ALIMENTATION COUCHE-TARD INC.
INVESTORS PRESENTATION
October 2016 FORWARD-LOOKING INFORMATION AND CAUTIONARY LANGUAGE
This presentation and the accompanying oral presentation contain forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “projected”, “estimate”, “may”, “anticipate”, “believe”, “expect”, “plan”, “intend” or similar words suggesting future outcomes or statements regarding an outlook. All statements other than statements of historical fact contained in these slides are forward-looking statements.
Forward-looking statements involve numerous assumptions, risks and uncertainties. A variety of factors, many of which are beyond Alimentation Couche-Tard Inc.’s (“Couche-Tard”) control, may cause actual results to differ materially from the expectations expressed in its forward-looking statements. These factors include, but are not limited to, 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, foreign exchange rate fluctuations, and such other risks as described in detail from time to time in documents filed by Couche-Tard with securities regulatory authorities in Canada, including those risks described in Couche-Tard’s management’s discussion and analysis (MD&A) for the year ended April 24, 2016. Couche-Tard’s MD&A and other publicly filed documents are available on SEDAR at www.sedar.com.
Unless otherwise required by law, Couche-Tard does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by it or on its behalf. No financial information presented in this presentation as of a date more recent than April 24, 2016 has been audited.
While the information contained in this presentation is believed to be accurate, Couche-Tard expressly disclaims any and all liability for any losses, claims or damages of whatsoever kind based upon the information contained in, or omissions from, this presentation or any oral communication transmitted in connection therewith. In addition, none of the statements contained in this presentation are intended to be, nor shall be deemed to be, representations or warranties of Couche-Tard and its affiliates. Where the information is from third-party sources, the information is from sources believed to be reliable, but Couche-Tard has not independently verified any of such information contained herein.
This presentation is not, and under no circumstances is to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of securities. Under no circumstances should the information contained herein be considered an offer to sell or a solicitation of an offer to buy any securities.
2 COMPANY REPRESENTATIVES
Brian Hannasch President and Chief Executive Officer
Claude Tessier Chief Financial Officer
Mathieu Descheneaux Vice President Finance
3 AGENDA
1. Company Highlights 2. Ambitions & Strategy 3. Network Development 4. Value Creation & Financial Review 5. CST Case Study
4 KEY DATA
• Listed on the Toronto Stock Exchange ATD.B
• Market Cap1 Approx. CA$36B
• Revenue US$34.1B Fiscal Year 20162 US$8.4B Q1 2017 YTD2
• Gross Profit US$6.0B Fiscal Year 20162 US$1.5B Q1 2017 YTD2 (+7.1%)
• EBITDA US$2.3B Fiscal Year 20162 US$0.6B Q1 2017 YTD2 (+12.2%)
• Number of stores3 12,081 North America 7,863 Europe 2,708 International 1,510
• Net Debt / Leverage4 FY2016 US$2.3B / 0.97x Q1 2017 US$2.2B / 0.94x • Ratings S&P BBB (Stable outlook) Moody’s Baa2 (Stable outlook)
1.As of September 30, 2016. 2.Fiscal Year ended 24/04/2016 and Q1 2017 YTD being 12 weeks to 17/07/2016. 3.Includes Couche-Tard’s Company-Owned/Dealer-Operated and Dealer-Owned-Dealer-Operated sites as of July 17, 2016. 5 4.Long term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by EBITDA adjusted for non-recurring items. Refer to the Corporation’s MD&As for more details. ALIMENTATION COUCHE-TARD INC.
COMPANY HIGHLIGHTS WHO WE ARE
Couche-Tard is a Canadian based group and a world leader in the convenience store and road transportation fuel retail sector • In North America, Couche-Tard is the largest independent convenience store operator in terms of number of company-operated stores. • In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in Scandinavia, Ireland and the Baltic countries, with a significant presence in Poland and Russia.
• 7,863 convenience stores throughout North America, including North America 6,474 stores offering road transportation fuel in all 10 Canadian provinces and 41 U.S. States, and employing about 80,000 people
• 2,708 stores, comprising a broad retail network across Scandinavia (Norway, Sweden and Denmark), Ireland, the Baltics (Estonia, Europe Latvia and Lithuania), Poland and Russia. Including employees at its branded franchise stations, about 25,000 people work in its retail network, terminals and service offices across Europe.
• Over 1,500 stores operated by independent operators under the Circle K banner in 13 other countries or regions worldwide which International brings the number of sites in Couche-Tard’s network to almost 12,100 .
(1) As of July 17, 2016.
7 COMPANY HISTORY
• 1980 Start of operations with the opening of a first convenience store located in Laval, Québec. • 80’s-90’s Consolidation of the Canadian market. • 2001 First breakthrough of Couche-Tard in the United States : acquisition of the assets of Johnson Oil Company, Inc., owner of 225 Bigfoot stores, all located in the U.S. Midwest. • 2003 Acquisition of The Circle K Corporation from ConocoPhillips Company that operates 1,663 Circle K corporate stores located in 16 States and has a franchising or licensing relationship with 627 additional stores in the U.S. and worldwide.
• 2004 Couche-Tard becomes an active player in the US market consolidation.
• 2012 Acquisition of Statoil Fuel & Retail, a leading Scandinavian road transport fuel retailer. Statoil Fuel & Retail operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania) and Russia with approximately 2,300 stores, the majority of which offer fuel and convenience products while the others are automated (fuel only) stations. • 2015 Acquisition of The Pantry Inc., a leading convenience store operator in the southeastern United States and one of the largest independently operated convenience store chains in the United States. The Pantry operates approximately 1,500 stores in 13 States under select banners, including Kangaroo Express®, its primary operating banner. • 2015 Couche-Tard launches its global Circle K brand, the world’s preferred destination for convenience and fuel. • 2016 Acquisition of Topaz, the leading convenience and fuel retailer in Ireland, made up of 444 stores. All the Topaz stores will be rebranded with the new global brand Circle K.
