TORONTO, May 5, 2020 /CNW/
- George Weston Limited (TSX: WN) ("GWL" or the "Company")
today announced its consolidated unaudited results for the 12 weeks
ended March 21, 2020.
GWL's 2020 First Quarter 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.
"I am proud of our teams who have kept essential supermarkets
and pharmacies open, bakery shelves stocked, and hundreds of
properties safe and secure," said Chairman and Chief Executive
Officer, Galen G. Weston. "We
continue to make meaningful and necessary investments to ensure the
well-being of our customers, colleagues, and tenants during these
uncertain times. Looking ahead, each of our businesses is set to
deliver long-term value creation from a position of operational
strength and with a solid financial foundation when we transition
to a new post-pandemic reality."
GWL's group of companies performed well in the first quarter and
responded quickly to the dramatic onset of the COVID-19 pandemic.
Beginning in mid-March, the pandemic began to affect our people,
our operations and our communities. In our retail and consumer
goods businesses, sales of essential items initially surged in
response to stockpiling. At the same time, sales of non-essential
goods and services declined, and governments ordered mandatory
closures of non-essential businesses, negatively impacting the
financial health of affected tenants. Recognizing the important
role our group of companies plays in helping individuals and
businesses meet the challenges of the pandemic, investments by the
businesses ramped up to protect and support colleagues, customers
and tenants. Following the initial surge in sales at the end of
March in our retail and consumer goods businesses, demand has
moderated. The response by each of our businesses and costs related
to COVID-19 have continued in the second quarter.
2020 FIRST QUARTER HIGHLIGHTS
Net earnings available to common shareholders of the Company
were $582 million ($3.78 per
common share), an increase of $1,070
million ($6.96 per common
share) compared to the same period in 2019. The increase was due to
an improvement of $38 million ($0.25 per common share) in the underlying
operating performance of the Company and the favourable
year-over-year net impact of adjusting items totaling $1,032 million ($6.71 per common share), which was primarily due
to the favourable year-over-year impact of the fair value
adjustment of the Trust Unit liability of $1,086 million ($7.07 per common share).
Adjusted net earnings available to common shareholders of the
Company(1) were $239
million ($1.55 per common
share). In comparison to the same period in 2019, this represented
an increase of $38 million
($0.25 per common share), or 18.9%,
due to the improvement in underlying operating performance of the
Company and the positive contribution from the year-over-year
increase in the Company's ownership interest in Loblaw Companies
Limited ("Loblaw"), as a result of Loblaw share repurchases,
partially offset by higher net interest expense and other financing
charges.
First quarter financial results reflect an estimated increase in
revenue of approximately $753 million
and net earnings available to common shareholders of $29 million ($0.19
per common share) primarily related to the significant increase in
initial demand for grocery and pharmacy products at Loblaw in March
following the onset of the COVID-19 pandemic in Canada.
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, the Company's results include:
- the impact of COVID-19 as set out in the "Consolidated Other
Business Matters" section of this News Release; and
- the year-over-year impact of the fair value adjustment of the
Trust Unit liability as a result of the significant changes in
Choice Properties Real Estate Investment Trust ("Choice
Properties") unit price, recorded in net interest expense and other
financing charges. The Company's results are impacted by market
price fluctuations of Choice Properties' Trust Units on the basis
that the Trust Units held by unitholders, other than the Company,
are redeemable for cash at the option of the holder. The Company's
financial results are negatively impacted when the Trust Unit price
rises and positively impacted when the Trust Unit price
declines.
