TORONTO, July 31, 2012 /CNW/ - George Weston Limited ("GWL") and
its subsidiaries (collectively the "Company") today is announcing
its unaudited results for the 12 weeks ended June 16, 2012. The
Company's Q2 2012 Quarterly Report to Shareholders, including the
Company's unaudited interim period condensed consolidated financial
statements and Management's Discussion and Analysis ("MD&A")
for the 12 and 24 weeks ended June 16, 2012, 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 second
quarter 2012 adjusted basic net earnings per common share((2)) were
$1.06 compared to $1.34 in the same period in 2011, a decrease of
$0.28. The decrease was primarily attributable to a decline in the
operating performance of Loblaw Companies Limited ("Loblaw"). The
decline in the operating performance of Loblaw was primarily due to
an increase in labour and other operating costs, incremental costs
related to investments in information technology ("IT") and supply
chain((3)), a decline in gross profit( )and a charge related to the
transition of certain Ontario conventional stores to the more cost
effective and efficient operating terms of collective agreements
ratified in the third quarter of 2010. Increased labour costs and
the decline in gross profit included incremental investments in
Loblaw's customer proposition that were not covered by operations.
(unaudited) ($ millions 12 Weeks Ended 24 Weeks Ended except where
otherwise indicated) As at or for Jun. 16, Jun. 18, Change Jun. 16,
Jun. 18, Change the periods 2012 2011 2012 2011 ended as indicated
Sales $ 7,627 $ 7,531 1.3% $ 14,851 $ 14,679 1.2% Operating $ 323 $
397 $ 597 $ 700 (14.7)% income (18.6)% Adjusted $ 364 $ 440 $ 675 $
820 (17.7)% operating (17.3)% income(2) Adjusted 4.8% 5.8% 4.5%
5.6% operating margin(2) Net interest $ 72 $ 98 $ 116 $ 164 (29.3)%
expense and (26.5)% other financing charges Income taxes $ 55 $ 69
$ 114 $ 141 (19.1)% (20.3)% Net earnings $ 137 $ 157 $ 261 $ 262
(0.4)% attributable (12.7)% to shareholders of the Company Net
earnings $ 196 $ 230 $ 367 $ 395 (7.1)% (14.8)% Basic net $ 0.99 $
1.13 $ 1.88 $ 1.87 0.5% earnings per (12.4)% common share ($)
Adjusted $ 1.06 $ 1.34 $ 1.95 $ 2.41 (19.1)% basic net (20.9)%
earnings per common share (2) ($) Adjusted $ 556 $ 612 (9.2)% $
1,051 $ 1,158 (9.2)% EBITDA(2) Adjusted 7.3% 8.1% 7.1% 7.9% EBITDA
margin(2) The Company's basic net earnings per common share were
$0.99 compared to $1.13 in the same period in 2011, a decrease of
$0.14, or 12.4%. Adjusted basic net earnings per common share((2))
declined $0.28 and excluded the year-over-year favourable net
impact of certain items, primarily certain foreign currency
translation gains and the fair value adjustment of the forward sale
agreement for 9.6 million Loblaw common shares, partially offset by
the accrual of a multi-employer pension plan ("MEPP") withdrawal
liability incurred by Weston Foods in the second quarter of 2012.
The Company uses non-GAAP financial measures. See the "Non-GAAP
Financial Measures" section of this News Release for more
information on these non-GAAP financial measures. OPERATING
SEGMENTS Weston Foods (unaudited) 12 Weeks Ended 24 Weeks Ended ($
millions) Jun. 16, Jun. 18, 2011 Jun. 16, 2012 Jun. 18, 2011 2012
Sales $ 400 $ 407 $ 825 $ 817 Operating $ 12 $ 55 $ 72 $ 74 income
Adjusted $ 65 $ 65 $ 124 $ 122 operating income(2) Adjusted 16.3%
16.0% 15.0% 14.9% operating margin(2) Adjusted $ 78 $ 78 $ 151 $
149 EBITDA(2) Adjusted 19.5% 19.2% 18.3% 18.2% EBITDA margin(2)
Weston Foods sales in the second quarter of 2012 decreased by 1.7%
to $400 million from $407 million in the same period in 2011.
