BRAMPTON, ON, February 25, 2016 /CNW/ - Loblaw Companies Limited (TSX:
L) ("Loblaw" or the "Company") today announced its unaudited financial
results for the fourth quarter ended January 2, 2016 and the release of
its 2015 Annual Report ("Annual Report"), which includes the Company's
audited consolidated financial statements and Management's Discussion
and Analysis ("MD&A") for the fiscal year ended January 2, 2016. The
Company's 2015 Annual 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.
"I am pleased to report that we continued to deliver against our
financial plan in the fourth quarter and, on a comparable basis, we
delivered positive same-store sales and stable margins, achieved growth
in operating earnings, and our strong balance sheet allowed us to
return capital to our shareholders through share repurchases," said
Galen G. Weston, Executive Chairman and President, Loblaw Companies
Limited.
"The Company continues to execute on its strategic framework and purpose
of Live Life Well - consistently delivering the best in food, best in health and beauty,
operational excellence, and growth. Our relentless focus on this
framework has positioned us to achieve our financial plan amidst a
competitive environment and continued pressures from healthcare
reform."
2015 FOURTH QUARTER HIGHLIGHTS
The Company's comparative results were negatively impacted by the
inclusion of the 53rd week of 2014 ("53rd week"). The 53rd week
resulted in the following impacts to the Company's 2014 fourth quarter
and full year results: $789 million of higher retail sales, $71 million
of higher EBITDA, and estimated impacts on net earnings and basic net
earnings per common share of $52 million and $0.13 per share,
respectively. The following highlights exclude the impact of the 53rd
week, unless otherwise noted:
-
Revenue was $10,865 million, an increase of 2.3% compared to the fourth
quarter of 2014.
-
Adjusted EBITDA(2) was $881 million, an increase of $2 million compared to the fourth
quarter of 2014.
-
Retail segment sales were $10,606 million, an increase of 2.2% compared
to the fourth 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 5.0%, with
same-store pharmacy sales increasing by 4.2% and same-store front store
sales increasing by 5.7%.
-
Adjusted net earnings available to common shareholders of the Company(2) were $363 million, an increase of 5.5% compared to the fourth quarter of
2014. Adjusted basic net earnings per common share(2) were $0.88, an increase of 6.0% compared to the fourth quarter of 2014.
-
Net earnings available to common shareholders of the Company were $128
million, a decrease of 34.4% compared to the fourth quarter of 2014
(48.2% compared to the fourth quarter of 2014 including the negative
impact of the 53rd week). Basic net earnings per common share were
$0.31, a decrease of 34.0% compared to the fourth quarter of 2014
(48.3% compared to the fourth quarter of 2014 including the negative
impact of the 53rd week).
-
Net earnings available to common shareholders of the Company and basic
net earnings per common share were negatively impacted by charges of
$112 million resulting from the impairment of Drug retail ancillary
assets held for sale and $55 million related to the accelerated
finalization of transitioning of certain grocery stores to more cost
effective and efficient operating terms under collective agreements
("Labour Agreements").
-
The Company realized approximately $69 million of net synergies in the
quarter compared to $49 million in the fourth quarter of 2014. In 2015,
the Company realized $242 million in synergies (net of related costs).
-
The Company repurchased 2,920,000 shares for cancellation at a cost of
$185 million.
See "News Release Endnotes" at the back of this News Release.
CONSOLIDATED RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016
and January 3, 2015
|
|
2015
|
|
2014
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
(millions of Canadian dollars except
where otherwise indicated)
|
|
(12 weeks)
|
|
(13 weeks)
|
|
$ Change
|
|
% Change
|
|
(52 weeks)
|
|
(53 weeks)
|
|
$ Change
|
% Change
|
|
Revenue
|
|
$
|
10,865
|
|
$
|
11,413
|
|
$
|
(548)
|
|
(4.8)%
|
|
$
|
45,394
|
|
$
|
42,611
|
|
$
|
2,783
|
|
6.5 %
|
|
|
Revenue excluding 53rd week(ii)
|
|
|
10,865
|
|
|
10,624
|
|
|
241
|
|
2.3%
|
|
|
45,394
|
|
|
41,822
|
|
|
3,572
|
|
8.5 %
|
|
Adjusted EBITDA(2)
|
|
$
|
881
|
|
$
|
950
|
|
$
|
(69)
|
|
(7.3)%
|
|
$
|
3,549
|
|
$
|
3,227
|
|
$
|
322
|
|
10.0 %
|
|
|
Adjusted EBITDA(2) excluding 53rd week(ii)
|
|
|
881
|
|
|
879
|
|
|
2
|
|
0.2%
|
|
|
3,549
|
|
|
3,156
|
|
|
393
|
|
12.5 %
|
|
Adjusted EBITDA margin(2)
|
|
|
8.1%
|
|
|
8.3%
|
|
|
|
|
|
|
|
7.8%
|
|
|
7.6%
|
|
|
|
|
|
Net earnings attributable to
shareholders of the Company
|
|
$
|
131
|
|
$
|
247
|
|
$
|
(116)
|
|
(47.0)%
|
|
$
|
632
|
|
$
|
53
|
|
$
|
579
|
|
1,092.5 %
|
Net earnings available to common
shareholders of the Company(i)
|
|
|
128
|
|
|
247
|
|
|
(119)
|
|
(48.2)%
|
|
|
625
|
|
|
53
|
|
|
572
|
|
1,079.2 %
|
|
|
Net earnings available to common
shareholders of the Company(i)
excluding 53rd week(ii)
|
|
|
128
|
|
|
195
|
|
|
(67)
|
|
(34.4)%
|
|
|
625
|
|
|
1
|
|
|
624
|
|
62,400.0 %
|
Adjusted net earnings available to
common shareholders of the Company(2)
|
|
|
363
|
|
|
396
|
|
|
(33)
|
|
(8.3)%
|
|
|
1,422
|
|
|
1,217
|
|
|
205
|
|
16.8 %
|
|
|
Adjusted net earnings available to
common shareholders of the Company(2)
excluding 53rd week(ii)
|
|
|
363
|
|
|
344
|
|
|
19
|
|
5.5%
|
|
|
1,422
|
|
|
1,165
|
|
|
257
|
|
22.1 %
|
|
Basic net earnings per common share ($)
|
|
$
|
0.31
|
|
$
|
0.60
|
|
$
|
(0.29)
|
|
(48.3)%
|
|
$
|
1.52
|
|
$
|
0.14
|
|
$
|
1.38
|
|
985.7 %
|
|
|
Basic net earnings per common
share excluding 53rd week(ii) ($)
|
|
$
|
0.31
|
|
$
|
0.47
|
|
$
|
(0.16)
|
|
(34.0)%
|
|
$
|
1.52
|
|
$
|
-
|
|
$
|
1.52
|
|
100.0 %
|
Adjusted basic net earnings per
common share(2) ($)
|
|
$
|
0.88
|
|
$
|
0.96
|
|
$
|
(0.08)
|
|
(8.3)%
|
|
$
|
3.46
|
|
$
|
3.20
|
|
$
|
0.26
|
|
8.1 %
|
|
|
Adjusted basic net earnings per
common share(2) excluding 53rd week(ii) ($)
|
|
$
|
0.88
|
|
$
|
0.83
|
|
$
|
0.05
|
|
6.0%
|
|
$
|
3.46
|
|
$
|
3.06
|
|
$
|
0.40
|
|
13.1 %
|
Basic weighted average common
shares outstanding (in millions)
|
|
|
410.7
|
|
|
412.0
|
|
|
|
|
|
|
|
411.5
|
|
|
380.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Net earnings available to common shareholders of the Company is net
earnings attributable to shareholders of the Company net of dividends
declared on the Company's Second Preferred Shares, Series B.
|
|
(ii)
|
The impact of the 53rd week on net earnings available to common
shareholders of the Company is estimated based on operating income of
the 53rd week of $71 million and applying the effective tax rate for
the fourth quarter of 2014. The impact of the 53rd week on basic net
earnings per common share is based on the estimated net earnings
available to common shareholders of the Company divided by the weighted
average common shares outstanding for the fourth quarter and
year-to-date of 2014, respectively.
|
|
|
|
Adjusted net earnings available to common shareholders of the Company(2) were $363 million ($0.88 per common share) in the fourth quarter of 2015
compared to $396 million ($0.96 per common share) in the fourth quarter
of 2014. Net earnings available to common shareholders of the Company
were $128 million ($0.31 per common share) in the fourth quarter of
2015 compared to $247 million ($0.60 per common share) in the fourth
quarter of 2014. The Company's comparative results were negatively
impacted by the 53rd week of 2014, as noted in the table above.