(unaudited)
|
12 Weeks
Ended
|
|
|
|
($ millions except
where otherwise indicated)
|
|
|
|
|
|
For the periods ended
as indicated
|
Mar. 21,
2020
|
Mar. 23,
2019
|
|
$ Change
|
% Change
|
Revenue
|
$
|
12,333
|
$
|
11,173
|
$
|
1,160
|
10.4%
|
Operating
income
|
$
|
598
|
$
|
586
|
$
|
12
|
2.0%
|
Adjusted
EBITDA(1)
|
$
|
1,304
|
$
|
1,158
|
$
|
146
|
12.6%
|
Adjusted EBITDA
margin(1)
|
|
10.6%
|
|
10.4%
|
|
|
|
Net earnings
(loss) attributable to shareholders
|
|
|
|
|
|
|
|
of the Company
|
$
|
592
|
$
|
(478)
|
$
|
1,070
|
223.8%
|
Net earnings
(loss) available to common shareholders
|
|
|
|
|
|
|
|
of the Company
|
$
|
582
|
$
|
(488)
|
$
|
1,070
|
219.3%
|
Adjusted net earnings
available to common shareholders
|
|
|
|
|
|
|
|
of the Company(1)
|
$
|
239
|
$
|
201
|
$
|
38
|
18.9%
|
Diluted net
earnings (loss) per common share ($)
|
$
|
3.78
|
$
|
(3.18)
|
$
|
6.96
|
218.9%
|
Adjusted diluted net
earnings per common share(1) ($)
|
$
|
1.55
|
$
|
1.30
|
$
|
0.25
|
19.2%
|
|
|
|
|
|
|
|
Net earnings available to common shareholders of the Company in
the first quarter of 2020 were $582 million ($3.78 per common share), an increase of
$1,070 million ($6.96 per common share), or 219.3%, compared to
the same period in 2019. The increase was due to the favourable
year-over-year net impact of adjusting items totaling $1,032 million ($6.71 per common share) and an improvement in the
underlying operating performance of $38 million ($0.25 per common share) described below.
- The favourable year-over-year net impact of adjusting items
totaling $1,032 million ($6.71 per common share) was primarily due
to:
-
- the favourable year-over-year impact of the fair value
adjustment of the Trust Unit Liability of $1,086 million ($7.07 per common share); and
- the favourable year-over-year impact of the fair value
adjustment of the forward sale agreement for 9.6 million Loblaw
common shares of $46 million
($0.30 per common share);
partially offset by,
- the unfavourable year-over-year impact of the fair value
adjustment on investment properties of $70
million ($0.47 per common
share);
- the unfavourable impact of the deferred tax expense on the
outside basis difference in certain Loblaw shares of $14 million ($0.09
per common share); and
- the unfavourable year-over-year impact of restructuring and
other related costs of $12 million
($0.07 per common share).
- The improvement in underlying operating performance of
$38 million ($0.25 per common share) was primarily due
to:
-
- the favourable underlying operating performance of Loblaw and
Weston Foods including the impact of COVID-19 estimated at
approximately $29 million
($0.19 per common share); and
- the positive contribution from the year-over-year increase in
the Company's ownership interest in Loblaw, as a result of Loblaw
share repurchases;
partially offset by,
- an increase in adjusted net interest expenses and other
financing charges(1).
Adjusted net earnings available to common shareholders of the
Company(1) in the first quarter of 2020 were
$239 million ($1.55 per common
share), an increase of $38 million ($0.25 per common share), or 18.9%, due to the
improvement in underlying operating performance described
above.
CONSOLIDATED OTHER BUSINESS MATTERS
COVID-19 First quarter financial results reflect an
estimated increase in revenue from the impact of COVID-19 of
approximately $753 million, primarily
related to Loblaw. Loblaw experienced unprecedented consumer demand
and stockpiling relating to COVID-19, with sales surging in the
final two weeks of March. The result was both a sharp increase in
revenue and profit followed by ramp-up in spending to protect and
benefit its colleagues and customers. The estimated increase in
revenue and diluted net earnings per common share was impacted by
each of the Company's reportable operating segments as follows:
|
|
|
|
|
|
|
|
|
12 Weeks
Ended
Mar. 21,
2020
|
(unaudited)
($ millions except
where otherwise indicated)
|
Loblaw
|
Weston
Foods
|
Other
and
Intersegment
|
Total(i)
|
Revenue
|
$
|
751
|
$
|
5
|
$
|
(3)
|
$
|
753
|
Diluted net earnings
per common share ($)
|
$
|
0.18
|
$
|
0.01
|
$
|
—
|
$
|
0.19
|
Diluted weighted
average common shares
|
|
|
|
|
outstanding (in
millions)
|
|
|
|
153.8
|
|
|
|
|
|
|
|
(i)
|
Nominal impact in the
first quarter of 2020 from Choice Properties.
|
Refer to the "COVID-19 Update and Outlook" section of this News
Release for more information.
