Empire Company Posts Q2 Results - Net Earnings before Capital Gains (Losses)
and Other Items of $72.1 Million (up 14.3 percent) and Net Earnings of $70.4
Million (up 7.3 percent)
STELLARTON, NS,
Second Quarter Highlights
- Revenue of $3.87 billion, up $146.8 million or 3.9 percent.
- Sobeys Inc. ("Sobeys") same-store sales increased 2.7 percent.
- Earnings before capital gains (losses) and other items of $72.1 million
($1.06 per share) compared to $63.1 million ($0.96 per share) last
year.
- Capital gains (losses) and other items, net of tax, of ($1.7) million
versus $2.5 million last year.
- Net earnings of $70.4 million ($1.03 per share) compared to $65.6
million ($1.00 per share) last year.
- Net debt to total capital of 27.5 percent, down from 28.6 percent at
the end of the last fiscal year and 34.5 percent at the end of Q2 last
year.
-------------
Note: As a result of the equity issue completed on April 24, 2009, Empire
had a diluted weighted average number of shares outstanding of 68.5
million in the second quarter ended October 31, 2009 compared to 65.7
million in the second quarter last year.
Commenting on the results,
CONSOLIDATED FINANCIAL OVERVIEW
Revenue
Consolidated revenue for the second quarter equalled
Real estate division revenue in the second quarter was
Investments and other operations recorded revenue of
Operating Income
Consolidated operating income in the second quarter was
The contributors to the change in consolidated operating income from the second quarter last year were as follows:
(i) Sobeys' operating income contribution to Empire in the second
quarter totalled $106.3 million, an increase of $11.7 million or
12.4 percent from the $94.6 million recorded in the second quarter
last year.
(ii) Residential property operating income contribution in the second
quarter was $7.3 million, a decrease of $0.2 million from the $7.5
million recorded in the second quarter last year.
(iii) Commercial property operating income for the quarter was
$6.3 million compared to $4.5 million in the second quarter last
fiscal year, an increase of $1.8 million. Crombie REIT contributed
$4.9 million to operating income in the second quarter versus a
$3.8 million contribution in the second quarter last year.
(iv) Investments and other operations (net of corporate expenses)
contributed operating income of $0.8 million in the second quarter
compared to $6.7 million in the second quarter last year. Equity
accounted earnings generated from the Company's 27.6 percent
interest in Wajax Income Fund ("Wajax") amounted to $1.9 million in
the second quarter versus $5.1 million in the second quarter last
year. Operating income generated from other operations (net of
corporate expenses) amounted to ($1.1) million compared to
$1.6 million in the second quarter last year.
The table below presents a summary of financial performance for the 13 and 26 weeks ended
Summary Table of Consolidated Financial Results
13 Weeks Ended 26 Weeks Ended
---------------------- ----------------------
($ in millions, except Oct. 31, Nov. 1, Oct. 31, Nov. 1,
per share information) 2009 2008(1) 2009 2008(1)
---------- ---------- ---------- -----------
Segmented revenue
Food retailing $ 3,807.0 $ 3,660.1 $ 7,713.7 $ 7,371.6
---------- ---------- ---------- -----------
Real estate
Residential 14.0 13.7 25.4 33.7
Commercial 4.7 4.0 8.4 8.9
---------- ---------- ---------- -----------
18.7 17.7 33.8 42.6
---------- ---------- ---------- -----------
Investments and
other operations 52.3 50.6 99.6 92.7
---------- ---------- ---------- -----------
3,878.0 3,728.4 7,847.1 7,506.9
Elimination (3.3) (0.5) (3.9) (0.8)
---------- ---------- ---------- -----------
$ 3,874.7 $ 3,727.9 $ 7,843.2 $ 7,506.1
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Segmented operating
income
Food retailing $ 106.3 $ 94.6 $ 227.9 $ 200.9
---------- ---------- ---------- -----------
Real estate
Residential 7.3 7.5 12.4 21.2
Crombie REIT(2) 4.9 3.8 9.8 8.4
Commercial 1.4 0.7 1.1 1.9
---------- ---------- ---------- -----------
13.6 12.0 23.3 31.5
---------- ---------- ---------- -----------
Investments and
other operations
Wajax(3) 1.9 5.1 4.6 10.6
Other investments
and operations,
net of corporate
expenses (1.1) 1.6 (4.9) (1.4)
---------- ---------- ---------- -----------
0.8 6.7 (0.3) 9.2
---------- ---------- ---------- -----------
$ 120.7 $ 113.3 $ 250.9 $ 241.6
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Earnings before capital
gains (losses) and
other items $ 72.1 $ 63.1 $ 144.3 $ 134.0
Capital gains (losses)
and other items, net
of tax (1.7) 2.5 15.8 7.3
---------- ---------- ---------- -----------
Net earnings $ 70.4 $ 65.6 $ 160.1 $ 141.3
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Basic earnings per share
Operating earnings $ 1.06 $ 0.96 $ 2.11 $ 2.04
Capital gains (losses)
and other items, net
of tax (0.03) 0.04 0.23 0.11
---------- ---------- ---------- -----------
Net earnings $ 1.03 $ 1.00 $ 2.34 $ 2.15
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Basic weighted average
number of shares
outstanding
(in millions)(4) 68.4 65.6 68.4 65.6
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Diluted earnings per
share
Operating earnings $ 1.06 $ 0.96 $ 2.11 $ 2.04
Capital gains (losses)
and other items, net
of tax (0.03) 0.04 0.23 0.11
---------- ---------- ---------- -----------
Net earnings $ 1.03 $ 1.00 $ 2.34 $ 2.15
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Diluted weighted average
number of shares
outstanding
(in millions)(4) 68.5 65.7 68.5 65.7
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Annualized dividends
per share $ 0.74 $ 0.70
---------- ----------
---------- ----------
----------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) 47.4 percent equity accounted interest in Crombie REIT.
(3) 27.6 percent equity accounted interest in Wajax.
(4) The increase in the weighted average number of shares outstanding
reflects an equity issue completed on April 24, 2009 which resulted
in a total of 2,713,000 shares being issued.
Additional segmented information is contained in note 12 of the unaudited consolidated financial statements for the second quarter of fiscal 2010 included in this release.
Interest Expense
Interest expense in the second quarter amounted to
Consolidated funded debt was
Income Taxes
The Company's effective income tax rate for the second quarter was 29.6 percent compared to 29.4 percent in the second quarter of fiscal 2009.
Earnings before Capital Gains (Losses) and Other Items
For the 13 weeks ended
Empire's per share earnings were impacted by an increase in the weighted average number of shares outstanding, to 68.5 million on a diluted basis from 65.7 million last year, as a result of an equity issue completed
The table below presents Empire's segmented earnings before capital gains (losses) and other items by division for the 13 and 26 weeks ended
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
------------------------- ----------------------------
Oct. 31, Nov. 1, ($) Oct. 31, Nov. 1, ($)
($ in millions) 2009 2008(1) Change 2009 2008(1) Change
-------------------------------------------------------------------------
Food retailing(2) $ 64.9 $ 53.9 $ 11.0 $134.1 $112.1 $ 22.0
Real estate 8.8 7.4 1.4 14.9 20.5 (5.6)
Investments &
other operations (1.6) 1.8 (3.4) (4.7) 1.4 (6.1)
-------------------------------------------------------------------------
Consolidated $ 72.1 $ 63.1 $ 9.0 $144.3 $134.0 $ 10.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) Includes the impact of depreciation and amortization related to the
privatization of Sobeys in June 2007.
