METRO posts record net earnings in the first quarter of 2009



    
    -------------------------------------------------------------------------
    2009 FIRST QUARTER HIGHLIGHTS

    - Sales of $2,600.5 million, up 3.7%
    - Same store sales up 3.5%
    - Adjusted net earnings(1) of $84.1 million, up 34.8%
    - Adjusted fully diluted net earnings per share(1) of $0.76, up 40.7%
    - Declared dividend of $0.1375 per share, up 10.0%
    -------------------------------------------------------------------------
    

    MONTREAL, Jan. 27 /CNW Telbec/ - METRO INC. realized adjusted net
earnings(1) of $84.1 million in the first quarter of 2009, an increase of
34.8% over the $62.4 million in 2008. Adjusted fully diluted net earnings per
share(1) increased by 40.7% to $0.76 compared to $0.54 last year.
    Adjusted earnings(1) exclude non-recurring costs of $4.5 million before
taxes recorded in the first quarter of 2009 to support the conversion of our
Ontario supermarkets to the Metro banner, as well as a non-recurring tax
expense decrease of $11.4 million in the first quarter of 2008.
    Net earnings, which take these non-recurring items into account, were
$81.1 million in the first quarter of 2009 versus $73.8 million in 2008, an
increase of 9.9%. Fully diluted net earnings per share increased by 14.1% to
$0.73 compared to $0.64 last year.
    First quarter sales for 2009 reached $2,600.5 million, up 3.7% compared
to $2,506.8 million for the corresponding quarter of the previous fiscal year.
Excluding decreased sales of tobacco products and the effect of the
non-renewal of a convenience store chain supply contract, 2009 first quarter
sales increased by 4.9%. Same store sales increased by 3.5%.
    "We are very pleased to have realized record net earnings in the first
quarter of 2009. Our growth in both sales and net earnings reflects our strong
performance in Québec and a marked improvement in our Ontario results. Our
Ontario supermarket conversion plan is on schedule with 67 of the 159 stores
converted to the Metro banner as of January 23, 2009 and, results to date are
encouraging. Despite the difficult economic environment, we are
well-positioned in our markets and look forward(2) to fiscal 2009 with
confidence," stated Eric R. La Flèche, President and Chief Executive Officer.

    SALES

    2009 first quarter sales reached $2,600.5 million compared to $2,506.8
million last year, an increase of 3.7%. Excluding decreased sales of tobacco
products and the effect of the non-renewal of a convenience store chain supply
contract, 2009 first quarter sales increased by 4.9%. Same store sales
increased by 3.5%.

    EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
    (EBITDA)(1)

    First quarter EBITDA(1) in 2009 was $170.2 million, up 19.7% from $142.2
million for the same quarter last year. First quarter EBITDA(1) represented
6.5% of sales versus 5.7% last year. Excluding banner conversion costs of $4.5
million recorded in 2009, adjusted first quarter EBITDA(1) represented 6.7% of
sales.
    After experiencing difficulties in the first two quarters of 2008, namely
intense competition in Ontario and issues associated with our new information
systems in Ontario and our new Food Services warehouse in Québec, we achieved
a turnaround and saw renewed growth in our EBITDA(1) for the third and fourth
quarters of 2008 and the first quarter of 2009. This turnaround saw a marked
improvement in our gross margins.
    In the first quarter of 2009, we retrospectively applied a new accounting
standard issued by the Canadian Institute of Chartered Accountants (CICA),
Section 3031 "Inventories", by restating prior periods' financial statements.
Under this new standard, handling and transformation costs are now included in
inventory costs instead of operating expenses. Cost of sales is therefore
higher than in the past, gross margins and operating expenses are lower.
    In quarters where the value of inventories at the beginning is lower than
the value of inventories at the end, as is the case for our first quarter
because of the Holidays, the rise in inventory increases EBITDA(1) by an
amount equal to the costs, other than those that are part of the cost of
sales, included in the inventory changes and which used to be included in
operating expenses. The increase in 2009 first quarter EBITDA(1) resulting
from the adoption of this new accounting standard is similar to the increase
in 2008 first quarter EBITDA(1) resulting from the prior periods'
restatements.
    However, in the second quarter of 2009, where the value of inventories at
the end of the quarter will be(2) lower than at the beginning, the effect on
our EBITDA(1) will be(2) reversed. Inventory changes in the third and fourth
quarters should(2) not be significant and so should(2) not materially affect
our EBITDA(1). This new standard should(2) not have a material effect on
overall fiscal year results.
    Equity earnings from our investment in Alimentation Couche-Tard were
$11.1 million compared to $5.7 million in 2008. Alimentation Couche-Tard's
improved results were due mainly to higher gross fuel margins despite
decreased fuel sales. Excluding non-recurring items as well as equity earnings
from our investment in Alimentation Couche-Tard, our adjusted 2009 first
quarter EBITDA(1) was $163.6 million or 6.3% of sales versus $136.5 million or
5.4% of sales in 2008.

