BRAMPTON, ON, November 18, 2015 /CNW/ - Loblaw Companies Limited (TSX:
L) ("Loblaw" or the "Company") today announced its unaudited financial
results for the third quarter ended October 10, 2015. The Company's
third quarter report will be available in the Investor Centre section
of the Company's website at loblaw.ca and will be filed with SEDAR and available at sedar.com.
"In the third quarter, our business remained focused on delivering the
best in food experience, best in health and beauty, operational
excellence, and growth," reported Galen G. Weston, President and
Executive Chairman of Loblaw Companies Limited.
"While the grocery industry remained intensely competitive, and the
regulatory environment in healthcare challenging, we maintained a
stable trading platform, achieved incremental efficiencies and
delivered planned synergies. Having reached our deleveraging target
during the quarter, we are now in a position to accelerate our focus on
returning capital to shareholders."
2015 THIRD QUARTER HIGHLIGHTS
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Retail segment sales were $13,715 million, an increase of 2.5% compared
to the third quarter of 2014.
-
Food retail (Loblaw) same-store sales growth was 3.1%, excluding gas bar
and the negative impact of a change in distribution model by a tobacco
supplier; and
-
Drug retail (Shoppers Drug Mart) same-store sales growth was 4.9%, with
same-store pharmacy sales increasing by 3.5% and same-store front store
sales increasing by 6.2% compared to the third quarter of 2014.
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Retail adjusted gross profit percentage(2) was 26.0%, flat compared to the third quarter of 2014.
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Adjusted EBITDA(2) was $1,022 million, an increase of 2.1% compared to the third quarter
of 2014.
-
Net earnings available to common shareholders of the Company were $166
million, an increase of 16.9% compared to the third quarter of 2014.
Adjusted net earnings available to common shareholders of the Company(2) were $408 million, an increase of 10.0% compared to the third quarter of
2014.
-
Basic net earnings per common share were $0.40, an increase of 17.6%
compared to the third quarter of 2014. Adjusted basic net earnings per
common share(2) were $0.99, an increase of 10.0%.
-
The Company realized approximately $76 million of net synergies in the
quarter compared to $44 million in the third quarter of 2014. Since the
close of the acquisition of Shoppers Drug Mart, the Company has
realized $222 million in annualized synergies (net of related costs).
The Company continues to expect to achieve annualized synergies of $300
million (net of related costs) in the third year following the close of
the acquisition.
-
Adjusted debt(2) decreased by $527 million compared to the second quarter of 2015. The
Company has now achieved its debt reduction target following the
acquisition of Shoppers Drug Mart, with a cumulative reduction of
$1,872 million. The Company's adjusted debt(2) to rolling year adjusted EBITDA(2) was 2.5x as at October 10, 2015.
See "News Release Endnotes" at the back of this News Release
CONSOLIDATED RESULTS OF OPERATIONS
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For the periods ended October 10, 2015
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and October 4, 2014
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2015
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2014(3)
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2015
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2014(3)
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(millions of Canadian dollars except
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where otherwise indicated)
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(16 weeks)
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(16 weeks)
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$ Change
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% Change
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(40 weeks)
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(40 weeks)
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$ Change
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% Change
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Revenue
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$
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13,946
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$
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13,599
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$
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347
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2.6%
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$
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34,529
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$
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31,198
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$
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3,331
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10.7%
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Adjusted EBITDA(2)
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$
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1,022
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$
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1,001
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$
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21
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2.1%
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$
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2,668
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$
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2,277
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$
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391
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17.2%
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Adjusted EBITDA margin(2)
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7.3%
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7.4%
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7.7%
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7.3%
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Net earnings (loss)
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attributable to shareholders
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of the Company
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$
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170
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$
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142
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$
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28
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19.7%
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$
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501
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$
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(194)
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$
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695
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358.2%
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Net earnings (loss) available
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to common shareholders
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of the Company(i)
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166
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142
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24
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16.9%
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497
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(194)
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691
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356.2%
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Adjusted net earnings available
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to common shareholders
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of the Company(2)
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408
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371
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37
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10.0%
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1,059
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821
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238
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29.0%
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Basic net earnings (loss)
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per common share ($)
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$
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0.40
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$
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0.34
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$
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0.06
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17.6%
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$
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1.21
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$
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(0.52)
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$
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1.73
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332.7%
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Adjusted basic net earnings per
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common share(2) ($)
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$
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0.99
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$
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0.90
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$
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0.09
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10.0%
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$
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2.57
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$
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2.22
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$
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0.35
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15.8%
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(i)
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Net earnings (loss) available to common shareholders of the Company is
net earnings (loss) attributable to shareholders of the Company net of
dividends paid on the Company's Second Preferred Shares, Series B.
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Adjusted net earnings available to common shareholders of the Company(2) were $408 million ($0.99 per common share) in the third quarter of 2015
compared to $371 million ($0.90 per common share) in the third quarter
of 2014. The increase of $37 million ($0.09 per common share) was primarily due to:
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an improvement in the underlying operating performance of the Retail
segment, including positive same-store sales in both Food and Drug
retail and an increase in gross profit driven by sales;
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the positive contribution of net synergies;
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a reduction in depreciation and amortization in the Retail segment due
to an increase in the estimated useful life of certain IT systems and
lower depreciation on older IT and supply chain assets; and
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a reduction in adjusted net interest expense and other financing charges(2) primarily driven by repayments of the Company's unsecured term loan
facility related to the acquisition of Shoppers Drug Mart Corporation
("Shoppers Drug Mart") and matured capital securities.
Net earnings available to common shareholders of the Company were $166
million ($0.40 per common share) in the third quarter of 2015 compared
to $142 million ($0.34 per common share) in the third quarter of 2014
and included the year-over-year impact of the following items:
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strong underlying performance of the Retail segment;
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the favourable impact of a charge of $107 million ($0.19 per common
share) incurred in the third quarter of 2014 related to the fair value
increment on the acquired inventory sold associated with the
acquisition of Shoppers Drug Mart; partially offset by
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an unfavourable impact in restructuring and other related costs of $49
million ($0.10 per common share) primarily related to the closure of
certain unprofitable retail locations announced in the 2015 Second
Quarter Report to Shareholders;
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the unfavourable impact of an increase in net interest expense and other
financing charges, primarily due to the fair value adjustment to the
Trust Unit Liability of $72 million ($0.18 per common share); and
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an increase in the effective income tax rate from 23.2% to 35.2%,
primarily attributable to the non-deductible fair value adjustment to
the Trust Unit Liability, an increase in certain other non-deductible
items and an increase in current tax as a result of an increase of 2%
in the Alberta statutory corporate income tax rate.
