Stock Name: EMP.A
Amount: CAD 0.225
Announcement Date: 14/09/2011
Record Date: 12/10/2011
Dividend Detail:
STELLARTON, NS, Sept. 14, 2011 /CNW/ - Empire Company Limited (TSX:
EMP.A) today announced financial results for its first quarter ended
August 6, 2011. For the first quarter, the Company recorded earnings
before capital losses and other items, net of minority interest, of
$90.1 million ($1.32 per share) compared to $86.3 million ($1.26 per
share) in the first quarter last year. Net earnings in the first
quarter after minority interest were $89.2 million ($1.31 per share)
compared to $86.3 million ($1.26 per share) in the first quarter last
year.
Paul Sobey, President and CEO stated, "We are pleased with our start to
fiscal 2012 as both Sobeys and our investments and other operations
segments posted increased earnings in a very competitive environment.
Sobeys' improved merchandising and execution combined with ongoing cost
and productivity initiatives continue to fuel our ability to sustain
growth."
With the transition to International Financial Reporting Standards
("IFRS") effective the first quarter of fiscal 2012, all comparative
figures for fiscal 2011 that were previously reported in the
consolidated financial statements prepared in accordance with Canadian
Generally Accepted Accounting Principles ("CGAAP") have been restated
to conform with the new IFRS standards.
With the transition to IFRS, the Company now has two reportable
operating segments:
1) | The Food Retailing segment, which consists of wholly-owned Sobeys Inc. ("Sobeys"); and |
2) | The Investments and Other Operations segment, the principal components of which include investments in Crombie REIT (45.9 percent ownership interest; 40.4 percent fully diluted), an approximate 40 percent ownership interest in Genstar Development Partnership and wholly-owned Empire Theatres Limited. |
Further information on the transition to IFRS is included in note 18 to
the Company's first quarter unaudited consolidated financial
statements. The unaudited consolidated financial statements for the
first quarter ended August 6, 2011 are available through a link as
provided in the section titled "Unaudited Consolidated Financial
Statements" at the end of this news release.
In addition to the financial information contained in this quarterly
news release and in the unaudited consolidated financial statements,
the Company's quarterly and annual Management's Discussion and Analysis
are available on the Company's website at www.empireco.ca and also on SEDAR at www.sedar.com.
First Quarter Highlights
Sales of $4.15 billion, up $128.3 million or 3.2 percent.
Sobeys' same-store sales increased 1.7 percent compared with Q1 last
year.
Operating income of $150.4 million versus $148.5 million last year.
Effective income tax rate of 27.1 percent versus 28.9 percent in Q1 last
year.
Earnings before capital losses and other items, net of minority
interest, of $90.1 million ($1.32 per share) compared to $86.3 million
($1.26 per share) last year.
Capital losses and other items, net of tax, of $0.9 million compared to
nil in Q1 last year.
Net earnings, net of minority interest, of $89.2 million ($1.31 per
share) compared to $86.3 million ($1.26 per share) last year.
Funded debt to total capital ratio of 25.5 percent compared to 30.3
percent in Q1 last year.
__________________
Note: Empire had a diluted weighted average number of shares outstanding
in the first quarter of 68.0 million compared to 68.5 million in the
first quarter last year. The decrease was a result of the purchase for
cancellation under a Normal Course Issuer Bid ("NCIB") of a total of
0.5 million Non-Voting Class A shares during the second quarter of last
fiscal year.
Dividend Declaration
The Board of Directors declared a quarterly dividend of 22.5 cents per
share on both the Non-Voting Class A shares and the Class B common
shares that will be payable on October 31, 2011 to shareholders of
record on October 14, 2011. The Board also declared regular dividends
on the Company's outstanding preferred shares. These dividends are
eligible dividends as defined for the purposes of the Income Tax Act
(Canada) and applicable provincial legislation and, therefore, qualify
for the favourable tax treatment applicable to such dividends.
CONSOLIDATED FINANCIAL RESULTS
Sales
Consolidated sales for the first quarter were $4.15 billion compared to
$4.03 billion for the same quarter last year, an increase of $128.3
million or 3.2 percent. Sobeys' sales equalled $4.11 billion versus
$3.98 billion in the first quarter last year, an increase of $130.8
million or 3.3 percent. Sobeys' first quarter same-store sales
increased 1.7 percent compared to the first quarter last year. The
growth in Sobeys' sales is the direct result of modest inflation,
increased retail selling square footage from new stores and
enlargements, coupled with the ongoing implementation of sales and
merchandising initiatives, improved store level execution, and product
and services innovation.