Foreign currency translation positively impacted sales by
approximately 1.6%. Excluding this impact, sales decreased 3.3%
mainly due to a decrease in volumes of 3.9% compared to the same
period in 2011. Pricing across certain product categories
contributed positively to sales growth by 0.6%. Weston Foods
operating income in the second quarter of 2012 was $12 million
compared to $55 million in the same period in 2011, a decrease of
$43 million. The decrease was mainly due to the accrual of a MEPP
withdrawal liability of $35 million recorded in the second quarter
of 2012. Weston Foods adjusted operating income((2)) remained flat
at $65 million in the second quarter of 2012 compared to the same
period in 2011. Weston Foods adjusted operating margin((2)) was
16.3% compared to 16.0% in the same period in 2011. Adjusted
operating income((2)) in the second quarter of 2012 was positively
impacted by the benefits realized from productivity improvements
and other cost reduction initiatives. These benefits were offset by
higher commodity and other input costs and lower sales volumes
compared to the same period in 2011. Loblaw (unaudited) 12 Weeks
Ended 24 Weeks Ended ($ millions) Jun. 16, 2012 Jun. 18, 2011 Jun.
16, 2012 Jun. 18, 2011 Sales $ 7,375 $ 7,278 $ 14,312 $ 14,150
Operating $ 288 $ 343 $ 525 $ 644 income Adjusted $ 299 $ 375 $ 551
$ 698 operating income(2) Adjusted 4.1% 5.2% 3.8% 4.9% operating
margin(2) Adjusted EBITDA $ 478 $ 534 $ 900 $ 1,009 (2) Adjusted
EBITDA 6.5% 7.3% 6.3% 7.1% margin(2) In the second quarter of 2012,
Loblaw continued to execute on its plan. Loblaw began to gain
traction on sales, particularly in its core food and drug
businesses, as it continued its disciplined approach to improving
its customer proposition. Loblaw sales in the second quarter of
2012 increased by 1.3% to $7,375 million from $7,278 million in the
same period in 2011. Retail segment sales increased by 1.1% and
same-store sales growth was 0.2% (2011 - 0.4% decline). Sales
growth in food was moderate, sales growth in drugstore was modest,
gas bar sales declined marginally, sales in general merchandise,
excluding apparel, declined moderately and sales in apparel were
flat. Loblaw experienced modest average quarterly internal food
price inflation during the second quarter of 2012 and moderate
average quarterly food price inflation during the second quarter of
2011, lower than the average quarterly national food price
inflation of 2.5% (2011 - 4.0%) as measured by "The Consumer Price
Index for Food Purchased from Stores". In the last twelve months,
Loblaw opened 22 corporate and franchise stores and closed seven
corporate and franchise stores, resulting in a net increase of 0.4
million square feet, or 0.8%. Loblaw sales in the second quarter of
2012 were also positively impacted by an increase in revenue from
its Financial Services segment, which includes President's Choice
Bank, a subsidiary of Loblaw. The increase in Financial Services
segment revenue was primarily driven by higher interchange fee
income, interest income and PC Telecom revenues when compared to
the same period in 2011. Loblaw operating income in the second
quarter of 2012 was $288 million compared to $343 million in the
same period in 2011, a decrease of $55 million. The decrease was
mainly due to a decline in adjusted operating income((2) )of $76
million, partially offset by the effect of certain prior years'
commodity tax matters of $15 million recorded in the second quarter
of 2011. Loblaw adjusted operating income((2)) was $299 million in
the second quarter of 2012 compared to $375 million in the same
period in 2011, a decrease of $76 million. Loblaw adjusted
operating margin((2)) was 4.1% compared to 5.2% in the same period
in 2011. The decreases in adjusted operating income((2)) and
adjusted operating margin((2)) were primarily attributable to an
increase in labour and other operating costs, incremental costs
related to investments in IT and supply chain((3)), a decline in
gross profit, a decrease in foreign exchange gains and a charge
related to the transition of certain Ontario conventional stores to
the more cost effective and efficient operating terms of collective
agreements ratified in the third quarter of 2010, partially offset
by changes in the value of Loblaw's investments in its franchise
