METRO reports growth of 27.8% in 2012 fourth quarter adjusted net earnings per share(1)
METRO reports growth of 27.8% in 2012 fourth quarter adjusted net earnings per share(1)
MONTREAL, Nov. 14, 2012 /CNW Telbec/ - METRO INC. (TSX: MRU) announced its results today for the fourth quarter and fiscal year ended September 29, 2012.
2012 FOURTH QUARTER HIGHLIGHTS
-- 13-week quarter versus 12 weeks in 2011
-- Net earnings of $145.1 million, or $1.46 per share, up 75.9%
-- Adjusted net earnings((1)) of $123.4 million, or $1.24 per
share, up 27.8%
-- Sales of $2,943.7 million, up 11.1%
-- Same store sales up 1.1%
-- Declared dividend of $0.215 per share, up 11.7%
FISCAL 2012 HIGHLIGHTS
-- 53-week fiscal year versus 52 weeks in 2011
-- Net earnings of $489.3 million, or $4.84 per share, up 27.7%
-- Adjusted net earnings((1)) of $470.6 million, or $4.65 per
share, up 18.3%
-- Sales of $12,010.8 million, up 5.4%
-- Same store sales up 1.2%
Fiscal Year
(Millions of dollars, Change %
except for net earnings 2012 2011
per share/EPS) (13 weeks) % (12 weeks) %
Sales 2,943.7 100.0 2,649.5 100.0 11.1
EBITDA((1)) 246.3 8.4 166.8 6.3 47.7
Adjusted EBITDA((1))
excluding share of
earnings from our
investment in
Alimentation Couche-Tard 209.2 7.1 172.0 6.5 21.6
Net earnings 145.1 4.9 84.4 3.2 71.9
Adjusted net earnings(
(1)) 123.4 4.2 98.9 3.7 24.8
Fully diluted EPS 1.46 — 0.83 — 75.9
Adjusted fully diluted
EPS((1)) 1.24 — 0.97 — 27.8
Fiscal Year
(Millions of dollars, Change %
except for net earnings 2012 2011
per share/EPS) (53 weeks) % (52 weeks) %
Sales 12,010.8 100.0 11,396.4 100.0 5.4
EBITDA((1)) 894.3 7.4 766.3 6.7 16.7
Adjusted EBITDA((1))
excluding share of
earnings from our
investment in
Alimentation Couche-Tard 821.7 6.8 744.4 6.5 10.4
Net earnings 489.3 4.1 392.7 3.4 24.6
Adjusted net earnings(
(1)) 470.6 3.9 407.2 3.6 15.6
Fully diluted EPS 4.84 — 3.79 — 27.7
Adjusted fully diluted
EPS((1)) 4.65 — 3.93 — 18.3
PRESIDENT'S MESSAGE
"We are very pleased with our strong fourth quarter and fiscal 2012
performance, resulting from our team's excellent execution, effective cost
control, and sustained investments in our network. While we expect competitive
activity will remain strong in 2013, we will continue((2)) to emphasize our
customer first strategies to drive( )our future growth," stated Eric R. La
Flèche, President and Chief Executive Officer.
PRESS RELEASE
This press release sets out the financial position and consolidated results of
METRO INC. on September 29, 2012. It should be read in conjunction with the
unaudited interim condensed consolidated financial statements and accompanying
notes in this press release.
As of September 25, 2011, the Corporation has prepared its financial
statements according to International Financial Reporting Standards (IFRS).
The unaudited interim condensed consolidated financial statements for the
13-week and 53-week periods ended September 29, 2012 have been prepared by
management in accordance with IAS 34 "Interim Financial Reporting" and IFRS 1
"First-time Adoption of International Financial Reporting Standards". They
should be read in conjunction with the audited annual consolidated financial
statements and accompanying notes which were prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP) and the Management's
Discussion & Analysis, including the IFRS conversion plan, presented in the
Corporation's 2011 Annual Report. Given the change in accounting standards,
they should be read in conjunction with the following information as well:
a) the unaudited interim condensed consolidated financial statements
for the 12-week period ended December 17, 2011, particularly the
explanations on the transition to IFRS on September 26, 2010 (note
2), significant accounting policies (note 3) and additional annual
information requirements under IFRS (note 13) since all of this
information is not included in this press release;
b) the explanations on the transition to IFRS on September 24, 2011
(note 2) and new accounting policies (note 3) in this press release.
Unless otherwise stated, this press release is based upon information as at
November 2, 2012 and all figures are presented according to IFRS.
SALES
Sales in the fourth quarter and fiscal 2012 reached $2,943.7 million and
$12,010.8 million, up 11.1% and 5.4% respectively compared to sales of
$2,649.5 million and $11,396.4 million for the corresponding periods last
year. The 2012 fiscal year was 53 weeks long, with one more week to the year
and fourth quarter than last year. Excluding this extra week, fiscal 2012 and
fourth quarter sales were up 3.4% and 2.5% respectively. Adonis stores and
distributor Phoenicia's fourth quarter and fiscal 2012 sales contributed $63.3
million and $236.6 million respectively to the Corporation's sales. Same store
sales were up 1.1% for the fourth quarter of 2012 compared to the
corresponding period in 2011. We experienced very modest inflation in the
fourth quarter of 2012, but lower than the Consumer Price Index reported by
Statistics Canada.
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION
(EBITDA)((1) )
EBITDA adjustments((1))
Fiscal Year
2012 2011 Change
(13 weeks) (12 weeks) %
(Millions
of dollars,
unless EBITDA/ EBITDA/
otherwise Sales Sales
indicated) EBITDA Sales (%) EBITDA Sales (%) EBITDA
EBITDA 246.3 2,943.7 8.4 166.8 2,649.5 6.3 47.7
Closure — — 20.5 —
costs
Couche-Tard (25.0) — — —
dilution
gain
Adjusted 221.3 2,943.7 7.5 187.3 2,649.5 7.1 18.2
EBITDA
Share of (12.1) — (15.3) —
earnings in
Couche-Tard
Adjusted 209.2 2,943.7 7.1 172.0 2,649.5 6.5 21.6
EBITDA
excluding
share of
earnings
Fiscal Year
2012 2011 Change
(53 weeks) (52 weeks) %
(Millions
of dollars,
unless EBITDA/ EBITDA/
otherwise Sales Sales
indicated) EBITDA Sales (%) EBITDA Sales (%) EBITDA
EBITDA 894.3 12,010.8 7.4 766.3 11,396.4 6.7 16.7
Closure — — 20.5 —
costs
Couche-Tard (25.0) — — —
dilution
gain
Adjusted 869.3 12,010.8 7.2 786.8 11,396.4 6.9 10.5
EBITDA
Share of (47.6) — (42.4) —
earnings in
Couche-Tard
Adjusted 821.7 12,010.8 6.8 744.4 11,396.4 6.5 10.4
EBITDA
excluding
share of
earnings
EBITDA((1)) for the fourth quarter of 2012 was $246.3 million, up 47.7% from
$166.8 million for the same quarter last year. EBITDA((1)) for fiscal 2012 was
$894.3 million, up 16.7% from $766.3 million for fiscal 2011.
In the fourth quarters of 2012 and 2011, we respectively recorded a
non-recurring gain of $25.0 million before taxes and a non-recurring loss of
$20.5 million before taxes.
In August 2012, Alimentation Couche-Tard issued 7.3 million shares for net
proceeds of approximately $330 million to finance part of its acquisition of
Statoil Fuel & Retail ASA. As the Corporation did not participate in this
share issue, our interest in Couche-Tard decreased from 11.6% to 11.1%. This
dilution and our share in Couche-Tard's increased value as a result of the
share issue amount to a deemed disposition and deemed proceeds of disposition
of part of our investment for a net pre-tax gain of $25.0 million.
In the fourth quarter of 2011, we closed our meat processing plant in Montreal
and a grocery warehouse in Toronto to improve operational efficiency. Closure
costs were $20.5 million before taxes.
Excluding these non-recurring items, adjusted EBITDA((1)) for the fourth
quarter and fiscal 2012 were $221.3 million and $869.3 million respectively.
Adjusted EBITDA((1)) for the 2011 fourth quarter and fiscal year were $187.3
million and $786.8 million respectively.
Adjusted EBITDA((1)) for the fourth quarter and fiscal 2012 were up 18.2% and
10.5% respectively over those for the corresponding periods of fiscal 2011.
Our share of earnings in Alimentation Couche-Tard, excluding the dilution gain
of $25.0 million before taxes, were $12.1 million for the fourth quarter and
$47.6 million for fiscal 2012, versus $15.3 million and $42.4 million for the
corresponding periods of fiscal 2011. In its two last quarterly reports,
Couche-Tard stated that non-recurring items were included in those quarters
and that excluding them had reduced the adjusted net earnings((1)) for its
fourth quarter ended April 29, 2012 by $US 15.4 million and increased its
adjusted net earnings((1)) for the first quarter ended July 22, 2012 by $US
70.1 million.
Excluding the non-recurring items and our share of earnings in Alimentation
Couche-Tard, the adjusted EBITDA((1)) for the fourth quarter and fiscal 2012
were $209.2 million and $821.7 million respectively, or 7.1 % and 6.8% of
their respective sales. Adjusted EBITDA((1)) for the corresponding periods
last year were $172.0 million and $744.4 million respectively, or 6.5% of
sales for both periods.
Adjusted EBITDA((1)), excluding our share of earnings in Alimentation
Couche-Tard, for the fourth quarter and fiscal 2012 were up 21.6% and 10.4%
respectively over those for the corresponding periods of fiscal 2011.
The significant increase in adjusted EBITDA((1)) for the fourth quarter of
2012 compared to the same quarter of 2011 is also attributable to the results
for the 53(rd) week of 2012 when several fixed costs were no longer in effect.
Gross margins for the fourth quarter and fiscal 2012 were 18.5% and 18.4%
respectively, up from 17.7% and 18.1% for the corresponding periods of 2011.
Our merchandising strategies, the decrease of in-store losses, and the Adonis
stores contributed to these increases. In addition, in the fourth quarter of
2011, a reclassification of approximately $10 million for the first three
quarters was made between salaries at the expense level and the cost of goods
sold. Excluding this reclassification, the gross margins in the fourth quarter
of 2011 was 18.1%.
DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS
Total depreciation and amortization expenses for the fourth quarter and fiscal
2012 amounted to $41.8 million and $183.9 million respectively compared to
$41.5 million and $179.3 million for the corresponding periods last year.
Fourth quarter net financial costs totalled $11.7 million in 2012 versus $9.4
million last year, while fiscal 2012 net financial costs totalled $46.4
million versus $41.5 million last year. Interest rates averaged 4.2% for
fiscal 2012 and the corresponding period last year.
INCOME TAXES
The fourth quarter and fiscal 2012 income tax expenses of $47.7 million and
$174.7 million represented effective tax rates of 24.7% and 26.3%
respectively. The fourth quarter and fiscal 2011 income tax expenses of $31.5
million and $152.8 million represented effective tax rates of 27.2% and 28.0%
respectively. On June 20, 2012, the Ontario Legislative Assembly adopted the
budget tabled on March 27, 2012, thereby deferring the scheduled reductions in
corporate tax rates of 0.5% on July 1, 2012 and of 1.0% on July 1, 2013 until
an expected balanced budget in 2017-2018 is attained. With these reductions in
tax rates being suspended and deferred conditionally, we have canceled in the
third quarter of 2012, $3.0 million of deferred taxes in our statement of
financial position for tax savings recorded in prior periods related to these
reductions in tax rates, and recorded an equivalent non-recurring income tax
expense. Excluding this non-recurring tax expense, our effective tax rate for
fiscal 2012 was 25.8%.
The tax rates for the 2012 periods were lower than those for the corresponding
periods last year due to two federal corporate tax rate reductions of 1.5%
each effective January 1, 2011 and 2012, as well as a 0.5% reduction in
Ontario's effective July 1, 2011.
