STELLARTON, NS, June 28, 2017 /CNW/ -
Fourth Quarter Summary
- Sobeys' same-store sales excluding fuel decreased 1.6 percent;
however, tonnage increased
- Earnings per share of $0.11
- Adjusted earnings per share of $0.18 compared to $0.35 last year
- Project Sunrise transformation underway
- Planned fiscal 2018 capital expenditures set at $350 million
Empire Company Limited ("Empire" or the "Company") (TSX: EMP.A)
today announced financial results for its fourth quarter and full
year ended May 6, 2017. In the
fourth quarter, the Company recorded adjusted net earnings, net of
non-controlling interest, of $50.2
million ($0.18 per diluted
share) compared to $95.3 million
($0.35 per diluted share) in the
fourth quarter last year, a 47.3 percent decrease.
"The initial efforts we have put in motion are starting to take
root. We are seeing positive signs with increased tonnage for the
first time in 17 quarters, stabilizing margins and disciplined cost
containment," said Michael Medline, President and CEO, Empire
Company Limited. "Having said that, we are not where we want to be
and we are most certainly not out of the woods yet. Although
we are doing a better job of managing our day-to-day business, we
remain in the nascent stages of delivering significant cost savings
while addressing a number of brand and customer offering
opportunities that will provide a compelling reason for consumers
to shop us more."
In the fourth quarter of fiscal 2017, the Company launched
Project Sunrise, a comprehensive three year transformation intended
to simplify the organizational structure and reduce costs. The
transformation is expected to deliver approximately $500 million in annualized cost savings by fiscal
2020 that will allow the Company to grow its earnings and re-invest
in the business, growing both its sales and earnings. In total, the
Company expects to incur approximately $200
million in one-time costs associated with severance,
relocation, consulting and minor system developments, the bulk of
which will be incurred in the first half of fiscal 2018. Please see
the "Overview of the Business" section of the Company's
Management's Discussion and Analysis for further information.
Dividend Declaration
The Board of Directors announced an increase in Empire's annual
dividend per share, paid quarterly, from $0.41 per share to $0.42 per share. It also declared a quarterly
dividend of $0.1050 per share on both
the Non-Voting Class A shares and the Class B common shares that
will be payable on July 31, 2017 to
shareholders of record on July 14,
2017. These dividends are eligible dividends as defined for
the purposes of the Income Tax Act (Canada) and applicable provincial
legislation.
OPERATING RESULTS
|
|
|
|
|
|
|
|
($ in millions,
except per
share amounts)
|
13 Weeks Ended
May 6, 2017
|
14 Weeks Ended
May 7, 2016
|
($)
Change
|
52 Weeks Ended
May 6, 2017
|
53 Weeks Ended
May 7, 2016
|
|
($)
Change
|
Sales
|
$
|
5,798.9
|
$
|
6,283.2
|
$
|
(484.3)
|
$
|
23,806.2
|
$
|
24,618.8
|
$
|
(812.6)
|
Gross profit
(1)
|
|
1,420.9
|
|
1,546.2
|
|
(125.3)
|
|
5,707.2
|
|
5,957.6
|
|
(250.4)
|
EBITDA
(2)
|
|
171.7
|
|
(1,047.2)
|
|
1,218.9
|
|
777.2
|
|
(1,944.7)
|
|
2,721.9
|
Adjusted EBITDA
(2)
|
|
193.9
|
|
269.6
|
|
(75.7)
|
|
796.9
|
|
1,161.4
|
|
(364.5)
|
Operating income
(loss)
|
|
61.4
|
|
(1,160.2)
|
|
1,221.6
|
|
333.0
|
|
(2,418.5)
|
|
2,751.5
|
Finance costs,
net
|
|
27.7
|
|
36.3
|
|
(8.6)
|
|
118.0
|
|
137.4
|
|
(19.4)
|
Income tax expense
(recovery)
|
|
1.4
|
|
(256.7)
|
|
258.1
|
|
42.5
|
|
(441.3)
|
|
483.8
|
Net earnings (loss)
(3)
|
|
29.5
|
|
(942.6)
|
|
972.1
|
|
158.5
|
|
(2,131.0)
|
|
2,289.5
|
Adjusted net earnings
(2)(3)
|
|
50.2
|
|
95.3
|
|
(45.1)
|
|
191.3
|
|
410.2
|
|
(218.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (fully diluted)
(3)(4)(5)
|
$
|
0.11
|
$
|
(3.47)
|
$
|
3.58
|
$
|
0.58
|
$
|
(7.78)
|
$
|
8.36
|
Adjusted EPS (fully
diluted) (3)(5)
|
$
|
0.18
|
$
|
0.35
|
$
|
(0.17)
|
$
|
0.70
|
$
|
1.50
|
$
|
(0.80)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
271.7
|
|
271.7
|
|
|
|
272.0
|
|
274.0
|
|
|
(1)
|
Gross profit
amounts and corresponding ratios are calculated using the food
retailing segment results.
|
(2)
|
See "Non-GAAP
Financial Measures" section of this news release.
|
(3)
|
Net of
non-controlling interest.
|
(4)
|
The weighted
average number of shares used for the purpose of basic and diluted
loss per share is equal, as the impact of all potential common
shares would be anti-dilutive.
|
(5)
|
Earnings per share
("EPS").
|
Sales
Consolidated sales, which are generated by the food retailing
segment, for the 13 weeks ended May 6,
2017 decreased primarily as a result of the following
factors: (i) the additional week of operations in fiscal 2016
which accounted for approximately $461.2
million in sales; (ii) retail food price deflation; and
(iii) price sensitivity by consumers and their continued shift to
improved value, partially offset by increases in total tonnage
sales. In addition to the factors noted for the quarter,
fiscal 2017 consolidated sales decreased due to the negative impact
of merchandising and promotional strategies in Western Canada.
