TORONTO, May 7, 2013 /CNW/ - George Weston Limited (TSX:
WN) ("GWL") today announced its consolidated unaudited results for
the 12 weeks ended March 23,
2013.
The 2013 First Quarter Report to Shareholders of George Weston
Limited and its subsidiaries, together referred to as the
"Company", including the Company's unaudited interim period
condensed consolidated financial statements and Management's
Discussion and Analysis ("MD&A") for the 12 weeks ended
March 23, 2013, is available in
the Investor Centre section of the Company's website at
www.weston.ca and has been filed with the System for Electronic
Document Analysis and Retrieval ("SEDAR") and will be available at
www.sedar.com.
2013 First Quarter Summary
• Adjusted basic net earnings per common
share(2) of $0.88 compared
to $0.87 in the first quarter of
2012.
• Adjusted operating income(2) growth of 3.9%
to $323 million.
• Sales growth of 3.7% to $7,494
million.
• Quarterly common share dividend increase of 9.2% to
$0.415 per common share, which
follows a 5.6% increase late last year.
"The first quarter of 2013 delivered strong operating results
for George Weston Limited. Our continued focus on enhancing
shareholder value is a priority and today we announced a dividend
increase - building on the increase announced late last year. Work
is well underway on the initial public offering of the Loblaw Real
Estate Investment Trust, and I am pleased with the progress", said
W. Galen Weston, Executive Chairman,
George Weston Limited.
CONSOLIDATED RESULTS OF
OPERATIONS |
|
(unaudited) |
|
|
|
|
|
|
|
|
($ millions except where otherwise
indicated) |
12 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
For the periods ended as indicated |
|
Mar. 23, 2013 |
|
Mar. 24,
2012(3) |
|
Change |
Sales |
|
$ |
7,494 |
|
|
$ |
7,224 |
|
|
3.7 |
% |
Operating income |
|
$ |
382 |
|
|
$ |
274 |
|
|
39.4 |
% |
Adjusted operating income(2) |
|
$ |
323 |
|
|
$ |
311 |
|
|
3.9 |
% |
Adjusted operating margin(2) |
|
4.3 % |
|
|
4.3 % |
|
|
|
Adjusted EBITDA(2) |
|
$ |
520 |
|
|
$ |
495 |
|
|
5.1 |
% |
Adjusted EBITDA margin(2) |
|
6.9 % |
|
|
6.9 % |
|
|
|
Net interest expense and other financing
charges |
|
$ |
84 |
|
|
$ |
50 |
|
|
68.0 |
% |
Income taxes |
|
$ |
73 |
|
|
$ |
58 |
|
|
25.9 |
% |
Net earnings attributable to shareholders of the
Company |
|
$ |
162 |
|
|
$ |
121 |
|
|
33.9 |
% |
Basic net earnings per common share ($) |
|
$ |
1.19 |
|
|
$ |
0.87 |
|
|
36.8 |
% |
Adjusted basic net earnings per common
share(2) ($) |
|
$ |
0.88 |
|
|
$ |
0.87 |
|
|
1.1 |
% |
Free cash flow(2) |
|
$ |
(377) |
|
$ |
(388) |
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
Pavi Binning, President, George
Weston Limited, commented that "We are pleased with the first
quarter's operating results. Loblaw delivered positive sales
performance while investing in an improved in-store experience and
made good progress on the roll-out of its new IT system. Weston
Foods achieved performance consistent with the prior year. We
anticipate the benefits of growth, marketing and innovation
investments to be realized increasingly over the course of the
year".
The Company's first quarter 2013 adjusted basic net earnings per
common share(2) were $0.88
compared to $0.87 in the same period
in 2012, an increase of $0.01. The
increase was attributable to the improvement in the operating
performance of Loblaw Companies Limited ("Loblaw"), partially
offset by a higher effective income tax rate(4).
The Company's basic net earnings per common share were
$1.19 compared to $0.87 in the same period in 2012, an increase of
$0.32. The increase included the
year-over-year favourable net impact of certain items, primarily
the impact of certain foreign currency translation, the impact of
defined benefit plan amendments and the impact of the forward sale
agreement for 9.6 million Loblaw common shares.
During the first quarter of 2013, the Company announced
amendments to certain of its defined benefit plans impacting
certain employees retiring after January 1, 2015. As a result, in the
first quarter of 2013, the Company recorded a gain of $51 million and will realize annual pre-tax
savings of approximately $14 million
related to these defined benefit plan amendments.
The Company uses non-GAAP financial measures. See the "Non-GAAP
Financial Measures" section of this News Release for more
information on these non-GAAP financial measures.
