George Weston Limited Reports Second Quarter 2017 Results(2)

TORONTO, July 28, 2017 /CNW/ - George Weston Limited (TSX: WN) ("GWL" or the "Company") today announced its consolidated unaudited results for the 12 weeks ended June 17, 2017.

GWL's 2017 Second Quarter Report to Shareholders has been filed with SEDAR and is available at sedar.com and in the Investor Centre section of the Company's website at weston.ca.

Galen Weston, Chairman and Chief Executive Officer, George Weston Limited, commented that "George Weston Limited's results continue to reflect the execution of the strategic priorities by both of the Company's operating segments. Loblaw delivered solid sales metrics and financial results in a deflationary environment and plans to intensify its focus on reducing costs in a highly competitive market with incremental external pressures. Weston Foods results were below expectations due to challenges in meeting an aggressive plan in the frozen business, which more than offset solid performance in the other three business segments."

2017 SECOND QUARTER HIGHLIGHTS

(unaudited)
($ millions except where otherwise indicated)		12 Weeks Ended							24 Weeks Ended
For the periods ended as indicated		Jun. 17, 2017			Jun. 18, 2016			Change	Jun. 17, 2017			Jun. 18, 2016		Change
Sales		$	11,435		$	11,075		3.3%	$	22,235		$	21,875	1.6%
Operating income		$	639		$	525		21.7%	$	1,149		$	982	17.0%
Adjusted EBITDA^(1)		$	1,037		$	981		5.7%	$	1,961		$	1,871	4.8%
Adjusted EBITDA margin^(1)				9.1%			8.9%			8.8%			8.6%
Net earnings attributable to shareholders
	of the Company	$	170		$	143		18.9%	$	287		$	190	51.1%
Net earnings available to common shareholders
	of the Company	$	160		$	133		20.3%	$	267		$	170	57.1%
Adjusted net earnings available to common
	shareholders of the Company^(1)	$	216		$	200		8.0%	$	399		$	368	8.4%
Diluted net earnings per common share ($)		$	1.23		$	1.04		18.3%	$	2.07		$	1.31	58.0%
Adjusted diluted net earnings per common share^(1) ($)		$	1.67		$	1.56		7.1%	$	3.09		$	2.85	8.4%

CONSOLIDATED RESULTS OF OPERATIONS

Net earnings available to common shareholders of the Company increased by $27 million ($0.19 per common share) to $160 million ($1.23 per common share) in the second quarter of 2017 compared to the same period in 2016. The increase was primarily due to an improvement in the underlying operating performance of $16 million ($0.11 per common share) and the favourable year-over-year net impact of adjusting items totaling $11 million ($0.08 per common share), as described below.

• The improvement in underlying operating performance of $16 million ($0.11 per common share) was primarily due to:
• the underlying operating performance of Loblaw Companies Limited's ("Loblaw") Retail segment; and
• the favourable impact of a decrease in the adjusted tax rate⁽¹⁾ primarily attributable to a decrease in certain non-deductible items;

partially offset by,

• the unfavourable impact of an increase in depreciation and amortization.
  
  
• The favourable year-over-year net impact of adjusting items totaling $11 million ($0.08 per common share) was primarily due to:
• a decrease in restructuring and other related charges of $19 million ($0.15 per common share);
• the fair value adjustment of the Trust Unit liability of $16 million ($0.12 per common share);
• foreign currency translation of $8 million ($0.06 per common share);
• prior year charges related to retail locations in Fort McMurray impacted by wildfires of $4 million ($0.03 per common share); and
• prior year charge related to pension annuities and buy-outs of $2 million ($0.02 per common share);

partially offset by,

• the unfavourable impact of a fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares of $39 million ($0.31 per common share).
  
  
• Net earnings available to common shareholders of the Company also included the positive contribution from the increase in the Company's ownership interest in Loblaw, as a result of Loblaw's share repurchases.

Adjusted net earnings available to common shareholders of the Company⁽¹⁾ increased by $16 million ($0.11 per common share) to $216 million ($1.67 per common share) in the second quarter of 2017 compared to the same period in 2016. The increase was due to improvements in underlying operating performance and the positive contribution from the increase in the Company's ownership interest in Loblaw as described above.

