BRAMPTON, ON, May 4, 2022 /CNW/
- Loblaw Companies Limited (TSX: L) ("Loblaw" or the
"Company") announced today its unaudited financial results for the
first quarter ended March 26,
2022(1).
Loblaw delivered another strong quarter in a retail environment
experiencing fewer COVID-19 related restrictions and continued
inflationary pressures. Drug Retail results were strong and drove
margin expansion in the quarter, as front-store and prescription
sales benefited from the loosening of social restrictions, and
Pharmacy services continued to perform well. Food sales continued
to benefit from higher than normal eat-at-home levels, and
customers responded favourably to data-driven marketing promotions
and PC Optimum™ loyalty program offers. The Company's
Discount division performed very well, led by strong growth in the
No Frills® hard-discount banner. The Market
division performed well relative to the Canadian conventional
grocery sector, but was impacted by the shift to discount.
"Loblaw demonstrated consistent operating and financial results,
reflecting the strength of its portfolio of businesses and the
ability to provide service and value to meet the evolving needs of
Canadians," said Galen G. Weston,
Chairman and President, Loblaw Companies Limited. "We have begun
the year with momentum in our core retail businesses, a clear
strategic agenda, and continued traction in our growth
initiatives."
2022 FIRST QUARTER HIGHLIGHTS
- Revenue was $12,262 million, an
increase of $390 million, or
3.3%.
- Retail segment sales were $12,045
million, an increase of $375
million, or 3.2%.
-
- Food Retail (Loblaw) same-stores sales increased by 2.1%.
- Drug Retail (Shoppers Drug Mart) same-store sales increased by
5.2%.
- E-commerce sales decreased by 9.8% lapping growth of 133%.
- Operating income was $738
million, an increase of $121
million, or 19.6%.
- Adjusted EBITDA(2) was $1,343
million, an increase of $125
million, or 10.3%.
- Retail segment adjusted gross profit percentage(2)
was 31.1%, an increase of 80 basis points.
- Net earnings available to common shareholders of the Company
were $437 million, an increase of
$124 million or 39.6%. Diluted net
earnings per common share were $1.30,
an increase of $0.40, or 44.4%.
- Adjusted net earnings available to common shareholders of the
Company(2) were $459
million, an increase of $67
million, or 17.1%.
- Adjusted diluted net earnings per common share(2)
were $1.36, an increase of
$0.23 or 20.4%.
- Repurchased for cancellation, 1.3 million common shares at a
cost of $148 million and invested
$186 million in capital expenditures.
Retail segment free cash flow(2) was $214 million.
- The Company announced today the release of its 2021
Environmental, Social and Governance ("ESG") Report.
- Eleventh consecutive annual increase to the quarterly common
share dividend from $0.365 per common
share to $0.405 per common share, an
increase of 11%.
See "News Release Endnotes" at the end of this News Release.
CONSOLIDATED AND SEGMENT RESULTS OF OPERATIONS
The following tables provide key performance metrics for the
Company by segment and same-store sales.
|
2022
|
2021
|
|
(12
weeks)
|
(12 weeks)
|
For the periods ended
March 26, 2022 and March 27, 2021
|
Retail
|
Financial
Services
|
Eliminations
|
Consolidated
|
Retail
|
Financial
Services
|
Eliminations
|
Consolidated
|
(millions of Canadian
dollars)
|
Revenue
|
$
|
12,045
|
$
|
274
|
$
|
(57)
|
$
|
12,262
|
$
|
11,670
|
$
|
253
|
$
|
(51)
|
$
|
11,872
|
Adjusted gross
profit(2)
|
$
|
3,743
|
$
|
241
|
$
|
(57)
|
$
|
3,927
|
$
|
3,533
|
$
|
216
|
$
|
(51)
|
$
|
3,698
|
Adjusted gross profit
%(2)
|
|
31.1%
|
|
N/A
|
|
— %
|
|
32.0%
|
|
30.3%
|
|
N/A
|
|
— %
|
|
31.1%
|
Operating
income
|
$
|
690
|
$
|
48
|
$
|
—
|
$
|
738
|
$
|
553
|
$
|
64
|
$
|
—
|
$
|
617
|
Adjusted operating
Income(2)
|
|
781
|
|
48
|
|
—
|
|
829
|
|
661
|
|
64
|
|
—
|
|
725
|
Adjusted
EBITDA(2)
