Net earnings increased by 21.0% in the first quarter of 2010 and dividend
raised by 23.6%
-------------------------------------------------------------------------
2010 FIRST QUARTER HIGHLIGHTS
- Net earnings of $98.1 million ($0.91 per share), up 21.0%
- Adjusted net earnings(1) of $88.7 million, up 5.5%
- Adjusted fully diluted net earnings per share(1) of $0.82, up 7.9%
- Sales of $2,645.0 million, up 1.7%
- Declared dividend per share of $0.17, up 23.6%
-------------------------------------------------------------------------
Excluding a non-recurring tax expense decrease of
"We are pleased with our first quarter results which improved on last year's excellent first quarter. Customer count continued to rise, but our basket size was smaller than last year as we experienced deflation in certain product categories. The economic environment remains challenging, however we are well-positioned in our markets and confident(2) that we will continue our growth in 2010," stated Eric R. La Flèche, President and Chief Executive Officer.
SALES
2010 first quarter sales reached
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION
(EBITDA)(1)
First quarter EBITDA(1) reached
Our share of earnings from our investment in Alimentation Couche-Tard in the first quarter of 2010 was
EBITDA(1) Adjustments
(Millions of 12 weeks / Fiscal Year
dollars, 2010 2009
unless ------------------------------------------------------------
otherwise EBITDA Sales EBITDA/ EBITDA Sales EBITDA/
indicated) Sales (%) Sales (%)
-------------------------------------------------------------------------
EBITDA 182.1 2,645.0 6.9 170.2 2,600.5 6.5
Banner
conversion
costs 0.9 - 4.5 -
-------------------------------------------------------------------------
Adjusted
EBITDA 183.0 2,645.0 6.9 174.7 2,600.5 6.7
Share of
earnings from
our investment
in Alimentation
Couche-Tard (10.8) - (11.1) -
-------------------------------------------------------------------------
Adjusted EBITDA
excluding share
of earnings 172.2 2,645.0 6.5 163.6 2,600.5 6.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION AND FINANCIAL COSTS
Total amortization expenses for the first quarter of 2010 amounted to
INCOME TAXES
The income tax expenses of
NET EARNINGS
Net earnings for the first quarter of 2010 were
Net Earnings Adjustments
12 weeks / Fiscal Year
2010 2009 Change (%)
------------------------------------------------------------
(Millions Fully (Millions Fully Net Fully
of diluted of diluted earnings diluted
dollars) EPS dollars) EPS EPS
(Dollars) (Dollars)
-------------------------------------------------------------------------
Net earnings 98.1 0.91 81.1 0.73 21.0 24.7
Banner
conversion
costs after
taxes 0.6 - 3.0 0.03
Decrease in
tax expense (10.0) (0.09) - -
-------------------------------------------------------------------------
Adjusted net
earnings(1) 88.7 0.82 84.1 0.76 5.5 7.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarterly Highlights
(Millions of dollars, unless 2010 2009 2008 Change
otherwise indicated) (%)
-------------------------------------------------------------------------
Sales
Q1 2,645.0 2,600.5 - 1.7
Q4 - 2,532.5 2,476.0 2.3
Q3 - 3,513.3 3,370.0 4.3
Q2 - 2,549.7 2,372.4 7.5
-------------------------------------------------------------------------
Net earnings
Q1 98.1 81.1 - 21.0
Q4 - 84.4 72.5 16.4
Q3 - 112.6 91.9 22.5
Q2 - 76.3 54.0 41.3
-------------------------------------------------------------------------
Adjusted net earnings(1)
Q1 88.7 84.1 - 5.5
Q4 - 85.9 72.5 18.5
Q3 - 111.8 91.9 21.7
Q2 - 77.2 54.0 43.0
-------------------------------------------------------------------------
Fully diluted net earnings
per share (Dollars)
Q1 0.91 0.73 - 24.7
Q4 - 0.77 0.65 18.5
Q3 - 1.01 0.81 24.7
Q2 - 0.68 0.48 41.7
-------------------------------------------------------------------------
Adjusted fully diluted net
earnings per share(1) (Dollars)
Q1 0.82 0.76 - 7.9
Q4 - 0.78 0.65 20.0
Q3 - 1.01 0.81 24.7
Q2 - 0.68 0.48 41.7
-------------------------------------------------------------------------
First quarter sales for 2010 were up 1.7% over those for 2009. This increase was achieved despite a slight drop in the value of our basket, whereas last year high food price inflation and the temporary closing of several stores of a competitor due to a labour conflict, had a positive impact on our first and second quarter sales.