business. Increased labour costs and the decline in gross profit
included an estimated $5 million and $10 million, respectively, of
incremental investments in Loblaw's customer proposition that were
not covered by operations. NET INTEREST EXPENSE AND OTHER FINANCING
CHARGES In the second quarter of 2012, net interest expense and
other financing charges decreased by $26 million to $72 million
compared to the same period in 2011. The decrease was mainly due to
an increase of $22 million in non-cash income related to the fair
value adjustment of the forward sale agreement for 9.6 million
Loblaw common shares. Excluding this impact, net interest expense
and other financing charges decreased by $4 million compared to the
same period in 2011, mainly due to GWL's refinancing of certain
long term debt through the issuance of new Medium Term Notes in the
fourth quarter of 2011 which resulted in lower overall interest
rates. INCOME TAXES In the second quarter of 2012, income tax
expense decreased to $55 million from $69 million, and the
effective income tax rate decreased to 21.9% from 23.1%, compared
to the same period in 2011. The decreases were primarily due to
non-taxable foreign currency translation gains recorded in the
second quarter of 2012, reductions in the federal and Ontario
statutory income tax rates and a decrease in income tax expense
related to certain prior year income tax matters. The effective
income tax rate in the second quarter of 2011 was also impacted by
the utilization of realized foreign currency losses. OUTLOOK((1))
This outlook reflects the underlying operating performance of the
Company's operating segments as discussed below. For the full year
2012, Weston Foods expects to deliver sales in line with 2011.
Weston Foods will continue 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. For the full year 2012, Loblaw estimates operating income to
be down year-over-year, with more pressure in the first half of the
year, as it does not expect its operations to cover incremental
costs related to investments in IT and supply chain and the ongoing
investments in its customer proposition. For the full year 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 and ongoing customer proposition
investments at Loblaw. 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 continued
expectations that for the full year 2012: For Weston Foods: --
sales will be in line with 2011; and -- efforts will be made to
achieve full year operating margins in line with those in 2011. For
Loblaw Companies Limited ("Loblaw"): -- there will be incremental
costs related to investments in IT and supply chain, as well as
incremental investments in Loblaw's customer proposition; and --
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 its operations will not cover the incremental costs related to
the investments in IT and supply chain and its customer
proposition. For the Company: -- 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, income 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 franchise 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 the
Enterprise Risks and Risk Management section of the MD&A
included in the Company's 2012 Second Quarter Report to
Shareholders and Section 12, "Enterprise Risks and Risk
Management", of the MD&A included in the Company'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. (3) Incremental costs related to
investments in IT and supply chain include IT costs, depreciation
and amortization and supply chain project costs. 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. Certain
expenses and income that must be recognized under GAAP are not
necessarily reflective of the Company's underlying operating
performance. For this reason, management uses certain non-GAAP
financial measures to exclude the impact of these items 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 certain items
does not imply that they are non-recurring. Loblaw does not report
its results of operations on an adjusted basis, however the Company
excludes the impact of certain Loblaw items, as applicable, when
reporting its consolidated and segment results. These non-GAAP
financial 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 and Adjusted EBITDA 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. 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. 12 Weeks Ended Jun. 16, 2012 Jun.