REPORTABLE OPERATING SEGMENTS
Retail Segment
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For the periods ended October 10, 2015
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and October 4, 2014
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2015
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2014(3)
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2015
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2014(3)
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(millions of Canadian dollars except
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where otherwise indicated)
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(16 weeks)
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(16 weeks)
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$ Change
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% Change
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(40 weeks)
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(40 weeks)
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$ Change
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% Change
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Sales
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$
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13,715
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$
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13,375
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$
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340
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2.5%
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$
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33,863
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$
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30,567
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$
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3,296
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10.8%
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Gross profit
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3,560
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3,366
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194
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5.8%
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8,895
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6,809
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2,086
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30.6%
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Adjusted gross profit(2)
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3,560
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3,473
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87
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2.5%
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8,903
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7,728
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1,175
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15.2%
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Adjusted gross profit %(2)
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26.0%
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26.0%
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26.3%
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25.3%
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Adjusted EBITDA(2)
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$
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976
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$
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954
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22
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2.3%
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$
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2,529
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$
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2,143
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386
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18.0%
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Adjusted EBITDA margin(2)
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7.1 %
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7.1%
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7.5%
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7.0 %
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Depreciation and amortization
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$
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470
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$
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496
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(26)
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(5.2)%
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$
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1,198
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$
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1,065
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133
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12.5%
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2015
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2014(3)
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2015
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2014(3)
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For the periods ended October 10, 2015 and October 4, 2014
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(16 weeks)
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(16 weeks)
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(40 weeks)
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(40 weeks)
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Food retail same-store sales growth
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1.3%
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2.6%
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1.7%
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1.9%
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Drug retail same-store sales growth
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4.9%
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2.5%
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4.0%
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2.1%
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Same-store pharmacy sales growth
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3.5%
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3.5%
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3.6%
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2.3%
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Same-store front store sales growth
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6.2%
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1.6%
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4.4%
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2.0%
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Sales Retail segment sales were $13,715 million in the third quarter of 2015, an increase of $340 million compared to
the third quarter of 2014. Food retail (Loblaw) sales of $10,178
million were higher by $190 million, or 1.9%, compared to the third
quarter of 2014. Drug retail (Shoppers Drug Mart) sales of $3,537
million were higher by $150 million, or 4.4%. The increase in Retail
segment sales was primarily due to the following factors:
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Food retail same-store sales growth was 3.1% for the quarter, after
excluding gas bar (0.9%) and the negative impact of a change in
distribution model by a tobacco supplier (0.9%). Including these
impacts, Food retail same-store sales growth was 1.3% (2014 - 2.6%).
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The Company's Food retail average quarterly internal food price index
was higher than (2014 - in line with) the average quarterly national
food price inflation of 3.8% (2014 - 2.8%) 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 the Company's stores;
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Drug retail sales were comprised of pharmacy sales of $1,699 million
(2014 - $1,640 million), with same-store sales growth of 3.5% (2014 -
3.5%) and front store sales of $1,838 million (2014 - $1,747 million),
with same-store sales growth of 6.2% (2014 - 1.6%).
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In the last 12 months, there was an increase in Retail net square
footage of 0.1 million, or 0.1%. Excluding the divestitures required
pursuant to the Consent Agreement, Retail net square footage increased
by 0.3 million square feet, or 0.4%.
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In 2014, the Company modified its fee arrangements with the franchisees
of certain franchise banners. The modified arrangements are expected to
result in an annual reduction of Food retail segment sales and gross
profit of approximately $150 million, with a corresponding decrease in
selling, general and administrative expenses ("SG&A"). In the third
quarter of 2015, the impact of the modified arrangements was a $43
million negative impact to Food retail sales and gross profit, with an
offsetting $43 million positive impact to SG&A.
Adjusted Gross Profit(2) Adjusted gross profit(2) of $3,560 million was $87 million higher compared to the third quarter
of 2014. Adjusted gross profit percentage(2) was flat compared to the third quarter of 2014 but included a 30 basis
point negative impact from the above noted modifications to certain
franchise fee arrangements. After excluding this negative impact,
adjusted gross profit percentage(2) was 26.3% compared to 26.0% in the third quarter of 2014. The increase
of 30 basis points was driven by an increase in Food retail adjusted
gross profit percentage(2) compared to the third quarter of 2014, partially offset by a decrease
in the Drug retail adjusted gross profit percentage(2) compared to the third quarter of 2014. The key drivers of the increase
were:
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a positive impact due to the consolidation of franchises, which
commenced in the second quarter;
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the achievement of operational synergies in both Food and Drug retail;
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a decrease in transportation costs; and
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stronger Drug retail front store gross profit percentage driven by
strong sales growth in all front store categories, combined with a
continued focus on promotional effectiveness and margin enhancement
initiatives; partially offset by
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lower Drug retail pharmacy gross profit percentage, as higher script
volumes were offset by the impact of healthcare reform and the increase
in the usage of generic molecules.
Adjusted EBITDA(2) Adjusted EBITDA(2) of $976 million was $22 million higher compared to the third quarter of
2014, driven by the increase in adjusted gross profit(2) described above, partially offset by an increase in SG&A of $65
million. As a percentage of sales, the increase in SG&A was positively
impacted by the modification to certain franchise fee arrangements,
which was fully offset in gross profit above. Excluding this impact,
SG&A increased by $108 million, an increase of 30 basis points over
2014. The increase in SG&A included the impact of the following:
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higher store and store support costs, primarily driven by higher sales
and investments in marketing and business initiatives;
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unfavourable foreign exchange impacts;
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the inclusion of the SG&A of consolidated franchises as described below;
and
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higher charges related to settlement of collective agreements in the
quarter; partially offset by
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favourable changes in the value of the Company's investments in its
franchise business; and
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efficiencies achieved in the Food retail supply chain, administration
and information technology ("IT").
Depreciation and Amortization Depreciation and amortization was $470 million in the third quarter of
2015, a decrease of $26 million compared to the third quarter of 2014,
and included $164 million (2014 - $168 million) in amortization of
intangible assets related to the acquisition of Shoppers Drug Mart.
Excluding this amount, depreciation and amortization decreased by $22
million driven by:
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an increase in the estimated useful life of certain IT systems; and
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lower depreciation on older IT and supply chain assets.
Other Retail Business Matters
Consolidation of Franchises In 2015, the Company implemented a new, simplified franchise agreement
("Franchise Agreement") for its franchised Food retail stores. For
financial reporting purposes, the franchise stores subject to the
Franchise Agreement were consolidated. All new franchises will be
subject to the Franchise Agreement. Existing franchises will be
converted to the Franchise Agreement as the existing agreements expire.
As at October 10, 2015, 43 franchises were consolidated and the
year-to-date impact was incremental revenue of $28 million, a decrease
to EBITDA(2) of $8 million and an increase in depreciation and amortization of $2
million.
Closure of Certain Unprofitable Retail Locations As announced in the 2015 Second Quarter Report to Shareholders, the
Company finalized a plan that will result in the closure of
approximately 52 unprofitable retail locations across a range of
banners and formats. The Company expects that the closures will be
completed by the end of the second quarter of 2016. On an annualized
basis, the closures will decrease sales by approximately $300 million
but will result in a favourable impact of approximately $30 million to
EBITDA(2) and $5 million to depreciation and amortization.
The restructuring and other related costs associated with the plan are
expected to total approximately $140 million. Of this amount, a charge
of $86 million was recorded in the third quarter of 2015 and
$131 million year-to-date. The year-to-date amount included $92 million
for severance and lease termination costs and $39 million for asset
impairments associated with these retail locations. The Company expects
approximately $9 million to be recognized as stores close.
As at the end of the third quarter of 2015, 13 retail locations had been
closed.
Labour Agreements Over the past five years, the Company has been transitioning stores to
more cost effective and efficient operating terms under collective
agreements ("Labour Agreements"). The Company is committed to
completing these Labour Agreements and expects to finalize the majority
of the remaining stores in the fourth quarter of 2015. The Company
anticipates it will incur a charge of approximately $60 million in SG&A
related to the completion of these Labour Agreements in the fourth
quarter of 2015, which will be excluded in calculating adjusted net
earnings available to common shareholders of the Company(2).