Second, third and fourth quarter sales for 2009 were up 7.5%, 4.3% and 2.3% respectively over those for 2008. Effective merchandising programs allowed us to post increases. Excluding decreased tobacco sales, 2009 second, third and fourth quarter sales were up 8.3%, 5.2%, and 3.2% respectively over 2008.
First quarter net earnings and fully diluted net earnings per share for 2010 were up 21.0% and 24.7% respectively over those for 2009. Excluding pre-tax banner conversion costs of
In 2009, our sales growth and ongoing efforts to improve store operations in Ontario allowed us to increase our gross margins.
Second quarter net earnings and fully diluted net earnings per share for 2009 were up 41.3% and 41.7% from 2008. Excluding banner conversion costs of
Difficulties encountered in the second quarter of 2008 also explain the 2009 second quarter increase over the same quarter of 2008. These difficulties stemming from a more intensely competitive environment in Ontario and issues associated with our new information systems in Ontario and our new Food Services warehouse in Québec were resolved in the third and fourth quarters of 2008.
Third quarter net earnings and fully diluted net earnings per share in 2009 were up 22.5% and 24.7% respectively from 2008. Excluding non-recurring items recorded in the third quarter of 2009, namely
Fourth quarter net earnings and fully diluted net earnings per share in 2009 were up 16.4% and 18.5% over those for 2008. Excluding 2009 fourth quarter banner conversion costs of
2010 2009 2008
(Millions of -------------------------------------------------------
dollars) Q1 Q1 Q2 Q3 Q4 Q2 Q3 Q4
-------------------------------------------------------------------------
Net earnings 98.1 81.1 76.3 112.6 84.4 54.0 91.9 72.5
Banner conversion
costs after
taxes 0.6 3.0 0.9 1.9 1.5 - - -
Decrease in tax
expense (10.0) - - (2.7) - - - -
-------------------------------------------------------------------------
Adjusted net
earnings(1) 88.7 84.1 77.2 111.8 85.9 54.0 91.9 72.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2010 2009 2008
(Dollars and -------------------------------------------------------
per share) Q1 Q1 Q2 Q3 Q4 Q2 Q3 Q4
-------------------------------------------------------------------------
Fully diluted
net earnings 0.91 0.73 0.68 1.01 0.77 0.48 0.81 0.65
Banner conversion
costs after
taxes - 0.03 - 0.02 0.01 - - -
Decrease in tax
expense (0.09) - - (0.02) - - - -
-------------------------------------------------------------------------
Adjusted fully
diluted net
earnings(1) 0.82 0.76 0.68 1.01 0.78 0.48 0.81 0.65
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Position
OPERATING ACTIVITIES
Operating activities generated cash flows of
INVESTING ACTIVITIES
Investing activities required outflows of
FINANCING ACTIVITIES
Financing activities required outflows of
FINANCIAL POSITION
Despite the difficult economic environment, we do not anticipate(2) any liquidity risk and consider that our financial position at the end of the first quarter of fiscal 2010 as very solid. We had an unused authorized revolving line of credit of
At the end of the first quarter of 2010, the main elements of our long-term debt were as follows:
Interest Rate Balance Maturity
(Millions
of dollars)
-------------------------------------------------------------------------
Credit A Facility Rates fluctuate with 369.3 August 15, 2012
changes in bankers'
acceptance rates
Series A Notes 4.98% fixed rate 200.0 October 15, 2015
Series B Notes 5.97% fixed rate 400.0 October 15, 2035
-------------------------------------------------------------------------
At the end of the quarter, one interest rate swap agreement in the notional amount of
Fixed Rate Notional Amount Maturity
(Millions of dollars)
-------------------------------------------------------------------------
4.0425% 50.0 December 16, 2010
-------------------------------------------------------------------------
Giving effect to this swap agreement, at the end of the quarter, long-term indebtedness comprised
At the end of the first quarter, we also had foreign exchange forward contracts to hedge against the effect of foreign exchange rate fluctuations on our future U.S. dollar denominated purchases. The fair value of these short-term foreign exchange forward contracts was insignificant.