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 the consolidation and cash and short-term investments
held by the Company. 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.
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 Operating Results
(unaudited)
|
12 Weeks
Ended
|
|
|
|
($ millions except
where otherwise indicated)
|
|
|
|
|
|
|
For the periods ended
as indicated
|
Mar. 21,
2020
|
Mar. 23,
2019
|
|
$ Change
|
% Change
|
Revenue
|
$
|
11,800
|
$
|
10,659
|
$
|
1,141
|
10.7%
|
Operating
income
|
$
|
539
|
$
|
449
|
$
|
90
|
20.0%
|
Adjusted
EBITDA(1)
|
$
|
1,167
|
$
|
1,038
|
$
|
129
|
12.4%
|
Adjusted EBITDA
margin(1)
|
9.9%
|
9.7%
|
|
|
Depreciation and
amortization(i)
|
$
|
594
|
$
|
580
|
$
|
14
|
2.4%
|
|
|
|
|
|
|
|
(i)
|
Depreciation and
amortization in the first quarter of 2020 includes
$119 million (2019 – $119 million) of amortization of
intangible assets acquired with Shoppers Drug Mart Corporation
("Shoppers Drug Mart").
|
Unless otherwise indicated, Loblaw's operating results include
the impacts of COVID-19 and the consolidation of franchises.
Revenue Loblaw revenue in the first quarter of
2020 was $11,800 million, an
increase of $1,141 million, or
10.7%, compared to the same period in 2019, primarily driven
by retail sales. Loblaw financial results reflect an estimated
increase in revenue of approximately $751
million related to the significant increase in initial
demand for grocery and pharmacy products in March following the
onset of the COVID-19 pandemic in Canada.
Retail sales in the first quarter of 2020 increased by
$1,132 million, or 10.8%,
compared to the same period in 2019 and included food retail
sales of $8,332 million (2019 –
$7,515 million) and drug retail sales
of $3,252 million (2019 –
$2,937 million). Excluding the
consolidation of franchises, retail sales increased by
$946 million, or 9.3%, primarily driven by the following
factors:
- the increase in sales included the impact of COVID-19,
estimated at approximately $768
million, which included the favourable impact of the
consolidation of franchises of $91
million;
- food retail same-store sales growth was 9.6% for the quarter.
Food same-store sales growth was positively impacted by COVID-19.
Food retail basket size increased and traffic increased in the
quarter;
- Loblaw's food retail average article price was 1.5% (2019 –
3.8%), which reflects the impact of inflation on the specific mix
of goods sold in Loblaw's stores in the quarter. The average
quarterly national food price inflation was 2.8% (2019 – inflation
of 3.3%) 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 10.7%. Drug same-store
sales growth was positively impacted by COVID-19. Pharmacy
same-store sales growth was 10.6% and front store same-store sales
growth was 10.7%.
In the last 12 months, 13 food and drug stores were opened and 7
food and drug stores were closed, resulting in a net increase
in retail square footage of 0.2 million square feet, or
0.3%.
Financial services revenue was flat compared to the first
quarter of 2019 mainly due to higher interest and interchange
income attributable to the growth in the credit card portfolio and
higher sales attributable to The Mobile Shop offset by
the negative impact of COVID-19, driven by lower interchange income
and lower sales attributable to The Mobile
Shop.
Operating income Loblaw operating income in the
first quarter of 2020 was $539 million, an increase of
$90 million, or 20.0%, compared to the same period in 2019.
The increase included the improvement in underlying operating
performance of $115 million, partially offset by the
unfavourable year-over-year net impact of adjusting items totaling
$25 million, as described below:
- the improvement in underlying operating performance of
$115 million was primarily due to
retail, including the favourable contribution from the
consolidation of franchises of $28
million, partially offset by the decline in financial
services.
