TORONTO, March 1, 2012 /CNW/ - George Weston Limited ("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 Change except where Dec.
Dec. Dec. Dec. otherwise 31, 31, 31, 31, indicated) 2011 2010
Change 2011 2010 Sales $ 7,636 $ 7,375 3.5% $ 32,376 $ 31,847 1.7%
Operating $ $ $ $ 2.6% income 352 367 (4.1)% 1,609 1,568 Operating
margin 4.6% 5.0% 5.0% 4.9% Adjusted $ $ $ $ 2.5% operating
income(2) 373 378 (1.3)% 1,700 1,659 Adjusted operating margin(2)
4.9% 5.1% 5.3% 5.2% Net interest $ $ $ $ (22.3)% expense and other
financing charges 108 87 24.1% 366 471 Income taxes $ 71 $ 108
(34.3)% $ 324 $ 394 (17.8)% Net earnings $ $ $ $ 40.5% attributable
to shareholders of the Company 109 111 (1.8)% 635 452 Basic net $ $
$ $ 44.9% earnings per common share ($) 0.77 0.78 (1.3)% 4.58 3.16
Adjusted $ $ $ $ 18.8% basic net earnings per common share ($)(2)
1.01 0.92 9.8% 4.86 4.09 Adjusted $ $ $ $ 5.0% EBITDA(2) 558 545
2.4% 2,459 2,342 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, Dec. 31, Dec. 31, Dec. 31, 2010 2011
2010 2011 Sales $ 410 $ 386 $ 1,772 $ 1,624 Operating $ 57 $ 57 $
208 $ 285 income Operating 13.9% 14.8% 11.7% 17.5% margin Adjusted
$ 56 $ 48 $ 265 $ 235 operating income(2) Adjusted 13.7% 12.4%
15.0% 14.5% operating margin(2) Adjusted $ 71 $ 63 $ 325 $ 290
EBITDA(2) Adjusted 17.3% 16.3% 18.3% 17.9% EBITDA margin(2) 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,
Dec. 31, Dec. 31, Dec. 31, 2010 2011 2010 2011 Sales $ 7,373 $
7,119 $ 31,250 $ 30,836 Operating $ 313 $ 322 $ 1,376 $ 1,339
income Operating 4.2% 4.5% 4.4% 4.3% margin Adjusted $ 317 $ 330 $
1,435 $ 1,424 operating income(2) Adjusted 4.3% 4.6% 4.6% 4.6%
operating margin(2) Adjusted $ 487 $ 482 $ 2,134 $ 2,052 EBITDA(2)
Adjusted 6.6% 6.8% 6.8% 6.7% EBITDA margin(2) 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) Weston
Other Weston Other ($ millions) Foods Loblaw (1) Consolidated Foods
Loblaw (1) Consolidated Net earnings $ 109 $ 111 attributable to
shareholders of the Company Add impact of the following:
Non-controlling 64 61 interests Income taxes 71 108 Net interest
108 87 expense and other financing charges Operating $ 57 $ 313 $
(18) $ 352 $ 57 $ 322 $ (12) $ 367 income (loss) Add (deduct)
impact of the following: Restructuring 5 5 3 1 4 and other
charges(2) Commodity (1) (1) (5) (5) derivatives fair value
adjustment at Weston Foods Foreign 18 18 12 12 currency translation
losses Share-based (3) 4 1 (7) 7 compensation net of equity
derivatives Net insurance (2) (2) proceeds at Weston Foods Adjusted
$ 56 $ 317 $ $ 373 $ 48 $ 330 $ $ 378 operating income Depreciation
15 170 185 15 152 167 and amortization 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 $1 million as a
result of changes in Loblaw's distribution network. 52 Weeks Ended
Dec. 31, Dec. 31, 2011 2010 (unaudited) Weston Other Weston Other
($ millions) Foods Loblaw (1) Consolidated Foods Loblaw (1)
Consolidated Net earnings $ 635 $ 452 attributable to shareholders
of the Company Add impact of the following: Non-controlling 284 251
interests Income taxes 324 394 Net interest 366 471 expense and
other financing charges Operating $ 208 $ 1,376 $ 25 $ 1,609 $ 285
$ 1,339 $ (56) $ 1,568 income (loss) Add (deduct) impact of the
following: Restructuring and other charges(2) 13 31 44 8 53 61
Commodity 31 31 (39) (39) derivatives fair value adjustment at
Weston Foods Foreign (25) (25) 56 56 currency translation (gains)
losses Share-based 20 27 47 (19) 32 13 compensation net of equity
derivatives Certain prior 15 15 years' commodity tax matters at
Loblaw Net insurance (7) (7) proceeds at Weston Foods Gain on sale
of (14) (14) a portion of a Loblaw property Adjusted $ 265 $ 1,435
$ $ 1,700 $ 235 $ 1,424 $ $ 1,659 operating income Depreciation 60
699 759 55 628 683 and amortization 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. Dec.