NET EARNINGS
Net earnings for the fourth quarter of 2012 were $145.1 million, an increase
of 71.9% over net earnings of $84.4 million for the same quarter of 2011.
Fully diluted net earnings per share rose 75.9% to $1.46 from $0.83 last year.
Excluding the Couche-Tard dilution gain of $25.0 million before taxes recorded
in the fourth quarter of 2012 as well as the closure costs of $20.5 million
before taxes in the corresponding quarter of 2011, our adjusted net
earnings((1)) for the fourth quarter of 2012 were $123.4 million and our
adjusted fully diluted net earnings per share((1)) were $1.24, for increases
of 24.8% and 27.8% respectively.
The significant increase in adjusted net earnings((1)) for the fourth quarter
of 2012 over the same quarter of 2011 is also attributable to the results for
the 53(rd) week of 2012 when several fixed costs were no longer in effect.
Net earnings for fiscal 2012 reached $489.3 million, up 24.6% from $392.7
million last year. Fully diluted net earnings per share were $4.84 compared to
$3.79 last year, an increase of 27.7%. Excluding the non-recurring tax expense
of $3.0 million and the Couche-Tard dilution gain of $25.0 million before
taxes recorded in 2012 as well as the closure costs of $20.5 million before
taxes in 2011, our adjusted net earnings((1)) were $470.6 million and our
adjusted fully diluted net earnings per share((1)) were $4.65, increases of
15.6% and 18.3% respectively.
Net earnings adjustments
Fiscal Year
2012 2011 Change (%)
(13 weeks) (12 weeks)
Fully Fully
(Millions diluted (Millions diluted Fully
of EPS of EPS Net diluted
dollars) (Dollars) dollars) (Dollars) earnings EPS
Net earnings 145.1 1.46 84.4 0.83 71.9 75.9
Closure costs
after taxes — — 14.5 0.14
Couche-Tard
dilution gain
after taxes (21.7) (0.22) — —
Non-recurring
tax expense — — — —
Adjusted net
earnings((1)) 123.4 1.24 98.9 0.97 24.8 27.8
Fiscal Year
2012 2011 Change (%)
(53 weeks) (52 weeks)
Fully Fully
(Millions diluted (Millions diluted Fully
of EPS of EPS Net diluted
dollars) (Dollars) dollars) (Dollars) earnings EPS
Net earnings 489.3 4.84 392.7 3.79 24.6 27.7
Closure costs
after taxes — — 14.5 0.14
Couche-Tard
dilution gain
after taxes (21.7) (0.22) — —
Non-recurring
tax expense 3.0 0.03 — —
Adjusted net
earnings((1)) 470.6 4.65 407.2 3.93 15.6 18.3
QUARTERLY HIGHLIGHTS
(Millions of dollars, unless otherwise 2012 2011 Change
indicated) (53 weeks) (52 weeks) %
Sales
Q1((3)) 2,711.7 2,622.5 3.4
Q2((3)) 2,651.9 2,557.5 3.7
Q3((4)) 3,703.5 3,566.9 3.8
Q4((5)) 2,943.7 2,649.5 11.1
Fiscal 12,010.8 11,396.4 5.4
Net earnings
Q1((3)) 103.7 95.5 8.6
Q2((3)) 96.1 85.7 12.1
Q3((4)) 144.4 127.1 13.6
Q4((5)) 145.1 84.4 71.9
Fiscal 489.3 392.7 24.6
Adjusted net earnings ((1))
Q1((3)) 103.7 95.5 8.6
Q2((3)) 96.1 85.7 12.1
Q3((4)) 147.4 127.1 16.0
Q4((5)) 123.4 98.9 24.8
Fiscal 470.6 407.2 15.6
Fully diluted net earnings per share
(Dollars)
Q1((3)) 1.01 0.91 11.0
Q2((3)) 0.94 0.82 14.6
Q3((4)) 1.43 1.23 16.3
Q4((5)) 1.46 0.83 75.9
Fiscal 4.84 3.79 27.7
Adjusted fully diluted net earnings per
share((1)) (Dollars)
Q1((3)) 1.01 0.91 11.0
Q2((3)) 0.94 0.82 14.6
Q3((4)) 1.46 1.23 18.7
Q4((5)) 1.24 0.97 27.8
Fiscal 4.65 3.93 18.3
((3) ) 12 weeks
((4)) 16 weeks
((5)) 2012 - 13 weeks, 2011 - 12 weeks
First, second and third quarter sales for 2012 reached $2,711.7 million,
$2,651.9 million and $3,703.5 million respectively, up 3.4%, 3.7% and 3.8%
from $2,622.5 million, $2,557.5 million and $3,566.9 million for the
corresponding periods last year. Adonis stores and distributor Phoenicia sales
contributed $33.0 million to the Corporation's sales for eight weeks in the
first quarter, $59.0 million for the second quarter and $81.3 million for the
third quarter of 2012. Same store sales were up 1.7% over those for 2011 in
the first quarter, 1.0% in the second quarter and 1.0% in the third quarter of
2012. We experienced moderate inflation in our food basket in the first
quarter which was, however, lower than in the previous quarter and lower than
levels reported by Statistics Canada. We experienced modest impact from
inflation in the second quarter of 2012 albeit lower than in the previous
quarter. During the third quarter of 2012, we experienced very modest
inflation which was lower than in the first two quarters.
Fourth quarter sales for 2012 reached $2,943.7 million, up 11.1% from $2,649.5
million last year. Excluding the 53(rd) week of fiscal 2012, the sales
increase for the fourth quarter was 2.5%. Adonis stores and distributor
Phoenicia sales contributed $63.3 million to 2012 fourth quarter sales. During
the fourth quarter of 2012, we experienced very modest inflation similar to
the previous quarter.
Net earnings for the first and second quarters of 2012 were $103.7 million and
$96.1 million compared to $95.5 million and $85.7 million for the
corresponding quarters last year, increases of 8.6% and 12.1%. Fully diluted
net earnings per share rose 11.0% and 14.6% to $1.01 and $0.94 from $0.91 and
$0.82 last year.
Net earnings for the third quarter of 2012 were $144.4 million, up 13.6% from
$127.1 million for the corresponding quarter of 2011. Fully diluted net
earnings per share for the third quarter of 2012 were $1.43, up 16.3% from
$1.23 for the same quarter of 2011. Excluding the non-recurring tax expense of
$3.0 million, our adjusted net earnings((1)) were $147.4 million and our
adjusted fully diluted net earnings per share((1)) were $1.46, up 16.0% and
18.7% respectively.
Net earnings for the fourth quarter of 2012 were $145.1 million versus $84.4
million for the corresponding quarter of 2011, an increase of 71.9%. Fully
diluted net earnings per share were $1.46 versus $0.83 last year, an increase
of 75.9%. Excluding the Couche-Tard dilution gain of $25.0 million before
taxes recorded in the fourth quarter of 2012 as well as the closure costs of
$20.5 million before taxes in the corresponding quarter of 2011, our adjusted
net earnings((1)) for the fourth quarter of 2012 were $123.4 million and our
adjusted fully diluted net earnings per share((1)) were $1.24, for increases
of 24.8% and 27.8% respectively. The significant increase in adjusted
EBITDA((1)) for the fourth quarter of 2012 is also attributable to the results
for the 53(rd) week of 2012 when several fixed costs were no longer in effect.
2012 2011
(Millions of
dollars) Q1 Q2 Q3 Q4 Fiscal Q1 Q2 Q3 Q4 Fiscal
Net earnings 103.7 96.1 144.4 145.1 489.3 95.5 85.7 127.1 84.4 392.7
Closure costs
after taxes — — — — — — — — 14.5 14.5
Couche-Tard
dilution gain
after taxes — — — (21.7) (21.7) — — — — —
Non-recurring
tax expense — — 3.0 — 3.0 — — — — —
Adjusted net
earnings((1)) 103.7 96.1 147.4 123.4 470.6 95.5 85.7 127.1 98.9 407.2
2012 2011
(Dollars and
per share) Q1 Q2 Q3 Q4 Fiscal Q1 Q2 Q3 Q4 Fiscal
Fully diluted
net earnings 1.01 0.94 1.43 1.46 4.84 0.91 0.82 1.23 0.83 3.79
Closure costs
after taxes — — — — — — — — 0.14 0.14
Couche-Tard
dilution gain
after taxes — — — (0.22) (0.22) — — — — —
Non-recurring
tax expense — — 0.03 — 0.03 — — — — —
Adjusted
fully diluted
net earnings(
(1)) 1.01 0.94 1.46 1.24 4.65 0.91 0.82 1.23 0.97 3.93
CASH POSITION
OPERATING ACTIVITIES
Operating activities generated cash flows of $126.8 million in the fourth
quarter and $546.1 million over fiscal 2012, compared to $183.3 million and
$542.4 million respectively in the corresponding periods of fiscal 2011. This
decrease is due primarily to net changes in non-cash working capital items
that required greater outflows in the fourth quarter of 2012 compared to last
year.
INVESTING ACTIVITIES
Investing activities required outflows of $69.2 million in the fourth quarter
of 2012 and $357.0 million in fiscal 2012 versus $53.0 million and $226.7
million in the corresponding periods of 2011. The increase in funds used in
the fourth quarter of 2012 compared to that of 2011 is due primarily to
greater fixed asset acquisitions and disposals of a net $19.3 million in 2012
and greater business acquisitions of $5.8 million in 2011. The increase in
funds used during fiscal 2012 compared to fiscal 2011 is due primarily to
greater business acquisitions in 2012 compared to 2011, attributable to the
acquisition of Adonis stores and their distributor Phoenicia for a cash
consideration of $146.8 million (net of cash acquired totalling $3.0 million)
as well as increased acquisitions of $80.8 million of fixed and intangible
assets.
During fiscal 2012, the Corporation and its retailers invested $281.8 million
in our retail network, for a gross expansion of 383,200 square feet and a net
expansion of 34,400 square feet or 0.2%. Major renovations and expansions of
19 stores were completed, 7 new stores were opened and 11 stores were closed.
FINANCING ACTIVITIES
Financing activities required outflows of $82.7 million and $371.3 million in
the fourth quarter and fiscal 2012 versus 2011 fourth quarter and fiscal year
outflows of $75.3 million and $274.9 million. The increase in funds used in
the fourth quarter of 2012 compared to that of 2011 is due to a $57.5 million
increase in net debt repayment and a $40.1 million decrease in the redemption
of shares. The increase in funds used during fiscal 2012 compared to fiscal
2011 is due primarily to a $26.7 million increase in the redemption of shares
and a $60.1 million increase in net debt repayment.
FINANCIAL POSITION
We do not anticipate((2)) any liquidity risk and consider our financial
position at the end of the fourth quarter of fiscal 2012 as very solid. We had
an unused authorized revolving credit facility of $284.6 million.
At the end of the fourth quarter of 2012, the main elements of our non-current
debt were as follows:
Balance
(Millions of
Interest Rate dollars) Maturity
Revolving Credit Rates fluctuate with
Facility changes in bankers'
acceptance rates 315.4 November 3, 2016
Series A Notes 4.98% fixed rate 200.0 October 15, 2015
Series B Notes 5.97% fixed rate 400.0 October 15, 2035
On October 12, 2012, the revolving credit facility's maturity date was
extended to November 3, 2017.
At the end of the fourth quarter, we had foreign exchange forward contracts to
hedge against the effect of foreign exchange rate fluctuations on our future
foreign-denominated purchases of goods and services.