• 2016 Couche-Tard signs an agreement with Imperial Oil to acquire 279 Esso-branded Canadian fuel and convenience sites. These sites are located in the provinces of Ontario and Québec. • 2017 Couche-Tard enters into a merger agreement to acquire 100% of the outstanding shares of CST Brands, Inc. (NYSE:CST) which stands as the 4th largest chain in North America with 1,146 locations in the US due to a strong presence in Texas and 873 locations in Canada.
8 A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR
• Leading C-store operator in North America, Scandinavia, Ireland and Baltics Broad Geographic Footprint with • Strong banners Leading Market Positions • World class retailer with geographically diversified footprint
• Increasing focus on private label, fresh food products and famous for concepts Superior Product Offerings • Industry leading merchandise gross margin
• Proven integrator Track Record of Highly Disciplined • Well positioned to lead further consolidation in fragmented industry Growth and Debt Reduction • Committed to remain investment grade post acquisition
•Steady industry performance throughout downturns with strong projected growth Attractive Sector Dynamics •C-store sector well positioned to gain share from traditional food retail •Industry-leading returns in recessions
•Strong and consistent financial performance throughout all economic cycles Powerful Financial Results •Prolific history of positive same-store comps and 27% Return on equity •Significant FCF generation (2011-2016) CAGR of 23%
•Proven ability to extract significant synergies from acquisitions Attractive Synergy Potential •Transferring best practices across entire platform
•Management team with strong track record and founders have 23% equity ownership as of April 24, 2016 Disciplined Management Culture •Management and Board need to hold a multiple of their salary in Shares •Decentralized operating model
9 EXPERIENCED MANAGEMENT TEAM
Alain Bouchard Brian P. Hannasch Claude Tessier Founder and Executive President and Chief Chief Financial Officer Chairman of the Board Executive Officer On September 24, 2014, President and Chief Claude Tessier, CPA, CA, is Mr. Bouchard stepped down Executive Officer since Couche-Tard’s Chief as President and Chief 2014. Previously Chief Financial Officer since Executive Officer and took Operating Officer since 2010 January 2016. Beforehand, on a new role as Founder and Senior Vice-President, Mr. Tessier was President of and Executive Chairman of U.S. Operations from 2008 the IGA Operations the Board of Directors. to 2010. Business Unit part of Sobeys since 2012.
Jean Bernier Geoffrey C. Haxel Dennis Tewell Darrell Davis Group President Global Senior Vice-President, Senior Vice-President, Senior Vice-President, Fuels and North-East Operations Operations Operations OperationsAppointed Group President Appointed Senior Vice- Appointed Senior Vice- Appointed Senior Vice- Global Fuels and North-East President, Operations in President, Operations in President, Operations in Operations on July 30, 2012. January 2011. He was June 2013. Prior to his May 2012. Previously, he He has over 25 years of formerly Vice-President, current appointment, He had been Vice-President experience in the Operations, U.S. Arizona held the position of Vice- Operations, Florida since convenience store, fuel and Region since December President, Worldwide March 2011. grocery store sectors of the 2003. Franchise as he joined retail industry. Couche-Tard in January 2011. Jacob Schram Alex Miller Jørn Madsen Hans-Olav Høidahl Group President, European Senior Vice President, Executive Vice-President, Executive Vice-President, Operations Global Fuels Central & Eastern Europe Scandinavia Appointed Senior Vice- Appointed Group President, Appointed Executive Vice- Appointed Executive Vice- President Global Fuels on European Operations in President, Central & Eastern President, Scandinavia on February 16, 2016. June, 2012. He was formerly Europe on October 1, 2010. October 1, 2010. He was Previously, he had been Chief Executive Officer for He was formerly Vice formerly Vice President for Vice-President North Statoil Fuel & Retail from President for country Energy Europe in the Statoil American Fuels since October 1st, 2010. He joined operations in Statoil Energy Group since 2006. October 2012. He joined Statoil in 1996. & Retail since 2007. He Couche-Tard in January joined Statoil in 1990. 2012 as Director of Operations Midwest.
10 Leader in the Canadian convenience store industry NORTH AMERICAN NETWORK • In Canada, the convenience store sector is dominated by a few major players including Couche-Tard and integrated oil companies. Some of the later are selling, or expected to sell their retail assets. • In 2016, Couche-Tard signed an agreement with Imperial Oil to acquire 279 sites in Ontario and Quebec. These store are currently being integrated. Largest independent convenience store operator in the US in terms of number of company operated stores • In the US, the convenience sector is fragmented and in a consolidation phase • Couche-Tard acquired The Pantry in March 2015, one of the largest independently operated convenience stores in the US • The Corporation has recently entered into a merger agreement to acquire 100% of the outstanding shares of CST Brands, the 4th largest chain in North America. The transaction is expected to close early calendar year 2017.
Canada US Couche-Tard Circle K Circle K Kangaroo Express Mac’s (will be rebranded to (will be rebranded Circle K) to Circle K)
Total network of 7,863 stores in North America
As of July 17, 2016.
