TORONTO, Feb. 27, 2014 /CNW/ - George Weston Limited (TSX:
WN) ("GWL") today announced its consolidated unaudited results for
the 12 weeks ended December 31,
2013 and the release of its 2013 Annual Report.
The 2013 Annual Report to Shareholders of George Weston Limited
and its subsidiaries (together referred to as the "Company"),
including the Company's audited annual consolidated financial
statements and Management's Discussion and Analysis ("MD&A")
for the fiscal year ended December 31,
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 Fourth Quarter Summary
- Sales growth of 2.5% to $7,919
million.
- Adjusted operating income(1) declined to
$374 million from $382 million.
- Adjusted basic net earnings per common share(1)
increased to $1.11 from $1.00 in the fourth quarter of 2012.
"2013 was a transformational year for George Weston Limited. We
made significant progress on our strategic initiatives and are
well-positioned for the future. We continued to focus on long term
value creation for shareholders through our support of the Shoppers
Drug Mart acquisition, the launch of Choice Properties REIT and by
raising our common share dividend in the second quarter", said
W. Galen Weston, Executive Chairman,
George Weston Limited.
CONSOLIDATED RESULTS OF
OPERATIONS |
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(unaudited) |
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($ millions except where otherwise
indicated) |
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12 Weeks Ended |
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52 Weeks Ended |
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For the periods
ended as indicated |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Change |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Change |
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Sales |
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$ |
7,919 |
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$ |
7,727 |
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2.5% |
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$ |
33,582 |
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$ |
32,742 |
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2.6% |
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Operating income |
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$ |
394 |
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$ |
321 |
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22.7% |
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$ |
1,621 |
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$ |
1,393 |
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16.4% |
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Adjusted operating
income(1) |
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$ |
374 |
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$ |
382 |
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(2.1)% |
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$ |
1,584 |
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$ |
1,570 |
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0.9% |
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Adjusted operating
margin(1) |
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4.7% |
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4.9% |
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4.7% |
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4.8% |
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Adjusted EBITDA(1) |
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$ |
585 |
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$ |
583 |
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0.3% |
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$ |
2,471 |
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$ |
2,406 |
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2.7% |
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Adjusted EBITDA
margin(1) |
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7.4% |
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7.5% |
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7.4% |
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7.3% |
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Net earnings from
continuing
operations attributable to
shareholders of the Company |
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$ |
185 |
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$ |
63 |
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193.7% |
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$ |
616 |
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$ |
475 |
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29.7% |
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Net earnings from
continuing
operations |
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$ |
232 |
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$ |
112 |
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107.1% |
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$ |
849 |
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$ |
708 |
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19.9% |
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Discontinued operations |
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$ |
58 |
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Basic net earnings
per common
share from continuing
operations ($) |
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$ |
1.37 |
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$ |
0.41 |
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234.1% |
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$ |
4.48 |
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$ |
3.36 |
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33.3% |
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Adjusted basic net earnings
per
common share from continuing
operations(1) ($) |
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$ |
1.11 |
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$ |
1.00 |
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11.0% |
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$ |
4.49 |
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$ |
4.39 |
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2.3% |
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Pavi Binning, President, George
Weston Limited, commented that "George Weston Limited's fourth
quarter results continue to reflect the challenging
environments in which both of its operating segments participate.
In 2014, Loblaw and Weston Foods will continue to execute their
respective strategies with a view to driving sales growth while
focusing on cost and efficiencies".
George Weston Limited's fourth quarter 2013 adjusted basic net
earnings per common share(1) were $1.11 compared to $1.00 in the same period in 2012, an increase of
$0.11. The increase was due to a
lower effective income tax rate(4) partially offset by
declines in the operating performance of the Company's two
operating segments, Weston Foods and Loblaw Companies Limited
("Loblaw"), compared to the same period in 2012. The lower
effective income tax rate(4) was primarily due to an
increase in income tax recoveries related to prior year income tax
matters and the reversal of previously recognized current tax
assets in the fourth quarter of 2012.
Basic net earnings per common share increased to $1.37 compared to $0.41, an increase of $0.96, and was positively impacted by the fair
value adjustment of the forward sale agreement for 9.6 million
Loblaw common shares and a number of other items. For a
complete list of items which impacted basic net earnings per common
share but that are excluded from adjusted basic net earnings per
common share(1), see the "Non-GAAP Financial Measures"
section of this News Release.
In the fourth quarter of 2013, Loblaw announced the reduction of
approximately 275 store-support positions and incurred a charge of
$32 million associated with this
restructuring.
OPERATING SEGMENTS
Weston Foods |
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(unaudited) |
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12 Weeks Ended |
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52 Weeks Ended |
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($ millions
except where otherwise indicated) |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Sales |
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$ |
413 |
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$ |
399 |
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$ |
1,812 |
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$ |
1,765 |
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Operating income |
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$ |
40 |
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$ |
44 |
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$ |
238 |
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$ |
230 |
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Adjusted operating
income(1) |
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$ |
54 |
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$ |
57 |
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$ |
267 |
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$ |
275 |
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Adjusted operating
margin(1) |
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13.1% |
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14.3% |
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14.7% |
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15.6% |
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Adjusted EBITDA(1) |
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$ |
69 |
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$ |
71 |
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$ |
330 |
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$ |
334 |
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Adjusted EBITDA
margin(1) |
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16.7% |
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17.8% |
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18.2% |
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18.9% |
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For the fourth quarter of 2013, Weston Foods sales increased by
3.5% to $413 million from
$399 million and volumes
increased by 0.1% compared to the same period in 2012. Excluding
the impact of the loss of certain frozen products that Weston Foods
distributed on behalf of certain customers in 2012 and foreign
currency translation, sales increased by 1.6% due to the combined
positive impact of pricing and changes in sales mix of 1.4% and an
increase in volume of 0.2%.
Weston Foods operating income was $40 million in the fourth quarter of 2013
compared to $44 million in the
same period in 2012. Operating margin for the fourth quarter of
2013 was 9.7% compared to 11.0% in the same period in 2012.
Adjusted operating income(1) decreased by
$3 million, or 5.3%, to
$54 million in the fourth
quarter of 2013 from $57 million
in the same period in 2012. Adjusted operating margin(1)
was 13.1% for the fourth quarter of 2013 compared to 14.3% in the
same period in 2012.
Adjusted operating income(1) was positively impacted
by higher sales volumes driven by investments in growth, marketing
and innovation, including new manufacturing capacity and
promotional activity, as well as higher pricing and the benefits
realized from productivity improvements and other cost reduction
initiatives. This improvement was more than offset by a decline in
the performance of the frozen dough business, the cost impact of
investments, including the impact of changes in sales mix, and
higher commodity and other input costs. Excluding the frozen dough
business, adjusted operating income(1) was stable during
the quarter.
