Alimentation Couche-Tard announces record earnings in third quarter of fiscal year 2019

• Net earnings attributable to shareholders of the Corporation ("net earnings") of $612.1 million ($1.08 per share on a diluted basis) for the third quarter of fiscal 2019 compared with $482.4 million ($0.85 per share on a diluted basis) for the third quarter of fiscal 2018. Excluding certain items for both comparable periods, net earnings for the quarter would have been approximately $609.0 million¹ or $1.08¹ per share on a diluted basis, compared with $0.53¹ per share on a diluted basis for the third quarter of fiscal 2018, an increase of 103.8%.
• Total merchandise and service revenues of $4.2 billion, an increase of 8.8%. Same-store merchandise revenues increased by 4.5% in the U.S., by 2.9% in Europe and by 4.9% in Canada.
• Merchandise and service gross margin increased by 0.6% in the U.S. to 33.7%, while it decreased by 0.4% in Europe to 41.8%, and by 0.9% in Canada to 33.1%.
• Total road transportation fuel volumes grew by 1.6%. Same-store road transportation fuel volumes increased by 0.8% in the U.S., while they decreased by 1.4% in Europe and by 0.6% in Canada.
• Road transportation fuel gross margin increased by 13.76¢ per gallon in the U.S. to 29.42¢ per gallon, by US 0.43¢ per liter in Europe to US 8.30¢ per liter, and decreased by CA 1.22¢ per liter in Canada to CA 8.11¢ per liter.
• On December 1, 2018, the disposal of the Corporation's marine fuel business was completed for total proceeds of $24.3 million, resulting in a pre-tax net gain of $3.2 million.
• Current annual synergies run rate related to the CST Brands Inc. ("CST") integration reached approximately $207.0 million.
• Adjusted leverage ratio continued to improve and reached 2.38:1, on a pro-forma basis.
• More than 4,900 stores in North America and more than 1,900 stores in Europe now display the new Circle K global brand.
• The Corporation announced, subject to TSX approval, its intention to implement a new share repurchase program which would allow it to repurchase up to 4.0% of its Class B subordinate voting shares.
• 25.0% increase of the quarterly dividend, from CA 10.0¢ to CA 12.5¢.
• Return on equity and return on capital employed at 23.8% and 13.9%, respectively, on a pro-forma basis.

 

 

LAVAL, QC, March 19, 2019 /PRNewswire/ - For its third quarter ended February 3, 2019, Alimentation Couche-Tard Inc. ("Couche-Tard" or the "Corporation") (TSX: ATD.A) (TSX: ATD.B) announces record net earnings attributable to shareholders of the Corporation of $612.1 million, representing $1.08 per share on a diluted basis. The results for the third quarter of fiscal 2019 were affected by a pre-tax gain from the disposal of the marine fuel business of $3.2 million, pre-tax restructuring costs of $1.6 million, a pre-tax net foreign exchange gain of $1.5 million, as well as pre-tax acquisition costs of $0.6 million. The results for the comparable quarter of fiscal 2018 were affected by a net tax benefit of $218.6 million (of which $14.1 million is attributable to non-controlling interest) following the approval of the "U.S. Tax Cuts and Jobs Act", a pre-tax net foreign exchange loss of $9.8 million, a $6.6 million pre-tax accelerated depreciation and amortization expense and pre-tax incremental costs of $3.0 million, both in connection with the Corporation's global brand initiative, pre-tax restructuring and integration costs of $6.8 million, pre-tax acquisition costs of $4.2 million, pre-tax negative goodwill of $2.8 million as well as by pre-tax incremental expenses caused by hurricanes totaling $1.8 million. Excluding these items, the adjusted diluted net earnings per share would have remained at $1.08 for the third quarter of fiscal 2019, compared with $0.53 for the third quarter of fiscal 2018, an increase of 103.8%, driven by higher road transportation fuel margins in the U.S., organic growth, as well as by the contribution from acquisitions, partly offset by a higher income tax rate as well as the net negative impact from the translation of our Canadian and European operations into US dollars. All financial information is in US dollars unless stated otherwise.

"I am very pleased with the strong and balanced results we had this quarter. In particular, we had solid growth in year-over-year same store merchandise revenues in all our markets," stated Brian Hannasch, President and CEO of Alimentation Couche-Tard. "We also see positive momentum in regions where the former CST locations have been rebranded showing the strength of both the Circle K and Couche-Tard programs and operations to drive sales. The network-wide focus on promotional traffic-driving campaigns, improved product mixes and tactical loyalty programs contributed to our continued strong top line growth."

