George Weston Limited - Fourth Quarter and Fiscal Year Ended December 31, 2011(1).

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Mar 01, 2012, 15:41 ET

TORONTO, March 1, 2012 /CNW/ - George Weston Limited (TSX: WN) ("GWL") and its subsidiaries (collectively the "Company") today is announcing its unaudited results for the fourth quarter of 2011 and the release of its 2011 Annual Report.

The Company's 2011 Annual Report to Shareholders, including the Company's audited annual consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the fiscal year ended December 31, 2011, is available in the Investor Centre section of the Company's website at www.weston.ca and has been filed with the System for Electronic Document Analysis and Retrieval ("SEDAR") and will be available at www.sedar.com.

CONSOLIDATED RESULTS OF OPERATIONS
George Weston Limited's fourth quarter 2011 adjusted basic net earnings per common share⁽²⁾ were $1.01 compared to $0.92 in the same period in 2010, an increase of $0.09 or 9.8%. The increase in the fourth quarter of 2011 was due to improved operating results at Weston Foods and a decrease in income tax expense, partially offset by a decline in adjusted operating income⁽²⁾ at Loblaw Companies Limited ("Loblaw") compared to the same period in 2010.


(unaudited)	12 Weeks Ended					52 Weeks Ended
($ millions except where otherwise indicated)		Dec. 31, 2011		Dec. 31, 2010	Change			Dec. 31, 2011		Dec. 31, 2010	Change
Sales	$	7,636	$	7,375	3.5%		$	32,376	$	31,847	1.7%
Operating income	$	352	$	367	(4.1)%		$	1,609	$	1,568	2.6%
Operating margin		4.6%		5.0%				5.0%		4.9%
Adjusted operating income⁽²⁾	$	373	$	378	(1.3)%		$	1,700	$	1,659	2.5%
Adjusted operating margin⁽²⁾		4.9%		5.1%				5.3%		5.2%
Net interest expense and other financing charges	$	108	$	87	24.1%		$	366	$	471	(22.3)%
Income taxes	$	71	$	108	(34.3)%		$	324	$	394	(17.8)%
Net earnings attributable to shareholders of the Company	$	109	$	111	(1.8)%		$	635	$	452	40.5%
Basic net earnings per common share ($)	$	0.77	$	0.78	(1.3)%		$	4.58	$	3.16	44.9%
Adjusted basic net earnings per common share ($)⁽²⁾	$	1.01	$	0.92	9.8%		$	4.86	$	4.09	18.8%
Adjusted EBITDA⁽²⁾	$	558	$	545	2.4%		$	2,459	$	2,342	5.0%
Adjusted EBITDA margin⁽²⁾		7.3%		7.4%				7.6%		7.4%

Due to the Company's transition to International Financial Reporting Standards ("IFRS" or "GAAP"), effective the first quarter of 2011, all comparative figures that were previously reported in accordance with Canadian Generally Accepted Accounting Principles have been restated to conform with IFRS.

As previously noted in the first quarter of 2011, the Company is using three new non-GAAP financial measures: adjusted basic net earnings per common share⁽²⁾, adjusted operating income⁽²⁾ and adjusted EBITDA⁽²⁾. Under GAAP, certain expenses and income must be recognized that are not necessarily reflective of the Company's underlying operating performance. These non-GAAP financial measures exclude the impact of certain items and are used internally when analyzing consolidated and segment underlying operating performance. These non-GAAP financial measures are also helpful in assessing underlying operating performance on a consistent basis. Adjusted operating income⁽²⁾ and adjusted EBITDA⁽²⁾ exclude restructuring and other charges, a commodity derivatives fair value adjustment at Weston Foods, foreign currency translation gains and losses, the impact of share-based compensation net of equity derivatives, net insurance proceeds recorded by Weston Foods, a gain related to the sale of a portion of a Loblaw property, and the effect of certain prior years' commodity tax matters at Loblaw. Adjusted basic net earnings per common share⁽²⁾also exclude the impact of the accounting for Weston Holdings Limited's ("WHL"), a subsidiary of GWL, forward sale agreement for 9.6 million Loblaw common shares and the impact of federal tax legislation changes. See the "Non-GAAP Financial Measures" section of this News Release for more information on the Company's non-GAAP financial measures.

