George Weston Limited Reports 2018 Fourth Quarter and Fiscal Year Ended December 31, 2018 Results(2)

TORONTO, Feb. 26, 2019 /CNW/ - George Weston Limited (TSX: WN) ("GWL" or the "Company") today announced its consolidated unaudited results for the 12 weeks ended December 31, 2018.

GWL's 2018 Annual Report includes the Company's audited annual consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the fiscal year ended December 31, 2018. The 2018 Annual Report 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 G. Weston, Chairman and Chief Executive Officer, George Weston Limited, commented that "Having successfully completed the spin-out of Choice Properties, George Weston has transformed into a more balanced and diversified company, with three strong and well-positioned pillars in retail, food and real estate."

"Loblaw delivered strong operational performance again this quarter and is accelerating its investments in growth as its strategy continues to gain momentum. Choice Properties delivered solid financial and operational results and the integration of CREIT and Choice Properties continues to progress well. At Weston Foods, fourth quarter results came in as expected, as the business began to stabilize."

2018 FOURTH QUARTER HIGHLIGHTS

Unless otherwise indicated, the Company's results include:

• the impact of the acquisition of Canadian Real Estate Investment Trust ("CREIT") by Choice Properties Real Estate Investment Trust ("Choice Properties"), as set out in the "Choice Properties Segment Results" section below; and
• the dilutive impact on both the Company's diluted net earnings per common share and adjusted diluted net earnings per common share⁽¹⁾, as a result of the issuance of approximately 26.6 million common shares in connection with the spin-out of Loblaw Companies Limited ("Loblaw") interest in Choice Properties to the Company, as described below.

(unaudited)
($ millions except where otherwise
indicated)	Quarters Ended										Years Ended
For the periods ended as indicated	Dec. 31, 2018			Dec. 31, 2017^(4)			$ Change		% Change		Dec. 31, 2018			Dec. 31, 2017^(4)			$ Change		% Change
Sales	$	11,717		$	11,402		315		2.8%		$	48,568		$	48,289		279		0.6 %
Operating income	$	690		$	164		526		320.7%		$	2,585		$	2,561		24		0.9 %
Adjusted EBITDA^(1)	$	1,146		$	1,065		81		7.6%		$	4,528		$	4,337		191		4.4 %
Adjusted EBITDA margin^(1)		9.8%			9.3%							9.3%			9.0%
Net earnings attributable to
shareholders
of the Company	$	281		$	44		237		538.6%		$	574		$	766		(192)		(25.1)%
Net earnings available to
common shareholders
of the Company	$	271		$	34		237		697.1%		$	530		$	722		(192)		(26.6)%
Adjusted net earnings
available to common
shareholders
of the Company^(1)	$	232		$	226		6		2.7%		$	908		$	903		5		0.6%
Diluted net earnings per
common share ($)	$	1.86		$	0.27		1.59		588.9%		$	3.99		$	5.58		(1.59)		(28.5)%
Adjusted diluted net earnings
per common share^(1)($)	$	1.59		$	1.76		(0.17)		(9.7)%		$	6.85		$	6.99		(0.14)		(2.0)%

On November 1, 2018, the Company and Loblaw completed a reorganization under which Loblaw spun out its approximate 61.6% effective interest in Choice Properties to the Company (the "reorganization"), as described in the "Consolidated Other Business Matters" section below. The Company issued approximately 26.6 million common shares to Loblaw shareholders other than the Company and its subsidiaries ("Loblaw minority shareholders").

Following the reorganization, the Company owned an approximate 65.4% effective interest in Choice Properties directly (which includes the approximate 3.8% interest in Choice Properties directly owned by GWL prior to the reorganization) and Choice Properties became a reportable operating segment of the Company.

CONSOLIDATED RESULTS OF OPERATIONS

Net earnings available to common shareholders of the Company in the fourth quarter of 2018 were $271 million, an increase of $237 million compared to the same period in 2017. The increase included the favourable year-over-year net impact of adjusting items totaling $231 million and the improvement in underlying operating performance of $6 million, as described below.

• The favourable year-over-year net impact of certain adjusting items totaling $231 million was primarily due to:
• the fair value adjustment to the Trust Unit Liability of $97 million;
• the year-over-year favourable impact of restructuring and other charges of $77 million;
• the impact of prior year charges at Loblaw related to the PC Optimum Program of $67 million; and
• the favourable impact of deferred tax recoveries of $52 million;
  
  partially offset by,
  
  
• the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares of $84 million.
  
  
• The improvement in underlying operating performance of $6 million was mainly due to the following:
• the favourable underlying operating performance of Choice Properties, including the impact of the acquisition of CREIT;
• the favourable underlying operating performance of Loblaw's Retail segment, which more than offset the negative year-over-year impact of minimum wage increases and incremental healthcare reform, partially offset by a decline in the underlying operating performance of Loblaw's Financial Services segment; and
• the positive contribution from the increase in the Company's ownership interest in Loblaw, as a result of Loblaw's share repurchases;
  
  partially offset by,
  
  
• an increase in adjusted net interest expense and other financing charges⁽¹⁾, including the impact of the acquisition of CREIT, as described below;
• an increase in depreciation and amortization expense, as described below; and
• the unfavourable underlying operating performance of Weston Foods.

Adjusted net earnings available to common shareholders of the Company⁽¹⁾ in the fourth quarter of 2018 were $232 million, an increase of $6 million, or 2.7%, compared to the same period in 2017, due to the improvement in underlying operating performance, as described above.

Diluted net earnings per common share in the fourth quarter of 2018 were $1.86 per common share, an increase of $1.59 per common share compared to the same period in 2017. The increase was mainly due to:

• the favourable year-over-year impact of adjusting items totaling $1.76 per common share, primarily due to the following:
• the fair value adjustment to the Trust Unit Liability of $0.66 per common share;
• the year-over-year favourable impact of restructuring and other charges of $0.61 per common share;
• the impact of prior year charges at Loblaw related to the PC Optimum Program of $0.51 per common share; and
• the favourable impact of deferred tax recoveries of $0.35 per common share;
  
  partially offset by,
  
  
• the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement for 9.6 million Loblaw common shares of $0.58 per common share;

       partially offset by,

• a decline of $0.17 per common share, including the net earnings improvement in the underlying operating performance described above, which was more than offset by the dilutive impact of the Company's issuance of approximately 26.6 million common shares in connection with the reorganization.

Adjusted diluted net earnings per common share⁽¹⁾ in the fourth quarter of 2018 were $1.59 per common share, a decline of $0.17 per common share, or 9.7%, compared to the same period in 2017. Normalized for the dilutive impact of the Company's issuance of approximately 26.6 million common shares, adjusted diluted net earnings per common share⁽¹⁾ increased by approximately $0.06 per common share, or 3.4%, which included the positive contribution from the increase in the Company's ownership interest in Loblaw of approximately $0.04 per common share.

CONSOLIDATED OTHER BUSINESS MATTERS

Loblaw's Spin-out of Choice Properties Real Estate Investment Trust  On November 1, 2018, the Company and Loblaw completed a reorganization under which Loblaw distributed its approximate 61.6% effective interest in Choice Properties to the Company on a tax-free basis to Loblaw and its Canadian shareholders. In connection with the reorganization, Loblaw minority shareholders received 0.135 of a common share of the Company for each common share of Loblaw held, which was equivalent to the market value of their pro rata interest in Choice Properties as at the announcement date of the reorganization, and the Company received Loblaw's approximate 61.6% effective interest in Choice Properties. Following the reorganization, Loblaw no longer had an interest in Choice Properties and the Company owned an approximate 65.4% effective interest in Choice Properties directly (which includes the approximate 3.8% interest in Choice Properties directly owned by the Company prior to the completion of the reorganization).

As a result of the reorganization, Loblaw ceased to consolidate its equity interest in Choice Properties and Choice Properties became a separate reportable operating segment of the Company. The Loblaw segment results include transactions between Loblaw and Choice Properties in the current and comparative period, including, but not limited to, rent payments made by Loblaw to Choice Properties. Following the reorganization, the Loblaw segment results also include impairment and depreciation of certain assets associated with the retail locations that are leased from Choice Properties. These transactions are eliminated and the impairment and depreciation is reversed, as applicable, in Other and Intersegment Eliminations as they are consolidated by the Company.