Loblaw |
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(unaudited) |
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12 Weeks Ended |
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52 Weeks Ended |
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($ millions except where
otherwise indicated) |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Dec. 31, 2013 |
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Dec.
31, 2012(3) |
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Sales |
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$ |
7,640 |
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$ |
7,465 |
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$ |
32,371 |
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$ |
31,604 |
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Operating income |
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$ |
312 |
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$ |
259 |
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$ |
1,308 |
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$ |
1,187 |
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Adjusted operating
income(1) |
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$ |
320 |
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$ |
325 |
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$ |
1,317 |
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$ |
1,295 |
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Adjusted operating
margin(1) |
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4.2% |
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4.4% |
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4.1% |
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4.1% |
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Adjusted EBITDA(1) |
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$ |
516 |
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$ |
512 |
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$ |
2,141 |
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$ |
2,072 |
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Adjusted EBITDA
margin(1) |
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6.8% |
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6.9% |
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6.6% |
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6.6% |
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Loblaw sales in the fourth quarter of 2013 increased by 2.3% to
$7.6 billion from $7.5 billion in the same period in 2012.
Same-store sales growth was 0.6% (2012 - flat), positively impacted
by the timing of the Thanksgiving
holiday, estimated to be between 0.6% and 0.8%, and negatively
impacted by an ice storm in Eastern
Canada and a strike in Western
Canada which negatively impacted same-store sales growth by
approximately 0.2% and 0.1%, respectively. The range of same-store
sales growth for the quarter, after the impact of these items, was
approximately 0.1% to 0.3%. Loblaw's average quarterly internal
food price inflation during the fourth quarter of 2013 was lower
than the average quarterly national food price inflation of 0.9%
(2012 - 1.5%) as measured by "The Consumer Price Index for
Food Purchased from Stores". In the last 12 months, corporate and
franchise square footage increased 0.8% (2012 - 0.6%). Loblaw sales
in the fourth quarter of 2013 were also positively impacted by an
increase in Financial Services segment revenue.
Loblaw operating income increased by $53 million to $312 million in the fourth quarter of 2013
compared to $259 million in the
same period in 2012. Loblaw operating income was positively
impacted by the favourable year-over-year change in fixed asset and
other related (recoveries) impairments and lower restructuring and
other charges, partially offset by a number of other items. For a
complete list of items which impacted operating income but that are
excluded from adjusted operating income(1), see the
"Non-GAAP Financial Measures" section of this News Release. In
addition, operating income was negatively impacted by a decrease in
underlying operating performance of $5 million, or 1.5%, as described below.
Loblaw adjusted operating income(1) was $320 million in the fourth quarter of 2013
compared to $325 million in the
same period in 2012, a decrease of $5 million. Adjusted operating
margin(1) was 4.2% compared to 4.4% in the same period
in 2012. The decreases in adjusted operating income(1)
and adjusted operating margin(1) were primarily driven
by a decline in Loblaw's Retail segment, partially offset by an
improvement in Loblaw's Financial Services segment. The decrease in
Loblaw's Retail segment was primarily driven by investments in, and
changes to the value of Loblaw's franchise business, costs related
to the growth in certain of Loblaw's emerging businesses and higher
other operating costs, including depreciation and amortization,
partially offset by higher gross profit and labour efficiencies.
The increase in Loblaw's Financial Services segment was mainly
attributable to higher revenues, partially offset by higher
operating costs and continued investments in marketing and customer
acquisitions.
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES
Net interest expense and other financing charges in the fourth
quarter of 2013 decreased to $106 million from $175 million in the same period in 2012. The
decrease included the favourable year-over-year impact of the fair
value adjustment of the forward sale agreement for 9.6 million
Loblaw common shares of $111 million, partially offset by the
unfavourable year-over-year impact of a number of Choice Properties
Real Estate Investment Trust ("Choice Properties") and Shoppers
Drug Mart Corporation ("Shoppers Drug Mart") related items recorded
in the fourth quarter of 2013 as follows:
- a fair value adjustment related to the Trust Unit liability,
reflecting the change in the fair value of Choice Properties'
Trust Units ("Units") held by unitholders other than the Company,
of $23 million; and
- net interest expense of $14
million relating to indebtedness incurred to finance the
acquisition of Shoppers Drug Mart.
Excluding the above impacts, net interest expense and other
financing charges in the fourth quarter of 2013 increased by
$5 million, primarily driven by
Unit distributions by Choice Properties.
INCOME TAXES
In the fourth quarter of 2013 income taxes increased to
$56 million from $34 million, and the effective income tax rate
decreased to 19.4% from 23.3% in the same period in 2012.
The decrease in the effective income tax rate when compared to
2012 was primarily due to an increase in income tax recoveries
related to prior year matters, reversal of previously recognized
current tax assets in the fourth quarter of 2012 and higher
non-taxable foreign currency translation gains partially offset by
an increase in non-deductible amounts (including fair value
adjustments related to the Trust Unit liability). The Company
(excluding Loblaw) expensed current tax assets of $8 million in the fourth quarter of 2012 due to
amendments to the Income Tax Act relating to the taxation of
Canadian corporations with foreign affiliates.
AGREEMENT TO ACQUIRE SHOPPERS DRUG MART CORPORATION
On July 14, 2013, Loblaw entered into
an arrangement agreement to acquire all of the outstanding common
shares of Shoppers Drug Mart. The transaction is subject to various
regulatory approvals under the Competition Act (Canada) and by the Toronto Stock Exchange, and
the fulfillment of certain other closing conditions customary in
transactions of this nature. The process of review under the
Competition Act (Canada) is
proceeding as expected and the Company anticipates that the
transaction will be completed during the first quarter of 2014.
There can be no assurance that all conditions will be met or waived
or that Loblaw will be able to successfully consummate the proposed
transaction as currently contemplated or at all.
OUTLOOK(2)
This outlook reflects the underlying operating performance of the
Company's operating segments as discussed below.
For full year 2014, Weston Foods expects modest sales growth
driven primarily by volumes. Despite the anticipated growth in
sales, adjusted operating income(1) is expected to
decline due to continued investments in growth, including plant
start-up costs, capabilities, marketing and innovation. In
addition, results will be more challenged in the first half of the
year by the performance of the frozen dough business and higher
commodity and other input costs.