Capital Gains (Losses) and Other Items
The Company recorded capital gains (losses) and other items, net of tax, of (
The table below presents capital gains (losses) and other items, net of tax, for the 13 and 26 weeks ended
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
------------------------- ----------------------------
Oct. 31, Nov. 1, ($) Oct. 31, Nov. 1, ($)
($ in millions) 2009 2008 Change 2009 2008 Change
-------------------------------------------------------------------------
Equity share of
Crombie REIT's
other expenses $ (3.1) $ - $ (3.1) $ (3.1) $ - $ (3.1)
Change in fair
value of Canadian
third-party
asset-backed
commercial paper 1.1 - 1.1 1.1 - 1.1
(Loss) gain on
sale of properties (0.1) 2.9 (3.0) 0.1 7.7 (7.6)
Foreign exchange
gains (losses) 0.4 (0.4) 0.8 0.7 (0.4) 1.1
Tax recovery
related to sale
of shares in
Hannaford Bros.
Co. - - - 17.0 - 17.0
-------------------------------------------------------------------------
$ (1.7) $ 2.5 $ (4.2) $ 15.8 $ 7.3 $ 8.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net Earnings
Consolidated net earnings in the second quarter equalled
The table below presents Empire's segmented net earnings for the 13 and 26 weeks ended
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
------------------------- ----------------------------
Oct. 31, Nov. 1, ($) Oct. 31, Nov. 1, ($)
($ in millions) 2009 2008(1) Change 2009 2008(1) Change
-------------------------------------------------------------------------
Food retailing(2) $ 66.0 $ 53.9 $ 12.1 $135.2 $112.1 $ 23.1
Real estate 5.7 10.3 (4.6) 11.8 27.4 (15.6)
Investments &
other operations (1.3) 1.4 (2.7) 13.1 1.8 11.3
-------------------------------------------------------------------------
Consolidated $ 70.4 $ 65.6 $ 4.8 $160.1 $141.3 $ 18.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) Includes the impact of depreciation and amortization related to the
privatization of Sobeys in June 2007.
QUARTERLY RESULTS OF OPERATIONS
The following table is a summary of selected consolidated financial information derived from the Company's unaudited interim period consolidated financial statements for each of the eight most recently completed quarters.
------------------------
Fiscal 2010
------------------------
Q2 Q1
(13 Weeks) (13 Weeks)
($ in millions, except Oct. 31, Aug. 1,
per share information) 2009 2009
-------------------------------------------------------------------------
Revenue $ 3,874.7 $ 3,968.5
Operating income 120.7 130.2
Operating earnings(2) 72.1 72.2
Capital gains (losses)
and other items, net
of tax (1.7) 17.5
-------------------------------------------------------------------------
Net earnings $ 70.4 $ 89.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
basic
Operating earnings $ 1.06 $ 1.05
Capital gains (losses)
and other items,
net of tax (0.03) 0.26
-------------------------------------------------------------------------
Net earnings $ 1.03 $ 1.31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic weighted average
number of shares
outstanding
(in millions)(3) 68.4 68.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
diluted
Operating earnings $ 1.06 $ 1.05
Capital gains (losses)
and other items,
net of tax (0.03) 0.26
-------------------------------------------------------------------------
Net earnings $ 1.03 $ 1.31
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted weighted average
number of shares
outstanding
(in millions)(3) 68.5 68.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
------------------------------------------------
Fiscal 2009(1)
------------------------------------------------
Q4 Q3 Q2 Q1
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
($ in millions, except May 2, Jan. 31, Nov. 1, Aug. 2,
per share information) 2009 2009 2008 2008
-------------------------------------------------------------------------
Revenue $ 3,709.0 $ 3,800.0 $ 3,727.9 $ 3,778.2
Operating income 109.0 115.6 113.3 128.3
Operating earnings(2) 62.6 65.0 63.1 70.9
Capital gains (losses)
and other items, net
of tax (0.8) (3.5) 2.5 4.8
-------------------------------------------------------------------------
Net earnings $ 61.8 $ 61.5 $ 65.6 $ 75.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
basic
Operating earnings $ 0.95 $ 0.99 $ 0.96 $ 1.08
Capital gains (losses)
and other items,
net of tax (0.01) (0.05) 0.04 0.07
-------------------------------------------------------------------------
Net earnings $ 0.94 $ 0.94 $ 1.00 $ 1.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic weighted average
number of shares
outstanding
(in millions)(3) 65.9 65.6 65.6 65.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
diluted
Operating earnings $ 0.95 $ 0.99 $ 0.96 $ 1.08
Capital gains (losses)
and other items,
net of tax (0.01) (0.05) 0.04 0.07
-------------------------------------------------------------------------
Net earnings $ 0.94 $ 0.94 $ 1.00 $ 1.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted weighted
average number of
shares outstanding
(in millions)(3) 66.0 65.7 65.7 65.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-----------------------
Fiscal 2008(1)
-----------------------
Q4 Q3
(13 Weeks) (13 Weeks)
($ in millions, except May 3, Feb. 2,
per share information) 2008 2008
-------------------------------------------------------------------------
Revenue $ 3,557.8 $ 3,503.0
Operating income 136.2 90.7
Operating earnings(2) 73.6 48.9
Capital gains (losses)
and other items,
net of tax (7.1) (0.3)
-------------------------------------------------------------------------
Net earnings $ 66.5 $ 48.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
basic
Operating earnings $ 1.12 $ 0.74
Capital gains (losses)
and other items,
net of tax (0.11) -
-------------------------------------------------------------------------
Net earnings $ 1.01 $ 0.74
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic weighted average
number of shares
outstanding
(in millions)(3) 65.6 65.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per share information,
diluted
Operating earnings $ 1.12 $ 0.74
Capital gains (losses)
and other items,
net of tax (0.11) -
-------------------------------------------------------------------------
Net earnings $ 1.01 $ 0.74
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted weighted
average number of
shares outstanding
(in millions)(3) 65.7 65.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) Operating earnings is earnings before capital gains (losses) and
other items.
(3) The increase in the weighted average number of shares outstanding
reflects an equity issue completed on April 24, 2009 which resulted
in a total of 2,713,000 shares being issued.
For the most recent eight quarters, the Company's financial results have continued to show improvement on a trailing four quarter basis compared to prior periods on the same basis. The Company does experience some seasonality, as evidenced in the results presented above, in particular, during the summer months and over holidays.
Consolidated sales and operating earnings growth have been influenced by the Company's investing activities, the competitive environment, general industry trends and by other risk factors as outlined in the fiscal 2009 annual MD&A, as contained on pages 23 - 60 of the Company's 2009 Annual Report.
