GEORGE WESTON LIMITED 
GWL's 2020 Annual Report includes the Company's audited annual consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the fiscal year ended
As a result of the Company's reporting calendar, the fourth quarter and full year 2020 include an extra week of operations ("the 53rd week") compared to 2019.
"George Weston performed well during the fourth quarter," said
Loblaw Companies Limited ("Loblaw") delivered positive results with strong same-store and e-commerce sales growth in a quarter heavily impacted by COVID-19. Costs remained elevated to ensure the safety and security of customers and colleagues. Loblaw continued to deliver value in categories that mean the most to its customers and focused on accelerating its three strategic growth areas of Everyday Digital Retail, Payments and Rewards, and
Choice Properties Real Estate Investment Trust ("
2020 FOURTH QUARTER HIGHLIGHTS
Net earnings available to common shareholders of the Company were $289 million (
Adjusted net earnings available to common shareholders of the Company(1) in the fourth quarter of 2020 were
CONSOLIDATED RESULTS OF OPERATIONS
Unless otherwise indicated, the Company's results include an extra week of operations (the "53rd week") in the fourth quarter and full year 2020 results when compared to 2019 as a result of the Company's reporting calendar.
The Company's results reflect the impact of COVID-19 and the year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the significant changes in
(unaudited) | Quarters Ended | Years Ended | ||||||||||||||||
($ millions except where otherwise | ||||||||||||||||||
For the periods ended as indicated | (13 weeks) | (12 weeks) | $ Change | % Change | (53 weeks) | (52 weeks) | $ Change | % Change | ||||||||||
Revenue | $ | 13,806 | $ | 12,107 | $ | 1,699 | 14.0% | $ | 54,705 | $ | 50,109 | $ | 4,596 | 9.2% | ||||
Operating income | $ | 906 | $ | 718 | $ | 188 | 26.2% | $ | 2,888 | $ | 2,958 | $ | (70) | (2.4)% | ||||
Adjusted EBITDA(1) | $ | 1,501 | $ | 1,351 | $ | 150 | 11.1% | $ | 5,607 | $ | 5,483 | $ | 124 | 2.3% | ||||
Adjusted EBITDA margin(1) | 10.9% | 11.2% | 10.2% | 10.9% | ||||||||||||||
Net earnings attributable to | $ | 299 | $ | 443 | $ | (144) | (32.5)% | $ | 963 | $ | 242 | $ | 721 | 297.9% | ||||
Net earnings available to | $ | 289 | $ | 433 | $ | (144) | (33.3)% | $ | 919 | $ | 198 | $ | 721 | 364.1% | ||||
Adjusted net earnings | $ | 312 | $ | 262 | $ | 50 | 19.1% | $ | 1,055 | $ | 1,117 | $ | (62) | (5.6)% | ||||
Diluted net earnings per | $ | 1.88 | $ | 2.81 | $ | (0.93) | (33.1)% | $ | 5.96 | $ | 1.26 | $ | 4.70 | 373.0% | ||||
Adjusted diluted net | $ | 2.03 | $ | 1.69 | $ | 0.34 | 20.1% | $ | 6.85 | $ | 7.24 | $ | (0.39) | (5.4)% | ||||
The following table provides the approximate impact of the 53rd week on the consolidated results of the Company in the fourth quarter of 2020:
53rd week | ||||||||||
($ millions except where otherwise indicated) | Loblaw | Weston | Other and | Total | ||||||
Revenue | $ | 878 | $ | 29 | $ | (10) | $ | 897 | ||
Adjusted EBITDA(1) | $ | 67 | $ | 4 | $ |
— | $ | 71 | ||
Adjusted EBITDA margin(1) | 7.6% | 13.8% | ||||||||
Depreciation and amortization | $ | — | $ | — | $ |
— | $ | — | ||
Operating income | $ | 67 | $ | 4 | $ |
— | $ | 71 | ||
Net earnings available to common shareholders of | $ | 18 | $ | 3 | $ |
— | $ | 21 | ||
Diluted net earnings per common share ($) | $ | 0.12 | $ | 0.02 | $ |
— | $ | 0.14 | ||
In the fourth quarter of 2020, the Company recorded net earnings available to common shareholders of the Company of $289 million (
- The unfavourable year-over-year net impact of adjusting items totaling
$194 million ($1.27 per common share) was due to: - the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability of
$223 million ($1.44 per common share) as a result of the increase inChoice Properties' unit price in the fourth quarter of 2020; and - the unfavourable year-over-year impact of asset impairments, net of recoveries of
$9 million ($0.08 per common share);
partially offset by, - the favourable year-over-year impact of the fair value adjustment on investment properties of
$38 million ($0.25 per common share). - The improvement in the Company's consolidated underlying operating performance of
$50 million ($0.34 per common share) was due to: - the favourable underlying operating performance of Loblaw including the impact of COVID-19 and related costs;
- the favourable underlying operating performance of
Weston Foods including the impact of COVID-19 and related costs; and - the decrease in the adjusted effective tax rate(1) mainly due to the favourable impact of the non-taxable portion of the gain from the
Choice Properties' transactions completed in the fourth quarter of 2020 and the year-over-year impact of certain non-deductible tax items;
partially offset by, - an increase in adjusted net interest expense and other financing charges(1); and
- an increase in depreciation and amortization.