During the 13 and 52 weeks ended May 6,
2017, Sobeys' same-store sales decreased 1.1 percent and 2.1
percent, respectively, from the same period last year. Excluding
the impact of fuel, same-store sales decreased 1.6 percent and 2.2
percent, respectively. During the 52 weeks ended May 6, 2017, same-store sales excluding fuel and
the retail West business unit decreased 1.2 percent.
Gross Profit
The decrease in gross profit during the fourth quarter was a
result of the factors impacting sales. For the fourth quarter
of fiscal 2017, gross margin of 24.5 percent remained relatively
flat compared to the same period last year, and increased 80 basis
points compared to the third quarter of fiscal 2017 as a result of
focused execution along with the positive impact of
seasonality.
The decrease in gross profit during fiscal 2017 continued to be
the result of the factors impacting sales, as well as significant
investments made in pricing, particularly in the West business
unit. For the 52 weeks ended May 6,
2017, gross margin of 24.0 percent remained relatively flat
compared to the same period last year.
EBITDA
EBITDA increased in both the fourth quarter and fiscal 2017
largely due to impairments recorded for goodwill and long-lived
assets in the prior year.
Adjusted EBITDA decreased in both the fourth quarter and fiscal
2017 mainly as a result of the previously mentioned factors
affecting sales, as well as increases in selling and administrative
expenses, including increased labour costs and promotional
spending.
|
|
|
|
|
($ in
millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
EBITDA
|
$
|
171.7
|
$
|
(1,047.2)
|
$
|
777.2
|
$
|
(1,944.7)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Costs related to
Project Sunrise
|
|
15.8
|
|
-
|
|
15.8
|
|
-
|
|
Distribution centre
restructuring
|
|
4.3
|
|
2.2
|
|
9.6
|
|
7.9
|
|
Loss (gain) on
disposal of manufacturing facilities
|
|
-
|
|
32.1
|
|
(7.5)
|
|
71.8
|
|
Historical
organizational realignment (reversals) costs
|
|
(0.9)
|
|
(0.4)
|
|
3.4
|
|
13.2
|
|
Network
rationalization (reversals)
|
|
3.0
|
|
(13.9)
|
|
(1.6)
|
|
(13.9)
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
1,296.8
|
|
-
|
|
3,027.1
|
|
|
22.2
|
|
1,316.8
|
|
19.7
|
|
3,106.1
|
Adjusted
EBITDA
|
$
|
193.9
|
$
|
269.6
|
$
|
796.9
|
$
|
1,161.4
|
Operating Income
Consolidated operating income for the fourth quarter increased
primarily as a result of impairments of goodwill and long-lived
assets recorded in the prior year. This was slightly offset
by: (i) an increase in selling and administrative expenses in the
current year; (ii) an additional week of operations in fiscal 2016;
and (iii) a decrease in operating income contribution from the
investment and other operations segment as Crombie Real Estate
Investment Trust's ("Crombie REIT") contribution was lower due to a
group of properties sold by Crombie REIT in their first quarter of
fiscal 2016 and reversals of deferred gains in the prior year.
For fiscal 2017, consolidated operating income increased
primarily as a result of the impairments of goodwill and long-lived
assets recorded in the prior year. This was slightly offset
by an increase in selling and administrative expenses in the
current year and an additional week of operations in fiscal
2016.
Finance Costs
For the fourth quarter and full year of fiscal 2017, net finance
costs decreased from the same periods last year primarily due to
debt repayments in fiscal 2017.
Income Taxes
The Company's effective income tax rate for the fourth quarter
of fiscal 2017 was 4.2 percent compared to 21.5 percent in the same
period last year. Excluding the impact of the fiscal 2016
impairments, the effective income tax rate would have been 23.0
percent in the same period last year. The decrease is
primarily attributed to the re-measurement of the Company's
deferred income tax provision completed during the quarter and the
impact of capital gain transactions undertaken.
The Company's effective income tax rate for the 52 weeks ended
May 6, 2017 increased to 19.8 percent
compared to 17.3 percent in the 53 weeks ended May 7, 2016. Excluding the impact of the
fiscal 2016 impairments, the effective income tax rate would have
been 27.0 percent. The change is attributed to capital gain
transactions, the sale and lease back of retail properties to
Crombie REIT on a tax deferred basis, as well as changes in
legislation related to eligible capital expenditures in the current
year.
Net Earnings
Consolidated net earnings, net of non-controlling interest, in
the fourth quarter increased primarily as a result of impairments
of goodwill and long-lived assets recorded in the prior year and a
provision related to the previous sale of manufacturing
facilities.