REPORTABLE OPERATING SEGMENTS

The Company has two reportable operating segments, Loblaw and Weston Foods. The Company also holds cash, short term investments and a direct interest in Choice Properties Real Estate Investment Trust ("Choice Properties") of approximately 6.0%. Loblaw has three reportable operating segments: Retail, Financial Services and Choice Properties. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, credit card services, insurance brokerage services, personal banking services, gift cards and telecommunication services. Loblaw also holds an approximately 82.5% effective interest in Choice Properties, which owns, manages and develops well-located retail and other commercial real estate across Canada. The Weston Foods operating segment includes a leading fresh bakery business in Canada and frozen, artisan bakery and biscuit businesses throughout North America.

Weston Foods Segment Results

(unaudited)
($ millions except where otherwise indicated)	12 Weeks Ended					24 Weeks Ended
For the periods ended as indicated	Jun. 17, 2017		Jun. 18, 2016		Change	Jun. 17, 2017		Jun. 18, 2016		Change
Sales	$	509	$	496	2.6%	$	1,048	$	1,058	(0.9)%
Operating income	$	24	$	26	(7.7%)	$	47	$	60	(21.7)%
Adjusted EBITDA^(1)	$	54	$	59	(8.5)%	$	115	$	122	(5.7)%
Adjusted EBITDA margin^(1)	10.6%		11.9%				11.0%		11.5%
Depreciation and amortization^(i)	$	25	$	24	4.2%	$	49	$	51	(3.9)%

(i)	Depreciation and amortization in the second quarter of 2016 includes $2 million of accelerated depreciation related to restructuring and other charges.

Sales  Weston Foods sales in the second quarter of 2017 were $509 million, an increase of $13 million, or 2.6%, compared to the same period in 2016. Sales included the positive impact of foreign currency translation of approximately 2.4%. Excluding the favourable impacts of foreign currency translation and the timing of Easter, sales decreased by 0.6% due to a decrease in volumes, partially offset by the positive impact of changes in sales mix.

Operating Income  Weston Foods operating income in the second quarter of 2017 was $24 million, a decrease of $2 million, or 7.7% compared to the same period in 2016. The decrease was primarily due to the decline in underlying operating performance, partially offset by the favourable year-over-year net impact of the net proceeds from insurance claims of $4 million and settlement charges related to pension annuities and buy-outs in the second quarter of 2016 of $3 million.

Adjusted EBITDA⁽¹⁾  Weston Foods adjusted EBITDA⁽¹⁾ in the second quarter of 2017 was $54 million, a decrease of $5 million, or 8.5%, compared to the same period in 2016. The decrease was driven by continued investments in the business, partially offset by productivity improvements.

Weston Foods adjusted EBITDA margin⁽¹⁾ in the second quarter of 2017 decreased to 10.6% compared to 11.9% in the same period in 2016. The decline in adjusted EBITDA margin⁽¹⁾ was mainly due to incremental investments in the business.

Depreciation and Amortization  Weston Foods depreciation and amortization was $25 million in the second quarter of 2017, an increase of $1 million, or 4.2%, compared to the same period in 2016. Depreciation and amortization included $2 million of accelerated depreciation recorded in the second quarter of 2016 related to the planned closures of pie and cake manufacturing facilities. Excluding these amounts, depreciation and amortization increased by $3 million in the second quarter of 2017 due to investments in capital.

Weston Foods Other Business Matters

Restructuring  Weston Foods continuously evaluates strategic and cost reduction initiatives related to its manufacturing assets, distribution networks and administrative infrastructure with the objective to streamline operations and to ensure a low cost operating structure. In the second quarter of 2017, Weston Foods recorded restructuring and other charges of $5 million (2016 – $5 million). These charges primarily relate to employee related costs and restructuring plans pertaining to previously closed manufacturing facilities in Canada and the U.S. with production transferring to other facilities. Restructuring and other charges included $2 million of accelerated depreciation recorded in the second quarter of 2016.

Loblaw Segment Results

(unaudited)
($ millions except where otherwise indicated)	12 Weeks Ended						24 Weeks Ended
For the periods ended as indicated	Jun. 17, 2017		Jun. 18, 2016			Change	Jun. 17, 2017		Jun. 18, 2016		Change
Sales	$	11,079	$	10,731		3.2%	$	21,480	$	21,112	1.7%
Operating income	$	624	$	515		21.2%	$	1,114	$	949	17.4%
Adjusted EBITDA^(1)	$	983	$	922		6.6%	$	1,846	$	1,749	5.5%
Adjusted EBITDA margin^(1)	8.9%			8.6%				8.6%		8.3%
Depreciation and amortization^(i)	$	360	$	346		4.0%	$	720	$	714	0.8%

(i)	Depreciation and amortization in the second quarter of 2017 includes $121 million (2016 – $123 million) of amortization of intangible assets acquired with Shoppers Drug Mart Corporation ("Shoppers Drug Mart").

