Alimentation Couche-Tard Announces its Results for its First Quarter of Fiscal Year 2020
Quarter
-- Net earnings attributable to shareholders of the Corporation ("net
earnings") of $538.8 million ($0.95 per share on a diluted basis) for
the first quarter of fiscal 2020 compared with $455.6 million ($0.81 per
share on a diluted basis) for the first quarter of fiscal 2019.
Excluding certain items for both comparable periods, net earnings for
the quarter would have been approximately $548.0 million(1) or $0.97(1)
per share on a diluted basis, compared with $0.87(1) per share on a
diluted basis for the first quarter of fiscal 2019, an increase of
11.5%.
-- Total merchandise and service revenues of $3.6 billion, an increase of
1.6%. Same-store merchandise revenues increased by 2.5% in the U.S., by
0.7% in Europe and by 0.3% in Canada.
-- Merchandise and service gross margin increased by 0.5% in the U.S. to
34.0%, while it decreased by 0.9% in Europe to 41.5%, and by 1.6% in
Canada to 32.9%.
-- Same-store road transportation fuel volume increased by 0.6% in the U.S.
and by 0.4% in Canada, while it decreased by 1.6% in Europe.
-- Road transportation fuel gross margin increased by 4.16¢ per gallon in
the U.S. to 26.86¢ per gallon, while it decreased by US 0.77¢ per
liter in Europe to US 8.44¢ per liter, and by CA 1.51¢ per liter in
Canada to CA 7.40¢ per liter.
-- Circle K rebranding project continues in North America with more than
5,800 stores now displaying the new Circle K global brand.
-- Return on capital employed(2) at 13.2%, up 60 basis points, driven by
higher earnings before interests and taxes.
-- Adjusted leverage ratio(2) continued to improve and reached 2.03 : 1
partly driven by debt repayment of $150.0 million.
-- Approval, on September 4, 2019, of a two-for-one split of all the
Corporation's issued and outstanding Class "A" and Class "B" shares on
record as at September 20, 2019.
-- Adoption, on April 29, 2019, of the new International Financial
Reporting Standards on lease accounting ("IFRS 16") with significant
impacts on the presentation of statement of earnings, cash flows and
balance sheet, without impact on strategy or financial framework.
LAVAL, QC, Sept. 4, 2019 /PRNewswire/ - For its first quarter ended July 21, 2019, Alimentation Couche-Tard Inc. ("Couche-Tard" or the "Corporation") (TSX: ATD.A) (TSX: ATD.B) announces net earnings attributable to shareholders of the Corporation of $538.8 million, representing $0.95 per share on a diluted basis. The results for the first quarter of fiscal 2020 were affected by a pre-tax net foreign exchange loss of $6.5 million, an income tax expense of $4.5 million (of which $3.5 million is attributable to shareholders of the Corporation) following the asset exchange transaction with CAPL, as well as pre-tax acquisition costs of $0.2 million. The results for the comparable quarter of fiscal 2019 were affected by a $55.0 million pre-tax impairment charge on CAPL's goodwill, pre-tax restructuring costs of $1.5 million, a pre-tax net foreign exchange loss of $1.0 million, as well as pre-tax acquisition costs of $0.5 million. Excluding these items, the adjusted diluted net earnings per share would have been $0.97(1) for the first quarter of fiscal 2020, compared with $0.87(1) for the first quarter of fiscal 2019, an increase of 11.5%, driven by higher road transportation fuel margins in the U.S., and lower financing costs following deleveraging, partly offset by higher income tax rate. All financial information is in US dollars unless stated otherwise.
(1) Please refer to the section
"Net earnings attributable to
shareholders of the Corporation
("net earnings") and adjusted
net earnings attributable to
shareholders of the Corporation
("adjusted net earnings")" of
this press release for
additional information on this
performance measure not defined
by IFRS. This performance
measure, for the 12-week period
ended July 22, 2018, has been
adjusted for the estimated pro
forma impact of IFRS 16.
(2) Please refer to the section
"Summary Analysis of
Consolidated Results for the
First Quarter of Fiscal 2020" of
this press release for
additional information on these
performance measures not defined
by IFRS. These performance
measures, for the 52-week period
ended April 28, 2019, have been
adjusted for the estimated pro
forma impact of IFRS 16.
"We had steady growth in our convenience segment this quarter even as we cycled against an exceptional first quarter last year. While all our regions saw increases in same-store sales, I am especially proud of the innovations taking place in our network to improve our offer and the customer journey," stated Brian Hannasch, President and CEO of Alimentation Couche-Tard. "This quarter, we launched our Easy Pay loyalty program nationally in the U.S., expanded our digital upsell platform to over 5,700 locations, started piloting home delivery in Texas, and progressed with our popular food-to-go initiatives in Europe. We leveraged national promotions and targeted local campaigns to increase the Circle K brand exposure, and we are working hard to learn more about our customers and making their lives a little easier every day."
"While fuel volume were healthy and fuel margins remained strong in the U.S., we continue to feel pressure in our European business from a competitive backdrop and unfavorable weather conditions. Across the board, our focus is on executing our growth strategy in terms of pricing, loyalty programs and mobile payment, and broadening awareness of our Circle K Fuel brand. In the U.S., we reached our 2,000(th) location dispensing the Circle K Fuel Brand as we push forward our global priority to bring more traffic to our sites and enhance our margins", concluded Brian Hannasch.
