Couche-Tard posts record earnings for the second quarter
Tue Nov 25, 11:46 AM
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- Second quarter revenues up 30.2% at $4.6 billon
- Motor fuel gross margin at 24.88 cents per gallon in the United-States
and at Cdn4.66 cents per litre in Canada
- Record quarterly net earnings of $97.6 million, or $0.49 per share on a
diluted basis
- Standard & Poor's credit rating agency raises the Company's long-term
corporate credit rating from BB to BB+
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TSX: ATD.A, ATD.B
LAVAL, QC, Nov. 25 /CNW Telbec/ - Alimentation Couche-Tard Inc. closes its second quarter with $4.6 billion revenues, an increase of $1.1 billion or 30.2%.
Net earnings for the 12-week period ended October 12, 2008, reached $97.6 million, or $0.49 per share on a diluted basis, significantly higher by $43.4 million compared to $54.2 million, or $0.27 per share on a diluted basis, last year. Contributing to the second quarter net earnings were the sharp increases in motor fuel gross margins in the United-States which fully offset the 10.6% decrease in same-store motor fuel volumes in the U.S. An part of this decrease, 1.7%, is attributable to the impact of fuel supply issues and temporary store closures in the wake of hurricanes, the remaining being attributable to the general economical conditions. On the demand side, for August only, as per the U.S. Federal Highway Administration (FHA) and considering the weighting of Couche-Tard's stores in each U.S. state, the decrease in distance travelled on U.S. highways in concerned states is 6.8%. Also in the U.S., the company's results were supported by the merchandise and service revenues contribution despite a slight decrease of 1.0% in same-store revenues due in part to the impact of the hurricanes and a gross margin of 32.3%.
In Canada, same-store merchandise revenues and motor fuel volume respectively increased by 1.4% and 2.2%. In addition, merchandise and service and motor fuel gross margins respectively posted at 34.4% and Cdn4.66 cents per litre.
"It's been quite a while since we last had the satisfaction to capitalize on motor fuel gross margins that turned to our advantage", declared Alain Bouchard, President and Chef Executive Officer. "Despite lower motor fuel volumes resulting from supply issues and temporary stores closures due to hurricanes compounded by the overall drop in demand, our U.S. divisions units recorded a good performance by deriving significant motor fuel gross margins. However, we remain prepared to deal with the significant challenge created by the difficult economic conditions although these same conditions could also allow us to realize acquisitions at potentially advantageous terms given our solid financial position", he concluded.
Highlights of the Second Quarter of Fiscal 2009
Growth of the Store Network
12-week period ended 24-week period ended
October 12, 2008 October 12, 2008
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Company- Affi- Company- Affi-
operated liated operated liated
stores stores Total stores stores Total
-----------------------------------------------------------
Number of
stores,
beginning
of period 4,339 1,056 5,395 4,068 1,051 5,119
Acquisitions 1 - 1 86 - 86
Openings /
construc-
tions /
additions(1) 27 17 44 228 36 264
Closures /
withdrawals (15) (9) (24) (30) (23) (53)
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Number of
stores, end
of period 4,352 1,064 5,416 4,352 1,064 5,416
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(1) Includes stores added to our network through the partnership
agreement with Irving Oil.
IMPACT Program
During the quarter, Couche-Tard also implemented its IMPACT program in 32 company-operated stores (76 since the beginning of the fiscal year). As a result, 58.8% of the company-operated stores have now been converted to the IMPACT program.
Partnership
In connection with its commercial partnership with Irving Oil put in place during the first quarter of 2009 and relating to 252 convenience stores, Couche-Tard has integrated seven Irving stores in Canada during the second quarter of fiscal 2009, bringing the integrated number of stores to 203 from the initial 252 (79 in Canada and 124 in the U.S.). The Company expects that the remaining stores included in the initial agreement will be integrated with its network before the end of fiscal year 2009. In addition, pursuant to the agreement, another 13 stores located in the United States were added to the initial 252 stores. These 13 stores were integrated with our network during the second quarter.
In addition to the agreement described above, Couche-Tard integrated another 13 Irving stores in the United States during the second quarter.
Corporate credit rating
Effective August 28, 2008, Standard & Poor's credit rating agency raised Couche-Tard's long-term corporate credit rating from BB to BB+. The upgrade reflects its resilient operating performance and credit metrics during the current difficult market conditions. As per Standard & Poor's, the revised rating is supported by the Company's strong market position in the North American convenience store segment, the solid performance of its merchandising programs and by management's proven track record of integrating acquisitions.
Dividends
On November 25, 2008, the Board of Directors declared a quarterly dividend of Cdn$0.035 per share for the second quarter of fiscal 2009 to shareholders on record as at December 4, 2008, and approved its payment for December 12, 2008. This is an eligible dividend within the meaning of the Income Tax Act of Canada.
Share repurchase program
1) Program effective August 8, 2007, which expired August 7, 2008
Pursuant to this share repurchase program, Couche-Tard repurchased 8,800 Class A multiple voting shares during the second quarter at an average cost of Cdn$10.91 and 1,904,100 Class B subordinate voting shares at an average cost of Cdn$10.83. There were no shares repurchased during the first quarter. Since the implementation of the program, the Company has repurchased a total of 2,125,400 Class A multiple voting shares at an average cost of Cdn$15.04 and 5,949,706 Class B subordinate voting shares at an average cost of Cdn$15.18.
2) Program effective August 8, 2008, expiring at the latest on August 7,
2009
During the second quarter and since the implementation of the program, the Company has repurchased a total of 3,000 Class A multiple voting shares at an average cost of Cdn$13.44 and 1,792,600 Class B subordinate voting shares at an average cost of Cdn$13.79. Security holders may obtain a copy of the notice filed with the Toronto Stock Exchange, without charge, by contacting the Corporate Secretary of Couche-Tard at 1600, St-Martin Blvd. East, Tower B, 2nd Floor, Laval, Québec, H7G 4S7.
Subsequent event
Effective November 7, 2008, the Company acquired, from Gate Petroleum Company, seven company-operated stores operating under the Gate banner in the Greensboro and Raleigh areas in North Carolina, United States.
Exchange Rate Data
The Company reports in US dollar given the predominance of its operations in the United States and its US dollar denominated debt.
The following table presents relevant exchange rates information based upon the Bank of Canada closing rates expressed as US dollars per Cdn$1.00:
12-week periods ended 24-week periods ended
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October October October October
12, 14, 12, 14,
2008 2007 2008 2007
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Average for period(1) 0.9458 0.9658 0.9679 0.9480
Period end 0.8469 1.0276 0.8469 1.0276
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(1) Calculated by taking the average of the closing exchange rates of
each day in the applicable period.