Our main financial ratios were as follows:
As at As at
September 29, September 24,
2012 2011
Financial structure
Non-current debt (Millions of dollars) 973.9 1,025.5
Equity (Millions of dollars) 2,545.1 2,399.3
Non-current debt/total capital (%) 27.7 29.9
Fiscal Year
2012 2011
Results
EBITDA((1))/Financial costs (Times) 19.3 18.5
SHARE CAPITAL REORGANIZATION
Following the Annual General Meeting of Shareholders held on January 31, 2012,
our share capital has been changed as follows:
-- each issued and outstanding Class B Share carrying 16 votes per
share has been converted into one single vote Class A
Subordinate Share;
-- the Class B Shares, along with the rights, privileges,
restrictions and conditions attached thereto, have been
eliminated;
-- the Class A Subordinate Shares have been redesignated as
"Common Shares" and shall constitute the Corporation's sole
class of equity shares carrying one vote per share;
-- First Preferred Shares have been redesignated as "Preferred
Shares".
For ease of reading, we have restated all prior periods disclosed to reflect
the share capital reorganization of January 31, 2012 as if it had always
existed. Therefore, only the Common Shares are disclosed in this press
release. This restatement is possible since Class B Shares and Class A
Subordinate Shares were participating shares. The differences between these
classes of shares were primarily voting rights, the exclusivity of Class B
Shares held by Metro Merchants, and that Class B Shares were not listed on the
Toronto Stock Exchange.
CAPITAL STOCK, STOCK OPTIONS AND
PERFORMANCE SHARE UNITS
As at As at
September 29, September 24,
2012 2011
Number of Common Shares outstanding
(Thousands) 97,186 101,084
Stock options:
Number outstanding (Thousands) 1,683 1,776
Exercise prices (Dollars) 24.73 to 58.41 20.20 to 47.14
Weighted average exercise price 35.38
(Dollars) 39.27
Performance share units:
Number outstanding (Thousands) 284 310
NORMAL COURSE ISSUER BID PROGRAM
The Corporation decided to renew the issuer bid program as an additional
option for using excess funds. Thus, we will be able to decide, in the
shareholders' best interest, to reimburse debt or to repurchase Corporation
Shares. The Board of Directors authorized the Corporation to repurchase, in
the normal course of business, between September 10, 2012 and September 9,
2013, up to 6,000,000 of its Common Shares representing approximately 6.2 % of
its issued and outstanding shares at the close of the Toronto Stock Exchange
on August 31, 2012. Repurchases are made through the stock exchange at market
price and in accordance with its policies and regulations, and in any other
manner allowed by the stock exchange and by any other securities regulatory
agency, including off-board transactions. Common Shares so repurchased will be
cancelled. Under the normal course issuer bid program covering the period from
September 8, 2011 to September 7, 2012, the Corporation repurchased 4,239,800
Common Shares at an average price of $50.99 for a total of $216.2 million.
Under the normal course issuer bid program covering the period from September
10, 2012 to September 9, 2013, the Corporation repurchased, up to November 2,
2012, 333,300 Common Shares at an average price of 57.65 $, for a total of
$19.2 million.
DIVIDENDS
On September 25, 2012, the Corporation's Board of Directors declared a
quarterly dividend of $0.215 per Common Share payable November 21, 2012, an
increase of 11.7% over the dividend declared for the same quarter last year.
On an annualized basis, this dividend represents 21.3% of 2011 net earnings.
SHARE TRADING
The value of METRO shares remained in the $43.76 to $59.68 range over fiscal
2012. During this period, a total of 70.0 million shares traded on the Toronto
Stock Exchange. The closing price at the end of fiscal 2012 was $58.40
compared to $44.69 at the end of fiscal 2011. The closing price on Friday,
November 2, 2012 was $58.86.
NEW ACCOUNTING POLICIES
RECENTLY ISSUED
Classification and measurement of financial assets and financial liabilities
In November 2009, the International Accounting Standards Board (IASB)
published IFRS 9 "Financial Instruments". This new standard simplifies the
classification and measurement of financial assets set out in IAS 39
"Financial Instruments: Recognition and Measurement". Financial assets are to
be measured at amortized cost or fair value. They are to be measured at
amortized cost if the two following conditions are met:
a) the assets are held within a business model whose objective is to
collect contractual cash flows; and
b) the contractual cash flows are solely payments of principal and
interest on the outstanding principal.
All other financial assets are to be measured at fair value through net
earnings. The entity may, if certain conditions are met, elect to use the fair
value option instead of measurement at amortized cost. As well, the entity may
choose upon initial recognition to measure non-trading equity investments at
fair value through comprehensive income. Such a choice is irrevocable.
In October 2010, the IASB issued revisions to IFRS 9, adding the requirements
for classification and measurement of financial liabilities contained in IAS
39 and further points. For financial liabilities measured at fair value
through net earnings using the fair value option, the amount of change in a
liability's fair value attributable to changes in its credit risk is
recognized directly in other comprehensive income.
In December 2011, the IASB deferred the mandatory effective date of IFRS 9 to
fiscal years beginning on or after January 1, 2015. Early adoption is
permitted under certain conditions. An entity is not required to restate
comparative financial periods for its first-time application of IFRS 9, but
must comply with the new disclosure requirements.
Offsetting financial assets and financial liabilities
In December 2011, the IASB issued amendments to IAS 32 "Financial Instruments:
Presentation" clarifying the requirements for offsetting financial assets and
financial liabilities. These amendments shall be applied to annual periods
beginning on or after January 1, 2014.
The IASB also issued amendments to IFRS 7 "Financial Instruments: Disclosures"
improving disclosure on offsetting of financial assets and financial
liabilities. These amendments shall be applied to annual and interim periods
beginning on or after January 1, 2013.
Consolidated Financial Statements
In May 2011, the IASB published IFRS 10 "Consolidated Financial Statements"
which is a replacement of SIC-12 "Consolidation - Special Purpose Entities",
and certain parts of IAS 27 "Consolidated and Separate Financial Statements".
IFRS 10 uses control as the single basis for consolidation, irrespective of
the nature of the investee, employing the following factors to identify
control:
a) power over the investee;
b) exposure or rights to variable returns from involvement with the investee;
c) the ability to use power over the investee to affect the amount of the
investor's returns.
IFRS 10 shall be applied to fiscal years beginning on or after January 1,
2013. Early adoption is permitted under certain conditions.
Joint Arrangements
In May 2011, the IASB published IFRS 11 "Joint Arrangements" which supersedes
IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities -
Non-Monetary Contributions by Venturers". IFRS 11 requires that joint ventures
be accounted for using the equity method of accounting and eliminates the need
for proportionate consolidation. This new standard shall be applied to fiscal
years beginning on or after January 1, 2013. Early adoption is permitted under
certain conditions.
Disclosure of Interests in Other Entities
In May 2011, the IASB published IFRS 12 "Disclosure of Interests in Other
Entities" which requires that an entity disclose information on the nature of
and risks associated with its interests in other entities (i.e. subsidiaries,
joint arrangements, associates or unconsolidated structured entities) and the
effects of those interests on its financial statements. IFRS 12 shall be
applied to fiscal years beginning on or after January 1, 2013. Early adoption
is permitted under certain conditions. Entities may, without early adoption of
IFRS 12, choose to incorporate only some of the required disclosures in their
financial statements.
Fair Value Measurement
In May 2011, the IASB published IFRS 13 "Fair Value Measurement" to establish
a single framework for fair value measurement of financial and non-financial
items. IFRS 13 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. It also requires disclosure of
certain information on fair value measurements. IFRS 13 shall be applied to
fiscal years beginning on or after January 1, 2013. Early adoption is
permitted.
Employee Benefits
In June 2011, the IASB issued amendments to IAS 19 "Employee Benefits".
Changes in defined benefit obligations and plan assets are to be recognized in
comprehensive income when they occur, thus eliminating the corridor approach
and accelerating recognition of past service cost. Net interest is to be
recognized in net earnings and calculated using the discount rate by reference
to market yields at the end of the reporting period on high quality corporate
bonds. The actual return on plan assets minus net interest is to be recognized
in other comprehensive income. These amendments shall be applied to fiscal
years beginning on or after January 1, 2013. Early adoption is permitted.
Presentation of Financial Statements
In June 2011, the IASB issued amendments to IAS1 "Presentation of Financial
Statements". Items of other comprehensive income and the corresponding tax
expense are required to be grouped into those that will and will not
subsequently be reclassified through net earnings. These amendments shall be
applied to fiscal years beginning on or after July 1, 2012. Early adoption is
permitted.
At present, the Corporation is assessing the impact of the above-mentioned
amendments on its earnings, financial position and cash flows.
EVENT AFTER THE REPORTING PERIOD
On October 22, 2012, we announced a conditional agreement to dispose of our
food service operation, the Distagro division, which supplies restaurant and
gas station chains. The disposal for a consideration of approximately $15
million excluding working capital and a net gain after taxes of approximately
$7 million should take place in the next few weeks.
The transaction will be recorded in our financial statements as a discontinued
operation and the Corporation's consolidated income statements for current and
prior periods will be restated. Related Distagro sales and expenditures will
be recorded as a net loss on a discontinued operation under a separate income
statement section.
FORWARD-LOOKING INFORMATION
We have used, throughout this report, different statements that could, within
the context of regulations issued by the Canadian Securities Administrators,
be construed as being forward-looking information. In general, any statement
contained herein, which does not constitute a historical fact, may be deemed a
forward-looking statement. Expressions such as "continue", "drive",
"anticipate" and other similar expressions are generally indicative of
forward-looking statements. The forward-looking statements contained herein
are based upon certain assumptions regarding the Canadian food industry, the
general economy, our annual budget, as well as our 2013 action plan.
These forward-looking statements do not provide any guarantees as to the
future performance of the Corporation and are subject to potential risks,
known and unknown, as well as uncertainties that could cause the outcome to
differ significantly. An economic slowdown or recession, or the arrival of a
new competitor, are examples described under the "Risk Management" section of
the 2011 Annual Report which could have an impact on these statements. We
believe these statements to be reasonable and pertinent as at the date of
publication of this report and represent our expectations. The Corporation
does not intend to update any forward-looking statement contained herein,
except as required by applicable law.
IFRS AND NON-IFRS MEASUREMENTS
In addition to the IFRS earnings measurements provided, we have included
certain IFRS and non-IFRS earnings measurements. These measurements are
presented for information purposes only. They do not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to similar
measurements presented by other public companies.
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA is a measurement of earnings that excludes financial costs, taxes,
depreciation and amortization. It is an additional IFRS measurement and it is
presented separately in the condensed consolidated statements of income. We
believe that EBITDA is a measurement commonly used by readers of financial
statements to evaluate a company's operational cash-generating capacity and
ability to discharge its financial expenses.
ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS
PER SHARE
Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net earnings
per share are earnings measurements that exclude non-recurring items. They are
non-IFRS measurements. We believe that presenting earnings without
non-recurring items leaves readers of financial statements better informed as
to the current period and corresponding period's earnings, thus enabling them
to better evaluate the Corporation's performance and judge its future outlook.
OUTLOOK
We are very pleased with our strong fourth quarter and fiscal 2012
performance, resulting from our team's excellent execution, effective cost
control, and sustained investments in our network. While we expect competitive
activity will remain strong in 2013, we will continue((2) )to emphasize our
customer first strategies to drive((2)) our future growth.
CONFERENCE CALL
Financial analysts and institutional investors are invited to participate in a
conference call on the 2012 fourth quarter and fiscal year results at 10:00
a.m. (EST) on Wednesday, November 14, 2012. To access the conference call,
please dial 647 427-7450 or 1 888 231-8191. The media and investing public may
access this conference via a listen mode only.
((1)) See section on "IFRS and Non-IFRS Measurements"
((2)) See section on "Forward-looking Information"
Interim Condensed Consolidated Financial Statements
METRO INC.