In connection with the reorganization, the Company issued approximately 26.6 million common shares to Loblaw minority shareholders. The Company continues to be controlled by Mr. W. Galen Weston who, directly and indirectly through entities which he controls, owns approximately 53.1% of the outstanding common shares of the Company.

The Company consolidated Loblaw and Choice Properties into its financial statements before and after the reorganization, and as a result adjusted net earnings⁽¹⁾ remain relatively unchanged. The issuance of approximately 26.6 million common shares in connection with the reorganization has a dilutive impact on both the Company's diluted net earnings per common share and adjusted diluted net earnings per common share⁽¹⁾.

The Company recorded $10 million and $20 million in transaction costs and other related costs in the fourth quarter and year-to-date 2018, respectively. 

REPORTABLE OPERATING SEGMENTS
The Company operates through its three reportable operating segments, Weston Foods, Loblaw and Choice Properties. The Company also holds cash and short term investments. The Weston Foods operating segment includes a leading North American bakery that offers packaged bread and rolls in Canada as well as frozen and artisan bread and rolls, cakes, donuts, pies, biscuits and alternatives throughout Canada and the U.S.

Loblaw has two reportable operating segments, Retail and Financial Services. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, financial services and wireless mobile products and services. Loblaw is one reportable operating segment of the Company.

Choice Properties owns, manages and develops a high quality portfolio of commercial retail, industrial, office and residential properties across Canada.

Weston Foods Segment Results

(unaudited)
($ millions except where otherwise
indicated)		Quarters Ended											Years Ended
For the periods ended as indicated		Dec. 31, 2018			Dec. 31, 2017			$ Change			% Change		Dec. 31, 2018			Dec. 31, 2017			$ Change			% Change
Sales		$	507		$	527		$	(20)		(3.8)%		$	2,122		$	2,243		$	(121)		(5.4)%
Operating income		$	22		$	8		$	14		175.0%		$	73		$	91		$	(18)		(19.8)%
Adjusted EBITDA^(1)		$	55		$	61		$	(6)		(9.8)%		$	219		$	256		$	(37)		(14.5)%
Adjusted EBITDA margin^(1)			10.8%			11.6%								10.3%			11.4%
Depreciation and
amortization^(i)		$	27		$	35		$	(8)		(22.9)%		$	130		$	117		$	13		11.1%

(i)	Depreciation and amortization includes $10 million in the fourth quarter of 2017 and $9 million (2017 – $10 million) year-to-date in 2018 of accelerated depreciation and amortization related to restructuring and other charges.

Sales  Weston Foods sales in the fourth quarter of 2018 were $507 million, a decrease of $20 million, or 3.8%, compared to the same period in 2017. Sales included the favourable impact of foreign currency translation of approximately 2.1%. Excluding the favourable impact of foreign currency translation, sales decreased by 5.9%, mainly due to a decrease in volumes, including the impact of product rationalization and the loss of sales to key customers, and the negative impact of changes in sales mix.

Operating income  Weston Foods operating income in the fourth quarter of 2018 was $22 million, an increase of $14 million, or 175.0% compared to the same period in 2017. The increase included the favourable year-over-year net impact of adjusting items totaling $22 million, partially offset by the decline in underlying operating performance of $8 million. The year-over-year net impact of adjusting items included the following:

• the favourable year-over-year impact of restructuring and other charges of $24 million;

       partially offset by,

• the unfavourable year-over-year impact of inventory losses, net of recoveries, of $2 million.

Adjusted EBITDA⁽¹⁾  Weston Foods adjusted EBITDA⁽¹⁾ in the fourth quarter of 2018 was $55 million, a decrease of $6 million compared to the same period in 2017. Excluding the impact of a net gain related to the sale leaseback of a property for $10 million, the decrease was driven by higher input and distribution costs and the decline in sales, partially offset by productivity improvements and the net benefits realized from the transformation program.

Weston Foods adjusted EBITDA margin⁽¹⁾ in the fourth quarter of 2018 was 10.8% compared to 11.6% in the same period in 2017. The decline in adjusted EBITDA margin⁽¹⁾ in the fourth quarter of 2018 was mainly due to the factors impacting adjusted EBITDA⁽¹⁾, as described above.

Depreciation and Amortization  Weston Foods depreciation and amortization in the fourth quarter of 2018 was $27 million, a decrease of $8 million compared to the same period in 2017. Depreciation and amortization in the fourth quarter of 2017 included $10 million of accelerated depreciation related to the closure of an unprofitable facility in the U.S. Excluding this amount, depreciation and amortization in the fourth quarter of 2018 increased by $2 million due to investments in capital.

Weston Foods Other Business Matters

Restructuring and other charges  Weston Foods continuously evaluates strategic and cost reduction initiatives related to its manufacturing assets, distribution networks and administrative infrastructure with the objective of ensuring a low cost operating structure. In the fourth quarter of 2018, Weston Foods recorded restructuring and other charges of $9 million (2017 – $33 million) which were primarily related to the reorganization costs from the transformation program. Restructuring and other related costs recorded in the fourth quarter of 2018 included $8 million of severance and exit costs and a nominal amount of accelerated depreciation.

Loblaw Segment Results⁽³⁾ 

(unaudited)
($ millions except where otherwise
indicated)	Quarters Ended											Years Ended
For the periods ended as indicated	Dec. 31, 2018			Dec. 31, 2017^(4)			$ Change			% Change		Dec. 31, 2018			Dec. 31, 2017^(4)			$ Change			% Change
Sales	$	11,218		$	10,992		$	226		2.1%		$	46,693		$	46,587		$	106		0.2%
Operating income	$	443		$	55		$	388		705.5%		$	1,915		$	2,041		$	(126)		(6.2)%
Adjusted EBITDA^(1)	$	893		$	880		$	13		1.5%		$	3,520		$	3,513		$	7		0.2%
Adjusted EBITDA margin^(1)		8.0%			8.0%								7.5%			7.5%
Depreciation and
amortization^(i)	$	356		$	342		$	14		4.1%		$	1,497		$	1,454		$	43		3.0%

(i)	Depreciation and amortization includes $120 million (2017 – $121 million) in the fourth quarter of 2018 and $521 million (2017 – $524 million) year-to-date of amortization of intangible assets acquired with Shoppers Drug Mart Corporation ("Shoppers Drug Mart").

Immediately following Loblaw's spin-out of Choice Properties, Loblaw no longer retained its interest in Choice Properties and has ceased to consolidate its equity interest in Choice Properties from its consolidated financial statements.  As a result, Loblaw's current and comparative financial results are restated to present Continuing Operations of Loblaw. For further details, see the "Consolidated Other Business Matters" section.

As previously announced, Loblaw's year-over-year financial performance was negatively impacted by minimum wage increases and incremental healthcare reform.

Sales  Loblaw sales in the fourth quarter of 2018 were $11,218 million, an increase of $226 million, or 2.1%, compared to the same period in 2017, primarily driven by Retail. Retail sales increased by $181 million, or 1.7%, compared to the same period in 2017 and included food retail sales of $7,750 million (2017 – $7,623 million) and drug retail sales of $3,226 million (2017 – $3,172 million).

Excluding the consolidation of franchises, Retail sales increased by $103 million, or 1.0% due to positive same-store sales growth, primarily driven by the following factors:

• food retail same-store sales growth was 0.8%. Loblaw's food retail average quarterly internal food price index was moderately lower than the average quarterly national food price inflation of 1.7% 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; and
• drug retail same-store sales growth was 1.9%, including pharmacy same-store sales growth of 0.6% and front store same-store sales growth of 2.8%. Pharmacy same-store sales growth included the impact of incremental healthcare reform.

In the last 12 months, 17 food and drug stores were opened and 22 food and drug stores were closed, resulting in a net increase in Retail square footage of 0.1 million square feet, or 0.1%.

The redemption of Loblaw Cards resulted in the delivery of approximately $4 million of free products to customers in the fourth quarter of 2018, which was provided for in the fourth quarter of 2017. The redemptions did not benefit sales or Loblaw's financial performance and Loblaw's management does not believe it had a significant impact on food retail same-store sales.