Selected Consolidated Financial Information
The following table highlights certain information regarding Couche-Tard's
operations for the 12-week and 24-week periods ended October 12, 2008, and
October 14, 2007:
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(In millions
of US dollars,
unless otherwise
stated) 12-week periods ended 24-week periods ended
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October October Varia- October October Varia-
12, 14, tion 12, 14, tion
2008 2007 % 2008 2007 %
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Statement of
Operations
Data:
Merchandise
and service
revenues(1):
United
States 899.6 835.7 7.6 1,757.4 1,674.2 5.0
Canada 445.4 425.3 4.7 889.6 849.4 4.7
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Total
merchandise
and service
revenues 1,345.0 1,261.0 6.7 2,647.0 2,523.6 4.9
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Motor fuel
revenues:
United
States 2,748.9 1,954.4 40.7 5,371.4 3,976.7 35.1
Canada 462.5 284.4 62.6 857.0 573.0 49.6
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Total motor
fuel
revenues 3,211.4 2,238.8 43.4 6,228.4 4,549.7 36.9
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Total
revenues 4,556.4 3,499.8 30.2 8,875.4 7,073.3 25.5
----------------------------------------------------------
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Merchandise
and service
gross
profit(1):
United
States 290.5 277.4 4.7 568.4 551.2 3.1
Canada 153.0 149.2 2.5 310.4 296.7 4.6
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Total
merchandise
and service
gross
profit 443.5 426.6 4.0 878.8 847.9 3.6
----------------------------------------------------------
Motor fuel
gross profit:
United
States 181.2 90.0 101.3 282.3 199.5 41.5
Canada 21.6 19.0 13.7 43.3 37.2 16.4
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Total motor
fuel gross
profit 202.8 109.0 86.1 325.6 236.7 37.6
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Total gross
profit 646.3 535.6 20.7 1,204.4 1,084.6 11.0
Operating,
selling,
administrative
and general
expenses 466.6 400.4 16.5 889.7 794.3 12.0
Depreciation
and amorti-
zation of
property and
equipment and
other assets 41.1 41.1 0.0 84.0 78.8 6.6
----------------------------------------------------------
Operating
income 138.6 94.1 47.3 230.7 211.5 9.1
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Net earnings 97.6 54.2 80.1 144.8 123.3 17.4
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Other Operating
Data:
Merchandise and
service gross
margin(1):
Consolidated 33.0% 33.8% (0.8) 33.2% 33.6% (0.4)
United States 32.3% 33.2% (0.9) 32.3% 32.9% (0.6)
Canada 34.4% 35.1% (0.7) 34.9% 34.9% 0.0
Growth
(decrease) of
same-store
merchandise
revenues(2)(3):
United States (1.0%) 4.2% (0.5%) 3.9%
Canada 1.4% 6.6% 0.3% 6.0%
Motor fuel
gross margin(3):
United States
(cents par
gallon): 24.88 13.04 90.8 20.47 14.83 38.0
Canada
(Cdn cents
per litre) 4.66 5.06 (7.9) 5.05 5.03 0.4
Volume of motor
fuel sold(4):
United States
(millions of
gallons) 753.6 723.2 4.2 1,429.2 1,408.4 1.5
Canada
(millions of
litres) 490.9 392.6 25.0 886.8 783.2 13.2
(Decrease)
growth of
same-store
motor fuel
volume (3):
United States (10.6%) 1.3% (7.7%) (0.2%)
Canada 2.2% 6.5% 2.5% 7.1%
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Per Share Data:
Basic net
earnings
per share
(dollars
per action) 0.50 0.27 85.2 0.74 0.61 21.3
Diluted net
earnings
per share
(dollars
per action) 0.49 0.26 88.5 0.73 0.59 23.7
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October April Varia-
12, 27, tion
2008 2008 %
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Balance Sheet
Data:
Total assets 3,323.4 3,320.6 2.8
Interest-
bearing debt 829.3 842.2 (12.9)
Shareholders'
equity 1,283.0 1,253.7 29.3
Ratios:
Net interest-
bearing debt/
total
capitalization(5) 0.34 :1 0.33 :1
Net interest-
bearing debt/
EBITDA(6) 1.26 :1(7) 1.29 :1
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1. Includes other revenues derived from franchise fees, royalties and
rebates on some purchases by franchisees and licensees.
2. Does not include services and other revenues (as described in
footnote 1 above). Growth in Canada is calculated based on Canadian
dollars.
3. For company-operated stores only.
4. Includes volume of franchisees and dealers.
5. 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 Canadian GAAP and
therefore may not be comparable to similar measures presented by other
public companies.
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 EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortization). It does not have a standardized meaning prescribed by
Canadian GAAP and therefore may not be comparable to similar measures
presented by other public companies.
7. This ratio was standardized over a period of one year. It includes the
results of the first quarter of the year ending April 26, 2009 as well
as the second, third and fourth quarters of the year ended April 27,
2008.
Operating Results
Revenues amounted to $4.6 billion in the second quarter of 2009, up $1.1 billion, for an increase of 30.2% compared to the second quarter of 2008, of which $707.5 million is related to the increase in motor fuel retail prices and $580.4 million is attributable to major acquisitions. These factors contributing to the increase were partially offset by a decrease in same-store motor fuel volume and a slight decrease in same-store merchandise revenues in the United States as well as a 2.1% depreciation of the Canadian dollar against its US counterpart.
For the first half-year, the growth in merchandise and services revenues was $1.8 billion or 25.5%, which boosted the revenues to $8.9 billion, of which $1.4 billion comes from higher motor fuel retail prices, $667.3 million is attributable to major acquisitions and $31.7 million come from the appreciation of the Canadian dollar. Once again, these positive items where partially offset by a drop in same-store motor fuel volumes and a slight decrease in same-store merchandise revenues in the United States. During the first two quarters, 80.3% of the Company's revenues came from the United States compared to 79.9% last year.
More specifically, the growth of merchandise and service revenues for the second quarter was $84.0 million, an increase of 6.7% compared to the same quarter last year, of which $97.7 million was generated by major acquisitions, partially offset by a $8.8 million depreciation of the Canadian dollar against its U.S. counterpart. Regarding internal growth, as measured by the growth in same-store merchandise revenues, it fell by 1.0% in the United States while increasing by 1.4% in Canada. The decrease in the U.S. illustrates the economic slowdown in some regions, especially in the southern part of the country. The situation was magnified by a significant rise of 34.4% in the average motor fuel retail price at the pump compared to the second quarter last year, leaving that much less margin on consumers' personal disposable income for in-store purchases. In-store sales in the U.S. were also affected by motor fuel supply issues and temporary store closures in some US-based business units in the wake of hurricanes. In the same manner, a tightened application of immigration laws in Arizona noticeably affected sales within the business unit whose stores had a strong concentration of Hispanic consumers. As for the Canadian market, business units had the benefit of more favourable economic conditions than the United States, allowing for growth in same-store merchandise revenues which were partially offset by the negative effect of smuggling on tobacco products.