Financial Services Segment(4)
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|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended October 10, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and October 4, 2014
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
(millions of Canadian dollars except
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
where otherwise indicated)
|
|
(16 weeks)
|
|
|
|
(16 weeks)
|
|
|
$ Change
|
|
|
% Change
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
|
|
$ Change
|
|
|
% Change
|
Revenue
|
|
$
|
211
|
|
|
|
$
|
207
|
|
|
$
|
4
|
|
|
1.9 %
|
|
|
$
|
609
|
|
|
$
|
579
|
|
|
$
|
30
|
|
|
5.2%
|
Adjusted EBITDA(2)
|
|
|
39
|
|
|
|
|
42
|
|
|
|
(3)
|
|
|
(7.1)%
|
|
|
|
122
|
|
|
|
120
|
|
|
|
2
|
|
|
1.7%
|
Earnings before income taxes
|
|
|
23
|
|
|
|
|
27
|
|
|
|
(4)
|
|
|
(14.8)%
|
|
|
|
73
|
|
|
|
76
|
|
|
|
(3)
|
|
|
(3.9)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
October 10, 2015
|
|
|
October 4, 2014
|
|
|
$ Change
|
|
% Change
|
Average quarterly net credit card receivables
|
|
$
|
2,604
|
|
|
$
|
2,512
|
|
|
$
|
92
|
|
3.7%
|
Credit card receivables
|
|
|
2,663
|
|
|
|
2,549
|
|
|
|
114
|
|
4.5%
|
Allowance for credit card receivables
|
|
|
51
|
|
|
|
51
|
|
|
|
—
|
|
—%
|
Annualized yield on average quarterly gross credit card receivables
|
|
|
13.6%
|
|
|
|
13.8%
|
|
|
|
|
|
|
Annualized credit loss rate on average quarterly gross credit card
receivables
|
|
|
4.4%
|
|
|
|
4.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes Earnings before income taxes were $23 million in the third quarter of
2015, a decrease of $4 million compared to the third quarter of 2014.
The decrease was primarily driven by higher interest income
attributable to growth in credit card receivables, offset by higher
operating costs resulting from an increase in the active customer base
and higher interest expenses to fund the growth in credit card
receivables.
Credit Card Receivables As at October 10, 2015, credit card receivables were $2,663 million, an
increase of $114 million compared to October 4, 2014. This increase was
primarily driven by a growth in the active customer base as a result of
continued investments in customer acquisitions and marketing
initiatives, partially offset by higher customer payment rates. As at
October 10, 2015, the allowance for credit card receivables was $51
million, flat compared to October 4, 2014.
Choice Properties Segment(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended October 10, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and October 4, 2014
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
(millions of Canadian dollars except
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
where otherwise indicated)
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
$ Change
|
|
|
% Change
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
|
|
$ Change
|
|
% Change
|
Revenue
|
|
$
|
187
|
|
|
$
|
171
|
|
|
$
|
16
|
|
|
9.4%
|
|
|
$
|
552
|
|
|
$
|
508
|
|
|
$
|
44
|
|
8.7%
|
Adjusted EBITDA(2)
|
|
|
136
|
|
|
|
107
|
|
|
|
29
|
|
|
27.1%
|
|
|
|
378
|
|
|
|
348
|
|
|
|
30
|
|
8.6%
|
Net interest expense and other financing charges
|
|
|
308
|
|
|
|
(18)
|
|
|
|
326
|
|
|
1,811.1%
|
|
|
|
572
|
|
|
|
232
|
|
|
|
340
|
|
146.6%
|
Adjusted funds from operations(2)
|
|
|
79
|
|
|
|
73
|
|
|
|
6
|
|
|
8.2%
|
|
|
|
231
|
|
|
|
211
|
|
|
|
20
|
|
9.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(2) Adjusted EBITDA(2) was $136 million in the third quarter of 2015, an increase of $29
million compared to the third quarter of 2014, primarily driven by
contributions from properties acquired subsequent to the third quarter
of 2014, an increase in base rent from existing properties and a
favourable fair value adjustment on investment properties.
Net Interest Expense and Other Financing Charges Net interest expense and other financing charges were $308 million in
the third quarter of 2015, an increase of $326 million compared to the
third quarter of 2014. The increase was primarily driven by the fair
value adjustment on Class B Limited Partnership units.
Adjusted Funds from Operations(2) Adjusted funds from operations(2) were $79 million in the third quarter of 2015, an increase of $6 million compared to the
third quarter of 2014, primarily driven by:
-
higher contribution from property operations; partially offset by
-
an increase in normalized sustaining property and leasing capital
expenditures, resulting from a larger investment property portfolio.
Other Matters In the third quarter of 2015, Choice Properties acquired two properties
from the Company for a purchase price of approximately $18 million,
excluding acquisition costs, for consideration of $15 million in cash
and issuance of 280,155 Class B Limited Partnership units.
Subsequent to the end of the third quarter of 2015, Choice Properties
announced an increase in its annual distribution per unit of 3.1% to
$0.67 per unit, effective for unitholders of record on January 29, 2016
and filed a Short Form Base Shelf Prospectus allowing for the issuance
of up to $2,000 million of Units and debt securities, or any
combination thereof over a 25-month period.
DECLARATION OF DIVIDENDS
Subsequent to the end of the third quarter of 2015, the Board of
Directors declared a quarterly dividend on Common Shares and Second
Preferred Shares, Series B.
Common Shares
|
|
|
|
$0.250 per common share, payable on December 30, 2015 to shareholders of
record
on December 15, 2015
|
|
|
|
|
|
|
|
Second Preferred Shares, Series B
|
|
|
|
$0.33125 per share, payable on December 31, 2015 to shareholders of
record on
December 15, 2015
|
|
OUTLOOK(1)
Loblaw's strategic framework is focused on delivering the best in food,
best in health and beauty, operational excellence and growth. This
strategic framework is supported by a financial strategy of maintaining
a stable trading environment that targets positive same-store sales and
stable gross margin; surfacing efficiencies; delivering synergies as a
result of its acquisition of Shoppers Drug Mart; and deleveraging the
balance sheet. Consistent with its previous outlook, on a full year
comparative basis reflecting 2014 financial results for Loblaw and
Shoppers Drug Mart(i), in 2015 the Company expects to:
-
Maintain positive same-store sales and stable gross margin (excluding
synergies) in the Retail segment;
-
Achieve net synergies as a result of the acquisition of Shoppers Drug
Mart of approximately $235 million;
-
Continue to drive net efficiencies across the Food retail business by
achieving reductions in supply chain, administrative functions and IT,
while still investing in key areas, like eCommerce;
-
Grow adjusted operating income(2) in its Food retail business, excluding synergies, and experience a
decline in adjusted operating income(2) in its Drug retail business, excluding synergies, as a result of
investments in key projects and other factors;
-
Grow consolidated adjusted net earnings available to common shareholders(2) (including synergies) relative to 2014, despite the negative impact in
the fourth quarter of healthcare reform, incremental investments in key
projects, and lower incremental synergies; and
-
Invest approximately $1,200 million in capital expenditures.
The Company's expectations continue to include the following:
-
Competitive intensity expected to remain high, but relatively stable as
industry square footage growth in supermarket-type merchandise
moderates; and
-
Continued pressure in our Drug retail business from the ongoing impact
of healthcare reform.