OPERATING SEGMENTS

Weston Foods

(unaudited)	12 Weeks Ended				52 Weeks Ended
($ millions)		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Sales	$	410	$	386	$	1,772	$	1,624
Operating income	$	57	$	57	$	208	$	285
Operating margin		13.9%		14.8%		11.7%		17.5%
Adjusted operating income⁽²⁾	$	56	$	48	$	265	$	235
Adjusted operating margin⁽²⁾		13.7%		12.4%		15.0%		14.5%
Adjusted EBITDA⁽²⁾	$	71	$	63	$	325	$	290
Adjusted EBITDA margin⁽²⁾		17.3%		16.3%		18.3%		17.9%

For the fourth quarter of 2011, Weston Foods sales of $410 million increased by 6.2% and volumes decreased by 0.5% when compared to the same period in 2010. The acquisition of ACE Bakery Ltd. ("ACE") on November 1, 2010 positively impacted sales growth and volume by approximately 1.4% and 0.8%, respectively, and foreign currency translation positively impacted sales growth by approximately 0.4%. Excluding the acquisition and foreign currency translation, sales increased 4.4% due to the positive impact of higher pricing across key product categories of 5.7%, partially offset by a decrease in volume of 1.3%. Price increases were implemented during 2011 to mitigate higher commodity and fuel costs.

Weston Foods operating income was $57 million in the fourth quarters of both 2011 and 2010 and operating margin was 13.9% compared to 14.8% in the same period in 2010.

Weston Foods adjusted operating income⁽²⁾ was $56 million in the fourth quarter of 2011 compared to $48 million in the same period in 2010, an increase of 16.7%. Weston Foods adjusted operating margin⁽²⁾ was 13.7% compared to 12.4% in the same period in 2010. Adjusted operating income⁽²⁾ was positively impacted by sales growth mainly as a result of higher pricing in key product categories and the acquisition of ACE, and by the benefits realized from productivity improvements and other cost reduction initiatives, which were partially offset by significant increases in commodity and fuel costs in the fourth quarter of 2011, when compared to the same period in 2010. Weston Foods adjusted operating income⁽²⁾excludes restructuring and other charges, a commodity derivatives fair value adjustment, the impact of share-based compensation net of equity derivatives and net insurance proceeds. See the "Non-GAAP Financial Measures" section of this News Release for more information on the Company's non-GAAP financial measures.

Loblaw

(unaudited)		12 Weeks Ended			52 Weeks Ended
($ millions)		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Sales	$	7,373	$	7,119	$	31,250	$	30,836
Operating income	$	313	$	322	$	1,376	$	1,339
Operating margin		4.2%		4.5%		4.4%		4.3%
Adjusted operating income⁽²⁾	$	317	$	330	$	1,435	$	1,424
Adjusted operating margin⁽²⁾		4.3%		4.6%		4.6%		4.6%
Adjusted EBITDA⁽²⁾	$	487	$	482	$	2,134	$	2,052
Adjusted EBITDA margin⁽²⁾		6.6%		6.8%		6.8%		6.7%

Loblaw sales in the fourth quarter of 2011 increased by 3.6% to $7.4 billion compared to $7.1 billion in the same period in 2010. Same-store retail sales growth was 2.5% (2010 - 1.6% decline), with an extra day of store operations having a positive impact estimated to be between 0.8% and 1.0%. Sales growth in food was strong, partially driven by the extra day of operations, sales growth in drugstore was flat, gas bar sales growth was strong, sales in general merchandise, excluding apparel, declined marginally and sales growth in apparel was strong. Loblaw experienced moderate average quarterly internal food price inflation during the fourth quarter of 2011, which was lower than the average quarterly national food price inflation of 5.2% (2010 - 1.5%) as measured by "The Consumer Price Index for Food Purchased from Stores". Loblaw sales in the fourth quarter of 2011 were also positively impacted by an increase in Financial Services segment revenue driven by increased credit card transaction values resulting in higher interchange fee income when compared to the same period in 2010 and higher PC Telecom revenues as a result of the new Mobile Shop kiosk launch in the fourth quarter of 2011.

Loblaw operating income in the fourth quarter of 2011 decreased by 2.8% to $313 million from $322 million in the same period in 2010 and operating margin was 4.2% compared to 4.5% in the same period in 2010.

Loblaw adjusted operating income⁽²⁾ was $317 million in the fourth quarter of 2011 compared to $330 million in the same period in 2010, a decrease of 3.9%. Loblaw adjusted operating margin⁽²⁾ was 4.3% compared to 4.6% in the same period in 2010. The decreases in adjusted operating income⁽²⁾ and adjusted operating margin⁽²⁾ were mainly attributable to costs associated with the transition of certain Ontario conventional stores to the more cost effective and efficient operating terms under collective agreements ratified in 2010, the incremental costs related to the investments in information technology ("IT") and supply chain, increases in promotional pricing programs and transportation costs, start up costs associated with the launch of Loblaw's Joe Fresh brand in the United States, the decrease in operating income from Loblaw's Financial Services segment and fixed asset impairment charges net of recoveries, partially offset by growth and performance of Loblaw's franchisees, continued labour, supply chain and other operating cost efficiencies, improved control label profitability and improved shrink. Loblaw adjusted operating income⁽²⁾ excludes other charges and the impact of share-based compensation net of equity derivatives. See the "Non-GAAP Financial Measures" section of this News Release for more information on the Company's non-GAAP financial measures.