Investments and other operations' sales in the first quarter were $51.1
million versus $51.7 million in the first quarter last year.
The table below presents a summary of consolidated financial performance
for the 13 weeks ended August 6, 2011 compared to the 13 weeks ended
July 31, 2010.
13 Weeks Ended | 13 Weeks Ended | |||||||||
($ in millions, except per share information) | August 6, 2011 | July 31, 2010 | ||||||||
Segmented sales | ||||||||||
Food retailing | $ | 4,106.1 | $ | 3,975.3 | ||||||
Investments and other operations | 51.1 | 51.7 | ||||||||
4,157.2 | 4,027.0 | |||||||||
Elimination | 3.0 | 1.1 | ||||||||
$ | 4,154.2 | $ | 4,025.9 | |||||||
Segmented operating income (1) | ||||||||||
Food retailing | $ | 135.4 | $ | 133.3 | ||||||
Investments and other operations | ||||||||||
Crombie REIT (2) | 4.8 | 4.4 | ||||||||
Genstar (3) | 7.5 | 7.9 | ||||||||
Wajax Income Fund (4) | - | 3.4 | ||||||||
Other, net of corporate expenses | 2.7 | (0.5) | ||||||||
15.0 | 15.2 | |||||||||
$ | 150.4 | $ | 148.5 | |||||||
Earnings before capital losses and other items, | ||||||||||
net of minority interest | $ | 90.1 | $ | 86.3 | ||||||
Capital losses and other items, net of tax | 0.9 | - | ||||||||
Net earnings, net of minority interest | $ | 89.2 | $ | 86.3 | ||||||
Basic earnings per share | ||||||||||
Operating earnings, net of minority interest | $ | 1.32 | $ | 1.26 | ||||||
Capital losses and other items, net of tax | 0.01 | - | ||||||||
Net earnings, net of minority interest | $ | 1.31 | $ | 1.26 | ||||||
Basic weighted average number | ||||||||||
of shares outstanding (in millions)(5) | 67.9 | 68.5 | ||||||||
Diluted earnings per share | ||||||||||
Operating earnings, net of minority interest | $ | 1.32 | $ | 1.26 | ||||||
Capital losses and other items, net of tax | 0.01 | - | ||||||||
Net earnings, net of minority interest | $ | 1.31 | $ | 1.26 | ||||||
Diluted weighted average number | ||||||||||
of shares outstanding (in millions)(5) | 68.0 | 68.5 | ||||||||
Dividends per share | $ | 0.225 | $ | 0.200 | ||||||
__________________
(1) | Operating income or EBIT is calculated as earnings before minority interest, capital losses and other items, finance costs (net of finance income) and income tax expense. |
(2) | 45.9 percent equity accounted interest in Crombie REIT (40.4% fully diluted). |
(3) | 40.7 percent equity accounted interest in Genstar Development Partnership, 45.9 percent equity accounted interest in Genstar Development Partnership II, and 42.1 percent equity accounted interests in each of GDC Investments 4, L.P., GDC Investments 5, L.P., and GDC Investments 6, L.P. (collectively referred to as "Genstar"). |
(4) | The 27.5 percent equity accounted interest in Wajax Income Fund ("Wajax") was sold on October 5, 2010. |
(5) | The decrease in the weighted average number of shares outstanding compared to the 13 weeks ended July 31, 2010 is the result of Empire purchasing for cancellation under its NCIB 0.5 million Non-Voting Class A shares during the second quarter of fiscal 2011. |
Operating Income
Consolidated operating income in the first quarter was $150.4 million,
an increase of $1.9 million or 1.3 percent from the $148.5 million
recorded in the first quarter last year.
The contributors to the change in consolidated operating income from the
first quarter last year are as follows:
Sobeys' operating income contribution to Empire in the first quarter
totalled $135.4 million, an increase of $2.1 million or 1.6 percent
from the $133.3 million recorded in the first quarter last year;
Genstar contributed operating income to Empire of $7.5 million compared
to $7.9 million in the first quarter last year;
Crombie REIT contributed operating income to Empire of $4.8 million
compared to $4.4 million in the first quarter last year; and
Other investments and operations contributed operating income to Empire
of $2.7 million compared to $2.9 million in the first quarter last
year.
Finance Costs
Finance costs, net of finance income, in the first quarter amounted to
$16.6 million, a decrease of $4.4 million from the $21.0 million
recorded in the first quarter last year. The decline in finance costs
reflects an increase in finance income and a decrease in interest
expense as a result of a reduction in average consolidated funded debt
outstanding.