11 EUROPEAN NETWORK
Leader in convenience store and road transportation fuel retail in the Scandinavian and Baltic countries and Ireland (which was acquired on February 1st, 2016) • The European convenience store sector is often dominated by a few major players, including integrated oil companies. Some of these are in the process of selling, or are expected to sell their retail assets • In Q1, 50 stores were transferred to our Danish network in relation to the Shell Denmark acquisition(1). The remaining 77 sites will be transferred by the end of third quarter FY2017. • Key brands: Circle K Being rebranded from Statoil Ingo Unmanned Scandinavian stations Topaz Will be rebranded to Circle K
2,708 stores in 9 countries or regions in Europe
As of July 17, 2016. (1) In May 2016, Couche-Tard completed the acquisition of Shell Denmark. As per the requirements of the European commission, the Corporation will retain 127 sites and divest 24 of its legacy sites. An agreement has been reached to convert all retained sites to company-operated stores. The stores are added to the Danish network as they are transferred from Dansk Fuel. 12 INTERNATIONAL PRESENCE
Central / South Asia America • Convenience stores China United Arab operated by independent Mexico Emirates 94 operators under the 297 30 Circle K brand • License agreement to Guam use the brandname Honduras 13 Circle K 18 • Agreement to convert Hong Kong over 700 « Extra » Egypt 330 branded convenience 4 Costa Rica Philippine stores to Circle K in 1 Macau Vietnam s Mexico by August 2017 28 169 6 and a minimum of 2,400 by 2030 Malaysia 6 Indonesia 514
More than 1,500 licensed Circle K stores in Asia, Costa Rica, Egypt, Honduras, Mexico and U.A.E
As of July 17, 2016.
13 CONSOLIDATED NETWORK RECAP
Canada U.S. Europe International Total presence COCO(1) 1,440 4,661 1,864 - 7,965 CODO(2) - 145 375 - 520 DODO(3) - 551 469 - 1,020 Franchise/Affiliated(4) 390 676 - - 1,066
Licensed(5) - - - 1,510 1,510
Total 1,830 6,033 2,708 1,510 12,081
Of which: Automats - - 969 - 969 # With fuel 749 5,725 2,705 - 9,179 % With fuel 41% 95% 100% - 76%
(1) Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service stations) are operated by Couche-Tard or one of its commission agents. (2) Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service stations) are operated by an independent operator in exchange for rent and to which Couche-Tard supplies road transportation fuel through supply contracts. Some of these sites are subject to a franchise agreement, licensing or other similar agreement under one of our main or secondary banners. (3) Sites controlled and operated by independent operators to which Couche-Tard supplies road transportation fuel through supply contracts. Some of these sites are subject to a franchise agreement, licensing or other similar agreement under one of our main or secondary banners. (4) Stores operated by an independent operator through a franchising, licensing or another similar agreement under one of our main or secondary banners. (5) Stores operated by independent operators under the Circle K banner in other countries or regions worldwide.
As of July 17, 2016.
14 COUCHE-TARD – WORLD LEADER
Couche-Tard is a leading global convenience store operator with EBITDA of $2.4 billion(1) • Well diversified • Merchandise and services represent 56% of gross profits • Focus on growing high margin categories
(1) 2017 Q1 LTM, Pro forma Topaz
15 REVENUE & GROSS PROFIT
Gross Profit is the more accurate reflection of our business operations
• Revenue includes road transportation fuel revenues which is the dollar amount of sales • Revenue can therefore change with movements in the average selling price of road transportation fuel • In fiscal 2016, road transportation fuel revenue represented about : 53% of total revenue in Canada 68% of total revenue in the US, and 76% of total revenue in Europe • Yet, road transportation fuel gross margins represented only about 40% of Couche-Tard’s overall gross profit • Gross profit represents our income after cost of sales
CAG: Five-year compounded annual growth - fiscal 2016 over fiscal 2011
16 ACT - HISTORY OF STRONG FINANCIAL PERFORMANCE Gross Profit Same Store Sales
2010 2011 2012 2013 2014 2015 2016
Merchandise Sales (in millions of US Dollars) 16% CAGR US 2.9% 4.2% 2.7% 1.0% 3.8% 3.9% 4.6%
6 082 Europe - - - - 1.6% 2.0% 2.8% 4 988 5 268 4 610 Canada 4.8% 1.8% 2.8% 2.0% 1.9% 3.4% 2.9%
2 975 2 553 2 746 Motor Fuel Volume US 1.0% 0.7% 0.1% 0.6% 1.7% 3.4% 6.6% 2010 2011 2012 2013 2014 2015 2016 Europe - - - - 2.5% 2.4% 2.6%
Canada 3.0% 3.9% (0.9%) 0.0% 1.3% (0.1%) 0.9%
EBITDA Free Cash Flow (1)
(in millions of US Dollars) (in millions of US Dollars) 24% CAGR 25% CAGR 2 332 1 067 1 876 979 1 640 865 1 376 614 647 734 841 278 378 404
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Proven track record of significant growth
(1) Free Cash Flow defined as: EBITDA minus total CAPEX (excluding price paid for acquisitions), net dividends paid, net interests paid and net income taxes paid plus proceeds from disposal.
17 STOCK PERFORMANCE – COMPARED TO PUBLIC COMPETITORS AND RETAIL INDUSTRY
Source: Reuters. As of August 26, 2016.
