2021
Annual Report
Report to Shareholders
Fellow Shareholders,
As we look back on another year where COVID-19 impacted the lives
of Canadians, George Weston Limited and its businesses continued
to serve communities from coast to coast to coast with a strong
sense of pride and purpose. Together, we rose to meet the challenges
posed by the pandemic, keeping employees, customers, and tenants
safe, fed, and well. We did so as we also made meaningful progress
against our transformation journey.
The sale of Weston Foods at the end of 2021 marked an important milestone as the
Company focuses on its most significant long-term value creation drivers in retail
and real estate. Since the very first bread route that marked the beginning of George
Weston in 1882, bakery has been at the heart of our organization, and we are pleased
to see that business position itself for the future in the hands of two excellent buyers.
At Loblaw, a leadership transition was accompanied by a renewed focus on retail
excellence. This saw the organization pare back its strategic initiatives to the most
meaningful growth avenues and dedicate reinvigorated energy towards consistent
execution in its core. At the same time, Loblaw helped millions of Canadians stay
fed and well through the country’s largest grocery store and e-commerce network,
nationwide COVID-19 testing and vaccinations, and an increasingly compelling suite
of virtual healthcare tools.
1
GEORGE WESTON LIMITED 2021 ANNUAL REPORT We have continued
conviction in the
importance of owning
market-leading
businesses that serve
their communities well.
Choice Properties continued to deliver income stability and net asset value
appreciation as it improved its already strong balance sheet and portfolio.
The announcement of its plans to redevelop the Golden Mile Shopping Centre
in Toronto is just one example of the significant development potential across
its properties. And, with the completion of its first green bond offering in the
back half of the year, Choice Properties reaffirmed its commitment to both
sustainable development and prudent balance sheet management.
As we reflect upon 2021, it remains clear that our Company’s success was the
direct result of the remarkable people who worked across our group, and we
extend our heartfelt thanks to each and every one of them.
Looking towards the future, we have continued conviction in the importance
of owning market-leading businesses that serve their communities well, and
confidence that doing so we will create value over the long-term.
Sincerely,
[signed]
[signed]
Galen G. Weston
Richard Dufresne
Chairman and Chief Executive Officer
President and Chief Financial Officer
Toronto, Canada
March 1, 2022
2
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Management’s Discussion
and Analysis
The following Management’s Discussion and Analysis (“MD&A”) for George
Table of Contents
Weston Limited (“GWL” or the “Company”) should be read in conjunction with the
audited annual consolidated financial statements and the accompanying notes on
pages 99 to 177 of this Annual Report. The Company’s audited annual consolidated
financial statements and the accompanying notes for the year ended December
31, 2021 have been prepared in accordance with International Financial Reporting
Standards (“IFRS” or “GAAP”) as issued by the International Accounting Standards
Board (“IASB”). The audited annual consolidated financial statements include the
accounts of the Company and other entities that the Company controls and are
reported in Canadian dollars, except where otherwise noted.
Under GAAP, certain expenses and income must be recognized that are not
necessarily reflective of the Company’s underlying operating performance.
4 At a Glance
5 Our Business
8 Key Performance Indicators
Operating Segments
12 Loblaw
14 Choice Properties
17 Financial Results
78 Outlook
Non-GAAP financial measures exclude the impact of certain items and are used
79 Non-GAAP Financial Measures
95 Forward-Looking Statements
96 Additional Information
internally when analyzing consolidated and segment underlying operating
performance. These non-GAAP financial measures are also helpful in assessing
underlying operating performance on a consistent basis. See Section 14,
“Non-GAAP Financial Measures”, of this MD&A for more information on the
Company’s non-GAAP financial measures.
The Company operates through its two reportable operating segments: Loblaw
Companies Limited (“Loblaw”) and Choice Properties Real Estate Investment Trust
(“Choice Properties”). Other and Intersegment includes eliminations, intersegment
adjustments related to the consolidation and cash and short-term investments
held by the Company. All other company level activities that are not allocated to the
reportable operating segments, such as net interest expense, corporate activities
and administrative costs are included in Other and Intersegment.