NET INTEREST EXPENSE AND OTHER FINANCING CHARGES
Net interest expense and other financing charges in the fourth quarter of 2011 increased by $21 million to $108 million compared to the same period in 2010, primarily due to a $21 million decrease in non-cash income related to the fair value adjustment of WHL's forward sale agreement for 9.6 million Loblaw common shares. Excluding the impact of the fair value adjustment, net interest expense and other financing charges in the fourth quarter of 2011 was flat when compared to the same period in 2010 reflecting the net impact of a decrease in interest expense due to the repayment by Loblaw of its $350 million; 6.50% Medium Term Note in the first quarter of 2011, offset by lower short term interest income due to lower cash and short term investment balances.

INCOME TAXES
The fourth quarter 2011 effective income tax rate decreased to 29.1% from 38.6% in the same period in 2010. The decrease in the effective income tax rate in the fourth quarter of 2011 compared to the same period in 2010 was primarily due to the decrease in non-deductible items, a decrease in income tax expense related to certain prior year income tax matters and reductions in the federal and Ontario statutory income tax rates. Changes in federal tax legislation that resulted in the elimination of the Company's ability to deduct costs associated with cash-settled stock options resulted in a charge of $18 million which was recorded in income tax expense in the fourth quarter of 2010.

OUTLOOK⁽¹⁾
This outlook reflects the underlying operating performance of the Company's operating segments as discussed below.

In 2012, Weston Foods expects to deliver modest sales growth with market conditions expected to remain challenging. Higher commodity and input costs are expected in the first half of 2012, and these higher costs will put increased pressure on operating margins when compared to the same period in 2011. Weston Foods is continuing its efforts to reduce costs through improved efficiencies and ongoing cost reduction initiatives in an effort to achieve full year operating margins in line with those in 2011.

In 2012, Loblaw will continue to strengthen its customer proposition, while the completion of its IT systems will remain a key priority. Loblaw expects there to be incremental costs related to net investments in IT and supply chain in 2012, as well as continued investment in its customer proposition. Loblaw does not expect its operations to cover these incremental costs, and as a result, anticipates full year 2012 operating income to be down year-over-year, with more pressure in the first half of the year.

For 2012, George Weston Limited anticipates adjusted basic net earnings per common share⁽²⁾ to be down year-over-year, primarily due to the impact of the incremental costs at Loblaw, as discussed above.

FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects and opportunities. These forward-looking statements are typically identified by words such as "anticipate", "expect", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may" and "should" and similar expressions, as they relate to the Company and its management. In this News Release, forward-looking statements include the Company's expectation that:

For Weston Foods:

sales growth will be modest;
commodity and input costs in the first half of 2012 will be higher than the comparable period in 2011, putting increased pressure on operating margins in the first half of 2012 when compared to the same period in 2011; and
efforts will be made to achieve full year operating margins in line with those in 2011.

For Loblaw:

there will be incremental costs related to investments in IT and supply chain in 2012, as well as continued investment in Loblaw's customer proposition; and
full year 2012 operating income will be down year-over-year, with more pressure in the first half of the year, as a result of Loblaw's expectation that operations will not cover the incremental costs related to the investments in IT and supply chain and its customer proposition.

For the Company:

full year 2012 adjusted basic net earnings per common share⁽²⁾ will be down year-over-year.

These forward-looking statements are not historical facts but reflect the Company's current expectations concerning future results and events. They also reflect management's current assumptions regarding the risks and uncertainties referred to below and their respective impact on the Company. In addition, the Company's expectation with regard to Weston Foods' operating margins in 2012 is based in part on the assumptions that there will be no significant unanticipated increase in the price of commodities and other input costs that Weston Foods will not be able to offset through pricing, improved efficiencies and ongoing cost reduction initiatives. The Company's expectation with regard to Loblaw's operating income in 2012 is based in part on the assumptions that Loblaw achieves its plan to increase net retail square footage by 1% and there are no unexpected adverse events or costs related to Loblaw's investments in IT and supply chain. The Company's expectation with regard to adjusted basic net earnings per common share⁽²⁾in 2012 is based in part on the assumption that interest rates, tax rates and the Company's ownership interest in Loblaw will be similar to those in 2011.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including, but not limited to:

failure to realize sales growth, anticipated cost savings or operating efficiencies from the Company's major initiatives, including investments in the Company's IT systems and the Company's IT systems implementation, or unanticipated results from these initiatives;
the inability of the Company's IT infrastructure to support the requirements of the Company's business;
unanticipated results associated with the Company's strategic initiatives and the impact of acquisitions or dispositions of businesses on the Company's future revenues and earnings;
heightened competition, whether from current competitors or new entrants to the marketplace;
changes in economic conditions including the rate of inflation or deflation, changes in interest and foreign currency exchange rates and changes in derivative and commodity prices;
public health events;
risks associated with product defects, food safety and product handling;
failure to achieve desired results in labour negotiations, including the terms of future collective bargaining agreements which could lead to work stoppages;
the inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory and to control shrink;
failure by the Company to maintain appropriate records to support its compliance with accounting, tax or legal rules, regulations and policies;
the availability and increased costs relating to raw materials, ingredients and utilities, including electricity and fuel;
failure of the Company's franchised stores to perform as expected;
reliance on the performance and retention of third-party service providers including those associated with the Company's supply chain and apparel business;
supply and quality control issues with vendors;
changes to or failure to comply with laws and regulations affecting the Company and its businesses, including changes to the regulation of generic prescription drug prices and the reduction of reimbursement under public drug benefit plans and the elimination or reduction of professional allowances paid by drug manufacturers;
changes in the Company's income, commodity, other tax and regulatory liabilities including changes in tax laws, regulations or future assessments;
any requirement of the Company to make contributions to its registered funded defined benefit pension plans or the multi-employer pension plans in which it participates in excess of those currently contemplated;
the risk that the Company would experience a financial loss if its counterparties fail to meet their obligations in accordance with the terms and conditions of their contracts with the Company; and
the inability of the Company to collect on its credit card receivables.

This is not an exhaustive list of the factors that may affect the Company's forward-looking statements. Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including Section 12, "Enterprise Risks and Risk Management", of MD&A included in GWL's 2011 Annual Report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this News Release. The Company disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

(1)

This News Release contains forward-looking information. See Forward-Looking Statements for a discussion of material factors that could cause actual results to differ materially from the conclusions, forecasts and projections herein and of the material factors and assumptions that were applied in presenting the conclusions, forecasts and projections presented herein. This News Release must be read in conjunction with George Weston Limited's filings with securities regulators made from time to time, all of which can be found at www.weston.ca and www.sedar.com.

(2)

See non-GAAP financial measures.

NON-GAAP FINANCIAL MEASURES
In this News Release the Company uses the following non-GAAP financial measures: adjusted operating income and adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin and adjusted basic net earnings per common share. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with GAAP.

Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA and Adjusted EBITDA Margin
The following tables reconcile adjusted operating income and adjusted EBITDA to GAAP net earnings attributable to shareholders of the Company reported for the periods ended as indicated. Under GAAP, certain expenses and income must be recognized that are not necessarily reflective of the Company's underlying operating performance. These non-GAAP financial measures exclude the impact of certain items and are used internally when analyzing consolidated and segment underlying operating performance. These non-GAAP financial measures are also helpful in assessing underlying operating performance on a consistent basis. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of the items listed in the following tables does not imply that they are non-recurring. Loblaw does not report its results on an adjusted basis, however the Company excludes the impact of the below items, as applicable, when reporting the results of the Loblaw segment.

The Company believes adjusted operating income is useful in assessing the Company's underlying operating performance and in making decisions regarding the ongoing operations of its business. The Company believes adjusted EBITDA is also useful in assessing the underlying operating performance of the Company's ongoing operations and in assessing the Company's ability to generate cash flows to fund its cash requirements, including its capital investment program.

Adjusted operating margin is calculated as adjusted operating income divided by sales. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by sales.

	12 Weeks Ended
									Dec. 31, 2011								Dec. 31, 2010
(unaudited) ($ millions)			Weston Foods		Loblaw		Other⁽¹⁾		Consolidated		Weston Foods		Loblaw		Other⁽¹⁾		Consolidated
Net earnings attributable to shareholders of the Company								$	109							$	111
Add impact of the following:
Non-controlling interests									64								61
Income taxes									71								108
Net interest expense and other financing charges									108								87
Operating income (loss)		$	57	$	313	$	(18)	$	352	$	57	$	322	$	(12)	$	367
Add (deduct) impact of the following:
Restructuring and other charges⁽²⁾			5						5		3		1				4
Commodity derivatives fair value adjustment at Weston Foods			(1)						(1)		(5)						(5)
Foreign currency translation losses							18		18						12		12
Share-based compensation net of equity derivatives			(3)		4				1		(7)		7
Net insurance proceeds at Weston Foods			(2)						(2)
Adjusted operating income		$	56	$	317	$		$	373	$	48	$	330	$		$	378
Depreciation and amortization			15		170				185		15		152				167
Adjusted EBITDA		$	71	$	487	$		$	558	$	63	$	482	$		$	545

(1)

Operating income in the fourth quarter of 2011 included a loss of $18 million (2010 - $12 million) related to the effect of foreign currency translation on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin Holdings GmbH ("Dunedin"), a subsidiary of GWL, and certain of its affiliates, which are foreign operations that have the same functional currency as that of the Company.