Adjusted net earnings available to common shareholders of the Company(1) in the fourth quarter of 2020 were $312 million (
CONSOLIDATED OTHER BUSINESS MATTERS
COVID-19 RELATED COSTS In 2020, the Company incurred significant COVID-19 costs related to temporary pay premiums, pay protection safeguards, additional security, customer convenience and increased health and safety measures, totaling approximately
Quarter Ended | Year Ended | ||||
(unaudited) | |||||
($ millions) | (13 weeks) | (53 weeks) | |||
Loblaw | $ | 45 | $ | 445 | |
3 | 21 | ||||
2 | 24 | ||||
Consolidated | $ | 50 | $ | 490 | |
(i) |
CONSOLIDATION IMPACTS OF CHOICE PROPERTIES' TRANSACTIONS
Quarters Ended | Years Ended | ||||||||||
(unaudited) | |||||||||||
($ millions) | (13 weeks) | (12 weeks) | (53 weeks) | (52 weeks) | |||||||
$ | 11 | $ | 7 | $ | 31 | $ | 7 | ||||
Net interest expense and other financing charges | $ | 11 | $ | 7 | $ | 31 | $ | 7 | |||
CHOICE PROPERTIES' TRANSACTIONS In 2020,
For tax purposes, these transactions were treated as a sale, and the income tax expense reflects the benefit from the non-taxable portion of the gain from the sale of properties by
REPORTABLE OPERATING SEGMENTS
The Company operates through its three reportable operating segments, Loblaw,
Loblaw has two reportable operating segments, retail and financial services. Loblaw's retail segment consists primarily of food retail and drug retail. 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, cookies, cakes, pies, cones and wafers, artisan baked goods and more.
The Company's results in 2020 include an extra week of operation, the 53rd week, as described in the "Consolidated Results of Operations" section of this News Release.
Loblaw Operating Results
Quarters Ended | Years Ended | |||||||||||||
(unaudited) | ||||||||||||||
($ millions except where | ||||||||||||||
For the periods ended as indicated | (13 weeks) | (12 weeks) | $ Change | % Change | (53 weeks) | (52 weeks) | $ Change | % Change | ||||||
Revenue | $ | 13,286 | $ | 11,590 | $ | 1,696 | 14.6% | $ | 52,714 | $ | 48,037 | $ | 4,677 | 9.7% |
Operating income | $ | 700 | $ | 539 | $ | 161 | 29.9% | $ | 2,357 | $ | 2,262 | $ | 95 | 4.2% |
Adjusted EBITDA(1) | $ | 1,330 | $ | 1,203 | $ | 127 | 10.6% | $ | 5,033 | $ | 4,904 | $ | 129 | 2.6% |
Adjusted EBITDA margin(1) | 10.0% | 10.4% | 9.6% | 10.2% | ||||||||||
Depreciation and | $ | 609 | $ | 589 | $ | 20 | 3.4% | $ | 2,596 | $ | 2,524 | $ | 72 | 2.9% |
(i) | Depreciation and amortization in the fourth quarter of 2020 includes $117 million (2019 – $116 million) and $509 million (2019 – $508 million) year-to-date of amortization of intangible assets acquired with |
Revenue Loblaw revenue in the fourth quarter of 2020 was
Retail sales increased by
Excluding the consolidation of franchises, retail sales increased by
- food retail same-store sales growth was 8.6% for the quarter. Food retail same-store sales growth was positively impacted by COVID-19. On a comparable week basis food retail basket size increased and traffic decreased in the quarter;
- Loblaw's food retail average article price was higher by 3.9% (2019 – 0.8%), which reflects the year-over-year growth in food retail revenue over the average number of articles sold in Loblaw's stores in the quarter. The increase in average article price was due to sales mix; and
- drug retail same-store sales growth was 3.7% for the quarter. Pharmacy same-store sales growth was 5.0% and front store same-store sales growth was 2.8%.
In 2020, 19 food and drug stores were opened and 9 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 in the fourth quarter of 2020 decreased by $17 million compared to the fourth quarter of 2019 mainly due to lower interest income from lower volume of credit card receivables, and lower credit card related fees primarily driven by lower customer spending. The decrease was partially offset by higher sales attributable to The Mobile Shop, and higher interchange income due to prior year impact of a reclassification between revenue and expense of
Operating income Loblaw operating income in the fourth quarter of 2020 was $700 million, an increase of $161 million when compared to the fourth quarter of 2019, which included the impact of the 53rd week of $67 million. The increase included an improvement in underlying operating performance of $108 million and the favourable year-over-year net impact of adjusting items totaling $53 million, as described below:
- the improvement in underlying operating performance of
$108 million was primarily due to an improvement in retail which included the favourable contribution from the consolidation of franchises of$34 million . The improvement in the underlying operating performance of retail was positively impacted by the 53rd week. This was partially offset by the performance from financial services. In the fourth quarter of 2020, Loblaw incurred approximately$45 million in COVID-19 related costs in the quarter to ensure the safety and security of customers and colleagues. - the favourable year-over-year net impact of adjusting items totaling
$53 million was primarily due to the following: - the favourable year-over-year change in asset impairments, net of recoveries of
$58 million ; and - the favourable year-over-year impact of restructuring and other related costs of
$14 million ;
partially offset by, - the unfavourable year-over-year impact of Loblaw's fair value adjustment on non-operating properties of
$13 million ; and - the unfavourable impact of reversal of certain prior period items in 2019 of
$7 million .
Adjusted EBITDA(1) Loblaw adjusted EBITDA(1) in the fourth quarter of 2020 was
Retail adjusted EBITDA(1) in the fourth quarter of 2020 increased by $135 million, including the favourable impact of the consolidation of franchises of $37 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 of 29.4% decreased by 40 basis points compared to the fourth quarter of 2019. Excluding the consolidation of franchises, retail gross profit percentage was 26.9%, a decrease of 80 basis points compared to the fourth quarter of 2019. Food retail margins were negatively impacted as a result of COVID-19 related changes in sales mix and competitive pricing. Drug retail margins were negatively impacted as a result of COVID-19 related changes in front store sales mix. Excluding the 53rd week, retail gross profit percentage decreased by 70 basis points.