31, Dec.31, 2011 Dec. 31, 31,2011 2010 2010 Basic net $ 0.77 $ 0.78
$ 4.58 $ 3.16 earnings per common share Add (deduct) impact of the
following(1): Accounting 0.09 (0.04) (0.10) 0.36 for WHL's forward
sale agreement for 9.6 million Loblaw common shares Federal tax
0.10 0.10 legislation changes Restructuring 0.02 0.03 0.18 0.23 and
other charges Commodity (0.01) (0.02) 0.17 (0.21) derivatives fair
value adjustment at Weston Foods Foreign 0.14 0.09 (0.19) 0.43
currency translation losses (gains) Share-based 0.01 (0.02) 0.27
0.02 compensation net of equity derivatives Certain prior 0.05
years' commodity tax matters at Loblaw Net insurance (0.01) (0.04)
proceeds at Weston Foods Gain on sale (0.06) of a portion of a
Loblaw property Adjusted $ 1.01 $ 0.92 $ 4.86 $ 4.09 basic net
earnings per common share (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
Dec. 31, Dec. 31, Dec.31, Dec. 31 2010 except where 2011 2010 2011
otherwise indicated) Revenue $ 7,636 $ 7,375 $ 32,376 $ 31,847
Operating Expenses Cost of 5,541 24,421 23,918 inventories sold
5,794 Selling, 1,467 6,346 6,361 general and administrative
expenses 1,490 7,284 7,008 30,767 30,279 OperatingIncome 352 367
1,609 1,568 Net Interest 108 87 366 471 Expense and Other Financing
Charges Earnings Before 244 280 1,243 1,097 Income Taxes Income
Taxes 71 108 324 394 Net Earnings 173 172 919 703 Attributable to:
Shareholders of 111 635 452 the Company 109 Non-Controlling 61 284
251 Interests 64 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 $
1,372 $ 1,453 $ 1,490 equivalents Short term 2,362 3,253 3,420
investments Accounts 559 462 444 receivable Credit card 2,101 1,997
2,095 receivables Inventories 2,147 2,050 2,080 Income taxes 37
recoverable Prepaid expenses 122 91 107 and other assets Assets
held for 32 71 56 sale Total Current 8,732 9,377 9,692 Assets Fixed
Assets 9,172 8,823 8,261 Investment 82 74 75 Properties Goodwill
and 1,555 1,554 1,293 Intangible Assets Deferred Income 295 311 390
Taxes Security Deposits 367 435 348 Franchise Loans 331 314 344
Receivable Other Assets 789 808 787 Total Assets $ 21,323 $ 21,696
$ 21,190 LIABILITIES CurrentLiabilities Bank $ 3 $ 11 $ 10
indebtedness Trade and other 3,940 4,799 3,676 payables Provisions
67 92 96 Income taxes 12 79 payable Short term debt 1,280 871 1,525
Long term debt 87 1,202 312 due within one year Total Current 5,377
6,987 5,698 Liabilities Provisions 94 95 110 Long Term Debt 6,757
6,114 6,256 Deferred Income 160 162 140 Taxes 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
24 (14) Surplus Retained Earnings 4,496 4,311 5,153 Accumulated
Other (11) (23) 1 Comprehensive (Loss) Income Total Equity 5,459
5,224 6,104 Attributable to Shareholders of theCompany
Non-Controlling 2,221 2,080 1,902 Interests Total Equity 7,680
7,304 8,006 Total Liabilities $ 21,323 $ 21,696 $ 21,190 and Equity
Consolidated Statements of Cash Flow 12 Weeks Ended 52 Weeks Ended
($ millions) Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2011 2010 2011
2010 Operating Activities Net earnings $ 173 $ 172 $ 919 $ 703
Income taxes 71 108 324 394 Net interest 87 471 expense and other
financing charges 108 366 Depreciation and 167 683 amortization 188
762 Foreign currency 12 56 translation losses (gains) 18 (25)
Income taxes paid (61) (94) (277) (336) Interest received 20 16 76
67 Settlement of equity forward contracts (22) (22) Net (increase)
(142) 98 decrease in credit card receivables (190) (104) Change in
339 136 non-cash working capital 351 (36) Fixed assets and (9) 28
other related impairments (2) 7 (Gain) loss on (10) 8 disposal of