Claude Tessier, Chief Financial Officer, stated: "During the first quarter of fiscal 2020, we once again generated impressive cash flows which we used to invest in our network, repay our debt and return cash to our shareholders through dividends and our share repurchase program. On the expense side, our teams across the network worked diligently on cost containment which yielded a nice sequential improvement resulting in lower cost growth than the previous two quarters. The optimization of our cost base will remain a focus area over the next quarters as we remain committed to our usual cost discipline. I am pleased that these combined efforts have led to the continued increase in our return on capital employed and demonstrated our continual commitment to our customary financial discipline and increasing value for our shareholders."
Significant Items of the First Quarter of Fiscal 2020
-- The rollout of our Circle K brand in Europe was completed during the
quarter, while in North America it is progressing steadily. As of July
21, 2019, more than 5,800 stores in North America, including 789 stores
acquired from CST, now proudly display our new global brand.
-- On August 7, 2019, subsequent to the end of the quarter, we announced
the closing of an investment in Fire & Flower Holdings Corp. ("Fire &
Flower"), a leading independent cannabis retailer based in Alberta,
Canada. We invested approximately $26.0 million in the form of unsecured
convertible debentures to obtain a 9.9% ownership interest in Fire &
Flower upon conversion. We have also been issued Common Share purchase
warrants, that, if exercised in full in accordance with the terms
thereof, would subsequently increase our ownership interest to 50.1%.
Through this investment, we aim to combine our expertise in scaling
retail stores with Fire & Flower's retail experience and proprietary
HiFyre(TM) digital platform to capitalize on new cannabis markets as
they emerge.
-- On May 28, 2019, we repaid, without penalty, $150.0 million of our
$300.0 million US-dollar-denominated senior unsecured notes issued on
December 14, 2017 and maturing on December 13, 2019. On August 13, 2019,
subsequent to the end of the quarter, we repaid, without penalty, the
remaining $150.0 million of these notes.
-- During the first quarter of fiscal 2020, we repurchased 764,174 Class B
subordinate voting shares under our share repurchase program, for a net
amount of $46.2 million. In addition, subsequent to the end of the
quarter, we repurchased an additional 740,892 Class B subordinate voting
shares, for a net amount of $45.1 million, totaling 1,505,066 Class B
subordinate voting shares and $91.3 million since the launch of the
program. All shares repurchased were cancelled.
-- During its September 4, 2019 meeting, the Board of Directors approved a
two-for-one split of all the Corporation's issued and outstanding Class
A multiple-voting shares and Class B subordinate voting shares on record
as at September 20, 2019 and payable on September 27, 2019. This share
split was approved by regulatory authorities.
Changes in our Network
-- During the first quarter of fiscal 2020, we acquired eight
company-operated stores through distinct transactions.
-- During the first quarter of fiscal 2020, we completed the construction
of 12 stores and the relocation or reconstruction of 9 stores. As of
July 21, 2019, 32 stores were under construction and should open in the
upcoming quarters.
-- In May 2019, we closed the first transaction of the asset exchange
agreement with CAPL. In this first transaction, 60 Circle K U.S. stores
have been exchanged against 17 company-operated stores owned and
operated by CAPL and the real estate for 8 properties held by CAPL, for
a total value of approximately $58.0 million. Following the exchange
transaction, we performed a re-evaluation of our deferred tax assets and
liabilities which generated an income tax expense of $4.5 million, of
which $3.5 million is attributable to shareholders of the Corporation.
The remaining tranches are expected to be completed by the end of the
first quarter of calendar year 2020.
Summary of changes in our store network during the first quarter of fiscal 2020
The following table presents certain information regarding changes in our store network over the 12-week period ended July 21, 2019:
12-week period ended July 21, 2019
Type of site Company- CODO DODO Franchised and Total
operated other affiliated
Number of sites, beginning
of period 9,794 514 1,052 1,215 12,575
Acquisitions 8 8
Openings /constructions /
additions 29 4 24 57
Closures /disposals /
withdrawals (35) (64) (20) (23) (142)
Store conversion (3) 6 (3)
---
Number of sites, end of
period 9,793 456 1,033 1,216 12,498
---
CAPL network 1,320
Circle K branded sites
under licensing
agreements 2,248
---
Total network 16,066
---
Number of automated fuel
stations included in the 981 12 993
period?end figures
---
New Accounting Standard Adopted by the Corporation
