Alimentation Couche-Tard announces its results for the third quarter of fiscal 2013
- Diluted net earnings per share of the third quarter are US$0.75 compared to US$0.48 last year, a 56.3% increase. Excluding the foreign exchange loss and acquisition costs, diluted net earnings per share would have been US$0.81, an increase of 65.3%.
- Total merchandise and service revenues up 4.4% in the United States and up 5.1% in Canada. In the United States, excluding tobacco products, the increase is 2.6% on a same-store basis.
- Consolidated merchandise and service gross margin up US$189.5 million or 30.9%.
- Total road transportation fuel volume up 8.0% in the U.S. and up 5.8% in Canada.
- Road transportation fuel gross margin stood at US17.80¢ per gallon in the United States, US10.46¢ per litre in Europe and Cdn5.88¢ per litre in Canada.
- Once adjusted for the usual items, expenses are up 0.2% for the third quarter.
LAVAL, QC, March 19, 2013 /CNW Telbec/ - For its third quarter, Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B) announces net earnings of $142.5 million, up $55.7 million or 64.2%, which equals $0.75 per share on a diluted basis, an increase of $0.27 per share or 56.3% over the third quarter of fiscal 2012 net earnings per share. The increase in net earnings is mainly attributable to the contribution from acquisitions, to higher road transportation fuel margins, to the growing contribution of merchandise and service sales, to Couche-Tard's sound management of its expenses as well as to a lower income tax rate. These items, which contributed to the growth in net earnings, were partially offset by the increase in financial expenses attributable to the additional debt that Couche-Tard incurred to finance the acquisition of Statoil Fuel & Retail as well as to a foreign exchange loss of $13.6 million. All financial information is in US dollars unless stated otherwise.
"Our recent acquisitions continue to contribute significantly to our results" declared Alain Bouchard, President and Chief Executive Officer. "We continue to improve our network by adding quality stores, while divesting some stores that do not meet our profitability criteria. Despite the difficult and uncertain conditions in some markets, we grew the organic contribution, both in terms of merchandise, service and motor fuel. With respect to Europe, we are making good progress on identifying and implementing opportunities to improve efficiency and increase revenues. Our analysis show that opportunities are numerous and as promising. Some can be implemented immediately while others may take more time as they require rigorous analysis and planning. We maintain our objective of $150.0 million to $200.0 million in annual synergies and cost savings to be realized by September 2015." Mr. Bouchard concluded.
As for Raymond Paré, Vice-President and Chief Financial Officer, he indicated: "Since the acquisition of Statoil Fuel & Retail, we have achieved the goals we had set for ourselves from day one and we remain confident regarding synergies to come. Results from the last quarters are encouraging taking into consideration the economic uncertainty in many of our markets and when we compared ourselves to other retailers. We achieved our objective of constantly generating value for our shareholders and our partners, whether it was through organic growth, acquisitions, expense control or management of our balance sheet. Our balance sheet is solid and gives us the financial flexibility we need, at low cost. As at February 3, 2013, we had access to more than $1.3 billion through our operating credits and our available cash. At the same date, on a pro forma basis, for the acquisition of Statoil Fuel & Retail, our adjusted net interest bearing debt to EBITDAR ratio of 3.25:1 remains comfortable, and this, even before the positive impact of synergies. Finally, also as at February 3, 2013, the average interest rate we pay on our debt was approximately 2.49%, once the cross-currency swaps are taken into account while our recent transactions have also allowed us to benefit from varying maturities up to ten years. We are therefore in a good position to continue to reduce our leverage and to maintain our favorable risk profile in order to take advantage of acquisition opportunities".
Highlights of the Third Quarter of fiscal 2013
Statoil Fuel & Retail ASA ("Statoil Fuel & Retail")
Acquisition of Statoil Fuel & Retail
On June 19, 2012, the Corporation acquired 81.2% of the 300,000,000 issued and outstanding shares of Statoil Fuel & Retail for a cash consideration of 51.20 Norwegian Kroners ("NOK") per share for a total amount of NOK 12.47 billion or approximately $2.10 billion through a voluntary public offer (the "offer"). From June 22, 2012 to June 29, 2012, the Corporation acquired 53,238,857 additional shares of Statoil Fuel & Retail for a cash consideration of NOK 51.20 per share, totalling NOK 2.73 billion or approximately $0.45 billion, increasing its participation to 98.9%. Having reached a shareholding of more than 90%, on June 29, 2012, in accordance with Norwegian laws, Couche-Tard initiated the compulsory acquisition of all of the remaining Statoil Fuel & Retail shares not deposited under the offer from the holders thereof and, as a result, since such date, the Corporation owns 100% of the issued and outstanding shares of Statoil Fuel & Retail. The NOK 51.20 per share cash consideration for the compulsory acquisition of all of the remaining shares of Statoil Fuel & Retail not deposited under the offer was paid on July 11, 2012. The Oslo Børs Stock Exchange confirmed the delisting of the Statoil Fuel & Retail shares effective as of the close of markets in Norway on July 12, 2012. The acquisition of the 300,000,000 issued and outstanding shares of Statoil Fuel & Retail was therefore made for a total cash consideration of NOK 15.36 billion, or $2.58 billion. During the 16 and 40-week periods ended February 3, 2013, the Corporation recorded to earnings transaction costs of $0.3 million and $1.8 million, respectively, in connection with this acquisition, which adds to transaction costs of $0.8 million recorded to fiscal 2012 earnings.
Statoil Fuel & Retail is a leading Scandinavian road transport fuel retailer with over 100 years of operations in the region. Statoil Fuel & Retail operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania), and Russia with approximately 2,300 sites, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated service-stations (road transportation fuel only). Statoil Fuel & Retail has a leading position in several countries where it does business and owns the land for over 900 sites and buildings for over 1,700 sites.
Statoil Fuel & Retail offers other products including stationary energy, marine fuel, aviation fuel, lubricants and chemicals. In Europe, Statoil Fuel & Retail operates 12 key fuel terminals as well as 38 fuel depots in eight countries.
Including employees at Statoil branded franchise stations, about 18,500 people work in Statoil Fuel & Retail's retail network across Europe, in its corporate headquarters, in its eight regional offices, in its terminals and in its depots.
More information about Statoil Fuel & Retail is available on its website at www.statoilfuelretail.com.
This transaction has been financed using the Corporation's acquisition facility. For more information on the acquisition facility, refer to Couche-Tard's 2012 Annual Report.
Results for the 16 and 40-week periods ended February 3, 2013 include those of Statoil Fuel & Retail for the period beginning October 1st, 2012 and ending January 31, 2013 and for the period beginning June 20, 2012 and ending January 31, 2013, respectively. The consolidated balance sheet as of February 3, 2013 includes the balance sheet of Statoil Fuel & Retail as of January 31, 2013, as adjusted for the preliminary purchase price allocation.
The following table provides an overview of Statoil Fuel & Retail's accounting periods that will be incorporated into Couche-Tard's upcoming consolidated financial statements:
| Couche-Tard quarters | Statoil Fuel & Retail equivalent accounting periods | Statoil Fuel & Retail balance sheet date (2) |
| 12-week period that will end April 28, 2013 (4th quarter of fiscal 2013) |
February, March and April 2013 | April 30, 2013 |
| 12-week period that will end July 21, 2013 (1st quarter of fiscal 2014) |
May and June 2013 and from July 1st to July 21, 2013 (1) | June 30, 2013 |
| 12-week period that will end October 13, 2013 (2nd quarter of fiscal 2014) |
From July 22 to July 31, 2013, August and September 2013 and from October 1st to October 13, 2013 (1) | September 30, 2013 |
| 16-week period that will end February 2, 2014 (3rd quarter of fiscal 2014) |
From October 14 to October 31, 2013, November and December 2013 and January 2014 | January 31, 2014 |
| 12-week period that will end April 27, 2014 (4th quarter of fiscal 2014) |
February, March and April 2014 | April 30, 2014 |
| (1) | For the period from July 1st to July 21, 2013 and the period from October 1st to October 13, 2013, Statoil Fuel & Retail results will be determined according to management's best estimates based on the current budget and trends observed during the previous periods. Any difference between estimated results and actual results will be reported in the next quarter results. | |
| (2) | The consolidated balance sheet will be adjusted for significant transactions, if any, occurring between Statoil Fuel & Retail balance sheet date and Couche-Tard balance sheet date. |
The alignment of Statoil Fuel & Retail's accounting periods with those of Couche-Tard will be made once the replacement of Statoil Fuel & Retail's financial systems is finalized.
Synergies and cost reduction initiatives
As previously communicated, since the acquisition of Statoil Fuel & Retail, the Corporation has been actively working on identifying and implementing available synergies and cost reduction opportunities. Although numerous and promising, many of these opportunities can take time to implement, requiring rigorous analysis and planning. The goal is to find the right balance so the ongoing activities and projects already underway are not jeopardize.
For the 40-week period ended February 3, 2013, Couche-Tard recorded synergies and cost savings of approximately $17.0 million before taxes. These synergies and cost reductions mainly reduced cost of sales as well as operating, selling, administrative and general expenses. The amount was determined by comparison with the reference period which was defined as Statoil Fuel & Retail last full fiscal year previous to the acquisition (fiscal year 2011 ended December 31, 2011), but it does not necessarily represent the full annual impact of these initiatives.
These synergies and cost reductions come from a variety of sources, such as expenses reduction following the delisting of Statoil Fuel & Retail, the renegotiation of certain agreements with suppliers, the reduction in store costs, the restructuring of departments, etc.
The work around the identification and implementation of available synergies and cost reduction opportunities is far from over. Couche-Tard's teams continue to work actively on various projects that seem promising.
Foreign exchange forward contracts
As described above, the acquisition of Statoil Fuel & Retail was denominated in NOK whereas Couche-Tard's acquisition facility is denominated in US dollars. The Corporation had therefore determined that there was a risk related to fluctuations in the exchange rate between the US dollar and the NOK as the hypothetical weakening of the US dollar against the NOK would have increased the US dollars cash requirements in order to close the acquisition of Statoil Fuel & Retail. To mitigate this risk and because of the lack of liquidity in the currency market for the NOK, Couche-Tard entered into foreign exchange forward contracts (hereinafter, "forwards") with reputable financial institutions allowing it to predetermine a significant portion of the disbursement it planned to make in US dollars for the acquisition of Statoil Fuel & Retail.
In total, from April 10, 2012 to June 12, 2012, the Corporation had entered into forwards requiring it to deliver US$3.47 billion in exchange for NOK 20.14 billion, representing a weighted average rate of NOK 5.8114 per US dollar which was a favorable rate compared to the rate of 5.75 in effect as at April 18, 2012, the date the offer was announced and comparable to the average exchange rate for the last three years as demonstrated by the following graph:
Subsequently, Couche-Tard modified the original maturity dates of certain forwards to make them coincide with the actual disbursement dates for the payment of Statoil Fuel & Retail shares and the repayment of certain of Statoil Fuel & Retail debts. Thus, from June 15, 2012 to August 24, 2012, the Corporation settled all of the forwards to pay for Statoil Fuel & Retail shares and certain of its debts (see details below).
Based on accounting standards, since Couche-Tard could not apply hedge accounting, the Corporation recorded its investment in Statoil Fuel & Retail in its consolidated balance sheet based on the exchange rates prevailing on the settlement dates of the acquisition transaction while the changes in fair value of forwards were recorded to earnings. Cash flow wise, the sum of these two amounts is equivalent, in all material respect, to the U.S. dollars amount the Corporation would have paid, had the transaction taken place on April 18, 2012, the date the offer was announced, or more specifically, at the average rate of NOK 5.8114 that the Corporation secured with this strategy. The impact on cash is therefore the one Couche-Tard had predetermined by securing the exchange rate at a favorable level compared to its modeling of the acquisition and compared to the rate at the time the offer was announced.
During the 40-week period ended February 3, 2013, the Corporation recorded to earnings a loss of $102.9 million in relation with these forwards.
Taking into consideration the $17.0 million gain recorded in the fourth quarter of fiscal 2012 and the $102.9 million loss recorded during the 40-week period ended February 3, 2013, in total, Couche-Tard realized a net loss of $85.9 million on these forwards.
Foreign exchange gain
During the 40-week period ended February 3, 2013, in connection with the financing of the acquisition transaction of Statoil Fuel & Retail, Couche-Tard recorded a non-recurring foreign exchange gain of $7.4 million due to NOK cash held by its U.S. operations in anticipation of the settlement of the acquisition transaction and repayment of debts of Statoil Fuel & Retail.
Statoil Fuel & Retail Debt
Change of control impact on Statoil Fuel & Retail's bonds
At the time of the acquisition of Statoil Fuel & Retail, the later had issued and outstanding bonds amounting to NOK 1,500.0 million (approximately $253.0 million as at June 19, 2012). According to Statoil Fuel & Retail's bond agreements dated February 21, 2012, the bondholders had an option to require pre-payment at par plus accrued interest upon occurrence of a change of control event, for a period of two months. This condition was met on June 19, 2012, when Couche-Tard gained control of more than 50% of Statoil Fuel & Retail. In case bondholders exercised the option to require pre-payment, the settlement of the pre-payment had to occur within 30 business days following the date when the option was exercised. The exercise period for the options to require pre-payment expired on August 20, 2012. Couche-Tard has subsequently extended the option to require pre-payment until September 25, 2012. Since then, the Corporation has been actively working on redeeming the bonds for which the holders have not exercised their option to require pre-payment.
As of February 3, 2013, Couche-Tard had redeemed Statoil Fuel & Retail's bonds for a total of NOK 1,472.0 million (approximately $250.0 million), leaving NOK 28.0 million (approximately $5.1 million) still outstanding. The redemption of the bonds has been made using Couche-Tard's acquisition facility, its revolving unsecured operating credit and its available cash.
