Canada NewsWire
BRAMPTON, ON, February 25, 2016
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:
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:
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:
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.
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:
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:
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:
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:
Excluding these impacts, as a percentage of sales, SG&A was essentially flat compared to 2014 and reflects the following:
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:
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:
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:
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 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: |
(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: |
(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:
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