Dividend Declaration
The Board of Directors declared a quarterly dividend of 18.5 cents per share on both the Non-Voting Class A shares and the Class B common shares that will be payable on
OPERATING PERFORMANCE BY DIVISION
FOOD RETAILING
Sobeys, Empire's wholly-owned food division, conducts business through more than 1,300 retail grocery stores (corporately owned and franchised) which operate in every province across
The table below presents Sobeys' contribution to Empire's consolidated sales, operating income and net earnings:
-------------------------------------------------------------------------
13 Weeks Ended Year-over-Year
------------------------- --------------------
Oct. 31, Nov. 1, ($) (%)
($ in millions) 2009 2008(1) Change Change
-------------------------------------------------------------------------
Sales $ 3,807.0 $ 3,660.1 $ 146.9 4.0%
Operating income(2) 106.3 94.6 11.7 12.4%
Capital gains and
other items 1.1 - 1.1 -
Net earnings(2) 66.0 53.9 12.1 22.4%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
26 Weeks Ended Year-over-Year
------------------------- --------------------
Oct. 31, Nov. 1, ($) (%)
($ in millions) 2009 2008(1) Change Change
-------------------------------------------------------------------------
Sales $ 7,713.7 $ 7,371.6 $ 342.1 4.6%
Operating income(2) 227.9 200.9 27.0 13.4%
Capital gains and
other items 1.1 - 1.1 -
Net earnings(2) 135.2 112.1 23.1 20.6%
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) Includes the impact of depreciation and amortization related to the
privatization of Sobeys in June 2007.
Sales
Sobeys' sales for the second quarter of fiscal 2010 were
Operating Income
Sobeys reported operating income of
After deducting the impact of depreciation and amortization related to the privatization, Sobeys' operating income contribution to Empire in the second quarter of fiscal 2010 was
Capital Gains and Other Items
For the second quarter and first half of fiscal 2010, Sobeys reported capital gains and other items, net of tax, of
Net Earnings
Sobeys recorded second quarter net earnings of
Deducting the impact of depreciation and amortization related to the privatization and the related tax impact, Sobeys contributed net earnings of
REAL ESTATE
Empire's real estate operations are focused on: (i) the development of food-anchored shopping plazas; (ii) ownership of retail and office properties through a 47.4 percent ownership interest in Crombie REIT; and (iii) residential land development through an ownership interest in Genstar.
Commercial real estate operations are conducted through ECL Properties Limited ("ECL") and its wholly-owned subsidiary, ECL Developments Limited ("ECL Developments"), while residential land development is primarily conducted through Genstar, which operates principally in Ontario and Western
Revenue
Real estate division revenue amounted to
Operating Income
Second quarter real estate division operating income was
The table below presents revenue, operating income, net earnings and funds from operations for the real estate division's commercial operations and residential operations:
------------------------- ----------------------------
13 Weeks Ended 26 Weeks Ended
-------------------------- ---------------------------
Oct. 31, Nov. 1, ($) Oct. 31, Nov. 1, ($)
($ in millions) 2009 2008 Change 2009 2008 Change
-------------------------------------------- ---------------------------
Revenue
Residential $ 14.0 $ 13.7 $ 0.3 $ 25.4 $ 33.7 $ (8.3)
Commercial 4.7 4.0 0.7 8.4 8.9 (0.5)
-------------------------------------------- ---------------------------
$ 18.7 $ 17.7 $ 1.0 $ 33.8 $ 42.6 $ (8.8)
-------------------------------------------- ---------------------------
-------------------------------------------- ---------------------------
Operating income
-------------------------------------------- ---------------------------
Residential $ 7.3 $ 7.5 $ (0.2) $ 12.4 $ 21.2 $ (8.8)
Crombie REIT(1) 4.9 3.8 1.1 9.8 8.4 1.4
Commercial 1.4 0.7 0.7 1.1 1.9 (0.8)
-------------------------------------------- ---------------------------
$ 13.6 $ 12.0 $ 1.6 $ 23.3 $ 31.5 $ (8.2)
-------------------------------------------- ---------------------------
-------------------------------------------- ---------------------------
Net earnings
-------------------------------------------- ---------------------------
Residential $ 5.1 $ 4.9 $ 0.2 $ 8.5 $ 14.5 $ (6.0)
Commercial 3.7 2.5 1.2 6.4 6.0 0.4
Capital gains
(losses), net
of tax (3.1) 2.9 (6.0) (3.1) 6.9 (10.0)
-------------------------------------------- ---------------------------
$ 5.7 $ 10.3 $ (4.6) $ 11.8 $ 27.4 $(15.6)
-------------------------------------------- ---------------------------
-------------------------------------------- ---------------------------
Funds from
operations(2)
-------------------------------------------- ---------------------------
Residential $ 5.1 $ 4.9 $ 0.2 $ 8.5 $ 14.5 $ (6.0)
Commercial 4.1 2.6 1.5 7.3 6.1 1.2
-------------------------------------------- ---------------------------
$ 9.2 $ 7.5 $ 1.7 $ 15.8 $ 20.6 $ (4.8)
-------------------------------------------- ---------------------------
-------------------------------------------- ---------------------------
(1) Equity accounted earnings in Crombie REIT during the period.
(2) Operating earnings plus depreciation and amortization.
Capital Gains (Losses)
There were capital gains (losses), net of tax, of (
Net Earnings
Real estate division net earnings contribution in the second quarter amounted to
Funds from Operations
Funds from operations in the second quarter of
INVESTMENTS AND OTHER OPERATIONS
The third component of Empire is its investments and other operations, consisting primarily of a 27.6 percent ownership interest in Wajax and wholly-owned Empire Theatres (the second largest movie exhibitor in
At
-------------------------------------------------------------------------
Oct. 31, 2009 May 2, 2009
----------------------------- ----------------------------
Unreali- Unreali-
Market Carrying zed Market Carrying zed
($ in millions) Value Value Gain Value Value Gain
-------------------------------------------------------------------------
Investment in
Crombie REIT $ 304.0 $ 14.1 $ 289.9 $ 175.6 $ (19.7) $ 195.3
Investment in
Wajax 85.8 30.4 55.4 71.3 31.0 40.3
Investment in
Genstar
U.S.(1) 11.9 11.9 - 7.5 7.5 -
Other
investments(2) 11.6 11.6 - 1.1 1.1 -
-------------------------------------------------------------------------
$ 413.3 $ 68.0 $ 345.3 $ 255.5 $ 19.9 $ 235.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nov. 1, 2008
----------------------------
Unreali-
Market Carrying zed
($ in millions) Value Value Gain
-------------------------------------------------------------------------
Investment in
Crombie REIT $ 202.1 $ 5.3 $ 196.8
Investment in
Wajax 109.9 32.7 77.2
Investment in
Genstar
U.S.(1) 0.1 0.1 -
Other
investments(2) 1.3 1.3 -
-------------------------------------------------------------------------
$ 313.4 $ 39.4 $ 274.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Assumes market value equals book value.
(2) Includes a $10.4 million Crombie REIT convertible unsecured
subordianted debenture.