- Excluding the consolidation of franchises, retail SG&A increased by
$251 million and SG&A as a percentage of sales was 17.4%, a decrease of 20 basis points compared to the fourth quarter of 2019. The favourable decrease of 20 basis points was primarily related to sales leverage as well as process and efficiency gains, which were partially offset by COVID-19 related costs and incremental e-commerce labour costs as a result of increased online sales.
Financial services adjusted EBITDA(1) decreased by $8 million compared to the fourth quarter of 2019, primarily driven by lower revenue as described above, partially offset by lower credit losses from the decrease in expected credit losses from an improving economic outlook and lower contractual charge-off, and lower customer acquisitions costs.
Loblaw adjusted EBITDA(1) was not impacted by any sale and leaseback of properties to
Depreciation and Amortization Loblaw's depreciation and amortization in the fourth quarter of 2020 was $609 million, an increase of $20 million compared to the fourth quarter of 2019. The increase in depreciation and amortization in the fourth quarter of 2020 was primarily driven by the consolidation of franchises and an increase in Information Technology ("IT") assets.
Depreciation and amortization in the fourth quarter of 2020 included $117 million (2019 – $116 million) of amortization of intangible assets related to the acquisition of Shoppers Drug Mart.
Loblaw Other Business Matters
Process and Efficiency In the fourth quarter of 2020 and year-to-date, Loblaw recorded approximately $10 million and $58 million, respectively, of restructuring and other related costs, primarily related to Process and Efficiency initiatives. Included in the restructuring charges were approximately
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 ("Franchise Agreement").
Consolidation of franchises in the fourth quarter of 2020 resulted in a year-over-year increase in revenue of $121 million, an increase in adjusted EBITDA(1) of $37 million, an increase in depreciation and amortization of $3 million and an increase in net earnings attributable to non-controlling interests of $37 million.
Choice Properties Operating Results
(unaudited) ($ millions except where otherwise For the periods ended as indicated | Quarters Ended | Years Ended | ||||||||||||||||
$ Change | % Change | $ Change | % Change | |||||||||||||||
(12 weeks) | (12 weeks) | (52 weeks) | (52 weeks) | |||||||||||||||
Revenue | $ | 322 | $ | 318 | $ | 4 | 1.3% | $ | 1,271 | $ | 1,289 | $ | (18) | (1.4)% | ||||
Net interest expense (income) | ||||||||||||||||||
and other financing | $ | 217 | $ | (74) | $ | 291 | 393.2% | $ | 173 | $ | 1,472 | $ | (1,299) | (88.2)% | ||||
Net income (loss) | $ | 117 | $ | 294 | $ | (177) | (60.2)% | $ | 451 | $ | (581) | $ | 1,032 | 177.6% | ||||
Funds from Operations(1)(ii) | $ | 172 | $ | 166 | $ | 6 | 3.6% | $ | 652 | $ | 680 | $ | (28) | (4.1)% | ||||
(i) | Net interest expense (income) 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 2020 was
Net Interest Expense and Other Financing Charges Net interest expense and other financing charges in the fourth quarter of 2020 were
Net Income Net income in the fourth quarter of 2020 was
- the unfavourable impact of higher net interest expense and other financing charges described above; and
- an increase in expected credit loss provisions related to tenant receivables;
partially offset by,
- the favourable year-over-year impact of the fair value adjustment on investment properties.
Funds from Operations(1) Funds from Operations(1) in the fourth quarter of 2020 was
Choice Properties Other Business Matters
Investment Property Transactions Subsequent to the end of 2020,
Weston Foods Operating Results
Quarters Ended | Years Ended | ||||||||||||||
(unaudited) ($ millions except where otherwise For the periods ended as indicated | |||||||||||||||
$ Change | % Change | $ Change | % Change | ||||||||||||
(13 weeks) | (12 weeks) | (53 weeks) | (52 weeks) | ||||||||||||
Sales | $ | 523 | $ | 522 | $ | 1 | 0.2% | $ | 2,062 | $ | 2,155 | $ | (93) | (4.3)% | |
Operating income | $ | 35 | $ | 27 | $ | 8 | 29.6% | $ | 3 | $ | 72 | $ | (69) | (95.8)% | |
Adjusted EBITDA(1) | $ | 79 | $ | 56 | $ | 23 | 41.1% | $ | 200 | $ | 223 | $ | (23) | (10.3)% | |
Adjusted EBITDA margin(1) | 15.1% | 10.7% | 9.7% | 10.3% | |||||||||||
Depreciation and | |||||||||||||||
amortization(i) | $ | 41 | $ | 36 | $ | 5 | 13.9% | $ | 175 | $ | 147 | $ | 28 | 19.0% | |
(i) | Depreciation and amortization in the fourth quarter of 2020 includes $8 million (2019 – $3 million) and $30 million (2019 – $9 million) year-to-date of accelerated depreciation related to restructuring and other related costs. |
Sales
Operating Income Weston Foods operating income in the fourth quarter of 2020 was $35 million, an increase of $8 million compared to
- the unfavourable year-over-year impact of restructuring and other related costs of
$17 million ; and - the unfavourable year-over-year impact of the fair value adjustment of derivatives of
$2 million ;
partially offset by,
- the favourable 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 2020 was $79 million, an increase of $23 million, or 41.1%, compared to the fourth quarter of 2019. Excluding the favourable impact of the 53rd week of
Depreciation and Amortization Weston Foods depreciation and amortization in the fourth quarter of 2020 was $41 million, an increase of $5 million compared to the fourth quarter of 2019. Depreciation and amortization in the fourth quarter of 2020 included $8 million (2019 – $3 million) of accelerated depreciation related to
Weston Foods Other Business Matters
Restructuring and other related costs
Transaction between
OUTLOOK(2)
For 2021, the Company expects adjusted net earnings(1) to increase due to the results from its operating segments as described below. Additionally, the Company expects to return capital to shareholders through share repurchases by allocating a portion of the free cash flow received from its operating businesses and proceeds from participating in Loblaw's normal course issuer bid.
