Fourth Quarter Summary
- Earnings per share of $0.26
compared to $0.11 last
year
- Adjusted earnings per share of $0.35 compared to $0.18 last year
- Same-store sales excluding fuel consistent with last
year
- Project Sunrise transformation on track; first year
successfully completed
- Free cash flow of $350.6
million, increased from $170.8
million last year
- Annual dividend per share increased 4.8% to $0.44
- Capital investment program for fiscal 2019 expected
to be $425 million
STELLARTON, NS, June 28, 2018 /CNW/ - Empire Company
Limited ("Empire" or the "Company") (TSX: EMP.A) today announced
its financial results for the fourth quarter and full year ended
May 5, 2018. For the quarter,
the Company recorded adjusted net earnings, net of non-controlling
interest, of $93.0 million
($0.35 per diluted share) compared to
$50.2 million ($0.18 per diluted share) last year.
"We are proud of our achievements this year," said Michael
Medline, President and CEO. "We have restructured our
company, taken out significant costs and stabilized our
margins. This has generated an improvement in adjusted
earnings of 80% and an increase in free cash flow of 27%.
Going forward, our principal mission will be to grow sales and take
back market share. This is not a simple task, but we now have
the strategy, tactical game plan and team to get it
done."
In the fourth quarter of fiscal 2017, the Company launched
Project Sunrise, a comprehensive three year transformation intended
to simplify the organizational structure and reduce costs. The
transformation is expected to result in at least $500 million in annualized cost savings by the
end of fiscal 2020. The transformation is on track after the first
year and benefits continue to be in-line with management's
expectations.
In fiscal 2018, benefits realized by the Company from the
transformation initiative, were comprised of organizational design
cost reductions, improvements in store operations and cost
reductions from strategic sourcing. The in-year benefit was
approximately 20% of the total target, the majority of which was
achieved in the second half of the year.
For fiscal 2019, management expects that benefits will be
derived from the annualized effect of initiatives during fiscal
2018, plus other operational initiatives. Management
estimates up to a further 30% of the Company's target can be
achieved during the year. The majority of the incremental
benefit would accrue to the Company in the second half of fiscal
2019.
Dividend Declaration
The Company declared a 4.8% increase in Empire's dividend
per share. The increased quarterly dividend, will result in
the annual dividend increasing from $0.42 to $0.44 per
share. Pursuant to this, the Board of Directors declared a
quarterly dividend of $0.11 per share
on both the Non-Voting Class A shares and the Class B common shares
that will be payable on July 31, 2018
to shareholders of record on July 13,
2018. These dividends are eligible dividends as defined for
the purposes of the Income Tax Act (Canada) and applicable provincial
legislation.
OPERATING RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
($ in millions,
except per share
amounts)
|
|
May 5, 2018
|
|
May
6, 2017
|
|
$ Change
|
|
May 5, 2018
|
|
May
6, 2017
|
|
$ Change
|
Sales
|
$
|
5,886.1
|
$
|
5,798.9
|
$
|
87.2
|
$
|
24,214.6
|
$
|
23,806.2
|
$
|
408.4
|
Gross
profit(1)
|
|
1,451.3
|
|
1,420.9
|
|
30.4
|
|
5,900.5
|
|
5,707.2
|
|
193.3
|
Operating
income
|
|
110.6
|
|
61.4
|
|
49.2
|
|
346.5
|
|
333.0
|
|
13.5
|
Adjusted operating
income(1)
|
|
139.7
|
|
90.1
|
|
49.6
|
|
601.7
|
|
378.5
|
|
223.2
|
EBITDA(1)
|
|
217.8
|
|
171.7
|
|
46.1
|
|
785.7
|
|
777.2
|
|
8.5
|
Adjusted
EBITDA(1)
|
|
240.4
|
|
193.9
|
|
46.5
|
|
1,014.7
|
|
796.9
|
|
217.8
|
Net
earnings(2)
|
|
71.0
|
|
29.5
|
|
41.5
|
|
159.5
|
|
158.5
|
|
1.0
|
Adjusted net
earnings(1)(2)
|
|
93.0
|
|
50.2
|
|
42.8
|
|
344.3
|
|
191.3
|
|
153.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS(2)(3)
|
$
|
0.26
|
$
|
0.11
|
$
|
0.15
|
$
|
0.59
|
$
|
0.58
|
$
|
0.01
|
Adjusted
EPS(1)(2)(3)
|
$
|
0.35
|
$
|
0.18
|
$
|
0.17
|
$
|
1.27
|
$
|
0.70
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
272.2
|
|
271.7
|
|
|
|
272.1
|
|
272.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
|
|
May 5, 2018
|
|
May 6,
2017
|
|
|
|
May 5, 2018
|
|
May 6,
2017
|
|
|
Same-store
sales(1) growth (decline)
|
|
0.5%
|
|
(1.1)%
|
|
|
|
0.8%
|
|
(2.1)%
|
|
|
Same-store sales
growth (decline), excluding fuel
|
|
0.0%
|
|
(1.6)%
|
|
|
|
0.5%
|
|
(2.2)%
|
|
|
Gross
margin(1)(4)
|
|
24.7%
|
|
24.5%
|
|
|
|
24.4%
|
|
24.0%
|
|
|
EBITDA
margin(1)(4)
|
|
3.7%
|
|
3.0%
|
|
|
|
3.2%
|
|
3.3%
|
|
|
Adjusted EBITDA
margin(1)(4)
|
|
4.1%
|
|
3.3%
|
|
|
|
4.2%
|
|
3.3%
|
|
|
Effective income tax
rate
|
|
13.7%
|
|
4.2%
|
|
|
|
23.8%
|
|
19.8%
|
|
|
|
|
(1)
|
See "Non-GAAP
Financial Measures & Financial Metrics" section of this News
Release.
