TORONTO, Feb. 25, 2020
/CNW/ - George Weston Limited (TSX: WN) ("GWL" or the "Company")
today announced its consolidated unaudited results for the 12 weeks
ended December 31, 2019.
GWL's 2019 Annual Report includes the Company's audited annual
consolidated financial statements and Management's Discussion and
Analysis ("MD&A") for the fiscal year ended December 31,
2019. The 2019 Annual Report has been filed on SEDAR and
is available at sedar.com and in the Investor Centre section of
the Company's website at weston.ca.
Galen G. Weston, Chairman and
Chief Executive Officer, George Weston Limited, commented that
"George Weston's businesses
performed well during the fourth quarter. Loblaw improved its sales
trajectory, achieved its financial metrics and continued to invest
in strategic growth areas. Choice Properties continued to deliver
stable and consistent results, and Weston Foods demonstrated solid
performance with its business having stabilized in 2019."
2019 FOURTH QUARTER HIGHLIGHTS
Net earnings available to common shareholders of the Company
were $433 million, an increase of $162
million compared to the same period in 2018. The increase
was due to an improvement of $30 million in the underlying
operating performance of the Company and the positive
year-over-year net impact of adjusting items totaling
$132 million which includes the following:
- the favourable year-over-year impact of the fair value
adjustment of the forward sale agreement for 9.6 million Loblaw
Companies Limited ("Loblaw") common shares of $135 million;
and
- the favourable year-over-year impact of the fair value
adjustment of the Trust Unit liability of $104 million;
partially offset
by,
- the unfavourable year-over-year impact of the remeasurement of
deferred tax balances of $62 million;
and
- the unfavourable year-over-year impact of asset impairments,
net of recoveries, of $31
million.
Adjusted net earnings available to common shareholders of the
Company(1) were $262
million. In comparison to the same period in 2018, this
represented an increase of $30
million, or 12.9%. The increase was primarily due to the
improvement in the underlying operating performance of the Company,
the increased ownership in Loblaw as a result of Loblaw share
repurchases and the positive contribution from a full year of
direct ownership in Choice Properties Real Estate Investment Trust
("Choice Properties").
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, the Company's results include:
- the impact of the implementation of International Financial
Reporting Standards 16 "Leases" ("IFRS 16"), as set out in the
"Consolidated Other Business Matters" section below;
- the impact of the acquisition of Canadian Real Estate
Investment Trust ("CREIT") by Choice Properties in the second
quarter of 2018;
- the year-over-year impact of the fair value adjustment of the
Trust Unit liability as a result of the significant changes in
Choice Properties' unit price, recorded in net interest expense and
other financing charges. The Company's results are impacted by
market price fluctuations of Choice Properties' Trust Units on the
basis that the Trust Units held by unitholders, other than the
Company, are redeemable for cash at the option of the holder. The
Company's financial results are negatively impacted when the Trust
Unit price rises and positively impacted when the Trust Unit price
declines; and
- the dilutive impact on both the Company's diluted net earnings
per common share and adjusted diluted net earnings per common
share(1) as a result of the issuance of approximately
26.6 million common shares in connection with a reorganization in
November 2018, as set out in the
"Consolidated Other Business Matters" section below.
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions except
where otherwise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indicated)
|
|
Quarters
Ended
|
|
|
|
|
|
|
|
Years
Ended
|
|
|
|
|
|
|
For the periods ended
as indicated
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
|
$ Change
|
|
% Change
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
|
$ Change
|
|
% Change
|
Sales
|
|
$
|
12,107
|
|
$
|
11,717
|
|
$
|
390
|
|
3.3
|
%
|
|
$
|
50,109
|
|
$
|
48,568
|
|
$
|
1,541
|
|
3.2
|
%
|
Operating
income
|
|
$
|
718
|
|
$
|
690
|
|
$
|
28
|
|
4.1
|
%
|
|
$
|
2,958
|
|
$
|
2,585
|
|
$
|
373
|
|
14.4
|
%
|
Adjusted
EBITDA(1)
|
|
$
|
1,351
|
|
$
|
1,146
|
|
$
|
205
|
|
17.9
|
%
|
|
$
|
5,483
|
|
$
|
4,528
|
|
$
|
955
|
|
21.1
|
%
|
Adjusted EBITDA
margin(1)
|
|
|
11.2%
|
|
|
9.8%
|
|
|
|
|
|
|
|
10.9%
|
|
|
9.3%
|
|
|
|
|
|
Net earnings
attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the Company
|
|
$
|
443
|
|
$
|
281
|
|
$
|
162
|
|
57.7
|
%
|
|
$
|
242
|
|
$
|
574
|
|
$
|
(332)
|
|
(57.8)
|
%
|
Net earnings
available to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the Company
|
|
$
|
433
|
|
$
|
271
|
|
$
|
162
|
|
59.8
|
%
|
|
$
|
198
|
|
$
|
530
|
|
$
|
(332)
|
|
(62.6)
|
%
|
Adjusted net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available to
common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the Company(1)
|
|
$
|
262
|
|
$
|
232
|
|
$
|
30
|
|
12.9
|
%
|
|
$
|
1,117
|
|
$
|
908
|
|
$
|
209
|
|
23.0
|
%
|
Diluted net
earnings per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common share
($)
|
|
$
|
2.81
|
|
$
|
1.86
|
|
$
|
0.95
|
|
51.1
|
%
|
|
$
|
1.26
|
|
$
|
3.99
|
|
$
|
(2.73)
|
|
(68.4)
|
%
|
Adjusted diluted
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings
per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common share(1) ($)
|
|
$
|
1.69
|
|
$
|
1.59
|
|
$
|
0.10
|
|
6.3
|
%
|
|
$
|
7.24
|
|
$
|
6.85
|
|
$
|
0.39
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings available to common shareholders of the Company in
the fourth quarter of 2019 were $433 million, an increase of
$162 million, or 59.8%, compared to the same period in 2018.
The increase included the favourable year-over-year net impact of
adjusting items totaling $132 million and the improvement in
underlying operating performance of $30 million, as described
below.
- The positive year-over-year net impact of certain adjusting
items totaling $132 million was
primarily due to:
-
- the favourable year-over-year impact of the fair value
adjustment of the forward sale agreement for 9.6 million Loblaw
common shares of $135 million;
and
- the favourable year-over-year impact of the fair value
adjustment of the Trust Unit Liability of $104 million;
partially
offset by,
-
- the unfavourable year-over-year impact of the remeasurement of
deferred tax balances of $62 million;
and
- the unfavourable year-over-year impact of asset impairments,
net of recoveries of $31
million.
- The improvement in underlying operating performance of
$30 million was primarily due
to:
-
- the favourable underlying operating performance of Loblaw;
- a decrease in income tax expense;
- the positive contribution from the increase in the Company's
ownership interest in Loblaw, as a result of Loblaw share
repurchases;
- the positive contribution from the Company's direct ownership
interest in Choice Properties, as a result of the reorganization in
November 2018; and
- the favourable underlying operating performance of Weston Foods
after excluding the prior year impact of a net gain related to the
sale leaseback of a property;
partially
offset by,
- an increase in adjusted net interest expenses and other
financing charges(1) as described in the "Consolidated
Other Business Matters" section below.
Adjusted net earnings available to common shareholders of the
Company(1) in the fourth quarter of 2019 were
$262 million, an increase of
$30 million, or 12.9%, due to the
improvement in underlying operating performance described above.
Adjusted net earnings available to common shareholders of the
Company(1) included the favourable impact of IFRS 16 of
$2 million in the fourth quarter of
2019.