Loblaw Loblaw cannot predict the precise impacts of COVID-19 on its 2021 financial results. However, Loblaw anticipates that grocery sales will remain elevated in the first half due to continued impact of the pandemic, including the impact of lockdown measures in many jurisdictions. As economies reopen, revenue growth will be challenged compared to elevated 2020 sales. Loblaw expects that in 2021 costs will be lower compared to those incurred in 2020 as a result of COVID-19, and as Process & Efficiencies and Data-Driven Insights programs continue to deliver benefits. Moderate levels of regulatory drug reform are anticipated.
Loblaw expects:
- its core retail business to grow earnings faster than sales;
- growth in financial services profitability;
- EPS growth in the low double digits;
- to invest approximately
$1.2 billion in capital expenditures, net of proceeds from property disposals; and - to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.
In the four weeks following the end of the quarter, Loblaw's food same-store sales growth remained elevated and drug same-store sales growth slowed in front store while remaining consistent in pharmacy. For the balance of the first quarter, both food and drug same-store sales will lap consumer stockpiling that began in the first quarter of 2020. COVID-19 related costs are trending in the range of
Although the duration and longer-term impact of the COVID-19 pandemic cannot be predicted,
Despite the ongoing impact of the pandemic,
The majority of
In 2021,
The uncertainty associated with the pandemic makes it difficult to reliably estimate future sales trends and the overall financial performance of the business.
- sales to be modestly higher compared to 2020, after excluding the impact of foreign currency translation and the impact of the 53rd week in fiscal 2020;
- adjusted EBITDA(1) to be higher compared to 2020;
- capital expenditures to decrease to approximately
$145 million ; and - depreciation to increase in the mid-single digits compared to 2020.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the fourth 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 |
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Preferred Shares, Series I |
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Preferred Shares, Series III |
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Preferred Shares, Series IV |
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Preferred Shares, Series V |
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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.
During 2020, Management undertook a review of adjusting items in non-GAAP financial measures, and revised the Company's non-GAAP financial measures policy. The changes in non-GAAP financial measures policy will be effective beginning
For reconciliation to, and description of the Company's non-GAAP financial measures and financial metrics, see Section 14, "Non-GAAP Financial Measures", of the MD&A in the Company's 2020 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 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", "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 2021 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 "Enterprise Risks and Risk Management" section, of the MD&A in the Company's 2020 Annual Report and the Company's Annual Information Form 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
(millions of Canadian dollars except where otherwise indicated) | (13 weeks) | (12 weeks) | (53 weeks) | (52 weeks) | ||||||||
For the periods ended as indicated | (unaudited) | (unaudited) | (audited) | (audited) | ||||||||
Revenue | $ | 13,806 | $ | 12,107 | $ | 54,705 | $ | 50,109 | ||||
Operating Expenses | ||||||||||||
Cost of inventories sold | 9,493 | 8,229 | 37,583 | 34,166 | ||||||||
Selling, general and administrative expenses | 3,407 | 3,160 | 14,234 | 12,985 | ||||||||
12,900 | 11,389 | 51,817 | 47,151 | |||||||||
Operating Income | 906 | 718 | 2,888 | 2,958 | ||||||||
Net Interest Expense and Other Financing Charges | 245 | 7 | 831 | 1,704 | ||||||||
Earnings Before Income Taxes | 661 | 711 | 2,057 | 1,254 | ||||||||
Income Taxes | 148 | 133 | 475 | 431 | ||||||||
Net Earnings | 513 | 578 | 1,582 | 823 | ||||||||
Attributable to: | ||||||||||||
Shareholders of the Company | 299 | 443 | 963 | 242 | ||||||||
Non-Controlling Interests | 214 | 135 | 619 | 581 | ||||||||
Net Earnings | $ | 513 | $ | 578 | $ | 1,582 | $ | 823 | ||||