- the unfavourable year-over-year net impact of adjusting items
totaling $25 million was primarily
due to the following:
-
- the unfavourable year-over-year impact of the fair value
adjustment of derivatives of $17
million;
- the unfavourable impact of a prior year net gain on sale of
non-operating properties of $8
million; and
- the unfavourable year-over-year impact of restructuring and
other related costs of $7
million;
partially offset by,
- the favourable impact of prior year pension annuities and
buy-outs of $10 million.
Adjusted EBITDA(1) Loblaw adjusted
EBITDA(1) in the first quarter of 2020 was
$1,167 million, an increase of
$129 million, or 12.4%, compared to the same period in 2019.
The increase was primarily due to the improvement in retail,
partially offset by financial services.
Retail adjusted EBITDA(1) increased by
$176 million, including the favourable impact of the
consolidation of franchises of $36 million and was driven by
an increase in retail gross profit, partially offset by an increase
in retail selling, general and administrative expenses
("SG&A").
- Retail gross profit percentage was 29.8%, an increase of 20
basis points compared to the same period in 2019. Excluding the
consolidation of franchises, retail gross profit percentage was
27.3%, a decrease of 30 basis points compared to the first quarter
of 2019. Food retail margins were stable but were negatively
impacted by product mix and drug retail margins were negatively
impacted, largely due to COVID-19.
- Retail SG&A increased by $177
million compared to the first quarter of 2019. Excluding the
consolidation of franchises, retail SG&A increased by
$88 million and SG&A as a
percentage of sales was 17.5%, an improvement of 70 basis points
compared to the first quarter of 2019, primarily driven by COVID-19
sales leverage.
Financial services adjusted EBITDA(1) decreased by
$47 million compared to the same
period in 2019 due to higher expected credit losses attributable to
an immediate increase in unemployment rate forecasts and
recessionary environment.
Loblaw adjusted EBITDA(1) in the first quarter of
2019 included a gain of $5 million
related to the sale and leaseback of properties to Choice
Properties.
Depreciation and Amortization Loblaw's depreciation
and amortization in the first quarter of 2020 was
$594 million, an increase of $14 million compared to the
same period in 2019, primarily driven by the consolidation of
franchises and an increase in information technology ("IT") assets.
Included in depreciation and amortization is the amortization of
intangible assets acquired with Shoppers Drug Mart of $119 million (2019 – $119
million).
Loblaw Other Business Matters
Process and Efficiency In the first quarter
of 2020, Loblaw recorded approximately $19 million of
restructuring and other related costs, primarily related to Process
and Efficiency initiatives. Included in the restructuring charges
is $15 million related to the closure
of the two distribution centres in Laval and Ottawa, that were previously announced in the
first quarter of 2020. 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 the end
of the first quarter of 2020, Loblaw consolidated all of its
remaining franchisees for accounting purposes under a simplified
franchise agreement implemented in 2015.
Consolidation of franchises in the first quarter of 2020
resulted in a year-over-year increase in revenue of
$186 million, an increase in adjusted
EBITDA(1) of $36 million, an increase in
depreciation and amortization of $8 million and an increase in
net earnings attributable to non-controlling interests of
$28 million.
Choice Properties Operating Results
(unaudited)
|
12 Weeks
Ended
|
|
|
|
($ millions except
where otherwise indicated)
|
|
|
|
|
|
|
For the periods ended
as indicated
|
Mar. 21,
2020
|
Mar. 23,
2019
|
$ Change
|
%Change
|
Revenue
|
$
|
325
|
$
|
323
|
$
|
2
|
0.6
|
%
|
Net interest (income)
expense and other financing charges(i)
|
$
|
(256)
|
$
|
1,125
|
$
|
(1,381)
|
(122.8)
|
%
|
Net income
(loss)
|
$
|
333
|
$
|
(902)
|
$
|
1,235
|
136.9
|
%
|
Funds from
Operations(1)(ii)
|
$
|
171
|
$
|
169
|
$
|
2
|
1.2
|
%
|
|
|
|
|
|
|
|
|
(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.
|
Revenue Revenue in the first quarter of 2020
was $325 million, an increase of
$2 million, or 0.6%, compared to the same period in 2019, and
included $187 million (2019 –
$191 million) generated from tenants
within Loblaw's retail segment. The increase in revenue was
primarily driven by:
- an increase in base rent and operating cost recoveries from
existing properties; and
- additional revenue generated from properties acquired in 2019
and 2020 and from tenant openings in newly developed leasable
space;
partially offset by,
- foregone revenue from sold properties including those sold as
part of the Choice Properties' portfolio transaction in the third
quarter of 2019.