|
$
|
1,285
|
$
|
58
|
$
|
—
|
$
|
1,343
|
$
|
1,145
|
$
|
73
|
$
|
—
|
$
|
1,218
|
Adjusted EBITDA
margin(2)
|
|
10.7%
|
|
N/A
|
|
—%
|
|
11.0%
|
|
9.8%
|
|
N/A
|
|
— %
|
|
10.3 %
|
Net interest expense
and other financing charges
|
$
|
126
|
$
|
16
|
$
|
—
|
$
|
142
|
$
|
144
|
$
|
16
|
$
|
—
|
$
|
160
|
Adjusted net interest
expense and other financing charges
|
|
137
|
|
16
|
|
—
|
|
153
|
|
144
|
|
16
|
|
—
|
|
160
|
Earnings before
income taxes
|
$
|
564
|
$
|
32
|
$
|
—
|
$
|
596
|
$
|
409
|
$
|
48
|
$
|
—
|
$
|
457
|
Income Taxes
|
|
|
|
|
|
|
$
|
123
|
|
|
|
|
|
|
$
|
122
|
Adjusted income
taxes(2)
|
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
151
|
Net earnings
attributable to non-controlling interests
|
|
|
|
|
|
|
$
|
33
|
|
|
|
|
|
|
$
|
19
|
Prescribed dividends on
preferred shares in share capital
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
Net earnings
available to common shareholders of the Company
|
|
|
|
|
|
|
$
|
437
|
|
|
|
|
|
|
$
|
313
|
Adjusted net earnings
available to common shareholders of the
Company(2)
|
|
|
|
|
|
|
|
459
|
|
|
|
|
|
|
|
392
|
Diluted net earnings
per common share ($)
|
|
|
|
|
|
|
$
|
1.30
|
|
|
|
|
|
|
$
|
0.90
|
Adjusted diluted net
earnings per common share(2) ($)
|
|
|
|
|
|
|
$
|
1.36
|
|
|
|
|
|
|
$
|
1.13
|
Diluted weighted
average common shares outstanding (in millions)
|
|
|
|
|
|
|
|
336.7
|
|
|
|
|
|
|
|
348.2
|
|
|
|
|
|
|
|
|
|
|
For the periods ended
March 26, 2022 and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
(12
weeks)
|
(12 weeks)
|
|
Sales
|
Same-store
sales
|
Sales
|
Same-store
sales
|
Food retail
|
$
|
8,682
|
2.1%
|
$
|
8,479
|
0.1%
|
Drug retail
|
|
3,363
|
5.2%
|
|
3,191
|
(1.7)%
|
Pharmacy
|
|
1,724
|
6.8%
|
|
1,614
|
3.5%
|
Front store
|
|
1,639
|
3.6%
|
|
1,577
|
(6.4)%
|
|
|
|
|
|
RETAIL SEGMENT
- Retail segment sales were $12,045
million, an increase of $375
million, or 3.2%.
-
- Food Retail (Loblaw) sales were $8,682
million and Food Retail same-store sales grew by 2.1% (2021
– 0.1%).
-
- The Consumer Price Index as measured by The Consumer Price
Index for Food Purchased From Stores was 7.5% (2021 – 0.9%) which
was slightly lower than the Company's internal food inflation.
- Food Retail basket size decreased and traffic increased.
- Drug Retail (Shoppers Drug Mart) sales were $3,363 million, and Drug Retail same-store sales
grew by 5.2% (2021 – decreased by 1.7%), with pharmacy same-store
sales growth of 6.8% (2021 – 3.5%) and front store same-store sales
growth of 3.6% (2021 – decreased by 6.4%).
-
- On a same-store basis, the number of prescriptions dispensed
increased by 5.8% (2021 – decreased by 0.8%) and the average
prescription value increased by 0.4% (2021 – 2.4%).
- Operating income was $690
million, an increase of $137
million, or 24.8%.
- Adjusted gross profit(2) was $3,743 million, an increase of $210 million, or 5.9%. The adjusted gross profit
percentage(2) of 31.1% increased by 80 basis points,
primarily driven from favourable changes in the Drug Retail sales
mix, with underlying improvements in business initiatives across
the Retail segment.
- Adjusted EBITDA(2) was $1,285
million, an increase of $140
million, or 12.2%. The increase was driven by an increase in
adjusted gross profit(2), partially offset by an
increase in SG&A. SG&A as a percentage of sales was 20.4%,
a decrease of 10 basis points. The favourable decrease of 10 basis
points was primarily due to lower COVID-19 related expenses,
partially offset by higher costs incurred in Drug Retail from
providing pharmacy related services.
- Depreciation and amortization was $621
million, an increase of $20
million or 3.3%, primarily driven by an increase in IT
assets and leased assets. Included in depreciation and amortization
was the amortization of intangibles assets related to the
acquisition of Shoppers Drug Mart Corporation of $117 million (2021 – $117
million).