Net Earnings per Common Share ($) | ||||||||||||
Basic | $ | 1.89 | $ | 2.82 | $ | 5.99 | $ | 1.29 | ||||
Diluted | $ | 1.88 | $ | 2.81 | $ | 5.96 | $ | 1.26 | ||||
Consolidated Balance Sheets
As at | ||||
(millions of Canadian dollars) | 2020 | 2019(i) | ||
ASSETS | ||||
Current Assets | ||||
Cash and cash equivalents | $ | 2,581 | $ | 1,834 |
Short-term investments | 575 | 229 | ||
Accounts receivable | 1,192 | 1,295 | ||
Credit card receivables | 3,109 | 3,518 | ||
Inventories | 5,385 | 5,270 | ||
Prepaid expenses and other assets | 304 | 336 | ||
Assets held for sale | 108 | 203 | ||
Total Current Assets | 13,254 | 12,685 | ||
Fixed Assets | 11,943 | 11,773 | ||
Right-of-Use Assets | 4,043 | 4,074 | ||
Investment Properties | 4,930 | 4,888 | ||
573 | 605 | |||
Intangible Assets | 7,032 | 7,488 | ||
4,772 | 4,775 | |||
Deferred Income Taxes | 139 | 250 | ||
Security Deposits | 75 | 76 | ||
Franchise Loans Receivable | — | 19 | ||
Other Assets | 1,314 | 1,180 | ||
Total Assets | $ | 48,075 | $ | 47,813 |
LIABILITIES | ||||
Current Liabilities | ||||
Bank indebtedness | $ | 86 | $ | 18 |
Trade payables and other liabilities | 6,011 | 5,906 | ||
Loyalty liability | 194 | 191 | ||
Provisions | 109 | 147 | ||
Income taxes payable | 128 | 53 | ||
Demand deposits from customers | 24 | — | ||
Short-term debt | 1,335 | 1,489 | ||
Long-term debt due within one year | 924 | 1,842 | ||
Lease liabilities due within one year | 799 | 857 | ||
Associate interest | 349 | 280 | ||
Total Current Liabilities | 9,959 | 10,783 | ||
Provisions | 117 | 90 | ||
Long Term Debt | 13,519 | 12,712 | ||
Lease Liabilities | 4,206 | 4,250 | ||
Trust Unit Liability | 3,600 | 3,601 | ||
Deferred Income Taxes | 2,059 | 2,245 | ||
Other Liabilities | 1,197 | 957 | ||
Total Liabilities | 34,657 | 34,638 | ||
EQUITY | ||||
Share Capital | 3,599 | 3,626 | ||
Retained Earnings | 5,226 | 4,766 | ||
Contributed Surplus | (1,180) | (979) | ||
Accumulated Other Comprehensive Income | 166 | 196 | ||
Total Equity Attributable to Shareholders of the Company | 7,811 | 7,609 | ||
Non-Controlling Interests | 5,607 | 5,566 | ||
Total Equity | 13,418 | 13,175 | ||
Total Liabilities and Equity | $ | 48,075 | $ | 47,813 |
(i) | Certain comparative figures have been restated to conform with current year presentation. |
Consolidated Statements of Cash Flows
(millions of Canadian dollars) | ||||||||||||||
For the periods ended as indicated | (13 weeks) | (12 weeks) | (53 weeks) | (52 weeks) | ||||||||||
Operating Activities | ||||||||||||||
Net earnings | $ | 513 | $ | 578 | $ | 1,582 | $ | 823 | ||||||
Add: | ||||||||||||||
Net interest expense and other financing charges | 245 | 7 | 831 | 1,704 | ||||||||||
Income taxes | 148 | 133 | 475 | 431 | ||||||||||
Depreciation and amortization | 572 | 548 | 2,427 | 2,318 | ||||||||||
Asset impairments, net of recoveries | 24 | 50 | 39 | 46 | ||||||||||
Adjustment to fair value of investment properties and | ||||||||||||||
assets held for sale | 6 | 27 | 194 | 93 | ||||||||||
Change in allowance for credit card receivables | (10) | 8 | 41 | 29 | ||||||||||
Foreign currency translation gain | — | (1) | — | — | ||||||||||
Change in provisions | (16) | 15 | (6) | (54) | ||||||||||
1,482 | 1,365 | 5,583 | 5,390 | |||||||||||
Change in gross credit card receivables | (91) | (263) | 368 | (238) | ||||||||||
Change in non-cash working capital | 286 | 239 | (57) | (7) | ||||||||||
Income taxes paid | (106) | (110) | (448) | (656) | ||||||||||
Interest received | 6 | 7 | 25 | 35 | ||||||||||
Interest received from finance leases | 2 | — | 3 | 4 | ||||||||||
Other | (5) | 34 | 47 | 27 | ||||||||||
Cash Flows from Operating Activities | 1,574 | 1,272 | 5,521 | 4,555 | ||||||||||
Investing Activities | ||||||||||||||
Fixed asset and investment properties purchases | (562) | (441) | (1,235) | (1,155) | ||||||||||
Intangible asset additions | (73) | (102) | (357) | (403) | ||||||||||
Business acquisition, net of cash acquired | — | — | — | — | ||||||||||
Cash assumed on initial consolidation of franchises | — | 5 | 14 | 20 | ||||||||||
Proceeds from disposal of assets | 125 | 37 | 301 | 87 | ||||||||||
Lease payments received from finance leases | — | 2 | 5 | 8 | ||||||||||
Change in short-term investments | (178) | (9) | (346) | 52 | ||||||||||
Change in security deposits | — | (18) | — | 7 | ||||||||||
Other | 39 | 21 | (120) | (108) | ||||||||||
Cash Flows used in Investing Activities | (649) | (505) | (1,738) | (1,492) | ||||||||||