Net Interest Expense and Other Financing
Charges Net interest income and other financing
charges in the first quarter of 2020 was $256 million, compared to net interest expense
and other financing charges of $1,125 million in the same period in 2019.
The change of $1,381 million was
primarily driven by:
- the favourable year-over-year impact of the fair value
adjustment on Class B LP units ("Exchangeable Units") of
$1,377 million as a result of the
significant decrease in the unit price of Choice Properties in the
quarter;
- a reduction of interest expense on term loans as a result of
repayments made using proceeds from the offering of Trust Units in
the second quarter of 2019 and Choice Properties' portfolio
transaction;
- a reduction of interest expense on the credit facility through
the use of proceeds from the offering of Trust Units in the second
quarter of 2019; and
- a decline in mortgage principal balances due to repayments
contributing to a lower interest expense;
partially offset by,
- an increase in interest charges on the senior unsecured
debentures due to a higher principal amount outstanding as compared
to the prior year.
Net income (loss) Net income in the first quarter of 2020
was $333 million, compared to a net
loss of $902 million in the same period in 2019. The change of
$1,235 million was primarily
driven by:
- the favourable impact of higher net interest income and other
financing charges, described above; and
- an increase in net operating income from existing properties
and the contribution from completed developments;
partially offset by,
- the unfavourable year-over-year impact of the fair value
adjustment on investment properties.
Funds from Operations(1)
Funds from Operations(1) in the first
quarter of 2020 was $171 million, an increase of
$2 million compared to the same period in 2019 primarily
driven by lower borrowing costs as a result of a reduction in
indebtedness in the second quarter of 2019, partially offset by a
reduction in net operating income attributable to the Choice
Properties' portfolio transaction.
Choice Properties Other Business Matters
Investment Property Transactions During the
first quarter of 2020, Choice Properties acquired one property from
a third party vendor for a purchase price excluding transaction
costs of $21 million, and disposed of
its sole US property and three other properties for proceeds of
$135 million, of which $110 million was settled in cash and the balance
applied to the assumption of mortgage debt.
Weston Foods Operating Results
(unaudited)
|
12 Weeks
Ended
|
|
|
|
($ millions except
where otherwise indicated)
|
|
|
|
|
|
|
For the periods ended
as indicated
|
Mar. 21,
2020
|
Mar. 23,
2019
|
$ Change
|
% Change
|
Sales
|
$
|
535
|
$
|
516
|
$
|
19
|
3.7
|
%
|
Operating
income
|
$
|
1
|
$
|
10
|
$
|
(9)
|
(90.0)
|
%
|
Adjusted
EBITDA(1)
|
$
|
52
|
$
|
46
|
$
|
6
|
13.0
|
%
|
Adjusted EBITDA
margin(1)
|
9.7%
|
8.9%
|
|
|
|
Depreciation and
amortization(i)
|
$
|
43
|
$
|
32
|
$
|
11
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
(i)
|
Depreciation and
amortization in the first quarter of 2020 includes $9 million
(2019 – nil) of accelerated depreciation related to restructuring
and other related costs.
|
Sales Weston Foods sales in the first quarter
of 2020 were $535 million, an increase of $19 million, or
3.7%, compared to the same period in 2019. The increase in sales
included the impact of COVID-19, estimated at approximately
$5 million. Foreign currency
translation had a nominal impact on sales in the quarter. 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 first quarter of 2020 was $1 million, a decrease
of $9 million, or 90.0%, compared to the same period in 2019.