(2)

Other charges at Loblaw in the fourth quarter of 2010 included $1 million as a result of changes in Loblaw's distribution network.

	52 Weeks Ended
								Dec. 31, 2011								Dec. 31, 2010
(unaudited) ($ millions)		Weston Foods		Loblaw		Other⁽¹⁾		Consolidated		Weston Foods		Loblaw		Other⁽¹⁾		Consolidated
Net earnings attributable to shareholders of the Company							$	635							$	452
Add impact of the following:
Non-controlling interests								284								251
Income taxes								324								394
Net interest expense and other financing charges								366								471
Operating income (loss)	$	208	$	1,376	$	25	$	1,609	$	285	$	1,339	$	(56)	$	1,568
Add (deduct) impact of the following:
Restructuring and other charges⁽²⁾		13		31				44		8		53				61
Commodity derivatives fair value adjustment at Weston Foods		31						31		(39)						(39)
Foreign currency translation (gains) losses						(25)		(25)						56		56
Share-based compensation net of equity derivatives		20		27				47		(19)		32				13
Certain prior years' commodity tax matters at Loblaw				15				15
Net insurance proceeds at Weston Foods		(7)						(7)
Gain on sale of a portion of a Loblaw property				(14)				(14)
Adjusted operating income	$	265	$	1,435	$		$	1,700	$	235	$	1,424	$		$	1,659
Depreciation and amortization		60		699				759		55		628				683
Adjusted EBITDA	$	325	$	2,134	$		$	2,459	$	290	$	2,052	$		$	2,342

(1)	Operating income for the year included a gain of $25 million (2010 - a loss of $56 million) related to the effect of foreign currency translation on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates, which are foreign operations that have the same functional currency as that of the Company.
(2)	Other charges for the year at Loblaw included $8 million (2010 - nil) related to an internal realignment of Loblaw's business centred around Loblaw's two primary store formats, conventional and discount, and $23 million (2010 - $53 million) related to changes in Loblaw's distribution network, including a charge of nil (2010 - $26 million) due to an asset impairment.

The year-over-year change in the following items influenced operating income in the fourth quarter of 2011:

Restructuring and other charges The Company continuously evaluates strategic and cost reduction initiatives related to its store infrastructure, manufacturing assets, distribution networks and administrative infrastructure with the objective of ensuring a low cost operating structure. Restructuring activities related to these initiatives are ongoing. The details of restructuring and other charges are included in Section 7, "Results of Reportable Operating Segments" of the MD&A included in the 2011 Annual Report.

Commodity derivatives fair value adjustment at Weston Foods Weston Foods is exposed to commodity price fluctuations primarily as a result of purchases of certain raw materials, fuels and utilities. In accordance with the Company's risk management strategy, Weston Foods enters into commodity derivatives to reduce the impact of price fluctuations in forecasted raw material purchases over a specified period of time. These commodity derivatives are not acquired for trading or speculative purposes. These commodity derivatives are not designated for financial reporting purposes as cash flow hedges of anticipated future raw material purchases, and accordingly hedge accounting does not apply. As a result, changes in the fair value of these derivatives, which include realized and unrealized gains and losses related to future purchases of raw materials, are recorded in operating income. In the fourth quarter of 2011, Weston Foods recorded income of $1 million (2010 - $5 million), related to the fair value adjustment of exchange traded commodity derivatives that were not designated within a hedging relationship. Despite the impact of accounting for these commodity derivatives on the Company's reported results, the derivatives have the economic impact of largely mitigating the associated risks arising from price fluctuations in the underlying commodities during the period that the commodity derivatives are held.

Foreign currency translation gains and losses The Company's consolidated financial statements are expressed in Canadian dollars, however a portion of the Company's (excluding Loblaw's) net assets are denominated in U.S. dollars and as a result, the Company is exposed to foreign currency translation gains and losses. The impact of foreign currency translation on a portion of the U.S. dollar denominated net assets, primarily cash and short term investments held by Dunedin and certain of its affiliates, which are foreign operations that have the same functional currency as that of the Company, is recorded in operating income. In the fourth quarter of 2011, foreign currency translation losses of $18 million (2010 - $12 million) were recorded in operating income as a result of the appreciation of the Canadian dollar.

Share-based compensation net of equity derivatives The amount of net share-based compensation cost recorded in operating income is mainly dependent upon the level of fluctuations in the market prices of GWL and Loblaw common shares, the number of unexercised Restricted Share Units ("RSU") and their vesting schedules relative to the number of underlying common shares of the equity derivatives. The equity derivatives change in value as the market prices of the respective underlying common shares change and provide a partial offset to fluctuations in share-based compensation expense, including RSU plan expense. The Company manages stock option, RSU plan and equity derivative impacts on a net basis and therefore the impact of stock options is also excluded from operating income when management reviews consolidated and segment operating performance. The fourth quarter of 2011 year-over-year increase in the share-based compensation net of equity derivatives charge was $1 million and was primarily attributable to changes in the market prices of GWL and Loblaw common shares.