The following comparisons exclude the impacts of the 53rd week.
Adjusted net earnings available to common shareholders of the Company(2) in the fourth quarter of 2015 were $363 million ($0.88 per common
share), an increase of $19 million ($0.05 per common share) compared to
2014, excluding the impact of the 53rd week, primarily due to the
following:
-
consistent operating performance in the Retail segment, despite the
impact of healthcare reform; with the unfavourable impact of
non-recurring transactions that had positive impacts in the prior year
and unfavourable foreign exchange impacts;
-
a positive contribution from incremental net synergies;
-
a reduction in depreciation and amortization in the Retail segment due
to an increase in the estimated useful life of certain information
technology ("IT") systems and lower depreciation on older IT and other
store assets; and
-
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.
Net earnings available to common shareholders of the Company in the
fourth quarter of 2015 were $128 million ($0.31 per common share), a
decrease of $67 million ($0.16 per common share) compared to the fourth
quarter of 2014. In addition to the items described above, the decrease
in net earnings available to common shareholders of the Company(2) included the year-over-year impact of the following significant items:
-
the unfavourable impact of the impairment of Drug retail ancillary
assets held for sale of $112 million ($0.20 per common share);
-
the unfavourable impact of the accelerated finalization of transitioning
of certain grocery stores to more cost effective and efficient Labour
Agreements of $55 million ($0.10 per common share);
-
the unfavourable impact of a charge related to inventory measurement
associated with the conversion of all of its franchised grocery stores
to the new IT systems of $33 million ($0.06 per common share);
partially offset by
-
the favourable impacts of the recognition of the fair value increment on
the acquired Shoppers Drug Mart inventory sold in the prior year of $69
million ($0.12 per common share); and
-
the favourable impact of a decrease in net interest expense and other
financing charges, primarily due to the fair value adjustment to the
Trust Unit Liability of $13 million ($0.04 per common share).
REPORTABLE OPERATING SEGMENTS
Retail Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016
and January 3, 2015
|
|
2015
|
|
2014
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
(millions of Canadian dollars except
where otherwise indicated)
|
|
(12 weeks)
|
|
(13 weeks)
|
|
$ Change
|
|
% Change
|
|
(52 weeks)
|
|
(53 weeks)
|
|
$ Change
|
|
% Change
|
|
Sales
|
|
$
|
10,606
|
|
$
|
11,164
|
|
$
|
(558)
|
|
(5.0)%
|
|
$
|
44,469
|
|
$
|
41,731
|
|
$
|
2,738
|
|
6.6 %
|
|
|
Sales excluding 53rd week
|
|
|
10,606
|
|
|
10,375
|
|
|
231
|
|
2.2 %
|
|
|
44,469
|
|
|
40,942
|
|
|
3,527
|
|
8.6 %
|
|
Gross profit
|
|
|
2,794
|
|
|
2,925
|
|
|
(131)
|
|
(4.5)%
|
|
|
11,689
|
|
|
9,734
|
|
|
1,955
|
|
20.1 %
|
|
|
Gross profit excluding 53rd week
|
|
|
2,794
|
|
|
2,725
|
|
|
69
|
|
2.5 %
|
|
|
11,689
|
|
|
9,534
|
|
|
2,155
|
|
22.6 %
|
|
Adjusted gross profit(2)
|
|
|
2,844
|
|
|
2,994
|
|
|
(150)
|
|
(5.0)%
|
|
|
11,747
|
|
|
10,722
|
|
|
1,025
|
|
9.6 %
|
|
|
Adjusted gross profit(2) excluding 53rd week
|
|
|
2,844
|
|
|
2,794
|
|
|
50
|
|
1.8 %
|
|
|
11,747
|
|
|
10,522
|
|
|
1,225
|
|
11.6 %
|
|
Adjusted gross profit %(2)
|
|
|
26.8 %
|
|
|
26.8 %
|
|
|
|
|
|
|
|
26.4 %
|
|
|
25.7 %
|
|
|
|
|
|
|
|
Adjusted gross profit %(2) excluding 53rd week
|
|
|
26.8 %
|
|
|
26.9 %
|
|
|
|
|
|
|
|
26.4 %
|
|
|
25.7 %
|
|
|
|
|
|
|
Adjusted EBITDA(2)
|
|
$
|
823
|
|
$
|
897
|
|
|
(74)
|
|
(8.2)%
|
|
$
|
3,352
|
|
$
|
3,040
|
|
|
312
|
|
10.3 %
|
|
|
Adjusted EBITDA(2) excluding 53rd week
|
|
|
823
|
|
|
826
|
|
|
(3)
|
|
(0.4)%
|
|
|
3,352
|
|
|
2,969
|
|
|
383
|
|
12.9 %
|
|
Adjusted EBITDA margin(2)
|
|
|
7.8
|
|
|
8.0
|
|
|
|
|
|
|
|
7.5
|
|
|
7.3 %
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
369
|
|
$
|
388
|
|
|
(19)
|
|
(4.9)%
|
|
$
|
1,567
|
|
$
|
1,453
|
|
|
114
|
|
7.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
For the periods ended January 2, 2016
and January 3, 2015
|
|
(12 weeks)
|
|
(12 weeks)
|
|
(52 weeks)
|
|
(52 weeks)
|
|
Food retail same-store sales growth
|
|
2.4 %
|
|
2.4 %
|
|
1.9 %
|
|
2.0 %
|
|
Drug retail same-store sales growth
|
|
5.0 %
|
|
3.8 %
|
|
4.3 %
|
|
2.6 %
|
|
|
Same-store pharmacy sales growth
|
|
4.2 %
|
|
4.2 %
|
|
3.7 %
|
|
2.7 %
|
|
|
Same-store front store sales growth
|
|
5.7 %
|
|
3.6 %
|
|
4.7 %
|
|
2.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's comparative results in the Retail segment were negatively
impacted by the inclusion of the 53rd week, as previously described.
Sales Retail segment sales were $10,606 million in the fourth quarter of 2015
compared to $11,164 million of the fourth quarter of 2014.
-
Food retail (Loblaw) sales were $7,631 million in the fourth quarter of
2015 (2014 - $8,110 million) and Drug retail (Shoppers Drug Mart) sales
were $2,975 million in the fourth quarter of 2015 (2014 - $3,054
million).
-
Excluding the impact of the 53rd week, Food retail sales were $7,631
million in the fourth quarter of 2015 (2014 - $7,536 million) and Drug
retail sales were $2,975 million in the fourth quarter of 2015 (2014 -
$2,839 million).
Excluding the impact of the 53rd week of 2014, Retail segment sales
increased by $231 million compared to the fourth quarter of 2014,
primarily due to the following factors:
-
Food retail same-store sales growth was 3.1% for the quarter, after
excluding gas bar (0.5%) and the negative impact of a change in
distribution model by a tobacco supplier (0.2%). Including these
impacts, Food retail same-store sales growth was 2.4% (2014 - 2.4%).
-
The Company's Food retail average quarterly internal food price index
was moderately higher than (2014 - slightly higher) the average
quarterly national food price inflation of 4.1% (2014 - 3.5%) 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.
-
Drug retail sales were comprised of pharmacy sales of $1,315 million,
with same-store sales growth of 4.2% (2014 - 4.2%), and front store
sales of $1,660 million, with same-store sales growth of 5.7% (2014 -
3.6%).
-
In the last 12 months, there was a decrease in Retail net square footage
of 0.1 million, or 0.1%, primarily driven by the Company's store
closure plan announced in the second quarter of 2015.
