Alimentation Couche-Tard maintains its momentum into the second quarter of fiscal year 2019

• Net earnings attributable to shareholders of the Corporation ("net earnings") of $473.1 million ($0.84 per share on a diluted basis) for the second quarter of fiscal 2019 compared with $432.5 million ($0.76 per share on a diluted basis) for the second quarter of fiscal 2018. Excluding certain items for both comparable periods, net earnings for the quarter would have been approximately $473.0 million¹ or $0.84¹ per share on a diluted basis, compared with $0.80¹ per share on a diluted basis for the second quarter of fiscal 2018, an increase of 5.0%.
• Total merchandise and service revenues of $3.5 billion, an increase of 11.1%. Same-store merchandise revenues increased by 4.4% in the U.S., by 4.6% in Europe and by 5.1% in Canada.
• Merchandise and service gross margin increased by 1.1% in the U.S., to 34.3%, while it decreased by 0.9% in Europe and Canada, to 41.1% and 33.7%, respectively.
• Total road transportation fuel volumes grew by 12.6%. Same-store road transportation fuel volumes increased by 1.2% in the U.S. and by 0.1% in Europe, while same-store volumes decreased by 2.2% in Canada.
• Road transportation fuel gross margin decreased by US 2.82¢ per gallon in the U.S. to US 21.88¢ per gallon, by US 0.79¢ per liter in Europe, to US 8.75¢ per liter and by CA 0.22¢ per liter in Canada, to CA 8.42¢ per liter.
• Current annual synergies run rate related to the CST Brands Inc. ("CST") integration reached approximately $200.0 million.
• Adjusted leverage ratio continued to improve and reached 2.79:1, on a pro-forma basis.
• Circle K rebranding project continues in North America and Ireland. More than 4,050 stores in North America and more than 1,800 stores in Europe now display the new Circle K global brand.
• Return on equity and return on capital employed at 24.0% and 12.1%, respectively, on a pro-forma basis.

 

 

LAVAL, QC, Nov. 27, 2018 /PRNewswire/ - For its second quarter ended October 14, 2018, Alimentation Couche-Tard Inc. (TSX: ATD.A) (TSX: ATD.B) announces net earnings attributable to shareholders of the Corporation of $473.1 million, representing $0.84 per share on a diluted basis. The results for the second quarter of fiscal 2019 were affected by a net tax benefit of $6.2 million stemming from the decrease of the statutory income tax rate in Sweden, pre-tax restructuring costs of $4.8 million, a pre-tax net foreign exchange gain of $3.7 million, as well as pre-tax acquisition costs of $0.7 million. The results for the comparable quarter of fiscal 2018 were affected by a pre-tax net foreign exchange loss of $17.3 million, pre-tax incremental expenses caused by hurricanes totaling $4.8 million, a $4.2 million pre-tax accelerated depreciation and amortization expense in connection with the Corporation's global brand initiative, as well as pre-tax acquisition costs of $3.4 million. Excluding these items, the adjusted diluted net earnings per share would have remained at $0.84 for the second quarter of fiscal 2019, compared with $0.80 for the second quarter of fiscal 2018, an increase of 5.0%, driven by organic growth, the contribution from acquisitions, as well as a lower income tax rate, partly offset by lower road transportation fuel margins and 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.

"We had strong performance this quarter across the entire network. In particular, I am pleased with year-over-year same-store merchandise revenues. In the U.S., where we had a 4.4% increase, we also improved our underlying margins," stated Brian Hannasch, President and CEO of Alimentation Couche-Tard. "We are also pleased with the improvement in year-over-year same-store sales results in Canada and in Europe driven by new promotions and the continued success of our food programs in many areas. Overall, we feel good about the momentum we are seeing in our stores as we continue our network-wide push of promotional and marketing programs."

Brian Hannasch continued: "While U.S. fuel margins were strong this quarter, they were markedly lower compared to the prior year quarter, which was impacted by volatility caused by the hurricanes in Texas and Florida last year. In Canada, we improved the trend in same-store transportation fuel volumes compared to the first quarter of fiscal 2019 as the new loyalty program was introduced at the Esso locations and continues to gain traction."

"Great work continues to be done at the CST and Holiday sites. The rebranding of several hundred former CST stores to Circle K contributed to the overall positive same-store merchandise results this quarter. Hundreds more CST sites are scheduled for rebranding by the end of the fiscal year, and we are seeing good customer acceptance at these locations. From the Holiday network, we are beginning to track the added value of the food pilots in other business units," concluded Brian Hannasch. 

Claude Tessier, Chief Financial Officer stated: "This was once again an impressive quarter in terms of cash-flow generation and continuation of our deleveraging plan. After only 15 months, we are very close to hitting our 3-year synergy expectations related to the CST acquisition. We also efficiently managed inflationary pressure from both wages and other costs while keeping our operating expenses under control. This is due to our strict financial discipline as we continue our strategic growth trajectory and increasing value for our shareholders."

 Significant Items of the Second Quarter of Fiscal 2019

• As at October 14, 2018, our annual synergies run rate for the CST acquisition reached approximately $200.0 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 expect 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 October 14, 2018, more than 4,050 stores in North America, including more than 300 stores acquired from CST, and more than 1,800 stores in Europe are now proudly displaying our new global brand.
• During the quarter, we recorded a net tax benefit of $6.2 million, derived from the evaluation of our deferred income tax balances following the decrease of the statutory income tax rate in Sweden, which will decrease from 22.0% to 20.6% over the next 2 years.
• During the quarter, as part of our costs 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 European operations. As such, an additional restructuring expense of $4.8 million was recorded during the second quarter of fiscal 2019.
• In connection with divestiture of certain assets, we have paid a compensatory amount of $6.3 million to CAPL. This compensatory payment was recorded in our operating expenses and was eliminated upon consolidation.
• During the quarter, we finalized our estimates of the fair value of the assets acquired, the liabilities assumed and the goodwill for the Holiday Stationstores, LLC acquisition ("Holiday"). There were no other changes to the adjusted net earnings previously reported.

 

 

Changes in our Network

• During the second quarter and first half-year of fiscal 2019, we acquired two company-operated stores through distinct transactions.
• During the second quarter of fiscal 2019, we completed the construction, relocation or reconstruction of 11 stores, reaching a total of 21 stores since the beginning of the fiscal year. As of October 14, 2018, 34 stores were under construction and should open in the upcoming quarters.

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

The following table presents certain information regarding changes in our store network over the 12-week period ended October 14, 2018:

 

 

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 Second Quarter and First Half-year of Fiscal 2019

The following table highlights certain information regarding our operations for the 12 and 24-week periods ended October 14, 2018 and October 15, 2017. CAPL refers to CrossAmerica Partners LP.