Financing Activities | ||||||||||||||
Change in bank indebtedness | (107) | (134) | 68 | (38) | ||||||||||
Change in short-term debt | 85 | 237 | (154) | (90) | ||||||||||
Change in demand deposits from customers | 24 | — | 24 | — | ||||||||||
Proceeds from other financing | 235 | 9 | 231 | 435 | ||||||||||
Interest paid | (180) | (181) | (883) | (891) | ||||||||||
Long-term debt – Issued | 164 | 123 | 2,492 | 1,438 | ||||||||||
– Repayments | (369) | (126) | (2,598) | (1,690) | ||||||||||
Cash rent paid on lease liabilities - Interest | (47) | (49) | (207) | (214) | ||||||||||
Cash rent paid on lease liabilities - Principal | (145) | (84) | (650) | (520) | ||||||||||
Share capital – Issued | 1 | 1 | 1 | 40 | ||||||||||
– Purchased and held in trusts | — | — | (21) | (6) | ||||||||||
– Purchased and cancelled | (123) | (25) | (123) | (25) | ||||||||||
Loblaw common share capital – Issued | 1 | 2 | 30 | 82 | ||||||||||
– Purchased and held in trusts | — | (42) | (10) | (62) | ||||||||||
– Purchased and cancelled | (275) | (163) | (552) | (937) | ||||||||||
— | — | — | 345 | |||||||||||
– Issuance costs | — | — | — | (14) | ||||||||||
Dividends – To common shareholders | (5) | — | (328) | (319) | ||||||||||
– To preferred shareholders | (3) | (3) | (44) | (44) | ||||||||||
– To minority shareholders | (59) | — | (284) | (228) | ||||||||||
Other | 24 | 8 | (27) | (12) | ||||||||||
Cash Flows used in Financing Activities | (779) | (427) | (3,035) | (2,750) | ||||||||||
Effect of foreign currency exchange rate changes on cash and | ||||||||||||||
cash equivalents | (1) | (1) | (1) | — | ||||||||||
Change in Cash and Cash Equivalents | 145 | 339 | 747 | 313 | ||||||||||
Cash and Cash Equivalents, Beginning of Period | 2,436 | 1,495 | 1,834 | 1,521 | ||||||||||
Cash and Cash Equivalents, End of Period | $ | 2,581 | $ | 1,834 | $ | 2,581 | $ | 1,834 | ||||||
(i) | Certain comparative figures have been restated to conform with current year presentation. |
Basic and Diluted Net Earnings per Common Share
(millions of Canadian dollars except where otherwise indicated) | (13 weeks) | (12 weeks) | (53 weeks) | (52 weeks) | |||||||||||||
For the periods ended as indicated | (unaudited) | (unaudited) | (audited) | (audited) | |||||||||||||
Net earnings attributable to shareholders of the Company | $ | 299 | $ | 443 | $ | 963 | $ | 242 | |||||||||
Prescribed dividends on preferred shares in share capital | (10) | (10) | (44) | (44) | |||||||||||||
Net earnings available to common shareholders of the | |||||||||||||||||
Company | $ | 289 | $ | 433 | $ | 919 | $ | 198 | |||||||||
Reduction in net earnings due to dilution at Loblaw | (1) | (1) | (4) | (4) | |||||||||||||
Net earnings available to common shareholders | |||||||||||||||||
for diluted earnings per share | $ | 288 | $ | 432 | $ | 915 | $ | 194 | |||||||||
Weighted average common shares | |||||||||||||||||
outstanding (in millions) | 153.2 | 153.8 | 153.4 | 153.5 | |||||||||||||
Dilutive effect of equity-based | |||||||||||||||||
compensation(i) (in millions) | 0.1 | 0.2 | 0.1 | 0.2 | |||||||||||||
Diluted weighted average common shares outstanding | |||||||||||||||||
(in millions) | 153.3 | 154.0 | 153.5 | 153.7 | |||||||||||||
Basic net earnings per common share ($) | $ | 1.89 | $ | 2.82 | $ | 5.99 | $ | 1.29 | |||||||||
Diluted net earnings per common share ($) | $ | 1.88 | $ | 2.81 | $ | 5.96 | $ | 1.26 | |||||||||
(i) | In the fourth quarter of 2020 and year-to-date, 1.7 million ( |
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 2020 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.
Quarters Ended | ||||||||||||||||||||||||||||||||||||||||
(13 weeks) | (12 weeks) | |||||||||||||||||||||||||||||||||||||||
(unaudited) | Loblaw | Choice | Weston | Other and | Total | Loblaw | Choice | Weston | Other and | Total | ||||||||||||||||||||||||||||||
Revenue | $ | 13,286 | $ | 322 | $ | 523 | $ | (325) | $ | 13,806 | $ | 11,590 | $ | 318 | $ | 522 | $ | (323) | $ | 12,107 | ||||||||||||||||||||
Operating income (loss) | $ | 700 | $ | 332 | $ | 35 | $ | (161) | $ | 906 | $ | 539 | $ | 220 | $ | 27 | $ | (68) | $ | 718 | ||||||||||||||||||||
Net interest expense | ||||||||||||||||||||||||||||||||||||||||
(income) and other | 166 | 217 | — | (138) | 245 | 176 | (74) | — | (95) | 7 | ||||||||||||||||||||||||||||||
Earnings (loss) before | ||||||||||||||||||||||||||||||||||||||||
income taxes | $ | 534 | $ | 115 | $ | 35 | $ | (23) | $ | 661 | $ | 363 | $ | 294 | $ | 27 | $ | 27 | $ | 711 | ||||||||||||||||||||