For fiscal 2017, Empire consolidated net earnings, net of
non-controlling interest, were primarily impacted by the reasons
noted in the EBITDA section.
|
|
|
|
|
($ in millions,
except per share amounts)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
Net earnings (loss)
(1)
|
$
|
29.5
|
$
|
(942.6)
|
$
|
158.5
|
$
|
(2,131.0)
|
EPS (fully diluted)
(2)
|
$
|
0.11
|
$
|
(3.47)
|
$
|
0.58
|
$
|
(7.78)
|
|
|
|
|
|
|
|
|
|
Adjustments
(3):
|
|
|
|
|
|
|
|
|
|
Intangible
amortization associated with the Canada Safeway
acquisition
|
|
4.7
|
|
4.8
|
|
18.8
|
|
19.1
|
|
Cost related to
Project Sunrise
|
|
11.3
|
|
-
|
|
11.3
|
|
-
|
|
Distribution centre
restructuring
|
|
3.1
|
|
1.6
|
|
6.9
|
|
5.8
|
|
Loss (gain) on
disposal of manufacturing facilities
|
|
-
|
|
25.6
|
|
(5.5)
|
|
57.4
|
|
Historical
organizational realignment (reversals) costs
|
|
(0.6)
|
|
(0.3)
|
|
2.5
|
|
9.6
|
|
Network
rationalization (reversals)
|
|
2.2
|
|
(10.1)
|
|
(1.2)
|
|
(10.1)
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
1,016.3
|
|
-
|
|
2,459.4
|
|
|
20.7
|
|
1,037.9
|
|
32.8
|
|
2,541.2
|
Adjusted net earnings
(1)
|
$
|
50.2
|
$
|
95.3
|
$
|
191.3
|
$
|
410.2
|
Adjusted EPS (fully
diluted)
|
$
|
0.18
|
$
|
0.35
|
$
|
0.70
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
271.7
|
|
271.7
|
|
272.0
|
|
274.0
|
(1)
|
Net of
non-controlling interest.
|
(2)
|
The weighted
average number of shares used for the purpose of basic and diluted
loss per share is equal, as the impact of all potential common
shares would be anti-dilutive.
|
(3)
|
All adjustments
are net of income taxes.
|
FINANCIAL PERFORMANCE BY SEGMENT
The Company operates and reports on two business segments:
- Food retailing, which consists of wholly-owned
subsidiary Sobeys Inc. ("Sobeys"), and
- Investments and other operations, which as of
May 6, 2017 included investments in
Crombie Real Estate Investment Trust ("Crombie REIT") (41.5 percent
equity accounted interest; 40.3 percent fully diluted) and
interests in Genstar.
FOOD RETAILING
The following table presents Sobeys' contribution to Empire, net
of consolidation adjustments, including a purchase price allocation
from the privatization of Sobeys.
|
|
|
|
|
|
($ in
millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
($)
Change
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
($)
Change
|
Sales
|
$
|
5,798.9
|
$
|
6,283.2
|
$
|
(484.3)
|
$
|
23,806.2
|
$
|
24,618.8
|
$
|
(812.6)
|
Gross
profit
|
|
1,420.9
|
|
1,546.2
|
|
(125.3)
|
|
5,707.2
|
|
5,957.6
|
|
(250.4)
|
EBITDA
|
|
162.8
|
|
(1,072.0)
|
|
1,234.8
|
|
703.2
|
|
(2,036.0)
|
|
2,739.2
|
Adjusted
EBITDA
|
|
185.0
|
|
244.8
|
|
(59.8)
|
|
722.9
|
|
1,070.1
|
|
(347.2)
|
Operating income
(loss)
|
|
52.5
|
|
(1,184.9)
|
|
1,237.4
|
|
259.3
|
|
(2,509.2)
|
|
2,768.5
|
Net earnings (loss)
(1)
|
|
23.6
|
|
(958.2)
|
|
981.8
|
|
112.7
|
|
(2,193.3)
|
|
2,306.0
|
Adjusted net earnings
(1)
|
|
44.3
|
|
79.7
|
|
(35.4)
|
|
145.5
|
|
347.9
|
|
(202.4)
|
(1)
|
Net of
non-controlling interest.
|
Sales
Sobeys' reported sales for the 13 weeks ended May 6, 2017 decreased primarily as a result of
the following factors: (i) the additional week of operations
in fiscal 2016 which accounted for approximately $461.2 million in sales; (ii) retail food price
deflation; and (iii) price sensitivity by consumers and their
continued shift to improved value, partially offset by increases in
total tonnage sales. In addition to the factors noted for the
quarter, fiscal 2017 sales decreased due to the negative impact of
merchandising and promotional strategies in Western Canada.
During the 13 and 52 weeks ended May 6,
2017, Sobeys' same-store sales decreased 1.1 percent and 2.1
percent, respectively, from the same period last year.
Excluding the impact of fuel, same-store sales decreased 1.6
percent and 2.2 percent, respectively. During the 52 weeks
ended May 6, 2017, same-store sales
excluding fuel and the retail West business unit decreased 1.2
percent.
Gross Profit
The decrease in Sobeys' gross profit during the fourth quarter
was a result of the factors impacting sales. For the fourth
quarter of fiscal 2017, gross margin of 24.5 percent remained
relatively flat compared to the same period last year, and
increased 80 basis points compared to the third quarter of fiscal
2017 as a result of focused execution along with the positive
impact of seasonality.
The decrease in Sobeys' gross profit during fiscal 2017
continued to be the result of the factors impacting sales, as well
as significant investments made in pricing, particularly in the
West business unit. For the 52 weeks ended May 6, 2017, gross margin of 24.0 percent
remained relatively flat compared to the same period last
year.
EBITDA
EBITDA increased in both the fourth quarter and fiscal 2017
largely due to impairments recorded for goodwill and long-lived
assets in the prior year.