(i)
|
Includes Shoppers Drug Mart's financial results for the first quarter of
2014 and excludes the impact of the 53rd week of $71 million in
adjusted EBITDA(2) and adjusted operating income(2).
|
NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP financial measures: Retail
segment adjusted gross profit, Retail segment adjusted gross profit
percentage, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted
net interest expense and other financing charges, adjusted income
taxes, adjusted income tax rate, adjusted net earnings, adjusted basic
net earnings per common share, adjusted debt and with respect to Choice
Properties: adjusted funds from operations. The Company believes these
non-GAAP financial measures provide useful information to both
management and investors in measuring the financial performance and
financial condition of the Company for the reasons outlined below.
Management uses these and other non-GAAP financial measures to exclude
the impact of certain expenses and income that must be recognized under
GAAP when analyzing consolidated and segment underlying operating
performance, as the excluded items are not necessarily reflective of
the Company's underlying operating performance and make comparisons of
underlying financial performance between periods difficult. 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 the "Non-GAAP
Financial Measures" section of the Company's Third Quarter 2015 Report
to Shareholders.
Retail Segment Adjusted Gross Profit and Retail Segment Adjusted Gross
Profit Percentage Retail segment adjusted gross profit percentage is calculated as
adjusted Retail segment gross profit divided by Retail segment sales.
The Company believes that Retail segment adjusted gross profit is
useful in assessing the Retail segment's underlying operating
performance and in making decisions regarding the ongoing operations of
the business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended October 10, 2015 and October 4, 2014
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
(millions of Canadian dollars)
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
Retail segment gross profit
|
|
$
|
3,560
|
|
|
$
|
3,366
|
|
|
$
|
8,895
|
|
|
$
|
6,809
|
Add impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge related to apparel inventory
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
Recognition of fair value increment on inventory sold
|
|
|
—
|
|
|
|
107
|
|
|
|
—
|
|
|
|
729
|
|
Charge related to inventory measurement and other conversion differences
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
190
|
Retail segment adjusted gross profit
|
|
$
|
3,560
|
|
|
$
|
3,473
|
|
|
$
|
8,903
|
|
|
$
|
7,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin The following tables reconcile earnings (loss) before income taxes, net
interest expense and other financing charges and depreciation and
amortization ("EBITDA"), adjusted EBITDA and adjusted operating income
to operating income, which is reconciled to GAAP net earnings measures
reported in the condensed consolidated statements of earnings for the
periods ended October 10, 2015 and October 4, 2014. The Company
believes that adjusted EBITDA is useful in assessing the performance of
its ongoing operations and its ability to generate cash flows to fund
its cash requirements, including the Company's capital investments
program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by
revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 weeks)
|
(millions of Canadian dollars)
|
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations
|
|
|
Consolidated
|
Net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
142
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Net interest expense and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
Operating income
|
|
|
$
|
419
|
|
|
$
|
37
|
|
|
$
|
135
|
|
|
$
|
(133)
|
|
|
$
|
458
|
|
|
|
|
$
|
294
|
|
|
$
|
41
|
|
|
$
|
105
|
|
|
$
|
(105)
|
|
|
$
|
335
|
Depreciation and amortization
|
|
|
|
470
|
|
|
|
2
|
|
|
|
1
|
|
|
|
4
|
|
|
|
477
|
|
|
|
|
|
496
|
|
|
|
1
|
|
|
|
—
|
|
|
|
3
|
|
|
|
500
|
EBITDA
|
|
|
$
|
889
|
|
|
$
|
39
|
|
|
$
|
136
|
|
|
$
|
(129)
|
|
|
$
|
935
|
|
|
|
|
$
|
790
|
|
|
$
|
42
|
|
|
$
|
105
|
|
|
$
|
(102)
|
|
|
$
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$
|
419
|
|
|
$
|
37
|
|
|
$
|
135
|
|
|
$
|
(133)
|
|
|
$
|
458
|
|
|
|
|
$
|
294
|
|
|
$
|
41
|
|
|
$
|
105
|
|
|
$
|
(105)
|
|
|
$
|
335
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drug Mart
|
|
|
|
164
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
164
|
|
|
|
|
|
168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
168
|
|
Restructuring and other related costs
|
|
|
|
95
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
95
|
|
|
|
|
|
44
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
46
|
|
Fair value adjustment on fuel and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
foreign currency contracts
|
|
|
|
(12)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12)
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Fixed asset and other related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impairments, net of recoveries
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
Pension annuities and buy-outs
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recognition of fair value increment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on inventory sold
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
107
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
107
|
|
Fair value adjustment on Shoppers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drug Mart's equity-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation liability
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Shoppers Drug Mart acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related costs, net of impact from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
divestitures
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2)
|
Adjusted operating income
|
|
|
$
|
670
|
|
|
$
|
37
|
|
|
$
|
135
|
|
|
$
|
(133)
|
|
|
$
|
709
|
|
|
|
|
$
|
626
|
|
|
$
|
41
|
|
|
$
|
107
|
|
|
$
|
(105)
|
|
|
$
|
669
|
Depreciation and amortization
|
|
|
|
470
|
|
|
|
2
|
|
|
|
1
|
|
|
|
4
|
|
|
|
477
|
|
|
|
|
|
496
|
|
|
|
1
|
|
|
|
—
|
|
|
|
3
|
|
|
|
500
|
Less: Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mart
|
|
|
|
(164)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(164)
|
|
|
|
|
|
(168)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(168)
|
Adjusted EBITDA
|
|
|
$
|
976
|
|
|
$
|
39
|
|
|
$
|
136
|
|
|
$
|
(129)
|
|
|
$
|
1,022
|
|
|
|
|
$
|
954
|
|
|
$
|
42
|
|
|
$
|
107
|
|
|
$
|
(102)
|
|
|
$
|
1,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40 weeks)
|
(millions of Canadian dollars)
|
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations
|
|
|
Consolidated
|
|
|
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations
|
|
|
Consolidated
|