Diluted net earnings per common share in the fourth quarter of
2019 were $2.81, an increase of
$0.95 per common share compared to
the same period in 2018. The increase was mainly due to:
- the favourable year-over-year impact of adjusting items
totaling $0.85 per common share,
primarily due to the following:
-
- the favourable year-over-year impact of the fair value
adjustment of the forward sale agreement for 9.6 million Loblaw
common shares of $0.91 per common
share; and
- the favourable year-over-year impact of the fair value
adjustment of the Trust Unit Liability of $0.63 per common share;
partially offset by,
-
- the unfavourable impact of the remeasurement of deferred tax
balances of $0.43 per common share;
and
- the unfavourable year-over-year impact of asset impairments,
net of recoveries of $0.20 per common
share.
- the improvement in the underlying operating performance of
$0.10 per common share.
Adjusted diluted net earnings per common share(1) in
the fourth quarter of 2019 were $1.69, an increase of $0.10 per common share, or 6.3%, compared to the
same period in 2018. The increase was due to the improvement in the
underlying operating performance described above, partially offset
by the dilutive impact of the Company's issuance of common shares
in connection with the reorganization. IFRS 16 had a nominal impact
on adjusted diluted net earnings per common share(1) in
the fourth quarter of 2019.
CONSOLIDATED OTHER BUSINESS MATTERS
IFRS 16 Implementation In 2016, the IASB issued
IFRS 16, replacing International Accounting Standard 17, "Leases"
("IAS 17") and related interpretations. The standard
introduced a single, on-balance sheet recognition and measurement
model for lessees, eliminating the distinction between operating
and finance leases. The Company implemented the standard on
January 1, 2019 using the modified retrospective
approach. As a result, the Company's 2019 results incorporate lease
accounting under IFRS 16. Prior year results have not been
restated. See Section 11 "Accounting
Standard Implemented" of the MD&A in the Company's 2019 Annual
Report for more information on the implementation of
IFRS 16.
The implementation of IFRS 16 significantly increased the assets
and liabilities on the Company's Consolidated Balance Sheet and
changed the timing and presentation of lease-related expenses in
the Company's results. The Company recorded a right-of-use asset of
$4.1 billion and a lease
liability of $5.1 billion under
the new standard. Under IFRS 16, the depreciation expense on
right-of-use assets and interest expense on lease liabilities
replaced rent expense, which was previously recognized on a
straight-line basis in operating income under IAS 17 over the
term of a lease.
The following table provides the year-over-year impacts of the
implementation of IFRS 16 on the consolidated results of the
Company in the fourth quarter of 2019 and year-to-date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Weeks
|
|
|
|
|
|
|
|
52 Weeks
|
|
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
|
|
$ Change
|
($ millions except
where otherwise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indicated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Favourable/(unfavourable)
|
|
Loblaw
|
Weston
Foods
|
Other and
Intersegment
|
Total(i)
|
|
Loblaw
|
Weston
Foods
|
Other and
Intersegment
|
Total(i)
|
Operating
income
|
|
$
|
73
|
$
|
—
|
$
|
(26)
|
$
|
47
|
|
$
|
334
|
$
|
4
|
$
|
(134)
|
$
|
204
|
Adjusted
EBITDA(1)
|
|
285
|
2
|
(117)
|
170
|
|
1,239
|
12
|
(526)
|
725
|
Net interest expense
and other
|
|
|
|
|
|
|
|
|
|
|
financing
charges
|
|
(78)
|
(1)
|
33
|
(46)
|
|
(348)
|
(3)
|
169
|
(182)
|
Depreciation and
amortization
|
|
(212)
|
(2)
|
91
|
(123)
|
|
(905)
|
(8)
|
392
|
(521)
|
Net earnings
available to
|
|
|
|
|
|
|
|
|
|
|
common shareholders
of
|
|
|
|
|
|
|
|
|
|
|
the Company
|
|
(2)
|
(1)
|
5
|
2
|
|
(6)
|
—
|
25
|
19
|
Diluted net earnings
per
|
|
|
|
|
|
|
|
|
|
|
common share
($)
|
|
(0.01)
|
(0.01)
|
0.03
|
0.01
|
|
(0.04)
|
—
|
0.16
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Includes nominal
year-over-year impact in the fourth quarter of 2019 and
year-to-date from Choice Properties.
|
Loblaw's Spin-out of Choice Properties Real Estate Investment
Trust On November 1, 2018,
the Company and Loblaw completed a reorganization under which
Loblaw distributed its approximate 61.6% effective interest in
Choice Properties to the Company on a tax-free basis to Loblaw and
its Canadian shareholders. In connection with the reorganization,
Loblaw minority shareholders received 0.135 of a common share of
the Company for each common share of Loblaw held, which was
equivalent to the market value of their pro rata interest in Choice
Properties as at the announcement date of the spin-out, and as part
of the reorganization the Company received Loblaw's approximate
61.6% effective interest in Choice Properties. Following the
reorganization, Loblaw no longer retained its interest in Choice
Properties and as a result, Loblaw ceased to consolidate its equity
interest in Choice Properties. Choice Properties became a separate
reportable operating segment of the Company. In connection with the
reorganization, the Company issued approximately 26.6 million
common shares to Loblaw minority shareholders.
The issuance of approximately 26.6 million common shares in
connection with the reorganization had a dilutive impact on
both the Company's diluted net earnings per common share and
adjusted diluted net earnings per common share(1) in
2019 and 2018.
The Company continues to be controlled by Mr. W. Galen
Weston who, directly and indirectly through entities which he
controls, owns approximately 53.2% of the outstanding common shares
of the Company.
Offering of Trust Units In the second quarter of
2019, Choice Properties completed an offering of 30,042,250 trust
units (the "Units") at a price of $13.15 per Unit, for aggregate gross proceeds of
approximately $395 million, and net
proceeds of approximately $381
million (the "Offering"). The Offering consisted of
26,237,250 Units sold to a syndicate of underwriters and 3,805,000
Units purchased by the Company for approximately $50 million. Choice Properties incurred issuance
costs of $14 million recorded in net interest expense and
other financing charges.
Choice Properties' Portfolio Transaction On
September 30, 2019, Choice Properties
sold a portfolio of 30 properties across Canada to a third party for aggregate
consideration of $426 million. The
portfolio consisted of 27 Loblaw stand-alone retail properties and
3 Loblaw distribution centres. On consolidation, the transaction
was not recognized as a sale of assets as under the terms of the
leases, Loblaw did not relinquish control of the properties for
purposes of IFRS 16 and IFRS 15. Instead, the proceeds were
recognized as a financial liability on the Company's consolidated
balance sheet as at the end of the third quarter of 2019. For tax
purposes, this transaction was treated as a sale and income tax
expense reflects the benefit from the non-taxable portion of the
gain from the sale of the portfolio of properties by Choice
Properties.
As a result of the increase in taxable income from the sale
transactions in 2019, the Board of Trustees of Choice Properties
declared a special non-cash distribution in the form of Trust
Units on December 31, 2019. On
consolidation, distributions made by Choice Properties to
unitholders other than the Company are reported as interest expense
and other financing charges. As a result, the Company recorded
$18 million in the fourth quarter of
2019 in Other and Intersegment.
REPORTABLE OPERATING SEGMENTS
The Company operates through its three reportable operating
segments, Loblaw, Choice Properties and Weston Foods. Other and
Intersegment includes eliminations, intersegment adjustments
related to consolidation and cash and short term investments held
by the Company. Effective in the first quarter of 2019, all other
company level activities that are not allocated to the reportable
operating segments, such as interest expense, corporate activities
and administrative costs are included in Other and Intersegment.
Weston Foods and Other and Intersegment comparative figures have
been restated to conform to the current year presentation.
Loblaw has two reportable operating segments, Retail and
Financial Services. Loblaw provides Canadians with grocery,
pharmacy, health and beauty, apparel, general merchandise and
financial services.
Choice Properties owns, manages and develops a high-quality
portfolio of commercial retail, industrial, office and residential
properties across Canada.
Weston Foods is a North American bakery making bread,
rolls, cupcakes, donuts, biscuits, cakes, pies, cones and wafers,
artisan baked goods and more.