- During the quarter, the Company agreed to acquire Lifemark
Health Group ("Lifemark") for aggregate cash consideration of
$845 million. Lifemark is the leading
provider of outpatient physiotherapy, massage therapy, occupational
therapy, chiropractic, mental health, and other ancillary
rehabilitation services through its more than 300 clinics across
Canada. Regulatory approvals have
been received and the transaction is expected to close on or about
May 10, 2022.
- 9 food and drug stores were opened, and 10 food and drug stores
were closed, resulting in a net decrease in Retail square footage
of 0.1 million square feet, or 0.1%.
FINANCIAL SERVICES SEGMENT
- Revenue was $274 million, an
increase of $21 million or 8.3%. The
increase was primarily driven by higher interest income from growth
in credit card receivables and higher interchange income.
- Earnings before income taxes were $32
million, a decrease in earnings of $16 million. The Financial Services business
continues to benefit from the economic re-opening but earnings have
decreased due to the year over year impact of the expected credit
loss provision from lapping a larger prior year release of
$20 million versus the current
quarter release of $5 million. The
decrease is also driven by the prior year reversal of certain
commodity tax accrued.
OUTLOOK(3)
Loblaw will continue to execute on retail excellence in its core
grocery and pharmacy businesses while advancing its growth
initiatives in 2022. In the third year of the pandemic, the
Company's businesses remain well placed to service the everyday
needs of Canadians. However, the Company cannot predict the precise
impacts of COVID-19 and the current industry volatility on its 2022
financial results. Loblaw anticipates that in the first half of
2022 sales will benefit from the continued impact of the pandemic
and elevated industry-wide inflation. As societies and economies
reopen and the Company starts to lap elevated 2021 inflationary
prices and COVID-19 related pharmacy services, year on year revenue
growth will be more challenged.
The Company continues to expect:
- its Retail business to grow earnings faster than sales;
- Earnings per Common Share growth in the low double digits, with
higher growth in the first half of the year;
- to invest approximately $1.4
billion in capital expenditures, net of proceeds from
property disposals, reflecting incremental store and distribution
network investments; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
The company issued its 2021 ESG Report, aligned with GRI
standards, expanded SASB disclosures and commentary related to
ongoing TCFD assessment.
In the quarter, Loblaw continued support for communities: it's
annual spring food drive raised more than $1
million of products for food bank partners nationwide; the
Company mobilized immediate and ongoing support for the Canadian
Red Cross Humanitarian Crisis Appeal with in-kind donations and
funds donated and raised totaling $1.8
million.
NORMAL COURSE ISSUER BID PROGRAM
During the first quarter of 2022, the Company entered into an
automatic share purchase plan ("ASPP") with a broker in order to
facilitate the repurchase of the Company's common shares under its
NCIB. During the effective period of the ASPP, the Company's broker
may purchase common shares at times when the Company would not be
active in the market.
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, opportunities and legal and regulatory
matters. Specific forward-looking statements in this News Release
include, but are not limited to, statements with respect to the
Company's anticipated future results, events and plans, strategic
initiatives and restructuring, regulatory changes including further
healthcare reform, future liquidity, planned capital investments,
and the status and impact of Information Technology systems
implementation. These specific forward-looking statements are
contained throughout this News Release including, without
limitation, in the "Consolidated Results of Operations" and
"Outlook" section of this News Release. Forward-looking statements
are typically identified by words such as "expect", "anticipate",
"believe", "foresee", "could", "estimate", "goal", "intend",
"plan", "seek", "strive", "will", "may", "should" and similar
expressions, as they relate to the Company and its management.
Forward-looking statements reflect the Company's estimates,
beliefs and assumptions, which are based on management's perception
of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate
in the circumstances. The Company's estimates, beliefs and
assumptions are inherently subject to significant business,
economic, competitive and other uncertainties and contingencies
regarding future events, including the COVID-19 pandemic and as
such, are subject to change. The Company can give no assurance that
such estimates, beliefs and assumptions will prove to be
correct.
Numerous risks and uncertainties could cause the Company's
actual results to differ materially from those expressed, implied
or projected in the forward-looking statements, including those
described in the Company's MD&A in the Company's 2021 Annual
Report - Financial Review and Section 4 "Risks" of the Company's
2021 Annual Information Form for the year ended January 1, 2022.
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. Except as
required by law, the Company does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
DECLARATION OF DIVIDENDS
Subsequent to the end of the first quarter of 2022, the Board of
Directors declared a quarterly dividend on Common Shares and
Second Preferred Shares, Series B.