September 29, 2012
Condensed consolidated statements of income
Periods ended September 29, 2012 and September 24, 2011
(Unaudited) (Millions of dollars, except for net earnings per share)
Fiscal Year Fiscal Year
2012 2011 2012 2011
(13 weeks) (12 weeks) (53 weeks) (52 weeks)
Sales 2,943.7 2,649.5 12,010.8 11,396.4
Cost of sales and
operating expenses
(note 5) (2,734.5) (2,477.5) (11,189.1) (10,652.0)
Share of an
associate's earnings 37.1 15.3 72.6 42.4
Closure expenses — (20.5) — (20.5)
Earnings before
financial costs,
taxes, depreciation
and amortization 246.3 166.8 894.3 766.3
Depreciation and
amortization (note 5) (41.8) (41.5) (183.9) (179.3)
Operating income 204.5 125.3 710.4 587.0
Financial costs, net
(note 5) (11.7) (9.4) (46.4) (41.5)
Earnings before
income taxes 192.8 115.9 664.0 545.5
Income taxes (note 6) (47.7) (31.5) (174.7) (152.8)
Net earnings 145.1 84.4 489.3 392.7
Attributable to:
Equity holders of the
parent 143.3 84.4 481.8 392.7
Non-controlling
interests 1.8 — 7.5 —
145.1 84.4 489.3 392.7
Net earnings per
share (Dollars) (note
7)
Basic 1.47 0.83 4.87 3.81
Fully diluted 1.46 0.83 4.84 3.79
See accompanying notes
Condensed consolidated statements of comprehensive income
Periods ended September 29, 2012 and September 24, 2011
(Unaudited) (Millions of dollars)
Fiscal Year Fiscal Year
2012 2011 2012 2011
(13 weeks) (12 weeks) (53 weeks) (52 weeks)
Net earnings 145.1 84.4 489.3 392.7
Other comprehensive
income (note 10)
Change in the fair
value of a
derivative
designated as cash
flow hedge — — — 0.4
Changes in defined
benefit plans
Actuarial losses
(16.1) (83.7) (65.6) (66.8)
Asset ceiling
effect 0.1 3.8 (2.7) 0.5
Minimum funding
requirement (4.2) (5.1) 0.1 (2.5)
Share of an
associate's other
comprehensive
income 0.1 — (0.6) 0.1
Corresponding
income taxes 5.4 21.7 19.0 17.4
Comprehensive income 130.4 21.1 439.5 341.8
Attributable to:
Equity holders of the
parent 128.6 21.1 432.0 341.8
Non-controlling
interests 1.8 — 7.5 —
130.4 21.1 439.5 341.8
See accompanying notes
Condensed consolidated statements of financial position
(Unaudited) (Millions of dollars)
As at As at As at
September 29, September 24, September 26,
2012 2011 2010
ASSETS
Current assets
Cash and cash equivalents 73.3 255.5 214.7
Accounts receivable 332.8 300.3 311.3
Inventories 784.4 728.3 699.3
Prepaid expenses 6.6 11.7 9.7
Current taxes 13.9 2.2 1.7
1,211.0 1,298.0 1,236.7
Assets held for sale 0.6 6.6 —
1,211.6 1,304.6 1,236.7
Non-current assets
Investment in an 324.5 258.7 220.9
associate
Other financial assets 21.6 17.0 15.8
Fixed assets 1,280.3 1,226.1 1,217.2
Investment properties 22.1 27.0 27.8
Intangible assets 373.1 297.2 304.0
Goodwill 1,859.5 1,649.1 1,603.7
Deferred taxes 56.3 45.8 48.8
Defined benefit assets 1.4 1.6 20.3
5,150.4 4,827.1 4,695.2
LIABILITIES AND EQUITY
Current liabilities
Bank loans 0.3 0.3 1.0
Accounts payable 1,086.4 1,061.1 1,064.1
Current taxes 60.5 46.2 50.8
Provisions 11.2 17.3 9.2
Current portion of debt 12.1 378.1 4.7
1,170.5 1,503.0 1,129.8
Non-current liabilities
Debt (note 8) 973.9 656.2 1,004.3
Defined benefit 156.9 132.2 97.0
liabilities
Provisions 3.1 4.0 4.8
Deferred taxes 147.7 119.0 124.5
Other liabilities 13.9 13.4 15.9
Non-controlling interest 139.3 — —
2,605.3 2,427.8 2,376.3
Equity
Capital stock (note 9) 664.6 682.6 702.1
Contributed surplus 4.6 3.8 8.2
Retained earnings 1,976.1 1,763.6 1,608.4
Accumulated other (101.0) (51.2) (0.3)
comprehensive income
(note 10)
Equity attributable to 2,544.3 2,398.8 2,318.4
equity holders of the
parent
Non-controlling interests 0.8 0.5 0.5
2,545.1 2,399.3 2,318.9
5,150.4 4,827.1 4,695.2
See accompanying notes
Condensed consolidated statements of changes in equity
Periods ended September 29, 2012 and September 24, 2011
(Unaudited) (Millions of dollars)
Attributable to the equity holders of the parent
Accumulated
other
Capital comprehensive Non-
stock Contributed Retained income controlling Total (53 weeks) (note 9) surplus earnings (note 10) Total interests equity
Balance as at September 24, 2011 682.6 3.8 1,763.6 (51.2) 2,398.8 0.5 2,399.3
Net earnings 481.8 481.8 7.5 489.3
Other comprehensive income (49.8) (49.8) (49.8)
Comprehensive income — — 481.8 (49.8) 432.0 7.5 439.5
Shares issued for cash 0.1 0.1 0.1
Stock options exercised 10.3 (2.3) 8.0 8.0
Shares redeemed (28.7) (28.7) (28.7)
Share redemption premium (186.3) (186.3) (186.3)
Acquisition of treasury shares (0.3) (0.3) (0.3)
Treasury share acquisition premium (2.3) (2.3) (2.3)
Released treasury shares 0.6 (0.6) — —
Share-based compensation cost 6.1 6.1 6.1
Performance share units cash settlement (0.1) (0.1) (0.1)
Dividends (82.9) (82.9) (82.9)
Share conversion fees (0.1) (0.1) (0.1)
Reclassification of non-controlling interest liability — (7.2) (7.2)
(18.0) 0.8 (269.3) — (286.5) (7.2) (293.7)
Balance as at
September 29,
2012 664.6 4.6 1,976.1 (101.0) 2,544.3 0.8 2,545.1
See accompanying
notes
Attributable to the equity holders of the parent
Accumulated
other
Capital comprehensive Non-
stock Contributed Retained income controlling Total (52 weeks) (note 9) surplus earnings (note 10) Total interests equity
Balance as at September 26, 2010 702.1 8.2 1,608.4 (0.3) 2,318.4 0.5 2,318.9
Net earnings 392.7 392.7 392.7
Other comprehensive income (50.9) (50.9) (50.9)
Comprehensive income — — 392.7 (50.9) 341.8 — 341.8
Stock options exercised 9.1 (2.1) 7.0 7.0
Shares redeemed (27.9) (27.9) (27.9)
Share redemption premium (160.4) (160.4) (160.4)
Acquisition of treasury shares (1.3) (1.3) (1.3)
Treasury shares acquisition premium (7.6) (7.6) (7.6)
Released treasury shares 0.6 (0.6) — —
Share-based compensation cost 6.3 6.3 6.3
Performance share units cash settlement (0.4) (0.4) (0.4)
Dividends (77.1) (77.1) (77.1)
(19.5) (4.4) (237.5) — (261.4) — (261.4)
Balance as at
September 24,
2011 682.6 3.8 1,763.6 (51.2) 2,398.8 0.5 2,399.3
See accompanying
notes
Condensed consolidated statements of cash flows
Periods ended September 29, 2012 and September 24, 2011
(Unaudited) (Millions of dollars)
Fiscal Year Fiscal Year
2012 2011 2012 2011
(13 weeks) (12 weeks) (53 weeks) (52 weeks)
Operating activities
Earnings before
income taxes 192.8 115.9 664.0 545.5
Non-cash items
Share of an
associate's
earnings (37.1) (15.3) (72.6) (42.4)
Closure expenses — 8.9 — 8.9
Depreciation and
amortization 41.8 41.5 183.9 179.3
Amortization of
deferred financing
costs 0.1 0.2 0.3 0.4
Loss (gain) on
disposal and
write-offs of fixed
and intangible
assets and
investment
properties (4.5) 12.5 (5.4) 10.0
Impairment losses
on fixed and
intangible assets
and investment
properties 2.1 12.0 10.3 14.8
Impairment loss
reversals on fixed
and intangible
assets (3.6) (5.5) (10.0) (5.5)
Share-based
compensation cost 2.0 1.4 6.1 6.3
Difference between
amounts paid for
employee benefits
and current period
cost (24.4) (5.1) (43.3) (14.9)
Financial costs,
net 11.7 9.4 46.4 41.5
180.9 175.9 779.7 743.9
Net change in
non-cash working
capital items (19.8) 45.1 (44.4) (7.1)
Interest paid (3.8) (2.4) (48.0) (45.1)
Income taxes paid (30.5) (35.3) (141.2) (149.3)
126.8 183.3 546.1 542.4
Investing activities
Business
acquisitions, net of
cash acquired
totalling $3.0 in
2012 (note 4) — (5.8) (146.8) (74.2)
Proceeds on disposal
of assets held for
sale — — 6.6 —
Net change in other
financial assets 0.1 — (4.6) 5.4
Dividends from an
associate 1.5 1.3 6.2 4.7
Additions to fixed
assets (85.9) (44.5) (210.5) (148.1)
Proceeds on disposal
of fixed assets 22.1 — 26.9 2.6
Proceeds on disposal
of investment
properties 1.9 2.8 3.5 2.8
Additions to
intangible assets and
goodwill (8.9) (6.8) (38.3) (19.9)
(69.2) (53.0) (357.0) (226.7)
Financing activities
Net change in bank
loans (1.2) (0.8) (15.5) (0.7)
Shares issued (note
9) 1.7 0.3 8.1 7.0
Shares redeemed (note
9) (2.5) (42.6) (215.0) (188.3)
Acquisition of
treasury shares (note
9) — (8.9) (2.6) (8.9)
Performance share
units cash settlement — — (0.1) (0.4)
Increase in debt 388.6 0.7 391.1 8.4
Repayment of debt (448.2) (2.8) (454.9) (12.1)
Use of non-current
provisions — (0.3) — (0.3)
Net change in other
liabilities (0.2) (1.4) 0.5 (2.5)
Dividends (20.9) (19.5) (82.9) (77.1)
(82.7) (75.3) (371.3) (274.9)
Net change in cash
and cash equivalents (25.1) 55.0 (182.2) 40.8
Cash and cash
equivalents —
beginning of period 98.4 200.5 255.5 214.7
Cash and cash
equivalents —
end of period 73.3 255.5 73.3 255.5
See accompanying
notes
Notes to interim condensed consolidated financial statements
Periods ended September 29, 2012 and September 24, 2011
(Unaudited) (Millions of dollars, unless otherwise indicated)
1. STATEMENT PRESENTATION
METRO INC. (the Corporation) is a company incorporated under the laws of
Quebec. The Corporation is one of Canada's leading food retailers and
distributors and operates a network of supermarkets, discount stores and
drugstores. Its head office is located at 11011 Maurice-Duplessis Blvd.,
Montreal, Quebec, Canada, H1C 1V6. Its various components constitute a single
operating segment.
As of September 25, 2011, the Corporation has prepared its financial
statements according to International Financial Reporting Standards (IFRS).