On March 23, 2021, the Company announced its intention to launch a process to
sell the Weston Foods business, comprised of the fresh, frozen and ambient bakery
businesses. On December 10, 2021, the Company announced the sale of its Weston
Foods fresh and frozen bakery businesses. On December 29, 2021, the Company
announced the sale of its Weston Foods ambient bakery business. See Section 1,
“Business Developments” of this MD&A for further details. Upon the respective
sale dates, the net assets of Weston Foods were de-recognized and the Weston
Foods results, net of intersegment eliminations, have been presented separately
as discontinued operations in the Company’s current and comparative results.
Unless otherwise indicated, the Company’s results include an extra week of
operations (the “53rd week”) in the fourth quarter and full year 2020 results when
compared to 2021 as a result of the Company’s reporting calendar.
The information in this MD&A is current to March 1, 2022, unless otherwise noted.
FOOTNOTE LEGEND
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
2 GWL Corporate refers to the non-consolidated financial results and metrics of GWL. GWL Corporate is a subset of Other and Intersegment.
3 Certain figures have been restated due to the non-GAAP financial measures policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change
Effective First Quarter of 2021” of the Company’s 2021 Management’s Discussion and Analysis.
4 Comparative figures have been restated to conform with current year presentation.
5 To be read in conjunction with “Forward-Looking Statements” beginning on page 95.
6 For financial definitions and ratios refer to Glossary beginning on page 180.
3
GEORGE WESTON LIMITED 2021 ANNUAL REPORT
At a Glance
Key financial highlights
As at or for the year ended December 31, 2021
($ millions except where otherwise indicated)
• The Company’s interest in Weston Foods is presented separately as discontinued operations in the Company’s current and comparative results.
Unless otherwise indicated, all financial information reflects the Company’s results from continuing operations.
• Unless otherwise indicated, the Company’s results include an extra week of operations, the “53rd week”, in the fourth quarter and full year 2020
results when compared to 2021 as a result of the Company’s reporting calendar.
Consolidated(1)
REVENUE
OPERATING INCOME
ADJUSTED EBITDA( 1)
ADJUSTED EBITDA MARGIN(1) (%)
$53,748
$4,027
$5,995
11.2%
+0.9%
vs. 2020(4)
+40.1%
vs. 2020(4)
+11.9%
vs. 2020(3)(4)
+110bps
vs. 2020(3)(4)
NET EARNINGS AVAILABLE TO
COMMON SHAREHOLDERS FROM
CONTINUING OPERATIONS
ADJUSTED NET EARNINGS
AVAILABLE TO COMMON
SHAREHOLDERS FROM
CONTINUING OPERATIONS(1)
DILUTED NET EARNINGS
PER COMMON SHARE FROM
CONTINUING OPERATIONS ($)
ADJUSTED DILUTED NET EARNINGS
PER COMMON SHARE FROM
CONTINUING OPERATIONS(1) ($)
$709
-22.3%
vs. 2020(4)
$1,232
$4.66
+24.1%
vs. 2020(3)(4)
-21.3%
vs. 2020(4)
$8.14
+26.4%
vs. 2020(3)(4)
GWL Corporate(2)
CASH FLOW FROM OPERATING
BUSINESSES(1) FROM
CONTINUING OPERATIONS
GWL CORPORATE FREE
CASH FLOW(1) FROM
CONTINUING OPERATIONS
ANNUALIZED DIVIDENDS
DECLARED PER SHARE ($)
ADJUSTED RETURN
ON CAPITAL( 1) (%)
$579
-6.9%
vs. 2020(4)
$978
+19.0%
vs. 2020(4)
$2.40
+9.1%
vs. 2020
12.6%
+190bps
vs. 2020(3)(4)
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
2 GWL Corporate refers to the non-consolidated financial results and metrics of GWL. GWL Corporate is a subset of Other and Intersegment.
3 Certain figures have been restated due to the non-GAAP financial measures policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change
Effective First Quarter of 2021” of the Company’s Management’s Discussion and Analysis.
4 Comparative figures have been restated to conform with current year presentation.
4
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Our Business
Our history as a family business
In 1882, a young Toronto bread salesman and former baker’s apprentice named George
Weston went into business for himself when he bought a bread route from his employer.