    
    EBITDA(1) Adjustments


                                      12 weeks / Fiscal Year
                                2009                          2008
                 ------------------------------------------------------------
    (Millions of
     dollars,
     unless         EBITDA     Sales    EBITDA/   EBITDA     Sales    EBITDA/
     otherwise                           Sales                         Sales
     indicated)                             (%)                           (%)
    -------------------------------------------------------------------------
    EBITDA           170.2   2,600.5       6.5     142.2   2,506.8       5.7
    Banner
     conversion
     costs             4.5         -                   -         -
    -------------------------------------------------------------------------
    Adjusted
     EBITDA          174.7   2,600.5       6.7     142.2   2,506.8       5.7
    Share of
     earnings from
     our investment
     in Alimentation
     Couche-Tard     (11.1)        -                (5.7)        -
    -------------------------------------------------------------------------
    Adjusted EBITDA
     excluding share
     of earnings     163.6   2,600.5       6.3     136.5   2,506.8       5.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    DEPRECIATION AND AMORTIZATION AND FINANCIAL COSTS

    2009 first quarter depreciation and amortization expenses were $41.6
million compared with $40.1 million last year. First quarter financial costs
totalled $12.5 million versus $14.0 million last year. First quarter interest
rate averaged 5.0% versus 5.5% for the first quarter of 2008.

    INCOME TAXES

    The income tax expense of $35.0 million for the first quarter of 2009
represents an effective tax rate of 30.1% compared with $15.7 million and an
effective tax rate of 17.8% in 2008. In the first quarter of 2008, we
benefited from a tax expense decrease of $11.4 million as a result of future
federal income tax rate decreases. Excluding this decrease in income tax
expense, the effective tax rate for the first quarter of 2008 was 30.8%.

    NET EARNINGS

    Net earnings for the first quarter of 2009 were $81.1 million, compared to
$73.8 million last year, an increase of 9.9%. Fully diluted net earnings per
share were $0.73, up 14.1% from $0.64 in 2008. Excluding the income tax
expense decrease of $11.4 million in 2008 and banner conversion costs in 2009,
adjusted net earnings(1) for the first quarter of 2009 were $84.1 million, up
34.8% from last year, while adjusted fully diluted net earnings per share(1)
were $0.76, up 40.7% from $0.54 last year.

    Net Earnings Adjustments

                           12 weeks / Fiscal Year
                          2009                2008             Change (%)
                 ------------------------------------------------------------
                               Fully               Fully
                 (Millions   diluted (Millions   diluted               Fully
                        of       EPS        of       EPS       Net   diluted
                   dollars) (Dollars)  dollars) (Dollars) earnings       EPS
    -------------------------------------------------------------------------
    Net earnings      81.1      0.73      73.8      0.64       9.9      14.1
    Banner
     conversion
     costs after
     taxes             3.0      0.03         -         -
    Decrease in
     tax expense         -         -     (11.4)    (0.10)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)      84.1      0.76      62.4      0.54      34.8      40.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Quarterly Highlights

    (Millions of dollars, unless          2009      2008      2007    Change
     otherwise indicated)                                                 (%)
    -------------------------------------------------------------------------
    Sales
    Q1                                 2,600.5   2,506.8         -       3.7
    Q4                                       -   2,476.0   2,432.4       1.8
    Q3                                       -   3,370.0   3,341.0       0.9
    Q2                                       -   2,372.4   2,356.2       0.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings
    Q1                                    81.1      73.8         -       9.9
    Q4                                       -      72.5      58.4      24.1
    Q3                                       -      91.9      89.6       2.6
    Q2                                       -      54.0      59.7      (9.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted net earnings(1)
    Q1                                    84.1      62.4         -      34.8
    Q4                                       -      72.5      67.6       7.2
    Q3                                       -      91.9      91.4       0.5
    Q2                                       -      54.0      63.4     (14.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fully diluted net earnings
     per share (Dollars)
    Q1                                    0.73      0.64         -      14.1
    Q4                                       -      0.65      0.50      30.0
    Q3                                       -      0.81      0.77       5.2
    Q2                                       -      0.48      0.51      (5.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted fully diluted net
     earnings per share(1) (Dollars)
    Q1                                    0.76      0.54         -      40.7
    Q4                                       -      0.65      0.58      12.1
    Q3                                       -      0.81      0.78       3.8
    Q2                                       -      0.48      0.54     (11.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    First quarter sales for 2009 were up 3.7% over those for 2008. Excluding
decreased sales of tobacco products and the effect of the non-renewal of a
convenience store chain supply contract, 2009 first quarter sales were up
4.9%.
    Sales in the second, third and fourth quarters of 2008 versus those for
the corresponding quarters of 2007 were affected by increased competition in
Ontario and decreased sales of tobacco products. Excluding the decreased sales
of tobacco products, 2008 second, third and fourth quarter sales were up 1.2%,
1.5% and 2.1% respectively over 2007.
    First quarter net earnings and fully diluted net earnings per share for
2009 were up 9.9% and 14.1% respectively over those for 2008. Excluding 2009
first quarter banner conversion costs of $4.5 million before taxes and the
income tax expense decrease of $11.4 million in 2008 as a result of future
federal income tax rate decreases, adjusted net earnings(1) and adjusted fully
diluted net earnings per share(1) were up 34.8% and 40.7% respectively. The
difficulties in the first two quarters of 2008 stemming from a more
competitive environment in Ontario and issues associated with our new
information systems in Ontario and our new Food Services warehouse in Québec
were resolved in the third and fourth quarters of 2008.
    Second quarter net earnings and fully diluted net earnings per share in
2008 were down 9.5% and 5.9% respectively from 2007. Excluding A&P
acquisition-related integration and rationalization costs before taxes of $5.4
million in the second quarter of 2007, adjusted net earnings(1) and adjusted
fully diluted net earnings per share(1) for the second quarter of 2008 were
down 14.8% and 11.1% respectively, compared to adjusted net earnings(1) and
adjusted fully diluted net earnings per share(1) for the second quarter of
2007. The difficulties encountered in the first two quarters of 2008 caused
this drop in profitability.
    Third quarter net earnings and fully diluted net earnings per share in
2008 were up 2.6% and 5.2% respectively from 2007. Excluding third quarter A&P
acquisition-related integration and rationalization costs before taxes of $5.4
million and a $1.8 million income tax expense reduction resulting from a
future decrease announced in the federal tax rate, adjusted net earnings(1)
and adjusted fully diluted net earnings per share(1) for the third quarter of
2008 were up 0.5% and 3.8% respectively, compared to adjusted net earnings(1)
and adjusted fully diluted net earnings per share(1) for the third quarter of
2007. The turnaround achieved following the difficulties encountered in the
first two quarters of 2008 contributed to this earnings growth.
    Fourth quarter net earnings and fully diluted net earnings per share in
2008 were up 24.1% and 30.0% respectively over those for 2007. Excluding A&P
acquisition-related integration and rationalization costs before taxes of
$14.1 million in the fourth quarter of 2007, adjusted net earnings(1) and
adjusted fully diluted net earnings per share(1) for the fourth quarter of
2008 were up 7.2% and 12.1% over adjusted net earnings(1) and adjusted fully
diluted net earnings per share(1) for the fourth quarter of 2007. Our return
to earnings growth in the third quarter of 2008 continued in the fourth
quarter.