Net earnings (loss) attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(194)
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Net interest expense and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66)
|
Operating income
|
|
|
$
|
1,164
|
|
|
$
|
115
|
|
|
$
|
377
|
|
|
$
|
(371)
|
|
|
$
|
1,285
|
|
|
|
|
$
|
38
|
|
|
$
|
115
|
|
|
$
|
345
|
|
|
$
|
(343)
|
|
|
$
|
155
|
Depreciation and amortization
|
|
|
|
1,198
|
|
|
|
7
|
|
|
|
1
|
|
|
|
10
|
|
|
|
1,216
|
|
|
|
|
|
1,065
|
|
|
|
5
|
|
|
|
—
|
|
|
|
9
|
|
|
|
1,079
|
EBITDA
|
|
|
$
|
2,362
|
|
|
$
|
122
|
|
|
$
|
378
|
|
|
$
|
(361)
|
|
|
$
|
2,501
|
|
|
|
|
$
|
1,103
|
|
|
$
|
120
|
|
|
$
|
345
|
|
|
$
|
(334)
|
|
|
$
|
1,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$
|
1,164
|
|
|
$
|
115
|
|
|
$
|
377
|
|
|
$
|
(371)
|
|
|
$
|
1,285
|
|
|
|
|
$
|
38
|
|
|
$
|
115
|
|
|
$
|
345
|
|
|
$
|
(343)
|
|
|
$
|
155
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mart
|
|
|
|
412
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
412
|
|
|
|
|
|
293
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
293
|
|
Restructuring and other related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
costs
|
|
|
|
161
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
161
|
|
|
|
|
|
44
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
46
|
|
Fair value adjustment on fuel and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
foreign currency contracts
|
|
|
|
(15)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15)
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Fixed asset and other related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impairments, net of recoveries
|
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
|
|
14
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
15
|
|
Charge related to apparel inventory
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shoppers Drug Mart acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related costs, net of impact from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
divestitures
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
58
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58
|
|
Pension annuities and buy-outs
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recognition of fair value increment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on inventory sold
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
729
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
729
|
|
Charge related to inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
measurement and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion differences
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
190
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
190
|
|
Fair value adjustment on Shoppers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drug Mart's equity-based
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation liability
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
Adjusted operating income
|
|
|
$
|
1,743
|
|
|
$
|
115
|
|
|
$
|
377
|
|
|
$
|
(371)
|
|
|
$
|
1,864
|
|
|
|
|
$
|
1,371
|
|
|
$
|
115
|
|
|
$
|
348
|
|
|
$
|
(343)
|
|
|
$
|
1,491
|
Depreciation and amortization
|
|
|
|
1,198
|
|
|
|
7
|
|
|
|
1
|
|
|
|
10
|
|
|
|
1,216
|
|
|
|
|
|
1,065
|
|
|
|
5
|
|
|
|
—
|
|
|
|
9
|
|
|
|
1,079
|
Less: Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mart
|
|
|
|
(412)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(412)
|
|
|
|
|
|
(293)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(293)
|
Adjusted EBITDA
|
|
|
$
|
2,529
|
|
|
$
|
122
|
|
|
$
|
378
|
|
|
$
|
(361)
|
|
|
$
|
2,668
|
|
|
|
|
$
|
2,143
|
|
|
$
|
120
|
|
|
$
|
348
|
|
|
$
|
(334)
|
|
|
$
|
2,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Interest Expense and Other Financing Charges The following table reconciles adjusted net interest expense and other
financing charges to net interest expense and other financing charges
in the condensed consolidated statements of earnings for the periods
ended October 10, 2015 and October 4, 2014. The Company believes that
adjusted net interest expense and other financing charges is useful in
assessing the Company's underlying financial performance and in making
decisions regarding the financial operations of the business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
(millions of Canadian dollars)
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
Net interest expense and other financing charges
|
|
$
|
205
|
|
|
$
|
150
|
|
|
$
|
503
|
|
|
$
|
415
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment to the Trust Unit Liability
|
|
|
(49)
|
|
|
|
23
|
|
|
|
(74)
|
|
|
|
3
|
|
Accelerated amortization of deferred financing costs
|
|
|
(4)
|
|
|
|
(4)
|
|
|
|
(15)
|
|
|
|
(18)
|
|
Shoppers Drug Mart acquisition-related costs, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impact from divestitures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15)
|
Adjusted net interest expense and other financing charges
|
|
$
|
152
|
|
|
$
|
169
|
|
|
$
|
414
|
|
|
$
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Income Taxes and Adjusted Income Tax Rate The Company believes adjusted income taxes is useful in assessing the
underlying operating performance and in making decisions regarding the
ongoing operations of its business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
2015
|
|
|
|
2014
|
(millions of Canadian dollars)
|
|
(16 weeks)
|
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
|
(40 weeks)
|
Adjusted operating income(i)
|
|
$
|
709
|
|
|
|
$
|
669
|
|
|
|
$
|
1,864
|
|
|
|
$
|
1,491
|
Adjusted net interest expense and other financing charges(i)
|
|
|
152
|
|
|
|
|
169
|
|
|
|
|
414
|
|
|
|
|
385
|
Adjusted earnings before taxes
|
|
$
|
557
|
|
|
|
$
|
500
|
|
|
|
$
|
1,450
|
|
|
|
$
|
1,106
|
Income taxes
|
|
$
|
89
|
|
|
|
$
|
43
|
|
|
|
$
|
286
|
|
|
|
$
|
(66)
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax impact of items included in adjusted earnings before taxes(ii)
|
|
|
62
|
|
|
|
|
86
|
|
|
|
|
144
|
|
|
|
|
351
|
|
Provincial statutory corporate income tax rate change
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(38)
|
|
|
|
|
—
|
Adjusted income taxes
|
|
$
|
151
|
|
|
|
$
|
129
|
|
|
|
$
|
392
|
|
|
|
$
|
285
|
Effective tax rate
|
|
|
35.2%
|
|
|
|
|
23.2%
|
|
|
|
|
36.6%
|
|
|
|
|
25.4%
|
Adjusted income tax rate
|
|
|
27.1%
|
|
|
|
|
25.8%
|
|
|
|
|
27.0%
|
|
|
|
|
25.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
See reconciliations of adjusted operating income and adjusted net
interest expense and other financing charges above.
|
(ii)
|
See the EBITDA, adjusted EBITDA and adjusted EBITDA margin table and the
adjusted net interest expense and other financing charges table above
for a complete list of items included in adjusted earnings before
taxes.
|
Adjusted income tax rate is calculated as adjusted income taxes divided
by the sum of adjusted operating income less adjusted net interest
expense and other financing charges.