18 ALIMENTATION COUCHE-TARD INC.
AMBITIONS & STRATEGY OUR VISION
TO BECOME THE WORLD’S PREFERED DESTINATION FOR CONVENIENCE AND FUEL
20 OUR GLOBAL BRAND GET HIGH DEF
21 GLOBAL CIRCLE K BRAND
• On September 22, 2015, Couche-Tard announced the creation of a new, global convenience brand, “Circle KTM” • The existing Circle K is already Couche-Tard’s largest and most international brand. It can be seen today serving the needs of customers in 16 countries around the world • The new Circle K brand will replace the existing brands • Circle K® • Statoil® • Mac’s® • Kangaroo Express® • Topaz® • Couche-Tard has chosen to retain the company’s founding Couche-Tard retail brand in the province of Québec, Canada • The rollout will take place progressively across the US, Scandinavia, Central and Eastern Europe and Canada • The new Circle K brand will also appear on licensed stores worldwide • The Company’s goal in the coming years is to have a single convenience retail brand across our worldwide network • Very pragmatic approach: Couche-Tard will be rebranding stores as part of its normal cycle of store refreshes • Prioritization of recent acquisitions, such as The Pantry, as well as those for which Couche-Tard is under contractual obligations to rebrand, such as the Statoil sites in Europe • A total of 247 stores in Europe and 477 stores in North America are now proudly displaying our new global convenience brand Circle K. Before After Before After
22 REBRANDING STATUS
As of Q1 2016, 477 stores in North America and 247 stores in Europe had been rebranded with our new global convenience brand Circle K.
23 NEW GLOBAL BRAND – SAME APPROACH TO SERVING OUR CUSTOMERS
SUPER GLOBAL SUPER LOCAL
24 THE PROMISE BEHIND THE BRAND
25 MAKING IT EASY BRAND PILLARS SUPPORTING OUR PROMISE
26 BRAND PILLARS – FAST & FRIENDLY SERVICE
Recruitment Employee Employee Service Training Physical & Hiring engagement turnover standards appearance
27 BRAND PILLARS – EASY VISTS
Predictable in-store and forecourt experience
Clean In-stock Fast transaction #2 reason impacting Out-of-stock is #1 reason 88% of US adults want shoppers’ decision of for missed sale in c- their store checkout which c-store to visit stores experience to be faster (after location)
Source Convenience store news
28 BRAND PILLARS – PRODUCTS FOR PEOPLE ON THE GO
Hot Cold Private Food Dispensed Dispensed Car Wash Fuel Label Beverages Beverages
29 CONVENIENCE KEY CATEGORIES
30 PRIVATE LABEL
Better value proposition to customers
Increased Circle K brand awarness
Higher penny profit
31 FUEL
Consumer Payment & experience Loyalty
Pillars
Product Pricing Differentiation
32 ALIMENTATION COUCHE-TARD INC.
NETWORK DEVELOPMENT NEW FORMAT DEVELOPMENT
Larger fuel offering
Food service expansion
High traffic locations
Focus on site layouts & critical dimensions
Circle K Branded store & customized fuel branding
Standardization of building, interior layout & image
34 NEW SITES We completed the construction, relocation or reconstruction of 93 stores during fiscal 2016
35 ALIMENTATION COUCHE-TARD INC.
VALUE CREATION AND FINANCIAL REVIEW OUR FOUR PILLARS OF VALUE CREATION – THE EQUATION
Protect Value & Enable Value Drivers Growth
Capital Organic Cost Structure & Value Acquisitions Growth Discipline Financial Creation Discipline
37 Focus on ORGANIC GROWTH customers’ needs and respond to market trends Emphasize on Construction, key categories relocation or – Food, coffee, reconstruction cold of stores beverages, fuel and car wash
Innovation and Branding Organic Growth technology
Private label Execution
Continuous improvement
38 ORGANIC – FISCAL 2016 TOP-LINE GROWTH THROUGHOUT
Europe SSS +2.8%
Canada Europe SSV SSV +2.6% +0.9%
Organic Growth
Canada US SSS SSS +2.9% +4.6%
US SSV: Same-store volume SSV SSS: Same-store merchandise sales +6.6%
39 ORGANIC – SUSTAINABLE TOP-LINE GROWTH
Merchandise & Service Sales Road Transportation Fuel Volume (millions of US dollars) (millions of gallons) 10% CAG 20% CAG 10,072 10,502 8,135 7,596 7,953 8,276 7,626 6,222 6,599 6,945 4,613 4,195
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Same-store Merchandise Road Transportation Fuel 5% Revenues 10% Same-Store Volume
0% 2011 2012 2013 2014 2015 2016
0% -10% 2011 2012 2013 2014 2015 2016 US Europe Canada US Europe Canada
CAG: Compounded Annual Growth
40 ORGANIC GROWTH – FISCAL 2016 MERCHANDISE & SERVICE MARGIN IMPROVEMENTS
Europe 42.5% +1.3%
Organic Growth United Canada States 32.8% 33.3% -0.1% +0.4%
41 NO CLEAR CORRELATION BETWEEN FUEL PRICES & MARGINS U.S. Market (1) • No clear correlation between fuel selling price and margins • Our margins are not directly impacted by lower fuel selling prices • Lower fuel prices leave customers more money in their pockets for their in-store shopping
U.S. Fuel Margins (CPG) (1) Canadian Fuel Margins (CPL) (1) Norwegian Fuel Margins (NOK PL) (2)