OPERATING SEGMENTS
Weston Foods |
|
|
|
|
|
|
|
(unaudited) |
|
12 Weeks Ended |
|
|
|
|
|
|
|
|
|
($ millions except where otherwise indicated) |
|
Mar. 23,
2013 |
|
|
|
Mar. 24, 2012 |
|
Sales |
|
$ |
424 |
|
|
|
$ |
425 |
|
Operating income |
|
$ |
48 |
|
|
|
$ |
60 |
|
Adjusted operating income(2) |
|
$ |
59 |
|
|
|
$ |
59 |
|
Adjusted operating margin(2) |
|
|
13.9 % |
|
|
|
|
13.9 % |
|
Adjusted EBITDA(2) |
|
$ |
73 |
|
|
|
$ |
73 |
|
Adjusted EBITDA margin(2) |
|
|
17.2 % |
|
|
|
|
|
17.2 % |
|
|
|
|
|
|
|
|
|
Weston Foods sales in the first quarter of 2013 decreased by
0.2% to $424 million from
$425 million and volumes
decreased by 1.3% compared to the same period in 2012 largely due
to the loss of certain frozen distributed products that Weston
Foods distributed on behalf of certain customers in 2012. This loss
negatively impacted sales and volume growth by approximately 1.9%
and 0.8%, respectively, while foreign currency translation
positively impacted sales by approximately 0.3%. Excluding the
impact of the loss of certain distributed products and foreign
currency translation, sales increased 1.4% mainly due to the
positive impact of pricing across key product categories of 1.9%,
partially offset by a decrease in volume of 0.5% compared to the
same period in 2012.
Weston Foods operating income in the first quarter of 2013 was
$48 million compared to
$60 million in the same period
in 2012, a decrease of $12 million. The decrease was primarily due
to the unfavourable year-over-year impact of the change in the fair
value adjustment of commodity derivatives of $11 million.
Weston Foods adjusted operating income(2) was
$59 million in the first
quarters of both 2013 and 2012. Weston Foods adjusted operating
margin(2) remained flat at 13.9% compared to the same
period in 2012. Adjusted operating income(2) was
positively impacted by the benefits realized from productivity
improvements and other cost reduction initiatives and higher
pricing in key product categories. These benefits were offset by
lower sales volumes and investments in growth, marketing and
innovation compared to the same period in 2012.
Loblaw |
|
|
|
|
|
|
|
(unaudited) |
|
12 Weeks Ended |
|
|
|
|
|
|
|
|
|
($ millions except where otherwise indicated) |
|
Mar. 23,
2013 |
|
|
|
Mar. 24, 2012 |
|
Sales |
|
$ |
7,202 |
|
|
|
$ |
6,937 |
|
Operating income |
|
$ |
307 |
|
|
|
$ |
237 |
|
Adjusted operating income(2) |
|
$ |
264 |
|
|
|
$ |
252 |
|
Adjusted operating margin(2) |
|
3.7 % |
|
|
|
3.6 % |
|
Adjusted EBITDA(2) |
|
$ |
447 |
|
|
|
$ |
422 |
|
Adjusted EBITDA margin(2) |
|
6.2 % |
|
|
|
6.1 % |
|
|
|
|
|
|
|
|
|
In the first quarter of 2013, Loblaw showed continued evidence
of momentum in its core business, with the fresh-led,
customer-focused strategy delivering results. Greater assortment
and an improved in-store experience contributed to same-store sales
growth and positive trends in tonnage and market share across the
country and across all banners.
Loblaw sales in the first quarter of 2013 increased by 3.8% to
$7,202 million from $6,937 million in the same period in 2012.
Loblaw's Retail segment sales increased by 3.4% and same-store
sales growth was 2.8% (2012 - decline of 0.7%), positively impacted
by the shift in timing of certain holidays. Sales growth in food
and gas bar was strong, sales growth in drugstore was modest, sales
in general merchandise, excluding apparel, declined marginally and
sales in apparel were flat. Loblaw experienced flat (2012 - modest)
average quarterly internal food price inflation during the first
quarter of 2013, which was lower than the average quarterly
national food price inflation of 1.4% (2012 - 3.7%) as
measured by "The Consumer Price Index for Food Purchased from
Stores". In the last twelve months, Loblaw opened 20 corporate and
franchise stores and closed 12 corporate and franchise stores,
resulting in a net increase of 0.2 million square feet, or
0.4%. Loblaw sales in the first quarter of 2013 were also
positively impacted by an increase in revenue from its Financial
Services segment, which includes President's Choice Bank, a
subsidiary of Loblaw.
Loblaw operating income in the first quarter of 2013 was
$307 million compared to
$237 million in the same period
in 2012, an increase of $70 million. The increase was mainly due to
the $51 million gain related to the
defined benefit plan amendments recorded in the first quarter of
2013 and an increase in adjusted operating income(2) of
$12 million as described
below.
Loblaw adjusted operating income(2) was $264 million in the first quarter of 2013
compared to $252 million in the
same period in 2012. Adjusted operating margin(2) was
3.7% compared to 3.6% in the same period in 2012. The increase in
adjusted operating income(2) was primarily attributable
to an improvement in the operating performance of Loblaw's
Financial Services segment, increased gross profit from Loblaw's
Retail segment and lower costs related to the transition of certain
Ontario conventional stores to the
more cost effective and efficient operating terms of collective
agreements ratified in the third quarter of 2010. These increases
were partially offset by increased labour associated with higher
sales, increased operating costs and the impact of foreign
exchange. The increase in Loblaw's Financial Services segment was
mainly attributable to higher revenue and lower costs related to
the renegotiation of vendor contracts, partially offset by
investments in the Mobile Shop business, higher credit card losses
on higher receivables balances and higher PC points loyalty
costs.
