U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 40-F|_| REGISTRATION STATEMENT PURSUANT TO
SECTION 12 OF THESECURITIES EXCHANGE ACT OF 1934 |X| ANNUAL
REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 25, 2004
  
  Commission File Number 333-10100 ALIMENTATION COUCHE-TARD INC.
(Exact name of Registrant as specified in its charter) Quebec
  5411
  Not Applicable(Province
  or other jurisdiction of 
  incorporation or organization)
  (Primary
  Standard Industrial
  Classification Code Number)
  (I.R.S.
  Employer
  Identification No.) 1600 St-Martin Boulevard East
Tower B, Suite 200
Laval, Quebec H7G 4S7, Canada
(450) 662-6632(Address and telephone number of Registrants
principal executive offices) Couche-Tard Financing Corp.
1500 North Priest Drive
Tempe, Arizona 85281
(602) 728-3114(Name,
address (including zip code) and telephone number
(including area code) of agent for service in the United States) Securities registered or to be registered pursuant to Section 12(b) of
the Act:None Securities registered or to be registered pursuant to Section 12(g) of
the Act:Common Shares, no par value Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:None For
  annual reports, indicate by check mark the information filed with this Form:|X|
  Annual information form
  |X|
  Audited annual financial statements Indicate
the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report: The Registrant had 28,520,861 Multiple Voting  Shares  and 70,245,401
Subordinate Voting Shares outstanding as at April 25, 2004 Indicate
by check mark whether the Registrant by filing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934 (the Exchange Act).  If Yes is
marked, indicate the filing number assigned to the Registrant in connection
with such Rule. Yes  |_|.                         No  |X|. Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that
the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. Yes  |X|.                         No  |_|. 1    DOCUMENTS
FILED WITH THIS FORM 40-F
1.
  Annual
  Information Form of the Registrant for the fiscal year ended April 25, 2004.2.
  Consolidated Audited
  Financial Statements of the Registrant as at and for the years ended on April
  25, 2004, April 27, 2003 and April 28, 2002, including a reconciliation to
  United States generally accepted accounting principles.3.
  Managements
  Discussion and Analysis of Results and Financial Position of the
  Registrant.CONTROLS AND PROCEDURES
Within
the 90 days prior to the filing date of this report, the Registrant carried out
an evaluation, under the supervision and with the participation of the
Registrants management, including the Registrants Chairman of the Board,
President and Chief Executive Officer and Executive Vice-President and Chief
Financial Officer, of the effectiveness of the design and operation of the
Registrants disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chairman of the Board, President and
Chief Executive Officer and Executive Vice-President and Chief Financial
Officer concluded that the Registrants disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Registrant (including its consolidated subsidiaries) required to be included in
the Registrants periodic Securities and Exchange Commission filings. No significant
changes were made in the Registrants internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
Change in Internal Controls Over Financial Reporting

The
Registrant maintains a system of internal controls over financial reporting.
There were no changes in the Registrants 
internal controls that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially affect,
the Registrants internal control over financial reporting.

AUDIT MATTERS
Audit Committee
See the
disclosure under Audit Committee Disclosure in the Annual Information Form
filed herewith.
The Board of
Directors of the Registrant has determined that it has one audit
committee financial expert serving on its audit committee.  Mr. Desrosiers has been determined by the
Board of Directors of Couche-Tard to meet the audit committee financial
expert criteria prescribed by the Securities and Exchange Commission (SEC)
and applicable Canadian regulatory requirements and is independent, as that
term is defined by applicable Canadian regulatory requirements.  The SEC has indicated that the designation
of Mr. Desrosiers as an audit committee financial expert does not make Mr.
Desrosiers an expert for any purposes, impose any duties, obligations or
liability on Mr. Desrosiers, that are greater than those imposed on members of
the audit committee and Board of Directors who do not carry this designation,
or affect the duties, obligations or liability of any other member of the audit
committee.
2

Audit and Related Fees
See
the disclosure under Audit Committee Disclosure  Auditors Fees in the Annual
Information Form filed herewith.
Pre-Approval Policies and Procedures
It
is within the mandate of the Registrants audit committee to approve all audit
and non-audit related fees.  See the
disclosure under Audit Committee Disclosure  Policy on the Approval of
Non-Audit Services in the Annual Information Form filed herewith.

CODE OF ETHICS
The
Registrant has adopted a Code of Ethics for its Chief Executive Officer, Chief
Financial Officer and directors and officers. 
See the disclosure under Audit Committee Disclosure  Code of Ethics for
CEO, CFO and Senior Financial Officers in the Annual Information Form filed
herewith.  A copy of the Code of Ethics
will be provided in print to any shareholder who requests it.  There were no amendments or waivers to the
Code of Ethics in fiscal 2004.
OFF-BALANCE SHEET ARRANGEMENTS
See
the disclosure under Off-Balance Sheet Arrangements in the Managements
Discussion and Analysis of Results and Financial Position filed
herewith.
TABULAR DISCLOSURE OF CONTRACTUAL
OBLIGATIONS
See
the disclosure under Contractual Obligations and Commercial Commitments  in the Managements
Discussion and Analysis of Results and Financial Position filed
herewith.

Document 1


ALIMENTATION COUCHE-TARD
INC.
ANNUAL INFORMATION FORM
Fiscal year ended April
25, 2004
July 13, 2004

TABLE OF CONTENTS
Subject
  
  PageForward-Looking Statements
  
  3The Company
  
  4- Name and Incorporation
  
  4- Intercorporate Relationships
  
  5General Development of the Business
  
  6- Overview
  
  6- History
  
  6- Fiscal 2002  2004 Highlights
  
  6Business
  
  8- Business Strengths
  
  8- Business Strategy
  
  9- Industry
  
  10- Store Network
  
  11- Merchandise Operations
  
  12- Fuel Operations
  
  13- Distribution and Suppliers
  
  14- Properties
  
  15- Information Systems
  
  15- Employees and Training
  
  16- Trade Names, Service Marks and Trademarks
  
  16Competition
  
  16Environmental Matters
  
  17Regulatory Matters
  
  17Risk Factors
  
  18Dividends
  
  18Capital Structure
  
  18Ratings
  
  18Market for Securities
  
  19Directors
  and Officers
  
  20Legal
  Proceedings
  
  26Transfer
  Agent and Registrar
  
  26Material
  Contracts
  
  26Audit
  Committee Disclosure
  
  28- Charter
  
  28-
  Composition of the Audit Committee
  
  29-
  Financial Literacy
  
  30- Policy
  on the Approval of Non-audit Services
  
  31- Code of
  Ethics for CEO, CFO and Senior Financial Officers
  
  31-
  Auditors Fees
  
  31Additional
  Information
  
  32As used in this annual information form, unless the
context indicates otherwise: (i) we, our and us, the Company or
Couche-Tard» refer collectively to Alimentation Couche-Tard Inc. and,
unless the context otherwise requires or indicates, its subsidiaries and (ii)
$ or dollars refer to Canadian dollars and US$ or US dollars refer to
United States dollars.
FORWARD-LOOKING STATEMENTS

We make
forward-looking statements throughout this annual information form. Whenever
you read a statement that is not simply a statement of historical fact (such as
when we describe what we believe, expect, or anticipate will occur, what
we intend, plan or seek to do or accomplish and other similar
statements), you

3

must remember
that our expectations may not be correct or that we may not take such actions
or accomplish such goals. We do not guarantee that the transactions and events
described in this annual information form will happen as described (or that
they will happen at all). You should read this annual information form
completely and with the understanding that actual future results may be
materially different from what we expect. We will not update these
forward-looking statements, even though our situation will change in the
future.
Whether actual results will conform to our
expectations and predictions is subject to a number of risks and uncertainties,
including:

  difficulties in implementing our business strategy
  and technology;
  difficulties that may be encountered in the
  integration of the operations of acquired companies;
  changes in wholesale and retail motor fuel pricing;
  changes in the regulation or taxation of cigarettes
  or alcohol;
  difficulties in retaining key members of our
  management team;
  changes in the financial markets affecting our
  financial structure and our cost of capital and borrowed money;
  compliance with and changes in environmental
  regulations;
  our level of debt;
  general economic conditions;
  changes in operating expenses or the need for
  additional capital expenditures;
  the effects of acquisitions we might make in the
  future; and
  changes in pricing policies by our competitors or
  us.Reference is
made to Risk Factors herein below.
THE COMPANY

Name and Incorporation

The Company
was incorporated under Part IA of the Companies Act (Québec) by certificate of
amalgamation dated May 1, 1988.  On
December 15, 1994, The Company changed its corporate name from Actidev Inc.
to Alimentation Couche-Tard Inc. The Companys share capital was also changed
at that time so that it consists of an unlimited number of first preferred
shares, an unlimited number of second preferred shares, an unlimited number of
multiple voting shares and an unlimited number of subordinate voting shares.  By certificate of amendment dated September
8, 1995, the Company re-designated the multiple voting shares as Class A
multiple voting shares (the Multiple
Voting Shares) and the subordinate voting shares as Class B subordinate
voting shares (the Subordinate Voting
Shares). The Companys shares trade
on the Toronto Stock Exchange and, as of April 25, 2004, the Company had a
total market capitalization of approximately $2.3 billion.

The head
office of the Company is located at 1600 St-Martin Blvd. East, Tower B, Suite
200, Laval, Québec H7G 4S7.
Intercorporate Relationships
4

The following
chart illustrates the corporate organization of the Company and its principal
subsidiaries, all of which are 100% owned.

ORGANIZATION CHART

5



GENERAL DEVELOPMENT OF THE BUSINESS
Overview
We are the
leader in the Canadian convenience store industry. We are the fourth largest
convenience store operator in North America and the second largest independent
(not integrated with a petroleum company) convenience store operator in North
America. As at April 25, 2004, our network consisted of 4,881 convenience
stores, 3,079 of which include motor fuel dispensing, located in eight large
geographic markets, including three in Canada and five in the United States,
which cover 23 American states.
We sell food
and beverage items, motor fuel and other products and services targeted to meet
our customers demand for convenience and quality in a clean and welcoming
environment.  We believe that our
business model has differentiated Couche-Tard from its competition through its
decentralized management structure, commitment to operational expertise, focus
on in-store merchandise, particularly the higher growth and higher margin
foodservice category, and continued investment in store modernization and
technology.
The
convenience store industry is fragmented, with the top 10 operators
representing only approximately 24% of the estimated total of 132,400 stores in
the United States. Industry consolidation by highly leveraged operators in the
1990s, combined with competition and fluctuations in motor fuel margins, has
led to numerous corporate restructurings and rationalizations in recent years.
As a result, we believe the opportunity exists for well-capitalized,
established industry participants to grow through mergers and acquisitions.
History
Alain
Bouchard, the Chairman, President and Chief Executive Officer of Alimentation
Couche-Tard Inc., started the chain with one store in 1980. In 1986, with
a network of 34 stores, a predecessor of Couche-Tard completed an initial
public offering and listed its shares on the Montreal Exchange. In 1994, the
predecessor company was privatized by its majority shareholder,
Actidev Inc., a publicly held company. Later that year, Actidev Inc.
changed its corporate name to Alimentation Couche-Tard Inc.
After establishing a leading position in Quebec, Couche-Tard expanded
through internal growth and acquisitions in Ontario and Western Canada in 1997,
followed by several acquisitions in the United States beginning in 2001. In
May 1997, Couche-Tard acquired 245 Provi-Soir
stores in Quebec and 50 Winks stores
in Ontario and Western Canada from Provigo Inc. In April 1999,
Couche-Tard acquired 980 stores in Ontario and Western Canada operating under
the Macs, Mikes Mart and Beckers banners through the acquisition of Silcorp Limited,
a publicly-held company.
Fiscal 2002 - 2004 Highlights
Fiscal 2002:
In
June 2001, Couche-Tard acquired the assets of Johnson Oil Company, Inc.
(Johnson Oil) in Indiana, Illinois and Kentucky for a
total cost of $119.3 million.  The
acquired network from Johnson Oil included 172 corporate stores, 35 dealer
locations and 18 commission retailer sites under the Bigfoot banner, all with gasoline sales.  This acquisition generated $562 million in
sales in fiscal 2002.
In July 2001,
the Multiple Voting Shares and the Subordinate Voting Shares of the Company
were split on a two-for-one basis.
In August
2001, the Company acquired all of the shares of R-Con Centres Inc., the holder
of Macs master franchise for
Manitoba, where that banner encompasses 31 stores including eight with gasoline
dispensing.
In December
2001, the Company completed a public offering of 4,000,000 Subordinate Voting
Shares at a price of $25.40 per Subordinate Voting Share, for net proceeds to
the Company of $97,536,000 (before deducting the expenses of the issue).
6

Also in
December 2001, the Company acquired from BP Amoco Oil Company, a six-store
convenience chain based in Lafayette, Indiana.
In February
2002, the building of Couche-Tards $13.5 million Laval distribution centre was
completed.  Such distribution centre
provides integrated, high quality services to the Quebec network.
In April 2002,
the Company acquired a network of 12 stores from Bruce Miller Oil Company (10
locations were owned by Bruce Miller Oil Company and two are affiliated stores)
located in South-eastern Indiana and the Cincinnati Metro Area in Ohio.
Fiscal 2003:
In July 2002, the Company acquired from Handy Andy Food Stores, Inc. its
network of 16 convenience stores in the Indianapolis area (Indiana), 15 of
which stores sell gasoline under the Marathon
and Citgo brands.
Also in July 2002, the Multiple Voting Shares and the Subordinate Voting
Shares of the Company were split on a two-for-one basis.
In August 2002, the Company acquired the assets of Dairy Mart Convenience
Stores, Inc. (Hudson, Ohio) (Dairy Mart), a leading regional convenience
retailing chain with stores located in Ohio, Kentucky, Pennsylvania, Michigan
and Indiana. Through Macs Convenience Stores Inc. (Macs US), Couche-Tard
became the owner of 287 Dairy Mart stores, for a total cost of US$79.5 million.
This transaction included a one-year management contract (the Management
Contract) for the networks remaining 153 stores, some of which could be
acquired by Macs US during the next few months, while others could be closed
or sold on behalf of Dairy Mart.
In December 2002, the Company acquired the Tabatout network which
accounts for 30 points of sale in Québec and is part of the non-traditional
store market.
In March 2003, the Company acquired 92 Dairy Mart stores which had been
subject to the Management Contract since the acquisition of Dairy Mart in
August 2002. This transaction had the effect of terminating the Management
Contract.
Fiscal 2004:
In August
2003, the Company and Allied Domecq Quick Service Restaurants entered into an
agreement whereby the Company acquired the master franchisee rights for the Dunkin Donuts banner in Québec. Thus, the
94 Dunkin Donuts stores already established in Québec became franchisees of
the Company which is now responsible for the implementation of all aspects of
the Dunkin Donuts system in Québec.
On
September 4, 2003, Couche-Tard acquired certain assets of Clark Retail
Enterprises, Inc. for total cash consideration of $41.0 million. In
this transaction, Couche-Tard acquired 43 convenience stores, 33 of which are
located in Illinois, with the remainder in Indiana, Iowa, Michigan and Ohio.
All of the stores sell motor fuel. Couche-Tard acquired the buildings and land
at 31 of these sites, with the remaining 12 being leased. On October 30,
2003, Couche-Tard completed a sale-leaseback transaction with respect to 19 of
the Clark stores and received proceeds of approximately
US$15 million.
On
December 17, 2003, Couche-Tard acquired The Circle K Corporation
(Circle K) from ConocoPhillips for a net cash purchase price of
US$803.9 million, subject to post-closing adjustments. The Acquisition was
financed through the proceeds from the issuance of US$350 million 7 1/2% Senior
Subordinated Notes due 2013, borrowings under our senior credit facility and
net proceeds of $220.5 million from the issuance of Class B subordinate voting
shares. (See Material Contracts.)
In connection with the Acquisition:

  Couche-Tard acquired all the outstanding capital
  stock of Circle K;7


  we entered into a five-year motor fuel supply
  agreement with ConocoPhillips;
  we entered into several other related agreements
  with ConocoPhillips, including several trademark licensing agreements and a
  reseller agreement;
  we entered into an environmental liabilities
  agreement with ConocoPhillips; and
  we agreed to undertake certain capital improvements
  at the Circle K stores in connection with the proposed settlement of
  litigation brought against Circle K under the Americans with Disabilities
  Act.As at April 25, 2004 the Company had achieved
excellent progress in the Circle K integration plan with some US$10 million in
synergies achieved within the first 130 days, by implementing Couche-Tards
decentralized business model at Circle K and renegotiating several merchandise
supply agreements.
In March and
April 2004, the Company entered into sale-leaseback agreements for 322 Circle K
properties acquired on December 17, 2003. The net proceeds from this
transaction of  US$252.9 million were
used to reimburse part of the long-term debt borrowed in connection with the
Acquisition.

BUSINESS
Business Strengths
Leading Market Position.  We have a network of more
than 4,800 convenience stores which makes us the second largest independent operator
and the fourth largest overall operator of convenience stores in North America,
including independent chains and chains operated by integrated oil companies.
We believe our well-recognized banners, including Couche-Tard, Circle K
and Macs, have an established reputation for convenience and
excellence in product selection and value that helps to differentiate our
stores from those of our competitors. We believe that the geographic diversity
of our network throughout the United States and Canada reduces our exposure to
adverse local and/or regional market conditions, including fluctuations in
motor fuel prices. With more than $9 billion in revenues in fiscal 2004
and over 20 years of convenience store operations, we believe our size and
experience have enabled us to develop operating efficiencies that provide us
with a competitive advantage, particularly with respect to merchandising and
purchasing.
Well-Located and Modernized Store Base.  We believe that we have
high-quality stores in strategic locations. We believe that focusing on
developing networks of stores in the geographic areas in which we operate
enables us to study those markets and refine our location strategy. We
selectively choose our store sites to maximize our store traffic and visibility
and we effectively manage the closure of under-performing stores. Due to
current land prices and the unavailability of suitable properties in our
primary markets, we believe it would be difficult for our competitors and new
entrants to replicate our store base.
We have made
substantial investments in our Couche-Tard stores through our Store 2000
Concept. Couche-Tard has implemented the Store 2000 Concept in over 1,000 of
its company-operated stores, which represent approximately 29% of such stores.
Currently, all of Couche-Tards company-operated stores (excluding Circle K)
use scanning technology, which is significantly higher than the industry
average of approximately 76% of convenience stores. We intend to complete the
installation of such technology at all Circle K company-operated stores
over the next 24 months.
Differentiated Business Model.  We believe that our
business model has positively differentiated Couche-Tard from its competitors.
The principal elements of this business model are as follows:

Decentralized Management Structure.  We believe that our
  culture is entrepreneurial and that Couche-Tards management structure is one
  of our most important business strengths. Couche-Tard manages its operations
  and workforce in a decentralized manner in order to expedite decision making,
  to address local demand for specific products and services, and to minimize
  corporate overhead costs. Each store is operated as a distinct business unit
  and store managers are responsible for meeting financial and operational8


targets. We support our store managers with a
  strong, experienced management team and capital resources, which we believe
  provide our managers with a significant competitive advantage compared to
  smaller operators. In addition, we implement a rigorous performance
  measurement or benchmarking process to ensure that best practices are
  deployed across our network and to allow us to provide timely and effective
  feedback to our managers at all levels.Commitment to Operational Expertise.  We have developed
  substantial operational expertise that enables us to efficiently match our
  product assortment with our customers preferences. We employ this expertise
  throughout our product delivery chain, from the selection of store locations
  to the development of store designs, the supply and distribution of products,
  the merchandising and marketing, and ultimately to the sale of products to
  our customers. This delivery chain is supported by our experienced and
  well-trained store and management personnel who are focused on optimizing
  store performance and maximizing our customers satisfaction. In addition,
  each stage of our operations is supported by the use of technology that
  enables us to perform an in-depth analysis of our inventory purchases and
  sales. We use this information to continue to refine our purchasing
  operations and to work with our suppliers to tailor our merchandising and
  customize our shelf space to increase sales volume. As a result, we believe
  we are able to secure more favourable purchasing terms from our suppliers.Focus on In-store Merchandise.  We have been able to
  focus on growing and developing our in-store merchandise sales, which
  generate higher margins than motor fuel sales because, unlike many of our
  competitors, a major oil company does not own us. In particular, Couche-Tard
  has focused on growing its higher margin foodservice business, including its
  Quick Service Restaurants (QSRs), to further improve profit margins and
  differentiate its stores from those of its competitors.Experienced and Incentivized Management Team with a
Proven Track Record.  Our senior executive management team has
worked together for more than 20 years and has developed extensive
expertise in operating convenience stores. As of April 25, 2004, our senior
executive management team collectively owned approximately 20% of Alimentation
Couche-Tard Inc.s stock and controlled approximately 54% of the voting
rights of all outstanding shares. Furthermore, our nine operational
vice-presidents have an average of approximately 17 years of industry
experience. Many of our management personnel at all levels have progressed into
management positions after working with us for many years at different levels
of the organization, while others have joined us in connection with
acquisitions and have brought us additional expertise. Since 1997, Couche-Tard
has completed many acquisitions, and managements ability to integrate stores
into our existing network has been an important factor in our success. In addition,
our management has transitioned Couche-Tard from a local Quebec company to a
leading convenience store operator in Canada and the United States.
Business Strategy

We plan to
continue growing our business and improving our financial performance by implementing
our business strategy, the key elements of which include:

Drive Internal Sales Growth and Profitability.  We use our branding
strategy, innovative store concepts and foodservice offerings to enhance
customer loyalty and return shopping, and to grow same-store sales by promoting
the consumption of high-margin products and tailoring our product and service
offerings to meet local tastes.
In-Store Branding.  We use in-store branding
  strategies, including proprietary and national brands, to differentiate our
  fresh food offerings from other convenience stores, build customer loyalty
  and promote return shopping. At the core of this offering is a quality
  assortment of freshly brewed coffee, frozen/iced beverages, fresh sandwiches
  and other fresh food items that are marketed under our proprietary brands.
  Our La Maisonnee and Handful branded fresh sandwiches and breakfast
  selections, and Sunshine Joe Coffee Co., Sloche, Froster, Thirst Buster and
  The Frozen Zone brands of beverages are examples of successful proprietary
  branded items that we have added to our growing selection of fresh products.
  In addition, we continue to build on existing partnerships with recognized
  coffee franchises and national brand names such as Van Houtte, Millstone and
Seattles Best.9

Store 2000 Concept.  We plan to continue to
  use Couche-Tards successful Store 2000 Concept to grow same-store sales and
  drive purchases of higher margin products and services. We believe that the
  implementation of our Store 2000 Concept has favourably impacted the revenues
  and profit margins of reconfigured stores. We intend to introduce our Store
  2000 Concept to the Circle K stores over the next few years.Quick Service Restaurants.  Since 1998, Couche-Tard
  has implemented QSRs as a key element of its Store 2000 Concept. These QSRs
  are designed to increase customer traffic and profit margins by attracting
  customers through recognized brands and encouraging them to spend more time
  in the store. Couche-Tard operates these QSRs withinthe Couche-Tard stores as a franchisee and is
  responsible for their daily operations. We intend to continue to implement
  this strategy in our Couche-Tard stores and selectively introduce it to our
  Circle K stores.Invest in Store Modernization and Information Systems.  We intend to continue
investing in the modernization of our store base and the enhancement of our
technology and information systems at all levels throughout our store network
and in our distribution centre. We analyze our investment opportunities based
on their potential growth, profitability and rate of return on capital. We
believe that our access to both internal and external sources of capital allows
us to make investments that provide us with a competitive advantage in a highly-fragmented
industry.
We have made
significant investments in technology because we believe that the information
generated from such systems is critical to the operation of our business. By
analyzing the data generated by our point-of-sale (POS) systems, we are
better able to adjust our product and service mix to meet local demands,
eliminate slow-moving inventory items, and optimize our purchasing activities.

Leverage Supplier Relationships.  We seek to develop and
maintain strong relationships with our merchandise and motor fuel suppliers. As
the largest convenience store operator in Canada and fourth largest overall
convenience store operator in North America, we represent an attractive
distribution channel to suppliers due to our scale, broad geographic presence
and our proven ability to grow merchandise and motor fuel sales. We use the
inventory information from our POS systems to work with our suppliers to
provide mutually agreeable merchandising and exclusivity arrangements, which we
believe allows us to secure more favourable purchasing terms. Moreover, we
believe the consolidation of Couche-Tard and Circle K will lead to
additional volume purchasing benefits.
Selectively Expand our Store Network. 
We plan to continue to expand our store network through new store
development and selective acquisitions. In particular, we intend to focus our
resources on identifying fill-in opportunities comprised of individual stores
or small chains within our existing markets that will complement our current operations.
These fill-in acquisitions allow us to focus our management efforts on the
regions in which we operate and to realize regional economies of scale. When we
make an acquisition, we apply our business model to the acquired stores and
typically integrate such stores into our operational and information systems.
Industry
The
convenience store industry is undergoing significant structural changes,
including increased competition from new market entrants such as drug stores,
warehouse clubs, large supermarkets and other mass retailers (commonly known as
hypermarkets) which have added convenience store staple products such as bread,
milk and packaged beverages to their product mix. In addition, an increasing
number of hypermarkets are selling motor fuel at low prices in an attempt to
establish themselves as a one-stop shopping location and to increase customer
trip frequency and traffic at their stores. See  - Competition.
In response to heightened competition in the industry, convenience
stores are extending their range of traditional products and services to
include calling cards, financial services, photo developing, QSRs and other
products and services. In addition to being conveniently located and open for
extended hours, convenience stores now cater to customers with busy schedules
who expect to find a wide assortment of items in stock and to have many
available payment options. Convenience stores are also catering to time-pressed
consumers looking for grab-and-go items by offering fresh food and baked
goods prepared on-site. As a result, those convenience store operators with
superior

10

merchandising, distribution expertise and capital can overcome the
challenges resulting from rising operating costs and increased customer
demands.
Store Network
Couche-Tard is
the largest Canadian convenience store operator with a network of
1,924convenience stores in Canada and has a significant presence in the United
States with an additional 2,957 stores. Of the 4,881 Couche-Tard stores, 3,620
are company-operated and 1,261 are operated under our affiliate program. Motor
fuel is sold at 64% of Couche-Tards company-operated stores.Couche-Tards Canadian stores are located
in Quebec, Ontario, Alberta, British Columbia, Manitoba, Saskatchewan and the
Northwest Territories, and its U.S. stores are located in 23 U.S. states,
including Ohio, Indiana, Kentucky, Illinois, Michigan, Pennsylvania, Iowa,
Arizona, Florida, California, Louisiana and Texas.  The Couche-Tard stores are primarily operated under the Couche-Tard and Macs banners in Canada and the Macs and Circle K
banners in the United States.
Couche-Tards
stores, which are located in a variety of high-traffic areas, include
freestanding stores and stores located in strip shopping centres. Couche-Tards
stores in Canada and in the U.S. Midwest are designed to appeal to customers in
their local markets, rather than conforming to a single standard format. The
Circle K stores simple and consistent design makes them easily recognizable.  The majority of the stores are open seven
days a week, 24 hours a day, with peak customer traffic in the early
morning and late afternoon. The size of the typical Couche-Tard store is
between 2,000 and 2,500 square feet, while newly-developed stores are typically
approximately 3,000 square feet, to accommodate in-store seating and, in
certain cases, QSRs.
The following table sets out the number of Couche-Tards stores in
operation by geographic location and type of store as of April 25, 2004.

Region
  
  Provinces/States
  
  Total
  Number of
  Stores
  
  Total
  Company-
  Operated
  Stores
  
  Total
  Affiliates
  
  Percentage
  of Total
  StoresEastern Canada
  
  Quebec
  
  
  
  844
  
  
  
  
  569
  
  
  
  
  275
  
  
  
  
  17.2
  %Central Canada
  
  Ontario
  
  
  
  793
  
  
  
  
  614
  
  
  
  
  179
  
  
  
  
  16.2
  %Western Canada
  
  British Columbia, Alberta, Saskatchewan, Manitoba, Northwest
  Territories
  
  
  
  287
  
  
  
  
  283
  
  
  
  
  4
  
  
  
  
  6.1
  %U.S. Midwest
  
  Ohio, Indiana, Kentucky, Illinois, Michigan, Pennsylvania, Iowa
  
  
  
  675
  
  
  
  
  504
  
  
  
  
  171
  
  
  
  
  13.8
  %U.S. West Coast
  
  Washington, Oregon, California
  
  
  
  542
  
  
  
  
  283
  
  
  
  
  259
  
  
  
  
  11.1
  %U.S. Arizona 
  Region
  
  Nevada, Arizona, New Mexico, Western Texas
  
  
  
  554
  
  
  
  
  526
  
  
  
  
  28
  
  
  
  
  11.4
  %U.S. Southeast
  
  Tennessee, Northern Mississippi, Georgia, North Carolina, South
  Carolina
  
  
  
  345
  
  
  
  
  279
  
  
  
  
  66
  
  
  
  
  7.0
  %U.S. Florida and
  Gulf Coast
  
  Florida, Alabama, Arkansas, Louisiana, Southern Mississippi, Eastern
  Texas
  
  
  
  839
  
  
  
  
  562
  
  
  
  
  277
  
  
  
  
  17.2
  %Total
  
  
  
  
  
  4,881
  
  
  
  
  3,620
  
  
  
  
  1,261
  
  
  
  
  100
  %Couche-Tard
conducts its convenience store business through two main types of arrangements,
as set out below.
Company-Operated Stores.  Couche-Tard has 3,620 company-operated
stores in its network, 2,810 of which are employee-operated and 810 of which
are dealer-operated. All of the stores in Quebec and the United States are
employee-operated. For employee-operated stores, Couche-Tard is responsible for
store operations, owns the equipment, systems and inventory and employs
salaried and part-time staff. For dealer-operated stores, Couche-Tard owns the
equipment, inventory and systems and the independent store operator employs the
staff, agrees to operate according to Couche-Tards standards and is paid a
commission based primarily on store revenues to manage the store. The
dealer-operator is also fully responsible for losses related to any inventory
shrinkage.

Affiliated Store Program.  Couche-Tards affiliated store program
includes franchise arrangements, license arrangements and arrangements under
which the Midwest sells motor fuel to certain independent store operators
(motor fuel dealers).

11


a)
  Franchised Stores.  Couche-Tard has 291 franchised stores in
  Canada and the United States. Franchised stores are operated by independent
  store operators who have entered into a franchise agreement, which typically
  provides for an upfront franchise fee and/or royalties based primarily on
  sales to be paid to Couche-Tard. These stores operate under one of
  Couche-Tards banners. The franchisee is responsible for managing the store,
  hiring and managing the staff and maintaining inventory through supply
  agreements with authorized suppliers. In most cases, Couche-Tard either
  leases or subleases the real estate to the franchisee and, in many locations;
  Couche-Tard owns the in-store equipment and motor fuel equipment.b)
  Licensed Stores.  Couche-Tard has 876 stores operated under
  license agreements in Canada and the United States that are owned and
  operated by independent store operators. The licensee typically owns or
  leases the real property from third parties and owns all other assets related
  to the business. The licensee enters into a license agreement with
  Couche-Tard to use one of Couche-Tards proprietary banners and agrees to buy
  merchandise from certain suppliers in order to benefit from certain vendor
  rebates based on Couche-Tards purchasing volume. Couche-Tards revenues from
  licensed stores includes license fees and a portion of the vendor rebates
  related to the licensees purchases that are paid to Couche-Tard.c)
  Motor Fuel Dealers.  Couche-Tards Midwest
  Division has agreements to sell motor fuel directly to 94 independent
  operators at cost plus a mark-up.Internationally,
Couche-Tard through Circle K has license agreements for the operation and
development of stores in Japan, Hong Kong, China, Indonesia, Mexico and Taiwan.
The terms of these agreements vary, as do the royalty rates which are generally
below 1% of merchandise sales.
Merchandise Operations

Couche-Tard
offers its customers more than 2,500 product stock keeping units (SKUs) that
include traditional convenience store items such as packaged and frozen
beverages, candy and snacks, coffee, dairy items, beer/wine and tobacco
products, as well as products not traditionally offered by convenience stores
such as fresh food and foodservice items. In addition, services such as
automatic teller machines and lottery ticket sales are featured in many stores.
Couche-Tard is continually looking for new product ideas, such as cell phones,
prepaid phone cards and home office supplies, to offer to its customers to meet
their convenience needs. Couche-Tard evaluates store product assortment on an
ongoing basis to ensure that low turnover products are replaced by top selling
items in order to maximize selling space and ensure that high demand items are
available to the consumer.