assets (7) (18) Other 22 (1) 2 (29) Cash Flows from 669 645 1,974
Operating Activities 2,279 Investing Activities Fixed asset (447)
(1,214) purchases (362) (1,027) Change in short 159 80 term
investments 49 929 Business (121) (308) acquisition - net of cash
acquired (12) Proceeds from 53 90 fixed assets sales 6 57 Change in
(8) (25) franchise investments and other receivables (27) (24)
Change in (3) (104) security deposits (123) 74 Other (12) 9 (12)
(12) Cash Flows used in (469) (358) (15) Investing Activities
(1,493) Financing Activities Change in bank 5 (2) indebtedness (5)
(8) Change in short (590) (654) term debt 10 409 Long term debt -
609 981 Issued 352 635 - 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 (186) common shareholders (1,186) - To
preferred (44) (44) shareholders (3) (3) - To minority (79) (57)
shareholders (22) (14) Cash Flows used in (225) (136) (2,049)
Financing Activities (806) Effect of foreign currency exchange rate
on cash and cash equivalents (2) (6) 9 (17) Change in Cash and (27)
145 (81) Cash Equivalents (37) Cash and Cash 1,399 1,308 1,453
Equivalents, Beginning of Period 1,490 Cash and Cash $ 1,372 1,453
1,372 $ Equivalents, End of Period $ $ 1,453 Basic and
Diluted Net Earnings per Common Share 12 Weeks Ended 52 Weeks Ended
($ millions Dec.31,2011 Dec. 31, Dec. 31, Dec. 31, except where
2010 2011 2010 otherwise indicated) Net earnings $ 109 $ 111 $ 635
$ 452 attributable to shareholders of the Company Prescribed (10)
(10) (44) (44) dividends on preferred shares in share capital Net
earnings $ 99 $ 101 $ 591 $ 408 available to common shareholders
Impact of (3) (8) (20) GWL equity swaps Reduction in (3) (2) (4)
(9) net earnings due to dilution at Loblaw Net earnings $ 93 $ 91 $
587 $ 379 available to common shareholders for diluted earnings per
share Weighted 128.8 129.1 129.0 129.1 average common shares
outstanding (in millions) Dilutive 0.1 0.1 effect of share-based
compensation (1) (in millions) Dilutive 0.6 0.5 0.6 effect of GWL
equity swaps(1) (in millions) Diluted 129.5 129.6 129.1 129.7
weighted average common shares outstanding (in millions) Basic net
$ 0.77 $ 0.78 $ 4.58 $ 3.16 earnings per common share ($) Diluted
net $ 0.72 $ 0.70 $ 4.55 $ 2.92 earnings per common share ($) (1)
In the fourth quarter of 2011 and year-to-date, 1,115,191 (2010 -
1,530,495) and 1,915,191 (2010 - 1,266,666) outstanding potentially
dilutive instruments, respectively, were not included in the
computation of diluted net earnings per common share as their
impact would have been anti-dilutive. Segment Information The
Company has two reportable operating segments: Weston Foods and
Loblaw. The accounting policies of the reportable operating
segments are the same as those described in the Company's 2011
Annual Report. The Company measures each reportable operating
segment's performance based on adjusted EBITDA((1) )and adjusted
operating income((1)). Neither reportable operating segment is
reliant on any single external customer. 12 Weeks Ended 52 Weeks
Ended ($ millions) Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2011 2010
2011 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 OperatingIncome (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 investor@weston.ca.
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. George Weston Limited CONTACT:
Mr. Geoffrey H. Wilson, Senior Vice President, Financial
ControlandInvestor Relations, at the Company's Executive Office or
by e-mailat investor@weston.ca
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