Operating income (loss) | $ | 700 | $ | 332 | $ | 35 | $ | (161) | $ | 906 | $ | 539 | $ | 220 | $ | 27 | $ | (68) | $ | 718 | ||||||||||||||||||||
Depreciation and | ||||||||||||||||||||||||||||||||||||||||
amortization | 609 | 1 | 41 | (79) | 572 | 589 | — | 36 | (77) | 548 | ||||||||||||||||||||||||||||||
Adjusting items(i) | 21 | (107) | 3 | 106 | 23 | 75 | 5 | (7) | 12 | 85 | ||||||||||||||||||||||||||||||
Adjusted EBITDA(i) | $ | 1,330 | $ | 226 | $ | 79 | $ | (134) | $ | 1,501 | $ | 1,203 | $ | 225 | $ | 56 | $ | (133) | $ | 1,351 | ||||||||||||||||||||
Depreciation and | ||||||||||||||||||||||||||||||||||||||||
amortization(ii) | 492 | 1 | 33 | (79) | 447 | 473 | — | 33 | (77) | 429 | ||||||||||||||||||||||||||||||
Adjusted operating | ||||||||||||||||||||||||||||||||||||||||
income (loss)(i) | $ | 838 | $ | 225 | $ | 46 | $ | (55) | $ | 1,054 | $ | 730 | $ | 225 | $ | 23 | $ | (56) | $ | 922 | ||||||||||||||||||||
(i) | Certain items are excluded from operating income (loss) to derive adjusted EBITDA(1). Adjusted EBITDA(1) is used internally by management when analyzing segment underlying operating performance. |
(ii) | Excludes $117 million (2019 – $116 million) of amortization of intangible assets acquired with |
Years Ended | |||||||||||||||||||||||||||||||||||||||
(53 weeks) | (52 weeks) | ||||||||||||||||||||||||||||||||||||||
(unaudited) | Loblaw | Choice | Weston | Other and | Total | Loblaw | Choice | Weston | Other and | Total | |||||||||||||||||||||||||||||
Revenue | $ | 52,714 | $ | 1,271 | $ | 2,062 | $ | (1,342) | $ | 54,705 | $ | 48,037 | $ | 1,289 | $ | 2,155 | $ | (1,372) | $ | 50,109 | |||||||||||||||||||
Operating income (loss) | $ | 2,357 | $ | 622 | $ | 3 | $ | (94) | $ | 2,888 | $ | 2,262 | $ | 890 | $ | 72 | $ | (266) | $ | 2,958 | |||||||||||||||||||
Net interest expense | |||||||||||||||||||||||||||||||||||||||
(income) and other | 742 | 173 | (1) | (83) | 831 | 747 | 1,472 | 1 | (516) | 1,704 | |||||||||||||||||||||||||||||
Earnings (loss) before | |||||||||||||||||||||||||||||||||||||||
income taxes | $ | 1,615 | $ | 449 | $ | 4 | $ | (11) | $ | 2,057 | $ | 1,515 | $ | (582) | $ | 71 | $ | 250 | $ | 1,254 | |||||||||||||||||||
Operating income (loss) | $ | 2,357 | $ | 622 | $ | 3 | $ | (94) | $ | 2,888 | $ | 2,262 | $ | 890 | $ | 72 | $ | (266) | $ | 2,958 | |||||||||||||||||||
Depreciation and | |||||||||||||||||||||||||||||||||||||||
amortization | 2,596 | 3 | 175 | (347) | 2,427 | 2,524 | 1 | 147 | (354) | 2,318 | |||||||||||||||||||||||||||||
Adjusting items(i) | 80 | 254 | 22 | (64) | 292 | 118 | 23 | 4 | 62 | 207 | |||||||||||||||||||||||||||||
Adjusted EBITDA(i) | $ | 5,033 | $ | 879 | $ | 200 | $ | (505) | $ | 5,607 | $ | 4,904 | $ | 914 | $ | 223 | $ | (558) | $ | 5,483 | |||||||||||||||||||
Depreciation and | |||||||||||||||||||||||||||||||||||||||
amortization(ii) | 2,087 | 3 | 145 | (347) | 1,888 | 2,016 | 1 | 138 | (354) | 1,801 | |||||||||||||||||||||||||||||
Adjusted operating | |||||||||||||||||||||||||||||||||||||||
income (loss)(i) | $ | 2,946 | $ | 876 | $ | 55 | $ | (158) | $ | 3,719 | $ | 2,888 | $ | 913 | $ | 85 | $ | (204) | $ | 3,682 | |||||||||||||||||||
(i) | Certain items are excluded from operating income (loss) to derive adjusted EBITDA(1). Adjusted EBITDA(1) is used internally by management when analyzing segment underlying operating performance. |
(ii) | Excludes $509 million (2019 – $508 million) of amortization of intangible assets acquired with |
NON-GAAP FINANCIAL MEASURES POLICY CHANGE COMMENCING FISCAL 2021
In 2020, management undertook a review of historical adjusting items as part of an effort to reduce the number of non-GAAP items it adjusts for in its financial reporting. Management concluded that, in order to present adjusting items in a manner more consistent with that of its Canadian and
Starting in the first quarter of 2021, restructuring and other related costs will be considered an adjusting item only if significant and if part of a publicly announced restructuring plan. Other unusual items will be assessed on a case by case basis based on their nature, magnitude and propensity to re-occur. This change will take effect in the first quarter of 2021 with restatement of comparative periods at that time.
The below summaries are presented for informational purposes and reconciles the non-GAAP financial measures as previously reported in 2020 to those which will be reported under the new policy beginning in 2021.