Operating income  Loblaw operating income in the fourth quarter of 2018 was $443 million, an increase of $388 million compared to the same period in 2017, primarily driven by the favourable year-over-year net impact of adjusting items totaling $390 million, partially offset by a decline in underlying operating performance of $2 million, as described below:

• the decline in underlying operating performance of $2 million was primarily driven by Financial Services, partially offset by the improvements in the underlying operating performance of Retail, including the favourable year-over-year contribution from the consolidation of franchises in the quarter; and
  
  
• the favourable year-over-year net impact of adjusting items totaling $390 million was primarily due to the following:
• prior year charges related to the PC Optimum Program of $187 million;
• the year-over-year favourable impact of restructuring and other related charges of $175 million; and
• the year-over-year favourable impact of prior year charges related to the Loblaw Card Program of $107 million;
  
  partially offset by,
  
  
• the year-over-year unfavourable impact of asset impairments, net of recoveries, of $30 million;
• the unfavourable impact of prior year income earned, net of certain costs incurred, from the wind-down of PC Financial banking services of $17 million;
• the unfavourable change in fair value adjustment on fuel and foreign currency contracts of $13 million; and
• the unfavourable impact of the prior year recovery related to land transfer tax assessment of $9 million.

Adjusted EBITDA⁽¹⁾  Loblaw adjusted EBITDA⁽¹⁾ in the fourth quarter of 2018 was $893 million, an increase of $13 million compared to the same period in 2017. The increase was primarily driven by improvements in Retail including the favourable contribution from the consolidation of franchises in the quarter, partially offset by Financial Services.

Retail adjusted EBITDA⁽¹⁾ was $855 million, an increase of $26 million compared to the same period in 2017, driven by an increase in gross profit, partially offset by an increase in SG&A.

• Retail gross profit percentage of 29.6% increased by 20 basis points compared to the fourth quarter of 2017. Excluding the consolidation of franchises, Retail gross profit percentage was 27.7%, a decrease of 30 basis points compared to the fourth quarter of 2017. Margins were negatively impacted by health care reform and positively impacted by food retail.
• Retail SG&A as a percentage of sales was 21.9%, an increase of 20 basis points compared to the fourth quarter of 2017. Excluding the consolidation of franchises, SG&A decreased $19 million and as a percentage of sales was 20.1%, an improvement of 30 basis points compared to the fourth quarter of 2017, mainly driven by the following factors:
• lower store costs driven by process efficiencies and a decrease in advertising costs, partially offset by minimum wage increases; and
• lower store support costs driven by previously announced costs savings initiatives;
  partially offset by,
• the unfavourable year-over-year impact of foreign exchange.

Financial Services adjusted EBITDA⁽¹⁾ decreased by $13 million compared to the same period in 2017, primarily driven by lower core banking income attributable to the discontinuation of the personal banking services under the PC Financial brand, higher operating costs including investments in digital strategy and higher customer acquisition costs, partially offset by higher net interchange income attributable to the growth in the credit card portfolio.

Loblaw adjusted EBITDA⁽¹⁾ in the fourth quarter of 2018 also included a net gain of $8 million (2017 – $7 million) related to the sale leaseback of properties.

Depreciation and Amortization  Loblaw's depreciation and amortization in the fourth quarter of 2018 was $356 million, an increase of $14 million compared to the same period in 2017. The increase in depreciation and amortization was primarily driven by the consolidation of franchises, an increase in information technology ("IT") assets and the change in estimated useful life of certain building components as a result of the spin-out of Choice Properties. Depreciation and amortization in the fourth quarter of 2018 included $120 million (2017 – $121 million) of amortization of intangible assets acquired with Shoppers Drug Mart.

Loblaw Other Business Matters

Process and Efficiency  Loblaw continues to execute on a multi-year plan, initiated in 2018, focused on improving processes and generating efficiencies across its administrative, store, and distribution network infrastructures. Many initiatives are underway to reduce the complexity and cost of business operations, ensuring a low cost operating structure that allows for continued investments in Loblaw's strategic growth areas. Loblaw's management anticipates investing capital as well as recording restructuring and other charges related to these initiatives in 2019 and beyond.

Consolidation of Franchises  Loblaw has more than 500 franchise food retail stores in its network. As at year end 2018, 400 of these stores were consolidated for accounting purposes under a new, simplified franchise agreement ("Franchise Agreement") implemented in 2015.

Loblaw will convert the remaining franchises to the Franchise Agreement as existing agreements expire, at the end of which all franchises will be consolidated for accounting purposes. The following table presents the number of franchises consolidated in the fourth quarter of 2018 and year-to-date, and the total impact of the consolidation of franchises included in the consolidated results of the Company.

(unaudited)
($ millions except where otherwise indicated)		Quarters Ended						Years Ended
For the periods ended as indicated		Dec. 31, 2018			Dec. 31, 2017			Dec. 31, 2018			Dec. 31, 2017
Number of Consolidated Franchise stores,
beginning of period		379			273			310			200
Add:	Net Number of Consolidated Franchise
stores in the period		21			37			90			110
Number of Consolidated Franchise stores, end
of period		400			310			400			310
Sales		$	264		$	186		$	1,048		$	710
Operating income		20			16			33			23
Adjusted EBITDA^(1)		35			27			92			66
Depreciation and amortization		15			11			59			43
Net earnings attributable to
non-controlling interests		19			14			34			24

Operating income included in the table above does not significantly impact net earnings available to common shareholders of the Company as the related income is largely attributable to non-controlling interests.

Choice Properties Segment Results

(unaudited)
($ millions except where otherwise
indicated)	Quarters Ended											Years Ended
For the periods ended as indicated	Dec. 31, 2018			Dec. 31, 2017			$ Change			% Change		Dec. 31, 2018			Dec. 31, 2017			$ Change			% Change
Revenue	$	323		$	211		$	112		53.1%		$	1,148		$	830		$	318		38.3%
Net interest (income) expense
and other financing charges^(i)	$	(80)		$	116		$	196		169.0%		$	(57)		$	351		$	408		116.2%
Net income	$	281		$	36		$	245		680.6%		$	650		$	405		$	245		60.5%
Funds from operations^(1)(ii)	$	172		$	117		$	55		47.0%		$	604		$	443		$	161		36.3%

(i)	Net interest expense and other financing charges includes a fair value adjustment on Class B Limited Partnership units.
(ii)	Funds from operations is calculated for management purposes and includes the accelerated amortization of debt premium of $37 million.

Choice Properties' current and comparative financial results are presented as a reportable operating segment of the Company on a full year basis.

Revenue  Revenue in the fourth quarter of 2018 was $323 million, an increase of $112 million compared to the fourth quarter of 2017, and included $185 million (2017 – $180 million) generated from tenants within Loblaw Retail. The increase in revenue was primarily driven by:

• additional revenue generated from the investment properties included in the CREIT acquisition of $106 million; and
• an increase in base rent and operating cost recoveries from existing properties.

Net Interest (Income) Expense and Other Financing Charges  Net interest expense and other financing charges in the fourth quarter of 2018 resulted in income of $80 million, compared to net interest expense of $116 million in the fourth quarter of 2017. The change of $196 million was primarily driven by:

• a favourable change in the fair value adjustment on Class B Limited Partnership units of $234 million;

       partially offset by,

• higher interest expense resulting from the issuance of new debt related to the acquisition of CREIT; including senior unsecured debentures, term loans and draws on the syndicated credit facility and interest expense on the debt assumed on the acquisition of CREIT.

Net income  Net income in the fourth quarter of 2018 was $281 million, an increase of $245 million compared to the fourth quarter of 2017. The increase was primarily driven by:

• an increase in net operating income from investment properties acquired as part of the acquisition of CREIT;
• an increase in net operating income from existing properties; and
• the favourable change in net interest expense and other financing charges, described above;

       partially offset by,

• an unfavourable change in the fair value adjustment to investment properties; and
• acquisition and other costs related to the acquisition of CREIT of $11 million.

Funds from Operations⁽¹⁾  Funds from Operations⁽¹⁾ in the fourth quarter of 2018 were $172 million, an increase of $55 million compared to the fourth quarter of 2017, primarily driven by additional property operating income attributable to the acquired portfolio, partially offset by higher interest expense due to the acquisition of CREIT.