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES
In the first quarter of 2013, net interest expense and other
financing charges increased by $34 million to $84 million compared to the same period in
2012. Net interest expense and other financing charges are impacted
by the fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares. This fair value adjustment
had an unfavourable year-over-year impact in the first quarter of
2013 of $37 million.
Excluding this impact, net interest expense and other financing
charges decreased by $3 million
compared to the same period in 2012, primarily due to the decline
in net interest on the Company's net defined benefit
obligation.
INCOME TAXES
In the first quarter of 2013, income tax expense increased to
$73 million from $58 million in the same period in 2012. The
effective income tax rate decreased to 24.5% in the first quarter
of 2013 from 25.9% in the same period in 2012, primarily due to
non-taxable foreign currency translation gains recorded in 2013
(2012 - non-deductible foreign currency translation losses). The
effective income tax rate in the first quarter of 2012 was also
impacted by recoveries related to certain prior year income tax
matters.
REAL ESTATE INVESTMENT TRUST ("REIT") UPDATE
During the fourth quarter of 2012, the Company announced Loblaw's
intention to create a REIT to acquire approximately 35 million
square feet of Loblaw's real estate assets. Since that
announcement, work has progressed according to plan. Loblaw expects
to file a preliminary prospectus for the REIT in late May 2013 and to complete the initial public
offering ("IPO") of the REIT in early to mid-July of 2013, subject
to prevailing market conditions and receipt of required regulatory
approvals, including approval to list the units on the Toronto
Stock Exchange. A highly experienced board of trustees has been
selected and the senior management team for the REIT is now in
place. Approximately 35 million square feet of property with a
market value of at least $7 billion
will be transferred to the REIT.
OUTLOOK(1)
The outlook reflects the underlying operating performance of the
Company's operating segments as discussed below.
For full year 2013, Weston Foods sales growth is expected to be
moderate due to a combination of pricing and modest volume growth.
Adjusted operating margins(2) are expected to remain in
line with 2012 as Weston Foods invests in growth, marketing
and innovation. The benefits from these investments are expected to
be realized increasingly over the course of the year.
Over the past several quarters, Loblaw has strengthened its
customer proposition and made significant progress with its
information technology ("IT") infrastructure implementation. These
initiatives, with investments in price, assortment and labour are
expected to be offset by operating efficiencies. Investment in
infrastructure programs will continue as the IT system is rolled
out to distribution centres and stores, with associated expenses
flat to 2012. Sales growth in 2013 will be moderated by a
competitive environment characterized by ongoing square footage
expansions, a new competitor's entry into the market and generic
drug deflation. As a result, Loblaw expects modest growth in
adjusted operating income(2) in 2013, excluding the
impact of the $61 million
restructuring charge recorded in the fourth quarter of 2012, the
impact of the previously announced plan to launch an IPO of a new
REIT, and the $51 million gain
recorded in the first quarter of 2013 associated with amendments to
certain defined benefit plans.
Over the long term, Loblaw still expects positive same-store
sales, a decline in IT and supply chain costs, and a moderation of
capital expenditures. This should result in growth in adjusted
operating income(2), adjusted EBITDA(2) and
an increase in free cash flow(2).
FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the
Company's objectives, plans, goals, aspirations, strategies,
financial condition, results of operations, cash flows,
performance, prospects and opportunities. Specific statements with
respect to anticipated future results are included in the "Outlook"
section of this News Release. Forward-looking statements are
typically identified by words such as "expect", "anticipate",
"believe", "foresee", "could", "estimate", "goal", "intend",
"plan", "seek", "strive", "will", "may" and "should" and similar
expressions, as they relate to the Company and its management.
Forward-looking statements reflect the Company's current
estimates, beliefs and assumptions, which are based on management's
perception of historical trends, current conditions and expected
future developments, as well as other factors it believes are
appropriate in the circumstances. The Company's expectation of
operating and financial performance in 2013 is based on certain
assumptions including assumptions about revenue growth, anticipated
cost savings and operating efficiencies, no unanticipated changes
in the effective income tax rates, no unexpected adverse events or
costs related to Loblaw's investments in IT and supply chain, and
no significant unanticipated increase in the price of commodities
and other input costs at Weston Foods that it will not be able to
offset. The Company's estimates, beliefs and assumptions are
inherently subject to significant business, economic, competitive
and other uncertainties and contingencies regarding future events
and as such, are subject to change. The Company can give no
assurance that such estimates, beliefs and assumptions will prove
to be correct.