-
In 2014, the Company modified its fee arrangements with the franchisees
of certain franchise banners. The modified arrangements resulted in an
annual reduction of Food retail segment sales and gross profit with a
corresponding decrease in selling, general and administrative expenses
("SG&A"). In the fourth quarter of 2015, the impact of the modified
arrangements was a $32 million negative impact to Food retail sales and
gross profit, with an offsetting $32 million positive impact to SG&A.
In 2016, the Company will implement these modified fee arrangements
with the remaining franchise banners. In 2016, the incremental impact
of modified fee arrangements to the remaining franchise banners is
expected to result in an annual reduction in Food retail segment sales
and gross profit of approximately $60 million, with a corresponding
decrease in SG&A.
Adjusted Gross Profit(2) Adjusted gross profit(2) was $2,844 million in the fourth quarter of 2015 compared to $2,994
million in the fourth quarter of 2014. Excluding the impact of the 53rd
week of 2014, adjusted gross profit(2) was $50 million higher compared to the fourth quarter of 2014. Excluding
the impact of the 53rd week, adjusted gross profit percentage(2) of 26.8% decreased by 10 basis points compared to the fourth quarter of
2014, and included the following impacts:
-
a positive impact of approximately 30 basis points due to the
consolidation of franchises, which commenced in the second quarter of
2015; and
-
a negative impact of approximately 30 basis points from the above
mentioned modification to certain franchise fee arrangements.
After excluding these impacts, the 10 basis points decrease in adjusted
gross profit percentage(2) compared to the fourth quarter of 2014 reflects the following:
-
a decline in Drug retail gross profit percentage primarily due to the
impact of healthcare reform; partially offset by
-
the achievement of operational synergies in both Food and Drug retail.
Adjusted EBITDA(2) Adjusted EBITDA(2) was $823 million in the fourth quarter of 2015 compared to $897 million
in the fourth quarter of 2014. Excluding the impact of the 53rd week of
2014, adjusted EBITDA(2) decreased by $3 million compared to the fourth quarter of 2014, driven
by an increase in SG&A of $53 million, or 10 basis points, partially
offset by the increase in adjusted gross profit(2) described above. As a percentage of sales, the increase in SG&A was
impacted by the following factors:
-
a positive impact of approximately 30 basis points from the above
mentioned modification to certain franchise fee arrangements, which was
fully offset in gross profit above; and
-
a negative impact of approximately 30 basis points due to the
consolidation of franchises.
Excluding these impacts, as a percentage of sales, SG&A was essentially
flat compared to 2014 and reflects the following:
-
non-recurring transactions that had positive impacts in the prior year;
-
unfavourable foreign exchange impacts;
-
higher store and store support costs; partially offset by
-
favourable changes in the fair value of the Company's investments in its
franchise business.
Depreciation and Amortization Depreciation and amortization was $369 million in the fourth quarter of
2015, a decrease of $19 million compared to the fourth quarter of 2014,
and included $124 million (2014 - $124 million) in amortization of
intangible assets related to the acquisition of Shoppers Drug Mart.
Excluding this amount, depreciation and amortization decreased by $19
million driven by:
-
an increase in the estimated useful life of certain IT systems; and
-
lower depreciation on older IT and other store assets.
Other Business Matters
Impairment of Drug Retail Ancillary Assets Held for Sale During 2015, the Company commenced actively marketing the sale of
certain assets of the Shoppers ancillary healthcare businesses. As a
result, the Company recorded a charge of $112 million in the fourth
quarter associated with the write-down of the assets and other related
restructuring charges. The charge was excluded in calculating adjusted
net earnings available to common shareholders of the Company(2). Of the $112 million charge, $46 million was recognized in gross profit
and the remainder in SG&A. Subsequent to the end of 2015, the Company
signed an agreement for the sale of certain of these assets. The
Company expects the annualized impact of the divestitures to be a
decrease in sales of approximately $245 million and an increase in
adjusted EBITDA(2) of $14 million.
Inventory Measurement As of the end of 2015, the Company had completed the conversion of all
of its franchised grocery stores to the new IT systems that include a
perpetual inventory system. The re-measurement of inventory owned by
the franchises as a result of implementing the system resulted in a
decrease in inventory value of $33 million. The re-measurement resulted
in a charge of $4 million in gross profit related to consolidated
franchises and $29 million to SG&A related to non-consolidated
franchises. The total charge was excluded in calculating adjusted net
earnings available to common shareholders of the Company(2).
Consolidation of Franchises As of the end of 2015, 85 franchises were consolidated in the Company's
results. The incremental impacts to the Company's results were as
follows:
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2015
|
|
(millions of Canadian dollars)
|
(12 weeks)
|
|
|
(52 weeks)
|
|
Sales
|
$
|
28
|
|
|
$
|
56
|
|
Gross profit
|
32
|
|
|
|
58
|
|
Adjusted gross profit(2)
|
32
|
|
|
|
58
|
|
Adjusted EBITDA(2)
|
(4)
|
|
|
|
(12)
|
|
Depreciation and amortization
|
3
|
|
|
|
5
|
|
Net loss attributable to Non-Controlling Interest
|
(3)
|
|
|
|
(9)
|
|
|
|
|
|
|
The Company expects that the impact in 2016 of new and current
consolidated franchises will be incremental revenue of approximately
$320 million, an increase to EBITDA(2) of approximately $40 million and an increase in depreciation and
amortization of approximately $20 million.
Accelerated Finalization of Labour Agreements Over the past five years, the Company has been transitioning stores to
more cost effective and efficient operating terms under collective
agreements. The Company was committed to the transition and accordingly
accelerated the finalization of these Labour Agreements for the
majority of the remaining stores in the fourth quarter of 2015. The
Company incurred a charge of $55 million in SG&A related to the
completion of this process in the fourth quarter of 2015, which was
excluded in calculating adjusted net earnings available to common
shareholders of the Company(2).
Future Disclosures Shoppers Drug Mart is aggregated with the Company's retail businesses in
the Retail reportable operating segment on the basis that all of the
Company's retail operations have the same economic characteristics. The
Retail reportable operating segment is separately discussed in the
Company's interim and annual disclosures. Continuing in the 2016 fiscal
year, the Company will limit the amount of separate financial
disclosures specific to Shoppers Drug Mart in the Retail reportable
operating segment. The results of Shoppers Drug Mart will be fully
incorporated into the Company's comparative figures in 2016 and as such
its year-over-year results will be more meaningful in the future.
The Company will continue to provide sales metrics on Drug retail
pharmacy and front store sales to the extent that those categories
remain relevant to how the Company views the Retail segment.
Disclosures related to gross profit and adjusted EBITDA(2) will be on a combined basis and will include business-specific
disclosures only to the extent that those disclosures are significant
to the understanding of the underlying drivers of the overall Retail
segment results.
Financial Services Segment(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016 and January 3, 2015
|
|
2015
|
|
2014
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
(12 weeks)
|
|
(13 weeks)
|
|
$ Change
|
|
% Change
|
|
(52 weeks)
|
|
(53 weeks)
|
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$
|
240
|
|
$
|
231
|
|
$
|
9
|
|
3.9 %
|
|
$
|
849
|
|
|
$
|
810
|
|
|
$
|
39
|
|
4.8 %
|
|
Adjusted EBITDA(2)
|
|
51
|
|
51
|
|
|
—
|
|
— %
|
|
173
|
|
|
171
|
|
|
2
|
|
1.2 %
|
|
Earnings before income taxes
|
|
33
|
|
35
|
|
|
(2)
|
|
(5.7)%
|
|
|
106
|
|
|
111
|
|
|
(5)
|
|
(4.5)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
As at
|
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
January 2, 2016
|
|
January 3, 2015
|
|
$ Change
|
|
% Change
|
|
Average quarterly net credit card receivables
|
|
$
|
2,642
|
|
$
|
2,535
|
|
$
|
107
|
|
|
4.2 %
|
|
Credit card receivables
|
|
|
2,790
|
|
|
2,630
|
|
|
160
|
|
|
6.1 %
|
|
Allowance for credit card receivables
|
|
|
54
|
|
|
54
|
|
|
—
|
|
|
— %
|
|
Annualized yield on average quarterly gross credit card receivables
|
|
|
13.6 %
|
|
|
13.7 %
|
|
|
|
|
|
|
|
Annualized credit loss rate on average quarterly gross credit card
receivables
|
|
|
4.3 %
|
|
|
4.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes Earnings before income taxes were $33 million in the fourth quarter of
2015, a decrease of $2 million compared to the fourth quarter of 2014.