Sales, operating income and adjusted EBITDA⁽¹⁾ in the second quarter of 2017 included the impacts of the consolidation of franchises, as set out in "Loblaw Other Business Matters".

Sales  Loblaw sales in the second quarter of 2017 were $11,079 million, an increase of $348 million compared to the same period in 2016, primarily driven by Retail. Retail sales increased by $333 million, or 3.2%, compared to the same period in 2016 and included food retail sales of $7,944 million (2016 – $7,718 million) and drug retail sales of $2,883 million (2016 – $2,776 million).

Excluding the consolidation of franchises, Retail sales increased by $253 million, or 2.4%, primarily driven by the following factors:

• food retail same-store sales growth was 1.2%, including gas bar. Excluding the favourable impact of the timing of Easter and gas bar, food retail same-store sales were relatively flat. Loblaw's food retail average quarterly internal food price index declined and was marginally higher than the average quarterly national food price deflation of 1.4% as measured by "The Consumer Price Index for Food Purchased from Stores" ("CPI"). CPI does not necessarily reflect the effect of inflation on the specific mix of goods sold in Loblaw stores;
• drug retail same-store sales growth was 3.7%, including pharmacy same-store sales growth of 2.9% and front store same-store sales growth of 4.5%. Excluding the favourable impact of the timing of Easter, drug retail same-store sales growth was approximately 2.9%; and
• in the last 12 months, Retail net square footage increased by 0.5 million square feet, or 0.7%.

Operating Income 

Loblaw operating income in the second quarter of 2017 was $624 million, an increase of $109 million compared to the same period in 2016, primarily driven by the improvements in underlying operating performance of $45 million and the favourable year-over-year net impact of certain adjusting items totaling $64 million, as described below:

• the improvements in underlying operating performance of $45 million were primarily driven by Retail and included higher sales and an increase in gross margin, partially offset by higher selling, general and administrative expenses ("SG&A"), and depreciation and amortization. The improvements in underlying operating performance also included the positive contribution from the consolidation of franchises; and
• the favourable year-over-year net impact of certain Retail adjusting items totaling $64 million was primarily due to the following:
• prior year restructuring and other related charges of $43 million;
• prior year charges related to retail locations in Fort McMurray impacted by wildfires of $12 million; and
• the change in fair value adjustment of derivatives of $11 million.

Adjusted EBITDA⁽¹⁾  Loblaw adjusted EBITDA⁽¹⁾ in the second quarter of 2017 was $983 million, an increase of $61 million compared to the same period in 2016, primarily driven by Retail. Retail adjusted EBITDA⁽¹⁾ increased $55 million driven by an increase in Retail gross profit, partially offset by an increase in Retail SG&A.

• Retail gross profit percentage was 27.8%, an increase of 90 basis points compared to the same period in 2016. Excluding the consolidation of franchises, Retail gross profit percentage was 26.7%, an increase of 30 basis points compared to the second quarter of 2016. The increase in Retail gross profit percentage was mainly driven by improvements in food retail shrink partially offset by lower drug retail margins.
• Retail SG&A as a percentage of sales was 19.2%, an increase of 60 basis points compared to the second quarter of 2016. Excluding the consolidation of franchises, Retail SG&A increased by $54 million. SG&A as a percentage of sales, excluding the consolidation of franchises, was 18.1%, an unfavourable increase of 10 basis points compared to the second quarter of 2016, mainly driven by certain one-time costs.

Depreciation and Amortization  Loblaw's depreciation and amortization was $360 million in the second quarter of 2017, an increase of $14 million compared to the same period in 2016, primarily driven by the consolidation of franchises and an increase in IT assets. Depreciation and amortization in the second quarter of 2017 included $121 million (2016 – $123 million) of amortization of intangible assets acquired with Shoppers Drug Mart.

Loblaw Other Business Matters

Gas Bar Network  On July 17, 2017, Loblaw sold its gas bar operations, for proceeds of approximately $540 million, to Brookfield Business Partners L.P. ("Brookfield"). As a result of the transaction, Brookfield has become a strategic partner to Loblaw and will continue to offer Loblaw's PC Plus loyalty program at the gas bars. Consistent with the first quarter of 2017, Loblaw has classified $78 million of fixed assets and $10 million of inventory, related to the gas bar operations, as assets held for sale as at June 17, 2017. In addition, Loblaw has classified $54 million of related accounts payable and accrued liabilities that will be assumed by the purchaser as liabilities held for sale as at June 17, 2017. In 2016, the gas bar operations sold approximately 1,700 million litres of gas and contributed approximately $1,500 million to sales. After taking into account the earnings associated with the gas bar operations and the ongoing commitment of Loblaw to fund certain loyalty program costs, the expected annual impact will be a reduction in adjusted EBITDA⁽¹⁾ of approximately $80 million, based on 2016 information. Loblaw expects to use the proceeds from the sale for general corporate activities.