Net insurance proceeds at Weston Foods During the fourth quarter of 2011, Weston Foods received net insurance proceeds of $2 million representing insurance proceeds related to the loss of a Quebec facility, net of charges incurred.

Adjusted Basic Net Earnings per Common Share
The following table reconciles adjusted basic net earnings per common share to GAAP basic net earnings per common share reported for the periods ended as indicated. Under GAAP, certain expenses and income must be recognized that are not necessarily reflective of the Company's underlying operating performance. This non-GAAP financial measure excludes the impact of certain items and is used internally when analyzing consolidated underlying operating performance. This non-GAAP financial measure is also helpful in assessing underlying operating performance on a consistent basis. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of the items listed in the following table does not imply that they are non-recurring. Loblaw does not report its results on an adjusted basis, however the Company excludes the impact of the below items on the Loblaw segment, as applicable, when reporting the Company's consolidated results.

The Company believes adjusted basic net earnings per common share is useful in assessing the Company's underlying operating performance and in making decisions regarding the ongoing operations of its business.

(unaudited)	12 Weeks Ended				52 Weeks Ended
($)		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Basic net earnings per common share	$	0.77	$	0.78	$	4.58	$	3.16
Add (deduct) impact of the following⁽¹⁾:
Accounting for WHL's forward sale agreement for 9.6 million Loblaw common shares		0.09		(0.04)		(0.10)		0.36
Federal tax legislation changes				0.10				0.10
Restructuring and other charges		0.02		0.03		0.18		0.23
Commodity derivatives fair value adjustment at Weston Foods		(0.01)		(0.02)		0.17		(0.21)
Foreign currency translation losses (gains)		0.14		0.09		(0.19)		0.43
Share-based compensation net of equity derivatives		0.01		(0.02)		0.27		0.02
Certain prior years' commodity tax matters at Loblaw						0.05
Net insurance proceeds at Weston Foods		(0.01)				(0.04)
Gain on sale of a portion of a Loblaw property						(0.06)
Adjusted basic net earnings per common share	$	1.01	$	0.92	$	4.86	$	4.09

(1) Net of interest, income taxes and non-controlling interests, as applicable.

In addition to the items described in the "Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA and Adjusted EBITDA Margin" section above, the year-over-year change in the following items also influenced basic net earnings per common share in the fourth quarter of 2011:

Accounting for WHL's forward sale agreement for 9.6 million Loblaw common shares WHL recognizes a non-cash charge or income, which is included in consolidated net interest expense and other financing charges, representing the fair value adjustment of WHL's forward sale agreement for 9.6 million shares. The fair value adjustment in the forward contract is a non-cash item resulting from fluctuations in the market price of the underlying Loblaw shares that WHL owns. WHL does not record any change in the market price associated with the Loblaw shares it owns. At maturity, if the forward price is greater than (less than) the market price, WHL will receive (pay) cash equal to the difference between the notional value and the market value of the forward contract. Any cash paid under the forward contract could be offset by the sale of Loblaw shares. In the fourth quarter of 2011, a charge related to the accounting for WHL's forward sale agreement for 9.6 million Loblaw common shares of $0.09 (2010 - income of $0.04) per common share was recorded in net interest expense and other financing charges as a result of the increase (2010 - decrease) in the market price of Loblaw common shares.

Federal tax legislation changes In the fourth quarter of 2010, the Company recorded a charge of $18 million related to changes in federal tax legislation that resulted in the elimination of the Company's ability to deduct costs associated with cash-settled stock options. In the fourth quarter of 2010, a charge of $0.10 per common share was recorded in income tax expense as a result of this change in legislation.

SELECTED FINANCIAL INFORMATION
The following includes selected quarterly financial information which has been prepared by management in accordance with IFRS and is based on the Company's audited annual consolidated financial statements for the year ended December 31, 2011. This financial information does not contain all disclosures required by IFRS, and accordingly, this financial information should be read in conjunction with the Company's audited annual consolidated financial statements and MD&A for the year ended December 31, 2011 which is contained in the Company's 2011 Annual Report available in the Investor Centre section of the Company's website at www.weston.ca.