Change of control impact on Statoil Fuel & Retail's bank facilities
According to Statoil Fuel & Retail's bank facility agreement dated August 26, 2010, majority lenders had the right to cancel their total commitments and declare all outstanding loans, together with accrued interest, immediately due and payable upon occurrence of a change of control event. The cancellation had to be given by not less than 30 days' notice to Statoil Fuel & Retail. Majority lenders requested to have the total commitments cancelled as of August 7, 2012. Following this notification, Couche-Tard had to repay the NOK 300.0 million (approximately $50.0 million) then outstanding under the revolving credit facility as well as the NOK 2,650.0 million (approximately $448.0 million) then outstanding under the term loan at the cancellation date on August 7, 2012. No additional drawdowns can be made under Statoil Fuel & Retail's bank facility. Repayments have been made using Couche-Tard's acquisition facility and its available cash.
Disposal of the liquefied petroleum gas sales ("LPG") operations
On December 7, 2012, Couche-Tard sold Statoil Fuel & Retail's LPG operations for NOK 130.0 million (approximately $23.0 million) before working capital adjustments. The transaction did not generate any gain or loss on disposal.
Preliminary purchase price allocation and adjustments to results previously reported
During the third quarter of fiscal 2013, Couche-Tard made adjustments to the preliminary purchase price allocation of Statoil Fuel & Retail. The results of the first and second quarter of fiscal 2013 have been adjusted assuming that the adjustments to the preliminary purchase price allocation of Statoil Fuel & Retail had been completed at the acquisition date. In addition, the Corporation made changes to the classification of certain components of Statoil Fuel & Retail's statements of earnings in order to conform to Couche-Tard's presentation. The following table summarizes the impact of these adjustments.
| 12-week period ended October 14, 2012 |
12-week period ended July 22, 2012 |
||||||
| Reported | Adjustments | Adjusted | Reported | Adjustments | Adjusted | ||
| Merchandise and service revenues - Europe | 283.6 | (5.0) | 278.6 | 32.1 | (0.5) | 31.6 | |
| Merchandise and service cost of sales - Europe | 174.0 | (5.0) | 169.0 | 19.9 | (0.5) | 19.4 | |
| Merchandise and service gross profit - Europe | 109.6 | - | 109.6 | 12.2 | - | 12.2 | |
| Operating, selling, administrative and general expenses | 801.5 | 0.4 | 801.9 | 549.1 | (0.1) | 549.0 | |
| Depreciation and amortization of property and equipment and other assets | 143.3 | (9.2) | 134.1 | 66.1 | - | 66.1 | |
| Operating income | 222.6 | 8.8 | 231.4 | 243.8 | 0.1 | 243.9 | |
| Net financial expenses | 14.7 | 1.2 | 15.9 | 121.7 | - | 121.7 | |
| Earnings before income taxes | 211.6 | 7.6 | 219.2 | 127.3 | 0.1 | 127.4 | |
| Income taxes | 36.4 | 1.4 | 37.8 | 24.4 | - | 24.4 | |
| Net earnings | 175.2 | 6.2 | 181.4 | 102.9 | 0.1 | 103.0 | |
| 24-week period ended October 14, 2012 |
|||
| Reported | Adjustments | Adjusted | |
| Merchandise and service revenues - Europe | 315.7 | (5.5) | 310.2 |
| Merchandise and service cost of sales - Europe | 193.9 | (5.5) | 188.4 |
| Merchandise and service gross profit - Europe | 121.8 | - | 121.8 |
| Operating, selling, administrative and general expenses | 1,350.6 | 0.3 | 1,350.9 |
| Depreciation and amortization of property and equipment and other assets | 209.4 | (9.2) | 200.2 |
| Operating income | 466.4 | 8.9 | 475.3 |
| Net financial expenses | 136.4 | 1.3 | 137.6 |
| Earnings before income taxes | 338.9 | 7.7 | 346.6 |
| Income taxes | 60.8 | 1.4 | 62.2 |
| Net earnings | 278.1 | 6.3 | 284.4 |
The Corporation continues to work on some items, including remaining useful life of certain assets. Thus, the depreciation expense will be subsequently adjusted to reflect the results of this work.
Network growth
Completed transactions
In November 2012, Couche-Tard acquired, from Sun Pacific Energy, 27 company-operated stores operating in Washington State, United States. The Corporation owns the land and building for 26 sites while it leases these assets for the other site.
In November 2012, Couche-Tard acquired, from Davis Oil Company, seven company-operated stores operating in Georgia, United States. The Corporation owns the land and building for all sites.
In December 2012, Couche-Tard acquired, from Kum & Go L.C., seven company-operated stores operating in Oklahoma, United States. The Corporation leases the land and building for all sites.
During the third quarter of fiscal 2013, under the June 2011 agreement with ExxonMobil, Couche-Tard acquired one site operated by an independent operator for which the Corporation owns the land and building. Couche-Tard was also transferred seven road transportation fuel supply agreements during this period.
In addition, during the third quarter of fiscal 2013, Couche-Tard acquired 11 additional company-operated stores through distinct transactions.
Subsequent to the third quarter, Couche-Tard purchased 29 company-operated stores located in Illinois, Missouri and Oklahoma, United States from Dickerson Petroleum Inc. The Corporation owns the land and buildings for 25 sites while it leases the land and owns the buildings for the other sites. Road transportation fuel supply agreements were also transferred for 27 sites, of which 26 are owned and operated by independent operators and one is leased by the Corporation.
Internal available cash was used for these acquisitions.
Store construction
Couche-Tard completed the construction of 15 new stores during the 16-week period ended February 3, 2013 for a cumulated total of 38 stores since the beginning of fiscal 2013.
Evolution of the store network
The following table presents certain information regarding changes in Couche-Tard's network over the 16-week period ended February 3, 2013(1):
| 16-week period ended February 3, 2013 | |||||||
| Type of site | Company- operated (2) |
CODO (3) | DODO (4) | Franchised and other affiliated (5) |
Total | ||
| Number of sites, beginning of period | 6,180 | 606 | 460 | 1,227 | 8,473 | ||
| Acquisitions | 52 | 1 | 7 | - | 60 | ||
| Openings / constructions / additions | 15 | - | 7 | 34 | 56 | ||
| Closures / disposals / withdrawals | (43) | (12) | (14) | (53) | (122) | ||
| Conversions into Company-operated store | 14 | (11) | (3) | - | - | ||
| Conversions into affiliated store | (2) | - | 2 | - | - | ||
| Number of sites, end of period | 6,216 | 584 | 459 | 1,208 | 8,467 | ||
| Number of automated service stations included in the period end figures (6) | 920 | - | 35 | - | 955 | ||
The following table presents certain information regarding changes in Couche-Tard's network over the 40-week period ended February 3, 2013(1):
| 40-week period ended February 3, 2013 | |||||||||
| Type of site | Company- operated (2) |
CODO (3) | DODO (4) | Franchised and other affiliated (5) |
Total | ||||
| Number of sites, beginning of period | 4,539 | 161 | 189 | 1,264 | 6,153 | ||||
| Acquisitions | 1,706 | 459 | 288 | - | 2,453 | ||||
| Openings / constructions / additions | 39 | 1 | 21 | 93 | 154 | ||||
| Closures / disposals / withdrawals | (84) | (24) | (36) | (149) | (293) | ||||
| Conversion into Company-operated stores | 18 | (13) | (5) | - | - | ||||
| Conversion into affiliated stores | (2) | - | 2 | - | - | ||||
| Number of sites, end of period | 6,216 | 584 | 459 | 1,208 | 8,467 | ||||
| (1) | These figures include 50% of the stores operated through RDK, a joint venture. Statoil Fuel & Retail ending balances are as at January 31, 2013. | ||||||||
| (2) | Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service-stations) are operated by Couche-Tard or one of its commission agent. | ||||||||
| (3) | Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service-stations) are operated by an independent operator in exchange for rent and to which Couche-Tard supplies road transportation fuel though supply contracts. Some of these sites are subject to a franchise agreement, licensing or other similar agreement under one of Couche-Tard's main or secondary banners. | ||||||||
| (4) | 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 Couche-Tard's main or secondary banners. | ||||||||
| (5) | Stores operated by an independent operator through a franchising, licensing or another similar agreement under one of Couche-Tard's main or secondary banners. | ||||||||
| (6) | These sites sell road transportation fuel only. | ||||||||
In addition to the stores above, under licensing agreements, about 4,150 stores are operated under the Circle K banner in nine other countries worldwide (China, Guam, Hong Kong, Indonesia, Japan, Macau, Mexico, Vietnam and United Arab Emirates), which brings to more than 12,600 the number of sites in Couche-Tard's network.
Issuance of Canadian dollar denominated senior unsecured notes
On November 1st, 2012, the Corporation issued Canadian dollar denominated senior unsecured notes totalling CA$1.0 billion, divided into three tranches:
| Notional amount (millions) | Maturity | Coupon rate | |
| Tranche 1 | CA$300.0 | November 1st, 2017 | 2.861% |
| Tranche 2 | CA$450.0 | November 1st, 2019 | 3.319% |
| Tranche 3 | CA$250.0 | November 1st, 2022 | 3.899% |
Interest is payable semi-annually on May 1st and November 1st of each year and the notional amount will be reimbursed at the maturity of each tranche.
In addition to allowing it to spread the maturities of a portion of its long-term debt, this issuance allows Couche-Tard to secure the interest rate of a portion of its long-term debt at favourable rates.
The net proceeds from the issuance, which were approximately CA$995.0 million, were used to repay a portion of Couche-Tard's acquisition facility.
Cross-currency swaps
On November 1st, 2012, in order to manage its currency risk, Couche-Tard entered into cross-currency swap agreements for a total notional amount of CA$1.0 billion, allowing to synthetically convert its Canadian dollar denominated senior unsecured notes into US dollars as well as to exchange interest payments on the notional amounts, which, on a net basis, provides Couche-Tard with financing at even more favourable conditions than those the Corporation got through the issuance of the Canadian dollar denominated senior unsecured notes.
| Receive - Notional (millions) |
Receive - Rate | Pay - Notional (millions) |
Pay - Rate | Maturity | |||
| CA$300.0 | 2.861% | US$300.7 | 2.0340% | November 1st, 2017 | |||
| CA$125.0 | 3.319% | US$125.4 | 2.7325% | November 1st, 2019 | |||
| CA$20.0 | 3.319% | US$20.1 | 2.7375% | November 1st, 2019 | |||
| CA$305.0 | 3.319% | US$305.9 | 2.7400% | November 1st, 2019 | |||
| CA$125.0 | 3.899% | US$125.4 | 3.4900% | November 1st, 2022 | |||
| CA$125.0 | 3.899% | US$125.4 | 3.4925% | November 1st, 2022 |
Couche-Tard identified and documented the cross-currency swap agreements as foreign exchange hedges of its net investment in its U.S. operations. According to the related accounting treatment, the changes in fair value of the swap agreements are included in other comprehensive income rather than in the consolidated statement of earnings.
Dividends
During its March 19, 2013 meeting, the Corporation's Board of Directors declared a quarterly dividend of CA$0.075 per share for the third quarter of fiscal 2013 to shareholders on record as at March 28, 2013, payable on April 11, 2013. This is an eligible dividend within the meaning of the Income Tax Act of Canada.
Exchange Rate Data
The Corporation uses the US dollar as its reporting currency which provides more relevant information given the predominance of its operations in the United States and its debt largely dominated in US dollars.
The following table sets forth information about exchange rates based upon closing rates expressed as US dollars per comparative currency unit:
| 16-week periods ended | 40-week periods ended | ||||
| February 3, 2013 |
January 29, 2012 |
February 3, 2013 |
January 29, 2012 |
||
| Average for period (1) | |||||
| Canadian Dollar | 1.0072 | 0.9811 | 1.0011 | 1.0051 | |
| Norwegian Krone (2) | 0.1770 | - | 0.1732 | - | |
| Swedish Krone (2) | 0.1514 | - | 0.1497 | - | |
| Danish Krone (2) | 0.1751 | - | 0.1719 | - | |
| Zloty (2) | 0.3170 | - | 0.3101 | - | |
| Euro (2) | 1.3058 | - | 1.2810 | - | |
| Lats (2) | 1.8740 | - | 1.8393 | - | |
| Litas (2) | 0.3782 | - | 0.3711 | - | |
| Ruble (2) | 0.0324 | - | 0.0318 | - | |
| Period end | |||||
| Canadian Dollar | 1.0027 | 0.9993 | 1.0027 | 0.9993 | |
| Norwegian Krone (3) | 0.1827 | - | 0.1827 | - | |
| Swedish Krone (3) | 0.1574 | - | 0.1574 | - | |
| Danish Krone (3) | 0.1820 | - | 0.1820 | - | |
| Zloty (3) | 0.3237 | - | 0.3237 | - | |
| Euro (3) | 1.3584 | - | 1.3584 | - | |
| Lats (3) | 1.9433 | - | 1.9433 | - | |
| Litas (3) | 0.3942 | - | 0.3942 | - | |
| Ruble (3) | 0.0333 | - | 0.0333 | - | |
| (1) | Calculated by taking the average of the closing exchange rates of each day in the applicable period. | ||||
| (2) | Average rate for the period from October 1st, 2012 to January 31st, 2013 for the 16-week period ended February 3, 2013 and from June 20th, 2012 to January 31st, 2013 for the 40-week period ended February 3, 2013. Calculated using the average exchange rate at the close of each day for the stated period. | ||||
| (3) | As at January 31, 2013. | ||||
Considering Couche-Tard uses the US dollar as its reporting currency, in its consolidated financial statements and in the present document, unless indicated otherwise, results from its Canadian, European and corporate operations are translated into US dollars using the average rate for the period. Unless otherwise indicated, variances and explanations related to variations in the foreign exchange rate and the volatility of the Canadian dollar and European currencies which are discussed in the present document are therefore related to the translation in US dollars of its Canadian, European and corporate operations results.