Consolidation of Franchises  Loblaw has more than 500 franchise food retail stores in its network. As at the end of the second quarter of 2017, 241 of these stores were consolidated for accounting purposes under a new, simplified franchise agreement ("Franchise Agreement") implemented in 2015.

Loblaw will convert franchises to the Franchise Agreement as existing agreements expire, at the end of which all franchises will be consolidated. The following table presents the number of franchises consolidated in the second quarter of 2017 and the total impact of the consolidation of franchises included in the consolidated results of the Company.

(unaudited) ($ millions) For the periods ended as indicated
	12 Weeks Ended
	Jun. 17, 2017		Jun. 18, 2016
Number of Consolidated Franchise stores, beginning of period	225			115
Add: Net Number of Consolidated Franchise stores in the period	16			17
Number of Consolidated Franchise stores, end of period	241			132
Sales	$	155		$	75
Operating income (loss)	2			(5)
Adjusted EBITDA^(1)	12			(1)
Depreciation and amortization	10			4
Net income (loss) attributable to Non-Controlling Interest	3			(5)

Operating income (loss) included in the table above does not significantly impact net earnings available to common shareholders of the Company as the related income (loss) are largely attributable to Non-Controlling Interests.

Loblaw expects the estimated annual impact in 2017 of new and current consolidated franchises to be revenue of approximately $680 million, adjusted EBITDA⁽¹⁾ of approximately $55 million, depreciation and amortization of approximately $45 million and net earnings attributable to Non-Controlling Interests of approximately $10 million.

OUTLOOK⁽²⁾

Weston Foods expects adjusted EBITDA⁽¹⁾ in the second half of 2017 to trend in a similar fashion to the first half of 2017 when compared to last year as sales from the frozen business are ramping up slower than previously anticipated. For the year, sales growth generated by incremental capacity and productivity improvements will be offset by a challenging environment in Weston Foods' Canadian fresh bakery business and incremental investments required to meet new more stringent regulatory requirements in food safety and labelling. Management expects to make capital investments of approximately $220 million in 2017 related to growth, regulatory and maintenance. Depreciation is projected to increase in 2017 when compared to 2016.

Loblaw's outlook for 2017 remains unchanged. Loblaw remains focused on its strategic framework, delivering the best in food, best in health and beauty, operational excellence and growth. This framework is supported by a financial plan of maintaining a stable trading environment that targets positive same-store sales and stable gross margin, surfacing efficiencies to deliver operating leverage, and returning capital to shareholders. In 2017, on a full year comparative basis, despite the current deflationary environment, Loblaw expects to:

• deliver positive same-store sales and stable gross margin in its Retail segment in a highly competitive grocery market, with continued negative pressure from healthcare reform;
• grow adjusted net earnings⁽¹⁾;
• invest approximately $1.3 billion in capital expenditures, including $1.0 billion in its Retail segment; and
• return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Beyond 2017, the recent announcements of minimum wage increases in Ontario and Alberta and further healthcare reform in Quebec will negatively impact Loblaw's net earnings. The expected incremental impact of minimum wage increases on Loblaw's labour expenses is approximately $190 million in 2018. In addition, the recently announced healthcare reform in Quebec will result in a more significant incremental impact in 2018 than in prior years. Loblaw is currently assessing how to mitigate these impacts.

For 2017, the Company expects growth in net earnings to be driven by an increase in net earnings at Loblaw, and the positive impact of the Company's increased ownership in Loblaw as a result of Loblaw's share repurchases.

DECLARATION OF QUARTERLY DIVIDENDS

Subsequent to the end of the second quarter of 2017, the Company's Board of Directors declared a quarterly dividend on GWL Common Shares, Preferred Shares, Series I, Preferred Shares, Series III, Preferred Shares, Series IV and Preferred Shares, Series V payable as follows:

	Common Shares	$0.455 per share payable October 1, 2017, to shareholders of record September 15, 2017;
	Preferred Shares, Series I	$0.3625 per share payable September 15, 2017, to shareholders of record August 31, 2017;
	Preferred Shares, Series III	$0.3250 per share payable October 1, 2017, to shareholders of record September 15, 2017;
	Preferred Shares, Series IV	$0.3250 per share payable October 1, 2017, to shareholders of record September 15, 2017; and
	Preferred Shares, Series V	$0.296875 per share payable October 1, 2017, to shareholders of record September 15, 2017.