Choice Properties Other Matters

Acquisition of Investment Properties  During 2018, Choice Properties acquired eight investment properties for an aggregate purchase price of $112 million, excluding acquisition costs. Of the eight investment properties acquired during 2018, three investment properties were acquired from third-party vendors, for an aggregate purchase price of $34 million, excluding acquisition costs, which was settled by an assumption of a $3 million mortgage, with the remainder in cash. During 2018, Choice Properties acquired five investment properties from Weston Foods and Loblaw, of which one property was acquired from Weston Foods and four properties from Loblaw. This included one property from Weston Foods and three properties from Loblaw during the fourth quarter of 2018, for an aggregate purchase price of $78 million, excluding acquisition costs, fully settled in cash.

Choice Properties' Acquisition of CREIT  On May 4, 2018, Choice Properties acquired all the assets and assumed all the liabilities, including outstanding debt, of CREIT for total consideration of $3,708 million. The consideration was comprised of $1,652 million of cash and the issuance of 182,836,481 new Trust Units.

As at December 31, 2018, on a year-to-date basis, Choice Properties incurred costs totaling $141 million related to the acquisition of CREIT, which were recorded in SG&A.

The following table provides impact of the acquisition of CREIT on the Choice Properties segment in the fourth quarter and year-to-date of 2018:

(unaudited)											Quarter Ended			Year Ended
($ millions unless where otherwise indicated)											Dec. 31, 2018			Dec. 31, 2018
Revenue											$	106		$	280
Net income											60				165

On a year-to-date pro forma basis, the impact of the CREIT acquisition on Choice Properties revenue and net income in 2018 would have amounted to approximately $420 million and $250 million, respectively, excluding the impact of acquisition transaction costs and other related expenses and any adjustment to the fair value of the investment properties acquired. This pro forma information incorporates the effect of the purchase equation as if the acquisition had been effective January 1, 2018.

The following table provides the impacts of the acquisition of CREIT on the consolidated results of the Company in the fourth quarter and year-to-date of 2018:

(unaudited)			Quarter Ended				Year Ended
($ millions unless where otherwise indicated)			Dec. 31, 2018				Dec. 31, 2018^(i)
Revenue			$	103			$	274
Adjusted EBITDA^(1)				71				192
Adjusted net interest expense and other financing charges^(1)				68				187
Adjusted net earnings available to common shareholders of
the Company^(1)				2				4
Adjusted diluted net earnings per common share^(1) ($)				0.01				0.03

(i)	Year-to-date adjusted net interest and other financing charges^(1) includes $2 million recorded in the first quarter of 2018. Year-to-date adjusted net earnings available to common shareholders of the Company^(1) includes a nominal loss recorded in the first half of 2018.

OUTLOOK⁽²⁾

Weston Foods is focused on becoming a premier North American bakery and delivering solid financial results. In 2019, Weston Foods will focus on growing its core business, selectively innovating in new segments and markets, and strengthening key processes. 

In 2019, on a full-year comparative basis, Weston Foods expects its business performance to stabilize:

• Sales will be lower when compared to 2018, due to the impact of lapping sales lost from key customers last year and the impact of product rationalization, partially offset by growth in key categories and pricing;
• Excluding the prior year gains on the sale leaseback of properties, adjusted EBITDA⁽¹⁾ will be slightly lower when compared to 2018. Adjusted EBITDA⁽¹⁾ will be impacted by headwinds from higher input and distribution costs in an inflationary environment and by sales trends as described above, partially offset by improvements driven from productivity and the transformation program;
• Investment in capital expenditures to decrease to approximately $200 million; and
• Depreciation will increase compared to 2018.

Loblaw is focused on its strategic framework, delivering best in food and health and beauty, using data driven insights underpinned by process and efficiency excellence. This framework is supported by Loblaw's financial plan of maintaining a stable trading environment that targets positive same-store sales and stable gross margin, creating efficiencies to deliver operating leverage, investing for the future and returning capital to shareholders.

Loblaw will remain focused on delivering Process and Efficiency improvements to offset increasing costs and to fund continued incremental investments in its strategic growth areas of Everyday Digital Retail, Connected Healthcare and Payments & Rewards. 

In 2019, on a full-year comparative basis, Loblaw expects to:

• deliver positive same-store sales and stable gross margin in its Retail segment in a highly competitive market;
• deliver positive adjusted net earnings⁽¹⁾ growth;
• invest approximately $1.1 billion in capital expenditures, net of proceeds from property disposals; and
• return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Choice Properties' strategy is to grow and manage its portfolio and cash flow by leveraging its sizable base of assets, its relationship with Loblaw and its solid capital structure. With the acquisition of CREIT on May 4, 2018, Choice Properties has evolved into two primary functional areas: an existing income producing property portfolio and a development business. The income producing property portfolio provides a solid foundation for stable cash flows and is diversified by both geographic location and product type including retail, industrial, office and residential assets. Development initiatives provide the opportunity to add high quality real estate by focusing primarily on retail intensification projects and well located rental residential projects at various stages of development.  Looking forward, Choice Properties will continue to focus on financial and operational stability, the advancement of retail and industrial development projects and the expansion of its multi-residential platform. 

In 2019, Choice Properties will continue to focus on financial and operational stability. This includes improvement to its portfolio quality through property acquisition and dispositions, the advancement of retail and industrial development projects, the expansion of its multi-residential platform and prudent management of maturing debt and variable interest rate exposure.

For 2019, the Company expects adjusted net earnings⁽¹⁾ to increase due to the results from its operating segments as described above.

DECLARATION OF QUARTERLY DIVIDENDS

Subsequent to the end of the fourth quarter of 2018, 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	$0.515 per share payable April 1, 2019, to shareholders of record March 15, 2019;
	Preferred Shares, Series I	$0.3625 per share payable March 15, 2019, to shareholders of record February 28, 2019;
	Preferred Shares, Series III	$0.3250 per share payable April 1, 2019, to shareholders of record March 15, 2019;
	Preferred Shares, Series IV	$0.3250 per share payable April 1, 2019, to shareholders of record March 15, 2019; and
	Preferred Shares, Series V	$0.296875 per share payable April 1, 2019, to shareholders of record March 15, 2019.

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, 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 Section 18, "Non-GAAP Financial Measures", of the Company's 2018 Annual Report.

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.

		Quarters Ended
											Dec. 31, 2018															Dec. 31, 2017^(4)
(unaudited)                                     ($ millions)		Weston Foods			Loblaw^(3)			Choice Properties^(3)			Other & Intersegment^(3)			Consolidated			Weston Foods			Loblaw^(3)			Choice Properties^(3)			Other & Intersegment^(3)			Consolidated
Net earnings attributable to
shareholders of the Company														$	281														$	44
Add impact of the following:
Non-controlling interests														131															34
Income taxes														60															(29)
Net interest expense and other
financing charges														218															115
Operating income		$	22		$	443		$	202		$	23		$	690		$	8		$	55		$	152		$	(51)		$	164
Add impact of the following:
Amortization of intangible assets
acquired with Shoppers
Drug Mart		$	—		$	120		$	—		$	—		$	120		$	—		$	121		$	—		$	—		$	121
Asset impairments, net of
recoveries		—			83			—			(77)			6			—			53			—			—			53
Restructuring and other charges		9			(4)			—			—			5			33			171			—			(6)			198
Loblaw's Spin-out of Choice
Properties		—			2			—			8			10			—			—			—			—			—
Loblaw Card Program		—			—			—			—			—			—			107			—			—			107
Fair value adjustment on
investment properties		—			5			15			(16)			4			—			—			3			(3)			—
Fair value adjustment of derivatives		(3)			8			—			—			5			(3)			(5)			—			—			(8)
Wind-down of PC Financial banking
services		—			—			—			—			—			—			(17)			—			—			(17)
CREIT acquisition and other
related costs		—			—			11			—			11			—			—			—			—			—
Inventory loss, net of recoveries		—			—			—			—			—			(2)			—			—			—			(2)
PC Optimum Program		—			—			—			—			—			—			187			—			—			187
Certain prior period items		—			—			—			—			—			—			(4)			—			—			(4)
Prior year land transfer tax
recovery		—			—			—			—			—			—			(9)			—			—			(9)
Foreign currency translation^(i)		—			—			—			(1)			(1)			—			—			—			(1)			(1)
Adjusting items		$	6		$	214		$	26		$	(86)		$	160		$	28		$	604		$	3		$	(10)		$	625
Adjusted operating income		$	28		$	657		$	228		$	(63)		$	850		$	36		$	659		$	155		$	(61)		$	789
Depreciation and amortization
excluding the impact of the above
adjustments^(ii)		27			236			1			32			296			25			221			—			30			276
Adjusted EBITDA		$	55		$	893		$	229		$	(31)		$	1,146		$	61		$	880		$	155		$	(31)		$	1,065

(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 $120 million (2017 – $121 million) of amortization of intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw and $10 million in 2017 of accelerated depreciation and amortization recorded by Weston Foods, related to restructuring and other charges.