Selected Quarterly Financial Information
The following table highlights certain information regarding Couche-Tard's operations for the 16 and 40-week periods ended February 3, 2013 and January 29, 2012. The figures for the 16 and 40-week periods ended February 3, 2013 include those of Statoil Fuel & Retail for the period beginning October 1st, 2012 and ending January 31st, 2013 and for the period beginning June 20, 2012 and ending January 31st, 2013, respectively. Consolidated balance sheet data includes Statoil Fuel & Retail's figures as at January 31st, 2013, as adjusted for the preliminary purchase price allocation.
| (In millions of US dollars, unless otherwise stated) | 16-week periods ended | 40-week periods ended | ||||||
| February 3, 2013 |
January 29, 2012 |
Variation % | February 3, 2013 |
January 29, 2012 |
Variation % | |||
| Statement of Operations Data: | ||||||||
| Merchandise and service revenues (1): | ||||||||
| United States | 1,328.0 | 1,272.5 | 4.4 | 3,486.5 | 3,298.3 | 5.7 | ||
| Europe | 372.2 | - | - | 682.4 | - | - | ||
| Canada | 625.5 | 595.4 | 5.1 | 1,724.2 | 1,685.3 | 2.3 | ||
| Total merchandise and service revenues | 2,325.7 | 1,867.9 | 24.5 | 5,893.1 | 4,983.6 | 18.2 | ||
| Road transportation fuel revenues: | ||||||||
| United States | 4,337.3 | 3,969.0 | 9.3 | 11,285.7 | 9,901.7 | 14.0 | ||
| Europe | 2,999.8 | - | - | 5,535.3 | - | - | ||
| Canada | 849.8 | 767.2 | 10.8 | 2,230.0 | 2,049.0 | 8.8 | ||
| Total road transportation fuel revenues | 8,181.9 | 4,736.2 | 72.9 | 19,051.0 | 11,950.7 | 59.4 | ||
| Other revenues (2): | ||||||||
| United States | 2.0 | 1.6 | 25.0 | 5.0 | 3.9 | 28.2 | ||
| Europe | 1,058.9 | - | - | 1,955.9 | - | - | ||
| Canada | 0.2 | 0.1 | 100.0 | 0.4 | 0.4 | - | ||
| Total other revenues | 1,061.1 | 1.7 | - | 1,961.3 | 4.3 | - | ||
| Total revenues | 11,573.7 | 6,605.8 | 75.2 | 26,905.4 | 16,938.6 | 58.8 | ||
| Merchandise and service gross profit (1): | ||||||||
| United States | 440.6 | 420.9 | 4.7 | 1,159.1 | 1,088.7 | 6.5 | ||
| Europe | 154.6 | - | - | 276.4 | - | - | ||
| Canada | 208.4 | 193.2 | 7.9 | 581.7 | 563.4 | 3.2 | ||
| Total merchandise and service gross profit | 803.6 | 614.1 | 30.9 | 2,017.2 | 1,652.1 | 22.1 | ||
| Road transportation fuel gross profit: | ||||||||
| United States | 227.6 | 171.4 | 32.8 | 593.7 | 473.1 | 25.5 | ||
| Europe | 294.2 | - | - | 559.6 | - | - | ||
| Canada | 50.1 | 41.0 | 22.2 | 126.9 | 112.3 | 13.0 | ||
| Total road transportation fuel gross profit | 571.9 | 212.4 | 169.3 | 1,280.2 | 585.4 | 118.6 | ||
| Other revenues gross profit (2): | ||||||||
| United States | 2.0 | 1.6 | 25.0 | 5.0 | 3.9 | 28.2 | ||
| Europe | 113.9 | - | - | 215.7 | - | - | ||
| Canada | 0.2 | 0.1 | 100.0 | 0.4 | 0.4 | - | ||
| Total other revenues gross profit | 116.1 | 1.7 | - | 221.1 | 4.3 | - | ||
| Total gross profit | 1,491.6 | 828.2 | 80.1 | 3,518.0 | 2,241.8 | 56.9 | ||
| Operating, selling, administrative and general expenses | 1,100.1 | 641.7 | 71.4 | 2,451.0 | 1,622.5 | 51.1 | ||
| Depreciation and amortization of property and equipment and other assets | 182.2 | 75.7 | 140.7 | 382.4 | 177.6 | 115.3 | ||
| Operating income | 209.3 | 110.8 | 88.9 | 684.6 | 441.7 | 55.0 | ||
| Net earnings | 142.5 | 86.8 | 64.2 | 426.9 | 339.8 | 25.6 | ||
| Other Operating Data: | ||||||||
| Merchandise and service gross margin (1): | ||||||||
| Consolidated | 34.6% | 32.9% | 1.7 | 34.2% | 33.2% | 1.0 | ||
| United States | 33.2% | 33.1% | 0.1 | 33.2% | 33.0% | 0.2 | ||
| Europe | 41.5% | - | - | 40.5% | - | - | ||
| Canada | 33.3% | 32.4% | 0.9 | 33.7% | 33.4% | 0.3 | ||
| Growth of same-store merchandise revenues (3) (4): | ||||||||
| United States | 0.8% | 3.4 % | 1.3% | 2.5% | ||||
| Canada | 1.7% | 3.1 % | 2.3% | 2.1% | ||||
| Road transportation fuel gross margin : | ||||||||
| United States (cents per gallon) (4) | 17.80 | 14.84 | 19.9 | 18.61 | 16.99 | 9.5 | ||
| Europe (cents per litre) (5) | 10.46 | - | - | 10.58 | - | - | ||
| Canada (CA cents per litre) (4) | 5.88 | 5.19 | 13.3 | 5.79 | 5.41 | 7.0 | ||
| Volume of road transportation fuel sold (5): | ||||||||
| United States (millions of gallons) | 1,306.7 | 1,209.4 | 8.0 | 3,265.8 | 2,876.6 | 13.5 | ||
| Europe (millions of litres) | 2,812.3 | - | - | 5,285.3 | - | - | ||
| Canada (millions of litres) | 852.7 | 805.9 | 5.8 | 2,200.4 | 2,065.1 | 6.6 | ||
| Growth of (decrease in) same-store road transportation fuel volume (4): | ||||||||
| United States | 0.8% | 1.1% | 0.5% | 0.0% | ||||
| Canada | (0.9%) | 0.0% | 0.4% | (1.2%) | ||||
| Per Share Data: | ||||||||
| Basic net earnings per share (dollars per share) | 0.76 | 0.49 | 55.1 | 2.32 | 1.88 | 23.4 | ||
| Diluted net earnings per share (dollars per share) | 0.75 | 0.48 | 56.3 | 2.29 | 1.84 | 24.5 | ||
| February 3, 2013 |
April 29, 2012 |
Variation $ | ||||||
| Balance Sheet Data: | ||||||||
| Total assets | 10,507.9 | 4,453.2 | 6,054.7 | |||||
| Interest-bearing debt | 3,653.8 | 665.2 | 2,988.6 | |||||
| Shareholders' equity | 3,218.9 | 2,174.6 | 1,044.3 | |||||
| Indebtedness Ratios: | ||||||||
| Net interest-bearing debt/total capitalization (6) | 0.50: 1 | 0.14 : 1 | ||||||
| Net interest-bearing debt/EBITDA (7) | 2.19: 1 (8) | 0.43 : 1 | ||||||
| Adjusted net interest bearing debt/EBITDAR (9) | 3.25: 1 (8) | 2.10 : 1 | ||||||
| Returns: | ||||||||
| Return on equity (10) | 22.4% (8) | 22.0% | ||||||
| Return on capital employed (11) | 11.7% (8) | 19.0% | ||||||
| (1) | Includes other revenues derived from franchise fees, royalties and suppliers rebates on some purchases made by franchisees and licensees. | |||||||
| (2) | Includes revenues from rental of assets, from sale of aviation fuel, marine fuel, liquefied petroleum gas ("LPG"), heating oil, kerosene, lubricants and chemicals. | |||||||
| (3) | Does not include services and other revenues (as described in footnote 1 above). Growth in Canada is calculated based on Canadian dollars. | |||||||
| (4) | For company-operated stores only. | |||||||
| (5) | Total road transportation fuel. | |||||||
| (6) | This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by the addition of shareholders' equity and long-term debt, net of cash and cash equivalents and temporary investments. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations. | |||||||
| (7) | This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization). It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations. | |||||||
| (8) | This ratio is presented on a pro forma basis. It includes Couche-Tard's results for the first, second and third quarters of the fiscal year which will end April 28, 2013 and of the fourth quarter of the fiscal year ended April 29, 2012 as well as Statoil Fuel & Retail's results for the 12-month period ended January 31, 2013. Statoil Fuel & Retail balance sheet and earnings have been adjusted to make their presentation in line with Couche-Tard's policies and for preliminary fair value adjustments to assets acquired, including goodwill, and to liabilities assumed. Statoil Fuel & Retail purchase price allocation being preliminary, this ratio could change. | |||||||
| (9) | This ratio is presented for information purposes only and represents a measure of financial condition used especially in financial circles. It represents the following calculation: long-term interest-bearing debt plus the product of eight times rent expense, net of cash and cash equivalents and temporary investments divided by EBITDAR (Earnings Before Interest, Tax, Depreciation, Amortization and Rent expense). It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations. | |||||||
| (10) | This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: net earnings divided by average equity for the corresponding period. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations. | |||||||
| (11) | This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: earnings before income taxes and interests divided by average capital employed for the corresponding period. Capital employed represents total assets less short-term liabilities not bearing interests. It does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other public corporations. | |||||||
Operating Results
Revenues reached $11.6 billion in the third quarter of fiscal 2013, up almost $5.0 billion, an increase of 75.2%, mainly attributable to acquisitions, to the increase in road transportation fuel sales generated by the higher average retail prices at the pump, to the growth of same-store merchandise sales and road transportation fuel volume as well as to the foreign exchange impact from the stronger Canadian dollar against the U.S. currency.
For the first three quarters of fiscal 2013, revenues grew by $9.97 billion, an increase of 58.8% compared to the first three quarters of fiscal 2012 mainly because of the contribution from acquisitions and the increase in same-store merchandise sales and road transportation fuel volume. These items that contributed to the increase in revenues were partially offset by the impact of the weaker Canadian dollar.
More specifically, the growth of merchandise and service revenues for the third quarter of fiscal 2013 was $457.8 million or 24.5%, of which approximately $410.5 million was generated by acquisitions. As for internal growth, same-store merchandise revenues increased by 0.8% in the United States and by 1.7% in Canada. The increase in same-store merchandise revenues is attributable to Couche-Tard's merchandising strategies, to the economic conditions in each of its markets as well as to the investments it made to enhance service and the offering of products in its stores. More specifically, in the U.S., for the cigarettes category, the changes made to the supply terms of the industry and to Couche-Tard's pricing strategies as well as the competitive environment had an unfavorable impact on Couche-Tard's sales for that product category because of their deflationary impact. Thus, Couche-Tard estimates that excluding tobacco products sales, its same-store merchandise revenues in the United States increased by 2.6%. As for the stronger Canadian dollar, it had a favourable impact of approximately $16.0 million.
In the first three quarters of fiscal 2013, merchandise and service revenues rose by $909.5 million, a 18.2% increase compared to the same period last fiscal year, mainly because of the contribution from acquisitions and the increase in same-store merchandise revenues of 1.3% in the United States and 2.3% in Canada. As for the weaker Canadian dollar, it had an unfavorable impact of approximately $7.0 million.
Road transportation fuel revenues increased by $3.45 billion or 72.9% in the third quarter of fiscal 2013, of which approximately $3.3 billion stems from acquisitions. Same-store road transportation fuel volume in the United States increased by 0.8% while, in Canada, it decreased by 0.9%. Although not very strong, volume growth in the United States is still satisfactory when compared with data from the U.S. Federal Highway Administration's Traffic Volume Trends reports which indicate that, in October and November 2012, travel on U.S. roads and streets increased by only 0.3% and 0.8% compared to October and November 2011, respectively while it decreased by 2.9% in December 2012 compared to December 2011.
The higher average retail price of road transportation fuel generated an increase in revenues of approximately $48.0 million as shown in the following table, starting with the fourth quarter of fiscal year ended April 24, 2011:
| Quarter | 4th | 1st | 2nd | 3rd | Weighted average |
|
| 53-week period ended February 3, 2013 | ||||||
| United States (US dollars per gallon) | 3.74 | 3.50 | 3.66 | 3.36 | 3.55 | |
| Canada (CA cents per litre) | 117.05 | 112.62 | 117.41 | 110.43 | 114.11 | |
| 52-week period ended January 29, 2012 | ||||||
| United States (US dollars per gallon) | 3.44 | 3.67 | 3.50 | 3.32 | 3.47 | |
| Canada (CA cents per litre) | 108.53 | 114.08 | 112.90 | 109.88 | 111.31 | |
For the first three quarters of fiscal 2013, motor fuel revenues increased by $7.10 billion or 59.4%, of which approximately $6.93 billion came from acquisitions. Same-store motor fuel volume increased by 0.5% in the United States and by 0.4% in Canada. As for the weaker Canadian dollar, it had an unfavorable impact of approximately $8.0 million.
Other revenues showed an increase of $1.1 billion for the third quarter of fiscal 2013, entirely attributable to acquisitions. Other revenues include revenues from rental of assets, from sale of aviation and marine fuel, liquefied petroleum gas ("LPG"), heating oil, kerosene, lubricants and chemicals.
For the first three quarters of fiscal 2013, other revenues showed an increase of $2.0 billion for reasons similar to those of the third quarter.