Adjusted Net Earnings and Adjusted Basic Net Earnings Per Common Share The Company believes adjusted net earnings and adjusted basic net
earnings per common share are useful in assessing the Company's
underlying operating performance and in making decisions regarding the
ongoing operations of its business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014(3)
|
|
|
2015
|
|
|
2014(3)
|
(millions of Canadian dollars)
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
Adjusted net earnings attributable to shareholders of the Company
|
|
$
|
412
|
|
|
$
|
371
|
|
|
$
|
1,063
|
|
|
$
|
821
|
Less: Prescribed dividends on preferred shares in share capital
|
|
|
(4)
|
|
|
|
—
|
|
|
|
(4)
|
|
|
|
—
|
Adjusted net earnings available to common shareholders of the Company
|
|
$
|
408
|
|
|
$
|
371
|
|
|
$
|
1,059
|
|
|
$
|
821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles adjusted net earnings available to common
shareholders of the Company and adjusted basic net earnings per common
share to GAAP net earnings available to common shareholders of the
Company and basic net earnings per common share reported for the
periods ended October 10, 2015 and October 4, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
(millions of Canadian dollars/Canadian dollars)
|
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
|
|
Basic Net
Earnings Per
Common
Share
|
|
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
|
|
Basic Net
Earnings Per
Common Share
|
|
|
Net Earnings
Available to
Common
Shareholders
of the
Company
|
|
|
Basic Net
Earnings Per
Common
Share
|
|
|
Net Earnings
(Loss)
Available to
Common
Shareholders
of the
Company
|
|
|
Basic Net
Earnings (Loss)
Per Common
Share
|
|
|
$
|
166
|
|
|
$
|
0.40
|
|
|
$
|
142
|
|
|
$
|
0.34
|
|
|
$
|
497
|
|
|
$
|
1.21
|
|
|
$
|
(194)
|
|
|
$
|
(0.52)
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets acquired with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoppers Drug Mart
|
|
|
120
|
|
|
|
0.30
|
|
|
|
124
|
|
|
|
0.31
|
|
|
|
302
|
|
|
|
0.73
|
|
|
|
216
|
|
|
|
0.58
|
|
Restructuring and other related costs
|
|
|
76
|
|
|
|
0.18
|
|
|
|
34
|
|
|
|
0.08
|
|
|
|
132
|
|
|
|
0.32
|
|
|
|
34
|
|
|
|
0.09
|
|
Fair value adjustment to the Trust Unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability(i)
|
|
|
49
|
|
|
|
0.12
|
|
|
|
(23)
|
|
|
|
(0.06)
|
|
|
|
74
|
|
|
|
0.18
|
|
|
|
(3)
|
|
|
|
(0.01)
|
|
Provincial statutory corporate income tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38
|
|
|
|
0.09
|
|
|
|
—
|
|
|
|
—
|
|
Accelerated amortization of deferred financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
costs
|
|
|
3
|
|
|
|
0.01
|
|
|
|
3
|
|
|
|
0.01
|
|
|
|
11
|
|
|
|
0.03
|
|
|
|
13
|
|
|
|
0.04
|
|
Fair value adjustment on fuel and foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency contracts
|
|
|
(9)
|
|
|
|
(0.02)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11)
|
|
|
|
(0.03)
|
|
|
|
—
|
|
|
|
—
|
|
Fixed asset and other related impairments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of recoveries
|
|
|
2
|
|
|
|
—
|
|
|
|
8
|
|
|
|
0.02
|
|
|
|
7
|
|
|
|
0.02
|
|
|
|
12
|
|
|
|
0.03
|
|
Charge related to apparel inventory
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
0.02
|
|
|
|
—
|
|
|
|
—
|
Shoppers Drug Mart acquisition-related costs,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of impact from divestitures
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
64
|
|
|
|
0.17
|
|
Pension annuities and buy-outs
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Recognition of fair value increment on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
inventory sold
|
|
|
—
|
|
|
|
—
|
|
|
|
79
|
|
|
|
0.19
|
|
|
|
—
|
|
|
|
—
|
|
|
|
536
|
|
|
|
1.45
|
|
Charge related to inventory measurement and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other conversion differences
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
139
|
|
|
|
0.38
|
|
Fair value adjustment on Shoppers Drug
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mart's equity-based compensation liability
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
0.01
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
0.01
|
Adjusted
|
|
$
|
408
|
|
|
$
|
0.99
|
|
|
$
|
371
|
|
|
$
|
0.90
|
|
|
$
|
1,059
|
|
|
$
|
2.57
|
|
|
$
|
821
|
|
|
$
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Gains or losses related to the fair value adjustment to the Trust Unit
Liability are not subject to tax.
|
Adjusted Debt The following table reconciles adjusted debt, used in the adjusted debt
to rolling year adjusted EBITDA ratio, to GAAP measures reported as at
the periods indicated. The Company believes that adjusted debt is
relevant in assessing the amount of financial leverage employed. In the
table below, the Company has also presented adjusted debt as at March
28, 2014, the date of the acquisition of Shoppers Drug Mart, as this is
the baseline for the Company's debt reduction targets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
As at
|
|
|
As at
|
(millions of Canadian dollars)
|
|
October 10, 2015
|
|
|
October 4, 2014
|
|
|
January 3, 2015
|
|
|
March 28, 2014
|
Bank indebtedness
|
|
$
|
243
|
|
|
$
|
323
|
|
|
$
|
162
|
|
|
$
|
295
|
Short term debt
|
|
|
580
|
|
|
|
605
|
|
|
|
605
|
|
|
|
605
|
Long term debt due within one year
|
|
|
1,344
|
|
|
|
71
|
|
|
|
420
|
|
|
|
902
|
Long term debt
|
|
|
9,760
|
|
|
|
11,549
|
|
|
|
11,042
|
|
|
|
11,262
|
Trust Unit Liability
|
|
|
810
|
|
|
|
697
|
|
|
|
722
|
|
|
|
703
|
Capital securities
|
|
|
—
|
|
|
|
224
|
|
|
|
225
|
|
|
|
224
|
Certain other liabilities
|
|
|
31
|
|
|
|
49
|
|
|
|
28
|
|
|
|
39
|
Total debt
|
|
$
|
12,768
|
|
|
$
|
13,518
|
|
|
$
|
13,204
|
|
|
$
|
14,030
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Securitization Trusts
|
|
$
|
1,580
|
|
|
$
|
1,355
|
|
|
$
|
1,355
|
|
|
$
|
1,355
|
|
Independent Funding Trusts
|
|
|
506
|
|
|
|
487
|
|
|
|
498
|
|
|
|
469
|
|
Trust Unit Liability
|
|
|
810
|
|
|
|
697
|
|
|
|
722
|
|
|
|
703
|
|
Guaranteed Investment Certificates
|
|
|
684
|
|
|
|
563
|
|
|
|
634
|
|
|
|
443
|
Adjusted debt
|
|
$
|
9,188
|
|
|
$
|
10,416
|
|
|
$
|
9,995
|
|
|
$
|
11,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted debt to rolling year adjusted EBITDA is calculated as adjusted
debt divided by cumulative adjusted EBITDA for the latest four
quarters.
Choice Properties' Adjusted Funds from Operations(4) The following table reconciles Choice Properties' adjusted funds from
operations to GAAP measures for the periods ended October 10, 2015 and October 4, 2014. The Company believes adjusted
funds from operations is useful in measuring economic performance and
is indicative of Choice Properties' ability to pay distributions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
(millions of Canadian dollars)
|
|
(16 weeks)
|
|
|
(16 weeks)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
Net (loss) income
|
|
$
|
(174)
|
|
|
$
|
123
|
|
|
$
|
(196)
|
|
|
$
|
113
|
|
Fair value adjustment on Class B Limited Partnership units
|
|
|
221
|
|
|
|
(100)
|
|
|
|
315
|
|
|
|
(63)
|
|
Fair value adjustment on investment properties
|
|
|
(1)
|
|
|
|
16
|
|
|
|
16
|
|
|
|
16
|
|
Fair value adjustments on unit-based compensation
|
|
|
1
|
|
|
|
(1)
|
|
|
|
1
|
|
|
|
(1)
|
|
Distributions on Class B Limited Partnership units
|
|
|
51
|
|
|
|
48
|
|
|
|
151
|
|
|
|
141
|
|
Amortization of tenant improvement allowances
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Internal expenses for leasing
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
Funds from Operations
|
|
$
|
98
|
|
|
$
|
86
|
|
|
$
|
288
|
|
|
$
|
207
|
|
Restructuring
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Straight-line rental revenue
|
|
|
(9)
|
|
|
|
(9)
|
|
|
|
(27)
|
|
|
|
(26)
|
|
Amortization of finance charges
|
|
|
—
|
|
|
|
(1)
|
|
|
|
(1)
|
|
|
|
50
|
|
Unit-based compensation expense
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Sustaining property and leasing capital expenditures, normalized(i)
|
|
|
(11)
|
|
|
|
(6)
|
|
|
|
(31)
|
|
|
|
(24)
|
Adjusted Funds from Operations
|
|
$
|
79
|
|
|
$
|
73
|
|
|
$
|
231
|
|
|
$
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Seasonality impacts the timing of capital expenditures. The adjusted
funds from operations calculation has been adjusted for this factor to
make the quarters more comparable.
|
SEGMENT INFORMATION
The Company has three reportable operating segments with all material
operations carried out in Canada:
-
The Retail segment consists primarily of retail food and Associate-owned
drug stores, and also includes in-store pharmacies and other health and
beauty products, gas bars and apparel and other general merchandise.