In the first half-year, merchandise and services revenues rose by $123.4 million compared to the same period last year, of which $114.2 million stems from major acquisitions and $17.3 million from a strong Canadian dollar as compared to last year. These results were partially offset by a slight decrease of 0.5% in the U.S. same-store merchandise revenues.
Motor fuel revenues increased $972.6 million or 43.4% in the second quarter, of which 72.7% of the increase stems from a higher average retail price at the pump in the U.S. and Canadian company-operated stores, as shown in the following table, beginning with the third quarter of the year ended April 27, 2008:
Weighted
Quarter 3rd 4th 1st 2nd average
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52-week period ended
October 12, 2008
United States (US
dollars per gallon) 2.96 3.22 3.91 3.67 3.41
Canada (Cdn cents
per litre) 95.92 103.69 122.66 114.37 108.96
52-week period ended
October 14, 2007
United States (US
dollars per gallon) 2.26 2.52 2.98 2.73 2.61
Canada (Cdn cents
per litre) 80.27 90.11 98.49 92.35 89.85
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The major acquisitions contributed 131.7 million additional gallons in the second quarter, or $482.7 million in revenues, partially offset by the depreciation of the Canadian dollar against its U.S. counterpart, resulting in a decrease in revenues of $8.9 million. Same-store motor fuel volume fell 10.6% in the United States and rose 2.2% in Canada. In the United States, the negative performance is mainly due to poor economic conditions in the southern part of the country, to the overall decline in consumer demand resulting from the sharp increase in motor fuel retail prices at the pump as well as supply issues and temporary store closures in some US-based business units in the wake of hurricanes. For August only, as per the U.S. Federal Highway Administration (FHA) and considering the weighting of the Company's stores in each U.S. state, the decrease in distance travelled on U.S. highways in concerned states is 6.8%. As for the problems related to hurricanes, the impact is a decrease in same-store motor fuel volumes of approximately 1.7%. However, very high gross margins in these areas largely made up for the drop in volumes. In Canada, the growth is considered to be acceptable taking into account the 23.8% increase in motor fuel retail prices as compared to the same period last year.
For the first two quarters, motor fuel revenues rose $1.7 billion, up 36.9%. The increase in the motor fuel retail price at the pump accounts for $1.4 billion of the increase, while the strong Canadian dollar accounts for $14.4 million. The major acquisitions contributed an additional 149.7 million gallons or $553.1 million in sales. Finally, the same-store motor fuel volume dropped by 7.7% in the United States but rose by 2.5% in Canada, which adversely impacted overall motor fuel sales. This performance is generally driven by the same factors as those prevailing in the second quarter.
The merchandise and service gross margin fell to 33.0% in the second quarter of 2009 from 33.8% during the same period last year. In the United States, the gross margin was 32.3%, a decrease from 33.2% the previous year. This drop is due to three key factors: 1) normal increase in spoiled inventory resulting from the Company's strategy to boost the offer of fresh products in stores. This situation should stabilize itself once programs reach their maturity; 2) a pricing strategy in tune with market competitiveness and economic conditions within each market; 3) some major acquisitions that have a lower gross margin than the Company's existing network also had a negative impact on the gross margin in the U.S., but it should progressively improve following the implementation of Couche-Tard's integration strategies. In Canada, the margin fell to 34.4%, a 0.7% decrease due to factors similar to those influencing performance in the United States.
During the first half of the year, the merchandise and services gross margin was 33.2%. More specifically, it was 32.3% in the U.S., a decrease of 0.6% and 34.9% in Canada, which is similar to last year. The reasons outlined for the quarter chiefly explain the performance registered in the first half-year.
During the second quarter, the motor fuel gross margin for the company-operated stores in the United States increased markedly by 11.84 cents per gallon, from 13.04 cents per gallon last year to 24.88 cents per gallon this year. In Canada, the margin fell, reaching Cdn4.66 cents per litre compared with Cdn5.06 cents per litre in the second quarter of 2008. The motor fuel gross margin of the company-operated stores in the United States as well as the impact of expenses related to electronic payment modes for the last eight quarters, beginning with the third quarter of the year ended April 27, 2008 were as follows:
(US cents per gallon)
Weighted
Quarter 3rd 4th 1st 2nd average
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52-week period ended
October 12, 2008
Before deduction of
expenses related to
electronic payment
modes 14.38 10.02 15.55 24.88 16.25
Expenses related to
electronic payment
modes 3.98 4.02 5.07 4.94 4.47
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After deduction of
expenses related to
electronic payment
modes 10.40 6.00 10.48 19.94 11.78
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52-week period ended
October 14, 2007
Before deduction of
expenses related to
electronic payment
modes 13.19 13.12 16.73 13.04 13.97
Expenses related to
electronic payment
modes 3.12 3.59 4.15 3.82 3.64
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After deduction of
expenses related to
electronic payment
modes 10.07 9.53 12.58 9.22 10.33
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As for the 24-week period ending October 12, 2008, the motor fuel gross margin of company-operated stores in the United States stood at 20.47 cents per gallon, compared to 14.83 cents per gallon during the first two quarters of last year. In Canada, the margin rose slightly to 5.05 cents per litre in the first half of the year compared to 5.03 cents per litre last year.
Operating, selling, administrative and general expenses, for the second quarter and the first half-year, rose 16.5% and 12.0%, respectively, compared with last year. For the second quarter, higher expenses related to major acquisitions, including Irving stores, account for 10.6% of the increase, the rise in electronic payment modes expenses accounts for 1.5%, while a 1.1% increase is due to the combined impact of the conversion expenses of certain motor fuel equipment in order to comply with ethanol distribution standards and of the increase in rental charges. The remaining difference of 3.3% is chiefly due to the normal increase of the operating expenses mainly caused by inflation. During the first half of the year, these same elements respectively account for 6.1%, 1.6% and 0.9% of the variation. The remaining variance of 3.4% for the first half of the year is also due to a normal increase in operating expenses caused by inflation.
Earnings before interests, taxes, depreciation and amortization (EBITDA)(1) was $179.7 million for the second quarter and $314.7 million for the first half-year, up 32.9% and 8.4% respectively compared with last year. Major acquisitions contributed to EBITDA for an amount of $9.9 million during the quarter and $11.9 million during the half-year.
For the quarter, depreciation expense remained stable because the additional depreciation from investments made in fiscal 2008 and in the first half-year of 2009 through acquisitions and the ongoing implementation of the IMPACT program in Couche-Tard's network was offset by the impact of sale and leaseback transactions completed during fiscal 2008.
For the second quarter, financial expenses decreased by $4.5 million compared with last year while they decreased by $9.7 million during the first half-year. These decreases are due to the combined decrease in the average borrowings and interest rates.
