset by one less
week during the fourth quarter of fiscal 2018 compared with the fourth quarter of fiscal 2017. We continue to rigorously focus
on controlling the costs throughout our organization, while ensuring we maintain the quality of service we offer to our customers.
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) and
adjusted EBITDA
During the fourth quarter of fiscal 2018, EBITDA increased from $521.6 million to $711.1 million. Excluding the specific items
shown in the table below from EBITDA of the fourth quarter of fiscal 2018 and of the corresponding period of fiscal 2017, the
adjusted EBITDA for the fourth quarter of fiscal 2018 increased by $173.9 million or 32.9% compared with the corresponding
period of the previous fiscal year, mainly through the contribution from acquisitions, higher fuel margins, organic growth and the
net positive impact from the translation of the results of our Canadian and European operations into US dollars, partly offset by
one less week during the fourth quarter of fiscal 2018 compared with the fourth quarter of fiscal 2017. Acquisitions contributed
approximately $119.0 million to the adjusted EBITDA of the fourth quarter of fiscal 2018, while the variation in exchange rates
had a net positive impact of approximately $22.0 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, consider that those performance measures facilitate the evaluation of our ongoing operations and our
ability to generate cash flows to fund our cash requirements, including our capital expenditures program. 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, intangible assets and
other assets
EBITDA
Adjusted for:
EBITDA attributable to non-controlling interests
Restructuring costs attributable to shareholders of
the Corporation (including $1.3 million for our interest in CAPL for the 52-week period ended
April 29, 2018)
Acquisition costs
Curtailment gain on defined benefits pension plan obligation
Adjusted EBITDA
12-week period ended
April 29, 2018
396.9
13-week period ended
April 30, 2017
277.6
0.3
75.7
238.2
711.1
(15.5 )
6.9
0.9
(0.6 )
702.8
43.6
46.0
154.4
521.6
-
2.1
6.4
(1.2 )
528.9
42
Annual Report © 2018 Alimentation Couche-Tard Inc.
Depreciation, amortization and impairment of property and equipment, intangible assets
and other assets (“depreciation”)
For the fourth quarter, depreciation, amortization and impairment expenses increased by $83.8 million. Excluding CAPL, the
depreciation expense increased by $67.5 million, mainly driven by the impact from investments made through acquisitions, the
replacement of equipment, the addition of new stores and the ongoing improvement of our network. The depreciation expense
for the fourth quarter includes a charge of $4.5 million for the accelerated depreciation and amortization of certain assets in
connection with our global rebranding project.
Net financial expenses
Net financial expenses for the fourth quarter of fiscal 2018 were $75.7 million, an increase of $29.7 million compared with the
fourth quarter of fiscal 2017. Excluding the net foreign exchange loss of $1.0 million and $15.1 million recorded in the fourth
quarters of fiscal 2018 and fiscal 2017, respectively, as well as CAPL’s financial expenses of $5.5 million, net financial expenses
increased by $38.3 million. This increase is mainly attributable to our higher average long-term debt in connection with our recent
acquisitions, partly offset by the repayments made, as well as by one less week during the fourth quarter of fiscal 2018 compared with
the fourth quarter of fiscal 2017. The net foreign exchange loss of $1.0 million for the fourth quarter of fiscal 2018 is mainly due to the
impact of foreign exchange variations on certain cash balances and working capital items.
Income taxes
During the fourth quarter of fiscal 2018, following the finalization of our analysis of the impacts of the “U.S. Tax Cuts and Jobs
Act”, we recorded an additional net tax benefit of $69.7 million, of which $4.1 million relates to non-controlling interests. This net
tax benefit is mostly derived from the remeasurement of the Deemed Repatriation Transition Tax (“Transition tax”), as well as
from the remeasurement of our deferred income tax balances using the new U.S. statutory federal income tax rate, which
decreased from 35.0% to 21.0%.
Excluding this adjustment, the income tax expense would have been approximately $70.0 million for the fourth quarter of fiscal
2018, corresponding to an income tax rate of 17.6%, which compares to an income tax rate of 13.6% for the fourth quarter of
fiscal 2017, due to a different mix in our earnings across various countries.
Net earnings attributable to shareholders of the Corporation and adjusted net earnings
attributable to shareholders of the Corporation (“net earnings”)
Net earnings for the fourth quarter of fiscal 2018 were $392.7 million, compared with $277.6 million for the fourth quarter of the
previous fiscal year, an increase of $115.1 million or 41.5%. Diluted net earnings per share stood at $0.70, compared with
$0.49 the previous year.
Excluding the items shown in the table below from net earnings of the fourth quarter of fiscal 2018 and of fiscal 2017, net earnings
for the fourth quarter of fiscal 2018 would have been approximately $336.0 million, compared with $298.0 million for the fourth
quarter of fiscal 2017, an increase of $38.0 million or 12.8%. Adjusted diluted net earnings per share would have been
approximately $0.59 for the fourth quarter of fiscal 2018 compared with $0.52 for the corresponding period of fiscal 2017, an
increase of 13.5%. The translation of revenues and expenses from our Canadian and European operations into US dollars had
a net positive impact of approximately $10.0 million on net earnings of the fourth quarter of fiscal 2018.
Annual Report © 2018 Alimentation Couche-Tard Inc.
43
The table below reconciles reported net earnings to adjusted net earnings:
(in millions of US dollars)
12-week period ended
April 29, 2018
13-week period ended
April 30, 2017
Net earnings attributable to shareholders of the Corporation, as reported
Adjusted for:
Tax benefit stemming from the “U.S. Tax Cuts and Jobs Act” – attributable to shareholders of
the Corporation
Restructuring costs – attributable to shareholders of the Corporation
Accelerated depreciation and amortization expense
Net foreign exchange loss
Acquisition costs
Curtailment gain on defined benefits pension plan obligation
Tax impact of the items above and rounding
Adjusted net earnings attributable to shareholders of the Corporation
392.7
(65.6 )
6.9
4.5
1.0
0.9
(0.6 )
(3.8 )
336.0
277.6
-
2.1
5.3
15.1
6.4
(1.2 )
(7.3 )
298.0
It should be noted that adjusted net earnings is not a performance measure defined by IFRS, but we, as well as investors and
analysts, consider this measure useful for evaluating the underlying performance of our operations on a comparable basis. Note
that our definition of this measure may differ from the one used by other public corporations.
44
Annual Report © 2018 Alimentation Couche-Tard Inc.
Summary analysis of consolidated results of fiscal 2018
The following table highlights certain information regarding our operations for the 52-week period ended April 29, 2018, the 53-
week period ended April 30, 2017 and the 52-week period ended April 24, 2016.
(in millions of US dollars, unless otherwise stated)
Statement of Operations Data:
Merchandise and service revenues(1):
United States
Europe
Canada
CAPL
Total merchandise and service revenues
Road transportation fuel revenues:
United States
Europe
Canada
CAPL
Elimination of intercompany transactions with CAPL
Total road transportation fuel revenues
Other revenues(2):
United States
Europe
Canada
CAPL
Elimination of intercompany transactions with CAPL
Total other revenues
Total revenues
Merchandise and service gross profit(1):
United States
Europe
Canada
CAPL
Total merchandise and service gross profit
Road transportation fuel gross profit:
United States
Europe
Canada
CAPL
Elimination of intercompany transactions with CAPL
Total road transportation fuel gross profit
Other revenues gross profit(2):
United States
Europe
Canada
CAPL
Elimination of intercompany transactions with CAPL
Total other revenues gross profit
Total gross profit
Operating, selling, administrative and general expenses
Excluding CAPL
CAPL
Elimination of intercompany transactions with CAPL
Total Operating, selling, administrative and general expenses
Restructuring costs (including $5.2 million for CAPL for the 52-week period ended
April 29, 2018)
(Gain) loss on disposal of property and equipment and other assets
Curtailment gain on defined benefits pension plan obligation
Gain on disposal of lubricant business
Depreciation, amortization and impairment of property and equipment, intangible assets
and other assets
Excluding CAPL
CAPL
Total depreciation, amortization and impairment of property and equipment, intangible
assets and other assets
Operating income
Excluding CAPL
CAPL
Elimination of intercompany transactions with CAPL
Total operating income
Net earnings including non-controlling interests
Net (earnings) attributable to non-controlling interests
Net earnings attributable to shareholders of the Corporation
Per Share Data:
Basic net earnings per share (dollars per share)
Diluted net earnings per share (dollars per share)
Adjusted diluted net earnings per share (dollars per share)
Cash dividend per share (CA cents per share)
52-week period
2018
53-week period
2017
52-week period
2016
9,432.0
1,413.9
2,053.5
76.6
12,976.0
23,327.3
7,684.1
4,819.9
1,547.6
(262.4 )
37,116.5
25.1
1,217.7
27.6
47.6
(16.1 )
1,301.9
51,394.4
3,140.1
602.3
707.7
18.6
4,468.7
1,868.1
1,024.2
424.9
69.6
-
3,386.8
23.2
173.7
27.6
47.6
(16.1 )
256.0
8,111.5
5,070.1
67.8
(12.5 )
5,125.4
56.9
(17.7 )
(0.6 )
-
845.3
61.1
906.4
2,045.1
(0.4 )
(3.6 )
2,041.1
1,680.5
(6.9 )
1,673.6
2.96
2.95
2.60
37.00
7,669.8
1,205.8
1,848.5
-
10,724.1
16,492.0
6,473.4
3,089.0
-
-
26,054.4
14.0
1,098.4
13.6
-
-
1,126.0
37,904.5
2,545.0
511.4
625.2
-
3,681.6
1,407.6
917.5
262.0
-
-
2,587.1
14.0
185.5
13.6
-
-
213.1
6,481.8
4,100.5
-
-
4,100.5
8.1
11.8
(3.9 )
-
667.6
-
667.6
1,697.7
-
-
1,697.7
1,208.9
-
1,208.9
2.13
2.12
2.21
34.75
7,366.5
933.8
1,771.6
-
10,071.9
15,864.1
5,422.3
2,019.8
-
-
23,306.2
14.9
751.1
0.5
-
-
766.5
34,144.6
2,452.3
397.0
581.4
-
3,430.7
1,479.4
811.5
148.9
-
-
2,439.8
14.9
195.6
0.5
-
-
211.0
6,081.5
3,836.5
-
-
3,836.5
-
18.8
(27.2 )
(47.4 )
633.1
-
633.1
1,667.7
-
-
1,667.7
1,191.4
-
1,191.4
2.10
2.09
2.08
26.75
Annual Report © 2018 Alimentation Couche-Tard Inc.
45
(in millions of US dollars, unless otherwise stated)
Other Operating Data – excluding CAPL:
Merchandise and service gross margin(1):
Consolidated
United States
Europe
Canada
Growth of same-store merchandise revenues(3)(12):
United States(4)
Europe
Canada(4)
Road transportation fuel gross margin:
United States (cents per gallon)(4)
Europe (cents per litre)
Canada (CA cents per litre)(4)
Total volume of road transportation fuel sold:
United States (millions of gallons)
Europe (millions of litres)
Canada (millions of litres)
Growth of (decrease in) same-store road transportation fuel volume(12) :
United States(4)
Europe
Canada(4)
Balance Sheet Data:
Total assets (excluding $1.3 billion for CAPL)
Interest-bearing debt (excluding $536.8 million for CAPL)
Shareholders’ equity
Indebtedness Ratios(5):
Net interest-bearing debt/total capitalization(6)
Leverage ratio(7)(11)
Adjusted leverage ratio(8)(11)
Returns(5):
Return on equity(9)(11)
Return on capital employed(10)(11)
52-week period
2018
53-week period
2017
52-week period
2016
34.5%
33.3%
42.6%
34.5%
0.8%
2.7%
0.4%
19.39
8.72
8.84
9,794.1
11,747.6
6,161.4
(0.4% )
-
(1.4% )
34.3%
33.2%
42.4%
33.8%
2.0%
3.5%
0.1%
18.56
8.22
7.66
7,643.1
11,160.2
4,550.1
2.6%
1.0%
(0.3% )
34.1%
33.3%
42.5%
32.8%
4.6%
2.8%
2.9%
20.15
8.82
6.41
7,260.2
9,200.8
3,072.3
6.6%
2.6%
0.9%
April 29, 2018
April 30, 2017
April 24, 2016
21,846.6
8,350.1
7,563.4
0.50 : 1
2.46 : 1
3.13 : 1
24.8%
12.0%
14,185.6
3,354.9
6,009.6
0.31 : 1
1.09 : 1
2.02 : 1
22.5%
15.8%
12,264.8
2,838.1
5,041.1
0.31 : 1
0.95 : 1
1.93 : 1
27.0%
19.2%
Includes revenues derived from franchise fees, royalties, suppliers rebates on some purchases made by franchisees and licensees as well as from wholesale of merchandise.
Includes revenues from the rental of assets, from the sale of aviation and marine fuel, heating oil, kerosene, and chemicals.
(1)
(2)
(3) Does not include services and other revenues (as described in footnotes 1 and 2 above). Growth in Canada and in Europe is calculated based on local currencies.
(4) For company-operated stores only.
(5) These measures are presented as if our investment in CAPL was reported using the equity method as we believe it allows a more relevant presentation of the underlying performance
of the Corporation.
(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. For the purpose of this calculation, CAPL’s long-term debt is excluded as it is a non-recourse debt to the Corporation. We believe this ratio is useful to investors and
analysts.
(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 specific items. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public
corporations. For the purpose of this calculation, CAPL’s long-term debt is excluded as it is a non-recourse debt to the Corporation. We believe this ratio is useful to investors and
analysts.
(8) This measure 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 specific items. It does not have a standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other public corporations. For the purpose of this calculation, CAPL’s long-term debt is excluded as it is a non-recourse debt to the
Corporation. We believe this measure is useful to investors and analysts.
(9) This measure 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. We believe this measure is useful to investors and analysts.
(10) This measure 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. We believe
this measure is useful to investors and analysts.
(11) As of April 29, 2018, this ratio is presented for the 52-week period ended April 29, 2018 on a pro forma basis for the acquisitions of CST and Holiday. CST and Holiday’s earnings and
balance sheet figures have been adjusted to make their presentation in line with Couche-Tard’s policies. As of April 30, 2017, this measure is presented for the 53-week period ended
April 30, 2017 on a pro forma basis for the stores network acquired from Imperial Oil. As at April 24, 2016, this measure is presented for the 52-week period ended April 24, 2016 on a
pro forma basis for Topaz’s results.
(12) Presented on a comparable basis of 52 weeks.
46
Annual Report © 2018 Alimentation Couche-Tard Inc.
Revenues
For fiscal 2018, our revenues increased by $13.5 billion or 35.6% compared with fiscal 2017, mainly attributable to the
contribution from acquisitions, to a higher average road transportation fuel selling price, to organic growth, as well as to the
positive net impact from the translation of revenues of our Canadian and European operations into US dollars, partly offset by
one less week during fiscal 2018 compared with fiscal 2017.
More specifically, the growth in merchandise and service revenues was $2.3 billion. Excluding CAPL’s revenues as well as the
net positive impact from the translation of our Canadian and European operations into US dollars, merchandise and service
revenues increased by approximately $2.0 billion or 18.9%. This increase is attributable to the contribution from acquisitions,
which amounted to approximately $2.1 billion, as well as to organic growth, partly offset by one less week during fiscal 2018
compared with fiscal 2017. Same-store merchandise revenues grew by 0.8% in the United States, negatively impacted by the
general softness in the retail industry as well as by the significant climatic events of the middle of the year. Same-store
merchandise revenues grew by 2.7% in Europe, a great success considering the replacement of the well-known brand Statoil
with our global Circle K brand. Same-store merchandise revenues grew by 0.4% in Canada.
The growth in road transportation fuel revenues was $11.1 billion. Excluding CAPL’s revenues, as well as the net positive impact
from the translation of our European and Canadian operations into US dollars, road transportation fuel revenues increased by
$9.2 billion or 35.3%. This increase is attributable to the contribution from acquisitions, which amounted to approximately
$6.6 billion, as well as to the impact of a higher average road transportation fuel selling price, which had a positive impact of
approximately $2.6 billion, partly offset by one less week during fiscal 2018 compared with fiscal 2017. Same-store road
transportation fuel volumes decreased by 0.4% in the United States, by 1.4% in Canada and were stable in Europe.
The following table shows the average selling price of road transportation fuel in our various markets, starting with the first
quarter of the fiscal year ended April 30, 2017:
Quarter
52-week period ended April 29, 2018
United States (US dollars per gallon) – excluding CAPL
Europe (US cents per litre)
Canada (CA cents per litre)
53-week period ended April 30, 2017
United States (US dollars per gallon) – excluding CAPL
Europe (US cents per litre)
Canada (CA cents per litre)
1st
2.21
61.39
99.81
2.20
58.65
92.66
2nd
3rd
4th
2.47
68.23
101.46
2.10
58.01
90.36
2.30
71.19
108.11
2.18
61.87
94.67
2.51
78.32
110.39
2.25
62.46
97.20
Weighted
average
2.37
70.52
102.85
2.18
60.40
94.35
Total other revenues for fiscal 2018 were $1.3 billion. Excluding CAPL’s revenues, other revenues increased by $144.4 million.
The impact of acquisitions for fiscal 2018 was approximately $24.0 million.
Gross profit
Our gross profit was $8.1 billion for fiscal 2018, up by $1.6 billion, an increase of 25.1% compared with fiscal 2017, mainly
attributable to the contribution from acquisitions, to higher fuel margins, to organic growth, to the net positive impact from the
translation of operations of our Canadian and European operations into US dollars, as well as to the contribution from CAPL,
partly offset by one less week during fiscal 2018 compared with fiscal 2017.
During fiscal 2018, our consolidated merchandise and service gross profit was $4.5 billion, an increase of $787.1 million
compared with fiscal 2017. Excluding CAPL’s gross profit, as well as the net positive impact from the translation of our Canadian
and European operations into US dollars, consolidated merchandise and service gross profit increased by approximately
$713.0 million or 19.4%. This increase is mostly attributable to the contribution from acquisitions, which amounted to
approximately $683.0 million, and to our organic growth, partly offset by one less week during fiscal 2018 compared with fiscal
2017. The gross margin was 33.3% in the United States, an increase of 0.1%, it was 42.6% in Europe, an increase of 0.2%,
while in Canada it was 34.5%, an increase of 0.7%, mainly as a result of the conversion of certain Esso agent sites to company-
operated stores.
The consolidated road transportation fuel gross profit was $3.4 billion for fiscal 2018, an increase of $799.7 million compared
with fiscal 2017. Excluding CAPL’s gross profit, as well as the net positive impact from the translation of our Canadian and
European operations into US dollars, consolidated road transportation fuel gross profit increased by approximately $665.0 million
or 25.7%. The road transportation fuel gross margin was 19.39¢ per gallon in the United States, an increase of 0.83¢ per gallon
or 4.5% over fiscal 2017. Road transportation fuel margin was CA 8.84¢ per litre in Canada, an increase of CA 1.18¢ per litre,
still driven by the inclusion of the CST stores in our network and different pricing strategies, and it was US 8.72¢ per litre in
Europe, an increase of US 0.50¢ per litre.
Annual Report © 2018 Alimentation Couche-Tard Inc.
47
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 the fiscal year ended
April 30, 2017, were as follows:
(US cents per gallon)
Quarter
52-week period ended April 29, 2018
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
53-week period ended April 30, 2017
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
20.75
3.79
16.96
20.86
4.08
16.78
2nd
24.70
4.21
20.49
19.87
3.99
15.88
3rd
15.66
3.73
11.92
18.33
3.99
14.34
4th
17.29
3.62
13.67
15.47
4.12
11.35
Weighted
average
19.39
3.82
15.57
18.56
4.04
14.52
As demonstrated by the table above, road transportation fuel margins in the United States can be volatile from one quarter to
another but tend to normalize over longer periods. Margin volatility and expenses related to electronic payment modes are not
as significant in Europe and Canada.
In fiscal 2018, other revenues gross profit was $256.0 million, an increase of $42.9 million compared with fiscal 2017. Excluding
CAPL’s gross profit, other revenues gross profit increased by $11.4 million.
Operating, selling, administrative and general expenses (“expenses”)
For fiscal 2018, expenses increased by 25.0% compared with fiscal 2017, but increased by only 2.0%, if we exclude certain
items as demonstrated by the following table:
Total variance, as reported
Adjusted for:
Increase from incremental expenses related to acquisitions
Increase from the net impact of foreign exchange translation
CAPL’s expenses for fiscal 2018
Acquisition costs recognized to earnings of fiscal 2017
Acquisition costs recognized to earnings of fiscal 2018
Increase from higher electronic payment fees, excluding acquisitions
Additional costs incurred following Hurricanes Harvey and Irma
Incremental costs from our global brand initiatives
Negative goodwill recognized to earnings of fiscal 2018
Remaining variance
52-week period ended
April 29, 2018
25.0%
(18.7%)
(1.9%)
(1.7%)
0.5%
(0.3%)
(0.7%)
(0.2%)
(0.1%)
0.1%
2.0%
The remaining increase is derived from higher minimum wages in certain regions, normal inflation, higher advertising and
marketing activities in connection with our global brand project, higher expenses needed to support our organic growth, the
conversion of CODO stores into company-operated stores and by proportionally higher operational expenses in our recently
built stores, as these stores generally have a larger footprint and higher sales than the average of our existing network, partly
offset by one less week during fiscal 2018 compared with fiscal 2017. We continue to favour a rigorous control of costs throughout
our organization, while ensuring we maintain the quality of service we offer to our customers.
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) and
adjusted EBITDA
During fiscal 2018, EBITDA increased from $2.4 billion to $3.0 billion. Excluding the specific items shown in the table below from
EBITDA, the adjusted EBITDA for fiscal 2018 increased by $558.5 million or 23.1% compared with fiscal 2017 mainly through
the contribution from acquisitions, which were approximately $478.0 million, higher fuel margins, organic growth and the net
positive impact from the translation of the results of our Canadian and European operations into US dollars, of approximately
$53.0 million, partly offset by one less week during fiscal 2018 compared with fiscal 2017.
It should be noted that EBITDA and adjusted EBITDA are not performance measures defined by IFRS, but we, as well as
investors and analysts, consider that those performance measures facilitate the evaluation of our ongoing operations and our
ability to generate cash flows to fund our cash requirements, including our capital expenditures program. Note that our definition
of these measures may differ from the one used by other public corporations:
48
Annual Report © 2018 Alimentation Couche-Tard Inc.