Couche-Tard
employs category management as a merchandising tool and assigns internal
category managers for its top selling products in each region. These category
managers are experts on the products within their responsibilities, and they
use their in-depth knowledge of the products sales trends, regional
preferences, popularity and producers in deciding which items to stock in a
particular geographical region.
Based on merchandise purchase and sales information, Couche-Tard
estimates category revenues as a percentage of total in-store merchandise sales
for the last fiscal year as follows:
Category
  
  Percentage of
  TotalTobacco Products
  
  
  
  37.4Grocery
  
  
  
  24.8Beer/Wine/Liquor
  
  
  
  15.7Candy/Snacks
  
  
  
  9.7Food Service
  
  
  
  8.6Dairy Products
  
  
  
  3.8Total In-Store Merchandise Sales
  
  
  
  100.0
  %12

In order to
grow its merchandise sales and increase profits, Couche-Tard focuses primarily
on developing its banners and brands, growing and refining its Store 2000
Concept and expanding its QSR business.

Branding.  Couche-Tard operates its stores under a variety of banners,
including Couche-Tard, Provi-Soir, Macs, Mikes Mart,
Beckers and Winks in Canada and Bigfoot, Dairy
Mart, Macs and Handy-Andy in the U.S. Midwest.
Circle K stores operate under the Circle K
banner. In-store brands include Circle K,
Circle K Express, Grocery Express, Grabbers, The Frozen Zone,
Circle K Strike Out Meter, Thirst Buster, Thirst Buster Nothings Cooler,
Thirst Freezer, Thirst Freezer Dangerously Cold, Freshest Coffee Going!andCircle K Short Orders. Our main service
brand is Circlek.com. Tag lines
include All you want today is at your
Circle K, All you want
today and Circle K, A
Better Way. The core banners for Couche-Tard are currently Couche-Tard, Macs and Circle K.
Couche-Tards
brand strategy employs both proprietary and national brands for brewed coffee,
frozen/iced beverages, fresh sandwiches and other fresh food items. La Maisonnee and Handful branded fresh sandwiches and
breakfast selections and Sunshine Joe Coffee
Co. are examples of successful proprietary branded items that
Couche-Tard has added to its growing selection of fresh products. Couche-Tard
also continues to build on existing partnerships with recognized coffee
franchises and brand names such as Van
Houtte and Seattles Best Coffee
names.
Store 2000 Concept.  In 1998, Couche-Tard launched its Store 2000
Concept. The program has been implemented in over 1,000, or approximately 28%,
of its company-operated stores. Under the Store 2000 Concept, the selection of
products and services is designed to create an in-store perception of freshness
to appeal to consumers and promote increased sales of higher-margin products.
Each selected location is adapted to the needs of the socio-economic and
cultural character of the community with the assistance of a multi-disciplinary
team comprising marketing, merchandising, real estate service, interior design
and operations specialists. A full-scale Store 2000 Concept implementation
typically includes an expanded foodservice operation, and may include a QSR.
Couche-Tard uses a scaled-down version of the concept in markets that cannot
support a full-scale conversion. The cost of a full-scale Store 2000 Concept
implementation is typically between $150,000 and $200,000, while a partial or
scaled-down conversion may cost between $40,000 and $60,000. Management
believes that there is an opportunity to increase gross margins through the
expansion of this concept, particularly in certain of the Circle K stores.
Quick Service Restaurants. 
In order to differentiate its company-operated stores and to increase
customer traffic and profit margins, Couche-Tard is focusing on the expansion
of its foodservice program and has entered into franchise agreements with quick
service restaurants including Subway,
Dunkin Donuts, M&M Meat Shops, Taco Bell, Mr. Hero, Noble Roman, A&W,
Mr. Sub, Cafe Depot, Second Cup and Quiznos. These foodservice programs are a very important
part of the Store 2000 Concept. Couche-Tard runs the branded foodservice
operation as a franchisee and pays royalties, rather than renting out space to
foodservice operators for a fixed dollar fee. While this approach prevents
Couche-Tard from partnering with certain companies, it allows Couche-Tard to
benefit from increased popularity of these products and Couche-Tard believes
that this approach enables it to generate higher margin and returns, as well as
to ensure quality of service.

Fuel Operations

Prior to
Couche-Tards entry into the U.S. market, approximately 70% of total revenues
were generated from merchandise and service revenues and 30% from motor fuel
sales. The mix has been altered since the acquisition of Bigfoot, Dairy Mart
and Circle K, as these companies had a greater reliance on motor fuel sales
than Couche-Tard. In fiscal 2004, Couche-Tards motor fuel sales in Canada
represented about 30% of its Canadian revenues compared to approximately 57% of
revenues for its U.S. stores.

Generally,
Couche-Tards company-operated stores sell both branded and unbranded motor
fuel by purchasing the motor fuel and reselling it at a profit. In addition,
Couche-Tard earns a commission for supplying unbranded motor fuel on a
consignment basis to company-operated stores in respect of which it does not own
the pumps or storage tanks. Couche-Tard also acts as agent in the sale of motor
fuel to some of its franchise stores and receives a commission. At select
locations in the United States only, Couche-Tard sells motor fuel to
independent store operators for cost plus a mark-up. Except for sales made on a
commission basis for which only the commission is recorded as motor fuel
revenues, Couche-Tard includes the full value of such sales in its motor fuel
revenues.
13


The wholesale
price in Couche-Tards supply agreements with major oil companies is typically
set by the oil company supplying the motor fuel. Generally, Couche-Tard obtains
the fuel at a price referred to as the rack to retail price and sets the
retail price.
Couche-Tard sells motor fuel either under its own brands, including Couche-Tard and Macs in Canada and Bigfoot
and Circle Kin the United States, or under the name of major oil
companies such as Esso, Petro-Canada, Shell,
Irving, Ultramar, BP Amoco, 76
and Phillips 66, among others. In
connection with the acquisition of Circle K, we entered into license agreements
with ConocoPhillips which allow us to use the Union
76, 76and Union brand
name at 849 sites and the Phillips 66, 66and
Phillips brand name at 68 sites
in the United States. Circle K has given notice to ConoccoPhillips of its plan
to debrand the 76 and 66 locations in California and Arizona which commenced in
June 2004.
Distribution and Suppliers
Merchandise Distribution and Supply Arrangements.  Couche-Tard has established
national and regional distribution and supply networks for its in-store
merchandise in Canada and the United States. With the exception of Eastern
Canada where Couche-Tard operates its own distribution centre, in-store
merchandise is supplied to Couche-Tard stores either through distribution
specialists or directly by manufacturers. Couche-Tard has arrangements with
major tobacco manufacturers and other major suppliers such as FritoLay, Nestle,
Coca-Cola and Pepsi for direct distribution to its
stores. Couche-Tard has also negotiated supply agreements with regional
suppliers, to the extent required, to meet the needs of each market and to
adapt its product mix to local consumer preferences.
In Central
Canada, Couche-Tard uses Karrys Bros., Limited as a regional warehouse supplier
to distribute the majority of its in-store merchandise on an exclusive basis to
its company-operated stores and on a non-exclusive basis to affiliates.
Couche-Tard also purchases products such as carbonated beverages and potato
chips, which are not covered under the arrangement with Karrys, directly from
manufacturers and producers. Similarly, Couche-Tard uses Core-Mark
International Inc. as its exclusive supplier for the majority of its
in-store merchandise to its Western Canada stores. Recently, Couche-Tard
entered into an exclusive supply agreement with Eby-Brown Company to supply the
majority of its in-store merchandise for all of its company-operated stores in
the U.S. Midwest. To the extent required, the remainder of the products are
purchased on a non-exclusive basis from regional manufacturers.
In Eastern
Canada, Couche-Tard recently opened a distribution centre in Laval, Quebec
through which most deliveries to Couche-Tards Quebec stores are channelled,
with the remainder of supplies being delivered directly to the stores by the
manufacturers. The distribution centre was established to allow Couche-Tard to
provide integrated, high-quality services to the 739 Couche-Tard stores
dispersed throughout the province. The distribution centre has enabled
Couche-Tard to increase the frequency of its delivery of dairy products and
fresh and frozen foods from once to at least twice a week.

Circle K
has a distribution centre in Arizona which is managed by Core-Mark
International Inc. pursuant to a contract for a fee. The distribution
centre services approximately 500 Circle K stores. The distribution centre
allows Circle K to utilize its buying power for warehouse-delivered items
plus certain dairy, bakery, sandwich, ice cream and snack items through vendor
consolidation with the Arizona distribution centre.
Two types of
suppliers provide merchandise to Circle K stores. Direct store delivery
suppliers generally supply items such as beer, soft drinks, snack items,
newspapers, milk and bread directly to the stores, while warehouse suppliers
provide cigarettes, fountain cups, groceries, health and beauty aids, and candy
and snacks to the Circle K stores in all areas outside of Arizona.
Circle K also uses Core-Mark as a warehouse supplier to distribute
merchandise to the majority of its stores west of the Mississippi and to
provide management services to the Circle K distribution centre located in
Arizona. Circle K uses McLane Company, Inc. to distribute merchandise to
the majority of its stores east of the Mississippi.
Core-Mark is a
subsidiary of Fleming Companies Inc., which filed for Chapter 11
protection on April 1, 2003. To date, the bankruptcy has caused only
minimal disruption in the services Core-Mark provides to Circle K.
Nevertheless, Circle K management is monitoring the situation and has
developed contingency plans to ensure an uninterrupted supply of merchandise to
the stores. These plans are flexible and address the various scenarios that
14

could
occur in markets served by Core-Mark. 
Core-Mark is expected to emerge from reorganization proceedings in the
summer of 2004.

Motor Fuel Supply Arrangements.  Couche-Tard purchases the motor fuel it
sells under its brand name directly from oil refineries. It also purchases
branded motor fuel from a number of major oil companies and sells such motor
fuel under the oil companys name. Typically, the motor fuel sold in Canada
under Couche-Tards brand is supplied in accordance with motor fuel supply
contracts. Generally, both of these types of contracts are entered into with
major oil companies and are based on a scaling or commission per litre (or
gallon) sold, both of which are directly correlated to the quantity of fuel
sold.
Circle K
has entered into a supply agreement with ConocoPhillips pursuant to which
ConocoPhillips will provide, for at least the next five years, subject to
cancellation at the option of Couche-Tard, a supply of gasoline and diesel for
the stores covered by such supply agreement. 
In 2004, Circle K gave notice to terminate its supply arrangement with
ConoccoPhillips for California and Arizona. 
Cancellation of the supply agreement for other areas is being considered
in the future.
Properties
Of the 3,620
company-operated stores, 2,792 are leased and 828 are owned by Couche-Tard,
while the remaining 1,259 stores are either leased or owned by affiliates and
franchisees. Most of the owned properties are located in Quebec. Couche-Tard
believes that none of the leases is individually material to it. Most of the
leases are net leases requiring Couche-Tard to pay taxes, insurance and
maintenance costs. Although the leases expire at various times, the leases for
approximately 45% of these properties have terms, including renewal options,
extending beyond the end of fiscal 2008. Of the leases that expire prior to the
end of fiscal 2008, management anticipates that it will be able to negotiate
acceptable extensions of the leases for those locations that it intends to
continue operating. A number of our properties have been and will be subject to
sale-leaseback transactions.
Couche-Tard
leases its corporate headquarters in Laval, Quebec. Management believes that
Couche-Tards headquarters are adequate for its present and foreseeable needs.
In addition, Couche-Tard has three regional offices located in Scarborough,
Ontario, Calgary, Alberta, Columbus, Indiana, Fort Mill, South Carolina, Tampa,
Florida, Corona, California and Tempe, Arizona, all of which are leased. The
distribution centre in Laval, Quebec is also leased.  We lease a portion of Circle Ks corporate headquarters, in
Tempe, Arizona, from ConocoPhillips. Pursuant to an Office Lease between
ConocoPhillips and Circle K entered into at the time of closing of the
Acquisition, Tosco Operating Company, Inc. leases to Circle K approximately
193,747 (currently 125,000) square feet of office space in a building located
in Tempe, Arizona. Circle K has the right to reduce the area of the leased
premises at any time upon 30 days prior notice.  In June 2004, Circle K entered into a lease for 75,000 square
feet of office space to house the Arizona Region and centralized administrative
functions.  The move is expected to be
completed by October at which time the lease with ConoccoPhillips will be terminated.

Information Systems
Couche-Tard uses the information obtained from its POS systems to manage its
product mix at the store level. The periodic reports generated from the data
collected using POS scanners allows the store operators to identify slow-moving
inventory, track customer preferences, optimize product assortment and
effectively adapt the store to the needs of community. Couche-Tard uses POS
technology, including scanning, in all of its company-operated stores except
for Circle K stores where approximately 36% are equipped with POS technology,
including scanning. Couche-Tard is also currently implementing new POS systems
including the selective installation of touch screens in its Macs stores and
pay-at-the-pump systems for motor fuel distribution at certain company-owned
stores in all of its regions. This technology maximizes convenience for
customers while allowing Couche-Tard to collect information on consumer habits
to better implement its merchandising strategy. In fiscal 2003, Couche-Tard
established a data warehouse for all of its Canadian divisions and is
developing a wide area network, or WAN, which will allow it to implement a
perpetual inventory and in-store assisted ordering system. The system, which is
in use primarily in Quebec, is designed to optimize the store supply process.
15


Employees and Training

As of April
25, 2004, Couche-Tard had approximately 34,000 employees throughout its
company-operated stores, administrative offices and distribution centre.
Approximately 150 employees work in the head office in Laval, Quebec. All of
Couche-Tards head office employees work on a full-time basis.

Couche-Tard is
organized in eight operating units based on geography: Eastern Canada (Quebec),
Central Canada (Ontario), Western Canada, the U.S. Midwest, the West Coast
Region, the Arizona Region, the Southeast Region and the Florida and Gulf Coast
Region, each managed by a Vice-President of Operations. Each Vice-President is
typically responsible for up to 800 stores. Each store is operated as a
separate business unit and store managers within each region are required to
meet specific performance objectives. Store managers report to market managers
who are typically responsible for eight to ten stores. Market managers report
to regional directors who typically oversee 60 to 70 stores. Finally, regional
directors are accountable to the regional vice-presidents. Couche-Tards
decentralized structure allows most store-specific decisions to be made
locally, rather than centrally, which expedites the decision-making process.
When Couche-Tard hires head office director-level employees who are new
to the convenience store industry, those employees generally spend six to 12
weeks learning employee positions at the store level. Couche-Tard believes that
this fosters a sense of ownership in the business and promotes entrepreneurial
behaviour. Couche-Tard typically spends between 2% and 4% of total annual
compensation in the network on the training of its employees.
Trade Names, Service Marks and Trademarks
Couche-Tard
has registered or applied for registration of a variety of trade names, service
marks and trademarks for use in its business, which Couche-Tard regards as
having significant value and as being important factors in the marketing of the
company and its convenience stores. Couche-Tard operates its corporate stores
under a variety of banners, including Couche-Tard,
Provi-Soir,Macs,Mikes
Mart,Beckers and Winks in Canada and under the Circle K,Bigfoot,
Dairy Mart,Macs and Handy
Andy banners in the United States. The three core banners are Couche-Tard, Circle K and Macs. Couche-Tard sells its proprietary
branded food items such as La Maisonnee
and Handful fresh sandwiches and
breakfast selections, as well as Sloche
and Froster brands of iced
beverages.  Circle K store brands
include Circle K,Circle K Express,Grocery Express,Grabbers,The
Frozen Zone,Circle K Strike
Out Meter,Thirst Buster,
Thirst Buster Nothings Cooler,Thirst Freezer,Thirst Freezer Dangerously Cold,Freshest Coffee Going!,and Circle K
Short Orders.Service brands
include: QuickFlick and Circlek.com. Tag lines include All you want today is at your Circle K,
All you want today and Circle K, A Better Way.  Couche-Tard also sells motor fuel under its
private labels, including Couche-Tard,
Macs,Bigfoot and Dairy Mart.
Couche-Tard is not dependent upon any single trademark or trade name, however,
it considers its banners and brands to be important assets. Accordingly,
Couche-Tards policy is to register or otherwise protect these intangible
assets in all jurisdictions in which Couche-Tard operates. Couche-Tard has
exclusive rights to use its trademarks, except in certain counties in Texas and
Oklahoma where Circle K has granted SSP Partners, one of its franchisees,
the exclusive right to use the Circle K
brand.
COMPETITION
Our stores
compete with a number of national, regional, local and independent retailers,
including hypermarkets, grocery and supermarket chains, grocery wholesalers and
buying clubs, other convenience store chains, oil company motor fuel/mini-convenience
stores, food stores and fast food chains as well as variety, drug and candy
stores. In terms of motor fuel sales, our stores compete with other food
stores, service stations and, increasingly, supermarket chains and discount
retailers. Each stores ability to compete depends on its location,
accessibility and customer service. The rapid growth in the numbers of
convenience-type stores opened by oil companies and the entry of a large number
of hypermarkets into the industry over the past several years has intensified
competition. An increasing number of hypermarkets and other retail format such
as supermarkets and drugstores have been expanding their product mix to include
core convenience items and fill-in grocery. This channel blending is eroding
the convenience stores traditional base of business, as exemplified by major
drug store chains extending business hours to 24 hours a day, seven days a
week and selling a product assortment similar to that of convenience stores.
16

ENVIRONMENTAL MATTERS
We are subject
to various federal, state, provincial and local environmental laws and
regulations, including, in the United States, the Resource Conservation and
Recovery Act of 1976, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of
1986 and the Clean Air Act, in each case as amended. The enforcement of these
laws by regulatory agencies such as the U.S. Environmental Protection Agency
(the EPA) and its state and provincial equivalents will continue to affect
our operations by imposing increased operating and maintenance costs and
capital expenditures required for compliance. In addition, certain procedures
required by these laws can result in increased lead time and costs for new
facilities. Violation of environmental statutes, regulations or orders could
result in civil or criminal enforcement actions. We make financial expenditures
in order to comply with regulations governing underground storage tanks adopted
by federal, provincial, state and local regulatory agencies.
In particular,
at the U.S. federal level, the Resource Conservation and Recovery Act of 1976,
as amended, requires the EPA to establish a comprehensive regulatory program
for the detection, prevention and cleanup of releases from leaking underground
storage tanks. Regulations enacted by the EPA in 1988 established requirements
for installing underground storage tank systems, upgrading underground storage
tank systems, taking corrective action in response to releases, closing
underground storage tank systems, keeping appropriate records, and maintaining
evidence of financial responsibility for taking corrective action and
compensating third parties for bodily injury and property damage resulting from
releases. These regulations permit states to develop, administer and enforce
their own regulatory programs, incorporating requirements which are at least as
stringent as the federal standards.
Our Canadian operations are also subject to environmental regulation
imposed by provincial, federal and municipal governments. This primarily
relates to the motor fuel operations conducted at approximately 509 locations
throughout Canada, including the remediation of such products which have
spilled or leaked on or migrated from such locations and other locations used
in our earlier operations and those of our predecessors. We believe that we are
in material compliance with environmental laws in Canada, including such
regulation, and do not anticipate that any increase in the future costs of
maintaining compliance in Canada or of remediation of spills or leaks,
including any capital expenditure required, will be material to us. We are
currently dealing with a small number of claims by third parties or
governmental agencies for remediation or damages caused by contamination
alleged to be on or migrating from our current or historic operations. We do
not anticipate any material expense from such claims. However, changes in
applicable requirements and their enforcement or newly discovered conditions
could cause us to incur material costs that could adversely affect our business
and results of operations.
REGULATORY MATTERS
Many aspects
of our operations are subject to regulation under federal, provincial, state
and local laws. We describe below the most significant of the regulations that
impact all aspects of our operations.
Safety. We are subject to
comprehensive federal, provincial, state and local safety laws and regulations.
These regulations address issues ranging from facility design, equipment
specific requirements, training, hazardous materials, record retention,
self-inspection, equipment maintenance and other worker safety issues including
workplace violence. These regulatory requirements are fulfilled through a comprehensive
Health, Environmental and Safety program. There are no known safety risks or
liabilities that are material to our operations or financial position.
Sale of Alcoholic Beverages and Tobacco Products.  In certain areas where our
stores are located, provincial, state or local laws limit the sale of and/or
the hours of operation for the sale of alcoholic beverages and the sale of
alcoholic beverages and tobacco products to persons younger than a specified
age. State and local regulatory agencies have the authority to approve, revoke,
suspend or deny applications for and renewals of permits and licenses relating
to the sale of alcoholic beverages, as well as issue fines to stores for the
improper sale of alcoholic beverages or tobacco products. These agencies may
also impose various restrictions and sanctions. In many states, retailers of
alcoholic beverages have been held responsible for damages caused by
intoxicated individuals who purchased alcoholic beverages from them. Retailers
of alcoholic beverages may also be fined or have a stores permit revoked for
selling alcohol to a minor. While the potential exposure for damage claims, as
a seller of
17

alcoholic
beverages is substantial, we have adopted procedures intended to minimize such
exposure. In addition, we maintain general liability insurance which may
mitigate the effect of any liability.
Store Operations.  Our stores are subject to regulation by
federal agencies and to licensing and regulations by provincial, state and
local health, sanitation, safety, fire and other departments relating to the
development and operation of convenience stores, including regulations relating
to zoning and building requirements and the preparation and sale of food.
Difficulties in obtaining or failures to obtain the required licenses or
approvals could delay or prevent the development of a new store in a particular
area.
Our operations are also subject to federal, provincial and state laws
governing such matters as wage rates, overtime, working conditions and citizenship
requirements. At the federal level, there are proposals under consideration
from time to time to increase minimum wage rates and to introduce a system of
mandated health insurance, which could affect our results of operations.
RISK FACTORS
The Business
Risks and Other Risks sections of our Managements Discussion and Analysis
of Operating Results and Financial Position on pages 50 to 54 of the Companys
2004 Annual Report, is incorporated herein by reference, as supplemented from
time to time in the Business Risks sections of our quarterly reports to
shareholders.
DIVIDENDS
Since 1989,
the Company has not declared any dividends. 
In addition, the Credit Agreement dated as of December 17, 2003 among
Couche-Tard and the members of its lending syndicate restricts the payment of
dividends, return of capital or other distributions to the shareholders of the
Company, without the consent of the lenders, except, notably, for stock
dividends in connection with stock subdivisions of the outstanding equity
shares and normal course repurchases, in accordance with applicable rules. The
Board of Directors believes that the Company has a strong potential for
development and should invest large amounts to keep its network competitive.  For this reason, over the near term, the
Company plans to invest its liquidity in expansion and renovation projects.
CAPITAL STRUCTURE
The voting
shares of the Company are its Class A Multiple Voting Shares (the Multiple
Voting Shares) and its Class B Subordinate Voting Shares (the Subordinate
Voting Shares).  As at June
30, 2004, 28,520,561 Multiple Voting Shares and 72,109,356Subordinate Voting Shares of the Company
were issued and outstanding.  Each
Multiple Voting Share carries 10 votes and each Subordinate Voting Share
carries one vote with respect to all matters coming before the Meeting.
Conversion RightsEach Multiple Voting Share is convertible at
any time at the holders option into one fully paid and non-assessable
Subordinate Voting Share.  Upon the
earliest to occur of: (i) the day upon which all of the Majority Holders
(defined in the Articles of the Company as being Messrs. Alain Bouchard,
Richard Fortin, Réal Plourde and Jacques DAmours) will have reached the age of
65, or (ii) the day when the Majority Holders hold, directly or indirectly,
collectively less than 50% of the voting rights attaching to all outstanding
voting shares of the Company, each Subordinate Voting Share shall be
automatically converted into one fully paid and non-assessable Multiple Voting
Share.
Take-Over Bid ProtectionIn the event that an offer as defined in the
Articles of the Company (an Offer) is made to holders of Multiple
Voting Shares, each Subordinate Voting Share shall become convertible at the
holders option into one Multiple Voting Share, for the sole purpose of
allowing the holder to accept the Offer. 
The term Offer is defined in the Articles of the Company as an offer
in respect of the Multiple Voting Shares which, if addressed to holders
resident in Québec, would constitute a take-over bid, a securities exchange bid
or an issuer bid under the Securities Act (Québec) (as presently in
force or as it may be subsequently amended or readopted), except that an Offer
shall not
18

include: (a)
an offer which is made at the same time for the same price and on the same
terms to all holders of Subordinate Voting Shares; and (b) an offer which, by
reason of an exemption or exemptions obtained under the Securities Act (Québec),
does not have to be made to all holders of Multiple Voting Shares; provided
that, if the offer is made by a person other than a Majority Holder or by a
Majority Holder to a person other than a Majority Holder, in reliance on the
block purchase exemption set forth in section 123 of the Securities Act (Québec), the
offer price does not exceed 115% of the lower of the average market price of
the Multiple Voting Shares and the average market price of the Subordinate
Voting Shares as established with the formula provided by the Regulation
Respecting Securities (Québec). 
The conversion right attached to the Subordinate Voting Shares is
subject to the condition that if, on the expiry date of an Offer, any of the
Subordinate Voting Shares converted into Multiple Voting Shares are not taken
up and paid for, such Subordinate Voting Shares shall be deemed never to have
been so converted and to have always remained Subordinate Voting Shares.  The Articles of the Company contain
provisions concerning the conversion procedure to be followed in the event of
an Offer.
RATINGS
On November
18, 2003, Moodys Investors Service announced that it rated the Companys
Senior Subordinated Notes at Ba3. Obligations rated Ba are in the fifth highest
category and are judged to have speculative elements and are subject to
substantial credit risk. The rating is based upon potential post-Circle K
merger operating efficiencies from the Companys position as one of the leading
convenience store chain in North America, the Companys pattern after prior
acquisitions of reducing leverage with free cash flow and incremental equity
offerings, and expected growth in higher-margin merchandise categories.  Constraining the ratings are the integration
risks in more than doubling the Companys base with the Circle K acquisition,
the expectation that fixed charge coverage will remain fairly low for the next
several years, and increase reliance on unpredictable profits from gasoline
sales.  This is the first time that Moodys has rated the Companys securities.
On November
21, 2003, Standard and Poors Ratings Services Limited announced that it had
assigned a B rating to the Companys Senior Subordinated Notes, with a stable
outlook. An obligation rated B is more vulnerable to non-payment than
obligations rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligors capacity or willingness to
meet its financial commitment on the obligation.  The rating reflects the relative large size of the Circle K
acquisition, and the resulting high leverage of the mostly debt funded
acquisition. These factors are partially offset by the Companys strong
performing current store base, the acquired store base that has performed
reasonably well and a seasoned management team that has experience with
previous, albeit smaller acquisitions. 
This is the first time that Standard and Poors has rated the Companys
securities.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
rating organization.
MARKET FOR SECURITIES
The Multiple
Voting Shares and Subordinate Voting Shares are listed on the Toronto Stock
Exchange since December 6, 1999 under the symbols ATD.A and ATD.B,
respectively.

19

Price Ranges and Volume Traded

Monthly Period
  
  Symbol
  
  High Price (1)
  
  Low Price(1)
  
  Traded VolumeApril-03(2)
  
  
  ATD.A
  
  
  $
  14.52
  
  
  
  $
  14.15
  
  
  
  1,100May-03
  
  
  ATD.A
  
  
  $
  15.50
  
  
  
  $
  14.00
  
  
  
  10,013June-03
  
  
  ATD.A
  
  
  $
  16.00
  
  
  
  $
  14.20
  
  
  
  28,719July-03
  
  
  ATD.A
  
  
  $
  17.30
  
  
  
  $
  14.00
  
  
  
  17,970August-03
  
  
  ATD.A
  
  
  $
  18.50
  
  
  
  $
  17.00
  
  
  
  8,058Sept-03
  
  
  ATD.A
  
  
  $
  26.00
  
  
  
  $
  17.15
  
  
  
  30,496Oct-03
  
  
  ATD.A
  
  
  $
  31.25
  
  
  
  $
  22.30
  
  
  
  28,338Nov-03
  
  
  ATD.A
  
  
  $
  28.50
  
  
  
  $
  23,50
  
  
  
  24,608Dec-03
  
  
  ATD.A
  
  
  $
  27.00
  
  
  
  $
  23.55
  
  
  
  29,192Jan-04
  
  
  ATD.A
  
  
  $
  26.50
  
  
  
  $
  24.50
  
  
  
  14,152Fed-04
  
  
  ATD.A
  
  
  $
  27.25
  
  
  
  $
  24.25
  
  
  
  16,770March-04
  
  
  ATD.A
  
  
  $
  29.33
  
  
  
  $
  23.51
  
  
  
  153,071April-04(3)
  
  
  ATD.A
  
  
  $
  24.66
  
  
  
  $
  24.29
  
  
  
  36,482April-03(2)
  
  
  ATD.B
  
  
  $
  13.33
  
  
  
  $
  13.17
  
  
  
  78,177May-03
  
  
  ATD.B
  
  
  $
  14.30
  
  
  
  $
  12.55
  
  
  
  1,613,209June-03
  
  
  ATD.B
  
  
  $
  14.15
  
  
  
  $
  13.10
  
  
  
  1,241,652July-03
  
  
  ATD.B
  
  
  $
  15.80
  
  
  
  $
  13.45
  
  
  
  2,608,123Aug-03
  
  
  ATD.B
  
  
  $
  16.50
  
  
  
  $
  15.02
  
  
  
  1,472,523Sept-03
  
  
  ATD.B
  
  
  $
  17.69
  
  
  
  $
  15.75
  
  
  
  1,703,570Oct-03
  
  
  ATD.B
  
  
  $
  23.24
  
  
  
  $
  16.90
  
  
  
  5,431,072Nov-03
  
  
  ATD.B
  
  
  $
  23.79
  
  
  
  $
  20.55
  
  
  
  4,125,668Dec-03
  
  
  ATD.B
  
  
  $
  23.98
  
  
  
  $
  22.01
  
  
  
  3,791,323Jan-04
  
  
  ATD.B
  
  
  $
  24.50
  
  
  
  $
  22.51
  
  
  
  2,952,099Feb-04
  
  
  ATD.B
  
  
  $
  26.70
  
  
  
  $
  21.95
  
  
  
  4,959,904March-04
  
  
  ATD.B
  
  
  $
  29.25
  
  
  
  $
  23.36
  
  
  
  13,224,890April-04(3)
  
  
  ATD.B
  
  
  $
  24.28
  
  
  
  $
  23.84
  
  
  
  2,007,022(1)
  All prices
  are in CAD$ an on a per share basis.(2)
  From April
  28 to 30, 2003 - average prices and total volumes for partial month(3)
  From April 1
  to 25, 2004  average prices and volumes for partial monthDIRECTORS AND OFFICERS
Directors
The following
tables list the Companys directors. 
All information is accurate as of June 30, 2004.
20

Name, municipality of
  residence and office held
  with the Company
  
  Principal occupation
  
  Director since
  
  Number of Multiple
  Voting Shares
  beneficially owned or
  over which control or
  direction is exercised 
  (1)
  
  Number of
  Subordinate
  Voting Shares
  beneficially
  owned or over
  which control or
  direction is
  exercised (1)Alain
  Bouchard (4)Lorraine, Québec
  Chairman of the Board, 
  President and Chief 
  Executive Officer
  
  Chairman of the Board, President and Chief Executive Officer of the
  Company
  
 1988
  
  
  16,270,160 (2)
  
  
  
  601,984 (3)Member of
  the Board of Directors and Human Resources Committee of Quebecor inc.
  (communications holding company) and Atrium Biotechnologies Inc. (development
  and marketing of cosmetic and nutritional ingredients); member of the Board
  of Directors, Audit Committee and Human Resources and Compensation Committee
  of RONA inc.(hardware stores retailer)Robert Brunet (6),(7)Bolton Centre, QuébecLead Director
  
  President, Socoro Inc. (management consulting firm)
  
  1991
  
  
  
  
  
  
  102,000Jacques
  DAmours (4)Lorraine, Québec 
  Vice-President, 
  Administration
  
  Vice-President, Administration of the Company
  
  1988
  
  
  1,421,760
  
  
  
  387,600 (3)Roger Desrosiers(6)Montréal, Québec 
  Chairman of the Audit 
  Committee
  
  Corporate Director
  
  2003
  
  
  
  
  
  
  4,000Member of the Board of Directors and Chairman of the Audit Committee
  of Desjardins, Groupe d Assurances Générales and its subsidiaries, La
  Sécurité, Compagnie d Assurances, the Securities Insurance Company and Certas
  Inc.  Also member of the Board of
  Directors of PG Mensys Systèmes d  Information Inc. and M3K Inc.Jean Élie(5) Montréal, Québec
  
  Corporate Director
  
  1999
  
  
  
  
  
  
  17,700Richard Fortin (4) Longueuil, Québec
  Executive Vice-President and
  Chief Financial Officer
  
  Executive Vice-President and Chief Financial Officer of the Company
  
  1988
  
  
  966,140
  
  
  
  403,600 (3)Member of the Board of Directors and Audit Committee of
  Transcontinental inc. (commercial printer)Josée Goulet 
  Montréal, Québec
  
  Director of marketing services, Bell Canada (telephone company)
  
  2000
  
  
  
  
  