|
(2)
|
Net of
non-controlling interest.
|
(3)
|
Earnings per share
("EPS").
|
(4)
|
Consolidated
operating results as a percentage of sales.
|
Sales
Sales increased by 1.5% for the 13 weeks ended
May 5, 2018. Food
inflation was positive which contributed to the increase in sales,
although same-store sales were consistent with last
year. Sales were affected by an aggressive industry
promotional environment and the effect of winding down ten
underperforming stores in British Columbia. These stores are
scheduled to close in the first quarter of fiscal 2019.
Excluding related businesses, same-store sales for food
increased and estimated food tonnage sold was consistent with last
year.
Sales increased by 1.7% for the 52 weeks ended
May 5, 2018, as same-store sales were
higher in most areas of the country, driven by more disciplined
pricing strategies compared to significant deflationary pricing
strategies in the prior year. Food inflation was positive,
contributing to the increase in sales.
Gross Profit
Gross profit increased by 2.1% and 3.4% for the 13 and 52
weeks ended May 5, 2018,
respectively, compared to last year due to increases in sales and
stable margins as management focused on improved store execution
and promotional strategies. Management continues to focus on
stabilizing and improving margin rates.
Operating Income
For the 13 and 52 weeks ended May
5, 2018, operating income increased mainly as a result of
improvements in sales and margins, benefits related to Project
Sunrise and other cost efficiencies, and a gain on the sale of
assets to Crombie Real Estate Investment Trust
("Crombie REIT"). These results were partially offset
by expenses related to Project Sunrise and increases in incentive
compensation accruals due to improved performance. Adjusted
operating income increased 55% over the fourth quarter last year
and 59% over fiscal 2017.
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
($ in
millions)
|
|
May 5, 2018
|
|
May 6,
2017
|
|
May 5, 2018
|
|
May 6,
2017
|
Operating
income
|
$
|
110.6
|
$
|
61.4
|
$
|
346.5
|
$
|
333.0
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost related to
Project Sunrise
|
|
22.3
|
|
15.8
|
|
207.8
|
|
15.8
|
|
Intangible
amortization associated with the Canada Safeway
acquisition
|
|
6.5
|
|
6.5
|
|
26.2
|
|
25.8
|
|
West business unit
store closures
|
|
0.3
|
|
-
|
|
21.2
|
|
-
|
|
Distribution centre
restructuring
|
|
-
|
|
4.3
|
|
-
|
|
9.6
|
|
Gain on disposal of
manufacturing facilities
|
|
-
|
|
-
|
|
-
|
|
(7.5)
|
|
Network
rationalization (reversals)
|
|
-
|
|
3.0
|
|
-
|
|
(1.6)
|
|
Historical
organizational realignment (reversals) costs
|
|
-
|
|
(0.9)
|
|
-
|
|
3.4
|
|
|
29.1
|
|
28.7
|
|
255.2
|
|
45.5
|
Adjusted operating
income
|
$
|
139.7
|
$
|
90.1
|
$
|
601.7
|
$
|
378.5
|
EBITDA
EBITDA and adjusted EBITDA increased in the 13 and 52
weeks ended May 5, 2018 as a result
of improvements in sales, benefits related to Project Sunrise and
the gain on sale of assets to Crombie REIT. Adjusted EBITDA margin
increased 80 basis points in the quarter and 90 basis points over
prior year as a result of efficiencies realized from Project
Sunrise and improved gross margins.