NON-GAAP FINANCIAL MEASURES

The Company uses the following non-GAAP financial measures: adjusted EBITDA and adjusted EBITDA margin, adjusted net earnings attributable to shareholders of the Company, adjusted net earnings available to common shareholders of the Company and adjusted diluted net earnings per common share. In addition to these items, the following measures are used by management in calculating adjusted diluted net earnings per common share: adjusted operating income, adjusted net interest expense and other financing charges, adjusted income taxes and adjusted income tax rate. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance of the Company for the reasons outlined below.

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 consolidated and segment underlying operating performance. The excluded items are not necessarily reflective of the Company's underlying operating performance and make comparisons of underlying financial performance between periods difficult. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with GAAP.

For details on the nature of items excluded in the calculation of any of the non-GAAP financial measures detailed below, see the "Non-GAAP Financial Measures" section of the Company's 2017 Second Quarter Report to Shareholders.

Adjusted EBITDA  The Company believes adjusted EBITDA is useful in assessing and making decisions regarding the underlying operating performance of the Company's ongoing operations and in assessing the Company's ability to generate cash flows to fund its cash requirements, including its capital investment program.

The following table reconciles adjusted EBITDA to operating income, which is reconciled to GAAP net earnings attributable to shareholders of the Company reported for the periods ended as indicated.

			12 Weeks Ended
			Jun. 17, 2017								Jun. 18, 2016
(unaudited)  ($ millions)			Weston Foods		Loblaw		Other		Consolidated		Weston Foods		Loblaw		Other		Consolidated
Net earnings attributable to shareholders
	of the Company								$	170							$	143
Add impact of the following:
	Non-controlling interests								194								84
	Income taxes								140								141
	Net interest expense and other
		financing charges							135								157
Operating income			$	24	$	624	$	(9)	$	639	$	26	$	515	$	(16)	$	525
Add impact of the following:
	Amortization of intangible assets acquired
		with Shoppers Drug Mart			121				121				123				123
	Pension annuities and buy-outs								—		3						3
	Fair value adjustment of derivatives		4		(1)				3		3		10				13
	Restructuring and other charges		5						5		5		43				48
	Inventory loss, net of recoveries		(4)						(4)								—
	Asset impairments, net of recoveries						3		3								—
	Charges related to retail locations in
		Fort McMurray							—				12				12
	Drug retail ancillary assets								—				(4)				(4)
	Foreign currency translation^(i)						6		6						16		16
Adjusting items			$	5	$	120	$	9	$	134	$	11	$	184	$	16	$	211
Adjusted operating income			$	29	$	744	$	—	$	773	$	37	$	699	$	—	$	736
Depreciation and amortization excluding the
	impact of the above adjustments^(ii)		25		239				264		22		223				245
Adjusted EBITDA			$	54	$	983	$	—	$	1,037	$	59	$	922	$	—	$	981

(i)	Represents the effect of foreign currency translation on a portion of the U.S. dollar denominated cash and cash equivalents and short term investments held by foreign operations.
(ii)	Depreciation and amortization for the calculation of adjusted EBITDA excludes $121 million (2016 – $123 million) of amortization of intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw and $2 million of accelerated depreciation recorded by Weston Foods in the second quarter of 2016, related to restructuring and other charges.

			24 Weeks Ended
							Jun. 17, 2017									Jun. 18, 2016
(unaudited) ($ millions)			Weston Foods		Loblaw		Other		Consolidated		Weston Foods		Loblaw		Other		Consolidated
Net earnings attributable to shareholders
	of the Company								$	287							$	190
Add impact of the following:
	Non-controlling interests								317								182
	Income taxes								240								216
	Net interest expense and other
		financing charges							305								394
Operating income			$	47	$	1,114	$	(12)	$	1,149	$	60	$	949	$	(27)	$	982
Add impact of the following:
	Amortization of intangible assets acquired
		with Shoppers Drug Mart			242				242				247				247
	Pension annuities and buy-outs				7				7		3		2				5
	Fair value adjustment of derivatives		9		5				14		2		20				22
	Restructuring and other charges		14						14		14		44				58
	Inventory loss, net of recoveries		(4)						(4)								—
	Asset impairments, net of recoveries						3		3				2				2
	Charges related to retail locations in
		Fort McMurray							—				12				12
	Prior year land transfer tax assessment								—				10				10
	Drug retail ancillary assets								—				(4)				(4)
	Foreign currency translation^(i)						9		9						27		27
Adjusting items			$	19	$	254	$	12	$	285	$	19	$	333	$	27	$	379
Adjusted operating income			$	66	$	1,368	$	—	$	1,434	$	79	$	1,282	$	—	$	1,361
Depreciation and amortization excluding the
	impact of the above adjustments^(ii)		49		478				527		43		467				510
Adjusted EBITDA			$	115	$	1,846	$	—	$	1,961	$	122	$	1,749	$	—	$	1,871