Numerous risks and uncertainties could cause the Company's
actual results to differ materially from the estimates, beliefs and
assumptions expressed or implied in the forward-looking statements,
including, but not limited to:
- failure to realize anticipated results, including revenue
growth, anticipated cost savings or operating efficiencies from the
Company's major initiatives, including those from
restructuring;
- failure to realize benefits from investments in the Company's
IT systems, including the Company's systems implementation, or
unanticipated results from these initiatives;
- the inability of the Company's IT infrastructure to support the
requirements of the Company's business;
- unanticipated results associated with the Company's strategic
initiatives and the impact of acquisitions or dispositions of
businesses on the Company's future revenues and earnings;
- heightened competition, whether from current competitors or new
entrants to the marketplace;
- changes in economic conditions including the rate of inflation
or deflation, changes in interest and foreign currency exchange
rates and changes in derivative and commodity prices;
- public health events;
- risks associated with product defects, food safety and product
handling;
- failure to achieve desired results in labour negotiations,
including the terms of future collective bargaining agreements
which could lead to work stoppages;
- the inability of the Company to manage inventory to minimize
the impact of obsolete or excess inventory and to control
shrink;
- the impact of potential environmental liabilities;
- failure to respond to changes in consumer tastes and buying
patterns;
- reliance on the performance and retention of third-party
service providers including those associated with the Company's
supply chain and apparel business;
- supply and quality control issues with vendors;
- changes to the regulation of generic prescription drug prices
and the reduction of reimbursement under public drug benefit plans
and the elimination or reduction of professional allowances paid by
drug manufacturers;
- changes in the Company's income, commodity, other tax and
regulatory liabilities including changes in tax laws, regulations
or future assessments;
- any requirement of the Company to make contributions to its
registered funded defined benefit pension plans or the
multi-employer pension plans in which it participates in excess of
those currently contemplated;
- the risk that the Company would experience a financial loss if
its counterparties fail to meet their obligations in accordance
with the terms and conditions of their contracts with the
Company;
- the inability of Loblaw to collect on its credit card
receivables; and
- failure to execute the IPO of Loblaw's proposed REIT.
This is not an exhaustive list of the factors that may affect
the Company's forward-looking statements. Other risks and
uncertainties not presently known to the Company or that the
Company presently believes are not material could also cause actual
results or events to differ materially from those expressed in its
forward-looking statements. Additional risks and uncertainties are
discussed in the Company's materials filed with the Canadian
securities regulatory authorities from time to time, including the
"Enterprise Risks and Risk Management" section of the MD&A
included in the Company's 2013 First Quarter Report to Shareholders
and Section 13, "Enterprise Risks and Risk Management", of the
MD&A included in the Company's 2012 Annual Report. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect the Company's expectations only as of the
date of this News Release. Except as required by law, the Company
does not undertake to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP financial measures:
adjusted operating income and adjusted operating margin, adjusted
EBITDA and adjusted EBITDA margin, adjusted basic net earnings per
common share and free cash flow. The Company believes these
non-GAAP financial measures provide useful information to both
management and investors in measuring the financial performance of
the Company for the reasons outlined below.
Certain expenses and income that must be recognized under GAAP
are not necessarily reflective of the Company's underlying
operating performance. For this reason, management uses certain
non-GAAP financial measures to exclude the impact of these items
when analyzing consolidated and segment underlying operating
performance. These non-GAAP financial measures are also helpful in
assessing underlying operating performance on a consistent
basis.
From time to time, the Company may exclude additional items if
it believes doing so would result in a more effective analysis of
underlying operating performance. The exclusion of certain items
does not imply that they are non-recurring. Loblaw does not report
its results of operations on an adjusted basis, however the Company
excludes the impact of certain Loblaw items, as applicable, when
reporting its consolidated and segment results.
These non-GAAP financial measures do not have a standardized
meaning prescribed by GAAP and therefore they may not be comparable
to similarly titled measures presented by other publicly traded
companies, and they should not be construed as an alternative to
other financial measures determined in accordance with GAAP.
Adjusted Operating Income and Adjusted EBITDA
The Company believes adjusted operating income is useful in
assessing the Company's underlying operating performance and in
making decisions regarding the ongoing operations of its business.
The Company believes adjusted EBITDA is also useful in assessing
the underlying operating performance of the Company's ongoing
operations and in assessing the Company's ability to generate cash
flows to fund its cash requirements, including its capital
investment program.
The following table reconciles adjusted operating income and
adjusted EBITDA to GAAP net earnings attributable to shareholders
of the Company reported for the periods ended as indicated.
|
12 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
Mar. 23,
2013 |
|
|
|
|
Mar. 24, 2012(1) |
(unaudited)
($ millions) |
Weston
Foods |
Loblaw |
Other(2) |
Consolidated |
|
|
Weston
Foods |
Loblaw |
Other(2) |
Consolidated |
Net earnings attributable to shareholders of the
Company |
|
|
|
$ |
162 |
|
|
|
|
|
|
$ |
121 |
|
Add impact of the following: |
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
63 |
|
|
|
|
|
|
45 |
|
Income taxes |
|
|
|
73 |
|
|
|
|
|
|
58 |
|
Net interest expense and other financing
charges |
|
|
|
84 |
|
|
|
|
|
|
50 |
|
Operating income (loss) |
$ |
48 |
|
$ |
307 |
|
$ |
27 |
|
$ |
382 |
|
|
|
$ |
60 |
|
$ |
237 |
|
$ |
(23) |
|
$ |
274 |
|
Add (deduct) impact of the following: |
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges(3) |
1 |
|
|
|
1 |
|
|
|
1 |
|
3 |
|
|
4 |
|
Fair value adjustment of commodity
derivatives at Weston Foods |
8 |
|
|
|
8 |
|
|
|
(3) |
|
|
|
(3) |
|
Share-based compensation net of equity
derivatives |
2 |
|
8 |
|
|
10 |
|
|
|
1 |
|
12 |
|
|
13 |
|
Defined benefit plan amendments |
|
(51) |
|
|
(51) |
|
|
|
|
|
|
|
Foreign currency translation (gain) loss |
|
|
(27) |
|
(27) |
|
|
|
|
|
23 |
|
23 |
|
Adjusted operating income |
$ |
59 |
|
$ |
264 |
|
$ |
$ |
323 |
|
|
|
$ |
59 |
|
$ |
252 |
|
$ |
$ |
311 |
|
Depreciation and amortization |
14 |
|
183 |
|
|
197 |
|
|
|
14 |
|
170 |
|
|
184 |
|
Adjusted EBITDA |
$ |
73 |
|
$ |
447 |
|
$ |
$ |
520 |
|
|
|
$ |
73 |
|
$ |
422 |
|
$ |
$ |
495 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's condensed consolidated financial statements
included in the 2013 First Quarter Report to Shareholders. |
(2) |
Operating income in the first quarter of 2013 included a gain
of $27 million (2012 - loss of $23 million) related to
the effect of foreign currency translation on a portion of the U.S.