18, 2011 (unaudited) Weston Other Weston Other ($ millions) Foods
Loblaw (1) Consolidated Foods Loblaw (1) Consolidated Net earnings
$ 137 $ 157 attributable to shareholders of the Company Add impact
of the following: Non-controlling 59 73 interests Income taxes 55
69 Net interest 72 98 expense and other financing charges Operating
$ 12 $ 288 $ 23 $ 323 $ 55 $ 343 $ (1) $ 397 income (loss) Add
(deduct) impact of the following: Restructuring 5 6 11 2 2 and
other charges(2) Fair value 7 7 12 12 adjustment of commodity
derivatives at Weston Foods Share-based 6 5 11 (2) 15 13
compensation net of equity derivatives MEPP withdrawal 35 35
liability incurred by Weston Foods Certain prior 15 15 year's
commodity tax matters at Loblaw Foreign (23) (23) 1 1 currency
translation (gain) loss Adjusted $ 65 $ 299 $ $ 364 $ 65 $ 375 $ $
440 operating income Depreciation 13 179 192 13 159 172 and
amortization Adjusted EBITDA $ 78 $ 478 $ $ 556 $ 78 $ 534 $ $ 612
(1) Operating income in the second quarter of 2012 included a gain
of $23 million (2011 - loss of $1 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 foreign
operations. (2) Other charges at Loblaw in the second quarter of
2012 included $6 million (2011 - $2 million) related to changes in
Loblaw's distribution network. Restructuring and other charges
included $1 million (2011 - nil) of accelerated depreciation
incurred by Weston Foods. 24 Weeks Ended Jun. 16, 2012 Jun. 18,
2011 (unaudited) Weston Other Weston Other ($ millions) Foods
Loblaw (1) Consolidated Foods Loblaw (1) Consolidated Net earnings
$ 261 $ 262 attributable to shareholders of the Company Add impact
of the following: Non-controlling 106 133 interests Income taxes
114 141 Net interest 116 164 expense and other financing charges
Operating $ 72 $ 525 $ $ 597 $ 74 $ 644 $ (18) $ 700 income (loss)
Add (deduct) impact of the following: Restructuring 6 9 15 6 31 37
and other charges(2) Fair value 4 4 28 28 adjustment of commodity
derivatives at Weston Foods Share-based 7 17 24 14 8 22
compensation net of equity derivatives MEPP withdrawal 35 35
liability incurred by Weston Foods Certain prior 15 15 year's
commodity tax matters at Loblaw Foreign 18 18 currency translation
(gain) loss Adjusted $ 124 $ 551 $ $ 675 $ 122 $ 698 $ $ 820
operating income Depreciation 27 349 376 27 311 338 and
amortization Adjusted EBITDA $ 151 $ 900 $ $ 1,051 $ 149 $ 1,009 $
$ 1,158 (1) Year-to-date operating income included a nominal gain
(2011 - loss of $18 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 foreign operations. (2)
Year-to-date other charges at Loblaw included $9 million (2011 -
$23 million) related to changes in Loblaw's distribution network.
Other charges in 2011 also included a charge of $8 million related
to an internal realignment of Loblaw's business centered around its
two primary store formats, conventional and discount. Restructuring
and other charges included $1 million (2011 - nil) of accelerated
depreciation incurred by Weston Foods. The year-over-year changes
in the following items influenced operating income in the second
quarter of 2012: 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 the "Reportable
Operating Segments" section of the MD&A included in the
Company's Q2 2012 Quarterly Report to Shareholders. Fair value
adjustment of commodity derivatives 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. Hedge accounting is
not applied to these commodity derivatives and as a result, changes
in their fair value, which include realized and unrealized gains
and losses related to future purchases of raw materials, are
recorded in operating income. In the second quarter of 2012, Weston
Foods recorded a charge of $7 million (2011 - $12 million) related
to the fair value adjustment of exchange traded commodity
derivatives. 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.
Share-based compensation net of equity derivatives Both GWL
and Glenhuron Bank Limited have entered into equity derivatives to
partially hedge their exposure to the impact of increases in the
value of GWL and Loblaw common shares on share-based compensation
cost. The amount of net share-based compensation cost recorded in
operating income is mainly dependent upon changes in the value of
GWL and Loblaw common shares and the number and vesting of
outstanding restricted share units ("RSU") and performance share
units ("PSU") relative to the number of common shares underlying
the equity derivatives. The Company assesses stock option plan, RSU
plan, PSU 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. In the second quarter of 2012, a charge of
$11 million (2011 - $13 million) was recorded related to
share-based compensation net of equity derivatives. Multi-employer
pension plan withdrawal liability incurred by Weston Foods In
the second quarter of 2012, Weston Foods recorded a charge of $35
million related to its withdrawal from a United States MEPP in
which it participated. Certain prior years' commodity tax matters
at Loblaw In the second quarter of 2011, Loblaw recorded a
charge of $15 million related to certain prior years' commodity tax
matters. Foreign currency translation gain and loss The
Company's consolidated financial statements are expressed in
Canadian dollars. 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 foreign operations is recorded in
operating income. In the second quarter of 2012, a foreign currency
translation gain of $23 million (2011 - loss of $1 million) was
recorded in operating income as a result of the depreciation (2011
- appreciation) of the Canadian dollar. Adjusted Basic Net Earnings
per Common Share The Company believes adjusted basic net earnings
per common share is useful in assessing the Company's underlying
operating performance and in making decisions regarding the ongoing
operations of its business. The following table reconciles adjusted
basic net earnings per common share to GAAP basic net earnings per
common share reported for the periods ended as indicated.