Loblaw Segment Results
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions except
where otherwise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indicated)
|
|
Quarters
Ended
|
|
|
|
|
|
Years
Ended
|
|
|
|
|
|
For the periods ended
as indicated
|
|
Dec. 31,
2019
|
Dec. 31,
2018
|
|
$ Change
|
% Change
|
Dec. 31,
2019
|
Dec. 31,
2018
|
|
$ Change
|
% Change
|
Sales
|
|
$
|
11,590
|
$
|
11,218
|
$
|
372
|
3.3
|
%
|
$
|
48,037
|
$
|
46,693
|
$
|
1,344
|
2.9
|
%
|
Operating
income
|
|
$
|
539
|
$
|
443
|
$
|
96
|
21.7
|
%
|
$
|
2,262
|
$
|
1,915
|
$
|
347
|
18.1
|
%
|
Adjusted
EBITDA(1)
|
|
$
|
1,203
|
$
|
893
|
$
|
310
|
34.7
|
%
|
$
|
4,904
|
$
|
3,520
|
$
|
1,384
|
39.3
|
%
|
Adjusted EBITDA
margin(1)
|
|
|
10.4%
|
|
8.0%
|
|
|
|
|
|
10.2%
|
|
7.5%
|
|
|
|
|
Depreciation
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization(i)
|
|
$
|
589
|
$
|
356
|
$
|
233
|
65.4
|
%
|
$
|
2,524
|
$
|
1,497
|
$
|
1,027
|
68.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Depreciation and
amortization includes $116 million (2018 –
$120 million) in the fourth quarter of 2019 and
$508 million (2018 – $521 million) year-to-date
of amortization of intangible assets acquired with Shoppers Drug
Mart Corporation ("Shoppers Drug Mart").
|
Unless otherwise indicated, Loblaw's segment results include the
impacts of spin-out related incremental depreciation, the
implementation of IFRS 16 and the consolidation of franchises.
For further details, see the "Consolidated Other Business Matters"
section.
Sales Loblaw sales in the fourth quarter of 2019
were $11,590 million, an
increase of $372 million, or 3.3%, compared to the same
period in 2018, primarily driven by Retail. Retail sales increased
by $345 million, or 3.1%, compared to the same period
in 2018 and included food retail sales of $7,960 million (2018 – $7,750 million) and drug retail sales of
$3,361 million (2018 – $3,226 million). Excluding the consolidation of
franchises, Retail sales increased by $294 million, or 2.7%,
primarily driven by the following factors:
- food retail same-store sales growth was 1.9%. After excluding
the favourable impact of the timing of Thanksgiving, food retail
same-store sales growth was approximately 0.8%. The timing of
Thanksgiving had a nominal impact on food retail same-store sales
growth in the fourth quarter of 2018. Food retail basket size
increased and traffic increased in the quarter;
- Loblaw's food retail average article price was 0.8% (2018 –
2.3%), which reflects the price inflation on the specific mix of
goods sold in Loblaw's stores in the quarter. The average quarterly
national food price inflation was 3.7% (2018 – inflation of 1.7%),
as measured by "The Consumer Price Index for Food Purchased from
Stores" ("CPI"). CPI does not necessarily reflect the effect of
inflation on the specific mix of goods sold in Loblaw stores;
and
- drug retail same-store sales growth was 3.9%, including
pharmacy same-store sales growth of 6.1% and front store same-store
sales growth of 2.2%. The timing of Thanksgiving had a nominal
impact on the drug retail same-store sales growth in the fourth
quarter of 2019 and 2018.
In 2019, 15 food and drug stores were opened and 6 food and drug
stores were closed, resulting in a net increase in Retail square
footage of 0.4 million square feet, or 0.6%.
Operating income Loblaw operating income in
the fourth quarter of 2019 was $539 million, an increase of
$96 million, or 21.7%, compared to the same period in 2018.
The increase included the favourable impact of IFRS 16 of
approximately $73 million and the total unfavourable impact of
spin-out related depreciation of approximately $21 million.
Normalized for these impacts, operating income increased by
$44 million primarily driven by the favourable year-over-year
net impact of adjusting items totaling $23 million and the
improvement in underlying operating performance of $21 million
described below:
- the favourable year-over-year net impact of adjusting items
totaling $23 million was primarily
due to the following:
-
- the favourable year-over-year impact of the fair value
adjustment on investment properties of $17
million;
- the favourable year-over-year impact of the fair value
adjustment of derivatives of $13
million;
- the favourable impact of a net gain on sale of non-operating
properties of $8 million;
- the favourable impact associated with a prior period item of
$7 million; and
- the favourable year-over-year impact of transaction and other
related costs in connection with Loblaw's spin-out of Choice
Properties of $2 million;
partially offset by,
-
- the unfavourable year-over-year impact of restructuring and
other related costs of $28
million.
- the improvement in underlying operating performance of
$21 million was primarily due to
Financial Services, partially offset by Retail, including the
unfavourable contribution from the consolidation of franchises of
$13 million.
Adjusted EBITDA(1) Loblaw adjusted
EBITDA(1) in the fourth quarter of 2019 was
$1,203 million, an increase of
$310 million, or 34.7%, compared to the same period in 2018
and included the favourable impact of IFRS 16 of approximately
$285 million. Normalized for the impact of IFRS 16, adjusted
EBITDA(1)increased by $25 million, or 2.8%,
primarily due to improvements in Financial Services, partially
offset by Retail.
Retail adjusted EBITDA(1) was $1,135 million, an increase of
$280 million compared to the same period in 2018 and included
the favourable impact of IFRS 16 of approximately $285 million. Normalized for this impact, Retail
adjusted EBITDA(1) decreased by $5 million, or 0.6% driven by an increase in
Retail selling, general and administrative expenses ("SG&A"),
partially offset by an increase in Retail gross profit.
- Retail gross profit percentage of 29.8% was flat compared to
the same period in 2018. Excluding the consolidation of franchises,
Retail gross profit percentage was 27.7%, a decrease of 10 basis
points compared to the fourth quarter of 2018. Margins were
negatively impacted by the mix within drug retail and the pricing
strategy in food retail.
- Retail SG&A increased by $116
million compared to the same period in 2018. Normalized for
the impact of IFRS 16 and the consolidation of franchises, Retail
SG&A increased by $62 million and
SG&A as a percentage of sales was 20.2%, flat compared to the
fourth quarter of 2018, primarily driven by Process and Efficiency
initiatives, offset by strategic growth investments.
Financial Services adjusted EBITDA(1) increased by
$30 million compared to the same period in 2018, primarily
driven by revenue growth, lower operating costs including
investments in digital strategy and lower customer acquisition
costs, partially offset by higher credit losses and an associated
increase to the forward-looking allowance for credit card
receivables.
Loblaw adjusted EBITDA(1) in the fourth quarter of
2019 was not impacted by any sale and leaseback of properties to
Choice Properties (2018 – gain of $8 million).
Depreciation and Amortization Loblaw's
depreciation and amortization in the fourth quarter of 2019 was
$589 million, an increase of $233 million compared to the
same period in 2018 and included the unfavourable impact of IFRS 16
of approximately $212 million and the
total unfavourable impact of spin-out related depreciation of
approximately $21 million. Normalized
for these impacts, depreciation and amortization was flat compared
to the fourth quarter of 2018. Included in depreciation and
amortization is the amortization of intangible assets acquired with
Shoppers Drug Mart of $116 million
(2018 – $120 million).
Loblaw Other Business Matters
Spin-out of Choice Properties Impact on
Loblaw Results As a result of the reorganization,
buildings owned by Choice Properties and leased by Loblaw are
accounted for as leases and no longer accounted for as owned
property by Loblaw. The building components associated with these
leases post spin-out are classified as leasehold improvements and
depreciated over the lesser of the lease term and useful life up to
25 years. The remaining average lease term on the leases
related to these leasehold improvements is approximately
10 years. Loblaw's 2019 fourth quarter financial results
included depreciation and amortization of $21 million ($91
million year-to-date).