This segment is comprised of several operating segments, which have
been aggregated primarily due to similarities in the nature of products
and services offered for sale in the retail operations and the customer
base;
-
The Financial Services segment provides credit card services, loyalty
programs, insurance brokerage services, personal banking services
provided by a major Canadian chartered bank, deposit taking services
and telecommunication services; and
-
The Choice Properties segment owns and leases income-producing
commercial properties. The Choice Properties segment information
presented below reflects the accounting policies of Choice Properties,
which may differ from those of the consolidated Company. Differences in
policies are eliminated in Consolidation and Eliminations.
The Company's chief operating decision maker evaluates segment
performance on the basis of adjusted EBITDA(2) and adjusted operating income(2), as reported to internal management, on a periodic basis.
Information for each reportable operating segment is included below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 10, 2015
|
|
|
October 4, 2014
|
|
|
(16 weeks)
|
|
|
(16 weeks)
|
(millions of Canadian dollars)
|
|
Retail
|
|
|
Financial
Services(4)
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations(i)
|
|
|
Total
|
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations(i)
|
|
|
Total
|
Revenue(ii)
|
|
$
|
13,715
|
|
|
$
|
211
|
|
$
|
187
|
|
|
$
|
(167)
|
|
|
$
|
13,946
|
|
|
$
|
13,375
|
|
|
$
|
207
|
|
|
$
|
171
|
|
|
$
|
(154)
|
|
|
$
|
13,599
|
EBITDA(iii)
|
|
$
|
889
|
|
|
$
|
39
|
|
$
|
136
|
|
|
$
|
(129)
|
|
|
$
|
935
|
|
|
$
|
790
|
|
|
$
|
42
|
|
|
$
|
105
|
|
|
$
|
(102)
|
|
|
$
|
835
|
Adjusting Items(iii)
|
|
|
87
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
87
|
|
|
|
164
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
166
|
Adjusted EBITDA(iii)
|
|
$
|
976
|
|
|
$
|
39
|
|
$
|
136
|
|
|
$
|
(129)
|
|
|
$
|
1,022
|
|
|
$
|
954
|
|
|
$
|
42
|
|
|
$
|
107
|
|
|
$
|
(102)
|
|
|
$
|
1,001
|
Depreciation and Amortization(iv)
|
|
|
306
|
|
|
|
2
|
|
|
1
|
|
|
|
4
|
|
|
|
313
|
|
|
|
328
|
|
|
|
1
|
|
|
|
—
|
|
|
|
3
|
|
|
|
332
|
Adjusted Operating Income(iii)
|
|
$
|
670
|
|
|
$
|
37
|
|
$
|
135
|
|
|
$
|
(133)
|
|
|
$
|
709
|
|
|
$
|
626
|
|
|
$
|
41
|
|
|
$
|
107
|
|
|
$
|
(105)
|
|
|
$
|
669
|
Net interest expense and other financing charges
|
|
$
|
108
|
|
|
$
|
14
|
|
$
|
308
|
|
|
$
|
(225)
|
|
|
$
|
205
|
|
|
$
|
119
|
|
|
$
|
14
|
|
|
$
|
(18)
|
|
|
$
|
35
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Consolidation and Eliminations includes the following items:
|
|
-
Revenue includes the elimination of $127 million (2014 - $118 million)
of rental revenue and $40 million (2014 - $36 million) of cost recovery
recognized by Choice Properties, generated from the Retail segment.
|
|
-
Operating income includes the elimination of the $127 million (2014 -
$118 million) impact of rental revenue described above; the elimination
of a $1 million gain (2014 - $16 million loss) recognized by Choice
Properties related to the fair value adjustments on investment
properties, which are classified as Fixed Assets or Investment
Properties by the Company and measured at cost; the recognition of $4
million (2014 - $3 million) of depreciation expense for certain
investment properties recorded by Choice Properties; and the
elimination of intercompany charges of $1 million (2014 - nil).
|
|
-
Net interest expense and other financing charges includes the
elimination of $64 million (2014 - $61 million) of interest expense
included in Choice Properties related to debt owing to the Company and
a $221 million fair value loss (2014 - gain of $100 million) recognized
by Choice Properties on Class B Limited Partnership units held by the
Company. Net interest and other financing charges also includes Unit
distributions to external unitholders of $11 million (2014 - $11
million), which excludes distributions paid to the Company and a $49
million fair value loss (2014 - gain of $23 million) on the Company's
Trust Unit Liability and, in 2014, the $8 million reversal of Choice
Properties interest expense incurred to June 30, 2014.
|
(ii)
|
Included in Financial Services revenue is $93 million (2014 - $91
million) of interest income.
|
(iii)
|
Certain items are excluded from EBITDA(2) to derive adjusted EBITDA(2). Adjusted EBITDA(2) is used internally by management when analyzing segment underlying
performance.
|
(iv)
|
Depreciation and amortization for the calculation of adjusted EBITDA(2) excludes $164 million (2014 - $168 million) of amortization of
intangible assets acquired with Shoppers Drug Mart.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 10, 2015
|
|
|
October 4, 2014(3)
|
|
|
(40 weeks)
|
|
|
(40 weeks)
|
(millions of Canadian dollars)
|
|
Retail
|
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations(i)
|
|
|
Total
|
|
|
Retail
|
|
Financial
Services(4)
|
|
|
Choice
Properties(4)
|
|
|
Consolidation
and
Eliminations(i)
|
|
|
Total
|
Revenue(ii)
|
|
$
|
33,863
|
|
|
$
|
609
|
|
|
$
|
552
|
|
|
$
|
(495)
|
|
|
$
|
34,529
|
|
|
$
|
30,567
|
|
$
|
579
|
|
|
$
|
508
|
|
|
$
|
(456)
|
|
|
$
|
31,198
|
EBITDA(iii)
|
|
$
|
2,362
|
|
|
$
|
122
|
|
|
$
|
378
|
|
|
$
|
(361)
|
|
|
$
|
2,501
|
|
|
$
|
1,103
|
|
$
|
120
|
|
|
$
|
345
|
|
|
$
|
(334)
|
|
|
$
|
1,234
|
Adjusting Items(iii)
|
|
|
167
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
167
|
|
|
|
1,040
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
1,043
|
Adjusted EBITDA(iii)
|
|
$
|
2,529
|
|
|
$
|
122
|
|
|
$
|
378
|
|
|
$
|
(361)
|
|
|
$
|
2,668
|
|
|
$
|
2,143
|
|
$
|
120
|
|
|
$
|
348
|
|
|
$
|
(334)
|
|
|
$
|
2,277
|
Depreciation and Amortization(iv)
|
|
|
786
|
|
|
|
7
|
|
|
|
1
|
|
|
|
10
|
|
|
|
804
|
|
|
|
772
|
|
|
5
|
|
|
|
—
|
|
|
|
9
|
|
|
|
786
|
Adjusted Operating Income(iii)
|
|
$
|
1,743
|
|
|
$
|
115
|
|
|
$
|
377
|
|
|
$
|
(371)
|
|
|
$
|
1,864
|
|
|
$
|
1,371
|
|
$
|
115
|
|
|
$
|
348
|
|
|
$
|
(343)
|
|
|
$
|
1,491
|
Net interest expense and other financing charges
|
|
$
|
285
|
|
|
$
|
42
|
|
|
$
|
572
|
|
|
$
|
(396)
|
|
|
$
|
503
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$
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286
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$
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39
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$
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232
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$
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(142)
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$
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415
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(i)
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Consolidation and Eliminations includes the following items:
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|
-
Revenue includes the elimination of $374 million (2014 - $350 million)
of rental revenue and $121 million (2014 - $106 million) of cost
recovery recognized by Choice Properties, generated from the Retail
segment.