As of April 29, 2019, we have adopted IFRS 16, Leases, which requires lessees to recognize on the balance sheet a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts, except with respect to lease contracts that meet limited exception criteria. As permitted under the specific transition provisions in the standard, we have elected not to restate our comparative figures for the 2019 financial year. The tables below present the estimated pro forma impact of the change in accounting policy on our previously reported results:
12-week period ended July 22, 2018
Total
Total estimated pro
estimated pro forma IFRS 16
Excluding:
Including: forma IFRS 16 impacts impacts -
Depreciation and interests(1) attributable to
Pre - IFRS
Rent under Pro forma IFRS 16 shareholders of the Corporation
16 As IAS 17
(in millions of US
dollars) reported
Other
Revenues 14,786.5 9.0 9.0 14,795.5 3.0
Cost of sales 12,569.4 12,569.4
---
Gross profit 2,217.1 9.0 9.0 2,226.1 3.0
---
Operating, selling,
administrative (82.0)
and general expenses
1,312.5 (88.0) 6.0 (82.0) 1,230.5
Restructuring costs 1.5 1.5
Loss on disposal of
property and
equipment and other
assets
0.2 0.2
Depreciation,
amortization and 301.5 (4.0) 90.0 86.0 387.5 81.0
impairment
---
Total operating
expenses 1,615.7 (92.0) 90.0 6.0 4.0 1,619.7 (1.0)
---
Operating income 601.4 92.0 (90.0) 3.0 5.0 606.4 4.0
Share of earnings of
joint
ventures and
associated
companies
7.1 7.1
EBITDA 910.0 88.0 3.0 91.0 1,001.0 85.0
Financial expenses 79.4 (5.0) 21.0 16.0 95.4 14.0
Financial revenues (2.7) (2.7)
Foreign exchange
loss 1.0 1.0
---
Net financial
expenses 77.7 (5.0) 21.0 16.0 93.7 14.0
---
Earnings before
income taxes 530.8 97.0 (111.0) 3.0 (11.0) 519.8 (10.0)
Income taxes 88.2 25.0 (28.0) 1.0 (2.0) 86.2 (2.0)
---
Net earnings
including non-
controlling
interests 442.6 72.0 (83.0) 2.0 (9.0) 433.6 (8.0)
===
Net loss
attributable to
non-controlling
interests 13.0 5.0 (4.0) 1.0 14.0
---
Net earnings
attributable to 455.6 (8.0)
shareholders of the
Corporation 72.0 (78.0) (2.0) (8.0) 447.6
===
52-week period ended April 28, 2019
Total
Total estimated pro
estimated pro forma IFRS 16 impacts
Excluding:
Including: forma IFRS 16 impacts - attributable to
Depreciation and interests(1) shareholders of the Corporation
Pre - IFRS Rent under IAS 17 Pro forma IFRS 16
16 As reported
(in millions of US
dollars)
Other
Revenues 59,117.6 40.0 40.0 59,157.6 20.0
Cost of sales 49,922.7 49,922.7
---
Gross profit 9,194.9 40.0 40.0 9,234.9 20.0
---
Operating, selling,
administrative 5,646.1 (361.0)
and general expenses
(390.0) 28.0 (362.0) 5,284.1
Restructuring costs 10.5 10.5
Gain on disposal of
property and (21.3
equipment and other
assets
(21.3)
Depreciation,
amortization and 1,070.7 (18.0) 388.0 370.0 1,440.7 356.0
impairment
---
Total operating
expenses 6,706.0 (408.0) 388.0 28.0 8.0 6,714.0 (5.0)
---
Operating income 2,488.9 408.0 (388.0) 12.0 32.0 2,520.9 25.0
Share of earnings of
joint
ventures and
associated
companies
23.4 23.4
EBITDA 3,583.0 390.0 12.0 402.0 3,984.0 381.0
Financial expenses 338.7 (20.0) 90.0 70.0 408.7 62.0
Financial revenues (13.3) (13.3)
Foreign exchange
gain (5.3) (5.3)
---
Net financial
expenses 320.1 (20.0) 90.0 70.0 390.1 62.0
---
Earnings before
income taxes 2,192.2 428.0 (478.0) 12.0 (38.0) 2,154.2 (37.0)
Income taxes 370.9 108.0 (120.0) 3.0 (9.0) 361.9 (9.0)
---
Net earnings
including non- 1,821.3 320.0 (358.0) 9.0 (29.0) 1,792.3 (28.0)
controlling
interests
===
Net loss
attributable to
non- 12.6 (3.0) 20.0 (16.0) 1.0 13.6
controlling
interests
---
Net earnings
attributable to 1,833.9 (28.0)
shareholders of the
Corporation 317.0 (338.0) (7.0) (28.0) 1,805.9
===
(1) Depreciation and interest
expenses are based on our
assessment of Fiscal 2020
impact.
In order to facilitate the understanding of our financial performance, we have adjusted some of our previously reported performance measures. All adjustments related to IFRS 16 are clearly identified and are based on the calculations presented in the tables above.
The adoption of the new accounting standard affected the following specific items in the opening balance sheet on April 29, 2019:
(in
millions
of US
dollars)
Balance, Adoption of Adjusted balance,
beginning of period beginning of period
IFRS 16
---
Assets
Current
assets
Prepaid
expenses 83.7 (26.4) 57.3
Property
and
equipment 11,129.9 (306.5) 10,823.4
Right-
of-
use
assets 2,835.0 2,835.0
Intangible
assets 944.4 (104.5) 839.9
Other
assets 306.6 27.7 334.3
Total
assets 22,607.7 2,425.3 25,033.0
===
Liabilities
Current
liabilities
Accounts
payable
and
accrued
liabilities 3,917.1 (24.6) 3,892.5
Current
portion
of
long-
term
debt 1,310.7 (40.5) 1,270.2
Current
portion
of
lease
liabilities 382.9 382.9
Long-
term
debt 5,640.7 (287.8) 5,352.9
Lease
liabilities 2,569.3 2,569.3
Long-
term
provisions 590.1 (3.0) 587.1
Deferred
credits
and
other
liabilities 349.0 (158.3) 190.7
Deferred
income
taxes 1,037.1 (3.2) 1,033.9
Total
liabilities 13,426.6 2,434.8 15,861.4
===
Equity
Retained
earnings 9,053.5 (9.5) 9,044.0
Total
equity 9,181.1 (9.5) 9,171.6
===
For further information, refer to our Q1 2020 unaudited interim condensed consolidated financial statements.
Exchange Rate Data
We use the US dollar as our reporting currency, which provides more relevant information given the predominance of our operations in the United States.