Process and Efficiency Loblaw continues to
execute on a multi-year plan, initiated in 2018, that focuses on
improving processes and generating efficiencies across
administrative, store and distribution network
infrastructure. Many initiatives are underway to reduce the
complexity and cost of business operations, ensuring a low cost
operating structure that allows for continued investments in
Loblaw's strategic growth areas. Loblaw's management
anticipates investing capital as well as recording restructuring
and other charges related to these initiatives in 2020, and beyond.
In the fourth quarter of 2019, Loblaw recorded approximately
$24 million ($74 million year-to-date) of restructuring and
other related costs, primarily related to Process and Efficiency
initiatives.
Subsequent to year end 2019, Loblaw announced the future closure
of two distribution centres in Laval and Ottawa. Loblaw is investing to build a modern
and efficient expansion to its Cornwall distribution centre to serve its food
and drug retail businesses in Ontario and Quebec. Over the next two years, the
distribution centres in Laval and
Ottawa will be transferring their
volumes to Cornwall. Loblaw expects to incur additional
restructuring costs in 2020 and 2021 related to these closures.
Consolidation of Franchises Loblaw has more
than 500 franchise food retail stores in its network. As at year
end 2019, 470 of these stores were consolidated for accounting
purposes under a simplified franchise agreement ("Franchise
Agreement") implemented in 2015.
Consolidation of franchises in the fourth quarter of 2019
resulted in a year-over-year increase in revenue of
$51 million, a decrease in adjusted
EBITDA(1) of $7 million, an increase in
depreciation and amortization of $6 million and a decrease in
net earnings attributable to non-controlling interests of
$10 million.
Choice Properties Segment Results
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions except
where otherwise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indicated)
|
|
Quarters
Ended
|
|
|
|
|
|
|
Years
Ended
|
|
|
|
|
|
For the periods ended
as indicated
|
Dec. 31,
2019
|
Dec. 31,
2018
|
|
$ Change
|
% Change
|
Dec. 31,
2019
|
Dec. 31,
2018
|
|
$ Change
|
% Change
|
Revenue
|
$
|
318
|
$
|
323
|
$
|
(5)
|
(1.5)
|
%
|
$
|
1,289
|
$
|
1,148
|
$
|
141
|
12.3
|
%
|
Net interest
(income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense and
other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
charges(i)
|
$
|
(74)
|
$
|
(80)
|
$
|
6
|
7.5
|
%
|
$
|
1,472
|
$
|
(57)
|
$
|
1,529
|
2,682.5
|
%
|
Net income
|
$
|
294
|
$
|
281
|
$
|
13
|
4.6
|
%
|
$
|
(581)
|
$
|
650
|
$
|
(1,231)
|
(189.4)
|
%
|
Funds from
operations(1)(ii)
|
$
|
166
|
$
|
172
|
$
|
(6)
|
(3.5)
|
%
|
$
|
680
|
$
|
604
|
$
|
76
|
12.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Net interest expense
and other financing charges includes a fair value adjustment on
Exchangeable Units.
|
(ii)
|
Funds from operations
is calculated in accordance with the Real Property Association of
Canada's White Paper on Funds from Operations & Adjusted Funds
from Operations for IFRS issued in February 2019. Funds from
operations for the year ended 2018 includes the
accelerated amortization of debt premium of $37 million, an
exception to the White Paper definition.
|
Revenue Revenue in the fourth quarter of
2019 was $318 million, a decrease of
$5 million, or 1.5%, compared to the
same period in 2018, and included $178
million (2018 – $189 million)
generated from tenants within Loblaw's Retail segment. The decrease
in revenue was primarily driven by:
- Choice Properties' portfolio transaction as described in the
"Consolidated Other Business Matters" section of this News
Release;
partially offset
by,
- additional revenue generated from properties acquired in 2018
and 2019 and from tenant openings in newly developed leasable
space; and
- an increase in base rent and operating cost recoveries from
existing properties.
Net Interest Income and Other Financing Charges Net
interest income and other financing charges in the fourth quarter
of 2019 was $74 million, compared to
$80 million in the same period in 2018. The change of
$6 million was primarily driven
by:
- the unfavourable year-over-year impact of the fair value
adjustment on Class B LP units ("Exchangeable Units") of
$8 million; and
- higher interest expense resulting from the issuance of new
senior unsecured debentures;
partially offset
by,
- lower interest expense resulting from the repayments made on
the term loans.
Net income Net income in the fourth quarter of 2019
was $294 million, an increase of
$13 million compared to the same period in 2018. The increase
was primarily driven by:
- the favourable year-over-year impact of the fair value
adjustment on investment properties; and
- the favourable year-over-year impact of acquisition and other
costs related to the acquisition of CREIT;
partially offset
by,
- the unfavourable impact of higher interest expense and other
financing charges described above.
Funds from Operations(1) Funds
from Operations(1) in the fourth quarter of 2019 was
$166 million, a decrease of
$6 million compared to the same period in 2018, primarily
driven by the decrease in revenue due to Choice Properties'
portfolio transaction, partially offset by growth in net operating
income attributable to properties acquired in 2018 and 2019 and
from tenant openings in newly developed leasable space.
Choice Properties Other Business Matters
Investment Property Transactions During
2019, Choice Properties acquired eight investment properties and a
financial real estate asset for an aggregate purchase price of
$149 million, excluding transaction
costs. Of the eight investment properties acquired during 2019,
five investment properties were acquired from third-party vendors,
for an aggregate purchase price of $77 million, excluding
transaction costs, which was settled by an assumption of a
$14 million mortgage, settlement of
mortgages receivable of $25 million,
with the remainder in cash. During 2019, Choice Properties acquired
one property from Weston Foods and two properties and one financial
real estate asset from Loblaw, for an aggregate purchase price of
$72 million, excluding transaction costs, fully settled in
cash.
During 2019, Choice Properties had six disposition transactions
for an aggregate selling price of $468
million, excluding transaction costs, which were settled in
cash. These disposition activities included the sale of:
- a portfolio of 30 properties across Canada to a third-party for aggregate
consideration of $426 million,
excluding transaction costs. The portfolio consisted of 27 Loblaw
stand-alone retail properties and 3 Loblaw distribution
centres;
- retail property in Cowansville,
Quebec, which had a Loblaw lease for $1 million, excluding transaction costs.
Concurrent with the sale, Choice Properties recognized lease
surrender income of $2 million upon
disposition, which was settled in cash;
- development lands in Brampton,
Ontario and in Strathcona County, Alberta for $31
million, excluding transaction costs;
- retail property in Red Deer,
Alberta, which had a Loblaw lease for $9 million, excluding transaction costs; and
- land parcel at retail property in Olds, Alberta for $1
million, excluding transaction costs.