(unaudited) 12 Weeks Ended 24 Weeks Ended ($) Jun. Jun. Jun. Jun.
18, 16, 2012 18, 2011 16, 2012 2011 Basic net $ 0.99 $ 1.13 $ 1.88
$ 1.87 earnings per common share (Deduct) Add impact of the
following(1): Fair value (0.09) 0.04 (0.34) (0.08) adjustment of
the forward sale agreement for 9.6 million Loblaw common shares
Restructuring 0.05 0.01 0.07 0.14 and other charges Fair value 0.04
0.06 0.02 0.15 adjustment of commodity derivatives at Weston Foods
Share-based 0.08 0.04 0.15 0.14 compensation net of equity
derivatives MEPP 0.17 0.17 withdrawal liability incurred by Weston
Foods Certain prior 0.05 0.05 years' commodity tax matters at
Loblaw Foreign (0.18) 0.01 0.14 currency translation (gain) loss
Adjusted $ 1.06 $ 1.34 $ 1.95 $ 2.41 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 and Adjusted EBITDA" section above, the
year-over-year change in the following item also influenced basic
net earnings per common share in the second quarter of 2012: Fair
value adjustment of the forward sale agreement for 9.6 million
Loblaw common shares The fair value adjustment of the forward
sale agreement for 9.6 million Loblaw common shares is non-cash and
is included in consolidated net interest expense and other
financing charges. The adjustment is determined by changes in the
value of the underlying Loblaw shares. At maturity, any cash paid
under the forward sale agreement could be offset by the sale of the
underlying Loblaw common shares. In the second quarter of 2012,
income of $0.09 (2011 - charge of $0.04) was recorded in net
interest expense and other financing charges as a result of the
decrease (2011 - increase) in the market price of Loblaw common
shares. SELECTED FINANCIAL INFORMATION The following includes
selected quarterly financial information which is prepared by
management in accordance with International Financial Reporting
Standards ("IFRS") and is based on the Company's 2012 Second
Quarter Report to Shareholders. 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 2011 Annual Report and 2012 Second Quarter Report to
Shareholders available in the Investor Centre section of the
Company's website at www.weston.ca. Condensed Consolidated
Statements of Earnings (unaudited) 12 Weeks Ended 24 Weeks Ended
(millions of Canadian dollars except where otherwise Jun. Jun. Jun.
Jun. indicated) 16, 2012 18, 2011 16, 18, 2012 2011 Revenue $ 7,627
$ 7,531 $ 14,851 $ 14,679 Operating Expenses Cost of inventories
5,751 5,646 11,173 10,987 sold Selling, general and 1,553 1,488
3,081 2,992 administrative expenses 7,304 7,134 14,254 13,979
Operating Income 323 397 597 700 Net Interest Expense and Other 72
98 116 164 Financing Charges Earnings Before Income Taxes 251 299
481 536 Income Taxes 55 69 114 141 Net Earnings 196 230 367 395
Attributable to: Shareholders of the 137 157 261 262 Company
Non-Controlling 59 73 106 133 Interests Net Earnings $ 196 $ 230 $
367 $ 395 Net Earnings per Common Share ($) Basic $ 0.99 $ 1.13 $
1.88 $ 1.87 Diluted $ 0.98 $ 1.08 $ 1.87 $ 1.86 Condensed
Consolidated Balance Sheets (unaudited) As at (millions of Jun. 16,
Jun. 18, Dec. 31, Canadian dollars) 2012 2011 2011 ASSETS Current
Assets Cash and cash $ 1,559 $ 1,446 $ 1,372 equivalents Short term
2,042 1,982 2,362 investments Accounts 557 510 559 receivable
Credit card 2,058 1,974 2,101 receivables Inventories 1,996 2,060
2,147 Income taxes 53 46 37 recoverable Prepaid 154 146 122
expenses and other assets Assets held for 23 66 32 sale Total
Current 8,442 8,230 8,732 Assets Fixed Assets 9,219 8,861 9,172
Investment 95 73 82 Properties Goodwill and 1,587 1,546 1,555