The unaudited interim condensed consolidated financial statements for the
13-week and 53-week periods ended September 29, 2012 have been prepared by
management in accordance with IAS 34 "Interim Financial Reporting" and IFRS 1
"First-time Adoption of International Financial Reporting Standards". They
should be read in conjunction with the audited annual consolidated financial
statements and accompanying notes which were prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP) presented in the
Corporation's 2011 Annual Report. Given the change in accounting standards,
they should be read in conjunction with the following information as well:
a) the unaudited interim condensed consolidated financial statements
for the 12-week period ended December 17, 2011, particularly the
explanations on the transition to IFRS on September 26, 2010 (note
2), significant accounting policies (note 3) and additional annual
information requirements under IFRS (note 13) since all of this
information is not included in this press release;
b) the explanations on the transition to IFRS on September 24, 2011
(note 2) and new accounting policies (note 3) in this press release.
Some of the corresponding figures have been reclassified in line with the
presentation adopted for the current fiscal year.
2. EXPLANATIONS ON THE TRANSITION TO IFRS
This note explains the principal adjustments made in converting the unaudited
consolidated financial statements from GAAP to IFRS, specifically the
consolidated statement of financial position as at September 24, 2011, as well
as the consolidated statements of income, consolidated statements of
comprehensive income and consolidated statements of cash flows for the 12-week
period and fiscal year ended September 24, 2011.
The adjustments regarding the consolidated statements of financial position as
at September 26, 2010 were disclosed in note 2 to the unaudited interim
condensed consolidated financial statements for the 12-week period ended
December 17, 2011 and are not reproduced in this note.
To facilitate comprehension, the adjustments are presented in two different
ways. In the first, the adjustments are itemized according to IFRS standards
and the three following categories: 1) optional exemptions under IFRS 1 that
apply only once at the time of changeover to IFRS, 2) recurring differences in
accounting treatment between GAAP and IFRS, 3) reclassifications for
presentation purposes that have no impact on net earnings. In the second, the
adjustments are itemized according to financial statement items.
TERMINOLOGY
There are differences between IFRS and GAAP terminology. The following table
lists the main differences:
_____________________________________________________________________
| GAAP terminology | IFRS terminology |
|__________________________________|__________________________________|
|Statement of earnings |Statement of income |
|__________________________________|__________________________________|
|Balance sheet |Statement of financial position |
|Long-term |Non-current |
|Investment in a company subject to|Investment in an associate |
|significant influence |Deferred taxes |
|Future income taxes |Defined benefit assets or |
|Accrued benefit assets or |liabilities |
|liabilities |Equity |
|Shareholders' equity | |
|__________________________________|__________________________________|
|Notes to financial statements |Notes to financial statements |
|Reportable segment |Operating segment |
|Variable interest entities |Special purpose entities |
|Assets or liabilities held for |Financial assets or liabilities at|
|trading |fair value |
| |through net earnings |
|Definite/indefinite useful lives |Finite/indefinite useful lives |
|Capital leases |Finance leases |
|Employee future benefits |Employee benefits |
|Projected benefit method prorated |Projected unit credit method |
|on services/ Accumulated benefit |Defined benefit obligations |
|method |Share-based payment transactions |
|Accrued benefit obligations | |
|Stock-based compensation and other| |
|stock-based payments | |
|__________________________________|__________________________________|
FIRST-TIME ADOPTION OF IFRS
At the date of transition, IFRS 1 authorizes certain exemptions from
retrospective application. The following optional exemptions were used:
Employee benefits
All actuarial gains and losses on the date of transition were recognized in
retained earnings.
Business combinations
The IFRS 3 "Business Combinations" was not applied to business combinations
that occurred before the transition date.
RECONCILIATION OF CONSOLIDATED FINANCIAL POSITION AND EQUITY
As at September 24, 2011
Adjustments
Accounting
Notes GAAP IFRS 1 treatment Presentation IFRS
ASSETS
Current assets
Cash and cash
equivalents 255.5 255.5
Accounts
receivable i 306.9 (6.6) 300.3
Inventories 728.3 728.3
Prepaid
expenses 11.7 11.7
Income taxes
receivable 2.2 2.2
Deferred taxes n 19.2 (19.2) —
1,323.8 — — (25.8) 1,298.0
Assets held for
sale i — 6.6 6.6
1,323.8 — — (19.2) 1,304.6
Non-current
assets
Investment in
an associate r — 1.3 257.4 258.7
Other financial
assets s 274.7 (0.3) (257.4) 17.0
Fixed assets t 1,321.3 (63.7) (31.5) 1,226.1
Investment
properties u — (4.5) 31.5 27.0
Intangible
assets d 308.5 (11.3) 297.2
Goodwill e 1,649.9 (0.8) 1,649.1
Deferred taxes q 1.2 11.2 14.2 19.2 45.8
Defined benefit
assets v 79.4 (47.3) (30.5) 1.6
4,958.8 (36.1) (95.6) — 4,827.1
LIABILITIES AND
EQUITY
Current
liabilities
Bank loans 0.3 0.3
Accounts
payable l 1,078.4 (17.3) 1,061.1
Income taxes
payable 46.2 46.2
Provisions l — 17.3 17.3
Deferred taxes n 11.2 (11.2) —
Current portion
of debt m 8.8 369.3 378.1
1,144.9 — — 358.1 1,503.0
Non-current
liabilities
Debt m 1,025.5 (369.3) 656.2
Defined benefit
liabilities v 44.0 38.1 50.1 132.2
Provisions l — 4.0 4.0
Deferred taxes q 158.5 (10.9) (39.8) 11.2 119.0
Other
liabilities e, l 17.9 (4.5) 13.4
2,390.8 27.2 10.3 (0.5) 2,427.8
Equity
Capital stock 682.6 682.6
Contributed
surplus h 1.7 2.1 3.8
Retained
earnings w 1,883.7 (63.3) (56.8) 1,763.6
Accumulated
other
comprehensive
income x — (51.2) (51.2)
Equity
attributable to
the equity
holders of the
parent 2,568.0 (63.3) (105.9) — 2,398.8
Non-controlling
interests e — 0.5 0.5
2,568.0 (63.3) (105.9) 0.5 2,399.3
4,958.8 (36.1) (95.6) — 4,827.1
RECONCILIATION OF CONSOLIDATED STATEMENTS OF INCOME
12-week period ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment Presentation IFRS
Sales o 2,656.7 (7.2) 2,649.5
Cost of
sales and
operating
expenses y (2,479.0) (5.7) 7.2 (2,477.5)
Share of an
associate's
earnings b 15.2 0.1 15.3
Closure
expenses c (20.2) (0.3) (20.5)
Earnings
before
financial
costs,
taxes,
depreciation
and
amortization 172.7 (5.9) — 166.8
Depreciation
and
amortization z (45.0) 3.5 (41.5)
Operating
income 127.7 (2.4) — 125.3
Financial
costs, net (9.4) (9.4)
Earnings
before
income taxes 118.3 (2.4) — 115.9
Income taxes aa (32.2) 0.7 (31.5)
Net earnings 86.1 (1.7) — 84.4
Net earnings
per share
(Dollars)
Basic 0.85 0.83
Fully
diluted 0.84 0.83
Fiscal year ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment Presentation IFRS
Sales o 11,430.6 (34.2) 11,396.4
Cost of
sales and
operating
expenses y (10,679.6) (6.6) 34.2 (10,652.0)
Share of an
associate's
earnings b 42.6 (0.2) 42.4
Closure
expenses c (20.2) (0.3) (20.5)
Earnings
before
financial
costs,
taxes,
depreciation
and
amortization 773.4 (7.1) — 766.3
Depreciation
and
amortization z (195.2) 15.9 (179.3)
Operating
income 578.2 8.8 — 587.0
Financial
costs, net (41.5) (41.5)
Earnings
before
income taxes 536.7 8.8 — 545.5
Income taxes aa (150.4) (2.4) (152.8)
Net earnings 386.3 6.4 — 392.7
Net earnings
per share
(Dollars)
Basic 3.75 3.81
Fully
diluted 3.73 3.79
RECONCILIATION OF CONSOLIDATED COMPREHENSIVE INCOME
12-week period ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment IFRS
Net earnings 86.1 (1.7) 84.4
Other comprehensive
income
Changes in defined
benefit plans
Actuarial losses f — (83.7) (83.7)
Asset ceiling effect f — 3.8 3.8
Minimum funding f — (5.1) (5.1)
requirement
Corresponding income f — 21.7 21.7
taxes
Comprehensive income 86.1 (65.0) 21.1
Fiscal year ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment IFRS
Net earnings 386.3 6.4 392.7
Other comprehensive
income
Change in the fair
value of a derivative
designated as cash flow
hedge 0.4 0.4
Changes in defined
benefit plans
Actuarial losses f — (66.8) (66.8)
Asset ceiling effect f — 0.5 0.5
Minimum funding f — (2.5) (2.5)
requirement
Share of an associate's b — 0.1 0.1
other comprehensive
income
Corresponding income f (0.1) 17.5 17.4
taxes
Comprehensive income 386.6 (44.8) 341.8
RECONCILIATION OF CONSOLIDATED CASH FLOWS
12-week period ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment Presentation IFRS
Operating activities
Net earnings 86.1 (1.7) 84.4
Income taxes aa, p — (0.7) 32.2 31.5
Earnings before income 86.1 (2.4) 32.2 115.9
taxes
Non-cash items
Share of an b (15.2) (0.1) (15.3)
associate's earnings
Closure costs 8.9 8.9
Depreciation and z 45.0 (3.5) 41.5
amortization
Amortization of 0.2 0.2
deferred financing
costs
Loss on disposal and c 12.2 0.3 12.5
write-offs of fixed
and intangible assets
and investment
properties
Deferred taxes p 16.8 (16.8) —
Impairment losses on d — 12.0 12.0
fixed and intangible
assets and investment
properties
Impairment loss d — (5.5) (5.5)
reversals on fixed
and intangible assets
Share-based 1.4 1.4
compensation cost
Difference between f (4.0) (1.1) (5.1)
amounts paid for
employee benefits and
current period cost
Financial costs, net p — 9.4 9.4
151.4 (0.3) 24.8 175.9
Net change in non-cash e, l, p 32.3 0.2 12.6 45.1
working capital items
Interest paid p — (2.4) (2.4)
Income taxes paid p — (35.3) (35.3)
183.7 (0.1) (0.3) 183.3
Investing activities
Business acquisitions e (5.9) 0.1 (5.8)
Dividends from an 1.3 1.3
associate
Additions to fixed (44.5) (44.5)
assets
Proceeds on disposal of k 2.8 (2.8) —
fixed assets
Proceeds on disposal of k — 2.8 2.8
investment properties
Additions to intangible (6.8) (6.8)
assets
(53.1) 0.1 — (53.0)
Financing activities
Net change in bank (0.8) (0.8)
loans
Shares issued 0.3 0.3
Shares redeemed (42.6) (42.6)
Acquisition of treasury (8.9) (8.9)
shares
Increase in debt 0.7 0.7
Repayment of debt (2.8) (2.8)
Use of non-current l — (0.3) (0.3)
provisions
Net change in other l (2.0) 0.6 (1.4)
liabilities
Dividends (19.5) (19.5)
(75.6) — 0.3 (75.3)
Net change in cash and 55.0 — — 55.0
cash equivalents
Cash and cash 200.5 200.5
equivalents —
beginning of period
Cash and cash 255.5 — — 255.5
equivalents — end
of period
Fiscal year ended September 24, 2011
Adjustments
Accounting
Notes GAAP treatment Presentation IFRS
Operating activities
Net earnings 386.3 6.4 392.7
Income taxes aa, p — 2.4 150.4 152.8
Earnings before income 386.3 8.8 150.4 545.5
taxes
Non-cash items
Share of an b (42.6) 0.2 (42.4)
associate's earnings
Closure costs 8.9 8.9
Depreciation and z 195.2 (15.9) 179.3
amortization
Amortization of 0.4 0.4
deferred financing
costs
Loss on disposal and c 9.7 0.3 10.0
write-offs of fixed
and intangible assets
and investment
properties
Interest income from p (0.1) 0.1 —
investments
Deferred taxes p 14.6 (14.6) —
Impairment losses on d — 14.8 14.8
fixed and intangible
assets and investment
properties
Impairment loss d — (5.5) (5.5)
reversals on fixed
and intangible assets
Share-based 6.3 6.3
compensation cost
Difference between f (11.1) (3.8) (14.9)
amounts paid for
employee benefits and
current fiscal year
cost
Financial costs, net p — 41.5 41.5
567.6 (1.1) 177.4 743.9
Net change in non-cash e, l, p (24.4) 0.8 16.5 (7.1)
working capital items
Interest paid p — (45.1) (45.1)
Income taxes paid p — (149.3) (149.3)
543.2 (0.3) (0.5) 542.4
Investing activities
Business acquisitions e (74.5) 0.3 (74.2)
Net change in other 5.4 5.4
financial assets
Dividends from an 4.7 4.7
associate
Additions to fixed (148.1) (148.1)
assets
Proceeds on disposal of k 5.4 (2.8) 2.6
fixed assets
Proceeds on disposal of k — 2.8 2.8
investment properties
Additions to intangible (19.9) (19.9)
assets
(227.0) 0.3 — (226.7)
Financing activities
Net change in bank (0.7) (0.7)
loans