    
                       2009               2008                  2007
    (Millions of       ------------------------------------------------------
     dollars)            Q1     Q1     Q2     Q3     Q4     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Net earnings       81.1   73.8   54.0   91.9   72.5   59.7   89.6   58.4
    Integration and
     rationalisation
     costs after
     taxes                -      -      -      -      -    3.7    3.6    9.2
    Banner
     conversion costs
     after taxes        3.0      -      -      -      -      -      -      -
    Decrease in
     tax expense          -  (11.4)     -      -      -      -   (1.8)     -
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)       84.1   62.4   54.0   91.9   72.5   63.4   91.4   67.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                       2009               2008                  2007
                       ------------------------------------------------------
    (Dollars and
     per share)          Q1     Q1     Q2     Q3     Q4     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Fully diluted
     net earnings      0.73   0.64   0.48   0.81   0.65   0.51   0.77   0.50
    Integration and
     rationalisation
     costs after
     taxes                -      -      -      -      -   0.03   0.01   0.08
    Banner
     conversion costs
     after taxes       0.03      -      -      -      -      -      -      -
    Decrease in
     tax expense          -  (0.10)     -      -      -      -      -      -
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings(1)       0.76   0.54   0.48   0.81   0.65   0.54   0.78   0.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Cash Position

    OPERATING ACTIVITIES

    Operating activities generated cash flows of $50.8 million in the first
quarter of 2009 versus $13.0 million in the corresponding quarter of 2008.
This variation is due primarily to increased first quarter net earnings for
2009 as compared to 2008 and decreased use of non-cash working capital.

    INVESTING ACTIVITIES

    Investing activities required outflows of $55.1 million in the first
quarter of 2009 compared to $55.0 million in 2008. Over the quarter, the
Company and retailers invested $86.8 million in our retail network for a net
expansion of 145,000 square feet or 0.8%. Major renovations and expansions of
12 stores were completed, and five new stores were opened.

    FINANCING ACTIVITIES

    Financing activities required outflows of $5.3 million in the first
quarter of 2009 versus $30.9 million in 2008. The variation in outflows is
largely attributable to the greater issuance of shares, for $17.4 million in
2009 versus $1.0 million in 2008, arising primarily from the exercise of stock
options, as well as to the redemption of shares in the amount of $9.3 million
in 2009 versus $40.9 million in 2008. Finally, a lower increase in bank loans
of $2.3 million occurred in 2009 versus $24.7 million in 2008. Stock
redemption was greater in the first quarter of 2008 due mainly to the
repurchase of 1.5 million Class A Subordinate shares held by The Great
Atlantic & Pacific Tea Company (A&P US) for an amount of $40.9 million.

    Financial Position

    Despite the financial market crisis, we do not anticipate(2) any
liquidity risk and consider our financial position at the end of the first
quarter of 2009 as very solid. We had an unused authorized revolving line of
credit of $400.0 million and a debt ratio (long-term debt/total capital) of
32.0%.
    At the end of the first quarter, the main elements of our long-term debt
were as follows:

    
                            Interest Rate       Balance          Maturity
                                             (Millions of
                                                dollars)
    -------------------------------------------------------------------------
    Credit A Facility    Rates fluctuate with     369.3      August 15, 2012
                          changes in bankers'
                           acceptance rates

    Series A Notes         4.98% fixed rate       200.0     October 15, 2015

    Series B Notes         5.97% fixed rate       400.0     October 15, 2035
    -------------------------------------------------------------------------

    At the end of the quarter, interest rate swap agreements in the notional
amount of $100.0 million were outstanding under our Credit A Facility. These
agreements provide for the exchange of variable interest payments for fixed
interest payments according to the following terms:

    Fixed Rates                 Notional Amount                 Maturity
                             (Millions of dollars)
    -------------------------------------------------------------------------
    3.9820%                          50.0                  December 16, 2009
    4.0425%                          50.0                  December 16, 2010
    -------------------------------------------------------------------------

    Giving effect to these swap agreements, at the end of the quarter,
long-term indebtedness comprised $700.0 million at fixed rates ranging from
4.482% to 5.97% and $269.3 million at variable rates which fluctuate with
changes in bankers' acceptance rates.