The following table sets forth information about exchange rates based upon closing rates expressed as US dollars per comparative currency unit:
12-week periods
ended
July 21, 2019 July 22, 2018
Average for period
Canadian dollar 0.7517 0.7673
Norwegian krone 0.1155 0.1234
Swedish krone 0.1055 0.1138
Danish krone 0.1505 0.1575
Zloty 0.2629 0.2726
Euro 1.2703 1.1734
Ruble 0.0156 0.0160
Summary Analysis of Consolidated Results for the First Quarter of Fiscal 2020
The following table highlights certain information regarding our operations for the 12-week periods ended July 21, 2019, and July 22, 2018. CAPL refers to CrossAmerica Partners LP.
12-week periods ended
(in millions of US
dollars, unless
otherwise stated) July 21,
July 22,
Variation
2019 2018
%
Statement of Operations
Data:
Merchandise and service
revenues(1):
United States 2,657.8 2,609.1 1.9
Europe 353.1 368.7 (4.2)
Canada 575.6 544.4 5.7
CAPL 19.8 26.3 (24.7)
Elimination of
intercompany
transactions with CAPL (0.5) (0.7) (28.6)
Total merchandise and
service revenues 3,605.8 3,547.8 1.6
Road transportation fuel
revenues:
United States 6,801.5 7,159.5 (5.0)
Europe 1,919.8 1,952.5 (1.7)
Canada 1,201.4 1,291.8 (7.0)
CAPL 567.4 633.7 (10.5)
Elimination of
intercompany
transactions with CAPL (121.4) (140.3) (13.5)
Total road transportation
fuel revenues 10,368.7 10,897.2 (4.8)
Other revenues(2):
United States 6.9 5.4 27.8
Europe 155.1 319.0 (51.4)
Canada 4.8 6.2 (22.6)
CAPL 25.8 15.2 69.7
Elimination of
intercompany
transactions with CAPL (4.1) (4.3) (4.7)
Total other revenues 188.5 341.5 (44.8)
Total revenues 14,163.0 14,786.5 (4.2)
Merchandise and service
gross profit(1):
United States 904.9 874.8 3.4
Europe 146.5 156.3 (6.3)
Canada 189.5 187.9 0.9
CAPL 4.6 6.4 (28.1)
Elimination of
intercompany
transactions with CAPL (0.5) (0.6) (16.7)
Total merchandise and
service gross profit 1,245.0 1,224.8 1.6
Road transportation fuel
gross profit:
United States 672.5 560.0 20.1
Europe 222.2 246.5 (9.9)
Canada 81.5 100.0 (18.5)
CAPL 23.1 26.6 (13.2)
Total road transportation
fuel gross profit 999.3 933.1 7.1
Other revenues gross
profit(2):
United States 6.9 5.3 30.2
Europe 31.3 36.8 (14.9)
Canada 4.8 6.2 (22.6)
CAPL 25.8 15.2 69.7
Elimination of
intercompany
transactions with CAPL (4.1) (4.3) (4.7)
Total other revenues
gross profit 64.7 59.2 9.3
Total gross profit 2,309.0 2,217.1 4.1
Operating, selling,
administrative and
general expenses
Excluding CAPL 1,224.3 1,294.7 (5.4)
CAPL 20.2 22.6 (10.6)
Elimination of
intercompany
transactions with CAPL (4.4) (4.8) (8.3)
Total Operating, selling,
administrative and
general expenses 1,240.1 1,312.5 (5.5
Restructuring costs 1.5 (100.0)
Loss on disposal of
property and equipment
and other assets 10.1 0.2 4,950.0
Depreciation,
amortization and
impairment
Excluding CAPL 284.2 213.2 33.3
CAPL 22.9 88.3 (74.1)
Total depreciation,
amortization and
impairment 307.1 301.5 1.9
Operating income
Excluding CAPL 743.0 671.3 10.7
CAPL 8.9 (69.8 (112.8)
Elimination of
intercompany
transactions with CAPL (0.2) (0.1) 100.0
Total operating income 751.7 601.4 25.0
Net financial expenses 87.0 77.7 0.12
Net earnings including
non-controlling
interests 536.0 442.6 21.1
Net loss attributable to
non-controlling
interests 2.8 13.0 (78.5)
Net earnings attributable
to shareholders of the
Corporation 538.8 455.6 18.3
Per Share Data:
Basic net earnings per
share (dollars per
share) 0.96 0.81 18.5
Diluted net earnings per
share (dollars per
share) 0.95 0.81 17.3
Adjusted diluted net
earnings per share
(dollars per share)(13) 0.97 0.87 11.5
12-week periods ended
(in millions of US
dollars, unless
otherwise stated) July 21,
July 22,
Variation
2019 2018
%
Other Operating Data -
excluding CAPL:
Merchandise and service
gross margin(1):
Consolidated 34.6% 34.6%
United States 34.0% 33.5% 0.5
Europe 41.5% 42.4% (0.9)
Canada 32.9% 34.5% (1.6)
Growth of same-store
merchandise
revenues(3):
United States(4) 2.5% 4.2% (1.7)
Europe 0.7% 7.3% (6.6)
Canada(4) 0.3% 6.6% (6.3)
Road transportation
fuel gross margin:
United States (cents
per gallon)(4) 26.86 22.70 18.3
Europe (cents per
liter) 8.44 9.21 (8.4)
Canada (CA cents per
liter)(4) 7.40 8.91 (16.9)
Total volume of road
transportation fuel
sold:
United States (millions
of gallons) 2,590.6 2,574.6 0.6
Europe (millions of
liters) 2,633.6 2,676.4 (1.6)
Canada (millions of
liters) 1,472.6 1,469.2 0.2
Growth of (decrease in)
same-store road
transportation fuel
volume(4):
United States 0.6% 0.6%
Europe (1.6%) (0.1%) (1.5)
Canada 0.4% (3.3%) 3.7
(in
millions
of US
dollars,
unless
otherwise
stated) July 21, 2019
April 28, 2019
Variation $
Balance
Sheet
Data(5):
Total
assets as at
(including April
$1.3 28,
billion 2019,
and $1.1 respectively)
billion
for CAPL
as at
July 21,
2019 and 25,431.6 25,033.0 398.6
Interest-
bearing July 21,
debt 2019 and
(including as at
$686.1 April 28,
million 2019,
and respectively)(6)
$696.0
million
for CAPL
as at
9,410.4 9,575.3 (164.9)
Equity
attributable
to
shareholders
of the
Corporation 9,409.8 8,913.7 496.1
Indebtedness
Ratios(7):
Net
interest-
bearing
debt/
total
capitalization(6)(8) 0.45 : 1
0.48 : 1
Leverage
ratio(9) 1.94 : 1
2.09 : 1
Adjusted
leverage
ratio(10) 2.03 : 1
2.18 : 1
Returns(7):
Return on
equity(11) 22.0% 21.9%
Return on
capital
employed(12) 13.2% 12.6%
---
(1) Includes revenues derived from
franchise fees, royalties,
suppliers' rebates on some
purchases made by franchisees and
licensees, as well as from
wholesale of merchandise.