Shares issued 7.0 7.0
Shares redeemed (188.3) (188.3)
Acquisition of treasury (8.9) (8.9)
shares
Performance share units (0.4) (0.4)
cash settlement
Increase in debt 8.4 8.4
Repayment of debt (12.1) (12.1)
Use of non-current l — (0.3) (0.3)
provisions
Net change in other l (3.3) 0.8 (2.5)
liabilities
Dividends (77.1) (77.1)
(275.4) — 0.5 (274.9)
Net change in cash and 40.8 — — 40.8
cash equivalents
Cash and cash 214.7 214.7
equivalents —
beginning of year
Cash and cash 255.5 — — 255.5
equivalents — end
of year
NOTES TO RECONCILIATIONS BY STANDARD
IFRS 1
a) Employee benefits
At the date of transition to IFRS, use of the exemption from retrospective
application, allowing all actuarial gains and losses to be recognized in
retained earnings, entailed the following adjustments:
Increase / (decrease) Notes September 24, 2011
Financial position:
Deferred tax assets q 11.2
Defined benefit assets v (47.3)
Defined benefit liabilities v 38.1
Deferred tax liabilities q (10.9)
Retained earnings w (63.3)
ACCOUNTING TREATMENT
b) Investment in an associate
Starting with the first quarter of its 2012 fiscal year, the publicly traded
associate in which the Corporation has an interest issued its first IFRS
consolidated financial statements. The Corporation's share of the adjustments
related to the conversion of the associate's consolidated financial statements
from GAAP to IFRS was made up of the following items:
Increase / (decrease) Notes September 24, 2011
Financial position:
Investment in an associate r 1.3
Deferred tax liabilities q 0.1
Retained earnings w 1.1
Accumulated other comprehensive income x 0.1
September 24, 2011
Increase / (decrease) 12 weeks 52 weeks
Net earnings:
Share in an associate's earnings 0.1 (0.2)
Comprehensive income:
Share in an associate's comprehensive income 0.1
c) Fixed assets
Under IFRS, the roof and HVAC are separate building components whose useful
life is less than the building's. The roof and HVAC are depreciated over 20
years and the rest of the building over 50 years. Under GAAP, all of the
building was depreciated over 40 years. This adjustment had the following
impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Fixed assets t 16.8
Deferred tax assets q (1.0)
Deferred tax liabilities q 3.4
Retained earnings w 12.4
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Depreciation and amortization z 0.1 1.1
Closure expenses (0.3) (0.3)
Income taxes aa 0.1 (0.2)
Cash flows:
Loss on disposal and write-offs
of fixed and
intangible assets and investment
properties 0.3 0.3
d) Impairment of assets
Under IFRS, impairment testing is conducted at the level of the asset itself,
a cash generating unit (CGU) or group of CGUs. A CGU is the smallest
identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Each
store is a separate CGU, and impairment testing is performed at the store
level. Impairment testing of warehouses is conducted at the level of the
different groups of CGUs. As for goodwill, certain private labels and support
assets that cannot be allocated wholly to a single CGU, impairment testing is
conducted at the level of the unique operating segment. Impairment testing of
investment properties, investment in an associate, banners, certain private
labels and loyalty programs is conducted at the level of the asset itself.
Under GAAP, impairment testing was done at the level of the asset itself, a
group of assets or a reporting unit. These adjustments had the following
impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Fixed assets t (80.5)
Investment properties u (4.5)
Intangible assets (11.3)
Deferred tax assets q 15.5
Deferred tax liabilities q (9.0)
Retained earnings w (71.8)
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Impairment losses y (12.0) (14.8)
Impairment loss reversals y 5.5 5.5
Depreciation and amortization z 3.4 14.8
Income taxes aa 0.8 (1.4)
e) Business combinations
Under IFRS, business combination-related costs are expensed when incurred.
Only restructuring costs for the acquired business that would have been
incurred even if there had been no business combination may be included in the
purchase price allocation. Non-controlling interests are presented in equity.
Under GAAP, business combination-related costs were considered in purchase
price allocation. Restructuring costs for the acquired business could be
included in the purchase price allocation. Non-controlling interests were
presented in other liabilities. These adjustments had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Goodwill (0.8)
Other financial assets s (0.3)
Deferred tax liabilities q (0.3)
Other liabilities (0.5)
Retained earnings w (0.8)
Non-controlling interests 0.5
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Operating expenses y (0.3) (1.1)
Income taxes aa 0.1 0.3
Cash flows:
Business acquisitions 0.1 0.3
Net change in non-cash working 0.2 0.8
capital items
f) Employee benefits
Actuarial gains or losses
Under IFRS, actuarial gains or losses are recognized in comprehensive income.
Under GAAP, they were deferred and amortized using the corridor method and
recognized in net earnings. This adjustment had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Deferred tax assets q (1.1)
Defined benefit assets v (23.2)
Defined benefit liabilities v 39.5
Deferred tax liabilities q (17.0)
Retained earnings w 3.0
Accumulated other comprehensive x (49.8)
income
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Employee benefit expense y 2.0 4.1
Income taxes aa (0.5) (1.1)
Comprehensive income:
Actuarial losses (83.7) (66.8)
Corresponding income taxes 21.3 17.0
Past service cost
Under IFRS, past service cost for vested benefits is recognized immediately in
net earnings. Under GAAP, past service cost was amortized on a straight-line
basis over the average remaining service period of active participants,
regardless of vesting. This adjustment had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Deferred tax assets q 1.7
Defined benefit liabilities v 10.6
Deferred tax liabilities q (0.9)
Retained earnings w (8.0)
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Employee benefit expense y (0.8) (0.2)
Income taxes aa 0.2
Asset ceiling and minimum funding requirement
Under IFRS, in the case of a surplus funded plan, defined benefit assets are
limited to the availability of future contribution reductions calculated on a
going concern and solvency basis. Furthermore, an additional liability could
be recorded when minimum funding requirements exceed economic benefits
available. Ceiling and minimum funding requirement effects are recognized for
each period and recorded in comprehensive income. Under GAAP, in the case of a
surplus funded plan, accrued benefit assets were limited to the availability
of future contribution reductions calculated on a going concern basis. Any
variances regarding the ceiling were recorded in net earnings. This adjustment
had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Defined benefit assets v (11.1)
Deferred tax liabilities q (3.0)
Retained earnings w (6.6)
Accumulated other comprehensive x (1.5)
income
September 24, 2011
Increase / (decrease) Notes 12 weeks 52 weeks
Net earnings:
Employee benefit expense y (0.1) (0.1)
Comprehensive income:
Asset ceiling effect 3.8 0.5
Minimum funding requirement (5.1) (2.5)
Corresponding income taxes 0.4 0.5
Post-employment benefits
Post-employment benefits plans consist of pension benefits, post-employment
life insurance, and post-employment health care. Certain plans provide
post-employment life insurance and health care benefits only to employees with
a minimum of 20 years of service and aged 65 at retirement. Under IFRS, vested
rights to these plans are recognized only when employees turn 45, if hired
before then. Under GAAP, recognition was from an employee's hiring date for
employees hired before they were 45 years old. As the recognition date is
later under IFRS than under GAAP, recognized obligations are less under IFRS.
This adjustment had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Defined benefit assets v 3.8
Deferred tax assets q (0.9)
Retained earnings w 2.9
g) Income taxes
Under IFRS, differences between the carrying amount and tax base of intangible
assets with indefinite useful lives have to be recognized as deferred tax
assets or liabilities based on applicable tax rates when the asset is to be
realized. Since these intangible assets are not amortized, they are deemed to
be realized upon their disposal and therefore the capital gains tax rate was
used. Under GAAP, the common practice was to use the corporate tax rate in
accounting for deferred taxes. This adjustment had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Deferred tax liabilities q (13.1)
Retained earnings w 13.1
h) Share-based payment
Under IFRS, when stock option awards vest gradually, each tranche is
considered as a separate award with recognition of the compensation expense
over the vesting term of each tranche. Under GAAP, all tranches were
considered as a single award with straight-line recognition of the
compensation expense over the total vesting term of all tranches. This
adjustment had the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Contributed surplus 2.1
Retained earnings w (2.1)
PRESENTATION
i) Assets held for sale
Under IFRS, assets held for sale are presented separately in the consolidated
statement of financial position. Under GAAP, they were included in accounts
receivable. The impact of this reclassification as at September 24, 2011 was
$6.6.
j) Investment in an associate
Under IFRS, investments accounted for using the equity method are presented
separately in the consolidated statement of financial position. Under GAAP,
they were included in investments and other assets. The impact of this
reclassification as at September 24, 2011 was $257.4 (notes r and s).
k) Investment properties
Under IFRS, investment properties are held for capital appreciation and to
earn rentals. They are not occupied by the owner for its ordinary activities.
They are presented separately in the consolidated statement of financial
position. Under GAAP, the concept of investment properties did not exist and
such land and buildings were included in fixed assets. This reclassification
has the following impacts:
Increase / (decrease) Notes September 24, 2011
Financial position:
Fixed assets t (31.5)
Investment properties u 31.5
September 24, 2011
Increase / (decrease) 12 weeks 52 weeks
Cash flows:
Proceeds on disposal of fixed (2.8) (2.8)
assets
Proceeds on disposal of 2.8 2.8
investment properties
l) Provisions Under IFRS, current and non-current provisions are presented separately in the consolidated statement of financial position. Under GAAP, they were included in accounts payable and other long-term liabilities. This reclassification had the following impacts:
Increase / (decrease) September 24, 2011
Financial position:
Current provisions 17.3
Accounts payable (17.3)
Non-current provisions 4.0
Other liabilities (4.0)
September 24, 2011
Increase / (decrease) 12 weeks 52 weeks
Cash flows:
Net change in non-cash working capital (0.3) (0.5)
items
Non-current provisions used (0.3) (0.3)
Net change in other liabilities 0.6 0.8
m) Debt
Under IFRS, financial liabilities at the closing date will mature within the
next 12 months are presented in current items in the statement of financial
position, even if a refinancing agreement is entered into after the closing
date and before the financial statements are authorized for issue. Under GAAP,
they were presented with the non-current items in the statement of financial
position. The impact of this reclassification as at September 24, 2011 was
$369.3 for the Credit A Facility.
n) Deferred taxes
Under IFRS, deferred tax assets and liabilities are classified as non-current
items in the consolidated statement of financial position. Under GAAP, the
current and non-current portions of deferred tax assets and liabilities were
presented separately. The impacts of this reclassification of current deferred
tax assets and liabilities as at September 24, 2011 were $19.2 and $11.2 (note
q).