|
|
-
Operating income includes the elimination of the $374 million (2014 -
$350 million) impact of rental revenue described above; the elimination
of a $16 million loss (2014 - $16 million loss) recognized by Choice
Properties related to the fair value adjustments on investment
properties, which are classified as Fixed Assets or Investment
Properties by the Company and measured at cost; the recognition of $10
million (2014 - $9 million) of depreciation expense for certain
investment properties recorded by Choice Properties; and the
elimination of intercompany charges of $3 million (2014 - nil).
|
|
-
Net interest expense and other financing charges includes the
elimination of $188 million (2014 - $235 million) of interest expense
included in Choice Properties related to debt owing to the Company and
a $315 million fair value loss (2014 - gain of $63 million) recognized
by Choice Properties on Class B Limited Partnership units held by the
Company. Net interest and other financing charges also includes Unit
distributions to external unitholders of $33 million (2014 - $33
million), which excludes distributions paid to the Company and a $74
million fair value loss (2014 - gain of $3 million) on the Company's
Trust Unit Liability.
|
(ii)
|
Included in Financial Services revenue is $274 million (2014 - $266
million) of interest income.
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(iii)
|
Certain items are excluded from EBITDA(2) to derive adjusted EBITDA(2). Adjusted EBITDA(2) is used internally by management when analyzing segment underlying
performance.
|
(iv)
|
Depreciation and amortization for the calculation of adjusted EBITDA(2) excludes $412 million (2014 - $293 million) of amortization of
intangible assets acquired with Shoppers Drug Mart.
|
FORWARD-LOOKING STATEMENTS
This News Release for the Company 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, synergies and other benefits associated with
the acquisition of Shoppers Drug Mart, future liquidity and debt
reduction targets, planned capital investments, and status and impact
of IT systems implementation. 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", "on track"
and "should" and similar expressions, as they relate to the Company and
its management.
Forward-looking statements reflect the Company's current estimates,
beliefs and assumptions, which are based on management's perception of
historical trends, current conditions and expected future developments,
as well as other factors it believes are appropriate in the
circumstances. The Company's expectation of operating and financial
performance in 2015 is based on certain assumptions including
assumptions about anticipated cost savings, operating efficiencies and
continued growth from current 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
15 "Enterprise Risks and Risk Management" of the Management's
Discussion and Analysis in the 2014 Annual Report - Financial Review
("2014 Annual Report") and Annual Information Form (for the year ended
January 3, 2015). Such risks and uncertainties include:
-
failure to realize the anticipated strategic benefits or operational,
competitive and cost synergies following the acquisition of Shoppers
Drug Mart;
-
failure to realize benefits from investments in the Company's IT
systems, including the Company's IT systems implementation, or
unanticipated results from these initiatives;
-
failure to realize anticipated results, including revenue growth,
anticipated cost savings or operating efficiencies from the Company's
major initiatives, including those from restructuring;
-
the inability of the Company's IT infrastructure to support the
requirements of the Company's business;
-
changes in the Company's estimate of inventory cost as a result of its
IT system upgrade;
-
changes to the regulation of generic prescription drug prices and the
reduction of reimbursements under public drug benefit plans and the
elimination or reduction of professional allowances paid by drug
manufacturers;
-
failure to achieve desired results in labour negotiations, including the
terms of future collective bargaining agreements, which could lead to
work stoppages;
-
heightened competition, whether from current competitors or new entrants
to the marketplace;
-
changes in economic conditions, including the rate of inflation or
deflation, changes in interest and currency exchange rates and
derivative and commodity prices;
-
changes in the Company's income, capital, commodity, property and other
tax and regulatory liabilities, including changes in tax laws,
regulations or future assessments;
-
the risk that the Company will be unsuccessful in any material
litigation, class action, or regulatory proceeding;
-
the inability of the Company to manage inventory to minimize the impact
of obsolete or excess inventory and to control shrink;
-
the risk that the Company would experience a financial loss if its
counterparties fail to meet their obligations in accordance with the
terms and conditions of their contracts with the Company; and
-
the inability of the Company to collect on and fund its credit card
receivables.
This is not an exhaustive list of the factors that may affect the
Company's forward-looking statements. Other risks and uncertainties not
presently known to the Company or that the Company presently believes
are not material could also cause actual results or events to differ
materially from those expressed in its forward-looking statements.
Additional risks and uncertainties are discussed in the Company's
materials filed with the Canadian securities regulatory authorities
from time to time, including, without limitation, the section entitled
"Risks" in the Company's Annual Information Form (for the year ended
January 3, 2015). 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.
CORPORATE PROFILE
2014 Annual Report and 2015 Third Quarter Report to Shareholders
The Company's 2014 Annual Report and 2015 Third Quarter Report to
Shareholders are available in the Investor Centre section of the
Company's website at loblaw.ca and sedar.com.
Additional financial information has been filed electronically with
various securities regulators in Canada through the System for
Electronic Document Analysis and Retrieval (SEDAR) and with the Office
of the Superintendent of Financial Institutions (OSFI) as the primary
regulator for the Company's subsidiary, President's Choice Bank. The
Company holds an analyst call shortly following the release of its
quarterly results. These calls are archived in the Investor Centre
section of the Company's website at loblaw.ca.
Conference Call and Webcast
Loblaw Companies Limited will host a conference call as well as an audio
webcast on November 18, 2015 at 10:00 a.m. (ET).
To access via tele-conference please dial (416) 204-9702. The playback
will be made available two hours after the event at (647) 436-0148,
access code: 667786. To access via audio webcast, please visit
loblaw.ca, go to Investor Centre and click on webcast. Pre-registration
will be available.
Full details about the conference call and webcast are available on the
Loblaw Companies Limited website at loblaw.ca.
|
News Release Endnotes
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|
|
(1)
|
This News Release contains forward-looking information. See
"Forward-Looking Statements" section of this News Release for a
discussion of material factors that
could cause actual results to differ materially from the forecasts and
projections herein and of the material factors and assumptions that
were used when making
these statements. This News Release should be read in conjunction with
Loblaw Companies Limited's filings with securities regulators made from
time to time, all of
which can be found at sedar.com and at loblaw.ca.
|
(2)
|
See "Non-GAAP Financial Measures" section of this News Release.
|
(3)
|
Certain 2014 figures have been restated to conform with the current
year's presentation. See "Non-GAAP Financial Measures" section of this
News Release and
Note 2 "Significant Accounting Policies" and Note 4 "Business
Acquisitions" in the Company's 2015 Third Quarter Report to
Shareholders.
|
(4)
|
The results for the Financial Services and Choice Properties segments
are for the periods ended September 30, 2015 and September 30, 2014,
consistent with the
segments' fiscal calendars. Adjustments to align Financial Services' and
Choice Properties' results to October 10, 2015 and October 4, 2014 are
included in
Consolidation and Eliminations. See the "Non-GAAP Financial Measures"
and the "Segment Information" sections of this News Release.
|
SOURCE Loblaw Companies Limited