The decrease was due to the unfavourable year-over-year net impact
of adjusting items totaling $13 million, partially offset by
the improvement in underlying operating performance of
$4 million. The year-over-year net impact of adjusting items
included the following:
- the unfavourable year-over-year impact of restructuring and
other related costs of $14
million;
partially offset by,
- the favourable year-over-year impact of the fair value
adjustment of derivatives of $1
million.
Adjusted EBITDA(1) Weston Foods
adjusted EBITDA(1) in the first quarter of 2020 was
$52 million, an increase of $6 million or 13.0%, compared
to the same period in 2019. The increase was driven by sales
growth, productivity improvements and the net benefits realized
from Weston Foods' transformation program, partially offset by
higher input and distribution costs.
Weston Foods adjusted EBITDA margin(1) in the first
quarter of 2020 increased to 9.7% compared to 8.9% in the same
period in 2019. The improvement in adjusted EBITDA
margin(1) in the first quarter of 2020 was driven by the
factors described above.
Depreciation and Amortization Weston
Foods depreciation and amortization in the first quarter of 2020
was $43 million, an increase of $11 million compared to
the same period in 2019. Depreciation and amortization in the first
quarter of 2020 included $9 million (2019 – nil) of
accelerated depreciation related to Weston Foods' transformation
program. Excluding this amount, depreciation and amortization in
the first quarter of 2020 increased by $2 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 first quarter of 2020, Weston Foods
recorded restructuring and other related costs of $16 million
(2019 – $2 million) which were primarily related to Weston
Foods' transformation program.
COVID-19 UPDATE AND OUTLOOK(2)
General The COVID-19 pandemic continues to have a
dramatic impact on the Company's operating segments, colleagues,
customers, tenants, suppliers and other stakeholders. While
the duration and effects of the pandemic remain unknown, the
Company and each of its operating segments has reacted quickly to
the changing circumstances.
Loblaw has ramped up investments in four areas: enhancing
customer convenience by expanding online capabilities and
increasing staffing in its stores; supporting colleagues in its
stores and distribution centres with temporary pay premiums and pay
protection safeguards; securing operations, with more in-store
cleaning and in-store security, introducing new ways to shop stores
to promote social distancing, and installing plexiglass barriers at
check outs; and providing financial support to its communities and
customers by pledging financial support to food banks and community
charities and offering personalized solutions
for President's Choice Financial
Mastercard® customers who are experiencing
financial hardship.
The costs of the incremental investments by Loblaw ramped up
towards the end of the first quarter of 2020 and continued into the
second quarter. Given the unprecedented nature of the pandemic and
its impact on the country, Loblaw expects that consumer behavior
and the resulting impact on sales and product mix, as well as the
cost of operating the business, will continue to be volatile. In
the five weeks following the end of the first quarter, sales mix
continued to evolve as customers spent less on discretionary items.
On a same-store sales basis, food retail was up by approximately
10% and drug retail down by approximately 6%, in each case compared
to the same period in the prior year. Loblaw currently estimates
that additional investments are running at approximately
$90 million per period.
As one of Canada's largest
landlords, Choice Properties has an important role to play in
helping Canadians and their businesses during these unprecedented
and challenging times. Choice Properties has assisted qualifying
small businesses and independent tenants with a deferral of rent
for 60 days, effective April 1, 2020.
The amounts deferred for qualifying tenants are due to be repaid
over a 12-month period and as of April 22, 2020, were
approximately $5 million of monthly
contractual rent. Choice Properties has also been in discussions
with those of its larger tenants who have been adversely affected
by COVID-19 and is considering rent deferral requests on a case by
case basis. As of April 22, 2020, Choice Properties had
received 86% of the contractual rents for April.
Choice Properties expects its development initiatives will be
impacted by delays due to COVID-19. These delays may impact the
completion dates of ongoing development projects, but Choice
Properties remains confident that over time, its development
initiatives will add high-quality real estate to the portfolio at a
reasonable cost.
Weston Foods is focused on its important food manufacturing role
in North America and ensuring a
reliable supply of quality products to its customers. To further
this objective, Weston Foods has been investing to support
colleagues in its bakeries and distribution centres with temporary
pay premiums and pay protection safeguards and by increasing health
and safety measures at its facilities.
