The quarter marks the one-year anniversary of the CST Brands acquisition.
For its first quarter ended July 22, 2018, Alimentation Couche-Tard Inc. announced net earnings attributable to shareholders of the Corporation of $455.6 million, representing $0.81 per share on a diluted basis.
The results for the first quarter of fiscal 2019 were affected by a $55.0 million pre-tax impairment charge on CrossAmerica Partners LP’s (CAPL) 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.
The results for the comparable quarter of fiscal 2018 were affected by pre-tax restructuring and integration costs of $43.2 million (of which $5.2 million was attributable to non-controlling interest), a pre-tax net foreign exchange loss of $20.3 million, a $13.4 million tax recovery following an internal reorganization, an $11.5 million pre-tax gain on the disposal of a terminal, an $8.8 million pre-tax gain on the investment the Corporation held in CST, a $3.7 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 $3.3 million. Excluding these items, the adjusted diluted net earnings per share would have been $0.88 for the first quarter of fiscal 2019, compared with $0.67 for the first quarter of fiscal 2018, an increase of 31.3%, driven by the contribution from acquisitions, higher road transportation fuel margins, organic growth, as well as lower income tax rate, partly offset by higher financing expenses following the Corporation’s recent acquisitions. All financial information is in US dollars unless stated otherwise.
“Overall, we are very pleased with the results this quarter. In particular, we had strong year-over-year same-store merchandise revenues increases across the network in the U.S., Canada, and Europe with a good balance of in-store traffic and basket growth while we were able to maintain or improve underlying margins in most geographies,” stated Brian Hannasch, president and CEO of Alimentation Couche-Tard. “During the quarter, we had parts of our network that benefited from better weather than last year, particularly in Europe and Eastern Canada. As first seen in the fourth quarter of fiscal 2018, all geographies also continue to see improving traffic trends, partially driven by the ramping up of our promotional marketing and advertising initiatives, as well as by strong consumer spending.”
Hannasch continued, “I am also pleased with our fuel volume and margins in the U.S. and in Europe in the facing of rising retail prices. In the U.S., we had generally healthy margins as well as improvement in volumes in the business units with CST sites. Also, while we did see volume growth in most of Canada, our Esso branded stores were affected by a temporary gap in loyalty programs this quarter.”
“This quarter marked the one-year anniversary of our CST acquisition, and I am very proud of the integration and results. It all starts with people, and we have added a lot of great people to the Couche-Tard family who have done an amazing job turning around trends. Once again this quarter, we had good same-store merchandise growth, and we continued to realize impressive synergies. We are also well on our way in rebranding the former Corner Stores locations to Circle K with the initiative starting in the Rocky Mountain Business Unit, and the “We are Circle K” campaign in full swing across Texas,” concluded Hannasch.
Claude Tessier, chief financial officer stated: “Our solid results this quarter have once again generated strong cash flow that is allowing us to accelerate our deleveraging plan as evidenced by our adjusted leverage ratio of 2.86:1. While in-store hourly-wage rate pressures brought this quarter’s growth in expenses to higher levels than in the past, we have effectively kept the rest of our cost increases in line with inflation. As always, this cost control is due to our rigorous financial discipline and focus on increasing value for our shareholders.”
During the quarter, as part of costs reduction initiatives and the search for synergies aimed at improving efficiency, the company made the decision to proceed with the restructuring of certain of our European operations. As such, an additional restructuring expense of $1.5 million was recorded during the first quarter of fiscal 2019.
As at July 22, 2018, its annual synergies run rate for the CST acquisition reached approximately $189.0 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. The company expects that its synergies will reach $215.0 million over the three years following the close of the transaction.
During the quarter, Couche-Tard adjusted its assessment of the fair value of the assets acquired, the liabilities assumed and the goodwill for the Holiday acquisition. The preliminary adjustments, which are subject to material adjustments until the process is completed, had the following impact on our previously reported net earnings:
The Circle K rebranding project continues in North America and Ireland. More than 3,650 stores in North America and more than 1,700 stores in Europe now display the new Circle K global brand.