Revenue, including interest and interchange income, increased, driven
by growth of the credit card portfolio, partially offset by an
industry-wide reduction in interchange rates by MasterCard® International Incorporated. Higher transaction volumes drove an
increase in the costs associated with the Financial Services loyalty
program.
Credit Card Receivables As at January 2, 2016, credit card receivables were $2,790 million, an
increase of $160 million compared to January 3, 2015. This increase was
primarily driven by a growth in the active customer base as a result of
continued investments in customer acquisition, marketing and product
initiatives. As at January 2, 2016, the allowance for credit card
receivables was $54 million, flat compared to January 3, 2015 due to
the strong credit performance from the receivables balance.
Choice Properties Segment(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016 and January 3, 2015
|
|
2015
|
|
2014
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
|
(12 weeks)
|
|
(13 weeks)
|
|
$ Change
|
|
% Change
|
|
(52 weeks)
|
|
(53 weeks)
|
|
$ Change
|
% Change
|
|
Revenue
|
|
$
|
191
|
|
$
|
175
|
|
$
|
16
|
|
9.1 %
|
|
$
|
743
|
|
$
|
683
|
|
$
|
60
|
|
8.8 %
|
|
Adjusted EBITDA(2)
|
|
224
|
|
|
223
|
|
|
1
|
|
0.4 %
|
|
|
602
|
|
|
571
|
|
|
31
|
|
5.4 %
|
|
Net interest expense and other financing charges
|
|
184
|
|
|
137
|
|
|
47
|
|
34.3 %
|
|
|
756
|
|
|
369
|
|
|
387
|
|
104.9 %
|
|
Adjusted funds from operations(2)
|
|
82
|
|
|
74
|
|
|
8
|
|
10.8 %
|
|
|
313
|
|
|
285
|
|
|
28
|
|
9.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(2) Adjusted EBITDA(2) was $224 million in the fourth quarter of 2015, an increase $1 million
compared to the fourth quarter of 2014, primarily driven by:
-
contributions from acquired properties; and
-
an increase in base rent and net recoveries of property tax and
operating costs from existing properties; partially offset by
-
the change in fair value adjustment on investment properties.
Net Interest Expense and Other Financing Charges Net interest expense and other financing charges were $184 million in
the fourth quarter of 2015, an increase of $47 million compared to the
fourth 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 $82 million in the fourth quarter of 2015, an increase of $8
million compared to the fourth quarter of 2014, primarily driven by
higher contributions from property operations.
Other Matters In the fourth quarter of 2015, Choice Properties Real Estate Investment
Trust ("Choice Properties") acquired four properties from the Company
for a purchase price of approximately $45 million, excluding
acquisition costs, for consideration of $31 million in cash and
issuance of 1,294,701 Class B Limited Partnership units.
Subsequent to the end of 2015, Choice Properties entered into certain
bond forward contracts with a notional value of $300 million. In
addition, Choice Properties issued an early redemption notice for the
$300 million Series 5 senior unsecured debenture at par, effective
March 7, 2016.
DECLARATION OF DIVIDENDS
Subsequent to the end of the fourth quarter of 2015, the Board of
Directors declared a quarterly dividend on Common Shares and Second
Preferred Shares, Series B.
|
|
|
|
|
|
Common Shares
|
|
$0.25 per common share, payable on April 1, 2016 to shareholders of
record on March 15, 2016
|
|
|
|
|
|
|
|
Second Preferred Shares, Series B
|
|
$0.33 per share, payable on March 31, 2016 to shareholders of record on
March 15, 2016
|
|
|
|
|
|
|
OUTLOOK(5)
Loblaw remains focused on its strategic framework, 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 returning capital to shareholders. In 2016, the Company
expects to:
-
deliver positive same-store sales and stable gross margin in its Retail
segment in a highly competitive grocery market and with continued
negative pressure from healthcare reform;
-
grow adjusted net earnings;
-
invest approximately $1.3 billion in capital expenditures, including
$1.0 billion in its Retail segment; and
-
return capital to shareholders by allocating a significant portion of
free cash flow to share repurchases.
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, 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 2015 Annual Report.
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 January 2, 2016 and January 3, 2015
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
(millions of Canadian dollars)
|
|
(12 weeks)
|
|
(13 weeks)
|
|
(52 weeks)
|
|
(53 weeks)
|
|
Retail segment gross profit
|
|
$
|
2,794
|
|
$
|
2,925
|
|
$
|
11,689
|
|
$
|
9,734
|
|
Add impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Drug retail ancillary assets held for sale
|
|
46
|
|
|
—
|
|
46
|
|
|
—
|
|
|
Charge related to apparel inventory
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
Charge related to inventory measurement and other conversion differences
|
|
4
|
|
|
—
|
|
|
4
|
|
|
190
|
|
|
Recognition of fair value increment on inventory sold
|
|
—
|
|
|
69
|
|
|
—
|
|
|
798
|
|
Retail segment adjusted gross profit
|
|
$
|
2,844
|
|
$
|
2,994
|
|
$
|
11,747
|
|
$
|
10,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin The following tables reconcile earnings 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 consolidated statements of earnings for the periods
ended January 2, 2016 and January 3, 2015. 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 investment program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by
revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
(13 weeks)
|
|
(millions of Canadian dollars)
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations
|
|
Consolidated
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations
|
|
Consolidated
|
|
Net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
247
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Net interest expense and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
Operating income
|
|
$
|
265
|
|
$
|
48
|
|
$
|
224
|
|
$
|
(221)
|
|
$
|
316
|
|
$
|
459
|
|
$
|
49
|
|
$
|
223
|
|
$
|
(224)
|
|
$
|
507
|
|
Depreciation and amortization
|
|
|
369
|
|
|
3
|
|
|
—
|
|
|
4
|
|
|
376
|
|
|
388
|
|
|
2
|
|
—
|
|
|
3
|
|
|
393
|
|
EBITDA
|
|
$
|
634
|
|
$
|
51
|
|
$
|
224
|
|
$
|
(217)
|
|
$
|
692
|
|
$
|
847
|
|
$
|
51
|
|
$
|
223
|
|
$
|
(221)
|
|
$
|
900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
265
|
|
$
|
48
|
|
$
|
224
|
|
$
|
(221)
|
|
$
|
316
|
|
$
|
459
|
|
$
|
49
|
|
$
|
223
|
|
$
|
(224)
|
|
$
|
507
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers
Drug Mart
|
|
|
124
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|
124
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|
Impairment of Drug retail ancillary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets held for sale
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Labour agreements
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Charge related to inventory measurement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other conversion differences
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fixed asset and other related impairments,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Modifications to certain franchise fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arrangements
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(40)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40)
|
|
|
Pension annuities and buy-outs
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fair value adjustment on fuel and foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency contracts
|
|
|
(6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Restructuring and other related costs
|
|
|
(7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Recognition of fair value increment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on inventory sold
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
Shoppers Drug Mart acquisition-related costs,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of impact from divestitures
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
Fair value adjustment on Shoppers Drug Mart's
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity-based compensation liability
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Adjusted operating income
|
|
$
|
578
|
|
$
|
48
|
|
$
|
224
|
|
$
|
(221)
|
|
$
|
629
|
|
$
|
633
|
|
$
|
49
|
|
$
|
223
|
|
$
|
(224)
|
|
$
|
681
|
|
Depreciation and amortization
|
|
|
369
|
|
|
3
|
|
|
—
|
|
|
4
|
|
|
376
|
|
|
388
|
|
|
2
|
|
|
—
|
|
|
3
|
|
|
393
|
|
Less: Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug Mart
|
|
|
(124)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(124)
|
|
|
(124)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(124)
|
|
Adjusted EBITDA
|
|
$
|
823
|
|
$
|
51
|
|
$
|
224
|
|
$
|
(217)
|
|
$
|
881
|
|
$
|
897
|
|
$
|
51
|
|
$
|
223
|
|
$
|
(221)
|
|
$
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
(52 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