Adjusted EBITDA decreased in both the fourth quarter and fiscal
2017 mainly as a result of the previously mentioned factors
affecting sales, as well as increases in selling and administrative
expenses, including increased labour costs and promotional
spending.
|
|
|
|
|
($ in millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
EBITDA
|
$
|
162.8
|
$
|
(1,072.0)
|
$
|
703.2
|
$
|
(2,036.0)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Costs related to
Project Sunrise
|
|
15.8
|
|
-
|
|
15.8
|
|
-
|
|
Distribution centre
restructuring
|
|
4.3
|
|
2.2
|
|
9.6
|
|
7.9
|
|
Loss (gain) on
disposal of manufacturing facilities
|
|
-
|
|
32.1
|
|
(7.5)
|
|
71.8
|
|
Historical
organizational realignment (reversals) costs
|
|
(0.9)
|
|
(0.4)
|
|
3.4
|
|
13.2
|
|
Network
rationalization (reversals)
|
|
3.0
|
|
(13.9)
|
|
(1.6)
|
|
(13.9)
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
1,296.8
|
|
-
|
|
3,027.1
|
|
|
22.2
|
|
1,316.8
|
|
19.7
|
|
3,106.1
|
Adjusted
EBITDA
|
$
|
185.0
|
$
|
244.8
|
$
|
722.9
|
$
|
1,070.1
|
Operating Income
Sobeys' operating income contribution to Empire for both the
fourth quarter and fiscal 2017 increased primarily as a result of
the impairments of goodwill and long-lived assets recorded in the
prior year. This was slightly offset by an increase in
selling and administrative expenses in the current year and an
additional week of operations in fiscal 2016.
Net Earnings
Sobeys' contributed net earnings, net of non-controlling
interest, to Empire in the fourth quarter increased primarily as a
result of the impairments of goodwill and long-lived assets and the
provision related to the previous sale of manufacturing
facilities.
For fiscal 2017, Sobeys' contributed net earnings, net of
non-controlling interest, to Empire were primarily impacted by the
reasons noted in the EBITDA section.
|
|
|
|
|
($ in millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
Net earnings (loss)
(1)
|
$
|
23.6
|
$
|
(958.2)
|
$
|
112.7
|
$
|
(2,193.3)
|
Adjustments
(2):
|
|
|
|
|
|
|
|
|
|
Intangible
amortization associated with the Canada Safeway
acquisition
|
|
4.7
|
|
4.8
|
|
18.8
|
|
19.1
|
|
Costs related to
Project Sunrise
|
|
11.3
|
|
-
|
|
11.3
|
|
-
|
|
Distribution centre
restructuring
|
|
3.1
|
|
1.6
|
|
6.9
|
|
5.8
|
|
Loss (gain) on
disposal of manufacturing facilities
|
|
-
|
|
25.6
|
|
(5.5)
|
|
57.4
|
|
Historical
organizational realignment (reversals) costs
|
|
(0.6)
|
|
(0.3)
|
|
2.5
|
|
9.6
|
|
Network
rationalization (reversals)
|
|
2.2
|
|
(10.1)
|
|
(1.2)
|
|
(10.1)
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
1,016.3
|
|
-
|
|
2,459.4
|
|
|
20.7
|
|
1,037.9
|
|
32.8
|
|
2,541.2
|
Adjusted net earnings
(1)
|
$
|
44.3
|
$
|
79.7
|
$
|
145.5
|
$
|
347.9
|
(1)
|
Net of
non-controlling interest.
|
(2)
|
All adjustments
are net of income taxes.
|
INVESTMENTS AND OTHER OPERATIONS
The table below presents investments and other operations'
contribution to Empire's operating income.
|
|
|
|
|
|
|
($ in
millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016
|
($)
Change
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
($)
Change
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crombie REIT
(1)
|
$
|
7.7
|
$
|
18.1
|
$
|
(10.4)
|
$
|
41.5
|
$
|
38.9
|
$
|
2.6
|
|
Real estate
partnerships (2)
|
|
4.9
|
|
2.8
|
|
2.1
|
|
35.1
|
|
46.7
|
|
(11.6)
|
|
Other operations, net
of corporate expenses
|
|
(3.7)
|
|
3.8
|
|
(7.5)
|
|
(2.9)
|
|
5.1
|
|
(8.0)
|
|
$
|
8.9
|
$
|
24.7
|
$
|
(15.8)
|
$
|
73.7
|
$
|
90.7
|
$
|
(17.0)
|
(1)
|
41.5 percent
equity accounted interest in Crombie REIT (as at May 7, 2016 – 41.5
percent interest).
|
(2)
|
Interests in
Genstar.
|
Operating Income
Investments and other operations' operating income contribution
to Empire decreased in the 13 weeks ended May 6, 2017 primarily as a result of a group of
properties sold by Crombie REIT in their first quarter of fiscal
2016 and the reversal of deferred gains in the prior year.
For fiscal 2017, the decrease in investments and other
operations' operating income contribution to Empire is attributed
to a decrease in operating income from Genstar primarily due to the
sale of two real estate partnerships by Genstar Development
Partnership II in the third quarter of fiscal 2016 and a decrease
in operating income from other operations compared to the prior
year due to property sales by Crombie REIT in fiscal 2016 that
resulted in the realization of previously deferred gains.