Common
Shares
|
$0.405 per
common share, payable on July 1, 2022 to shareholders of
record on June 15, 2022.
|
|
|
Second Preferred
Shares, Series B
|
$0.33125
per share, payable on June 30, 2022
to shareholders of record on June 15, 2022.
|
EXCERPT OF NON-GAAP FINANCIAL MEASURES
The Company uses non-GAAP financial measures, as reconciled and
fully described in Appendix 1 "Non-GAAP Financial Measures" of this
News Release.
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 should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
The following table provides a summary of the differences
between the Company's consolidated results on GAAP and Non-GAAP
financial measures, which are reconciled and fully described in
Appendix 1.
As at or for the
periods ended March 26, 2022
and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
(12
weeks)
|
(12 weeks)
|
|
GAAP
|
Adjusting
Items
|
Non-GAAP(2)
|
GAAP
|
Adjusting
Items
|
Non-GAAP(2)
|
EBITDA
|
$
|
1,369
|
$
|
(26)
|
$
|
1,343
|
$
|
1,227
|
$
|
(9)
|
$
|
1,218
|
Operating
Income
|
$
|
738
|
$
|
91
|
$
|
829
|
$
|
617
|
$
|
108
|
$
|
725
|
Net interest expense
and other financing charges
|
|
142
|
|
11
|
|
153
|
|
160
|
|
—
|
|
160
|
Earnings before
income taxes
|
$
|
596
|
$
|
80
|
$
|
676
|
$
|
457
|
$
|
108
|
$
|
565
|
Deduct the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
|
|
123
|
|
58
|
|
181
|
|
122
|
|
29
|
|
151
|
Non-controlling
Interests
|
|
33
|
|
—
|
|
33
|
|
19
|
|
—
|
|
19
|
Prescribed dividends on
preferred shares
|
|
3
|
|
—
|
|
3
|
|
3
|
|
—
|
|
3
|
Net earnings
available to common shareholders of the
Company(i)
|
$
|
437
|
$
|
22
|
$
|
459
|
$
|
313
|
$
|
79
|
$
|
392
|
Diluted net earnings
per common share ($)
|
$
|
1.30
|
$
|
0.06
|
$
|
1.36
|
$
|
0.90
|
$
|
0.23
|
$
|
1.13
|
Diluted weighted
average common shares (millions)
|
|
336.7
|
|
—
|
|
336.7
|
|
348.2
|
|
—
|
|
348.2
|
|
|
|
|
|
|
|
|
(i)
|
Net earnings available
to common shareholders of the Company are net earnings attributable
to shareholders of the Company net of dividends declared on the
Company's Second Preferred Shares, Series B.
|
The following table provides a summary of the Company's adjusting
items which are reconciled and fully described in Appendix 1.
As at or for the
periods ended March 26, 2022 and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
(12
weeks)
|
(12 weeks)
|
Operating
Income
|
$
|
738
|
$
|
617
|
Add (Deduct) impact of
the following:
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
$
|
117
|
$
|
117
|
Restructuring and other
related costs
|
|
(15)
|
|
4
|
Lifemark transaction
costs
|
|
3
|
|
—
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
(14)
|
|
(8)
|
Gain on sale of
non-operating properties
|
|
—
|
|
(5)
|
Adjusting
Items
|
$
|
91
|
$
|
108
|
Adjusted Operating
Income(2)
|
$
|
829
|
$
|
725
|
Net interest expense
and other financing charges
|
$
|
142
|
$
|
160
|
Add the impact of the
following:
|
|
|
|
|
Recovery related to
Glenhuron
|
|
11
|
|
—
|
Adjusted Net
interest expense and other financing
charges(2)
|
$
|
153
|
$
|
160
|
Income
Taxes
|
$
|
123
|
$
|
122
|
Add the impact of the
following:
|
|
|
|
|
Recovery related to
Glenhuron
|
$
|
33
|
$
|
—
|
Tax impact of items
included in adjusted earnings before taxes
|
|
25
|
|
29
|
Adjusting
Items
|
$
|
58
|
$
|
29
|
Adjusted Income
Taxes(2)
|
$
|
181
|
$
|
151
|
|
|
|
|
CORPORATE PROFILE
2021 Annual Report and 2022 First Quarter Report to
Shareholders
The Company's 2021 Annual Report and 2022 First Quarter Report
to Shareholders are available in the "Investors" section of the
Company's website at loblaw.ca and on sedar.com.