dollar denominated cash and short term investments held by foreign
operations. |
(3) |
Restructuring and other charges included $1 million (2012 -
nil) of accelerated depreciation incurred by Weston Foods.
Restructuring and other charges at Loblaw in the first quarter of
2012 of $3 million related to changes in Loblaw's distribution
network. |
The year-over-year changes in the following items influenced
operating income in the first quarter of 2013:
Restructuring and other charges The Company
continuously evaluates strategic and cost reduction initiatives
related to its store infrastructure, manufacturing assets,
distribution networks and administrative infrastructure with the
objective of ensuring a low cost operating structure. Restructuring
activities related to these initiatives are ongoing. The details of
restructuring and other charges are included in the "Reportable
Operating Segments" section of the MD&A included in the
Company's 2013 First Quarter Report to Shareholders.
Fair value adjustment of commodity derivatives at Weston
Foods Weston Foods is exposed to commodity price
fluctuations primarily as a result of purchases of certain raw
materials, fuels and utilities. In accordance with the Company's
risk management policy, Weston Foods enters into commodity
derivatives to reduce the impact of price fluctuations in
forecasted raw material purchases over a specified period of time.
These commodity derivatives are not acquired for trading or
speculative purposes. Pursuant to Weston Foods' derivative
instruments accounting policy, certain changes in fair value, which
include realized and unrealized gains and losses related to future
purchases of raw materials, are recorded in operating income. In
the first quarter of 2013, Weston Foods recorded a charge of
$8 million (2012 - income of
$3 million) related to the fair
value adjustment of exchange traded commodity derivatives. Despite
the impact of accounting for these commodity derivatives on the
Company's reported results, the derivatives have the economic
impact of largely mitigating the associated risks arising from
price fluctuations in the underlying commodities during the period
that the commodity derivatives are held.
Share-based compensation net of equity derivatives
GWL and Glenhuron Bank Limited ("Glenhuron") held equity
derivatives to partially hedge the impact of increases in the value
of GWL and Loblaw common shares on share-based compensation cost.
The amount of net share-based compensation cost recorded in
operating income has historically been mainly dependent upon
changes in the value of GWL and Loblaw common shares and the number
and vesting of Restricted Share Units ("RSUs") and Performance
Share Units ("PSUs") relative to the number of common shares
underlying the equity derivatives. In the first quarter of 2013,
GWL and Glenhuron settled their remaining equity derivative
contracts and the RSU and PSU plans were amended to require
settlement in common shares rather than in cash. As a result of the
settlements and plan amendments, the components of share-based
compensation and their exposure to changes in the value of GWL and
Loblaw common shares have changed. In order to assess consolidated
and segment operating performance on a consistent basis, management
continues to exclude the impact of share-based compensation from
operating income. In the first quarter of 2013, a charge of
$10 million (2012 - $13 million) was recorded related to
share-based compensation net of equity derivatives.
Defined benefit plan amendments During the first
quarter of 2013, the Company announced amendments to certain of its
defined benefit plans impacting certain employees retiring after
January 1, 2015. As a
result, the Company recorded a gain of $51 million and will realize annual pre-tax
savings of approximately $14 million
related to these defined benefit plan amendments.
Foreign currency translation gains and
losses The Company's consolidated financial
statements are expressed in Canadian dollars. A portion of the
Company's (excluding Loblaw's) net assets are denominated in U.S.
dollars and as a result, the Company is exposed to foreign currency
translation gains and losses. The impact of foreign currency
translation on a portion of the U.S. dollar denominated net assets,
primarily cash and short term investments held by foreign
operations is recorded in operating income. In the first quarter of
2013, a foreign currency translation gain of $27 million (2012 - loss of $23 million) was recorded in operating
income as a result of the depreciation (2012 - appreciation) of the
Canadian dollar.
Adjusted Basic Net Earnings per Common Share
The Company believes adjusted basic net earnings per common share
is useful in assessing the Company's underlying operating
performance and in making decisions regarding the ongoing
operations of its business.
The following table reconciles adjusted basic net earnings per
common share to GAAP basic net earnings per common share reported
for the periods ended as indicated.