(i)	Represents the effect of foreign currency translation on a portion of the U.S. dollar denominated cash and cash equivalents and short term investments held by foreign operations.
(ii)	Depreciation and amortization for the calculation of adjusted EBITDA excludes $242 million (2016 – $247 million) of amortization of intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw and $8 million of accelerated depreciation recorded by Weston Foods in 2016, related to restructuring and other charges.

The following new items impacted operating income in the second quarter of 2017:

Inventory loss, net of recoveries  In 2016, Weston Foods' damaged inventory of $11 million (U.S. $9 million) was written-off and was recorded in SG&A in the Company's consolidated statement of earnings. In the second quarter of 2017, the Company received partial proceeds from the insurance claim.  The insurance claim remains in progress and further proceeds are expected to be recorded as the claim progresses.

Asset impairments, net of recoveries  At each balance sheet date, the Company assesses and, when required, records impairments and recoveries of previous impairments related to the carrying value of its fixed assets, investment properties, intangible and other assets.

Adjusted Net Interest Expense and Other Financing Charges  The Company believes adjusted net interest expense and other financing charges is useful in assessing the ongoing net financing costs of the Company.

The following table reconciles adjusted net interest expense and other financing charges to GAAP net interest expense and other financing charges reported for the periods ended as indicated.

(unaudited) ($ millions)			12 Weeks Ended					24 Weeks Ended
			Jun. 17, 2017		Jun. 18, 2016			Jun. 17, 2017		Jun. 18, 2016
Net interest expense and other financing charges			$	135	$	157		$	305	$	394
Add:	Fair value adjustment of the Trust Unit liability		1		(73)			(23)		(94)
	Fair value adjustment of the forward sale agreement
		for 9.6 million Loblaw common shares	(2)		51			(19)		(31)
Adjusted net interest expense and other financing charges			$	134	$	135		$	263	$	269

Adjusted Income Taxes and Adjusted Income Tax Rate  The Company believes the adjusted income tax rate applicable to adjusted earnings before taxes is useful in assessing the underlying operating performance of its business.

The following table reconciles the effective income tax rate applicable to adjusted earnings before taxes to the GAAP effective income tax rate applicable to earnings before taxes as reported for the periods ended as indicated.

(unaudited)		12 Weeks Ended					24 Weeks Ended
($ millions except where otherwise indicated)		Jun. 17, 2017		Jun. 18, 2016			Jun. 17, 2017		Jun. 18, 2016
Adjusted operating income^(i)		$	773	$	736		$	1,434	$	1,361
Adjusted net interest expense and other
	financing charges^(i)	134			135			263	269
Adjusted earnings before taxes		$	639	$	601		$	1,171	$	1,092
Income taxes		$	140	$	141		$	240	$	216
Add:	Tax impact of items excluded from adjusted
	earnings before taxes^(ii)	33			30			78		95
	Statutory corporate income tax rate change									(3)
Adjusted income taxes		$	173	$	171		$	318	$	308
Effective income tax rate applicable to earnings
	before taxes	27.8%			38.3%			28.4%		36.7%
Adjusted income tax rate applicable to adjusted earnings
	before taxes	27.1%			28.5%			27.2%		28.2%

(i)	See reconciliations of adjusted operating income and adjusted net interest expense and other financing charges above.
(ii)	See the adjusted EBITDA table and the adjusted net interest expense and other financing charges table above for a complete list of items excluded from adjusted earnings before taxes.

Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net Earnings Per Common Share  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.

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 reported for the periods ended as indicated.