Consolidated funded debt was $1,100.4 million at the end of the first
quarter of fiscal 2012 compared to $1,261.6 million at the end of the
first quarter of fiscal 2011, a $161.2 million or 12.8 percent
decrease. The decline in funded debt is primarily due to the sale of
Wajax and the sale of properties to Crombie REIT and third parties
where a portion of the proceeds from these sales were used to repay
funded debt.
Income Tax Expense
The effective income tax rate for the first quarter (excluding the
impact of capital losses and other items) was 27.1 percent versus 28.9
percent in the first quarter last year. The reduction in the effective
income tax rate is primarily due to the declining income tax rates
across the different jurisdictions in which Empire operates.
Earnings before Capital Losses and Other Items
For the 13 weeks ended August 6, 2011, Empire recorded earnings before
capital losses and other items, net of minority interest, of $90.1
million ($1.32 per share) compared to $86.3 million ($1.26 per share)
recorded in the first quarter last year. The $3.8 million or 4.4
percent increase in earnings before capital losses and other items, net
of minority interest, was the result of the $1.9 million increase in
operating income, the $4.4 million decrease in finance costs (net of
finance income) and a $0.6 million decrease in income taxes (excluding
the impact of capital losses and other items), partially offset by a
$3.1 million increase in minority interest.
The following table presents Empire's segmented earnings before capital
losses and other items, net of minority interest, by division for the
13 weeks ended August 6, 2011 compared to the 13 weeks ended July 31,
2010.
13 Weeks Ended | ($) | (%) | |||||
($ in millions) | August 6, 2011 | July 31, 2010 | Change | Change | |||
Food retailing | $ | 81.6 | $ | 78.8 | $ | 2.8 | 3.6% |
Investments and other operations | 8.5 | 7.5 | 1.0 | 13.3% | |||
Consolidated | $ | 90.1 | $ | 86.3 | $ | 3.8 | 4.4% |
Capital Losses and Other Items
The Company recorded capital losses, net of tax, in the first quarter of
$0.9 million compared to nil in the first quarter last year.
Net Earnings
Consolidated net earnings, after minority interest, in the first quarter
equalled $89.2 million compared to $86.3 million in the first quarter
last year. The increase in net earnings of $2.9 million is attributed
to the $3.8 million increase in earnings before capital losses and
other items, net of minority interest, partially offset by the $0.9
million increase in net capital losses and other items.
The following table presents Empire's segmented net earnings, after
minority interest, for the 13 weeks ended August 6, 2011 compared to
the 13 weeks ended July 31, 2010.
13 Weeks Ended | ($) | (%) | |||||
($ in millions) | August 6, 2011 | July 31, 2010 | Change | Change | |||
Food retailing | $ | 81.6 | $ | 78.8 | $ | 2.8 | 3.6% |
Investments and other operations | 7.6 | 7.5 | 0.1 | 1.3% | |||
Consolidated | $ | 89.2 | $ | 86.3 | $ | 2.9 | 3.4% |
The following tables provide financial highlights for Empire's two
reportable segments - Food Retailing and Investments and Other
Operations.
FOOD RETAILING
13 Weeks Ended | ($) | (%) | |||||
($ in millions) | August 6, 2011 | July 31, 2010 | Change | Change | |||
Sales | $ | 4,106.1 | $ | 3,975.3 | $ | 130.8 | 3.3% |
EBITDA | 217.6 | 210.4 | 7.2 | 3.4% | |||
Operating income | 135.4 | 133.3 | 2.1 | 1.6% | |||
Net earnings, net of minority interest | $ | 81.6 | $ | 78.8 | $ | 2.8 | 3.6% |
Sobeys recorded gross profit of $992.7 million in the quarter, an
increase of $33.5 million over the first quarter last year. This
increase was due to sales growth and continued focus on cost
management, partially offset by higher cost of inventories. Gross
margin, which is gross profit divided by sales, remained consistent at
24.2 percent compared to the first quarter of fiscal 2011.
Sobeys contributed EBITDA to Empire of $217.6 million in the first
quarter of fiscal 2012, an increase of $7.2 million or 3.4 percent from
the $210.4 million in the same period last year. EBITDA margin for the
first quarter of fiscal 2012 was 5.30 percent versus 5.29 percent in
the first quarter last year.