  
   (3)21
Roger Longpré (5),(6)
  
  Brossard, Québec 
  Chairman of the Human 
  Resources and Corporate 
  Governance Committee
  
  President, Mergerac Inc. (consultants in mergers and acquisitions)
  
  2001
  
  
  
  
  
  
  8,000 (3)Réal Plourde
  (4)Montréal, Québec 
  Executive Vice-President and 
  Chief Operating Officer
  
  Executive Vice-President and Chief Operating Officer of the Company
  
  1988
  
  
  350,256
  
  
  
  646,800 (3)Member of the Board of Directors and Compensation Committee of
  Bouclair Inc. (fabric retailer).Jean-Pierre
  Sauriol (5) Laval, Québec
  
  President and Chief Executive Officer, Dessau-Soprin inc.
  (engineering- construction company)
  
  2003
  
  
  
  
  
  
  2,000Member of the Board of Directors of Dessau-Soprin inc. and Camoplast
  inc. (industrial manufacturer)Jean TurmelMontréal, Québec
  
  President  Financial Markets, Treasury and Investment of a Canadian
  chartered bank
  
  2002
  
  
  
  
  
  
  8,000 (3)Member of the Board of Directors of a Canadian chartered bank; member
  of the Board of Directors and Chairman of National Bank Financial Inc. and
  Natcan Investment Management Inc. (financial services) and also of  the Montreal ExchangeNotes:1)
  The information as to the shares beneficially owned, controlled or
  directed, not being within the knowledge of the Company, has been furnished
  by the respective candidates individually.2)
  Of this number, 14,973,132 shares are held through Developpements
  Orano Inc.3)
  Messrs. Alain Bouchard, Richard Fortin, Réal Plourde and Jacques
  D  Amours also hold options granting them the right to purchase 1,600,000,
  710,000, 710,000 and 4,000 Subordinate Voting Shares, respectively. Mrs.
  Josée Goulet, Messrs. Roger Longpré and  Jean Turmel hold options granting them the right to purchase 40,000,
  20,000 and 10,000 Subordinate Voting Shares, respectively.4)
  Member of the Executive Committee.5)
  Member of the Human Resources and Corporate Governance Committee.6)
  Member of the Audit Committee.7)
  Lead director.Alain
Bouchard has been a board member since 1988.
He is the founder of the companies that became Alimentation
Couche-Tard Inc., which began with just one store in 1980. He is our
Chairman of the Board, President and Chief Executive Officer and has more than
35 years of experience in the industry. Mr. Bouchard began his career
at Perrette Dairy Ltd. in 1968 as interim store manager. He later became
supervisor and district director until 1973. As district director, he
supervised the opening of 80 stores and developed the Perrette network. From
1973 to 1976, while employed by Provigo Inc. (Provi-Soir division),
Mr. Bouchard organized and supervised the opening of 70 Provi-Soir
convenience stores. From 1976 to 1980, Mr. Bouchard operated a Provi-Soir
franchise and, in 1980, he opened the first Couche-Tard convenience store. Mr. Bouchard
is also a director of Quebecor Inc., a communications holding company,
RONA Inc., a hardware retailer and Atrium Biotechnologies Inc.
(development and marketing of cosmetic and nutritional ingredients).
22


Richard
Fortin has been a board member since 1988.
He is our Executive Vice-President and Chief Financial Officer. Before joining
Couche-Tard in 1984, he had more than 13 years of experience at a number
of major financial institutions, and was Vice-President of Quebec for a
Canadian bank wholly-owned by Societe Generale (France). Mr.  Fortin holds
a bachelors degree in Management with a major in Finance from Laval University
in Quebec City. Mr. Fortin is also a director of Transcontinental Inc., a
commercial printer.
Réal
Plourde has been a board member since 1988.
He is our Executive Vice-President and Chief Operating Officer.
Mr. Plourde joined us in 1984 and has held various positions, ranging from
Manager of Technical Services to Vice-President of Development, Sales and Operations.
In 1988 and 1989, Mr. Plourde also acted as President of Pro
Optic Inc., then a wholly-owned subsidiary of Couche-Tard and Quebecs
first optical lens manufacturer. Mr. Plourde began his career in various
engineering projects in Canada and Africa. Mr. Plourde holds an
Engineering Degree (Applied Sciences) from Laval University in Quebec City and
an MBA from the Ecole des Hautes Etudes Commerciales in Montreal.
Mr. Plourde is a member of the Quebec Engineers Association. Mr. Plourde
is also a director of Bouclair Inc., a fabric retailer.
Jacques D Amours has been a board member since 1988. He is our Vice-President,
Administration and, since joining us in 1980, has worked in a variety of roles,
including Manager of Technical Services, Vice-President of Sales and
Vice-President of Administration and Operations.
Robert R.
Brunet has been a board member since 1991.
Mr. Brunet is President of Socoro Inc., a management consulting firm.
From 1988 to 1998, Mr. Brunet was Vice-President and General Manager of
RNG Group Inc., a Canadian energy equipment distribution company. From
1963 to 1988, Mr. Brunet was employed by Gulf Canada Inc. and by
Ultramar Canada Inc. where his last function was as Vice-President, Retail
Operations.
Jean A.
Élie has been a board member since 1999.
From 1998 to 2002, Mr. Élie was managing director of a Canadian bank
wholly-owned by Societe Generale (France). From 1987 to 1997, Mr. Élie was
a director and member of the Executive Committee and Chairman of the Finance
and Audit Committee of Hydro-Quebec, for which he also acted as Interim
Chairman in 1996. From 1981 to 1995, he was a Vice-President and officer
(director of governance and corporate services) of Burns Fry Limited (today BMO
Nesbitt Burns Inc.), a Canadian investment banking and brokerage firm.
Mr. Élie was also a director and member of the Executive Committee of the
Investment Dealers Association of Canada. Mr. Élie holds a B.C.L. (law)
from McGill University and an MBA from the University of Western Ontario and is
a member of the Quebec Bar Association.

Josée
Goulet has been a board member since 2000.
Mrs. Goulet is Chief of Marketing Services with Bell Canada, a telephone
company. Mrs. Goulet joined the Bell group of companies in 1985 and held
various management positions prior to being appointed to various senior
management positions since 1994. Mrs. Goulet graduated from the Ecole
Polytechnique of Montreal where she obtained a bachelors degree in electrical
engineering and holds an MBA from McGill University in Montreal.

Roger
Longpré has been a board member since 2001.
Mr. Longpré is President and founder of Mergerac Inc., a consulting
firm in the areas of mergers and acquisitions and corporate finance. From 1986
to 1994, Mr. Longpré was a partner of Raymond Chabot Grant Thornton where
he began consulting in the areas of corporate finance and mergers and
acquisitions and subsequently became responsible for all of the firms
financial consulting services. From 1980 to 1986, Mr. Longpré was
Vice-President of Credit Suisse First Boston Canada, Montreal Branch. Prior to
1980, Mr. Longpré was employed in the banking industry.  Mr. Longpré has a bachelors degree in
business administration with a major in finance. He also holds an MBA degree,
also with a major in finance.

Jean Turmel has been a board member since 2002. Mr. Turmel is President,
Financial Markets, Treasury and Investment Bank of a Canadian chartered bank.
Mr. Turmel is a director of a Canadian chartered bank and a director and
chairman of National Bank Financial Inc. Mr. Turmel is also Chairman
of the Board of Natcan Investment Management Inc. Prior to 1981,
Mr. Turmel held various positions at McMillan Bloedel Inc., Dominion
Securities Inc. and Merrill Lynch Royal Securities. Mr. Turmel holds
a baccalaureate in commerce and an MBA both from Laval University in Quebec
City.

Jean-Pierre
Sauriol as elected to the board of directors
on September 24, 2003. Mr. Sauriol is President and Chief Executive Officer
of Dessau-Soprin Inc., one of Canadas largest engineering-construction
companies.

23


Mr. Sauriol
was Chairman of the Association of Consulting Engineers of Canada in 1993 and
of the Association of Consulting Engineers of Quebec in 1988 and 2000.
Mr. Sauriol is a Fellow of the Canadian Academy of Engineering.
Mr. Sauriol graduated from the Ecole Polytechnique of Montreal in 1979 and
completed Harvard Business Schools Owner President Management Program in 1993.
Roger
Desrosiers was elected to the board of
directors on September 24, 2003. Mr. Desrosiers has been a chartered
accountant since 1963. In 1973, Mr. Desrosiers founded an accounting firm
that subsequently merged with Arthur Andersen in 1994. From 1994 to 2000,
Mr. Desrosiers was the Managing Partner, Eastern Canada of Arthur
Andersen. From 1968 to 1973, Mr. Desrosiers was assistant-treasurer,
director of accounting and budget for Quebec-Telephone (now TELUS Inc.).
Prior to 1968, Mr. Desrosiers practised accounting with Coopers &
Lybrand. Mr. Desrosiers is a Fellow of the Quebec Order of Chartered
Accountants. Mr. Desrosiers sits on the Board of Directors of various
insurance companies and is a member of the Consulting Board of Telus
Quebec Inc. and Telus Solutions d  Affaires. Mr. Desrosiers holds a
Masters Degree in Commercial Sciences and a License in Accounting Sciences both
from Laval University in Quebec City.
One of the Companys directors is employed by a subsidiary of a
Canadian chartered bank, which is one of the Companys lenders.

Officers

The following
table lists the Companys officers who are not also directors.  All information is accurate as of
June 30, 2004.

Name & municipality of
  residence
  
  Office held with the Company
  
  Officer since
  
  Number of Subordinate
  Voting Shares beneficially
  owned or over which
  control or direction is
  exercisedMICHEL BERNARD
  COLUMBUS, INDIANA
  
  Vice-President,
  Operations, U.S.Midwest
  
  2003
  
  
  48,100ROBERT G. CAMPAU
  
  Vice-President,
  Operations, U.S. Southeast Region
  
  2003
  
  
  NILCAVE CREEK, ARIZONASTÉPHANE GONTHIER
  
  Vice-President,
  Operations, Central Canada
  
  1998
  
  
  50,750Ste-Rose, QuebecMICHEL GUINARD
  LAVAL QUEBEC
  
  Vice-President,
  Development
  
  2000
  
  
  1,300BRIAN HANNASCHColumbus Indiana
  
  Vice-President, Integration
  
  2001
  
  
  8,000GEOFFREY C. HAXEL
  
  Vice-President,
  Operations, U.S. Arizona Region
  
  2003
  
  
  NILSCOTTSDALE, ARIZONAJEAN-LUC MEUNIER
  ROSEMERE, QUEBEC
  
  Vice-President,
  Operations, Eastern Canada
  
  2004
  
  
  NILCHARLES PARKER
  SCOTTSDALE, ARIZONA
  
  Vice-President,
  Operations, U.S. Florida/Gulf Region
  
  2003
  
  
  NILJOY POWELL
  CHINO HILLS, CALIFORNIA
  
  Vice-President,
  Operations, U.S. West Coast Region
  
  2003
  
  
  NILKIM TROWBRIDGE
  CALGARY, ALBERTA
  
  Vice-President, Operations, Western Canada
  
  2003
  
  
  70,00024


Michel
Bernard has been our Vice-President,
Operations, U.S. Midwest since 2003. Mr. Bernard has served in a variety
of operations and marketing-related positions during his 24-year supermarket
and convenience store career. Mr. Bernard joined Couche-Tard in 1987 and
subsequently departed in 1994 to pursue other opportunities including as
Director of Convenience Retailing for Petro-Canada. Mr. Bernard returned
to Couche-Tard in 1999 as Senior Director of Marketing and Merchandising.
Mr. Bernard holds a bachelors degree in Management, with a major in
Marketing, from the Universite du Quebec a Montreal.
Robert G.
Campau has been our Vice-President,
Operations, U.S. Southeast Region since the closing of the Acquisition.
Mr. Campau began his nearly 30-year convenience industry career with the
Southland Corporation (7-Eleven) in 1974. Since joining Circle K in 1979,
Mr. Campau held a variety of positions including zone manager, division
manager, director of operations, franchise support services, director of
organizational development, director of operations and representative of the Office
of the President. Prior to the Acquisition, he served as Manager of Retail
Support for ConocoPhillips. Mr. Campau earned his bachelors degree in
business administration from the University of Wisconsin at Madison.
Stéphane
Gonthier has been our Vice-President,
Operations, Central Canada since April 2004 and prior thereto, he was
Vice-President, Operations, Eastern Canada and Secretary since 1999.  In 1998, he joined us as Vice-President of
Legal Affairs, Petroleum Operations and Secretary. Before joining Couche-Tard,
he practised law. Mr. Gonthier holds an LL.B from the University of
Montreal and an MBA from the University of Sherbrooke and is a member of the
Quebec Bar Association.
Michel Guinardjoined Alimentation Couche-Tard in 2000 and was appointed its Vice
President, Real Estate in 2002.Mr Guinard previously worked 10 years as
Director,Real Estate-Quebec for Tim Hortons following a 21 year career in the
canadian petroleum industry with Petrofina and Petro Canada in operations,
strategic planning, marketing and real estate functions .Mr Guinard holds a
bachelors degree in Economics from Concordia University (Loyola College).
Brian P.
Hannasch has been our Vice-President,
Integration since 2003. In 2001, he was appointed Vice-President, Operations,
U.S. Midwest where he was responsible for all aspects of our U.S. operations.
From 2000 to 2001, Mr. Hannasch was Vice-President of Operations for
Bigfoot Food Stores LLC, a 225 unit convenience store chain in the U.S. Midwest
acquired by Couche-Tard. From 1989 to 2000, Mr. Hannasch was employed by
BP Amoco in various positions of increasing responsibility. His last position
with BP Amoco was Vice-President of Marketing for the Midwest Business Unit.
Mr. Hannasch holds a B.A. in Finance from Iowa State University and an MBA
in Marketing and Finance from the University of Chicago.

Geoffrey C.
Haxel has been our Vice-President,
Operations, U.S. Arizona Region since the closing of the Acquisition.
Mr. Haxel served in a variety of operations and marketing positions since
joining Circle K in 1988. Mr. Haxel began his career as a district
manager trainee and also held the positions of sales manager, category manager
and division manager. Prior to the Acquisition, Mr. Haxel served as Circle Ks
Arizona Region Manager with responsibility for more than 600 sites in a
four-state territory. Mr. Haxel has completed coursework toward a bachelors
degree in chemical engineering from the University of Oklahoma.

Jean-Luc
Meunier A member of Couche-Tards team since
1999, Jean-Luc Meunier was appointed Vice-President, Operations, Eastern Canada
in 2004  after holding various positions such as Operations Manager, Real
Estate Manager and Technical Services Manager. Mr. Meunier also acquired some
eight years of experience in project engineering, consulting, analysis and
management at Shell Canada.

Charles M.
Parkerhas been our Vice-President,
Operations, U.S. Florida Region since the closing of the Acquisition.
Mr. Parker held a variety of operations and marketing positions during his
21-year convenience store career. After joining Circle K in 1987,
Mr. Parker worked in a variety of positions including division merchandise
manager, region marketing manager, division president, region vice-president
and director of retail development in various markets. In 2001, following the
acquisition of Tosco Corporation by Phillips Petroleum Company, Mr. Parker
became Manager of Company Operations for Circle K, responsible for the
operating performance of more than 2,000 company-operated convenience stores.
Prior to joining Circle K, Mr. Parker had a seven-year tenure with
Southland Corporation (7-Eleven). Mr. Parker holds a bachelors degree in
management from the University of New Mexico.

25


Joy A.
Powell has been our Vice-President, Operations,
U.S. West Coast Region since the closing of the Acquisition. Mrs. Powell
served in a variety of operations and marketing-related positions during her
19-year convenience store career. In 1992, she joined Circle K as a
division operations manager. Prior to the Acquisition, Mrs. Powell served
as Circle Ks West Coast Region Manager with overall operations
responsibility for approximately 450 sites in a six-state territory. Prior to
joining Circle K, Mrs. Powell had an eight-year tenure with the Southland
Corporation (7-Eleven). Mrs. Powell studied business administration with a
concentration in marketing at California State University, Hayward.
Kim J. Trowbridge has been our Vice-President,
Operations, Western Canada since 1999. Prior to 1999, Mr. Trowbridge was
Vice-President, Operations, Western division for Macs Convenience
Stores Inc. Mr. Trowbridge is Chairman of the Alberta Food Processors
Association and the President and a director of the Western Convenience Store
Association. Mr. Trowbridge has more than 20 years of experience in the
convenience store industry.
LEGAL PROCEEDINGS
In the
ordinary course of business, Couche-Tard is a defendant in a number of legal
proceedings, suits, and claims common to companies engaged in retail businesses.
The majority of these cases are brought by individual plaintiffs. Couche-Tard
believes that it is not currently involved in any litigation, claims or
proceedings in which an adverse outcome would have a material adverse effect on
Couche-Tards operating results and financial condition.
In the stock purchase agreement for all the outstanding capital stock of
Circle K, ConocoPhillips has agreed to indemnify us against all judgments
arising from legal proceedings filed and served on Circle K as of the closing
date.
TRANSFER AGENT AND REGISTRAR
The transfer
agent and registrar for the shares of the Company is National Bank Trust
Company, 1100 University Street, Suite 900, Montreal, Quebec H3B 4L8.  Registrar offices are located in Toronto,
Calgary  and Vancouver.

MATERIAL CONTRACTS
Credit agreement
In connection
with the Acquisition, we refinanced the majority of Couche-Tards long-term
debt. We entered into a senior credit facility with a syndicate of lenders led
by three Canadian chartered banks. The senior credit facility is comprised of:

  five-year revolving credits
  facilities of up to an aggregate of approximately $150.0 million;
  a five-year Canadian Term Loan
  A facility of up to US$265.0 million; and
  a seven-year U.S. Term Loan B
  facility of up to US$245.0 million.Revolving Credit Facilities.  We have five-year revolving credit
facilities in the amount of $50 million available in Canadian dollars or
U.S. dollars to the Canadian borrowers and in the amount of US$75  million
available in U.S. dollars to the U.S. borrowers, which bear interest at the
Canadian prime rate, or the Canadian or U.S. base rate (as applicable) or
LIBOR, plus a certain margin varying on the basis of our leverage ratio. The
revolving facilities are also available in the form of bankers acceptances
(for Canadian dollar advances) and in the form of letters of credit (not to
exceed $10 million (or the U.S. dollar equivalent) in respect of the
Canadian facility and US$30 million in respect of the U.S. facility).
Canadian Term Loan A Facility.  We have a five-year Term Loan a facility
denominated in U.S. dollars in the amount of US$265 million, which
amortizes over the term of the facility in quarterly instalments varying from
2.5% to 7.5% of the principal amount. The facility bears interest at the
Canadian base rate or LIBOR, plus a certain margin varying on the basis of our
leverage ratio.

U.S. Term Loan B Facility.  In addition, we have a
seven-year Term Loan B facility denominated in U.S. dollars in an amount of
US$245 million which amortizes over the term of the facility in quarterly
instalments equal to 1% per

26


annum in the
first six years and 94% in the seventh year. This loan bears interest at the
U.S. base rate or LIBOR, plus a fixed margin.

Prepayments. Our senior credit facility may be
prepaid without premium or penalty at any time. In addition, we may be required
to prepay loans outstanding under the senior credit facility, subject to
certain limitations, by using:

  100% of the net proceeds from
  the sale or issuance of certain debt or equity securities;
  100% of the net cash proceeds
  from certain asset sales (excluding sales of inventory in the ordinary course
  of business and certain specified dispositions), and insurance or
  condemnation proceeds, subject to certain reinvestment provisions; and
  50% of our excess cash flow (as
  defined in the credit agreement) in each fiscal year, except when our
  adjusted leverage ratio is below a certain level.Increase
in Commitments  Under the senior credit facility, we may
request an increase of the lenders commitments under either the revolving
credit facilities or the term facilities in Canadian or U.S. dollars up to an
aggregate amount equal to US$100 million; however, the lenders are not
obligated to fund any of the requested increase in commitments.
Certain CovenantsOur senior credit facility contains
various restrictive covenants. It (i ) requires us to maintain specified
financial ratios, such as a minimum fixed charge and interest coverage ratio
and maximum senior secured leverage and adjusted leverage ratios; and
(ii) includes limitations on additional debt, acquisitions and capital
expenditures. In addition, the senior credit facility prohibits us from
declaring or paying any dividends and making any payments with respect to
subordinated debt, including the Notes, other than scheduled payments of
interest. If we fail to perform our obligations under, or fail to meet the
conditions of, our senior credit facility or if payment creates a default under
the senior credit facility, we will be prohibited from making any payment with
respect to the notes (including payments of interest).

Events
of DefaultOur senior credit facility contains
customary events of default for a facility of this nature, including
cross-default with certain material indebtedness such as the notes or material
sale-leaseback transactions and upon a change of control.

Trust Indenture

As part of our financing of the Acquisition, we issued US$350 million
71/2 % Senior Subordinated Notes due 2013 (the Notes) under an Indenture (the
Indenture) with Wells Fargo Bank Minnesota, N.A., as trustee (the
Trustee). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the TIA).

The indenture governing the Notes, among other things,
(i) restricts our ability and the ability of our subsidiaries to incur
additional debt, issue shares of preferred stock, incur liens, pay dividends or
make certain other restricted payments and enter into certain transactions with
affiliates; (ii) prohibits restrictions on the ability of our subsidiaries
to pay dividends or make certain payments to us; and (iii) restricts our
ability and the ability of our subsidiaries to merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of our assets. The indenture related to the Notes also
contains various covenants, which limit our discretion in the operation of our
businesses.
Circle K Sale and Leaseback Agreements

During March
2004, Circle K Stores Inc. sold a total of 315 properties to 5 investment
companies, Fortress Investment Group controls 2 of which and 3 of which are
controlled by Realty Income Corporation. 
These properties were immediately leased back by Circle K Stores Inc.
pursuant to leases having initial terms of between 15 and 17 years.  The leases also include options to extend
the lease terms for five option terms of 5 years each, and two additional
option terms of 10 years each, for a maximum of 45 years following the initial
term.  The performance of Circle K
Stores Inc.s obligations as tenant under each lease is guaranteed by the
Company.

27

In addition, subject to certain conditions,
each landlord can sell a property and require Circle K Stores Inc. to enter
into a new lease with a subsequent purchaser, such lease being on essentially
the same terms as the lease with the selling landlord, and to execute certain
documents relating to the transfer of the applicable lease.  Upon such a sale, the selling landlord may
also require the Company to execute a new guaranty of Circle K Stores Inc.s
lease obligations in favour of the purchaser of the leased property.
AUDIT COMMITTEE DISCLOSURE
CharterThe Audit
Committee assists the Board of Directors in its task of supervising the
Companys accounting and financial procedures and financial reporting in order
to enhance its integrity and ensure compliance with all legal requirements. The
Audit Committee also ensures that the Company respects its financial
commitments and complies with legal and regulatory requirements governing
financial reporting and the management of financial risk.
The Audit
Committee has the following responsibilities with respect to the reporting of
financial information and the Chairman of the Committee reports thereon to the
Board of Directors:
1.
  Review, together with management and the external
  auditors, the annual financial statements and the related notes, the external
  auditors report thereon and the accompanying press release and obtain
  explanations from management on any significant discrepancies with the
  corresponding periods before recommending their approval by the board and
  publication.2.
  Review, together with management, the quarterly
  financial statements and accompanying press releases before recommending
  their approval by the board and publication.3.
  Review the financial information contained in the
  annual information form, the financial information contained in the annual
  report, managements analysis of the financial position and the operating
  results, and the financial information contained in the annual information
  form and other documents containing similar financial information before
  their disclosure to the public or filing with Canadian regulatory
  authorities.4.
  Review on an annual basis, together with management
  and the external auditors, the quality and not just acceptability of the
  Corporations new accounting policies and review the disclosure and impact of
  contingencies and the reasonableness of provisions, reserves and estimations
  which may have a material impact on the reporting of financial information.5.
  Review, together with the external auditors, the
  problems and difficulties in connection with the audit and measures adopted
  in this regard by management and find a solution to disagreements between
  management and the external auditors on the reporting of financial
  information.The Audit
Committee has the following responsibilities with respect to risk management
and external controls and the Chairman of the Committee reports thereon to the
Board of Directors:
1.
  Monitor the quality and integrity of the
  corporations internal control and management information systems through
  discussions with management, the external auditors and the internal auditors,
  where applicable.2.
  Ensure effective coordination between the internal
  and external auditors.3.
  Oversee the reporting of information by management
  on internal control.4.
  Review on an annual basis and monitor the
  Corporations risk assessment and management policies.28

5.
  At least once per year, review an internal auditors
  report describing the internal quality control procedures, the material
  issues raised in the course of the latest reviews of the internal control and
  management information systems, or as a result of an inquiry by government or
  professional authorities, as well as the recommendations made and measures
  adopted with respect thereto.6.
  Assist the board in discharging its responsibility
  for ensuring that the Corporation complies with the applicable legal and
  regulatory requirements.The
Audit Committee has the following responsibilities with respect to the internal
auditor and the Chairman of the Committee reports thereon to the Board of
Directors:1.
  Approve the internal audit plan.2.
  Ensure that the internal auditor reports the results
  of his work to the Audit Committee on a semi-annual basis.The Audit
Committee has the following responsibilities with respect to the external
auditors and the Chairman of the Committee reports thereon to the Board of
Directors:
1.
  Review the written annual declaration of the
  external auditors concerning all their connections with the Corporation and
  discuss the connections or services, which may have an impact on their
  objectivity or ability to function independently.2.
  Approve the appointment and, if necessary, the
  non-renewal of the mandate (in both cases, subject to shareholder approval)
  of the external auditors and review their competence, performance and ability
  to function independently.3.
  Approve all audit services and determine which
  services other than audit services the auditors are not authorized to
  perform.4.
  Ensure the that the fees charged by the external
  auditors both for audit services and other authorized services are
  reasonable.5.
  Review the audit plan with the external auditors and
  management and approve its schedule.6.
  Establish a policy concerning the hiring of current
  or past employees of the external auditors.7.
  Ensure that the external auditors always report to
  the Audit Committee and the board as representatives of the
  shareholders.8.
  The Audit Committee always has direct lines of
  communication with the external auditors.9.
  The Audit Committee may meet, as appropriate,
  without management or the external auditors present, subject to prior
  approval by the lead director and the chair of the board.10.
  The Audit Committee shall hold separate meetings with
  management and the external auditors at least once a year or more often as
  appropriate.Composition of the Audit Committee
The Audit
Committee is currently composed of three unrelated independent directors,
namely Messrs. Roger Desrosiers (Chairman), Robert Brunet and Roger Longpré.

29

Financial Literacy
Roger Desrosiers.Mr. Desrosiers has been a
chartered accountant since 1963. In 1973, Mr. Desrosiers founded an
accounting firm that subsequently merged with Arthur Andersen in 1994. From
1994 to 2000, Mr. Desrosiers was the Managing Partner, Eastern Canada of
Arthur Andersen. From 1968 to 1973, Mr. Desrosiers was
assistant-treasurer, director of accounting and budget for Quebec-Telephone
(now TELUS Inc.). Prior to 1968, Mr. Desrosiers practised accounting
with Coopers & Lybrand. Mr. Desrosiers is a Fellow of the Quebec
Order of Chartered Accountants. Mr. Desrosiers sits on the Board of
Directors of various insurance companies and is a member of the Consulting
Board of Telus Quebec Inc. and Telus Solutions dAffaires.
Mr. Desrosiers holds a Masters Degree in Commercial Sciences and a License
in Accounting Sciences both from Laval University in Quebec City.  During his career, Mr. Desrosiers developed
an expertise in auditing large public companies and therefore, as an accountant
engaged in auditing or reviewing an issuers financial statements, he has an
understanding of generally accepted accounting principles and financial
statements.  Mr. Desrosiers has also acted
as lead partner and as audit partner of an audit engagement team and has
actively supervised the audit, review, analysis or evaluation of financial
statements for various clients.  These
financial statements presented accounting issues that are generally comparable
to the breadth and complexity of issues that can reasonably be expected to be
raised by the Companys financial statements. 
Mr. Desrosiers has also, through his experience, the ability to assess
the general application of generally accepted accounting principles in
connection with the accounting for estimate, accruals and reserves.  In addition, Mr. Desrosiers has acquired an
understanding of internal controls and procedures for financial reporting
through his experience as director of accounting and in performing audit
engagements.  Finally, Mr. Desrosiers is
the Chairman of the Audit Committee of several companies and therefore has an
understanding of audit committee functions. 
The Board of Directors of the Company has determined that Mr. Desrosiers
is an audit committee financial expert in accordance with the U.S.
Sarbanes-Oxley Act and the rules of the U.S. Securities and Exchange Commission
enacted there under.
Roger Longpré.  Mr. Longpré has a bachelors degree in
business administration with a major in finance. He also holds an MBA degree,
also with a major in finance. He spent the first thirteen years of his career
in the field of corporate lending with gradually increasing responsibilities in
various managerial positions for a Canadian bank, for a subsidiary of Citigroup
and for the Swiss-owned Credit Suisse First Boston Canada. His primary role as
a lender was to analyse, structure and conclude financings for private and
publicly traded corporations of all sizes. In doing so, he closely scrutinized
financial statements on a regular basis and questioned management thereon.  He has developed an understanding of
accounting principles through his experience in performing extensive financial
statement analysis or evaluation. He has also evaluated a companys internal
controls and procedures for financial reporting. For the past eighteen years,
Mr. Longpré has been acting as a consultant in the areas of mergers and
acquisitions and of corporate finance. He was employed from 1986 10 1994 as a
partner in charge of the financial consulting practice by the audit firm
Raymond, Chabot, Grant, Thornton where he directly supervised a team of some 25
professionals operating in the fields of business valuation, financial
engineering, litigation, financial modeling, corporate finance, mergers and
acquisitions, grants and subsidies, etc. During this time, he analyzed and
evaluated financial statements that
presented accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by the
Companys financial statements. During the last ten years, he has been
active as founder and president of Mergerac Inc., a private investment bank
specializing in mergers and acquisitions and in corporate finance. During his
career, Mr. Longpré has been instrumental in concluding numerous business
transactions including several with very sophisticated financial structures. He
has an in-depth knowledge of financial instruments and practices and he keeps
abreast of all new financial market developments.

Robert Brunet. Mr. Brunet is President of Socoro Inc., a management
consulting firm. From 1988 to 1998, Mr. Brunet was Vice-President and
General Manager of RNG Group Inc., a Canadian energy equipment
distribution company. From 1963 to 1988, Mr. Brunet was employed by Gulf
Canada Inc. and by Ultramar Canada Inc. where his last function was
as Vice-President, Retail Operations. 
As Vice-President and General Manager of RNG Group Inc., Mr. Brunet
actively supervised the preparation of financial statements as well as the
internal controls and procedures for financial reporting.  Mr. Brunets understanding of generally
accepted accounting principles was acquired through education (he completed two
years of a four year program toward an accounting diploma) and through his
experience in preparing and actively supervising the preparation of a budget
and financial statements as Vice-President and General Manager  of RNG Group Inc. In the same way, Mr.
Brunet has experience in assessing the general application of accounting
principles in connection with the accounting for estimates, accruals and
reserves.