    FINANCIAL RATIOS
                                                       As at           As at
                                                 December 20,   September 27,
                                                        2008            2008
    -------------------------------------------------------------------------
    Financial structure
    Long-term debt (Millions of dollars)             1,007.1         1,005.0
    Shareholders' equity (Millions of dollars)       2,142.9         2,068.3
    Long-term debt/total capital (%)                    32.0            32.7

                                                 Fiscal 2009     Fiscal 2008
                                                   (12 weeks)      (12 weeks)
                                                 ----------------------------
    Results
    EBITDA(1)/Financial costs (Times)                   13.6            10.2
    -------------------------------------------------------------------------


    CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

                                                       As at           As at
                                                 December 20,   September 27,
                                                        2008            2008
    -------------------------------------------------------------------------
    Number of Class A Subordinate Shares
     outstanding (Thousands)                         110,325         109,806
    Number of Class B Shares outstanding
     (Thousands)                                         739             750
    Stock options:
      Number outstanding (Thousands)                   2,718           3,534
      Exercise price (Dollars)                      17.01 to        17.01 to
                                                       39.17           39.17
      Weighted average exercise price (Dollars)        24.42           23.63
    Performance share units:
      Number outstanding (Thousands)                     210             210
      Weighted average maturity (Months)                  15              18
    -------------------------------------------------------------------------
    

    NORMAL COURSE ISSUER BID PROGRAM

    Under the normal course issuer bid program, the Company may repurchase up
to 6 million of its Class A Subordinate shares between September 5, 2008 and
September 4, 2009. Since September 5, 2008, the Company repurchased 1,113,600
shares at an average price of $29.08 for a total of $32.4 million. This
program offers us an additional option for using excess funds. Thus, we can
decide, in the shareholders' best interest, to reimburse debt or to repurchase
Company shares.

    DIVIDENDS

    On January 26, 2009, the Company's Board of Directors declared a
quarterly dividend of $0.1375 per Class A Subordinate Share and Class B Share
payable March 9, 2009, an increase of 10.0% over the dividend for the same
quarter last year. On an annualized basis, this dividend represents more than
20% of 2008 net earnings.

    SHARE TRADING

    The value of METRO INC. shares remained in the range of $27.38 to $37.48
over the first quarter of fiscal 2009. During this period, a total of 34.2
million shares were traded on the Toronto Stock Exchange. The closing price on
Friday, January 16, 2009 was $36.97, compared with $31.77 at the end of fiscal
2008.

    New Accounting Policies

    ADOPTED IN 2009

    Inventories

    In the first quarter of 2009, the Company adopted Section 3031
"Inventories". Under this new standard, inventories shall be measured at the
lower of cost and net realizable value and the retail method may be used if it
is close to cost. Furthermore, all costs incurred in bringing the inventories
to their present location and condition shall be included in the cost of
inventories. Other costs shall be recognized as expenses in the period in
which they are incurred.
    The Company measures its wholesale inventories at the lower of cost,
determined by the average cost method net of certain considerations received
from vendors, and net realizable value. Retail inventories are valued at the
retail price less the gross margin and certain considerations received from
vendors. Following this new section's adoption, the Company has included
certain costs in its cost of inventories, such as receiving and shelving costs
and also costs for products transformed in store. Warehousing costs are
recognized as operating expenses.
    The new Section 3031 was applied retrospectively with restatement of
prior periods' financial statements.
    The adjustments are explained in note 2 to the consolidated financial
statements included in this interim report.

    Goodwill and Intangible Assets

    In the first quarter of 2009, the Company adopted the Section 3064
"Goodwill and Other Intangible Assets". The new section states that upon their
initial identification, intangible assets are to be recognized as assets only
if they meet the definition of an intangible asset and the recognition
criteria. As for subsequent measurement of intangible assets, goodwill and
disclosure, Section 3064 carries forward the requirements of the old Section
3062 "Goodwill and Other Intangible Assets". The adoption of these guidelines
did not have any material effect on the Company's results, financial position
or cash flows.

    RECENTLY ISSUED

    International Financial Reporting Standards

    On February 13, 2008, the Accounting Standards Board confirmed the date
of changeover from GAAP to International Financial Reporting Standards (IFRS).
Canadian publicly accountable companies must adopt IFRS for their interim and
annual financial statements relating to fiscal years beginning on or after
January 1, 2011. We are currently developing our IFRS conversion plan and
evaluating the effect of the new standards on our consolidated financial
statements.