(unaudited)		12 Weeks Ended					24 Weeks Ended
($ millions except where otherwise indicated)		Jun. 17, 2017		Jun. 18, 2016			Jun. 17, 2017		Jun. 18, 2016
Net earnings attributable to shareholders of the Company		$	170	$	143		$	287	$	190
Less:	Prescribed dividends on preferred shares in share capital	(10)		(10)			(20)		(20)
Net earnings available to common shareholders
	of the Company	$	160	$	133		$	267	$	170
Less:	Reduction in net earnings due to dilutive instruments at Loblaw	(2)					(2)		(2)
Net earnings available to common shareholders for diluted
	earnings per share	$	158	$	133		$	265	$	168
Net earnings attributable to shareholders of the Company		$	170	$	143		$	287	$	190
Adjusting items (refer to the following table)		56		67			132		198
Adjusted net earnings attributable to shareholders
	of the Company	$	226	$	210		$	419	$	388
Less:	Prescribed dividends on preferred shares in share capital	(10)		(10)			(20)		(20)
Adjusted net earnings available to common shareholders
	of the Company	$	216	$	200		$	399	$	368
Less:	Reduction in net earnings due to dilutive instruments at Loblaw	(2)					(2)		(2)
Adjusted net earnings available to common shareholders for
	diluted earnings per share	$	214	$	200		$	397	$	366
Weighted average common shares outstanding (millions)^(i)		128.3		128.4			128.3		128.3

(i)	Includes impact of dilutive instruments for purposes of calculating adjusted diluted net earnings per common share.

The following table reconciles adjusted net earnings available to common shareholders of the Company and adjusted diluted net earnings per common share to GAAP net earnings available to common shareholders of the Company and diluted net earnings per common share as reported for the periods ended as indicated.

			12 Weeks Ended
			Jun. 17, 2017				Jun. 18, 2016
($ except where otherwise indicated)			Net Earnings Available to Common Shareholders of the Company ($ millions)		Diluted Net  Earnings Per Common Share		Net Earnings Available to Common Shareholders of the Company ($ millions)		Diluted Net Earnings Per Common Share
As reported			$	160	$	1.23	$	133	$	1.04
Add impact of the following^(i):
	Amortization of intangible assets acquired
		with Shoppers Drug Mart	42		0.33		42		0.34
	Pension annuities and buy-outs						2		0.02
	Fair value adjustment of derivatives		3		0.03		6		0.04
	Restructuring and other charges		3		0.02		22		0.17
	Inventory loss, net of recoveries		(2)		(0.02)
	Asset impairments, net of recoveries		3		0.02
	Charges related to retail locations in Fort McMurray						4		0.03
	Drug retail ancillary assets						(1)		(0.01)
	Fair value adjustment of the forward sale agreement for
		9.6 million Loblaw common shares	2		0.02		(37)		(0.29)
	Fair value adjustment of the Trust Unit liability		(1)		(0.01)		15		0.11
	Foreign currency translation		6		0.05		14		0.11
Adjusting items			$	56	$	0.44	$	67	$	0.52
Adjusted			$	216	$	1.67	$	200	$	1.56

(i)	Net of income taxes and non-controlling interests, as applicable.

			24 Weeks Ended
			Jun. 17, 2017				Jun. 18, 2016
($ except where otherwise indicated)			Net Earnings Available to Common Shareholders of the Company ($ millions)		Diluted Net Earnings Per Common Share		Net Earnings Available to Common Shareholders of the Company ($ millions)		Diluted Net Earnings Per Common Share
As reported			$	267	$	2.07	$	170	$	1.31
Add impact of the following^(i):
	Amortization of intangible assets acquired
		with Shoppers Drug Mart	84		0.65		85		0.66
	Pension annuities and buy-outs		2		0.02		3		0.03
	Fair value adjustment of derivatives		9		0.07		9		0.06
	Restructuring and other charges		10		0.08		28		0.22
	Inventory loss, net of recoveries		(2)		(0.02)
	Asset impairments, net of recoveries		3		0.02		1		0.01
	Charges related to retail locations in Fort McMurray						4		0.03
	Prior year land transfer tax assessment						3		0.02
	Drug retail ancillary assets						(1)		(0.01)
	Fair value adjustment of the forward sale agreement for
		9.6 million Loblaw common shares	14		0.11		22		0.17
	Fair value adjustment of the Trust Unit liability		4		0.03		19		0.15
	Statutory corporate income tax rate change						1		0.01
	Foreign currency translation		8		0.06		24		0.19
Adjusting items			$	132	$	1.02	$	198	$	1.54
Adjusted			$	399	$	3.09	$	368	$	2.85

(i)       Net of income taxes and non-controlling interests, as applicable.