30


Policy on the Approval of Non-audit
Services
At its meeting held on March 16, 2004, the Board of Directors adopted a
policy and procedures on the pre-approval of non-audit services by the
Companys auditors.  This policy
prohibits the Company from engaging the auditors to provide certain non-audit
services to the Company and its subsidiaries, including bookkeeping or other
services related to the accounting records or financial statements, financial
information systems design and implementation, appraisal or valuation services,
actuarial services, internal audit services, investment banking services,
management functions or human resources functions, legal services and expert
services unrelated to the audit.  The
policy allows the Company to engage the auditors to provide non-audit services,
other than the prohibited services, only if the services have specifically been
pre-approved by the Audit Committee.
A copy of the policy and procedures on the pre-approval of non-audit
services by the Companys auditors may be obtained without charge by contacting
the Corporate Secretary at the head office of the Company, 1600 St-Martin Blvd.
East, Tower B, Suite 200, Laval, Quebec H7G 4S7.
Code of Ethics for CEO,CFO and Senior
Financial Officers
At its meeting
held on March 15, 2004, the Audit Committee approved a Code of ethics for the
CEO, CFO and senior financial officers in accordance with the U.S.
SarbanesOxley Act and the applicable rules of the U.S. Securities and Exchange
Commission.
A copy of the Code of ethics for the CEO, CFO and
senior financial officers may be obtained
without charge by contacting the Corporate Secretary at the head office of the
Company, 1600 St-Martin Blvd. East, Tower B, Suite 200, Laval, Quebec H7G 4S7.
Auditors Fees
Raymond Chabot Grant Thornton, chartered accountants, Montreal, have served
as the Companys auditors since1990. 
For the fiscal years ended on April 25, 2004 and on April 27, 2003, fees
billed for audit, audit-related, tax and all other services provided to the
Company by Raymond Chabot Grant Thornton were the following:
2004
  
  2003Audit
  Fees(1)
  
  $
  1,388,010
  
  $
  363,021Audit-Related
  Fees(2)
  
  $
  142,111
  
  $
  54,314Tax
  Fees(3)
  
  $
  19,030
  
  $
  47,230All
  Other Fees
  
  
  NIL
  
  
  NILTOTAL
  
  $
  1,549,151
  
  $
  464,565Notes:(1)
  Audit
  services are professional services rendered for the audit of an issuers
  annual financial statements and, if applicable, for the reviews of an
  issuers financial statements included in the issuers quarterly reports and
  services that are normally provided by the accountant in connection with an
  engagement to audit the financial statements of an issuer - for example:
  attendance
  at audit committee meetings at which matters related to the audits or reviews
  are discussed;
  consultations
  on specific audit or accounting matters that arise during or as a result of
  an audit or review;
  preparation
  of a management letter;
  time
  incurred in connection with the audit of the income tax accrual;
  services in
  connection with the issuers annual and quarterly reports, prospectuses and
  other filings with Canadian, US or other securities commissions, including an
  amount of $899,973 billed in 2004 for services rendered from October 2003 to
  April 2004  in connection with the
  offering memorandum and registration statement for the financing of the
  Circle K acquisition.(2)
  Audit-related
  services (the Canadian term) are assurance and related services traditionally
  performed by an independent auditor - for example:31


  employee benefit plan audits;
  accounting work related to mergers and acquisitions,
  including special audits, due diligence and accounting consultations
  (including an amount of $117,111 billed in 2004  for due diligence services in connection with the Circle K
  acquisition;
  internal control reviews;
  assurance engagements that are not required by
  statute or regulation;
  general advice on accounting standards.(3)
  This category includes tax services other than time
  incurred in connection with the audit of the income tax accrual.ADDITIONAL INFORMATION
The Company
shall provide to any person, upon request to the Secretary of the Company when
the securities of the Company are in the course of a distribution pursuant to a
short form prospectus or a preliminary short form prospectus has been filed in
respect of a distribution of its securities,:

I.
  one copy of the Companys annual information form,
  together with one copy of any document, or the pertinent pages of any
  document, incorporated by reference in the annual information form,II.
  one copy of the comparative financial statements of
  the Company for its most recently completed financial year together with the
  accompanying report of the auditor and one copy of any interim financial
  statements of the Company subsequent to the financial statements for its most
  recently completed financial year,III.
  one copy of the management proxy circular of the
  Company in respect of its most recent annual meeting of shareholders that
  involved the election of directors, andIV.
  one copy of any other documents that are
  incorporated by reference into the preliminary short form prospectus or the
  short form prospectus and are not required to be provided under I to III
  above; orat any other
time, one copy of any of the documents 
referred to in I, II and III above, provided that the Company may
require the payment of a reasonable.
Additional information, including officers and directors remuneration
and loans granted to them, if any, principal shareholders of the Company, stock
options and the interest of insiders in material transactions, if any, is
contained in the management proxy circular dated July 13, 2004 which was
prepared for the 2004 annual meeting of shareholders.  Other financial information is included in the audited
consolidated financial statements and the notes thereto for the fiscal year
ended April 25, 2004 as well as Managements Discussion and Analysis
thereon.  All such additional
information relating to the Company is available on SEDAR at
www.sedar.com.  The foregoing documents
may be obtained by contacting the Corporate Secretary at the head office of the
Company, 1600 St-Martin Blvd. East, Tower B, Suite 200, Laval, Quebec H7G 4S7.

32

Document 2


Alimentation
Couche-Tard Inc.
Consolidated
Financial Statements 
as at April 25, 2004, April 27, 2003 and April 
28, 2002

33

Auditors Report
To the Board of Directors of 
Alimentation Couche-Tard Inc.
We have audited the consolidated balance
sheets of Alimentation Couche-Tard Inc. as at April 25, 2004 and April 27, 2003
and the consolidated statements of earnings, retained earnings and cash flows
for each of the years in the three-year period ended April 25, 2004. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial
statements present fairly, in all material respects, the financial position of
the Company as at April 25, 2004 and April 27, 2003 and the results of its
operations and its cash flows for each of the years in the three-year period
ended April 25, 2004 in accordance with Canadian generally accepted accounting
principles.

(signed) Raymond Chabot Grant Thornton
Chartered Accountants 
General Partnership
Montreal, Canada 
June 11, 2004

34

Comments by Auditors for
U.S. Readers on 
Canada-U.S. Reporting Differences
In the United States, reporting standards
for auditors require the addition of an explanatory paragraph (following the
opinion paragraph) when there is a change in accounting principles that has a
material effect on the comparability of the Companys financial statements,
such as the changes described in Note 2 to the consolidated financial
statements. Our report to the Board of Directors dated June 11, 2004 is
expressed in accordance with Canadian reporting standards which do not require
a reference to such a change in accounting principles in the auditors report
when the change is properly accounted for and adequately disclosed in the
financial statements.
(signed) Raymond Chabot Grant Thornton
Chartered Accountants 
General Partnership
Montreal,
Canada 
June 11, 2004
35

Alimentation Couche-Tard Inc.
Consolidated EarningsYears
ended April 25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)

Year endedApril 25, 2004 (a)
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Revenues
  
  
  
  5,872,394
  
  
  
  
  3,315,194
  
  
  
  
  2,391,999Cost of sales
  
  
  
  4,649,420
  
  
  
  
  2,565,317
  
  
  
  
  1,809,213Gross profit
  
  
  
  1,222,974
  
  
  
  
  749,877
  
  
  
  
  582,786Operating, selling, administrative and general
  expenses
  
  
  
  985,531
  
  
  
  
  592,052
  
  
  
  
  460,823Depreciation and amortization of fixed and other
  assets (Note
  5)
  
  
  
  74,466
  
  
  
  
  44,948
  
  
  
  
  33,7251,059,997
  
  
  
  
  637,000
  
  
  
  
  494,548Operating income
  
  
  
  162,977
  
  
  
  
  112,877
  
  
  
  
  88,238Financial expenses (Note 5)
  
  
  
  31,137
  
  
  
  
  14,894
  
  
  
  
  15,067Earnings before income taxes and write-off of
  financial expenses
  
  
  
  131,840
  
  
  
  
  97,983
  
  
  
  
  73,171Write-off of financial expenses (Note 4)
  
  
  
  12,463Earnings before income taxes
  
  
  
  119,377
  
  
  
  
  97,983
  
  
  
  
  73,171Income taxes (Note 6)
  
  
  
  39,872
  
  
  
  
  31,942
  
  
  
  
  25,834Net earnings
  
  
  
  79,505
  
  
  
  
  66,041
  
  
  
  
  47,337Earnings per share (Note 7)Basic
  
  
  
  0.89
  
  
  
  
  0.78
  
  
  
  
  0.61Fully diluted
  
  
  
  0.85
  
  
  
  
  0.76
  
  
  
  
  0.58The accompanying notes are an integral part of the consolidated
financial statements.
(a)
  For the year ended April 25, 2004, the Company
  modified the presentation of certain direct costs, related mainly to the sale
  of telephone cards. Costs in the amount of $59,269 in 2003 and $51,593 in
  2002 that were presented in the cost of sales were reclassified and are now
  presented as a decrease in revenues. As well, the Company modified its
  presentation of operating income. Under the new presentation, the operating
  income includes the depreciation and amortization of fixed and other assets.
  Furthermore, the amortization related to financial expenses is now presented
  under the financial expenses heading. The amortization of these items was
  formerly presented under the depreciation and amortization of fixed and other
  assets heading.36

Alimentation Couche-Tard Inc.
Consolidated Retained EarningsYears
ended April 25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars)
Year endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Balance at the beginning, as restated (Note 2)
  
  
  
  183,517
  
  
  
  
  117,476
  
  
  
  
  73,175Net earnings
  
  
  
  79,505
  
  
  
  
  66,041
  
  
  
  
  47,337263,022
  
  
  
  
  183,517
  
  
  
  
  120,512Share issue expenses (net of future income taxes of
  $ 970 in 2004 and $ 1,524 in 2002)
  
  
  
  2,157
  
  
  
  
  
  
  
  
  
  3,036Balance at the end
  
  
  
  260,865
  
  
  
  
  183,517
  
  
  
  
  117,476The accompanying notes are an integral part of the consolidated financial
statements.

37

Alimentation Couche-Tard Inc.
Consolidated Cash FlowsYears
ended April 25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars)

Year endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $OPERATING
  ACTIVITIESNet earnings
  
  
  
  79,505
  
  
  
  
  66,041
  
  
  
  
  47,337Non-cash itemsDepreciation and amortization
  
  
  
  66,802
  
  
  
  
  42,437
  
  
  
  
  29,965Write-off of financial expenses
  
  
  
  12,463Loss on disposal of fixed assets and other assets
  
  
  
  2,724
  
  
  
  
  2,051
  
  
  
  
  1,468Future income taxes
  
  
  
  (14,930
  )
  
  
  
  9,719
  
  
  
  
  15,991146,564
  
  
  
  
  120,248
  
  
  
  
  94,761Deferred revenues
  
  
  
  12,148
  
  
  
  
  899
  
  
  
  
  2,056Provision for site restoration costs
  
  
  
  (409
  )
  
  
  
  (15
  )
  
  
  
  (1,276
  )Deferred pension expense
  
  
  
  (516
  )
  
  
  
  (339
  )
  
  
  
  (1,286
  )Other liabilities
  
  
  
  (2,619
  )Changes in working capital
  items (Note 8)
  
  
  
  158,987
  
  
  
  
  20,585
  
  
  
  
  (16,822
  )Cash flows from operating activities
  
  
  
  314,155
  
  
  
  
  141,378
  
  
  
  
  77,433INVESTING
  ACTIVITIESBusiness acquisitions (Note 4)
  
  
  
  (1,025,340
  )
  
  
  
  (156,248
  )
  
  
  
  (128,139
  )Liabilities assumed on business acquisitions
  
  
  
  (2,246
  )Fixed assets
  
  
  
  (115,208
  )
  
  
  
  (86,746
  )
  
  
  
  (77,164
  )Proceeds from sale and leaseback transactions
  
  
  
  379,497Disposal of fixed assets and other assets
  
  
  
  5,271
  
  
  
  
  3,528
  
  
  
  
  12,077Goodwill and other assets
  
  
  
  (3,136
  )
  
  
  
  (3,503
  )
  
  
  
  (3,098
  )Cash flows from investing activities
  
  
  
  (761,162
  )
  
  
  
  (242,969
  )
  
  
  
  (196,324
  )FINANCING
  ACTIVITIESBank indebtedness
  
  
  
  
  
  
  
  
  (7,512
  )
  
  
  
  5,495Long-term debt net of financing expenses
  
  
  
  1,123,506
  
  
  
  
  180,233
  
  
  
  
  116,362Repayment of long-term debt
  
  
  
  (741,909
  )
  
  
  
  (40,743
  )
  
  
  
  (95,732
  )Share issue net of related expenses
  
  
  
  224,026
  
  
  
  
  4,453
  
  
  
  
  98,292Cash flows from financing activities
  
  
  
  605,623
  
  
  
  
  136,431
  
  
  
  
  124,417Effect of exchange rate
  fluctuations on cash and cash equivalents
  
  
  
  2,302
  
  
  
  
  692
  
  
  
  
  (137
  )Net increase in cash and cash
  equivalents
  
  
  
  160,918
  
  
  
  
  35,532
  
  
  
  
  5,389Cash and cash equivalents at the beginning
  
  
  
  48,404
  
  
  
  
  12,872
  
  
  
  
  7,483Cash and cash equivalents at the end
  
  
  
  209,322
  
  
  
  
  48,404
  
  
  
  
  12,872The accompanying notes are an integral part of the consolidated
financial statements.

38

Alimentation Couche-Tard Inc.
Consolidated Balance Sheetsas at
April 25, 2004 and April 27, 2003(in thousands of
Canadian dollars)

April 25, 2004
  
  April 27, 2003$
  
  $ASSETSCurrent assetsCash and cash equivalents
  
  
  
  209,322
  
  
  
  
  48,404Accounts receivable (Note
  9)
  
  
  
  128,518
  
  
  
  
  108,008Inventories (Note 10)
  
  
  
  374,843
  
  
  
  
  179,874Prepaid expenses
  
  
  
  16,413
  
  
  
  
  3,487Future income taxes
  
  
  
  26,539
  
  
  
  
  2,850755,635
  
  
  
  
  342,623Fixed assets (Note 11)
  
  
  
  898,483
  
  
  
  
  441,259Trademarks, licenses and permits
  
  
  
  214,474Goodwill
  
  
  
  278,911
  
  
  
  
  269,527Other assets (Note 12)
  
  
  
  53,275
  
  
  
  
  16,167Future income taxes
  
  
  
  32,715
  
  
  
  
  1,6022,233,493
  
  
  
  
  1,071,178LIABILITIESCurrent liabilitiesAccounts payable (Note 14)
  
  
  
  657,865
  
  
  
  
  293,763Income taxes payable
  
  
  
  36,548
  
  
  
  
  10,407Future income taxes
  
  
  
  
  
  
  
  
  8,128Instalments on long-term debt
  
  
  
  6,032
  
  
  
  
  17,986700,445
  
  
  
  
  330,284Long-term debt (Note 15)
  
  
  
  724,500
  
  
  
  
  278,327Deferred revenues and other liabilities (Note 16)
  
  
  
  40,077
  
  
  
  
  8,965Future income taxes
  
  
  
  21,645
  
  
  
  
  12,9531,486,667
  
  
  
  
  630,529SHAREHOLDERS
  EQUITYCapital stock (Note 17)
  
  
  
  485,689
  
  
  
  
  258,536Contributed surplus
  
  
  
  1,222
  
  
  
  
  1,222Retained earnings
  
  
  
  260,865
  
  
  
  
  183,517Cumulative translation adjustments (Note 19)
  
  
  
  (950
  )
  
  
  
  (2,626
  )746,826
  
  
  
  
  440,6492,233,493
  
  
  
  
  1,071,178The accompanying notes are an integral part of the consolidated
financial statements.
39

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

1 - GOVERNING STATUTES, NATURE OF OPERATIONS AND
YEAR-END DATE

The Company,
incorporated under Part IA of the Companies Act (Québec), operates a network of
convenience stores. The Companys year-end corresponds to the last Sunday of
April of each fiscal year.

The Company
operates approximately 4,900 convenience stores from which it generates
primarily sales of food products, tobacco, beverages, motor fuel and other
products. These stores are located in Canada and the United States.
2 - CHANGES IN ACCOUNTING POLICIES
Year ended April 25, 2004
Recording of certain considerations received by a vendor
In January
2004, the Emerging Issues Committee of the Canadian Institute of Chartered
Accountants (CICA) released Abstract 144 (EIC-144), Accounting by a
Customer (Including a Reseller) for Certain Consideration Received From a
Vendor.
EIC-144
specifies the accounting methods to be applied to certain considerations
received from a vendor. EIC-144 should be applied retroactively to all
financial statements for annual and interim periods ending after August 15,
2004. The Company adopted these new recommendations both early and
retroactively on January 30, 2004.
EIC-144
stipulates that cash consideration received by a company from a vendor is
presumed to be a reduction of the prices of the vendors products or services
and should, therefore, be accounted for as a reduction of cost of sales and
related inventory when recognized in the companys income statement and balance
sheet.
However, that
presumption is overcome when:
(i)
  The consideration is either a payment for assets or
  services delivered to the vendor, in which case the cash consideration should
  be accounted for as revenue in the income statement. However, any amount in
  excess of the estimated fair value of the assets or services delivered should
  be accounted for as a reduction of cost of sales and related inventory when
  recognized in the companys income statement and balance sheet.(ii)
  The consideration is a reimbursement of costs
  incurred by the Company to sell the vendors products, in which case the cash
  consideration should be accounted for as a reduction of costs when recognized
  in the companys income statement. However, any amount in excess of costs
  that is reimbursed should be accounted for as a reduction of cost of sales
  and of related inventories.For the year
ended April 25, 2004, application of EIC-144 resulted in a $1,025 increase
($287 in 2003 and $2,849 in 2002) in the cost of goods sold and a decrease in
net earnings of $711 ($193 in 2003 and $1,725 in 2002).

40

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

2 - CHANGES IN ACCOUNTING POLICIES (Continued)

The following
tables illustrate the impact of applying EIC-144 for previous years:

Consolidated earnings and consolidated retained earnings

Year endedApril 27, 2003
  
  April 28, 2002As reported
  
  As restated
  
  As reported
  
  As restated$
  
  $
  
  $
  
  $Operating
  income
  
  
  113,164
  
  
  112,877
  
  
  91,087
  
  
  88,238Income taxes
  
  
  32,036
  
  
  31,942
  
  
  26,958
  
  
  25,834Net earnings
  
  
  66,234
  
  
  66,041
  
  
  49,062
  
  
  47,337Retained
  earnings, beginning of year
  
  
  121,924
  
  
  117,476
  
  
  75,898
  
  
  73,175Basic net
  earnings per share
  
  
  0.78
  
  
  0.78
  
  
  0.63
  
  
  0.61Diluted net
  earnings per share
  
  
  0.76
  
  
  0.76
  
  
  0.60
  
  
  0.58Consolidated cash flows
Year endedApril 27, 2003
  
  April 28, 2002As reported
  
  As restated
  
  As reported
  
  As restated$
  
  $
  
  $
  
  $Net earnings
  
  
  66,234
  
  
  66,041
  
  
  49,062
  
  
  47,337Future
  income taxes
  
  
  9,813
  
  
  9,719
  
  
  17,115
  
  
  15,991Changes in
  working capital items
  
  
  20,298
  
  
  20,585
  
  
  (19,671
  )
  
  (16,822
  )Consolidated balance sheet
April 27, 2003As reported
  
  As restated$
  
  $Inventories
  
  
  188,848
  
  
  179,874Future
  income taxes (current assets)
  
  
  1,647
  
  
  2,850Goodwill
  
  
  268,612
  
  
  269,527Future
  income taxes (current liabilities)
  
  
  10,463
  
  
  8,128Retained
  earnings
  
  
  188,158
  
  
  183,517Cumulative
  translation adjustments
  
  
  (2,746
  )
  
  (2,626
  )41

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

2 - CHANGES IN ACCOUNTING POLICIES (Continued)

Impairment of long-lived assets

In December
2002, the CICA issued a new Handbook Section 3063 entitled Impairment of
Long-lived Assets. This section sets out standards for recognizing, measuring
and reporting the impairment of long-lived assets. It supersedes the write-down
provisions included in Section 3061, Property, Plant and Equipment. This new
section requires that the Company recognize an impairment loss for long-lived
assets to be kept and used when events or changes in circumstances result in
their carrying amount exceeding the sum of the undiscounted cash flows expected
to result from their use and eventual disposition. The impairment loss is
equivalent to the amount by which the assets carrying amount exceeds its fair
value. In accordance with the new CICA Handbook recommendations, Section 3063
applies prospectively for years beginning on or after April 1, 2003.

This
modification of accounting principles was applied prospectively beginning April
28, 2003 and had no material impact on the carrying amount of the Companys
tangible assets.
Guarantees
In February
2003, the CICA issued Accounting Guideline number 14 (AcG-14), Disclosure of
Guarantees. This guideline provides information related to disclosures to be
provided under certain guarantees. The Company adopted these new
recommendations as at April 28, 2003.
In the normal
course of its activities, the Company enters into various agreements as per the
definition of a guarantee set out in AcG-14. AcG-14 stipulates that a guarantee
(or indemnification) eventually requires the Company to make payments to a
third party based on (i) changes in an underlying related to an asset,
liability, or an equity security of the indemnified party, or (ii) another
entitys failure to perform under an obligating agreement or (iii) failure of a
third party to make payment for a debt that has reached maturity.
As at April
25, 2004, there are no material guarantee as per the definition of AcG-14
issued by the Company.
Year ended April 27, 2003
Stock-based Compensation and Other Stock-based Payments
On April 29,
2002, the Company adopted prospectively the new recommendations of the CICA Handbook,
Section 3870, entitled Stock-based Compensation and Other Stock-based Payments. This section defines notably
recognition, measurement and disclosure standards for stock-based compensation
to employees. These standards define a fair value-based method of accounting
and encourage entities to adopt this method of accounting for its stock-based
employee compensation plans. Under this method, compensation cost should be
measured at the grant date based on the fair value of the award and should be
recognized over the related service period. An entity that does not adopt the
fair value method of accounting for its awards granted to employees is required
to include in its financial statements pro forma disclosures of net income and
earnings per share as if the fair value method of accounting had been applied.
The Company has adopted the latter alternative treatment (See Note 18).

42

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
2 - CHANGES IN ACCOUNTING POLICIES (Continued)
According to
the transitional provisions in Section 3870, the Company must, as of its fiscal
year beginning on April 26, 2004, apply the compensation cost related to the
options granted after April 28, 2002 directly to earnings.
Year ended April 28, 2002
Earnings per share
During the
year ended April 28, 2002, the Company adopted, on a retroactive basis, the new
recommendations of the CICA Handbook, Section 3500, regarding the calculation
and presentation of earnings per share information. According to the new
recommendations, the treasury stock method should be used instead of the
imputed earnings approach to determine the dilutive effect of warrants and
stock options for the purpose of calculating diluted earnings per share. The
adoption of these new recommendations had a negligible impact on diluted
earnings per share calculation.
Goodwill and other intangible assets
During the
year ended April 28, 2002, the Company adopted, on a prospective basis, the new
recommendations issued by the CICA Handbook, Section 3062, entitled Goodwill
and Other Intangible Assets with respect to goodwill and other intangible
assets. According to the new recommendations, goodwill and other intangible
assets with a useful life determined to be indefinite are no longer amortized
and are tested for impairment, either annually or more frequently if events or
situations indicate possible impairment.
3 - ACCOUNTING POLICIES
Accounting estimates
The
preparation of financial statements in accordance with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts recorded in the financial statements and
notes to financial statements. These estimates are based on managements best
knowledge of current events and actions that the Company may undertake in the
future. Actual results may differ from those estimates.
Principles of consolidation
The
consolidated financial statements include the accounts of the Company and of
its subsidiaries, all of which are wholly owned.

43

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
3 - ACCOUNTING POLICIES (Continued)
Foreign currency translation
The U.S.
subsidiaries assets and liabilities are translated into Canadian dollars using
the exchange rate in effect at the balance sheet date since these subsidiaries
are considered to be self-sustaining from a financial and operational
standpoint. Revenues and expenses are translated at the average rate in effect
during the year. Gains and losses are shown under the cumulative translation
adjustments account in the shareholders equity.
The Company
has designated its entire long-term debt denominated in U.S. dollars as a hedge
of its net investment in its self-sustaining foreign subsidiaries. Accordingly,
the related exchange gains or losses are also presented under the cumulative
translation adjustments account.
Earnings per share
Basic earnings
per share is calculated by dividing the net earnings available to Class A and
Class B shareholders by the weighted average number of Class A and Class B
shares outstanding during the year. Diluted earnings per share is calculated
using the treasury stock method which assumes that all stock options with an
exercise price that is lower than the average market price will be exercised
and that proceeds from these options will be used to repurchase Class B
shares of the Company at their average market price during the year.
Revenue recognition
The Company
recognizes revenue at the time of sale in stores.
Operating, selling, administrative and general expenses
The main items
representing operating, selling, administrative and general expenses are labour
expenses building occupancy expenses and head office expenses.
Operating,
selling, administrative and general expenses also include advertising expenses
that are charged as incurred and that totalled $18,367 in 2004, $10,679 in
2003, and $8,214 in 2002.
Cash and cash equivalents
Cash includes
cash and demand deposits. Cash equivalents include highly liquid investments
that can be converted into cash for a set amount and that mature less than
three months from the date of acquisition.
Allowance for doubtful accounts
Allowance for
doubtful accounts provides for estimated losses on accounts receivable. The
allowance is established based upon a review of the aggregate accounts, loss
experience, economic conditions and other pertinent factors. Account losses are
charged and recoveries are credited to the allowance for doubtful accounts. The
collection policies and procedures of the Company vary by type of account
receivable and prior payment history.

44

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
3 - ACCOUNTING POLICIES (Continued)
Inventory valuation
Inventory is
valued at the lesser of cost and the net realization value. Cost of merchandise
- distribution centres is determined according to the first in first out
method, the cost of merchandise - retail is valued based on the retail price
less the normal margin and the cost of motor fuel inventory is determined
according to the average cost method.
Supplier rebates
Amounts
collected pursuant to agreements with suppliers, before the revenue recognition
criteria is satisfied, are deferred. Under EIC-144, as mentioned in Note 2,
these amounts are included in the calculation of operating income either at the
time of sale or based on the term of the supplier agreement, as specified in
each agreement.
Income taxes
The Company
uses the tax liability method to account for income taxes. Under this method,
future tax assets and liabilities are determined according to differences
between the carrying amounts and tax bases of assets and liabilities. They are
measured by applying enacted or substantively enacted tax rates and laws at the
date of the financial statements for the years in which the temporary
differences are expected to reverse. It is more likely than not that all of the
future income tax assets will be realized.
Depreciation
Fixed assets
are depreciated over their useful lives. With the exception of the periods and
annual rates relating to the fixed assets acquired from Circle K which are
described below, the fixed assets are depreciated according to the following
period and annual rates :
Methods
  
  Period
  and ratesBuildings
  and parking lots
  
  Diminishing
  balance
  
  5%Petroleum
  infrastructure and leasehold improvements
  
  Straight-line
  
  7%Equipment
  
  Diminishing
  balance
  
  15% to 30%Signs
  
  Diminishing
  balance
  
  20%Buildings under
  capital leases
  
  Straight-line
  
  Lease term45

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

3 - ACCOUNTING POLICIES (Continued)

Fixed assets
relating to the operations acquired from Circle K (see Note 4) are amortized
according to the straight-line method and the following periods:

PeriodsBuildings
  and parking lots
  
  3 to 40 yearsPetroleum
  infrastructures and leasehold improvements
  
  3 to 40 yearsEquipment
  
  1 to 15 yearsSigns
  
  3 to 7 yearsBuildings
  under capital leases
  
  1 to 15 yearsGiven that
Circle K uses different methods and rates for amortizing fixed assets, as is
explained above, and given the large number of acquisitions which have been
made recently in the U.S., the Company will perform an analysis of the
estimated useful lives of all of its fixed assets. This could result in
amendments being made to the amortization methods currently being used.
Goodwill

Goodwill is
the excess of the purchase price of an acquired business over the fair value of
underlying net assets acquired at the time of acquisition. Goodwill is not
amortized. It is rather tested for impairment annually, or more frequently if
events or changes in circumstances indicate that it might be impaired. The
impairment test consists of a comparison of the fair value of the Companys
reporting units with their carrying amount. The fair value of the reporting
units is determined according to an estimate of future discounted cash flows.
When the carrying amount of a reporting unit is greater than its fair value,
the Company compares the fair value of the goodwill related to the reporting
units with its carrying amount. Any impairment in the carrying amount of
goodwill is charged to income.

Trademarks, licenses and other assets
Trademarks,
licenses and permits are recorded at cost and are not amortized; rather, they
are tested for impairment annually, or more frequently, if events or circumstances
indicate that the asset might be impaired.
Other assets
include deferred charges at amortized cost and deposits
Deferred
charges are mainly financing costs amortized 
using the current interest rate method over the period of the
corresponding debt and expenses incurred in connection with the analysis and
signing of operating leases which are deferred are amortized over the lease
term. Other deferred charges are amortized on a straight-line basis over a
period of five to seven years.

46

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
3 - ACCOUNTING POLICIES (Continued)
Employee future benefits
The Company accrues
its obligations under employee pension plans and the related costs, net of plan
assets. The Company has adopted the following policies with respect to the
defined benefit plans:

  The cost of pension benefits earned by employees is
  actuarially determined using the projected benefit method prorated on service
  and is recorded in income as the services are rendered by employees. The
  calculations reflect managements best estimate of expected plan investment
  performance, salary escalation and retirement ages of employees;
  For the purpose of calculating the expected return
  on plan assets, those assets are valued at fair value;
  The excess of the net actuarial gain (loss) over 10%
  of the greater of the benefit obligation and the fair value of plan assets is
  amortized over the average remaining service period of active employees.The pension
costs recorded in earnings for the defined contribution plan is equivalent to
the contributions which the Company is required to pay in exchange for services
provided by employees.
Environmental costs
Allowances for
site restoration costs represent the estimated future cost of ensuring that the
soil and sub-soil meet government standards for sites for which it is the
Companys responsibility to restore. The obligation is recognized on the
earlier of the following dates: the date on which the contaminant is discovered
or the date on which operations on the site are discontinued. The estimated
amount of future restoration costs is reviewed regularly based on available
information and governing legislation. Where the forecast restoration costs,
less any amount to be recovered from third parties, exceed existing provisions,
an expense is recognized in the year during which the shortfall has been
identified.
Stock-based compensation plan

The Company
offers a stock option plan as described in Note 18. No amount is recognized for
this plan when the share purchase options are issued to employees, managers and
directors. Any consideration received when holders exercise their options is
credited to capital stock. Since the Company does not account for stock options
awarded to employees using the fair value based method, it discloses pro forma
information regarding net earnings and earnings per share which are calculated
as if the fair value based accounting method had been used to account for stock
options awarded (See Note 18).


47

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
3 - ACCOUNTING POLICIES (Continued)
Financial instruments
The Company
uses derivative financial instruments by way of interest swaps to manage
current and forecast risks related to interest rate fluctuations associated
with the Companys debt. The Company does not use speculative derivative
financial instruments.
Accordingly,
the Company adheres to AcG-13 regarding the identification, designation,
documentation and effectiveness of hedge relationships for the purposes of
applying hedge accounting.
Based on the
Companys policy, it designates each derivative financial instrument as a hedge
against a recognized loan instrument. The Company estimates that derivative
financial instruments are efficient hedges, at the time of the establishment of
the hedge and the duration of the instrument, since the date to maturity, the
reference amount and interest rate of the instruments corresponds to all the
conditions of a loan instrument.
The Company
uses interest rate swaps as part of its program for managing the combination of
fixed and variable interest rates of its debt and the corresponding aggregate
loan rate. Interest rate swaps result in an exchange of interest payments
without an exchange of principal underlying the interest payments. They are
accounted for as an adjustment of accrued interest expense on loan instruments.
The corresponding amount to be paid to counterparties or to be received from
counterparties is accounted for as an adjustment of accrued interest.
Gains and
losses on interest rate swaps, when completed, will be recognized under other
current assets or liabilities or under long-term assets or liabilities in the
balance sheet and are amortized as an adjustment of accrued interest related to
the obligation over the period corresponding to the remaining initial life of
the completed swap. In the event of early extinguishment of the debt, any
realized or unrealized gains or losses related to the swap will be recognized
in the consolidated earnings at the time of the extinguishment of the debt.

4 - BUSINESS ACQUISITIONS
During the
past three fiscal years, the Company has realized business acquisitions that
were recorded using the acquisition method. Income from business acquisitions
is included in the consolidated financial statements as of the date of
acquisition.

48

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
4 - BUSINESS ACQUISITIONS (Continued)
Year ended April 25, 2004
On December
17, 2003, the Company acquired all of the outstanding shares of The Circle K Corporation
(Circle K) from ConocoPhillips Company and became the owner of a chain of 1,663
stores in 16 U.S. states, mainly in the southern United States. Circle K also
holds franchise or licensing agreements with 627 stores in the United States
and 4,003 international licenses agreements.
Considering
the acquisition costs and the amounts payable in accordance with a price
adjustment clause, based on the working capital acquired, this acquisition was
made for a total consideration of US$831,767 (CA$1,102,507). The transaction
was financed in part by issuing 13,555,538 new Class B subordinate voting shares
(see Note 17), by issuing unsecured subordinate notes maturing in 2014
totalling US$350,000, by new secured credit facilities comprising of revolving
term credits of $50,000 and US$75,000, as well as a five-year US$265,000 term
loan and a seven-year US$245,000 term loan. These credit facilities replaced
the preceding ones in effect as at December 17, 2003. The deferred financing
costs relating to the former credit facilities have been written off.
On September
4, 2003, the Company concluded the acquisition of assets of Clark Retail
Enterprises Inc. and became the owner of 43 stores from in the states of
Illinois, Indiana, Iowa, Michigan and Ohio.

Considering
the transaction costs, this acquisition was made for a total cash consideration
of of $41,017. The transaction was financed along with the Companys existing
credit facilities.
Most of the
goodwill related to this transaction is expected to be deductible for tax
purposes.
The
preliminary allocations of the purchase prices of the acquisitions which follow
were established based on information available and on the basis of preliminary
evaluations. These allocations are subject to change should new information
become available and that the strategies of integrating and restructuring
assets have been completed. Furthermore, tax consequences of the assets
acquired are also preliminary.