(53 weeks)
|
|
(millions of Canadian dollars)
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations
|
|
Consolidated
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations
|
|
Consolidated
|
|
Net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Net interest expense and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
584
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Operating income
|
|
$
|
1,429
|
|
$
|
163
|
|
$
|
601
|
|
$
|
(592)
|
|
$
|
1,601
|
|
$
|
497
|
|
$
|
164
|
|
$
|
568
|
|
$
|
(567)
|
|
$
|
662
|
|
Depreciation and amortization
|
|
|
1,567
|
|
|
10
|
|
|
1
|
|
|
14
|
|
|
1,592
|
|
|
1,453
|
|
|
7
|
|
|
—
|
|
|
12
|
|
|
1,472
|
|
EBITDA
|
|
$
|
2,996
|
|
$
|
173
|
|
$
|
602
|
|
$
|
(578)
|
|
$
|
3,193
|
|
$
|
1,950
|
|
$
|
171
|
|
$
|
568
|
|
$
|
(555)
|
|
$
|
2,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
1,429
|
|
$
|
163
|
|
$
|
601
|
|
$
|
(592)
|
|
$
|
1,601
|
|
$
|
497
|
|
$
|
164
|
|
$
|
568
|
|
$
|
(567)
|
|
$
|
662
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug Mart
|
|
|
536
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
536
|
|
|
417
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
417
|
|
|
Restructuring and other related costs
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154
|
|
|
44
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
46
|
|
|
Impairment of Drug retail ancillary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets held for sale
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Labour agreements
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Charge related to inventory measurement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other conversion differences
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
190
|
|
|
Fixed asset and other related impairments,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of recoveries
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
15
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
16
|
|
|
Fair value adjustment on fuel and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
foreign currency contracts
|
|
|
(21)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21)
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Modifications to certain franchise fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
arrangements
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(40)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40)
|
|
|
Charge related to apparel inventory
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Pension annuities and buy-outs
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Shoppers Drug Mart acquisition-related costs,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of impact from divestitures
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|
Recognition of fair value increment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on inventory sold
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
798
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
798
|
|
|
Fair value adjustment on Shoppers Drug Mart's
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity-based compensation liability
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Adjusted operating income
|
|
$
|
2,321
|
|
$
|
163
|
|
$
|
601
|
|
$
|
(592)
|
|
$
|
2,493
|
|
$
|
2,004
|
|
$
|
164
|
|
$
|
571
|
|
$
|
(567)
|
|
$
|
2,172
|
|
Depreciation and amortization
|
|
|
1,567
|
|
|
10
|
|
|
1
|
|
|
14
|
|
|
1,592
|
|
|
1,453
|
|
|
7
|
|
|
—
|
|
|
12
|
|
|
1,472
|
|
Less: Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquired with Shoppers Drug Mart
|
|
|
(536)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(536)
|
|
|
(417)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(417)
|
|
Adjusted EBITDA
|
|
$
|
3,352
|
|
$
|
173
|
|
$
|
602
|
|
$
|
(578)
|
|
$
|
3,549
|
|
$
|
3,040
|
|
$
|
171
|
|
$
|
571
|
|
$
|
(555)
|
|
$
|
3,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 consolidated statements of earnings for the periods ended
January 2, 2016 and January 3, 2015. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016 and January 3, 2015
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
(millions of Canadian dollars)
|
|
(12 weeks)
|
|
|
(13 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
Net interest expense and other financing charges
|
|
$
|
141
|
|
|
$
|
169
|
|
|
|
$
|
644
|
|
|
|
$
|
584
|
|
Deduct impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment to the Trust Unit Liability
|
|
(7)
|
|
|
(20)
|
|
|
(81)
|
|
|
(17)
|
|
|
Accelerated amortization of deferred financing costs
|
|
—
|
|
|
|
(5)
|
|
|
(15)
|
|
|
(23)
|
|
|
Shoppers Drug Mart acquisition-related costs, net of impact from
divestitures
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15)
|
|
Adjusted net interest expense and other financing charges
|
|
$
|
134
|
|
|
|
$
|
144
|
|
|
|
$
|
548
|
|
|
|
$
|
529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended January 2, 2016 and January 3, 2015
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
(millions of Canadian dollars)
|
|
(12 weeks)
|
|
|
(13 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
Adjusted operating income(i)
|
|
$
|
629
|
|
|
$
|
681
|
|
|
|
$
|
2,493
|
|
|
|
$
|
2,172
|
|
Adjusted net interest expense and other financing charges(i)
|
|
134
|
|
|
144
|
|
|
|
548
|
|
|
|
529
|
|
Adjusted earnings before taxes
|
|
$
|
495
|
|
|
$
|
537
|
|
|
|
$
|
1,945
|
|
|
|
$
|
1,643
|
|
Income taxes
|
|
$
|
48
|
|
|
$
|
91
|
|
|
|
$
|
334
|
|
|
|
$
|
25
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax impact of items included in adjusted earnings before taxes(ii)
|
|
85
|
|
|
50
|
|
|
|
229
|
|
|
|
401
|
|
|
Provincial statutory corporate income tax rate change
|
|
—
|
|
|
—
|
|
|
|
(38)
|
|
|
—
|
|
Adjusted income taxes
|
|
$
|
133
|
|
|
$
|
141
|
|
|
|
$
|
525
|
|
|
|
$
|
426
|
|
Effective tax rate
|
|
27.4 %
|
|
|
26.9 %
|
|
|
|
34.9 %
|
|
|
32.1 %
|
|
Adjusted income tax rate
|
|
26.9 %
|
|
|
26.3 %
|
|
|
|
27.0 %
|
|
|
25.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
The following table reconciles adjusted basic net earnings per common
share to GAAP basic net earnings per common share as reported for the
periods ended January 2, 2016 and January 3, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($)
|
|
(12 weeks)
|
|
|
(13 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
Basic net earnings per common share
|
|
$
|
0.31
|
|
|
$
|
0.60
|
|
|
$
|
1.52
|
|
|
$
|
0.14
|
|
Add (deduct) impact of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets acquired with Shoppers Drug Mart
|
|
0.22
|
|
|
0.22
|
|
|
0.96
|
|
|
0.80
|
|
|
Restructuring and other related costs
|
|
(0.01)
|
|
—
|
|
|
0.31
|
|
|
0.09
|
|
|
Impairment of Drug retail ancillary assets held for sale
|
|
0.20
|
|
|
—
|
|
|
0.20
|
|
|
—
|
|
|
Fair value adjustment to the Trust Unit Liability(i)
|
|
0.01
|
|
|
0.05
|
|
|
0.20
|
|
|
0.04
|
|
|
Labour agreements
|
|
0.10
|
|
|
—
|
|
|
0.10
|
|
|
—
|
|
|
Provincial statutory corporate income tax rate change
|
|
—
|
|
|
—
|
|
|
0.09
|
|
|
—
|
|
|
Charge related to inventory measurement and other conversion differences
|
|
0.06
|
|
|
—
|
|
|
0.06
|
|
|
0.37
|
|
|
Fixed asset and other related impairments, net of recoveries
|
|
0.01
|
|
|
—
|
|
|
0.02
|
|
|
0.04
|
|
|
Fair value adjustment on fuel and foreign currency contracts
|
|
(0.01)
|
|
0.01
|
|
|
(0.04)
|
|
0.01
|
|
|
Modifications to certain franchise fee arrangements
|
|
(0.02)
|
|
(0.07)
|
|
(0.02)
|
|
(0.08)
|
|
|
Accelerated amortization of deferred financing costs
|
|
—
|
|
|
0.01
|
|
|
0.03
|
|
|
0.04
|
|
|
Charge related to apparel inventory
|
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
Pension annuities and buy-outs
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
|
Shoppers Drug Mart acquisition-related costs, net of impact from
divestitures
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.19
|
|
|
Recognition of fair value increment on inventory sold
|
|
—
|
|
|
0.12
|
|
|
—
|
|
|
1.55
|
|
|
Fair value adjustment on Shoppers Drug Mart's equity-based compensation
liability
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Adjusted basic net earnings per common share
|
|
$
|
0.88
|
|
|
$
|
0.96
|
|
|
$
|
3.46
|
|
|
$
|
3.20
|
|
Weighted average common shares outstanding (millions)
|
|
410.7
|
|
|
412.0
|
|
|
411.5
|
|
|
380.5
|
|
Adjusted net earnings attributable to shareholders of the Company
(millions of Canadian dollars)
|
|
$
|
366
|
|
|
$
|
396
|
|
|
$
|
1,429
|
|
|
$
|
1,217
|
|
Less: Prescribed dividends on preferred shares in share capital
(millions of Canadian dollars)
|
|
(3)
|
|
—
|
|
|
(7)
|
|
—
|
|
Adjusted net earnings available to common shareholders of the Company
(millions of Canadian dollars)
|
|
$
|
363
|
|
|
$
|
396
|
|
|
$
|
1,422
|
|
|
$
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Gains or losses related to the fair value adjustment to the Trust Unit
Liability are not subject to tax.