Income tax rate for the second quarter of 2009 is 24.5%, down from the 32.5% posted last year. This decrease comes in great part from the corporate reorganization that the Company put in place at the beginning of the quarter which resulted in a non-recurring income tax expense of $8.3 million during the first quarter. For the first half-year, the rate is 31.6%. As mentioned in the first quarter, the benefits of the reorganization should continue to positively impact the income tax rate during the next quarters.
Couche-Tard closed the second quarter of fiscal 2009 with net earnings of $97.6 million, which equals $0.50 per share (or $0.49 per share on a diluted basis), compared with $54.2 million last year, an increase of $43.4 million or 80.1%. As for the first half-year net earnings were at $144.8 million compared to $123.3 million last year.
Liquidity and Capital resources
The Company's sources of liquidity remain unchanged compared with the fiscal year ended April 27, 2008, with the exception of its new term revolving unsecured operating credit of a maximum amount of $310.0 million.
With respect to the capital expenditures and the acquisitions that Couche-Tard carried out in the first half-year, they were financed using available cash flow. The Company expects that the cash available from operations together with borrowings available under its revolving unsecured credit facilities, as well as potential sale and leaseback transactions, will meet its liquidity needs in the foreseeable future.
Its credit facilities have not changed with respect to their terms of use since April 27, 2008. As at October 12, 2008, $478.1 million of the Company's term revolving unsecured operating credits had been used ($440.0 million for the US dollars portion and $38.1 million for the Canadian dollars portion) and the weighted average effective interest rate was 4.40% for the US dollar portion and 3.90% for the Canadian dollars portion. The Company also has a $333.9 million subordinated unsecured debt (nominal value amounting to $350.0 million, net of attributable financing costs of $10.8 million, adjusted for the fair value of the interest rate swaps designated as a fair value hedge of the debt) bearing interest at an effective rate of 8.23% (6.56% taking into account the effect of the interest rate swaps) and maturing in 2013. In addition, standby letters of credit in the amount of Cdn$0.8 million and $17.9 million were outstanding as at October 12, 2008.
Selected Consolidated Cash Flow Information
(In millions
of US
dollars) 12-week periods ended 24-week periods ended
-----------------------------------------------------------
October October Vari- October October Vari-
12, 14, ation 12, 14, ation
2008 2007 $ 2008 2007 $
-----------------------------------------------------------
Operating
activities
Cash flows(1) 146.2 97.3 48.9 242.0 203.6 38.4
Other 2.6 25.8 (23.2) (35.0) 7.3 (42.3)
-----------------------------------------------------------
Net cash
provided by
operating
activities 148.8 123.1 25.7 207.0 210.9 (3.9)
-----------------------------------------------------------
Investing
activities
Business
acquisitions (1.1) (3.7) 2.6 (66.2) (57.5) (8.7)
Purchase of
property and
equipment,
net of
proceeds
from the
disposal of
property and
equipment (50.6) (52.7) 2.1 (83.2) (87.4) 4.2
Proceeds
from sale
and
leaseback
transactions 2.6 21.8 (19.2) 2.6 32.5 (29.9)
Other (2.8) (0.3) (2.5) (5.7) (1.3) (4.4)
-----------------------------------------------------------
Net cash used
in investing
activities (51.9) (34.9) (17.0) (152.5) (113.7) (38.8)
-----------------------------------------------------------
Financing
activities
(Decrease)
increase in
long-term
borrowing (46.7) (0.5) (46.2) (17.6) 11.2 (28.8)
Issuance of
shares - 0.4 (0.4) - 4.5 (4.5)
Share
repurchase (43.8) (7.9) (35.9) (43.8) (7.9) (35.9)
Dividends (13.3) (11.7) (1.6) (13.3) (11.7) (1.6)
-----------------------------------------------------------
Net cash used
in financing
activities (103.6) (19.7) (84.1) (74.7) (3.9) (70.8)
-----------------------------------------------------------
-----------------------------------------------------------
Company
credit rating
Standard and
Poor's BB+ BB BB+ BB
Moody's Ba1 Ba1 Ba1 Ba1
-------------------------------------------------------------------------
(1) These cash flows are presented for information purposes only and
represent a performance measure used especially in financial circles.
They represent cash flows from net earnings, plus depreciation and
amortization, loss on disposal of assets and future income taxes.
They do not have a standardized meaning prescribed by Canadian GAAP
and therefore may not be comparable to similar measures presented by
other public companies.
Operating activities
During the second quarter of fiscal 2009, net cash from operating activities reached $148.8 million, up $25.7 million from the second quarter of fiscal 2008. This increase is mainly due to higher net earnings during the second quarter of fiscal 2009 compared to last year, partially offset by changes in the working capital, including a decrease in accounts receivable, inventories, as well as in accounts payable and accrued liabilities.
Investing activities
During the second quarter, the investments were primarily related to the replacement of equipment in some stores to enhance the offering of products and services, the addition of new stores as well as the ongoing implementation of the IMPACT program throughout the Company's network.
Financing activities
During the second quarter, the decrease in long term debt amounted to $46.7 million. In addition, Couche-Tard repurchased shares for a total amount of $43.8 million.
Financial Position
As shown by the 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.
The total consolidated assets amounted to $3.3 billion as at October 12, 2008, virtually the same amount compared to April 27, 2008.
Shareholders' equity amounted to $1,283.3 million as at October 12, 2008, up $29.3 million compared to April 27, 2008.
Summary of Quarterly Results
(In millions
of US dollars
except for
per share 24-week
data, period ended 52-week period ended
unaudited) October 12, 2008 April 27, 2008
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Quarter 2nd 1st 4th 3rd 2nd 1st
Weeks 12 weeks 12 weeks 12 weeks 16 weeks 12 weeks 12 weeks
-----------------------------------------------------------
Revenues 4,556.4 4,319.0 3,705.8 4,590.9 3,499.8 3,573.5
-----------------------------------------------------------
Income
before
deprecia-
tion and
amorti-
zation of
property
and
equipment
and other
assets,
financial
expenses
and income
taxes 179.7 135.0 63.7 130.6 135.2 155.1
Depreciation
and amorti-
zation of
property and
equipment
and other
assets 41.1 42.9 39.9 53.8 41.1 37.7
-----------------------------------------------------------
Operating
income 138.6 92.1 23.8 76.8 94.1 117.4
-----------------------------------------------------------
Financial
expenses 9.3 9.8 9.1 16.7 13.8 15.0
-----------------------------------------------------------
Net earnings 97.6 47.2 15.5 50.5 54.2 69.1
-----------------------------------------------------------
-----------------------------------------------------------
Net earnings
per share
Basic $0.50 $0.24 $0.08 $0.25 $0.27 $0.34
Diluted $0.49 $0.24 $0.08 $0.24 $0.26 $0.33
-------------------------------------------------------------------------
(In millions
of US dollars
except for Extract from
per share the 52-week
data, period ended
unaudited) April 29, 2007
-------------------------------------------------------------------------
Quarter 4th 3rd
Weeks 13 weeks 16 weeks
-----------------------------------------------------------
Revenues 2,972.6 3,498.0
-----------------------------------------------------------
Income
before
deprecia-
tion and
amorti-
zation of
property
and
equipment
and other
assets,
financial
expenses
and income
taxes 99.0 125.0
Depreciation
and amorti-
zation of
property and
equipment
and other
assets 34.4 43.3
-----------------------------------------------------------
Operating
income 64.6 81.7
-----------------------------------------------------------
Financial
expenses 14.4 16.6
-----------------------------------------------------------
Net earnings 33.4 43.7
-----------------------------------------------------------
-----------------------------------------------------------
Net earnings
per share
Basic $0.17 $0.22
Diluted $0.16 $0.21
-------------------------------------------------------------------------
Outlook
In the course of fiscal 2009, the Company will pursue its investments with caution in order to, amongst other things, deploy its IMPACT program. The Company also intends to attempt to realize acquisitions by seizing opportunities arising from the economic climate and attractive conditions to secure cash. In view of current accessibility conditions to capital market and debt, Couche-Tard believes to be in good position to create value.