Brian Hannasch continued: "Fuel also had a strong showing this quarter where we benefited from both falling product costs and the structure of some of our larger fuel agreements. We also saw good volume growth in our U.S. market. In Canada, we continued to improve the trend in same-store transportation fuel volumes especially at the Esso sites where the newly implemented loyalty program is gaining traction. We are also proud of the work being done to grow the Circle K fuel brand, which is quickly expanding to hundreds of locations in North America providing an easier customer‑experience both at the fuel courts and inside our stores."

"This quarter also marked the one-year anniversary of our Holiday acquisition. We are very pleased with the integration and more importantly the outstanding people who serve our customers in our Northern Tier business unit. Our dedicated teams have worked very hard to learn from and capture Holiday's best practices, and we have made significant strides in piloting programs across the network based on Holiday's food offer, promotional programs and operational efficiencies. It has been a great year of growing together."

Claude Tessier, Chief Financial Officer, stated: "We take great pride in reducing our debt and further strengthening our balance sheet, and our remarkable results this quarter are a tribute to that effort. With the strong cash flow generated during the quarter and the faster than anticipated deleveraging, as evidenced by our adjusted leverage ratio of 2.38:1, we are in a strong position to create more value for our shareholders through the continuation of our strategic growth plans, while increasing our dividend and seeking regulatory approval for a new share repurchase program. As always, we will maintain our customary commitment to financial discipline as we consider future opportunities."

 Significant Items of the Third Quarter of Fiscal 2019

• On December 1, 2018, we completed the disposal of our marine fuel business to St1 Norge AS through a share purchase agreement pursuant to which St1 Norge AS acquired 100% of all issued and outstanding shares of Statoil Fuel & Retail Marine AS. Total proceeds from the disposal were $24.3 million. The transaction resulted in a pre-tax gain on disposal of $3.2 million.
• On December 17, 2018, we entered into an Asset Exchange Agreement with CAPL under which 192 Circle K U.S. company‑operated stores will be exchanged against the real estate property currently held by CAPL for 56 U.S. company‑operated stores currently leased and operated by Couche-Tard and 17 company-operated stores currently owned and operated by CAPL in the U.S. Upper Midwest. The aggregate value of this agreement is approximately $185.0 million. It is expected that the exchange of assets will occur in a series of transactions over a period of up to 24 months, starting in the first half of calendar year 2019. As CAPL is fully consolidated in our consolidated financial statements, no gain or loss are expected from these transactions.
• As at February 3, 2019, our annual synergies run rate for the CST acquisition reached approximately $207.0 million. These synergies should result in reductions in operating, selling, administrative and general expenses, as well as improvements in road transportation fuel and merchandise distribution and supply costs. We are confident that we will reach our synergy target of $215.0 million¹.
• The rollout of the Circle K brand in North America and Ireland is progressing steadily. As of February 3, 2019, more than 4,900 stores in North America, including approximately 550 stores acquired from CST, and more than 1,900 stores in Europe were proudly displaying our new global brand.
• During the quarter, as part of our cost's reduction initiatives and the search for synergies aimed at improving our efficiency, we made the decision to proceed with the restructuring of certain of our operations. As such, an additional restructuring expense of $1.6 million was recorded to earnings of the third quarter of fiscal 2019.
• On November 28, 2018, we entered into a new credit agreement consisting of an unsecured non-revolving credit facility of an aggregate maximum amount of $213.5 million, maturing June 27, 2020 (the "credit facility"). During the quarter, we used the entire credit facility to repay the remaining outstanding balance of our acquisition facility.
• On March 19, 2019, we announced, subject to TSX approval, our intention to implement a new share repurchase program which would allow us to repurchase up to 4.0% of our Class B subordinate voting shares.

 

 

Changes in our Network

• During the third quarter of fiscal 2019, we acquired three company-operated stores through distinct transactions and added two company-operated stores through RDK, a joint-venture, for a total of seven company-operated stores since the beginning of fiscal year 2019.
• During the third quarter of fiscal 2019, we completed the construction, relocation or reconstruction of 11 stores, reaching a total of 32 stores since the beginning of the fiscal year. As of February 3, 2019, 42 stores were under construction and should open in the upcoming quarters.

Summary of changes in our store network during the third quarter of fiscal 2019

The following table presents certain information regarding changes in our store network over the 16-week period ended February 3, 2019:

 

 

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:

 

 

Summary Analysis of Consolidated Results for the Third Quarter and First Three Quarters of Fiscal 2019

The following table highlights certain information regarding our operations for the 16 and 40-week periods ended February 3, 2019, and February 4, 2018. CAPL refers to CrossAmerica Partners LP.