FINANCIAL RATIOS
As at As at
December 19, September 26,
2009 2009
-------------------------------------------------------------------------
Financial structure
Long-term debt (Millions of dollars) 1,004.5 1,004.3
Shareholders' equity (Millions of dollars) 2,318.5 2,264.1
Long-term debt/total capital (%) 30.2 30.7
Fiscal 2010 Fiscal 2009
(12 weeks) (12 weeks)
----------------------------
Results
EBITDA(1)/Financial costs (Times) 16.6 13.6
-------------------------------------------------------------------------
CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS
As at As at
December 19, September 26,
2009 2009
-------------------------------------------------------------------------
Number of Class A Subordinate Shares
outstanding (Thousands) 107,056 107,830
Number of Class B Shares outstanding
(Thousands) 642 718
Stock options:
Number outstanding (Thousands) 1,762 1,864
Exercise prices (Dollars) 17.23 17.23
to 39.17 to 39.17
Weighted average exercise price (Dollars) 28.93 28.53
Performance share units:
Number outstanding (Thousands) 268 268
Weighted average maturity (Months) 15 18
-------------------------------------------------------------------------
NORMAL COURSE ISSUER BID PROGRAM
Under the normal course issuer bid program, the Company may repurchase up to 6,000,000 of its Class A Subordinate shares between
DIVIDENDS
On
SHARE TRADING
The value of METRO shares remained in the
New Accounting Policy Recently Published
International Financial Reporting Standards
On
We set up a project structure to achieve the changeover of our consolidated financial statements to IFRS. A multidisciplinary working group analyzes, recommends accounting policy choices and implements each IFRS standard. A steering committee made up of senior executives approves accounting policy choices and makes sure that information technology, internal control, contractual and any other adjustments are made. The external auditors are notified of our choices and consulted on them. The Company's Audit Committee ensures that management fulfills its responsibilities and successfully accomplishes the changeover to IFRS.
We developed a work plan whose phases are outlined in the following tables, with actions, timetable and progress.
Phase 1: Preliminary Study and Diagnostic
-------------------------------------------------------------------------
Actions Identification of the IFRS standards that will require
changes with regard to measurement in consolidated
financial statements and disclosure.
Rank of standards based on their anticipated impact on our
consolidated financial statements and the effort their
implementation requires.
-------------------------------------------------------------------------
Timetable End of our 2008 fiscal year.
-------------------------------------------------------------------------
Progress Completed.
-------------------------------------------------------------------------
Phase 2: Standards Analysis
-------------------------------------------------------------------------
Actions Analysis of the differences between GAAP and IFRS.
Selection of the accounting policies that the Company will
apply on an ongoing basis.
Company's selection of IFRS 1 exemptions at the date of
transition.
Calculation of the quantitative impact on the consolidated
financial statements.
Disclosure analysis.
Preparation of draft consolidated financial statements and
notes.
Identification of the collateral impact in the following
areas.
- information technology
- internal control over financial reporting
- disclosure controls and procedures
- contracts
- compensation
- taxation
- training
-------------------------------------------------------------------------
Timetable We have prepared a detailed timetable that contemplates the
bulk of the analysis that will be completed by the end of
September 2010. We prioritized standards, based on their
ranking in the diagnostic, the time needed to complete the
analysis and implementation, working group members'
availability, as well as the timing of discussion papers,
exposure drafts and new standards to be issued by the
International Accounting Standards Board (IASB).