While Couche-Tard is aware that its results depend on several external factors, including the exchange rate effect and the motor fuel net margin, the Company believes that its profitability should increase during the current fiscal year.
Finally, in line with its business model, Couche-Tard will 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 growing clientele.
Profile
Alimentation Couche-Tard Inc. is the leader in the Canadian convenience store industry. In North America, Couche-Tard is the second largest independent convenience store operator (whether integrated with a petroleum company or not) in terms of number of stores. Couche-Tard currently operates a network of 5,416 convenience stores, 3,574 of which include motor fuel dispensing, located in 11 large geographic markets, including eight in the United States covering 33 states and three in Canada covering ten provinces. More than 46,000 people are employed throughout Couche-Tard's retail convenience network and service centers.
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.
Conference Call on November 25, 2008 at 2:30 P.M. (Montreal Time)
-----------------------------------------------------------------
Financial analysts and investors who wish to participate in the conference call on Couche-Tard's results can dial 1-800-733-7571 a few minutes before the start of the call. For those unable to participate, a taped re-broadcast will be available November 25, 2008 from 4:30 p.m. until December 2, 2008 at 11:59 p.m., by dialing 1-877-289-8525 - access code 21288369 followed by the #key. Also, a webcast of the conference call will be available on the website of the Company for a period of 90 days after the conference call. Members of the media and other interested parties are invited to listen in.
-----------------------
(1) Earnings before interests, taxes, depreciation and amortization is
not a performance measure defined by Canadian GAAP, but management,
investors and analysts use this measure to evaluate the Company's
operating and financial performance. Note that the Company's
definition of this measure may differ from the ones used by other
companies.
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions of US dollars, except per share amounts, unaudited)
12 weeks 24 weeks
For the periods ended October 12, October 14, October 12, October 14,
2008 2007 2008 2007
-------------------------------------------------------------------------
$ $ $ $
Revenues 4,556.4 3,499.8 8,875.4 7,073.3
Cost of sales 3,910.1 2,964.2 7,671.0 5,988.7
-------------------------------------------------------------------------
Gross profit 646.3 535.6 1,204.4 1,084.6
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Operating, selling,
administrative and
general expenses 466.6 400.4 889.7 794.3
Depreciation and
amortization of
property and equipment
and other assets 41.1 41.1 84.0 78.8
-------------------------------------------------------------------------
507.7 441.5 973.7 873.1
-------------------------------------------------------------------------
Operating income 138.6 94.1 230.7 211.5
Financial expenses 9.3 13.8 19.1 28.8
-------------------------------------------------------------------------
Earnings before income
taxes 129.3 80.3 211.6 182.7
Income taxes (Note 9) 31.7 26.1 66.8 59.4
-------------------------------------------------------------------------
Net earnings 97.6 54.2 144.8 123.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share
(Note 5)
Basic 0.50 0.27 0.74 0.61
Diluted 0.49 0.26 0.73 0.59
Weighted average number
of shares (in thousands) 194,530 202,785 195,628 202,692
Weighted average number
of shares - diluted
(in thousands) 198,265 207,978 199,474 208,074
Number of shares
outstanding at end of
period (in thousands) 193,023 202,471 193,023 202,471
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of US dollars, unaudited)
For the periods ended 12 weeks 24 weeks
October 12, October 14, October 12, October 14,
2008 2007 2008 2007
-------------------------------------------------------------------------
$ $ $ $
Net earnings 97.6 54.2 144.8 123.3
Other comprehensive income
Changes in cumulative
translation
adjustments (1) (69.9) 30.9 (67.7) 71.2
Net change in unrealized
gains on
available-for-sale
financial assets - - - 0.1
-------------------------------------------------------------------------
Other comprehensive income (69.9) 30.9 (67.7) 71.3
-------------------------------------------------------------------------
Comprehensive income 27.7 85.1 77.1 194.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the 12 and 24-week periods ended October 12, 2008, these amounts
include net loss of $134.5 and $126.1, respectively, (net gain of
$63.7 and $117.8, respectively, for the 12 and 24-week periods ended
October 14, 2007) arising from the translation of US dollar
denominated long-term debt designated as a foreign exchange hedge of
the Company's net investment in its U.S. self-sustaining operations.