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial expenses
Depreciation, amortization and impairment of property and equipment, intangible assets and
other assets
EBITDA
Adjusted for:
EBITDA attributable to non-controlling interests
Restructuring costs attributable to shareholders of
the Corporation (including $1.3 million for our interest in CAPL for the 52-week period ended
April 29, 2018)
Acquisition costs
Gain on disposal of a terminal
Gain on investment in CST
Incremental costs related to hurricanes
Incremental costs from our global brand initiatives
Negative goodwill
Curtailment gain on defined benefits pension plan obligation
Adjusted EBITDA
52-week period ended
April 29, 2018
1,680.5
53-week period ended
April 30, 2017
1,208.9
57.3
335.3
906.4
2,979.5
(49.5 )
51.7
11.8
(11.5 )
(8.8 )
6.6
3.0
(2.8 )
(0.6 )
2,979.4
383.2
136.0
667.6
2,395.7
-
8.1
21.0
-
-
-
-
-
(3.9 )
2,420.9
Depreciation, amortization and impairment of property and equipment, intangible assets
and other assets
For fiscal 2018, depreciation, amortization and impairment expenses increased by $238.8 million. Excluding CAPL, the
depreciation expense increased by $177.7 million mainly driven by the impact from investments made through acquisitions, the
replacement of equipment, the addition of new stores and the ongoing improvement of our network. The depreciation expense
for fiscal 2018 includes a charge of $19.0 million for the accelerated depreciation and amortization of certain assets in connection
with our global rebranding project.
Net financial expenses
Net financial expenses for fiscal 2018 were $335.3 million, an increase of $199.3 million compared with fiscal 2017. Excluding
the net foreign exchange loss of $48.4 million and the net foreign exchange loss of $9.6 million recorded in fiscal 2018 and
fiscal 2017, respectively, as well as CAPL’s financial expenses of $19.4 million, net financial expenses increased by
$141.1 million. This increase is mainly attributable to our higher average long-term debt in connection with our recent acquisitions,
partly offset by the repayments made, as well as by one less week during fiscal 2018 compared with fiscal 2017. The net foreign
exchange loss of $48.4 million for fiscal 2018 is mainly due to the impact of foreign exchange variations on certain cash balances and
working capital items.
Income taxes
During fiscal 2018, following the approval of the “U.S. Tax Cuts and Jobs Act”, we recorded a net tax benefit of $288.3 million,
of which $18.2 million relates to non-controlling interests. This net tax benefit is mostly derived from the remeasurement of our
deferred income tax balances using the new U.S. statutory federal income tax rate, which decreased from 35.0% to 21.0%,
partly offset by the Deemed Repatriation Transition Tax (“Transition tax”).
Excluding this adjustment, as well as an adjustment for a tax benefit stemming from an internal reorganization, the income tax
expense for fiscal 2018 would have been approximately $346.0 million, corresponding to an income tax rate of 20.6%, which
compares to an income tax rate of 24.1% for fiscal 2017. This reduction in our income tax rate stems mainly from the decrease
in our U.S. statutory federal income tax rate starting January 1, 2018.
Net earnings attributable to shareholders of the Corporation and adjusted net earnings
attributable to shareholders of the Corporation (“net earnings”)
Net earnings for fiscal 2018 were $1.7 billion, compared with $1.2 billion for fiscal 2017, an increase of $464.7 million or 38.4%.
Diluted net earnings per share stood at $2.95, compared with $2.12 the previous year.
Annual Report © 2018 Alimentation Couche-Tard Inc.
49
Excluding the items shown in the table below from net earnings of fiscal 2018 and fiscal 2017, net earnings for fiscal 2018 would
have been approximately $1.5 billion, compared with $1.3 billion for fiscal 2017, an increase of $219.0 million or 17.4%. Adjusted
diluted net earnings per share would have been approximately $2.60 for fiscal 2018, compared with $2.21 for fiscal 2017, an
increase of 17.6%. The translation of revenues and expenses from our Canadian and European operations into US dollars had
a net positive impact of approximately $26.0 million on net earnings of fiscal 2018.
(in millions of US dollars)
Net earnings attributable to shareholders of the Corporation, as reported
Adjusted for:
Tax benefit stemming from the “U.S. Tax Cuts and Jobs Act” – attributable to shareholders of
52-week period ended
April 29, 2018
53-week period ended
April 30, 2017
1,673.6
1,208.9
the Corporation
Restructuring costs – attributable to shareholders of the Corporation
Accelerated depreciation and amortization expense
Net foreign exchange loss
Acquisition costs
Curtailment gain on defined benefits pension plan obligation
Tax benefit stemming from an internal reorganization
Gain on disposal of a terminal
Gain on investment in CST
Incremental costs related to hurricanes
Incremental costs from our global brand initiatives
Negative goodwill
Tax impact of the items above and rounding
Adjusted net earnings attributable to shareholders of the Corporation
(270.1 )
51.7
19.0
48.4
11.8
(0.6 )
(13.4 )
(11.5 )
(8.8 )
6.6
3.0
(2.8 )
(31.9 )
1,475.0
-
8.1
27.1
9.6
21.0
(3.9 )
-
-
-
-
-
-
(14.8 )
1,256.0
It should be noted that adjusted net earnings is not a performance measure defined by IFRS, but we, as well as investors and
analysts, consider this measure useful for evaluating the underlying performance of our operations on a comparable basis. Note
that our definition of this measure may differ from the one used by other public corporations.
50
Annual Report © 2018 Alimentation Couche-Tard Inc.
Financial Position as at April 29, 2018
As shown by our indebtedness ratios included in the “Summary analysis of consolidated results for fiscal 2018” section and our
net cash provided by operating activities, our financial position is solid.
Our total consolidated assets amounted to $23.1 billion as at April 29, 2018, an increase of $8.9 billion over the balance as at
April 30, 2017, primarily stemming from the acquisition of CST, which includes CAPL, and Holiday, as well as from the positive
effect from the variation in exchange rates. It should be noted that we have updated our balance sheet as at April 30, 2017 to
reflect the final adjustments we made during fiscal 2018 to the fair value assessment of the assets acquired, the liabilities
assumed and the goodwill for the Dansk Fuel A/S acquisition.
During the 52-week period ended on April 29, 2018, we recorded a return on capital employed of 12.0%.
Significant balance sheet variations are explained as follows:
Accounts receivable
Accounts receivables increased by $512.2 million, from $1.5 billion as at April 30, 2017, to $2.0 billion as at April 29, 2018. The
increase stems mainly from the acquisitions of CST and Holiday, a higher cost for road transportation fuel, and the positive net
impact of approximately $92.0 million from the variation in exchange rates at the balance sheet date.
Inventories
Inventories increased by $504.0 million, from $865.0 million as at April 30, 2017, to $1.4 billion as at April 29, 2018. The increase
stems mainly from the acquisitions of CST and Holiday, a higher cost for road transportation fuel and the positive net impact of
approximately $23.0 million from the variation in exchange rates at the balance sheet date.
Property and equipment
Property and equipment increased by $3.6 billion, from $7.5 billion as at April 30, 2017, to $11.1 billion as at April 29, 2018,
mainly as a result of the acquisitions of CST and Holiday, the investments we made to our network, as well as the positive net
impact of approximately $232.0 million from the exchange rates variation at the balance sheet date, partly offset by the
depreciation, amortization and impairment expense.
Goodwill
Goodwill increased by $3.7 billion, from $2.4 billion as at April 30, 2017, to $6.1 billion as at April 29, 2018, mainly as a result of
the acquisitions of CST and Holiday, as well as the positive net impact of approximately $76.0 million from the exchange rates
variation at the balance sheet date.
Intangible assets
Intangible assets increased by $364.2 million, from $670.1 million as at April 30, 2017, to $1.0 billion as at April 29, 2018, mainly
as a result of the acquisitions of CST and Holiday, and of the positive net impact of approximately $31.0 million from the variation
in exchange rates at the balance sheet date.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities increased by $1.1 billion, from $2.7 billion as at April 30, 2017, to $3.8 billion as at
April 29, 2018. The increase mainly stems from acquisitions of CST and Holiday and a higher cost for road transportation fuel.
The strengthening of local currencies compared to the US dollar increased accounts payable and accrued liabilities by
approximately $137.0 million.
Long-term debt and current portion of long-term debt
Long-term debt and current portion of long-term debt increased by $5.5 billion, from $3.4 billion as at April 30, 2017, to $8.9 billion
as at April 29, 2018, mainly as a result of the financing of the acquisitions of CST and Holiday, the inclusion of CAPL’s debt in
our consolidated balance sheet, in addition to the impact of the strengthening Canadian dollar and Euro against the US dollar,
which was approximately $143.0 million, partly offset by repayments made.
Annual Report © 2018 Alimentation Couche-Tard Inc.
51
Equity
Equity attributable to shareholders of the corporation amounted to $7.6 billion as at April 29, 2018, up $1.6 billion compared with
April 30, 2017, mainly reflecting an increase in net earnings and other comprehensive income for fiscal 2018, partly offset by
dividends declared. For the 52-week period ended April 29, 2018, we recorded a return on equity of 24.8%.
At April 29, 2018, non-controlling interests equity was $327.0 million (nil at April 30, 2017), mainly reflecting the acquisition of
control of CAPL and its net earnings, partly offset by distributions.
Liquidity and Capital Resources
Our principal sources of liquidity are our net cash provided by operating activities and borrowings available under our 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.
Revolving unsecured operating credit, maturing in December 2022 (“operating credit D”)
Credit agreement consisting of a revolving unsecured facility of a maximum amount of $2,525.0 million. As at April 29, 2018,
$1.4 billion of our operating credit D had been used. As at the same date, the weighted average effective interest rate was
3.236% and standby letters of credit in the amount of $16.1 million were outstanding.
On November 24, 2017, we amended the operating credit D to extend its maturity to December 2022. Moreover, on the same date,
we amended the standby fees that are applied to the unused portion of the credit facility, which now vary based on our credit rating.
Also, letters of credit fees and the variable margin used to determine the interest rate applicable to borrowed amounts are now
determined according to our credit rating as well.
Term revolving unsecured operating credit, maturing in January 2020 (“operating credit F”)
Credit agreement consisting of a revolving unsecured facility of an initial maximum amount of €25.0 million maturing on
January 30, 2020. The credit facility is available in Euros, in the form of a revolving unsecured operating credit. The amounts
borrowed bear interest at variable rates based on the funding base rate or the EURIBOR rate plus a fixed margin of 1.5%. As at
April 29, 2018, operating credit F was unused.
CAPL US-dollar-denominated senior secured revolving credit facility, without recourse to the Corporation maturing in
April 2020
As at April 29, 2018, CAPL had a credit agreement consisting of a US-dollar-denominated senior secured revolving credit facility
of a maximum amount of $650.0 million, maturing on April 25, 2020, under which swing-line loans may be drawn up to
$25.0 million and standby letters of credit may be issued up to an aggregate of $45.0 million. This facility is without recourse to
the Corporation.
As at April 29, 2018, $509.5 million of CAPL’s revolving credit facility had been used. At the same date, the effective interest
rate was 4.740% and CAPL was in compliance with the restrictive provisions and ratios imposed by the credit agreement.
Available liquidities
As at April 29, 2018, excluding CAPL’s revolving credit facility, a total of approximately $1.1 billion was available under our
revolving unsecured operating credit facilities and we were in compliance with the restrictive covenants and ratios imposed by
the credit agreements at that date. Thus, at the same date, excluding CAPL’s cash and revolving credit facility, we had access
to approximately $1.8 billion through our available cash and revolving unsecured operating credit facilities.
52
Annual Report © 2018 Alimentation Couche-Tard Inc.
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, intangible assets and other assets
Proceeds from disposal of CST’s assets held for sale
Proceeds from disposal of property and equipment and other assets
Proceeds from disposal of an available-for-sale investment
Restricted cash
Deposit for business acquisition
Proceeds from sale of and capital reduction received from an associated company held-
for-sale
Investment in an associated company held-for-sale
Net cash used in investing activities
Financing activities
Issuance of senior unsecured notes, net of financing costs
Repayment of debts assumed on the CST acquisition
Net increase (decrease) in term revolving unsecured operating credit D
Net increase (decrease) in acquisition facility, net of financing costs
Repayment of senior unsecured notes
Share repurchase
Cash dividends paid
Settlement of derivative financial instruments
Net decrease in other debts
Net increase in CAPL senior secured revolving credit facility
CAPL distributions paid to non-controlling interests
Exercise of stock options
Net cash provided by financing activities
Credit ratings
S&P Global Ratings – Corporate credit rating
Moody’s - Senior unsecured notes credit rating
Operating activities
52-week period
ended
April 29, 2018
53-week period
ended
April 30, 2017
Variation
2,163.1
(5,380.9 )
(1,169.3 )
895.5
132.1
91.6
(13.5 )
-
-
-
(5,444.5 )
3,935.9
(1,075.9 )
702.9
412.1
(232.5 )
(193.1 )
(162.4 )
(81.3 )
(42.9 )
64.5
(50.5 )
0.2
3,277.0
BBB
Baa2
1,925.5
237.6
(4,049.3 )
(175.2 )
895.5
37.1
91.6
(9.1 )
(18.6 )
(137.1 )
308.1
(3,057.0 )
3,084.1
(1,075.9 )
879.5
415.1
(232.5 )
(193.1 )
(17.1 )
(75.5 )
(16.9 )
64.5
(50.5 )
(3.1 )
2,778.6
(1,331.6 )
(994.1 )
-
95.0
-
(4.4 )
18.6
137.1
(308.1 )
(2,387.5 )
851.8
-
(176.6 )
(3.0 )
-
-
(145.3 )
(5.8 )
(26.0 )
-
-
3.3
498.4
BBB
Baa2
During fiscal 2018, net cash from our operations reached $2.2 billion, up $237.6 million compared with fiscal 2017, mainly due
to higher net earnings.
Investing activities
During fiscal 2018, investing activities were primarily for the acquisition of CST for an amount of $3.5 billion, the acquisition of
Holiday for an amount of $1.6 billion, and other acquisitions for an amount of $287.5 million (of which $75.6 million relates to
CAPL). Net investments in property and equipment, intangible assets and other assets amounted to $1.2 billion. Proceeds from
disposals of CST assets held for sale consisted of the disposal of CST sites to Empire for an amount of $143.0 million and of
the sale of a portion of CST’s Canadian assets to Parkland Fuel Corporation for an amount of $752.5 million. In addition, the
proceeds from our original investment in CST were for an amount of $91.6 million.
Net investments in property and equipment, intangible assets 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, for our rebranding project, for the addition of
new stores, for the ongoing improvement of our network, as well as for information technology.
Financing activities
During fiscal 2018, we issued Canadian- and US-dollar-denominated senior unsecured notes for a net amount of $3.9 billion.
We also repaid the debt assumed through the acquisition of CST for an amount of $1.1 billion and repaid an amount of
$232.5 million on our Canadian-dollar-denominated senior unsecured notes. We also drew a net amount of $702.9 million on
our revolving unsecured operating credit and a net amount of $412.1 million on our acquisition facility. We also repurchased
4,372,923 Class B subordinate voting shares held by Metro Canada Holdings Inc. for a net amount of $193.1 million and paid
total dividends of $162.4 million.
Annual Report © 2018 Alimentation Couche-Tard Inc.
53
Contractual Obligations and Commercial Commitments
Set out below is a summary of our material contractual obligations as at April 29, 2018(1):
2019
2020
2021
2022
2023
Thereafter
Total
(in millions of US dollars)
Long-term debt(2)(3)
Finance lease obligations and other debts
Operating lease obligations
Total
-
67.4
464.2
531.6
1,760.3
82.5
417.2
646.4
55.6
355.0
1,397.4
1,194.1
3,576.4
48.6
297.1
40.2
209.4
217.4
826.2
8,574.6
511.7
2,569.1
2,260.0
1,057.0
1,743.1
1,443.7
4,620.0
11,655.4
(1)
(2)
(3)
The summary does not include the payments required under defined benefit pension plans.
Does not include future interest payments.
Includes CAPL’s non-recourse debt of $509.5 million maturing April 2020.
Fuel Purchase Obligations
United States (in millions of gallons)
Europe (in millions of litres)
Canada (in millions of litres)
CAPL (in millions of gallons)
2019
2020
2021
2022
2023
Thereafter
Total
2,869.6
3,638.7
3,229.7
365.1
2,685.1
2,583.6
1,945.5
1,750.5
4,107.4
-
3,462.7
137.2
-
3,797.7
10.2
-
-
-
3,249.1
3,229.7
32,668.1
6.8
4.5
-
15,941.7
3,638.7
49,637.0
523.8
Long-term debt. As at April 29, 2018, our long-term debt totaled $8.9 billion, detailed as follows:
i. Borrowings of $412.1 million under our unsecured non-revolving acquisition credit facility, maturing on June 27th, 2020. As
at April 29, 2018, the effective interest rate was 3.358%.
ii. Canadian-dollar-denominated senior unsecured notes totaling $1.9 billion (CA $2.4 billion), and US-dollar-denominated
senior unsecured notes totaling $3.4 billion, divided as follows:
a. Tranche 2 with a notional amount of CA$450.0 million, maturing on November 1st, 2019, bearing interest at 3.319%.
b. Tranche 3 with a notional amount of CA$250.0 million, maturing on November 1st, 2022, bearing interest at 3.899%.
c. Tranche 4 with a notional amount of CA$300.0 million, maturing on August 21st, 2020, bearing interest at 4.214%.
d. Tranche 5 with a notional amount of CA$700.0 million, maturing on June 2nd, 2025, bearing interest at 3.600%.
e. Tranche 7 with a notional amount of CA$700.0 million, maturing on July 26th, 2024, bearing interest at 3.056%.
f. Tranche 6 with a notional amount of $1.0 billion, maturing on July 26th, 2022, bearing interest at 2.700%.
g. Tranche 8 with a notional amount of $1.0 billion, maturing on July 26th, 2027, bearing interest at 3.550%.
h. Tranche 9 with a notional amount of $500.0 million, maturing on July 26th, 2047, bearing interest at 4.500%.
i. Tranche 10 with a notional amount of $600.0 million, maturing on December 13th, 2019, bearing interest at 2.350%.
j. Tranche 11 with a notional amount of $300.0 million, maturing on December 13th, 2019, bearing interest at three-month
LIBOR plus 0.500%.
iii. Borrowings of $1.4 billion under our revolving unsecured operating credits denominated in US and Canadian dollars,
maturing in December 2022. The effective interest rate was 3.236% as at April 29, 2018.
iv. Euro-denominated senior unsecured notes totaling $900.7 million, with a notional amount of €750.0 million, maturing on
May 6, 2026, bearing interest at 1.875% and an effective rate of 1.944%.
v. Borrowings of $509.5 million under CAPL’s credit agreement consisting of a US-dollar-denominated senior secured revolving
credit facility, maturing on April 25, 2020. The effective interest rate was 4.740% as at April 29, 2018.
vi. NOK-denominated senior unsecured notes totaling $83.9 million, with a notional amount of NOK 675.0 million, maturing on
February 18, 2026, bearing interest at 3.850% and an effective rate of 3.927%.
vii. Other long-term debts of $352.4 million, including obligations related to building and equipment under finance leases.
Finance leases and operating leases obligations. We lease an important portion of our assets using conventional operating
leases and finance leases mainly for the rental of stores, land, equipment and office buildings. Generally, our real estate leases
in North America are for primary terms of 5 to 20 years, usually with options to renew at market prices. In Europe, the lease
terms range from short-term contracts to contracts with maturities up to more than 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 leases, we are subject to additional rent based on revenues as well
as future escalations in the minimum lease amount. When leases are determined to be finance leases, obligations and related
assets are included in our consolidated balance sheets.
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.
54
Annual Report © 2018 Alimentation Couche-Tard Inc.
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, could be 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 29, 2018, the total future lease payments under such agreements are approximately $5.3 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. We have also issued guarantees to third parties, and on behalf of third parties, for maximum
undiscounted future payments totaling $15.1 million. These guarantees primarily relate to financial guarantee commitments
under 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 29, 2018
were not significant.
We also issue surety bonds for a variety of business purposes for our own operations, including surety bonds for taxes, lottery
sales, wholesale distribution and alcoholic beverage sales. In most cases, a municipality or state governmental agency requires
the surety bonds as a condition of operating a store in that area.
Other commitments. We have entered into various property purchase agreements, as well as 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.
Annual Report © 2018 Alimentation Couche-Tard Inc.
55
Selected Quarterly Financial Information
Our 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 2017, contains 53 weeks, the fourth quarter comprises 13 weeks. The following is a summary
of selected consolidated financial information derived from our 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, intangibles assets
and other assets
Depreciation, amortization and impairment of property and
equipment, intangibles assets 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 including non-controlling interests
Net (earnings) loss attributable to non-controlling
interest
Net earnings attributable to shareholders of the
Corporation
Net earnings per share
Basic
Diluted
52-week period ended April 29, 2018
4th
12 weeks
13,614.8
3rd
16 weeks
15,791.8
2nd
12 weeks
12,140.6
53-week period ended April 30, 2017
1st
3rd
12 weeks 13 weeks 16 weeks 12 weeks 12 weeks
9,622.6 11,415.8 8,445.5 8,420.6
9,847.2
2nd
4th
1st
705.2
714.9
846.3
681.1
514.4
628.7
617.0
605.2
238.2
467.0
5.9
75.6
396.9
288.6
426.3
9.2
110.9
490.5
209.3
637.0
170.3
510.8
154.4
360.0
210.1
418.6
156.7
460.3
146.4
458.8
8.3
89.6
433.5
8.6
59.2
359.6
7.2
46.0
277.6
8.4
43.3
287.0
5.3
21.9
321.5
9.5
24.8
322.8
(4.2
)
(6.9
)
(1.0
)
5.2
-
-
-
-
392.7
483.6
432.5
364.8
277.6
287.0
321.5
322.8
$0.70
$0.70
$0.86
$0.86
$0.76
$0.76
$0.64
$0.63
$0.49
$0.49
$0.51
$0.50
$0.57
$0.57
$0.56
$0.56
The volatility of road transportation fuel gross margins, mostly in the United States, seasonality and changes in the exchange
rates have an impact on the variability of our quarterly net earnings.
56
Annual Report © 2018 Alimentation Couche-Tard Inc.
Analysis of consolidated results for the fiscal year ended April 30, 2017
Revenues
Our revenues were $37.9 billion for fiscal 2017, an increase of $3.8 billion, or 11.0%, compared with fiscal 2016, mainly
attributable to the contribution from acquisitions, to the continued growth in same-store merchandise revenues and road
transportation fuel volumes, to a higher average road transportation fuel selling price, as well as to the impact of the 53rd week
in fiscal 2017. These items, which contributed to the increase in revenues, were partly offset by the negative net impact from the
translation of revenues of our Canadian and European operations into US dollars, and by the impact from the disposal of our
lubricant business during the second quarter of fiscal 2016.