-------------------------------------------------------------------------
Progress At the end of the first quarter of fiscal 2010, we began the
analysis of 29 IFRS standards and interpretations out of a
total of approximately 50 that may have an impact on our
Company.
-------------------------------------------------------------------------
Phase 3: Implementation
-------------------------------------------------------------------------
Actions Preparation of the opening balance sheet at the date of
transition.
Compilation of the comparative financial data.
Production of the interim consolidated financial statements
and the associated disclosure.
Production of the annual consolidated financial statements
and the associated disclosure.
Implementation of changes regarding collateral impacts.
-------------------------------------------------------------------------
Timetable At the end of fiscal 2011, our opening balance sheet,
comparative financial data under IFRS and changes regarding
collateral impacts will be completed.
In fiscal 2012, we will produce our interim and annual
consolidated financial statements and disclosure in
accordance with IFRS.
-------------------------------------------------------------------------
Progress Not yet commenced.
-------------------------------------------------------------------------
So far, we have analyzed a number of IFRS standards. We have made choices, as warranted, with regard to these standards and noted the differences between some of these standards and our current accounting policies. The most significant ones are set out in the following table:
-------------------------------------------------------------------------
Standards Comparison between Preliminary Findings
IFRS and GAAP
-------------------------------------------------------------------------
Borrowing costs IFRS: We have to We will not capitalize
capitalize borrowing borrowing costs on
costs on qualifying qualifying assets, as
assets, i.e. assets that they are deemed to be
require an extended immaterial.
period of preparation
before they are usable or
saleable.
GAAP: These borrowing
costs may be capitalized.
-------------------------------------------------------------------------
Fixed assets IFRS: After initial We will continue to use
recognition, we can the cost model in order
measure our fixed assets to avoid balance sheet
using the cost model or variations in the fair
the revaluation model. value of fixed assets and
GAAP: The revaluation the corresponding impact
model is not allowed. on P&L statements.
---------------------------------------------------------
IFRS: We have to amortize Two new components, the
our fixed assets based on roof and HVAC system,
their components. will be amortized
GAAP: Component separately from the
identification rules are building.
less stringent. The carrying value of
these assets and
corresponding
depreciation expense will
be different, but the
impact should not be
material.
-------------------------------------------------------------------------
Investment IFRS: After initial We will continue to use
property recognition, we can the cost model in order
measure our investment to avoid balance sheet
property using the cost variations in the fair
model or the revaluation value of investment
model. property and the
GAAP: The revaluation corresponding impact on
model is not allowed. P&L statements.
-------------------------------------------------------------------------
Impairment of IFRS: We have to conduct Our impairment testing
assets impairment testing of will be conducted at the
our assets at the level of each store and
independent cash each warehouse that
generating unit (CGU) supplies external
level. clients. Impairment
GAAP: The unit is defined testing of corporate
as it generates both assets and goodwill will
independent cash inflows be conducted at the
and outflows. level of groups of CGUs.
Impairment testing results
may be different, but
their impact should not
be material.
-------------------------------------------------------------------------
Share-based IFRS: When stock option The compensation expense
payment awards vest gradually, will have to be
each tranche is to be recognized over the
considered as a separate expected term of each
award. vested tranche. It will
GAAP: The gradually vested be different, but the
tranches are considered impact should not be
as a single award. material.
-------------------------------------------------------------------------
Earnings per IFRS: We have to Diluted earnings per share
share independently determine, will be different, but
for the interim period the impact should not be
and the year-to-date, material.
the number of potentially
dilutive shares to
consider in calculating
diluted earnings per
share.
GAAP: The number is
independently determined
for the interim period,
but the year-to-date is
a weighted average of the
periods.
-------------------------------------------------------------------------
We have also made choices concerning certain exemptions from retrospective application at the time of changeover provided by IFRS 1 and which are set out in the following table:
-------------------------------------------------------------------------
Optional Exemptions Preliminary Findings
-------------------------------------------------------------------------
Borrowing costs This exemption allows us not to capitalize
borrowing costs on our qualifying assets before
the IFRS transition date.