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CAPITAL STOCK
(in millions of US dollars, unaudited)
For the 24-week periods ended October 12, October 14,
2008 2007
-------------------------------------------------------------------------
$ $
Balance, beginning of period 348.8 352.3
Stock options exercised for cash - 4.5
Fair value of stock options exercised - 1.7
Carrying value of Class A multiple voting
shares and Class B subordinate voting shares
repurchased and cancelled (8.8) (0.9)
-------------------------------------------------------------------------
Balance, end of period 340.0 357.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CONTRIBUTED SURPLUS
(in millions of US dollars, unaudited)
For the 24-week periods ended October 12, October 14,
2008 2007
-------------------------------------------------------------------------
$ $
Balance, beginning of period 15.6 13.4
Stock-based compensation expense (Note 7) 1.5 2.0
Fair value of stock options exercised - (1.7)
-------------------------------------------------------------------------
Balance, end of period 17.1 13.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in millions of US dollars, unaudited)
For the 24-week periods ended October 12, October 14,
2008 2007
-------------------------------------------------------------------------
$ $
Balance, beginning of period 775.0 681.9
Impact of changes in accounting policies
(Note 2) - 0.9
-------------------------------------------------------------------------
Balance, beginning of period, as restated 775.0 682.8
Net earnings 144.8 123.3
-------------------------------------------------------------------------
919.8 806.1
Dividends (13.3) (11.7)
Excess of purchase price over carrying value
of Class A multiple voting shares and Class B
subordinate voting shares repurchased and
cancelled (27.2) (5.2)
-------------------------------------------------------------------------
Balance, end of period 879.3 789.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
(in millions of US dollars, unaudited)
For the 24-week periods ended October 12, October 14,
2008 2007
-------------------------------------------------------------------------
$ $
Balance, beginning of period 114.3 97.8
Impact of changes in accounting policies (Note 2) - 0.4
-------------------------------------------------------------------------
Balance, beginning of period, as restated 114.3 98.2
Other comprehensive income (67.7) 71.3
-------------------------------------------------------------------------
Balance, end of period 46.6 169.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of US dollars, unaudited)
For the periods ended 12 weeks 24 weeks
October 12, October 14, October 12, October 14,
2008 2007 2008 2007
-------------------------------------------------------------------------
$ $ $ $
Operating activities
Net earnings 97.6 54.2 144.8 123.3
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 36.4 36.7 74.5 69.7
Future income taxes 9.6 8.4 19.2 13.8
Loss (gain) on disposal
of property and equipment
and other assets 2.6 (2.0) 3.5 (3.2)
Deferred credits 1.8 2.8 4.1 7.7
Other 2.8 6.2 7.2 9.6
Changes in non-cash
working capital (2.0) 16.8 (46.3) (10.0)
-------------------------------------------------------------------------
Net cash provided by
operating activities 148.8 123.1 207.0 210.9
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Investing activities
Purchase of property
and equipment (53.1) (58.9) (88.1) (98.5)
Business acquisitions
(Note 4) (1.1) (3.7) (66.2) (57.5)
Increase in other assets (2.8) (0.3) (5.7) (1.3)
Proceeds from disposal
of property and equipment
and other assets 2.5 6.2 4.9 11.1
Proceeds from sale and
leaseback transactions 2.6 21.8 2.6 32.5
-------------------------------------------------------------------------
Net cash used in investing
activities (51.9) (34.9) (152.5) (113.7)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Financing activities
Net (decrease) increase
in long-term debt (46.7) (0.5) (17.6) 11.2
Repurchase of Class A
multiple voting shares
and Class B subordinated
voting shares (43.8) (7.9) (43.8) (7.9)
Dividends paid (13.3) (11.7) (13.3) (11.7)
Issuance of shares - 0.4 - 4.5
-------------------------------------------------------------------------
Net cash provided by
financing activities (103.8) (19.7) (74.7) (3.9)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Effect of exchange rate
fluctuations on cash and
cash equivalents (8.7) 6.5 (7.9) 11.3
-------------------------------------------------------------------------
Net (decrease) increase in
cash and cash equivalents (15.6) 75.0 (28.1) 104.6
Cash and cash equivalents,
beginning of period 203.5 171.3 216.0 141.7
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period 187.9 246.3 187.9 246.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental information:
Interest paid 4.9 7.9 19.2 30.8
Income taxes paid 21.6 7.6 46.5 19.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
(in millions of US dollars)
As at As at
October 12, April 27,
2008 2008
(unaudited)
-------------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 187.9 216.0
Accounts receivable 269.9 251.7
Inventories 435.5 444.5
Prepaid expenses 19.7 8.3
Future income taxes 23.3 24.7
-------------------------------------------------------------------------
936.3 945.2
Property and equipment 1,754.0 1,748.3
Goodwill 389.7 402.6
Trademarks and licenses 172.1 170.3
Deferred charges 11.6 13.8
Other assets 42.9 39.5
Future income taxes 16.8 0.9
-------------------------------------------------------------------------
3,323.4 3,320.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 805.3 842.7
Income taxes payable 35.8 18.6
Current portion of long-term debt 2.9 1.2
-------------------------------------------------------------------------
844.0 862.5
Long-term debt 826.4 841.0
Deferred credits and other liabilities 258.1 253.8
Future income taxes 111.9 109.6
-------------------------------------------------------------------------
2,040.4 2,066.9
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Shareholders' equity
Capital stock 340.0 348.8
Contributed surplus 17.1 15.6
Retained earnings 879.3 775.0
Accumulated other comprehensive income 46.6 114.3
-------------------------------------------------------------------------
1,283.0 1,253.7
-------------------------------------------------------------------------
3,323.4 3,320.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US dollars, except per share and stock option data,
unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION
The unaudited interim consolidated financial statements have been prepared
by the Company in accordance with Canadian generally accepted accounting
principles (Canadian GAAP) and have not been subject to a review engagement by
the Company's external auditors. These consolidated 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 27,
2008, with the exception of the accounting changes described in Note 2 below.
The unaudited interim consolidated financial statements do not include all the
information for complete financial statements and should be read in
conjunction with the audited annual consolidated financial statements and
notes thereto in the Company's 2008 Annual Report (the 2008 Annual Report).
The results of operations for the interim periods presented do not necessarily
reflect results expected for the full year.
The Company's business follows a seasonal pattern. The busiest period is
the first half-year of each fiscal year, which includes summer's sales.
2. ACCOUNTING CHANGES
2009
Inventories
On April 28, 2008, the Company adopted the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3031, "Inventories", which replaces
Section 3030 of the same name. The new section provides guidance on the basis
and method of measurement of inventories and allows for reversal of previous
write-downs. The section also establishes new standards on disclosure of
accounting policies used, carrying amounts, amounts recognized as an expense,
write-downs and the amount of any reversal of any write-downs. This new
standard aligns accounting for inventories under Canadian GAAP with
International Financial Reporting Standards (IFRS).
The adoption of this new Section had no material impact on the Company's
consolidated financial results.
2008
Financial Instruments - Recognition and Measurement
On April 30, 2007, the Company adopted CICA Handbook Section 3855
"Financial Instruments - Recognition and Measurement", which establishes
standards for recognition and measurement of financial assets, financial
liabilities and non-financial derivatives. This new standard must be
implemented retroactively without restatement of prior periods financial
statements.
The Company made the following classifications:
Classification
Financial assets Subsequent of gains
and liabilities Classification measurement(1) and losses
Cash and cash Held-for-trading Fair value Net earnings
equivalents
Accounts receivable Loans and Amortized cost Net earnings
receivables
Investments in Available-for- Fair value Other
publicly-traded sale comprehensive
securities income
Bank indebtedness Other financial Amortized cost Net earnings
and long-term debt liabilities
Accounts payable Other financial Amortized cost Net earnings
and accrued liabilities
liabilities
(1) Initial measurement of all financial assets and liabilities is at
fair value.
As of April 30, 2007, the impact of the implementation of the
classifications described above is a $0.5 increase in Other assets, a $0.1
increase in the long-term Future income tax liability and a $0.4 increase in
Accumulated other comprehensive income. These adjustments relate to an
investment in publicly-traded securities held by the Company. For the 24-week
period ended October 14, 2007, the impact is an increase of $0.1 in Other
comprehensive income.