CONSOLIDATED FINANCIAL CONDITION
|
|
|
|
($ in millions,
except per share
and ratio calculations)
|
May 6,
2017
|
May 7, 2016
(1)(2)
|
May 2, 2015
(1)(2)
|
Shareholders'
equity, net of non-controlling
interest
|
$
|
3,644.2
|
$
|
3,623.9
|
$
|
5,986.7
|
Book value per common
share (3)
|
$
|
13.41
|
$
|
13.34
|
$
|
21.61
|
Long-term debt,
including current portion
|
$
|
1,870.8
|
$
|
2,367.4
|
$
|
2,284.1
|
Funded debt to total
capital (3)
|
|
33.9%
|
|
39.5%
|
|
27.6%
|
Net funded debt to
net total capital (3)
|
|
31.3%
|
|
36.7%
|
|
24.9%
|
Funded debt to
adjusted EBITDA (3)
|
|
2.3x
|
|
2.0x
|
|
1.7x
|
Adjusted EBITDA to
interest expense (3)
|
|
7.7x
|
|
10.2x
|
|
9.6x
|
Current assets to
current liabilities
|
|
0.9x
|
|
1.0x
|
|
0.9x
|
Total
assets
|
$
|
8,695.5
|
$
|
9,138.5
|
$
|
11,497.2
|
Total non-current
financial liabilities
|
$
|
2,502.1
|
$
|
2,735.9
|
$
|
2,942.0
|
(1)
|
Amounts have been
reclassified to correspond to the current period presentation on
the consolidated balance sheets.
|
(2)
|
Amounts have been
restated. See "Changes to Accounting Policies Adopted During
Fiscal 2017" section of Management's Discussion and Analysis for
further detail.
|
(3)
|
See "Non-GAAP
Financial Measures" section of this news release.
|
The ratio of funded debt to total capital improved to 33.9
percent at May 6, 2017 from 39.5
percent at May 7,
2016.
Free Cash Flow
Free cash flow (1) is used to measure the change in
the Company's cash available for debt repayment, dividend payments
and other investing and financing activities.
|
|
|
|
|
($ in millions)
|
13 Weeks
Ended
May 6, 2017
|
14 Weeks
Ended
May 7, 2016 (2)
|
52 Weeks
Ended
May 6, 2017
|
53 Weeks
Ended
May 7, 2016
|
Cash flows from
operating activities
|
$
|
225.8
|
$
|
242.4
|
$
|
708.5
|
$
|
896.8
|
Plus: proceeds
on disposal of property, equipment and investment
property
|
|
36.8
|
|
11.6
|
|
425.7
|
|
142.5
|
Less: property,
equipment and investment property purchases
|
|
(91.8)
|
|
(173.9)
|
|
(460.7)
|
|
(616.5)
|
Free cash
flow
|
$
|
170.8
|
$
|
80.1
|
$
|
673.5
|
$
|
422.8
|
(1)
|
See "Non-GAAP
Financial Measures" section of this news release.
|
(2)
|
Amounts have been
reclassified to correspond to the current period presentation on
the consolidated statement of cash flows.
|
Free cash flow in the fourth quarter of fiscal 2017 increased
from the same period last year primarily as a result of the
following factors: (i) increased proceeds from real estate
transactions; and (ii) decreased purchases of property, equipment
and investment property due to planned reduction of capital
expenditures.
For fiscal 2017, free cash flow increased compared to the prior
year primarily as a result of the following factors: (i) increased
proceeds on disposal of property, equipment and investment property
primarily due to the agreement entered into with Crombie REIT; (ii)
decreased purchases of property, equipment and investment
property. These factors are partially offset by decreased
operating activities.
SUBSEQUENT EVENTS
On May 11, 2017, the unitholders
of Crombie REIT approved a tax reorganization that will eliminate
wholly-owned corporate subsidiaries being subject to corporate
income taxes. This tax reorganization is not expected to have a
significant impact on the financial position of the Company.
On June 2, 2017, Sobeys entered a
new, senior, unsecured non-revolving credit facility for
$500.0 million. The facility
bears floating interest tied to Canadian prime rate or bankers'
acceptance rates. The financing is intended to be used to
repay long-term debt due in calendar 2018.
On June 2, 2017, Crombie REIT
announced that it had exercised its right to redeem its 5.00%
Series D Convertible Unsecured Subordinated Debentures. The
redemption will be effective on July
4, 2017. Upon redemption, Crombie REIT will pay to the
holders of debentures the redemption price equal to the outstanding
principal amount and all accrued and unpaid interest. Empire
currently holds a $25.1 million
investment in the Series D convertible debentures.
FORWARD-LOOKING INFORMATION
This document contains forward-looking statements which are
presented for the purpose of assisting the reader to contextualize
the Company's financial position and understand management's
expectations regarding the Company's strategic priorities,
objectives and plans. These forward-looking statements may
not be appropriate for other purposes. Forward-looking
statements are identified by words or phrases such as
"anticipates", "expects", "believes", "estimates", "intends",
"could", "may", "plans", "predicts", "projects", "will", "would",
"foresees" and other similar expressions or the negative of these
terms.
By its nature, forward-looking information requires the Company
to make assumptions and is subject to inherent risks, uncertainties
and other factors which may cause actual results to differ
materially from forward-looking statements made. For more
information on risks, uncertainties and assumptions that may impact
the Company's forward-looking statements, please refer to the
Company's materials filed with the Canadian securities regulatory
authorities, including the "Risk Management" section of the
Company's Annual Information Form and Annual Management's
Discussion and Analysis.