o) Loyalty programs
Under IFRS, the cost of loyalty program points is recorded as a reduction in
sales. Under GAAP, it was recorded in the cost of sales and operating
expenses. The impact of this reclassification for the 12-week period ended
September 24, 2011 was $7.2 and $34.2 for the year ended September 24, 2011
(note y).
p) Interest and income taxes paid
Under IFRS, interest and income taxes paid are incorporated in the
consolidated statement of cash flows. Under GAAP, interest and income taxes
paid were presented as supplementary information. This reclassification had
the following impacts:
September 24, 2011
Increase / (decrease) 12 weeks 52 weeks
Cash flows:
Financial costs, net 9.4 41.5
Interest paid (2.4) (45.1)
Interest income from investments 0.1
Income taxes 32.2 150.4
Income taxes paid (35.3) (149.3)
Deferred income taxes (16.8) (14.6)
Net change in non-cash working capital items 12.9 17.0
SUMMARY OF FINANCIAL STATEMENT ADJUSTMENTS
FINANCIAL POSITION
q) Deferred tax assets and liabilities
Deferred tax assets
September 24, 2011
Accounting Increase / (decrease) Notes IFRS 1 treatment Presentation
Exemption from retrospective a 11.2 application
Fixed assets c (1.0)
Impairment of assets d 15.5
Employee benefits
Actuarial gains or losses f (1.1)
Past service cost f 1.7
Post-employment benefits f (0.9)
Reclassification of current n 19.2 portion
11.2 14.2 19.2
Deferred tax liabilities
September 24, 2011
Accounting Increase / (decrease) Notes IFRS 1 treatment Presentation
Exemption from retrospective (10.9) application a
Investment in an associate b 0.1
Fixed assets c 3.4
Impairment of assets d (9.0)
Business combinations e (0.3)
Employee benefits
Actuarial gains or losses f (17.0)
Past service cost f (0.9)
Asset ceiling and minimum (3.0) funding requirement f
Income taxes g (13.1)
Reclassification of current 11.2 portion n
(10.9) (39.8) 11.2
r) Investment in an associate
September 24, 2011
Accounting Increase / (decrease) Notes treatment Presentation
Share of an associate's IFRS conversion b 1.3
Reclassification of other financial j 257.4 assets
1.3 257.4
s) Other financial assets
September 24, 2011
Increase / (decrease) Accounting
Notes treatment Presentation
Business combinations e (0.3)
Reclassification of investment in an j (257.4) associate
(0.3) (257.4)
t) Fixed assets
September 24, 2011
Accounting Increase / (decrease) Notes treatment Presentation
Components c 16.8
Impairment of assets d (80.5)
Reclassification of investment properties k (31.5)
(63.7) (31.5)
u) Investment properties
September 24, 2011
Accounting Increase / (decrease) Notes treatment Presentation
Impairment of assets d (4.5)
Reclassification of fixed assets k 31.5
(4.5) 31.5
v) Defined benefit assets and liabilities
Defined benefit assets
September 24, 2011
Accounting Increase / (decrease) Notes IFRS 1 treatment
Exemption from retrospective application a (47.3)
Employee benefits
Actuarial losses f (23.2)
Asset ceiling and minimum funding (11.1) requirement f
Post-employment benefits f 3.8
(47.3) (30.5)
Defined benefit liabilities
September 24, 2011
Accounting Increase / (decrease) Notes IFRS 1 treatment
Exemption from retrospective application a 38.1
Employee benefits
Actuarial losses f 39.5
Past service cost f 10.6
38.1 50.1
w) Retained earnings
September 24, 2011
Accounting Increase / (decrease) Notes IFRS 1 treatment
Exemption from retrospective application a (63.3)
Investment in an associate b 1.1
Fixed assets c 12.4
Impairment of assets d (71.8)
Business combinations e (0.8)
Employee benefits
Actuarial gains or losses f 3.0
Past service cost f (8.0)
Asset ceiling and minimum funding (6.6) requirement f
Post-employment benefits f 2.9
Income taxes g 13.1
Share-based payment h (2.1)
(63.3) (56.8)
x) Accumulated other comprehensive income
September 24, 2011
Accounting Increase / (decrease) Notes treatment
Investment in an associate b 0.1
Employee benefits
Actuarial losses f (49.8)
Asset ceiling and minimum funding (1.5) requirement f
(51.2)
NET EARNINGS
y) Cost of sales and operating expenses
September 24, 2011
12 weeks 52 weeks
Increase / Accounting Accounting
(decrease) Notes treatment Presentation treatment Presentation
Impairment of
assets
Impairment (12.0) (14.8)
losses d
Impairment loss 5.5 5.5
reversals d
Business (0.3) (1.1)
combinations e
Employee benefits
Actuarial gains 2.0 4.1
or losses f
Past service (0.8) (0.2)
cost f
Asset ceiling (0.1) (0.1)
and minimum
funding
requirement f
Loyalty programs o 7.2 34.2
(5.7) 7.2 (6.6) 34.2
z) Depreciation and amortization
September 24, 2011
12 weeks 52 weeks
Accounting Accounting Decrease / (increase) Notes treatment treatment
Fixed assets c 0.1 1.1
Impairment of assets d 3.4 14.8
3.5 15.9
aa) Income taxes
September 24, 2011
12 weeks 52 weeks
Accounting Accounting Decrease / (increase) Notes treatment treatment
Fixed assets c 0.1 (0.2)
Impairment of assets d 0.8 (1.4)
Business combinations e 0.1 0.3
Employee benefits
Actuarial gains or losses f (0.5) (1.1)
Past service cost f 0.2
0.7 (2.4)
3. NEW ACCOUNTING POLICIES
RECENTLY ISSUED
Classification and measurement of financial assets and financial liabilities
In November 2009, the International Accounting Standards Board (IASB)
published IFRS 9 "Financial Instruments". This new standard simplifies the
classification and measurement of financial assets set out in IAS 39
"Financial Instruments: Recognition and Measurement". Financial assets are to
be measured at amortized cost or fair value. They are to be measured at
amortized cost if the two following conditions are met:
a) the assets are held within a business model whose objective is to collect
contractual cash flows; and
b) the contractual cash flows are solely payments of principal and interest on
the outstanding principal.
All other financial assets are to be measured at fair value through net
earnings. The entity may, if certain conditions are met, elect to use the fair
value option instead of measurement at amortized cost. As well, the entity may
choose upon initial recognition to measure non-trading equity investments at
fair value through comprehensive income. Such a choice is irrevocable.
In October 2010, the IASB issued revisions to IFRS 9, adding the requirements
for classification and measurement of financial liabilities contained in IAS
39 and further points. For financial liabilities measured at fair value
through net earnings using the fair value option, the amount of change in a
liability's fair value attributable to changes in its credit risk is
recognized directly in other comprehensive income.
In December 2011, the IASB deferred the mandatory effective date of IFRS 9 to
fiscal years beginning on or after January 1, 2015. Early adoption is
permitted under certain conditions. An entity is not required to restate
comparative financial periods for its first-time application of IFRS 9, but
must comply with the new disclosure requirements.
Offsetting financial assets and financial liabilities
In December 2011, the IASB issued amendments to IAS 32 "Financial Instruments:
Presentation" clarifying the requirements for offsetting financial assets and
financial liabilities. These amendments shall be applied to annual periods
beginning on or after January 1, 2014.
The IASB also issued amendments to IFRS 7 "Financial Instruments: Disclosures"
improving disclosure on offsetting of financial assets and financial
liabilities. These amendments shall be applied to annual and interim periods
beginning on or after January 1, 2013.
Consolidated Financial Statements
In May 2011, the IASB published IFRS 10 "Consolidated Financial Statements"
which is a replacement of SIC-12 "Consolidation-Special Purpose Entities", and
certain parts of IAS 27 "Consolidated and Separate Financial Statements". IFRS
10 uses control as the single basis for consolidation, irrespective of the
nature of the investee, employing the following factors to identify control:
a) power over the investee;
b) exposure or rights to variable returns from involvement with the investee;
c) the ability to use power over the investee to affect the amount of the
investor's returns.
IFRS 10 shall be applied to fiscal years beginning on or after January 1,
2013. Early adoption is permitted under certain conditions.
Joint Arrangements
In May 2011, the IASB published IFRS 11 "Joint Arrangements" which supersedes
IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities -
Non-Monetary Contributions by Venturers". IFRS 11 requires that joint ventures
be accounted for using the equity method of accounting and eliminates the need
for proportionate consolidation. This new standard shall be applied to fiscal
years beginning on or after January 1, 2013. Early adoption is permitted under
certain conditions.
Disclosure of Interests in Other Entities
In May 2011, the IASB published IFRS 12 "Disclosure of Interests in Other
Entities" which requires that an entity disclose information on the nature of
and risks associated with its interests in other entities (i.e. subsidiaries,
joint arrangements, associates or unconsolidated structured entities) and the
effects of those interests on its financial statements. IFRS 12 shall be
applied to fiscal years beginning on or after January 1, 2013. Early adoption
is permitted under certain conditions. Entities may, without early adoption of
IFRS 12, choose to incorporate only some of the required disclosures in their
financial statements.
Fair Value Measurement
In May 2011, the IASB published IFRS 13 "Fair Value Measurement" to establish
a single framework for fair value measurement of financial and non-financial
items. IFRS 13 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. It also requires disclosure of
certain information on fair value measurements. IFRS 13 shall be applied to
fiscal years beginning on or after January 1, 2013. Early adoption is
permitted.
Employee Benefits
In June 2011, the IASB issued amendments to IAS 19 "Employee Benefits".
Changes in defined benefit obligations and plan assets are to be recognized in
comprehensive income when they occur, thus eliminating the corridor approach
and accelerating recognition of past service cost. Net interest is to be
recognized in net earnings and calculated using the discount rate by reference
to market yields at the end of the reporting period on high quality corporate
bonds. The actual return on plan assets minus net interest is to be recognized
in other comprehensive income. These amendments shall be applied to fiscal
years beginning on or after January 1, 2013. Early adoption is permitted.
Presentation of Financial Statements
In June 2011, the IASB issued amendments to IAS 1 "Presentation of Financial
Statements". Items of other comprehensive income and the corresponding tax
expense are required to be grouped into those that will and will not
subsequently be reclassified through net earnings. These amendments shall be
applied to fiscal years beginning on or after July 1, 2012. Early adoption is
permitted.
At present, the Corporation is assessing the impact of the above-mentioned
amendments on its earnings, financial position and cash flows.
4. BUSINESS ACQUISITIONS
ADONIS AND PHOENICIA
On October 23, 2011, the Corporation acquired 55% of the net assets of Adonis,
a Montreal-area retailer with four existing stores and a fifth one under
construction that was opened in December 2011, as well as Phoenicia, an
importer and wholesaler with a distribution centre in Montreal and another in
the Greater Toronto Area. These businesses specialize in perishable and ethnic
food products. In the fourth quarter of 2012, an adjustment of $0.7 was
recorded for a final purchase price paid by the Corporation for the 55%
interest of $161.4 with a remaining balance of $11.6 to be paid. The
acquisition was accounted for using the purchase method. The Corporation
controls the acquired businesses and consolidated their earnings as of the
date of acquisition. The final total purchase price allocation was as follows:
Net assets acquired at their fair value
Cash 3.0
Accounts receivable 10.6
Inventories 24.3
Prepaid expenses 0.5
Fixed assets 11.9
Intangible assets
Finite useful life 10.7
Indefinite useful life 63.4
Goodwill 206.8
Bank loans (15.5)
Accounts payable (5.4)
Debt (10.4)
Deferred tax liabilities (6.4)
293.5
Cash consideration 149.8
Balance due 11.6
Total consideration for the Corporation's interest (55%) 161.4
Non-controlling interest (45%) 132.1
293.5
The non-controlling interest was measured at 45% of the fair value of the
acquired companies' net assets.