Given that we will not capitalize these borrowing
costs, we will not use the exemption.
-------------------------------------------------------------------------
Deemed cost On the IFRS transition date, we can recognize each
fixed asset and investment property at its deemed
cost, which shall be its fair value.
We shall analyze our fixed assets and investment
property to determine whether or not to use the
exemption.
-------------------------------------------------------------------------
Share-based payment This exemption would relieve us from applying the
standard to equity instruments acquired before the
IFRS transition date.
We have decided not to avail ourselves of this
exemption.
-------------------------------------------------------------------------
Other key analyses are in progress or will be undertaken shortly. Consequently, preliminary findings do not appear in the above tables. Any choices made or variances identified will be communicated once the analyses have been completed. Furthermore, the release of IASB discussion papers, exposure drafts and new standards could change our preliminary findings.
Press Release
This press release sets out the financial position and consolidated results of METRO INC. on
Non-GAAP Measurements
In addition to GAAP earnings measurements provided, we have included certain non-GAAP earnings measurements. These measurements are presented for information purposes only. They do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measurements presented by other public companies.
Earnings before financial costs, taxes, depreciation and amortization
(EBITDA)
EBITDA is a measurement of earnings that excludes financial costs, taxes, depreciation and amortization. We believe that EBITDA is a measurement commonly used by readers of financial statements to evaluate a company's operational cash-generating capacity and ability to discharge its financial expenses.
Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net
earnings per share
Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net earnings per share are earnings measurements that exclude non-recurring items. We believe that presenting earnings without non-recurring items leaves readers of financial statements better informed as to the current period and corresponding period's earnings, thus enabling them to better evaluate the Company's performance and judge its future outlook.
Forward-looking Information
We have used, throughout this press release, different statements that could, within the context of regulations issued by the Canadian Securities Administrators, be construed as being forward-looking information. In general, any statement contained herein, which does not constitute a historical fact, may be deemed a forward-looking statement. Expressions such as "confident", "anticipate" and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements contained herein are based upon certain assumptions regarding the Canadian food industry, the general economy, our annual budget, as well as our 2010 action plan.
These forward-looking statements do not provide any guarantees as to the future performance of the Company and are subject to potential risks, known and unknown, as well as uncertainties that could cause the outcome to differ significantly. An economic slowdown or recession, or the arrival of a new competitor, are examples described under the "Risk Management" section of the 2009 Annual Report which could have an impact on these statements. We believe these statements to be reasonable and pertinent as at the date of publication of this press release and represent our expectations. The Company does not intend to update any forward-looking statement contained herein, except as required by applicable law.
Conference Call
Financial analysts and institutional investors are invited to participate in a conference call on the 2010 first quarter results at
---------------------
(1) See section on "Non-GAPP measurements"
(2) See section on "Forward-looking information"
Consolidated Statements of Earnings
12-week periods ended December 19, 2009 and December 20, 2008
(Unaudited) (Millions of dollars, except for net earnings per share)
Fiscal Year
-------------
2010 2009
-------------------------------------------------------------------------
Sales $ 2,645.0 $ 2,600.5
Cost of sales and operating expenses (note 8) (2,472.8) (2,436.9)
Share of earnings in a public company subject
to significant influence 10.8 11.1
Banner conversion costs (note 3) (0.9) (4.5)
-------------------------------------------------------------------------
Earnings before financial costs, taxes,
depreciation and amortization 182.1 170.2
Depreciation and amortization (46.7) (41.6)
-------------------------------------------------------------------------
Operating income 135.4 128.6
Financial costs, net (note 5) (11.0) (12.5)