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
($ in
millions)
|
|
May 5, 2018
|
|
May 6,
2017
|
|
May 5, 2018
|
|
May 6,
2017
|
EBITDA
|
$
|
217.8
|
$
|
171.7
|
$
|
785.7
|
$
|
777.2
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost related to
Project Sunrise
|
|
22.3
|
|
15.8
|
|
207.8
|
|
15.8
|
|
West business unit
store closures
|
|
0.3
|
|
-
|
|
21.2
|
|
-
|
|
Gain on disposal of
manufacturing facilities
|
|
-
|
|
-
|
|
-
|
|
(7.5)
|
|
Distribution centre
restructuring
|
|
-
|
|
4.3
|
|
-
|
|
9.6
|
|
Network
rationalization (reversals)
|
|
-
|
|
3.0
|
|
-
|
|
(1.6)
|
|
Historical
organizational realignment (reversals) costs
|
|
-
|
|
(0.9)
|
|
-
|
|
3.4
|
|
|
22.6
|
|
22.2
|
|
229.0
|
|
19.7
|
Adjusted
EBITDA
|
$
|
240.4
|
$
|
193.9
|
$
|
1,014.7
|
$
|
796.9
|
Income Taxes
The effective income tax rate for the 13 weeks ended
May 5, 2018 was 13.7% compared to
4.2% in the same quarter last year. The effective tax rate is
affected by several items, including an internal reorganization
that the Company completed during the quarter to simplify its
corporate structure, resulting in a positive adjustment to deferred
tax balances. Lower taxes on gains on the sale of retail
properties also reduced the effective tax rate.
The effective income tax rate for the 52 weeks ended
May 5, 2018 increased to 23.8%
compared to 19.8% for the 52 weeks ended May
6, 2017.
Net Earnings
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
($ in millions,
except per share amounts)
|
|
May 5, 2018
|
|
May 6,
2017
|
|
May 5, 2018
|
|
May 6,
2017
|
Net
earnings(1)
|
$
|
71.0
|
$
|
29.5
|
$
|
159.5
|
$
|
158.5
|
EPS (fully
diluted)
|
$
|
0.26
|
$
|
0.11
|
$
|
0.59
|
$
|
0.58
|
Adjustments (net of
income taxes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost related to
Project Sunrise
|
|
17.0
|
|
11.3
|
|
150.1
|
|
11.3
|
|
Intangible
amortization associated with the Canada Safeway
acquisition
|
|
4.8
|
|
4.7
|
|
19.2
|
|
18.8
|
|
West business unit
store closures
|
|
0.2
|
|
-
|
|
15.5
|
|
-
|
|
Gain on disposal of
manufacturing facilities
|
|
-
|
|
-
|
|
-
|
|
(5.5)
|
|
Distribution centre
restructuring
|
|
-
|
|
3.1
|
|
-
|
|
6.9
|
|
Network
rationalization (reversals)
|
|
-
|
|
2.2
|
|
-
|
|
(1.2)
|
|
Historical
organizational realignment (reversals) costs
|
|
-
|
|
(0.6)
|
|
-
|
|
2.5
|
|
|
22.0
|
|
20.7
|
|
184.8
|
|
32.8
|
Adjusted net
earnings(1)
|
$
|
93.0
|
$
|
50.2
|
$
|
344.3
|
$
|
191.3
|
Adjusted EPS (fully
diluted)
|
$
|
0.35
|
$
|
0.18
|
$
|
1.27
|
$
|
0.70
|
Diluted weighted
average number of shares outstanding (in millions)
|
|
272.2
|
|
271.7
|
|
272.1
|
|
272.0
|
|
|
(1)
|
Net of non-controlling
interest.
|
Free Cash Flow
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
($ in
millions)
|
|
May 5, 2018
|
|
May 6,
2017
|
|
May 5, 2018
|
|
May 6,
2017
|
Cash flows from
operating activities
|
$
|
313.5
|
$
|
225.8
|
$
|
879.7
|
$
|
708.5
|
Add: proceeds
on disposal of property, equipment and investment
property
|
|
113.2
|
|
36.8
|
|
217.2
|
|
425.7
|
Less: property,
equipment and investment property purchases
|
|
(76.1)
|
|
(91.8)
|
|
(239.8)
|
|
(460.7)
|
Free cash
flow
|
$
|
350.6
|
$
|
170.8
|
$
|
857.1
|
$
|
673.5
|
Free cash flow(1) increased for the 13 weeks
ended May 5, 2018 compared to last
year primarily due to improved operating earnings and an increase
in proceeds on the sale of properties. During the fourth
quarter, Sobeys entered into an agreement with Crombie REIT to sell
a portfolio of 11 properties, nine of which were leased
back.
Free cash flow increased for the 52 weeks ended
May 5, 2018 compared to the 52 weeks
ended May 6, 2017 due to lower levels
of capital investments and improved operating activities. This was
partially offset by lower proceeds received from the disposition of
real estate assets for the full year.
1)
|
See "Non-GAAP Financial Measures & Financial
Metrics" section of this News Release.
|
FINANCIAL PERFORMANCE BY SEGMENT
The Company operates and reports on two business
segments:
- Food retailing, which consists of
wholly-owned subsidiary Sobeys Inc. ("Sobeys"); and
- Investments and other operations,
including investments in Crombie REIT (41.5 percent equity
accounted interest; 40.3 percent fully diluted) and interests in
Genstar.