By the turn of the century, Weston’s Bread was known throughout the city and George
Weston had become Canada’s biggest baker.
In 1924, George’s eldest son, Garfield Weston, followed in his father’s footsteps and
became president of George Weston Limited. In spite of war and the depression, Garfield
transformed his father’s Toronto bakery into a commercial food empire with holdings on
several continents.
In 1953, George Weston Limited expanded its grocery business, acquiring majority control
of Loblaws Inc. In 1956, Loblaw Companies Limited was incorporated, and over the next
two decades, Loblaw continued to expand its operations throughout Canada and the
United States.
In the early 1970s, a third generation took charge as W. Galen Weston successfully
consolidated the large conglomerate, reinventing Loblaw in the process and transforming
it into Canada’s largest grocery chain and GWL’s largest asset.
In 2006, Galen G. Weston assumed responsibility for Loblaw and guided Loblaw through
a period of transformation and growth in response to a rapidly changing business
environment, including the creation and initial public offering of Choice Properties
Real Estate Investment Trust in 2013 and the acquisition of Shoppers Drug Mart shortly
thereafter. In 2017, Galen G. Weston was appointed CEO of George Weston Limited.
In 2018, as part of GWL’s transformation initiative and long-term commitment to create
shareholder value, the Company completed a reorganization where Loblaw spun out its
majority interest in Choice Properties to GWL. GWL’s acquisition of a majority ownership
of Choice Properties was a critical milestone in the recent history of the Company. With
the addition of Choice Properties to the portfolio, the Company became more balanced,
with three strong and well-positioned businesses in retail, real estate and consumer goods.
In 2021, George Weston Limited made the decision to sell its Weston Foods bakery
business. The business had been the foundation for the Weston Group in Canada since
its establishment in 1882. The sale of the business was completed at the end of 2021,
positioning the Company to focus on its market-leading retail and real estate businesses.
For more than a century and a quarter, thousands of employees of George Weston
Limited and its subsidiaries have built an enterprise that has persevered and prospered
through good times and bad to become one of Canada's most successful companies.
What we do
George Weston Limited is a Canadian public company, founded in 1882 and listed on
52.6%
Loblaw
Loblaw (TSX: L) is Canada’s food and
pharmacy leader and the nation’s
largest retailer. Loblaw provides
Canadians with grocery, pharmacy,
health and beauty, apparel, general
merchandiseandfinancialservices,
through its grocery banners,
Shoppers Drug Mart, Joe Fresh
and President’s Choice Bank.
61.7%
Choice Properties
Choice Properties REIT (TSX: CHP.UN)
is a leading real estate investment
trust that aims to create long-term
value by owning, managing and
developing high-quality assets.
The Choice Properties portfolio
is comprised of retail properties,
primarily leased to necessity-based
tenants,andindustrial,officeand
residential assets, concentrated
in attractive markets and includes
an impressive pipeline of
the Toronto Stock Exchange (TSX:WN) since January 1928. The Company owns two
development opportunities.
businesses in retail and real estate.
5
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Our Business
Our Operating and Value Creation Strategy
George Weston Limited’s mission is to build
generational value with actively managed
market-leading businesses in retail and
real estate through expertise in strategy,
mergers and acquisitions, capital allocation
and talent development.
Over the years, the Company has successfully executed strategic transactions and has
tightly managed its leverage and capital structure.
The Company is a leader in each of its operating segments, retail and real estate, with
market-leading brands in retail and coveted locations in real estate.
The Company is committed to supporting its portfolio of companies, providing expertise
and decision support. This includes support in areas such as strategy, talent development,
capital allocation and mergers and acquisitions.
The Company brings a unique perspective to the operating business level, having a
viewpoint that spans across the retail and real estate categories, enabling the identification
of opportunities and the sharing of best practices.
By accumulating capital from its existing businesses and prudently leveraging its debt
capacity, the Company supports investments in strategic transactions that create value at
its portfolio companies. The Company also considers strategic initiatives where it can
leverage its existing capabilities and expertise to create long-term value for shareholders.
The Company has a track record of providing stability and maintaining a long-term outlook.
The Company seeks to deploy its capital optimally, including returning capital to shareholders
and re-investing capital in its portfolio of companies, where it can further enhance
earnings capability.