The goodwill from the acquisition corresponds to the growth potential of
Adonis stores and the broadening of the Corporation's customer base through
improvement of the ethnic food offering in all its stores. In the goodwill's
tax treatment, 53% of the goodwill will be treated as an eligible capital
property with related tax deductions and 47% as non-deductible.
Since their acquisition, the acquired businesses have increased Corporation
sales and net earnings by $236.6 and $16.0 respectively. If the acquisition
had taken place at the beginning of fiscal 2012, the acquired businesses would
have increased Corporation sales and net earnings by an additional amount of
$16.5 and $1.1 respectively.
Acquisition-related costs of $1.1 were recorded in cost of sales and operating
expenses.
AFFILIATED STORES
During fiscal 2011, the Company acquired 11 affiliated stores which it already
supplied. The total purchase price was $74.2 in cash. The acquisition of these
stores was accounted for using the purchase method. The stores' results have
been consolidated as of their respective acquisition dates. The final purchase
price allocation was as follows:
Net assets acquired at their fair value
Inventories 10.2
Fixed assets 12.7
Deferred tax assets 2.4
Goodwill 48.9
Cash consideration 74.2
The goodwill resulting from the acquisition corresponds to the additional
contribution expected from these stores. The tax treatment of the goodwill was
an eligible capital property with the related tax deductions.
Acquisition-related costs of $0.3 were recorded in cost of sales and operating
expenses.
5. ADDITIONAL INFORMATION ON THE NATURE OF EARNINGS COMPONENTS
Fiscal Year Fiscal Year
2012 2011 2012 2011
(13 weeks) (12 weeks) (53 weeks) (52 weeks)
Sales 2,943.7 2,649.5 12,010.8 11,396.4
Cost of sales and operating
expenses
Cost of sales (2,400.2) (2,181.0) (9,800.3) (9,333.6)
Wages and fringe benefits (161.8) (132.7) (662.1) (620.9)
Employee benefit expense (11.6) (8.2) (49.1) (45.7)
Rents, taxes and common (62.5) (56.6) (262.1) (253.8)
costs
Electricity and natural (28.3) (26.8) (114.0) (111.0)
gas
Impairment losses on (2.1) (12.0) (10.3) (14.8)
fixed, intangible assets
and investment properties
Impairment loss reversals 3.6 5.5 10.0 5.5
on fixed and intangible
assets
Other expenses (71.6) (65.7) (301.2) (277.7)
(2,734.5) (2,477.5) (11,189.1) (10,652.0)
Share of an associate's
earnings
Share of earnings 12.1 15.3 47.6 42.4
Dilution gain 25.0 — 25.0 —
37.1 15.3 72.6 42.4
Closure costs — (20.5) — (20.5)
Depreciation and
amortization
Fixed assets (34.1) (33.9) (150.5) (146.1)
Investment properties — — (0.1) (0.1)
Intangible assets (7.7) (7.6) (33.3) (33.1)
(41.8) (41.5) (183.9) (179.3)
Financing costs, net
Current interest (0.9) (0.2) (2.9) (1.1)
Non-current interest (11.2) (9.8) (45.1) (43.3)
Amortization of deferred (0.1) (0.2) (0.3) (0.4)
financing costs
Interest income 0.6 0.8 2.2 3.5
Passage of time (0.1) — (0.3) (0.2)
(11.7) (9.4) (46.4) (41.5)
Earnings before income 192.8 115.9 664.0 545.5
taxes
Impairment losses and impairment loss reversals recorded during the periods
were particularly on food stores where cash flows decreased or increased due
to local competition.
In August 2012, Alimentation Couche-Tard issued 7.3 million shares for net
proceeds of approximately $330 to finance part of its acquisition of Statoil
Fuel & Retail ASA. As the Corporation did not participate in this share issue,
its interest in Couche-Tard decreased from 11.6% to 11.1%. This dilution and
the Corporation's share in Couche-Tard's increased value as a result of the
share issue amount to a deemed disposition and deemed proceeds of disposition
of part of its investment for a net pre-tax gain of $25.0.
In the fourth quarter of 2011, non-recurring closure costs of $20.5 before
taxes, consisting of dismantling expenses, asset write-offs and others, were
incurred for the closure of the Montreal meat-processing plant and a grocery
warehouse in Toronto.
6. INCOME TAXES
The effective income tax rates were as follows:
Fiscal Year Fiscal Year
2012 2011 2012 2011 (Percentage) (13 weeks) (12 weeks) (53 weeks) (52 weeks)
Combined statutory income 27.2 28.8 27.2 28.8 tax rate
Changes
Impact on deferred taxes due to postponement of 1.5% future reductions of Ontario tax rate — — 0.5 —
Share of an associate's (2.9) (2.3) (1.8) (1.3) earnings
Others 0.4 0.7 0.4 0.5
24.7 27.2 26.3 28.0
7. NET EARNINGS PER SHARE
Basic net earnings per share and fully diluted net earnings per share were
calculated using the following number of shares:
Fiscal Year Fiscal Year
2012 2011 2012 2011 (Millions) (13 weeks) (12 weeks) (53 weeks) (52 weeks)
Weighted average number of
shares
outstanding - Basic 97.2 101.5 98.9 103.1
Dilutive effect under:
Stock option plan 0.4 0.4 0.4 0.4
Performance share unit 0.3 0.2 0.3 0.1
plan
Weighted average number of
shares
outstanding - Fully diluted 97.9 102.1 99.6 103.6
8. DEBT
In the first quarter of fiscal 2012, the Corporation obtained a new $600.0
five-year revolving credit facility and cancelled the unused $400.0 revolving
line of credit maturing on August 15, 2012. The Corporation used part of the
new credit facility to pay back the $369.3 Credit A Facility when it matured
on August 15, 2012. The new credit facility bears interest at rates that
fluctuate with changes in banker's acceptance rates and is unsecured. As at
September 29, 2012, $284.6 from the $600.0 revolving credit facility remained
undrawn.
9. CAPITAL STOCK
AUTHORIZED
Following the Annual General Meeting of Shareholders held on January 31, 2012,
the Corporation's share capital has been changed as follows:
-- each issued and outstanding Class B share carrying 16 votes per
share has been converted into one single vote Class A
Subordinate Share;
-- the Class B shares, along with the rights, privileges,
restrictions and conditions attached thereto, have been
eliminated;
-- the Class A Subordinate Shares have been redesignated as
"Common Shares" and constitute the Corporation's sole class of
equity shares carrying one vote per share;
-- First Preferred Shares have been redesignated as "Preferred
Shares".
OUTSTANDING
To facilitate reading, the Corporation has restated all prior periods
disclosed to reflect the share capital reorganization of January 31, 2012 as
if it had always existed. Therefore, only the Common Shares are disclosed in
this note. This restatement is possible since Class B Shares and Class A
Subordinate Shares were participating shares. The differences between these
classes of shares were primarily voting rights, the exclusivity of Class B
Shares held by Metro Merchants, and that Class B Shares were not listed on the
Toronto Stock Exchange.
The outstanding Common Shares were summarized as follows:
Common Shares
Number
(Thousands)
Balance as at September 26, 2010 105,069 702.1
Shares issued for cash 1 —
Shares redeemed for cash, excluding premium of (4,147) (27.9)
$160.4
Acquisition of treasury shares, excluding premium (190) (1.3)
of $7.6
Released treasury shares 94 0.6
Stock options exercised 257 9.1
Balance as at September 24, 2011 101,084 682.6
Shares issued for cash 2 0.1
Shares redeemed for cash, excluding premium of (4,213) (28.7)
$186.3
Acquisition of treasury shares, excluding premium (50) (0.3)
of $2.3
Released treasury shares 92 0.6
Stock options exercised 271 10.3
Balance as at September 29, 2012 97,186 664.6
STOCK OPTION PLAN
The outstanding options were summarized as follows:
Weighted
average
Number exercise price
(Thousands) (Dollars)
Balance as at September 26, 2010 1,777 32.29
Granted 290 47.06
Exercised (257) 27.30
Cancelled (34) 34.67
Balance as at September 24, 2011 1,776 35.38
Granted 293 53.76
Exercised (271) 29.77
Cancelled (115) 38.44
Balance as at September 29, 2012 1,683 39.27
The exercise prices of the outstanding options ranged from $24.73 to $58.41 as
at September 29, 2012 with expiration dates up to 2019 with 521 of those
options exercisable at a weighted average exercise price of $31.47.
The compensation expense for these options amounted to $0.8 for the 13-week
period ended September 29, 2012 (2011 - $0.6) and to $2.3 for fiscal 2012
(2011 - $2.5).
PERFORMANCE SHARE UNIT PLAN
The number of performance share units (PSUs) outstanding was as follows:
Number
(Units)
Balance as at September 26, 2010 308,904
Granted 110,756
Settled (104,153)
Cancelled (5,778)
Balance as at September 24, 2011 309,729
Granted 97,043
Settled (94,499)
Cancelled (28,096)
Balance as at September 29, 2012 284,177
The number of Corporation Common Shares held in trust for participants was as
follows:
Number
(Units)
Balance as at September 26, 2010 203,548
Acquisition of treasury shares 190,000
Released treasury shares (93,608)
Balance as at September 24, 2011 299,940
Acquisition of treasury shares 50,000
Released treasury shares (91,907)
Balance as at September 29, 2012 258,033
The compensation expense for the PSU plan amounted to $1.2 for the 13-week
period ended September 29, 2012 (2011 - $0.8) and to $3.8 for fiscal 2012
(2011 - $3.8).
10. ACCUMULATED OTHER COMPREHENSIVE INCOME
Defined benefit Share of an
Cash flow hedge plans associate Total
Balance as at (0.3) — — (0.3)
September 26, 2010
Change in the 0.4 0.4
fair value of a
derivative
designated as
cash flow hedge
Changes in
defined benefit
plans
Actuarial (66.8) (66.8)
losses
Asset ceiling 0.5 0.5
effect
Minimum funding (2.5) (2.5)
requirement
Share of an 0.1 0.1
associate's other
comprehensive
income
Corresponding (0.1) 17.5 17.4
income taxes
Balance as at — (51.3) 0.1 (51.2)
September 24, 2011
Changes in
defined benefit
plans
Actuarial (65.6) (65.6)
losses
Asset ceiling (2.7) (2.7)
effect
Minimum funding 0.1 0.1
requirement
Share of an (0.6) (0.6)
associate's other
comprehensive
income
Corresponding 18.9 0.1 19.0
income taxes
Balance as at — (100.6) (0.4) (101.0)
September 29, 2012
11. EVENT AFTER THE REPORTING PERIOD
On October 22, 2012, the Corporation announced a conditional agreement to
dispose of its food service operation, the Distagro division, which supplies
restaurant and gas station chains. The disposal for a consideration of
approximately $15 excluding working capital and a net gain after taxes of
approximately $7 should take place in the next few weeks.
The transaction will be recorded in the financial statements as a discontinued
operation and the Corporation's consolidated income statements for current and
prior periods will be restated. Related Distagro sales and expenditures will
be recorded as a net loss on a discontinued operation under a separate income
statement section.
12. APPROVAL OF FINANCIAL STATEMENTS
The condensed consolidated financial statements for the 13-week and 53-week
periods ended September 29, 2012 (including comparative figures) were approved
for issue by the Board of Directors on November 13, 2012.
François Thibault Senior Vice-President, Chief Financial Officer and
Treasurer Tel.: (514) 643-1003
METRO INC. Investor Relations Department Telephone: (514) 643-1055
E-mail: finance@metro.ca
METRO INC. corporate information and press releases are available on the
Internet at the following address: www.metro.ca
SOURCE: METRO INC.
To view this news release in HTML formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/November2012/14/c5974.html
CO: METRO INC.
ST: Quebec
NI: RET FBR FOD ERN DIV CONF
-0- Nov/14/2012 12:00 GMT
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