The table below presents investments and other operations' financial
highlights for the 13 and 26 weeks ended October 31, 2009 compared to the same
period last year:
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
-------------------------- ---------------------------
Oct. 31, Nov. 1, ($) Oct. 31, Nov. 1, ($)
($ in millions) 2009 2008 Change 2009 2008 Change
-------------------------------------------- ---------------------------
Revenue $ 52.3 $ 50.6 $ 1.7 $ 99.6 $ 92.7 $ 6.9
-------------------------------------------------------------------------
Operating income
Wajax 1.9 5.1 (3.2) 4.6 10.6 (6.0)
Other operations,
net of corporate
expenses (1.1) 1.6 (2.7) (4.9) (1.4) (3.5)
-------------------------------------------------------------------------
Total operating
income 0.8 6.7 (5.9) (0.3) 9.2 (9.5)
-------------------------------------------------------------------------
Operating earnings (1.6) 1.8 (3.4) (4.7) 1.4 (6.1)
Capital gains
(losses) and other
items, net of
tax(1) 0.3 (0.4) 0.7 17.8 0.4 17.4
-------------------------------------------------------------------------
Net earnings $ (1.3) $ 1.4 $ (2.7) $ 13.1 $ 1.8 $ 11.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) First quarter fiscal 2010 capital gains and other items, net of tax,
includes $17.0 million related to the settlement of Canada Revenue
Agency tax reassessment relating to the fiscal 2001 sale of Hannaford
Bros. Co. shares.
Revenue
Investments and other operations' revenue, primarily generated by Empire Theatres, equalled
Operating Income
Investments and other operations (net of corporate expenses) contributed operating income of
Operating Earnings
Investments and other operations (net of corporate expenses) contributed operating earnings of (
Net Earnings
Investments and other operations (net of corporate expenses) contributed (
CONSOLIDATED FINANCIAL CONDITION
The Company's financial condition has improved since the start of the fiscal year as evidenced by the capital structure and key financial condition measures in the table below.
-------------------------------------------------------------------------
($ in millions, except per share and Oct. 31, May 2, Nov. 1,
ratio calculations) 2009 2009(1) 2008(1)
-------------------------------------------------------------------------
Shareholders' equity $ 2,827.0 $ 2,678.8 $ 2,466.8
Book value per share $ 41.23 $ 39.07 $ 37.46
Bank indebtedness $ 77.4 $ 45.9 $ 40.5
Long-term debt, including current
portion(2) $ 1,206.7 $ 1,257.0 $ 1,435.3
Funded debt to total capital 31.2% 32.7% 37.4%
Net debt to capital ratio(3) 27.5% 28.6% 34.5%
Debt to EBITDA(4) 1.60x 1.64x 1.87x
EBITDA to interest expense(4) 10.68x 9.84x 7.99x
Total assets $ 6,008.5 $ 5,891.1 $ 5,774.3
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated
financial statements for the second quarter ended October 31, 2009.
(2) Includes liabilities related to assets held for sale.
(3) Net debt to capital is net debt divided by total capital net of cash
and cash equivalents.
(4) Calculation uses trailing 12-month EBITDA and interest expense.
Total funded debt of
Liquidity and Capital Resources
The Company maintains the following sources of liquidity: (i) cash and cash equivalents on hand; (ii) unutilized bank credit facilities; and (iii) cash generated from operating activities. The Company anticipates that these sources of liquidity will be sufficient to meet expected cash outflows over the next year.
At
At the end of the second quarter of fiscal 2010, on a non-consolidated basis, Empire directly maintained authorized bank lines for operating, general and corporate purposes of
Included in the current portion of long-term debt and bank indebtedness is
The Company anticipates that the above mentioned in-place sources of liquidity will adequately meet its short-term and long-term financial requirements. The Company mitigates potential liquidity risk by ensuring its various sources of funds are diversified by term to maturity and source of credit.
The table below highlights major cash flow components for the 13 and 26 weeks ended
Major Cash Flow Components
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
------------------------- ------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
($ in millions) 2009 2008(1) 2009 2008(1)
-------------------------------------------------------------------------
Earnings for common
shareholders $ 70.4 $ 65.6 $ 160.1 $ 141.2
Items not affecting cash 86.7 78.6 176.1 163.8
-------------------------------------------------------------------------
157.1 144.2 336.2 305.0
Net change in non-cash
working capital (93.5) (27.8) (65.6) (38.9)
-------------------------------------------------------------------------
Cash flows from operating
activities 63.6 116.4 270.6 266.1
Cash flows used in
investing activities (135.2) (55.0) (237.8) (151.2)
Cash flows used in
financing activities (18.1) (57.7) (53.5) (132.2)
-------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents $ (89.7) $ 3.7 $ (20.7) $ (17.3)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Amounts have been restated as a result of a change in accounting
policy and a reclassification with respect to goodwill and intangible
assets. Please refer to note 1 of the unaudited consolidated financial
statements for the second quarter ended October 31, 2009.
Operating Activities
Second quarter cash flows from operating activities equalled
Investing Activities
Cash used in investing activities of
Cash used in investing activities for the second quarter of fiscal 2010 includes an investment of
The table below outlines the number of stores Sobeys invested in during the 13 and 26 weeks ended
Sobeys' Corporate and Franchised Store
Construction Activity
-------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
----------------------- ------------------------
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
Number of Stores 2009 2008 2009 2008
------------------------------------------------ ------------------------
Opened/Acquired/Relocated 10 11 24 22
Expanded 2 3 5 7
Rebannered/Redeveloped - 5 5 10
Closed 2 7 24 18
-------------------------------------------------------------------------
The following table shows Sobeys' square footage changes for the 13 and 52
weeks ended October 31, 2009 by type:
Sobeys' Square Footage Changes
(in thousands)
-------------------------------------------------------------------------
Q2 F10 vs. Q2 F10 vs.
Square Feet Q1 F10 Q2 F09
-------------------------------------------------------------------------
Opened 118 891
Relocated 6 79
Acquired - 33
Expanded 28 120
Closed (14) (737)
-------------------------------------------------------------------------
Net Change 138 387
-------------------------------------------------------------------------
-------------------------------------------------------------------------
At
Financing Activities
Financing activities during the second quarter of fiscal 2010 used
Accounting Policy Changes
The accounting policy changes are explained in note 1 to the unaudited consolidated financial statements included in this release.
Additional Information
Additional information about the Company has been filed electronically with various securities regulators in
Definition of Non-GAAP Measures
Certain measures included in this news release do not have a standardized meaning under Canadian Generally Accepted Accounting Principles ("GAAP") and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies. The Company includes these measures because it believes certain investors use these measures as a means of assessing Empire's financial performance.
Empire's definition of the non-GAAP terms are as follows: (i) operating earnings is net earnings before capital gains (losses) and other items; (ii) operating income or earnings before interest and taxes ("EBIT") is calculated as operating earnings before minority interest, interest expense and income taxes; (iii) earnings before interest, taxes, depreciation and amortization ("EBITDA") is calculated as EBIT plus depreciation and amortization; (iv) funded debt is all interest-bearing debt which includes bank loans, bankers' acceptances, long-term debt and debt related to assets held for sale; (v) total capital is calculated as funded debt plus equity; (vi) net debt is calculated as funded debt less cash and cash equivalents; (vii) funds from operations are calculated as operating earnings plus depreciation and amortization; and (viii) same-store sales are sales from stores in the same location in both reporting periods.