(2) Includes revenues from the rental
of assets and from the sale of
aviation fuel, energy for
stationary engines and marine fuel
(until November 30, 2018).
(3) Does not include services and other
revenues (as described in
footnotes 1 and 2 above). Growth
in Canada and in Europe is
calculated based on local
currencies.
(4) For company-operated stores only.
(5) The balance sheet data as at April
28, 2019, has been adjusted for
the estimated pro forma impact of
IFRS 16.
(6) This measure is presented including
the following balance sheet
accounts: Current portion of long-
term debt, Long-term debt,
Current portion of lease
liabilities, and Lease
liabilities.
(7) These measures are presented as if
our investment in CAPL was
reported using the equity method
as we believe it allows a more
relevant presentation of the
underlying performance of the
Corporation.
(8) This measure is presented for
information purposes only and
represents a measure of financial
condition used especially in
financial circles. It represents
the following calculation:
interest-bearing debt, net of
cash and cash equivalents and
temporary investments divided by
the addition of shareholders'
equity and interest-bearing debt,
net of cash and cash equivalents
and temporary investments. It does
not have a standardized meaning
prescribed by IFRS and therefore
may not be comparable to similar
measures presented by other public
corporations. For the purpose of
this calculation, CAPL's long-
term debt is excluded as it is a
non-recourse debt to the
Corporation, as referenced in
footnote 7. This performance
measure, for the 52-week period
ended April 28, 2019, has been
adjusted for the estimated pro
forma impact of IFRS 16 and the
previously disclosed measure was
0.39 : 1. We believe this measure
is useful to investors and
analysts.
(9) This measure is presented for
information purposes only and
represents a measure of financial
condition used especially in
financial circles. It represents
the following calculation:
interest-bearing debt, net of
cash and cash equivalents and
temporary investments divided by
EBITDA (Earnings before Interest,
Tax, Depreciation, Amortization
and Impairment) adjusted for
specific items. It does not have a
standardized meaning prescribed by
IFRS and therefore may not be
comparable to similar measures
presented by other public
corporations. For the purpose of
this calculation, CAPL's long-
term debt is excluded as it is a
non-recourse debt to the
Corporation, as referenced in
footnote 7. This performance
measure, for the 52-week period
ended April 28, 2019, has been
adjusted for the estimated pro
forma impact of IFRS 16 and the
previously disclosed measure was
1.61 : 1. We believe this measure
is useful to investors and
analysts.
(10) This measure is presented for
information purposes only and
represents a measure of financial
condition used especially in
financial circles. It represents
the following calculation:
interest-bearing debt plus the
product of eight times rent
expense, net of cash and cash
equivalents and temporary
investments divided by EBITDAR
(Earnings before Interest, Tax,
Depreciation, Amortization,
Impairment and Rent expense)
adjusted for specific items. It
does not have a standardized
meaning prescribed by IFRS and
therefore may not be comparable to
similar measures presented by
other public corporations. For the
purpose of this calculation,
CAPL's interest bearing debt is
excluded as it is a non-recourse
debt to the Corporation, as
referenced in footnote 7. This
performance measure, for the 52-
week period ended April 28, 2019,
has been adjusted for the
estimated pro forma impact of IFRS
16 and the previously disclosed
measure was 2.29 : 1. We believe
this measure is useful to
investors and analysts.
(11) This measure is presented for
information purposes only and
represents a measure of
performance used especially in
financial circles. It represents
the following calculation: net
earnings divided by average equity
for the corresponding period. It
does not have a standardized
meaning prescribed by IFRS and
therefore may not be comparable to
similar measures presented by
other public corporations. This
performance measure, for the
52-week period ended April 28,
2019, has been adjusted for the
estimated pro forma impact of IFRS
16 and the previously disclosed
measure was 22.3%. We believe this
measure is useful to investors and
analysts.
(12) This measure is presented for
information purposes only and
represents a measure of
performance used especially in
financial circles. It represents
the following calculation:
earnings before income taxes and
interests divided by average
capital employed for the
corresponding period. Capital
employed represents total assets
less short-term liabilities not
bearing interests. It does not
have a standardized meaning
prescribed by IFRS and therefore
may not be comparable to similar
measures presented by other public
corporations. This performance
measure, for the 52-week period
ended April 28, 2019, has been
adjusted for the estimated pro
forma impact of IFRS 16 and the
previously disclosed measure was
14.1%. We believe this measure is
useful to investors and analysts.