Loblaw will continue to focus on investing in its customer
proposition in 2014 in its retail business - value, assortment and
service - while focusing on balancing these investments with
incremental efficiencies. In the first half of 2014 the environment
is expected to remain extremely competitive driven by continued
greater than historical square footage expansion, which is expected
to moderate in the second half of the year.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the fourth quarter of 2013, the Company's
Board of Directors declared a quarterly dividend on George Weston
Limited Common Shares, Preferred Shares, Series I, Preferred
Shares, Series III, Preferred Shares, Series IV and Preferred
Shares, Series V payable as follows:
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Common Shares |
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$0.415 per share payable April 1,
2014, to shareholders of record March 15, 2014; |
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Preferred Shares, Series I |
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$0.3625 per share payable March 15,
2014, to shareholders of record February 28, 2014; |
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Preferred Shares, Series III |
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$0.3250 per share payable April 1,
2014, to shareholders of record March 15, 2014; |
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Preferred Shares, Series IV |
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$0.3250 per share payable April 1,
2014, to shareholders of record March 15, 2014; and |
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Preferred Shares, Series V |
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$0.296875 per share payable April 1,
2014, to shareholders of record March 15, 2014. |
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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 forward-looking
statements in this News Release include, but are not limited to,
statements with respect to the Company's anticipated future results
and events and future plans. These specific forward-looking
statements are contained throughout this News Release including,
without limitation, 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 2014 is based on certain
assumptions including assumptions about sales and volume growth,
anticipated cost savings and operating efficiencies, and
competitive square footage growth. 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 those expressed, implied
or projected in the forward-looking statements, including those
described in Section 16, "Enterprise Risks and Risk Management" of
the MD&A included in the Company's 2013 Annual Report. Such
risks and uncertainties include:
- failure by Loblaw to complete the acquisition of Shoppers Drug
Mart or to realize the anticipated strategic benefits or
operational, competitive and cost synergies;
- failure to realize benefits from investments in the Company's
information technology ("IT") systems, including the Company's
systems implementation, or unanticipated results from these
initiatives;
- failure to realize anticipated results, including revenue
growth, anticipated cost savings or operating efficiencies from the
Company's major initiatives, including those from
restructuring;
- the inability of the Company's IT infrastructure to support the
requirements of the Company's business;
- 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;
- 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;
- changes in the Company's income, capital, commodity, property
and other tax and regulatory liabilities including changes in tax
laws, regulations or future assessments;
- changes to the regulation of generic prescription drug prices
and the reduction of reimbursements under public drug benefit plans
and the elimination or reduction of professional allowances paid by
drug manufacturers;
- the inability of the Company to manage inventory to minimize
the impact of obsolete or excess inventory and to control
shrink;
- changes in the Company's estimate of inventory cost as a result
of its IT system upgrade;
- failure to respond to changes in consumer and retail customer
trends;
- 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 in both advanced
and developing markets;
- the impact of potential environmental liabilities;
- any requirement of the Company to make contributions to its
registered funded defined benefit pension plans or the
multi-employer pension plans ("MEPPs") 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 of Choice Properties to execute its plan and realize
its forecasted results.
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. 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, and adjusted basic net earnings
per common share. 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.
Management uses these and other non-GAAP financial measures to
exclude the impact of certain expenses and income that must be
recognized under GAAP when analyzing consolidated and segment
underlying operating performance, as the excluded items are not
necessarily reflective of the Company's underlying operating
performance and make comparisons of underlying financial
performance between periods difficult. 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. Beginning in the third quarter of 2013,
Loblaw began reporting its results of operations on an adjusted
basis. The Company excludes the impact of items excluded by Loblaw
management when reporting its consolidated and segment results.
These 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 tables reconcile 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31,
2013 |
|
|
|
|
|
Dec. 31,
2012(i) |
|
(unaudited)
($ millions) |
Weston
Foods |
|
Loblaw |
|
Other(ii) |
|
Consolidated |
|
|
|
Weston
Foods |
|
Loblaw |
|
Other(ii) |
|
Consolidated |
|
Net earnings attributable to
shareholders of the
Company |
|
|
|
|
|
|
|
|
|
$ |
185 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
63 |
|
Add impact of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
34 |
|
Net interest expense and other financing
charges |
|
|
|
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
175 |
|
Operating income |
$ |
40 |
|
$ |
312 |
|
$ |
42 |
|
$ |
394 |
|
|
|
$ |
44 |
|
$ |
259 |
|
$ |
18 |
|
$ |
321 |
|
Add (deduct) impact of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other
charges(iii) |
|
3 |
|
|
32 |
|
|
|
|
|
35 |
|
|
|
|
3 |
|
|
63 |
|
|
|
|
|
66 |
|
Fair value adjustment of commodity
derivatives at Weston Foods |
|
4 |
|
|
|
|
|
|
|
|
4 |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
10 |
|
Share-based compensation net
of
equity derivatives |
|
2 |
|
|
8 |
|
|
|
|
|
10 |
|
|
|
|
(4) |
|
|
2 |
|
|
|
|
|
(2) |
|
Fixed asset and other related
(recoveries)
impairments |
|
|
|
|
(42) |
|
|
|
|
|
(42) |
|
|
|
|
|
|
|
12 |
|
|
|
|
|
12 |
|
Shoppers Drug Mart acquisition costs |
|
|
|
|
7 |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Choice Properties general and
administrative costs |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEPP withdrawal liability
incurred
by Weston Foods |
|
5 |
|
|
|
|
|
|
|
|
5 |
|
|
|
|
17 |
|
|
|
|
|
|
|
|
17 |
|
Gain on disposal of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|
|
|
|
|
(11) |
|
Defined benefit plan amendments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
|
|
|
|
|
|
|
|
(8) |
|