    Press Release

    This press release sets out the financial position and consolidated
results of METRO INC. on December 20, 2008. It should be read in conjunction
with the unaudited interim consolidated financial statements and accompanying
notes in this press release along with the consolidated financial statements
for the fiscal year ended September 27, 2008 and related notes and MD&A
presented in the Company's 2008 Annual Report. Certain comparative figures in
this press release have been restated as a consequence of the new accounting
standard on inventories which the Company adopted in the first quarter of
2009. This press release is based upon information as at January 16, 2009
unless otherwise stated. Additional information, including the Certification
of Interim Filings letters for the quarter ended December 20, 2008 signed by
the President and Chief Executive Officer and the Senior Vice-President and
Chief Financial Officer, is also available on the SEDAR website at:
www.sedar.com.

    Forward-looking Information

    We have used, throughout this press release, different statements that
could, within the context of regulations issued by the Canadian Securities
Administrators, be construed as being forward-looking information. In general,
any statement contained herein, which does not constitute a historical fact,
may be deemed a forward-looking statement. Expressions such as "we look
forward to", "will be", "we do not anticipate", "should not" and other similar
expressions are generally indicative of forward-looking statements. The
forward-looking statements contained herein are based upon certain assumptions
regarding the Canadian food industry, the general economy, and our annual
budget as well as our 2009 action plan.
    These forward-looking statements do not provide any guarantees as to the
future performance of the Company and are subject to potential risks, known
and unknown, as well as uncertainties that could cause the outcome to differ
significantly. An economic slowdown or recession or the arrival of a new
competitor are examples described under the "Risk Management" section of the
2008 Annual Report which could have an impact on these statements. We believe
these statements to be reasonable and pertinent as at the time of publication
of this press release and represent our expectations. The Company does not
intend to update any forward-looking statements contained herein, except as
required by applicable law.

    Non-GAAP Measurements

    In addition to the Canadian generally accepted accounting principles
(GAAP) earnings measurements provided, we have included certain non-GAAP
earnings measurements. These measurements are presented for information
purposes only. They do not have a standardized meaning prescribed by GAAP and
therefore may not be comparable to similar measurements presented by other
public companies.

    Earnings before interest, taxes, depreciation and amortization (EBITDA)

    EBITDA is a measurement of earnings that excludes interest, taxes,
depreciation and amortization. We believe that EBITDA is a measurement
commonly used by readers of financial statements to evaluate a company's
operational cash-generating capacity and ability to discharge its financial
expenses.

    Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net
    earnings per share

    Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net
earnings per share are earnings measurements that exclude non-recurring items.
We believe that presenting earnings without non-recurring items leaves readers
of financial statements better informed as to the current period and
corresponding period's earnings, thus enabling them to better evaluate the
Company's performance and judge its future outlook.

    Conference Call

    Financial analysts and institutional investors are invited to participate
in a conference call on the 2009 first quarter results at 4:00 p.m. EDT on
Tuesday, January 27, 2009. To access the conference call, please dial (416)
644-3416 or (514) 807-8791. The journalists and institutional investors are
invited to listen to the call in real time or delayed time on the METRO INC.
Web site at www.metro.ca.

    (1) See section on "Non-GAAP measurements"
    (2) See section on "Forward-looking information"

    
    Consolidated Statements of Earnings
    12-week periods ended December 20, 2008 and December 22, 2007
    (Unaudited) (Millions of dollars, except for net earnings per share)

                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
                                                                 (Restated -
                                                                      note 2)
    -------------------------------------------------------------------------
    Sales                                          $ 2,600.5       $ 2,506.8
    Cost of sales and operating expenses (note 8)   (2,436.9)       (2,370.3)
    Share of earnings in a public company subject
     to significant influence                           11.1             5.7
    Banner conversion costs (note 3)                    (4.5)              -
    -------------------------------------------------------------------------
    Earnings before interest, taxes, depreciation
     and amortization                                  170.2           142.2
    Depreciation and amortization                      (41.6)          (40.1)
    -------------------------------------------------------------------------
    Operating income                                   128.6           102.1
    Financial costs, net (note 5)                      (12.5)          (14.0)
    -------------------------------------------------------------------------
    Earnings before income taxes                       116.1            88.1
    Income taxes (note 6)                              (35.0)          (15.7)
    -------------------------------------------------------------------------
    Earnings before minority interest                   81.1            72.4
    Minority interest                                      -             1.4
    -------------------------------------------------------------------------
    Net earnings                                   $    81.1       $    73.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per share (Dollars) (note 7)
    Basic                                               0.73            0.65
    Fully diluted                                       0.73            0.64
    -------------------------------------------------------------------------
                                                   ----------
    See accompanying notes