|
Choice Properties' Adjusted Funds from Operations The following table reconciles Choice Properties' adjusted funds from
operations to GAAP measures for the periods ended January 2, 2016 and January 3, 2015. 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)
|
|
(12 weeks)
|
|
|
(13 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
Net income (loss)
|
|
$
|
41
|
|
|
$
|
87
|
|
|
$
|
(155)
|
|
$
|
200
|
|
|
Fair value adjustment on Class B Limited Partnership units
|
|
96
|
|
|
51
|
|
|
411
|
|
|
(12)
|
|
|
Fair value adjustment on investment properties
|
|
(88)
|
|
(98)
|
|
(72)
|
|
(82)
|
|
|
Fair value adjustments on unit-based compensation
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(1)
|
|
|
Distributions on Class B Limited Partnership units
|
|
52
|
|
|
50
|
|
|
203
|
|
|
191
|
|
|
Amortization of tenant improvement allowances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Internal expenses for leasing
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Funds from Operations
|
|
$
|
101
|
|
|
$
|
90
|
|
|
$
|
389
|
|
|
$
|
297
|
|
|
Restructuring
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Straight-line rental revenue
|
|
(10)
|
|
(9)
|
|
(37)
|
|
(35)
|
|
|
Amortization of finance charges
|
|
—
|
|
|
—
|
|
|
(1)
|
|
50
|
|
|
Unit-based compensation expense
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
Sustaining property and leasing capital expenditures, normalized(i)
|
|
(9)
|
|
(7)
|
|
(40)
|
|
(31)
|
|
Adjusted Funds from Operations
|
|
$
|
82
|
|
|
$
|
74
|
|
|
$
|
313
|
|
|
$
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
SELECTED FINANCIAL INFORMATION
The following includes selected quarterly and annual financial
information, which is prepared by management in accordance with
International Financial Reporting Standards ("IFRS") and is based on
the Company's audited annual consolidated financial statements for the
year ended January 2, 2016. This financial information does not contain
all disclosures required by IFRS, and accordingly, should be read in
conjunction with the Company's 2015 Annual Report, which is available
in the Investor Centre section of the Company's website at loblaw.ca and on sedar.com.
Consolidated Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of Canadian dollars except where otherwise indicated)
|
January 2, 2016
|
|
January 3, 2015
|
|
2015
|
|
2014
|
|
(12 weeks)
|
|
(13 weeks)
|
|
(52 weeks)
|
|
(53 weeks)
|
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
|
(audited)
|
|
Revenue
|
|
$
|
10,865
|
|
|
$
|
11,413
|
|
|
$
|
45,394
|
|
|
$
|
42,611
|
|
Cost of Merchandise Inventories Sold
|
|
7,831
|
|
|
8,260
|
|
|
32,846
|
|
|
32,063
|
|
Selling, General and Administrative Expenses
|
|
2,718
|
|
|
2,646
|
|
|
10,947
|
|
|
9,886
|
|
Operating Income
|
|
$
|
316
|
|
|
$
|
507
|
|
|
$
|
1,601
|
|
|
$
|
662
|
|
Net interest expense and other financing charges
|
|
141
|
|
|
169
|
|
|
644
|
|
|
584
|
|
Earnings Before Income Taxes
|
|
$
|
175
|
|
|
$
|
338
|
|
|
$
|
957
|
|
|
$
|
78
|
|
Income taxes
|
|
48
|
|
|
91
|
|
|
334
|
|
|
25
|
|
Net Earnings
|
|
$
|
127
|
|
|
$
|
247
|
|
|
$
|
623
|
|
|
$
|
53
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of the Company
|
|
$
|
131
|
|
|
$
|
247
|
|
|
$
|
632
|
|
|
$
|
53
|
|
|
Non-Controlling Interests
|
|
(4)
|
|
|
—
|
|
|
(9)
|
|
—
|
|
Net Earnings
|
|
$
|
127
|
|
|
$
|
247
|
|
|
$
|
623
|
|
|
$
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings per Common Share ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.60
|
|
|
$
|
1.52
|
|
|
$
|
0.14
|
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.59
|
|
|
$
|
1.51
|
|
|
$
|
0.14
|
|
Weighted Average Common Shares Outstanding (millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
410.7
|
|
|
412.0
|
|
|
411.5
|
|
|
380.5
|
|
|
Diluted
|
|
415.2
|
|
|
416.5
|
|
|
415.2
|
|
|
384.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
(millions of Canadian dollars)
|
January 2, 2016
|
|
|
January 3, 2015(i)
|
|
Assets
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,018
|
|
|
$
|
999
|
|
|
Short term investments
|
|
64
|
|
|
21
|
|
|
Accounts receivable
|
|
1,325
|
|
|
1,209
|
|
|
Credit card receivables
|
|
2,790
|
|
|
2,630
|
|
|
Inventories
|
|
4,322
|
|
|
4,309
|
|
|
Prepaid expenses and other assets
|
|
265
|
|
|
214
|
|
|
Assets held for sale
|
|
71
|
|
|
23
|
|
Total Current Assets
|
|
$
|
9,855
|
|
|
$
|
9,405
|
|
Fixed Assets
|
|
10,480
|
|
|
10,296
|
|
Investment Properties
|
|
160
|
|
|
185
|
|
Intangible Assets
|
|
9,164
|
|
|
9,675
|
|
Goodwill
|
|
3,362
|
|
|
3,318
|
|
Deferred Income Tax Assets
|
|
132
|
|
|
193
|
|
Security Deposits
|
|
2
|
|
|
7
|
|
Franchise Loans Receivable
|
|
329
|
|
|
399
|
|
Other Assets
|
|
455
|
|
|
281
|
|
Total Assets
|
|
$
|
33,939
|
|
|
$
|
33,759
|
|
Liabilities
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
$
|
143
|
|
|
$
|
162
|
|
|
Trade payables and other liabilities
|
|
5,106
|
|
|
4,774
|
|
|
Provisions
|
|
127
|
|
|
84
|
|
|
Income taxes payable
|
|
82
|
|
|
34
|
|
|
Short term debt
|
|
550
|
|
|
605
|
|
|
Long term debt due within one year
|
|
998
|
|
|
420
|
|
|
Associate interest
|
|
216
|
|
|
193
|
|
|
Capital securities
|
|
—
|
|
|
225
|
|
Total Current Liabilities
|
|
$
|
7,222
|
|
|
$
|
6,497
|
|
Provisions
|
|
131
|
|
|
76
|
|
Long Term Debt
|
|
10,013
|
|
|
11,042
|
|
Trust Unit Liability
|
|
821
|
|
|
722
|
|
Deferred Income Tax Liability
|
|
1,834
|
|
|
1,853
|
|
Other Liabilities
|
|
754
|
|
|
782
|
|
Total Liabilities
|
|
$
|
20,775
|
|
|
$
|
20,972
|
|
Equity
|
|
|
|
|
|
|
Preferred Share Capital
|
|
$
|
221
|
|
|
$
|
—
|
|
Common Share Capital
|
|
7,851
|
|
|
7,857
|
|
Retained Earnings
|
|
4,954
|
|
|
4,810
|
|
Contributed Surplus
|
|
102
|
|
|
104
|
|
Accumulated Other Comprehensive Income
|
|
23
|
|
|
8
|
|
Total Equity Attributable to Shareholders of the Company
|
|
$
|
13,151
|
|
|
$
|
12,779
|
|
Non-Controlling Interests
|
|
13
|
|
|
8
|
|
Total Equity
|
|
$
|
13,164
|
|
|
$
|
12,787
|
|
Total Liabilities and Equity
|
|
$
|
33,939
|
|
|
$
|
33,759
|
|
|
|
|
|
|
|
|
(i)
|
Certain comparative figures have been restated.