(13) This performance measure, for the
12-week period ended July 22,
2018, has been adjusted for the
estimated pro forma impact of IFRS
16 and the previously reported
adjusted net earnings per share
was $0.88.
Revenues
Our revenues were $14.2 billion for the first quarter of fiscal 2020, down by $623.5 million, a decrease of 4.2% compared with the corresponding quarter of fiscal 2019, mainly attributable to a net lower average road transportation fuel selling price, the net negative impact from the translation of our Canadian and European operations into US dollars, and the disposal of our marine fuel business, partly offset by organic growth.
Merchandise and service revenues
Total merchandise and service revenues for the first quarter of fiscal 2020 were $3.6 billion, an increase of $58.0 million compared with the corresponding quarter of fiscal 2019. Excluding CAPL's revenues, as well as the net negative impact from the translation of our Canadian and European operations into US dollars, merchandise and service revenues increased by approximately $97.0 million or 2.7%. This increase is primarily attributable to continued organic growth, despite unfavorable weather and cycling against an exceptional first quarter last year. Same-store merchandise revenues increased by 2.5% in the United States, by 0.7% in Europe and by 0.3% in Canada, driven by the improvements made to our offering, as well as by our various initiatives to drive traffic in our stores.
Road transportation fuel revenues
Total road transportation fuel revenues for the first quarter of fiscal 2020 were $10.4 billion, a decrease of $528.5 million compared with the corresponding quarter of fiscal 2019. Excluding CAPL's revenues, as well as the net negative impact from the translation of revenues of our Canadian and European operations into US dollars, road transportation fuel revenues decreased by approximately $338.0 million or 3.3%. This decrease is attributable to a net lower average road transportation fuel selling price, which had a net negative impact of approximately $354.0 million, partly offset by organic growth. Same?store road transportation fuel volume in the United States increased by 0.6%. In Europe, same?store road transportation fuel volume decreased by 1.6% due to the competitive landscape and unfavorable weather. In Canada, same?store road transportation fuel volume increased by 0.4%, another sequential improvement.
The following table shows the average road transportation fuel selling price of our company-operated stores in our various markets for the last eight quarters, starting with the second quarter of the fiscal year ended April 29, 2018:
Quarter
2nd
3rd
4th
1st Weighted average
---
52?week
period
ended
July
21,
2019
---
United
States
(US
dollars
per
gallon)
-
excluding
CAPL 2.72 2.42 2.51 2.66 2.57
Europe
(US
cents
per
liter) 80.56 75.28 74.59 77.35 76.86
Canada
(CA
cents
per
liter) 115.22 97.59 103.45 111.16 106.23
52?week
period
ended
July
22,
2018
---
United
States
(US
dollars
per
gallon)
-
excluding
CAPL 2.47 2.30 2.51 2.76 2.50
Europe
(US
cents
per
liter) 68.23 71.19 78.32 75.07 73.01
Canada
(CA
cents
per
liter) 101.46 108.11 110.39 117.95 109.37
Other revenues
Total other revenues for the first quarter of fiscal 2020 were $188.5 million, a decrease of $153.0 million compared with the corresponding period of fiscal 2019. Excluding CAPL's revenues, as well as the net negative impact from the translation of revenues of our Canadian and European operations into US dollars, other revenues decreased by approximately $146.0 million in the first quarter of fiscal 2020. The decrease is primarily driven by the disposal of our marine fuel business, which had an impact of approximately $80.0 million, as well as lower aviation fuel revenues which had a minimal impact on gross profit.
Gross profit
Our gross profit was $2.3 billion for the first quarter of fiscal 2020, up by $91.9 million, or 4.1%, compared with the corresponding quarter of fiscal 2019, mainly attributable to higher fuel margins in the United States and organic growth, partly offset by the net negative impact from the translation of our Canadian and European operations into US dollars, which totalled approximately $33.0 million.
Merchandise and service gross profit
In the first quarter of fiscal 2020, our merchandise and service gross profit was $1.2 billion, an increase of $20.2 million compared with the corresponding quarter of fiscal 2019. Excluding CAPL's gross profit, as well as the net negative impact from the translation of our Canadian and European operations into US dollars, merchandise and service gross profit increased by approximately $35.0 million or 2.9%, mainly attributable to our organic growth. Our gross margin increased by 0.5% in the United States to 34.0% and decreased by 0.9% in Europe to 41.5%, both driven by changes in product mix. In Canada, our gross margin decreased by 1.6% to 32.9%, mainly as a result of the conversion of our Esso stores from the agent model to the corporate model, as well as from a change in product mix.
Road transportation fuel gross profit
In the first quarter of fiscal 2020, our road transportation fuel gross profit was $999.3 million, an increase of $66.2 million compared with the corresponding quarter of fiscal 2019. Excluding CAPL's gross profit, as well as the net negative impact from the translation of our Canadian and European operations into US dollars, our first quarter of fiscal 2020 road transportation fuel gross profit increased by approximately $87.0 million or 9.6%. Our road transportation fuel gross margin was 26.86¢ per gallon in the United States, an increase of 4.16¢ per gallon supported by the volatility in crude oil prices as well as improved sourcing conditions. In Europe, the road transportation fuel gross margin was US 8.44¢ per liter, a decrease of US 0.77¢ per liter mainly due to the net negative impact of foreign exchange, and a higher bio-fuel blending ratio taking advantage of favorable conditions. The remaining variance is driven by competitive pressure in some of our markets. In Canada, the road transportation fuel gross margin was CA 7.40¢ per liter, a decrease of CA 1.51¢ per liter due to competitive pressure in some of our markets.