Although the Company believes the predictions, forecasts,
expectations or conclusions reflected in the forward-looking
information are reasonable, it can provide no assurance that such
matters will prove correct. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating
forward-looking information and are cautioned not to place undue
reliance on such forward-looking information. The forward-looking
information in this document reflects the Company's current
expectations and is subject to change. The Company does not
undertake to update any forward-looking statements that may be made
by or on behalf of the Company other than as required by applicable
securities laws.
NON-GAAP FINANCIAL MEASURES
There are measures included in this news release that do not
have a standardized meaning under GAAP and therefore may not be
comparable to similarly titled measures presented by other publicly
traded companies. The Company includes these measures because
it believes certain investors use these measures as a means of
assessing financial performance.
Empire's definition of the non-GAAP terms are as follows:
- Same-store sales are sales from stores in the same location in
both reporting periods.
- Gross profit is calculated as sales less cost of sales.
- Gross margin is gross profit divided by sales.
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") is calculated as net earnings (loss) before finance
costs (net of finance income), income tax expense (recovery), and
depreciation and amortization of intangibles.
- Adjusted EBITDA is EBITDA excluding certain items to better
analyze trends in performance. These adjustments result in a truer
economic representation on a comparative basis. The Company no
longer adjusts for items that are insignificant to current period
results or the comparative period.
- Interest expense is calculated as interest expense on financial
liabilities measured at amortized cost plus losses on cash flow
hedges reclassified from other comprehensive income or loss.
- Adjusted net earnings are net earnings (loss), net of
non-controlling interest, excluding certain items to better analyze
trends in performance and financial results. These adjustments
result in a truer economic representation of the underlying
business on a comparative basis. The Company no longer adjusts for
items that are insignificant to current period results or the
comparative period.
- Free cash flow is calculated as cash flows from operating
activities, plus proceeds on disposal of property, equipment and
investment property, less property, equipment and investment
property purchases.
- Funded debt is all interest bearing debt, which includes bank
loans, bankers' acceptances and long-term debt.
- Net funded debt is calculated as funded debt less cash and cash
equivalents.
- Total capital is calculated as funded debt plus shareholders'
equity, net of non-controlling interest.
- Net total capital is total capital less cash and cash
equivalents.
- Funded debt to total capital ratio is funded debt divided by
total capital.
- Net funded debt to net total capital ratio is net funded debt
divided by net total capital.
- Funded debt to adjusted EBITDA ratio is funded debt divided by
trailing four-quarter adjusted EBITDA.
- Adjusted EBITDA to interest expense ratio is trailing
four-quarter adjusted EBITDA divided by trailing four-quarter
interest expense.
- Book value per common share is shareholders' equity, net of
non-controlling interest, divided by total common shares
outstanding.
For a more complete description of Empire's non-GAAP terms,
please see Empire's Management's Discussion and Analysis for the
fiscal year ended May 6,
2017.
CONFERENCE CALL INFORMATION
The Company will hold an analyst call on Wednesday, June 28, 2017 beginning at
8:00 a.m. (Eastern Daylight Time)
during which senior management will discuss the Company's financial
results for the fourth quarter of fiscal 2017 ended May 6, 2017. To join this conference call,
dial (888) 231-8191 outside the Toronto area or (647) 427-7450 from within the
Toronto area. To secure a
line, please call 10 minutes prior to the conference call; you will
be placed on hold until the conference call begins. The media
and investing public may access this conference call via a listen
mode only. You may also listen to a live audiocast of the
conference call by visiting the Company's website located at
www.empireco.ca.
Replay will be available by dialing (855) 859-2056 and entering
passcode 40243765 until midnight July 5,
2017, or on the Company's website for 90 days following the
conference call.
SELECTED FINANCIAL INFORMATION
The following unaudited quarterly and audited annual financial
information has been prepared on a basis consistent with our
audited consolidated financial statements for the year ended
May 6, 2017. The information
does not include all disclosures required by IFRS and should be
read in conjunction with the Company's 2017 audited consolidated
financial statements available at www.sedar.com or by accessing the
Investor Centre section of the Company's website at
www.empireco.ca.