Sobeys' operating income contribution to Empire in the first quarter was
$135.4 million compared to $133.3 million last year, an increase of
$2.1 million or 1.6 percent. Operating income margin in the first
quarter equaled 3.30 percent versus 3.35 in the same quarter last year.
Sobeys will continue to focus on disciplined cost management
initiatives, supply chain and retail productivity improvements and
migration of best practices to continue to fund investments to drive
sales and improve margins over time.
Sobeys contributed net earnings, net of minority interest, to Empire of
$81.6 million in the quarter ended August 6, 2011 versus $78.8 million
in the first quarter of fiscal 2011. The $2.8 million or 3.6 percent
increase in net earnings contribution, net of minority interest, was
the result of a $2.1 million increase in operating income contribution,
a $2.2 million reduction in finance costs (net of finance income) and a
$1.6 million reduction in income tax expense, partially offset by a
$3.1 million increase in minority interest.
INVESTMENTS AND OTHER OPERATIONS
13 Weeks Ended | ($) | ||||||||
($ in millions) | August 6, 2011 | July 31, 2010 | Change | ||||||
Sales | $ | 51.1 | $ | 51.7 | $ | (0.6) | |||
Operating income | |||||||||
Crombie REIT(1) | 4.8 | 4.4 | 0.4 | ||||||
Genstar(2) | 7.5 | 7.9 | (0.4) | ||||||
Wajax | - | 3.4 | (3.4) | ||||||
Other, net of corporate expenses | 2.7 | (0.5) | 3.2 | ||||||
15.0 | 15.2 | (0.2) | |||||||
Earnings before capital losses and other items, net of minority interest | 8.5 | 7.5 | 1.0 | ||||||
Capital losses and other items | 0.9 | - | 0.9 | ||||||
Net earnings, net of minority interest | $ | 7.6 | $ | 7.5 | $ | 0.1 | |||
_________________
(1) | 45.9 percent equity accounted interest in Crombie REIT. |
(2) | 40.7 percent equity accounted interest in Genstar Development Partnership, 45.9 percent equity accounted interest in Genstar Development Partnership II, and 42.1 percent equity accounted interests in each of GDC Investments 4, L.P., GDC Investments 5, L.P., and GDC Investments 6, L.P. (collectively referred to as "Genstar"). |
Investments and other operations (net of corporate expenses) contributed
operating income of $15.0 million compared to $15.2 million in the
first quarter last year. Equity accounted earnings generated from the
Company's investment in Genstar amounted to $7.5 million compared to
$7.9 million in the same quarter last year, a decrease of $0.4 million
primarily as a result of lower margins on residential lot sales. Equity
accounted earnings from the Company's investment in Crombie REIT
increased $0.4 million to $4.8 million in the first quarter of fiscal
2012 compared to $4.4 million in the first quarter last year, primarily
driven by higher property revenues and the resulting higher property
net operating income.
As a result of its sale in the second quarter last fiscal year, there
were no equity accounted earnings in the first quarter of fiscal 2012
from Wajax compared to $3.4 million in the first quarter of last year.
Operating income from other operations (net of corporate expenses)
increased to $2.7 million from $(0.5) million in the first quarter last
year. The improvement in operating income from other operations was
primarily driven by dilution gains resulting from a change in the
Company's ownership interest in Crombie REIT, higher operating income
from other commercial operations and higher operating income from
Empire Theatres.
Investments and other operations (net of corporate expenses) contributed
$7.6 million to Empire's consolidated first quarter fiscal 2012 net
earnings, net of minority interest, compared to a $7.5 million net
earnings contribution, net of minority interest, in the first quarter
last year.
NORMAL COURSE ISSUER BID
The Company announced today that it has filed a notice with the Toronto
Stock Exchange ("TSX") to purchase for cancellation up to 673,755
Non-Voting Class A shares representing approximately two percent of
those outstanding, subject to obtaining regulatory approval. The
purchases will be made through the facilities of the TSX. Currently
33,687,747 Non-Voting Class A shares are issued and outstanding. The
price the Company will pay for any such shares will be the market price
at the time of acquisition. Purchases may commence on September 20,
2011, and shall terminate not later than September 19, 2012.
The Board of Directors and senior management of Empire are of the
opinion that from time to time the purchase of Non-Voting Class A
shares at the prevailing market prices is a worthwhile use of funds and
in the best interests of Empire and its shareholders. The Company has
purchased 513,579 Non-Voting Class A shares at a weighted average price
of $53.72 in the last 12 months under an NCIB that will expire on
September 19, 2011.