Food Retailing
|
|
|
|
13 Weeks
Ended
|
52 Weeks
Ended
|
|
|
May 5,
|
|
May 6,
|
|
$
|
|
May 5,
|
|
May 6,
|
|
$
|
($ in
millions)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Sales
|
$
|
5,886.1
|
$
|
5,798.9
|
$
|
87.2
|
$
|
24,214.6
|
$
|
23,806.2
|
$
|
408.4
|
Gross
profit
|
|
1,451.3
|
|
1,420.9
|
|
30.4
|
|
5,900.5
|
|
5,707.2
|
|
193.3
|
Operating
income
|
|
95.2
|
|
52.5
|
|
42.7
|
|
273.6
|
|
259.3
|
|
14.3
|
Adjusted operating
income
|
|
124.3
|
|
81.2
|
|
43.1
|
|
528.8
|
|
304.8
|
|
224.0
|
EBITDA
|
|
202.4
|
|
162.8
|
|
39.6
|
|
712.5
|
|
703.2
|
|
9.3
|
Adjusted
EBITDA
|
|
225.0
|
|
185.0
|
|
40.0
|
|
941.5
|
|
722.9
|
|
218.6
|
Net
earnings(1)
|
|
59.9
|
|
23.6
|
|
36.3
|
|
116.5
|
|
112.7
|
|
3.8
|
Adjusted net
earnings(1)
|
|
81.9
|
|
44.3
|
|
37.6
|
|
301.3
|
|
145.5
|
|
155.8
|
|
|
(1)
|
Net of non-controlling
interest.
|
Investments and Other Operations
|
|
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
|
|
|
52 Weeks
Ended
|
|
|
|
|
|
May 5,
|
|
May 6,
|
|
$
|
|
May 5,
|
|
May 6,
|
|
$
|
($ in
millions)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Operating
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crombie
REIT
|
$
|
10.8
|
$
|
7.7
|
$
|
3.1
|
$
|
39.5
|
$
|
41.5
|
$
|
(2.0)
|
|
Real estate
partnerships
|
|
3.3
|
|
4.9
|
|
(1.6)
|
|
33.9
|
|
35.1
|
|
(1.2)
|
|
Other operations, net
of corporate expenses
|
|
1.3
|
|
(3.7)
|
|
5.0
|
|
(0.5)
|
|
(2.9)
|
|
2.4
|
|
$
|
15.4
|
$
|
8.9
|
$
|
6.5
|
$
|
72.9
|
$
|
73.7
|
$
|
(0.8)
|
Operating Income
For the 13 weeks ended May 5,
2018, operating income from the Investments and other
operations segment increased primarily as a result of improved
earnings from Crombie REIT and other operations. The increase in
income from other operations can be attributed primarily to losses
incurred in the prior year including a dilution loss and a loss on
disposal of property.
For the 52 weeks ended May 5,
2018, operating income remained consistent as a result of
stable equity earnings from Crombie REIT and the Real estate
partnerships.
CONSOLIDATED FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
($ in millions,
except per share and ratio calculations)
|
|
May 5, 2018
|
|
|
May 6,
2017
|
|
|
May 7,
2016(1)(2)
|
Shareholders' equity,
net of non-controlling interest
|
$
|
3,702.8
|
|
$
|
3,644.2
|
|
$
|
3,623.9
|
Book value per common
share(3)
|
$
|
13.62
|
|
$
|
13.40
|
|
$
|
13.23
|
Long-term debt,
including current portion
|
$
|
1,666.9
|
|
$
|
1,870.8
|
|
$
|
2,367.4
|
Funded debt to total
capital
|
|
31.0%
|
|
|
33.9%
|
|
|
39.5%
|
Net funded debt to
net total capital(3)
|
|
21.9%
|
|
|
31.3%
|
|
|
36.7%
|
Funded debt to
adjusted EBITDA
|
|
1.6x
|
|
|
2.3x
|
|
|
2.0x
|
Adjusted EBITDA to
interest expense(3)
|
|
10.5x
|
|
|
7.7x
|
|
|
10.2x
|
Current assets to
current liabilities
|
|
0.8x
|
|
|
0.9x
|
|
|
1.0x
|
Total
assets
|
$
|
8,662.0
|
|
$
|
8,695.5
|
|
$
|
9,138.5
|
Total non-current
financial liabilities
|
$
|
1,929.9
|
|
$
|
2,502.1
|
|
$
|
2,735.9
|
|
|
(1)
|
Amounts have been reclassified to correspond to the
current period presentation on the consolidated balance
sheets.
|
(2)
|
Amounts have been restated. See "Changes to
Accounting Policies Adopted During Fiscal 2017" section of the
fiscal 2017 annual Management's Discussion and Analysis
("MD&A") for further
detail.
|
(3)
|
See "Non-GAAP Financial Measures & Financial
Metrics" section of this News Release.
|
OTHER SIGNIFICANT ITEMS
Minimum Wage Increases
The Company expects to incur increased labour costs as a
result of minimum wage increases in Ontario and Alberta and other effects associated with
the Fair Workplaces, Better Jobs Act, 2017 ("Bill
148") that was passed into law in Ontario on November
27, 2017. Management was successful in mitigating the
financial impact of these increased labour costs in fiscal 2018 and
continues to develop further plans to mitigate the full year
impacts for fiscal 2019 onward. However, there is some risk
that the Company may not be able to fully offset the effects on
earnings considering the short transition period of the cost
increases. The Company estimates the unmitigated financial impact
of the minimum wage increases, and other impacts including wage
parity could be up to $90 million in
fiscal 2019.