The consolidated merchandise and service gross margin grew by $189.5 million or 30.9% in the third quarter of fiscal 2013. In the United States, the gross margin increased by 0.1% to 33.2% while in Canada, it increased by 0.9% to 33.3%. This performance reflects changes in the product-mix, the modifications Couche-Tard brought to its supply terms as well as its merchandising strategy in line with market competitiveness and economic conditions within each market. In Europe, the margin was 41.5%, which is in line with Couche-Tard's expectations and historical margins recorded by Statoil Fuel & Retail at this time of the year. The higher merchandise and service gross margin as a percentage of sales in Europe reflects price and cost structures as well as a revenue mix that are different from those in North America.
During the first three quarters of fiscal 2013, the consolidated merchandise and service gross margin grew by $365.1 million or 22.1%. The gross margin was 33.2% in the United States, an increase of 0.2% while the margin was 33.7 % in Canada, up 0.3%. The gross margin stood at 40.5% in Europe.
In the third quarter of fiscal 2013, the road transportation fuel gross margin for Couche-Tard's company-operated stores in the United States increased by 2.96¢ per gallon, from 14.84¢ per gallon last year to 17.80¢ per gallon this year. In Canada, the gross margin increased to CA5.88¢ per litre compared with CA5.19¢ per litre for the third quarter of fiscal 2012. The road transportation fuel gross margin of Couche-Tard's company-operated stores in the United States as well as the impact of expenses related to electronic payment modes for the last eight quarters, starting with the fourth quarter of fiscal year ended April 24, 2011, were as follows:
| (US cents per gallon) | ||||||
| Quarter | 4th | 1st | 2nd | 3rd | Weighted average |
|
| 53-week period ended February 3, 2013 | ||||||
| Before deduction of expenses related to electronic payment modes | 16.98 | 23.20 | 15.20 | 17.80 | 18.22 | |
| Expenses related to electronic payment modes | 5.06 | 4.97 | 5.15 | 4.79 | 4.98 | |
| After deduction of expenses related to electronic payment modes | 11.92 | 18.23 | 10.05 | 13.01 | 13.24 | |
| 52-week period ended January 29, 2012 | ||||||
| Before deduction of expenses related to electronic payment modes | 14.06 | 19.95 | 17.04 | 14.84 | 16.33 | |
| Expenses related to electronic payment modes | 4.93 | 5.29 | 5.20 | 4.74 | 5.02 | |
| After deduction of expenses related to electronic payment modes | 9.13 | 14.66 | 11.84 | 10.10 | 11.31 | |
For the 40-week period ended February 3, 2013, the motor fuel gross margin for the Corporation's company-operated stores in the United States increased by 1.62¢ per gallon, from 16.99¢ per gallon last fiscal year to 18.61¢ per gallon this fiscal year. In Canada, the margin also increased, reaching CA5.79¢ per litre compared with CA5.41¢ per litre for the comparable period of fiscal 2012.
The total road transportation fuel margin in Europe for the third quarter and first three quarters stood at 10.46¢ per litre and 10.58¢ per litre, respectively, before deduction of expenses related to electronic payment modes.
For the third quarter and first three quarters of fiscal 2013, operating, selling, administrative and general expenses rose by 71.4% and 51.1% respectively, compared with the third quarter and first three quarters of fiscal 2012, but increased by only 0.2% in the third quarter and 0.8% in the first three quarters, if certain items are excluded, as demonstrated by the following table:
| 16-week period ended February 3, 2013 |
40-week period ended February 3, 2013 |
||
| Total variance as reported | 71.4% | 51.1% | |
| Subtract: | |||
| Increase from incremental expenses related to acquisitions | 70.3% | 50.4% | |
| Decrease (increase) from the stronger (weaker) Canadian dollar | 0.8% | (0.1%) | |
| Acquisition costs recognized to earnings of fiscal 2012 | (0.5%) | (0.3%) | |
| Increase from higher electronic payment fees, excluding acquisitions | 0.4% | 0.1% | |
| Acquisition costs recognized to earnings of fiscal 2013 | 0.2% | 0.2% | |
| Negative goodwill recognized to earnings of fiscal 2012 | 0.1% | 0.1% | |
| Negative goodwill recognized to earnings of fiscal 2013 | (0.1%) | (0.1%) | |
| Remaining variance | 0.2% | 0.8% | |
The increase in electronic payment fees stems mainly from the increase in the average retail price of road transportation fuel.
During the third quarter of fiscal 2013, EBITDA increased by 104.3% compared to the corresponding period of the previous fiscal year, reaching $395.4 million. Net of acquisition costs recorded to earnings, acquisitions contributed approximately $139.2 million to EBITDA. As for the first three quarters of fiscal 2013, EBITDA increased by 69.4% compared to the corresponding period of the previous fiscal year, reaching $1.08 billion. Net of acquisition costs recorded to earnings, acquisitions contributed approximately $368.6 million to EBITDA.
It should be noted that EBITDA is not a performance measure defined by IFRS, but Couche-Tard, as well as investors and analysts, use this measure to evaluate the Corporation's financial and operating performance. Note that Couche-Tard's definition of this measure may differ from the one used by other public corporations:
| (in millions of US dollars) | 16-week periods ended | 40-week periods ended | |||
| February 3, 2013 |
January 29, 2012 |
February 3, 2013 |
January 29, 2012 |
||
| Net earnings, as reported | 142.5 | 86.8 | 426.9 | 339.8 | |
| Add: | |||||
| Income taxes | 21.3 | 26.4 | 83.5 | 109.8 | |
| Net financial expenses | 49.4 | 4.6 | 187.0 | 10.3 | |
| Depreciation and amortization of property and equipment and other assets | 182.2 | 75.7 | 382.4 | 177.6 | |
| EBITDA | 395.4 | 193.5 | 1,079.8 | 637.5 | |
For the third quarter and first three quarters of fiscal 2013, depreciation expense increased due to the investments made through acquisitions, replacement of equipment, addition of new stores and ongoing improvement of Couche-Tard's network.
Since the Corporation has not yet finalized the purchase price allocation for certain acquisitions, including Statoil Fuel & Retail, the depreciation and amortization of property and equipment and other assets expense of the third quarter of fiscal 2013 could not be representative of the expense of coming quarters.
In addition, following the acquisition of Statoil Fuel & Retail, Couche-Tard has undertaken an analysis of the remaining useful lives of Statoil Fuel & Retail property and equipment in order to modify the appropriate depreciation periods. Based on the preliminary analysis, the Corporation concluded that the modification of depreciation periods would reduce the depreciation expense, which was reflected in the depreciation expense for the third quarter of fiscal 2013. However, given the volume of assets to process, the analytical work has not been completed yet. Additional changes to the depreciation expense could be made.
In total, changes the Corporation made to the preliminary purchase price allocation of Statoil Fuel & Retail as well as the changes that were made to the depreciation periods of Statoil Fuel and Retail's fixed assets resulted in a reduction of $9.2 million in the Corporation's consolidated depreciation expense reported for the second quarter of fiscal 2013.
Excluding the $13.6 million foreign exchange loss, the third quarter of fiscal 2013 posted net financial expenses of $35.8 million, up $31.2 million compared to the third quarter of fiscal 2012. The increase is mainly attributable to the additional debt required to finance the acquisition of Statoil Fuel & Retail as well as to financial expenses related to the debt assumed upon its acquisition. As for the foreign exchange loss of $13.6 million, it is mainly due to the impact of the exchange rate fluctuations on certain inter-company balances as well as to the impact of exchange rates fluctuations on U.S. dollars denominated sales made by the European operations.
For the first three quarters of fiscal 2013, Couche-Tard recorded net financial expenses of $187.0 million compared to $10.3 million for the comparable period of fiscal 2012. Excluding the $102.9 million non-recurring loss on forwards as well as the $3.6 million foreign exchange net loss, the first three quarters of fiscal 2013 posted net financial expenses of $80.5 million, up $70.2 million compared to the first three quarters of fiscal 2012 for reasons similar to those of the third quarter. The $3.6 million foreign exchange net loss is mainly composed of a foreign exchange loss of $11.0 million generated by the European operations for reasons similar to those of the third quarter, partly offset by the $7.4 million non-recurring gain recorded on the NOK cash held by the U.S. operations in connection with the financing of the acquisition of Statoil Fuel & Retail.
The income tax rate for the third quarter of fiscal 2013 is 13.0% compared to a rate of 23.3% for the corresponding quarter of the previous fiscal year. For the first three quarters of fiscal 2013, the rate is 16.4% compared to a rate of 24.4% for the first three quarters of the previous fiscal year.
Couche-Tard closed the third quarter of fiscal 2013 with net earnings of $142.5 million, compared to $86.8 million the previous fiscal year, an increase of $55.7 million or 64.2%. Diluted net earnings per share stood at $0.75 compared to $0.48 the previous year, an increase of 56.3%. The exchange rate variation between the Canadian dollar and the U.S. dollar did not have a significant impact on net earnings of the third quarter of fiscal 2013.
Excluding from net earnings of the third quarter of fiscal 2013 the acquisition costs as well as the foreign exchange loss, net earnings would have stood at approximately $153.2 million, up $64.3 million or 72.3%, while diluted earnings per share would have stood at approximately $0.81, an increase of 65.3%.
For the first three quarters of fiscal 2013, net earnings were $426.9 million, compared to $339.8 million the previous fiscal year, an increase of $87.1 million or 25.6%. Diluted net earnings per share stood at $2.29 compared to $1.84 the previous year, an increase of 24.5%.
Excluding from net earnings of the first three quarters of fiscal 2013 the non-recurring loss on forwards, the net foreign exchange loss as well as acquisition costs, net earnings would have stood at approximately $507.2 million, up $164.5 million or 48.0%, while diluted earnings per share would have stood at approximately $2.72, an increase of 46.2%.
Liquidity and Capital Resources
Couche-Tard's sources of liquidity remain unchanged compared with the fiscal year ended April 29, 2012 except for the maturity of certain of its credit facilities, the increase in the amount available under its Operating credit D, a new credit facility and Statoil Fuel & Retail's bank overdraft facilities described hereunder. For further information, please refer to the Corporation's 2012 Annual Report.
With respect to dividends paid, to capital expenditures and to acquisitions carried out in the first three quarters of fiscal 2013, they were financed using Couche-Tard's available cash and credit facilities. Couche-Tard expects that cash generated from operations together with borrowings available under its revolving unsecured credit facilities will be adequate to meet its liquidity needs in the foreseeable future.
On September 22, 2012, Couche-Tard's term revolving unsecured operating credits A ($326.0 million), B ($154.0 million) and C ($40.0 million) matured. On October 19, 2012, the Corporation increased by $275.0 million the maximum borrowings available under its term revolving unsecured operating D, bringing to $1,275.0 million the maximum borrowings available under operating credit D. As at February 3, 2013, $345.5 million of Couche-Tard's revolving unsecured operating credit D had been used. As at the same date, the weighted average effective interest rate was 1.75% and standby letters of credit in the amount of CA$2.3 million and $28.4 million were outstanding. Thus, as at February 3, 2013, approximately $899.0 million were available under the Corporation's revolving unsecured operating credit D and Couche-Tard was in compliance with the restrictive covenants and ratios imposed by the credit agreements.
On October 31, 2012, Couche-Tard entered into a new credit facility of a maximum amount of $50.0 with an initial term of 50 months. The credit facility is available in the form of a revolving unsecured operating credit, available in US dollars ("Term revolving unsecured operating credit E"). The amounts borrowed bear interest at variable rates based on the US base rate or the LIBOR rate plus a variable margin. Standby fees, which vary based on a leverage ratio and on the utilization rate of the credit facility, apply to the unused portion of the credit facility. The variable margin used to determine the interest rate applicable to amounts borrowed is determined according to a leverage ratio of the Corporation. As at February 3, 2013, the term revolving unsecured operating credit E was unused.
Thus, as at February 3, 2013, Couche-Tard had access to more than $1.3 billion through its available cash and revolving unsecured operating credits.
Through its acquisition of Statoil Fuel & Retail, Couche-Tard has access to bank overdraft facilities totalling approximately $536.6 million. As of January 31, 2013, approximately $24.8 million of the overdraft bank facilities had been used and the weighted average effective interest rate was 1.69%.
Selected Consolidated Cash Flow Information
| (In millions of US dollars) | 16-week periods ended | 40-week periods ended | |||||
| February 3, 2013 |
January 29, 2012 |
Variation | February 3, 2013 |
January 29, 2012 |
Variation | ||
| Operating activities | $ | $ | $ | $ | $ | $ | |
| Net cash provided by operating activities | 228.7 | 93.2 | 135.5 | 674.8 | 502.6 | 172.2 | |
| Investing activities | |||||||
| Purchase of property and equipment and other assets, net of proceeds from the disposal of property and equipment and other assets | (162.5) | (79.3) | (83.2) | (328.5) | (174.7) | (153.8) | |
| Business acquisitions | (70.3) | (312.5) | 242.2 | (2,593.1) | (350.3) | (2,242.8) | |
| Net settlement of foreign exchange forward contracts | - | - | - | (86.4) | - | (86.4) | |
| Other | 0.8 | 2.1 | (1.3) | 1.3 | (20.5) | 21.8 | |
| Net cash used in investing activities | (232.0) | (389.7) | 157.7 | (3,006.7) | (545.5) | (2,461.2) | |
| Financing activities | |||||||
| Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs | 997.5 | - | 997.5 | 997.5 | - | 997.5 | |
| Repayment of the unsecured non-revolving acquisition credit facility | (995.5) | - | (995.5) | (995.5) | - | (995.5) | |
| Repayment of non-current debt assumed on business acquisition | (31.4) | - | (31.4) | (800.5) | - | (800.5) | |
| Dividends | (14.2) | (12.8) | (1.4) | (41.7) | (36.3) | (5.4) | |
| Net (decrease) increase in other debt | (17.8) | 79.0 | (96.8) | (319.9) | 158.6 | (478.5) | |
| Issuance of shares upon exercise of stock-options | 1.1 | 16.8 | (15.7) | 8.1 | 19.2 | (11.1) | |
| Borrowings under the acquisition facility, net of financing costs | - | - | - | 3,190.2 | - | 3,190.2 | |
| Issuance of shares on public offering, net of issuance costs | - | - | - | 333.4 | - | 333.4 | |
| Share repurchase | - | (78.0) | 78.0 | - | (201.2) | 201.2 | |
| Net cash (used in) provided by financing activities | (60.3) | 5.0 | (65.3) | 2,371.6 | (59.7) | 2,431.3 | |
| Company credit rating | |||||||
| Standard and Poor's | BBB- | BBB- | |||||
| Moody's | Baa3 | N/A | |||||
Operating activities
During the third quarter and three first quarters of fiscal 2013, net cash from operations reached $228.7 million and $674.8 million, respectively, up $135.5 million and $172.2 million, respectively compared to the same periods in fiscal year 2012. In both cases, the increase is mainly due to higher earnings before depreciation and amortization expense, partly offset by unfavorable changes in non-cash working capital items, including the reduction in accounts payable.