Weston Foods Segment Results
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions except
where otherwise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indicated)
|
|
Quarters
Ended
|
|
|
|
|
|
|
Years
Ended
|
|
|
|
|
|
For the periods ended
as indicated
|
Dec. 31,
2019
|
Dec. 31,
2018(3)
|
|
$ Change
|
% Change
|
Dec. 31,
2019
|
Dec. 31,
2018(3)
|
|
$ Change
|
% Change
|
Sales
|
$
|
522
|
$
|
507
|
$
|
15
|
3.0
|
%
|
$
|
2,155
|
$
|
2,122
|
$
|
33
|
1.6
|
%
|
Operating
income
|
$
|
27
|
$
|
30
|
$
|
(3)
|
(10.0)
|
%
|
$
|
72
|
$
|
92
|
$
|
(20)
|
(21.7)
|
%
|
Adjusted
EBITDA(1)
|
$
|
56
|
$
|
59
|
$
|
(3)
|
(5.1)
|
%
|
$
|
223
|
$
|
233
|
$
|
(10)
|
(4.3)
|
%
|
Adjusted EBITDA
margin(1)
|
|
10.7%
|
|
11.6%
|
|
|
|
|
|
10.3%
|
|
11.0%
|
|
|
|
|
Depreciation
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization(i)
|
$
|
36
|
$
|
28
|
$
|
8
|
28.6
|
%
|
$
|
147
|
$
|
130
|
$
|
17
|
13.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Depreciation and
amortization includes $3 million (2018 – nominal) in the
fourth quarter of 2019 and $9 million (2018 –
$9 million) year-to-date in 2019 of accelerated depreciation
related to restructuring and other related costs.
|
Sales Weston Foods sales in the fourth quarter
of 2019 were $522 million, an increase of $15 million, or
3.0%, compared to the same period in 2018. Sales included the
negative impact of foreign currency translation of approximately
0.2%. Excluding the unfavourable impact of foreign currency
translation, sales increased by 3.2%. Sales were impacted by an
increase in volumes and the combined positive impact of pricing and
changes in sales mix, partially offset by the unfavourable impact
of product rationalization.
Operating income Weston Foods operating
income in the fourth quarter of 2019 was $27 million, a
decrease of $3 million, or 10.0%, compared to the same period
in 2018. Normalized for the nominal impact of IFRS 16 and the
prior year impact of a net gain of $10 million related to the
sale leaseback of a property, operating income increased by
$7 million. The increase included the favourable
year-over-year net impact of adjusting items totaling
$5 million, and the improvement in the underlying operating
performance of $2 million. The
year-over-year net impact of adjusting items included the
following:
- the favourable year-over-year impact of restructuring and other
related costs of $8 million; and
- the favourable year-over-year impact of the fair value
adjustment of derivatives of $1
million;
partially offset
by,
- the unfavourable year-over-year impact of inventory losses, net
of recoveries, of $4 million.
Adjusted EBITDA(1) Weston Foods
adjusted EBITDA(1) in the fourth quarter of 2019 was
$56 million, a decrease of $3 million or 5.1%, compared
to the same period in 2018. Normalized for the favourable
impact of IFRS 16 of approximately $2 million and the
prior year impact of a net gain of $10
million related to the sale leaseback of a property,
adjusted EBITDA(1) increased by $5 million.
The increase was driven by productivity improvements and the net
benefits realized from Weston Foods' transformation program,
partially offset by an increase in performance related compensation
accruals and higher input costs.
Weston Foods adjusted EBITDA margin(1) in the fourth
quarter of 2019 decreased to 10.7% compared to 11.6% in the
same period in 2018. Normalized for the favourable impact of IFRS
16 and the prior year impact of a net gain related to the sale
leaseback of a property, adjusted EBITDA margin(1)
increased by 60 basis points to 10.3% in the fourth quarter of 2019
compared to 9.7% in the same period in 2018, driven by the factors
described above.
Depreciation and Amortization Weston
Foods depreciation and amortization in the fourth quarter of 2019
was $36 million, an increase of $8 million compared to
the same period in 2018. Normalized for the unfavourable impact of
IFRS 16 of approximately $2 million, depreciation and
amortization increased by $6 million. Depreciation and
amortization in the fourth quarter of 2019 included $3 million
(2018 – nominal) of accelerated depreciation related to Weston
Foods' transformation program. Excluding this amount and the impact
of IFRS 16, depreciation and amortization in the fourth
quarter of 2019 increased by $3 million due to capital
investments.
Weston Foods Other Business Matters
Restructuring and other related
costs Weston Foods continuously evaluates
strategic and cost reduction initiatives related to its
manufacturing assets, distribution networks and administrative
infrastructure with the objective of ensuring a low cost
operating structure. In the fourth quarter of 2019, Weston Foods
recorded a net gain of $4 million
(2018 – costs of $4 million) related to restructuring
activities driven by a gain on sale of an unprofitable facility in
Canada, partially offset by
reorganization costs from the transformation program. Year-to-date,
charges of $11 million (2018 – $33 million) were
primarily related to the reorganization costs from the
transformation program.
OUTLOOK(2)
For 2020, the Company expects adjusted net
earnings(1) to increase due to the results from its
operating segments as described below.
Loblaw is focused on its strategic framework, delivering best in
food and health and beauty, using data driven insights underpinned
by process and efficiency excellence. This framework is supported
by Loblaw's financial plan of maintaining market share, with
positive same-store sales and stable gross margin, creating
efficiencies to deliver operating leverage, investing for the
future and returning capital to shareholders.
Loblaw will remain focused on delivering Process and Efficiency
improvements to offset increasing costs and to fund
continued incremental investments in infrastructure and to
support its strategic growth areas of Everyday Digital Retail,
Connected Healthcare and Payments & Rewards.
In 2020, on a full-year comparative basis, excluding the impact
of the 53rd week, Loblaw expects to:
- deliver positive same-store sales and stable gross margin in
its Retail segment in a highly competitive market;
- deliver positive adjusted net earnings(1)
growth;
- invest approximately $1.1 billion
in capital expenditures, net of proceeds from property disposals;
and
- return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
Choice Properties' real estate platform is positioned to deliver
both income stability and long term growth for its investors,
underpinned by disciplined financial management. Choice Properties'
income producing property portfolio provides a solid foundation for
stable cash flows through effective management and portfolio
diversification. The portfolio is diversified by both geography and
product type including retail, industrial, office and residential
assets. Overall, Choice Properties expects its income producing
portfolio will continue to operate at high occupancy levels and
deliver low single digits same asset NOI growth. Development
initiatives provide the opportunity to add high quality real estate
by focusing primarily on retail intensification projects which
provide incremental growth to existing sites, to larger, more
complex major mixed-use developments which Choice Properties
expects will drive net asset value growth in the future.
In 2020, Choice Properties will continue to improve its
portfolio quality and seek out opportunities, when available, to
strengthen its balance sheet by extending debt maturities with
longer term debt.
Weston Foods is focused on becoming a premier North American
bakery and delivering solid financial results. In 2020, Weston
Foods will continue to focus on growing its core business,
selectively investing in key categories and markets, and
strengthening key operational processes.
In 2020, Weston Foods expects:
- sales will be modestly higher compared to full year 2019, after
excluding the impact of foreign currency translation and the impact
of the 53rd week in 2020;
- adjusted EBITDA(1) will be higher compared to
2019;
- investment in capital expenditures to decrease to approximately
$185 million; and
- depreciation will increase compared to 2019.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the fourth quarter of 2019, the
Company's Board of Directors declared a quarterly dividend on GWL
Common Shares, Preferred Shares, Series I, Preferred Shares, Series
III, Preferred Shares, Series IV and Preferred Shares, Series
V payable as follows:
|
Common
Shares
|
$0.525 per share
payable April 1, 2020, to shareholders of
|
|
|
|
record as of March
15, 2020;
|
|
|
|
|
|
|
Preferred Shares,
Series I
|
$0.3625 per share
payable March 15, 2020, to shareholders
|
|
|
|
of record as of
February 29, 2020;
|
|
|
|
|
|
|
Preferred Shares,
Series III
|
$0.3250 per share
payable April 1, 2020, to shareholders of
|
|
|
|
record as of March
15, 2020;
|
|
|
|
|
|
|
Preferred Shares,
Series IV
|
$0.3250 per share
payable April 1, 2020, to shareholders of
|
|
|
|
record as of March
15, 2020; and
|
|
|
|
|
|
|
Preferred Shares,
Series V
|
$0.296875 per share
payable April 1, 2020, to shareholders
|
|
|
|
of record as of March
15, 2020.
|
|
NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures as it believes
these measures provide useful information to both management and
investors with regard to accurately assessing the Company's
financial performance and financial condition.
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 underlying consolidated and
segment 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. The Company excludes
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.