    Consolidated Balance Sheets
    (Unaudited) (Millions of dollars)
                                                   ----------
                                                                       As at
                                                                September 27,
                                                       As at            2008
                                                 December 20,    (Restated -
                                                        2008          note 2)
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash and cash equivalents                      $   142.1       $   151.7
    Accounts receivable                                332.4           309.7
    Inventories (note 8)                               738.1           641.6
    Prepaid expenses                                    13.6             7.6
    Income taxes receivable                             25.0            25.0
    Future income taxes                                 34.6            38.4
    -------------------------------------------------------------------------
                                                     1,285.8         1,174.0
    Investments and other assets                       178.7           169.1
    Fixed assets                                     1,250.6         1,231.9
    Intangible assets                                  324.3           328.6
    Goodwill                                         1,478.6         1,478.6
    Future income taxes                                  2.7             2.7
    Accrued benefit assets                              40.7            40.7
    -------------------------------------------------------------------------
                                                   $ 4,561.4       $ 4,425.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank loans                                     $     3.2       $     0.9
    Accounts payable                                 1,119.5         1,062.7
    Income taxes payable                                56.6            50.9
    Future income taxes                                  6.0             6.0
    Current portion of long-term debt                    5.5             6.3
    -------------------------------------------------------------------------
                                                     1,190.8         1,126.8
    Long-term debt                                   1,007.1         1,005.0
    Accrued benefit obligations                         44.2            50.7
    Future income taxes                                142.0           140.8
    Other long-term liabilities                         34.4            34.0
    -------------------------------------------------------------------------
                                                     2,418.5         2,357.3
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 9)                             713.2           697.6
    Contributed surplus                                  5.8             4.9
    Retained earnings                                1,426.8         1,366.8
    Accumulated other comprehensive income (note 10)    (2.9)           (1.0)
    -------------------------------------------------------------------------
                                                     2,142.9         2,068.3
    -------------------------------------------------------------------------
                                                   $ 4,561.4       $ 4,425.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------
    See accompanying notes


    Consolidated Statements of Cash Flows
    12-week periods ended December 20, 2008 and December 22, 2007
    (Unaudited) (Millions of dollars)

                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
                                                                 (Restated -
                                                                      note 2)
    -------------------------------------------------------------------------
    Operating activities
    Net earnings                                   $    81.1       $    73.8
    Non-cash items
      Share of earnings in a public company
       subject to significant influence                (11.1)           (5.7)
      Depreciation and amortization                     41.6            40.1
      Amortization of deferred financing costs           0.5             0.5
      Gain on disposal and write-off of fixed
       and intangible assets                               -            (0.3)
      Future income taxes                                5.8           (10.0)
      Stock-based compensation cost                      1.1             0.6
      Excess of amounts paid for employee future
       benefits over current period cost                (6.5)           (1.5)
      Minority interest                                    -            (1.4)
    -------------------------------------------------------------------------
                                                       112.5            96.1
    Net change in non-cash working capital
     related to operations                             (61.7)          (83.1)
    -------------------------------------------------------------------------
                                                         50.8           13.0
    -------------------------------------------------------------------------
    Investing activities
    Net change in investments and other assets          (0.2)           (1.7)
    Dividends from public company subject to
     significant influence                               0.7             0.7
    Acquisition of fixed assets                        (52.1)          (44.0)
    Disposal of fixed assets                             0.7             0.3
    Acquisition of intangible assets                    (4.2)          (10.3)
    -------------------------------------------------------------------------
                                                       (55.1)          (55.0)
    -------------------------------------------------------------------------
    Financing activities
    Net change in bank loans                             2.3            24.7
    Issuance of shares (note 9)                         17.4             1.0
    Redemption of shares (note 9)                       (9.3)          (40.9)
    Increase of long-term debt                           2.7             0.8
    Repayment of long-term debt                         (2.3)           (1.7)
    Net change in other long-term liabilities           (2.3)           (1.6)
    Dividends paid                                     (13.8)          (13.2)
    -------------------------------------------------------------------------
                                                        (5.3)          (30.9)
    -------------------------------------------------------------------------
    Net change in cash and cash equivalents             (9.6)          (72.9)
    Cash and cash equivalents - beginning of
     period                                            151.7           100.5
    -------------------------------------------------------------------------
    Cash and cash equivalents - end of period      $   142.1       $    27.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other information
    Interest paid                                       22.3            23.6
    Income taxes paid                                   23.7            42.1
    -------------------------------------------------------------------------
                                                   ----------
    See accompanying notes


    Consolidated Statements of Retained Earnings
    12-week periods ended December 20, 2008 and December 22, 2007
    (Unaudited) (Millions of dollars)

                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
                                                                 (Restated -
                                                                      note 2)
    -------------------------------------------------------------------------
    Balance - beginning of period                  $ 1,359.6       $ 1,214.3
    Adjustment due to a new accounting policy
     related to inventories (note 2)                     7.2             7.7
    -------------------------------------------------------------------------
    Restated balance                                 1,366.8         1,222.0
    Net earnings                                        81.1            73.8
    Dividends                                          (13.8)          (13.2)
    Share redemption premium                            (7.3)          (31.5)
    -------------------------------------------------------------------------
    Balance - end of period                        $ 1,426.8       $ 1,251.1
    -------------------------------------------------------------------------
                                                   ----------
    See accompanying notes


    Consolidated Statements of Comprehensive Income
    12-week periods ended December 20, 2008 and December 22, 2007
    (Unaudited) (Millions of dollars)

                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
                                                                 (Restated -
                                                                      note 2)
    -------------------------------------------------------------------------
    Net earnings                                   $    81.1       $    73.8

    Other comprehensive income (note 10)
    Change in fair value of derivatives designated
     as cash flow hedges net of income taxes
     of $0.8 (2008 - $0.3)                              (1.9)           (0.5)
    -------------------------------------------------------------------------
    Comprehensive income                           $    79.2       $    73.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------
    See accompanying notes
    