Investing activities
During the third quarter of fiscal 2013, investing activities were primarily for the acquisition of 52 company-operated stores for a total of $70.3 million as well as for net investments for capital expenditures and other assets which amounted to $162.5 million.
Since the beginning of the fiscal year, investing activities were primarily for the acquisition of Statoil Fuel & Retail and 120 additional company-operated stores for a net amount of $2.59 billion. Net investments for capital expenditures and other assets amounted to $328.5 million.
The capital investments were primarily for the replacement of equipment in some of Couche-Tard's stores to enhance its offering of products and services, the addition of new stores as well as the ongoing improvement of Couche-Tard's network.
Financing activities
During the third quarter, the Corporation repaid $995.5 million of its borrowings under the acquisition facility with the net proceeds of $997.5 million from the issuance of Canadian dollar denominated senior unsecured notes. The Corporation also repaid $31.4 million of the debt assumed upon the acquisition of Statoil Fuel & Retail.
Since the beginning of fiscal 2013, Couche-Tard borrowed a net amount of $2,194.7 million under its acquisition facility, it received a net amount of $997.5 million from the issuance of Canadian dollar denominated senior unsecured notes and received a net amount of $333.4 million from to the issuance of 7,302,500 Class B subordinate voting shares. These funds were used to finance the acquisition of Statoil Fuel & Retail for $2,583.3 million, to repay a portion of the debt assumed as part of this same acquisition for $800.5 million as well as to repay a portion of Couche-Tard's operating credits. During the same period, the Corporation paid dividends of $41.7 million.
Financial Position as at February 3, 2013
As shown by the Corporation's indebtedness ratios included in the "Selected Consolidated Financial Information" section and the net cash provided by operating activities, Couche-Tard's financial position is excellent.
Total consolidated assets amounted to $10.5 billion as at February 3, 2013, an increase of $6.0 billion over the balance as at April 29, 2012. This increase is primarily attributable to the acquisition of Statoil Fuel & Retail and to the weakening of the US dollar against the functional currencies of the Canadian and European operations as at the balance sheet date.
For the 53-week period ended February 3, 2013, Couche-Tard recorded a return on capital employed of 11.7%1.
Shareholders' equity amounted to $3.2 billion as at February 3, 2013, up $1.0 billion compared to April 29, 2012, mainly reflecting net earnings of the first three quarters of fiscal 2013, the increase in capital stock following the issuance of more than seven million shares as well as the increase in accumulated other comprehensive income following the weakening of the US dollar against the functional currencies of the Canadian and European operations as at the balance sheet date, partially offset by dividends declared. For the 53-week period ended February 3, 2013, the Corporation recorded a return on equity of 22.4%2.
__________________________
| 1 This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: earnings before income taxes and interests divided by average capital employed 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. This ratio is presented on a pro forma basis. It includes Couche-Tard's results for the first, second and third quarters of the fiscal year which will end April 28, 2013 and of the fourth quarter of the fiscal year ended April 29, 2012 as well as Statoil Fuel & Retail's results for the 12-month period ended January 31, 2013. Statoil Fuel & Retail balance sheet and earnings data have been adjusted to make their presentation in line with Couche-Tard's policies and for preliminary fair value adjustments to assets acquired, including goodwill, and to liabilities assumed. Statoil Fuel & Retail purchase price allocation being preliminary, this ratio could change. |
| 2 This ratio is presented for information purposes only and represents a measure of performance used especially in financial circles. It represents the following calculation: net earnings divided by average equity 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. This ratio is presented on a pro forma basis. It includes Couche-Tard's results for the first, second and third quarters of the fiscal year which will end April 28, 2013 and of the fourth quarter of the fiscal year ended April 29, 2012 as well as Statoil Fuel & Retail's results for the 12-month period ended January 31, 2013. Statoil Fuel & Retail balance sheet and earnings data have been adjusted to make their presentation in line with Couche-Tard's policies and for preliminary fair value adjustments to assets acquired, including goodwill, and to liabilities assumed. Statoil Fuel & Retail purchase price allocation being preliminary, this ratio could change. |
Selected Quarterly Financial Information
The Corporation's 52-week reporting cycle is divided into quarters of 12 weeks each except for the third quarter, which comprises 16 weeks. When a fiscal year, such as fiscal 2012, contains 53 weeks, the fourth quarter comprises 13 weeks. The following is a summary of selected consolidated financial information derived from the Corporation's interim consolidated financial statements for each of the eight most recently completed quarters. The results of the first and second quarter of fiscal 2013 have been adjusted to reflect the changes to the preliminary allocation of the purchase price of Statoil Fuel & Retail and reclassification of certain items.
| (In millions of US dollars except for per share data) | 40-week period ended February 3, 2013 |
53-week period ended April 29, 2012 | Extract from the 52-week period ended April 24, 2011 |
||||||
| Quarter | 3rd | 2nd | 1st | 4th | 3rd | 2nd | 1st | 4th | |
| Weeks | 16 weeks | 12 weeks | 12 weeks | 13 weeks | 16 weeks | 12 weeks | 12 weeks | 12 weeks | |
| Revenues | 11,573.7 | 9,310.7 | 6,021.5 | 6,064.9 | 6,605.8 | 5,153.9 | 5,178.9 | 4,737.0 | |
| Operating income before depreciation and amortization of property and equipment and other assets | 391.5 | 365.9 | 310.0 | 200.1 | 186.5 | 200.6 | 232.2 | 133.7 | |
| Depreciation and amortization of property and equipment and other assets | 182.2 | 134.1 | 66.1 | 62.2 | 75.7 | 52.4 | 49.5 | 50.9 | |
| Operating income | 209.3 | 231.4 | 243.9 | 137.9 | 110.8 | 148.2 | 182.7 | 82.8 | |
| Share of earnings of a joint venture and associated companies accounted for using the equity method | 3.9 | 3.7 | 5.2 | 3.4 | 7.0 | 5.2 | 6.0 | 2.6 | |
| Net financial expenses (revenues) | 49.4 | 15.9 | 121.7 | (13.0) | 4.6 | 2.5 | 3.2 | 2.6 | |
| Net earnings | 142.5 | 181.4 | 103.0 | 117.8 | 86.8 | 113.5 | 139.5 | 64.5 | |
| Net earnings per share | |||||||||
| Basic | $0.76 | $0.98 | $0.58 | $0.66 | $0.49 | $0.62 | $0.76 | $0.35 | |
| Diluted | $0.75 | $0.97 | $0.57 | $0.65 | $0.48 | $0.61 | $0.75 | $0.35 | |
The volatility of road transportation fuel gross margin and seasonality both have an impact on the variability of the quarterly net earnings. Given the acquisitions in recent years and higher retail prices at the pump, road transportation fuel revenues have become a more significant segment of the Corporation's business and therefore its quarterly results are more sensitive to the volatility of road transportation fuel gross margins. However, road transportation fuel margins tend to be less volatile when considered on an annual basis or a longer term. With that said, the majority of Couche-Tard's operating income is still derived from merchandise and service revenues.
Outlook
For the remainder of fiscal year 2013, Couche-Tard expects to continue to manage adequatly its capital expenditures while making sure to continue to invest the amounts necessary to maintain and improve its network. The Corporation also intends to keep an ongoing focus on its sales, supply terms and operating expenses while keeping an eye on growth opportunities that may become available to it.
Couche-Tard will pay special attention to the integration of Statoil Fuel & Retail. To do this, it has formed a multidisciplinary team that will ensure an effective integration and will identify improvement opportunities, including available synergies. Within this framework, Couche-Tard will also put in place strategies that will enable it to reduce its debt level in order to regain its financial flexibility and maintain the quality of its credit profile.
Finally, in line with its business model, Couche-Tard intends to continue to focus its resources on the sale of fresh products and on innovation, including the introduction of new products and services, in order to satisfy the needs of its large clientele.
Profile
Couche-Tard is the leader in the Canadian convenience store industry. In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum corporation or not) in terms of number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel in Scandinavian countries and in the Baltic States while it has a growing presence in Poland.
As of February 3, 2013, Couche-Tard's network comprises 6,173 convenience stores throughout North America, including 4,603 stores with road transportation fuel dispensing. Its North-American network consists of 13 business units, including nine in the United States covering 39 states and the District of Columbia and four in Canada covering all ten provinces. More than 60,000 people are employed throughout Couche-Tard's network and at its service offices in North America.
Through its acquisition of Statoil Fuel & Retail, Couche-Tard operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania), and Russia with 2,294 stores as at January 31, 2013, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated service-stations (road transportation fuel only). Couche-Tard also offers other products, including stationary energy, marine fuel, aviation fuel, lubricants and chemicals. It operates 12 key fuel terminals and 38 fuel depots in eight countries. Including employees at Statoil branded franchise stations, about 18,500 people work in Couche-Tard's retail network, terminals and service offices across Europe.
In addition, under licensing agreements, about 4,150 stores are operated under the Circle K banner in nine other countries (China, Guam, Hong Kong, Indonesia, Japan, Macau, Mexico, Vietnam and United Arab Emirates).
| The statements set forth in this press release, which describes Couche-Tard's objectives, projections, estimates, expectations or forecasts, may constitute forward-looking statements within the meaning of securities legislation. Positive or negative verbs such as "plan", "evaluate", "estimate", "believe" and other related expressions are used to identify such statements. Couche-Tard would like to point out that, by their very nature, forward-looking statements involve risks and uncertainties such that its results, or the measures it adopts, could differ materially from those indicated or underlying these statements, or could have an impact on the degree of realization of a particular projection. Major factors that may lead to a material difference between Couche-Tard's actual results and the projections or expectations set forth in the forward-looking statements include the effects of the integration of acquired businesses and the ability to achieve projected synergies, fluctuations in margins on motor fuel sales, competition in the convenience store and retail motor fuel industries, exchange rate variations, and such other risks as described in detail from time to time in the reports filed by Couche-Tard with securities authorities in Canada and the United States. Unless otherwise required by applicable securities laws, Couche-Tard disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking information in this release is based on information available as of the date of the release. |
Webcast on March 19, 2013 at 2:30 P.M. (EST)
Couche-Tard invites analysts known to the Corporation to send their two questions in advance to its management, before 11:00 A.M. (EST) on March 19, 2013.
Financial analysts and investors who wish to listen to the webcast on Couche-Tard's results which will take place online on March 19, 2013 at 2:30 P.M. (EST) can do so by accessing the Corporation's website at www.couche-tard.com/corporate and by clicking on the corporate presentations link of the investor relations section. For those who will not be able to listen to the live presentation, the recording of the webcast will be available on the Corporation's website for a period of 90 days.