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 should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
For details on the nature of items excluded in the calculation
of any of the non-GAAP financial measures detailed below, see
Section 14, "Non-GAAP Financial Measures" of the MD&A in the
Company's 2019 Annual Report.
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, opportunities and legal and regulatory
matters. Specific forward-looking statements in this News Release
include, but are not limited to, statements with respect to the
Company's anticipated future results, events and plans, strategic
initiatives and restructuring, regulatory changes including further
healthcare reform, future liquidity, planned capital investments,
and the status and impact of information technology ("IT") systems
implementations. These specific forward-looking statements are
contained throughout this News Release including, without
limitation, 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", "maintain", "achieve", "grow", "should" and similar
expressions, as they relate to the Company and its management.
Forward-looking statements reflect the Company's 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 2020 is based on certain assumptions
including assumptions about healthcare reform impacts, anticipated
cost savings and operating efficiencies and anticipated benefits
from strategic initiatives. 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 8, "Enterprise Risks and Risk Management"
of the MD&A in the Company's 2019 Annual Report and the
Company's Annual Information Form ("AIF") for the year ended
December 31, 2019.
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.
SELECTED FINANCIAL INFORMATION
The following includes selected quarterly financial information
which is prepared by management in accordance with IFRS and is
based on the Company's audited annual consolidated financial
statements for the year ended December 31, 2019. 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 2019 Annual Report available in the
Investor Centre section of the Company's website at
www.weston.ca.
Consolidated Statements of Earnings
|
|
|
|
|
|
|
|
|
|
Dec. 31,
2019
(12 weeks)
(unaudited)
|
|
Dec. 31,
2018(3)
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018(3)
|
(millions of Canadian
dollars except where otherwise indicated)
For the periods ended
as indicated
|
|
|
(12 weeks)
(unaudited)
|
|
|
(52 weeks)
(audited)
|
|
(52 weeks)
(audited)
|
Revenue
|
|
$
|
12,107
|
|
|
$
|
11,717
|
|
|
$
|
50,109
|
|
|
$
|
48,568
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Cost of inventories
sold
|
|
8,229
|
|
|
7,985
|
|
|
34,166
|
|
|
33,340
|
Selling, general and
administrative expenses
|
|
3,160
|
|
|
3,042
|
|
|
12,985
|
|
|
12,643
|
|
|
11,389
|
|
|
11,027
|
|
|
47,151
|
|
|
45,983
|
Operating
Income
|
|
718
|
|
|
690
|
|
|
2,958
|
|
|
2,585
|
Net Interest Expense
and Other Financing Charges
|
|
7
|
|
|
218
|
|
|
1,704
|
|
|
948
|
Earnings Before
Income Taxes
|
|
711
|
|
|
472
|
|
|
1,254
|
|
|
1,637
|
Income Tax
|
|
133
|
|
|
60
|
|
|
431
|
|
|
639
|
Net
Earnings
|
|
578
|
|
|
412
|
|
|
823
|
|
|
998
|
Attributable
to:
|
|
|
|
|
|
|
|
|
Shareholders of the
Company
|
|
443
|
|
|
281
|
|
|
242
|
|
|
574
|
Non-Controlling
Interests
|
|
135
|
|
|
131
|
|
|
581
|
|
|
424
|
Net
Earnings
|
|
$
|
578
|
|
|
$
|
412
|
|
|
$
|
823
|
|
|
$
|
998
|
Net Earnings per
Common Share ($)
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.82
|
|
|
$
|
1.86
|
|
|
$
|
1.29
|
|
|
$
|
4.02
|
Diluted
|
|
$
|
2.81
|
|
|
$
|
1.86
|
|
|
$
|
1.26
|
|
|
$
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
As at December
31
|
|
|
|
|
(millions of Canadian
dollars)
|
2019
|
2018(3)
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,834
|
|
$
|
1,521
|
|
Short term
investments
|
|
229
|
|
281
|
|
Accounts
receivable
|
|
1,375
|
|
1,329
|
|
Credit card
receivables
|
|
3,518
|
|
3,309
|
|
Inventories
|
|
5,270
|
|
5,001
|
|
Prepaid expenses and
other assets
|
|
256
|
|
370
|
|
Assets held for
sale
|
|
203
|
|
44
|
|
Total Current
Assets
|
|
12,685
|
|
11,855
|
|
Fixed
Assets
|
|
11,773
|
|
12,101
|
|
Right-of-Use
Assets
|
|
4,074
|
|
—
|
|
Investment
Properties
|
|
4,888
|
|
4,847
|
|
Equity Accounted
Joint Ventures
|
|
605
|
|
734
|
|
Intangible
Assets
|
|
7,488
|
|
7,958
|
|
Goodwill
|
|
4,775
|
|
4,781
|
|
Deferred Income
Taxes
|
|
250
|
|
286
|
|
Security
Deposits
|
|
76
|
|
87
|
|
Franchise Loans
Receivable
|
|
19
|
|
78
|
|
Other
Assets
|
|
1,180
|
|
1,087
|
|
Total
Assets
|
|
$
|
47,813
|
|
$
|
43,814
|
|
LIABILITIES
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Bank
indebtedness
|
|
$
|
18
|
|
$
|
56
|
|
Trade payables and
other liabilities
|
|
5,906
|
|
5,762
|
|
Loyalty
liability
|
|
191
|
|
228
|
|
Provisions
|
|
147
|
|
205
|
|
Income taxes
payable
|
|
53
|
|
171
|
|
Short term
debt
|
|
1,489
|
|
1,579
|
|
Long term debt due
within one year
|
|
1,842
|
|
1,343
|
|
Lease liabilities due
within one year
|
|
857
|
|
—
|
|
Associate
interest
|
|
280
|
|
260
|
|
Total Current
Liabilities
|
|
10,783
|
|
9,604
|
|
Provisions
|
|
90
|
|
167
|
|
Long Term
Debt
|
|
12,712
|
|
13,975
|
|
Lease
Liabilities
|
|
4,250
|
|
—
|
|
Trust Unit
Liability
|
|
3,601
|
|
2,658
|
|
Deferred Income
Taxes
|
|
2,245
|
|
2,515
|
|
Other
Liabilities
|
|
957
|
|
691
|
|
Total
Liabilities
|
|
34,638
|
|
29,610
|
|
EQUITY
|
|
|
|
|
Share
Capital
|
|
3,626
|
|
3,583
|
|
Retained
Earnings
|
|
4,766
|
|
5,017
|
|
Contributed
Surplus
|
|
(979)
|
|
(799)
|
|
Accumulated Other
Comprehensive Income
|
|
196
|
|
239
|
|
Total Equity
Attributable to Shareholders of the Company
|
|
7,609
|
|
8,040
|
|
Non-Controlling
Interests
|
|
5,566
|
|
6,164
|
|
Total
Equity
|
|
13,175
|
|
14,204
|
|
Total Liabilities
and Equity
|
|
$
|
47,813
|
|
$
|
43,814
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
(millions of Canadian
dollars)
|