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016
|
|
January 3, 2015
|
|
2015
|
|
2014(i)
|
|
|
(12 weeks)
|
|
(13 weeks)
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
(millions of Canadian dollars)
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
|
|
(audited)
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
127
|
|
|
$
|
247
|
|
|
$
|
623
|
|
|
$
|
53
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
48
|
|
|
91
|
|
|
334
|
|
|
25
|
|
|
|
Net interest expense and other financing charges
|
|
141
|
|
|
169
|
|
|
644
|
|
|
584
|
|
|
|
Depreciation and amortization
|
|
376
|
|
|
393
|
|
|
1,592
|
|
|
1,472
|
|
|
|
Net fixed asset and other related impairments
|
|
26
|
|
|
1
|
|
|
73
|
|
|
16
|
|
|
|
(Gain) Loss on disposal of assets
|
|
2
|
|
|
10
|
|
|
(5)
|
|
3
|
|
|
|
Recognition of fair value increment on inventory sold
|
|
—
|
|
|
69
|
|
|
—
|
|
|
798
|
|
|
|
Charge related to inventory measurement and other conversion differences
|
|
4
|
|
|
—
|
|
|
4
|
|
|
190
|
|
|
|
$
|
724
|
|
|
$
|
980
|
|
|
$
|
3,265
|
|
|
$
|
3,141
|
|
|
Change in non-cash working capital
|
|
100
|
|
|
116
|
|
|
235
|
|
|
(321)
|
|
|
Change in credit card receivables
|
|
(127)
|
|
(81)
|
|
(160)
|
|
(92)
|
|
|
Income taxes paid
|
|
(65)
|
|
(66)
|
|
(296)
|
|
(293)
|
|
|
Interest received
|
|
2
|
|
|
3
|
|
|
7
|
|
|
29
|
|
|
Other
|
|
(70)
|
|
—
|
|
|
28
|
|
|
105
|
|
Cash Flows from Operating Activities
|
|
$
|
564
|
|
|
$
|
952
|
|
|
$
|
3,079
|
|
|
$
|
2,569
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases
|
|
$
|
(329)
|
|
$
|
(304)
|
|
$
|
(1,008)
|
|
$
|
(856)
|
|
|
Intangible asset additions
|
|
(104)
|
|
(96)
|
|
(233)
|
|
(230)
|
|
|
Acquisition of Shoppers Drug Mart, net of cash acquired
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,619)
|
|
|
Consolidation of franchises
|
|
33
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
Change in short term investments
|
|
(18)
|
|
28
|
|
|
(43)
|
|
269
|
|
|
Proceeds from disposal of assets
|
|
2
|
|
|
53
|
|
|
36
|
|
|
129
|
|
|
Change in security deposits
|
|
209
|
|
|
(1)
|
|
5
|
|
|
1,694
|
|
|
Other
|
|
34
|
|
|
(43)
|
|
(28)
|
|
(71)
|
|
Cash Flows used in Investing Activities
|
|
$
|
(173)
|
|
$
|
(363)
|
|
$
|
(1,238)
|
|
$
|
(5,684)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in bank indebtedness
|
|
$
|
(100)
|
|
$
|
(161)
|
|
$
|
(19)
|
|
$
|
(133)
|
|
|
Change in short term debt
|
|
(30)
|
|
|
—
|
|
(55)
|
|
|
—
|
|
|
Long Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
338
|
|
|
125
|
|
|
1,186
|
|
|
5,865
|
|
|
|
Retired
|
|
(502)
|
|
(341)
|
|
(1,783)
|
|
(3,336)
|
|
|
Redemption of Capital Securities
|
|
—
|
|
|
—
|
|
|
(225)
|
|
—
|
|
|
Interest paid
|
|
(95)
|
|
(113)
|
|
(491)
|
|
(506)
|
|
|
Dividends paid on common and preferred shares
|
|
(105)
|
|
(101)
|
|
(416)
|
|
(496)
|
|
|
Common Share Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
15
|
|
|
19
|
|
|
63
|
|
|
629
|
|
|
|
Purchased and held in trust
|
|
(6)
|
|
|
—
|
|
(63)
|
|
—
|
|
|
|
Purchased and cancelled
|
|
(186)
|
|
(29)
|
|
(280)
|
|
(178)
|
|
|
Issuance of Preferred Share Capital
|
|
—
|
|
|
—
|
|
|
221
|
|
|
—
|
|
|
Other
|
|
16
|
|
|
26
|
|
|
23
|
|
|
—
|
|
Cash Flows (used in) from Financing Activities
|
|
$
|
(655)
|
|
$
|
(575)
|
|
$
|
(1,839)
|
|
$
|
1,845
|
|
Effect of foreign currency exchange rate changes on cash and cash
equivalents
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
17
|
|
|
$
|
9
|
|
Change in cash and cash equivalents
|
|
$
|
(257)
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
(1,261)
|
|
Cash and cash equivalents, beginning of period
|
|
1,275
|
|
|
980
|
|
|
999
|
|
|
2,260
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
1,018
|
|
|
$
|
999
|
|
|
$
|
1,018
|
|
|
$
|
999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Certain comparative figures have been restated.
|
SEGMENT INFORMATION
The Company has three reportable operating segments with all material
operations carried out in Canada:
-
The Retail segment consists primarily of corporate and franchise-owned
retail food and Associate-owned drug stores, and 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 that are 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016
|
|
|
January 3, 2015
|
|
|
|
|
(12 weeks)
|
|
|
(13 weeks)
|
|
|
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations(i)
|
|
Total
|
|
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations(i)
|
Total
|
|
|
(millions of Canadian dollars)
|
|
|
Revenue(ii)
|
|
$
|
10,606
|
|
$
|
240
|
|
$
|
191
|
|
$
|
(172)
|
|
$
|
10,865
|
|
|
|
$
|
11,164
|
|
$
|
231
|
|
$
|
175
|
|
$
|
(157)
|
$
|
11,413
|
|
EBITDA(iii)
|
|
$
|
634
|
|
$
|
51
|
|
$
|
224
|
|
$
|
(217)
|
|
$
|
692
|
|
|
|
$
|
847
|
|
$
|
51
|
|
$
|
223
|
|
$
|
(221)
|
$
|
900
|
|
Adjusting Items(iii)
|
|
189
|
|
—
|
|
—
|
|
—
|
|
|
189
|
|
|
|
50
|
|
—
|
|
—
|
|
—
|
|
50
|
|
Adjusted EBITDA(iii)
|
|
$
|
823
|
|
$
|
51
|
|
$
|
224
|
|
$
|
(217)
|
|
$
|
881
|
|
|
|
$
|
897
|
|
$
|
51
|
|
$
|
223
|
|
$
|
(221)
|
$
|
950
|
|
Depreciation and Amortization(iv)
|
|
245
|
|
3
|
|
—
|
|
4
|
|
252
|
|
|
|
264
|
|
2
|
|
—
|
|
3
|
|
269
|
|
Adjusted Operating Income(iii)
|
|
$
|
578
|
|
$
|
48
|
|
$
|
224
|
|
$
|
(221)
|
|
$
|
629
|
|
|
|
$
|
633
|
|
$
|
49
|
|
$
|
223
|
|
$
|
(224)
|
$
|
681
|
|
Net interest expense and other financing charges
|
|
$
|
82
|
|
$
|
15
|
|
$
|
184
|
|
$
|
(140)
|
|
$
|
141
|
|
|
|
$
|
100
|
|
$
|
14
|
|
$
|
137
|
|
$
|
(82)
|
$
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Consolidation and Eliminations includes the following items:
|
-
Revenue includes the elimination of $128 million (2014 - $121 million)
of rental revenue and $44 million (2014 - $36 million) of cost recovery
recognized by Choice Properties, generated from the Retail segment.