49

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
4 - BUSINESS ACQUISITIONS (Continued)
Circle K
  
  Clark
  
  Total$
  
  $
  
  $Current
  assets
  
  
  314,603
  
  
  4,943
  
  
  319,546Fixed assets
  
  
  778,812
  
  
  29,900
  
  
  808,712Goodwill
  
  
  
  
  
  7,312
  
  
  7,312Trademarks,
  licenses, permits and other assets
  
  
  210,966
  
  
  
  
  
  210,966Future
  income taxes
  
  
  37,004
  
  
  88
  
  
  37,0921,341,385
  
  
  42,243
  
  
  1,383,628Current
  liabilities assumed
  
  
  218,315
  
  
  632
  
  
  218,947Long-term
  debt assumed
  
  
  8,913
  
  
  
  
  
  8,913Deferred
  revenues and other liabilities assumed
  
  
  11,650
  
  
  594
  
  
  12,244238,878
  
  
  1,226
  
  
  240,104Net assets
  and total consideration
  
  
  1,102,507
  
  
  41,017
  
  
  1,143,524Less: Cash
  from the acquisition
  
  
  106,770
  
  
  
  
  
  106,770Net assets
  excluding cash from the acquisition
  
  
  995,737
  
  
  41,017
  
  
  1,036,754Less:
  Balance to be paid to vendors
  
  
  11,414
  
  
  
  
  
  11,414Cash
  consideration
  
  
  984,323
  
  
  41,017
  
  
  1,025,340Circle K was
acquired by paying amounts totalling US$823,156. As at April 25, 2004, an
amount of US$8,611 remains payable to vendors.
Clark was
acquired by paying the total consideration in cash at the date of acquisition.

Subsequent to the
acquisitions of Circle K and Clark, the Company entered into sale leaseback
agreements under which certain property, plant and equipment acquired were sold
to financial institutions and re-leased to the Company under long-term leases.
Most of these long-term leases are for periods of 15 to 17 years, with the
possibility of renewal. Minimum lease payments under the leases amount to
approximately US$25,500 per year, subject to indexation clauses.
These
transactions did not result in any gains or losses for the Company. Proceeds
related to these transactions totalled US$267,695, net of related
expenses,  and was used to repay a
portion of the long-term debt incurred for the acquisitions. The portion of
deferred financing costs relating to the repaid debt was written off.
Year ended April 27, 2003
On August 20, 2002, the Company acquired certain
assets of Dairy Mart Convenience Stores Inc. (Dairy Mart) and became the
owner of a chain of 285 stores in the states of Ohio, Kentucky, Pennsylvania,
Michigan and Indiana. Taking acquisition costs into account, this acquisition
was for a total cash consideration of $120,152. The full amount of the
transaction was financed through bank loans subsequent to changes in the
Companys long-term credit agreement.
50

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)

4 - BUSINESS ACQUISITIONS
(Continued)

This transaction included a one-year management agreement for 169
additional stores in this network, some of which could, under certain
conditions, be acquired by the Company in the months following the acquisition,
sold on behalf of Dairy Mart Convenience Stores Inc. or closed. Given the
temporary nature of the management agreement, the net amount of sales, cost of
sales and other operating costs associated with this agreement are shown under
operation, selling, administrative and general expenses. For the year ended
April 27, 2003, the management agreement generated sales of $129,344 and
operating income of $852.

During the year, the Company made four acquisitions of other store
networks in Canada and the United States, for a cash consideration of $36,822
including certain stores managed under the above-mentioned management
agreement.
All of these acquisitions, except for the Dairy Mart acquisition, are
shown under Other in the following table.
Most of the goodwill related to these transactions is expected to be
deductible for tax purposes.
The allocation of the purchase prices of the above-mentioned
acquisitions was determined as follows:

Dairy
  Mart
  
  Other
  
  Total$
  
  $
  
  $Current assets
  
  
  18,814
  
  
  
  1,628
  
  
  20,442Fixed assets
  
  
  73,174
  
  
  
  27,597
  
  
  100,771Goodwill
  
  
  31,342
  
  
  
  7,963
  
  
  39,305Other assets
  
  
  
  
  
  
  308
  
  
  308Future income taxes
  
  
  590
  
  
  
  
  
  
  590123,920
  
  
  
  37,496
  
  
  161,416Current liabilities
  assumed
  
  
  3,768
  
  
  
  674
  
  
  4,442Net assets
  
  
  120,152
  
  
  
  36,822
  
  
  156,974Less: Cash from the
  acquisition
  
  
  627
  
  
  
  99
  
  
  726Cash consideration
  
  
  119,525
  
  
  
  36,723
  
  
  156,248Year
ended April 28, 2002
On June 22, 2001, the Company acquired some of the operating assets of
Johnson Oil Company Inc., which operates a network of convenience stores under
the Bigfoot banner in the states of Indiana, Kentucky and Illinois. Considering
the transaction costs, this acquisition was made for a total cash consideration
of $119,324.

In addition, during the year ended April 28, 2002, the Company acquired
three other networks for a cash consideration of $8,815.

51

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)
4 - BUSINESS ACQUISITIONS
(Continued)
All of these acquisitions mentioned above, except for the June 22, 2001
acquisition, are shown under Other in the following table:
Johnson
  Oil
  Company Inc.
  
  Other
  
  Total$
  
  $
  
  $Current assets
  
  
  
  36,961
  
  
  
  2,647
  
  
  39,608Fixed assets
  
  
  
  60,137
  
  
  
  7,779
  
  
  67,916Goodwill
  
  
  
  57,312
  
  
  
  1,907
  
  
  59,219154,410
  
  
  
  12,333
  
  
  166,743Current liabilities
  assumed
  
  
  
  34,638
  
  
  
  3,206
  
  
  37,844Note payable
  
  
  
  448
  
  
  
  312
  
  
  76035,086
  
  
  
  3,518
  
  
  38,604Net assets acquired and
  cash consideration
  
  
  
  119,324
  
  
  
  8,815
  
  
  128,139In connection with the
Johnson Oil Company Inc. acquisition, the Company has signed leases for the
rental of commercial space and petroleum facilities. Under these leases, the
Company is required to pay approximately US$11,300 annually over 20 years. The
lease include clauses for an annual indexation of 2%.
5 - INFORMATION INCLUDED IN THE
CONSOLIDATED STATEMENT OF EARNINGS

Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Depreciation and
  amortization of fixed and other assetsFixed assets
  
  
  74,026
  
  
  
  44,108
  
  
  
  33,195Other assets
  
  
  440
  
  
  
  840
  
  
  
  53074,466
  
  
  
  44,948
  
  
  
  33,725Financial expensesInterest on long-term debt
  
  
  27,440
  
  
  
  12,669
  
  
  
  13,700Interest on short-term
  debt
  
  
  782
  
  
  
  1,228
  
  
  
  755Depreciation of deferred
  financing cost
  
  
  2,915
  
  
  
  997
  
  
  
  61231,137
  
  
  
  14,894
  
  
  
  15,067Interest expensesInterest expenses on
  long-term debt are net of interest income. Interest income totalled $477 in
  2004, $51 in 2003 and $360 in 2002.52

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)
5 - INFORMATION INCLUDED IN THE
CONSOLIDATED STATEMENT OF EARNINGS (Continued)
Supplementary information related to the rental expenses included in
operating, selling, administrative and general expenses.
Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Rent expensesRent expenses
  
  
  127,207
  
  
  
  
  93,313
  
  
  
  
  72,670Sub-leasing income
  
  
  9,265
  
  
  
  
  3,781
  
  
  
  
  2,440117,942
  
  
  
  
  89,532
  
  
  
  
  70,2306 - INCOME TAXES

Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Current income taxes
  
  
  54,802
  
  
  
  22,223
  
  
  
  9,843Future income taxes
  
  
  (14,930
  )
  
  
  9,719
  
  
  
  15,99139,872
  
  
  
  31,942
  
  
  
  25,834Earnings before income
  taxesDomestic
  
  
  57,538
  
  
  
  81,725
  
  
  
  66,901Foreign
  
  
  61,839
  
  
  
  16,258
  
  
  
  6,270119,377
  
  
  
  97,983
  
  
  
  73,171Current income taxesDomestic
  
  
  29,190
  
  
  
  19,718
  
  
  
  7,392Foreign
  
  
  25,612
  
  
  
  2,505
  
  
  
  2,45154,802
  
  
  
  22,223
  
  
  
  9,843Future income taxesDomestic
  
  
  (10,612
  )
  
  
  5,021
  
  
  
  16,280Foreign
  
  
  (4,318
  )
  
  
  4,698
  
  
  
  (289
  )(14,930
  )
  
  
  9,719
  
  
  
  15,99153

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April
25, 2004, April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)
6 - INCOME TAXES (Continued)

The principal items which resulted in differences between the Companys
effective income tax rates and the combined statutory rates in Canada are
detailed as follows:

Year endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002%
  
  %
  
  %Combined statutory income
  tax rate in Canada (a)
  
  
  35.70
  
  
  
  37.62
  
  
  
  39.90Impact of the announced
  tax rate increases (reductions)
  
  
  0.22
  
  
  
  (1.19
  )
  
  
  (2.99
  )Other permanent
  differences
  
  
  (2.52
  )
  
  
  (3.83
  )
  
  
  (1.60
  )Effective income tax rate
  
  
  33.40
  
  
  
  32.60
  
  
  
  35.31(a)
  The Companys combined
  statutory income tax rate in Canada includes the appropriate provincial
  income tax rates.The components of future tax assets (liabilities) are as follows:
April 25, 2004
  
  April 27, 2003$
  
  $Short-term future tax
  assets (liabilities)Expenses deductible in
  future years
  
  
  21,952
  
  
  
  5,997Deferral of GST and QST
  receivable
  
  
  
  
  
  
  (16,614
  )Deferred revenues
  
  
  835
  
  
  
  500Non-capital losses
  
  
  
  
  
  
  1,301Other
  
  
  3,752
  
  
  
  3,53826,539
  
  
  
  (5,278
  )Long-term future tax
  assets (liabilities)Fixed assets
  
  
  (9,315
  )
  
  
  (20,649
  )Non-capital losses
  
  
  2,267
  
  
  
  800Deferred revenues
  
  
  4,757
  
  
  
  2,050Borrowing and share issue
  costs
  
  
  4,580
  
  
  
  448Goodwill
  
  
  5,253
  
  
  
  8,645Other assets
  
  
  (2,320
  )
  
  
  (2,645
  )Other
  
  
  5,84811,070
  
  
  
  (11,351
  )54

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004,
April 27, 2003 and April 28, 2002(in thousands of
Canadian dollars, except per share amounts)
7 - EARNINGS PER SHARE

Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Basic earnings
  attributable to Class A and B shareholders
  
  
  79,505
  
  
  
  66,041
  
  
  
  47,337Weighted average number of
  shares (in thousands)
  
  
  89,702
  
  
  
  84,525
  
  
  
  77,580Dilutive effect of
  stock-based compensation (in thousands)
  
  
  4,030
  
  
  
  2,757
  
  
  
  3,797Weighted average number of
  diluted shares (in thousands)
  
  
  93,732
  
  
  
  87,282
  
  
  
  81,377Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Basic net earnings per
  share available for Class A and B shareholders
  
  
  
  0.89
  
  
  
  
  
  0.78
  
  
  
  
  
  0.61Diluted net earnings
  available for Class A and B shareholders
  
  
  
  0.85
  
  
  
  
  
  0.76
  
  
  
  
  
  0.58In calculating diluted
earnings per share for 2004, 0 stock options (1,725,000 in 2003 and 0 in 2002)
were excluded due to their antidilutive effect.
8 - INFORMATION INCLUDED IN THE
CONSOLIDATED STATEMENT OF CASH FLOWS

The changes in working capital items are detailed as follows:

Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Accounts receivable
  
  
  8,049
  
  
  
  (59,423
  )
  
  
  (7,062
  )Inventories
  
  
  (10,195
  )
  
  
  (27,754
  )
  
  
  (13,019
  )Prepaid expenses
  
  
  (8,693
  )
  
  
  (1,831
  )
  
  
  2,291Accounts payable
  
  
  143,529
  
  
  
  100,066
  
  
  
  10,708Income taxes payable
  
  
  26,297
  
  
  
  9,527
  
  
  
  (9,740
  )158,987
  
  
  
  20,585
  
  
  
  (16,822
  )Cash flows relating to interest and income taxes of operating
activities are detailed as follows:
Year
  endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Interest paid
  
  
  17,727
  
  
  
  12,591
  
  
  
  12,280Income taxes paid
  
  
  31,895
  
  
  
  11,570
  
  
  
  18,55655

Alimentation
Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and
April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

9 - ACCOUNTS RECEIVABLE
April 25, 2004
  
  April 27, 2003$
  
  $Trade accounts receivable and
  supplier discounts receivable
  
  
  75,617
  
  
  44,511Credit card receivable
  
  
  37,011
  
  
  12,399Environmental costs receivable
  
  
  1,420
  
  
  2,482Sales taxes receivable
  
  
  
  
  
  42,820Other accounts receivable
  
  
  14,470
  
  
  5,796128,518
  
  
  108,00810 - INVENTORIES
April 25, 2004
  
  April 27, 2003$
  
  $Merchandise - distribution centres
  
  
  36,553
  
  
  10,659Merchandise - retail
  
  
  273,814
  
  
  147,023Motor fuel
  
  
  64,476
  
  
  22,192374,843
  
  
  179,87411 - FIXED ASSETS
April
  25, 2004Cost
  
  Accumulateddepreciation
  
  Net$
  
  $
  
  $Land
  
  
  240,015
  
  
  
  
  
  240,015Buildings and parking lots
  
  
  167,415
  
  
  33,583
  
  
  133,832Leasehold improvements
  
  
  160,979
  
  
  46,257
  
  
  114,722Petroleum infrastructure
  
  
  123,004
  
  
  26,309
  
  
  96,695Equipment
  
  
  464,452
  
  
  170,983
  
  
  293,469Signs
  
  
  29,331
  
  
  10,561
  
  
  18,7701,185,196
  
  
  287,693
  
  
  897,503Buildings under capital lease
  
  
  4,607
  
  
  3,627
  
  
  9801,189,803
  
  
  291,320
  
  
  898,48356

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
11 - FIXED ASSETS (Continued)

April
  27, 2003Cost
  
  Accumulated
  depreciation
  
  Net$
  
  $
  
  $Land
  
  
  42,400
  
  
  
  
  
  42,400Buildings and parking lots
  
  
  90,051
  
  
  29,687
  
  
  60,364Leasehold improvements
  
  
  142,137
  
  
  37,890
  
  
  104,247Petroleum infrastructure
  
  
  73,945
  
  
  19,307
  
  
  54,638Equipment
  
  
  303,592
  
  
  131,896
  
  
  171,696Signs
  
  
  15,430
  
  
  8,504
  
  
  6,926667,555
  
  
  227,284
  
  
  440,271Buildings under capital lease
  
  
  4,533
  
  
  3,545
  
  
  988672,088
  
  
  230,829
  
  
  441,25912 - OTHER ASSETS
April 25, 2004
  
  April 27, 2003$
  
  $Deferred charges, at unamortized cost
  
  
  43,808
  
  
  8,619Deferred pension expense
  
  
  3,218
  
  
  3,905Deposits
  
  
  2,917
  
  
  2,512Other, at cost
  
  
  3,332
  
  
  1,13153,275
  
  
  16,16757

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
13 - BANK INDEBTEDNESS

Bank
indebtedness reflects the used portion of the credit facilities available to
the Company. Available credit facilities were unused as at April 25, 2004, with
the exception of certain letters of guarantee.

On December
17, 2003, the Company implemented a new credit agreement consisting of a 5-year
renewable operating credit, maturing in December 2008, in the amount of
CA$50,000 available in Canadian or U.S. dollars or as letters of guarantee not
exceeding CA$10,000 or the equivalent in U.S. dollars bearing interest at the
Canadian or U.S. prime rate plus 0.75% to 1.50% or at LIBOR plus 1.75% to
2.50%, depending on whether certain financial ratios are achieved. The
operating credit is also available in the form of bankers acceptances with
stamping fees of 1.75% to 2.50%, depending on whether certain financial ratios
are achieved. As at April 25, 2004, an amount of CA$48,782 was available under
this operating credit and the effective interest rate was 3.63%. The credit
agreement also provides for a 5-year renewable operating credit, maturing in
December 2008, of an amount of US$75,000 available in U.S. dollars and as
letters of guarantee not exceeding US$30,000, bearing interest at the U.S. prime
rate plus 0.75% to 1.50% or at LIBOR plus 1.75% to 2.50% depending on whether
certain financial ratios are achieved. As at April 25, 2004, an amount of
US$70,160 was available under under this operating credit and the effective
interest rate was 3.63%. These credit facilities are subject to the same
guarantees and restrictive covenants which apply to the term loans described in
Note 15.
As at April
27, 2003, the Company had a renewable operating credit in the amount of
CA$60,000 available in Canadian or U.S. dollars or as letters of guarantee
bearing interest at the Canadian or U.S. prime rate plus 0% to 0.50% or at
LIBOR plus 0.75% to 1.50%, depending on whether certain financial ratios were
achieved. The operating credit was also available in the form of bankers
acceptances with stamping fees of 0.75% to 1.50%, depending on whether certain
financial ratios were achieved. As at April 27, 2003, an amount of $59,644 was
available under this credit facility and the effective interest rate was 2.31%.
Furthermore, the Company had access to a margin of credit totalling US$3,000
bearing interest at the U.S. prime rate. As at April 27, 2003, an amount of
US$3,000 was available under this facility and the effective interest rate was
4.25%.
14 - ACCOUNTS PAYABLE

April 25, 2004
  
  April 27, 2003$
  
  $Accounts payable and accrued expenses
  
  
  474,960
  
  
  213,518Taxes payable
  
  
  52,703
  
  
  42,168Environmental expenses payable
  
  
  1,858
  
  
  2,266Salaries and social benefits
  
  
  45,745
  
  
  14,312Deferred revenues
  
  
  10,862
  
  
  4,349Other
  
  
  71,737
  
  
  17,150657,865
  
  
  293,76358

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
15 - LONG-TERM DEBT
April 25, 2004
  
  April 27, 2003$
  
  $Subordinated
  unsecured debt (a)
  
  
  476,245Secured term
  loans granted under the new credit arrangement (b)Term loan
  A (US$27,977 as at April 25, 2004)
  
  
  38,069Term loan
  B (US$149,976 as at April 25, 2004)
  
  
  204,072Note
  payable, secured by the assets of certain stores, 8.75%,repayable in monthly
  instalments, maturing in 2019
  
  
  7,469Note payable
  without interest, repayable in two equal instalments in May 2004 and 2005
  
  
  500Mortgage
  loans secured by land and buildings, rates varying from 7% to 13.25% (7% to
  13.25% in 2003), payable in monthly instalments, maturing on various dates
  until 2016
  
  
  273
  
  
  
  335Note
  payable, 9%
  
  
  
  
  
  
  249Obligations
  related to buildings under capital lease, rates varying between 8.18% to
  13.25% (8.18% and 13.25% for 2003), payable on various dates until 2018
  
  
  3,904
  
  
  
  2,968Unsecured term loans
  granted under the previous credit arrangement (c)Credit A
  (including US$23,000 as at April 27, 2003)
  
  
  
  
  
  
  53,306Credit B
  
  
  
  
  
  
  50,000Credit C
  (US$98,226 as at April 27, 2003)
  
  
  
  
  
  
  142,241Credit D
  (US$32,604 as at April 27, 2003)
  
  
  
  
  
  
  47,214730,532
  
  
  
  296,313Short-term
  instalments
  
  
  6,032
  
  
  
  17,986724,500
  
  
  
  278,327(a)
  Subordinated debtUnsecured subordinated debt of US$350,000, maturing
  December 15, 2013, bearing interest at a rate of 7.5%. Redeemable under
  certain conditions as of December 15, 2008.The total amount of the loan is subject to interest
  rate swaps (see Note 22).(b)
  Loans granted under the new credit agreement
  Term loan AUS$27,997 maximum authorized term loan maturing on
  December 17, 2008, payable in quarterly instalments increasing gradually from
  2.5% of the balance to 7.5%, as of July 2008, bearing interest at the
  Canadian prime rate plus 0.75% to 1.5% or the LIBOR rate plus 1.75% to 2.5%,
  depending on whether certain financial ratios have been achieved. As at April
  25, 2004, the effective interest rate was 3.63%.59

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
15 - LONG-TERM DEBT (Continued)


  Term loan BUS$149,976 maximum authorized term loan maturing on
  December 17, 2010, payable in quarterly instalments of 0.25% of the balance
  of the loan for the six first years and 23.50% for the seventh year, of the
  balance bearing interest at the prime U.S. rate plus 1.25% or the LIBOR rate
  plus 2.25%. As at April 25, 2004, the effective interest rate was 3.38%.Substantially all of the Companys assets have been
  pledged to secure these term loansUnder the new credit agreement, the Company must meet
certain commitments and achieve certain financial ratios. Furthermore, the new
credit agreement limits notably the amount of fixed assets that the Company may
acquire, the business acquisitions the Company may take part in, the amount of
the repayments of term loan A and B that the Company may make as well as
dividend payments.
As well, the
subordinated debts limit notably the business acquisitions that the Company may
make and dividend payments.
(c)
  Loans granted under the previous credit arrangement:
  Credit A:Revolving credit for a maximum authorized amount of
  CA$80,000 available in Canadian or U.S. dollars, maturing on April 23, 2005,
  bearing interest at the Canadian or U.S. prime rate plus 0.75% to 1.50%, or
  LIBOR plus 1.75% to 2.50%, depending on whether certain financial ratios are
  achieved. This credit was also available in the form of bankers acceptances
  with stamping fees of 1.75% to 2.50% depending on whether certain financial
  ratios are achieved. As at April 27, 2003, the effective rate was 4.08%;
  Credit B:Term credit for a maximum authorized amount of
  CA$50,000 maturing on April 16, 2006 and bearing interest at the prime rate
  plus 2.75% or the bankers acceptances rate with stamping fees of 3.75%. As
  at April 27, 2003, the effective rate was 6.66%;An amount of $25,000 of Credit B was subject to an
  interest rate swap in order to establish the annual rate for the related
  bankers acceptances at 5.25% until May 2004. This agreement was cancelled
  following the repayment of the debt in December 2003.
  Credit C:Term credit for a maximum authorized amount of
  US$98,226 payable in annual instalments of US$12,000 as of May 1, 2003 with
  the balance payable on May 1, 2006. This credit was available in Canadian or
  U.S. dollars in the form of advances or bankers acceptances according to the
  same rates as Credit A. As at April 27, 2003, the effective interest rate was
  3.38%;60

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
15 - LONG-TERM DEBT (Continued)


  Credit D:Term credit for a maximum authorized amount of
  US$32,604 maturing on June 20, 2007, bearing interest at the U.S. prime rate
  plus 2% or at LIBOR plus 3%. As at April 27, 2003, the effective interest
  rate was 4.38%.The instalments on long-term debt for the next years are as follows:Obligationsunder capital
  leases
  
  Other
  loans$
  
  $2005
  
  
  
  1,249
  
  
  
  5,4222006
  
  
  
  1,042
  
  
  
  9,2432007
  
  
  
  898
  
  
  
  10,9242008
  
  
  
  701
  
  
  
  11,9062009
  
  
  
  598
  
  
  
  12,8892010 and subsequent years
  
  
  
  3,192
  
  
  
  676,2447,680Interest expense included in minimum lease payments
  
  
  
  3,7763,90416 - DEFERRED REVENUES AND
OTHER LIABILITIES
April 25, 2004
  
  April 27, 2003$
  
  $Deferred revenues
  
  
  
  17,097
  
  
  
  
  7,957Provision for site restoration costs
  
  
  
  4,441
  
  
  
  
  1,008Provision for workers compensation
  
  
  
  5,710Other liabilities
  
  
  
  12,82940,077
  
  
  
  
  8,96561

Alimentation Couche-Tard Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
17 - CAPITAL STOCK

Authorized

Unlimited
number of shares without par value

First and second preferred shares issuable in
  series, ranking prior to other classes of shares with respect to dividends
  and payment of capital upon dissolution, non-voting. The Board of Directors
  is authorized to determine the designation, rights, privileges, conditions
  and restrictions relating to each series of shares prior to their issuance.Class A multiple voting and participating shares,
  ten votes per share except for certain situations which provide for only one
  vote per share, convertible into Class B subordinate voting shares on a
  share-for-share basis at the holders option. Under the articles of
  amendment, no new Class A multiple voting share can be issued.Class B subordinate voting and participating
  shares, convertible automatically into Class A multiple voting shares on a
  share-for-share basis upon the occurrence of certain events.The order of priority for the payment of dividends is
as follows:

  First preferred shares;
  Second preferred shares;
  Class B subordinate
  voting shares and Class A multiple voting shares, ranking pari passu.Issued and fully paid
The number of
shares outstanding changed as follows:

Year
  ended
  
  Year
  endedApril
  25, 2004
  
  April
  27, 2003Number
  of
  shares
  
  $
  
  Number
  of
  shares
  
  $Class A multiple voting sharesBalance, beginning of year
  
  
  28,548,824
  
  
  12,029
  
  
  28,548,824
  
  
  12,029Conversion into Class B shares
  
  
  (27,963
  )
  
  (12
  )28,520,861
  
  
  12,017
  
  
  28,548,824
  
  
  12,029Class B subordinate voting sharesBalance, beginning of year
  
  
  56,046,088
  
  
  246,507
  
  
  54,383,088
  
  
  242,054Issued as part of the acquisition ofCircle K
  
  
  13,555,538
  
  
  223,666Issued on conversion of Class Ashares
  
  
  27,963
  
  
  12Stock options exercised for cash
  
  
  659,400
  
  
  3,487
  
  
  1,663,000
  
  
  4,453Total issued and fully paid
  
  
  70,288,989
  
  
  473,672
  
  
  56,046,088
  
  
  246,507485,689
  
  
  
  
  
  258,53662

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

17 -
CAPITAL STOCK (Continued)

Year endedApril 28, 2002Number of
  shares
  
  $Class A multiple voting sharesBalance,
  beginning of year
  
  
  28,549,224
  
  
  12,029Conversion
  into Class B shares
  
  
  (400
  )28,548,824
  
  
  12,029Class B subordinate voting sharesBalance,
  beginning of year
  
  
  45,973,688
  
  
  139,202Issuance
  
  
  8,000,000
  
  
  101,600Issued
  on conversion of Class A shares
  
  
  400Stock
  options exercised for cash
  
  
  409,000
  
  
  1,252Total
  issued and fully paid
  
  
  54,383,088
  
  
  242,054254,083On December 17, 2003, the Company exchanged
13,555,538 warrants for Class B subordinate voting shares on a
share-for-share basis. These warrants were issued on October 6, 2003 at a price
of $16.50 each for a total consideration of $223,666. The issue costs, net of
related future income taxes, amount to $2,157.
During the year ended April 27, 2003 and the
year ended April 28, 2002, the Company split all of its shares on a two-for-one
basis. All share and per-share information in these consolidated financial
statements has been adjusted retroactively to reflect both stock splits.

On December 20, 2001, the Company issued
8,000,000 Class B subordinate voting shares for $12.70 per share, for total
gross proceeds of $101,600. The share issue expenses, net of the related future
income taxes, total $3,036.
18 -
STOCK-BASED COMPENSATION
During the year ended April 27, 2003, the
Company amended its two existing stock-based compensation plans by merging them
into a single plan. The plan provides for granting stock options for the
purchase of class B subordinate voting shares. As at April 25, 2004,
10,640,600 subordinate shares were reserved for issue and a total of 4,327,500 subordinate
shares were available for issuance as stock options. The conditions governing
the granting and exercise of the options are established by the Board of
Directors, as is the term of the options, which cannot exceed 10 years. The
options granted can generally be exercised as follows: 20% on the day following
the grant, the remaining options, 20% on each anniversary of the grant date,
over the next four years. The options cannot be granted at a price that is less
than the market price on the grant date.

63

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

18 -
STOCK-BASED COMPENSATION (Continued)

The table below presents the status of the
Companys stock option plan as at April 25, 2004, April 27, 2003 and April 28,
2002 and the changes therein during the years then ended.
Year ended
  
  Year endedApril 25,2004
  
  April 27, 2003Number of
  options
  
  Weighted
  average
  exercise price
  
  Number of
  options
  
  Weighted
  average
  exercise price$
  
  
  
  
  $Balance,
  beginning of year
  
  
  6,156,500
  
  
  8.14
  
  
  
  7,563,000
  
  
  6.70Granted
  
  
  840,000
  
  
  20.57
  
  
  
  265,000
  
  
  14.79Options
  exercised
  
  
  (659,400
  )
  
  5.29
  
  
  
  (1,663,000
  )
  
  2.68Cancelled
  
  
  (24,000
  )
  
  8.07
  
  
  
  (8,500
  )
  
  5.93Balance,
  end of year
  
  
  6,313,100
  
  
  10.09
  
  
  
  6,156,500
  
  
  8.14Exercisable
  options at end of year
  
  
  4,371,320
  
  
  
  
  
  3,652,900Year endedApril 28, 2002Number of
  options
  
  Weighted
  average
  exercise price$Balance,
  beginning of year
  
  
  
  
  
  
  
  
  5,788,000
  
  
  4.27Granted
  
  
  
  
  
  
  
  
  2,200,000
  
  
  12.42Options
  exercised
  
  
  
  
  
  
  
  
  (409,000
  )
  
  3.06Cancelled
  
  
  
  
  
  
  
  
  (16,000
  )
  
  5.34Balance,
  end of year
  
  
  
  
  
  
  
  
  7,563,000
  
  
  6.70Exercisable
  options at end of year
  
  
  
  
  
  
  
  
  3,975,00064

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
18 -
STOCK-BASED COMPENSATION (Continued)

The following table presents information on
the stock options outstanding as at April 25, 2004:

Options outstandingRange of
  exercise
  prices
  
  Number ofoutstanding
  options as at
  April 25, 2004
  
  Weightedaverage
  remaining
  contractual life
  
  Weighted
  average
  exercise price$$4
  - $6
  
  
  
  3,070,000
  
  
  
  2.55
  
  
  
  5.11$6
  - $9
  
  
  
  620,000
  
  
  
  7.09
  
  
  
  7.21$12
  - $16
  
  
  
  1,893,100
  
  
  
  8.04
  
  
  
  14.70$20
  - $25
  
  
  
  730,000
  
  
  
  9.60
  
  
  
  21.566,313,100Options exercisableRange of
  exercise
  prices
  
  
  
  
  Number of
  exercisable
  options as at
  April 25, 2004
  
  Weighted
  average
  exercise price$$4
  - $6
  
  
  
  
  
  
  2,814,000
  
  
  
  5.14$6
  - $9
  
  
  
  
  
  
  372,000
  
  
  
  7.21$12
  - $16
  
  
  
  
  
  
  1,039,320
  
  
  
  14.71$20
  - $25
  
  
  
  
  
  
  146,000
  
  
  
  21.564,371,320On May 25, 2004, subsequent to year-end,
1,790,000 options were exercised for a total consideration of $9,563.
The Company does not record any compensation
cost. If the compensation cost had been determined using the fair value method
at the date of attribution of stock options granted beginning on April 29, 2002
to employees, net earnings and earnings per share information would have been
reduced to the pro forma amounts shown in the following table:

Year endedApril 25, 2004
  
  April 27, 2003Disclosed
  
  Pro forma
  
  Disclosed
  
  Pro forma$
  
  $
  
  $
  
  $Net
  earnings
  
  
  79,505
  
  
  
  76,907
  
  
  
  60,041
  
  
  
  65,408Earnings
  per share
  
  
  0.89
  
  
  
  0.86
  
  
  
  0.78
  
  
  
  0.77Diluted
  earnings per share
  
  
  0.85
  
  
  
  0.82
  
  
  
  0.76
  
  
  
  0.75For purposes of calculating the compensation
cost, the fair value of stock options is recognized using the straight-line
method over the vesting period of the stock options.

65

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

18 -
STOCK-BASED COMPENSATION (Continued)

The pro forma impact on net earnings for the
period is not representative of the pro forma net earnings of future periods
because it does not take into account the pro forma compensation relating to
options granted prior to April 29, 2002.