Forward-Looking Statements
This news release contains forward-looking statements which reflect management's expectations regarding the Company's objectives, plans, goals, strategies, future growth, financial condition, results of operations, cash flows, performance, business prospects and opportunities. All statements other than statements of historical facts included in this news release, including statements regarding the Company's objectives, plans, goals, strategies, future growth, financial condition, results of operations, cash flows, performance, business prospects and opportunities, may constitute forward-looking information. Expressions such as "anticipates", "expects", "believes", "estimates", "intends", "could", "may", "plans", "predicts", "projects", "will", "would", "foresees", "remain confident that" and other similar expressions or the negative of these terms are generally indicative of forward-looking statements.
These forward looking statements include the following items: (a) the Company's expectation that its sources of liquidity will be sufficient to meet expected cash outflows over the next year and its short-term and long-term financial instruments, both of which could be impacted by changing capital market conditions as well as uncertainties that could cause the outcome to differ significantly from expectation; and (b) the Company's intention to renew or replace its credit facilities which mature within the next twelve months, which could be impacted by the credit environment. These statements are based on Empire management's reasonable assumptions and beliefs in light of the information currently available to them. The forward-looking information contained in this news release is presented for the purpose of assisting the Company's security holders in understanding its financial position and results of operation as at and for the periods ended on the dates presented and the Company's strategic priorities and objectives and may not be appropriate for other purposes. By its very nature, forward-looking information requires the Company to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's predictions, forecasts, expectations or conclusions will not prove to be accurate, that the Company's assumptions may not be correct and that the Company's objectives, strategic goals and priorities will not be achieved. Although the Company believes that the predictions, forecasts, expectations or conclusions reflected in the forward-looking information are reasonable, it can give no assurance that such matters will prove to have been correct. Such forward-looking information is not fact but only reflections of management's estimates and expectations. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These factors include but are not limited to: changes in general industry, market and economic conditions, competition from existing and new competitors, energy prices, supply issues, inventory management, changes in demand due to seasonality of the business, interest rates, changes in laws and regulations, operating efficiencies and cost saving initiatives. In addition, these uncertainties and risks are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including the Risk Management section of the annual Management Discussion and Analysis included in the Company's Annual Report.
Empire cautions that the list of important factors is not exhaustive and other factors could also adversely affect our results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information. Forward-looking statements may not take into account the effect on the Company's business of transactions occurring after such statements have been made. For example, dispositions, acquisitions, asset write-downs or other changes announced or occurring after such statements are made may not be reflected in forward-looking statements. The forward-looking information in this news release reflects the Company's expectations as of
Conference Call Invitation
The Company will hold an analyst call on
About Empire
Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered in Stellarton, Nova Scotia. Empire's core businesses include food retailing and related real estate. With over
EMPIRE COMPANY LIMITED
----------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in millions)
October 31 May 2 November 1
2009 2009 2008
Unaudited Audited Unaudited
Restated Restated
(Note 1) (Note 1)
----------- ----------- -----------
ASSETS
Current
Cash and cash equivalents $ 210.9 $ 231.6 $ 174.1
Receivables 329.8 318.7 311.0
Loans and other receivables 78.7 55.8 63.7
Income taxes receivable 17.0 4.9 -
Inventories (Note 2) 891.8 842.8 875.5
Prepaid expenses 53.4 63.9 56.3
----------------------- -----------
1,581.6 1,517.7 1,480.6
Investments, at realizable value 11.6 1.1 1.3
Investments, at equity (realizable
value $401.7; May 2, 2009 - $254.4;
November 1, 2008 - $312.1) (Note 4) 56.4 18.8 38.1
Loans and other receivables 78.0 75.3 57.6
Other assets (Note 5) 86.8 89.0 98.1
Property and equipment 2,554.6 2,567.8 2,482.6
Assets held for sale 20.4 8.5 22.3
Intangibles 447.5 441.5 433.5
Goodwill 1,171.6 1,171.4 1,160.2
----------- ----------- -----------
$ 6,008.5 $ 5,891.1 $ 5,774.3
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
Current
Bank indebtedness $ 77.4 $ 45.9 $ 40.5
Accounts payable and accrued
liabilities 1,481.6 1,487.1 1,392.3
Income taxes payable - - 30.4
Future income taxes 42.3 40.5 33.6
Long-term debt due within one
year (Note 6) 366.3 133.0 59.7
Liabilities relating to assets
held for sale - - 6.2
----------- ----------- -----------
1,967.6 1,706.5 1,562.7
Long-term debt (Note 6) 840.4 1,124.0 1,369.4
Employee future benefits
obligation 121.5 118.4 114.3
Future income taxes 84.6 89.5 108.7
Other long-term liabilities 128.4 135.0 115.4
Minority interest 39.0 38.9 37.0
----------- ----------- -----------
3,181.5 3,212.3 3,307.5
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Capital stock 324.5 324.5 193.5
Contributed surplus 2.4 1.7 1.1
Retained earnings 2,535.8 2,401.1 2,300.7
Accumulated other comprehensive
loss (Note 7) (35.7) (48.5) (28.5)
----------- ----------- -----------
2,827.0 2,678.8 2,466.8
----------- ----------- -----------
$ 6,008.5 $ 5,891.1 $ 5,774.3
----------- ----------- -----------
----------- ----------- -----------
Contingent liabilities (Note 16)
Subsequent event (Note 19)
See accompanying notes to the unaudited interim period consolidated
financial statements.
EMPIRE COMPANY LIMITED
----------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
--------------------------------------------
26 WEEKS ENDED
--------------
(Unaudited, in millions)
October 31 November 1
2009 2008
Restated
(Note 1)
----------- -----------
Balance, beginning of period as previously
reported $ 2,405.8 $ 2,207.6
Adjustment due to implementation of new
accounting standard (Note 1) (4.7) (25.0)
----------- -----------
Balance, beginning of period as restated 2,401.1 2,182.6
Net earnings 160.1 141.3
Dividends
Preferred shares - (0.1)
Common shares (25.4) (23.1)
----------- -----------
Balance, end of period $ 2,535.8 $ 2,300.7
----------- -----------
----------- -----------
See accompanying notes to the unaudited interim period consolidated
financial statements.
EMPIRE COMPANY LIMITED
----------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
PERIODS ENDED
-------------
(Unaudited, in millions)
October 31 November 1 October 31 November 1
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Net earnings $ 70.4 $ 65.6 $ 160.1 $ 141.3
----------- ----------- ----------- -----------
Other comprehensive
income
Unrealized gains
(losses) on
available-for-sale
financial assets,
net of income taxes
of $0.1; $(0.1);
$0.1; $(0.1) 0.3 (0.3) 0.4 (0.3)
Unrealized gains
(losses) on
derivatives
designated as cash
flow hedges, net of
income taxes of $1.0;
$(3.2); $2.2; $(3.2) 2.2 (6.4) 4.2 (6.5)
Reclassification of
loss on derivative
instruments
designated as cash
flow hedges to
earnings, net of
income taxes of
$0.7; $0.3; $1.5;
$0.6 1.5 0.6 3.0 1.2
Share of comprehensive
income of entities
accounted using the
equity method, net of
income taxes of $0.7;
$(1.2); $3.8; $(0.7) 1.3 (2.3) 6.8 (1.4)
Foreign currency
translation
adjustment (1.0) - (1.6) -
----------- ----------- ----------- -----------
4.3 (8.4) 12.8 (7.0)
----------- ----------- ----------- -----------
Comprehensive income $ 74.7 $ 57.2 $ 172.9 $ 134.3
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See accompanying notes to the unaudited interim period consolidated
financial statements.