Empire Company
Limited
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
As
At
|
May
6
|
May
7
|
Audited (in
millions of Canadian dollars)
|
2017
|
2016
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
207.3
|
|
$
|
264.7
|
|
Receivables
|
|
413.6
|
|
|
489.4
|
|
Inventories
|
|
1,322.2
|
|
|
1,287.3
|
|
Prepaid
expenses
|
|
117.5
|
|
|
117.3
|
|
Loans and other
receivables
|
|
25.5
|
|
|
26.4
|
|
Income taxes
receivable
|
|
31.9
|
|
|
11.9
|
|
Assets held for
sale
|
|
48.5
|
|
|
407.1
|
|
|
|
|
|
|
|
|
2,166.5
|
|
|
2,604.1
|
|
|
|
|
|
|
Loans and other
receivables
|
|
82.1
|
|
|
93.5
|
Investments
|
|
25.1
|
|
|
24.7
|
Investments, at
equity
|
|
648.4
|
|
|
574.9
|
Other
assets
|
|
43.3
|
|
|
57.3
|
Property and
equipment
|
|
3,033.3
|
|
|
3,144.7
|
Investment
property
|
|
103.0
|
|
|
82.9
|
Intangibles
|
|
880.5
|
|
|
911.5
|
Goodwill
|
|
1,003.4
|
|
|
998.7
|
Deferred tax
assets
|
|
709.9
|
|
|
646.2
|
|
|
|
|
|
|
|
$
|
8,695.5
|
|
$
|
9,138.5
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
2,230.2
|
|
$
|
2,173.1
|
|
Income taxes
payable
|
|
38.4
|
|
|
21.2
|
|
Provisions
|
|
88.1
|
|
|
174.9
|
|
Long-term debt due
within one year
|
|
134.0
|
|
|
350.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,490.7
|
|
|
2,719.6
|
|
|
|
|
|
|
Provisions
|
|
105.8
|
|
|
131.7
|
Long-term
debt
|
|
1,736.8
|
|
|
2,017.0
|
Other long-term
liabilities
|
|
141.7
|
|
|
108.7
|
Employee future
benefits
|
|
374.0
|
|
|
336.8
|
Deferred tax
liabilities
|
|
143.8
|
|
|
141.7
|
|
|
|
|
|
|
|
|
4,992.8
|
|
|
5,455.5
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Capital
stock
|
|
2,034.4
|
|
|
2,045.1
|
Contributed
surplus
|
|
25.3
|
|
|
22.5
|
Retained
earnings
|
|
1,572.8
|
|
|
1,546.4
|
Accumulated other
comprehensive income
|
|
11.7
|
|
|
9.9
|
|
|
|
|
|
|
|
|
3,644.2
|
|
|
3,623.9
|
|
|
|
|
|
|
Non-controlling
interest
|
|
58.5
|
|
|
59.1
|
|
|
|
|
|
|
|
|
3,702.7
|
|
|
3,683.0
|
|
|
|
|
|
|
|
$
|
8,695.5
|
|
$
|
9,138.5
|
Empire Company
Limited
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of
|
Unaudited
|
|
Audited
|
Earnings
(Loss)
|
13 and 14 Weeks
Ended
|
|
52 and 53 Weeks
Ended
|
(in millions of
Canadian dollars,
|
May
6
|
|
May
7
|
|
May
6
|
|
May
7
|
except share and
per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
5,798.9
|
|
$
|
6,283.2
|
|
$
|
23,806.2
|
|
$
|
24,618.8
|
Other income
(loss)
|
|
6.2
|
|
|
(16.7)
|
|
|
48.2
|
|
|
(10.9)
|
Share of earnings
from investments, at equity
|
|
12.9
|
|
|
19.9
|
|
|
77.5
|
|
|
86.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
4,378.0
|
|
|
4,737.0
|
|
|
18,099.0
|
|
|
18,661.2
|
|
Selling and
administrative expenses
|
|
1,378.6
|
|
|
1,412.8
|
|
|
5,499.9
|
|
|
5,424.2
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
|
1,296.8
|
|
|
-
|
|
|
3,027.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
61.4
|
|
|
(1,160.2)
|
|
|
333.0
|
|
|
(2,418.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs,
net
|
|
27.7
|
|
|
36.3
|
|
|
118.0
|
|
|
137.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
before income taxes
|
|
33.7
|
|
|
(1,196.5)
|
|
|
215.0
|
|
|
(2,555.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
1.4
|
|
|
(256.7)
|
|
|
42.5
|
|
|
(441.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
$
|
32.3
|
|
$
|
(939.8)
|
|
$
|
172.5
|
|
$
|
(2,114.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) for
the period attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest
|
$
|
2.8
|
|
$
|
2.8
|
|
$
|
14.0
|
|
$
|
16.4
|
|
Owners of the
Company
|
|
29.5
|
|
|
(942.6)
|
|
|
158.5
|
|
|
(2,131.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32.3
|
|
$
|
(939.8)
|
|
$
|
172.5
|
|
$
|
(2,114.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.11
|
|
$
|
(3.47)
|
|
$
|
0.58
|
|
$
|
(7.78)
|
|
Diluted
|
$
|
0.11
|
|
$
|
(3.47)
|
|
$
|
0.58
|
|
$
|
(7.78)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding, in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
271.7
|
|
|
271.7
|
|
|
271.9
|
|
|
273.9
|
|
Diluted
|
|
271.7
|
|
|
271.7
|
|
|
272.0
|
|
|
274.0
|
|
Unaudited
|
|
Audited
|
Empire Company
Limited
|
13 and 14 Weeks
Ended
|
|
52 and 53 Weeks
Ended
|
Condensed
Consolidated Statements of Cash Flows
|
May
6
|
|
May
7
|
|
May
6
|
|
May
7
|
(in millions of
Canadian dollars)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
$
|
32.3
|
|
$
|
(939.8)
|
|
$
|
172.5
|
|
$
|
(2,114.6)
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
88.6
|
|
|
90.9
|
|
|
355.5
|
|
|
384.8
|
|
Income tax expense