Commercial Bread Investigation
The Canadian Competition Bureau is currently investigating
the practices of certain suppliers and retailers, including the
Company, with regard to the supply and sale of commercial bread in
Canada beginning in 2001. The
Company is fully cooperating with the Competition Bureau. Based on
the information available to date, the Company does not believe
that it or any of its employees have violated the Competition
Act.
Class action lawsuits have been filed against the Company,
the suppliers and other retailers regarding the
allegations.
While both the Competition Bureau investigation and the
class action lawsuits are in the early stages, at this time the
Company does not believe that they will have a material adverse
effect on the Company's business or financial condition.
Healthcare Reform
On January 29, 2018,
additional healthcare reform was introduced by the pan-Canadian
Pharmaceutical Alliance with the Canadian Generic Pharmaceutical
Association that came into effect on April
1, 2018. This resulted in the price reduction of almost 70
high volume generic drugs. The Company estimates that the
effect, prior to any mitigation, of these changes may be to reduce
annual income before taxes by up to $40
million.
FORWARD-LOOKING INFORMATION
This document contains forward-looking statements which
are presented for the purpose of assisting the reader to
contextualize the Company's financial position and understand
management's expectations regarding the Company's strategic
priorities, objectives and plans. These forward-looking
statements may not be appropriate for other purposes.
Forward-looking statements are identified by words or phrases such
as "anticipates", "expects", "believes", "estimates", "intends",
"could", "may", "plans", "predicts", "projects", "will", "would",
"foresees" and other similar expressions or the negative of these
terms.
These forward-looking statements include, but are not
limited to, the following items:
- The Company's expectations regarding the impact of
Project Sunrise, including expected cost savings and efficiencies
resulting from this transformation initiative, and the expected
timing of the realization of fiscal 2019 in-year incremental
benefits, which could be impacted by several factors, including the
time required by the Company to complete the project as well as the
factors identified under the heading "Risk Management"
in the fiscal 2018 annual MD&A;
- The Company's expectations regarding the impact of
minimum wage increases in Ontario
and Alberta, other incremental
impacts of Bill 148 and the Company's ability to mitigate the
financial impact of these increases which may be impacted by
factors previously described under the heading "Minimum Wage
Increases"; and
- The Company's expectations regarding the impact of
healthcare reform that came into effect on April 1, 2018 which may be impacted by factors
previously described under the heading "Healthcare Reform" and
further described in the fiscal 2018 annual MD&A under the
heading "Risk Management – Drug Regulation, Legislation and
Healthcare Reform".
By its nature, forward-looking information requires the
Company to make assumptions and is subject to inherent risks,
uncertainties and other factors which may cause actual results to
differ materially from forward-looking statements made. For
more information on risks, uncertainties and assumptions that may
impact the Company's forward-looking statements, please refer to
the Company's materials filed with the Canadian securities
regulatory authorities, including the "Risk Management" section of
the fiscal 2018 annual MD&A.
Although the Company believes the predictions, forecasts,
expectations or conclusions reflected in the forward-looking
information are reasonable, it can provide no assurance that such
matters will prove correct. 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. The forward-looking
information in this document reflects the Company's current
expectations and is subject to change. The Company does not
undertake to update any forward-looking statements that may be made
by or on behalf of the Company other than as required by applicable
securities laws.
NON-GAAP FINANCIAL MEASURES & FINANCIAL
METRICS
There are measures and metrics included in this news
release that do not have a standardized meaning under generally
accepted accounting principles ("GAAP") and therefore may not be
comparable to similarly titled measures and metrics presented by
other publicly traded companies. The Company includes these
measures and metrics because it believes certain investors use
these measures and metrics as a means of assessing financial
performance.
Empire's definition of the non-GAAP terms are as
follows:
- Same-store sales are sales from stores in the same
location in both reporting periods.
- Adjusted net earnings are net earnings, net of
non-controlling interest, excluding certain items to better analyze
trends in performance and financial results. These adjustments
result in a truer economic representation of the underlying
business on a comparative basis. The Company no longer adjusts for
items that are insignificant to current period results or the
comparative period.
- Adjusted EPS (fully diluted) is calculated as adjusted
net earnings divided by diluted weighted average number of shares
outstanding.
- Free cash flow is calculated as cash flows from operating
activities, plus proceeds on disposal of property, equipment and
investment property, less property, equipment and investment
property purchases.
- Gross profit is calculated as sales less cost of
sales.
- Gross margin is gross profit divided by
sales.
- Adjusted operating income is operating income excluding
certain items to better analyze trends in performance. These
adjustments result in a truer economic representation on a
comparative basis. The Company no longer adjusts for items that are
insignificant to current period results or the comparative
period.