6
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Our Operating and Value Creation Strategy
Our Business
Built on what we have in common
Together, these four concepts unite our operating companies
and are core to our identity:
CORE VALUES
Our actions are shaped by a set of CORE Values,
which express a shared commitment to Care,
Ownership, Respect and Excellence across the
group of companies.
ETHICS & COMPLIANCE
Throughout our interactions, our decisions are
grounded in a strong sense of Ethics & Compliance.
BLUE CULTURE
Represents how our values come to life every
day in our interactions with our businesses,
each other and our customers.
SOCIAL RESPONSIBILITY
As a generational investor, long-term trends,
whether social, demographic, or environmental
matter and underpin the importance we place
on Social Responsibility.
RETAIL
REAL
ESTATE
ACTIVELY MANAGED
PORTFOLIO
BUILD GENERATIONAL
VALUE
Impacting
Through active management and by leveraging our culture
and values we seek to positively impact:
SHAREHOLDERS
We create value for our shareholders by enhancing
the value of our market-leading businesses,
supporting operational excellence, investing in
strategic transactions and by distributions in
the form of dividends.
TALENT
Our talent is central to achieving our long-term
goals. Our focus on attracting and developing
exceptional leaders is a strategic imperative
and we are proud to offer challenging and
rewarding careers.
COMMUNITIES
Consistent with our heritage and values, we are
focused on improving the quality of life in the
communities where we work.
7
GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Key Performance Indicators
As at or for the quarters (unaudited) and years ended December 31
($ millions except where otherwise indicated)
• The Company’s interest in Weston Foods is presented separately as discontinued operations in the Company’s current and comparative results.
Unless otherwise indicated, all financial information reflects the Company’s results from continuing operations.
• Unless otherwise indicated, the Company’s results include an extra week of operations, the “53rd week”, in the fourth quarter and full year 2020
results when compared to 2021 as a result of the Company’s reporting calendar.
REVENUE
OPERATING INCOME
ADJUSTED EBITDA( 1)
ADJUSTED NET EARNINGS
AVAILABLE TO COMMON
SHAREHOLDERS FROM
CONTINUING OPERATIONS(1)
$60,000
$5,000
$6,000
50,000
40,000
30,000
20,000
10,000
4,000
3,000
2,000
1,000
0
2021
2020
Q4
2021
Q4
2020
0
2021
2020
5,000
4,000
3,000
2,000
1,000
0
$1,500
1,200
900
600
300
0
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
53,748
2020(4)
53,270
Q4 2021
12,902
Q4 2020(4) 13,430
+0.9%
-3.9%
2021
2020(4)
Q4 2021
4,027
2,875
1,009
+40.1%
+16.1%
2021
2020(3)(4)
Q4 2021
5,995
5,356
1,453
+11.9%
+4.1%
Q4 2020(4)
869
Q4 2020(3)(4)
1,396
Q4 2020(3)(4)
2021
1,232
2020(3)(4)
Q4 2021
+24.1%
+29.5%
993
347
268
Performance in 2021
Performance in 2021
Performance in 2021
Performance in 2021
Revenue growth of $478 million,
primarily driven by Loblaw.
Operating income increased
by $1,152 million. The increase
was mainly attributable to
the underlying operating
performance of Loblaw and
Choice Properties and the
favourable year-over-year net
impact of adjusting items.
Adjusted EBITDA(1) increased
by $639 million, primarily
driven by an improvement in
the underlying operating
performance of Loblaw and
Choice Properties.
ADJUSTED EBITDA
MARGIN (1) (%)
11.2% +110bps
2021
vs. 2020(3)(4)
11.3% +90bps
Q4 2021
vs. Q4 2020(3)(4)
Adjusted net earnings available
to common shareholders
from continuing operations(1)
increased by $239 million,
driven by an increase in
the underlying operating
performance of Loblaw, Choice
Properties, the favourable
year-over-year impact of asset
impairments recorded on
consolidation, and a decrease
in adjusted net interest expense
andotherfinancingcharges(1),
partially offset by an increase in
depreciation and amortization
and higher tax expense.