-------------------------------------------------------------------------
Earnings before income taxes 124.4 116.1
Income taxes (note 6) (26.3) (35.0)
-------------------------------------------------------------------------
Net earnings $ 98.1 $ 81.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share (Dollars) (note 7)
Basic 0.91 0.73
Fully diluted 0.91 0.73
-------------------------------------------------------------------------
-------------
See accompanying notes
Consolidated Balance Sheets
(Unaudited) (Millions of dollars)
-------------
As at As at
December 19, September 26,
2009 2009
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ - $ 241.4
Accounts receivable 357.1 315.8
Inventories (note 8) 789.1 681.3
Prepaid expenses 13.8 8.3
Income taxes receivable 7.1 6.6
Future income taxes 25.9 29.8
-------------------------------------------------------------------------
1,193.0 1,283.2
Investments and other assets 215.9 204.0
Fixed assets 1,354.8 1,305.8
Intangible assets 322.3 325.4
Goodwill 1,595.9 1,478.6
Future income taxes 3.4 3.6
Accrued benefit asset 65.7 65.6
-------------------------------------------------------------------------
$ 4,751.0 $ 4,666.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans $ 7.7 $ 0.8
Accounts payable 1,137.9 1,111.2
Income taxes payable 32.3 24.8
Future income taxes 17.8 9.2
Current portion of long-term debt 5.5 6.4
-------------------------------------------------------------------------
1,201.2 1,152.4
Long-term debt 1,004.5 1,004.3
Accrued benefit liability 49.4 49.0
Future income taxes 149.2 165.0
Other long-term liabilities 28.2 31.4
-------------------------------------------------------------------------
2,432.5 2,402.1
-------------------------------------------------------------------------
Shareholders' equity
Capital stock (note 9) 713.3 716.7
Contributed surplus (note 10) 4.2 3.7
Retained earnings 1,602.3 1,545.7
Accumulated other comprehensive income
(note 11) (1.3) (2.0)
-------------------------------------------------------------------------
2,318.5 2,264.1
-------------------------------------------------------------------------
$ 4,751.0 $ 4,666.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
See accompanying notes
Consolidated Statements of Cash Flows
12-week periods ended December 19, 2009 and December 20, 2008
(Unaudited) (Millions of dollars)
Fiscal Year
-------------
2010 2009
-------------------------------------------------------------------------
Operating activities
Net earnings $ 98.1 $ 81.1
Non-cash items
Share of earnings in a public company
subject to significant influence (10.8) (11.1)
Depreciation and amortization 46.7 41.6
Amortization of deferred financing costs 0.5 0.5
Loss on disposal and write-off of fixed and
intangible assets 0.1 -
Future income taxes (3.4) 5.8
Stock-based compensation cost 1.2 1.1
Difference between amounts paid for employee
future benefits and current period cost 0.3 (6.5)
-------------------------------------------------------------------------
132.7 112.5
Net change in non-cash working capital items
related to operations (123.2) (61.7)
-------------------------------------------------------------------------
9.5 50.8
-------------------------------------------------------------------------
Investing activities
Business acquisitions (note 2) (136.7) -
Net change in investments and other assets (2.8) (0.2)
Dividends from public company subject to
significant influence 0.7 0.7
Additions to fixed assets (66.0) (52.1)
Proceeds on disposal of fixed assets 2.4 0.7
Additions to intangible assets (5.8) (4.2)
-------------------------------------------------------------------------
(208.2) (55.1)
-------------------------------------------------------------------------
Financing activities
Net change in bank loans 7.2 2.3
Issuance of shares (note 9) 2.2 17.4
Redemption of shares (note 9) (33.0) (9.3)
Increase in long-term debt 1.8 2.7
Repayment of long-term debt (3.9) (2.3)
Net change in other long-term liabilities (2.2) (2.3)
Dividends paid (14.8) (13.8)
-------------------------------------------------------------------------
(42.7) (5.3)
-------------------------------------------------------------------------
Net change in cash and cash equivalents (241.4) (9.6)
Cash and cash equivalents - beginning of period 241.4 151.7
-------------------------------------------------------------------------
Cash and cash equivalents - end of period $ - $ 142.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information
Interest paid 20.0 22.3
Income taxes paid 22.7 23.7
-------------------------------------------------------------------------
-------------
See accompanying notes
Consolidated Statements of Retained Earnings
12-week periods ended December 19, 2009 and December 20, 2008
(Unaudited) (Millions of dollars)
Fiscal Year
-------------
2010 2009
-------------------------------------------------------------------------