The fair value of options granted is
estimated at the attribution date using the Black-Scholes options pricing model
on the basis of the following assumptions for attributions granted during the
year:
Year endedApril 25, 2004
  
  April 27, 2003Expected
  dividend on shares
  
  None
  
  NoneExpected
  average volatility
  
  30%
  
  30%Weighted
  average risk-free interest rate
  
  4.45
  
  5.26Expected
  life
  
  8 years
  
  8 yearsThe weighted average fair value of options
granted in the year ended April 25, 2004 is $9.22 ($7.03 in 2003).
19 -
CUMULATIVE TRANSLATION ADJUSTMENTS

Year endedApril 25, 2004
  
  April 27, 2003$
  
  $Balance,
  beginning of year
  
  
  
  (2,626
  )
  
  
  
  (106
  )Effect
  of change in exchange rate during the yearOn
  the net investment in the self-sustaining foreign subsidiaries
  
  
  
  4,264
  
  
  
  
  (18,416
  )On
  the long-term debt denominated in U.S. dollars designated as a hedge of the
  net investment in the self-sustaining foreign subsidiaries
  
  
  
  (2,588
  )
  
  
  
  15,896Balance,
  end of year
  
  
  
  (950
  )
  
  
  
  (2,626
  )66

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
20 -
EMPLOYEE FUTURE BENEFITS

The Company has defined benefit pension
plans and a defined contribution pension plan for certain employees.

Information about the Companys defined
benefit plans, in aggregate, is as follows:
Year endedApril 25, 2004
  
  April 27, 2003$
  
  $Accrued benefit obligationsBalance,
  beginning of year
  
  
  
  29,606
  
  
  
  
  30,766Current
  service cost
  
  
  
  662
  
  
  
  
  586Past
  service cost
  
  
  
  
  
  
  
  
  3,215Interest
  cost
  
  
  
  1,890
  
  
  
  
  1,916Benefits
  paid
  
  
  
  (2,387
  )
  
  
  
  (2,251
  )Actuarial
  (gains) losses
  
  
  
  1,670
  
  
  
  
  (4,626
  )Balance,
  end of year
  
  
  
  31,441
  
  
  
  
  29,606Year endedApril 25, 2004
  
  April 27, 2003$
  
  $Plan assetsFair
  value, beginning of year
  
  
  
  25,077
  
  
  
  
  30,288Actual
  return on plan assets
  
  
  
  3,369
  
  
  
  
  (3,588
  )Employees
  contributions
  
  
  
  108
  
  
  
  
  112Benefits
  paid
  
  
  
  (1,871
  )
  
  
  
  (1,735
  )Fair
  value, end of year
  
  
  
  26,683
  
  
  
  
  25,077Funded
  status-plan deficit
  
  
  
  (4,758
  )
  
  
  
  (4,529
  )Unamortized
  net actuarial loss
  
  
  
  9,350
  
  
  
  
  10,051Unamortized
  transitional net asset
  
  
  
  (3,943
  )
  
  
  
  (4,509
  )Unamortized
  past service cost
  
  
  
  2,569
  
  
  
  
  2,892Accrued
  benefit asset
  
  
  
  3,218
  
  
  
  
  3,905As at April 25, 2004, the accrued benefit
obligation for pension plans with a funding deficit amounted to $10,754 ($9,715
in 2003). These plans are not funded and, accordingly, there are no assets.

67

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

20 -
EMPLOYEE FUTURE BENEFITS (Continued)

Information about pension expense (income)
for the Companys defined benefit plan for the year is as follows:

Year endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002$
  
  $
  
  $Pension expense (income)Current
  service cost, net of employee contributions
  
  
  
  554
  
  
  
  
  474
  
  
  
  
  436Interest
  cost
  
  
  
  1,890
  
  
  
  
  1,916
  
  
  
  
  2,080Expected
  return on plan assets
  
  
  
  (1,694
  )
  
  
  
  (2,063
  )
  
  
  
  (2,721
  )Amortized
  transitional asset
  
  
  
  (566
  )
  
  
  
  (566
  )
  
  
  
  (565
  )Amortized
  net actuarial loss
  
  
  
  696
  
  
  
  
  93Amortized
  past service cost
  
  
  
  323
  
  
  
  
  323Pension
  expense (income) for the year
  
  
  
  1,203
  
  
  
  
  177
  
  
  
  
  (770
  )The significant actuarial assumptions which
management considers the most likely to be used to determine the accrued
benefit obligation are the following:
Year endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002%
  
  %
  
  %Discount
  rate
  
  
  6.25
  
  
  
  6.50
  
  
  
  6.75Expected
  rate of return on plan assets
  
  
  7.00
  
  
  
  7.00
  
  
  
  8.00Rate
  of compensation increase
  
  
  4.00
  
  
  
  4.00
  
  
  
  4.00The Companys total pension expense under
its defined contribution plan for the year 2004 is $1,005 ($870 in 2003 and
$655 in 2002).
21 -
ENVIRONMENT

The Company is subject to Canadian and
American legislation governing the storage, handling and sale of gasoline and
related products. The Company considers that it is generally in compliance with
current environmental legislation.

The Company has an on-going training program
for its employees on environmental issues which includes preventive site
testing and site restoration in cooperation with regulatory authorities. The
Company also examines its gasoline equipment annually to make the necessary
investments. In connection with the closure of certain business locations, the
Company is required to remove its petroleum equipment.

68

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
21 -
ENVIRONMENT (Continued)
In all U.S. states in which the Company operates,
except Michigan, Florida, Texas and Washington, there is a state fund to cover
the cost of certain rehabilitation and removing of gasoline tanks. These state
funds provide insurance for gasoline facilities operations to cover the cost of
cleaning up damage to the environment caused by the usage of underground
gasoline equipment. Gasoline equipment tank registration fees and a gasoline
tax in each of the states finance the trust funds. The Company paid the
registration fees and remits the sales tax to the states where it is a member
of the trust fund. Insurance coverage is different in the various states and
can be as much as US$1,000 per site. The Companys deductible ranges from US$15
to US$55. There is no trust fund in the state of Michigan, Florida, Texas and
Washington.
In order to provide for the above-mentioned
restoration costs, the Company has recorded a $6,299  allowance for environmental costs as at April 25, 2004 ($3,274 as
at April 27, 2003). Of this amount, $1,858 ($2,266 as at April 27, 2003) has
been presented on a current basis.
22 -
FINANCIAL INSTRUMENTS
a) Description of derivative financial
instruments

Management of interest rate risk
The Company has entered into interest rate
swaps to manage interest rate fluctuations. It has agreed to swap the amount of
the difference between the variable interest rate and the fixed rate,
calculated based on the reference amounts.
The amounts outstanding at year-end,
classified by subsidiary and by currency, are as follows:
Maturity(a)
  
  Reference
  
  Pays/receives
  
  Fixed
  rate
  
  Variable
  rateUS$
  
  
  
  %December
  2013
  
  
  100,000
  
  
  
  pays variable
  
  
  7.50
  
  
  
  LIBOR 6 month/receives fixed
  
  
  
  
  
  
  plus 3.03%December
  2013
  
  
  100,000
  
  
  
  pays variable
  
  
  7.50
  
  
  
  LIBOR 6 month/receives fixed
  
  
  
  
  
  
  plus 2.98%December
  2013
  
  
  150,000
  
  
  
  pays variable
  
  
  7.50
  
  
  
  LIBOR 6 month/receives fixed
  
  
  
  
  
  
  plus 2.89%(a)
  Under
  certain conditions, the maturity date of the swaps can be altered to
  correspond with the repurchase conditions of the corresponding subordinated
  notes.69

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
22 -
FINANCIAL INSTRUMENTS (Continued)
b) Fair value of financial instruments
The fair value of cash and cash equivalents,
accounts receivable and accounts payable is comparable to their carrying amount
given that they will mature in less than one year;
With the exception of the unsecured
subordinated debt, there is no material difference between the fair value and
the carrying amount of the Companys long-term debt as at April 25, 2004 and
April 27, 2003, given that the largest loans bear interest at the floating
rate.
The fair value of the unsecured subordinated
debt was $496,485 as at April 25, 2004.
The fair value of the interest rate swap, as
determined by the Companys bank based on quoted market prices for similar
instruments was $27,175 payable by the Company ($577 payable by the Company in
2003).
23 -
CONTRACTUAL OBLIGATIONS
As at April 25, 2004, the Company has
entered into lease agreements expiring on various dates until 2027 which call
for the payment of $1,809,034 for the rental of commercial space, equipment and
a warehouse. Several of these leases contain renewal options and certain sites
are subleased to franchise-holders. The minimum lease payments for the next
five years are $187,698 in 2005, $176,087 in 2006, $163,342 in 2007, $142,356
in 2008 and $114,250 in 2009.
Moreover, the Company has concluded
agreements to acquire equipment and franchise rights which call for the payment
of $7,241. The minimum payments for the next five years are $2,061 in 2005,
$560 from 2006 to 2008 and $700 in 2009.


70

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
24 -
CONTINGENCIES
Various claims and legal proceedings have
been initiated against the Company in the normal course of its operations that
relate to human resources and the environment. In managements opinion, these
claims and proceedings are unfounded. Although the outcome of these proceedings
cannot be determined with certainty, management estimates that any payments
resulting from their outcome are not likely to have a substantial negative
impact on the Companys results and financial position.
25 -
SEGMENTED INFORMATION
The Company essentially operates in one
reportable segment, the sale of goods for immediate consumption and motor fuel
through corporate stores or franchise operations. It operates a convenience
store chain under several banners, including Couche-Tard, Macs, Bigfoot, Dairy
Mart and Circle K. Revenues from outside sources mainly fall into two
categories: merchandise and motor fuel. The Company operates convenience stores
in Canada and, since June 2001, in the United States.
Information on the principal revenue classes
as well as geographic information is as follows:
Year endedApril 25, 2004
  
  April 27, 2003Canada
  
  U.S.
  
  Total
  
  Canada
  
  U.S.
  
  Total$
  
  $
  
  $
  
  $
  
  $
  
  $External customer revenues(a)Merchandise
  and services
  
  
  1,510,589
  
  
  1,597,085
  
  
  3,107,674
  
  
  1,428,646
  
  
  514,660
  
  
  1,943,306Motor
  fuel
  
  
  677,507
  
  
  2,087,213
  
  
  2,764,720
  
  
  630,144
  
  
  741,744
  
  
  1,371,8882,188,096
  
  
  3,684,298
  
  
  5,872,394
  
  
  2,058,790
  
  
  1,256,404
  
  
  3,315,194Gross marginMerchandise
  and services
  
  
  491,283
  
  
  521,156
  
  
  1,012,439
  
  
  462,503
  
  
  169,639
  
  
  632,142Motor
  fuel
  
  
  63,351
  
  
  147,184
  
  
  210,535
  
  
  57,499
  
  
  60,236
  
  
  117,735554,634
  
  
  668,340
  
  
  1,222,974
  
  
  520,002
  
  
  229,875
  
  
  749,877Fixed assets and goodwill(a)
  
  
  484,785
  
  
  692,609
  
  
  1,177,394
  
  
  459,756
  
  
  251,030
  
  
  710,78671

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
25 -
SEGMENTED INFORMATION (Continued)

Year endedApril 28, 2002Canada
  
  U.S.
  
  Total$
  
  $
  
  $External customer revenues(a)Merchandise
  and services
  
  
  1,298,603
  
  
  204,519
  
  
  1,503,122Motor
  fuel
  
  
  532,203
  
  
  356,674
  
  
  888,8771,830,806
  
  
  561,193
  
  
  2,391,999Gross marginMerchandise
  and services
  
  
  426,538
  
  
  65,029
  
  
  491,567Motor
  fuel
  
  
  54,484
  
  
  36,735
  
  
  91,219481,022
  
  
  101,764
  
  
  582,786Fixed assets and goodwill(a)
  
  
  428,018
  
  
  122,696
  
  
  550,714(a)
  Geographic
  areas are determined according to where the Company generates operating
  income (where the sale takes place) and according to the location of the
  fixed assets and goodwill.The Company is not dependent on one major
customer as a revenue source.
26 -
COMPARATIVE FIGURES
Certain comparative figures have been
reclassified to conform with the presentation adopted in the current year.

72

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
27 -
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND THE UNITED STATES
The consolidated financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles (Canadian GAAP), which differ in certain respects from those
principles and practices that the Company would have followed had its
consolidated financial statements been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP).
A - Consolidated financial
statements
The adjustments to comply with U.S. GAAP
would be as follows:
Consolidated earnings
Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Net
  earnings in accordance with Canadian GAAP
  
  
  79,505
  
  
  66,041
  
  
  47,337Adjustments
  in respect ofDerivative financial
  instruments (a)
  
  
  577
  
  
  130
  
  
  (663
  )Pension
  expense (b)
  
  
  48
  
  
  (487
  )
  
  (572
  )Lease
  expense (c)
  
  
  (2,680
  )
  
  (1,823
  )
  
  (1,223
  )Sale-leaseback
  transactions (d)
  
  
  (7,477
  )
  
  (8,651
  )
  
  (7,912
  )Stock-based
  compensation (e)
  
  
  44
  
  
  
  
  
  (13,980
  )Deferred charges and other
  assets (f)
  
  
  352
  
  
  (854
  )
  
  (2,273
  )Asset
  retirement obligations (g)
  
  
  (351
  )Supplier
  rebates and other supplier payments (h)
  
  
  (6,523
  )
  
  (1,123
  )
  
  2,849Tax
  effect of the above adjustments
  
  
  6,486
  
  
  4,759
  
  
  2,644Cumulative
  effect of accounting changesDerivative financial
  instruments (net of taxes of $ 10) (a)
  
  
  
  
  
  
  
  
  (34
  )Asset
  retirement obligations (net of taxes of $ 943) (g)
  
  
  (1,859
  )(11,383
  )
  
  (8,049
  )
  
  (21,164
  )Net
  earnings in accordance with U.S. GAAP
  
  
  68,122
  
  
  57,992
  
  
  26,173Earnings
  per share in accordance with U.S. GAAP (j)Basic
  
  
  0.76
  
  
  0.69
  
  
  0.34Diluted
  
  
  0.73
  
  
  0.66
  
  
  0.3373

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)Consolidated balance sheets

April 25, 2004
  
  April 27, 2003Canadian
  GAAP
  
  U.S. GAAP
  
  Canadian
  GAAP
  
  U.S. GAAP$
  
  $
  
  $
  
  $ASSETSInventories
  (h)
  
  
  374,843
  
  
  375,672
  
  
  179,874
  
  
  187,438Current
  future income taxes (c) (e) (g) (h)
  
  
  26,539
  
  
  26,586
  
  
  2,850
  
  
  2,345Fixed
  assets (d) (f) (g)
  
  
  898,483
  
  
  1,049,016
  
  
  441,259
  
  
  582,035Goodwill
  (h)
  
  
  278,911
  
  
  278,113
  
  
  269,527
  
  
  268,612Other
  assets (b) (f)
  
  
  53,275
  
  
  52,559
  
  
  16,167
  
  
  15,501Long-term
  future income taxes (a) (c) (d) (g)
  
  
  32,715
  
  
  44,982
  
  
  1,602
  
  
  9,608LIABILITIESAccounts
  payable and accrued liabilities (c) (e) (g)
  
  
  657,865
  
  
  673,842
  
  
  293,763
  
  
  308,916Current
  future income taxes (h)
  
  
  
  
  
  
  
  
  8,128
  
  
  10,463Long-term
  debt (a) (d)
  
  
  724,500
  
  
  873,275
  
  
  278,327
  
  
  440,200Deferred
  credits and other liabilities (a) (b) (c) (d) (g)
  
  
  40,077
  
  
  81,604
  
  
  8,965
  
  
  17,113Long-term
  future income taxes (b) (f)
  
  
  21,645
  
  
  18,929
  
  
  10,341
  
  
  10,113SHAREHOLDERS EQUITYCapital
  stock (e) (i)
  
  
  485,689
  
  
  479,229
  
  
  258,536
  
  
  254,026Retained
  earnings (a) (b) (c) (d) (e) (f) (g) (h) (i)
  
  
  260,865
  
  
  225,505
  
  
  183,517
  
  
  157,383Cumulative
  translation adjustments (c) (d) (h)
  
  
  (950
  )
  
  
  
  
  (2,626
  )
  
  Accumulated
  other comprehensive loss
  
  
  
  
  
  (531
  )
  
  
  
  
  (2,391
  )a) Derivative financial instruments
On April 30, 2001, the Company adopted
Statement of Financial Accounting Standards (SFAS) 133,
Accounting for Derivative Instruments and Hedging Activities and
SFAS 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities". These standards require all derivative financial
instruments to be recorded on the balance sheet at their fair value. Changes in
the derivatives fair value are recognized in the current period earnings
unless certain hedge accounting criteria are satisfied.

The Company elected not to adopt the
optional hedge accounting provisions of SFAS 133 for an interest rate swap
contract that was outstanding on April 30, 2001. Accordingly, for U.S. GAAP
reporting purposes only, beginning in 2001 and for such contract, unrealized
gains and losses resulting from the valuation of this derivative financial
instruments at fair value were recognized in net earnings as the gains and
losses arise. In adopting these standards, the Company incurred a transition
adjustment of $44 net of income taxes of $10. In 2004, the Company terminated
this interest rate swap contract resulting in a reversal of the recorded fair
value of this derivative for U.S. GAAP purposes.

74

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)In 2004, the Company entered into new
interest rate swaps and designated those derivatives as fair value hedges of a
long-term debt, the hedged item. Since the hedge accounting criteria are
satisfied, the change in the fair value of the interest rate swaps is offset in
U.S. GAAP earnings against the change in the fair value of the long-term debt.
In the U.S. GAAP balance sheet, the interest rate swaps are set up at fair
value and a corresponding adjustment is made to the hedged debt.
In its primary Canadian GAAP financial
statements, the Company does not recognize any gains or losses relating to the
interest rate swaps but accounts for cash flows relating to such as an
adjustment of accrued interest expense on underlying loan instruments.
b) Pension expense and
minimum liability

On May 1, 2000, the Company adopted the new
Canadian accounting recommendations for employee future benefit costs. The
recommendations essentially harmonized Canadian GAAP with U.S. GAAP and were
applied prospectively. Differences between Canadian and U.S. GAAP remain with
respect to the amortization of actuarial gains and losses arising prior to May
1, 2000. Upon transition to the new Canadian recommendations, all unamortized
gains and losses were accumulated into a net transitional asset which is being
amortized to earnings. This approach creates a difference with U.S. GAAP, under
which net actuarial gains accumulated prior to May 1, 2000 continue to be
amortized over the expected average remaining service period using the corridor
approach.

Under U.S. GAAP, the Company has recorded an
additional minimum pension liability for unfunded plans representing the excess
of unfunded accumulated benefit obligations over previously recorded pension
cost liabilities. A corresponding amount is recognized as an intangible asset
except to the extent that these additional liabilities exceed the related
unrecognized prior service cost, in which case the excess is charged directly
to Other comprehensive income, net of related future income taxes.
c) Lease expense
Under Canadian GAAP, the operating lease
expenses are recorded on a pay as you go basis. Under U.S. GAAP, the effect of
the scheduled rent increases included in the minimum lease payments is
recognized on a straight-line basis over the lease term.
d) Sale-leaseback
transactions
Under Canadian GAAP, certain leases
concluded in conjunction with sale-leaseback transactions have been afforded
operating lease treatment. Under U.S. GAAP, these transactions in which the
Company has a continuing involvement in the underlying assets have been
accounted for under the financing method. Under this method, the Company records
the sale proceeds as a liability, recognizes interest expense, and continues to
record and amortize the related assets. The accounting for the sale-leaseback
transactions under the financing method will continue until the Companys
continuing involvement in the related assets ceases.

75

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)e) Stock-based compensation
Under U.S. GAAP, the Company follows the
intrinsic value method of accounting for stock-based compensation arrangements,
as provided for in Accounting Principles Board Opinion 25 ("APB 25").
For the period between September 1999 and April 2002, grants of options under
one of the existing employee stock option plans were accompanied by stock
appreciation rights (SARs) whereby participants could choose to exercise a SAR
instead of the corresponding option. In such cases, the participants received a
cash payment equal to the difference between the closing price of common shares
on the day immediately preceding the day of exercise and the exercise price of
the option. Under the intrinsic value method, such a plan results in a
liability and requires measurement of compensation expense which assumes that
all participants will exercise the SARs. The periodic change in the value of
the SARs is included in earnings. Options that were granted prior to September
1999 and after April 2002 had an exercise price equal to the market price at
the date of the grant; therefore, no compensation cost has been charged to
earnings. Under Canadian GAAP, no amount is recognized for these stock options
upon issuance to managers and directors. Any consideration received when
holders exercise their options is credited to capital stock.
f) Deferred charges and
other assets
Under Canadian GAAP, certain development
expenses are deferred and amortized over a period of five to seven years. Under
U.S. GAAP, those costs are charged to earnings as incurred.
g) Asset retirement
obligations
For U.S. GAAP purposes, effective April 28,
2003, the Company adopted the provisions for SFAS 143, Accounting for
Asset Retirement Obligations that generally applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal operation of a long-lived
asset. The Company recognizes, when the obligation is incurred, the fair value
of an estimated liability for the future cost to remove its underground motor
fuel storage tanks with a corresponding increase to the carrying value of the
related long-lived asset. The Company amortizes the amount added to the asset
as per the depreciation method established for the related asset and recognizes
accretion expense in relation with the discounted liability over the remaining
life of the underground storage tank. The liability is adjusted at the end of
each period to reflect the passage of time and changes in the estimated future
cash flows underlying the obligation. Under Canadian GAAP, asset retirement
obligations accounting, consistent with the rules of SFAS 143, will be
mandatory for the Company starting April 26, 2004.

76

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)h) Supplier rebates and
other supplier payments
Effective January 1, 2003, the Company
adopted the provisions of the EITF No. 02-16, Accounting by a Customer
Including a Reseller for Certain Consideration Received from a Vendor".
This issue addresses the appropriate accounting for cash consideration received
from a vendor that is presumed to be a reduction of the price of the vendors
products or services and therefore be deducted from the cost of goods sold and
considered for purposes of valuation of period-end inventories. That
presumption is overcome if it is a payment for assets or services delivered to
the vendor, in which case the cash consideration should be characterized as a
revenue, or it is a reimbursement of a specific and incremental cost, in which
case the cash consideration should be characterized as a reduction of that
cost. Also, it should be recognized based on a systematic and rational
allocation if the amounts are probable and reasonably estimated. If not, it
should be as the milestones are achieved.
For Canadian GAAP purposes, supplies rebates
and other supplies payments are subject to the provisions of EIC144 (see Note
2), which was applied retroactively on January 30, 2004.
i) Share issue expenses
Under Canadian GAAP, share issue expenses
net of future income taxes are shown as a reduction of retained earnings. Under
U.S. GAAP, these expenses must be shown as a reduction of capital stock.
j) Earnings per share
Under Canadian GAAP and U.S. GAAP the
methods utilized to determine earnings per share are the same. However, for the
year ended April 28, 2002, there is a difference in the calculation of the
dilutive effect of stock options between Canadian and U.S. GAAP due to the
stock options granted under APB 25 (see Note 27A(e)).
Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002Weighted
  average number of shares (in thousands)
  
  
  89,702
  
  
  84,525
  
  
  77,580Dilutive
  effect of stock based compensation under U.S. GAAP (in thousands)
  
  
  4,030
  
  
  2,757
  
  
  2,790Weighted
  average number of diluted shares under U.S. GAAP (in thousands)
  
  
  93,732
  
  
  87,282
  
  
  80,370Consolidated cash flows
Under Canadian GAAP, a separate subtotal
within operating activities is permitted. Under U.S. GAAP, such a subtotal
would not be presented.


77

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)Related party transaction
Under U.S. GAAP a related party also
includes principal owners. Principal owners are defined in SFAS 57,
Related Party Disclosures, as owners of 10% of the voting interests
of the Company. Under Canadian GAAP, the principal owner notion does not exist.
Related party transactions, incurred in the
normal course of business, at fair value, involving a principal owner are:
Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Purchases
  
  
  
  
  
  
  
  
  121,407Trade
  accounts payable
  
  
  
  
  
  
  
  
  B - Consolidated comprehensive income
U.S. GAAP requires the presentation of the
following statement of consolidated comprehensive income and accumulated other
comprehensive loss:

Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Net earnings in accordance with U.S. GAAP
  
  
  68,122
  
  
  57,992
  
  
  26,173Other
  comprehensive income (loss)Foreign
  currency translation adjustmentOn
  the investment in the self- sustaining foreign subsidiaries
  
  
  4,472
  
  
  (17,850
  )
  
  2,847On
  the long-term debt denominated in U.S. dollars designated as a hedge of the
  net investment in the self sustaining foreign subsidiaries
  
  
  (2,588
  )
  
  15,896
  
  
  (2,937
  )1,884
  
  
  (1,954
  )
  
  (90
  )Net
  change in minimum pension liability (net of taxes of $ (48) in 2004, $ 10 in
  2003 and $ 71 in 2002)
  
  
  (24
  )
  
  (40
  )
  
  251,860
  
  
  (1,994
  )
  
  (65
  )Consolidated comprehensive income
  
  
  69,982
  
  
  55,998
  
  
  26,10878

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)Changes in items of the accumulated other
comprehensive loss are as follows:

Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Accumulated
  other comprehensive lossBalance
  at the beginning
  
  
  (2,391
  )
  
  (397
  )
  
  
  (332
  )Changes
  during the yearCumulative
  translation adjustments
  
  
  1,884
  
  
  (1,954
  )
  
  
  (90
  )Minimum
  pension liability
  
  
  (24
  )
  
  (40
  )
  
  
  25Balance
  at the end
  
  
  (531
  )
  
  (2,391
  )
  
  
  (397
  )C - Accounting for stock-based compensation
Under U.S. GAAP, SFAS 123, Accounting
for Stock-based Compensation", establishes financial accounting and
reporting standards for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. Under U.S. GAAP, as permitted by SFAS 123, the
Company has elected to continue to follow the intrinsic value method of
accounting for stock-based compensation arrangements with employees. The effect
of the intrinsic value method is described in Note 18. If the fair value based
method of accounting had been applied, the Companys net earnings and net
earnings per share would have been as follows on a pro forma basis:

Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Net
  earnings, under U.S. GAAP, as reported
  
  
  68,122
  
  
  57,992
  
  
  26,173Compensation
  expense if the fair value method was used
  
  
  5,359
  
  
  4,214
  
  
  1,016Pro
  forma net earnings
  
  
  62,763
  
  
  53,778
  
  
  25,15779

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)

27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)Year endedApril 25,
  2004
  
  April 27,
  2003
  
  April 28,
  2002$
  
  $
  
  $Basic
  earnings per share as reported
  
  
  
  0.76
  
  
  
  
  0.69
  
  
  
  
  0.34Pro
  forma earnings per share - Basic
  
  
  
  0.70
  
  
  
  
  0.64
  
  
  
  
  0.32Diluted
  earnings per share as reported
  
  
  
  0.73
  
  
  
  
  0.66
  
  
  
  
  0.33Pro
  forma earnings per share - Fully diluted
  
  
  
  0.68
  
  
  
  
  0.62
  
  
  
  
  0.31Under
the provisions of SFAS 123, the pro forma disclosures above include the effects
of stock options granted by the Company subsequent to the 1995 year-end. These
pro forma disclosures do not include the effect of the stock options
accompanied by stock appreciation rights (SARs) because the compensation cost of
these SARs has already been recorded in net earnings (as discussed in Note
27A(e)). Under Canadian GAAP, pro forma disclosures similar to those above only
include the effects of stock options granted by the Company subsequent to April
29, 2002.
The fair value of options granted is
estimated at the attribution date using the Black-Scholes options pricing model
on the same basis and assumptions as disclosed in Note 18.

D - Accounting
pronouncements not yet implemented
Canadian GAAP
In July 2003, the Canadian Institute of
Chartered Accountants ("CICA") issued new Handbook Section 1100,
"Generally Accepted Accounting Principles". This standard establishes
standards for financial reporting in accordance with GAAP, and provides
guidance on sources to consult when selecting accounting policies and
determining appropriate disclosures when a matter is not dealt with explicitly
in the primary sources of GAAP. The section applies to fiscal years beginning
on or after October 1, 2003. The Company expects that this pronouncement will
not have a material impact on its results of operations and financial
condition.
In September and November 2003, the CICA
made amendments to Handbook Section 3870, Stock-based Compensation and
Other Stock-based Payments", to require that the fair value-based method
be applied to awards granted to employees, which previously had not been
accounted for at fair value. Thus, enterprises will be required to account for
the effect of such awards in their financial statements for fiscal years beginning
on or after January 1, 2004. The Company will be required to adopt a
retroactive application, with or without restating prior periods.

80

Alimentation Couche-Tard
Inc.
Notes to Consolidated Financial Statementsas at April 25, 2004, April 27, 2003 and April 28, 2002
(in thousands of Canadian dollars, except per share amounts)
27 -
  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  IN CANADA AND THE UNITED STATES (Continued)In March 2003, the CICA issued new Handbook
Section 3110, Asset Retirement Obligations that established standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated asset retirement cost. The section provides for an initial
recognition of the fair value of a liability for an asset retirement obligation
in the period in which it is incurred when a reasonable estimate of fair value
can be made. The asset retirement obligation is recorded as a liability with a
corresponding increase to the carrying amount of the related long-lived asset.
Subsequently, the asset retirement cost is allocated to expenses using a
systematic and rational allocation method and is adjusted to reflect
period-to-period changes in the liability resulting from passage of time and
revisions to either timing or the amount of the original estimate of the
undiscounted cash flows. The section is effective for fiscal years beginning on
or after January 1, 2004. Section 3110 harmonizes Canadian standards with the
requirements of SFAS 143 that the Company adopted on April 28, 2003. The
Company will adopt Section 3110 on April 26, 2004 under Canadian GAAP.
In January 2003, the CICA issued Accounting
Guideline No. 15, Consolidation of Variable Interest Entities (AcG-15)
which harmonizes with FASB Interpretation No. 46, Consolidation of Variable
Interest Entities, and provides guidance for applying the principles in
Section 1590, Subsidiaries, to certain special purpose entities. AcG-15
requires enterprises to identify variable interest entities in which they have
an interest, determine whether they are the primary beneficiary of such
entities and, if so, to consolidate them. The Company expects that this
pronouncement will not have a material impact on its results of operations and
financial condition.


81

Document 3


Managements Discussion and Analysis of Results and
Financial Position



Richard Fortin
Executive Vice-President and Chief Financial Officer
36Managements
discussion and analysis relates to the financial condition and results of
operations of Alimentation Couche-Tard Inc. (Couche-Tard) together with its
wholly owned subsidiaries, including The Circle K Corporation (Circle K) as of
December 18, 2003. Couche-Tard consolidated Circle K as of December 18, 2003,
following completion of the acquisition of all of the outstanding shares of
Circle K (the Acquisition). Accordingly, Couche-Tards results of operations
for the year ended April 25, 2004 include the results of operations of Circle K
as of December 18, 2003 and the results of operations for the previous years
exclude the results of operations of Circle K. We, our and us refer
collectively to Couche-Tard and its subsidiaries, including Circle K.
Except
where otherwise indicated, all financial information reflected herein is
expressed in Canadian dollars and determined on the basis of Canadian generally
accepted accounting principles. You should read the following discussion in
conjunction with the annual consolidated financial statements and related notes
included in this 2004 Annual Report. Additional information relating to
Couche-Tard, including the Annual Information Form, is available on SEDAR at
www.sedar.com.
Forward-Looking Statements
This
report includes certain statements that are forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any
statement in this report that is not a statement of historical fact may be
deemed to be a forward-looking statement. When used in this report, the words
believe, intend, expect, estimate and other similar expressions are
generally intended to identify forward-looking statements. These
forward-looking statements are not guarantees of future performance of
Couche-Tard or its industry and involve known and unknown risks and
uncertainties which may cause the outlook, the actual results or performance of
Couche-Tard or of its industry to be materially different from any future
results or performance expressed or implied by such statements. Such risks and
uncertainties include the risks set forth below under Business Risks as well
as other risks detailed from time to time in reports filed by Couche-Tard with
securities regulators in Canada and the United States.
Our Business

We
are the leader in the Canadian convenience store industry. We are the fourth
largest convenience store operator in North America and the second largest
independent (not integrated with a petroleum company) convenience store
operator in North America. As at April 25, 2004, our network consisted of 4,881
convenience stores, 3,079 of which include motor fuel dispensing, located in
eight large geographic markets, including three in Canada and five in the
United States, which cover 23 American states.

