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
2019 FOURTH QUARTER HIGHLIGHTS
Net earnings available to common shareholders of the Company were $433 million, an increase of
- 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
$31 million .
Adjusted net earnings available to common shareholders of the Company(1) were
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, the Company's results include:
- the impact of the implementation of International Financial Reporting Standards 16 "Leases" ("IFRS 16"), as set out in the "Consolidated Other Business Matters" section below;
- the impact of the acquisition of
Canadian Real Estate Investment Trust ("CREIT") byChoice Properties in the second quarter of 2018; - the year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the significant changes in
Choice Properties' unit price, recorded in net interest expense and other financing charges. The Company's results are impacted by market price fluctuations ofChoice Properties' Trust Units on the basis that the Trust Units held by unitholders, other than the Company, are redeemable for cash at the option of the holder. The Company's financial results are negatively impacted when the Trust Unit price rises and positively impacted when the Trust Unit price declines; and - the dilutive impact on both the Company's diluted net earnings per common share and adjusted diluted net earnings per common share(1) as a result of the issuance of approximately 26.6 million common shares in connection with a reorganization in
November 2018 , as set out in the "Consolidated Other Business Matters" section below.
(unaudited) | ||||||||||||||||||||||||||||
($ millions except where otherwise | ||||||||||||||||||||||||||||
indicated) | Quarters Ended | Years Ended | ||||||||||||||||||||||||||
For the periods ended as indicated | $ Change | % Change | $ 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 inNovember 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
Diluted net earnings per common share in the fourth quarter of 2019 were
- 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
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
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
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 | Other and | Total(i) | Loblaw | Weston | Other and |
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 ($) | (0.01) | (0.01) | 0.03 | 0.01 | (0.04) | — | 0.16 | 0.12 | ||||||||||
(i) | Includes nominal year-over-year impact in the fourth quarter of 2019 and year-to-date from |
Loblaw's Spin-out of Choice Properties Real Estate Investment Trust On
The issuance of approximately 26.6 million common shares in connection with the reorganization had a dilutive impact on both the Company's diluted net earnings per common share and adjusted diluted net earnings per common share(1) in 2019 and 2018.
The Company continues to be controlled by Mr. W. Galen Weston who, directly and indirectly through entities which he controls, owns approximately 53.2% of the outstanding common shares of the Company.
Offering of Trust Units In the second quarter of 2019,
As a result of the increase in taxable income from the sale transactions in 2019, the
REPORTABLE OPERATING SEGMENTS
The Company operates through its three reportable operating segments, Loblaw,
Loblaw has two reportable operating segments, Retail and Financial Services. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise and financial services.
Weston Foods is a North American bakery making bread, rolls, cupcakes, donuts, biscuits, cakes, pies, cones and wafers, artisan baked goods and more.
Loblaw Segment Results
(unaudited) | |||||||||||||||||||||
($ millions except where otherwise | |||||||||||||||||||||
indicated) | Quarters Ended | Years Ended | |||||||||||||||||||
For the periods ended as indicated | $ Change | % Change | $ 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 |
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
- 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 ofThanksgiving 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
Retail adjusted EBITDA(1) was
- 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
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
Loblaw Other Business Matters
Spin-out of
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
Subsequent to year end 2019, Loblaw announced the future closure of two distribution centres in
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 | $ Change | % Change | $ 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 |
Revenue Revenue in the fourth quarter of 2019 was
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
- 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
- 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
Choice Properties Other Business Matters
Investment Property Transactions During 2019,
During 2019,
- 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 inStrathcona 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 | $ Change | % Change | $ 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
- 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
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 Other Business Matters
Restructuring and other related costs
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,
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.
In 2020,
In 2020,
- 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 | |||
record as of | |||
Preferred Shares, Series I | |||
of record as of | |||
Preferred Shares, Series III | |||
record as of | |||
Preferred Shares, Series IV | |||
record as of | |||
Preferred Shares, Series V | |||
of record as of |
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
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
Consolidated Statements of Earnings
(12 weeks) | |||||||||||||||
(millions of Canadian dollars except where otherwise indicated) For the periods ended as indicated | (12 weeks) | (52 weeks) | (52 weeks) | ||||||||||||
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 | |||||||
(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 | |||||
605 | 734 | ||||||
Intangible Assets | 7,488 | 7,958 | |||||
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) | ||||||||||
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) | ||||||
— | — | 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
(millions of Canadian dollars except where otherwise indicated) For the periods ended as indicated | (12 weeks) | (12 weeks) | (52 weeks) | (52 weeks) | ||||||||
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,
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 | |||||||||||||||||||||||||||||||
(unaudited) (millions of Canadian dollars) | Loblaw | Choice | Weston | Other and | Total | Loblaw | Choice | Weston | Other and | 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 | ||||||||||||||||||||||||||||||
| Loblaw | Choice | Weston | Other and | Total | Loblaw | Choice | Weston | Other and | 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 |
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
INVESTOR RELATIONS
Shareholders, security analysts and investment professionals should direct their requests to
Additional financial information has been filed electronically with various securities regulators in
This News Release also includes selected information on
FOURTH QUARTER CONFERENCE CALL AND WEBCAST
ANNUAL MEETING
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
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