The average daily trading volume (the "ADTV") of the Non-Voting Class A
shares was 36,560 on the TSX over the last six completed calendar
months. Accordingly, under the policies of the TSX, the Company is
entitled to purchase, during any one trading day up to 9,140 Non-Voting
Class A shares (being 25 percent of the ADTV of the Non-Voting Class A
shares). The Company is entitled to purchase a larger amount of
Non-Voting Class A shares per calendar week, subject to the maximum
number that may be acquired under the NCIB, if the transaction meets
the block purchase exception under the TSX rules.
FORWARD-LOOKING INFORMATION
This discussion contains forward-looking information that reflect
management's current expectations related to matters such as future
financial performance and operating results of the Company. Expressions
such as "anticipates", "expects", "believes", "estimates", "could",
"may", "plans", "will", "would", and other similar expressions or the
negative of these terms are generally indicative of forward-looking
statements. Forward looking statements contained in this press release
include those relating to Sobeys expectations that it will continue to
focus on disciplined cost management initiatives, supply chain and
retail productivity improvements and migration of best practices to
continue to fund investments to drive sales and improve margins over
time which could be impacted by the final scope and scale of these
initiatives, and any purchases under the NCIB which may be impacted by
capital requirements of the Company and market conditions.
By its very nature, forward-looking information requires the Company to
make assumptions and is subject to inherent risks and uncertainties
which give rise to the possibility that the Company's expectations or
objectives will not prove to be accurate.
These forward-looking statements are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and risks are discussed in the
Company's materials filed with the Canadian securities regulatory
authorities from time to time, including the Risk Management section of
the annual Management Discussion and Analysis.
Readers are urged to consider these and other risks, uncertainties and
assumptions carefully in evaluating the forward-looking information and
are cautioned not to place undue reliance on such forward-looking
information. The forward-looking information in this press release
reflects the Company's expectations as of September 14, 2011, and is
subject to change after this date. The Company does not undertake to
update any forward-looking statements that may be made from time to
time by or on behalf of the Company other than as required by
applicable securities laws.
Non-GAAP Financial Measures
There are measures included in this press release that do not have a
standardized meaning under GAAP and therefore may not be comparable to
similarly titled measures presented by other publicly traded
companies. The Company includes these measures because it believes
certain investors use these measures as a means of assessing financial
performance.
Empire's definition of the non-GAAP terms are as follows:
Operating earnings is calculated as earnings before capital losses and
other items, net of minority interest.
Operating income or earnings before interest and taxes ("EBIT") is
calculated as operating earnings before minority interest, finance
charges (net of finance income) and income taxes.
Operating income margin is operating income divided by sales.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") is calculated as EBIT plus depreciation and amortization.
EBITDA margin is EBITDA divided by sales.
Funded debt is all interest bearing debt, which includes bank loans,
bankers' acceptances, long-term debt and debt related to assets held
for sale.
Total capital is calculated as funded debt plus shareholders' equity,
net of minority interest.
Same-store sales are sales from stores in the same locations in both
reporting periods.
Gross profit is calculated as sales less cost of sales.
Conference Call Invitation
The Company will hold an analyst call on Wednesday, September 14, 2011
beginning at 1:30 p.m. Eastern Daylight Time during which senior
management will discuss the Company's financial results for the first
quarter ended August 6, 2011. To join this conference call dial
1-888-231-8191 outside of the Toronto area or 647-427-7450 from within
the Toronto area. You may also listen to a live audiocast of the
conference call by visiting the Company's website located at www.empireco.ca. Replay will be available by dialling 1-855-859-2056 and entering
passcode 95893600 until midnight September 21, 2011, or on the
Company's website for 90 days following the conference call.
Unaudited Consolidated Financial Statements
The Company's unaudited consolidated financial statements for the first
quarter of fiscal 2012 ended August 6, 2011 are available at the
following link:
Q1 Fiscal 2012 Unaudited Consolidated Financial Statements
This information can also be accessed through the Investor Centre
section of the Company's website at www.empireco.ca and has been filed on SEDAR at www.sedar.com.
About Empire
Empire Company Limited (TSX: EMP.A) is a Canadian company headquartered
in Stellarton, Nova Scotia. Empire's core businesses include food
retailing and related real estate. With over $16 billion in annual
sales and approximately $6.5 billion in assets, Empire and its related
companies directly employ approximately 49,000 people.
Additional financial information relating to Empire, including the
Company's Annual Information Form, can be found on the Company's
website at www.empireco.ca or on SEDAR at www.sedar.com.
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