Swedish Fuel Margins (SEK PL) (2) Danish Fuel Margins (DKK PL) (2)
(1) For company-operated stores only. (2) For total network
42 US FUEL MARGINS TRENDS Year-over-year volatility – Long term trend is up
ACT Historical US Fuel Margins (CPG) US Industry Historical Fuel Margins (CPG) 24,00 22,00 +2.9 CAG 24,00 20,00 22,00 20,00 18,00 18,00 16,00 16,00 14,00 14,00 12,00 12,00 10,00 10,00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 • Large integrated oil companies out of retail. Market • Large integrated oil companies out of retail. Market dominated by pure play retailers who need to dominated by pure play retailers who need to maintain and grow margins in order to maintain maintain and grow margins in order to maintain profitability profitability • Higher premium fuel penetration • Higher premium fuel penetration • Improved, more sophisticated pricing strategies • Improved, more sophisticated execution • Improved supply conditions
ACT: Fiscal Year / Industry: Calendar Year Sources: ACT reporting documents and NACS SOI Annual Report. 43 Smart, disciplined ACQUISITIONS acquisition strategy – Spotting the right opportunities and striking the right deals at the right price
Spot the right Deleveraging opportunities
Acquisitions
Realization of Strike the right available deal at the right synergies price
Swift and efficient integration
44 PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS
Garvin oil
Compac Food Stores Revenue ($) Revenue Winners Sterling Stores
Pump N Shop
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 YTD Debt/ Adjusted 3.1 1.5 1.2 1.8 1.7 1.1 0.7 0.8 (2) (3) (3) (3) (4) 1.2 (3) (4) 1.2 (3) (4) EBITDA (1) 1.3 2.4 1.6 1.5
Stores 1,706 45 75 421 46 107 70 47 326 2,506 166 1,660 515 51 Acquired Agreement signed for additional stores acquisition in 2017 77
279
23
(1) Represents Total Debt/ Adjusted EBITDA. Presented on a pro forma basis. (2) Including full-year results for SFR. Refer to the Corporation’s MD&As for more details. (3) Adjusted for non-recurring items. Refer to the Corporation’s MD&As for more details. (4) Pro forma The Pantry for 2015 and Topaz for 2016. 45 EXCEPTIONAL DELEVERAGING TRACK RECORD
• ACT committed to maintaining a strong balance sheet and sustaining its investment grade credit rating
• Track record of rapid deleveraging after landmark acquisitions
The Pantry Circle K Acquisition No Transformational Acquisition SFR Acquisition Acquisition 2,299 Stores 2,453 Stores Acquired 1,017 Stores Acquired 1,547 Stores Acquired Leverage post SFR Rapid deleveraging Acquired $804M acquisition lower than after Acquisition Circle K transformational Strong credit metrics for several years acquisition $3.6B Acquisition $1.7B Acquisition 4,2 3,6 3,2 3,2 3,0 2,9 3,1 2,5 2,7 2,4 2,1 2,1 2,2 2,0 Adj. Adj. Net Debt / Adj. EBITDAR
F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 Pro Forma F2013 F2014 F2015 (1) F2016 (2)
(1) Pro forma The Pantry (2) Pro forma Topaz.
46 ACQUISITIONS AT FULL SPEED
Topaz 444 sites
Small Shell Acquisitions Danemark 295 sites 127 sites Synergies Statoil Fuel and Retail
•Target: $150M - $200M Acquisitions •Realized: >$200M
CST Brands The Pantry Synergies The Pantry 1,296 sites 1,559 sites
•Target for the first 24 months: $125M Imperial Oil •Current run-rate $111M for the first 18 months Canada 277 sites Synergies CST Brands
•Initial target of $150M –$200M Nearly 4,000 sites added to our network through acquisitions over the last 18 months (announced or completed)
47 COST CONTROL – PART OF OUR DNA
Disciplined Year-over-year expense Culture growth Scalable Organization, Continuous 1,9% 1,7% Systems & Benchmarking 1,5% Processes
0,8% Cost Control 0,2%
Economies of Sharing of 2011 2012 2013 2014 2015 2016 Scale Best Practices
Cost Efficient -0,9% Systems
5-year Average : +0.9%
48 CAPITAL STRUCTURE & FINANCIAL DISCIPLINE
Competitive cost of debt
Rapid deleveraging Well spread after maturities acquisitions
Cost Discipline Access to Disposal of liquidities – non-core Cash and assets credit facilities
Careful Dividend Allocation of growth Capital
49 STRONG EBITDA TO FCF CONVERSION Capital Investment primarily consists of the investment in property and equipment net of disposals and the ongoing improvement of our network: 23% CAG • Construction of new stores • Relocation and construction of existing stores • Replacement of equipment • Information technology • Rebranding
2016 increased significantly because of the integration of more than 1,500 Pantry stores.
Capex spend has averaged about 30% of EBITDA since 2011 • Year after year, Couche-Tard generates strong cash flow from its operations, which allows rapid deleveraging and leads to a strong credit profile • This enables Couche-Tard to be in a strong financial position to consider opportunities for Stay in business capital represents business acquisitions less than 10% of EBITDA. Large majority of capex spend is income producing.