(unaudited) |
|
12 Weeks Ended |
|
|
|
|
|
($) |
|
Mar. 23, 2013 |
Mar. 24,
2012(1) |
Basic net earnings per common share |
|
$ |
1.19 |
|
|
|
$ |
0.87 |
|
|
Add (Deduct) impact of the
following(2): |
|
|
|
|
|
|
Fair value adjustment of the forward sale
agreement for 9.6 million Loblaw common shares |
|
(0.03) |
|
|
|
(0.25) |
|
|
Restructuring and other charges |
|
0.01 |
|
|
|
0.02 |
|
|
Fair value adjustment of commodity derivatives at
Weston Foods |
|
0.05 |
|
|
|
(0.02) |
|
|
Share-based compensation net of equity
derivatives |
|
0.05 |
|
|
|
0.07 |
|
|
Defined benefit plan amendments |
|
(0.18) |
|
|
|
|
|
Foreign currency translation (gain) loss |
|
(0.21) |
|
|
|
0.18 |
|
|
Adjusted basic net earnings per common share |
|
$ |
0.88 |
|
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
(1) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's condensed consolidated financial statements
included in the 2013 First Quarter Report to Shareholders. |
(2) |
Net of interest, income taxes and non-controlling interests, as
applicable. |
In addition to the items described in the "Adjusted Operating
Income and Adjusted EBITDA" section above, the year-over-year
changes in the following item also influenced basic net earnings
per common share in the first quarter of 2013:
Fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares The fair value
adjustment of the forward sale agreement for 9.6 million
Loblaw common shares is non-cash and is included in consolidated
net interest expense and other financing charges. The adjustment is
determined by changes in the value of the underlying Loblaw common
shares. The first quarter year-over-year decrease in income related
to the fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares was $0.22 per common share and was attributable to a
smaller decrease in the market price of Loblaw common shares in
2013 compared to 2012.
Free Cash Flow
In the first quarter of 2013, the Company refined its definition of
free cash flow as calculated below. The Company believes that this
definition of free cash flow is the appropriate measure in
assessing the Company's cash available for additional funding and
investing activities.
The following table reconciles free cash flow to GAAP measures
reported for the periods ended as indicated.
(unaudited) |
|
12 Weeks Ended |
|
|
|
|
|
|
|
|
($ millions) |
|
Mar. 23, 2013 |
|
|
Mar. 24, 2012 |
|
Cash flows used in operating
activities |
|
$ |
(20) |
|
|
|
$ |
(38) |
|
|
Net decrease in credit card
receivables |
|
(130) |
|
|
|
(114) |
|
|
Less: |
Interest paid |
|
93 |
|
|
|
92 |
|
|
|
Fixed asset purchases |
|
134 |
|
|
|
144 |
|
|
Free cash flow |
|
$ |
(377) |
|
|
|
$ |
(388) |
|
|
|
|
|
|
|
|
|
SELECTED FINANCIAL INFORMATION
The following includes selected quarterly financial information
which is prepared by management in accordance with International
Financial Reporting Standards ("IFRS") and is based on the
Company's 2013 First Quarter Report to Shareholders. This financial
information does not contain all disclosures required by IFRS, and
accordingly, this financial information should be read in
conjunction with the Company's 2012 Annual Report and 2013 First
Quarter Report to Shareholders available in the Investor Centre
section of the Company's website at www.weston.ca.
Condensed Consolidated Statements of Earnings
(unaudited) |
12 Weeks Ended |
|
|
|
(millions of Canadian dollars except where otherwise
indicated) |
Mar. 23, 2013 |
Mar. 24,
2012(3) |
Revenue |
|
$ |
7,494 |
|
|
|
$ |
7,224 |
|
|
Operating Expenses |
|
|
|
|
|
|
|
Cost of inventories sold |
|
5,625 |
|
|
|
5,422 |
|
|
|
Selling, general and
administrative expenses |
|
1,487 |
|
|
|
1,528 |
|
|
|
|
7,112 |
|
|
|
6,950 |
|
|
Operating Income |
|
382 |
|
|
|
274 |
|
|
Net Interest Expense and Other
Financing Charges |
|
84 |
|
|
|
50 |
|
|
Earnings Before Income
Taxes |
|
298 |
|
|
|
224 |
|
|
Income Taxes |
|
73 |
|
|
|
58 |
|
|
Net Earnings |
|
225 |
|
|
|
166 |
|
|
Attributable to: |
|
|
|
|
|
|
|
Shareholders of the Company |
|
162 |
|
|
|
121 |
|
|
|
Non-Controlling Interests |
|
63 |
|
|
|
45 |
|
|
Net Earnings |
|
$ |
225 |
|
|
|
$ |
166 |
|
|
Net Earnings per Common Share
($) |
|
|
|
|
|
|
Basic |
|
$ |
1.19 |
|
|
|
$ |