In the first quarter, Weston Foods experienced strong demand for
certain categories of products, such as packaged bread and rolls
and alternatives in Canada and a
decrease in demand in other categories in both its retail and
foodservice channels. Consumer behavior is expected to
continue to be volatile. As a result of changes in demand, Weston
Foods is managing its production planning carefully and will,
during this COVID-19 pandemic, temporarily shut down certain
bakeries if demand for certain product categories declines. In the
four weeks following the end of the first quarter, sales excluding
the impact of foreign currency translation were down by 15% and
costs increased by approximately $5
million compared to the same period in the prior year.
Weston Foods is taking appropriate actions to emerge from the
COVID-19 pandemic with a solid recovery plan based on the actions,
processes and investments it has made with its employees,
suppliers, customers and other stakeholders in mind.
In light of the uncertainty surrounding the duration and
severity of the pandemic, it is not possible to reliably estimate
the length and severity of COVID-19 related impacts on the
financial results and operations of the Company. As announced on
April 9, 2020, the Company has withdrawn its 2020 Outlook that
is contained in its Management's Discussion and Analysis
("MD&A") for the year ended December 31,
2019.
Liquidity The Company and its operating segments
maintain robust balance sheets and liquidity. As at the end of the
first quarter of 2020, the liquidity position of the operating
segments was as follows: Loblaw's consolidated cash and short-term
investments balance was $2.2 billion.
The aggregate available liquidity at Loblaw was approximately
$3.9 billion including undrawn
amounts under committed credit facilities. Subsequent to the first
quarter of 2020, Loblaw agreed to issue $350
million aggregate principal amount of senior unsecured
notes, bearing interest at a rate of 2.284% per annum and maturing
on May 7, 2030, which is expected to
occur on May 7, 2020. Loblaw intends
to use the proceeds to partially fund the repayment of its
outstanding $350 million medium term
notes maturing June 18, 2020 and for
general corporate purposes. Choice Properties had $1.3 billion of available liquidity under its
committed credit facility and refinanced all bond maturities due
for the balance of the year. The Company (excluding Loblaw and
Choice Properties) had cash and short-term investments of
$0.8 billion with no debt maturities
in 2020.
Risk Factor For more information on the risks
presented to the Company by the COVID-19 pandemic, see Section 6,
"Enterprise Risks and Risk Management", of the MD&A in the
Company's 2020 First Quarter Report.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the first quarter of 2020, 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 July 1, 2020, to shareholders of
record as of June 15,
2020;
|
|
|
Preferred Shares,
Series I
|
$0.3625 per share
payable June 15, 2020, to shareholders of
record as of May 31,
2020;
|
|
|
Preferred Shares,
Series III
|
$0.3250 per share
payable July 1, 2020, to shareholders of
record as of June 15,
2020;
|
|
|
Preferred Shares,
Series IV
|
$0.3250 per share
payable July 1, 2020, to shareholders of
record as of June 15,
2020; and
|
|
|
Preferred Shares,
Series V
|
$0.296875 per share
payable July 1, 2020, to shareholders of
record as of June 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 reconciliation to, and description of the Company's non-GAAP
financial measures and financial metrics, see Section 8, "Non-GAAP
Financial Measures" of the MD&A in the Company's 2020 First
Quarter 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 IT systems implementations. These
specific forward-looking statements are contained throughout this
News Release including, without limitation, in the "COVID-19 Update
and 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 the COVID-19 pandemic, 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, including the COVID-19