Dec. 31,
2019
|
Dec. 31,
2018(3)
|
|
Dec. 31,
2019
|
Dec. 31,
2018(3)
|
For the periods ended
as indicated
|
(12
weeks)
|
(12 weeks)
|
|
(52
weeks)
|
(52 weeks)
|
Operating
Activities
|
|
|
|
|
|
Net
earnings
|
$
|
578
|
$
|
412
|
|
$
|
823
|
$
|
998
|
Add:
|
|
|
|
|
|
Net interest expense
and other financing charges
|
7
|
218
|
|
1,704
|
948
|
Income
taxes
|
133
|
60
|
|
431
|
639
|
Depreciation and
amortization
|
548
|
416
|
|
2,318
|
1,746
|
Asset impairments, net
of recoveries
|
50
|
4
|
|
54
|
21
|
Adjustment to fair
value of investment properties
|
27
|
4
|
|
85
|
48
|
Foreign currency
translation gain
|
(1)
|
(1)
|
|
—
|
(17)
|
Change in
provisions
|
15
|
(39)
|
|
(54)
|
(188)
|
|
1,357
|
1,074
|
|
5,361
|
4,195
|
Change in credit card
receivables
|
(255)
|
(286)
|
|
(209)
|
(307)
|
Change in non-cash
working capital
|
239
|
(282)
|
|
(7)
|
(644)
|
Income taxes
paid
|
(110)
|
(45)
|
|
(656)
|
(557)
|
Interest
received
|
7
|
11
|
|
35
|
44
|
Interest received from
finance leases
|
—
|
—
|
|
4
|
—
|
Other
|
34
|
(17)
|
|
27
|
(12)
|
Cash Flows from
Operating Activities
|
1,272
|
455
|
|
4,555
|
2,719
|
Investing
Activities
|
|
|
|
|
|
Fixed asset and
investment properties purchases
|
(441)
|
(546)
|
|
(1,155)
|
(1,250)
|
Intangible asset
additions
|
(102)
|
(74)
|
|
(403)
|
(343)
|
Business acquisition,
net of cash acquired
|
—
|
5
|
|
—
|
(1,619)
|
Cash assumed on
initial consolidation of franchises
|
5
|
4
|
|
20
|
18
|
Proceeds from disposal
of assets
|
37
|
124
|
|
87
|
189
|
Lease payments
received from finance leases
|
2
|
—
|
|
8
|
—
|
Change in short term
investments
|
(9)
|
(58)
|
|
52
|
832
|
Change in security
deposits
|
(18)
|
397
|
|
7
|
(1)
|
Other
|
21
|
31
|
|
(108)
|
(82)
|
Cash Flows used in
Investing Activities
|
(505)
|
(117)
|
|
(1,492)
|
(2,256)
|
Financing
Activities
|
|
|
|
|
|
Change in bank
indebtedness
|
(134)
|
(210)
|
|
(38)
|
(54)
|
Change in short term
debt
|
237
|
237
|
|
(90)
|
321
|
Proceeds from other
financing
|
9
|
—
|
|
435
|
—
|
Interest
paid
|
(181)
|
(224)
|
|
(891)
|
(992)
|
Long term
debt – Issued
|
123
|
1,020
|
|
1,438
|
4,880
|
–
Repayments
|
(126)
|
(1,324)
|
|
(1,690)
|
(3,565)
|
Cash rent paid on
lease liabilities - Interest
|
(49)
|
—
|
|
(214)
|
—
|
Cash rent paid on
lease liabilities - Principal
|
(84)
|
—
|
|
(520)
|
—
|
Share
capital – Issued
|
1
|
126
|
|
40
|
134
|
– Purchased and
held in trusts
|
—
|
—
|
|
(6)
|
—
|
– Purchased and
cancelled
|
(25)
|
(67)
|
|
(25)
|
(123)
|
Loblaw common share
capital – Issued
|
2
|
16
|
|
82
|
78
|
– Purchased and
held in trusts
|
(42)
|
(36)
|
|
(62)
|
(36)
|
– Purchased and
cancelled
|
(163)
|
(238)
|
|
(937)
|
(1,082)
|
Choice Properties
units – Issued
|
—
|
—
|
|
345
|
—
|
– Issuance costs
|
—
|
—
|
|
(14)
|
—
|
Dividends
– To common shareholders
|
—
|
—
|
|
(319)
|
(241)
|
– To preferred
shareholders
|
(3)
|
(3)
|
|
(44)
|
(44)
|
– To minority
shareholders
|
—
|
—
|
|
(228)
|
(228)
|
Other
|
8
|
25
|
|
(12)
|
(35)
|
Cash Flows used in
Financing Activities
|
(427)
|
(678)
|
|
(2,750)
|
(987)
|
Effect of foreign
currency exchange rate changes on cash and
|
|
|
|
|
|
cash
equivalents
|
(1)
|
8
|
|
—
|
11
|
Change in Cash and
Cash Equivalents
|
339
|
(332)
|
|
313
|
(513)
|
Cash and Cash
Equivalents, Beginning of Period
|
1,495
|
1,853
|
|
1,521
|
2,034
|
Cash and Cash
Equivalents, End of Period
|
$
|
1,834
|
$
|
1,521
|
|
$
|
1,834
|
$
|
1,521
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Earnings per Common Share
|
|
|
|
|
|
|
|
Dec. 31,
2019
|
Dec. 31,
2018
|
Dec. 31,
2019
|
Dec. 31,
2018
|
(millions of Canadian
dollars except where otherwise indicated)
For the periods ended
as indicated
|
|
(12 weeks)
(unaudited)
|
|
(12 weeks)
(unaudited)
|
|
(52 weeks)
(audited)
|
|
(52 weeks)
(audited)
|
Net earnings
attributable to shareholders of the Company
|
|
$
|
443
|
|
$
|
281
|
|
$
|
242
|
|
$
|
574
|
Prescribed dividends
on preferred shares in share capital
|
|
(10)
|
|
(10)
|
|
(44)
|
|
(44)
|
Net earnings
available to common shareholders of the
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
433
|
|
$
|
271
|
|
$
|
198
|
|
$
|
530
|
Reduction in net
earnings due to dilution at Loblaw
|
|
(1)
|
|
—
|
|
(4)
|
|
(2)
|
Net earnings
available to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
for diluted earnings per share
|
|
$
|
432
|
|
$
|
271
|
|
$
|
194
|
|
$
|
528
|
Weighted average
common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
(in millions)
|
|
153.8
|
|
145.4
|
|
153.5
|
|
131.8
|
Dilutive effect of
equity-based
|
|
|
|
|
|
|
|
|
compensation(i) (in millions)
|
|
0.2
|
|
0.3
|
|
0.2
|
|
0.4
|
Diluted weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
(in
millions)
|
|
154.0
|
|
145.7
|
|
153.7
|
|
132.2
|
Basic net earnings
per common share ($)
|
|
$
|
2.82
|
|
$
|
1.86
|
|
$
|
1.29
|
|
$
|
4.02
|
Diluted net earnings
per common share ($)
|
|
$
|
2.81
|
|
$
|
1.86
|
|
$
|
1.26
|
|
$
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
In the fourth quarter
of 2019 and year-to-date, 520,992 (2018 – 825,683) and 955,551
(2018 – 674,981) potentially dilutive instruments, respectively,
were excluded from the computation of diluted net earnings per
common share as they were anti-dilutive.
|
Segment Information
The Company has three reportable operating segments: Loblaw,
Choice Properties and Weston Foods. Other and Intersegment includes
eliminations, intersegment adjustments related to consolidation,
cash and short term investments held by the Company and all other
company level activities that are not allocated to the reportable
operating segments, as further illustrated below.
The accounting policies of the reportable operating segments are
the same as those described in the Company's 2019 audited annual
consolidated financial statements. The Company measures each
reportable operating segment's performance based on adjusted
EBITDA(1) and adjusted operating income(1).