		Years Ended
											Dec. 31, 2018															Dec. 31, 2017^(4)
(unaudited) ($ millions)		Weston Foods			Loblaw^(3)			Choice Properties^(3)			Other & Intersegment^(3)			Consolidated			Weston Foods			Loblaw^(3)			Choice Properties^(3)			Other & Intersegment^(3)			Consolidated
Net earnings attributable to
shareholders of the Company														$	574														$	766
Add impact of the following:
Non-controlling interests														424															823
Income taxes														639															449
Net interest expense and other
financing charges														948															523
Operating income		$	73		$	1,915		$	593		$	4		$	2,585		$	91		$	2,041		$	756		$	(327)		$	2,561
Add impact of the following:
Amortization of intangible assets
acquired with Shoppers
Drug Mart		$	—		$	521		$	—		$	—		$	521		$	—		$	524		$	—		$	—		$	524
Asset impairments, net of
recoveries		—			83			—			(77)			6			—			53			—			3			56
Impact of healthcare reform on
inventory balances		—			19			—			—			19			—			—			—			—			—
Restructuring and other charges		38			10			—			(15)			33			48			177			—			(12)			213
Loblaw's Spin-out of Choice
Properties		—			8			—			12			20			—			—			—			—			—
Loblaw Card Program		—			4			—			—			4			—			107			—			—			107
Fair value adjustment on
investment properties		—			6			89			(47)			48			—			—			(160)			160			—
Pension annuities and buy-outs		—			1			—			—			1			2			12			—			—			14
Fair value adjustment of
derivatives		(12)			(3)			—			—			(15)			14			20			—			—			34
Wind-down of PC Financial
banking services		—			(20)			—			—			(20)			—			(24)			—			—			(24)
CREIT acquisition and other
related costs		—			—			141			—			141			—			—			—			—			—
Inventory loss, net of recoveries		(1)			—			—			—			(1)			(6)			—			—			—			(6)
Gain on sale of air rights		—			—			—			(13)			(13)			—			—			—			—			—
PC Optimum Program		—			—			—			—			—			—			187			—			—			187
Certain prior period items		—			—			—			—			—			—			(4)			—			—			(4)
Prior year land transfer tax
recovery		—			—			—			—			—			—			(9)			—			—			(9)
Gain on disposition of Loblaw's gas
bar operations		—			—			—			—			—			—			(501)			—			—			(501)
Foreign currency translation^(i)		—			—			—			(17)			(17)			—			—			—			34			34
Adjusting items		$	25		$	629		$	230		$	(157)		$	727		$	58		$	542		$	(160)		$	185		$	625
Adjusted operating income		$	98		$	2,544		$	823		$	(153)		$	3,312		$	149		$	2,583		$	596		$	(142)		$	3,186
Depreciation and amortization
excluding the impact of the above
adjustments^(ii)		121			976			1			118			1,216			107			930			1			113			1,151
Adjusted EBITDA		$	219		$	3,520		$	824		$	(35)		$	4,528		$	256		$	3,513		$	597		$	(29)		$	4,337

(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 $521 million (2017 – $524 million) of amortization of intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw and $9 million (2017 – $10 million) of accelerated depreciation and amortization recorded by Weston Foods, related to restructuring and other charges.

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)		Quarters Ended				Years Ended
		Dec. 31, 2018		Dec. 31, 2017^(4)		Dec. 31, 2018		Dec. 31, 2017^(4)
Net interest expense and other financing charges		$	218	$	115	$	948	$	523
Add:	Loblaw's charge related to Glenhuron Bank Limited	—		—		(176)		—
	Fair value adjustment of the Trust Unit liability	85		8		41		7
	Fair value adjustment of the forward sale agreement for
	9.6 million Loblaw common shares	(94)		10		(50)		25
	Loblaw's Spin-out of Choice Properties	(1)		—		(1)		—
Adjusted net interest expense and other financing charges		$	208	$	133	$	762	$	555

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) ($ millions except where otherwise indicated)		Quarters Ended									Years Ended
		Dec. 31, 2018			Dec. 31, 2017^(4)					Dec. 31, 2018			Dec. 31, 2017^(4)
Adjusted operating income^(i)		$	850			$	789			$	3,312			$	3,186
Adjusted net interest expense and other financing charges^(i)		208				133				762				555
Adjusted earnings before taxes		$	642			$	656			$	2,550			$	2,631
Income taxes		$	60			$	(29)			$	639			$	449
Add:	Tax impact of items excluded from adjusted earnings
	before taxes^(ii)	56				170				170				225
	Loblaw's charge related to Glenhuron Bank Limited	—				—				(191)				—
	Remeasurement of deferred tax balances	62				19				62				19
	Statutory corporate income tax rate change	—				19				—				19
Adjusted income taxes		$	178			$	179			$	680			$	712
Effective income tax rate applicable to earnings before taxes		12.7%				(59.2)%				39.0%				22.0%
Adjusted income tax rate applicable to adjusted earnings
before taxes		27.7%				27.3%				26.7%				27.1%

(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 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 net earnings attributable to shareholders of the Company to net earnings available to common shareholders of the Company and then to adjusted net earnings available to common shareholders of the Company reported for the periods ended as indicated.

(unaudited) ($ millions except where otherwise indicated)		Quarters Ended								Years Ended
		Dec. 31, 2018				Dec. 31, 2017^(4)				Dec. 31, 2018				Dec. 31, 2017^(4)
Net earnings attributable to shareholders of the Company		$	281			$	44			$	574			$	766
Less:	Prescribed dividends on preferred shares in share capital	(10)				(10)				(44)				(44)
Net earnings available to common shareholders
of the Company		$	271			$	34			$	530			$	722
Reduction in net earnings due to dilution at Loblaw		$	—			$	—			$	(2)			$	(6)
Net earnings available to common shareholders for diluted
earnings per share		$	271			$	34			$	528			$	716
Net earnings attributable to shareholders of the Company		$	281			$	44			$	574			$	766
Adjusting items (refer to the following table)		(39)				192				378				181
Adjusted net earnings attributable to shareholders
of the Company		$	242			$	236			$	952			$	947
Less:	Prescribed dividends on preferred shares in share capital	(10)				(10)				(44)				(44)
Adjusted net earnings available to common shareholders
of the Company		$	232			$	226			$	908			$	903
Reduction in net earnings due to dilution at Loblaw		$	—			$	—			$	(2)			$	(6)
Adjusted net earnings available to common shareholders for
diluted earnings per share		$	232			$	226			$	906			$	897
Weighted average common shares outstanding (millions)^(i)		145.7				128.3				132.2				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.