EMPIRE COMPANY LIMITED
----------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
PERIODS ENDED
-------------
(Unaudited, in millions, except per share amounts)
October 31 November 1 October 31 November 1
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Revenue $ 3,874.7 $ 3,727.9 $ 7,843.2 $ 7,506.1
Operating expenses
Cost of sales,
selling and
administrative
expenses 3,675.2 3,540.6 7,439.1 7,118.0
Depreciation and
amortization 85.8 83.0 167.8 165.6
----------- ----------- ----------- -----------
113.7 104.3 236.3 222.5
Investment income
(Note 8) 7.0 9.0 14.6 19.1
----------- ----------- ----------- -----------
Operating income 120.7 113.3 250.9 241.6
----------- ----------- ----------- -----------
Interest expense
Long-term debt 16.8 19.3 34.2 39.4
Short-term debt 1.2 1.1 2.0 2.1
----------- ----------- ----------- -----------
18.0 20.4 36.2 41.5
----------- ----------- ----------- -----------
102.7 92.9 214.7 200.1
Capital (losses) gains
and other items
(Note 9) (3.0) 2.0 (2.4) 8.1
----------- ----------- ----------- -----------
Earnings before income
taxes and minority
interest 99.7 94.9 212.3 208.2
----------- ----------- ----------- -----------
Income taxes (Note 10)
Current 38.9 36.2 57.8 73.4
Future (9.8) (9.4) (10.8) (13.1)
----------- ----------- ----------- -----------
29.1 26.8 47.0 60.3
----------- ----------- ----------- -----------
Earnings before
minority interest 70.6 68.1 165.3 147.9
Minority interest 0.2 2.5 5.2 6.6
----------- ----------- ----------- -----------
Net earnings $ 70.4 $ 65.6 $ 160.1 $ 141.3
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share
(Note 3)
Basic $ 1.03 $ 1.00 $ 2.34 $ 2.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted $ 1.03 $ 1.00 $ 2.34 $ 2.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number
of common shares
outstanding, in
millions
Basic 68.4 65.6 68.4 65.6
Diluted 68.5 65.7 68.5 65.7
See accompanying notes to the unaudited interim period consolidated
financial statements.
EMPIRE COMPANY LIMITED
----------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
PERIODS ENDED
-------------
(Unaudited, in millions)
October 31 November 1 October 31 November 1
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Operating Activities
Net earnings $ 70.4 $ 65.6 $ 160.1 $ 141.3
Items not affecting
cash (Note 11) 86.7 78.6 176.1 163.8
Preferred dividends - - - (0.1)
----------- ----------- ----------- -----------
157.1 144.2 336.2 305.0
Net change in non-
cash working
capital (93.5) (27.8) (65.6) (38.9)
----------- ----------- ----------- -----------
Cash flows from
operating activities 63.6 116.4 270.6 266.1
----------- ----------- ----------- -----------
Investing Activities
Net increase in
investments (10.4) - (46.0) -
Purchase of property
and equipment (112.1) (76.2) (213.8) (197.8)
Proceeds on disposal
of property and
equipment 6.9 28.9 64.5 57.9
Loans and other
receivables 1.7 6.0 (25.4) 4.9
Increase in other
assets (9.9) (8.3) (2.6) (4.4)
Business acquisitions
(Note 15) (11.4) (5.4) (14.5) (11.8)
----------- ----------- ----------- -----------
Cash flows used in
investing activities (135.2) (55.0) (237.8) (151.2)
----------- ----------- ----------- -----------
Financing Activities
Increase (decrease)
in bank indebtedness 7.6 (11.6) 31.5 (50.2)
Issue of long-term
debt 21.9 35.6 66.5 41.0
Repayment of long-
term debt (33.5) (65.4) (121.0) (90.4)
Minority interest (1.4) (3.8) (5.1) (7.2)
Repurchase of
preferred shares - (0.9) - (2.3)
Common dividends (12.7) (11.6) (25.4) (23.1)
----------- ----------- ----------- -----------
Cash flows used in
financing activities (18.1) (57.7) (53.5) (132.2)
----------- ----------- ----------- -----------
(Decrease) increase
in cash and cash
equivalents (89.7) 3.7 (20.7) (17.3)
Cash and cash
equivalents, beginning
of period 300.6 170.4 231.6 191.4
----------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period $ 210.9 $ 174.1 $ 210.9 $ 174.1
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See accompanying notes to the unaudited interim period consolidated
financial statements.
EMPIRE COMPANY LIMITED
----------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
OCTOBER 31, 2009
----------------
(Unaudited, in millions except per share amounts)
1. Summary of Significant Accounting Policies
The unaudited interim period consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and include the accounts of Empire Company Limited (the "Company"), all subsidiary companies, including 100% owned Sobeys Inc. ("Sobeys") and its subsidiaries and variable interest entities ("VIEs") which the Company is required to consolidate.
Interim consolidated financial statements
These interim consolidated financial statements do not include all of the disclosures included in the Company's annual consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended
Generally accepted accounting principles
The accounting standards and policies used in the preparation of these interim consolidated financial statements conform with those used in the Company's 2009 annual consolidated financial statements except as noted below:
Adopted during fiscal 2010
Goodwill and intangible assets
In February 2008, the CICA issued Section 3064, "Goodwill and
Intangible Assets", which replaced existing Section 3062, "Goodwill and
Other Intangible Assets", and Section 3450, "Research and Development".
The new standard provides guidance on the recognition, measurement,
presentation and disclosure of goodwill and intangible assets. As a
result of adopting Section 3064, Emerging Issues Committee Abstract 27,
"Revenues and Expenditures During the Pre-operating Period", no longer
applies. The Company has implemented these requirements effective for
the first quarter of fiscal 2010 retroactively with restatement of the
comparative period in accordance with the transitional provisions. The
initial impact under the new standard as at May 2, 2009 was a decrease
to prepaid expenses of $6.9, a decrease to other assets of $62.4, a
decrease in property and equipment of $33.7, an increase to intangibles
of $96.1, a decrease of future tax liabilities of $2.2 as well as a
reduction of retained earnings of $4.7. The impact of implementation on
the balance sheet as at November 1, 2008 was a decrease of prepaid
expenses of $4.3, a decrease to other assets of $60.3, a decrease in
property and equipment of $26.8, an increase to intangibles of $87.1, a
decrease in future tax liabilities of $1.3 and an opening retained
earnings reduction of $3.5. For the 13 and 26 weeks ended November 1,
2008, cost of sales, selling and administrative expenses decreased $2.6
and $6.0, depreciation and amortization expense increased $2.7 and $5.3
and income taxes increased $Nil and $0.2 respectively.