0.87 |
|
|
Diluted |
|
$ |
1.18 |
|
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
(unaudited) |
As
at |
(millions of Canadian
dollars) |
Mar. 23, 2013 |
Mar. 24,
2012(3) |
|
Dec. 31,
2012(3) |
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
975 |
|
|
|
$ |
1,134 |
|
|
|
|
$ |
1,589 |
|
|
|
Short term investments |
|
2,415 |
|
|
|
2,221 |
|
|
|
|
2,138 |
|
|
|
Accounts receivable |
|
648 |
|
|
|
549 |
|
|
|
|
559 |
|
|
|
Credit card receivables |
|
2,175 |
|
|
|
1,987 |
|
|
|
|
2,305 |
|
|
|
Inventories |
|
2,057 |
|
|
|
2,027 |
|
|
|
|
2,132 |
|
|
|
Income taxes recoverable |
|
12 |
|
|
|
52 |
|
|
|
|
37 |
|
|
|
Prepaid expenses and other assets |
|
116 |
|
|
|
129 |
|
|
|
|
83 |
|
|
|
Assets held for sale |
|
35 |
|
|
|
18 |
|
|
|
|
30 |
|
|
Total Current Assets |
|
8,433 |
|
|
|
8,117 |
|
|
|
|
8,873 |
|
|
Fixed Assets |
|
9,410 |
|
|
|
9,135 |
|
|
|
|
9,452 |
|
|
Investment Properties |
|
95 |
|
|
|
95 |
|
|
|
|
100 |
|
|
Goodwill and Intangible Assets |
|
1,583 |
|
|
|
1,545 |
|
|
|
|
1,571 |
|
|
Deferred Income Taxes |
|
302 |
|
|
|
300 |
|
|
|
|
316 |
|
|
Security Deposits |
|
302 |
|
|
|
348 |
|
|
|
|
348 |
|
|
Franchise Loans Receivable |
|
372 |
|
|
|
352 |
|
|
|
|
363 |
|
|
Other Assets |
|
736 |
|
|
|
831 |
|
|
|
|
781 |
|
|
Total Assets |
|
$ |
21,233 |
|
|
|
$ |
20,723 |
|
|
|
|
$ |
21,804 |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Trade payables and other liabilities |
|
$ |
3,350 |
|
|
|
$ |
3,263 |
|
|
|
|
$ |
3,937 |
|
|
|
Provisions |
|
109 |
|
|
|
65 |
|
|
|
|
123 |
|
|
|
Short term debt |
|
1,330 |
|
|
|
1,290 |
|
|
|
|
1,319 |
|
|
|
Long term debt due within one year |
|
972 |
|
|
|
82 |
|
|
|
|
672 |
|
|
Total Current Liabilities |
|
5,761 |
|
|
|
4,700 |
|
|
|
|
6,051 |
|
|
Provisions |
|
98 |
|
|
|
91 |
|
|
|
|
94 |
|
|
Long Term Debt |
|
5,965 |
|
|
|
6,753 |
|
|
|
|
6,261 |
|
|
Deferred Income Taxes |
|
160 |
|
|
|
175 |
|
|
|
|
160 |
|
|
Other Liabilities |
|
825 |
|
|
|
996 |
|
|
|
|
943 |
|
|
Capital Securities |
|
223 |
|
|
|
222 |
|
|
|
|
223 |
|
|
Total Liabilities |
|
13,032 |
|
|
|
12,937 |
|
|
|
|
13,732 |
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
952 |
|
|
|
950 |
|
|
|
|
953 |
|
|
Contributed Surplus |
|
35 |
|
|
|
19 |
|
|
|
|
28 |
|
|
Retained Earnings |
|
4,810 |
|
|
|
4,585 |
|
|
|
|
4,736 |
|
|
Accumulated Other Comprehensive
Loss |
|
(9) |
|
|
|
(25) |
|
|
|
|
(24) |
|
|
Total Equity Attributable to
Shareholders of the Company |
|
5,788 |
|
|
|
5,529 |
|
|
|
|
5,693 |
|
|
Non-Controlling Interests |
|
2,413 |
|
|
|
2,257 |
|
|
|
|
2,379 |
|
|
Total Equity |
|
8,201 |
|
|
|
7,786 |
|
|
|
|
8,072 |
|
|
Total Liabilities and
Equity |
|
$ |
21,233 |
|
|
|
$ |
20,723 |
|
|
|
|
$ |
21,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flow
(unaudited) |
12 Weeks Ended |
|
|
|
(millions of Canadian
dollars) |
Mar. 23, 2013 |
Mar. 24,
2012(3) |
Operating Activities |
|
|
|
|
|
|
|
Net earnings |
|
$ |
225 |
|
|
|
$ |
166 |
|
|
|
Income taxes |
|
73 |
|
|
|
58 |
|
|
|
Net interest expense and other
financing charges |
|
84 |
|
|
|
50 |
|
|
|
Depreciation and amortization |
|
198 |
|
|
|
184 |
|
|
|
Foreign currency translation (gain)
loss |
|
(27) |
|
|
|
23 |
|
|
|
Gain on defined benefit plan
amendments |
|
(51) |
|
|
|
|
|
|
Income taxes paid |
|
(52) |
|
|
|
(73) |
|
|
|
Interest received |
|
13 |
|
|
|
9 |
|
|
|
Settlement of equity derivative
contracts |
|
(45) |
|
|
|
|
|
|
Change in credit card receivables |
|
130 |
|
|
|
114 |
|
|
|
Change in non-cash working
capital |
|
(570) |
|
|
|
(580) |
|
|
|
Fixed assets and other related
impairments |
|
|
|
|
3 |
|
|
|
Gain on disposal of assets |
|
(1) |
|
|
|
|
|
|
Other |
|
3 |
|
|
|
8 |
|
|
Cash Flows used in Operating
Activities |
|
(20) |
|
|
|
(38) |
|
Investing Activities |
|
|
|
|
|
|
|
Fixed asset purchases |
|
(134) |
|
|
|
(144) |
|
|
|
Change in short term investments |
|
(235) |
|
|
|
103 |
|
|
|
Business acquisition |
|
(9) |
|
|
|
|
|
|
Proceeds from fixed asset sales |
|
2 |
|
|
|
1 |
|
|
|
Change in franchise investments and
other receivables |
|
8 |
|
|
|
(17) |
|
|
|
Change in security deposits |
|
49 |
|
|
|
14 |
|
|
|
Intangible asset additions |
|
(9) |
|
|
|
|
|
|
Other |
|
(3) |
|
|
|
|
|
Cash Flows used in Investing