pandemic 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 for the year ended
December 31, 2019 as well as COVID-19 related risks that have
been added to Section 6, "Enterprise Risks and Risk Management" of
the MD&A in the Company's 2020 First Quarter Report.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect the Company's
expectations only as of the date of this News Release. Except as
required by law, the Company does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
SEGMENT INFORMATION
The Company has three reportable operating segments: Loblaw,
Choice Properties and Weston Foods. Other and Intersegment includes
eliminations, intersegment adjustments related to the
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
|
|
|
|
|
Mar. 21,
2020
|
Mar. 23,
2019
|
(unaudited)
($ millions)
|
Loblaw
|
Choice
Properties
|
Weston
Foods
|
Other
and
Intersegment
|
Total
|
Loblaw
|
Choice
Properties
|
Weston
Foods
|
Other
and
Intersegment
|
Total
|
Revenue
|
$
|
11,800
|
$
|
325
|
$
|
535
|
$
|
(327)
|
$
|
12,333
|
$
|
10,659
|
$
|
323
|
$
|
516
|
$
|
(325)
|
$
|
11,173
|
Operating
income
|
$
|
539
|
$
|
77
|
$
|
1
|
$
|
(19)
|
$
|
598
|
$
|
449
|
$
|
223
|
$
|
10
|
$
|
(96)
|
$
|
586
|
Net interest expense
and other
|
|
|
|
|
|
|
|
|
|
|
financing
charges
|
172
|
(256)
|
(1)
|
(173)
|
(258)
|
173
|
1,125
|
—
|
(426)
|
872
|
Earnings (loss)
before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income taxes
|
$
|
367
|
$
|
333
|
$
|
2
|
$
|
154
|
$
|
856
|
$
|
276
|
$
|
(902)
|
$
|
10
|
$
|
330
|
$
|
(286)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
539
|
$
|
77
|
$
|
1
|
$
|
(19)
|
$
|
598
|
$
|
449
|
$
|
223
|
$
|
10
|
$
|
(96)
|
$
|
586
|
Depreciation and
amortization
|
594
|
1
|
43
|
(78)
|
560
|
580
|
—
|
32
|
(77)
|
535
|
Adjusting
items(i)
|
34
|
149
|
8
|
(45)
|
146
|
9
|
7
|
4
|
17
|
37
|
Adjusted
EBITDA(i)
|
$
|
1,167
|
$
|
227
|
$
|
52
|
$
|
(142)
|
$
|
1,304
|
$
|
1,038
|
$
|
230
|
$
|
46
|
$
|
(156)
|
$
|
1,158
|
Depreciation and
amortization(ii)
|
475
|
1
|
34
|
(78)
|
432
|
461
|
—
|
32
|
(77)
|
416
|
Adjusted operating
income(i)
|
$
|
692
|
$
|
226
|
$
|
18
|
$
|
(64)
|
$
|
872
|
$
|
577
|
$
|
230
|
$
|
14
|
$
|
(79)
|
$
|
742
|
|
|
|
|
|
|
|
|
|
(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)
|
Excludes
$119 million (2019 – $119 million) of amortization of
intangible assets acquired with Shoppers Drug Mart, recorded by
Loblaw and $9 million (2019 – nil) of accelerated depreciation
recorded by Weston Foods, related to restructuring and
other related costs.
|
2020 FIRST QUARTER REPORT
The Company's 2019 Annual Report and 2020 First Quarter Report
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.
FIRST QUARTER CONFERENCE CALL AND WEBCAST
George Weston Limited will host a conference call as well as an
audio webcast on Tuesday, May 5, 2020 at 9:00 a.m.
(ET). 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: 1177906#. 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. (ET). Due
to the public health impact of the COVID-19 pandemic and
in consideration of the health and safety of our shareholders,
colleagues and the broader community, this year's meeting will be
held in a virtual meeting format only, by way of a live webcast.
Shareholders will be able to listen, participate and vote at the
meeting in real time through a live webcast online
at http://web.lumiagm.com/201456442. See "How do I attend and participate at the
virtual Meeting?" in the Management Proxy Circular dated
March 13, 2020, which can be viewed
online at www.weston.ca or under George Weston Limited's
SEDAR profile at www.sedar.com, for detailed instructions on
how to attend and vote at the meeting. Please refer to the
"News and Events" page at www.weston.ca for additional details
on the virtual meeting.
Ce rapport est disponible en français.
|
|
Endnotes
|
|
|
(1)
|
See the "Non-GAAP
Financial Measures" section of the Company's 2020 First Quarter
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 2020
First Quarter 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.
|
|
|
SOURCE George Weston Limited