Adopted during fiscal 2009
Inventories
In June 2007, the CICA issued Section 3031, "Inventories", which
replaced section 3030 with the same title. The Company applied the
standard prospectively to opening inventory and retained earnings for
fiscal 2009 in accordance with the transitional provisions. The initial
impact of measuring inventories under the new standard using a
consistent cost formula for inventories with a similar nature and use
was a decrease to the carrying amount of opening inventories of $27.9
and a decrease to income taxes payable of $6.4. Opening retained
earnings was reduced by $21.5, equal to the change in opening
inventories, net of tax.
Future changes in accounting policies
Business combinations, consolidated financial statements and non-
controlling interests
In January 2009, the CICA issued three new accounting standards which
are based on the International Accounting Standards Board's
International Financial Reporting Standard 3, "Business Combinations".
Section 1582, "Business Combinations", which replaces Section 1581 with
the same title, aims to improve the relevance, reliability and
comparability of the information provided in financial statements about
business combinations. This section is to be applied prospectively to
business combinations for which the acquisition date is on or after
January 1, 2011 and assets and liabilities that arose from business
combinations that preceded the adoption of this standard should not be
adjusted upon adoption. Section 1601, "Consolidated Financial
Statements", and Section 1602, "Non-controlling Interests", replace
Section 1600, "Consolidated Financial Statements", and establish
standards for the preparation of consolidated financial statements and
for accounting for a non-controlling interest in a subsidiary in
consolidated financial statements subsequent to a business combination.
These standards apply to interim and annual consolidated financial
statements beginning on or after January 1, 2011. Earlier adoption of
all three standards is permitted as of the beginning of a fiscal year,
however if an entity chooses to early adopt, all three standards must
be adopted concurrently. The Company is currently evaluating the impact
of these new standards.
Financial Instruments - Disclosures
In June 2009, the CICA issued amendments to the existing Section 3862,
"Financial Instruments - Disclosures", to more closely align the
section with those required under IFRS. The amendments include enhanced
disclosure requirements relating to fair value measurements of
financial instruments and liquidity risks. These amendments apply for
annual financial statements with fiscal years ending after
September 30, 2009. The adoption of the amendments to Section 3862 are
not expected to have a material impact on the disclosures of the
Company.
2. Inventories
The cost of inventories recognized as an expense during the 13 and 26 weeks ended
3. Earnings Per Share
Earnings applicable to common shares is comprised of the following:
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Operating earnings $ 72.1 $ 63.1 $ 144.3 $ 134.0
Capital (losses)
gains and other items,
net of income taxes
of $(1.3); $(0.5);
$(18.2); $0.8 (1.7) 2.5 15.8 7.3
----------- ----------- ----------- -----------
Net earnings 70.4 65.6 160.1 141.3
Preferred share
dividends - - - (0.1)
----------- ----------- ----------- -----------
Earnings applicable to
common shares $ 70.4 $ 65.6 $ 160.1 $ 141.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Included in income taxes of $(18.2) for the 26 weeks ended October 31,
2009 is an income tax recovery of $17.0 (see Note 10).
Earnings per share is comprised of the following:
Operating earnings $ 1.06 $ 0.96 $ 2.11 $ 2.04
Net capital (losses)
gains and other items (0.03) 0.04 0.23 0.11
----------- ----------- ----------- -----------
Basic earnings per
share $ 1.03 $ 1.00 $ 2.34 $ 2.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Operating earnings $ 1.06 $ 0.96 $ 2.11 $ 2.04
Net capital (losses)
gains and other items (0.03) 0.04 0.23 0.11
----------- ----------- ----------- -----------
Diluted earnings per
share $ 1.03 $ 1.00 $ 2.34 $ 2.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
4. Investments, at Equity
October 31 May 2 November 1
2009 2009 2008
----------- ----------- -----------
Wajax Income Fund (27.6% interest) $ 30.4 $ 31.0 $ 32.7
Crombie REIT (47.4% interest) 14.1 (19.7) 5.3
U.S. residential real estate
partnerships 11.9 7.5 0.1
----------- ----------- -----------
$ 56.4 $ 18.8 $ 38.1
----------- ----------- -----------
----------- ----------- -----------
The Company's carrying value of its investment in Wajax Income Fund is as
follows:
October 31 November 1
2009 2008
----------- -----------
Balance, beginning of period $ 31.0 $ 31.6
Equity earnings 4.6 10.6
Share of comprehensive loss (0.1) (0.1)
Distributions received (5.1) (9.4)
----------- -----------
Balance, end of period $ 30.4 $ 32.7
----------- -----------
----------- -----------
The Company's carrying value of its investment in Crombie REIT is as
follows:
October 31 November 1
2009 2008
----------- -----------
Balance, beginning of period $ (19.7) $ 9.5
Equity earnings
Continuing operations 9.8 8.4
Other expenses (4.7) -
Share of comprehensive income 10.7 (2.0)
Distributions received (12.0) (10.6)
Interest acquired in Crombie REIT 30.0 -
----------- -----------
Balance, end of period $ 14.1 $ 5.3
----------- -----------
----------- -----------
On
5. Other Assets
Asset-backed commercial paper
Included in other assets is
Discount rates vary depending upon the credit rating of the restructured long-term floating rate notes. Discount rates have been estimated using Government of
On
6. Long-Term Debt
During the first quarter, the Company's credit facility (
On
7. Accumulated Other Comprehensive Loss
The following table provides further detail regarding the composition of accumulated other comprehensive loss:
October 31 May 2 November 1
2009 2009 2008
----------- ----------- -----------
Balance, beginning of period $ (48.5) $ (21.5) $ (21.5)
Other comprehensive income (loss)
for the period 12.8 (27.0) (7.0)
----------- ----------- -----------
Balance, end of period $ (35.7) $ (48.5) $ (28.5)
----------- ----------- -----------
----------- ----------- -----------
An estimated net loss of
8. Investment Income
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
----------- ----------- ----------- -----------
Dividend and interest
income $ 0.2 $ 0.1 $ 0.2 $ 0.1
Share of earnings of
entities accounted
using the equity
method 6.8 8.9 14.4 19.0
----------- ----------- ----------- -----------
$ 7.0 $ 9.0 $ 14.6 $ 19.1
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
9. Capital (Losses) Gains and Other Items
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
----------- ----------- ----------- -----------
Equity share of Crombie
REIT's other expenses $ (4.7) $ - $ (4.7) $ -
Change in fair value
of Canadian third-
party asset-backed
commercial paper
(Note 5) 1.3 - 1.3 -
(Loss) gain on sale of
property (0.1) 2.4 0.1 8.5
Foreign exchange
gains (losses) 0.5 (0.4) 0.9 (0.4)
----------- ----------- ----------- -----------