Balance - beginning of period $ 1,545.7 $ 1,366.8
Net earnings 98.1 81.1
Dividends (14.8) (13.8)
Share redemption premium (note 9) (26.7) (7.3)
-------------------------------------------------------------------------
Balance - end of period $ 1,602.3 $ 1,426.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
See accompanying notes
Consolidated Statements of Comprehensive Income
12-week periods ended December 19, 2009 and December 20, 2008
(Unaudited) (Millions of dollars)
Fiscal Year
-------------
2010 2009
-------------------------------------------------------------------------
Net earnings $ 98.1 $ 81.1
Other comprehensive income (note 11)
Change in fair value of derivatives
designated as cash flow hedges 1.0 (2.7)
Corresponding income taxes (0.3) 0.8
-------------------------------------------------------------------------
Comprehensive income $ 98.8 $ 79.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
See accompanying notes
Notes to Interim Consolidated Statements
12-week periods ended December 19, 2009 and December 20, 2008
(Unaudited)(Millions of dollars, unless otherwise indicated)
1. Statement Presentation
The unaudited interim consolidated financial statements were prepared by management in accordance with Canadian generally accepted accounting principles (GAAP). The accounting policies and procedures used in preparing these interim consolidated financial statements are the same as those used in preparing the audited annual consolidated financial statements for the year ended
2. Business Acquisitions
In the first quarter of 2010, the Company acquired 18 affiliated stores which it already supplied. The total purchase price was
The acquisitions were accounted for using the purchase method. The stores' results have been consolidated as of their respective acquisition dates. The preliminary total purchase price allocation was as follows:
Considerations paid
Cash $ 136.7
Balance to be paid 15.5
-------------------------------------------------------------------------
Total considerations paid 152.2
-------------------------------------------------------------------------
Net assets acquired
Inventories 15.0
Other current assets 0.7
Fixed assets 22.8
Short-term liabilities assumed (3.6)
-------------------------------------------------------------------------
Total net assets acquired 34.9
-------------------------------------------------------------------------
Excess considerations paid over net assets acquired $ 117.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Management is currently carrying out a more specific analysis and changes will be made to the allocation of the excess considerations paid over net assets acquired as the information becomes available. For example, since the measurement of the fair value of fixed assets had not yet been completed at the time of the preliminary allocation, fixed assets have been presented at cost. Furthermore, the Company has not completed the assessment of possible costs related to the restructuring and integration of activities potentially giving rise to the recognition of a liability in the allocation of the purchase price. As a result, the actual amounts allocated to the identifiable assets acquired and liabilities assumed and the related operating results may vary according to the amounts initially recorded.
The tax treatment of the goodwill will be as eligible capital property with the related tax deductions.
3. Banner Conversion Costs
In the first quarter of 2010, the Company completed the conversion of its 159 Ontario stores to the Metro banner begun in the summer of 2008. Costs of
4. Employee Future Benefits
The Company maintains several defined benefit and defined contribution plans which provide most participants with pension and other retirement benefits and other post-employment benefits. The Company's defined contribution plan and defined benefit plan expense was as follows:
Fiscal Year
-------------------
2010 2009
-------------------------------------------------------------------------
Pension Other Pension Other
plans plans plans plans
-------------------------------------------------------------------------
Defined contribution plans $ 7.1 $ 0.1 $ 6.6 $ 0.1
-------------------------------------------------------------------------
Defined benefit plans
Current service costs 5.4 0.3 4.9 0.3
Interest cost 8.1 0.4 7.7 0.4
Projected return on plan assets (9.6) - (9.1) -
Amortization of actuarial losses
and past service costs 0.4 - 0.3 -
-------------------------------------------------------------------------
4.3 0.7 3.8 0.7
-------------------------------------------------------------------------
$ 11.4 $ 0.8 $ 10.4 $ 0.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------
5. Financial Costs, net
Fiscal Year
-------------
2010 2009
-------------------------------------------------------------------------
Short-term interest $ 0.5 $ 0.6
Long-term interest 10.3 12.1