CAG: Five-year compounded annual growth - fiscal 2016 over fiscal 2011. (1) 2015 Free cash flow includes the proceeds from the disposal of the aviation fuel business. (2) 2016 Free cash flow includes the proceeds from the disposal of the lubricants business. 50 STRONG CAPITAL STRUCTURE & FINANCIAL DISCIPLINE
Adjusted Free Cash Flow Leverage (in million dollars US) Ratio 1.90:1 5-year Average Cost Investment of Debt Grade Credit compounded 2.4 % Profile annual growth 1 089 1 067 +23 % 979 865 Capital Structure & Financial €750M of 614 Free Cash Discipline Flow senior unsecured 378 404 ~$1 Billion notes
~$2.5 Billion 2011 2012 2013 2014 2015 2016 LTM available $621M in under credit Cash facilities
Standard&Poors: BBB (Stable) Moody’s: Baa2 (Stable)
51 RESULT OF THE VALUE CREATION EQUATION : ADJUSTED DILUTED EARNINGS PER SHARE AND RETURN ON EQUITY GROWTH
Adjusted Diluted Return on Equity Earnings per Share - Value Diluted (USD) Creation 5-year compounded annual growth 2.09 27.0% +26 % 24.9% 1.79 22.0% 22.6% 20.3% 21.5% 1.35 1.11 0.81 0.67
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
52 RESULT OF THE VALUE CREATION EQUATION : DIVIDEND GROWTH
Dividends Paid – US Millions 5-year compounded annual growth 104 +26% 87 Value Creation 65 50 56 33
2011 2012 2013 2014 2015 2016
Quarterly dividend increased twice during fiscal 2016, from CA5.50¢ per share to CA7.75¢ per share, an increase of 41%
53 RESULT OF THE VALUE CREATION EQUATION : STOCK VALUE GROWTH
Value Creation Value Creation
54 Q1 SNAPSHOT – CONTINUED GROWTH
Q1-2016
Merchandise same-store revenues United States +2.4 % Europe +4.9 % Canada +0.9 % Road transportation fuel same-store volume
United States +2.5 % Europe +0.9 % Canada +0.6 %
Adjusted EBITDA $616M / +12 % Adjusted Diluted Earnings per Share $0.58 / +14 % Declared dividend per share 7.75 ¢ CA / +41 %
55 ALIMENTATION COUCHE-TARD INC.
ACQUISITIONS
Value Creation SHELL DENMARK SNAPSHOT
• In March 2015, Couche-Tard announced an agreement to acquire 315 service stations in Denmark • The agreement also included Shell’s commercial fuel business and Shell’s aviation fuel business in Denmark • Great strategic fit for Couche-Tard’s business in Denmark • On May 1, 2016, Couche-Tard completed the acquisition of all the shares of Dansk Fuel A/S (“Dansk Fuel”) from A/S Dansk Shell, comprising 315 service stations, a commercial fuel business and an aviation fuel business all located in Denmark. As per the requirements of the European commission, Couche-Tard will retain 127 sites, of which 82 are owned and 45 are leased from third parties and will divest the remaining of the Dansk Fuel business in addition to 24 of its legacy sites • The stores are added to Couche-Tard’s Danish network as they are transferred from Dansk Fuel AS. In Q1 2017, 50 stores were transferred to our Danish network and the remaining 77 sites will be transferred by the end of third quarter FY2017 • Dealers store to be converted into company-operated stores (COCO)
57 TOPAZ SNAPSHOT
• Acquisition closed February 1, 2016 • Topaz is the leading convenience and fuel retailer in Ireland, made up of 444 stations including its recently acquired Esso station network • 158 sites are operated by Topaz and 286 by dealers. Topaz owns underlying real estate for about 100 sites • Also includes commercial fuels operation, with two owned terminals and over 30 depots • Extensive and attractive convenience and fuel network, with good locations, quality forecourts and stores, an excellent food offering and very professional teams • Allows Couche-Tard to expand its geographic footprint into what, today, is one of Europe’s best performing economies • Great strategic fit for Couche-Tard, strengthening its position in Western Europe • Superior growth anticipated in in-store sales and fuel volume through the improvement of operations; sharing of business awareness and each company’s best practices; and better supply conditions • Expected cost reduction synergies from integration into existing European platform
58 ESSO CANADA SNAPSHOT
• On March 8, 2016, Couche-Tard announced an agreement to acquire 279 Esso-branded fuel and convenience sites in Canada • 229 sites are located in the province of Ontario, the majority of which in the Greater Toronto Area • 50 sites are located in the province of Québec, in the Greater Montréal Area • The agreement also includes 13 land banks and two dealer sites, as well as a long-term supply agreement for Esso branded fuel • Allows Couche-Tard to expand it’s geographic footprint into the Greater Toronto Area and the Montréal Area • Great strategic fit for Couche-Tard and it would strengthen its position in Canada • Strong underlying real estate value • Transaction has been approved by the Canadian Competition Bureau for 277 sites. 2 sites will need to be sold • The stores are currently in the process of being integrated