The road transportation fuel gross margin of our company-operated stores in the United States and the impact of expenses related to electronic payment modes for the last eight quarters, starting with the second quarter of the fiscal year ended April 29, 2018, were as follows:
(US cents per
gallon)
Quarter
2nd
3rd
4th
1st Weighted
average
52?week period ended
July 21, 2019
Before deduction of
expenses related to
electronic payment
modes 21.88 29.42 18.51 26.86 24.50
Expenses related to
electronic payment
modes(1) 4.55 4.31 4.40 4.70 4.50
After deduction of
expenses related to
electronic payment
modes 17.33 25.11 14.11 22.16 20.00
52-week period ended
July 22, 2018
Before deduction of
expenses related to
electronic payment
modes 24.70 15.66 17.29 22.70 19.42
Expenses related to
electronic payment
modes(1) 4.31 4.06 3.86 4.67 4.20
After deduction of
expenses related to
electronic payment
modes 20.39 11.60 13.43 18.03 15.22
---
(1) Please note that this information
has been restated to reflect the
cost of electronic payment
expenses per corporate-store road
transportation fuel gallons
instead of per total road
transportation fuel gallons.
As demonstrated by the table above, road transportation fuel margins in the United States can be volatile from one quarter to another but tend to be relatively stable or to increase over longer periods. Margin volatility and expenses related to electronic payment modes are not as significant in Europe and Canada.
Other revenues gross profit
In the first quarter of fiscal 2020, other revenues gross profit was $64.7 million, an increase of $5.5 million compared with the corresponding period of fiscal 2019. Excluding CAPL's gross profit, other revenues gross profit decreased by $5.3 million in the first quarter of fiscal 2020. The decrease is primarily driven by the disposal of our marine fuel business, which had an impact of approximately $3.0 million on the first quarter of fiscal 2020.
Operating, selling, administrative and general expenses ("expenses")
For the first quarter of fiscal 2020, expenses decreased by 5.5%, compared with the corresponding period of fiscal 2019. If we exclude certain items that are not considered indicative of future trends, expenses increased by 2.3%:
12-week period ended
July 21, 2019
Total variance, as reported (5.5)%
---
Adjusted for:
Decrease in rent expense from
transition to IFRS 16 6.2%
Decrease from the net impact of
foreign exchange translation 1.4%
Decrease in CAPL's expenses 0.2%
Disposal of our marine fuel
business 0.1%
Increase from higher electronic
payment fees, excluding
acquisitions (0.1)%
Remaining variance 2.3%
===
Excluding the conversion of our Esso stores from the agent model to the corporate model, the remaining variance for the first quarter of fiscal 2020 would have been only 1.7%. Growth in expenses was driven by normal inflation, higher expenses needed to support our growth and higher minimum wages in certain regions. We continue to rigorously focus on controlling costs throughout our organization, while ensuring we maintain the quality of service we offer to our customers.
Earnings before interest, taxes, depreciation, amortization and impairment (EBITDA) and adjusted EBITDA
During the first quarter of fiscal 2020, EBITDA increased from $910.0 million to $1,065.4 million, an increase of 17.1% compared with the same quarter last year. Excluding the specific items shown in the table below from EBITDA of the first quarter of fiscal 2020 and of the corresponding period of fiscal 2019, the adjusted EBITDA for the first quarter of fiscal 2020 increased by $58.3 million or 5.9% compared with the corresponding period of the previous fiscal year, driven by increased fuel margins in the United States and by organic growth, partly offset by the net negative impact from the translation of our Canadian and European operations into US dollars. The variation in exchange rates had a net negative impact of approximately $15.0 million.
It should be noted that EBITDA and adjusted EBITDA are not performance measures defined by IFRS, but we, as well as investors and analysts, consider that those performance measures facilitate the evaluation of our ongoing operations and our ability to generate cash flows to fund our cash requirements, including our capital expenditures program and payment of dividends. Note that our definition of these measures may differ from the one used by other public corporations.
12-week periods
ended
(in millions of US dollars) July 21, 2019 July 22, 2018
Net earnings including non-
controlling interests, as reported 536.0 442.6
---
Add:
Income taxes 135.3 88.2
Net financial expenses 87.0 77.7
Depreciation, amortization and
impairment 307.1 301.5
---
EBITDA 1,065.4 910.0
---
Adjusted for:
EBITDA attributable to non-
controlling interests (24.8) (14.5)
Acquisition costs 0.2 0.5
Restructuring costs attributable to
shareholders of the Corporation 1.5
Adjusted EBITDA, as previously
reported 1,040.8 897.5
===
Estimated pro forma impact from
transition to IFRS 16 attributable to
shareholders of the Corporation 85.0
---
Adjusted EBITDA 1,040.8 982.5
===
Depreciation, amortization and impairment ("depreciation")
For the first quarter of fiscal 2020, our depreciation expense increased by $5.6 million. Excluding CAPL's results as well as the $55.0 million impairment charge on CAPL's goodwill recognized during the first quarter of fiscal 2019, the depreciation expense increased by $71.0 million, mainly driven by the additional depreciation expense arising from right-of-use assets due to the adoption of IFRS 16, which had an impact of approximately $81.0 million, to the replacement of equipment, partly offset by the divestiture of stores and our marine fuel business.
Net financial expenses
Net financial expenses for the first quarter of fiscal 2020 were $87.0 million, an increase of $9.3 million compared with the first quarter of fiscal 2019. Excluding the items shown in the table below, net financial expenses decreased by $14.5 million, mainly attributable to our lower average long-term debt following the significant repayments made.