Intangible Assets Deferred Income 335 277 295 Taxes Security
Deposits 341 246 367 Franchise Loans 358 313 331 Receivable Other
Assets 822 809 789 Total Assets $ 21,199 $ 20,355 $ 21,323
LIABILITIES Current Liabilities Bank $ 2 $ 3 indebtedness Trade and
other $ 3,587 3,510 3,940 payables Provisions 71 107 67 Short term
debt 1,299 1,260 1,280 Long term debt 226 381 87 due within one
year Total Current 5,183 5,260 5,377 Liabilities Provisions 88 98
94 Long Term Debt 6,633 6,279 6,757 Deferred Income 167 157 160
Taxes Other Liabilities 1,091 802 1,033 Capital Securities 222 221
222 Total Liabilities 13,384 12,817 13,643 EQUITY Share Capital 950
951 950 Contributed Surplus 21 25 24 Retained Earnings 4,593 4,409
4,496 Accumulated Other (10) (34) (11) Comprehensive Loss Total
Equity 5,554 5,351 5,459 Attributable to Shareholders of the
Company Non-Controlling 2,261 2,187 2,221 Interests Total Equity
7,815 7,538 7,680 Total Liabilities $ 21,199 $ 20,355 $ 21,323 and
Equity Condensed Consolidated Statements of Cash Flow (unaudited)
12 Weeks Ended 24 Weeks Ended (millions of Canadian Jun. Jun. Jun.
Jun. dollars) 16, 18, 2011 16, 2012 18, 2011 2012 Operating
Activities Net earnings $ 196 $ 230 $ 367 $ 395 Income taxes 55 69
114 141 Net interest expense 72 98 116 164 and other financing
charges Depreciation and 193 172 377 338 amortization Foreign
currency (23) 1 18 translation (gain) loss Income taxes paid (63)
(66) (136) (144) Interest received 25 29 34 46 Change in credit
card (71) (87) 43 23 receivables Change in non-cash 292 95 (288)
(446) working capital Fixed assets and other 5 3 9 related
impairments (Gain) loss on disposal (2) 1 (2) 1 of assets Other
(11) (7) (3) (11) Cash Flows from Operating 663 540 625 534
Activities Investing Activities Fixed asset purchases (254) (170)
(398) (332) Change in short term 217 338 320 1,239 investments
Business acquisition - (12) net of cash acquired Proceeds from
fixed 15 1 16 6 asset sales Change in franchise 20 28 3 28
investments and other receivables Change in security 12 1 26 184
deposits Intangible asset (41) (4) (41) (5) additions Other 7 Cash
Flows (used in) from (31) 201 (74) 1,108 Investing Activities
Financing Activities Change in bank 1 2 (3) (9) indebtedness Change
in short term 9 9 19 389 debt Long term - Issued 14 159 37 216 debt
- Retired (44) (7) (73) (865) Share capital issued 1 1 Subsidiary -
Issued 2 16 4 19 share capital - Retired (2) (3) (4) (3) Interest
paid (117) (155) (209) (266) Dividends - To common (46) (47) (92)
(1,093) shareholders - To (11) (11) (22) (22) preferred
shareholders - To (22) (14) (22) (14) minority shareholders Cash
Flows used in (216) (50) (365) (1,647) Financing Activities Effect
of foreign 9 1 1 (2) currency exchange rate changes on cash and
cash equivalents Change in Cash and Cash 425 692 187 (7)
Equivalents Cash and Cash 1,134 754 1,372 1,453 Equivalents,
Beginning of Period Cash and Cash $ 1,559 $ 1,446 $ 1,559 $ 1,446
Equivalents, End of Period 2012 SECOND QUARTER REPORT TO
SHAREHOLDERS The Company's 2011 Annual Report and 2012 Second
Quarter Report to Shareholders 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 Tuesday, July
31, 2012 at 11:00 a.m. (EST). To access via tele-conference, please
dial (647) 427-7450. The playback will be available two hours after
the event at (416) 849-0833, passcode: 94021980#. To access via
audio webcast, please visit the Investor Centre section of
www.weston.ca. Pre-registration will be available. 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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