Consolidated Statements of Earnings


		12 Weeks Ended				52 Weeks Ended
($ millions except where otherwise indicated)			Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31 2010
Revenue		$	7,636	$	7,375	$	32,376	$	31,847
Operating Expenses
	Cost of inventories sold		5,794		5,541		24,421		23,918
	Selling, general and administrative expenses		1,490		1,467		6,346		6,361
			7,284		7,008		30,767		30,279
Operating Income			352		367		1,609		1,568
Net Interest Expense and Other Financing Charges			108		87		366		471
Earnings Before Income Taxes			244		280		1,243		1,097
Income Taxes			71		108		324		394
Net Earnings			173		172		919		703
Attributable to:
	Shareholders of the Company		109		111		635		452
	Non-Controlling Interests		64		61		284		251
Net Earnings		$	173	$	172	$	919	$	703
Net Earnings per Common Share Attributable to Shareholders of the Company ($)
Basic		$	0.77	$	0.78	$	4.58	$	3.16
Diluted		$	0.72	$	0.70	$	4.55	$	2.92

Consolidated Balance Sheets

		As at
($ millions)			Dec. 31, 2011		Dec. 31, 2010		Jan. 1, 2010
ASSETS
Current Assets
	Cash and cash equivalents	$	1,372	$	1,453	$	1,490
	Short term investments		2,362		3,253		3,420
	Accounts receivable		559		462		444
	Credit card receivables		2,101		1,997		2,095
	Inventories		2,147		2,050		2,080
	Income taxes recoverable		37
	Prepaid expenses and other assets		122		91		107
	Assets held for sale		32		71		56
Total Current Assets			8,732		9,377		9,692
Fixed Assets			9,172		8,823		8,261
Investment Properties			82		74		75
Goodwill and Intangible Assets			1,555		1,554		1,293
Deferred Income Taxes			295		311		390
Security Deposits			367		435		348
Franchise Loans Receivable			331		314		344
Other Assets			789		808		787
Total Assets		$	21,323	$	21,696	$	21,190
LIABILITIES
Current Liabilities
	Bank indebtedness	$	3	$	11	$	10
	Trade and other payables		3,940		4,799		3,676
	Provisions		67		92		96
	Income taxes payable				12		79
	Short term debt		1,280		871		1,525
	Long term debt due within one year		87		1,202		312
Total Current Liabilities			5,377		6,987		5,698
Provisions			94		95		110
Long Term Debt			6,757		6,114		6,256
Deferred Income Taxes			160		162		140
Other Liabilities			1,033		813		760
Capital Securities			222		221		220
Total Liabilities			13,643		14,392		13,184
EQUITY
Share Capital			950		950		950
Contributed Surplus			24		(14)
Retained Earnings			4,496		4,311		5,153
Accumulated Other Comprehensive (Loss) Income			(11)		(23)		1
Total Equity Attributable to Shareholders of the Company			5,459		5,224		6,104
Non-Controlling Interests			2,221		2,080		1,902
Total Equity			7,680		7,304		8,006
Total Liabilities and Equity		$	21,323	$	21,696	$	21,190

Consolidated Statements of Cash Flow

			12 Weeks Ended				52 Weeks Ended
($ millions)				Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Operating Activities
	Net earnings		$	173	$	172	$	919	$	703
	Income taxes			71		108		324		394
	Net interest expense and other financing charges			108		87		366		471
	Depreciation and amortization			188		167		762		683
	Foreign currency translation losses (gains)			18		12		(25)		56
	Income taxes paid			(61)		(94)		(277)		(336)
	Interest received			20		16		76		67
	Settlement of equity forward contracts			(22)				(22)
	Net (increase) decrease in credit card receivables			(190)		(142)		(104)		98
	Change in non-cash working capital			351		339		(36)		136
	Fixed assets and other related impairments			(2)		(9)		7		28
	(Gain) loss on disposal of assets			(7)		(10)		(18)		8
	Other			22		(1)		2		(29)
Cash Flows from Operating Activities				669		645		1,974		2,279
Investing Activities
	Fixed asset purchases			(362)		(447)		(1,027)		(1,214)
	Change in short term investments			49		159		929		80
	Business acquisition - net of cash acquired					(121)		(12)		(308)
	Proceeds from fixed assets sales			6		53		57		90
	Change in franchise investments and other receivables			(27)		(8)		(24)		(25)
	Change in security deposits			(123)		(3)		74		(104)
	Other			(12)		9		(12)		(12)
Cash Flows used in Investing Activities				(469)		(358)		(15)		(1,493)
Financing Activities
	Change in bank indebtedness			(5)		5		(8)		(2)
	Change in short term debt			10		(590)		409		(654)
	Long term debt - Issued			352		609		635		981
		- Retired		(353)		(7)		(1,209)		(322)
	Share Capital - Issued							1
		- Retired		(60)				(61)
	Subsidiary share capital - Issued			2				21
		- Retired		(17)				(39)
	Interest paid			(129)		(136)		(489)		(522)
	Dividends - To common shareholders							(1,186)		(186)
		- To preferred shareholders		(3)		(3)		(44)		(44)
		- To minority shareholders		(22)		(14)		(79)		(57)
Cash Flows used in Financing Activities				(225)		(136)		(2,049)		(806)
	Effect of foreign currency exchange rate on cash and cash equivalents			(2)		(6)		9		(17)
Change in Cash and Cash Equivalents				(27)		145		(81)		(37)
Cash and Cash Equivalents, Beginning of Period				1,399		1,308		1,453		1,490
Cash and Cash Equivalents, End of Period			$	1,372	$	1,453	$	1,372	$	1,453