ADJUSTED DILUTED NET
EARNINGS PER SHARE (1) ($)
$8.14 +26.4%
2021
vs. 2020(3)(4)
$2.32 +33.3%
Q4 2021
vs. Q4 2020(3)(4)
8
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Key Performance Indicators
GWL CORPORATE(2) CASH
FLOW FROM OPERATING
BUSINESSES(1) FROM
CONTINUING OPERATIONS
GWL CORPORATE(2) FREE
CASH FLOW(1) FROM
CONTINUING OPERATIONS
GWL CORPORATE ( 2)
DIVIDENDS PAID
GWL CORPORATE ( 2)
NET CASH (DEBT)
$700
600
500
400
300
200
100
0
$1,000
800
600
400
200
0
$350
300
250
200
150
100
50
0
$759 +1,865.1%
2021
vs. 2020
$(43)
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
2021
2020(4)
Q4 2021
Q4 2020(4)
579
622
146
142
-6.9%
+2.8%
2021
2020(4)
Q4 2021
Q4 2020(4)
978
822
213
217
+19.0%
-1.8%
2021
2020
342
328
+4.3%
Performance in 2021
Performance in 2021
Performance in 2021
Performance in 2021
GWL Corporate(2)cashflow
from operating businesses(1)
from continuing operations
decreased, primarily due to
the timing of the receipt
of Loblaw dividends in 2020.
GWL Corporate(2) free cash
flow(1) from continuing
operations increased, primarily
due to higher proceeds from
participation in Loblaw’s
Normal Course Issuer Bid,
partially offset by a decrease
in dividends received from
Loblaw due to timing and
higher income taxes paid.
See page 11 of this MD&A for
a calculation of this metric.
GWL Corporate(2) dividends
paid in the year were higher
due to an increase in the
dividend per common share
of 9.1% in the third quarter
of 2021.
See page 11 of this MD&A for
a history of GWL’s dividend
increases.
GWL Corporate(2) net cash
position increased primarily
due to higher cash and
cash equivalents including
proceeds received from
the disposal of the Weston
Foods business.
The settlement of the
net debt associated with
the equity forward sale
agreement was offset by
a reduction in cash and
had no impact on GWL
Corporate(2) net debt. See
section 3.3 “Components
of Total Debt” of this MD&A
for details.
See section 3.2 “Liquidity” of
this MD&A for a calculation
of this metric.
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
2 GWL Corporate refers to the non-consolidated financial results and metrics of GWL. GWL Corporate is a subset of Other and Intersegment.
3 Certain figures have been restated due to the non-GAAP financial measures policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change
Effective First Quarter of 2021” of the Company’s 2021 Management’s Discussion and Analysis.
4 Comparative figures have been restated to conform with current year presentation.
9
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Key Performance Indicators
Total Debt
The Company manages its debt on a segmented basis to ensure that each of its businesses
is employing leverage that is appropriate. The following chart presents total consolidated
debt by reportable operating segment as at December 31, 2021 and 2020. There is no recourse
to the Company for debt incurred by its operating segments.
The consolidated debt for the group as at December 31, 2021 was $20.3 billion. Indebtedness
of Loblaw and Choice Properties is fully serviced by their respective operating cash flows.
Indebtedness of GWL Corporate(2) is comprised of $450 million of senior unsecured debentures
and $121 million associated with the credit facility(ii). The settlement of the net debt associated
with the equity forward sale agreement was offset by a reduction in cash and had no impact on
GWL Corporate(2) net debt. See section 3.3 “Components of Total Debt” of this MD&A for details
about the settlement of the equity forward sale agreement.
TOTAL DEBT
As at December 31
($ billions)
$20.3
$21.0
0.6(i)(ii)
6.9
2.9
5.0
PC Financial
Loblaw Retail
Lease Liabilities
4.9(i)
2021
2020
1.2 (i)
7.1
2.8
5.0
4.9(i)
(i) In 2021, the Company recognized lease liabilities of $4.9 billion (2020 – $5.0 billion) on its consolidated balance
sheet, of which $4.9 billion (2020 – $4.9 billion) was attributable to Loblaw, with none attributable to Weston Foods
(2020 – $0.1 billion). Lease liabilities are recognized primarily for leases of real estate, vehicles and equipment.