Section 3855 also requires that transaction costs be i) recognized in
income when incurred or ii) added to or deducted from the amount of the
financial asset or liability to which they are directly attributable when the
asset or liability is not classified as held-for-trading. The Company has
deferred financing costs attributable to its Subordinated unsecured debt which
were previously deferred and amortized over the term of the debt.
Consequently, the Company elected to apply the accounting policy that consists
of deducting financing costs from the amount of the financial liability to
which they are directly attributable. As of April 30, 2007, this change
resulted in a decrease of $11.6 in Deferred charges, of $13.1 in Long-term
debt, in an increase of $0.6 in the long-term Future income tax liability and
of $0.9 in Retained earnings. For the 24-week period ended October 14, 2007,
the impact is not significant.
Hedges
Effective April 30, 2007, the Company adopted CICA Handbook Section 3865
"Hedges", which establishes circumstances under which hedge accounting may be
applied. The purpose of hedge accounting is to ensure that gains, losses,
revenues and expenses related to a hedging item and to the hedged item are
recognized in net income in the same period.
As described in Notes 4 and 23 of the consolidated financial statements
included in the 2008 Annual Report, the Company uses interest rate swaps as
part of its program for managing the interest rate of its Subordinated
unsecured debt. These interest rate swaps have been designated and documented
as an effective fair value hedge of the Subordinated unsecured debt. Under the
new standard, changes in the fair value of the swaps and the debt are
recognized in net income, counterbalancing each other, with the exception of
any ineffective portion of the hedging relationship. On the balance sheet, the
fair value of the interest swaps is recorded in Other assets if it is
favourable for the Company or in Deferred credits and other liabilities if it
is unfavourable for the Company.
The Company also designates its entire US dollars denominated long-term
debt as a foreign exchange hedge of its net investment in its U.S.
self-sustaining subsidiaries. Accordingly, corresponding foreign exchange
gains and losses are recorded in Accumulated other comprehensive income in the
Shareholders' equity to offset the foreign currency translation adjustments on
the investments.
As of April 30, 2007, these changes resulted in an increase of $14.9 in
Deferred credits other long-term liabilities and in a decrease of $14.9 in
Long-term debt.
Comprehensive Income
On April 30, 2007, the Company adopted CICA Handbook Section 1530
"Comprehensive Income". This Section introduces a new financial statement
which presents the change in equity of an enterprise from transactions and
other events and circumstances from non-owner sources. These transactions
include net changes in unrealized gains and losses on translating Canadian and
corporate operations into the reporting currency as well as unrealized gains
and losses related to changes in the fair value of certain financial
instruments that are not recorded in net earnings. These two types of
transactions are recorded in Other comprehensive income.
The result of the implementation of this new standard is that, beginning
in the first quarter of fiscal 2008, the Company includes, in its consolidated
financial statements, a consolidated statement of comprehensive income while
the cumulative net changes in other comprehensive income are included in
Accumulated other comprehensive income, which is presented as a new category
of Shareholders' equity. Consequently, an amount of $97.8 presented in
cumulative translation adjustments as at April 29, 2007 has been reclassified
to Accumulated other comprehensive income.
Disclosure and presentation
On April 30, 2007, the Company adopted CICA Handbook Section 3861
"Financial Instruments - Disclosure and Presentation", which replaces Section
3860, of the same name. Section 3861 establishes standards for presentation of
financial instruments and non-financial derivatives, and identifies the
information that should be disclosed about them.
Equity
Effective April 30, 2007, the Company adopted CICA Handbook Section 3251
"Equity", which replaces Section 3250 "Surplus". This new section establishes
standards for the presentation of equity and changes in equity during the
reporting period and requires the Company to present separately equity
components and changes in equity arising from i) net earnings; ii) other
comprehensive income; iii) other changes in retained earnings; iv) changes in
contributed surplus; v) changes in share capital; and vi) changes in reserves.
3. LONG TERM DEBT
On June 13, 2008, the Company entered into a new credit agreement
consisting of a revolving unsecured credit facility of a maximum amount of
$310.0 with an initial maturity, terms and conditions similar to those of the
other facility the Company already had as at April 27, 2008 as described in
Note 17a) presented in the 2008 Annual Report.
4. BUSINESS ACQUISITIONS
Effective April 29, 2008, the Company purchased 15 company-operated stores
from Speedway Superamerica LLC. The acquired stores operate under the Speedway
banner in central Illinois, United States.
Effective July 8, 2008, the Company purchased 70 company-operated stores
from Spirit Energy. Of these 70 stores, 11 are owned and 59 are leased sites.
The acquired stores operate under the Convenient Food Mart banner in the St.
Louis Missouri area and nearby central Illinois area.
During the quarter, the Company purchased one store through one distinct
transaction.
These acquisitions were settled for a total cash consideration of $66.2,
including direct acquisition costs. The preliminary allocations of the
purchase price of the acquisitions were established based on available
information and on the basis of preliminary evaluations and assumptions
management believes to be reasonable. Since the Company has not completed its
fair value assessment of the net assets acquired for all transactions, the
preliminary allocations are subject to adjustments to the fair value of the
assets and liabilities until the process is completed. The preliminary
allocations are based on the estimated fair values on the dates of
acquisition:
$
Tangible assets acquired
Inventories 11.0
Property and equipment 44.4
Other assets 0.5
-------------------------------------------------------------------------
Total tangible assets 55.9
-------------------------------------------------------------------------
Liabilities assumed
Accounts payable and accrued liabilities 1.5
Deferred credits and other liabilities 1.3
-------------------------------------------------------------------------
Total liabilities 2.8
-------------------------------------------------------------------------
Net tangible assets acquired 53.1
-------------------------------------------------------------------------
Goodwill 13.1
-------------------------------------------------------------------------
Total consideration paid, including direct acquisition costs 66.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company expects that the goodwill related to these transactions will
be deductible for tax purposes.