    Notes to Interim Consolidated Statements
    12-week periods ended December 20, 2008 and December 22, 2007
    (Unaudited) (Millions of dollars, unless underwise indicated)

    1. Statement Presentation

    The unaudited interim consolidated financial statements were prepared by
management in accordance with Canadian generally accepted accounting
principles (GAAP). The accounting policies and procedures used in preparing
these interim consolidated financial statements are the same as those used in
preparing the audited annual consolidated financial statements for the year
ended September 27, 2008, except for the new accounting policies described in
note 2. The unaudited interim consolidated financial statements should be read
along with the audited annual consolidated financial statements and notes to
the statements in the Company's 2008 Annual Report. The operating results for
the interim period covered do not necessarily reflect overall results for the
fiscal year. Certain comparative figures have been reclassified to conform to
the presentation being used in the current fiscal year.

    2. New Accounting Policies

    ADOPTED IN 2009

    Inventories

    In the first quarter of 2009, the Company adopted Section 3031
"Inventories". Under this new standard, inventories shall be measured at the
lower of cost and net realizable value and the retail method may be used if it
is close to cost. Furthermore, all costs incurred in bringing the inventories
to their present location and condition shall be included in the cost of
inventories. Other costs shall be recognized as expenses in the period in
which they are incurred.
    The Company measures its wholesale inventories at the lower of cost,
determined by the average cost method net of certain considerations received
from vendors, and net realizable value. Retail inventories are valued at the
retail price less the gross margin and certain considerations received from
vendors. Following this new section's adoption, the Company has included
certain costs in its cost of inventories, such as receiving and shelving costs
and also costs for products transformed in store. Warehousing costs are
recognized as operating expenses.
    The new Section 3031 was applied retrospectively with restatement of
prior periods' financial statements.

    The Company recorded the following adjustments to its fiscal 2009 first
quarter:

    
    Balance-sheet components

                                                                   Beginning
                                                                     balance
                                                                September 28,
    Increase or (Decrease)                                              2008
    -------------------------------------------------------------------------
    Inventories                                                         26.0

    Goodwill                                                           (11.5)

    Long-term future income taxes liability                              7.3

    Retained earnings                                                    7.2
    -------------------------------------------------------------------------

    The Company recorded the following adjustments to its fiscal 2008 first
quarter:


    Balance-sheet components

                                                   Beginning         Ending
                                                     balance        balance
                                                September 30,   December 22,
    Increase or (Decrease)                              2007           2007
    -------------------------------------------------------------------------
    Inventories                                         26.8           32.5

    Goodwill                                           (11.5)         (11.5)

    Long-term future income taxes liability              7.6            9.2

    Retained earnings                                    7.7           11.8
    -------------------------------------------------------------------------


    Earnings components

                                                            12-week period
                                                                     ended
                                                               December 22,
    Increase or (Decrease)                                            2007
    -------------------------------------------------------------------------
    Cost of sales and operating expenses                              (5.7)

    Income taxes                                                       1.6

    Net earnings                                                       4.1

    Basic net earnings per share (Dollars)                            0.04

    Fully diluted net earnings per share (Dollars)                    0.03
    -------------------------------------------------------------------------

    Goodwill and Intangible Assets

    In the first quarter of 2009, the Company adopted the Section 3064
"Goodwill and Intangible Assets". The new section states that upon their
initial identification, intangible assets are to be recognized as assets only
if they meet the definition of an intangible asset and the recognition
criteria. As for subsequent measurement of intangible assets, goodwill and
disclosure, Section 3064 carries forward the requirements of the old Section
3062 "Goodwill and Other Intangible Assets". The adoption of these guidelines
did not have any material effect on the Company's results, financial position
or cash flows.

    3. Banner Conversion Costs

    On August 7, 2008, the Company announced its conversion plan for changing
the five banners under which it operates its 159 Ontario supermarkets to the
Metro banner by December 2009. The Company also announced that an amount of
approximately $25 will be incurred for this conversion, most of which had
already been recorded under the A&P Canada integration plan.
    Banner conversion costs of $4.5 in the first quarter of 2009 are part of
those not recorded under the A&P Canada integration plan. More costs will be
incurred and expensed over the next few quarters.

    4. Employee Future Benefits

    The Company offers several defined benefit and defined contribution plans
that provide most participants with pension, other retirement and other
post-employment benefits. The Company's defined benefit and defined
contribution plan expenses were as follows:

                                                     Fiscal Year
                                       ------------------
                                               2009                2008
    -------------------------------------------------------------------------
                                       Pension     Other   Pension     Other
                                         plans     plans     plans     plans
    -------------------------------------------------------------------------
    Defined contribution plans         $   6.6   $   0.1   $   6.1   $   0.1
    -------------------------------------------------------------------------
    Defined benefit plans

    Current service cost                   4.9       0.3       5.3       0.4

    Interest cost                          7.7       0.4       7.1       0.4

    Projected return on plan assets       (9.1)        -      (9.8)        -

    Amortization of actuarial losses
     and past service cost                 0.3         -       0.3         -
    -------------------------------------------------------------------------
                                           3.8       0.7       2.9       0.8
    -------------------------------------------------------------------------
                                       $  10.4   $   0.8   $   9.0   $   0.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       ------------------