-
Operating income includes the elimination of the $128 million (2014 -
$121 million) impact of rental revenue described above; the elimination
of an $88 million gain (2014 - $98 million gain) 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 - $2 million).
-
Net interest expense and other financing charges includes the
elimination of $63 million (2014 - $62 million) of interest expense
included in Choice Properties related to debt owing to the Company and
a $96 million fair value loss (2014 - loss of $51 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 $12 million (2014 - $11
million), which excludes distributions paid to the Company and a $7
million fair value loss (2014 - loss of $20 million) on the Company's
Trust Unit Liability.
|
(ii)
|
Included in Financial Services revenue is $94 million (2014 - $90
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 $124 million (2014 - $124 million) of amortization of
intangible assets acquired with Shoppers Drug Mart.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016
|
|
|
|
January 3, 2015
|
|
|
|
|
(52 weeks)
|
|
|
|
(53 weeks)
|
|
|
|
|
Retail
|
|
Financial Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations(i)
|
|
Total
|
|
|
|
Retail
|
|
Financial
Services(3)
|
|
Choice
Properties(3)
|
|
Consolidation
and
Eliminations(i)
|
|
Total
|
|
|
(millions of Canadian dollars)
|
|
|
Revenue(ii)
|
|
$
|
44,469
|
|
$
|
849
|
|
$
|
743
|
|
$
|
(667)
|
|
$
|
45,394
|
|
|
|
$
|
41,731
|
|
$
|
810
|
|
$
|
683
|
|
$
|
(613)
|
|
$
|
42,611
|
|
|
EBITDA(iii)
|
|
$
|
2,996
|
|
$
|
173
|
|
$
|
602
|
|
$
|
(578)
|
|
$
|
3,193
|
|
|
|
$
|
1,950
|
|
$
|
171
|
|
$
|
568
|
|
$
|
(555)
|
|
$
|
2,134
|
|
|
Adjusting Items(iii)
|
|
356
|
|
—
|
|
—
|
|
—
|
|
356
|
|
|
|
1,090
|
|
—
|
|
3
|
|
—
|
|
1,093
|
|
|
Adjusted EBITDA(iii)
|
|
$
|
3,352
|
|
$
|
173
|
|
$
|
602
|
|
$
|
(578)
|
|
$
|
3,549
|
|
|
|
$
|
3,040
|
|
$
|
171
|
|
$
|
571
|
|
$
|
(555)
|
|
$
|
3,227
|
|
|
Depreciation and Amortization(iv)
|
|
1,031
|
|
10
|
|
1
|
|
14
|
|
1,056
|
|
|
|
1,036
|
|
7
|
|
—
|
|
12
|
|
1,055
|
|
|
Adjusted Operating Income(iii)
|
|
$
|
2,321
|
|
$
|
163
|
|
$
|
601
|
|
$
|
(592)
|
|
$
|
2,493
|
|
|
|
$
|
2,004
|
|
$
|
164
|
|
$
|
571
|
|
$
|
(567)
|
|
$
|
2,172
|
|
|
Net interest expense and other financing charges
|
|
$
|
367
|
|
$
|
57
|
|
$
|
756
|
|
$
|
(536)
|
|
$
|
644
|
|
|
|
$
|
386
|
|
$
|
53
|
|
$
|
369
|
|
$
|
(224)
|
|
$
|
584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Consolidation and Eliminations includes the following items:
|
-
Revenue includes the elimination of $502 million (2014 - $471 million)
of rental revenue and $165 million (2014 - $142 million) of cost
recovery recognized by Choice Properties, generated from the Retail
segment.
-
Operating income includes the elimination of the $502 million (2014 -
$471 million) impact of rental revenue described above; the elimination
of a $72 million gain (2014 - $82 million gain) 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 $14
million (2014 - $12 million) of depreciation expense for certain
investment properties recorded by Choice Properties; and the
elimination of intercompany charges of $4 million (2014 - $2 million).
-
Net interest expense and other financing charges includes the
elimination of $251 million (2014 - $297 million) of interest expense
included in Choice Properties related to debt owing to the Company and
a $411 million fair value loss (2014 - gain of $12 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 $45 million (2014 - $44
million), which excludes distributions paid to the Company and a $81
million fair value loss (2014 - loss of $17 million) on the Company's
Trust Unit Liability.
|
(ii)
|
Included in Financial Services revenue is $368 million (2014 - $356
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 $536 million (2014 - $417 million) of amortization of
intangible assets acquired with Shoppers Drug Mart.
|
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, synergies and other benefits associated with
the acquisition of Shoppers Drug Mart, future liquidity, 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" 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 2016 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
12 "Enterprise Risks and Risk Management" of the Management Discussion
and Analysis in the 2015 Annual Report and the Company's 2015 Annual
Information Form (for the year ended January 2, 2016). Such risks and
uncertainties include:
-
changes to the regulation of generic prescription drug prices, the
reduction of reimbursements under public drug benefit plans and the
elimination or reduction of professional allowances paid by drug
manufacturers;
-
the inability of the Company's IT infrastructure to support the
requirements of the Company's business, or the occurrence of any
internal or external security breaches, denial of service attacks,
viruses, worms and other known or unknown cybersecurity or data
breaches;
-
failure to realize benefits from investments in the Company's new IT
systems;
-
the inability of the Company to manage inventory to minimize the impact
of obsolete or excess inventory and to control shrink;
-
failure to realize the anticipated strategic benefits associated with
the acquisition of Shoppers Drug Mart;
-
public health events including those related to food or drug safety;
-
failure to realize anticipated results, including revenue growth,
anticipated cost savings or operating efficiencies associated with the
Company's major initiatives, including those from restructuring;
-
failure by the Company's franchisees or Associates to operate in
accordance with prescribed procedures or standards, or disruptions to
the Company's relationship with its franchisees or Associates;
-
failure to achieve desired results in labour negotiations, including the
terms of future collective bargaining agreements, which could lead to
work stoppages;
-
changes in the Company's income, capital, commodity, property and other
tax and regulatory liabilities, including changes in tax laws,
regulations or future assessments;
-
reliance on the performance and retention of third party service
providers, including those associated with the Company's supply chain
and apparel business;
-
issues with vendors in both advanced and developing markets;
-
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;
-
heightened competition, whether from current competitors or new entrants
to the marketplace;
-
changes in economic conditions, including economic recession or changes
in the rate of inflation or deflation, employment rates, interest
rates, currency exchange rates or derivative and commodity prices;
-
the impact of potential environmental liabilities; and
-
the inability of the Company to collect on or 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
("securities regulators") from time to time, including, without
limitation, the section entitled "Risks" in the Company's 2015 Annual
Information Form (for the year ended January 2, 2016). 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
2015 Annual Report
The Company's 2015 Annual Report is 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 February 25, 2016 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: 7942699. 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
|
|
|
|
|
(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)
|
The results for the Financial Services and Choice Properties segments
are for the periods ended December 31, 2015 and December 31, 2014,
consistent with the
segments' fiscal calendars. Adjustments to align Financial Services' and
Choice Properties' results to January 2, 2016 and January 3, 2015 are
included in Consolidation
and Eliminations. See the "Non-GAAP Financial Measures" and the "Segment
Information" sections of this News Release.
|
|
(4)
|
Certain 2014 figures have been restated to conform with the current
year's presentation.
|
|
(5)
|
To be read in conjunction with the "Forward-Looking Statements" section
of this News Release.
|
SOURCE Loblaw Companies Limited