59 ALIMENTATION COUCHE-TARD INC.
CST CASE STUDY TRANSACTION SUMMARY
• Alimentation Couche-Tard Inc. (“ACT”) has entered into a merger agreement to acquire 100% of the outstanding shares of CST Brands Inc. (“CST”) by merger, representing a total enterprise value of US$4.43 billion or approximately US$4.28 billion excluding the value of CST’s equity participation in CrossAmerica Partners LP (“CAPL”) • CST shareholders to receive a cash consideration of US$48.53 per share • Implied CST EBITDA multiple of 10.4x pre-synergies (1), 7.0X to 7.6x post-synergies (1) • Transaction is expected to generate between US$150M and US$200M in pre-tax annual cost synergies to be realized 24-36 months after closing • Merger expected to be accretive to earnings within the first year post closing – 40-50 cents EPS accretion expected within third year post closing • Couche-Tard expects to finance the purchase of CST, including the refinancing of a portion of CST’s existing indebtedness through: • Capacity under existing revolving credit facilities • New acquisition debt financing consisting of term loans of which a portion will be termed-out over time • Provides ACT control over CAPL’s General Partner, ownership of associated Incentive Distribution Rights and equity stake of ~20% in CAPL • CAPL is a distributor of branded and unbranded petroleum for motor vehicles in the United States • Following acquisition of CST, ACT will sell a majority of CST’s Canadian assets to Parkland Fuel Corporation for approximately US$750M • Strong value creation through: • Significant EPS accretion • Strong free cash flow generation • Continued capacity to invest in existing business • ACT’s usual discipline which will allow for rapid deleveraging and adequate positioning to seize future investment opportunities • The transaction is subject to CST shareholders approval, to customary regulatory approvals and to closing conditions. We anticipate that the CST transaction will close early calendar year 2017
(1) Pro forma the Flash Foods acquisition, the California and Wyoming sale of assets and adjusted for non-recurring expenses. Excluding CrossAmerica Partners LP. (2) All financial information in this presentation is in US dollars, except if otherwise indicated (3) All information in this presentation exclude CrossAmerica Partners LP, except if otherwise indicated 61 CST OVERVIEW
• CST operates as an independent retailer of motor fuel and convenience in the United States and Eastern Canada • US public company (NYSE ticker: CST) with a market capitalization of ~ $3.4B • Fuel offer mainly branded Valero in the US and Ultramar in Canada • Convenience offer mainly branded Corner Store in the US and Dépanneur du Coin/Corner Store in Canada (2) • 4th largest chain in North America, with Gross Profits • 1,146 locations in the US (1) • 873 locations in Canada + Commercial & Home Heat business 4% • Owns underlying real estate for approximately 1,000 sites (800 in the 27% US and 200 in Canada) (1) 45% 51% 73% • Last-twelve month period ended June 30, 2016 reported EBITDA of US$433M • In February 2016, CST acquired Flash Foods for $425M: Merch. & Serv. US Canada • 165 stores in Georgia and Florida Fuel • In July 2016, CST sold 79 stores in California and Wyoming for $408M Total Per Site • CST owns an investment in CrossAmerica Partners LP, an MLP focused on fuel wholesale and property rental Motor fuel gallons (2) 3.0 billion ~1.5 million • CST controls the general partner of CrossAmerica Partners LP Merchandise sales (2) $2.0 billion ~$1.3 million and owns 100% of the Incentive Distribution Rights • CST holds a 19% equity/economic stake worth ~ $150 million
(1) As of June 30, 2016, Pro forma sale of 79 California and Wyoming sites. Excludes CrossAmerica Parners LP. (2) LTM June 30, 2016, Pro forma sale of 79 California and Wyoming sites and acquisition of Flash Foods. Excludes CrossAmerica Parners LP. 62 HIGHLIGHTS OF THE TRANSACTION
Significant Strategic Acquisition Synergies Rationale Importance Potential
• Unique opportunity to acquire • Operating model alignment • Top-line upside one of few remaining potential North American public targets • Strong geographic • Sharing of business awareness and best practices exceeding 1,000 stores • Entry in Texas • Cost optimization • ACT to exceed 10,000 North • Void fill in US Southeast American stores (including Esso • Optimization of supply conditions Canada) • Strenghtening of existing network • Optimization of distribution • Increased scale and leverage to strategy create brand awareness and • Talent acquisition and cross- take advantage of merchandise learning potential • Elimination of redundant costs and fuel procurement opportunities • Valuable real estate portfolio • MLP structure
63 CST RETAIL NETWORK
1,146 company US Network operated sites
-305 company operated sites -72 cardlock Canadian sites Network -496 commission agents sites
As of June 30, 2016. US Network pro forma sale of 79 sites in California and Wyoming.
64 PRO FORMA NORTH AMERICA FOOTPRINT
53 • COUCHE-TARD 6 US: 6,052 15 4 Canada: 1,836 • CST (1) US: 1,140 (2) Canada: 873 • Esso Canada Ontario: 229 Quebec: 50 • Total US: 7,192 13 Canada: 2,988 7 North America: 10,180
17 9 CST acquisition will allow ACT to 32 further diversify its operations and cash flow with a stronger presence in Texas, a fast growing and business friendly state. 57 15 (1) As of June 30, 2016, pro forma sale of California and Wyoming sites. 0 Excludes CrossAmerica Parners LP 37 (2) Not taking into account subsequent sale of certain Canadian assets 26 (3) CST site count on map is as of December 31, 2015 , pro forma sale of 648 California and Wyoming sites. Does not take into account subsequent sale of 2 15 certain Canadian assets 31
65 PRO FORMA PROFILE - FINANCIAL
Couche-Tard to strengthen its leadership position as a global convenience store operator with pro forma EBITDA of $2.9B
(2) At Closing Pre-synergies EBITDA Contribution (billions of US Dollars) (1) Pro Forma
Revenues 38.4 9.3 47.7 5% % of total 81% 19% 100% 3% 14% GP 6.5 1.3 7.8
% of total 83% 17% 100% 83% Adj. EBITDA 2.5 0.4 2.9
Store network 12,453 (3) 2,013 14,466