Weston Foods insurance proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
|
(5) |
|
Foreign currency translation gain |
|
|
|
|
|
|
|
(42) |
|
|
(42) |
|
|
|
|
|
|
|
|
|
|
(18) |
|
|
(18) |
|
Adjusted operating income |
$ |
54 |
|
$ |
320 |
|
$ |
|
|
$ |
374 |
|
|
|
$ |
57 |
|
$ |
325 |
|
$ |
|
|
$ |
382 |
|
Depreciation and amortization |
|
15 |
|
|
196 |
|
|
|
|
|
211 |
|
|
|
|
14 |
|
|
187 |
|
|
|
|
|
201 |
|
Adjusted EBITDA |
$ |
69 |
|
$ |
516 |
|
$ |
|
|
$ |
585 |
|
|
|
$ |
71 |
|
$ |
512 |
|
$ |
|
|
$ |
583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's consolidated financial statements included in the
2013 Annual Report. |
(ii) |
Operating income in the fourth quarter of 2013 included a gain
of $42 million (2012 - $18 million) related to the effect of
foreign currency translation on a portion of the United States
("U.S.") dollar denominated cash and short term investments held by
foreign operations. |
(iii) |
Restructuring and other charges included $1 million (2012 - $1
million) of accelerated depreciation incurred by Weston Foods. |
|
52 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31, 2013 |
|
|
|
|
Dec. 31, 2012(i) |
|
(unaudited)
($ millions) |
Weston
Foods |
|
Loblaw |
|
Other(ii) |
|
Consolidated |
|
|
|
Weston
Foods |
|
Loblaw |
|
Other(ii) |
|
Consolidated |
|
Net earnings from continuing
operations
attributable to shareholders of the Company |
|
|
|
|
|
|
|
|
|
$ |
616 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
475 |
|
Add impact of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
|
|
|
|
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
233 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
Net interest expense and other financing
charges |
|
|
|
|
|
|
|
|
|
|
497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
441 |
|
Operating income (loss) |
$ |
238 |
|
$ |
1,308 |
|
$ |
75 |
|
$ |
1,621 |
|
|
|
$ |
230 |
|
$ |
1,187 |
|
$ |
(24) |
|
$ |
1,393 |
|
Add (deduct) impact of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other
charges(iii) |
|
6 |
|
|
35 |
|
|
|
|
|
41 |
|
|
|
|
12 |
|
|
72 |
|
|
|
|
|
84 |
|
Fair value adjustment of
commodity
derivatives at Weston Foods |
|
10 |
|
|
|
|
|
|
|
|
10 |
|
|
|
|
(6) |
|
|
|
|
|
|
|
|
(6) |
|
Share-based compensation net
of equity derivatives |
|
8 |
|
|
32 |
|
|
|
|
|
40 |
|
|
|
|
1 |
|
|
28 |
|
|
|
|
|
29 |
|
Fixed asset and other related
(recoveries)
impairments |
|
|
|
|
(32) |
|
|
|
|
|
(32) |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
19 |
|
Shoppers Drug Mart acquisition costs |
|
|
|
|
16 |
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Choice Properties general and
administrative costs |
|
|
|
|
6 |
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Choice Properties start-up costs |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plan amendments |
|
|
|
|
(51) |
|
|
|
|
|
(51) |
|
|
|
|
(8) |
|
|
|
|
|
|
|
|
(8) |
|
MEPP withdrawal liability incurred
by
Weston Foods |
|
5 |
|
|
|
|
|
|
|
|
5 |
|
|
|
|
51 |
|
|
|
|
|
|
|
|
51 |
|
Gain on disposal of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|
|
|
|
|
(11) |
|
Weston Foods insurance proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
|
(5) |
|
Foreign currency translation (gain) loss |
|
|
|
|
|
|
|
(75) |
|
|
(75) |
|
|
|
|
|
|
|
|
|
|
24 |
|
|
24 |
|
Adjusted operating income |
$ |
267 |
|
$ |
1,317 |
|
$ |
|
|
$ |
1,584 |
|
|
|
$ |
275 |
|
$ |
1,295 |
|
$ |
|
|
$ |
1,570 |
|
Depreciation and amortization |
|
63 |
|
|
824 |
|
|
|
|
|
887 |
|
|
|
|
59 |
|
|
777 |
|
|
|
|
|
836 |
|
Adjusted EBITDA |
$ |
330 |
|
$ |
2,141 |
|
$ |
|
|
$ |
2,471 |
|
|
|
$ |
334 |
|
$ |
2,072 |
|
$ |
|
|
$ |
2,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's consolidated financial statements included in the
2013 Annual Report. |
(ii) |
Year-to-date operating income included a gain of $75 million
(2012 - loss of $24 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. |
(iii) |
Restructuring and other charges included $4 million (2012 - $4
million) of accelerated depreciation incurred by Weston Foods. |
The year-over-year change in the following items influenced
operating income in the fourth 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
"Results of Reportable Operating Segments" and "Fourth Quarter
Results of Reportable Operating Segments" sections of the MD&A
included in the Company's 2013 Annual Report.
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
commodity 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 fourth quarter of 2013, Weston Foods recorded a charge of
$4 million (2012 - $10 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
Until the first quarter of 2013, 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 fourth quarter of 2013,
a charge of $10 million (2012 -
income of $2 million) was recorded
related to share-based compensation net of equity derivatives.
Fixed asset and other related (recoveries)
impairments At each balance sheet date, the Company
assesses and, when required, records impairments and recoveries of
previous impairments related to the carrying value of its fixed
assets, investment properties and intangible assets. In the fourth
quarter of 2013, Loblaw recorded net recoveries of $42 million (2012 - a charge of $12 million).
Shoppers Drug Mart acquisition costs In
connection with the agreement to acquire all of the outstanding
common shares of Shoppers Drug Mart, in the fourth quarter of 2013,
Loblaw incurred $7 million of
acquisition costs.
Choice Properties general and administrative
costs In the fourth quarter of 2013, Loblaw recorded
incremental general and administrative costs relating to Choice
Properties of $3 million.
Multi-employer pension plan withdrawal liability incurred
by Weston Foods During 2012, Weston Foods withdrew
from one of the U.S. MEPPs in which it participated and as a
result, paid a withdrawal liability of $34 million. During the fourth quarter of
2012, another participating employer withdrew from the plan and a
mass withdrawal was triggered. As a result of the mass withdrawal,
the Company is subject to an incremental withdrawal liability and
an additional provision of $5 million
was recorded in operating income during the fourth quarter of 2013.
The total liability recorded as at year end 2013 relating to the
Company's mass withdrawal liability is $22
million, $17 million of
which was recorded in the fourth quarter of 2012.
Gain on disposal of assets In the fourth
quarter of 2012, Loblaw recognized a gain of $11 million related to the sale of a
property.
Defined benefit plan amendments During the
fourth quarter of 2012, Weston Foods negotiated the elimination of
certain post-retirement benefits. As a result, a net gain of
$8 million was recorded in
operating income.
Weston Foods insurance proceeds In the
fourth quarter of 2012, Weston Foods recorded insurance proceeds of
$5 million related to the loss
of a Quebec facility in 2010.
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 fourth quarter
of 2013, a foreign currency translation gain of $42 million (2012 - $18 million) was recorded in operating
income as a result of the appreciation (2012 - appreciation) of the
U.S. dollar relative to the Canadian dollar.
Adjusted Basic Net Earnings per Common Share from Continuing
Operations
The Company believes adjusted basic net earnings per common
share from continuing operations is useful in assessing the
Company's underlying operating performance and in making decisions
regarding the ongoing operations of its business.