- Earnings before interest, taxes, depreciation and
amortization ("EBITDA") is calculated as net earnings before
finance costs (net of finance income), income tax expense, and
depreciation and amortization of intangibles.
- EBITDA margin is EBITDA divided by sales.
- Adjusted EBITDA is EBITDA excluding certain items to
better analyze trends in performance. These adjustments result in a
truer economic representation on a comparative basis. The Company
no longer adjusts for items that are insignificant to current
period results or the comparative period.
- Adjusted EBITDA margin is adjusted EBITDA divided by
sales.
- Book value per common share is shareholders' equity, net
of non-controlling interest, divided by total common shares
outstanding.
- Funded debt is all interest bearing debt, which includes
bank loans, bankers' acceptances and long-term debt.
- Total capital is calculated as funded debt plus
shareholders' equity, net of non-controlling interest.
- Funded debt to total capital ratio is funded debt divided
by total capital.
- Net funded debt is calculated as funded debt less cash
and cash equivalents.
- Net total capital is total capital less cash and cash
equivalents.
- Net funded debt to net total capital ratio is net funded
debt divided by net total capital.
- Funded debt to adjusted EBITDA ratio is funded debt
divided by trailing four-quarter adjusted EBITDA.
- Interest expense is calculated as interest expense on
financial liabilities measured at amortized cost plus losses on
cash flow hedges reclassified from other comprehensive income or
loss.
- Adjusted EBITDA to interest expense ratio is trailing
four-quarter adjusted EBITDA divided by trailing four-quarter
interest expense.
For a more complete description of Empire's non-GAAP
measures and metrics, please see Empire's MD&A for the fiscal
year ended May 5, 2018.
CONFERENCE CALL INFORMATION
The Company will hold an analyst call on Thursday, June 28, 2018 beginning at 12:00 p.m. (Eastern Daylight Time) during which
senior management will discuss the Company's financial results for
the fourth quarter of fiscal 2018. To join this conference call,
dial (888) 390-0546 outside the Toronto area or (416) 764-8688 from within the
Toronto area. To
secure a line, please call 10 minutes prior to the conference
call; you will be placed on hold until the conference
call begins. The media and investing public may access
this conference call via a listen mode only. You may also listen to
a live audiocast of the conference call by visiting the Company's
website located at
www.empireco.ca.
Replay will be available by dialing (888) 390-0541 and
entering access code 289585 until midnight July 12, 2018, or on the Company's website for 90
days following the conference call.
SELECTED FINANCIAL INFORMATION
The following unaudited quarterly and audited annual
financial information has been prepared on a basis consistent with
our audited consolidated financial statements for the year ended
May 5, 2018. The information does not
include all disclosures required by IFRS and should be read in
conjunction with the Company's 2018 audited consolidated financial
statements available at www.sedar.com or
by accessing the Investor Centre section of the Company's website
at www.empireco.ca.
Empire Company Limited
|
|
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
As At
|
|
May 5
|
|
May 6
|
(in millions of Canadian
dollars)
|
|
2018
|
2017
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
627.9
|
|
$
|
207.3
|
|
Receivables
|
|
|
433.2
|
|
|
413.6
|
|
Inventories
|
|
|
1,251.6
|
|
|
1,322.2
|
|
Prepaid
expenses
|
|
|
126.8
|
|
|
117.5
|
|
Loans and other
receivables
|
|
|
20.9
|
|
|
25.5
|
|
Income taxes
receivable
|
|
|
15.2
|
|
|
31.9
|
|
Assets held for
sale
|
|
|
20.4
|
|
|
48.5
|
|
|
|
|
|
|
|
|
|
|
2,496.0
|
|
|
2,166.5
|
|
|
|
|
|
|
|
Loans and other
receivables
|
|
|
80.6
|
|
|
82.1
|
Investments
|
|
|
-
|
|
|
25.1
|
Investments, at