		Quarters Ended
		Dec. 31, 2018									Dec. 31, 2017^(4)
($ 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			$	271			$	1.86				$	34			$	0.27
Add (deduct) impact of the following^(i):
Amortization of intangible assets acquired with Shoppers
Drug Mart			$	44			$	0.30				$	44			$	0.35
Asset impairments, net of recoveries			(26)				(0.17)					19				0.15
Restructuring and other charges			5				0.03					82				0.64
Loblaw's Spin-out of Choice Properties			9				0.06					—				—
Loblaw Card Program			—				—					39				0.30
Fair value adjustment on investment properties			4				0.03					—				—
Fair value adjustment of derivatives			1				0.01					(5)				(0.04)
Wind-down of PC Financial banking services			—				—					(7)				(0.05)
CREIT acquisition and other related costs			9				0.06					—				—
Inventory loss, net of recoveries			—				—					(1)				(0.01)
PC Optimum Program			—				—					67				0.51
Certain prior period items			—				—					(6)				(0.05)
Prior year land transfer tax recovery			—				—					(3)				(0.02)
Fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares			77				0.53					(7)				(0.05)
Remeasurement of deferred tax balances			(62)				(0.43)					(10)				(0.08)
Fair value adjustment of the Trust Unit liability			(99)				(0.68)					(2)				(0.02)
Statutory corporate income tax rate change			—				—					(19)				(0.15)
Foreign currency translation			(1)				(0.01)					1				0.01
Adjusting items			$	(39)			$	(0.27)				$	192			$	1.49
Adjusted			$	232			$	1.59				$	226			$	1.76

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

		Years Ended
		Dec. 31, 2018									Dec. 31, 2017^(4)
($ 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			$	530			$	3.99				$	722			$	5.58
Add (deduct) impact of the following^(i):
Amortization of intangible assets acquired with Shoppers
Drug Mart			191				1.45					184				1.43
Loblaw's charge related to Glenhuron Bank Limited			184				1.39					—				—
Asset impairments, net of recoveries			(26)				(0.19)					22				0.17
Impact of healthcare reform on inventory balances			7				0.05					—				—
Restructuring and other charges			26				0.19					93				0.73
Loblaw's Spin-out of Choice Properties			16				0.12					—				—
Loblaw Card Program			1				0.01					39				0.30
Fair value adjustment on investment properties			23				0.17						—				—
Pension annuities and buy-outs			1				0.01					5				0.04
Fair value adjustment of derivatives			(10)				(0.08)					17				0.13
Wind-down of PC Financial banking services			(7)				(0.05)					(9)				(0.07)
CREIT acquisition and other related costs			68				0.51					—				—
Inventory loss, net of recoveries			(1)				(0.01)					(3)				(0.02)
Gain on sale of air rights			(6)				(0.05)					—				—
PC Optimum Program			—				—					67				0.52
Certain prior period items			—				—					(6)				(0.05)
Prior year land transfer tax recovery			—				—					(3)				(0.02)
Gain on disposition of Loblaw's gas bar operations			—				—					(207)				(1.61)
Fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares			45				0.35					(18)				(0.14)
Remeasurement of deferred tax balances			(62)				(0.47)					(10)				(0.08)
Fair value adjustment of the Trust Unit liability			(57)				(0.43)					(2)				(0.02)
Statutory corporate income tax rate change			—				—					(19)				(0.15)
Foreign currency translation			(15)				(0.11)					31				0.25
Adjusting items			$	378			$	2.86				$	181			$	1.41
Adjusted			$	908			$	6.85				$	903			$	6.99

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

Choice Properties' Funds from Operations  The following table reconciles Choice Properties' Funds from Operations to net income for the periods ended as indicated. Choice Properties considers Funds from Operations to be a useful measure of operating performance as it adjusts for items included in net income that do not arise from operating activities or do not necessarily provide an accurate depiction of the Trust's performance. 

(unaudited)
($ millions)			Quarters Ended										Years Ended
For the periods ended as indicated			Dec. 31, 2018					Dec. 31, 2017					Dec. 31, 2018					Dec. 31, 2017
Net income			$	281				$	36				$	650				$	405
Add (deduct) impact of the following:
	Fair value adjustments on Class B Limited
	Partnership units		(215)					19					(594)					(38)
	Distributions on Class B Limited Partnership units		72					59					271					232
	Fair value adjustments on investment properties		19					3					89					(159)
	CREIT acquisition and other related costs		11					—					141					—
	Fair value adjustments of investment property held
	in equity accounted joint ventures		1					—					5					1
	Internal expenses for leasing		2					1					6					2
	Capitalized interest on equity accounted joint
	venture		1					—					3					—
	Accelerated amortization of debt premium		—					—					37					—
	Net income attributable to non-controlling interests		—					(1)					—					(1)
	Fair value adjustments on unit-based compensation		—					—					(4)					1
Funds from Operations			$	172				$	117				$	604				$	443

FORWARD-LOOKING STATEMENTS

This News Release contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this News Release include, but are not limited to, statements with respect to the Company's anticipated future results, events and plans, strategic initiatives, regulatory changes including 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", "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 2019 is based on certain assumptions including assumptions about sales and volume growth, anticipated cost savings, operating efficiencies, anticipated benefits from strategic initiatives and restructuring, healthcare reform impacts, future liquidity, planned capital investments, and the status and impact of information technology ("IT") systems implementations. 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 Section 12, "Enterprise Risks and Risk Management", of the MD&A of the Company's 2018 Annual Report and the Company's Annual Information Form ("AIF") for the year ended December 31, 2018. 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;
• the inability of the Company's 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 cybersecurity or data breaches;
• failure to realize benefits from investments in the Company's new IT systems;
• failure to realize the anticipated benefits associated with the Company's strategic priorities and major initiatives, including revenue growth, anticipated cost savings, operating efficiencies, or organizational changes that may impact the relationships with franchisees and associates;
• failure to effectively respond to consumer trends or heightened competition, whether from current competitors or new entrants to the marketplace;
• failure to maintain an effective supply chain could adversely affect the assortment and product availability at store level, which may negatively impact customer experience;
• failure to execute Loblaw's e-commerce initiative or to adapt its business model to the shifts in the retail landscape caused by digital advances;
• public health events including those related to food and drug safety;
• errors made through medication dispensing or errors related to patient services or consultations;
• adverse outcomes of legal and regulatory proceedings and related matters;
• changes to any of the laws, rules, regulations or policies applicable to the Company's business;
• failure to achieve desired results in labour negotiations, including the terms of future collective bargaining agreements;
• changes in economic conditions, including economic recession or changes in the rate of inflation or deflation, employment rates and household debt, political uncertainty, interest rates, currency exchange rates or derivative and commodity prices;
• 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, 2018. 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.

SELECTED FINANCIAL INFORMATION

The following includes selected quarterly financial information which is prepared by management in accordance with International Financial Reporting Standards ("IFRS") and is based on the Company's audited annual consolidated financial statements for the year ended December 31, 2018. This financial information does not contain all disclosures required by IFRS, and accordingly, this financial information should be read in conjunction with the Company's 2018 Annual Report available in the Investor Centre section of the Company's website at www.weston.ca.

Consolidated Statements of Earnings

(unaudited)
(millions of Canadian dollars except where otherwise indicated)		Dec. 31, 2018					Dec. 31, 2017^(4)					Dec. 31, 2018				Dec. 31, 2017^(4)
For the periods ended as indicated		(12 weeks)					(12 weeks)					(52 weeks)					(52 weeks)
Revenue		$	11,717				$	11,402				$	48,568				$	48,289
Operating Expenses
Cost of inventories sold		7,997					7,875					33,378					33,836
Selling, general and administrative expenses		3,030					3,363					12,605					11,892
		11,027					11,238					45,983					45,728
Operating Income		690					164					2,585					2,561
Net Interest Expense and Other
Financing Charges		218					115					948					523
Earnings Before Income Taxes		472					49					1,637					2,038
Income Tax		60					(29)					639					449
Net Earnings		412					78					998					1,589
Attributable to:
Shareholders of the Company		281					44					574					766
Non-Controlling Interests		131					34					424					823
Net Earnings		$	412				$	78				$	998				$	1,589
Net Earnings per Common Share ($)
Basic		$	1.86				$	0.27				$	4.02				$	5.65
Diluted		$	1.86				$	0.27				$	3.99				$	5.58