Q3 2013
ALIMENTATION COUCHE-TARD INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16 and 40-week periods ended February 3, 2013
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions of US dollars, except per share amounts, unaudited)
| 16 weeks | 40 weeks | |||||||
| For the periods ended |
February 3, 2013 |
|
January 29, 2012 |
|
February 3, 2013 |
|
January 29, 2012 |
|
| $ | $ | $ | $ | |||||
| Revenues | 11,573.7 | 6,605.8 | 26,905.4 | 16,938.6 | ||||
| Cost of sales | 10,082.1 | 5,777.6 | 23,387.4 | 14,696.8 | ||||
| Gross profit | 1,491.6 | 828.2 | 3,518.0 | 2,241.8 | ||||
| Operating, selling, administrative and general expenses | 1,100.1 | 641.7 | 2,451.0 | 1,622.5 | ||||
| Depreciation and amortization of property and equipment and other assets | 182.2 | 75.7 | 382.4 | 177.6 | ||||
| 1,282.3 | 717.4 | 2,833.4 | 1,800.1 | |||||
| Operating income | 209.3 | 110.8 | 684.6 | 441.7 | ||||
| Share of earnings of joint ventures and associated companies accounted for using the equity method | 3.9 | 7.0 | 12.8 | 18.2 | ||||
| Financial expenses | 40.2 | 4.9 | 88.5 | 11.4 | ||||
| Financial revenues | (4.4) | (0.3) | (8.0) | (1.1) | ||||
| Loss on foreign exchange forward contracts (Note 6) | - | - | 102.9 | - | ||||
| Foreign exchange rate loss from currency conversion | 13.6 | - | 3.6 | - | ||||
| Net financial expenses | 49.4 | 4.6 | 187.0 | 10.3 | ||||
| Earnings before income taxes | 163.8 | 113.2 | 510.4 | 449.6 | ||||
| Income taxes | 21.3 | 26.4 | 83.5 | 109.8 | ||||
| Net earnings | 142.5 | 86.8 | 426.9 | 339.8 | ||||
| Net earnings per share (Note 7) | ||||||||
| Basic | 0.76 | 0.49 | 2.32 | 1.88 | ||||
| Diluted | 0.75 | 0.48 | 2.29 | 1.84 | ||||
| Weighted average number of shares (in thousands) | 187,417 | 177,731 | 184,279 | 180,866 | ||||
| Weighted average number of shares - diluted (in thousands) | 189,037 | 181,259 | 186,161 | 184,364 | ||||
| Number of shares outstanding at end of period (in thousands) | 187,494 | 178,979 | 187,494 | 178,979 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of US dollars, unaudited)
| 16 weeks | 40 weeks | ||||||||
| For the periods ended |
February 3, 2013 |
|
January 29, 2012 |
February 3, 2013 |
January 29, 2012 |
||||
| $ | $ | $ | $ | ||||||
| Net earnings | 142.5 | 86.8 | 426.9 | 339.8 | |||||
| Other comprehensive income | |||||||||
| Translation adjustments | |||||||||
| Changes in cumulative translation adjustments (1) | 142.0 | 23.2 | 286.0 | (25.3) | |||||
| Change in fair value of a financial instrument designated as a hedge of the Corporation's net investment in its U.S. operations (2) | (6.7) | - | (6.7) | - | |||||
| Cash flow hedges | |||||||||
| Change in fair value of financial instruments (3) | 0.1 | 0.3 | 3.7 | 1.6 | |||||
| Gain realized on financial instruments transferred to earnings (4) | (0.9) | (0.6) | (4.5) | (1.7) | |||||
| Available-for-sale financial instrument | |||||||||
| Change in fair value of an available-for-sale financial instrument (5) | - | (0.3) | - | - | |||||
| Gain realized on the disposal of an available-for-sale financial instrument transferred to earnings (6) | - | - | - | (0.6) | |||||
| Net actuarial gains (7) | 27.8 | - | 27.8 | - | |||||
| Other comprehensive income | 162.3 | 22.6 | 306.3 | (26.0) | |||||
| Comprehensive income | 304.8 | 109.4 | 733.2 | 313.8 | |||||
| Comprehensive income attributable to: | |||||||||
| Shareholders of the Corporation | 304.8 | 109.4 | 741.1 | 313.8 | |||||
| Non-controlling interest | - | - | (7.9) | - | |||||
| Comprehensive income | 304.8 | 109.4 | 733.2 | 313.8 | |||||
| (1) | For the 40-week period ended February 3, 2013, this amount includes a gain of $20.7, net of income taxes of $3.2. For the 16 and 40-week periods ended January 29, 2012, these amounts include a gain of $16.0 and a loss of $20.5, respectively (net of income taxes of $2.4 and $3.1, respectively). These gains and this loss arise from the translation of the US dollar denominated long-term debt which was previously designated as a foreign exchange hedge of the Corporation's net investment in its U.S. operations (Note 2). | ||||||||
| (2) | For the 16-week and 40-week periods ended February 3, 2013, these amounts are net of income taxes of $1.4. | ||||||||
| (3) | For the 16-week period ended February 3, 2013, this amount is net of income taxes. For the 40-week period ended February 3, 2013, this amount is net of income taxes of $0.8. For the 16 and 40-week periods ended January 29, 2012, these amounts are net of income taxes of $0.1 and $0.5, respectively. | ||||||||
| (4) | For the 16 and 40-week periods ended February 3, 2013, these amounts are net of income taxes of $0.2 and $1.0, respectively. For the 16 and 40-week periods ended January 29, 2012, these amounts are net of income taxes of $0.2 and $0.6, respectively. | ||||||||
| (5) | For the 16-week period ended January 29, 2012, this amount is net of income taxes of $0.1. | ||||||||
| (6) | For the 40-week period ended January 29, 2012, this amount is net of income taxes. | ||||||||
| (7) | For the 16-week and 40-week periods ended February 3, 2013, these amounts are net of income taxes of $10.8. | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions of US dollars, unaudited)
| For the 40-week period ended | February 3, 2013 | ||||||||
| Attributable to the shareholders of the Corporation | |||||||||
| Capital stock |
Contributed surplus |
Retained earnings |
Accumulated other comprehensive income |
Total | Non- controlling interest |
Total equity |
|||
| $ | $ | $ | $ | $ | $ | $ | |||
| Balance, beginning of period | 321.0 | 17.9 | 1,826.8 | 8.9 | 2,174.6 | 2,174.6 | |||
| Comprehensive income: | |||||||||
| Net earnings | 426.9 | 426.9 | 426.9 | ||||||
| Other comprehensive income | 314.2 | 314.2 | (7.9) | 306.3 | |||||
| Total comprehensive income | 741.1 | (7.9) | 733.2 | ||||||
| Dividends | (41.7) | (41.7) | (41.7) | ||||||
| Acquisition of control of Statoil Fuel & Retail (Note 3) | - | 487.2 | 487.2 | ||||||
| Acquisition of non-controlling interest in Statoil Fuel & Retail (Note 3) | - | (479.3) | (479.3) | ||||||
| Class B subordinate voting shares issued for cash (1) (Note 8) | 336.5 | 336.5 | 336.5 | ||||||
| Stock option-based compensation expense | 0.3 | 0.3 | 0.3 | ||||||
| Initial fair value of stock options exercised | 0.9 | (0.9) | - | - | |||||
| Cash received upon exercise of stock options | 8.1 | 8.1 | 8.1 | ||||||
| Balance, end of period | 666.5 | 17.3 | 2,212.0 | 323.1 | 3,218.9 | - | 3,218.9 | ||
| (1) This amount is net of transaction costs which are net of a related income tax benefit of $3.4. | |||||||||
| For the 40-week period ended | January 29, 2012 | ||||||||
| Capital stock |
Contributed surplus |
Retained earnings |
Accumulated other comprehensive income |
Shareholders' equity |
|||||
| $ | $ | $ | $ | $ | |||||
| Balance, beginning of period | 323.8 | 19.3 | 1,596.3 | 40.0 | 1,979.4 | ||||
| Comprehensive income: | |||||||||
| Net earnings | 339.8 | 339.8 | |||||||
| Other comprehensive income | (26.0) | (26.0) | |||||||
| Total comprehensive income | 313.8 | ||||||||
| Dividends | (36.3) | (36.3) | |||||||
| Stock option-based compensation expense | 0.4 | 0.4 | |||||||
| Initial fair value of stock options exercised | 1.5 | (1.5) | - | ||||||
| Cash received upon exercise of stock options | 19.2 | 19.2 | |||||||
| Repurchase and cancellation of shares | (23.9) | (23.9) | |||||||
| Excess of acquisition cost over book value of Class A multiple voting shares and Class B subordinate voting shares repurchased and cancelled |
(177.3) | (177.3) | |||||||
| Balance, end of period | 320.6 | 18.2 | 1,722.5 | 14.0 | 2,075.3 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of US dollars, unaudited)
| 16 weeks | 40 weeks | |||||||
| For the periods ended |
February 3, 2013 |
|
January 29, 2012 |
|
February 3, 2013 |
|
January 29, 2012 |
|
| $ | $ | $ | $ | |||||
| Operating activities | ||||||||
| Net earnings | 142.5 | 86.8 | 426.9 | 339.8 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||
| Depreciation and amortization of property and equipment and other assets, net of amortization of deferred credits | 173.1 | 63.8 | 353.3 | 148.3 | ||||
| Deferred income taxes | (27.5) | (18.3) | (35.9) | 1.4 | ||||
| Share of earnings of joint ventures and of associated companies accounted for using the equity method, net of dividends received | (2.6) | (4.7) | (8.1) | (14.4) | ||||
| Deferred credits | 1.8 | 4.3 | 17.4 | 9.4 | ||||
| Loss (gain) on disposal of property and equipment and other assets | - | 2.6 | (2.4) | 7.8 | ||||
| Negative goodwill (Note 3) | (0.4) | (0.4) | (1.6) | (1.3) | ||||
| Loss on foreign exchange forward contracts (Note 6) | - | - | 102.9 | - | ||||
| Other | 3.0 | 2.8 | 31.8 | 17.0 | ||||
| Changes in non-cash working capital | (61.2) | (43.7) | (209.5) | (5.4) | ||||
| Net cash provided by operating activities | 228.7 | 93.2 | 674.8 | 502.6 | ||||
| Investing activities | ||||||||
| Purchase of property and equipment and other assets | (190.9) | (85.6) | (366.2) | (189.8) | ||||
| Business acquisitions (Note 3) | (70.3) | (312.5) | (2,593.1) | (350.3) | ||||
| Proceeds from disposal of property and equipment and other assets | 28.4 | 6.3 | 37.7 | 15.1 | ||||
| Restricted cash | 0.8 | 2.1 | 1.3 | (20.4) | ||||
| Net settlement of foreign exchange forward contracts | - | - | (86.4) | - | ||||
| Other | - | - | - | (0.1) | ||||
| Net cash used in investing activities | (232.0) | (389.7) | (3,006.7) | (545.5) | ||||
| Financing activities | ||||||||
| Issuance of Canadian dollar denominated senior unsecured notes, net of financing costs (Note 4) | 997.5 | - | 997.5 | - | ||||
| Repayment of the unsecured non-revolving acquisition credit facility (Note 4) | (995.5) | - | (995.5) | - | ||||
| Repayment of non-current debt assumed on business acquisition | (31.4) | - | (800.5) | - | ||||
| Cash dividends paid | (14.2) | (12.8) | (41.7) | (36.3) | ||||
| Net (decrease) increase in other debt | (17.8) | 79.0 | (319.9) | 158.6 | ||||
| Issuance of shares upon exercise of stock-options | 1.1 | 16.8 | 8.1 | 19.2 | ||||
| Borrowings under the unsecured non-revolving acquisition credit facility, net of financing costs (Note 4) | - | - | 3,190.2 | - | ||||
| Repurchase of shares | - | (78.0) | - | (201.2) | ||||
| Issuance of shares on public offering, net of transaction costs (Note 8) | - | - | 333.4 | - | ||||
| Net cash (used in) provided by financing activities | (60.3) | 5.0 | 2,371.6 | (59.7) | ||||
| Effect of exchange rate fluctuations on cash and cash equivalents | 40.3 | 6.0 | 31.8 | (4.1) | ||||
| Net (decrease) increase in cash and cash equivalents | (23.3) | (285.5) | 71.5 | (106.7) | ||||
| Cash, cash equivalents and bank overdraft, beginning of period | 399.1 | 488.5 | 304.3 | 309.7 | ||||
| Cash, cash equivalents and bank overdraft, end of period | 375.8 | 203.0 | 375.8 | 203.0 | ||||
| Bank overdraft, end of period (1) | 24.8 | - | 24.8 | - | ||||
| Cash and cash equivalents, end of period | 400.6 | 203.0 | 400.6 | 203.0 | ||||
| Supplemental information: | ||||||||
| Interest paid | 20.8 | 2.4 | 48.1 | 5.1 | ||||
| Interest and dividends received | 2.5 | 1.2 | 9.2 | 5.1 | ||||
| Income taxes paid | 88.6 | 40.3 | 129.4 | 36.3 | ||||
| Cash and cash equivalents components: | ||||||||
| Cash and demand deposits | 400.6 | 161.5 | ||||||
| Liquid investments | - | 41.5 | ||||||
| 400.6 | 203.0 | |||||||
| (1) Bank overdraft is included in Bank loans and current portion of long-term debt on the consolidated balance sheet. | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(in millions of US dollars, unaudited)
| As at February 3, | As at April 29, | ||
| 2013 | 2012 | ||
| $ | $ | ||
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | 400.6 | 304.3 | |
| Restricted cash | 21.4 | 22.7 | |
| Accounts receivable | 1,765.4 | 420.7 | |
| Inventories | 897.2 | 543.9 | |
| Prepaid expenses | 55.7 | 28.6 | |
| Foreign exchange forward contracts (Note 6) | - | 17.2 | |
| Income taxes receivable | 33.8 | - | |
| 3,174.1 | 1,337.4 | ||
| Property and equipment | 5,133.2 | 2,248.3 | |
| Goodwill | 1,097.5 | 502.9 | |
| Intangible assets | 848.0 | 217.0 | |
| Other assets | 155.7 | 68.2 | |
| Investment in joint ventures and in associated companies | 80.8 | 65.0 | |
| Deferred income taxes | 18.6 | 14.4 | |
| 10,507.9 | 4,453.2 | ||
| Liabilities | |||
| Current liabilities | |||
| Accounts payable and accrued liabilities | 2,307.8 | 1,025.7 | |
| Provisions | 85.9 | 50.1 | |
| Income taxes payable | - | 6.6 | |
| Bank loans and current portion of long-term debt (Note 4) | 48.4 | 484.4 | |
| 2,442.1 | 1,566.8 | ||
| Long-term debt (Note 4) | 3,605.4 | 180.8 | |
| Provisions | 323.5 | 107.5 | |
| Pension benefit liability | 117.1 | 39.5 | |
| Financial liabilities (Note 5) | 8.1 | - | |
| Deferred credits and other liabilities | 153.6 | 121.9 | |
| Deferred income taxes | 639.2 | 262.1 | |
| 7,289.0 | 2,278.6 | ||
| Shareholders' equity | |||
| Capital stock (Note 8) | 666.5 | 321.0 | |
| Contributed surplus | 17.3 | 17.9 | |
| Retained earnings | 2,212.0 | 1,826.8 | |
| Accumulated other comprehensive income | 323.1 | 8.9 | |
| 3,218.9 | 2,174.6 | ||
| 10,507.9 | 4,453.2 | ||
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US dollars unless otherwise noted, except per share amounts, unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION
The unaudited interim condensed consolidated financial statements (the "interim financial statements") have been prepared by the Corporation in accordance with Canadian generally accepted accounting principles as set out in the Handbook of the Canadian Institute of Chartered Accountants which includes International Financial Reporting Standards, as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34 "Interim Financial Reporting".
The interim financial statements were prepared in accordance with the same accounting policies and methods as the audited annual consolidated financial statements for the year ended April 29, 2012, except for those disclosed in Note 2. The interim financial statements do not include all the information required for complete financial statements and should be read in conjunction with the audited annual consolidated financial statements and notes thereto in the Corporation's 2012 Annual Report. The results of operations for the interim periods presented do not necessarily reflect results expected for the full fiscal year. The Corporation's business follows a seasonal pattern. The busiest period is the first half-year of each fiscal year, which includes summer's sales. These interim financial statements have not been subject to a review engagement by the Corporation's external auditors.