More specifically, the growth in merchandise and service revenues for fiscal 2017 was $652.2 million. Excluding the net negative
impact from the translation of our European and Canadian operations into US dollars, merchandise and service revenues
increased by $681.7 million or 6.8%. This increase is attributable to the contribution from multi-site acquisitions, which amounted
to approximately $328.0 million, to the impact of the 53rd week in fiscal 2017 and to our organic growth. On a 52-week comparable
basis, same-store merchandise revenues grew by 2.0% in the United States, despite the general softness in the retail industry.
In Europe, same-store merchandise revenues increased by 3.5% on a 52-week comparable basis, driven by the success of our
rebranding activities and the rollout and improvements of our food programs. In Canada, same-store merchandise revenues
increased by 0.1% on a 52-week comparable basis.
Road transportation fuel revenues increased by $2.7 billion in fiscal 2017. Excluding the negative net impact from the translation
of our Canadian and European operations into US dollars, road transportation fuel revenues increased by $2.9 billion or 12.4%.
This increase was attributable to the contribution from multi-site acquisitions, which amounted to approximately $2.0 billion, to
the impact of the 53rd week in fiscal 2017, to the higher average selling price of road transportation fuel, which resulted in an
increase in revenues of approximately $38.0 million, and to our organic growth. On a 52-week comparable basis, same-store
road transportation fuel volumes increased by 2.6% in the United States and by 1.0% in Europe due to – among other things –
the positive response from customers to our fuel rebranding initiatives and micro-market strategies, as well as to the growing
contribution from premium fuel. In the Southeastern U.S., fuel volumes continued to be negatively impacted by disruptions
caused by our fuel rebranding activities. In Canada, same-store road transportation fuel volumes decreased by 0.3% on a
52-week comparable basis, mainly as a result of the challenging economy in Western Canada.
The following table shows the average selling price of road transportation fuel in our various markets, starting with the first
quarter of the fiscal year ended April 24, 2016:
Quarter
53-week period ended April 30, 2017
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
52-week period ended April 24, 2016
United States (US dollars per gallon)
Europe (US cents per litre)
Canada (CA cents per litre)
1st
2.20
58.65
92.66
2.64
72.16
103.17
2nd
2.10
58.01
90.36
2.36
66.12
97.79
3rd
2.18
61.87
94.67
1.99
57.04
88.41
4th
2.25
62.46
97.20
1.86
51.59
82.28
Weighted
average
2.18
60.40
94.35
2.20
60.92
92.86
Other revenues increased by $359.5 million in fiscal 2017. The increase is mainly explained by the contribution from multi-site
acquisitions, which amounted to approximately $451.0 million, partly offset by the disposal of our lubricant business during the
second quarter of fiscal 2016, which had an impact of approximately $72.0 million.
Gross profit
During fiscal 2017, the consolidated merchandise and service gross profit was $3.7 billion, an increase of $250.9 million
compared with fiscal 2016. Excluding the net negative impact from the translation of our European and Canadian operations
into US dollars, consolidated merchandise and service gross profit increased by $262.9 million or 7.7%. This increase is
attributable to the contribution from multi-site acquisitions, which amounted to approximately $136.0 million, to the impact of the
53rd week of fiscal 2017 and to our organic growth. The gross margin was 33.2% in the United States, a decrease of 0.1%
because of a change in our product mix towards lower margin categories as well as from higher promotional activity compared
to the previous year. The margin was 42.4% in Europe, a decrease of 0.1%, while in Canada it was 33.8%, an increase of 1.0%
because of a different revenue mix in our recently acquired IOL stores network.
Road transportation fuel gross margin was 18.56¢ per gallon in the United States, a decrease of 1.59¢ per gallon attributable to
the volatility created by increasing crude oil prices. In Europe, the road transportation gross margin was 8.22¢ per litre, a
decrease of 0.60¢ per litre, mainly attributable to the impact of lower margins in Ireland compared with our margins in continental
Europe. In Canada, the road transportation fuel gross margin was CA 7.66¢ per litre, an increase of CA 1.25¢ per litre.
Annual Report © 2018 Alimentation Couche-Tard Inc.
57
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 the fiscal year ended
April 24, 2016, were as follows:
(US cents per gallon)
Quarter
53-week period ended April 30, 2017
Before deduction of expenses related to electronic payment modes
Expenses related to electronic payment modes
After deduction of expenses related to electronic payment modes
52-week period ended April 24, 2016
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
20.86
4.08
16.78
18.34
4.37
13.97
2nd
19.87
3.99
15.88
25.66
4.19
21.47
3rd
18.33
3.99
14.34
19.90
3.84
16.06
4th
15.47
4.12
11.35
16.78
3.74
13.04
Weighted
average
18.56
4.04
14.52
20.15
4.02
16.13
As demonstrated by the table above, road transportation fuel margins in the United States can be volatile from one quarter to
another but tend to normalize in the long run. Margin volatility and expenses related to electronic payment modes are not as
significant in Europe and Canada.
Other revenues gross profit increased by $2.1 million in fiscal 2017, which was derived from the contribution from multi-site
acquisitions, which amounted to approximately $35.0 million, partly offset by the disposal of our lubricant business in the second
quarter of fiscal 2016, which had an impact of approximately $21.0 million, and by the negative net impact from the translation
of our Canadian and European operations into US dollars.
Operating, selling, administrative and general expenses (“expenses”)
For fiscal 2017, expenses increased by 6.9% compared with the corresponding periods of fiscal 2016, but increased by only
2.1%, if we exclude certain items as demonstrated by the following table:
Total variance as reported
Adjust for:
Increase from incremental expenses related to acquisitions
Increase from higher electronic payment fees, excluding acquisitions
Acquisition costs recognized to earnings of fiscal 2017
Decrease from the net impact of foreign exchange translation
Charge on early termination of fuel supply agreements recognized to earnings in fiscal 2016
Acquisition costs recognized to earnings of fiscal 2016
Decrease from divestment of the lubricant business
Integration costs and expenses in connection with our global brand initiatives recognized in fiscal 2016
Remaining variance
53-week period ended
April 30, 2017
6.9%
(5.7%)
(0.5%)
(0.5%)
0.5%
0.3%
0.2%
0.7%
0.2%
2.1%
The remaining variance is due to the impact of the 53rd week, to normal inflation, to higher advertising and marketing activities
in connection with our global brand project, to higher expenses needed to support our organic growth, to the higher average
number of stores and to proportionally higher operational expenses in our recently built stores, as these stores generally have a
larger footprint than the average of our existing network. We continue to favour a rigorous control of costs throughout our
organization, while ensuring we maintain the quality of service we offer to our customers.
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) and
adjusted EBITDA
During fiscal 2017, EBITDA increased from $2,330.8 million to $2,395.7 million, a growth of 2.8% compared with fiscal 2016.
Excluding the specific items shown in the table below from EBITDA of fiscal 2017 and of fiscal 2016, the adjusted EBITDA for
fiscal 2017 increased by $127.1 million or 5.5% compared with the previous fiscal year mainly due to the contribution from
acquisitions, to the impact of the 53rd week in fiscal 2017 and to organic growth, partly offset by the lower road transportation
fuel gross margins in the United States. Multi-site acquisitions contributed approximately $140.0 million to the adjusted EBITDA,
while the variation in exchange rates had a negative net impact of approximately $15.0 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, consider that those performance measures facilitate the evaluation of our ongoing operations and our
ability to generate cash flows to fund our cash requirements, including our capital expenditures program. Note that our definition
of these measures may differ from the ones used by other public corporations:
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Annual Report © 2018 Alimentation Couche-Tard Inc.
(in millions of US dollars)
Net earnings, as reported
Add:
Income taxes
Net financial expenses
Depreciation, amortization and impairment of property and equipment, intangible assets and
other assets
EBITDA
Adjusted for:
Acquisition costs
Restructuring costs
Curtailment gains on pension plan obligation
Charge on early termination of fuel supply agreements
Net gain from the disposal of the lubricant business
Write-off expense on fuel rebranding
Integration costs and expenses in connection with our global brand initiatives
Adjusted EBITDA
53-week period ended
April 30, 2017
1,208.9
383.2
136.0
667.6
2,395.7
21.0
8.1
(3.9 )
-
-
-
-
2,420.9
52-week period ended
April 24, 2016
1,191.4
398.3
108.0
633.1
2,330.8
6.2
-
(27.2 )
12.4
(47.4 )
10.4
8.6
2,293.8
Depreciation, amortization and impairment of property and equipment, intangible assets
and other assets
For fiscal 2017, depreciation, amortization and impairment expense increased by $34.5 million, mainly as a result of investments
made through acquisitions, the replacement of equipment, the addition of new stores and the ongoing improvement of our
network. These items, which contributed to the increase in depreciation, amortization and impairment expense, were partially
offset by the net impact of the translation of our European and Canadian operations into US dollars. The depreciation,
amortization and impairment expense for fiscal 2017 includes a charge for the accelerated depreciation and amortization of
certain assets in connection with our global rebranding project, amounting to $27.1 million.
Net financial expenses
Net financial expenses for fiscal 2017 were $136.0 million, an increase of $28.0 million compared with fiscal 2016. Excluding the
net foreign exchange losses of $9.6 million and of $5.0 million recorded in fiscal 2017 and 2016, respectively, net financial
expenses increased by $23.4 million. This increase is mainly attributable to our higher average long-term debt in connection with our
recent acquisitions, partly offset by the repayments made. The net foreign exchange loss of $9.6 million is mainly due to the impact of
foreign exchange variations on certain cash balances and working capital items.
Income taxes
The income tax rate for fiscal 2017 was 24.1% compared with an income tax rate of 25.1% for fiscal 2016. The decrease in the
income tax rate stems from proportionally lower earnings in the United States where our statutory income tax rate is the highest
as well as from the impact of a different mix in our earnings across the various states.
Net earnings and adjusted net earnings
We closed fiscal 2017 with net earnings of $1,208.9 million, compared with $1,191.4 million for the previous fiscal year, an
increase of $17.5 million or 1.5%. Diluted net earnings per share stood at $2.12, compared with $2.09 the previous year. The
translation of revenues and expenses from our Canadian and European operations into US dollars had a negative net impact of
approximately $16.0 million on net earnings of fiscal 2017.
Excluding the items shown in the table below from net earnings of fiscal 2017 and fiscal 2016, net earnings for fiscal 2017 would
have been approximately $1,256.0 million, compared with $1,186.0 million for fiscal 2016, an increase of $70.0 million or 5.9%.
Adjusted diluted net earnings per share would have been approximately $2.21 for fiscal 2017, compared with $2.08 for
fiscal 2016, an increase of 6.2%.
Annual Report © 2018 Alimentation Couche-Tard Inc.
59
The table below reconciles reported net earnings to adjusted net earnings:
(in millions of US dollars)
Net earnings, as reported
Adjust for:
Net foreign exchange loss
Acquisition costs
Accelerated depreciation and amortization expense
Restructuring charges
Curtailment gains on pension plan obligation
Charge on early termination of fuel supply agreements
Net gain from the disposal of the lubricant business
Tax expense stemming from an internal reorganization
Write-off expense on fuel rebranding
Integration costs and expenses in connection with our global brand initiatives
Tax impact of the items above and rounding
Adjusted net earnings
53-week period ended
April 30, 2017
1,208.9
52-week period ended
April 24, 2016
1,191.4
9.6
21.0
27.1
8.1
(3.9 )
-
-
-
-
-
(14.8 )
1,256.0
5.0
6.2
17.8
-
(27.2 )
12.4
(47.4 )
22.9
10.4
8.6
(14.1 )
1,186.0
It should be noted that adjusted net earnings is not a performance measure defined by IFRS, but we, as well as investors and
analysts, consider this measure useful for evaluating the underlying performance of our operations on a comparable basis. Note
that our definition of this measure may differ from the one used by other public corporations.
Internal Controls over Financial Reporting
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, in all material
respects, the reliability, completeness and timeliness of the information we disclose in this MD&A and other public disclosure
documents. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports
filed with securities regulatory agencies is recorded and/or disclosed on a timely basis, as required by law, and is accumulated
and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. As at April 29, 2018, except for the exclusion of Holiday’s internal controls
described below, our management, following its assessment, certifies the design and operating effectiveness of the
Corporation’s disclosure controls and procedures.
We undertake ongoing evaluations of the effectiveness of our internal controls over financial reporting and implement control
enhancements, when appropriate. As at April 29, 2018, our management and our external auditors reported that these internal
controls were effective.
We exclude Holiday’s internal control over financial reporting from our evaluation of the overall effectiveness of our internal
control over financial reporting. This is due to the size and timing of this transaction, which occurred on December 22, 2017. The
limitation is primarily based on the time required to assess Holiday’s controls over financial reporting and to confirm they are
consistent with ours, as permitted by the Canadian Securities Administrator’s National Instrument 52-109 for 365 days following
an acquisition. We expect to finalize our assessment during fiscal 2019.
Holiday’s results since the acquisition date are included in our consolidated financial statements and constituted approximately
8.3% of total consolidated assets as of April 29, 2018, approximately 2.4% of consolidated revenues and 1.7% of consolidated
net earnings attributable to shareholders for the 52-week period ending on that date.
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 the amounts reported in the consolidated
financial statements and accompanying notes. 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. Inherent in the
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Annual Report © 2018 Alimentation Couche-Tard Inc.
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 recoverable amount, 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 intangible assets. Goodwill and other intangible 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. They are based on our prior experience in removing these tanks, estimated tank remaining
useful life, lease terms for those tanks installed on leased properties, external estimates and governmental regulatory
requirements. A discounted liability is recorded for the present value of an asset retirement obligation, with a corresponding
increase to the carrying value of the related long-lived asset at the time an underground storage tank is installed. To determine
the initial liability, the future estimated cash flows are discounted using a pre-tax rate that reflects current market assessments
of the time value of money, and the risks specific to the liability.
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’s contamination, location of sites and experience of the contractors performing the environmental assessments and
remediation work.
In each of the US states in which we operate, with the exception of Florida, Iowa, Maryland, Texas, Washington and West
Virginia, 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 environmental contamination caused by the use 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. We pay
annual registration fees and remits sales taxes to applicable states. Insurance coverage and deductibles differ from state to
state.
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 in Equity.
We use 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 all taxable temporary differences associated with investments in subsidiaries and
interests in joint ventures, except where we are 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 © 2018 Alimentation Couche-Tard Inc.
61
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 we intend to settle our current tax
assets and liabilities on a net basis.
We are 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. We
recognize 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.
Insurance and workers' compensation. In the U.S. and Ireland, we are self-insured for certain losses related to general liability
and workers’ compensation. The expected ultimate cost for claims incurred as of the consolidated balance sheet date is
discounted and is recognized as a liability. This cost is estimated based on analysis of our 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.
Recently issued accounting standards not yet implemented
Financial Instruments
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. On April 30, 2018, we will apply IFRS 9 retrospectively without restating comparative information,
with the exception of the hedging component which is applied prospectively.
The first requirement, recognition and measurement, requires a new classification of financial assets and liabilities under IFRS 9,
which largely retains requirements under IAS 39. Therefore, it will have no significant impact on our consolidated financial
statements. The second requirement, impairment, replaces the “incurred loss” model in IAS 39 with a forward-looking “expected
credit loss” model. The new impairment model will apply to financial assets measured at amortized cost and debt instruments
measured at fair value through other comprehensive income. This requirement will have no significant impact on our consolidated
financial statements. The third requirement, general hedge accounting, entails that we must ensure that hedge accounting
relationships are aligned with our risk management objectives and strategy and apply a more qualitative and forward-looking
approach to assessing hedge effectiveness. We continue to evaluate the impact of this requirement on our hedge accounting
policies.
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. On April 30, 2018, we will apply IFRS 15 using the
“modified retrospective approach”.
During fiscal 2018, we analyzed the impact on current revenue streams, comparing the current accounting policy with the new
guidance, and identified the differences from applying the new requirements to our contracts. Under the current accounting
policy, we recognize initial franchise fees when we have performed all material obligations and services, which generally occurs
when the franchise store opens. Under the new guidance, we will defer the initial fees and recognize revenue over the estimated
term of the related franchise agreement. As a result, we expect an adjustment related to initial franchise fees revenue of
approximately $4.0 million (net of income taxes of approximately $2.0 million) which will result in an adjustment to opening
Retained earnings on adoption.
Leases
In January 2016, the IASB issued IFRS 16, “Leases”, which will replace IAS 17, “Leases”. The new standard will be effective for
our fiscal year beginning on April 29, 2019, with early adoption permitted. The new standard requires lessees to recognize a
lease liability reflecting future lease payments and a “right-of-use asset” for virtually all lease contracts, and record it on the
balance sheet, except with respect to lease contracts that meet limited exception criteria.
Given that we have significant contractual obligations accounted for as operating leases under IAS 17, our preliminary conclusion
is that there will be a material increase to both assets and liabilities upon adoption of IFRS 16, and material changes to the
presentation of expenses associated with the lease arrangements, and, to a lower extent, the timing of recognition.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
The following table outlines the key areas that will be impacted by the adoption of IFRS 16:
Impacted areas of the business
Analysis
Impact
Financial reporting
Information systems
Internal controls
Stakeholders
The analysis includes which contracts will be in scope as
well as the options available under the new standard
such as whether to early adopt, the two recognition and
measurement exemptions and whether to apply the new
standard on a full retrospective application in accordance
with IAS 8 or choose the “modified retrospective
approach”.
consolidated
We are in the process of analyzing the full impact of the
adoption of IFRS 16 on our consolidated balance sheets
and
and
statement
comprehensive income. As at April 29, 2018, we intend to
adopt IFRS 16 for our fiscal year ending April 26, 2020
using the “modified retrospective approach” and to use the
exemptions for short-term leases and leases for which the
underlying asset is of low-value.
earnings
of
We are analyzing the need to make changes within our
the
information systems environment
management of more than 9,000 leases that will fall
within the scope of the new standard.
to optimize
We have evaluated different IT solutions for the eventual
recognition and measurement of leases in scope. An IT
solution was selected during the fiscal year ended
April 29, 2018 and is currently being implemented.
We will be performing an analysis of the changes to the
control environment as a result of the adoption of IFRS
16.
We are currently evaluating the impact of IFRS 16 on the
control environment.
We will be performing an analysis of the impact on the
disclosure to our stakeholders as a result of the adoption
of IFRS 16.
We have begun discussing the impact of IFRS 16 to
internal and external stakeholders.
Classification and Measurement of Share-based Payment Transactions
On April 30, 2018, we will apply amendments to IFRS 2, “Share-based Payment”, clarifying how to account for certain types of
share-based payment transactions, such as the effects of vesting and non-vesting conditions on the measurement of cash-
settled share-based payments. The amendments will be applied prospectively and will have no significant impact on the
consolidated financial statements.
Business Risks
We are constantly looking to control and improve our operations. In this perspective, identification and management of risks are
key components of such activities. We have identified and assessed key risk factors that could negatively impact our objectives
and their 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 as well as their financial impact.
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, 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 dependent 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 operations.
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, among
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 2018, road transportation fuel revenues accounted for approximately 72.0% of our total revenues, yet the road
transportation fuel gross margin represented about only 42.0% of our overall gross profits.
Tobacco products. Tobacco products represent our largest product category of merchandise and service revenues. For
fiscal 2018, tobacco products represented approximately 38.0% and 19.0% of total merchandise and service revenues and gross
profits, respectively. 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,
Annual Report © 2018 Alimentation Couche-Tard Inc.
63
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.
Legislative and regulatory requirements. Our operations are subject to numerous environmental laws and regulations that are
discussed under “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. Regulations related to employee compensation, benefits and
other programs, including minimum wage increases, could adversely affect our business, financial conditions and results of
operations.
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 regulations, or their current interpretation, on our business,
financial condition and results of operations would not be material.
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. These include 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.
Environmental requirements, and the enforcement and interpretation of these requirements, change frequently and have
generally become more stringent over time. Under various national, provincial, state and local laws and regulations, we may, as
the owner or operator, be liable for the costs of removal or remediation of contamination at our current or former sites, whether
or not we knew of, or caused, the presence of such contamination. We may also be subject to litigation costs, fines and other
sanctions as a result of our failure to comply with these requirements.
Our business may also be affected by laws and regulations addressing global climate change and the role played in it by fossil
fuel combustion and the resulting carbon emissions. Some jurisdictions in which we operate have enacted measures to limit
carbon emissions, and such measures increase the costs of petroleum-based fuels above what they otherwise would be and
may adversely affect the demand for road transportation fuel. Similarly, adoption of other environmental protection measures
affecting the petroleum supply chain, such as more stringent requirements applicable to the exploration, drilling, and
transportation of crude oil and to the refining and transportation of petroleum products, may also increase the costs of petroleum-
based fuels with similar effects on demand for road transportation fuel. The impact of such developments, individually or in
combination, could adversely affect our sales of road transportation fuel and associated gross profit.
Tax incentives and other subsidies in different legislations in which we operate have also made renewable fuels as well as
alternative powered and energy-efficient vehicles more competitive than they otherwise would have been, which may adversely
impact our business, financial condition and results of operations.
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, because the majority of this expense is based on a percentage of
the retail prices of road transportation fuel. For fiscal 2018, a variation of 10% in our expenses associated with electronic payment
modes would have had an impact of approximately $0.07 on earnings per share on a diluted base.
Information technology systems. We depend on information technology systems (“IT systems”) to manage numerous aspects of
our business transactions and to provide complete and reliable information to management. Our IT systems are an essential
component of our business and growth strategies, and obsolescence of or a serious disruption to our IT systems could
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Annual Report © 2018 Alimentation Couche-Tard Inc.
significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other
things, damage and interruption from power outage or natural disasters, computer system and network failures, loss of
telecommunications services, physical and electronic loss of data, security breaches, cyberattacks, computer viruses and laws
and regulations necessitating mandatory upgrades and timelines with which we may not be able to comply. Any serious
disruption could adversely affect our operations, our competitive position and/or reputation, and could lead to claims that could
have an adverse effect on profitability.
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 as well as other sensitive information
regarding our employees, business partners and vendors. 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 could also materially increase the costs we incur to protect
against such risks. 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.
In addition, the European Union General Data Protection Regulation (GDPR) effective as of May 2018, imposes penalties up to
a maximum of 4% of global annual revenues for breach of the regulation. Non-compliance to data protection laws could expose
us to regulatory investigations, which could result in fines and penalties.
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.
Tax laws and liabilities. We are subject to extensive tax obligations imposed by multiple jurisdictions, including direct and indirect
taxes, payroll taxes, franchise taxes, foreign withholding taxes and property taxes. New or changes to existing tax laws and
regulations could result in increased tax expenses or liabilities in the future and could materially and adversely impact our
financial conditions, results of operations and cash flows. Additionally, many tax obligations are subject to periodic audits by tax
authorities which could result in interests and penalties.