The following table reconciles adjusted basic net earnings per
common share from continuing operations to GAAP basic net earnings
per common share from continuing operations reported for the
periods ended as indicated.
|
|
12 Weeks Ended |
|
|
52 Weeks Ended |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($) |
|
Dec. 31, 2013 |
|
|
Dec. 31,
2012(i) |
|
|
|
Dec. 31, 2013 |
|
Dec. 31,
2012(i) |
|
Basic net earnings per common
share from continuing operations |
|
$ |
1.37 |
|
|
|
$ |
0.41 |
|
|
|
|
$ |
4.48 |
|
|
|
$ |
3.36 |
|
(Deduct) Add impact of the
following(ii): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
adjustment of the forward sale agreement
for 9.6 million Loblaw common shares |
|
|
(0.21) |
|
|
|
|
0.44 |
|
|
|
|
|
(0.01) |
|
|
|
|
0.20 |
|
Restructuring and other charges |
|
|
0.14 |
|
|
|
|
0.24 |
|
|
|
|
|
0.17 |
|
|
|
|
0.33 |
|
Fair value adjustment of commodity derivatives at
Weston Foods |
|
|
0.03 |
|
|
|
|
0.06 |
|
|
|
|
|
0.06 |
|
|
|
|
(0.03) |
|
Share-based compensation net of equity
derivatives |
|
|
0.05 |
|
|
|
|
(0.03) |
|
|
|
|
|
0.20 |
|
|
|
|
0.14 |
|
Fixed asset and other related
(recoveries) impairments |
|
|
(0.14) |
|
|
|
|
0.05 |
|
|
|
|
|
(0.11) |
|
|
|
|
0.07 |
|
Shoppers Drug Mart acquisition costs and net
financing charges |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
0.13 |
|
|
|
|
|
|
Choice Properties general and
administrative costs |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
0.03 |
|
|
|
|
|
|
Choice Properties start-up and IPO transaction
costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
0.17 |
|
|
|
|
|
|
Defined benefit plan amendments |
|
|
|
|
|
|
|
(0.04) |
|
|
|
|
|
(0.18) |
|
|
|
|
(0.04) |
|
MEPP withdrawal liability incurred by Weston
Foods |
|
|
0.02 |
|
|
|
|
0.08 |
|
|
|
|
|
0.02 |
|
|
|
|
0.24 |
|
Gain on disposal of assets |
|
|
|
|
|
|
|
(0.04) |
|
|
|
|
|
|
|
|
|
|
(0.04) |
|
Weston Foods insurance proceeds |
|
|
|
|
|
|
|
(0.03) |
|
|
|
|
|
|
|
|
|
|
(0.03) |
|
Early debt settlement costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
0.06 |
|
|
|
|
|
|
Fair value adjustment of Trust Unit liability |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
0.06 |
|
|
|
|
|
|
Foreign currency translation (gain) loss |
|
|
(0.33) |
|
|
|
|
(0.14) |
|
|
|
|
|
(0.59) |
|
|
|
|
0.19 |
|
Adjusted basic net earnings per
common share from
continuing operations |
|
$ |
1.11 |
|
|
|
$ |
1.00 |
|
|
|
|
$ |
4.49 |
|
|
|
$ |
4.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's consolidated financial statements included in the
2013 Annual Report. |
(ii) |
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
change in the following items also influenced basic net earnings
per common share in the fourth 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 net interest
expense and other financing charges. The adjustment is determined
by changes in the value of the underlying Loblaw common shares. In
the fourth quarter of 2013, income of $34 million on a pre-tax basis (2012 - a
charge of $77 million) was
recorded in net interest expense and other financing charges as a
result of the decrease (2012 - increase) in the market price of
Loblaw common shares.
Shoppers Drug Mart net financing charges In
addition to the acquisition costs noted above, during the fourth
quarter of 2013, net charges of $14 million on a pre-tax basis were incurred
in connection with the committed financing related to the
acquisition.
Choice Properties initial public offering ("IPO")
transaction costs In addition to the start-up costs noted
above, transaction costs of $1 million, on a pre-tax basis were incurred
in the fourth quarter of 2013 related directly to the IPO. These
transaction costs were recorded in net interest expense and other
financing charges.
Fair value adjustment of Trust Unit
liability The Company is exposed to market price
fluctuations as a result of the Choice Properties Units held
by the public. These Units are presented as a liability on the
Company's consolidated balance sheet as they are redeemable for
cash at the option of the holder, subject to certain restrictions.
This liability is recorded at fair value at each reporting period
based on the market price of Units. In the fourth quarter of
2013, the Company recorded a loss of $23 million related to the fair value
adjustment of the Trust Unit liability.
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 audited annual consolidated financial statements for the
year ended December 31, 2013.
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 audited annual
consolidated financial statements and MD&A for the year ended
December 31, 2013 which is
contained in the Company's 2013 Annual Report available in the
Investor Centre section of the Company's website at
www.weston.ca.
Consolidated Statements of Earnings
|
12 Weeks Ended |
52 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of Canadian dollars except where otherwise
indicated) |
Dec. 31, 2013 |
|
Dec.
31, 2012(3) |
|
Dec. 31, 2013 |
|
Dec.