equity
|
|
|
571.8
|
|
|
648.4
|
Other
assets
|
|
|
34.1
|
|
|
43.3
|
Property and
equipment
|
|
|
2,787.3
|
|
|
3,033.3
|
Investment
property
|
|
|
93.9
|
|
|
103.0
|
Intangibles
|
|
|
842.0
|
|
|
880.5
|
Goodwill
|
|
|
1,001.9
|
|
|
1,003.4
|
Deferred tax
assets
|
|
|
754.4
|
|
|
709.9
|
|
|
|
|
|
|
|
|
|
$
|
8,662.0
|
|
$
|
8,695.5
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
2,253.8
|
|
$
|
2,230.2
|
|
Income taxes
payable
|
|
|
53.5
|
|
|
38.4
|
|
Provisions
|
|
|
127.6
|
|
|
88.1
|
|
Long-term debt due
within one year
|
|
|
527.4
|
|
|
134.0
|
|
|
|
|
|
|
|
|
|
|
2,962.3
|
|
|
2,490.7
|
|
|
|
|
|
|
|
Provisions
|
|
|
129.3
|
|
|
105.8
|
Long-term
debt
|
|
|
1,139.5
|
|
|
1,736.8
|
Other long-term
liabilities
|
|
|
158.6
|
|
|
141.7
|
Employee future
benefits
|
|
|
361.2
|
|
|
374.0
|
Deferred tax
liabilities
|
|
|
141.3
|
|
|
143.8
|
|
|
|
|
|
|
|
|
|
|
4,892.2
|
|
|
4,992.8
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Capital
stock
|
|
|
2,039.5
|
|
|
2,034.4
|
Contributed
surplus
|
|
|
22.9
|
|
|
25.3
|
Retained
earnings
|
|
|
1,627.9
|
|
|
1,572.8
|
Accumulated other
comprehensive income
|
|
|
12.5
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
3,702.8
|
|
|
3,644.2
|
|
|
|
|
|
|
|
Non-controlling
interest
|
|
|
67.0
|
|
|
58.5
|
|
|
|
|
|
|
|
|
|
|
3,769.8
|
|
|
3,702.7
|
|
|
|
|
|
|
|
|
|
$
|
8,662.0
|
|
$
|
8,695.5
|
Empire Company
Limited
|
Unaudited
|
|
|
Consolidated
Statements of Earnings
|
13 Weeks
Ended
|
|
52 Weeks
Ended
|
(in millions of
Canadian dollars,
|
May
5
|
|
May
6
|
|
May
5
|
|
May
6
|
except share and
per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
5,886.1
|
|
$
|
5,798.9
|
|
$
|
24,214.6
|
|
$
|
23,806.2
|
Other
income
|
|
22.6
|
|
|
6.2
|
|
|
61.2
|
|
|
48.2
|
Share of earnings
from investments, at equity
|
|
14.4
|
|
|
12.9
|
|
|
74.3
|
|
|
77.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
4,434.8
|
|
|
4,378.0
|
|
|
18,314.1
|
|
|
18,099.0
|
|
Selling and
administrative expenses
|
|
1,377.7
|
|
|
1,378.6
|
|
|
5,689.5
|
|
|
5,499.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
110.6
|
|
|
61.4
|
|
|
346.5
|
|
|
333.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs,
net
|
|
25.4
|
|
|
27.7
|
|
|
110.5
|
|
|
118.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
85.2
|
|
|
33.7
|
|
|
236.0
|
|
|
215.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
11.7
|
|
|
1.4
|
|
|
56.2
|
|
|
42.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
73.5
|
|
$
|
32.3
|
|
$
|
179.8
|
|
$
|
172.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings for the
period attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest
|
$
|
2.5
|
|
$
|
2.8
|
|
$
|
20.3
|
|
$
|
14.0
|
|
Owners of the
Company
|
|
71.0
|
|
|
29.5
|
|
|
159.5
|
|
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
73.5
|
|
$
|
32.3
|
|
$
|
179.8
|
|
$
|
172.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.26
|
|
$
|
0.11
|
|
$
|
0.59
|
|
$
|
0.58
|
|
Diluted
|
$
|
0.26
|
|
$
|
0.11
|
|
$
|
0.59
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding, in millions
|
|
Basic
|
|
271.8
|
|
|
271.7
|
|
|
271.8
|
|
|
271.9
|
|
Diluted
|
|
272.2
|
|
|
271.7
|
|
|
272.1
|
|
|
272.0
|
|
Unaudited
|
|
|
Empire Company
Limited
|
13 Weeks
Ended
|
|
52 Weeks
Ended
|
Consolidated
Statements of Cash Flows
|
May
5
|
|
May
6
|
|
May
5
|
|
May
6
|
(in millions of
Canadian dollars)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
73.5
|
|
$
|
32.3
|
|
$
|
179.8
|
|
$
|
172.5
|
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
85.6
|
|
|
88.6
|
|
|
351.8
|
|
|
355.5
|
|
|
Income tax
expense
|
|
11.7
|
|
|
1.4
|
|
|
56.2
|
|
|
42.5
|
|
|
Finance costs,
net
|
|
25.4
|
|
|
27.7
|
|
|
110.5
|
|
|
118.0
|
|
|
Amortization of
intangibles
|
|
21.6
|
|
|
21.7
|
|
|
87.4
|
|
|
88.7
|
|
|
Net gain on disposal
of assets
|
|
(17.5)
|
|
|
(0.3)
|
|
|
(37.3)
|
|
|
(21.3)
|
|
|
Impairment of
non-financial assets, net
|
|
2.0
|
|
|
11.0
|
|
|
9.2
|
|
|
27.5