We
sell food and beverage items, motor fuel and other products and services
targeted to meet our customers demand for convenience and quality in a clean
and welcoming environment. We believe that our business model has
differentiated Couche-Tard from its competition through its decentralized
management structure, commitment to operational expertise, focus on in-store
merchandise particularly the higher growth and higher margin foodservice
category and continued investment in store modernization and technology.
We
conduct our business through different modes of operations including company
operated stores and our affiliate program, which includes franchised and
licensed locations. The amount of earnings before interest and taxes (EBIT)
generated from the affiliates amounted to $12.7 million or 7.8% of our total
EBIT for fiscal 2004.
The
convenience store industry is fragmented, with the top 10 operators
representing only approximately 24% of the estimated total of 132,400 stores in
the United States. Industry consolidation by highly leveraged operators in the
1990s, combined with competition and fluctuations in motor fuel margins, has
led to numerous corporate restructurings and rationalizations in recent years.
As a result, we believe the opportunity exists for well-capitalized,
established industry participants to grow through mergers and acquisitions.
372004 Overview

In
August 2003, we entered into an agreement with Allied Domecq Quick Service
Restaurants whereby we acquired the master franchisee rights for the
DunkinDonuts banner in Quebec. Thus, the 94 DunkinDonuts stores already
established in Quebec became franchisees of the Company, which is now
responsible for the implementation of all aspects of the DunkinDonuts system
in Quebec.

On
September 4, 2003, we acquired certain assets of Clark Retail Enterprises, Inc.
(Clark) for total cash consideration of $41.0 million. In this transaction, we
acquired 43 convenience stores, 33 of which are located in Illinois, with the
remainder in Indiana, Iowa, Michigan and Ohio. All of the stores sell motor
fuel. We acquired the buildings and land at 31 of these sites, with the
remaining 12 being leased. On October 30, 2003, we completed a sale and
leaseback transaction with respect to 19 of the Clark stores and received
proceeds of approximately US$15 million.
This
years major event was the Acquisition on December 17, 2003, for a total
consideration of $1.1 billion, with the takeover of 1,663 Circle K
company-operated stores in 16 American states, plus 627 affiliates. Due to the
closing date, our annual results reflect the impact of the Acquisition for a
130-day period. We believe we will improve our overall financial performance by
applying the Couche-Tard business model to our Circle K operations. We also
believe that we can produce the previously announced synergies of US$50 million
well within 18 to 24 months from the closing of the Acquisition. As at April
25, 2004, we have achieved synergies of approximately US$10 million, of which
approximately 92% is represented by reductions in selling, general and
administrative costs, with the balance generated by purchasing efficiencies. In
addition, we believe we can improve Circle Ks store level operations by
completing within the next 12 months the installation of POS systems, including
scanning, in all of Circle Ks company-operated stores that do not currently
have such technology and by implementing our Store 2000 Concept in certain
Circle K stores. There can be no assurance that such cost savings or operating
improvements will be realized or that there will not be delays in achieving
such synergies or cost savings.
During
the year, we completed the financing of the Acquisition with the issuance of
Senior Subordinated Notes due 2013, borrowings under our new senior credit
facility and the issuance of Class B subordinate voting shares of
Alimentation Couche-Tard Inc. In connection with the Acquisition, we refinanced
the majority of our long-term debt, as described herein under Liquidity and
Capital Resources.

Summary
of Fourth Quarter Results: 12-Week Period Ended April 25, 2004 and 12-Week
Period Ended April 27, 2003
During
the 12-week period ended April 25, 2004, Couche-Tard opened 13 new locations
and 11 quick service restaurants, and reconfigured 32 stores with its Store
2000 Concept.
The following is selected information from the statement of
  earnings
  
  12-week
  periods ended($ millions unless otherwise stated)
  
  April 25, 2004
  
  April 27, 2003Total sales
  
  2,289.0
  
  815.8Operating income
  
  55.0
  
  20.0Net earnings
  
  21.1
  
  11.3Our
fourth quarter 2004 included the results of Circle K for the entire period. The
results are a significant increase over the same period in the previous year,
which increase is primarily due to our US operations, particularly the Circle K
business. Consolidated sales at $2.29 billion were $1.47 billion over last
year, and operating income at $55.0 million was more than double last year, up
$35.0 million from $20.0 million in the previous year. Net earnings of $21.1
million was $9.8 million or 86.4% over the prior year. During this quarter, we
sold 322 Circle K properties under sale and leaseback agreements, generating
US$252.9 net of costs, which was used to repay a portion of our long-term debt.
Additionally, we repaid US$79.0 million of our long-term debt from excess cash.
As a result, our net interest bearing debt to total capitalization is 0.41:1 as
at April 25, 2004.
As
of April 25, 2004, Alimentation Couche-Tard Inc. had 28,520,861 Class A
multiple voting shares and 70,288,989 Class B subordinate voting shares
issued and outstanding.

38Income Statement Categories
Merchandise
and Service Sales.In-store
merchandise sales are comprised primarily of the sale of tobacco products,
grocery items, candy and snacks, beer/wine and fresh food offerings, including
quick service restaurants (QSRs). Service sales include the commission on sale
of lottery tickets and issuance of money orders, fees from automatic teller
machines and sales of postage stamps, calling card commissions and bus tickets.
Merchandise and service sales also include franchise fees, license fees,
royalties from franchisees and licensees and a portion of vendor rebates
related to certain purchases by franchisees, affiliates and licensees.
Motor
Fuel Sales.Couche-Tard
includes in its sales the total dollar amount of motor fuel sales, including
any imbedded taxes, if Couche-Tard takes ownership of the motor fuel inventory.
In the United States, Couche-Tard purchases motor fuel and sells it to 94
independent store operators at cost plus a mark up. Couche-Tard records the
full value of these sales (cost plus the mark up) as motor fuel sales. Where
Couche-Tard acts as a selling agent for a petroleum distributor, only the
commission earned by Couche-Tard is recorded as sales. Gross profit from motor
fuel is derived by deducting the cost of the motor fuel from the motor fuel
sales, except for commission locations, where the gross profit is equal to the
recorded commission from the sale.
Gross
Profit. Gross profit consists
primarily of sales less the related cost of the inventories: for in-store
merchandise, the cost of inventory is generally determined using the retail
method (retail price less normal margin), and for motor fuel, it is determined
using the average cost method.
Operating
Expenses. The primary components of
operating expenses are wages and salaries, commissions to dealers, occupancy
costs, corporate support costs and head office operations.

Key
performance indicators used by management, which can be found under Results of
Operations-Other Operating Data, are Merchandise and service gross margin,
Growth of average merchandise sales per store, Motor fuel gross margin and
Growth of average motor fuel volume per store.

Exchange Rate Data
Our
U.S. subsidiaries assets and liabilities are translated into Canadian dollars
using the exchange rate in effect at the balance sheet date. Sales and expenses
are translated at the average rate in effect during the year. The following
table sets forth information about exchange rates based upon the Bank of Canada
closing rates set forth as Canadian dollars per US$1.00.
52-week
  periods endedApril 25, 2004
  
  April 27, 2003
  
  April 28, 2002Average for the period (1)
  
  1.3438
  
  1.5399
  
  1.5669Period end
  
  1.3607
  
  1.4481
  
  1.5617(1) Calculated by taking the
average of the closing exchange rates of each day in the applicable period.
39Results of Operations

The
following table highlights certain information regarding our operations for the
52-week periods ended April 25, 2004, April 27, 2003 and April 28, 2002.

($ millions unless otherwise stated)
  
  52-week
  periods endedApril 25, 2004
  
  April 27,
  2003
  
  April 28,
  2002Statement
  of Operations Data:Merchandise and service
  sales (1):Canada
  
  1,510.6
  
  1,428.6
  
  1,298.6United States
  
  1,597.1
  
  514.7
  
  204.5Total merchandise and
  service sales
  
  3,107.7
  
  1,943.3
  
  1,503.1Motor fuel salesCanada
  
  677.5
  
  630.2
  
  532.2United States
  
  2,087.2
  
  741.7
  
  356.7Total motor fuel sales
  
  2,764.7
  
  1,371.9
  
  888.9Total
  sales
  
  5,872.4
  
  3,315.2
  
  2,392.0Merchandise and service
  gross profit (1):Canada
  
  491.3
  
  462.5
  
  426.6United States
  
  521.2
  
  169.7
  
  65.0Total merchandise and
  service gross profit
  
  1,012.5
  
  632.2
  
  491.6Motor fuel gross profit:Canada
  
  63.3
  
  57.5
  
  54.5United States
  
  147.2
  
  60.2
  
  36.7Total motor fuel gross
  profit
  
  210.5
  
  117.7
  
  91.2Total gross profit
  
  1,223.0
  
  749.9
  
  582.8Operating, selling,
  administrative and general expenses
  
  985.5
  
  592.2
  
  460.9Depreciation and
  amortization of fixed and other assets
  
  74.5
  
  44.9
  
  33.7Operating income
  
  163.0
  
  112.8
  
  88.2Financial Expenses
  
  31.1
  
  14.9
  
  15.1Write-off of financial
  expenses
  
  12.5
  
  
  
  Earnings before income
  taxes
  
  119.4
  
  97.9
  
  73.1Income taxes
  
  39.9
  
  31.9
  
  25.8Net
  earnings
  
  79.5
  
  66.0
  
  47.3Other
  Operating Data:Merchandise and service
  gross margin (1):Canada
  
  32.5
  %
  32.4
  %
  32.8
  %United States
  
  32.6
  %
  33.0
  %
  31.8
  %Growth of average
  merchandise sales per store (2):Canada
  
  3.1
  %
  9.6
  %
  6.3
  %United States  excluding
  the Acquisition
  
  3.9
  %
  7.9
  %
  Motor fuel gross margin:Canada (cents per litre)
  
  4.77
  
  4.64
  
  4.63United States (U.S. cents
  per gallon) (3)
  
  11.57
  
  12.23
  
  13.86Volume of motor fuel sold:Canada (millions of
  litres)
  
  1,329.2
  
  1,239.2
  
  1,177.3United States (millions of
  gallons)
  
  996.1
  
  355.5
  
  187.9Growth of average motor
  fuel volume per store:Canada
  
  6.7
  %
  4.7
  %
  4.7
  %United States  excluding
  the Acquisition
  
  6.4
  %
  1.4
  %
  (1)
  Includes other sales
  derived from franchise fees, royalties and rebates on some purchases by
  franchisees and licensees.(2)
  Does not include services
  and other sales (as described in footnote 1) and is based on the average
  number of stores open during each four-week period of the fiscal period.(3)
  For company-operated stores
  only.4052-Week Period Ended April 25, 2004 Compared to the 52-Week
Period Ended April 27, 2003
During
the 52-week period ended April 25, 2004, Couche-Tard completed two aquisitions
for a total of 2,333 locations, opened 51 new locations and 47 quick service
restaurants, and reconfigured 173 stores with its Store 2000 Concept.
For
the 52-week period ended April 25, 2004,Couche-Tard achieved salesof $5.87 billion, compared with $3.32
billion in 2003, a major increase of 77.1% or $2.56 billion, including $2.02
billion or 78.9%, which came from Circle K for the 130 days period from
December 18, 2003 to April 25, 2004. The Company recorded 62.7% of its sales in
the United States, up from 37.9% in the previous fiscal year.
During
the year, the Company adopted two changes in its accounting policy and has
applied both changes on a retroactive basis for all amounts included herein.
The first change relates to the recording of telephone calling card revenue.
Rather than recording the total value of the transaction as a sale, the Company
adopted the policy of recording the commission or net amount earned from such
transaction, consistent with recording the commissions on our sales of other
services such as the sale of lottery tickets. On a retroactive basis, sales are
adjusted downward by a relatively small amount each period, with the gross
profit remaining unchanged. The result is a slight increase in gross margin as
a percentage of sales of up to approximately one percentage point.

On
January 30, 2004, the Company retroactively adopted by anticipation the new
recommendation of the Canadian Institute of Chartered Accountants (CICA) on
accounting for consideration received from a vendor. This could result in an
increase or decrease in the Companys merchandise and service gross profit and
related gross margin depending on the fluctuations in the related inventories.
The impact on the Companys gross profit for each of the last three fiscal
years ended April 25, 2004, April 27, 2003 and April 28, 2002 brought about
decreases in gross profit of $1.03 million, $0.29 million and $2.85 million,
respectively.

  In the
  United States, salestotalled
  $3.68 billion, an increase of $2.43 billion reflecting mainly the
  contribution of Circle K results from December 18, 2003 as well as the impact
  of the acquisition of the Dairy Mart Stores, the 43 Clark stores acquired in
  September 2003, the stores opened during the year and internal growth in the
  American network. Growth of average merchandise sales per store (excluding
  Circle K for comparative purposes) was 3.9% over the prior year while growth
  of average motor fuel volume per store (excluding Circle K) was 6.4% over the
  prior year.
  In
  Canada, salesamounted
  to $2.19 billion, up 6.3%, or $129.3 million. Growth of average merchandise
  sales per store was 3.1% compared with the previous year. Growth of average
  motor fuel volume per store was 6.7% over the previous year. Overall,
  Canadian markets performed well in difficult business conditions, inluding a
  decline in the number of tourists under the impact of SARS and reduced
  exports due to the exchange rate.Gross
  profitgrew by
  63.1% or $473.1 million to $1.22 billion, compared with $749.9 million for
  the previous year. This increase is mainly due to higher sales, particularly
  as following the Acquisition, a higher motor fuel gross margin in Canada 
  somewhat offset by a decline in motor fuel gross margin in the United States.
  Consolidated
  merchandise and service gross marginwas 32.6% (including the Circle K results),
  reflecting the lower gross margin of Circle K due to its different product
  mix.
  Motor
  fuel gross marginincreased
  to 4.77¢ per litre in Canada, up from 4.64¢ per litre for the previous year.
  Motor fuel gross margin in the United States declined to 11.57¢US per gallon
  from 12.23¢US per gallon in the previous year. This decrease is attributable
  to the lower motor fuel margins experienced by Circle K in the first 45 days
  of the integration and the pressure on margins in the Midwest in the fourth
  quarter and a price war by two gasoline marketers in Kentucky.Operating
expensesincreased by
$393.5 million or 66.5% over the previous year. The increase is primarily
attributable to the Acquisition and, to a lesser extent, the Clark stores, the
full impact of the Dairy Mart stores and the growth in the Canadian network. As
a percentage of total sales, operating expenses declined by 1.1% due to lower
operating costs associated with higher motor fuel sales, which account for a
larger proportion of total revenues.
41Depreciation
and amortizationgrew
by 65.7% to $74.5 million in fiscal 2004. This increase is due mainly to Circle
K, the Clark stores, the full impact of the acquisition of Dairy Mart and store
renovations.

Financial
expensestotalled
$31.1 million, up $16.2 million or 109.1% over last year due to the higher
borrowings to finance the Acquisition. In addition, the Company recorded a
pre-tax write-off of financial expenses of $12.5 million related to the
refinancing of existing debt in connection with the Acquisition ($2.8 million)
and to the repayment of a portion of the new debt from the proceeds of the
sale/leaseback transactions completed in March and April 2004 and from the use
of a portion of cash surplus ($9.7 million).

Income
taxesincreased by
$7.9 million, or 24.8%, to $39.9 million. The increase is due to a combination
of an increase in pre-tax earnings, a rise in the provincial income tax rate in
Ontario and a greater portion of pretax income coming from the U.S. operations
which have a higher tax rate than Canada.

Net
earningsincreased by
$13.5 million, or 20.4%, to $79.5 million or $0.89 per share ($0.85 fully
diluted), compared with $66.0 million or $0.78 per share ($0.76 fully diluted)
in the previous year.

Net
earnings for fiscal 2004 was affected by the following unusual or
uncontrollable items, which are presented on an after-tax basis:


  a write-off of financial
  expenses of $8.3 million or $0.09 fully diluted per share, related to the
  refinancing of existing debt in connection with the Circle K acquisition and
  the repayment of a portion of the new debt,
  the rise in the corporate
  tax rate in Ontario, entailing an adjustment of future income taxes totalling
  $1.1 million and equivalent to $0.01 fully diluted per share,
  and the negative impact of
  approximately $3.1 million of the increase in the Canadian dollar, or $0.03
  fully diluted per share.Balance
Sheet
Our
total consolidated assetswere
$2.23 billion as at April 25, 2004, compared to $1.07 billion as at April 27,
2003, representing an increase of $1.16 billion. The increase is primarily due
to the asset base of the Acquisition, which amounted to $1.1 billion as at
April 25, 2004, including $201.9 million assigned to the Circle K trade name.
Total accounts receivable amounted to $128.5 million as at April 25, 2004,
including $56.2 million from Circle K. The balance, $72.3 million, decreased by
$35.7 million from $108.0 million as at April 27, 2003, which is attributable
to the receipt of sales tax credits after April 27, 2003. Total inventories as
at April 25, 2004 amounted to $374.8 million, an increase of $194.9 million,
compared to $179.9 million as at April 27, 2003. Circle K accounted for $173.4
million, with the remaining increase of $21.5 million primarily relating to new
stores, and the higher cost of motor fuel offset somewhat by the lower exchange
rate. Fixed assets as at April 25, 2004 totalled $898.5 million compared to
$441.3 million as at April 27, 2003, representing an increase of 457.2 million.
This increase results mainly from fixed assets acquired in connection with the
Acquisition and the 43 stores purchased from Clark Retail Enterprises Inc.
($808.7 million), the purchase of fixed assets of $115.2 million, net of
depreciation and amortization ($74.0 million) and the reduction of fixed assets
resulting from the sale and leaseback of 369 properties.

Accounts
payable and accrued liabilities were $657.9 million as at April 25, 2004, an increase
of $364.1 million compared to $293.8 million as at April 27, 2003. The accounts
payable and accrued liabilities of Circle K accounted for $327.4 million of
this increase, with the balance primarily represented by increases in trade
accounts payable related to inventory purchases in April 2004 and the accounts
payable relating to the higher cost of motor fuel compared with the previous
year. Long-term debt(including
the current portion due in one year) as at April 25, 2004 increased by $434.2
million during the year from $296.3 million as at April 27, 2003 to $730.5
million as at April 25, 2004. This increase is attributable to the debt raised
in connection with the Acquisition, net of a subsequent repayment of US$331.9
million from the net proceeds of sale and leaseback transactions with respect
to 322 Circle K sites and from the use of a portion of excess cash.
Shareholders
equityincreased by
$306.2 million during the fiscal year from $440.6 million as at April 27, 2003
to $746.8 million as at April 25, 2004. The increase is primarily attributable
to the shares issued during the year for $223.7 million in connection with the
Acquisition and the net earnings of $79.5 million for the year.



42Liquidity and Capital Resources
Our
principal source of liquidity is cash flow generated from operations and
borrowings under our revolving credit facilities. Our principal uses of cash
are to meet debt service requirements, finance our capital expenditures, make
acquisitions and provide for working capital. We expect that cash available
from operations together with borrowings available under our revolving credit
facilities will be adequate to meet our liquidity needs in the foreseeable
future.
The
Acquisition was financed through the proceeds from the issuance of US$350
million 7 1⁄2% Senior Subordinated Notes due 2013, borrowings under our senior
credit facility and the net proceeds of $220.5 million from the issuance of
13.6 million Class B subordinate voting shares of Alimentation Couche-Tard
Inc. The majority of our long-term debt was refinanced in connection with the
Acquisition.
As
at April 25, 2004, our total debt was $730.5 million (of which $476.2 million
consisted of notes, $242.1 million consisted of borrowings under our senior
credit facility and $12.2 million consisted of other long-term debt).
In
addition to the above, the Company entered into interest rate swap agreements
with three banks under which the Company will incur interest on US$350 million
at a rate of LIBOR plus an aggregate average interest rate factor of 2.95%. The
interest rate will be reset every six months over the term of the agreements.
Based on the Companys policy, it designates each derivative financial
instrument as a hedge against a recognized loan instrument. The agreements,
which expire on December 15, 2013, provide that, after December 15, 2008, each
Bank has the right to terminate its arrangement with the payment of a
termination fee if terminated before December 15, 2011 and, if after that date,
without payment of a termination fee. In addition, both parties to each
agreement have a mutual right to terminate the arrangement on the 5thanniversary
date of the effective date of each of the three agreements. If such right were
exercised by either party, one party would be required to pay the other party
the mark to market value of the interest rate swap.
Capital
Expenditures. Capital
expenditures are planned for the installation of POS systems, including
scanning, at the Circle K company-operated stores that do not currently have
this technology, the implementation of our Store 2000 Concept at certain
stores, new stores including a small number of existing stores, and the
replacement of equipment in some of our stores, including upgrading of
petroleum equipment at a number of locations. In connection with the
Acquisition, we expect to make certain capital improvements of up to US$18.6
million at the Circle K stores between June 2004 and December 2008 in
connection with the settlement of litigation brought against Circle K under the
Americans with Disabilities Act. In addition, we have a commitment to purchase
certain equipment for an amount of $1.5 million in the coming year. We expect
to fund these commitments with cash flows generated from operations.

Over
the past number of years, the Company has expended funds for maintaining the
stores to operating standards, renovated certain stores with our new Store 2000
Concept, opened new stores and invested in small acquisitions.

The
Company has funded these expenditures from cash flows from operating
activities. Over the past five fiscal years, total cash flows from operating
activities amounted to approximately $700 million and capital expenditures and
investment in small acquisitions amounted to approximately $460 million over
this period. We believe that we will be able to continue to fund future
expenditures of this nature from cash flows from operating activities. Major
acquisitions will be financed through a combination of debt and equity.
Credit
Facilities. We have five-year
revolving credit facilities in the amount of $50 million available in Canadian
dollars or U.S. dollars to the Canadian borrowers and in the amount of US$75
million available in U.S. dollars to the U.S. borrowers, which bear interest at
the Canadian prime rate, or the Canadian or U.S. base rate (as applicable) or
LIBOR, plus a certain margin varying on the basis of our leverage ratio. The
revolving facilities are also available in the form of bankers acceptances
(for Canadian dollar advances) and in the form of letters of credit (not to
exceed $10 million or the U.S. dollar equivalent) in respect of the Canadian
facility and US$30 million in respect of the U.S. facility). As of April 25,
2004, the facilities are undrawn, except for letters of credit of approximately
$1.2 million and US$4.8 million.
Our
senior credit facility is secured by virtually all the asset of the Company.
The Company must meet certain commitments and achieve certain financial ratios
under the new credit agreement. In addition, the new credit agreement limits
the amount of fixed assets that the Company may acquire, the business
acquisitions the Company may take part in, the amount of the repayments of term
loan A and B that the Company may make as well as dividend payments. As
well, the indenture governing the subordinated debt also contains certain
restrictions, including the achievement of a financial ratio, on our ability to
incur additional debt, pay dividends or make other restricted payments and
enter into certain transactions.

43Cash
Flows from Operating Activities. Cash
provided from operating activities more than doubled to $314.2 million in
fiscal 2004 compared with $141.4 million in 2003, an increase of $172.8
million, reflecting largely the contribution of Circle K for 130 days of
operation.
Cash
Flows from Investing Activities. Net
cash used in investing activities for the year ended April 25, 2004 amounted to
$761.1 million, including $984.3 million for the purchase of Circle K and $41.0
million for the purchase of 43 stores from Clark. In addition, capital
expenditures of $115.2 million were made in fiscal 2004, compared with $86.7
million for the same period in 2003. These capital expenditures were primarily
for existing store improvements and equipment, store openings and acquisitions,
information systems and expenditures related to gasoline facilities in
compliance with regulatory requirements.
During
fiscal 2004, we entered into five separate agreements to sell 369 sites under
sale and leaseback arrangements for total aggregate net proceeds of
approximately $379.5 million. Under these arrangements, the properties are
leased back with primary terms of: 103 sites for 15 years, 116 sites for 16
years, 122 sites for 17 years, 28 sites for 20 years. All agreements provide
for several renewal periods.
Included
in the above are 322 Circle K sites sold under two sale and leaseback
agreements for an aggregate of US$252.9 million net of costs. Minimum lease
payments under the leases total approximately US$24.7 million per year subject
to indexation features.

Cash
Flows from Financing Activities. Cash
generated from financing activities was $605.6 million for fiscal 2004 compared
with $136.4 million for the same period last year. We borrowed $1.12 billion in
new long-term debt and raised an additional $220.5 million net of expenses from
the issue of 13.6 million Class B subordinate voting shares. The total
proceeds were used to repay $239.3 million of the then existing long-term debt
and finance the Circle K acquisition. Additionally, we used the net proceeds of
US$252.9 million from the sale-leaseback transactions of 322 Circle K properties
and a portion of a cash surplus to repay a substantial $442.1 million in
long-term debt. Unamortized financing expenses related to the refinancing of
the existing debt at the time of the acquisition and to the repayment of a
portion of the new debt was written off and disclosed in a separate line in the
statement of earnings as Write-off of financial expenses.
Contractual Obligations and Commercial
Commitments
Set
out below is a summary of our material contractual cash obligations as of April
25, 2004:
2005
  
  2006
  
  2007
  
  2008
  
  2009
  
  Thereafter
  
  Total(in
  thousands of dollars)Long-term debt
  
  5,422
  
  9,243
  
  10,924
  
  11,906
  
  12,889
  
  676,244
  
  726,628Capital lease obligations
  
  1,249
  
  1,042
  
  898
  
  701
  
  598
  
  3,192
  
  7,680Operating lease
  obligations
  
  187,698
  
  176,087
  
  163,342
  
  142,356
  
  114,250
  
  1,025,301
  
  1,809,034Purchase commitments
  
  2,061
  
  560
  
  560
  
  560
  
  700
  
  2,800
  
  7,241Total
  
  196,430
  
  186,932
  
  175,724
  
  155,523
  
  128,437
  
  1,707,537
  
  2,550,583Long-Term
Debt. The majority of Couche-Tards long-term debt
was refinanced in connection with the Acquisition. See Liquidity and Capital
Resources. Couche-Tards long-term debt consists of (i) $476.2 (US$350)
million 7 1⁄2% Senior Subordinated Notes due 2013; (ii) a five-year $38.1 (US$28.0)
million Term Loan A secured facility that bears interest at the Canadian base
rate or LIBOR, plus a certain margin varying on a basis of our leverage ratio;
and (iii) a seven-year $204.1 (US$150.0) million Term Loan B secured facility
that bears interest at the U.S. base rate or LIBOR, plus a fixed margin; and
(iv) Circle Ks 8.75% note payable of approximately $7.5(US$5.5) million
outstanding as of April 25, 2004, that is collateralized by certain stores in
Florida. The note requires principal and interest payments throughout its term.
The final payment is due on December 1, 2019.
44Capital
Lease Obligations. Couche-Tard
has generally not used capital leases as a means of financing; however several
capital leases were assumed in connection with certain acquisitions. We do not
expect to use capital leases as a means of financing in the future. These
obligations and related assets are included in our Consolidated Balance Sheet.



Operating
Lease Obligations. We lease
a substantial portion of our real estate using conventional operating leases.
Generally our real estate leases in Canada are for primary terms of five to 10
years and in the United States are for 10 to 20 years, in both cases, with
options to renew. These obligations and related assets are not included in our
Consolidated Balance Sheet. Under certain of the store leases, we are subject
to additional rentals based on store sales as well as escalations in the
minimum future lease amount.
Purchase
commitments. During fiscal 2004,
we have concluded certain agreements to acquire equipment and franchise rights.
Contingencies. There are various legal proceedings and
claims pending against us that are common to our operations for which, in some
instances, no provision has been made. While it is not feasible to predict or
determine the ultimate outcome of these matters, it is the opinion of
management that these suits will not result in monetary damages not covered by
insurance that in the aggregate would be material and adverse to our business
or operations.
We
are covered by insurance policies that have significant deductibles. At this
time, we believe that we are adequately covered through the combination of
insurance policies and self-insurance. Future losses which exceed insurance
policy limits or, under adverse interpretations, are excluded from coverage
would have to be paid out of general corporate funds. In association with our
workers compensation policies, we issue letters of credit as collateral for
certain policies.
We
also issue surety bonds for a variety of business purposes, including bonds for
taxes, lottery sales, wholesale distribution and alcoholic beverage sales. In
most cases, the surety bonds are required by a municipality or state
governmental agency as a condition of operating a store in that area.

Off-Balance Sheet Arrangements
In
the normal course of business, we finance certain of our activities off-balance
sheet through operating leases for properties on which we conduct our retail
business. The future commitments are included under Operating lease
obligations in the table above.
45Selected Quarterly Financial Information
(Unaudited)
The
Companys 52-week reporting cycle is divided into four quarters of 12 weeks
each except for the third quarter, which comprises 16 weeks. When a fiscal
year, such as 2000, contains 53 weeks, the fourth quarter comprises 13 weeks.
The following is a summary of selected consolidated financial information
derived from the Companys unaudited interim consolidated financial statements
for each of the eight most recently completed quarters. This information was
prepared in accordance with Canadian GAAP and is reported in Canadian dollars.
($ millions except for per-share data)
  
  52 weeks ended April 25, 2004
  
  52 weeks
  ended April 27, 2003Quarter
  
  
  4th
  
  
  3rd
  
  
  2nd
  
  
  1st
  
  
  4th
  
  
  3rd
  
  
  2nd
  
  
  1stWeeks
  
  
  12 weeks
  
  
  16 weeks
  
  
  12 weeks
  
  
  12 weeks
  
  
  12
  weeks
  
  
  16
  weeks
  
  
  12
  weeks
  
  
  12
  weeksSales
  
  
  2,289.0
  
  
  1,765.0
  
  
  937.5
  
  
  880.9
  
  
  815.8
  
  
  1,040.3
  
  
  791.6
  
  
  667.5Income before depreciation
  
  
  81.1
  
  
  53.8
  
  
  53.8
  
  
  48.7
  
  
  31.1
  
  
  39.8
  
  
  46.4
  
  
  40.5Depreciation and
  amortization
  
  
  26.1
  
  
  24.9
  
  
  12.0
  
  
  11.5
  
  
  11.1
  
  
  15.0
  
  
  10.5
  
  
  8.3Operating income
  
  
  55.0
  
  
  28.9
  
  
  41.8
  
  
  37.2
  
  
  20.0
  
  
  24.8
  
  
  35.9
  
  
  32.2Financial expenses
  
  
  12.8
  
  
  11.7
  
  
  3.0
  
  
  3.6
  
  
  3.8
  
  
  4.6
  
  
  3.5
  
  
  3.0Write-off of financial
  expenses
  
  
  9.7
  
  
  2.8
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  Total financial expenses
  
  
  22.5
  
  
  14.5
  
  
  3.0
  
  
  3.6
  
  
  3.8
  
  
  4.6
  
  
  3.5
  
  
  3.0Net
  earnings
  
  
  21.1
  
  
  8.8
  
  
  26.5
  
  
  23.1
  
  
  11.3
  
  
  14.1
  
  
  21.4
  
  
  19.2Earnings
  per shareBasic
  
  $
  0.21
  
  $
  0.10
  
  $
  0.31
  
  $
  0.27
  
  $
  0.13
  
  $
  0.17
  
  $
  0.25
  
  $
  0.23Fully diluted
  
  $
  0.21
  
  $
  0.09
  
  $
  0.30
  
  $
  0.26
  
  $
  0.13
  
  $
  0.16
  
  $
  0.24
  
  $
  0.22The
quarterly financial information has been restated to reflect the impact of the
two changes in its accounting policies, the first one being the change in
accounting for revenues from telephone calling cards and the other one relating
to the adoption of the CICA recommendation for certain consideration received
from a vendor  both as described in the section 52-Week Period Ended April
25, 2004 Compared to the 52-Week Period Ended April 27, 2003.
Net
earnings have substantially increased generally in tandem with the Companys
major acquisitions, with the exception of the third quarter 2004 which was impacted
by the write-off of certain financial expenses associated with the refinancing
of long-term debt, additional interest expense associated with new debt
incurred in connection with the Acquisition, relatively lower motor fuel gross
margins in the Circle K business for the period from the effective date of the
Acquisition on December 18, 2003 to February 1, 2004, and difficult business
conditions, including a decline in the number of tourists under the impact of
SARS and reduced exports due to exchange rate.

The
fourth quarter, although impacted by the conditions referred to above, included
significant increases primarily related to the Acquisition. While merchandise
and service gross margins remained relatively stable over the eight quarters, total
gross profits were impacted by the variability in motor fuel gross margins. The
fourth quarter also included a $9.7 million write-off of financial expenses
relating to the repayment of a portion of new long-term debt.
52-Week Period Ended April 27, 2003 Compared to the 52-week
Period Ended April 28, 2002
During
2003, Couche-Tard acquired 420 stores in the United States and 30 stores in
Canada. Couche-Tard also opened 46 new stores and reconfigured 220 locations
with its Store 2000 Concept.
For
the 52-week period ended April 27, 2003, Couche-Tard announced salesof $3.32 billion, up from $2.39
billion for the same period a year earlier, an increase of 38.6% or $923.2
million. This increase was primarily due to acquisitions made in fiscal 2003,
the inclusion of a full year of results for the acquisitions made in fiscal
2002, the opening of 46 new stores and growth in average merchandise revenues
and in average motor fuel volume per store.