5. NET EARNINGS PER SHARE
12-week period 12-week period
ended October 12, 2008 ended October 14, 2007
--------------------------------------------------------------
Weighted Weighted
average average
number of Net number of Net
shares earnings shares earnings
Net (in thou- per Net (in thou- per
earnings sands) share earnings sands) share
--------------------------------------------------------------
$ $ $ $
Basic net
earnings
attributable
to Class A
and B
shareholders 97.6 194,530 0.50 54.2 202,785 0.27
Dilutive
effect of
stock
options 3,735 (0.01) 5,193 (0.01)
--------------------------------------------------------------
Diluted net
earnings
available
for Class A
and B
shareholders 97.6 198,265 0.49 54.2 207,978 0.26
--------------------------------------------------------------
--------------------------------------------------------------
24-week period 24-week period
ended October 12, 2008 ended October 14, 2007
--------------------------------------------------------------
Weighted Weighted
average average
number of Net number of Net
shares earnings shares earnings
Net (in thou- per Net (in thou- per
earnings sands) share earnings sands) share
--------------------------------------------------------------
$ $ $ $
Basic net
earnings
attribu-
table to
Class A
and B
shareholders 144.8 195,628 0.74 123.3 202,692 0.61
Dilutive
effect of
stock
options 3,846 (0.01) 5,382 (0.02)
--------------------------------------------------------------
Diluted net
earnings
available
for Class A
and B
shareholders 144.8 199,474 0.73 123.3 208,074 0.59
--------------------------------------------------------------
--------------------------------------------------------------
A total of 1,682,795 stock options are excluded from the calculation of
the diluted net earnings per share due to their antidilutive effect for the 12
and 24-weeks periods ended October 12, 2008. There are 591,525 stocks options
excluded from the calculation for the 12 and 24-weeks periods ended October
14, 2007.
6. CAPITAL STOCK
As at October 12, 2008, the Company has 53,727,412 (56,169,912 as at
October 14, 2007) issued and outstanding Class A multiple voting shares each
comprising ten votes per share and 139,295,236 (146,301,034 as at October 14,
2007) outstanding Class B subordinate voting shares each comprising one vote
per share.
7. STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
As at October 12, 2008, 9,083,695 stock options for the purchase of Class
B subordinate voting shares are outstanding (8,758,515 as at October 14,
2007). These stock options can be gradually exercised at various dates until
September 29, 2018, at an exercise price varying from Cdn$2.38 to Cdn$25.71.
Six series of stock options totaling 209,500 stock options at exercise prices
ranging from Cdn$13.45 to Cdn$15.44 were granted since the beginning of the
fiscal year.
For the 12 and 24-week periods ended October 12, 2008, the stock-based
compensation costs amount to $0.7 and $1.5, respectively. For the 12 and
24-week periods ended October 14, 2007, the stock-based compensation costs
amount to $0.9 and $2.0, respectively.
The fair value of stock options granted is estimated at the grant date
using the Black & Scholes option pricing model on the basis of the following
weighted average assumptions for the stock options granted during the period:
- risk-free interest rate of 3.41%;
- expected life of 8 years;
- expected volatility of 32.0%;
- expected quarterly dividend of Cdn$0.035 per share.
The weighted average fair value of stock options granted since the
beginning of the year is Cdn$5.44 (Cdn$10.06 as at October 14, 2007). A
description of the Company's stock-based compensation plan is included in Note
20 of the consolidated financial statements presented in the 2008 Annual
Report.
8. EMPLOYEE FUTURE BENEFITS
For the 12 and 24-week periods ended October 12, 2008, the Company's total
net pension expense included in its consolidated statement of earnings amounts
to $1.4 and $2.9, respectively. For the corresponding 12 and 24-week periods
ended October 14, 2007, the expense is $1.4 and $2.8. The Company's pension
plans are described in Note 21 of the consolidated financial statements
presented in the 2008 Annual Report.
9. INCOME TAXES
In the first quarter of fiscal 2009, the Company elaborated a corporate
reorganization which took effect on July 31, 2008. Accordingly, a $8.3 income
tax expense has been recognized during the first quarter while the benefits
should be recorded during the subsequent periods of the current fiscal year
and should also have a positive effect on the upcoming fiscal years.
10. SEGMENTED INFORMATION
The Company operates convenience stores in the United States and in
Canada. It essentially operates in one reportable segment, the sale of goods
for immediate consumption and motor fuel through corporate stores or franchise
operations. It operates a convenience store chain under several banners,
including Couche-Tard, Mac's and Circle K. Revenues from outside sources
mainly fall into two categories: merchandise and services and motor fuel.
The following table provides the information on the principal revenue
classes as well as geographic information:
12-week period 12-week period
ended October 12, 2008 ended October 14, 2007
--------------------------------------------------------------
United United
States Canada Total States Canada Total
--------------------------------------------------------------
$ $ $ $ $ $
External
customer
revenues (a)
Merchandise
and services 899.6 445.4 1,345.0 835.7 425.3 1,261.0
Motor fuel 2,748.9 462.5 3,211.4 1,954.4 284.4 2,238.8
--------------------------------------------------------------
3,648.5 907.9 4,556.4 2,790.1 709.7 3,499.8
--------------------------------------------------------------
--------------------------------------------------------------
Gross Profit
Merchandise
and services 290.5 153.0 443.5 277.4 149.2 426.6
Motor fuel 181.2 21.6 202.8 90.0 19.0 109.0
--------------------------------------------------------------
471.7 174.6 646.3 367.4 168.2 535.6
--------------------------------------------------------------
--------------------------------------------------------------
Property and
equipment
and
goodwill (a) 1,699.9 443.8 2,143.7 1,626.8 530.4 2,157.2
--------------------------------------------------------------
--------------------------------------------------------------
24-week period 24-week period
ended October 12, 2008 ended October 14, 2007
--------------------------------------------------------------
United United
States Canada Total States Canada Total
--------------------------------------------------------------
$ $ $ $ $ $
External
customer
revenues (a)
Merchandise
and services 1,757.4 889.6 2,647.0 1,674.2 849.4 2,523.6
Motor fuel 5,371.4 857.0 6,228.4 3,976.7 573.0 4,549.7
--------------------------------------------------------------
7,128.8 1,746.6 8,875.4 5,650.9 1,422.4 7,073.3
--------------------------------------------------------------
--------------------------------------------------------------
Gross Profit
Merchandise
and services 568.4 310.4 878.8 551.2 296.7 847.9
Motor fuel 282.3 43.3 325.6 199.5 37.2 236.7
--------------------------------------------------------------
850.7 353.7 1,204.4 750.7 333.9 1,084.6
--------------------------------------------------------------
--------------------------------------------------------------
(a) Geographic areas are determined according to where the Company
generates operating income (where the sale takes place) and according
to the location of the property and equipment and goodwill.
11. RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET IMPLEMENTED
Goodwill and Intangible Assets
In February 2008, the CICA issued Handbook Section 3064, "Goodwill and intangible assets", replacing Section 3062, "Goodwill and other intangible assets" and Section 3450, "Research and development costs". Various changes have been made to other sections of the CICA Handbook for consistency purposes. The new Section establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards relating to goodwill are unchanged from the standards included in the previous Section 3062.
This new standard is applicable to fiscal years beginning on or after October 1, 2008. The Company will implement this standard in its first quarter of fiscal year 2010 but does not expect it will have a material impact on its consolidated financial statements.
ContactsRaymond ParéVice-President and Chief Financial Officer
(450) 662-6632 ext. 4607
info@couche-tard.com
www.couche-tard.com
92.01 (1.00%)