Acquisitions. Acquisitions have been and should continue to be a significant part of our growth strategy. Our ability to identify
and complete strategic acquisitions in the future may be limited by different factors, including the number of attractive acquisition
targets with motivated sellers, internal demands on our resources and, to the extent necessary, our ability to obtain regulatory
approval and 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
Annual Report © 2018 Alimentation Couche-Tard Inc.
65
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 result in us paying a higher cost to obtain such products.
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.
Brand image and reputation. Trademarks and other proprietary rights are important to the Corporation’s competitive position
and we benefit from a well-recognized brand. If the Corporation is unsuccessful in protecting its intellectual property rights, or if
another party prevails in litigation claiming any rights thereto, the value of the brand could be diminished, causing customer
confusion and materially adversely impacting our business and financial results. Failure to maintain product safety and quality
could materially adversely affect our brand image and reputation and lead to potential product liability claims (including class-
action), government agency investigations and damages.
Recruitment and retention of highly qualified employees. We are dependent on our ability to attract and retain a strong
management team and key employees. If, for any reason, we are not able to attract and retain sufficient and appropriately skilled
people, our business, our financial results and our ability to achieve our strategic objectives may be compromised.
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, they are susceptible to severe storms, hurricanes, earthquakes and other natural
disasters.
Hazards and risks associated with fuel products. 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. 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.
Indebtedness. We currently have $6.2 billion of bonds with an average effective interest rate of 3.176% with the latest maturity
date being July 26, 2047. This level of indebtedness could have important consequences, such as allocating a portion of cash
flows from operations to the payment of interests on the indebtedness and other financial obligations, and thus making it
unavailable for other purposes and potentially affecting the corporation’s ability to obtain additional financing. The credit
arrangements contain restrictive covenants that may limit our ability to incur, assume or permit to exist additional indebtedness,
guarantees or liens. They also require the corporation to comply with certain coverage ratio tests which may prevent the
corporation from pursuing certain business opportunities or taking certain actions.
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 US dollars and
certain intercompany loans. As at April 29, 2018, all else being equal, a hypothetical variation of 5.0% of the US dollar, the
Norwegian Krone and the Euro against the Canadian dollar would have had a net impact of approximately $58.0 million on other
comprehensive income. We do not currently use derivative instruments to mitigate this risk.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
We use the US 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
at April 29, 2018, we carried a variable rate debt of approximately $2.6 billion. Based on the amount of our variable rate debt as
at April 29, 2018, a one percentage point increase in interest rates would decrease our earnings per share by $0.03 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. We are also exposed to a risk of change
in cash flows due to changes in interest rates on future debt issuance. To mitigate this risk, we entered into interest rate locks in
order to hedge the interest rates on forecasted debt issuance.
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 embedded total return swap, our
cross-currency swap agreements, our interest rate locks, 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.
Accounts receivable. We are exposed to risk related to the creditworthiness and performance of our customers, suppliers and
contract counterparties. As of April 29, 2018, we had outstanding accounts receivable totaling $2.0 billion. This amount primarily
consists of vendor rebates due from our suppliers, credit card receivables, receivables arising from the sale of fuel and other
products to independent franchised or licensed fuel station operators as well as amounts receivable from other industrial and
commercial clients. Contracts with longer payment cycles or difficulties in enforcing contracts or collecting accounts receivable
could lead to material fluctuations in our cash flows and could adversely impact our business, financial condition and results of
operations.
Insurance. We carry comprehensive liability, fire and extended coverage insurance on most of our facilities, with policy
specifications and insured limits customarily carried in our industry for similar properties. There can be no assurance that we will
be able to continue to obtain such insurance on favourable terms or at all. Some types of losses, such as losses resulting from
wars, acts of terrorism, or natural disasters, generally are not insured because they are either uninsurable or not economically
practical.
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.
Annual Report © 2018 Alimentation Couche-Tard Inc.
67
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.
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.
Outlook
For fiscal 2019, our focus will remain the integration of our recent acquisitions into our network and the identification and
realization of associated synergies. We will continue the implementation of some of our Circle K concepts into these sites and
work towards increasing traffic to sites while sustaining margins and controlling our costs.
We will also keep up the roll-out momentum of our new global convenience brand, Circle K, throughout North America, Europe
and our licensed stores worldwide. We are setting out to make it easy for existing and new customers in more countries than
ever before, building preference for Circle K as a destination for convenience and fuel, with a fresh look and feel and even better
products for people on the go, always combined with fast and friendly service.
July 9, 2018
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Annual Report © 2018 Alimentation Couche-Tard Inc.
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
have been prepared in accordance with 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 the reasonable accuracy, relevance and reliability of financial information and the 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
independent auditors, reviewed the consolidated financial statements of Alimentation Couche-Tard Inc. and recommended their
approval to the Board of Directors.
The consolidated financial statements for the fiscal years ended April 29, 2018, and April 30, 2017, 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 9, 2018
/s/ Brian Hannasch
Brian Hannasch
President and
Chief Executive Officer
/s/ Claude Tessier
Claude Tessier
Chief Financial Officer
Annual Report © 2018 Alimentation Couche-Tard Inc.
69
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 for the fiscal year ended April 29, 2018. 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 includes the
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, and that the degree of compliance with the policies or
procedures may deteriorate. On December 22, 2017, the Corporation acquired Holiday Stationstores, LLC and certain affiliated
companies (“Holiday”). Management excluded from its evaluation of the effectiveness of internal control over financial reporting
Holiday’s internal control over financial reporting. Holiday’s results since the acquisition date are included in the Corporation’s
consolidated financial statements and constituted approximately 8.3% of total consolidated assets as at April 29, 2018,
approximately 2.4% of consolidated revenues and 1.7% of consolidated net earnings attributable to shareholders for the fiscal
year then ended. See Note 4 to the consolidated financial statements for a discussion about this acquisition. Based on this
evaluation, management concluded that Alimentation Couche-Tard Inc.’s internal control over financial reporting was effective
as at April 29, 2018.
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 29, 2018 and expressed an unqualified opinion thereon,
which is included herein.
July 9, 2018
/s/ Brian Hannasch
Brian Hannasch
President and
Chief Executive Officer
/s/ Claude Tessier
Claude Tessier
Chief Financial Officer
70
Annual Report © 2018 Alimentation Couche-Tard Inc.
Independent Auditor’s Report
To the Shareholders of
Alimentation Couche-Tard Inc.
July 9, 2018
We have completed the integrated audits of Alimentation Couche-Tard Inc. and its subsidiaries’ consolidated financial statements
for the fiscal years ended April 29, 2018 and April 30, 2017, and its internal control over financial reporting as at April 29, 2018. Our
opinions, based on our audits, are presented below.
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Alimentation Couche-Tard Inc. and its subsidiaries, which
comprise the consolidated balance sheets as at April 29, 2018 and April 30, 2017, and the consolidated statements of earnings,
comprehensive income, changes in 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 Corporation’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.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Alimentation
Couche-Tard Inc. and its subsidiaries as at April 29, 2018 and April 30, 2017, 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 29, 2018.
Management’s responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting.
Auditor’s responsibility
Our responsibility is to express an opinion, based on our audit, on whether the 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
Annual Report © 2018 Alimentation Couche-Tard Inc.
71
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.
As indicated in the Management’s Report on Internal Control over Financial Reporting, the assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the internal controls of Holiday Stationstores, LLC and certain
affiliated companies, collectively known as “Holiday”, a recent acquisition included in the 2018 consolidated financial statements of
Alimentation Couche-Tard Inc., and which constituted approximately 8.3% of total assets as of April 29, 2018, and approximately
2.4% of revenue and 1.7% of net earnings for the fiscal year ended April 29, 2018. 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
Holiday.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
A Corporation’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 Corporation’s
assets that could have a material effect on the financial statements.
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 and that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, Alimentation Couche-Tard Inc. and its subsidiaries maintained, in all material respects, effective internal control over
financial reporting as at April 29, 2018, in accordance with the criteria established in Internal Control – Integrated Framework (2013),
issued by COSO.
Montreal, Canada
1 FCPA auditor, FCA, public accountancy permit No. A116853
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Annual Report © 2018 Alimentation Couche-Tard Inc.
Consolidated Statements of Earnings
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except per share amounts)
Revenues
Cost of sales (Note 8)
Gross profit
Operating, selling, administrative and general expenses
Restructuring costs (Note 23)
(Gain) loss on disposal of property and equipment and other assets
Curtailment gain (Note 28)
Depreciation, amortization and impairment of property and equipment, intangible assets and other assets
Total operating expenses (Note 8)
Operating income
Share of earnings of joint ventures and associated companies accounted for using the equity
method (Note 7)
Financial expenses
Financial revenues
Foreign exchange loss
Net financial expenses (Note 10)
Earnings before income taxes
Income taxes (Note 11)
Net earnings including non-controlling interests
Net earnings attributable to non-controlling interests (Note 5)
Net earnings attributable to shareholders of the Corporation
Net earnings per share (Note 12)
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
2018
(52 weeks)
$
51,394.4
43,282.9
8,111.5
2017
(53 weeks)
$
37,904.5
31,422.7
6,481.8
5,125.4
56.9
(17.7 )
(0.6 )
906.4
6,070.4
2,041.1
32.0
295.8
(8.9 )
48.4
335.3
1,737.8
57.3
1,680.5
(6.9 )
1,673.6
2.96
2.95
4,100.5
8.1
11.8
(3.9 )
667.6
4,784.1
1,697.7
30.4
132.8
(6.4 )
9.6
136.0
1,592.1
383.2
1,208.9
-
1,208.9
2.13
2.12
Annual Report © 2018 Alimentation Couche-Tard Inc.
73
Consolidated Statements of Comprehensive Income
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2))
Net earnings including non-controlling interests
Other comprehensive income (loss)
Items that may be reclassified subsequently to earnings
Translation adjustments
Change in cumulative translation adjustments(1)
Change in fair value and net interest on cross-currency interest rate swaps designated as a hedge of the
Corporation’s net investment in certain of its foreign operations(2) (Note 21)
Cash flow hedges
Change in fair value of financial instruments(2) (Note 29)
Loss (gain) realized on financial instruments transferred to earnings(2) (Note 29)
Available-for-sale investment
Change in fair value of an available-for-sale investment(2)
Gain realized on an available-for-sale investment transferred to earnings(2) (Note 4)
Items that will never be reclassified to earnings
Net actuarial gain (loss)(3) (Note 28)
Other comprehensive income (loss)
Comprehensive income including non-controlling interests
Comprehensive income attributable to non-controlling interests
Comprehensive income attributable to shareholders of the Corporation
2018
(52 weeks)
$
1,680.5
2017
(53 weeks)
$
1,208.9
137.3
84.2
(11.9 )
5.0
1.1
(8.8 )
25.1
232.0
1,912.5
(6.9 )
1,905.6
9.6
(112.0 )
(5.4 )
(4.7 )
21.5
-
(13.9 )
(104.9 )
1,104.0
-
1,104.0
(1) For the fiscal years ended April 29, 2018 and April 30, 2017, these amounts include gains of $70.1 (net of income taxes of $11.1) and losses of $36.4 (net of income taxes of $5.8), respectively.
These gains and losses arise from the translation of long-term debts denominated in foreign currencies.
(2) For the fiscal years ended April 29, 2018 and April 30, 2017, these amounts are net of income taxes of $3.8 and $0.2, respectively.
(3) For the fiscal years ended April 29, 2018 and April 30, 2017, these amounts are net of income taxes of $7.6 and $6.5, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
74
Annual Report © 2018 Alimentation Couche-Tard Inc.
Consolidated Statements of Changes in Equity
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2))
Balance, beginning of year
Acquisition of control of CAPL (Note 4)
Comprehensive income:
Net earnings
Other comprehensive income
Comprehensive income
Dividends declared
Distributions to non-controlling interests
(Note 5)
Stock option-based compensation expense
(Note 26)
Initial fair value of stock options exercised
Cash received upon exercise of stock options
Repurchase and cancellation of shares
(Note 25)
Balance, end of year
Balance, beginning of year
Comprehensive income:
Net earnings
Other comprehensive loss
Comprehensive income
Dividends declared
Stock option-based compensation expense
(Note 26)
Initial fair value of stock options exercised
Cash received upon exercise of stock
options
Balance, end of year
Capital
stock
$
708.7
-
-
-
-
-
-
1.6
0.1
(6.4 )
704.0
Capital
stock
$
699.8
-
-
-
-
5.6
3.3
708.7
Attributable to the shareholders of the Corporation
Accumulated other
comprehensive loss
(Note 27)
$
Contributed
surplus
$
Retained
earnings
$
Non-
controlling
interests
$
Total
$
15.7
-
-
-
-
-
3.6
(1.6 )
-
-
17.7
6,083.5
-
1,673.6
-
(162.4 )
-
-
-
-
(798.3 )
-
6,009.6
-
-
232.0
-
-
-
-
-
1,673.6
232.0
1,905.6
(162.4 )
-
3.6
-
0.1
(186.7 )
7,408.0
-
(566.3 )
(193.1 )
7,563.4
2018
(52 weeks)
Equity
$
6,009.6
370.6
1,680.5
232.0
1,912.5
(162.4 )
-
370.6
6.9
-
6.9
-
(50.5 )
(50.5 )
-
-
-
-
327.0
3.6
-
0.1
(193.1 )
7,890.4
Attributable to the shareholders of the Corporation
Contributed
surplus
Retained
earnings
$
14.8
-
-
-
6.5
(5.6 )
-
15.7
$
5,019.9
1,208.9
-
(145.3 )
-
-
-
6,083.5
Accumulated other
comprehensive loss
(Note 27)
$
Total
$
(693.4 ) 5,041.1
-
(104.9 )
-
-
-
1,208.9
(104.9 )
1,104.0
(145.3 )
6.5
-
-
3.3
(798.3 ) 6,009.6
Non-controlling
interests
$
-
-
-
-
-
-
-
-
-
2017
(53 weeks)
Equity
$
5,041.1
1,208.9
(104.9 )
1,104.0
(145.3 )
6.5
-
3.3
6,009.6
The accompanying notes are an integral part of the consolidated financial statements.
Annual Report © 2018 Alimentation Couche-Tard Inc.
75
Consolidated Statements of Cash Flows
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2))
Operating activities
Net earnings including non-controlling interests
Adjustments to reconcile net earnings including non-controlling interests to net cash provided by operating activities
Depreciation, amortization and impairment of property and equipment, intangible assets and other assets, and
amortization of financing costs, net of amortization of deferred credits
Deferred income taxes (Note 11)
Deferred credits
Share of earnings of joint ventures and associated companies accounted for using the equity method, net of
dividends received (Note 7)
(Gain) loss on disposal of property and equipment and other assets
Gain realized on an available-for-sale investment transferred to earnings (Note 4)
Other
Changes in non-cash working capital (Note 13)
Net cash provided by operating activities
Investing activities
Business acquisitions (Note 4)
Purchase of property and equipment, intangible assets and other assets
Proceeds from disposal of CST’s assets held for sale (Note 4)
Proceeds from disposal of property and equipment and other assets
Proceeds from disposal of an available-for-sale investment (Note 4)
Restricted cash
Deposit for business acquisition
Proceeds from sale of and capital reduction received from an associated company held-for-sale (Note 4)
Investment in an associated company held-for-sale (Note 4)
Net cash used in investing activities
Financing activities
Issuance of senior unsecured notes, net of financing costs (Notes 13 and 20)
Repayments of debts assumed on the CST acquisition (Notes 4 and 13)
Net increase (decrease) in term revolving unsecured operating credit D (Notes 13 and 20)
Net increase (decrease) in acquisition facility, net of financing costs (Notes 13 and 20)
Repayment of senior unsecured notes (Note 13)
Share repurchase
Cash dividends paid
Settlement of derivative financial instruments (Note 13)
Net decrease in other debts (Notes 13 and 20)
Net increase in CAPL senior secured revolving credit facility (Notes 13 and 20)
CAPL distributions paid to non-controlling interests (Note 5)
Exercise of stock options
Net cash provided by financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information:
Interest paid
Interest and dividends received
Income taxes paid
Cash and cash equivalents components:
Cash and demand deposits
Liquid investments
The accompanying notes are an integral part of the consolidated financial statements.
2018
(52 weeks)
$
2017
(53 weeks)
$
1,680.5
1,208.9
878.8
(208.6 )
51.3
(11.5 )
(8.9 )
(8.8 )
(3.0 )
(206.7 )
2,163.1
(5,380.9 )
(1,169.3 )
895.5
132.1
91.6
(13.5 )
-
-
-
(5,444.5 )
3,935.9
(1,075.9 )
702.9
412.1
(232.5 )
(193.1 )
(162.4 )
(81.3 )
(42.9 )
64.5
(50.5 )
0.2
3,277.0
33.0
28.6
637.6
666.2
233.5
36.7
277.5
665.5
0.7
666.2
654.9
47.2
18.6
(14.4 )
11.8
-
(17.8 )
16.3
1,925.5
(1,331.6 )
(994.1 )
-
95.0
-
(4.4 )
18.6
137.1
(308.1 )
(2,387.5 )
851.8
-
(176.6 )
(3.0 )
-
-
(145.3 )
(5.8 )
(26.0 )
-
-
3.3
498.4
1.8
38.2
599.4
637.6
102.2
21.3
360.4
592.7
44.9
637.6
76
Annual Report © 2018 Alimentation Couche-Tard Inc.
Consolidated Balance Sheets
As at April 29, 2018 and April 30, 2017
(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
Assets held for sale (Note 6)
Other short-term financial assets (Note 21)
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 7)
Deferred income taxes (Note 11)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 19)
Provisions (Note 23)
Liabilities associated with assets held for sale (Note 6)
Other short-term financial liabilities (Notes 21 and 22)
Income taxes payable
Current portion of long-term debt (Note 20)
Long-term debt (Note 20)
Provisions (Note 23)
Pension benefit liability (Note 28)
Other long-term financial liabilities (Note 21)
Income taxes payable
Deferred credits and other liabilities (Note 24)
Deferred income taxes (Note 11)
Equity
Capital stock (Note 25)
Contributed surplus
Retained earnings
Accumulated other comprehensive loss (Note 27)
Equity attributable to shareholders of the Corporation
Non-controlling interests (Note 5)
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
2018
$
2017
(adjusted, Note 2)
$
666.2
19.6
2,006.4
1,369.0
106.5
73.8
1.8
233.8
4,477.1
11,088.6
6,056.7
1,034.3
303.1
123.3
57.5
23,140.6
3,812.8
179.4
5.8
-
147.1
42.9
4,188.0
8,844.0
610.4
100.0
173.5
58.9
347.5
927.9
15,250.2
704.0
17.7
7,408.0
(566.3 )
7,563.4
327.0
7,890.4
637.6
6.1
1,494.2
865.0
60.3
-
7.6
102.1
3,172.9
7,511.4
2,370.2
670.1
313.4
107.9
39.7
14,185.6
2,704.3
130.5
-
88.6
75.3
253.2
3,251.9
3,101.7
489.4
94.6
223.1
-
267.2
748.1
8,176.0
708.7
15.7
6,083.5
(798.3 )
6,009.6
-
6,009.6
23,140.6
14,185.6
Annual Report © 2018 Alimentation Couche-Tard Inc.
77
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), 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 at 4204 Boulevard Industriel in Laval, Quebec, Canada.
As at April 29, 2018, the Corporation operates and licenses 12,740 convenience stores across North America, Ireland, Scandinavia (Norway,
Sweden and Denmark), Poland, the Baltics (Estonia, Latvia and Lithuania) and Russia, of which 9,718 are company-operated, and generates
income primarily from the sale of tobacco products, grocery items, beverages, fresh food offerings, including quick service restaurants, car wash
services, other retail products and services and road transportation fuel. In addition, through CrossAmerica Partners LP (“CAPL”), the
Corporation supplies road transportation fuel under various brands to approximately 1,300 locations in the United States.
Furthermore, under licensing agreements, more than 2,000 stores are operated under the Circle K banner in 14 other countries and territories
(China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Malaysia, Mexico, the Philippines, Saudi Arabia, the United Arab
Emirates and Vietnam), which brings the worldwide total network to more than 16,000 stores.
2.
BASIS OF PRESENTATION
Year-end date
The Corporation’s year-end is the last Sunday of April of each year. The fiscal years ended April 29, 2018 and April 30, 2017 are referred to as
“2018” and “2017”. The fiscal year ended April 29, 2018 had 52 weeks (53 weeks in 2017).
Basis of presentation
The Corporation prepares its consolidated financial statements in accordance with 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.
Approval of the financial statements
On July 9, 2018, the Corporation’s consolidated financial statements were approved by the Board of Directors, which also approved their
publication.
Comparative figures
During fiscal 2018, the Corporation made adjustments and finalized its estimates of the fair value of assets acquired and liabilities assumed for
the acquisition of Dansk Fuel A/S. As a result, changes were made to the following consolidated balance sheet accounts as at April 30, 2017:
Inventories decreased by $0.7, Property and equipment increased by $21.3, Intangible assets increased by $0.6, Accounts payable and accrued
liabilities increased by $0.3, Current portion of long-term debt increased by $0.8, Long-term debt increased by $5.9, Provisions increased by
$6.7 and Deferred credits and other liabilities increased by $0.7. Consequently, Goodwill decreased by $6.8. These changes did not result in
any material changes in the consolidated statement of earnings for the fiscal year ended April 30, 2017.
3.
ACCOUNTING POLICIES
Change in accounting policies
Statement of Cash Flows
The Corporation applied the amendments to IAS 7, “Statement of Cash Flows”, which are intended to clarify IAS 7 to improve information about
an entity’s financing activities. To comply with the new requirements, a reconciliation of total liabilities arising from financing activities has been
added. See Note 13 for the additional information disclosed in regards to the amendments.
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.
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
78
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
is different from the amounts that were initially recorded, such differences impact the current and deferred income tax assets and liabilities in
the period in which such determination is made.
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. See Note 5 for more details about the treatment of CAPL.
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 deconsolidated from the date control
ceases.
The Corporation holds contracts with franchisees and independent operators. They manage their store and are responsible for merchandising
and financing their inventory. Their 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 operations in the United States 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 consolidated balance sheet date, whereas revenues and expenses are translated using
the average exchange rate of the period. 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 translations, if any, are reflected in the earnings except for assets and liabilities
designated as part of hedging relationships.
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 consolidated balance sheet date. Revenues and expenses are translated using
the average exchange rate of the period. Individual transactions with a significant impact on the consolidated statements of earnings,
comprehensive income or cash flows are translated using the transaction date exchange rate.
Gains and losses arising from such translation are included in Accumulated other comprehensive income (loss) in 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, or a change in
ownership of the associated company or joint venture, 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. Gains and losses arising from such translations are included in Accumulated other comprehensive income (loss) in Equity.
Net earnings per share
Basic net earnings per share are calculated by dividing the net earnings available to Class A and Class B shareholders by the respective
weighted average number shares outstanding during the year. Diluted net earnings per share are calculated using the average weighted number
of shares outstanding plus the weighted average number of shares that would be issued upon the conversion of all potential dilutive stock
options into common shares.