31, 2012(3) |
|
|
Revenue |
|
$ |
7,919 |
|
|
|
$ |
7,727 |
|
|
|
$ |
33,582 |
|
|
|
$ |
32,742 |
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of inventories sold |
|
5,941 |
|
|
|
5,870 |
|
|
|
25,286 |
|
|
|
24,700 |
|
|
|
Selling, general and administrative expenses |
|
1,584 |
|
|
|
1,536 |
|
|
|
6,675 |
|
|
|
6,649 |
|
|
|
|
7,525 |
|
|
|
7,406 |
|
|
|
31,961 |
|
|
|
31,349 |
|
|
Operating Income |
|
394 |
|
|
|
321 |
|
|
|
1,621 |
|
|
|
1,393 |
|
|
Net Interest Expense and Other
Financing Charges |
|
106 |
|
|
|
175 |
|
|
|
497 |
|
|
|
441 |
|
|
Earnings Before Income
Taxes |
|
288 |
|
|
|
146 |
|
|
|
1,124 |
|
|
|
952 |
|
|
Income Taxes |
|
56 |
|
|
|
34 |
|
|
|
275 |
|
|
|
244 |
|
|
Net Earnings from Continuing
Operations |
|
232 |
|
|
|
112 |
|
|
|
849 |
|
|
|
708 |
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of the Company |
|
185 |
|
|
|
63 |
|
|
|
616 |
|
|
|
475 |
|
|
|
Non-Controlling Interests |
|
47 |
|
|
|
49 |
|
|
|
233 |
|
|
|
233 |
|
|
Net Earnings from Continuing
Operations |
|
232 |
|
|
|
112 |
|
|
|
849 |
|
|
|
708 |
|
|
Discontinued Operations |
|
|
|
|
|
|
|
58 |
|
|
|
|
Net Earnings |
|
$ |
232 |
|
|
|
$ |
112 |
|
|
|
$ |
907 |
|
|
|
$ |
708 |
|
|
Net Earnings per Common Share ($) -
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
$ |
1.37 |
|
|
|
$ |
0.41 |
|
|
|
$ |
4.48 |
|
|
|
$ |
3.36 |
|
|
|
Discontinued Operations |
|
|
|
|
|
|
|
$ |
0.46 |
|
|
|
|
|
|
Net Earnings |
|
$ |
1.37 |
|
|
|
$ |
0.41 |
|
|
|
$ |
4.94 |
|
|
|
$ |
3.36 |
|
|
Net Earnings per Common Share ($) -
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
$ |
1.37 |
|
|
|
$ |
0.32 |
|
|
|
$ |
4.45 |
|
|
|
$ |
3.29 |
|
|
|
Discontinued Operations |
|
|
|
|
|
|
|
$ |
0.46 |
|
|
|
|
|
|
Net Earnings |
|
$ |
1.37 |
|
|
|
$ |
0.32 |
|
|
|
$ |
4.91 |
|
|
|
$ |
3.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
As at December 31 |
|
|
|
|
|
|
|
|
|
(millions of Canadian
dollars) |
2013 |
|
2012(3) |
|
ASSETS |
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,869 |
|
|
|
$ |
1,589 |
|
|
|
Short term investments |
|
1,490 |
|
|
|
2,138 |
|
|
|
Accounts receivable |
|
736 |
|
|
|
559 |
|
|
|
Credit card receivables |
|
2,538 |
|
|
|
2,305 |
|
|
|
Inventories |
|
2,231 |
|
|
|
2,132 |
|
|
|
Income taxes recoverable |
|
|
|
|
37 |
|
|
|
Prepaid expenses and other assets |
|
84 |
|
|
|
83 |
|
|
|
Assets held for sale |
|
22 |
|
|
|
30 |
|
|
Total Current Assets |
|
9,970 |
|
|
|
8,873 |
|
|
Fixed Assets |
|
9,655 |
|
|
|
9,452 |
|
|
Investment Properties |
|
99 |
|
|
|
100 |
|
|
Goodwill and Intangible Assets |
|
1,580 |
|
|
|
1,571 |
|
|
Deferred Income Taxes |
|
299 |
|
|
|
316 |
|
|
Security Deposits |
|
1,791 |
|
|
|
348 |
|
|
Franchise Loans Receivable |
|
375 |
|
|
|
363 |
|
|
Other Assets |
|
853 |
|
|
|
781 |
|
|
Total Assets |
|
$ |
24,622 |
|
|
|
$ |
21,804 |
|
|
LIABILITIES |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Trade payables and other liabilities |
|
$ |
3,989 |
|
|
|
$ |
3,937 |
|
|
|
Provisions |
|
120 |
|
|
|
123 |
|
|
|
Income taxes payable |
|
2 |
|
|
|
|
|
|
Short term debt |
|
1,060 |
|
|
|
1,319 |
|
|
|
Long term debt due within one year |
|
1,208 |
|
|
|
672 |
|
|
Total Current Liabilities |
|
6,379 |
|
|
|
6,051 |
|
|
Provisions |
|
81 |
|
|
|
94 |
|
|
Long Term Debt |
|
7,736 |
|
|
|
6,261 |
|
|
Trust Unit Liability |
|
478 |
|
|
|
|
|
Deferred Income Taxes |
|
187 |
|
|
|
160 |
|
|
Other Liabilities |
|
618 |
|
|
|
943 |
|
|
Capital Securities |
|
224 |
|
|
|
223 |
|
|
Total Liabilities |
|
15,703 |
|
|
|
13,732 |
|
|
EQUITY |
|
|
|
|
|
|
Share Capital |
|
972 |
|
|
|
953 |
|
|
Contributed Surplus |
|
65 |
|
|
|
28 |
|
|
Retained Earnings |
|
5,272 |
|
|
|
4,736 |
|
|
Accumulated Other Comprehensive Income
(Loss) |
|
16 |
|
|
|
(24) |
|
|
Total Equity Attributable to
Shareholders of the Company |
|
6,325 |
|
|
|
5,693 |
|
|
Non-Controlling Interests |
|
2,594 |
|
|
|
2,379 |
|
|
Total Equity |
|
8,919 |
|
|
|
8,072 |
|
|
Total Liabilities and
Equity |
|
$ |
24,622 |
|
|
|
$ |
21,804 |
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
12 Weeks Ended |
|
52 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of Canadian dollars) |
Dec. 31, 2013 |
|
Dec.
31, 2012(3) |
|
Dec. 31, 2013 |
|
Dec.