$ (3.0) $ 2.0 $ (2.4) $ 8.1
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
10. Income Taxes
The effective tax rate for the 26 weeks ended
11. Supplementary Cash Flow Information
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
a) Items not affecting
cash
Depreciation and
amortization $ 85.8 $ 83.0 $ 167.8 $ 165.6
Future income taxes (9.8) (9.4) (10.8) (13.1)
Gain on disposal of
assets (1.7) (1.8) (1.5) (6.2)
Amortization of other
assets 2.5 (2.2) 0.3 (3.7)
Equity in earnings of
other entities, net
of dividends received 6.7 1.6 7.4 1.2
Minority interest 0.2 2.5 5.2 6.6
Stock-based
compensation 0.3 - 0.7 0.6
Long-term lease
obligation 1.1 0.8 3.9 2.4
Employee future
benefits obligation 1.6 2.0 3.1 3.6
Rationalization
costs (Note 18) - 2.1 - 6.8
----------- ----------- ----------- -----------
$ 86.7 $ 78.6 $ 176.1 $ 163.8
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
b) Other cash flow
information
Interest paid $ 24.3 $ 22.2 $ 34.2 $ 34.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income taxes paid $ 28.0 $ 12.5 $ 73.4 $ 49.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
12. Segmented Information
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
----------- ----------- ----------- -----------
Segmented revenue
Food retailing $ 3,807.0 $ 3,660.1 $ 7,713.7 $ 7,371.6
----------- ----------- ----------- -----------
Real estate
Residential 14.0 13.7 25.4 33.7
Commercial 4.7 4.0 8.4 8.9
----------- ----------- ----------- -----------
18.7 17.7 33.8 42.6
----------- ----------- ----------- -----------
Investment and other
operations 52.3 50.6 99.6 92.7
----------- ----------- ----------- -----------
3,878.0 3,728.4 7,847.1 7,506.9
Elimination of inter-
segment (3.3) (0.5) (3.9) (0.8)
----------- ----------- ----------- -----------
$ 3,874.7 $ 3,727.9 $ 7,843.2 $ 7,506.1
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Segmented operating
income
Food retailing $ 106.3 $ 94.6 $ 227.9 $ 200.9
Real estate
Residential 7.3 7.5 12.4 21.2
Crombie REIT 4.9 3.8 9.8 8.4
Commercial 1.4 0.7 1.1 1.9
Investment and other
operations
Wajax Income Fund 1.9 5.1 4.6 10.6
Other operations,
net of corporate
expenses (1.1) 1.6 (4.9) (1.4)
----------- ----------- ----------- -----------
$ 120.7 $ 113.3 $ 250.9 $ 241.6
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
October 31 May 2 November 1
2009 2009 2008
Restated Restated
(Note 1) (Note 1)
----------- ----------- -----------
Identifiable assets
Food retailing (excluding goodwill) $ 4,292.6 $ 4,272.1 $ 4,144.1
Goodwill 1,130.8 1,130.6 1,120.1
----------- ----------- -----------
Food retailing 5,423.4 5,402.7 5,264.2
Real estate 295.9 223.1 254.1
Investment and other operations
(including goodwill of $40.8;
May 2, 2009 - $40.8;
November 1, 2008 - $40.1) 289.2 265.3 256.0
----------- ----------- -----------
$ 6,008.5 $ 5,891.1 $ 5,774.3
----------- ----------- -----------
----------- ----------- -----------
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Depreciation and
amortization
Food retailing $ 80.5 $ 77.6 $ 157.2 $ 153.9
Real estate 0.4 0.1 0.9 0.1
Investment and other
operations 4.9 5.3 9.7 11.6
----------- ----------- ----------- -----------
$ 85.8 $ 83.0 $ 167.8 $ 165.6
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
Restated Restated
(Note 1) (Note 1)
----------- ----------- ----------- -----------
Capital expenditures
Food retailing $ 96.8 $ 71.8 $ 176.6 $ 176.9
Real estate 12.9 4.1 30.4 17.1
Investment and other
operations 2.4 0.3 6.8 3.8
----------- ----------- ----------- -----------
$ 112.1 $ 76.2 $ 213.8 $ 197.8
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
13. Related-Party Transaction
On
14. Employee Future Benefits
During the 13 and 26 weeks ended
15. Business Acquisitions
Sobeys acquires franchisee and non-franchisee stores and prescription files. The results of these acquisitions have been included in the consolidated financial results of the Company, and were accounted for through the use of the purchase method. As illustrated in the table below, the acquisition of certain franchisee and non-franchisee stores resulted in the acquisition of intangible assets. The method of amortization of limited life intangibles is on a straight-line basis over its estimated useful life.
2009 2008 2009 2008
(13 weeks) (13 weeks) (26 weeks) (26 weeks)
----------- ----------- ----------- -----------
Stores
------
Inventory $ 2.2 $ 1.5 $ 3.2 $ 3.2
Property and equipment 1.3 0.3 3.0 1.4
Intangibles 3.7 0.5 3.7 2.9
Goodwill - 0.3 0.2 1.2
Other (liabilities)
assets (1.6) 0.1 (1.4) 0.4
----------- ----------- ----------- -----------
Cash consideration $ 5.6 $ 2.7 $ 8.7 $ 9.1
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Prescription files
------------------
Intangibles $ 5.8 $ 2.7 $ 5.8 $ 2.7
----------- ----------- ----------- -----------
Cash consideration $ 5.8 $ 2.7 $ 5.8 $ 2.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
16. Contingent Liabilities
In the ordinary course of business, the Company is subject to ongoing audits by tax authorities. While the Company believes that its tax filing positions are appropriate and supportable, from time to time certain matters are reviewed and challenged by the tax authorities.
There are various claims and litigation, which the Company is involved with, arising out of the ordinary course of business operations. The Company's management does not consider the exposure to such litigation to be material, although this cannot be predicted with certainty.
17. Stock-Based Compensation
Deferred share units
Members of the Board of Directors may elect to receive all or any portion of their fees in deferred share units ("DSUs") in lieu of cash. The number of DSUs received is determined by the market value of the Company's Non-Voting Class A shares on each director's fee payment date. Additional DSUs are received as dividend equivalents. DSUs cannot be redeemed for cash until the holder is no longer a director of the Company. The redemption value of a DSU equals the market value of an Empire Company Limited Non-Voting Class A share at the time of the redemption. On an ongoing basis, the Company values the DSU obligation at the current market value of a corresponding number of Non-Voting Class A shares and records any increase in the DSU obligation as an operating expense. At
Stock option plan
During the first quarter, the Company granted an additional 162,399 options under the stock option plan for employees of the Company whereby options are granted to purchase Non-Voting Class A Shares. These options allow holders to purchase Non-Voting Class A Shares at
The compensation cost relating to the 13 and 26 weeks ended
Expected life 5.25 years
Risk-free interest rate 2.625%
Expected volatility 22.8%
Dividend yield 1.60%
Phantom performance option plan
In
18. Business Rationalization Costs
For the 13 and 26 weeks ended
19. Subsequent Event
On
20. Comparative Figures
Comparative figures have been reclassified, where necessary, to reflect the current period's presentation.
For further information: Paul V. Beesley, Executive Vice President and Chief Financial Officer, (902) 755-4440
Share this article