Revenue recognition
For its three major product categories, merchandise and services, road transportation fuel and other, the Corporation generally recognizes
revenue at the point of sale for convenience operations. For wholesale operations, the Corporation generally recognizes road transportation fuel
revenue upon delivery to its customers. 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 also include the wholesale of
merchandise and goods to certain independent operators and franchisees made from the Corporation’s distribution centers, 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 commissions on the sale of lottery tickets and issuance of money orders, fees from automatic teller machines, sales
of calling cards and gift cards, fees for cashing checks, 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, as well as commissions from agents, and royalties from franchisees and licensees, which are recognized periodically
based on sales reported by agents, and franchise and license operators.
Annual Report © 2018 Alimentation Couche-Tard Inc.
79
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 sales of stationary energy, marine fuel and aviation fuel, 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 and input materials, as well as transportation costs when they are incurred to bring
products to the point of sale.
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 consolidated 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 labor, net occupancy costs, electronic payment modes
fees, commissions to dealers and agents and overhead.
Cash and cash equivalents
Cash includes cash and demand deposits. Cash equivalents include highly liquid investments that can be readily converted into cash for a fixed
amount and which 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 fuel inventory is generally determined according to the average cost 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 (loss) or directly in 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 amount and the tax base 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 all taxable temporary differences associated with investments in subsidiaries and interests in joint
ventures, except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments
and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits
of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities,
when they relate to income taxes levied by the same taxation authority, and the Corporation intends to settle its current tax assets and liabilities
on a net basis.
Property and equipment, depreciation, amortization and impairment
Property and equipment are stated at cost less accumulated depreciation and are depreciated over their estimated useful lives using the straight-
line method based on the following periods:
Buildings and building components
Equipment
Buildings and equipment under finance leases
3 to 40 years
3 to 40 years
Lesser of the lease term and useful life
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.
80
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 the 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, favorable
leases 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. Favorable leases
represent lease terms that are favorable compared to those currently available in the marketplace, and they are amortized using the straight-
line method over the term of the lease. 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 agreements.
The Corporation distinguishes between lease contracts and capacity contracts. Lease contracts provide the right to use a specific asset for a
period of time. Capacity contracts confer the right to and the obligation to pay for availability of certain capacity volumes related primarily to
transportation. Such capacity contracts that do not involve specified single assets or that do not involve substantially all the capacity of an
undivided interest in a specific asset are not considered to qualify as leases for accounting purposes. Capacity payments are recognized in the
consolidated statements of earnings in Operating, selling, administrative and general expenses.
Lease arrangements in which the Corporation is a lessee
The Corporation accounts for finance leases in instances where it has acquired substantially all the benefits and risks incidental to ownership of
the leased property. In some cases, the characterization of a lease transaction is not 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 the useful life of the
asset, whichever is shorter.
Gains and losses resulting from sale and leaseback transactions are recorded in the consolidated 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 the loss
shall be deferred and amortized in proportion to the lease payments over the period during which the asset is expected to be used; or
Annual Report © 2018 Alimentation Couche-Tard Inc.
81
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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.
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 taking into account the number of awards that are expected to ultimately vest. 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 forfeitures.
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 the 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 (loss) with no impact on net earnings;
Past service costs are recorded to earnings at the earlier of the following dates:
o When the plan amendment or curtailment occurs;
o When the Corporation recognizes related restructuring costs or termination benefits; and
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, which is the rate 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 reporting 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 flows 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
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Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 contamination, 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’s contamination, location
of sites and experience of the contractors performing 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, remaining 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.
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 and Ireland, 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 consolidated balance sheet date is discounted and is recognized as a liability. This cost is
estimated based on an 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 either the plan has 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 values 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.
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
Classification
Subsequent measurement (1)
Classification of gains and
liabilities
Cash and cash equivalents
Restricted cash
Accounts receivable
Investments
Loans and receivables
Loans and receivables
Loans and receivables
Available-for-sale financial assets
Amortized cost
Amortized cost
Amortized cost
Fair value
Derivative financial instruments
Derivative financial instruments
designated as net investment hedges
Derivative financial instruments
designated as fair value hedges
Financial assets or liabilities at fair value
through profit or loss
Effective hedging instruments
Fair value
Fair value
Effective hedging instruments
Fair value
Bank indebtedness and long-term debt
Other financial liabilities
Accounts payable and accrued liabilities Other financial liabilities
Amortized cost
Amortized cost
(1) Initial measurement of all financial assets and financial liabilities is at fair value.
losses
Net earnings
Net earnings
Net earnings
Other comprehensive income
(loss) subject to reclassification
to net earnings
Net earnings
Other comprehensive income
(loss) subject to reclassification
to net earnings
Net earnings
Net earnings
Net earnings
Annual Report © 2018 Alimentation Couche-Tard Inc.
83
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 and deferred share units (“DSUs”) 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 and DSUs. 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 (loss) and subsequently reclassified to consolidated net earnings in the same
period that the change in the fair value of the PSUs and DSUs affected 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 (loss) as a result of applying hedge accounting will be recognized in the reporting period’s net earnings under Operating,
selling, administrative and general expenses.
Fuel swaps
The Corporation uses fuel swaps to manage the price risk associated with the commodity prices of road transportation fuel. The changes in fair
value of these swaps are recognized in the consolidated statement of earnings as financial expenses.
Also, from time to time, the Corporation uses fuel swaps to manage the price risk associated with an anticipated cash settlement transaction
related to a sale of a large volume of fuel. The Corporation documents and designates the fuel swaps as a cash flow hedge of the anticipated
cash settlement transaction related to the sale of fuel. Accordingly, changes in the fair value of the hedging item, the fuel swaps, are recognized
in Other comprehensive income (loss). Realized gains in Accumulated other comprehensive income (loss) are then reclassified to Cost of sales
in the same period as when the hedged transaction occurs.
Designated long-term debts denominated in foreign currencies
The Corporation designates a portion of its US-dollar- and its Norwegian-krone-denominated long-term debts as a foreign exchange hedge of
its net investment in its United States and Norwegian operations, respectively. The Corporation also designates a portion of its Euro-denominated
long-term debts as a foreign exchange hedge of its net investment in its Euro currency and Danish-krone operations. Accordingly, the gains and
losses arising from the translation of the designated debts that are designated to be an effective hedge, are recognized in Other comprehensive
income (loss), counterbalancing gains and losses arising from the translation of the Corporation’s net investment its United States, Norwegian,
and Euro currency and Danish-krone operations.
Cross-currency interest rate swaps
The Corporation designates cross-currency interest rate swaps as a foreign exchange hedge of its net investment in its foreign operations.
Accordingly, the portion of the gains or losses arising from the translation of the cross-currency interest rate swaps that are determined to be an
effective hedge, are recognized in Other comprehensive income (loss), counterbalancing gains and losses arising from the translation of the
Corporation’s net investment in its foreign operations.
Short-term cross-currency interest rate swaps
Occasionally, the Corporation uses short-term cross-currency interest rate swaps to manage the currency fluctuation risk associated with
forecasted cash disbursements in a foreign currency. Gains or losses arising from the translation of these short-term cross-currency interest
rate swaps are recognized in the consolidated statements of earnings as foreign exchange gain or loss.
Fixed-to-floating interest rate swaps
The Corporation uses fixed-to-floating interest rate swaps to manage the interest rate risk associated with fixed interest rate debt. The Corporation
designated these fixed-to-floating interest rate swaps as a fair value hedge of fixed interest rate debt issued (the “hedged item”). Accordingly, the
hedged item is remeasured to reflect changes in fair value arising from changes in the hedged risk and such remeasurements are recognized in the
consolidated statements of earnings as financial expenses. This is counterbalanced by gains and losses arising from the remeasurement of the
swap’s fair value, which are recognized in the consolidated statements of earnings as financial expenses as well.
Interest rate locks
The Corporation uses interest rate locks to manage the interest rate risk associated with forecasted debt issuance. The Corporation designates
these interest rate locks as a cash flow hedge of the debt ultimately issued. Accordingly, changes in the fair value of the hedging item, the
interest rate locks, are recognized in Other comprehensive income (loss). Realized gains and losses in Accumulated other comprehensive
income (loss) are reclassified to Interest expense over the same periods as the Interest expense on the debt will be recognized in earnings.
Guarantees
A guarantee is defined as a contract or an indemnification agreement contingently requiring an entity to make payments to a third party based
on future events. These payments are contingent on either changes in an underlying element 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
84
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
an indirect guarantee of the indebtedness of another party. Guarantees are initially recognized at fair value and subsequently revaluated when
the loss becomes probable.
Business combinations
Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the aggregate of the
fair values, at the date of acquisition, of assets given, liabilities incurred or assumed, and equity instruments issued by the Corporation in
exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3, “Business Combinations”, are recognized at their fair values at the acquisition date. Direct acquisition costs are recorded to
earnings when incurred.
Goodwill arising from business combinations is recognized as an asset and initially measured at cost, being the excess of the cost of the business
combination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the net fair
value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess (“Negative
goodwill”) is recognized immediately to earnings.
Determination of the fair value of the acquired assets and liabilities requires 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, a level 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
Financial Instruments
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 and general hedge accounting. On April 30, 2018, the Corporation will
apply IFRS 9 retrospectively without restating comparative information, with the exception of the hedging component which is applied
prospectively.
The first requirement, recognition and measurement, requires a new classification of financial assets and liabilities under IFRS 9, which largely
retains requirements under IAS 39. Therefore, it will have no significant impact on the Corporation’s consolidated financial statements. The
second requirement, impairment, replaces the “incurred loss” model in IAS 39 with a forward-looking “expected credit loss” model. The new
impairment model will apply to financial assets measured at amortized cost and debt instruments measured at fair value through other
comprehensive income. This requirement will have no significant impact on the Corporation’s consolidated financial statements. The third
requirement, general hedge accounting, entails that the Corporation must ensure that hedge accounting relationships are aligned with its risk
management objectives and strategy and apply a more qualitative and forward-looking approach to assessing hedge effectiveness. The
Corporation continues to evaluate the impact of this requirement on its hedge accounting policies.
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. On April 30, 2018, the Corporation will apply IFRS 15 using the “modified retrospective approach”.
During fiscal 2018, the Corporation analyzed the impact on its current revenue streams, comparing its current accounting policy with the new
guidance, and identified the differences from applying the new requirements to its contracts. Under the current accounting policy, the Corporation
recognizes initial franchise fees when it has performed all material obligations and services, which generally occurs when the franchise store
opens. Under the new guidance, the Corporation will defer the initial fees and recognize revenue over the estimated term of the related franchise
agreement. As a result, the Corporation expects an adjustment related to initial franchise fees revenue of approximately $4.0 (net of income
taxes of approximately $2.0) which will result in an adjustment to opening Retained earnings on adoption.
Classification and Measurement of Share-based Payment Transactions
On April 30, 2018, the Corporation will apply amendments to IFRS 2, “Share-based Payment”, clarifying how to account for certain types of
share-based payment transactions, such as the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based
payments. The amendments will be applied prospectively and will have no significant impact on the Corporation’s consolidated financial
statements.
Leases
In January 2016, the IASB issued IFRS 16, “Leases”, which will replace IAS 17, “Leases”. The new standard will be effective for the Corporation’s
fiscal year beginning on April 29, 2019, with early adoption permitted. The new standard requires lessees to recognize a lease liability reflecting
Annual Report © 2018 Alimentation Couche-Tard Inc.
85
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
future lease payments and a “right-of-use asset” for virtually all lease contracts, and record it on the balance sheet, except with respect to lease
contracts that meet limited exception criteria.
Given that it has significant contractual obligations accounted for as operating leases under IAS 17, the Corporation’s preliminary conclusion is that
there will be a material increase to both assets and liabilities upon adoption of IFRS 16, and material changes to the presentation of expenses
associated with the lease arrangements, and, to a lower extent, the timing of recognition.
The following table outlines the key areas that will be impacted by the adoption of IFRS 16:
Impacted areas of the business Analysis
Financial reporting
The analysis includes which contracts will be in
scope as well as the options available under the
new standard such as whether to early adopt, the
two recognition and measurement exemptions and
whether to apply the new standard on a full
retrospective application in accordance with IAS 8
or choose the “modified retrospective approach”.
Information systems
Internal controls
Stakeholders
its
information
The Corporation is analyzing the need to make
changes within
systems
environment to optimize the management of more
than 9,000 leases that will fall within the scope of
the new standard.
The Corporation will be performing an analysis of
the changes to the control environment as a result
of the adoption of IFRS 16.
The Corporation will be performing an analysis of
the impact on the disclosure to its stakeholders as
a result of the adoption of IFRS 16.
of
earnings
statement
IFRS 16 on
the adoption of
Impact
The Corporation is in the process of analyzing the full
impact of
the
Corporation’s consolidated balance sheets and
and
consolidated
comprehensive income. As at April 29, 2018, the
Corporation intends to adopt IFRS 16 for its fiscal
year ending April 26, 2020 using the “modified
retrospective approach” and to use the exemptions
for short-term leases and leases for which the
underlying asset is of low-value.
The Corporation has evaluated different IT solutions
for the eventual recognition and measurement of
leases in scope. An IT solution was selected during
the fiscal year ended April 29, 2018 and is currently
being implemented.
The Corporation is currently evaluating the impact of
IFRS 16 on its control environment.
The Corporation has begun discussing the impact of
IFRS 16 to internal and external stakeholders.
4.
BUSINESS ACQUISITIONS
The Corporation has made the following business acquisitions:
2018
Acquisition of CST Brands Inc.
On June 28, 2017, the Corporation completed the acquisition of all the issued and outstanding shares of CST Brands Inc. (“CST”) through an
all-cash transaction valued at $48.53 per share, with a total enterprise value of approximately $4.4 billion including net debt assumed. CST is
based in San Antonio, Texas and, before the closing of the acquisition, it employed more than 14,000 people at over 2,000 locations throughout
the Southwestern U.S., with an important presence in Texas, the Southeastern U.S., the State of New York and Eastern Canada.
Pursuant to the acquisition of CST, the Corporation has also acquired the general partner of CAPL, owns 100% of CAPL’s Incentive Distribution
Rights (“IDRs”) and, as at April 29, 2018, held a 21.4% equity investment in it (20.5% as at June 28, 2017). CAPL supplies road transportation
fuel under various brands to approximately 1,300 locations in the United States (see Note 5 for more details).
On the same day, the Corporation sold to Parkland Fuel Corporation a significant portion of CST’s Canadian assets for approximately
CA $986.0 ($752.5). The disposed assets mainly comprised CST’s independent dealers and commission agents network, its heating-oil
business, 159 company-operated sites, as well as its Montreal head office. As a result, the Corporation retained 157 of CST’s company-operated
sites in Canada. Also, on September 6, 2017, as per the requirements of the U.S. Federal Trade Commission, the Corporation sold 70 CST U.S.
company-operated sites to Empire Petroleum Partners, LLC for a total consideration of $143.0. No gain or loss was recognized on these sales
transactions. The disposed assets and associated liabilities are presented as held for sale in the fair value of assets acquired and liabilities
assumed and are recorded at their respective fair value less costs of disposal.
For the fiscal year ended April 29, 2018, acquisition costs of $5.8 in connection with this acquisition are included in Operating, selling,
administrative and general expenses.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The final estimates of the fair value of assets acquired and liabilities assumed for the CST acquisition are as follows:
Assets
Current assets
Cash and cash equivalents
Accounts receivable(a)
Inventories
Prepaid expenses
Assets held for sale
Property and equipment
Identifiable intangible assets
Other assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Liabilities associated with assets held for sale
Income taxes payable
Current portion of long-term debt
Long-term debt
Provisions
Deferred credits and other liabilities
Deferred income taxes
Net identifiable assets
Non-controlling interests
Goodwill
Total cash consideration paid
Cash and cash equivalents acquired
Net cash flow for the acquisition
Final estimate
$
215.8
120.8
180.3
13.1
1,111.3
1,641.3
2,445.5
345.7
30.2
4,462.7
402.9
8.6
215.8
20.5
76.4
724.2
1,483.4
80.5
100.6
358.6
2,747.3
1,715.4
(370.6 )
2,340.4
3,685.2
215.8
3,469.4
(a) The fair value of acquired accounts receivable represents the gross contractual amount for accounts receivable of $121.2, net of the uncollectible
amount estimated to $0.4.
None of the goodwill related to this transaction was deductible for tax purposes.
On June 28, 2017, the Corporation repaid all of CST’s borrowings under its revolving credit facilities for an amount of $498.8. Additionally, on
July 28, 2017, the Corporation repaid all of CST’s outstanding senior notes for an amount of $577.1 using its acquisition facility.
Prior to the CST acquisition, the Corporation held an available-for-sale investment in CST, and the resulting gains and losses were recorded to
Accumulated other comprehensive income (loss). On June 28, 2017, the Corporation disposed of this investment for total proceeds of $91.6.
As a result, a gain of $8.8 was realized and transferred from Accumulated other comprehensive income (loss) to earnings.
The CST acquisition was concluded in order to expand the Corporation’s market share, to penetrate new markets and to increase its economies
of scale, and was financed using the Corporation’s available cash, its existing credit facilities and its new acquisition facility (Note 20). This
acquisition generated goodwill mainly due to the significant footprint in the Southwestern United States. Since the date of acquisition, revenues
and net earnings attributable to the shareholders of the Corporation from this acquisition amounted to $7,776.7 and $77.9, respectively.
Acquisition of Holiday Stationstores, LLC
On December 22, 2017, the Corporation acquired all the membership interest of Holiday Stationstores, LLC and certain affiliated companies
(“Holiday”) for a total cash consideration of approximately $1.6 billion. The fair value of the contingent consideration, which is based on specific
results achieved over a three-year period, was estimated at $25.0 using the Corporation’s best estimate at the acquisition date. Holiday is an
important convenience store and fuel player in the U.S. Midwest region. As of the closing of the transaction, it had 516 sites, of which 373 were
operated by Holiday and 143 were operated by franchisees, as well as 27 dealer contracts. Holiday also operates a strong car wash business
with 234 locations as at closing date, 2 food commissaries and a fuel terminal in Newport, Minnesota. Its stores are located in Minnesota,
Wisconsin, Washington State, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and Alaska.
The Corporation has not yet completed its fair value assessment of the assets acquired, the liabilities assumed and goodwill. Consequently,
part of the fair value adjustments, mainly relating to property and equipment and intangible assets, related to this acquisition is included in
goodwill in the preliminary fair value assessment of the assets acquired and the liabilities assumed. Regarding the intangible assets, the
Corporation’s preliminary work has identified the following items which have not yet been evaluated in this preliminary fair value assessment:
trademarks, software, as well as fuel supply agreements. The Corporation has also not finalized the fair value assessment of favorable and
unfavorable leases and franchise agreements. The preliminary estimates thereof are subject to material adjustments to the fair value of the
assets, liabilities and goodwill until the process is completed. For the fiscal year ended April 29, 2018, acquisition costs of $4.1 in connection
with this acquisition are included in Operating, selling, administrative and general expenses.
Annual Report © 2018 Alimentation Couche-Tard Inc.
87
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The preliminary estimates of the fair value of assets acquired and liabilities assumed for the Holiday acquisition based on the estimated fair
value on the date of acquisition and available information as at the date of the publication of these annual consolidated financial statements are
as follows:
Tangible assets acquired
Cash and cash equivalents
Accounts receivable(a)
Inventories
Prepaid expenses
Property and equipment
Other assets
Investment in joint ventures and associated companies
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Long-term debt
Deferred credits and other liabilities
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Total consideration
Consideration receivable
Contingent consideration payable
Cash and cash equivalents acquired
Net cash flow for the acquisition
Preliminary
estimate
13.6
64.3
69.5
4.2
459.2
15.4
2.9
629.1
194.9
28.5
3.2
1.0
227.6
401.5
60.8
1,195.9
1,658.2
(4.4 )
25.0
13.6
1,624.0
(a) The fair value of acquired accounts receivable represents the gross contractual amount for accounts receivable of $65.3, net of the uncollectible
amount estimated to $1.0.
The Corporation expects that all of the goodwill related to this transaction will be deductible for tax purposes.
The Holiday acquisition was concluded in order to expand the Corporation’s market share, to penetrate new markets and to increase its
economies of scale, and was financed using the Corporation’s available cash and existing credit facilities. Since the date of acquisition, revenues
and net earnings attributable to the shareholders of the Corporation from this acquisition amounted to $1,224.8 and $28.0, respectively.
On a pro forma basis, had the Corporation concluded the CST and Holiday acquisitions at the beginning of its fiscal year, total revenues and
net earnings attributable to the shareholders of the Corporation would have amounted to $55,436.7 and $1,730.5, respectively.
Other acquisitions
On May 30, 2017, the Corporation acquired 53 company-operated sites located in Louisiana, United States, from American General
Investments, LLC and North American Financial Group, LLC. The convenience stores operate under the Cracker Barrel brand. The
Corporation owns the land and building for 47 sites and assumes the leases for the remaining 6 locations. On the same date, the
Corporation closed seven of those stores.
On July 7, 2017, the Corporation acquired from Empire Petroleum Partners, LLC, 53 fuel supply contracts with independent operators
in the Atlanta, GA, metro area. As part of this transaction, the Corporation also acquired real estate for two sites.
On November 28, 2017, the Corporation acquired certain assets from Jet Pep, Inc., including a fuel terminal, associated trucking
equipment and 18 retail sites located in Alabama. The Corporation owns the land and building for 17 sites and assumes the lease for
the remaining location.
In addition, through a distinct transaction, CAPL purchased other assets of Jet Pep, Inc. consisting of 101 commission operated retail
sites, including 92 owned sites, 5 leased sites and 4 independent commission accounts.
During fiscal 2018, the Corporation also acquired 11 company-operated stores through distinct transactions. The Corporation owns the
land and building for eight sites, leases the land and owns the building for two sites, and leases the land and the building for the remaining
site.
These transactions were settled for a total consideration of $289.7 using available cash and existing credit facilities. Since the Corporation has
not yet completed its fair value assessment of the assets acquired, the liabilities assumed and goodwill for all transactions, the preliminary
estimates thereof are subject to adjustments to the fair value of the assets, liabilities and goodwill until the process is completed. For the fiscal
year ended April 29, 2018, acquisition costs of $1.9 in connection with these acquisitions and other unrealized and ongoing acquisitions are
included in Operating, selling, administrative and general expenses.