Additional financial information has been filed electronically
with various securities regulators in Canada through the System for Electronic
Document Analysis and Retrieval (SEDAR) and with the Office of the
Superintendent of Financial Institutions (OSFI) as the primary
regulator for the Company's subsidiary, President's Choice Bank.
The Company holds an analyst call shortly following the release of
its quarterly results. These calls are archived in the "Investors"
section of the Company's website at loblaw.ca.
Conference Call and Webcast
Loblaw Companies Limited will host a conference call as well as
an audio webcast on May 4, 2022 at
10:00 a.m. (ET).
To access via tele-conference, please dial (416) 764-8688 or
(888) 390-0546. The playback will be made available approximately
two hours after the event at (416) 764-8677 or (888) 390-0541,
access code: 356227#. To access via audio webcast, please go
to the "Investor" section of loblaw.ca. Pre-registration will be
available.
Full details about the conference call and webcast are available
on the Loblaw Companies Limited website at loblaw.ca.
Annual Meeting of Shareholders
The 2022 Annual Meeting of Shareholders of Loblaw Companies
Limited will be held on Thursday, May 5,
2022 at 11:00 a.m. (ET). This
year's meeting will be held as a virtual meeting, by way of a live
webcast. Shareholders will be able to listen, participate and vote
at the meeting in real time through a live webcast online at
https://web.lumiagm.com/282236019. See
"How do I attend and participate in the virtual Meeting?" in
the Management Proxy dated March 25,
2022, which can be viewed online at www.loblaw.ca or under
Loblaw's SEDAR profile at www.sedar.com, for detailed instructions
on how to attend and vote at the meeting.
Please refer to the "Events and Presentations" or "Shareholders
Services" page at loblaw.ca for additional details on the virtual
meeting.
News
Release Endnotes
|
(1)
|
This News Release
contains forward-looking information. See "Forward-Looking
Statements" section of this News Release and the Company's 2021
Annual Report for a discussion of material factors that could cause
actual results to differ materially from the forecasts and
projections herein and of the material factors and assumptions that
were used when making these statements. This News Release should be
read in conjunction with Loblaw Companies Limited's filings with
securities regulators made from time to time, all of which can be
found at sedar.com and at loblaw.ca.
|
|
|
(2)
|
See "Non-GAAP Financial
Measures" section in Appendix 1 of this News Release, which
includes the reconciliation of such non-GAAP measures to the most
directly comparable GAAP measures.
|
|
|
(3)
|
To be read in
conjunction with the "Forward-Looking Statements" section of this
News Release and the Company's 2021 First Quarter Report to
Shareholders.
|
|
Appendix 1: NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP financial measures and
ratios: Retail segment gross profit; Retail segment adjusted gross
profit; Retail segment adjusted gross profit percentage; adjusted
earnings before income taxes, net interest expense and other
financing charges and depreciation and amortization ("adjusted
EBITDA"); adjusted EBITDA margin; adjusted operating income;
adjusted net interest expense and other financing charges; adjusted
income taxes; adjusted effective tax rate; adjusted net earnings
available to common shareholders; adjusted diluted net earnings per
common share, and free cash flow. The Company believes these
non-GAAP financial measures and ratios provide useful information
to both management and investors in measuring the financial
performance and financial condition of the Company for the reasons
outlined below.
Management uses these and other non-GAAP financial measures to
exclude the impact of certain expenses and income that must be
recognized under GAAP when analyzing underlying consolidated and
segment operating performance, as the excluded items are not
necessarily reflective of the Company's underlying operating
performance and make comparisons of underlying financial
performance between periods difficult. The Company excludes
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.
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 should
not be construed as an alternative to other financial measures
determined in accordance with GAAP.
Retail Segment Gross Profit, Retail Segment Adjusted Gross
Profit and Retail Segment Adjusted Gross Profit Percentage The
following tables reconcile adjusted gross profit by segment to
gross profit by segment, which is reconciled to revenue and cost of
merchandise inventories sold measures as reported in the
consolidated statements of earnings for the periods ended as
indicated. The Company believes that Retail segment gross profit
and Retail segment adjusted gross profit are useful in assessing
the Retail segment's underlying operating performance and in making
decisions regarding the ongoing operations of the business.