31, 2012(3) |
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings from continuing
operations |
|
$ |
232 |
|
|
|
$ |
112 |
|
|
|
$ |
849 |
|
|
|
$ |
708 |
|
|
Income taxes |
|
56 |
|
|
|
34 |
|
|
|
275 |
|
|
|
244 |
|
|
Net interest expense and other
financing charges |
|
106 |
|
|
|
175 |
|
|
|
497 |
|
|
|
441 |
|
|
Depreciation and amortization |
|
212 |
|
|
|
202 |
|
|
|
891 |
|
|
|
840 |
|
|
Foreign currency translation (gain)
loss |
|
(42) |
|
|
|
(18) |
|
|
|
(75) |
|
|
|
24 |
|
|
Gain on defined benefit plan
amendments |
|
|
|
|
|
|
|
(51) |
|
|
|
|
|
Income taxes paid |
|
(75) |
|
|
|
(52) |
|
|
|
(271) |
|
|
|
(261) |
|
|
Interest received |
|
7 |
|
|
|
22 |
|
|
|
59 |
|
|
|
65 |
|
|
Settlement of derivatives |
|
76 |
|
|
|
|
|
|
59 |
|
|
|
|
|
Change in credit card receivables |
|
(108) |
|
|
|
(232) |
|
|
|
(233) |
|
|
|
(204) |
|
|
Change in non-cash working
capital |
|
380 |
|
|
|
469 |
|
|
|
(250) |
|
|
|
43 |
|
|
Fixed asset and other related
(recoveries)
impairments |
|
(42) |
|
|
|
12 |
|
|
|
(32) |
|
|
|
19 |
|
|
Gain on disposal of assets |
|
2 |
|
|
|
(11) |
|
|
|
(1) |
|
|
|
(14) |
|
|
Other |
|
9 |
|
|
|
(33) |
|
|
|
21 |
|
|
|
(53) |
|
|
Cash Flows from Operating
Activities
of Continuing Operations |
|
813 |
|
|
|
680 |
|
|
|
1,738 |
|
|
|
1,852 |
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases |
|
(341) |
|
|
|
(398) |
|
|
|
(976) |
|
|
|
(1,110) |
|
|
Change in short term investments |
|
765 |
|
|
|
300 |
|
|
|
730 |
|
|
|
181 |
|
|
Business acquisition |
|
|
|
|
|
|
|
(9) |
|
|
|
|
|
Proceeds from fixed asset sales |
|
3 |
|
|
|
29 |
|
|
|
26 |
|
|
|
64 |
|
|
Change in franchise investments
and other receivables |
|
(22) |
|
|
|
(21) |
|
|
|
5 |
|
|
|
(22) |
|
|
Change in security deposits |
|
201 |
|
|
|
(5) |
|
|
|
(1,435) |
|
|
|
14 |
|
|
Intangible asset additions |
|
|
|
|
1 |
|
|
|
(12) |
|
|
|
(43) |
|
|
Other |
|
(1) |
|
|
|
|
|
|
(4) |
|
|
|
|
|
Cash Flows from (used in) Investing
Activities
of Continuing Operations |
|
605 |
|
|
|
(94) |
|
|
|
(1,675) |
|
|
|
(916) |
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Change in bank indebtedness |
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
Change in short term debt |
|
(289) |
|
|
|
10 |
|
|
|
(259) |
|
|
|
39 |
|
|
Long term debt |
- Issued, net of financing charges |
|
473 |
|
|
|
62 |
|
|
|
2,749 |
|
|
|
111 |
|
|
|
- Retired |
|
(469) |
|
|
|
(18) |
|
|
|
(871) |
|
|
|
(115) |
|
|
Trust Units |
- Issued, net of financing charges |
|
(1) |
|
|
|
|
|
|
416 |
|
|
|
|
|
Share capital |
- Issued |
|
|
|
|
2 |
|
|
|
17 |
|
|
|
2 |
|
|
|
- Purchased and held in trust |
|
|
|
|
|
|
|
(15) |
|
|
|
|
|
|
- Retired |
|
|
|
|
(1) |
|
|
|
(42) |
|
|
|
(1) |
|
|
Subsidiary share capital |
- Issued |
|
8 |
|
|
|
15 |
|
|
|
75 |
|
|
|
22 |
|
|
|
- Purchased and held |
|
|
|
|
|
|
|
|
|
|
|
|
|
in trust |
|
|
|
|
|
|
|
(46) |
|
|
|
|
|
|
- Retired |
|
|
|
|
(10) |
|
|
|
(73) |
|
|
|
(16) |
|
|
Interest paid |
|
(117) |
|
|
|
(125) |
|
|
|
(466) |
|
|
|
(456) |
|
|
Dividends |
- To common shareholders |
|
|
|
|
|
|
|
(203) |
|
|
|
(185) |
|
|
|
- To preferred shareholders |
|
(3) |
|
|
|
(3) |
|
|
|
(44) |
|
|
|
(44) |
|
|
|
- To minority shareholders |
|
|
|
|
|
|
|
(96) |
|
|
|
(65) |
|
|
Cash Flows (used in) from Financing
Activities
of Continuing Operations |
|
(398) |
|
|
|
(68) |
|
|
|
1,142 |
|
|
|
(711) |
|
|
Effect of foreign currency exchange
rate changes
on cash and cash equivalents |
|
12 |
|
|
|
4 |
|
|
|
27 |
|
|
|
(8) |
|
|
Cash Flows from Continuing
Operations |
|
1,032 |
|
|
|
522 |
|
|
|
1,232 |
|
|
|
217 |
|
|
Cash Flows from Discontinued
Operations |
|
|
|
|
|
|
|
48 |
|
|
|
|
|
Change in Cash and Cash
Equivalents |
|
1,032 |
|
|
|
522 |
|
|
|
1,280 |
|
|
|
217 |
|
|
Cash and Cash Equivalents, Beginning
of Period |
|
1,837 |
|
|
|
1,067 |
|
|
|
1,589 |
|
|
|
1,372 |
|
|
Cash and Cash Equivalents, End of
Period |
|
$ |
2,869 |
|
|
|
$ |
1,589 |
|
|
|
$ |
2,869 |
|
|
|
$ |
1,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Earnings per Common Share from
Continuing Operations
|
|
12 Weeks Ended |
|
|
52 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions except where otherwise
indicated) |
Dec. 31, 2013 |
|
|
|
Dec.
31, 2012(ii) |
|
|
|
Dec. 31, 2013 |
|
|
|
Dec.
31, 2012(ii) |
|
Net earnings from continuing
operations
attributable to shareholders of the Company |
|
$ |
185 |
|
|
|
$ |
63 |
|
|
|
$ |
616 |
|
|
|
$ |
475 |
|
Prescribed dividends on preferred
shares
in share capital |
|
(10) |
|
|
|
|
(10) |
|
|
|
|
(44) |
|
|
|
|
(44) |
|
Net earnings from continuing
operations
available to common shareholders |
|
$ |
175 |
|
|
|
$ |
53 |
|
|
|
$ |
572 |
|
|
|
$ |
431 |
|
Impact of GWL equity swaps |
|
|
|
|
(6) |
|
|
|
|
|
|
(2) |
|
Reduction in net earnings due to
dilution
at Loblaw |
|
|
|
|
|
|
|
(6) |
|
|
|
|
(3) |
|
|
|
|
(5) |
|
Net earnings from continuing
operations
available to common shareholders for
diluted earnings per share |
|
$ |
175 |
|
|
|
$ |
41 |
|
|
|
$ |
569 |
|
|
|
$ |
424 |
|
Weighted average common shares
outstanding (in millions) |
|
127.7 |
|
|
|
|
128.2 |
|
|
|
|
127.6 |
|
|
|
|
128.2 |
|
Dilutive effect of share-based
compensation(i) (in millions) |
|
0.3 |
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
Dilutive effect of GWL equity swaps(i)
(in millions) |
|
|
|
|
0.5 |
|
|
|
|
|
|
0.6 |
|
Diluted weighted average common
shares
outstanding (in millions) |
|
128.0 |
|
|
|
|
128.7 |
|
|
|
|
127.8 |
|
|
|
|
128.8 |
|
Basic net earnings per common
share
from continuing operations ($) |
|
$ |
1.37 |
|
|
|
$ |
0.41 |
|
|
|
$ |
4.48 |
|
|
|
$ |
3.36 |
|
Diluted net earnings per common
share
from continuing operations ($) |
|
$ |
1.37 |
|
|
|
$ |
0.32 |
|
|
|
$ |
4.45 |
|
|
|
$ |
3.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
In the fourth quarter of 2013 and year-to-date, 513,585 (2012 -
1,184,840) and 516,557 (2012 - 1,184,840) potentially dilutive
instruments, respectively, were excluded from the computation of
diluted net earnings per common share from continuing operations as
they were anti-dilutive. |
(ii) |
Certain 2012 figures have been restated due to the
implementation of IAS 19, "Employee Benefits". See note 2 of the
Company's consolidated financial statements included in the 2013
Annual Report. |
Segment Information
The Company has two reportable operating segments:
Weston Foods and Loblaw. The accounting policies of the
reportable operating segments are the same as those described in
the Company's 2013 Annual Report. The Company measures each
reportable operating segment's performance based on adjusted
EBITDA(i) and adjusted operating income(i).