(1) Couche-Tard Fiscal 2016 results pro forma the acquisition of Shell Denmark, Topaz and Esso Canada. (2) CST LTM financial results as at June 30, 2016 pro forma the acquisition of Flash Foods and divesture of 79 sites in California and Wyoming. Excludes CrossAmerica Partners LP and the anticipated effect of the sale of certain Canadian assets. (3) Includes Couche-Tard’s Company-Owned/Dealer-Operated and Dealer-Owned/Dealer-Operated sites. 66 PRO FORMA PROFILE – GROSS PROFITS BREAKDOWN
(1) (2) Pro Forma
Europe Canada Europe Canada Canada 25% 12% 20% 17% 27% Canada 100% By United United Geography States States 63% 73% United States 63%
Others Others Merch. & Others Others 3% 4% Services 4% 31% 1% Fuel By 42% Fuel Merch. & Merch. & Merch. & Fuel Services 44% Products Services Services 45% 51% 52% 55% Fuel 68%
Couche-Tard to strengthen presence in Canada and United States markets
(1) FY 2016 pro forma Topaz and Shell Denmark. (2) CST LTM June 30, 2016, pro forma Flash Foods acquisition and sale of California/Wyoming sites. Excludes CrossAmerica Partners LP and the anticipated effect of the sale of certain Canadian assets. 67 EXCEPTIONAL SYNERGIES POTENTIAL
TOP-LINE SYNERGIES COST SYNERGIES
Merchandise Supply Costs Increased brand Leveraging key penetration and awareness consumer
$150M- $200M in pre-tax cost synergies Leveraging Value drivers, best practices and e.g. loyalty, Operating Fuel cross- digital marketing, etc Expenses Sourcing & learning opportunities and Distribution Overhead Costs
68 INTEGRATION STRATEGY
Transfer Integrate Re- Roll-out key CST to support negotiate Evaluate Integrate programs– existing functions, Rebrand to ACT talent pool Sale of CST operations & Polar Pop, ACT non- Review technology Circle K/ existing and secure Canadian eliminate Simply fuel distribution and systems agreements key assets redundant Great Couche- agreements strategy & eliminate to leverage employees costs Coffee, Tard to unlock redundant increased ATMs, etc. procurement costs scale synergies
Build optimal strategy for CrossAmerica Partners LP
Well planned and efficient integration strategy – Similar to The Pantry
69 FORECASTS
Adj. Free cash flow Leverage (2)(3) (1)(3) 9% CAGR 3,5 3,1 1 489 1 544 2,6 1 437 2,2 1 208 2,0 1,8 986 798 1,4
FY16 Y1 Y2 Y3 Y4 Y5 FY16 PF Y1 Y2 Y3 Y4 Y5
Strong cash flow coupled with disciplined capital allocation and debt repayment to provide financial flexibility and ample room for continued growth
ACT anticipates EPS accretion to reach 40 to 50 cents during the third year following the acquisition
(1) Adjusted EBITDA minus total CAPEX (excluding price paid for acquisitions), net dividends paid, net interests paid and net income taxes paid plus proceeds from disposal. (2) Adjusted net debt / EBITDAR. Adjusted net debt defined as total debt plus 8 times net rent expense less cash. (3) Before the anticipated effect of the sale of certain Canadian assets. 70 PROVEN RECORD OF DISCIPLINED DEBT PAYDOWN
• At close, pro forma leverage expected to stand at 3.5x(3) (Adjusted Net Debt / Adjusted EBITDAR) • Combined company expected to benefit from strong free cash flow generation & robust EBITDA growth • Scalable capital expenditure allows flexibility to achieve deleveraging plan • Management targets reaching an Adjusted Net Debt/EBITDAR ratio of 2.6x within 18-24 months after closing
The Pantry CST & Esso Circle K Acquisition No Transformational Acquisition SFR Acquisition Acquisition Acquisitions 2,299 Stores 1,547 Stores 2,298 Stores 2,453 Stores Acquired 1,017 Stores Acquired Acquired Acquired Acquired Rapid deleveraging $804 M $3.6 B Leverage post SFR after Acquisition Strong credit metrics for several years Acquisition acquisition lower than transformational $6.0 B Circle K Acquisitions acquisition $1.7 B 4,2 Acquisition 3,6 3,5 3,0 3,2 3,2 2,9 3,1 2,5 2,7 2,4 2,6 2,1 2,1 2,2 2,0 Adj. Adj. Net Debt / Adj. EBITDAR
F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 Pro Forma F2013 F2014 F2015 (1) F2016 (2) Pro Forma 18-24 (4) months
Couche-Tard is committed to reducing its Adj. Net Debt / EBITDAR below 3.0x within 24 months
(1) Pro forma The Pantry (2) Pro forma Topaz. (3) Rent capitalized at 8.0x.EBITDAR adjusted for non-recurring items. Refer to Couche-Tard’s MDA for more details. (4) Assuming transaction closed April 24 2016. Including the annualized contribution of FY2016/FY2017 Couche-Tard 71 acquisitions. Before the anticipated effect of the sale of certain Canadian assets. STRONG FINANCING PLAN
Transaction financing needs of ~$4.8 billion (including acquisition costs), funded through Capacity under ACT’s existing credit facilities New acquisition financing consisting of term loans – three tranches with 1, 2 and 3 years terms ACT expects to repay for the term loans through Proceeds from the sale of Canadian assets Proceeds from sale of other non-core assets Term out to the bonds market Free cash flow Financing strategy will allow Access to capital at competitive conditions Flexibility to repay debt rapidly Capacity to modulate debt maturities
Competitive, well balanced and flexible financing structure
72 CROSS AMERICA
73 CROSS AMERICA
• ACT brings CrossAmerica: • Continuity with a sponsor whose management culture is aligned with CrossAmerica – Disciplined operator with best practices in acquisitions and integration – Strong and consistent financial performance throughout all economic cycles – Heightened focus on growing Free Cash Flow, with particular expertise in cost management – Well capitalized with solid balance sheet – Well positioned to lead further consolidation in fragmented industry • Scale and global reach provides additional operational benefits – Further strengthens relationship with many of our key suppliers – Many turnkey branding and franchise programs that can complement dealer offerings • Supports dealer health, which impacts fuel volume growth and additional rental income potential • Wholesale operations with complementary geographic reach
74 CONCLUSION
Broad Geographic Footprint with Leading Market Positions Superior Product Offerings Track Record of Highly Disciplined Growth and Debt Reduction Attractive Sector Dynamics Powerful Financial Results Attractive Synergy Potential Disciplined Management Culture
Poised for growth: Store network growth of more than 40% through closed and annouced acquisitions over the last 18 months
75