Retail segment adjusted gross profit percentage is calculated as
Retail segment adjusted gross profit divided by Retail segment
revenue.
|
2022
|
2021
|
|
(12
weeks)
|
(12 weeks)
|
For the periods ended
March 26, 2022 and March 27, 2021
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
Retail
|
Financial
Services
|
Eliminations
|
Total
|
(millions of Canadian
dollars)
|
Revenue
|
$
|
12,045
|
$
|
274
|
$
|
(57)
|
$
|
12,262
|
$
|
11,670
|
$
|
253
|
$
|
(51)
|
$
|
11,872
|
Cost of merchandise
inventories sold
|
|
8,302
|
|
33
|
|
—
|
|
8,335
|
|
8,137
|
|
37
|
|
—
|
|
8,174
|
Gross profit
|
$
|
3,743
|
$
|
241
|
$
|
(57)
|
$
|
3,927
|
$
|
3,533
|
$
|
216
|
$
|
(51)
|
$
|
3,698
|
Adjusted gross
profit
|
$
|
3,743
|
$
|
241
|
$
|
(57)
|
$
|
3,927
|
$
|
3,533
|
$
|
216
|
$
|
(51)
|
$
|
3,698
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income, Adjusted EBITDA and Adjusted EBITDA
Margin The following tables reconcile adjusted operating income
and adjusted EBITDA to operating income, which is reconciled to net
earnings attributable to shareholders of the Company as reported in
the consolidated statements of earnings for the periods ended as
indicated. The Company believes that adjusted EBITDA is useful in
assessing the performance of its ongoing operations and its ability
to generate cash flows to fund its cash requirements, including the
Company's capital investment program.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided
by revenue.
|
2022
|
2021
|
|
(12
weeks)
|
(12 weeks)
|
For the periods ended
March 26, 2022 and March 27, 2021 (millions of Canadian dollars)
|
Retail
|
Financial
Services
|
Consolidated
|
Retail
|
Financial
Services
|
Consolidated
|
Net earnings
attributable to shareholders of the Company
|
|
|
|
|
$
|
440
|
|
|
|
|
$
|
316
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
|
33
|
|
|
|
|
|
19
|
Net interest expense
and other financing charges
|
|
|
|
|
|
142
|
|
|
|
|
|
160
|
Income taxes
|
|
|
|
|
|
123
|
|
|
|
|
|
122
|
Operating
income
|
$
|
690
|
$
|
48
|
$
|
738
|
$
|
553
|
$
|
64
|
$
|
617
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
$
|
117
|
$
|
—
|
$
|
117
|
$
|
117
|
$
|
—
|
$
|
117
|
Lifemark transaction
costs
|
|
3
|
|
—
|
|
3
|
|
—
|
|
—
|
|
—
|
Gain on sale of
non-operating properties
|
|
—
|
|
—
|
|
—
|
|
(5)
|
|
—
|
|
(5)
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
(14)
|
|
—
|
|
(14)
|
|
(8)
|
|
—
|
|
(8)
|
Restructuring and other
related costs
|
|
(15)
|
|
—
|
|
(15)
|
|
4
|
|
—
|
|
4
|
Adjusting
items
|
$
|
91
|
$
|
—
|
$
|
91
|
$
|
108
|
$
|
—
|
$
|
108
|
Adjusted operating
income
|
$
|
781
|
$
|
48
|
$
|
829
|
$
|
661
|
$
|
64
|
$
|
725
|
Depreciation and
amortization
|
|
621
|
|
10
|
|
631
|
|
601
|
|
9
|
|
610
|
Less: Amortization of
intangible assets acquired with Shoppers Drug Mart
|
|
(117)
|
|
—
|
|
(117)
|
|
(117)
|
|
—
|
|
(117)
|
Adjusted
EBITDA
|
$
|
1,285
|
$
|
58
|
$
|
1,343
|
$
|
1,145
|
$
|
73
|
$
|
1,218
|
|
|
|
|
|
|
|
|
In addition to the items described in the Retail segment adjusted
gross profit section above, adjusted EBITDA was impacted by the
following:
Amortization of intangible assets acquired with
Shoppers Drug Mart The acquisition of Shoppers
Drug Mart in 2014 included approximately $6,050 million of definite life intangible
assets, which are being amortized over their estimated useful
lives. Annual amortization associated with the acquired intangibles
will be approximately $500 million until 2024 and will
decrease thereafter.
Restructuring and other related costs The
Company continuously evaluates strategic and cost reduction
initiatives related to its store infrastructure, distribution
networks and administrative infrastructure with the objective of
ensuring a low cost operating structure. Only restructuring
activities that are publicly announced related to these initiatives
are considered adjusting items.
In the first quarter of 2022, the Company recorded approximately
$15 million (2021 – charges of
$4 million) of restructuring and
other related recoveries in connection to the previously announced
closure of two distribution centres in Laval and Ottawa. The Company disposed of one of the
distribution centres for proceeds of $26
million and recognized a gain of $19
million, which was partially offset by $4 million of restructuring and other related
charges. The Company is investing to build a modern and efficient
expansion to its Cornwall
distribution centre to serve its food and drug retail businesses in
Ontario and Quebec. Volumes from the distribution centre
in Laval were transferred to
Cornwall and the Company will
record any remaining restructuring costs in the second quarter of
2022 related to these closures.