Consolidated Balance Sheets

As at December 31
(millions of Canadian dollars)		2018					2017^(4)
ASSETS
Current Assets
Cash and cash equivalents		$	1,521				$	2,034
Short term investments		281					1,113
Accounts receivable		1,309					1,324
Credit card receivables		3,329					3,100
Inventories		5,001					4,623
Prepaid expenses and other assets		370					236
Assets held for sale		44					33
Total Current Assets		11,855					12,463
Fixed Assets		12,101					11,689
Investment Properties		4,847					276
Equity Accounted Joint Venture		734					19
Intangible Assets		7,958					8,368
Goodwill		4,781					4,377
Deferred Income Taxes		286					247
Security Deposits		87					86
Franchise Loans Receivable		78					166
Other Assets		1,087					849
Total Assets		$	43,814				$	38,540
LIABILITIES
Current Liabilities
Bank indebtedness		$	56				$	110
Trade payables and other liabilities		5,762					5,451
Loyalty liability		228					349
Provisions		205					325
Income taxes payable		171					148
Short term debt		1,579					1,258
Long term debt due within one year		1,343					1,635
Associate interest		260					263
Total Current Liabilities		9,604					9,539
Provisions		167					190
Long Term Debt		13,975					10,457
Trust Unit Liability		2,658					634
Deferred Income Taxes		2,515					2,163
Other Liabilities		691					762
Total Liabilities		29,610					23,745
EQUITY
Share Capital		3,583					1,038
Retained Earnings		5,017					7,188
Contributed Surplus		(799)					(432)
Accumulated Other Comprehensive Income		239					140
Total Equity Attributable to Shareholders of the Company		8,040					7,934
Non-Controlling Interests		6,164					6,861
Total Equity		14,204					14,795
Total Liabilities and Equity		$	43,814				$	38,540

Consolidated Statements of Cash Flows

(unaudited)
(millions of Canadian dollars)	Dec. 31, 2018		Dec. 31, 2017^(4)		Dec. 31, 2018		Dec. 31, 2017^(4)
For the periods ended as indicated		(12 weeks)	(12 weeks)		(52 weeks)		(52 weeks)
Operating Activities
Net earnings	$	412	$	78	$	998	$	1,589
Add:
Net interest expense and other financing charges		218		115		948		523
Income taxes		60		(29)		639		449
Depreciation and amortization		416		407		1,746		1,685
Adjustment to fair value of investment properties		4		—		48		—
Gain on disposition of Loblaw's gas bar operations		—		—		—		(501)
Asset impairments, net of recoveries		4		101		21		109
Foreign currency translation (gain) loss		(1)		(1)		(17)		34
Change in provisions		(39)		261		(188)		238
PC Optimum Program		—		165		—		165
		1,074		1,097		4,195		4,291
Change in credit card receivables		(227)		(182)		(327)		(174)
Change in non-cash working capital		(341)		379		(624)		147
Income taxes paid		(45)		(110)		(557)		(892)
Interest received		11		7		44		23
Other		(17)		22		(12)		30
Cash Flows from Operating Activities		455		1,213		2,719		3,425
Investing Activities
Fixed asset purchases		(546)		(486)		(1,250)		(1,177)
Intangible asset additions		(74)		(89)		(343)		(297)
Acquisition of CREIT, net of cash acquired		—		—		(1,619)		—
Cash assumed on initial consolidation of franchises		4		8		18		26
Change in short term investments		(58)		(325)		832		(135)
Change in security deposits		397		(4)		(1)		—
Proceeds from disposal of assets		124		11		189		24
Proceeds from sale of Loblaw's gas bar operations		—		—		—		540
Other		36		(65)		(82)		(56)
Cash Flows used in Investing Activities		(117)		(950)		(2,256)		(1,075)
Financing Activities
Change in bank indebtedness		(210)		(169)		(54)		(5)
Change in short term debt		237		41		321		17
Interest paid		(224)		(104)		(992)		(556)
Long term debt  –  Issued		1,020		366		4,880		686
–  Retired		(1,324)		(72)		(3,565)		(450)
Share capital    –  Issued		128		21		134		22
–  Purchased and held in trusts		—		—		—		(7)
–  Purchased and cancelled		(67)		(28)		(123)		(31)
Loblaw common share capital  –  Issued		16		17		78		41
–  Purchased and held in trusts		(36)		—		(36)		(48)
–  Purchased and cancelled		(238)		(154)		(1,082)		(1,091)
Dividends    –  To common shareholders		—		—		(241)		(229)
–  To preferred shareholders		(3)		(3)		(44)		(44)
–  To minority shareholders		—		—		(228)		(175)
Other		23		16		(35)		5
Cash Flows used in Financing Activities		(678)		(69)		(987)		(1,865)
Effect of foreign currency exchange rate changes on cash
and cash equivalents		8		2		11		(11)
Change in Cash and Cash Equivalents		(332)		196		(513)		474
Cash and Cash Equivalents, Beginning of Period		1,853		1,838		2,034		1,560
Cash and Cash Equivalents, End of Period	$	1,521	$	2,034	$	1,521	$	2,034

Basic and Diluted Net Earnings per Common Share

(unaudited)
(millions of Canadian dollars except where otherwise indicated)	Dec. 31, 2018		Dec. 31, 2017^(4)		Dec. 31, 2018		Dec. 31, 2017^(4)
For the periods ended as indicated	(12 weeks)		(12 weeks)		(52 weeks)		(52 weeks)
Net earnings attributable to shareholders
of the Company	$	281	$	44	$	574	$	766
Prescribed dividends on preferred shares
in share capital	(10)		(10)		(44)		(44)
Net earnings available to common shareholders of
the Company	$	271	$	34	$	530	$	722
Reduction in net earnings due to dilution at Loblaw	—		—		(2)			(6)
Net earnings available to common shareholders
for diluted earnings per share	$	271	$	34	$	528	$	716
Weighted average common shares
outstanding (in millions)	145.4		127.7		131.8		127.7
Dilutive effect of share-based
compensation^(i)(in millions)	0.3		0.6		0.4		0.6
Weighted average common shares outstanding^(ii)
(in millions)	145.7		128.3		132.2		128.3
Basic net earnings per common share ($)	$	1.86	$	0.27	$	4.02	$	5.65
Diluted net earnings per common share ($)	$	1.86	$	0.27	$	3.99	$	5.58

(i)	In the fourth quarter of 2018 and year-to-date, 825,683 (2017 – 381,770) and 674,981 (2017 – 450,042) potentially dilutive instruments, respectively, were excluded from the computation of diluted net earnings per common share as they were anti-dilutive.
(ii)	Includes impact of dilutive instruments for purposes of calculating diluted net earnings per common share.

Segment Information

The Company has three reportable operating segments: Weston Foods, Loblaw and Choice Properties.

In 2018, the Company and Loblaw completed a reorganization under which Loblaw spun out its approximate 61.6% effective interest in Choice Properties to the Company, as described in "Consolidated Other Business Matters" of this press release. Following the reorganization, the Company owned an approximate 65.4% effective interest in Choice Properties directly and Choice Properties became a reportable operating segment of the Company.

The accounting policies of the reportable operating segments are the same as those described in the Company's 2018 audited annual consolidated financial statements. The Company measures each reportable operating segment's performance based on adjusted EBITDA⁽¹⁾ and adjusted operating income⁽¹⁾. Neither reportable operating segment is reliant on any single external customer.

	12 Weeks Ended
	Dec. 31, 2018										Dec. 31, 2017^(4)
(unaudited) (millions of Canadian dollars)	Weston Foods		Loblaw		Choice Properties		Other and Intersegment^(i)		Total		Weston Foods		Loblaw^(3)		Choice Properties		Other and Intersegment^(i)(3)		Total
Revenue	$	507	$	11,218	$	323	$	(331)	$	11,717	$	527	$	10,992	$	211	$	(328)	$	11,402
Operating income	$	22	$	443	$	202	$	23	$	690	$	8	$	55	$	152	$	(51)	$	164
Net interest expense and
other financing charges	103		95		(80)		100		218		(2)		89		116		(88)		115
Earnings before
income tax	$	(81)	$	348	$	282	$	(77)	$	472	$	10	$	(34)	$	36	$	37	$	49
Operating income	$	22	$	443	$	202	$	23	$	690	$	8	$	55	$	152	$	(51)	$	164
Depreciation and
amortization	27		356		1		32		416		35		342		—		30		407
Adjusting items^(ii)	6		94		26		(86)		40		18		483		3		(10)		494
Adjusted EBITDA^(ii)	$	55	$	893	$	229	$	(31)	$	1,146	$	61	$	880	$	155	$	(31)	$	1,065
Depreciation and
amortization^(iii)	27		236		1		32		296		25		221		—		30		276
Adjusted operating
income^(ii)	$	28	$	657	$	228	$	(63)	$	850	$	36	$	659	$	155	$	(61)	$	789