12-week
periods ended
(in millions of US dollars) July 21, 2019 July 22, 2018
Net financial expenses, as
reported 87.0 77.7
---
Adjusted for:
CAPL's financial expenses (11.3) (7.0)
Net foreign exchange loss (6.5) (1.0)
Estimated pro forma impact from
transition to IFRS 16 14.0
Net financial expenses excluding
items above 69.2 83.7
===
Income taxes
The income tax rate for the first quarter of fiscal 2020 was 20.2% compared with 16.6% for the corresponding period of fiscal 2019. Excluding the income tax expense of $4.5 million from the re-evaluation of the deferred tax assets and liabilities following the asset exchange transaction with CAPL, the income tax rate would have been 19.5%. The increase of the income tax rate of the first quarter of fiscal 2020 stems from the impact of a different mix in our earnings across the various jurisdictions.
Net earnings attributable to shareholders of the Corporation ("net earnings") and adjusted net earnings attributable to shareholders of the Corporation ("adjusted net earnings")
Net earnings for the first quarter of fiscal 2020 were $538.8 million, compared with $455.6 million for the first quarter of the previous fiscal year, an increase of $83.2 million or 18.3%. Diluted net earnings per share stood at $0.95, compared with $0.81 for the corresponding quarter of the previous year. The translation of revenues and expenses from our Canadian and European operations into United States dollars had a net negative impact of approximately $10.0 million on net earnings of the first quarter of fiscal 2020.
Excluding the items shown in the table below from net earnings of the first quarter of fiscal 2020 and of fiscal 2019, adjusted net earnings for the first quarter of fiscal 2020 would have been approximately $548.0 million, compared with $490.0 million for the first quarter of fiscal 2019, an increase of $58.0 million or 11.8%. Adjusted diluted net earnings per share would have been approximately $0.97 for the first quarter of fiscal 2020 compared with $0.87 for the corresponding period of fiscal 2019, an increase of 11.5%.
The table below reconciles reported net earnings to adjusted net earnings:
12-week periods ended 12-week periods
ended
(in millions of US dollars) July 21, 2019 July 22, 2018
Net earnings attributable to
shareholders of the
Corporation, as reported 538.8 455.6
---
Adjusted for:
Net foreign exchange loss 6.5 1.0
Income tax expense following
asset exchange transaction 3.5
Acquisition costs 0.2 0.5
Impairment charge on CAPL's
goodwill 55.0
Restructuring costs 1.5
Tax impact of the items above
and rounding (1.0) (15.6)
Adjusted net earnings
attributable to shareholders
of the Corporation, as
previously reported 548.0 498.0
---
Estimated pro forma impact
from transition to IFRS 16 (8.0)
---
Adjusted net earnings
attributable to shareholders
of the Corporation 548.0 490.0
===
It should be noted that adjusted net earnings is not a performance measure defined by IFRS, but we, as well as investors and analysts, consider this measure useful for evaluating the underlying performance of our operations on a comparable basis. Note that our definition of this measure may differ from the one used by other public corporations.
Dividends
During its September 4, 2019 meeting, the Board of Directors declared a quarterly dividend of CA 12.5¢ per share, before the share split, for the first quarter of fiscal 2020 to shareholders on record as at September 13, 2019, and approved its payment for September 27, 2019. This is an eligible dividend within the meaning of the Income Tax Act (Canada).
Profile
Couche-Tard is the leader in the Canadian convenience store industry. In the United States, it is the largest independent convenience store operator in terms of the number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in the Scandinavian countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland, and has an important presence in Poland.
As of July 21, 2019, Couche-Tard's network comprised 9,792 convenience stores throughout North America, including 8,565 stores with road transportation fuel dispensing. Its North American network consists of 19 business units, including 15 in the United States covering 48 states and 4 in Canada covering all 10 provinces. Approximately 109,000 people are employed throughout its network and at its service offices in North America. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to more than 1,300 locations in the United States.
In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through ten business units. As of July 21, 2019, Couche-Tard's network comprised 2,706 stores, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated fuel stations which only offer road transportation fuel. Couche-Tard also offers other products, including aviation fuel and energy for stationary engines. Including employees at branded franchise stores, approximately 24,000 people work in its retail network, terminals and service offices across Europe.
In addition, under licensing agreements, approximately 2,250 stores are operated under the Circle K banner in 16 other countries and territories (Cambodia, China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Jamaica, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam), which brings the worldwide total network to more than 16,000 stores.
For more information on Alimentation Couche-Tard Inc. or to consult its quarterly Consolidated Financial Statements and Management Discussion and Analysis, please visit: https://corpo.couche?tard.com.
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 "believe", "can", "shall", "intend", "expect", "estimate", "assume" 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 in 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 regulatory authorities in Canada. 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 September 5, 2019, at 8:00 A.M. (EDT)
Couche-Tard invites analysts known to the Corporation to send their two questions to its management before 7:00 P.M. (EDT) on September 4, 2019.
Financial analysts, investors, media and any individuals interested in listening to the webcast on Couche-Tard's results which will take place online on September 5, 2019, at 8:00 A.M. (EDT) can do so by either accessing the Corporation's website at https://corpo.couche?tard.com and by clicking in the "Investor Relations/Corporate presentations" section or by dialing 1?866?865-3087, followed by the access code 2366048#.
Rebroadcast: For individuals who will not be able to listen to the live webcast, a recording of the webcast will be available on the Corporation's website for a period of 90 days.
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SOURCE Alimentation Couche-Tard Inc.