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Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The preliminary estimates of the fair value of assets acquired and liabilities assumed for other acquisitions based on the estimated fair value on
the date of acquisition and available information as at the date of the publication of these annual consolidated financial statements are as follows:
Tangible assets acquired
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Income taxes receivable
Property and equipment
Other assets
Assets held for sale
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Long-term debt
Deferred credits and other liabilities
Deferred income taxes
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Negative goodwill
Total cash consideration paid
Cash and cash equivalents acquired
Net cash flow for the acquisition
$
2.2
0.8
25.6
0.2
0.3
185.7
0.3
2.0
217.1
6.8
4.8
0.8
3.9
7.7
24.0
193.1
30.1
69.3
(2.8 )
289.7
2.2
287.5
The Corporation expects that almost all 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.
Since the date of acquisition, revenues and net earnings from these stores amounted to $530.9 and $6.8, respectively. Considering the size and
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.
2017
Acquisition of certain Canadian assets from Imperial Oil Limited
The Corporation acquired 278 sites from Imperial Oil Limited (“IOL”), of which 228 are located in Ontario, mostly in the Greater Toronto Area,
and 50 are located in the Greater Montreal Area. The agreement also included 13 land banks and 1 dealer site as well as a long-term supply
contract for Esso-branded fuel. The integration of the sites began on September 12, 2016, and was completed on October 27, 2016. Of the
278 sites, the Corporation leases the land and building for 1 site, leases the land and owns the building for 40 sites, and owns both of these
assets for the remaining 237 sites. At closing, all sites were operating under a commission agency model under which a third party operates the
site and the Corporation operates the road transportation fuel activities.
This transaction was settled for a total consideration of approximately $1.3 billion and was financed using the Corporation’s available cash and
existing credit facilities.
For the fiscal year ended April 30, 2017, acquisition costs of $12.2 in connection with this acquisition are included in Operating, selling,
administrative and general expenses.
Annual Report © 2018 Alimentation Couche-Tard Inc.
89
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The final estimates of the fair value of assets acquired and liabilities assumed for this acquisition are as follows:
Assets
Current assets
Inventories
Property and equipment
Identifiable intangible assets
Other assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Provisions
Deferred credits and other liabilities
Deferred income taxes
Net identifiable assets
Goodwill
Total cash consideration paid
Final
estimate
$
13.8
13.8
742.9
6.6
4.1
767.4
1.2
19.5
20.7
7.7
18.9
47.3
720.1
565.6
1,285.7
All of the goodwill related to this transaction was 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. This acquisition generated goodwill mainly due to the strategic location of stores acquired.
Other acquisitions
On May 1, 2016, the Corporation completed the acquisition of all shares of Dansk Fuel A/S (“Dansk Fuel”) from A/S Dansk Shell,
comprising 315 service stations, a commercial fuel business and an aviation fuel business, all located in Denmark, for a total
consideration of $308.1. See Note 2 for details about the adjustments brought to the consolidated balance sheet accounts as at April
30, 2017.
As per the requirements of the European Commission, the Corporation:
o was approved to retain 127 Dansk Fuel sites, of which 86 were owned and 41 were leased from third parties;
o was required to divest the remainder of the Dansk Fuel business in addition to 24 of its legacy sites in Denmark; and
o
continued to operate separately from Dansk Fuel until the retained sites were transferred to its Danish subsidiary.
As the Corporation did not have control over Dansk Fuel’s operation, its shares were accounted for as an investment in an associated
company using the equity method.
Between June 20, 2016 and September 11, 2016, the Corporation gradually gained control over the operations of the retained sites
as they were transferred from Dansk Fuel to its Danish subsidiary and from then, the assets and results related to these sites are
included in its consolidated balance sheet and its consolidated earnings. Of the 127 retained sites, 72 are full-service stations, 49 are
unmanned automated fuel stations and 6 are truck stops, all of which were dealer-operated at the date of the transfer. During fiscal
2017, all sites were converted to company-operated sites.
On October 31, 2016, as all requirements of the European Commission had been met, the Corporation sold all of its shares in Dansk
Fuel to DCC Holding A/S, a subsidiary of DCC plc, for a total cash consideration of $71.5. Prior to this sale transaction, a capital
reduction of $65.6 was received from Dansk Fuel.
This transaction was financed using the Corporation’s available cash and existing credit facilities.
On November 15, 2016, the Corporation completed the acquisition of 23 company-operated sites located in Estonia from Sevenoil
Est OÜ and its affiliates, of which there are 11 full-service fuel stations and 12 unmanned automated fuel stations. The Corporation
leases the land and owns the building for three sites and owns those assets for the remaining sites. This transaction was financed
using the Corporation’s available cash and existing credit facilities.
During fiscal 2017, the Corporation also acquired 13 company-operated stores through distinct transactions. The Corporation owns
the land and building for these sites. These transactions were financed using the Corporation’s available cash and existing credit
facilities.
90
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
These transactions were settled for a total consideration of $223.5. For the fiscal year ended April 30, 2017, acquisition costs of $8.8 in
connection with these acquisitions and other unrealized and ongoing acquisitions are included in Operating, selling, administrative and general
expenses.
The final estimates of the fair value of assets acquired and liabilities assumed for the other acquisitions are as follows:
Tangible assets acquired
Inventories
Property and equipment
Other assets
Total tangible assets
Liabilities assumed
Accounts payable and accrued liabilities
Provisions
Long-term debt
Deferred credits and other liabilities
Total liabilities
Net tangible assets acquired
Intangible assets
Goodwill
Total consideration
Deemed consideration for the transfer of 127 sites from
Dansk Fuel
Total cash consideration paid
Initial estimate
Changes
Final estimate
$
12.8
130.0
3.9
146.7
2.4
4.3
-
7.2
13.9
132.8
-
90.7
223.5
177.6
45.9
(0.7 )
21.7
-
21.0
0.3
6.7
6.8
0.7
14.5
6.5
0.6
(7.1 )
-
-
-
12.1
151.7
3.9
167.7
2.7
11.0
6.8
7.9
28.4
139.3
0.6
83.6
223.5
177.6
45.9
All 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.
5.
CROSSAMERICA PARTNERS LP
As at April 29, 2018, the Corporation owns 100% of the equity interests of the sole member of the General Partner, 100% of the IDRs and
21.4% of the outstanding common units of CAPL. Following the Corporation’s evaluation of its relationship with CAPL, the Corporation concluded
that it controls the partnership’s operations and activities even though it does not have a majority ownership of CAPL’s outstanding common
units. As a result, the Corporation fully consolidates CAPL in its consolidated financial statements.
CAPL’s accounting periods do not coincide with the Corporation’s accounting periods. The consolidated statement of earnings, comprehensive
income, changes in equity and cash flows for the fiscal year ended April 29, 2018 include those of CAPL for the period beginning June 28, 2017
and ending March 31, 2018, adjusted for significant transactions, if any. The consolidated balance sheet as at April 29, 2018 includes the balance
sheet of CAPL as at March 31, 2018, adjusted for the final estimates of the fair value of assets acquired and liabilities assumed and for significant
transactions, if any.
All transactions between the Corporation and CAPL are eliminated from the Corporation’s consolidated financial statements. These transactions
consist of a mark-up on motor fuel purchased and sold between the Corporation and CAPL, rent charged by CAPL to the Corporation, earnings
from CAPL’s equity ownership interest in CST Fuel Supply, a subsidiary of the Corporation, the Corporation’s portion of CAPL’s common unit
distributions and the Corporation’s revenues from CAPL’s IDRs. Additionally, the Corporation provides management and corporate support
services to CAPL and charges CAPL a management fee under the terms of the Amended and Restated Omnibus Agreement, as well as an
allocation of certain incentive compensation. Approximately 78.3% of CAPL’s operating results were attributable to non-controlling interests for
the fiscal year ended April 29, 2018. Therefore, the Corporation’s shareholders do not have rights to a substantial portion of the operating results
of CAPL. The earnings attributable to CAPL’s other units holders are presented as non-controlling interests.
Annual Report © 2018 Alimentation Couche-Tard Inc.
91
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
CAPL is a publicly traded Delaware limited partnership and its common units are listed for trading on the New York Stock Exchange under the
symbol “CAPL.” As a result, CAPL is required to file reports with the United States Securities and Exchange Commission (“SEC”), where
additional information about its results of operations prepared in accordance with US General Accepted Accounting Principles can be found and
should be read in conjunction with the table below, which highlights the results of its operations and certain of its operating metrics since the
acquisition date and included in these consolidated financial statements prepared in accordance with IFRS:
Statement of Earnings for the period from June 28, 2017 to March 31, 2018, adjusted for
significant transactions, if any
Revenues
Gross profit
Total operating expenses (excluding depreciation, amortization and impairment of property
and equipment, intangible assets and other assets)
Depreciation, amortization and impairment of property and equipment, intangible assets and
other assets
Net financial expenses
Loss before income taxes
Income tax recovery
Net earnings
Statement of Cash Flow for the period from June 28, 2017 to March 31, 2018, adjusted for
significant transactions, if any
Net cash provided by operating activities
Net cash used in investing activities, including $75.6 for business acquisitions
Net cash provided by financing activities, including $50.5 of distributions paid to the
Corporation
Balance Sheet as at April 29, 2018
Cash and cash equivalents
Current assets (other than cash and cash equivalents)
Long-term assets
Current liabilities
Long-term liabilities
$
1,671.8
135.8
75.1
61.1
19.4
(19.8 )
(28.6 )
8.8
$
30.4
(52.8 )
13.5
$
1.7
68.0
1,224.9
64.9
665.2
6.
DISPOSAL OF BUSINESS
On November 27, 2017, the Corporation reached an agreement to sell 100% of its shares in Statoil Fuel & Retail Marine AS to St1 Norge AS. The
transaction is subject to the customary regulatory approvals and closing conditions and is expected to close during the calendar year 2018.
Therefore, as at April 29, 2018, criteria for its classification as an asset for sale had been met. The Corporation’s marine fuel business’ contribution
to each line of its consolidated balance sheet has been grouped under the lines “Assets held for sale” and “Liabilities associated with assets held for
sale” and stated at the lower of its carrying amount and fair value less costs to sell.
7.
INVESTMENT IN JOINT VENTURES AND ASSOCIATED COMPANIES
Investment in joint ventures
Investment in associated companies
2018
$
121.9
1.4
123.3
2017
$
106.4
1.5
107.9
The Corporation’s investment in joint ventures and associated companies, none of which are individually significant to the Corporation, 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 (loss) and comprehensive income (loss)
8.
SUPPLEMENTARY INFORMATION RELATING TO EXPENSES
Cost of sales
Selling expenses
Administrative expenses
Other operating expenses
Total operating expenses
2018
(52 weeks)
$
31.9
0.1
32.0
2018
(52 weeks)
$
43,282.9
5,156.1
805.4
108.9
6,070.4
2017
(53 weeks)
$
32.6
(2.2 )
30.4
2017
(53 weeks)
$
31,422.7
4,052.7
623.5
107.9
4,784.1
92
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The above expenses include rent expense of $412.8 ($385.5 in 2017), net of sub-leasing income of $25.8 ($23.1 in 2017).
Employee benefit charges
Salaries
Fringe benefits and other employer contributions
Employee future benefits (Note 28)
Termination benefits
Stock-based compensation and other stock-based payments (Note 26)
Curtailment gain on defined benefits pension plan obligation (Note 28)
9.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Salaries and other current benefits
Stock-based compensation and other stock-based payments
Employee future benefits (Note 28)
2018
(52 weeks)
$
2017
(53 weeks)
$
1,991.7
260.6
107.7
4.9
8.5
(0.6 )
2,372.8
1,544.3
190.5
98.4
6.5
10.6
(3.9 )
1,846.4
2018
(52 weeks)
$
12.7
7.0
2.8
22.5
2017
(53 weeks)
$
9.3
8.7
2.4
20.4
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
Interest on bank overdrafts and bank loans
Accretion of provisions (Note 23)
Net interest on defined benefit plans (Note 28)
Loss related to fair value hedge derivatives
Other finance costs
Financial revenues
Interest on bank deposits
Other financial revenues
Foreign exchange loss
Net financial expenses
11.
INCOME TAXES
Current income tax expense
Deferred income tax (recovery) expense
2018
(52 weeks)
$
2017
(53 weeks)
$
214.9
28.2
19.1
17.1
2.4
1.7
12.4
295.8
(5.0 )
(3.9 )
(8.9 )
48.4
335.3
85.1
23.6
1.5
14.5
1.5
-
6.6
132.8
(3.3 )
(3.1 )
(6.4 )
9.6
136.0
2018
(52 weeks)
$
265.9
(208.6 )
57.3
2017
(53 weeks)
$
336.0
47.2
383.2
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
2018
%
26.77
0.31
(22.73 )
(1.05 )
3.30
2017
%
26.83
(1.55 )
0.02
(1.23 )
24.07
(a) The Corporation’s combined statutory income tax rate in Canada includes the appropriate provincial income tax rates.
On December 22, 2017, the United States enacted the “U.S. Tax Cuts and Jobs Act”, commonly referred to as the U.S. tax reform, which resulted
in the U.S. statutory federal income tax rate to be reduced to 21.0% from the previous rate of 35.0%, effective January 1, 2018.
Annual Report © 2018 Alimentation Couche-Tard Inc.
93
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The Corporation recorded a net tax benefit of $288.3 for the fiscal year ended April 29, 2018, which is mostly derived from the remeasurement of
the Corporation’s deferred income tax balances using the new U.S. statutory federal income tax rate, partly offset by the Deemed Repatriation
Transition Tax (“Transition tax”). This benefit is estimated based on the Corporation’s initial analysis of the “U.S. Tax Cuts and Jobs Act”.
The components of deferred income tax assets and liabilities are as follows:
Balance as at
April 30, 2017
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income (loss) or
equity
$
Recognized
through business
acquisitions
(Note 4)
$
2018
Balance as at
April 29, 2018
$
Deferred income tax assets
Property and equipment
Expenses deductible during the following
years
Intangible assets
Goodwill
Deferred charges
Tax attributes
Asset retirement obligations
Deferred credits
Revenues taxable during the following
years
Unrealized exchange loss (gain)
Other
Deferred tax assets to be recovered within
12 months
Deferred tax assets to be recovered in
more than 12 months
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
Investment
Unrealized exchange loss
Other
Deferred tax liabilities to be recovered
within 12 months
Deferred tax liabilities to be recovered in
more than 12 months
21.1
16.5
-
(4.0 )
3.7
-
1.8
(7.3 )
-
1.8
6.1
39.7
742.1
94.2
(130.2 )
81.7
(63.5 )
(34.0 )
(2.7 )
(17.7 )
69.0
-
15.8
(6.6 )
748.1
(19.9 )
(18.5 )
25.0
4.0
14.9
1.4
(0.6 )
2.7
0.2
14.6
(22.9 )
0.9
(166.4 )
79.8
109.7
(39.0 )
15.8
(13.6 )
(125.4 )
(12.4 )
(69.0 )
(20.9 )
18.4
15.3
(207.7 )
-
-
-
-
0.3
2.0
-
-
(0.2 )
(2.0 )
16.8
16.9
8.4
-
(0.1 )
2.5
(0.3 )
5.7
0.1
0.1
-
(1.4 )
3.0
3.2
21.2
-
-
-
-
-
-
-
-
-
-
-
-
258.3
0.4
6.4
9.2
(10.2 )
(9.1 )
71.7
(16.8 )
-
60.3
-
(3.9 )
366.3
1.2
(2.0 )
25.0
-
18.9
3.4
1.2
(4.6 )
-
14.4
-
57.5
0.3
57.2
842.4
174.4
(14.2 )
54.4
(58.2 )
(51.0 )
(56.3 )
(46.8 )
-
38.0
37.2
8.0
927.9
(52.6 )
980.5
94
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
Balance as at
April 24, 2016
$
Recognized
to earnings
$
Recognized
directly to other
comprehensive
income (loss) or
equity
$
Transfer from
income taxes
payable
$
Recognized
through business
acquisitions
(Note 4)
$
2017
Balance as at
April 30, 2017
$
Deferred income tax assets
Property and equipment
Expenses deductible during the
following years
Goodwill
Deferred charges
Tax attributes
Asset retirement obligations
Deferred credits
Revenues taxable during the following
years
Unrealized exchange (gain) loss
Other
Deferred tax assets to be recovered within
12 months
Deferred tax assets to be recovered in
more than 12 months
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
Deferred tax liabilities to be recovered
within 12 months
Deferred tax liabilities to be recovered in
more than 12 months
17.2
18.2
(6.7 )
9.9
13.7
4.2
(2.8 )
-
(11.3 )
3.9
46.3
672.9
76.8
(121.3 )
96.6
(57.1 )
(26.9 )
(9.6 )
(13.4 )
77.9
-
(3.6 )
692.3
3.9
(1.2 )
2.7
(5.0 )
(13.7 )
(2.4 )
(5.0 )
1.2
15.5
3.6
(0.4 )
58.7
17.2
(7.6 )
(16.6 )
(8.6 )
(20.3 )
9.8
(3.8 )
(8.9 )
16.2
10.7
46.8
-
(0.5 )
-
(1.2 )
-
-
0.5
(1.2 )
(2.4 )
(1.4 )
(6.2 )
(13.2 )
0.2
(0.4 )
1.7
2.2
(2.6 )
0.4
0.1
-
(0.4 )
(13.7 )
(25.7 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15.8
-
-
-
-
-
15.8
-
-
-
-
-
-
-
-
-
-
-
23.7
-
(0.9 )
-
-
-
(3.3 )
(0.6 )
-
-
-
18.9
21.1
16.5
(4.0 )
3.7
-
1.8
(7.3 )
-
1.8
6.1
39.7
2.0
37.7
742.1
94.2
(130.2 )
81.7
(63.5 )
(34.0 )
(2.7 )
(17.7 )
69.0
15.8
(6.6 )
748.1
(80.0 )
828.1
Deferred income tax liabilities that would be payable upon repatriation of the retained earnings of certain foreign 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 $2,177.7 ($1,122.2 in 2017).
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 to Class A and B shareholders
Diluted net earnings per share available to Class A and B shareholders
2018
(52 weeks)
$
1,673.6
566,090
788
566,878
2.96
2.95
2017
(53 weeks)
$
1,208.9
567,864
1,429
569,293
2.13
2.12
In calculating diluted net earnings per share for 2018, 315,938 stock options are excluded due to their antidilutive effect (357,969 excluded stock
options in 2017).
During fiscal 2018, the Board declared total dividends of CA 37.00¢ per share (CA 34.75¢ per share in 2017).
Annual Report © 2018 Alimentation Couche-Tard Inc.
95
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
13.
SUPPLEMENTARY INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS
Changes in non-cash working capital
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes payable
Changes in net debt arising from financing activities
2018
(52 weeks)
$
(299.7 )
(204.5 )
(14.4 )
343.9
(32.0 )
(206.7 )
Cash and cash
equivalents
$
637.6
Obligations under
finance leases and
other debts
$
304.7
Long-term debt,
excluding
obligations under
finance leases and
other debts
$
3,050.2
Balance, beginning of year
Cash flows
Change in cash and cash equivalents
Net (decrease) increase in long-term debt
Repayment of debts assumed on the CST
Acquisition (Note 4)
Non-cash movements
New obligations under finance leases, net
of disposals
Business acquisitions
Change in fair value of associated swaps
Amortization of financing costs
Reclassified to assets held for sale
Effect of exchange rate fluctuations
Balance, end of year
(4.4 )
-
-
-
-
-
-
-
33.0
666.2
-
(42.9 )
-
29.2
43.4
-
-
(0.7 )
18.7
352.4
Changes in net other financial liabilities arising from financing activities
Balance, beginning of year
Cash flows
Settlement of derivative financial instruments
Non-cash movements
Change in fair value
Balance, end of year
14.
ACCOUNTS RECEIVABLE
Trade accounts receivable and vendor rebates receivable(a)
Credit and debit cards receivable(a)
Provision for doubtful accounts
Credit and debit cards receivable and trade accounts receivable and vendor
rebates receivable – net
Other accounts receivable
Provision for doubtful accounts
2017
(53 weeks)
$
(178.2 )
(40.6 )
3.4
255.9
(24.2 )
16.3
2018
(52 weeks)
Net debt
$
2,717.3
-
4,882.9
4.4
4,840.0
(1,075.9
)
(1,075.9
)
-
1,520.4
(6.8 )
6.9
-
156.8
8,534.5
29.2
1,563.8
(6.8 )
6.9
(0.7 )
142.5
8,220.7
2018
(52 weeks)
Total net other
financial liabilities
$
304.1
(81.3 )
(51.1 )
171.7
2017
$
677.6
651.5
(25.7 )
1,303.4
192.5
(1.7 )
1,494.2
2018
$
989.7
784.4
(31.0 )
1,743.1
264.0
(0.7 )
2,006.4
(a)
These amounts are presented net of an amount of $313.4 from Accounts payable and accrued expenses due to netting arrangements ($209.2 as at April 30, 2017).
96
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The following table details the aging of credit and debit cards receivable and trade accounts receivable and vendor rebates receivable that are not
impaired:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91 days and over
Movement in the provisions for doubtful accounts is as follows:
Balance, beginning of year
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
Other products
2018
$
1,554.6
128.8
16.0
21.2
22.5
1,743.1
2018
$
27.4
9.7
(7.7 )
2.3
31.7
2017
$
1,209.6
64.7
10.5
9.4
9.2
1,303.4
2017
$
28.5
7.2
(7.7 )
(0.6 )
27.4
2018
$
762.0
594.3
12.7
1,369.0
2017
(adjusted, Note 2)
$
549.0
315.0
1.0
865.0
The cost of sales amounts presented in the consolidated statements of earnings are almost entirely composed of inventory recognized as an
expense.
16.
PROPERTY AND EQUIPMENT
Year ended April 29, 2018
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Depreciation and amortization expense
Transfers
Reclassified to assets held for sale
Effect of exchange rate variations
Net book amount, end(a)
As at April 29, 2018
Cost
Accumulated depreciation, amortization and impairment
Net book amount (a)
Portion related to finance leases
Year ended April 30, 2017 (adjusted, Note 2)
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 30, 2017 (adjusted, Note 2)
Cost
Accumulated depreciation, amortization and impairment
Net book amount (a)
Portion related to finance leases
Land
$
2,619.5
33.9
1,118.9
(41.1 )
(9.8 )
5.7
-
94.0
3,821.1
3,848.5
(27.4 )
3,821.1
132.9
1,997.8
105.5
608.8
(43.3 )
(10.0 )
(0.2 )
11.5
(50.6 )
2,619.5
2,634.9
(15.4 )
2,619.5
140.5
Buildings and
building
components
$
Equipment
$
Leasehold
improvements
$
2,060.8
141.0
1,108.8
(53.5 )
(276.4 )
157.7
(2.9 )
73.8
3,209.3
4,292.0
(1,082.7 )
3,209.3
115.3
1,937.8
180.7
150.1
(29.1 )
(169.8 )
(0.3 )
36.3
(44.9 )
2,060.8
2,896.0
(835.2 )
2,060.8
113.7
2,574.3
1,024.6
815.7
(59.9 )
(446.6 )
(199.8 )
(17.5 )
72.6
3,763.4
5,988.8
(2,225.4 )
3,763.4
60.1
2,204.4
764.3
135.8
(60.6 )
(348.8 )
(0.5 )
(71.2 )
(49.1 )
2,574.3
4,463.0
(1,888.7 )
2,574.3
54.9
256.8
9.0
47.0
(1.4 )
(57.6 )
36.4
-
4.6
294.8
726.4
(431.6 )
294.8
-
231.5
62.0
-
(2.6 )
(53.3 )
-
23.4
(4.2 )
256.8
639.7
(382.9 )
256.8
-
(a) The net book amount as at April 29, 2018 includes $677.5 related to construction in progress ($516.2 as at April 30, 2017).