Basic and Diluted Net Earnings per Common Share

	12 Weeks Ended				52 Weeks Ended
($ millions except where otherwise indicated)		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Net earnings attributable to shareholders of the Company	$	109	$	111	$	635	$	452
Prescribed dividends on preferred shares in share capital		(10)		(10)		(44)		(44)
Net earnings available to common shareholders	$	99	$	101	$	591	$	408
Impact of GWL equity swaps		(3)		(8)				(20)
Reduction in net earnings due to dilution at Loblaw		(3)		(2)		(4)		(9)
Net earnings available to common shareholders for diluted earnings per share	$	93	$	91	$	587	$	379
Weighted average common shares outstanding (in millions)		128.8		129.1		129.0		129.1
Dilutive effect of share-based compensation⁽¹⁾ (in millions)		0.1				0.1
Dilutive effect of GWL equity swaps⁽¹⁾ (in millions)		0.6		0.5				0.6
Diluted weighted average common shares outstanding (in millions)		129.5		129.6		129.1		129.7
Basic net earnings per common share ($)	$	0.77	$	0.78	$	4.58	$	3.16
Diluted net earnings per common share ($)	$	0.72	$	0.70	$	4.55	$	2.92

(1)	In the fourth quarter of 2011 and year-to-date, 1,115,191 (2010 - 1,530,495) and 1,915,191 (2010 - 1,266,666) outstanding potentially dilutive instruments, respectively, were not included in the computation of diluted net earnings per common share as their impact would have been anti-dilutive.

Segment Information

The Company has two reportable operating segments: Weston Foods and Loblaw. The accounting policies of the reportable operating segments are the same as those described in the Company's 2011 Annual Report. The Company measures each reportable operating segment's performance based on adjusted EBITDA⁽¹⁾and adjusted operating income⁽¹⁾. Neither reportable operating segment is reliant on any single external customer.

			12 Weeks Ended				52 Weeks Ended
($ millions)				Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011		Dec. 31, 2010
Revenue
		Weston Foods	$	410	$	386	$	1,772	$	1,624
		Loblaw		7,373		7,119		31,250		30,836
		Intersegment		(147)		(130)		(646)		(613)
	Consolidated		$	7,636	$	7,375	$	32,376	$	31,847
Adjusted EBITDA⁽¹⁾
		Weston Foods	$	71	$	63	$	325	$	290
		Loblaw		487		482		2,134		2,052
	Total		$	558	$	545	$	2,459	$	2,342
Adjusted Operating Income⁽¹⁾
		Weston Foods	$	56	$	48	$	265	$	235
		Loblaw		317		330		1,435		1,424
	Total		$	373	$	378	$	1,700	$	1,659

(1) See non-GAAP financial measures.

2011 ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's annual audited consolidated financial statements and MD&A for the year ended December 31, 2011 are available in the Investor Centre section of the Company's website at www.weston.ca and have been filed with SEDAR and will be available at www.sedar.com.

INVESTOR RELATIONS
Shareholders, security analysts and investment professionals should direct their requests to Mr. Geoffrey H. Wilson, Senior Vice President, Financial Control and Investor Relations, at the Company's Executive Office or by e-mail at [email protected].

Additional financial information has been filed electronically with the Canadian securities regulatory authorities in Canada through SEDAR. This News Release includes selected information on Loblaw Companies Limited, a 63.0%-owned public reporting subsidiary company with shares trading on the Toronto Stock Exchange. For information regarding Loblaw, readers should also refer to the materials filed by Loblaw with the Canadian securities regulatory authorities from time to time. These filings are also maintained at Loblaw's corporate website at www.loblaw.ca.

CONFERENCE CALL AND WEBCAST PRESENTATION
George Weston Limited will host a conference call as well as an audio webcast on Thursday March 1, 2012 at 11:00 a.m. (EST). To access via teleconference please dial (647) 427-7450. The playback will be made available two hours after the event at (416) 849-0833 passcode: 46690230#. To access via audio webcast, please visit the "Investor Centre" section of www.weston.ca. Pre-registration will be available.

Ce rapport est disponible en français.

Mr. Geoffrey H. Wilson, Senior Vice President, Financial Control and Investor Relations, at the Company's Executive Office or by e-mail at [email protected]

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