Neither reportable operating segment is reliant on any single
external customer.
|
|
12 Weeks Ended |
|
52 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
Dec. 31,
2013 |
|
Dec. 31,
2012(vii) |
|
Dec. 31,
2013 |
|
Dec.
31, 2012(vii) |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weston Foods |
|
$ |
413 |
|
|
|
$ |
399 |
|
|
|
$ |
1,812 |
|
|
|
$ |
1,765 |
|
|
|
Loblaw |
|
7,640 |
|
|
|
7,465 |
|
|
|
32,371 |
|
|
|
31,604 |
|
|
|
Intersegment |
|
(134) |
|
|
|
(137) |
|
|
|
(601) |
|
|
|
(627) |
|
|
Consolidated |
|
$ |
7,919 |
|
|
|
$ |
7,727 |
|
|
|
$ |
33,582 |
|
|
|
$ |
32,742 |
|
|
Adjusted
EBITDA(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weston Foods |
|
$ |
69 |
|
|
|
$ |
71 |
|
|
|
$ |
330 |
|
|
|
$ |
334 |
|
|
|
Loblaw |
|
516 |
|
|
|
512 |
|
|
|
2,141 |
|
|
|
2,072 |
|
|
Total |
|
$ |
585 |
|
|
|
$ |
583 |
|
|
|
$ |
2,471 |
|
|
|
$ |
2,406 |
|
|
Depreciation and
Amortization(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weston Foods |
|
$ |
15 |
|
|
|
$ |
14 |
|
|
|
$ |
63 |
|
|
|
$ |
59 |
|
|
|
Loblaw |
|
196 |
|
|
|
187 |
|
|
|
824 |
|
|
|
777 |
|
|
Total |
|
$ |
211 |
|
|
|
$ |
201 |
|
|
|
$ |
887 |
|
|
|
$ |
836 |
|
|
Adjusted Operating
Income(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weston Foods |
|
$ |
54 |
|
|
|
$ |
57 |
|
|
|
$ |
267 |
|
|
|
$ |
275 |
|
|
|
Loblaw |
|
320 |
|
|
|
325 |
|
|
|
1,317 |
|
|
|
1,295 |
|
|
|
Impact of certain
items(iii) |
|
(22) |
|
|
|
(79) |
|
|
|
(38) |
|
|
|
|
(153) |
|
|
|
Other(iv) |
|
42 |
|
|
|
18 |
|
|
|
75 |
|
|
|
|
(24) |
|
|
Consolidated operating income |
|
$ |
394 |
|
|
|
$ |
321 |
|
|
|
$ |
1,621 |
|
|
|
$ |
1,393 |
|
|
Net Interest
Expense and Other
Financing Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weston Foods |
|
$ |
(21) |
|
|
|
$ |
91 |
|
|
|
$ |
54 |
|
|
|
$ |
90 |
|
|
|
Loblaw |
|
141 |
|
|
|
84 |
|
|
|
458 |
|
|
|
351 |
|
|
|
Other(v) |
|
(3) |
|
|
|
|
|
|
(6) |
|
|
|
|
|
|
|
|
Intersegment(vi) |
|
(11) |
|
|
|
|
|
|
(9) |
|
|
|
|
|
|
|
Consolidated net interest expense and
other financing charges |
|
$ |
106 |
|
|
|
$ |
175 |
|
|
|
$ |
497 |
|
|
|
$ |
441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Excludes certain items and is used internally by management
when analyzing segment underlying operating performance. |
(ii) |
Excludes accelerated depreciation in the fourth quarter of 2013
and year-to-date of $1 million (2012 - $1 million) and
$4 million (2012 - $4 million), respectively,
incurred by Weston Foods, included in restructuring
and other charges. |
(iii) |
The impact of certain items excluded by management includes
restructuring and other charges, the fair value adjustment of
commodity derivatives at Weston Foods, share-based compensation net
of equity derivatives, fixed asset and other related impairments at
Loblaw net of recoveries, certain costs relating to Choice
Properties and the Shoppers Drug Mart acquisition, the MEPP
withdrawal liability incurred by Weston Foods, defined benefit plan
amendments, gain on disposal of assets at Loblaw, and Weston Foods
insurance proceeds. |
(iv) |
Operating income in the fourth quarter of 2013 and year-to-date
included a gain of $42 million (2012 - $18 million) and
$75 million (2012 - loss of $24 million), respectively,
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. |
(v) |
Represents the Unit distributions from Choice Properties to
GWL. |
(vi) |
Represents the elimination of the fair value adjustment of the
Trust Unit liability related to GWL's direct investment in
Choice Properties. |
(vii) |
Certain 2012 figures have been restated due to the
implementation of revised IAS 19, "Employee Benefits". See note 2
of the Company's consolidated financial statements included in the
2013 Annual Report. |
2013 ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's annual audited consolidated financial statements and
MD&A for the year ended December 31,
2013 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, Investor Relations, Business
Intelligence and Communications, 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
63.0%-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 Thursday, February 27,
2014 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: 31040207#. To access via audio webcast, please
visit the Investor Centre section of www.weston.ca.
Pre-registration will be available.
|
|
Footnote Legend |
|
|
(1) |
See non-GAAP financial measures. |
(2) |
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 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. |
(3) |
Certain 2012 figures have been
restated due to the implementation of revised IAS 19, "Employee
Benefits". See note 2 of the Company's consolidated financial
statements included in the 2013 Annual Report. |
(4) |
Effective income tax rate excludes
the tax impact of items excluded from adjusted basic net earnings
per common share from continuing operations(1). |
|
|
SOURCE George Weston Limited