Annual Report © 2018 Alimentation Couche-Tard Inc.
Total
$
7,511.4
1,208.5
3,090.4
(155.9 )
(790.4 )
-
(20.4 )
245.0
11,088.6
14,855.7
(3,767.1 )
11,088.6
308.3
6,371.5
1,112.5
894.7
(135.6 )
(581.9 )
(1.0 )
-
(148.8 )
7,511.4
10,633.6
(3,122.2 )
7,511.4
309.1
97
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
17.
GOODWILL AND INTANGIBLE ASSETS
Goodwill
Net book amount, beginning of year
Business acquisitions (Note 4)
Reclassified to assets held for sale
Effect of exchange rate variations
Net book amount, end of year
2018
$
2017
(adjusted, Note 2)
$
2,370.2
3,605.6
(4.4 )
85.3
6,056.7
1,773.2
649.2
-
(52.2 )
2,370.2
Intangible assets
Year ended April 29, 2018
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Rent, depreciation and
amortization expense
Effect of exchange rate
variations
Net book amount, end
As at April 29, 2018
Cost
Accumulated depreciation and
amortization
Net book amount
Year ended April 30, 2017
(adjusted, Note 2)
Net book amount, beginning
Additions
Business acquisitions (Note 4)
Disposals
Rent, depreciation and
amortization expense
Effect of exchange rate
variations
Net book amount, end
As at April 30, 2017
(adjusted, Note 2)
Cost
Accumulated depreciation and
amortization
Net book amount
Trademarks
$
Franchise
agreements
$
Software(a)
$
Customer
relationships
$
Fuel supply
agreements
$
Favorable
leases
$
284.4
-
9.3
(1.5 )
38.8
0.1
56.3
-
160.4
31.4
11.0
(0.5 )
(40.1 )
(10.1 )
(33.1 )
8.6
260.7
2.1
87.2
8.5
177.7
55.7
-
1.2
(0.1 )
(6.4 )
8.4
58.8
9.4
-
305.2
(2.8 )
93.8
-
43.7
(1.6 )
Other
$
27.6
0.4
9.9
-
Total
$
670.1
31.9
436.6
(6.5 )
(23.7 )
(15.8 )
(1.7 )
(130.9 )
-
288.1
5.5
125.6
-
36.2
33.1
1,034.3
289.2
169.7
315.6
169.0
354.4
158.8
42.0
1,498.7
(28.5 )
260.7
(82.5 )
87.2
(137.9 )
177.7
(110.2 )
58.8
(66.3 )
288.1
(33.2 )
125.6
(5.8 )
36.2
(464.4 )
1,034.3
327.0
4.4
-
(3.9 )
55.1
0.1
-
-
169.1
25.3
0.1
(0.6 )
(37.9 )
(14.5 )
(27.8 )
(5.2 )
284.4
(1.9 )
38.8
(5.7 )
160.4
62.8
-
-
-
(5.4 )
(1.7 )
55.7
11.1
-
-
(0.5 )
(1.2 )
-
9.4
102.0
-
7.1
(3.8 )
28.8
0.8
-
(0.1 )
755.9
30.6
7.2
(8.9 )
(9.7 )
(1.9 )
(98.4 )
(1.8 )
93.8
-
27.6
(16.3 )
670.1
389.8
107.9
263.1
152.4
54.8
108.6
31.5
1,108.1
(105.4 )
284.4
(69.1 )
38.8
(102.7 )
160.4
(96.7 )
55.7
(45.4 )
9.4
(14.8 )
93.8
(3.9 )
27.6
(438.0 )
670.1
(a)
The net book amount as at April 29, 2018 includes $13.7 related to software in progress ($24.6 as at April 30, 2017).
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 29, 2018 and April 30, 2017 is as follows:
CGU
Canada
United States
CAPL
Scandinavia
Central and Eastern Europe
Ireland
Intangible assets with
indefinite useful lives
$
-
185.2
-
64.7
28.4
-
278.3
2018
Goodwill
$
829.1
4,531.6
128.5
482.4
12.6
72.5
6,056.7
Intangible assets with
indefinite useful lives
$
-
179.8
-
61.3
25.8
-
266.9
2017
Goodwill
(adjusted, Note 2)
$
692.0
1,139.0
-
461.2
12.4
65.6
2,370.2
The intangible assets with indefinite useful lives for the United States CGU are the Circle K trademark and licenses. The intangible asset with
indefinite useful life for the Scandinavia and Central and Eastern Europe (“CEE”) CGUs is the droplet logo. The Scandinavia CGU includes the
activities of Norway, Sweden and Denmark, while the CEE CGU includes the activities of Estonia, Latvia, Lithuania, Poland and Russia.
98
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
For the annual impairment test, the recoverable amount of the CGUs is determined on the basis of their fair value less costs to sell. The
Corporation uses an approach based on EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiples of comparable
corporations to determine these values and, for CAPL, an approach based of its market capitalization.
18.
OTHER ASSETS
Environmental costs receivable (Note 23)
Pension benefit assets (Note 28)
Deferred compensation assets
Deferred incentive payments
Investment contract including an embedded total return swap (Note 29)
Deposits
Other
19.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued expenses(a)
Sales and excise taxes
Salaries and related benefits
Other
2018
$
77.9
46.1
40.9
34.5
29.9
18.3
55.5
303.1
2017
$
77.5
16.3
34.1
27.5
25.1
16.3
116.6
313.4
2018
$
2,461.6
748.4
259.8
343.0
3,812.8
2017
(adjusted, Note 2)
$
1,666.0
638.1
186.2
214.0
2,704.3
(a)
This amount is presented net of an amount of $229.8 from Credit and debit cards receivable and $83.6 from Trade accounts receivable and vendor rebates receivable due to netting
arrangements ($185.2 and $24.0, respectively as at April 30, 2017).
20.
LONG-TERM DEBT
US-dollar-denominated senior unsecured notes(b)
Canadian-dollar-denominated senior unsecured notes(b)
US-dollar-denominated term revolving unsecured operating credit D, maturing in December 2022(c)
Euro-denominated senior unsecured notes, maturing in May 2026(d)
CAPL US-dollar-denominated senior secured revolving credit facility, without recourse to the Corporation, maturing
in April 2020(e)
Acquisition facility(a)
NOK-denominated senior unsecured notes, maturing in February 2026(f)
Obligations related to buildings and equipment under finance leases, with an average rate of 8.728%, payable on
various dates until 2070, and other debts
Current portion of long-term debt
(a) Acquisition facility
2018
$
3,373.6
1,857.3
1,397.4
900.7
509.5
412.1
83.9
352.4
8,886.9
42.9
8,844.0
2017
(adjusted, Note 2)
$
-
1,461.9
694.5
815.1
-
-
78.7
304.7
3,354.9
253.2
3,101.7
On June 27, 2017, the Corporation entered into a new credit agreement consisting of an unsecured non-revolving acquisition credit facility of an
aggregate maximum amount of $4.3 billion (the “acquisition facility”), divided into three tranches as follows:
Tranche A
Tranche B
Tranche C
Principal amount
$2.0 billion
$1.0 billion
$1.3 billion
Maturity
June 27, 2018
June 27, 2019
June 27, 2020
The acquisition facility was available exclusively to finance, directly or indirectly, the acquisition of CST, the related acquisition costs and the
repayment of any of CST’s and its subsidiaries’ outstanding debt. Amounts could be drawn up to 90 days after the first draw and can be
reimbursed at any time. The acquisition facility was available in US dollars by way of loans bearing interest at the US base rate or the LIBOR
rate plus a variable margin.
As at April 29, 2018, tranches A and B had been fully repaid. As at the same date, the effective interest rate was 3.358% and the Corporation
was in compliance with the restrictive provisions and ratios imposed by the credit agreement.
Annual Report © 2018 Alimentation Couche-Tard Inc.
99
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
(b) Canadian- and US-dollar-denominated senior unsecured notes
As at April 29, 2018, the Corporation had Canadian-dollar-denominated senior unsecured notes totaling CA $2.4 billion, and US-dollar-
denominated senior unsecured notes totaling $3.4 billion, divided as follows:
Tranche 2 – November 1, 2012 issuance
Tranche 3 – November 1, 2012 issuance
Tranche 4 – August 21, 2013 issuance
Tranche 5 – June 2, 2015 issuance
Tranche 6 – July 26, 2017 issuance
Tranche 7 – July 26, 2017 issuance
Tranche 8 – July 26, 2017 issuance
Tranche 9 – July 26, 2017 issuance
Tranche 10 – December 14, 2017 issuance
Tranche 11 – December 14, 2017 issuance
Notional
amount
CA $450.0
CA $250.0
CA $300.0
CA $700.0
$1,000.0
CA $700.0
$1,000.0
$500.0
$600.0
$300.0
Maturity
November 1, 2019
November 1, 2022
August 21, 2020
June 2, 2025
July 26, 2022
July 26, 2024
July 26, 2027
July 26, 2047
December 13, 2019
December 13, 2019 Three-month LIBOR
Coupon rate
3.319%
3.899%
4.214%
3.600%
2.700%
3.056%
3.550%
4.500%
2.350%
plus 0.500%
Effective rate as at
April 29, 2018
3.404%
3.963%
4.317%
3.649%
2.819%
3.133%
3.642%
4.576%
2.557%
2.791%
Interest payment dates
May 1st and November 1st
May 1st and November 1st
August 21st and February 21st
June 2nd and December 2nd
July 26th and January 26th
July 26th and January 26th
July 26th and January 26th
July 26th and January 26th
June 13th and December 13th
June 13th, September 13th,
December 13th and March 13th
Canadian-dollar-denominated notes issued on November 1, 2012, June 2, 2015 and July 26, 2017 are associated with cross-currency
interest rate swaps, and fixed interest rate US-dollar-denominated notes issued on December 14, 2017 are subject to fixed-to-floating interest
rate swaps (Note 21). Also, a portion of the US-dollar-denominated notes issued on July 26, 2017 were subject to interest rate locks in
anticipation of their issuance (Note 22).
The net proceeds from the July 26, 2017 issuances, which were approximately $3.0 billion, were mainly used to repay a portion of the
Corporation’s acquisition facility and of its term revolving unsecured operating credit facility.
The net proceeds from the December 14, 2017 issuances, which were $893.8, were mainly used to repay a portion of the Corporation’s term
revolving unsecured operating credit facility and acquisition facility.
(c) Term revolving unsecured operating credit D
As at April 29, 2018, the Corporation had a credit agreement consisting of a revolving unsecured facility of a maximum amount of $2,525.0. The
credit facility was available in the following forms:
A term revolving unsecured operating credit, available i) in Canadian dollars, ii) in US dollars, iii) in Euros, iv) in the form of
Canadian-dollar bankers’ acceptances, with stamping fees and v) 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, LIBOR or
EURIBOR 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 the Corporation’s credit rating, were applied to the unused portion of the credit facility. Letters of credit fees
and the variable margin used to determine the interest rate applicable to borrowed amounts were determined according to the Corporation’s
credit rating as well. Under this credit agreement, the Corporation must maintain certain financial ratios and respect certain restrictive provisions.
On November 24, 2017, this operating credit’s maturity was extended to December 2022.
As at April 29, 2018, the weighted average effective interest rate was 3.236% (2.000% as at April 30, 2017). As at April 29, 2018, the Corporation
had $27.0 borrowed on the available line of credit, and as at April 30, 2017, the available line of credit was unused. The Corporation was in
compliance with the restrictive provisions and ratios imposed by the credit agreement.
(d) Euro-denominated senior unsecured notes
As at April 29, 2018, the Corporation had Euro-denominated senior unsecured notes totaling €750.0 with a coupon rate of 1.875% and maturing
on May 6, 2026. Interest is payable annually on May 6 and the effective rate is 1.944%.
(e) CAPL US-dollar-denominated senior secured revolving credit facility, without recourse to the Corporation
As at April 29, 2018, CAPL had a credit agreement consisting of a US-dollar-denominated senior secured revolving credit facility of a maximum
amount of $650.0, maturing on April 25, 2020, under which swing-line loans may be drawn up to $25.0 and standby letters of credit may be
issued up to an aggregate of $45.0. This facility is without recourse to the Corporation.
As at April 29, 2018, the effective interest rate was 4.740% and CAPL was in compliance with the restrictive provisions and ratios imposed by the
credit agreement.
100
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
(f) Norwegian-krone-denominated senior unsecured notes
As at April 29, 2018, the Corporation had Norwegian-krone-denominated senior unsecured notes totaling NOK 675.0 with a coupon rate of
3.850% and maturing on February 18, 2026. Interest is payable semi-annually on April 20 and October 20 of each year and the effective rate
is 3.927%.
Term revolving unsecured operating credit F
As at April 29, 2018, the Corporation had a credit agreement consisting of an unsecured revolving facility of an initial maximum amount of
€25.0 maturing on January 30, 2020. The credit facility was available in Euros in the form of an unsecured revolving operating credit. The
amounts borrowed bear interest at variable rates based on the funding base rate or the EURIBOR rate plus a fixed margin of 1.5%.
Standby fees of 0.7% apply to the unused portion of the credit facility. Under this credit agreement, the Corporation must maintain certain
financial ratios and respect certain restrictive provisions.
As at April 29, 2018 and April 30, 2017, operating credit F was unused.
Bank overdraft facilities
The Corporation had access to bank overdraft facilities totaling approximately $165.4 as at April 29, 2018 ($282.0 as at April 30, 2017). As at
April 29, 2018 and April 30, 2017, they were unused.
Letters of credit
As at April 29, 2018, the Corporation had outstanding letters of credit related to its own operations of $97.9 ($80.9 as at April 30, 2017), of which
$16.1 ($9.2 as at April 30, 2017) reduced funds available under the Corporation’s term revolving unsecured operating credit D.
21.
INTEREST RATE SWAPS
The Corporation has entered into cross-currency interest rate swap agreements, allowing it to synthetically convert a portion of its Canadian-
dollar-denominated senior unsecured notes into US dollars.
Receive – Notional Receive – Rate Pay – Notional
Pay – Rate
Maturity
Fair value as at
April 29, 2018
Fair value as at
April 30, 2017
CA $2,100.0
From 3.056% to
3.899%
US $1,829.3
From 2.733% to
3.870%
From November 1, 2019
to June 2, 2025
CA $300.0
2.861%
US $300.7
2.034%
November 1, 2017
Current portion of financial liabilities
Other long-term financial liabilities
$
166.7
-
166.7
-
166.7
$
223.1
79.4
302.5
79.4
223.1
These agreements are designated as foreign exchange hedges of the Corporation’s net investment in its operations in the United States.
In addition to the agreements presented in the table above, the Corporation has entered into short-term cross-currency interest rate swap
agreements. As at April 29, 2018, these agreements had a fair value of $1.8 ($7.6 as at April 30, 2017) and are presented in Other short-term
financial assets. These agreements have varying rates and maturities extending until May 11, 2018.
Furthermore, the Corporation has entered into fixed-to-floating interest rate swap agreements, synthetically converting its newly issued fixed
to floating interest rates. These agreements became effective on
interest rate US-dollar-denominated senior unsecured notes
December 14, 2017, and all mature on December 13, 2019.
Notional amount
$
600.0
Receive – Rate
Pay – Rate
Three-month LIBOR plus rates
varying from 0.350% to 0.355%
2.350%
Fair value as at
April 29, 2018 (Note 29)
$
6.8
These agreements are designated as fair value hedges of the Corporation’s US-dollar-denominated senior unsecured notes issued on
December 14, 2017.
22.
INTEREST RATE LOCKS
During fiscal year 2018, the Corporation extended its interest rate locks that were effective as at the fiscal year ended April 30, 2017, and entered
into new interest rate locks at the following conditions:
Notional amount
$
250.0
250.0
Interest lock term
Rate
Maturity date
5 years
10 years
From 1.951% to 1.955%
From 2.392% to 2.393%
July 28, 2017
July 28, 2017
Annual Report © 2018 Alimentation Couche-Tard Inc.
101
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The instruments allowed the Corporation to hedge the variability of its interest payments on the anticipated issuance of US-dollar-denominated
senior unsecured notes due to changes in the US Treasury rates. Therefore, these instruments were designated as a cash flow hedge of the
Corporation’s interest rate risk and, as a result, during fiscal year 2018, a loss of $6.1 was recognized to Accumulated other comprehensive loss
to reflect the fluctuation in the interest rate locks fair value.
On July 20, 2017, prior to their maturity, the Corporation settled all its interest rate locks. As at the same date, the total cumulative loss since the
Corporation first entered into interest rate locks was $14.7. This loss was recognized to Accumulated other comprehensive loss and is amortized
over the term of the related US-dollar-denominated senior unsecured notes issued on July 26, 2017 as an adjustment to the related interest expense.
The fair value as at April 30, 2017 of $9.2 was included in Other short-term financial liabilities.
23.
PROVISIONS
The reconciliation of the Corporation’s main provisions is as follows:
Asset
retirement
obligations(a)
$
Provision for
environmental
costs(b)
$
Restructuring
provision(c)
$
Provision for
workers’
compensation(d)
$
Provision
for general
liability(d)
$
Other
$
2018
Balance, beginning of year
Business acquisitions (Note 4)
Liabilities incurred
Liabilities settled
Accretion expense
Reversal of provisions
Change in estimates
Reclassified to assets held for
sale
Effect of exchange rate variations
Balance, end of year
Current portion
Long-term portion
2017 (adjusted, Note 2)
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
368.1
75.5
3.1
(7.3 )
15.8
(6.0 )
3.3
(0.6 )
13.7
465.6
80.9
384.7
314.9
14.8
1.6
(13.3 )
13.3
(4.2 )
50.1
(9.1 )
368.1
59.7
308.4
159.2
29.9
9.1
(10.1 )
0.8
(7.7 )
(4.3 )
-
3.2
180.1
45.5
134.6
159.0
15.7
14.4
(18.6 )
0.5
(6.6 )
(2.4 )
(2.8 )
159.2
32.6
126.6
12.5
-
56.9
(49.7 )
-
-
-
-
0.7
20.4
17.6
2.8
11.9
-
8.1
(6.7 )
-
(0.4 )
-
(0.4 )
12.5
8.8
3.7
35.3
4.9
26.0
(21.7 )
0.5
-
(1.2 )
-
0.3
44.1
20.1
24.0
39.8
-
14.6
(20.7 )
0.6
-
1.0
-
35.3
18.1
17.2
35.4
3.3
19.5
(18.0 )
0.1
(0.1 )
(4.2 )
-
-
36.0
12.1
23.9
31.3
-
22.7
(18.6 )
0.1
-
(0.1 )
-
35.4
10.8
24.6
9.4
33.8
4.6
(4.4 )
-
(0.6 )
-
-
0.8
43.6
3.2
40.4
23.1
-
0.3
(8.9 )
-
(4.5 )
-
(0.6 )
9.4
0.5
8.9
Total
$
619.9
147.4
119.2
(111.2 )
17.2
(14.4 )
(6.4 )
(0.6 )
18.7
789.8
179.4
610.4
580.0
30.5
61.7
(86.8 )
14.5
(15.7 )
48.6
(12.9 )
619.9
130.5
489.4
(a)
The total undiscounted amount of estimated cash flows to settle the asset retirement obligations is approximately $829.0 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.
Environmental 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, United States and European legislation 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 current environmental
legislation.
The Corporation has an ongoing training program for its employees on environmental issues and performs preventative site testing and site
restoration in cooperation with regulatory authorities. The Corporation also examines its motor fuel equipment annually.
In most of the U.S. states in which the Corporation operates (with the exception of Alaska, Florida, Maryland, New York, Oregon, Texas,
Washington, West Virginia and Wisconsin), the Corporation participates in 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 environmental contamination caused by the use 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 differs from state to state.
In order to provide for the above-mentioned environmental costs, the Corporation has recorded a $180.1 provision for environmental costs as
at April 29, 2018 ($159.2 as at April 30, 2017). Furthermore, the Corporation has recorded an amount of $87.0 for environmental costs receivable
from trust funds as at April 29, 2018 ($82.8 as at April 30, 2017), of which $9.1 ($5.3 as at April 30, 2017) is included in Accounts receivable and
the remainder in Other assets.
102
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
24.
DEFERRED CREDITS AND OTHER LIABILITIES
Unfavorable leases
Deferred compensation liabilities
Deferred rent expense
Deposits
Deferred credits
Deferred branding credits
Other liabilities
25.
CAPITAL STOCK
Authorized
Unlimited number of shares without par value
2018
$
127.1
63.7
60.3
36.9
19.2
16.1
24.2
347.5
2017
(adjusted, Note 2)
$
68.5
56.3
69.9
22.9
14.4
16.4
18.8
267.2
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 the number of outstanding shares are as follows:
Class A multiple voting shares
Balance, beginning of year
Conversion into Class B shares(a)
Balance, end of year
Class B subordinate voting shares
Balance, beginning of year
Issued on conversion of Class A shares
Repurchased and cancelled shares(a)
Stock options exercised
Issued as part of a previous acquisition
Balance, end of year
2018
2017
147,766,540
(15,742,667 )
132,023,873
147,766,540
-
147,766,540
420,683,538
15,742,667
(4,372,923 )
140,743
-
432,194,025
419,823,571
-
-
859,829
138
420,683,538
(a) Share repurchase and conversion
On October 11, 2017, the Corporation reached an agreement to repurchase 4,372,923 Class B subordinate voting shares held by Metro Canada
Holdings Inc., a wholly owned subsidiary of Metro Inc., for a net amount of $193.1. The Class A shares held by Metro Canada Holdings Inc.
were converted into an equivalent number of Class B shares before the repurchase. The transaction closed on October 17, 2017, and all shares
repurchased were cancelled. The dividend deemed to have been paid to Metro Canada Holdings Inc. as a result of this repurchase is an eligible
dividend within the meaning of the Income Tax Act (Canada) and the Taxation Act (Quebec).
26.
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 10-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 the 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 enable 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
Annual Report © 2018 Alimentation Couche-Tard Inc.