Amortization of deferred financing costs 0.5 0.5
Interest income (0.3) (0.7)
-------------------------------------------------------------------------
$ 11.0 $ 12.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
6. Income Taxes
The effective income tax rates were as follows:
Fiscal Year
-------------
(Percentage) 2010 2009
-------------------------------------------------------------------------
Combined statutory income tax rate 30.4 31.4
Changes
Impact on future taxes of 4.0% total
decreases in Ontario tax rate (8.0) -
Share of earnings in a public company
subject to significant influence (1.5) (1.5)
Others 0.2 0.2
-------------------------------------------------------------------------
21.1 30.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
7. Net Earnings per Share
Basic net earnings per share and fully diluted net earnings per share were calculated based on the following number of shares:
Fiscal Year
-------------
(Millions) 2010 2009
-------------------------------------------------------------------------
Weighted average number of shares outstanding
- Basic 107.8 110.5
Dilutive effect under stock option and
performance share units plans 0.5 0.9
-------------------------------------------------------------------------
Weighted average number of shares outstanding
- Diluted 108.3 111.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------
8. Inventories
Inventories were detailed as follows:
-------------
As at As at
December 19, September 26,
2009 2009
-------------------------------------------------------------------------
Warehouse inventories $ 338.2 $ 304.0
Retail inventories 450.9 377.3
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$ 789.1 $ 681.3
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The cost of inventories expensed for the 12-week period ended
9. Capital Stock
Outstanding
Class A Class B Total
Subordinate Shares Shares
----------------------- -----------------------
Number Number
(Thousands) (Thousands)
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Balance as at
September 26,
2009 107,830 $ 715.3 718 $ 1.4 $ 716.7
Shares issued
for cash 104 2.2 - - 2.2
Shares redeemed
for cash,
excluding
premium of
$26.7 (954) (6.3) - - (6.3)
Stock options
exercised - 0.7 - - 0.7
Conversion of
Class B Shares
into Class A
Subordinate
Shares 76 0.1 (76) (0.1) -
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Balance as at
December 19,
2009 107,056 $ 712.0 642 $ 1.3 $ 713.3
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Stock Option Plan
The outstanding options and the changes during the 12-week period ended
Number Weighted
(Thousands) average
exercise
price
(Dollars)
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Balance as at September 26, 2009 1,864 28.53
Exercised (102) 21.59
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Balance as at December 19, 2009 1,762 28.93
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The exercise prices of the outstanding options ranged from
Compensation expense for these options amounted to
Performance Share Unit Plan
As at
Class A Subordinate Shares of the Company are held in trust for participants until the PSUs vest or are cancelled. The trust, considered a variable interest entity, is consolidated in the Company's financial statements with the cost of the acquired shares recorded as treasury shares in reduction of capital stock.
At the end of the first quarter of 2010, 257,255 shares were held in trust for participants until the PSUs shall have vested or been cancelled (as at
The compensation expense comprising all of these PSUs amounted to
10. Contributed Surplus
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Balance as at September 26, 2009 $ 3.7
Stock-based compensation cost 1.2
Stock options exercised (0.7)
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Balance as at December 19, 2009 $ 4.2
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11. Accumulated Other Comprehensive Income
Derivatives designated as cash flow hedges constitute the sole component of Accumulated Other Comprehensive Income. The changes during the 12-week period ended
Fiscal Year
-------------
2010 2009
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Balance - beginning of period $ (2.0) $ (1.0)
Change in fair value of designated
derivatives net of income taxes of $0.3
(2009 - $0.8) 0.7 (1.9)
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Balance - end of period $ (1.3) $ (2.9)
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%SEDAR: 00001783EF
For further information: Richard Dufresne, Senior Vice-President, Chief Financial Officer and Treasurer, (514) 643-1003; Investor Relations Department, (514) 643-1055, [email protected]; METRO INC.'s corporate information and press releases are available on the Internet at: www.metro.ca; Source: METRO INC.
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