No reportable operating segment is reliant on any single external
customer.
|
|
12 weeks
ended
|
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
(unaudited)
(millions of Canadian dollars)
|
|
Loblaw
|
|
Choice
Properties
|
|
Weston
Foods
|
|
Other and
Intersegment
|
|
Total
|
|
Loblaw
|
|
Choice
Properties
|
|
Weston
Foods(3)
|
|
Other and
Intersegment(3)
|
|
Total
|
Revenue
|
|
$
|
11,590
|
|
$
|
318
|
|
$
|
522
|
|
$
|
(323)
|
|
$
|
12,107
|
|
$
|
11,218
|
|
$
|
323
|
|
$
|
507
|
|
$
|
(331)
|
|
$
|
11,717
|
Operating
income
|
|
$
|
539
|
|
$
|
220
|
|
$
|
27
|
|
$
|
(68)
|
|
$
|
718
|
|
$
|
443
|
|
$
|
202
|
|
$
|
30
|
|
$
|
15
|
|
$
|
690
|
Net interest expense
and other financing charges
|
|
176
|
|
(74)
|
|
—
|
|
(95)
|
|
7
|
|
95
|
|
(80)
|
|
(1)
|
|
204
|
|
218
|
Earnings before
income tax
|
|
$
|
363
|
|
$
|
294
|
|
$
|
27
|
|
$
|
27
|
|
$
|
711
|
|
$
|
348
|
|
$
|
282
|
|
$
|
31
|
|
$
|
(189)
|
|
$
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
|
539
|
|
$
|
220
|
|
$
|
27
|
|
$
|
(68)
|
|
$
|
718
|
|
$
|
443
|
|
$
|
202
|
|
$
|
30
|
|
$
|
15
|
|
$
|
690
|
Depreciation and
amortization
|
|
589
|
|
—
|
|
36
|
|
(77)
|
|
548
|
|
356
|
|
1
|
|
28
|
|
31
|
|
416
|
Adjusting
items(i)
|
|
75
|
|
5
|
|
(7)
|
|
12
|
|
85
|
|
94
|
|
30
|
|
1
|
|
(85)
|
|
40
|
Adjusted
EBITDA(i)
|
|
$
|
1,203
|
|
$
|
225
|
|
$
|
56
|
|
$
|
(133)
|
|
$
|
1,351
|
|
$
|
893
|
|
$
|
233
|
|
$
|
59
|
|
$
|
(39)
|
|
$
|
1,146
|
Depreciation and
amortization(ii)
|
|
473
|
|
—
|
|
33
|
|
(77)
|
|
429
|
|
236
|
|
1
|
|
28
|
|
31
|
|
296
|
Adjusted operating
income(i)
|
|
$
|
730
|
|
$
|
225
|
|
$
|
23
|
|
$
|
(56)
|
|
$
|
922
|
|
$
|
657
|
|
$
|
232
|
|
$
|
31
|
|
$
|
(70)
|
|
$
|
850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks
ended
|
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
(millions of Canadian dollars)
|
|
Loblaw
|
|
Choice
Properties
|
|
Weston
Foods
|
|
Other and
Intersegment
|
|
Total
|
|
Loblaw
|
|
Choice
Properties
|
|
Weston
Foods(3)
|
|
Other and
Intersegment(3)
|
|
Total
|
Revenue
|
|
$
|
48,037
|
|
$
|
1,289
|
|
$
|
2,155
|
|
$
|
(1,372)
|
|
$
|
50,109
|
|
$
|
46,693
|
|
$
|
1,148
|
|
$
|
2,122
|
|
$
|
(1,395)
|
|
$
|
48,568
|
Operating
income
|
|
$
|
2,262
|
|
$
|
890
|
|
$
|
72
|
|
$
|
(266)
|
|
$
|
2,958
|
|
$
|
1,915
|
|
$
|
593
|
|
$
|
92
|
|
$
|
(15)
|
|
$
|
2,585
|
Net interest expense
and other financing charges
|
|
747
|
|
1,472
|
|
1
|
|
(516)
|
|
1,704
|
|
564
|
|
(57)
|
|
(1)
|
|
442
|
|
948
|
Earnings before
income tax
|
|
$
|
1,515
|
|
$
|
(582)
|
|
$
|
71
|
|
$
|
250
|
|
$
|
1,254
|
|
$
|
1,351
|
|
$
|
650
|
|
$
|
93
|
|
$
|
(457)
|
|
$
|
1,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
|
2,262
|
|
$
|
890
|
|
$
|
72
|
|
$
|
(266)
|
|
$
|
2,958
|
|
$
|
1,915
|
|
$
|
593
|
|
$
|
92
|
|
$
|
(15)
|
|
$
|
2,585
|
Depreciation and
amortization
|
|
2,524
|
|
1
|
|
147
|
|
(354)
|
|
2,318
|
|
1,497
|
|
1
|
|
130
|
|
118
|
|
1,746
|
Adjusting
items(i)
|
|
118
|
|
23
|
|
4
|
|
62
|
|
207
|
|
108
|
|
230
|
|
11
|
|
(152)
|
|
197
|
Adjusted
EBITDA(i)
|
|
$
|
4,904
|
|
$
|
914
|
|
$
|
223
|
|
$
|
(558)
|
|
$
|
5,483
|
|
$
|
3,520
|
|
$
|
824
|
|
$
|
233
|
|
$
|
(49)
|
|
$
|
4,528
|
Depreciation and
amortization(ii)
|
|
2,016
|
|
1
|
|
138
|
|
(354)
|
|
1,801
|
|
976
|
|
1
|
|
121
|
|
118
|
|
1,216
|
Adjusted operating
income(i)
|
|
$
|
2,888
|
|
$
|
913
|
|
$
|
85
|
|
$
|
(204)
|
|
$
|
3,682
|
|
$
|
2,544
|
|
$
|
823
|
|
$
|
112
|
|
$
|
(167)
|
|
$
|
3,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Certain items are
excluded from operating income to derive adjusted
EBITDA(1). Adjusted EBITDA(1) is used
internally by management when analyzing segment underlying
operating performance.
|
(ii)
|
The fourth quarter
and year ended December 31, 2019, excludes $116 million (2018 –
$120 million) and $508 million (2018 – $521 million), respectively
of amortization of intangible assets acquired with Shoppers Drug
Mart, recorded by Loblaw and $3 million (2018 – nominal) and $9
million (2018 – $9 million), respectively of accelerated
depreciation recorded by Weston Foods, related to restructuring and
other related costs.
|
2019 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, 2019 are
available in the Investor Centre section of the Company's website
at www.weston.ca and have been filed on SEDAR and are
available at www.sedar.com.
INVESTOR RELATIONS
Shareholders, security analysts and investment professionals
should direct their requests to Tara
Speers, Senior Director, Investor Relations,
at the Company's Executive Office or by e-mail at
investor@weston.ca.
Additional financial information has been filed electronically
with various securities regulators in Canada through SEDAR. This News Release
includes selected information on Loblaw, a public company with
shares trading on the Toronto Stock Exchange ("TSX"). For
information regarding Loblaw, readers should refer to the materials
filed by Loblaw on SEDAR from time to time. These filings are also
maintained on Loblaw's corporate website at www.loblaw.ca.
This News Release also includes selected information on Choice
Properties, a public real estate investment trust with units
trading on the TSX. For information regarding Choice Properties,
readers should refer to the materials filed by Choice Properties on
SEDAR from time to time. These filings are also maintained on
Choice Properties' website at www.choicereit.ca.
FOURTH QUARTER CONFERENCE CALL AND WEBCAST
George Weston Limited will host a conference call as well as an
audio webcast on Tuesday, February 25, 2020 at
9:00 a.m. (EST). To access via tele-conference, please dial
(647) 427-7450 or 1-888-231-8191. The playback will be
available two hours after the event at (416) 849-0833 or
1-855-859-2056, passcode: 7789047#. 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 Tuesday, May 5, 2020, at
11:00 a.m. (EDT) at The Royal Conservatory, TELUS Centre for
Performance and Learning, Koerner
Hall, 273 Bloor Street West, Toronto, Ontario, Canada.
Ce rapport est disponible en français.
|
|
Endnotes
|
|
|
(1)
|
See the "Non-GAAP
Financial Measures" section of of the Company's 2019 Annual Report,
which includes the reconciliation of such non-GAAP measures to the
most directly comparable GAAP measures.
|
(2)
|
This News Release
contains forward-looking information. See "Forward-Looking
Statements" section of this News Release and the Company's 2019
Annual Report 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 and assumptions that
were used when making these statements. This News Release should be
read in conjunction with GWL'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)
|
Comparative figures
have been restated to conform with current year
presentation.
|
|
|
|
SOURCE George Weston Limited