103
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 Plan as at April 29, 2018 and April 30, 2017 and the changes therein during the years
then ended:
Outstanding, beginning of year
Granted
Exercised
Outstanding, end of year
Number of
stock options
1,715,070
161,682
(150,270 )
1,726,482
2018
Weighted average
exercise price
CA $
28.27
61.43
5.43
33.36
Number of
stock options
2,474,205
154,256
(913,391 )
1,715,070
2017
Weighted average
exercise price
CA $
19.00
58.87
8.32
28.27
Exercisable, end of year
1,290,792
27.08
1,204,825
20.81
For options exercised in fiscal 2018, the weighted average share price at the date of exercise was CA $62.86 (CA $60.00 in 2017).
The following table presents information on the stock options outstanding and exercisable as at April 29, 2018:
Range of
exercise prices
CA $
4 – 16
16 – 35
35 – 65
Options outstanding
Number of
stock options
outstanding as at
April 29, 2018
Weighted average
remaining contractual
life (years)
545,300
661,531
519,651
1,726,482
2.02
6.41
8.23
Weighted
average
exercise price
CA $
7.48
34.39
59.24
Options exercisable
Number of
stock options
exercisable as at
April 29, 2018
545,300
529,225
216,267
1,290,792
Weighted
average
exercise price
CA $
7.48
34.39
58.64
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
2018
CA $0.36
25.00%
1.77%
8 years
2017
CA $0.31
28.00%
1.01%
8 years
The weighted average fair value of stock options granted was CA $17.55 in 2018 (CA $18.57 in 2017).
For 2018, the compensation cost charged to the consolidated statements of earnings amounts to $2.2 ($3.4 in 2017).
Deferred share unit plan
The Corporation has a DSU plan for the benefit of its external directors which allows them, at their option, to receive all or a portion of their
annual compensation and directors’ fee in the form of DSUs. A DSU is a notional unit, equivalent in value to the Corporation’s Class B share.
Upon leaving the Board of Directors, participants are entitled to receive the payment of their cumulated DSUs either in a) 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) Class B shares bought by the
Corporation on the open market on behalf of the participant.
The DSU expense and the related liability are recorded at the grant date. The liability is adjusted periodically to reflect any variation in the market
value of the Class B shares. As at April 29, 2018, the Corporation had a total of 260,374 DSUs outstanding (244,363 as at April 30, 2017) and
an obligation related to this notional unit allocation plan of $11.5 ($11.2 as at April 30, 2017) was recorded in Deferred credits and other liabilities.
The exposure to the Corporation’s share price risk is managed with an embedded total return swap (Note 29). For 2018, the net compensation
recovery amounted to $0.5 ($0.9 of net compensation cost in 2017).
Phantom stock units
The Corporation has a phantom stock unit (“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 antidilutive since they are payable solely in cash.
104
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The table below presents the status of the Corporation’s PSU plan as at April 29, 2018 and April 30, 2017 and the changes therein during the
years then ended in number of units:
Outstanding, beginning of year
Granted
Paid
Forfeited
Outstanding, end of year
2018
727,331
311,541
(297,712 )
(15,508 )
725,652
2017
765,601
227,342
(244,691 )
(20,921 )
727,331
As at April 29, 2018, an obligation related to this notional unit allocation plan of $4.1 was recorded in Accounts payable and accrued liabilities
($10.7 as at April 30, 2017) and $7.3 was recorded in Deferred credits and other liabilities ($7.1 as at April 30, 2017). The price risk of this
obligation is also managed with the embedded total return swap (Note 29). For 2018, the compensation cost amounted to $6.8 ($6.3 for 2017).
27.
ACCUMULATED OTHER COMPREHENSIVE LOSS
As at April 29, 2018
Attributable to shareholders of the Corporation
Items that may be reclassified to earnings
Cumulative translation
adjustments
$
Net investment
hedge
$
(287.4 )
-
(287.4 )
(266.4 )
(2.7 )
(263.7 )
Cash flow
hedge
$
(14.0 )
(0.5 )
(13.5 )
Will never be
reclassified to
earnings
Cumulative net
actuarial loss
$
(3.1 )
(1.4 )
(1.7 )
Accumulated other
comprehensive loss
$
(570.9 )
(4.6 )
(566.3 )
Attributable to shareholders of the Corporation
Items that may be reclassified to earnings
Will never be
reclassified to
earnings
Cumulative translation
adjustments
$
Net investment
hedge
$
(424.7 )
-
(424.7 )
(348.6 )
(0.7 )
(347.9 )
Available-for-
sale
investment
$
9.3
1.6
7.7
Cash flow
hedge
$
Cumulative net
actuarial loss
$
Accumulated other
comprehensive
loss
$
(6.9 )
(0.3 )
(6.6 )
(35.8 )
(9.0 )
(26.8 )
(806.7 )
(8.4 )
(798.3 )
Balance, before income taxes
Less: Income taxes
Balance, net of income taxes
As at April 30, 2017
Balance, before income taxes
Less: Income taxes
Balance, net of income taxes
28.
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, Sweden and Ireland. 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, 2017, and the next required valuation will be as at
December 31, 2018.
Some plans include benefit 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 is 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.
During fiscal year 2017, some of Norway’s defined benefits disability plans were terminated, which resulted in a pre-tax curtailment gain of $3.9,
with a corresponding decrease in the defined benefits pension plan obligation on the consolidated balance sheet. Also, most of Canada’s and
United States’ existing defined benefits pension plans were converted to defined contributions plans going forward. This decision had no
significant impact on the Corporation’s consolidated financial statements since employees kept their accumulated rights as of the date of the
conversion.
Annual Report © 2018 Alimentation Couche-Tard Inc.
105
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
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 surplus
Present value of defined benefit obligation for unfunded pension plans
Net accrued pension benefit liability
2018
$
(124.9 )
172.2
47.3
(101.2 )
(53.9 )
2017
$
(129.6 )
144.9
15.3
(93.6 )
(78.3 )
The pension benefit asset of $46.1 ($16.3 as at April 30, 2017) is included in Other assets and the Pension benefit liability of $100.0 ($94.6 as
at April 30, 2017) is presented separately in the consolidated balance sheets.
The defined benefit obligation and plan assets are composed by country as follows:
2018
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – (deficit) surplus
2017
Present value of defined benefit obligation
Fair value of plans’ assets
Funded status of plan – (deficit) surplus
Canada
$
(59.6 )
22.0
(37.6 )
United States
$
(14.1 )
-
(14.1 )
(58.3 )
21.7
(36.6 )
(13.1 )
-
(13.1 )
Norway
$
(40.4 )
2.0
(38.4 )
(38.2 )
2.9
(35.3 )
Sweden
$
(102.7 )
148.2
45.5
(104.9 )
120.3
15.4
Ireland
$
(9.3 )
-
(9.3 )
(8.7 )
-
(8.7 )
As at the measurement date, the plans’ assets consisted of:
Cash and cash equivalents
Equity securities
Debt instruments
Government
Corporate
Real estate
Other assets
Total
Quoted
$
0.1
92.8
Unquoted
$
-
-
68.2
4.8
-
5.4
171.3
-
-
0.9
-
0.9
Total
$
0.1
92.8
68.2
4.8
0.9
5.4
172.2
2018
%
0.1
53.9
39.6
2.8
0.5
3.1
100.0
Quoted
$
0.1
76.1
57.4
4.9
-
4.7
143.2
Unquoted
$
-
-
-
-
1.6
0.1
1.7
Total
$
0.1
76.1
57.4
4.9
1.6
4.8
144.9
The Corporation’s pension benefit expense for the fiscal year is determined as follows:
Total
$
(226.1 )
172.2
(53.9 )
(223.2 )
144.9
(78.3 )
2017
%
0.1
52.5
39.6
3.4
1.1
3.3
100.0
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
2018
$
3.6
0.1
3.7
2.4
(0.6 )
5.5
The amount recognized in Other comprehensive income (loss) for the fiscal year is determined as follows:
(Gains) losses from change in financial assumptions
Experience gains
Return on assets (excluding amounts included in interest income)
Amount recognized in Other comprehensive income (loss)
2018
$
(1.9 )
(4.5 )
(26.3 )
(32.7 )
2017
$
4.2
0.1
4.3
1.5
(3.9 )
1.9
2017
$
17.7
(0.8 )
3.5
20.4
The Corporation expects to make a contribution of $5.7 to the defined benefit plans during the next fiscal 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 United States Norway Sweden
%
%
2.75
4.25
2.75
4.00
1.75
2.00
%
2.50
2.50
0.10
%
3.65
3.71
2.00
Ireland Canada United States Norway
%
2.50
2.50
0.10
%
1.50
-
1.60
%
4.30
4.00
2.00
%
3.30
3.70
2.00
2018
Sweden
%
2.75
2.75
1.75
2017
Ireland
%
1.60
-
1.40
-
-
2.25
2.75
-
-
-
2.25
2.75
-
106
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The Corporation uses mortality tables provided by regulatory authorities and actuarial associations in each country. The social security base
amount (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:
Change in assumption
Increase in assumption
Decrease in assumption
Discount rate
Rate of compensation increase
Rate of benefit increase
Increase of life expectancy
0.50%
0.50%
0.50%
1 year
Decrease by 9.3%
Increase by 3.2%
Increase by 7.8%
Increase by 3.3%
Increase by 10.8%
Decrease by 2.3%
Decrease by 7.7%
-
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 analysis, 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 defined benefit pension plan 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 defined benefit pension plan 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
tables) will increase or decrease the obligation.
For funded plans, the individual plans have investment policy objectives to bring investment average duration in line with the average expected
life of the obligation and scheduled benefit 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 benefit payments. Also, as presented above, to
mitigate the risks, the investments are well diversified. The Corporation does not use derivatives to offset its risk and has not changed the
processes from the previous fiscal year.
In Europe, it is the Corporation’s responsibility to make or not to make contributions 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.
Defined contribution plans
The Corporation’s total pension expense under its defined contribution plans and mandatory governmental plans for the fiscal year 2018 is
$104.1 ($94.2 for 2017).
Deferred compensation plan – United States operations
The Corporation sponsors a deferred compensation plan that allows certain employees in its United States 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 $44.4 as at April 29, 2018
($37.9 as at April 30, 2017) and are included in Deferred credits and other liabilities.
29.
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 investments in its operations in the United States, Norway, Denmark, the
Baltics and Ireland. The Corporation also uses interest rate locks to hedge the interest rates on forecasted debt issuance, and fixed-to-floating
interest rate swaps to hedge the interest rates associated with fixed interest rate debt.
Annual Report © 2018 Alimentation Couche-Tard Inc.
107
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
Foreign currency risk
A large portion of the Corporation’s consolidated revenues and expenses are received or denominated in the functional currency of the business
units operating in 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, its Norwegian-krone and Euro-
denominated senior unsecured notes and the cross-currency interest rate swaps, a portion of which are designated as net investment hedges
of its operations in the United States, Norway, Denmark, the Baltics and Ireland. As at April 29, 2018, with all other variables held constant, a
hypothetical variation of 5.0% of the US dollar, the Norwegian krone and the Euro against the Canadian dollar would have had a net impact of
$57.7 on Other comprehensive income (loss). As the Corporation uses the US dollar as its reporting currency, part of these impacts are
compensated by the translation of the Canadian-dollar consolidated financial statements into US dollars.
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. To mitigate a portion of
this risk, the Corporation has entered into fixed-to-floating interest rate swaps in order to hedge a portion of the interest rate fair value risk
associated with fixed interest rate debt.
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 29, 2018, 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 financial expenses of a defined interest rate shift. Based on
variable rate and synthetically variable rate long-term debt balances as at April 29, 2018, the annual impact on net financial expenses of a
1.0% shift in interest rates would have been $31.9 ($6.9 based on balances as at April 30, 2017).
The Corporation is exposed to a risk of change in cash flows due to changes in interest rates on future debt issuance. To mitigate this risk, the
Corporation enters from time to time into interest rate locks in order to hedge the interest rates on forecasted debt issuance.
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 derivative financial instruments 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 reassessed according to policy and monitored on a regular basis. 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 store operations is limited considering
the nature of the Corporation’s activities and its counterparties. As at April 29, 2018, no single creditor accounted for over 10.0% of total Trade
accounts receivable and vendor rebates receivable and the related maximum credit risk exposure corresponds to their carrying amount.
The Corporation mitigates the credit risk related to Cash and cash equivalents and Credit and debit cards receivable by dealing with major
financial institutions that have very low or minimal credit risk. As at April 29, 2018, 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
Circle K/MasterCard and Holiday credit cards as described below.
In some European markets, customers can settle their purchases with a combined Circle K/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 29, 2018, relates to receivables of $162.6, of which $73.8 was interest-bearing. These receivables are not recognized in the
Corporation’s consolidated balance sheet. For fiscal year 2018, 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 derivative
financial instruments when their fair value is favorable to the Corporation. In accordance with its risk management policy, to reduce this risk, the
Corporation has entered into these derivatives with major financial institutions with a very low credit risk.
108
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
Liquidity risk
Liquidity risk is the risk that the Corporation will encounter difficulties in meeting its obligations associated with financial liabilities and lease
commitments. The Corporation is exposed to this risk mainly through its Long-term debt, Accounts payable and accrued expenses and lease
agreements. The Corporation’s liquidity is provided mainly by cash flows from operating activities and borrowings available under its revolving
credit facilities.
On an ongoing basis, the Corporation monitors rolling forecasts of its liquidity reserve on the basis of expected cash flows taking into account
operating needs, the 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 29, 2018, are as follows:
Non-derivative financial liabilities(1)
Accounts payable and accrued liabilities(2)
US-dollar-denominated senior unsecured notes
Canadian-dollar-denominated senior unsecured
Carrying
amount
$
Contractual
cash flows
$
Less than one
year
$
Between one
and two years
$
Between two
and five years
$
More than five
years
$
3,011.8
3,373.6
3,011.8
4,564.3
3,011.8
106.9
-
1,004.9
-
1,241.5
-
2,211.0
notes
1,857.3
2,203.3
US-dollar-denominated term revolving unsecured
operating credit D
Euro-denominated senior unsecured notes
CAPL senior secured revolving credit facility
Acquisition facility
NOK-denominated senior unsecured notes
Obligations related to buildings and equipment
under finance leases and other debts
Cross-currency interest rate swaps payable(1)
Cross-currency interest rate swaps receivable(1)
Fixed-to-floating interest rate swaps payable(1)
1,397.4
900.7
509.5
412.1
83.9
352.4
164.9
6.8
12,070.4
1,557.9
1,058.1
535.3
442.1
109.6
511.7
351.3
(315.9 )
1.0
14,030.5
65.1
44.3
17.0
22.7
13.2
3.2
67.4
61.4
(55.6 )
0.5
3,357.9
414.5
44.3
17.0
512.6
13.2
3.2
82.5
61.2
(55.3 )
0.5
2,098.6
563.1
1,160.6
1,469.3
50.9
-
415.7
9.7
144.4
146.6
(131.2 )
-
3,910.0
-
973.2
-
-
93.5
217.4
82.1
(73.8 )
-
4,664.0
(1) Based on spot rates, as at April 29, 2018, for balances in Canadian dollars, in Norwegian krone, in Euros and for 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 and stationary energy, 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 sale prices to reflect changes in
refined oil product prices. The time lag between a change in refined oil product prices and a change of prices of fuel sold by the Corporation can
impact the gross profit on sales of these products. From time to time, the Corporation enters into commodity financial derivatives to mitigate a
portion of this risk for its sales and purchases of road transportation fuel. As at April 29, 2018, the nominal value of such financial derivatives
was not material.
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 index 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 29, 2018, the impact on net earnings or
shareholders’ equity of a 5.0% shift in the value of the Corporation’s share price would not have been significant.
Fair value
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 implicit interest rates are generally consistent with equivalent market interest
rates for similar obligations. The carrying values of the acquisition facility, the term revolving unsecured operating credit D and the senior secured
revolving credit facility approximate their fair values given that their credit spreads are similar to the credit spread the Corporation would obtain
under similar conditions at the reporting date.
Fair value hierarchy
Fair value measurements are categorized in accordance with the following levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included in Level 1 but which are observable for the asset or liability, either directly or indirectly; and
Level 3: Inputs for the asset or liability which are not based on observable market data.
Annual Report © 2018 Alimentation Couche-Tard Inc.
109
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The estimated fair value of each class of financial instrument, the methods and assumptions that were used to determine them and their fair
value hierarchy are as follows:
Financial instruments at fair value on the consolidated balance sheets:
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, was $36.3 as at April 29, 2018 ($44.4 as at April 30, 2017) (Level 2);
The fair value of the cross-currency interest rate swaps, which is determined based on market rates, was $164.9 as at April 29, 2018
($294.9 as at April 30, 2017) (Level 2). They are presented as Other short-term financial assets for an amount of $1.8 and Other financial
liabilities for an amount of $166.7 on the consolidated balance sheets;
The fair value of the fixed-to-floating interest rate swaps, which is determined based on market rates, was $6.8 as at April 29, 2018
(Level 2). They are presented as Other financial liabilities on the consolidated balance sheet; and
The fair value of the interest rate locks, which is determined based on market rates obtained from the Corporation’s financial institutions
for similar financial instruments, was $9.2 as at April 30, 2017 (Level 2). They are presented as Other short-term financial liabilities on
the consolidated balance sheet.
Financial instruments not at fair value on the consolidated balance sheets:
The table below presents the fair value, which is based on observable market data (Level 2), and the carrying value of the financial
instruments which are not measured at fair value on the consolidated balance sheets:
US-dollar-denominated senior unsecured notes
Canadian-dollar-denominated senior unsecured notes
Euro-denominated senior unsecured notes
NOK-denominated senior unsecured notes
Capital risk management
Carrying value
$
3,373.6
1,857.3
900.7
83.9
2018
Fair value
$
3,279.4
1,873.5
925.9
90.5
Carrying value
$
-
1,461.9
815.1
78.7
2017
Fair value
$
-
1,542.6
840.4
81.1
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 25).
In its capital structure, the Corporation considers its stock option, PSU and DSU plans (Note 26). 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. This measure is presented as if the Corporation’s investment in CAPL was reported using the equity method as the
Corporation believes it allows a more relevant presentation of its underlying performance. Also, for the purpose of this calculation, CAPL’s long-
term debt is excluded as it is a non-recourse debt to the Corporation. As at the consolidated balance sheet dates, 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, including restricted cash
Net interest-bearing debt
Shareholders’ equity
Net interest-bearing debt
Total capitalization
Net interest-bearing debt to total capitalization ratio
2018
$
40.0
8,310.1
684.1
7,666.0
7,563.4
7,666.0
15,229.4
50.3%
2017
$
253.2
3,101.7
643.7
2,711.2
6,009.6
2,711.2
8,720.8
31.1%
Under its term revolving unsecured operating credits and acquisition facility, the Corporation must meet the following ratios on a consolidated
basis, but excluding CAPL:
110
A leverage ratio, which is the ratio of total Long-term debt less Cash and cash equivalents to EBITDA, which is a non-IFRS measure,
for the four most recent quarters; and
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.
Annual Report © 2018 Alimentation Couche-Tard Inc.
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
The Corporation monitors these ratios regularly and was in compliance with these covenants as at April 29, 2018 and April 30, 2017.
The Corporation is not subject to any significant externally imposed capital requirements.
30.
CONTRACTUAL OBLIGATIONS
Minimum lease payments
As at April 29, 2018, the Corporation has entered into operating lease agreements which call for aggregate minimum lease payments
of $2,569.1 for the rental of commercial space, equipment and warehouses. 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
$
464.2
1,278.7
826.2
As at April 29, 2018, the total amount of future minimum sublease payments expected to be received under sublease agreements related to
these operating leases is $81.9.
Purchase commitments
The Corporation has entered into various property purchase agreements, as well as product purchase agreements, which require the
Corporation 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.
31.
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 its 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 sub lessees fail to pay. As at April 29, 2018,
the total future lease payments under such agreements are approximately $5.3 and the fair value of the guarantee is not significant. Historically,
the Corporation has not made any significant payments in connection with these indemnification provisions.
The Corporation has also issued guarantees to third parties and on behalf of third parties for maximum undiscounted future payments
totaling $15.1. These guarantees primarily relate to financial guarantee commitments under 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 29, 2018 were not significant.
32.
SEGMENTED INFORMATION
The Corporation operates convenience stores in the United States, in Europe and in Canada. It operates in one reportable segment, the sale of
goods for immediate consumption, road transportation fuel and other products mainly through company-operated stores and franchised stores.
The Corporation operates its convenience store chain under several banners, including Circle K, Corner Store, Couche-Tard, Holiday, Ingo,
Mac’s, Re.Store and Topaz. Revenues from external customers mainly fall into three categories: merchandise and services, road transportation
fuel and other.
Annual Report © 2018 Alimentation Couche-Tard Inc.
111
Notes to the Consolidated Financial Statements
For the fiscal years ended April 29, 2018 and April 30, 2017
(in millions of US dollars (Note 2), except share and stock option data)
Information on the principal revenue categories 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
United States
$
Europe
$
Canada
$
Total
$
United States
$
2018
(52 weeks)
9,508.6
24,612.5
56.6
34,177.7
1,413.9
7,684.1
1,217.7
10,315.7
3,158.7
1,937.7
54.7
5,151.1
602.3
1,024.2
173.7
1,800.2
2,053.5
4,819.9
27.6
6,901.0
707.7
424.9
27.6
1,160.2
12,976.0
37,116.5
1,301.9
51,394.4
4,468.7
3,386.8
256.0
8,111.5
7,669.8
16,492.0
14.0
24,175.8
2,545.0
1,407.6
14.0
3,966.6
2017
(53 weeks)
(Adjusted, Note 2)
Total
$
Canada
$
1,848.5
3,089.0
13.6
4,951.1
10,724.1
26,054.4
1,126.0
37,904.5
625.2
262.0
13.6
900.8
3,681.6
2,587.1
213.1
6,481.8
Europe
$
1,205.8
6,473.4
1,098.4
8,777.6
511.4
917.5
185.5
1,614.4
Total long-term assets(b)
12,568.9
3,726.7
2,234.5
18,530.1
5,475.3
3,640.3
1,816.0
10,931.6
(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.
33.
SUBSEQUENT EVENT
Dividends
During its July 9, 2018 meeting, the Corporation’s Board of Directors declared a quarterly dividend of CA 10.0¢ per share for the fourth quarter
of fiscal 2018 to shareholders on record as at July 18, 2018, and approved its payment for August 1, 2018. This is an eligible dividend within the
meaning of the Income Tax Act (Canada).
112
Annual Report © 2018 Alimentation Couche-Tard Inc.
Board of Directors
Senior Management
Alimentation Couche-Tard Inc.
General Information
www.corpo.couche-tard.com
Annual Report © 2018
Alimentation Couche-Tard
Annual Report © 2018