    5. Financial Costs
                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
    -------------------------------------------------------------------------
    Interest, short term                           $     0.6       $     1.0

    Interest, long term                                 12.1            14.2

    Amortization of deferred financing costs             0.5             0.5

    Interest income                                     (0.7)           (1.7)
    -------------------------------------------------------------------------
                                                   $    12.5       $    14.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------

    6. Income Taxes

    The effective income tax rates were as follows:
                                                            Fiscal Year
                                                   ----------
    (Percentage)                                        2009            2008
    -------------------------------------------------------------------------
    Combined statutory income tax rate                  31.4            31.6

    Changes
      Impact of federal tax rate decrease of 3.5%
       on future taxes (2008 - $11.4)                      -           (13.0)

      Share of earnings in a public company subject
       to significant influence                         (1.5)           (1.0)

      Other                                              0.2             0.2
    -------------------------------------------------------------------------
                                                        30.1            17.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------

    7. Net Earnings per Share

    Basic net earnings per share and fully diluted net
     earnings per share were calculated based on the
     following number of shares:
                                                            Fiscal Year
                                                   ----------
    (Millions)                                          2009            2008
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding -
     Basic                                             110.5           114.0

    Dilutive effect under stock option plan and
     performance share units                             0.9             1.1
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding -
     Diluted                                           111.4           115.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------

    8. Inventories

    The breakdown of inventories was as follows:

                                                   ----------
                                                       As at           As at
                                                 December 20,   September 27,
                                                        2008            2008
    -------------------------------------------------------------------------
    Wholesale inventories                          $   332.4       $   293.7

    Retail inventories                                 405.7           347.9
    -------------------------------------------------------------------------
                                                   $   738.1       $   641.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------

    The cost of inventories recognized as an expense in the first quarter of
2009 was $2,139.9 (2008 - $2,086.8).

    9. Capital Stock

    Outstanding

                                Class A                Class B
                           Subordinate Shares           Shares         Total
                          -------------------- --------------------
                              Number              Number
                          (Thousands)         (Thousands)
    -------------------------------------------------------------------------
    Balance as at
     September 27, 2008      109,806   $ 696.1       750   $   1.5   $ 697.6

    Shares issued for cash       826      17.4         -         -      17.4

    Transfer from
     contributed surplus -
     options exercised             -       0.2         -         -       0.2

    Shares redeemed for
     cash, excluding
     premium of $7.3            (318)     (2.0)        -         -      (2.0)

    Conversion of Class B
     Shares into Class A
     Subordinate Shares           11         -       (11)        -         -
    -------------------------------------------------------------------------
    Balance as at
     December 20, 2008       110,325   $ 711.7       739   $   1.5   $ 713.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock Option Plan

    As at December 20, 2008, 2,717,840 stock options were outstanding at
exercise prices varying from $17.01 to $39.17, with expiry dates up to 2015.
Of these stock options, 1,435,460 could be exercised for a weighted average
exercise price of $21.82.
    Granted stock options were as follows:
                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
    -------------------------------------------------------------------------
    Granted stock options during the period (Units)   10,000          53,800

    Weighted average exercise price (Dollars)          33.60           28.09

    Weighted average fair value (Dollars)               7.58            7.54
    -------------------------------------------------------------------------
                                                   ----------


    During the 12-week period ended December 20, 2008, the weighted average
fair value of stock options granted during the period was established at the
time of grant using the Black & Scholes model and based on the following
weighted average assumptions: risk-free interest rate of 2.8% (2008 - 3.8%),
expected six-year term (2008 - six-year term), anticipated volatility of 22.0%
(2008 - 25.0%) and an anticipated 1.4% dividend yield (2008 - 1.5%).
    The compensation expense for these stock options amounted to $0.5 for the
12-week period of 2009 (2008 - $0.3).

    Performance Share Unit Plan

    As at December 20, 2008, 210,472 performance share units (PSUs) were
outstanding. During the first quarter of 2009, no PSU was granted (2008 -
27,747) and no PSU was cancelled (2008 - 5,134).
    At the end of the first quarter, 194,000 shares were held in trust for
participants until the PSUs shall have vested or been cancelled (194,000 as at
September 27, 2008).
    A compensation expense of $0.6 pertaining to PSUs was recorded in the
first quarter of 2009 (2008 - $0.3).

    10. Accumulated Other Comprehensive Income

    Derivatives designated as cash flow hedges constitute the sole item in
Accumulated Other Comprehensive Income. The changes that occurred during the
12-week period were as follows:

                                                            Fiscal Year
                                                   ----------
                                                        2009            2008
    -------------------------------------------------------------------------
    Balance - beginning of period                  $    (1.0)      $     1.2

    Change in fair value of derivatives designated
     net of income taxes of $0.8 (2008 - $0.3)          (1.9)           (0.5)
    -------------------------------------------------------------------------
    Balance - end of period                        $    (2.9)      $     0.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   ----------
    
    %SEDAR: 00001783EF




For further information:

For further information: Richard Dufresne, Senior Vice-President and
Chief Financial Officer, (514) 643-1003; Investor Relations Department: (514)
643-1055, finance@metro.ca; METRO INC.'s corporate information and press
releases are available on the Internet at: www.metro.ca; Source: METRO INC.


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890