On March 19, 2013, the Corporation's interim financial statements were approved by the board of directors who also approved their publication.
2. ACCOUNTING CHANGES
Accounting policies different from those used in the 2012 annual consolidated financial statements
Hedge of the net investment in foreign operations
The Corporation previously designated its entire US dollar denominated long-term debt as a foreign exchange hedge of its net investment in its U.S. operations. Accordingly, the portion of the gains or losses arising from the translation of the US dollar denominated debt that was determined to be an effective hedge was recognized in Other comprehensive income, counterbalancing gains and losses arising from translation of the Corporation's net investment in its U.S. operations. Had a portion of the hedging relationship become ineffective, the ineffective portion would have been recorded in the consolidated statement of earnings under Operating, selling, administrative and general expenses. The Corporation no longer designates its US dollar denominated long-term debt as a foreign exchange hedge of its net investment in its U.S. operations. Accordingly, the portion of the gains or losses arising from the translation of the US dollar denominated debt is recorded in the consolidated statement of earnings under Operating, selling, administrative and general expenses.
The Corporation has designated its cross-currency interest rate swap agreements (Note 5) as a foreign exchange hedge of its net investment in its U.S. operations. The hedge being effective, the gains or losses arising from the fair value variation of the cross-currency interest rate swaps are recognized in Other comprehensive income.
Revised Standards
Employee Benefits
On April 30, 2012, the Corporation early adopted the revised version of IAS 19 "Employee Benefits", issued by the IASB, which retroactively modifies accounting rules for defined benefits pension plans. The revised version of the standard contains multiple modifications, including the elimination of the corridor approach, which allowed deferring part of the actuarial gains and losses, as well as enhanced guidance on measurement of plan assets and defined benefit obligations, streamlining the presentation of changes in assets and liabilities arising from defined benefit plans and the introduction of enhanced disclosures for defined benefit plans.
Following the adoption of this revised standard, the Corporation also decided to present net interests on the net defined benefit liability (asset), previously presented in Operating, selling, administrative and general expenses, in Financial expenses. This adoption had no other significant impact on the Corporation's consolidated financial statements.
3. BUSINESS ACQUISITIONS
Acquisition of Statoil Fuel & Retail ASA ("Statoil Fuel & Retail")
On June 19, 2012, the Corporation acquired 81.2% of the 300,000,000 issued and outstanding shares of Statoil Fuel & Retail for a cash consideration of 51.20 Norwegian Kroners ("NOK") per share for a total amount of NOK 12.47 billion or approximately $2.1 billion through a voluntary public offer (the "offer"). From June 22, 2012 to June 29, 2012, the Corporation acquired 53,238,857 additional shares of Statoil Fuel & Retail for a cash consideration of 51.20 NOK per share, totaling NOK 2.73 billion or approximately $0.45 billion, increasing the Corporation's participation to 98.9%. Having reached a shareholding of more than 90%, on June 29, 2012, in accordance with Norwegian laws, the Corporation initiated the compulsory acquisition of all of the remaining Statoil Fuel & Retail shares not deposited under the offer from the holders thereof and, as a result, since such date, the Corporation owns 100% of the issued and outstanding shares of Statoil Fuel & Retail. The 51.20 NOK per share cash consideration for the compulsory acquisition of all of the remaining shares of Statoil Fuel & Retail not deposited under this offer was paid on July 11, 2012. The Oslo Børs Stock Exchange confirmed the delisting of the Statoil Fuel & Retail shares effective as of the close of markets in Norway on July 12, 2012. The acquisition of the 300,000,000 issued and outstanding shares of Statoil Fuel & Retail was therefore made for a total cash consideration of NOK 15.36 billion, or $2.58 billion. The Corporation set the acquisition date at June 19, 2012.
Statoil Fuel & Retail is a leading Scandinavian road transportation fuel retailer with over 100 years of operations in the region. Statoil Fuel & Retail operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania), and Russia with approximately 2,300 sites, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated service-stations (road transportation fuel only). Statoil Fuel & Retail has a leading position in several countries where it does business and owns the land for over 900 sites and buildings for over 1,700 sites.
Statoil Fuel & Retail's other products include stationary energy, marine fuel, aviation fuel, lubricants and chemicals. In Europe, Statoil Fuel & Retail operates 12 key fuel terminals and 38 fuel depots in eight countries.
During the 16 and 40-week periods ended February 3, 2013, the Corporation recorded transaction costs of $0.3 million and $1.8 million, respectively, in Operating, selling, administrative and general expenses, in connection with this acquisition, which adds to transaction costs of $0.8 million recorded in earnings for the year ended April 29, 2012.
The Corporation financed this acquisition through borrowings under its acquisition facility (Note 4).
Given the size of the transaction, the Corporation has not completed its fair value assessment of the assets acquired, the liabilities assumed and the goodwill for this transaction. The preliminary allocation is subject to adjustments to the fair value of the assets, liabilities and goodwill until the process is completed. Purchase price allocation based on the estimated fair value on the date of acquisition and available information as at the date of publication of these consolidated financial statements is as follows:
| Fair value accounted for at the acquisition date |
||
| $ | ||
| Assets | ||
| Current assets | ||
| Cash and cash equivalents | 193.7 | |
| Restricted cash | 0.8 | |
| Accounts receivable | 1,589.3 | |
| Inventories | 283.4 | |
| Prepaid expenses | 10.4 | |
| Income taxes receivable | 3.7 | |
| 2,081.3 | ||
| Property and equipment | 2,574.2 | |
| Identifiable intangible assets | 613.4 | |
| Other assets | 30.6 | |
| Investment in affiliated companies | 7.4 | |
| Deferred Income taxes | 51.5 | |
| 5,358.4 | ||
| Liabilities | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities | 1,680.3 | |
| Provisions | 25.2 | |
| Income taxes payable | 17.6 | |
| Bank loans and current portion of long-term debt | 845.3 | |
| 2,568.4 | ||
| Long-term debt | 53.6 | |
| Provisions | 197.8 | |
| Pension benefit liability | 66.2 | |
| Other liabilities | 5.5 | |
| Deferred income taxes | 374.3 | |
| 3,265.8 | ||
| Non-controlling interest | 487.2 | |
| Net identifiable assets | 1,605.4 | |
| Acquisition goodwill | 498.6 | |
| Consideration paid in cash on June 19, 2012 for the acquisition of control (81.2%) | 2,104.0 | |
| Consideration paid in cash for shares held by non-controlling shareholders | 479.3 | |
| Cash and cash equivalents acquired | (193.7) | |
| Bank overdraft assumed | 34,1 | |
| Net cash flow for the acquisition | 2,423.7 | |
The Corporation expects that the acquired goodwill will not be deductible for tax purposes.
The Corporation acquired Statoil Fuel & Retail with the aim of diversifying its operations geographically and of establishing a solid platform in Europe in order to support its future growth potential. Since the date of acquisition, Statoil Fuel & Retail's revenues and net earnings amounted to $8,173.6 and $91.0, respectively. The following summary presents the pro-forma consolidated results of the Corporation for the 40-week period ended February 3, 2013, under the assumption that Statoil Fuel & Retail was acquired on April 30, 2012. These amounts do not include the potential synergies that could result from the acquisition. This information is provided for illustrative purposes only and does not necessarily reflect actual or future consolidated results of the Corporation after the combination.
| $ | |
| Revenues | 28,708.8 |
| Net earnings | 429.5 |
Statoil Fuel & Retail's accounting periods do not coincide with the Corporation's accounting periods. The consolidated statement of earnings, comprehensive income, and cash flows for the 16 and 40-week periods ended February 3, 2013 include those of Statoil Fuel & Retail for the period beginning October 1st, 2012 and ending January 31, 2013 and for the period beginning June 20, 2012 and ending January 31, 2013, respectively. The consolidated statement of changes in equity for the 40-week period ended February 3, 2013 includes that of Statoil Fuel & Retail for the period beginning June 20, 2012 and ending January 31, 2013. The consolidated balance sheet as at February 3, 2013 includes the balance sheet of Statoil Fuel & Retail as at January 31, 2013, as adjusted for the preliminary purchase price allocation.
The alignment of Statoil Fuel & Retail's accounting period with those of the Corporation will be made once the replacement of Statoil Fuel & Retail financial systems is finalized.
Other acquisitions for the 40-week period ended February 3, 2012
- On May 8, 2012, the Corporation purchased 20 company-operated stores located in Texas, United States from Signature Austin Stores. The Corporation leases the land and buildings for all sites.
- On August 27, 2012, the Corporation purchased 29 company-operated stores located in Florida, United States from Florida Oil Holdings, LLC. The Corporation owns the land and buildings for 24 sites while it leases the land and owns the buildings for the other sites. The Corporation was also transferred a road transportation fuel supply agreement for one store owned and operated by an independent operator.
- On November 2, 2012, the Corporation acquired, from Sun Pacific Energy, 27 company-operated stores operating in Washington State, United States. The Corporation owns the land and buildings for 26 sites while it leases these assets for the other site.
- On November 28, 2012, the Corporation acquired, from Davis Oil Company, seven company-operated stores operating in Georgia, United States. The Corporation owns the land and buildings for all sites.
- On December 31, 2012, the Corporation acquired, from Kum & Go, L.C., seven company-operated stores operating in Oklahoma, United States. The Corporation leases the land and buildings for all sites.
- During the 40-week period ended February 3, 2013, under the June 2011 agreement with ExxonMobil, the Corporation acquired three stores operated by independent operators for which the real estate is owned by the Corporation along with the related road transportation fuel supply agreements. Additionally, 23 road transportation fuel supply agreements were transferred to the Corporation during this period.
- During the 40-week period ended February 3, 2013, the Corporation also acquired 30 other stores through distinct transactions. The Corporation leases the land and buildings for ten sites and owns these same assets for the other sites.
Acquisition costs in connection with these acquisitions and other unrealized acquisitions of $2.0 are included in Operating, selling, administrative and general expenses.
These acquisitions were settled for a total cash consideration of $169.4. Since the Corporation has not completed its fair value assessment of the assets acquired, the liabilities assumed and goodwill for all transactions, the preliminary allocations of certain acquisitions are subject to adjustments to the fair value of the assets, liabilities and goodwill until the process is completed. Purchase price allocations based on the estimated fair value on the date of acquisition and available information as at the date of publication of these consolidated financial statements is as follows:
| $ | ||
| Tangible assets acquired | ||
| Inventories | 9.6 | |
| Property and equipment | 120.4 | |
| Other assets | 0.2 | |
| Total tangible assets | 130.2 | |
| Liabilities assumed | ||
| Accounts payable and accrued liabilities | 4.6 | |
| Provisions | 7.2 | |
| Deferred credit and other liabilities | 0.5 | |
| Total liabilities | 12.3 | |
| Net tangible assets acquired | 117.9 | |
| Intangible assets | 0.6 | |
| Goodwill | 52.5 | |
| Negative goodwill recorded to Operating, selling, administrative and general expenses | (1.6) | |
| Total cash consideration paid | 169.4 | |
The Corporation expects that approximately $25.1 of the goodwill related to these transactions will be deductible for tax purposes.
These acquisitions were concluded in order to expand the Corporation's market share and to increase its economies of scale. These acquisitions generated goodwill in the amount of $52.5 mainly due to the strategic location of stores acquired. Since the date of acquisition, revenues and net earnings from these stores amounted to $374.9 and $3.4, respectively. Considering the nature of these acquisitions, the available financial information does not allow for the accurate disclosure of pro-forma revenues and net earnings had the Corporation concluded these acquisitions at the beginning of its fiscal year.
Disposal of the liquefied petroleum gas sales ("LPG") operations
On December 7, 2012, the Corporation sold Statoil Fuel & Retail's LPG operations for NOK 130.0 million (approximately $23.0 million) before working capital adjustments. No gain or loss was generated from this disposal.
4. BANK LOANS AND LONG-TERM DEBT
| As at February 3, 2013 |
As at April 29, 2012 |
|||
| $ | $ | |||
| Unsecured non-revolving acquisition credit facility, maturing in June 2015 (a) | 2,196.9 | - | ||
| US dollar term revolving unsecured operating credit A, matured in September 2012 | - | 312.7 | ||
| Canadian dollar term revolving unsecured operating credit A, matured in September 2012 | - | 13.6 | ||
| US dollar term revolving unsecured operating credit B, matured in September 2012 | - | 147.3 | ||
| Canadian dollar term revolving unsecured operating credit B, matured in September 2012 | - | 6.7 | ||
| US dollar term revolving unsecured operating credit D, maturing in December 2016 (b) | 345.5 | 116.0 | ||
| Canadian dollar term revolving unsecured operating credit D, maturing in December 2016 (b) | - | 53.0 | ||
| Canadian dollar denominated senior unsecured notes (c) | ||||
| Tranche 1, maturing in November 2017 | 299.4 | - | ||
| Tranche 2, maturing in November 2019 | 449.0 | - | ||
| Tranche 3, maturing in November 2022 | 249.3 | - | ||
| NOK fixed rate bonds, maturing in February 2019 (d) | 2.4 | - | ||
| NOK floating rate bonds, maturing in February 2017 (e) | 2.7 | - | ||
| Borrowings under bank overdraft facilities, maturing at various dates (f) | 24.8 | - | ||
| Other debts, including finance leases, maturing at various dates | 83.8 | 15.9 | ||
| 3,653.8 | 665.2 | |||
| Bank loans and current portion of long-term debt | 48.4 | 484.4 | ||
| 3,605.4 | 180.8 | |||
(a) Unsecured non-revolving acquisition credit facility
Borrowings of $2,203.0 presented net of financing costs of $6.1. As at February 3, 2013, the effective interest rate was 2.6% (rate of 2.5% on borrowed amounts).