|
|
|
Amortization of
deferred items
|
|
1.1
|
|
|
3.3
|
|
|
7.2
|
|
|
12.8
|
|
|
Equity in earnings of
other entities, net of distributions received
|
|
21.7
|
|
|
2.5
|
|
|
69.1
|
|
|
19.9
|
|
|
Employee future
benefits
|
|
1.6
|
|
|
1.0
|
|
|
1.5
|
|
|
8.5
|
|
|
Increase in long-term
lease obligation
|
|
1.2
|
|
|
2.2
|
|
|
11.2
|
|
|
13.9
|
|
|
(Decrease) increase
in long-term provisions
|
|
(7.0)
|
|
|
(3.0)
|
|
|
15.8
|
|
|
(35.4)
|
|
|
Equity based
compensation, net
|
|
1.7
|
|
|
1.7
|
|
|
6.9
|
|
|
3.3
|
|
Net change in
non-cash working capital
|
|
112.5
|
|
|
58.0
|
|
|
88.1
|
|
|
0.5
|
|
Income taxes paid,
net
|
|
(21.6)
|
|
|
(22.3)
|
|
|
(77.7)
|
|
|
(98.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
313.5
|
|
|
225.8
|
|
|
879.7
|
|
|
708.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in
investments
|
|
-
|
|
|
(0.4)
|
|
|
-
|
|
|
(0.4)
|
|
Property, equipment
and investment property purchases
|
|
(76.1)
|
|
|
(91.8)
|
|
|
(239.8)
|
|
|
(460.7)
|
|
Proceeds on disposal
of assets
|
|
113.2
|
|
|
36.8
|
|
|
217.2
|
|
|
425.7
|
|
Additions to
intangibles
|
|
(7.9)
|
|
|
(20.1)
|
|
|
(48.2)
|
|
|
(53.8)
|
|
Loans and other
receivables
|
|
(0.4)
|
|
|
(1.5)
|
|
|
6.1
|
|
|
12.3
|
|
Tenant
inducements
|
|
-
|
|
|
-
|
|
|
-
|
|
|
58.8
|
|
Other assets and
other long-term liabilities
|
|
3.7
|
|
|
3.3
|
|
|
2.9
|
|
|
2.7
|
|
Business
acquisitions
|
|
(0.6)
|
|
|
(0.2)
|
|
|
(3.8)
|
|
|
(21.9)
|
|
Interest
received
|
|
1.2
|
|
|
0.6
|
|
|
1.9
|
|
|
1.6
|
|
Proceeds on
redemption of investment
|
|
-
|
|
|
-
|
|
|
24.3
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used
in) investing activities
|
|
33.1
|
|
|
(73.3)
|
|
|
(39.4)
|
|
|
(35.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of long-term
debt
|
|
8.4
|
|
|
12.7
|
|
|
63.7
|
|
|
55.6
|
|
Repayment of
long-term debt
|
|
(111.2)
|
|
|
(28.4)
|
|
|
(188.2)
|
|
|
(397.2)
|
|
Net repayment of
credit facilities
|
|
(9.1)
|
|
|
(72.0)
|
|
|
(81.9)
|
|
|
(165.0)
|
|
Interest
paid
|
|
(35.4)
|
|
|
(32.1)
|
|
|
(87.4)
|
|
|
(87.0)
|
|
Acquisition of shares
held in trust
|
|
(0.1)
|
|
|
(0.1)
|
|
|
(0.1)
|
|
|
(10.7)
|
|
Dividends paid,
common shares
|
|
(28.5)
|
|
|
(27.8)
|
|
|
(114.0)
|
|
|
(111.3)
|
|
Non-controlling
interest
|
|
(0.9)
|
|
|
(0.8)
|
|
|
(11.8)
|
|
|
(14.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in
financing activities
|
|
(176.8)
|
|
|
(148.5)
|
|
|
(419.7)
|
|
|
(730.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
|
169.8
|
|
|
4.0
|
|
|
420.6
|
|
|
(57.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
458.1
|
|
|
203.3
|
|
|
207.3
|
|
|
264.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
$
|
627.9
|
|
$
|
207.3
|
|
$
|
627.9
|
|
$
|
207.3
|
2018 ANNUAL REPORT
The Company's audited consolidated financial statements
and the notes thereto for the fiscal year ended May 5, 2018 and MD&A for the fiscal year
ended May 5, 2018, which includes
discussion and analysis of results of operations, financial
position and cash flows will be available today, June 28, 2018. These documents can be accessed
through the Investor Centre section of the Company's website
at www.empireco.ca and also at
www.sedar.com.
The Company's 2018 Annual Report will be available on or
about July 27, 2018 and can be
accessed through the Investor Centre section of the Company's
website at www.empireco.ca and also
at www.sedar.com.
ABOUT EMPIRE
Empire Company Limited (TSX: EMP.A) is a Canadian company
headquartered in Stellarton, Nova
Scotia. Empire's key businesses are food retailing and
related real estate. With approximately $24.2 billion in annualized sales and
$8.7 billion in assets, Empire and
its subsidiaries, franchisees and affiliates employ approximately
120,000 people.
Additional financial information relating to Empire,
including the Company's Annual Information Form, can be found on
the Company's website at www.empireco.ca
or on SEDAR at
www.sedar.com.
SOURCE Empire Company Limited