  In the
  United States, salestotalled
  $1.26 billion, an increase of $695.2 million, reflecting the impact of the
  420 stores acquired in the early part of fiscal 2003 and growth in average
  merchandise sales per store of 7.9% as well as a 1.4% increase in average
  motor fuel volume per store.
  In
  Canada, salesincreased
  by 12.5% or $228.0 million, including sales from the 30 stores acquired in
  the year, to $2.06 billion. Growth of average merchandise sales per store was
  9.6% compared with the same period a year earlier and growth of average motor
  fuel volume was 4.7% over the prior year.46Gross
  profitgrew by
  28.7% or $167.1 million to $749.9 million. The increase is due primarily to
  the higher sales, offset by a slightly lower gross margin in Canada.
  Consolidated
  merchandise and service gross marginstood at 32.5% compared to 32.7% for the
  prior year, which is attributable to the slightly lower merchandise and
  service gross margin in Canada resulting from the inability to maintain the
  full gross margin on the higher retail price of tobacco products resulting
  from a tobacco tax increase in June 2002. In the United States, the Midwest
  networks gross margin increased from 31.8% in 2002 to 33.0% in 2003.
  Motor
  fuel gross marginincreased
  slightly to 4.64¢ per litre in Canada from 4.63¢ per litre in the prior year.
  In the United States, the Midwest networks motor fuel gross profit was $60.2
  million, an increase of $23.5 million, due to higher volumes and sales,
  offset by a decrease in motor fuel gross margin from 13.86¢US per gallon in
  2002 to 12.23¢US per gallon in 2003.Operating
Expenses. Operating expenses increased
by $131.3 million, or 28.5%, from $460.9 million in 2002 to $592.2 million in
2003. The increase was primarily due to the increased costs related to a larger
store base. As a percentage of total revenues, operating expenses decreased
from 19.3% to 17.9%, due to the combination of operating leverage and lower
operating costs associated with the increase of motor fuel revenues, which
represented a higher percentage of total revenues.
Depreciation
and Amortization. Depreciation
and amortization increased by $11.2 million, or 33.2%, from $33.7 million in
2002 to $44.9 million in 2003. The increase was primarily due to a combination
of the acquisitions in the United States and investments made in equipment in
connection with store renovations in the Canadian store network.

Financial
Expenses. Financial expenses decreased
by $0.2 million from $15.1 million in 2002 to $14.9 million in 2003. The
decrease is due to lower interest rates.

Income
Tax Expense. Income tax expense
increased by $6.1 million, or 23.6%, from $25.8 million in 2002 to $31.9
million in 2003. The increase is due to higher pre-tax income offset by a
slightly lower effective tax rate. The combined statutory tax rate in Canada
decreased in 2003 to 37.6%, compared to 39.9% in 2002.

Net
earningsamounted to
$66.0 million in 2003 or $0.78 per share ($0.76 fully diluted), compared with
$47.3 million or $0.61 per share ($0.58 fully diluted) for the prior year.

Critical Accounting Policies and Estimates

Estimates. This discussion and analysis of financial
condition and results of operations is based on Couche-Tards consolidated
financial statements, which have been prepared in accordance with Canadian
generally accepted accounting principles. The reported amounts of sales and
operating expenses, and of assets and liabilities and the related disclosure of
contingent assets and liabilities are based on estimates and judgments made by
Couche-Tard. Couche-Tard bases its estimates on assumptions that it believes to
be reasonable, including, for example, ones derived from historical experience.
On an ongoing basis, Couche-Tard reviews its estimates and assumptions based
upon currently available information. Actual results could differ from the
estimates and assumptions used.

Inventory. Couche-Tards inventory is comprised mainly
of products purchased for resale including grocery items, tobacco products,
packaged and fresh food products, motor fuel and lottery tickets. Inventories
are valued either on the first-in, first-out basis or at the lower of cost and
net realizable value. Cost is generally determined by the retail method for
in-store merchandise, the average cost method for motor fuel inventory and cost
for warehouse inventory. Inherent in the determination of gross profit margins
are certain management judgments and estimates, which could affect ending
inventory valuations and results of operations.

Depreciation
and Amortization. Assets
that are expected to be consumed in the conduct of Couche-Tards business with
a probability of having to be replaced in a future year are amortized on a
basis that will reduce the asset to a nominal value over its expected useful
life. The depreciation methods and associated periods or rates are based on
Couche-Tards experience in prior years. The use of different assumptions could
have resulted in different amounts expensed compared to those recorded.

Because
the depreciation methods and rates used in Circle K differ from those used by
Couche-Tard and in light of the number of acquisitions recently completed in
the United States, we will be undertaking an analysis of the expected useful
lives of our fixed assets and such process could result in modifications to
existing depreciation and amortization policies in fiscal 2005.

47Goodwill.Goodwill is tested for impairment annually or whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Factors that could trigger an impairment review include
significant underperformance relative to expected historical or projected
future operating results, significant changes in the manner of use of acquired
assets or the strategy for the overall business, and significant negative
industry or economic trends. Couche-Tards goodwill impairment analysis uses
estimates and assumptions in order to determine the fair value of its reporting
units. If assumptions are incorrect, the carrying value of our goodwill may be
overstated. Couche-Tards annual impairment test is performed in the first
quarter of each fiscal year.

Trademarks,
licenses and other assets.Trademarks, licenses and
permits are recorded at cost and not amortized; rather, they are tested for
impairment annually, or more frequently, if events or circumstances indicate
that the asset might be impaired.

Other
assets include trademarks, licenses and permits recorded at cost, deferred
costs at amortized cost and other expenses at cost.

Deferred
expenses are mainly financing costs amortized using the current interest rate
method over the period of the corresponding debt, and costs incurred in
connection with the analysis and signing of operating lease agreements which
are deferred are amortized over the lease term. Other deferred charges are
amortized on a straight-line basis over a period of five to seven years.
Environmental
Matters.Couche-Tard makes estimates of its
liabilities in order to accrue for the future costs of environmental
remediation related to its operating and non-operating properties where
releases of regulated substances have been detected. The estimates of the
anticipated future costs for environmental remediation are based on historical
experience and evaluations provided by environmental consultants. Couche-Tard
establishes reserves on a site-by-site basis and updates its reserves annually.
In cases where it is probable that corrective action will be required, if
remediation costs can be reasonably estimated, Couche-Tard records such costs
as a liability described as a reserve for site restoration. Based on currently
available information, Couche-Tard believes that it has adequately provided for
environmental exposures. However, should these matters be unfavorably resolved
with respect to Couche-Tard, they could have a material adverse effect on its
financial condition and results of operations.
Some U.S.
states have trust funds and reimbursement programs for environmental
remediation of motor fuel releases from underground store tanks. A portion of
the outlays for environmental remediation in such states may be reimbursable to
Couche-Tard under these programs. When Couche-Tard records a liability arising
from environmental remediation, it records an asset consisting of the related
expected receivable. Most of the trust funds and reimbursement programs have
eligibility requirements, caps on reimbursement or payment restrictions, which
make recovery uncertain in some circumstances, and those uncertainties are
reflected in the amount of the receivable asset established. Historical
collection experience, the financial capability of the trust fund, priority for
payment and the expected year of receipt of reimbursement are also considered.
Because governmental requirements and state reimbursement programs continue to
be implemented and revised, Couche-Tards estimated future remediation
expenditures and related state reimbursement amounts could change, and may also
be affected by changes in governmental enforcement policies and newly
discovered information. Such revisions could have a material impact on its
operations and financial conditions.
Couche-Tard
also receives occasional claims for alleged damage to neighbouring properties
or the groundwater or other natural resources on such properties from regulated
substances released from its current and past properties. As well, it is
possible for personal injury claims to be made alleging injuries from regulated
substances released from its properties, although we have not received this
type of claim to date. The consequences of the property and personal injury
claims described in this paragraph, if received, could be material to
Couche-Tards financial condition.
In the
United States, Couche-Tard is required in some states to obtain insurance or
otherwise establish its financial responsibility for third party claims.
Couche-Tard cannot provide assurances that the insurance it obtains will be
available on terms that do not adversely affect its financial condition.
Despite the availability of trust funds and reimbursement programs for
petroleum releases in certain states, these funds are limited in coverage and
in some cases slow to pay.
Insurance
and Workers Compensation.Couche-Tard uses a
combination of insurance, self-insured retention, and self-insurance for a
number of risks including workers compensation (in certain states), property
damage, and general liability claims. Accruals for loss incidences are made
based on Couche-Tards claims experience and actuarial assumptions followed in
the insurance industry. A material revision to Couche-Tards liability could
result from a significant change to its claims experience or the actuarial
assumptions of its insurers. Actual losses could differ from accrued amounts.
Workers compensation is covered by government-imposed insurance in Canada and
by third-party insurance in our United States operations, except in certain
states where Couche-Tard is self-insured. The coverages in Canada are
determined by each provincial regulatory authority and provide for premiums,
which can vary, year-to-year based on industry claims experience. The cost can
also increase or decrease in any one year based on claims experience within
each province as assessed by each provincial regulatory authority. With respect
to the third-party insurance in the United States, independent actuarial
estimates of the aggregate liabilities for claims incurred serve as a basis for
Couche-Tards share of workers compensation losses.

48Operating
Leases.In the normal course of business, Couche-Tard
enters into leases for land and buildings associated with its convenience
stores sites. In connection with certain acquisitions, Couche-Tard has entered
into sale-leaseback transactions with respect to certain store properties.
Theses transactions are a source of funding for new store growth and
Couche-Tard expects to continue this strategy in connection with future
acquisitions.
Vendor Allowances, Rebates and Other Vendor Payments.On January 30, 2004, the Company retroactively adopted by
anticipation the new recommendations of Abstract 144 of the Emerging Issues
Committee (EIC-144) entitled Accounting by
a Customer (Including a Reseller) for Certain Consideration Received From a
Vendor.(See Note 2 to the consolidated annual financial statements
herein below.)
Franchise and License Fees.Fees received
in connection with a franchise or license agreement, or renewal thereof, are
recognized in sales over the period of the agreement to which the fees relate.
Store Closings and Asset Impairment.Property
and equipment used in operations are assessed for impairment whenever changes
in facts and circumstances indicate a possible significant deterioration in the
future cash flows expected to be generated by an asset group. If, upon review,
the sum of the undiscounted pretax cash flows is less than the carrying value
of the asset group, the carrying value is written down to estimated fair value.
Individual assets are grouped for impairment purposes at the lowest level for
which there are identifiable cash flows that are largely independent of the
cash flows of other groups of assets. The fair value of impaired assets is
determined based on quoted market prices in active markets, if available, or
upon the present values of expected future cash flows using discount rates
commensurate with the risks involved in the asset group. Long-lived assets
committed by management for disposal within one year are accounted for at the
lower of amortized cost or fair value, less cost to sell.
Recently Issued Accounting Standards
In January
2003, the CICA issued Accounting Guideline No. 15, Consolidation of Variable
Interest Entities (AcG-15) which harmonizes with FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, and provides guidance for
applying the principles in Section 1590, Subsidiaries, to certain special
purpose entities. AcG-15 requires enterprises to identify variable interest
entities in which they have an interest, determine whether they are the primary
beneficiary of such entities and, if so, to consolidate them. In January 2004
the CICA Accounting Standards Board (AcSB) suspended the January 1, 2004
effective date for disclosure requirements in AcG-15 and in March 2004, a draft
guideline was published proposing that disclosures be made for fiscal years
ending on or after October 31, 2004. We expect that this pronouncement will not
have a material impact on our results of operations and financial condition.
In March
2003, the CICA issued new Handbook Section 3110, Asset Retirement Obligations
that established standards for recognition and measurement of a liability for
an asset retirement obligation and the associated asset retirement cost. The
section provides for an initial recognition of the fair value of a liability
for an asset retirement obligation in the period in which it is incurred when a
reasonable estimate of fair value can be made. The asset retirement obligation
is recorded as a liability with a corresponding increase to the carrying amount
of the related long-lived asset. Subsequently, the asset retirement cost is
allocated to expenses using a systematic and rational allocation method and is
adjusted to reflect period-to-period changes in the liability resulting from
passage of time and revisions to either timing or the amount of the original
estimate of the undiscounted cash flow. The section is effective for fiscal
years beginning on or after January 1, 2004. Section 3110 harmonizes Canadian
standards with the requirements of SFAS 143 that Couche-Tard adopted on April
28, 2003. We adopted Section 3110 on April 26, 2004 under Canadian GAAP.
In
September and November 2003, the AcSB made amendments to CICA Handbook Section
3870 in respect of Stock-based Compensation and Other Stock-based Payments
requiring that the fair-value based method be applied to awards granted to
employees, which previously had not been accounted for at fair value. We
adopted the fair value method for our stock-based compensation program
commencing at the beginning of our 2005 fiscal year.
In December
2003, the CICA Emerging Issues Committee issued Abstracts No. 141 Revenue
Recognition and No. 142 Revenue Arrangements with Multiple Deliverables. The
latter is based on Issue No. 06-21 entitled Revenue Arrangements with Multiple
Deliverables issued in May 2003 by the Emerging Issues Task Force of the
Financial Accounting Standards Board (FASB) in the United States. EICs 141 and
142 provide clarification guidelines for determining when revenue from the sale
of goods must be recognized. We already comply with these guidelines and
therefore we do not believe EIC 141 and 142 will have any impact on the
Company.

49Business Risks
Increases
and volatility in crude oil prices and volatility in wholesale petroleum
pricing and supply could affect our sales and gross profit.As
a result of our expansion in the United States, our motor fuel sales have
become a greater component of total sales. For the 52 weeks ending April 25,
2004, our motor fuel sales represented approximately 47% of total sales and our
motor fuel gross profit accounted for approximately 17% of our total gross
profit. Crude oil and domestic wholesale petroleum markets display significant
volatility. Since we typically have no more than a four to five-day supply of
motor fuel, we are susceptible to interruptions in the supply of motor fuel at
our facilities. General political conditions and instability in oil producing
regions, particularly in the Middle East and South America, could significantly
and adversely affect crude oil supplies and wholesale petroleum costs. Local
supply interruptions may also occur. For example, in August of 2003, a cracked
pipeline interrupted the supply of motor fuel to the greater Phoenix area. In
addition, any new standards that the U.S. Environmental Protection Agency may
impose on petroleum refining that would necessitate changes in the refining
process could limit the volume of petroleum products available from refiners in
the future. Volatility in wholesale petroleum supply and costs could result in
significant changes in the retail price of petroleum products and, if we are
unable to fully pass on increases to our customers or if we are required to
lower our retail motor fuel prices, in lower fuel gross margin per gallon or
litre. In addition, changes in the retail price of petroleum products could
dampen consumer demand for motor fuel. These factors could materially influence
our motor fuel volume, motor fuel gross profit and overall customer traffic,
which, in turn, could have a material adverse effect on our operating results
and financial condition.
The convenience store and retail motor fuel
industries are highly competitive and affected by new entrants.The
industries and geographic areas in which we operate are highly competitive and
marked by ease of entry and constant change in terms of the number and type of
retailers offering the products and services found in our stores. We compete
with other convenience store chains, independent convenience stores, gas
station operators, large and small food retailers, local pharmacies and
pharmaceutical chains, discount stores, club stores and mass merchants, many of
which are well-established companies. In recent years, several non-traditional
retail segments have entered the motor fuel retail business, including
supermarkets, club stores and mass merchants, and this additional competition
has had a negative impact on motor fuel profit margins in the convenience store
industry. These non-traditional motor fuel retailers have obtained a
significant share of the motor fuel market and their market share is expected
to grow. In some of our markets, our competitors have been in existence longer
and have greater financial, marketing and other resources than we do. As a
result, our competitors may be able to respond better to changes in the economy
and new opportunities within the industry. We may not be able to compete
successfully against current and future competitors, and competitive pressures
faced by us could materially and adversely affect our business, results of
operations and financial condition.
We are subject to federal, provincial, state and
local environmental laws, and the costs of compliance could require substantial
capital expenditures.Our operations are subject to a variety of
environmental laws and regulations, including those relating to emissions to
the air, discharges into water, releases of hazardous and toxic substances, and
remediation of contaminated sites. Under various federal, provincial, state and
local laws and regulations, we may, as the owner or operator, be liable for the
costs of removal or remediation of contamination at our current locations or
our former locations, whether or not we knew of, or were responsible for, the
presence of such contamination. In particular, as an owner and operator of
motor fuelling stations, we face risks relating to petroleum product
contamination, which other convenience store operators not engaged in such
activities would not face. The remediation costs and other costs required to
clean up or treat contaminated sites could be substantial. Contamination on and
from our current or former locations may subject us to liability to third
parties or governmental authorities for injuries to persons, property or
natural resources and may adversely affect our ability to sell or rent our
properties or to borrow money using such properties as collateral.
In the
United States, persons who dispose of or arrange for the disposal or treatment
of hazardous or toxic substances away from locations used in a business may
also be liable for the costs of removal or remediation of such substances at
the disposal sites although such sites are not owned by such persons. Although
we do not typically arrange for the treatment or disposal of large quantities
of hazardous or toxic substances from any location, our current and historic
operation of many locations and the disposal of contaminated soil and
groundwater wastes generated during cleanups of contamination at such locations
could expose us to such liability.

50We are
subject to extensive environmental laws and regulations regulating underground
storage tanks and vapour recovery systems. Compliance with existing and future
environmental laws regulating such tanks and systems may require significant
expenditures. In the United States, we pay fees to state leaking underground
storage tank trust funds in states where they exist. These state trust funds
are expected to pay or reimburse us for remediation expenses related to
contamination associated with underground storage tanks subject to their
jurisdiction. Such payments are always subject to a deductible paid by us,
specified per incident caps and specified maximum annual payments which vary
among the funds. As well, such funds may have eligibility requirements, which
not all of our sites will meet. To the extent state funds, or other responsible
parties do not pay or delay payments for remediation, we will be obligated to
make these payments, which could materially adversely affect our financial
condition and results of operations. We cannot assure you that these funds or
responsible third parties are or will continue to remain viable.
The nature of
our motor fuel operations and those we acquire present risks of soil and
groundwater contamination. In the future, we may incur substantial expenditures
for remediation of contamination that has not been discovered at existing
locations or locations, which we may acquire. We believe that a significant
number of our current locations may be contaminated and expect to discover that
contamination through the normal operation of our business in the future. We
regularly monitor our facilities for environmental contamination and take
reserves on our financial statements to cover potential environmental
remediation and compliance costs, as we consider appropriate. However, we
cannot assure you that the liabilities for which we have taken reserves are the
only environmental liabilities relating to our current and former locations,
that material environmental conditions not known to us do not exist, that
future laws or regulations will not impose material environmental liability on
us or that our actual environmental liabilities will not exceed our reserves.
In addition, failure to comply with any environmental regulations or an
increase in regulations could materially and adversely affect our operating
results and financial condition.
Future tobacco legislation, campaigns to discourage
smoking, increases in tobacco taxes and wholesale cost increases of tobacco
products could have a material adverse impact on our sales and profit.Tobacco
products represent our largest product category of merchandise and service
sales. For Couche-Tards fiscal year ended April 25, 2004, sales of tobacco
products were approximately 38% of total merchandise and service sales.
Significant increases in wholesale cigarettes costs and tax increase on tobacco
products, as well as future legislation and national and local campaigns to
discourage smoking in the United States and Canada, may have an adverse effect
on the demand for tobacco products, and therefore reduce our sales and profits.
Competitive
pressures in our markets can make it difficult to pass price increases on to
our customers. These factors could materially and adversely affect our retail
price of cigarettes, cigarette unit volume and sales, merchandise gross profit
and overall customer traffic. Because we derive a large percentage of our sales
from tobacco products, reduced sales of tobacco products or smaller margins on
the sales we make could have a material adverse effect on our operating results
and financial condition.
We may face some challenges integrating Circle K and
may not realize anticipated cost savings in a timely fashion or at all.The
full benefits of a business combination of Couche-Tard and Circle K requires
the integration of each companys administrative, finance, sales and marketing
organizations, and the implementation of appropriate operations, financial and
management systems and controls in order to capture the efficiencies and the
cost reductions that are anticipated to result from the Acquisition. This
requires substantial attention from our management team. The diversion of
management attention, as well as any other difficulties which may be
encountered in the transition and integration process, could have an adverse
impact on our sales and operating results. There can be no assurance that we
will be able to successfully integrate Couche-Tards operations and the
operations of Circle K. Moreover, in order to obtain the cost savings that
integration may provide, we may be required to make capital expenditures. Any
savings that we may achieve may not be recognized during the same period in
which capital expenditures are made.
Because we depend on the experience and industry
knowledge of our management, we would be adversely affected if members of our
management team left us.Our senior management team, including Mr.
Alain Bouchard, our Chairman, President and Chief Executive Officer, Mr.
Richard Fortin, Executive Vice-President and Chief Financial Officer, Mr. Réal
Plourde, Executive Vice-President and Chief Operating Officer, Mr. Jacques
DAmours, Vice-President of Administration and the heads of our operating
divisions, including our nine operational vice-presidents, who are principally
responsible for our operations under our decentralized management structure, are
integral parts of our management team and are key elements of our business
operations. Our future success depends on our ability to retain this team. If,
for any reason, our senior executives and divisional vice-presidents do not
continue to be active in management, our business, financial condition or
results of operations could be adversely affected. We do not enter into
employment agreements or non-competition agreements with our officers. Although
we believe that current management will remain active in the business and that
we will continue to be able to attract and retain other talented personnel and
replace key personnel should the need arise, competition in recruiting
replacement personnel could be significant. If we are not successful in retaining
our key personnel or replacing them, our business, financial condition or
results of operations could be adversely affected. In particular, although we
intend to retain a significant portion of Circle Ks operational management
personnel, no assurances can be given that we will be successful in employing
or retaining such persons.

51Acquisitions have been a substantial part, and are
expected to continue to be a part, of our growth strategy, which could expose
us to significant business risks.Acquisitions have been a
significant part of our growth strategy. We expect to continue to selectively
seek strategic acquisitions in the future. Our ability to consummate and to
integrate effectively any future acquisitions on terms that are favorable to us
may be limited by the number of attractive acquisition targets, internal
demands on our resources and, to the extent necessary, our ability to obtain
financing on satisfactory terms for larger acquisitions, if at all.
Acquisitions may expose us to additional risks, including:

  difficulties
  in integrating administrative, financial reporting, operational and
  information systems and managing newly-acquired operations and improving
  their operating efficiency;
  difficulties
  in maintaining uniform standards, controls, procedures and policies across
  all of our businesses;
  entry into
  markets in which we have little or no direct prior experience;
  difficulties
  in retaining key employees of the acquired operations;
  disruptions to
  our ongoing business; and
  diversion of
  management time and resources.In
addition, future acquisitions could result in the incurrence of additional
debt, costs, and contingent liabilities. We may also incur costs and divert
management attention for potential acquisitions, which are never consummated.
For acquisitions we do consummate, expected synergies may not materialize. Our
failure to effectively address any of these issues could adversely affect our
results of operations, financial condition and ability to service debt,
including the notes.
Although we
have historically performed a due diligence investigation of the businesses or
assets that we acquire, and anticipate continuing to do so for future
acquisitions, there may be liabilities of the acquired business or assets that
we fail or are unable to uncover during our due diligence investigation and for
which we, as a successor owner, may be responsible. When feasible, we seek to
minimize the impact of these types of potential liabilities by obtaining
indemnities and warranties from the seller, which may in some instances be
supported by deferring payment of a portion of the purchase price. However,
these indemnities and warranties, if obtained, may not fully cover the liabilities
because of their limited scope, amount or duration, the financial resources of
the indemnitor or warrantor or other reasons.

We may experience difficulties in executing key
aspects of our business strategy or in differentiating ourselves from our
competitors.The future success of our business is highly dependent
upon effectively implementing our business strategy and differentiating
ourselves from our competitors. We may experience difficulties in executing key
aspects of our business strategy. For example, we may be limited in our ability
to implement our Store 2000 Concept in additional stores because of a number of
factors, including limited capital expenditure resources and restrictions
contained in our senior credit facility. In addition, our in-store branding
strategies may be less successful than we anticipate in increasing our profit
margins. We may be unable to obtain new QSR franchises, and it is possible that
our existing QSR franchises would be cancelled. We may also be less successful
than anticipated in achieving volume-purchasing benefits. Furthermore, we may
experience difficulty in differentiating ourselves from our competitors if our
competitors are able to successfully employ business strategies similar to ours
or if market conditions or demographics reduce what we believe to be our
competitive advantages. While each of these factors applies to our Couche-Tard
stores, the risks particularly apply to our Circle K stores because of
potential complications in integrating the Circle K stores into our operations
and because the Circle K stores are located in markets in which we have not
previously operated.
We are subject to government regulations relating to,
among other things, alcohol, tobacco and minimum wage.Our business
and properties are subject to governmental laws and regulations including, but
not limited to, employment laws and regulations, regulations governing the sale
of alcohol and tobacco, minimum wage requirements and other laws and
regulations.

In certain
areas where our stores are located, provincial, state or local laws limit the
stores hours of operation or their sale of alcoholic beverages, tobacco
products, possible inhalants and lottery tickets, in particular to minors.
Failure to comply with these laws could adversely affect our sales and results
of operations because these state and local regulatory agencies have the power
to revoke, suspend or deny applications for and renewals of permits and
licenses relating to the sale of these products or to seek other remedies.
Regulations
related to wages also affect our business. Any appreciable increase in the
statutory minimum wage would result in an increase in our labor costs and such
cost increase, or the penalties for failing to comply with such statutory
minimums, could adversely affect our business, financial condition and results
of operations.

52Any change
in the legislation or regulations described above that is adverse to us and our
properties could affect our operating and financial performance. In addition,
new regulations are proposed from time to time which, if adopted, could have a
material adverse effect on our operating results and financial condition.
We are subject to short term interest rate
fluctuations.Since approximatly 98% of our long-term debt is
directly or indirectly (through interest rate swaps) based on variable interest
rate of no longer than six months in duration, the Company can experience
interest expense variances solely based on changes in short term interest
rates.
We are subject to currency exchange risk.A
substantial portion of our sales is expected to be made in the United States.
In our consolidated financial statements, we translate our local currency financial
results into Canadian dollars based on average exchange rates prevailing during
a reporting period or the exchange rate at the end of the period. During times
of a strengthening Canadian dollar, at a constant level of business, our
reported U.S. sales and earnings will be reduced because the local currency
will translate into fewer Canadian

Substantially
all of our indebtedness is denominated in U.S. dollars, while a significant
portion of our revenue and cash flow is expected to be generated from our
Canadian operations. To the extent that the cash flow generated from our U.S.
operations is not sufficient to satisfy the ongoing payment obligations under
our U.S. dollar denominated debt, we will need to convert Canadian dollars into
U.S. dollars in order to make the necessary payments. Accordingly, a
strengthening of the U.S. dollar against the Canadian dollar could make it more
difficult for us to repay our indebtedness.
Given the
volatility of exchange rates, we may not be able to manage our currency risks
effectively, which could have a material adverse effect on our financial
condition or results of operations.
Lawsuits relating to tobacco products.We
sell cigarettes and other tobacco-related products at all of our convenience
stores. In addition, Couche-Tard sells a brand of cigarettes that is
manufactured to be sold by it on an exclusive basis, and Circle K has its own
private label brand of cigarettes. We are not currently a named party in any
health-related tobacco litigation. However, various health-related legal
actions, proceedings and claims arising out of the sale, distribution,
manufacture, development, advertising and marketing of cigarettes have been
brought against vendors of tobacco products and may be instituted against us in
the future. Damages in amounts escalating into the hundreds of millions and
even billions of dollars have been pleaded in suits brought against vendors of
cigarettes. An unfavorable verdict against us in any health-related suit could
adversely affect our financial condition and ability to pay interest and
principal on the notes. Moreover, we have not established any reserves for the
payment of expenses or adverse results related to any potential health-related
litigation.
Changes in regional economic conditions may influence
the retail industry, consumer preferences and spending patterns.Our
sales may be negatively influenced by changes in regional or local economic
variables and consumer confidence. External factors that affect economic
variables and consumer confidence and over which we exercise no influence
include unemployment rates, levels of personal disposable income and regional
or local economic conditions. Changes in economic conditions could adversely
affect consumer spending patterns, travel and tourism in certain of our market
areas. Some of our stores are located in coastal, resort or tourist
destinations and, historically, travel and consumer behavior in such markets is
more severely affected by weak economic conditions.

We may be subject to losses that might not be covered
in whole or in part by our insurance coverage.We carry
comprehensive liability, fire and extended coverage insurance on most of our
facilities, with policy specifications and insured limits customarily carried
in our industry for similar properties. The cost of our insurance policies has
increased recently. In addition, some types of losses, such as losses resulting
from wars, acts of terrorism, or natural disasters, generally are not insured
because they are either uninsurable or not economically practical. Moreover,
insurers recently have become more reluctant to insure against these types of
events. Should an uninsured loss or a loss in excess of insured limits occur,
we could lose capital invested in that property, as well as the anticipated
future sales derived from the retailing activities conducted at that property,
while remaining obligated for any mortgage debt or other financial obligations
related to the property. Any such loss could adversely affect our business,
results of operations or financial condition.
Acts of war and terrorism could impact our business.Acts
of war and terrorism could impact general economic conditions and the supply
and price of crude oil. In addition, these events may cause damage to our
retail facilities and disrupt the supply of the products and services we offer
in our locations. In times of uncertainty, people also tend to travel less and
spend more time at home. All these factors could impact our sales, operating
results and financial condition.


53Other risks and Outlook

Interest
Rate Risk.We are exposed to market risk relating to
changes in interest rates relating to our variable rate debt. We have a
significant amount of debt, $718.4 million of which, in effect, bears interest
at floating rates, including $476.2 million 71/2%
notes that are subject to the interest rate swap. Our total annual interest
expense, assuming interest rates as they were in effect on April 25, 2004,
would be approximately $28.8 million. A one-percentage point increase in
interest rates would increase our total annual interest expense by $7.2
million.

Foreign
Exchange Risk.Our investment in assets in the United
States has been financed, for the most part, by U.S. dollar denominated debt.
This strategy reduces the impact on our net U.S. assets relating to
fluctuations in the value of the Canadian dollar relative to the U.S. dollar.
The foreign exchange exposure as of April 25, 2004 is set out below (in
thousands):

Net U.S.
  assets in U.S. dollars
  
  
  US$
  736,771Interest
  bearing debt denominated in U.S. dollars
  
  
  US$
  534,531Net U.S.
  assets less interest bearing debt denominated in U.S. dollars
  
  
  US$
  202,240There was a
negative impact of approximately $3.1 million to our 2004 net earnings due to
the increase in the Canadian dollar relative to the U.S. dollar.
Seasonality.Weather conditions can have an impact on our sales as
historical purchase patterns indicate that our customers increase their
transactions and also purchase higher margin items when weather conditions are
favorable. Consequently, our results are seasonal and typically more profitable
during the summer months. Motor fuel volumes and margins are also seasonal as
volumes increase during the summer driving season as well as margins. Motor
fuel margins are subject to fluctuation due to supply changes and can differ
from historical norms.

Outlook

Integrating
Circle K is a major priority for 2004-2005. However, we will also focus on
innovation to remain leaders in terms of differentiation in the North American
market. We will step up the implementation of our Store 2000 Concept, which is
now in place in some 1,000 of our stores. We will thus convert about 300 stores
during the year, while launching new products and services and developing our
successful brands. Expanding and diversifying our QSRs is also a priority, and
we plan to set up an additional 75 restaurants co-branded with our stores,
bringing our network to 320 QSRs or 9% of the chain. We will continue to expand
by opening 70 new stores, and acquiring small networks. We are confident we
will achieve solid sales and earnings growth in 2004-2005, due partly to the
fact we will benefit from the impact of Circle K for the full year.

July 12,
2004

54UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A.
  UndertakingThe Registrant undertakes to make available, in
  person or by telephone, representatives to respond to inquiries made by the
  Commission staff, and to furnish promptly, when required to do so by the
  Commission staff, information relating to: the securities registered pursuant
  to Form 40-F; the securities in relation to which the obligation to file an
  annual report on Form 40-F arises; or transactions in said securities.B.
  Consent to Service of ProcessThe Registrant has previously filed with the
  Commission a Form F-X.82

SIGNATURE
Pursuant to the requirements of the Exchange Act,
  the Registrant certifies that it meets all of the requirements for filing on
  Form 40-F and has duly caused this annual report to be signed on its behalf
  by the undersigned, thereto duly authorized.ALIMENTATION COUCHE-TARD INC.July 23,
  2004
  By: /s/ Brigitte CatellierBrigitte
  CatellierCorporate
  Secretary83

EXHIBIT INDEX
Number
  
  Document99.1
  
  Consent of Raymond Chabot
  Grant Thornton.99.2
  
  Certifications pursuant to
  Rule 13a-14 or 15d-14 of the Exchange Act, as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002 (Alain Bouchard and Richard
  Fortin)99.3
  
  Certifications pursuant to
  Title 18, United States Code, Section 1350 as adopted pursuant to Section 906
  of the Sarbanes-Oxley Act of 2002 (Alain Bouchard and Richard Fortin)84