Adjusted Operating Income and Adjusted EBITDA:
Quarters Ended | ||||||||||||||||||||||||||||||
(12 weeks) | (12 weeks) | (16 weeks) | ||||||||||||||||||||||||||||
(unaudited) | Loblaw | Choice | Weston | Other | Consoli- | Loblaw | Choice | Weston | Other | Consoli- | Loblaw | Choice | Weston | Other | Consoli- | |||||||||||||||
Adjusted Operating | ||||||||||||||||||||||||||||||
income - | $ | 692 | $ | 226 | $ | 18 | $ | (64) | $ | 872 | $ | 534 | $ | 201 | $ | (27) | $ | (59) | $ | 649 | $ | 882 | $ | 224 | $ | 18 | $ | 20 | $ | 1,144 |
Add (deduct) | ||||||||||||||||||||||||||||||
impact of the | ||||||||||||||||||||||||||||||
Asset Impairments, | ||||||||||||||||||||||||||||||
net of recoveries | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||
Restructuring | ||||||||||||||||||||||||||||||
and other related | (4) | — | — | — | (4) | (8) | — | — | — | (8) | (6) | — | — | — | (6) | |||||||||||||||
Adjusting Items | $ | (4) | $ | — | $ | — | $ | — | $ | (4) | $ | (8) | $ | — | $ | — | $ | — | $ | (8) | $ | (6) | $ | — | $ | — | $ | — | $ | (6) |
Adjusted operating | ||||||||||||||||||||||||||||||
income - Restated | 688 | 226 | 18 | (64) | 868 | 526 | 201 | (27) | (59) | 641 | 876 | 224 | 18 | 20 | 1,138 | |||||||||||||||
Depreciation and | ||||||||||||||||||||||||||||||
amortization | 594 | 1 | 43 | (78) | 560 | 598 | — | 44 | (76) | 566 | 795 | 1 | 47 | (114) | 729 | |||||||||||||||
Less: Amortization | ||||||||||||||||||||||||||||||
of intangible | (119) | — | — | — | (119) | (118) | — | — | — | (118) | (155) | — | — | — | (155) | |||||||||||||||
Less: Accelerated | ||||||||||||||||||||||||||||||
Depreciation | — | — | (9) | — | (9) | — | — | (10) | — | (10) | — | — | (3) | — | (3) | |||||||||||||||
Adjusted EBITDA - | ||||||||||||||||||||||||||||||
Restated | $ | 1,163 | $ | 227 | $ | 52 | $ | (142) | $ | 1,300 | $ | 1,006 | $ | 201 | $ | 7 | $ | (135) | $ | 1,079 | $ | 1,516 | $ | 225 | $ | 62 | $ | (94) | $ | 1,709 |
Quarter Ended | Year Ended | ||||||||||||||||||||
(13 weeks) | (53 weeks) | ||||||||||||||||||||
(unaudited) | Loblaw | Choice | Weston | Other | Consolidated | Loblaw | Choice | Weston | Other | Consolidated | |||||||||||
Adjusted Operating income - | |||||||||||||||||||||
previously reported | $ | 838 | $ | 225 | $ | 46 | $ | (55) | $ | 1,054 | $ | 2,946 | $ | 876 | $ | 55 | $ | (158) | $ | 3,719 | |
Add (deduct) impact of the | |||||||||||||||||||||
following: | |||||||||||||||||||||
Asset Impairments, net of | |||||||||||||||||||||
recoveries | (17) | — | — | (6) | (23) | (17) | — | — | (6) | (23) | |||||||||||
Restructuring and other | |||||||||||||||||||||
related costs | — | — | — | — | — | (18) | — | — | — | (18) | |||||||||||
Adjusting Items | $ | (17) | $ | — | $ | — | $ | (6) | $ | (23) | $ | (35) | $ | — | $ | — | $ | (6) | $ | (41) | |
Adjusted operating income - | |||||||||||||||||||||
Restated | $ | 821 | $ | 225 | $ | 46 | $ | (61) | $ | 1,031 | $ | 2,911 | $ | 876 | $ | 55 | $ | (164) | $ | 3,678 | |
Depreciation and | |||||||||||||||||||||
amortization | 609 | 1 | 41 | (79) | 572 | 2,596 | 3 | 175 | (347) | $ | 2,427 | ||||||||||
Less: Amortization of | |||||||||||||||||||||
intangible assets acquired | (117) | — | — | — | (117) | (509) | — | — | — | (509) | |||||||||||
Less: Accelerated | |||||||||||||||||||||
Depreciation | — | — | (8) | — | (8) | — | — | (30) | — | (30) | |||||||||||
Adjusted EBITDA - Restated | $ | 1,313 | $ | 226 | $ | 79 | $ | (140) | $ | 1,478 | $ | 4,998 | $ | 879 | $ | 200 | $ | (511) | $ | 5,566 | |
Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net earnings per Common Share are presented below:
Quarters Ended | Year Ended | ||||||||||||||||||||
(12 weeks) | (12 weeks) | (16 weeks) | (13 weeks) | (53 weeks) | |||||||||||||||||
Net Earnings Shareholders | Diluted | Net Earnings | Diluted | Net Earnings | Diluted | Net Earnings | Diluted | Net Earnings | Diluted | ||||||||||||
(unaudited) | |||||||||||||||||||||
Adjusted - | $ | 239 | $ | 1.55 | $ | 142 | $ | 0.93 | $ | 362 | $ | 2.35 | $ | 312 | $ | 2.03 | $ | 1,055 | $ | 6.85 | |
Add (deduct) | |||||||||||||||||||||
Asset | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (11) | $ | (0.08) | $ | (11) | $ | (0.08) | |
Restructuring | (2) | (0.01) | (3) | (0.02) | (2) | (0.01) | — | — | (7) | (0.04) | |||||||||||
Statutory | 2 | 0.01 | — | — | (1) | (0.01) | 1 | 0.01 | 2 | 0.01 | |||||||||||
Adjusting items | $ | — | $ | — | $ | (3) | $ | (0.02) | $ | (3) | $ | (0.02) | $ | (10) | $ | (0.07) | $ | (16) | $ | (0.11) | |
Adjusted - | $ | 239 | $ | 1.55 | $ | 139 | $ | 0.91 | $ | 359 | $ | 2.33 | $ | 302 | $ | 1.96 | $ | 1,039 | $ | 6.74 | |
There were no impacts to previously reported adjusted net interest expense and other financing charges as a result of this change as reported in the Company's 2020 annual and interim MD&A.
2020 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
Ce rapport est disponible en français.
Endnotes | |
(1) | See the "Non-GAAP Financial Measures" section of the Company's 2020 Annual Report, which includes the reconciliation of such non-GAAP |
(2) | This News Release contains forward-looking information. See "Forward-Looking Statements" section of this News Release and the |
SOURCE
© Canada Newswire, source