Lifemark transaction costs In connection with
the agreement to acquire Lifemark Health Group, in the first
quarter of 2022 the Company recorded $3 million of acquisition
costs in operating income.
Fair value adjustment on fuel and foreign currency
contracts The Company is exposed to commodity price and
U.S. dollar exchange rate fluctuations. In accordance with the
Company's commodity risk management policy, the Company enters into
exchange traded futures contracts and forward contracts to minimize
cost volatility relating to fuel prices and the U.S. dollar
exchange rate. These derivatives are not acquired for trading or
speculative purposes. Pursuant to the Company's derivative
instruments accounting policy, changes in the fair value of these
instruments, which include realized and unrealized gains and
losses, are recorded in operating income. Despite the impact of
accounting for these commodity and foreign currency derivatives on
the Company's reported results, the derivatives have the economic
impact of largely mitigating the associated risks arising from
price and exchange rate fluctuations in the underlying commodities
and U.S. dollar commitments.
Gain/loss on sale of non-operating properties In
the first quarter of 2021, the Company disposed of non-operating
properties to a third party and recorded a gain of $5 million
related to the sale.
Adjusted Net Interest Expense and Other Financing
Charges The following table reconciles adjusted net
interest expense and other financing charges to net interest
expense and other financing charges as reported in the consolidated
statements of earnings for the periods ended as indicated. The
Company believes that adjusted net interest expense and other
financing charges is useful in assessing the Company's underlying
financial performance and in making decisions regarding the
financial operations of the business.
For the periods ended
March 26, 2022 and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars)
|
(12
weeks)
|
(12 weeks)
|
Net interest expense
and other financing charges
|
$
|
142
|
$
|
160
|
Add (deduct) impact of
the following:
|
|
|
|
|
Recovery related to
Glenhuron
|
|
11
|
|
—
|
Adjusted net interest
expense and other financing charges
|
$
|
153
|
$
|
160
|
|
|
|
|
Recovery related to Glenhuron Bank Limited ("Glenhuron")
The Company has reversed in the quarter $35
million of previously recorded charges, of which
$33 million is recorded as income tax
recovery and $2 million is recorded
as interest income. In addition, interest of $9 million, before taxes was recorded in respect
of interest income earned on expected cash tax refunds.
Adjusted Income Taxes and Adjusted Effective Tax Rate The
following table reconciles adjusted income taxes to income taxes as
reported in the consolidated statements of earnings for the periods
ended as indicated. The Company believes that adjusted income taxes
is useful in assessing the Company's underlying operating
performance and in making decisions regarding the ongoing
operations of its business.
Adjusted effective tax rate is calculated as adjusted income
taxes divided by the sum of adjusted operating income less adjusted
net interest (recovery)/expense and other financing charges.
For the periods ended
March 26, 2022 and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
(12
weeks)
|
(12 weeks)
|
Adjusted operating
income(i)
|
$
|
829
|
$
|
725
|
Adjusted net interest
expense and other financing charges(i)
|
|
153
|
|
160
|
Adjusted earnings
before taxes
|
$
|
676
|
$
|
565
|
Income taxes
|
$
|
123
|
$
|
122
|
Add (deduct) impact of
the following:
|
|
|
|
|
Tax impact of items
included in adjusted earnings before
taxes(ii)
|
|
25
|
|
29
|
Recovery related to
Glenhuron
|
|
33
|
|
—
|
Adjusted income
taxes
|
$
|
181
|
$
|
151
|
Effective tax
rate
|
|
20.6%
|
|
26.7%
|
Adjusted income tax
rate
|
|
26.8%
|
|
26.7%
|
|
|
|
(i)
|
See reconciliations of
adjusted operating income and adjusted net interest expense and
other financing charges in the tables above.
|
(ii)
|
See the adjusted
operating income, adjusted EBITDA and adjusted EBITDA margin table
and the adjusted net interest expense and other financing charges
table above for a complete list of items included in adjusted
earnings before taxes.
|
Recovery related to Glenhuron The Company has reversed in
the quarter $35 million of previously
recorded charges, of which $33
million is recorded as income tax recovery and $2 million is recorded as interest income. In
addition, interest of $9 million,
before taxes was recorded in respect of interest income earned on
expected cash tax refunds.