(ii) GWL’s credit facility was fully repaid in January 2022.
10
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Key Performance Indicators
GWL Corporate(2) Free Cash Flow(1)
from Continuing Operations
The Company’s interest in Weston Foods is presented separately as discontinued operations in the
Company’s current and comparative results. Unless otherwise indicated, all financial information
reflects the Company’s results from continuing operations. GWL Corporate(2) free cash flow(1) from
continuing operations is generated from the dividends received from Loblaw, distributions received
from Choice Properties, and proceeds from participation in Loblaw’s Normal Course Issuer Bid, less
corporate expenses, interest and income taxes paid.
For the quarters and years ended December 31
($ millions)
Dividends from Loblaw
Distributions from Choice Properties
GWL Corporate(2) cash flow from operating
businesses(1) from continuing operations
Proceeds from participation in Loblaw’s
Normal Course Issuer Bid
GWL Corporate(2), financing, and other costs(i)
Income taxes paid
GWL Corporate(2) free cash flow(1) from
continuing operations
Quarters ended
2021
64
82
146
89
14
(36)
213
2020(4)
61
81
142
75
-
-
217
Years ended
2020(4)
296
326
622
336
(127)
(9)
822
2021
249
330
579
563
(101)
(63)
978
(i) Included in Other and Intersegment, GWL Corporate(2) includes all other company level activities that are not allocated
to the reportable operating segments, such as net interest expense, corporate activities and administrative costs.
Also included are dividends paid on preferred shares.
Dividends
GWL declared an annualized dividend of $2.40 per common share in 2021. The Company’s objective
is to increase the dividend per common share over time while retaining appropriate free cash flow
to finance future growth. Since 2012, the dividend per common share has increased at a 4.7% CAGR.
+4.7%
CAGR
$2.50
2.00
1.50
1.00
0.50
0.00
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
2 GWL Corporate refers to the non-consolidated financial results and metrics of GWL. GWL Corporate is a subset of Other and Intersegment.
4 Comparative figures have been restated to conform with current year presentation.
11
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Loblaw
Loblaw (TSX: L) provides Canadians with grocery,
pharmacy, health and beauty, apparel, general
merchandise and financial services.
Key performance indicators
As at or for the quarters (unaudited) and years ended December 31
($ millions except where otherwise indicated)
Strategy
REVENUE
OPERATING INCOME
Two years into the pandemic, Loblaw’s portfolio of businesses
remains strong and well positioned. Loblaw’s commitment
$60,000
to food and drug retail excellence is further strengthened by
50,000
40,000
30,000
20,000
10,000
0
2021
2020
$3,000
2,500
2,000
1,500
1,000
500
0
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
53,170
52,714
Q4 2021
12,757
Q4 2020
13,286
+0.9%
-4.0%
2021
2020
Q4 2021
Q4 2020
2,929
2,357
703
700
+24.3%
+0.4%
Performance in 2021
Performance in 2021
Revenue increased by
$456 million primarily due
to growth in retail sales
as a result of positive
same-store sales growth
and a net increase in retail
square footage.
Operating income increased
by $572 million compared to
2020. The increase was driven
by improvements in retail, which
included the negative impact
of the 53rd week in 2020 of
$67 million and improvements
infinancialservices.
three strategic priorities: Everyday Digital Retail, Payments
and Rewards, and Connected Healthcare. Enabling these
investments comes from a sharp focus on leveraging data
driven insights and process efficiency excellence to deliver
strong financial performance. With best-in-class assets,
Loblaw continues to meet Canadians’ everyday needs for
food, health and wellness in an evolving landscape.
Loblaw’s purpose-led approach to addressing environmental,
social and governance (“ESG”) issues focuses on two priorities:
fighting climate change and advancing social equity. By
integrating consideration of environmental and social risks
and good governance practices in its day-to-day business
activities, implementing robust compliance and ethics
programs and supporting its colleagues and the communities
in which it operates, Loblaw aims to be a leading contributor
to Canadian society both today and for generations to come.
Key highlights for the year
Loblaw’s focus on retail excellence drove strong operational and
financial performance as the COVID-19 pandemic continued
to impact operations and consumer behaviours. In food
retail, sales remained strong as eat-at-home trends remained
elevated even in periods where social restrictions loosened.