FORWARD-LOOKING STATEMENTS

This News Release contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects and opportunities. 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, regulatory changes including minimum wage increases and further healthcare reform and planned capital investments. These specific forward-looking statements are contained throughout this News Release including, without limitation, in the "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", "maintain", "achieve", "grow", and "should" and similar expressions, as they relate to the Company and its management.

Forward-looking statements reflect the Company's current 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 expectation of operating and financial performance in 2017 is based on certain assumptions including assumptions about sales and volume growth, anticipated cost savings, operating efficiencies, and continued growth from current initiatives. The Company's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events 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 "Enterprise Risks and Risk Management" section of the Management's Discussion and Analysis in the Company's 2016 Annual Report and the Company's Annual Information Form ("AIF") for the year ended December 31, 2016. Such risks and uncertainties include:

• changes to the regulation of generic prescription drug prices, the reduction of reimbursements under public drug benefit plans and the elimination or reduction of professional allowances paid by drug manufacturers;
• failure to effectively manage Loblaw's loyalty programs;
• the inability of the Company's information technology ("IT") infrastructure to support the requirements of the Company's business, or the occurrence of any internal or external security breaches, denial of service attacks, viruses, worms and other known or unknown cyber security or data breaches;
• failure to realize benefits from investments in the Company's new IT systems;
• failure to effectively respond to consumer trends or heightened competition, whether from current competitors or new entrants to the marketplace;
• public health events including those related to food and drug safety;
• changes to any of the laws, rules, regulations or policies applicable to the Company's business;
• failure to merchandise effectively, to execute Loblaw's e-commerce initiative or to adapt its business model to the shifts in the retail landscape caused by digital advances;
• failure to realize the anticipated benefits, including revenue growth, anticipated cost savings or operating efficiencies associated with the Company's investment in major initiatives that support its strategic priorities;
• changes in economic conditions, including economic recession or changes in the rate of inflation or deflation, employment rates and household debt, interest rates, currency exchange rates and derivative or commodity prices;
• failure to achieve desired results in labour negotiations, including the terms of future collective bargaining agreements;
• adverse outcomes of legal and regulatory proceedings and related matters;
• reliance on the performance and retention of third-party service providers, including those associated with the Company's supply chain and Loblaw's apparel business, including issues with vendors in both advanced and developing markets;
• the inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory and to control shrink;
• the inability of the Company to effectively develop and execute its strategy; and
• the inability of the Company to anticipate, identify and react to consumer and retail trends.

This is not an exhaustive list of the factors that may affect the Company's forward-looking statements. Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including without limitation, the section entitled "Operating and Financial Risks and Risk Management" in the Company's AIF for the year ended December 31, 2016. 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.

2017 SECOND QUARTER REPORT TO SHAREHOLDERS

The Company's 2016 Annual Report and 2017 Second Quarter Report to Shareholders are available in the Investor Centre section of the Company's website at www.weston.ca and have been filed with SEDAR and are available online at www.sedar.com.

INVESTOR RELATIONS

Shareholders, security analysts and investment professionals should direct their requests to Mr. Geoffrey H. Wilson, Senior Vice President, Investor Relations, Business Intelligence and Communications, at the Company's Executive Office or by e-mail at [email protected].

Additional financial information has been filed electronically with various securities regulators in Canada through SEDAR. This News Release includes selected information on Loblaw Companies Limited, a public company with shares trading on the Toronto Stock Exchange. For information regarding Loblaw, readers should also refer to the materials filed by Loblaw with SEDAR from time to time. These filings are also maintained at Loblaw's corporate website at www.loblaw.ca.

SECOND QUARTER CONFERENCE CALL AND WEBCAST PRESENTATION

George Weston Limited will host a conference call as well as an audio webcast on Friday, July 28, 2017 at 9:00 a.m. (EDT). To access via tele-conference, please dial [phone] or 1-888-231-8191. The playback will be available two hours after the event at [phone] or 1-855-859-2056, passcode: 49355213#. To access via audio webcast, please visit the Investor Centre section of www.weston.ca. Pre-registration will be available.

Endnotes
(1)	See "Non-GAAP Financial Measures" section of this News Release.
(2)	This News Release contains forward-looking information. See "Forward-Looking Statements" section of this News Release 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, estimates, beliefs and assumptions that were applied in presenting the conclusions, forecasts and projections presented herein. This News Release must be read in conjunction with GWL's filings with securities regulators made from time to time, all of which can be found at www.weston.ca and www.sedar.com.

SOURCE George Weston Limited

Mr. Geoffrey H. Wilson, Senior Vice President, Investor Relations, Business Intelligence and Communications, at the Company's Executive Office or by e-mail at [email protected].