(i)	Other and intersegment includes the following items:

	12 Weeks Ended
	2018						2017^(4)
(unaudited) ($ millions)	Revenue		Adjusted Operating Income^(1)		Net Interest Expense and Other Financing Charges		Revenue		Adjusted Operating Income^(1)		Net Interest Expense and Other Financing Charges
Before Consolidation and Elimination	$	12,048	$	913	$	118	$	11,730	$	850	$	203
Choice Properties Intersegment Consolidation and Elimination
Elimination of rental revenue	(154)		—		—		(130)		—		—
Elimination of cost recovery	(34)		—		—		(42)		—		—
Elimination of lease surrender	—		—		—		(6)		(6)		—
Intercompany charges	—		(14)		—		—		(2)		—
Weston Foods' net gain on sales leaseback of property to
Choice Properties	—		(10)		—		—		—		—
Loblaw's net gain on sales leaseback of property to
Choice Properties	—		(8)		—		—		(7)		—
Recognition of depreciation on Choice Properties'
investment properties classified as fixed assets by the
Company and measured at cost	—		(32)		—		—		(30)		—
Fair value adjustment on Choice Properties'
Class B LP Units	—		—		214		—		—		(19)
Fair value adjustment on Trust Unit liability	—		—		(85)		—		—		(9)
Unit distribution on Exchangeable Units paid by Choice
Properties to GWL and Loblaw	—		—		(72)		—		—		(59)
Unit distribution on Trust Units paid by Choice Properties,
excluding amounts paid to GWL and Loblaw	—		—		43		—		—		8
Interest on debt due from Choice Properties to Loblaw
and accretion income earned on intercompany
Class C Units	—		—		—		—		—		(9)
Other	—		1		—		—		(16)		—
Other
Intercompany sales	(143)		—		—		(150)		—		—
Total Consolidated	$	11,717	$	850	$	218	$	11,402	$	789	$	115

(ii)	Certain items are excluded from operating income to derive adjusted EBITDA^(1). Adjusted EBITDA^(1) is used internally by management when analyzing segment underlying performance.
(iii)	Excludes $120 million (2017 – $121 million) of amortization of intangible assets acquired with Shoppers Drug Mart, recorded by Loblaw, and $10 million in the fourth quarter of 2017 of accelerated depreciation and amortization recorded by Weston Foods, related to restructuring and other charges.

 

	52 Weeks Ended
	Dec. 31, 2018										Dec. 31, 2017^(4)
(millions of Canadian dollars)	Weston Foods		Loblaw		Choice Properties		Other and Intersegment		Total		Weston Foods		Loblaw^(3)		Choice Properties		Other and Intersegment^(3)		Total
Revenue	$	2,122	$	46,693	$	1,148	$	(1,395)	$	48,568	$	2,243	$	46,587	$	830	$	(1,371)	$	48,289
Operating income	$	73	$	1,915	$	593	$	4	$	2,585	$	91	$	2,041	$	756	$	(327)	$	2,561
Net interest expense and
other financing charges	88		564		(57)		353		948		13		374		351		(215)		523
Earnings before
income tax	$	(15)	$	1,351	$	650	$	(349)	$	1,637	$	78	$	1,667	$	405	$	(112)	$	2,038
Operating income	$	73	$	1,915	$	593	$	4	$	2,585	$	91	$	2,041	$	756	$	(327)	$	2,561
Depreciation and
amortization	130		1,497		1		118		1,746		117		1,454		1		113		1,685
Adjusting items^(ii)	16		108		230		(157)		197		48		18		(160)		185		91
Adjusted EBITDA^(ii)	$	219	$	3,520	$	824	$	(35)	$	4,528	$	256	$	3,513	$	597	$	(29)	$	4,337
Depreciation and
amortization^(iii)	121		976		1		118		1,216		107		930		1		113		1,151
Adjusted operating
income^(ii)	$	98	$	2,544	$	823	$	(153)	$	3,312	$	149	$	2,583	$	596	$	(142)	$	3,186

(i)	Other and intersegment includes the following items:

	52 Weeks Ended
	2018						2017^(4)
($ millions)	Revenue		Adjusted Operating Income^(1)		Net Interest Expense and Other  Financing Charges		Revenue		Adjusted Operating Income^(1)		Net Interest Expense and Other  Financing Charges
Before Consolidation and Elimination	$	49,963	$	3,465	$	595	$	49,660	$	3,328	$	738
Choice Properties Intersegment Consolidation and Elimination
Elimination of rental revenue	(555)		—		—		(529)		—		—
Elimination of cost recovery	(181)		—		—		(183)		—		—
Elimination of lease surrender	(10)		(10)		—		(6)		(6)		—
Intercompany charges	—		(4)		—		—		(7)		—
Restructuring and other related costs	—		—		—		—		—		—
Weston Foods' net gain on sales leaseback of property to
Choice Properties	—		(10)		—		—		—		—
Loblaw's net gain on sales leaseback of property to Choice
Properties	—		(6)		—		—		(7)		—
Recognition of depreciation on Choice Properties' investment
properties classified as fixed assets by the Company and
measured at cost	—		(118)		—		—		(113)		—
Fair value adjustment on Choice Properties' Class B LP Units	—		—		594		—		—		38
Fair value adjustment on Trust Unit liability	—		—		(41)		—		—		(10)
Unit distribution on Exchangeable Units paid by Choice
Properties to GWL and Loblaw	—		—		(271)		—		—		(232)
Unit distribution on Trust Units paid by Choice Properties,
excluding amounts paid to GWL and Loblaw	—		—		126		—		—		34
Interest on debt due from Choice Properties to Loblaw and
accretion income earned on intercompany Class C Units	—		—		(55)		—		—		(45)
Other	(1)		(5)		—		—		(9)		—
Other
Intercompany sales	(648)		—		—		(653)		—		—
Total Consolidated	$	48,568	$	3,312	$	948	$	48,289	$	3,186	$	523

(ii)	Certain items are excluded from operating income to derive adjusted EBITDA^(1). Adjusted EBITDA^(1) is used internally by management when analyzing segment underlying performance.
(iii)	Excludes $521 million (2017 – $524 million) of amortization of intangible assets acquired with Shoppers Drug Mart, recorded by Loblaw, and $9 million (2017 – $10 million) of accelerated depreciation and amortization recorded by Weston Foods, related to restructuring and other charges.

2018 ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's annual audited consolidated financial statements and MD&A for the year ended December 31, 2018 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. Roy MacDonald, Vice President, Investor Relations, 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.

This Annual Report includes selected information on Choice Properties. The Trust is listed on the TSX. For information regarding Choice Properties, readers should also refer to the materials filed by Choice Properties with SEDAR from time to time.  These filings are also available on Choice Properties' website at www.choicereit.ca.

FOURTH QUARTER CONFERENCE CALL AND WEBCAST PRESENTATION
George Weston Limited will host a conference call as well as an audio webcast on Tuesday, February 26, 2019 at 9:00 a.m. (EST). 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:  8453838#. To access via audio webcast, please visit the Investor Centre section of www.weston.ca. Pre-registration will be available.

ANNUAL MEETING
The George Weston Limited Annual Meeting of Shareholders will be held on Tuesday, May 7, 2019, at 11:00 a.m. (EDT) at The Royal Conservatory, TELUS Centre for Performance and Learning, Koerner Hall, 273 Bloor Street West, Toronto, Ontario, Canada.

Endnotes
(1)	See the "Non-GAAP Financial Measures" section of this News Release.
(2)	This News Release contains forward-looking information. See the "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.
(3)	Certain current and comparative figures have been restated to present Continuing Operations at Loblaw as a result of Loblaw's spin-out of Choice Properties.
(4)	Certain figures have been restated as a result of IFRS 15, "Revenue from Contracts with Customers" and a change in accounting policy.

SOURCE George Weston Limited

Mr. Roy MacDonald, Vice President, Investor Relations, at the Company's Executive Office or by e-mail at [email protected]