Activities |
|
(331) |
|
|
|
(43) |
|
|
Financing Activities |
|
|
|
|
|
|
|
Change in bank indebtedness |
|
|
|
|
(4) |
|
|
|
Change in short term debt |
|
11 |
|
|
|
10 |
|
|
|
Long term debt |
- Issued |
|
10 |
|
|
|
23 |
|
|
|
- Retired |
|
(26) |
|
|
|
(29) |
|
|
|
Share capital |
- Purchased and held in trust |
|
(15) |
|
|
|
|
|
|
- Retired |
|
(42) |
|
|
|
|
|
|
Subsidiary share capital |
- Issued |
|
11 |
|
|
|
2 |
|
|
|
|
- Purchased and held in trust |
|
(46) |
|
|
|
|
|
|
|
- Retired |
|
|
|
|
(2) |
|
|
|
Interest paid |
|
(93) |
|
|
|
(92) |
|
|
|
Dividends |
- To common shareholders |
|
(49) |
|
|
|
(46) |
|
|
|
|
- To preferred shareholders |
|
(11) |
|
|
|
(11) |
|
|
|
|
- To minority shareholders |
|
(23) |
|
|
|
|
|
Cash Flows used in Financing
Activities |
|
(273) |
|
|
|
(149) |
|
|
Effect of foreign currency exchange
rate changes on cash and cash equivalents |
|
10 |
|
|
|
(8) |
|
|
Change in Cash and Cash
Equivalents |
|
(614) |
|
|
|
(238) |
|
|
Cash and Cash Equivalents, Beginning
of Period |
|
1,589 |
|
|
|
1,372 |
|
|
Cash and Cash Equivalents, End of
Period |
|
$ |
975 |
|
|
|
$ |
1,134 |
|
|
|
|
|
|
|
|
|
Footnote Legend:
(1) |
This News Release contains forward-looking information. See
Forward-Looking Statements of this News Release for a discussion of
material factors that could cause actual results to differ
materially from the conclusions, forecasts and projections herein
and of the material factors, estimates, beliefs and assumptions
that were applied in presenting the conclusions, forecasts and
projections presented herein. This News Release must be read in
conjunction with George Weston Limited's filings with securities
regulators made from time to time, all of which can be found at
www.weston.ca and www.sedar.com. |
(2) |
See non-GAAP financial measures. |
(3) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's condensed consolidated financial statements
included in the 2013 First Quarter Report to Shareholders. |
(4) |
Effective income tax rate excludes the tax impact of items
excluded from adjusted basic net earnings per common
share(2). |
2013 FIRST QUARTER REPORT TO SHAREHOLDERS
The Company's 2012 Annual Report and 2013 First Quarter Report to
Shareholders are available in the Investor Centre section of the
Company's website at www.weston.ca and have been filed with SEDAR
and will be available at www.sedar.com.
INVESTOR RELATIONS
Shareholders, security analysts and investment professionals should
direct their requests to Mr. Geoffrey H.
Wilson, Senior Vice President, Financial Control and
Investor Relations, at the Company's Executive Office or by e-mail
at investor@weston.ca.
Additional financial information has been filed electronically
with the Canadian securities regulatory authorities in Canada through SEDAR. This News Release
includes selected information on Loblaw Companies Limited, a
63.1%-owned public reporting subsidiary company with shares trading
on the Toronto Stock Exchange. For information regarding Loblaw,
readers should also refer to the materials filed by Loblaw with the
Canadian securities regulatory authorities from time to time. These
filings are also maintained at Loblaw's corporate website at
www.loblaw.ca.
CONFERENCE CALL AND WEBCAST PRESENTATION
George Weston Limited will host a conference call as well as an
audio webcast on Tuesday, May 7, 2013
at 11:00 a.m. (EST). To access
via tele-conference, please dial (647) 427-7450. The playback will
be available two hours after the event at (416) 849-0833, passcode:
27675018#. To access via audio webcast, please visit the Investor
Centre section of www.weston.ca. Pre-registration will be
available.
Annual Meeting
The George Weston Limited Annual Meeting of Shareholders will be
held on Thursday, May 9, 2013 at
11:00 a.m. (EST) at The
Royal Conservatory, TELUS Centre for Performance and Learning,
Koerner Hall,
273 Bloor Street West, Toronto, Ontario, Canada. To access via
tele-conference, please dial (647) 427-7450. The playback will
be available two hours after the event at (416) 849-0833,
passcode: 29581945#. To access via audio webcast, please visit the
Investor Centre section of www.weston.ca. Pre-registration will be
available.
SOURCE George Weston Limited