(recovery)
|
|
1.4
|
|
|
(256.7)
|
|
|
42.5
|
|
|
(441.3)
|
|
Finance costs,
net
|
|
27.7
|
|
|
36.3
|
|
|
118.0
|
|
|
137.4
|
|
Amortization of
intangibles
|
|
21.7
|
|
|
22.1
|
|
|
88.7
|
|
|
89.0
|
|
Net (gain) loss on
disposal of assets
|
|
(0.3)
|
|
|
24.9
|
|
|
(21.3)
|
|
|
42.6
|
|
Impairment of
non-financial assets, net
|
|
11.0
|
|
|
6.2
|
|
|
27.5
|
|
|
17.6
|
|
Impairments of
goodwill and long-lived assets
|
|
-
|
|
|
1,296.8
|
|
|
-
|
|
|
3,027.1
|
|
Amortization of
deferred items
|
|
3.3
|
|
|
3.2
|
|
|
12.8
|
|
|
12.8
|
|
Equity in earnings of
other entities, net of distributions
received
|
|
2.5
|
|
|
14.8
|
|
|
19.9
|
|
|
9.9
|
|
Employee future
benefits
|
|
1.0
|
|
|
(9.9)
|
|
|
8.5
|
|
|
(4.2)
|
|
Increase in long-term
lease obligation
|
|
2.2
|
|
|
3.2
|
|
|
13.9
|
|
|
6.7
|
|
Decrease in long-term
provisions
|
|
(3.0)
|
|
|
(11.9)
|
|
|
(35.4)
|
|
|
(25.8)
|
|
Equity based
compensation, net
|
|
1.7
|
|
|
0.9
|
|
|
3.3
|
|
|
3.6
|
Net change in
non-cash working capital
|
|
58.0
|
|
|
(4.5)
|
|
|
0.5
|
|
|
(132.2)
|
Income taxes paid,
net
|
|
(22.3)
|
|
|
(34.1)
|
|
|
(98.4)
|
|
|
(116.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
225.8
|
|
|
242.4
|
|
|
708.5
|
|
|
896.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
investments
|
|
(0.4)
|
|
|
(0.6)
|
|
|
(0.4)
|
|
|
(4.0)
|
|
Property, equipment
and investment property purchases
|
|
(91.8)
|
|
|
(173.9)
|
|
|
(460.7)
|
|
|
(616.5)
|
|
Proceeds on disposal
of property, equipment and investment
property
|
|
36.8
|
|
|
11.6
|
|
|
425.7
|
|
|
142.5
|
|
Additions to
intangibles
|
|
(20.1)
|
|
|
(12.1)
|
|
|
(53.8)
|
|
|
(55.5)
|
|
Loans and other
receivables
|
|
(1.5)
|
|
|
11.6
|
|
|
12.3
|
|
|
(6.6)
|
|
Tenant
inducements
|
|
-
|
|
|
-
|
|
|
58.8
|
|
|
-
|
|
Other assets and
other long-term liabilities
|
|
3.3
|
|
|
0.3
|
|
|
2.7
|
|
|
5.6
|
|
Business
acquisitions
|
|
(0.2)
|
|
|
(12.5)
|
|
|
(21.9)
|
|
|
(90.7)
|
|
Interest
received
|
|
0.6
|
|
|
1.2
|
|
|
1.6
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities
|
|
(73.3)
|
|
|
(174.4)
|
|
|
(35.7)
|
|
|
(622.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of long-term
debt
|
|
12.7
|
|
|
18.9
|
|
|
55.6
|
|
|
82.7
|
|
Debt financing
costs
|
|
-
|
|
|
(1.4)
|
|
|
-
|
|
|
(1.4)
|
|
Repayment of
long-term debt
|
|
(28.4)
|
|
|
(22.4)
|
|
|
(397.2)
|
|
|
(94.5)
|
|
Net (repayment)
advance of credit facilities
|
|
(72.0)
|
|
|
(27.0)
|
|
|
(165.0)
|
|
|
68.1
|
|
Interest
paid
|
|
(32.1)
|
|
|
(37.3)
|
|
|
(87.0)
|
|
|
(92.4)
|
|
Repurchase of
Non-Voting Class A shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(148.1)
|
|
Acquisition of shares
held in trust
|
|
(0.1)
|
|
|
-
|
|
|
(10.7)
|
|
|
-
|
|
Dividends paid,
common shares
|
|
(27.8)
|
|
|
(27.2)
|
|
|
(111.3)
|
|
|
(109.4)
|
|
Non-controlling
interest
|
|
(0.8)
|
|
|
(0.9)
|
|
|
(14.6)
|
|
|
(10.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in
financing activities
|
|
(148.5)
|
|
|
(97.3)
|
|
|
(730.2)
|
|
|
(305.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
|
4.0
|
|
|
(29.3)
|
|
|
(57.4)
|
|
|
(31.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
203.3
|
|
|
294.0
|
|
|
264.7
|
|
|
295.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
207.3
|
|
$
|
264.7
|
|
$
|
207.3
|
|
$
|
264.7
|
2017 ANNUAL REPORT
The Company's audited consolidated financial statements and the
notes thereto for the fiscal year ended May
6, 2017 and MD&A for the fiscal year ended May 6, 2017, which includes discussion and
analysis of results of operations, financial position and cash
flows will be available today, June 28,
2017. These documents can be accessed through the Investor
Centre section of the Company's website at www.empireco.ca and also
at www.sedar.com.
The Company's 2017 Annual Report will be available on or about
July 28, 2017 and can be accessed
through the Investor Centre section of the Company's website at
www.empireco.ca and also at www.sedar.com.
ABOUT EMPIRE
Empire Company Limited (TSX: EMP.A) is a Canadian company
headquartered in Stellarton, Nova
Scotia. Empire's key businesses are food retailing and
related real estate. With approximately $23.8 billion in sales and $8.7 billion in assets, Empire and its
subsidiaries, franchisees and affiliates employ approximately
125,000 people.
Additional financial information relating to Empire, including
the Company's Annual Information Form, can be found on the
Company's website at www.empireco.ca or on SEDAR at
www.sedar.com.
SOURCE Empire Company Limited