Under the credit agreement, the Corporation must maintain certain financial ratios and respect certain restrictive covenants.
(b) Term revolving unsecured operating credit D
As at February 3, 2013, the effective interest rate was 1.75%.
On October 19, 2012, the Corporation entered into an agreement to amend the amount available under its US dollar term revolving unsecured operating credit D from $1,000.0 to $1,275.0. All other conditions pertaining to the previous agreement remain unchanged.
(c) Canadian dollar denominated senior unsecured notes
On November 1st, 2012, the Corporation issued Canadian dollar denominated senior unsecured notes totaling CA$ 1.0 billion, divided into three tranches:
| Notional amount | Maturity | Coupon rate | Effective rate as at February 3, 2013 |
|
| Tranche 1 | CA$300.0 | November 1st, 2017 | 2.861% | 3.0% |
| Tranche 2 | CA$450.0 | November 1st, 2019 | 3.319% | 3.4% |
| Tranche 3 | CA$250.0 | November 1st, 2022 | 3.899% | 4.0% |
The net proceeds from the issuance, which were approximately CA$995.0, were mainly used to repay a portion of the Corporation's unsecured non-revolving acquisition credit facility. The total amount of the notes is subject to cross-currency interest rate swaps (Note 5). Borrowings of $997.7 are presented net of financing costs of $5.0.
(d) NOK fixed-rate bonds
Bear interest at 5.75%.
(e) NOK floating-rate bonds
Bear interest based on an inter-bank rate plus a specified margin. As at January 31, 2013, the effective interest rate was 3.82%.
(f) Borrowings under overdraft bank facilities
The Corporation has access to bank overdraft facilities totaling approximately $536.6. As of January 31, 2013, the weighted average effective interest rate was 1.69%.
Term revolving unsecured operating credit E
On October 31, 2012, the Corporation entered into a new credit facility of a maximum amount of $50.0 with an initial term of 50 months. The credit facility is available in the form of a revolving unsecured operating credit, available in US dollars. The amounts borrowed bear interest at variable rates based on the US base rate or the LIBOR rate plus a variable margin.
Standby fees, which vary based on a leverage ratio and on the utilization rate of the credit facility, apply to the unused portion of the credit facility. The variable margin used to determine the interest rate applicable to amounts borrowed is determined according to a leverage ratio of the Corporation.
Under the credit agreement, the Corporation must maintain certain financial ratios and respect certain restrictive provisions.
As at February 3, 2013, operating credit E was unused.
5. CROSS-CURRENCY INTEREST RATE SWAPS
On November 1st, 2012, the Corporation entered into cross-currency interest rate swap agreements for a total notional amount of CA$1.0 billion, allowing it to synthetically convert its Canadian dollars denominated debt into US dollars.
| Receive - Notional | Receive - Rate | Pay - Notional | Pay - Rate | Fair value as at February 3, 2013 |
Maturity |
| CA$300.0 | 2.861% | US$300.7 | 2.0340% | $1.0 | November 1st, 2017 |
| CA$125.0 | 3.319% | US$125.4 | 2.7325% | $1.1 | November 1st, 2019 |
| CA$20.0 | 3.319% | US$20.1 | 2.7325% | $0.2 | November 1st, 2019 |
| CA$305.0 | 3.319% | US$305.9 | 2.7400% | $3.1 | November 1st, 2019 |
| CA$125.0 | 3.899% | US$125.4 | 3.4900% | $1.4 | November 1st, 2022 |
| CA$125.0 | 3.899% | US$125.4 | 3.4925% | $1.3 | November 1st, 2022 |
| Total financial liabilities | $8.1 |
The Corporation is exposed to fair value risk with regards to these cross-currency swap agreements. The cross-currency interest rate swap agreements were designated as a foreign exchange hedge of the Corporation's net investment in its U.S. operations.
6. FOREIGN EXCHANGE FORWARD CONTRACTS
As described above, the acquisition of Statoil Fuel & Retail was denominated in NOK whereas the Corporation's acquisition facility is denominated in US dollars. The Corporation has therefore determined that there was a risk related to fluctuations in the exchange rate between the US dollar and the NOK as the hypothetical weakening of the US dollar against the NOK would have increased the Corporation's US dollars cash requirements in order to close the acquisition of Statoil Fuel & Retail. To mitigate this risk and because of the lack of liquidity in the currency market for the NOK, the Corporation entered into foreign exchange forward contracts (hereinafter, "forwards") with reputable financial institutions allowing it to predetermine a significant portion of the disbursement it planned to make in US dollars for the acquisition of Statoil Fuel & Retail.
In total, from April 10, 2012 to June 12, 2012, the Corporation entered into forwards requiring it to deliver US$3.47 billion in exchange for NOK 20.14 billion, representing a weighted average rate of NOK 5.8114 per US dollar which is a favorable rate compared to the rate of NOK 5.75 per US dollar in effect at April 18, 2012, date of the announcement of the offer to acquire Statoil Fuel & Retail.
Subsequently, the Corporation modified the original maturity dates of certain forwards to make them coincide with the actual disbursement dates for the payment of Statoil Fuel & Retail shares and the repayment of certain of Statoil Fuel & Retail debts. Thus, from June 15, 2012 to August 24, 2012, the Corporation settled all of the forwards to pay for Statoil Fuel & Retail shares and certain of its debts.
During the 40-week period ended February 3, 2013, the Corporation recorded to earnings losses of $102.9, in relation with these forwards.
7. NET EARNINGS PER SHARE
| 16-week period ended February 3, 2013 |
16-week period ended January 29, 2012 |
|||||
| Net earnings |
Weighted average number of shares (in thousands) |
Net earnings per share |
Net earnings |
Weighted average number of shares (in thousands) |
Net earnings per share |
|
| $ | $ | $ | $ | |||
| Basic net earnings attributable to Class A and B shareholders | 142.5 | 187,417 | 0.76 | 86.8 | 177,731 | 0.49 |
| Dilutive effect of stock options | 1,620 | (0.01) | 3,528 | (0.01) | ||
| Diluted net earnings available for Class A and B shareholders | 142.5 | 189,037 | 0.75 | 86.8 | 181,259 | 0.48 |
| 40-week period ended February 3, 2013 |
40-week period ended January 29, 2012 |
|||||
| Net earnings |
Weighted average number of shares (in thousands) |
Net earnings per share |
Net earnings |
Weighted average number of shares (in thousands) |
Net earnings per share |
|
| $ | $ | $ | $ | |||
| Basic net earnings attributable to Class A and B shareholders | 426.9 | 184,279 | 2.32 | 339.8 | 180,866 | 1.88 |
| Dilutive effect of stock options | 1,882 | (0.03) | 3,498 | (0.04) | ||
| Diluted net earnings available for Class A and B shareholders | 426.9 | 186,161 | 2.29 | 339.8 | 184,364 | 1.84 |
When they have an anti-dilutive effect, stock options must be excluded from the calculation of the diluted net earnings per share. For the 16 and 40-week periods ended February 3, 2013, 35,000 stock options were excluded and no stock options were excluded for the 16 and 40-week periods ended January 29, 2012.
8. CAPITAL STOCK
Issuance of shares
On August 14, 2012, the Corporation issued 7,302,500 Class B subordinate voting shares at a price of CA$47.25 per share, for gross proceeds of approximately CA$345.0.
The net proceeds of the issuance, approximately CA$330.0, were mainly used to repay a portion of the Corporation's revolving unsecured operating credits then outstanding.
Repurchase of shares
Since October 25, 2011, the Corporation had a share repurchase program which expired on October 24, 2012. This program allowed the Corporation to repurchase up to 2,684,420 of the 53,688,412 Class A multiple voting shares and up to 11,126,400 of the 111,264,009 Class B subordinate voting shares issued and outstanding as at October 11, 2011 (representing 5.0% of the Class A multiple voting shares issued and outstanding and 10.0% of the Class B subordinate voting shares of the public float, as at that date, respectively, as defined by applicable rules). In accordance with Toronto Stock Exchange requirements, the Corporation could repurchase a daily maximum of 1,000 Class A multiple voting shares and of 82,118 Class B subordinate voting shares. When making such repurchases, the number of Class A multiple voting shares and of Class B subordinate voting shares in circulation is reduced and the proportionate interest of all remaining shareholders in the Corporation's share capital is increased on a pro rata basis. All shares repurchased under the share repurchase program were cancelled upon repurchase. The Corporation did not repurchase any shares under this program during the 16 and 40-week periods ended February 3, 2013.
Stock options
For the 16-week period ended February 3, 2013, a total of 152,555 stock options were exercised (2,171,724 for the 16-week period ended January 29, 2012). For the 40-week period ended February 3, 2013, a total of 1,166,024 stock options were exercised (2,358,141 for the 40-week period ended January 29, 2012).
Issued and outstanding shares
As at February 3, 2013, the Corporation has 49,367,280 (53,686,412 as at January 29, 2012) issued and outstanding Class A multiple voting shares each comprising ten votes per share and 138,126,246 (125,292,818 as at January 29, 2012) outstanding Class B subordinate voting shares each comprising one vote per share.
9. SEGMENTED INFORMATION
The Corporation operates convenience stores in the United States, in Europe and in Canada. It essentially operates in one reportable segment, the sale of goods for immediate consumption, of road transportation fuel and of other products through corporate stores or franchise operations. It operates a convenience store chain under several banners, including Circle K, Statoil, Couche-Tard and Mac's. Revenues from outside sources mainly fall into three categories: merchandise and services, road transportation fuel and other.
The following table provides information on the principal revenue classes as well as geographic information:
| 16-week period ended February 3, 2013 |
16-week period ended January 29, 2012 |
||||||||
| United States |
Europe (a) | Canada | Total | United States |
Europe | Canada | Total | ||
| $ | $ | $ | $ | $ | $ | $ | $ | ||
| External customer revenues (b) | |||||||||
| Merchandise and services | 1,328.0 | 372.2 | 625.5 | 2,325.7 | 1,272.5 | - | 595.4 | 1,867.9 | |
| Road transportation fuel | 4,337.3 | 2,999.8 | 849.8 | 8,186.9 | 3,969.0 | - | 767.2 | 4,736.2 | |
| Other | 2.0 | 1,058.9 | 0.2 | 1,061.1 | 1.6 | - | 0.1 | 1.7 | |
| 5,667.3 | 4,430.9 | 1,475.5 | 11,573.7 | 5,243.1 | - | 1,362.7 | 6,605.8 | ||
| Gross Profit | |||||||||
| Merchandise and services | 440.6 | 154.6 | 208.4 | 803.6 | 420.9 | - | 193.2 | 614.1 | |
| Road transportation fuel | 227.6 | 294.2 | 50.1 | 571.9 | 171.4 | - | 41.0 | 212.4 | |
| Other | 2.0 | 113.9 | 0.2 | 116.1 | 1.6 | - | 0.1 | 1.7 | |
| 670.2 | 562.7 | 258.7 | 1,491.6 | 593.9 | - | 234.3 | 828.2 | ||
| Total long-term assets (c) | 2,610.5 | 4,040.9 | 630.6 | 7,282.0 | 2,374.5 | - | 612.8 | 2,987.3 | |
| 40-week period ended February 3, 2013 |
40-week period ended January 29, 2012 |
||||||||
| United States |
Europe (a) | Canada | Total | United States |
Europe | Canada | Total | ||
| $ | $ | $ | $ | $ | $ | $ | $ | ||
| External customer revenues (b) | |||||||||
| Merchandise and services | 3,486.5 | 682.4 | 1,724.2 | 5,893.1 | 3,298.3 | - | 1,685.3 | 4,983.6 | |
| Road transportation fuel | 11,285.7 | 5,535.3 | 2,230.0 | 19,051.0 | 9,901.7 | - | 2,049.0 | 11,950.7 | |
| Other | 5.0 | 1,955.9 | 0.4 | 1,961.3 | 3.9 | - | 0.4 | 4.3 | |
| 14,777.2 | 8,173.6 | 3,954.6 | 26,905.4 | 13,203.9 | - | 3,734.7 | 16,938.6 | ||
| Gross Profit | |||||||||
| Merchandise and services | 1,159.1 | 276.4 | 581.7 | 2,017.2 | 1,088.7 | - | 563.4 | 1,652.1 | |
| Road transportation fuel | 593.7 | 559.1 | 126.9 | 1,279.7 | 473.1 | - | 112.3 | 585.4 | |
| Other | 5.0 | 215.7 | 0.4 | 221.1 | 3.9 | - | 0.4 | 4.3 | |
| 1,757.8 | 1,051.2 | 709.0 | 3,518.0 | 1,565.7 | - | 676.1 | 2,241.8 | ||
| (a) | Comprises Statoil Fuel & Retail. | ||||||||
| (b) | 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. | ||||||||
| (c) | Excluding financial instruments, deferred tax assets and post-employment benefit assets. | ||||||||
10. SUBSEQUENT EVENTS
Acquisition
On February 15, 2013, the Corporation purchased 29 company-operated stores located in Illinois, Missouri and Oklahoma, United States from Dickerson Petroleum Inc. The Corporation owns the land and buildings for 25 sites while it leases the land and owns the buildings for the other sites. The Corporation was also transferred road transportation fuel supply agreements for 27 sites, of which 26 are owned and operated by independent operators and one is leased by the Corporation.
Dividends
During its March 19, 2013 meeting, the Corporation's Board of Directors declared a quarterly dividend of CA$0.075 per share for the third quarter of fiscal 2013 to shareholders on record as at March 28, 2013, payable on April 11, 2013. This is an eligible dividend within the meaning of the Income Tax Act of Canada.
SOURCE: ALIMENTATION COUCHE-TARD INC.
Raymond Paré, Vice-President and Chief Financial Officer
Tel: (450) 662-6632 ext. 4607
[email protected]
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