Adjusted Net Earnings Available to Common
Shareholders and Adjusted Diluted Net Earnings Per Common
Share The following table reconciles adjusted net earnings
available to common shareholders of the Company and adjusted net
earnings attributable to shareholders of the Company to net
earnings attributable to shareholders of the Company and then to
net earnings available to common shareholders of the Company for
the periods ended as indicated. The Company believes that adjusted
net earnings available to common shareholders and adjusted diluted
net earnings per common share are useful in assessing the Company's
underlying operating performance and in making decisions regarding
the ongoing operations of its business.
For the periods ended
March 26, 2022 and March 27, 2021
|
2022
|
2021
|
(millions of Canadian
dollars except where otherwise indicated)
|
(12
weeks)
|
(12 weeks)
|
Net earnings
attributable to shareholders of the Company
|
$
|
440
|
$
|
316
|
Prescribed dividends on
preferred shares in share capital
|
|
(3)
|
|
(3)
|
Net earnings available
to common shareholders of the Company
|
$
|
437
|
$
|
313
|
Net earnings
attributable to shareholders of the Company
|
$
|
440
|
$
|
316
|
Adjusting items (refer
to the following table)
|
|
22
|
|
79
|
Adjusted net earnings
attributable to shareholders of the Company
|
$
|
462
|
$
|
395
|
Prescribed dividends on
preferred shares in share capital
|
|
(3)
|
|
(3)
|
Adjusted net earnings
available to common shareholders of the Company
|
$
|
459
|
$
|
392
|
Diluted weighted
average common shares outstanding (millions)
|
|
336.7
|
|
348.2
|
|
|
|
|
2022
|
2021
|
|
(12
weeks)
|
(12 weeks)
|
For the periods ended
March 26, 2022 and March 27, 2021
|
Net Earnings
(Losses) Available
to Common
Shareholders
of the
Company
|
Diluted
Net
Earnings (Losses)
Per Common Share
|
Net Earnings
(Losses) Available
to Common
Shareholders
of the
Company
|
Diluted
Net
Earnings (Losses)
Per Common
Share
|
(millions of Canadian
dollars/Canadian dollars)
|
As
reported
|
$
|
437
|
$
|
1.30
|
$
|
313
|
$
|
0.90
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with
Shoppers Drug Mart
|
$
|
87
|
$
|
0.25
|
$
|
86
|
$
|
0.25
|
Lifemark transaction
costs
|
|
2
|
|
0.01
|
|
—
|
|
—
|
Gain on sale of
non-operating properties
|
|
—
|
|
—
|
|
(4)
|
|
(0.01)
|
Fair value adjustment
on fuel and foreign currency contracts
|
|
(11)
|
|
(0.03)
|
|
(6)
|
|
(0.02)
|
Restructuring and other
related costs
|
|
(14)
|
|
(0.04)
|
|
3
|
|
0.01
|
Recovery related to
Glenhuron
|
|
(42)
|
|
(0.13)
|
|
—
|
|
—
|
Adjusting
items
|
$
|
22
|
$
|
0.06
|
$
|
79
|
$
|
0.23
|
Adjusted
|
$
|
459
|
$
|
1.36
|
$
|
392
|
$
|
1.13
|
|
|
|
Free Cash Flow(2) The following table reconciles, by
reportable operating segments, free cash flow to cash flows from
operating activities. The Company believes that free cash flow is
the appropriate measure in assessing the Company's cash available
for additional financing and investing activities.
|
2022
|
2021
|
|
(12
weeks)
|
(12 weeks)
|
For the periods ended
March 26, 2022 and March 27, 2021
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Consolidated
|
Retail
|
Financial
Services
|
Eliminations(i)
|
Consolidated
|
(millions of Canadian
dollars)
|
Cash flows from (used
in) operating activities
|
$
|
748
|
$
|
103
|
$
|
12
|
$
|
863
|
$
|
581
|
$
|
257
|
$
|
14
|
$
|
852
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
investments
|
|
182
|
|
4
|
|
—
|
|
186
|
|
197
|
|
6
|
|
—
|
|
203
|
Interest
paid
|
|
70
|
|
—
|
|
12
|
|
82
|
|
72
|
|
—
|
|
14
|
|
86
|
Lease payments,
net
|
|
282
|
|
—
|
|
—
|
|
282
|
|
275
|
|
—
|
|
—
|
|
275
|
Free cash
flow(2)
|
$
|
214
|
$
|
99
|
$
|
—
|
$
|
313
|
$
|
37
|
$
|
251
|
$
|
—
|
$
|
288
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Interest paid is
included in cash flows from operating activities under the
Financial Services segment.
|
SOURCE Loblaw Companies Limited