In drug retail, sales benefited from growth in pharmacy services
as nationwide COVID-19 testing and vaccinations ramped up
throughout 2021. Higher margin front-store categories within
drug retail, that had previously negatively impacted earnings,
gained sales momentum as the economy re-opened. Despite
supply chain and inflationary pressures, Loblaw continued to
deliver value in the categories that meant most to customers.
Loblaw Offerings
DIVISIONS:
Discount
Market
Shoppers Drug Mart
PC Financial
Joe Fresh
12
BRANDS:
President’s Choice
No Name
Life Brand
PC Optimum
PC Money
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Loblaw
ADJUSTED EBITDA( 1)
FREE CASH FLOW (1)(i)
FOOD RETAIL SAME-STORE
SALES GROWTH (i) (%)
DRUG RETAIL SAME-STORE
SALES GROWTH (i) (%)
$6,000
$2,500
10.0%
8.0%
5,000
4,000
3,000
2,000
1,000
0
2,000
1,500
1,000
500
0
8.0
6.0
4.0
2.0
0.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020(3)
5,579
4,996
Q4 2021
1,322
Q4 2020(3)
1,311
+11.7%
+0.8%
2021
2020
Q4 2021
Q4 2020
1,959
2,247
263
606
-12.8%
-56.6%
2021
2020
0.3%
8.6%
Q4 2021
1.1%
Q4 2020
8.6%
-830bps
-750bps
2021
2020
5.0%
4.9%
Q4 2021
7.9%
Q4 2020
3.7%
+10bps
+420bps
Performance in 2021
Performance in 2021
Performance in 2021
Performance in 2021
Adjusted EBITDA(1) increased by
$583 million compared to 2020,
primarily due to an increase in
retail, which included the negative
impact of the 53rd week in 2020
of $67 million and an increase in
financialservices.
Adjusted EBITDA margin(1) increased,
driven by an improvement in retail
adjustedgrossprofitpercentage(1)
from favourable changes in sales
mix in both food and drug retail and
improved business initiatives. This
was partially offset by an increase
in selling, general and administrative
expenses (“SG&A”) as a percentage
of sales due to higher expenses
related to the normalization of post-
lockdown operating conditions,
corporate costs including network
optimization costs, and higher
costs incurred in drug retail from
providing pharmacy related services,
partially offset by a reduction in
COVID-19 costs.
Freecashflow(1)(i) was lower
due to an increase in credit
card receivables from a rise in
customer spending and higher
income taxes paid, partially
offset by higher cash earnings.
CAPITAL EXPENDITURES
1.2 billion -3.3%
2021
vs. 2020
ADJUSTED EBITDA MARGIN ( 1) (%)
10.5% +100bps
2021
vs. 2020(3)
10.4% +50bps
Q4 2021
vs. Q4 2020(3)
Food retail same-store sales
growth(i) was 0.3%. Sales were
impacted by lower eat-at-home
trends after strong growth last
year, offset by higher industry
inflationlevels.Foodretail
basket size decreased and
trafficincreased.
Drug retail same-store sales
growth was 5.0%. Pharmacy
same-store sales growth
benefitedfromstrongsales
in pharmacy related services.
Front store same-store sales
growthbenefitedfromthe
economic re-opening in the
third quarter of 2021.
RETAIL DEBT TO RETAIL
ADJUSTED EBITDA( 1)(i)
2.6x
2021
-0.3x
vs. 2020
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
3 Certain figures have been restated due to the non-GAAP financial measures policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change
Effective First Quarter of 2021” of the Company’s 2021 Management’s Discussion and Analysis.
(i) For more information on these measures, see the 2021 Annual Report filed by Loblaw, which is available on sedar.com or at loblaw.ca.
13
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Choice Properties
Choice Properties REIT (TSX: CHP.UN) is a leading
Real Estate Investment Trust that creates enduring
value through the ownership, operation and
development of high-quality commercial and
residential properties.
Strategy
The combination of stability and growth is at the core of
Choice Properties’ commitment to create enduring value for
our stakeholders and the communities in which it operates.
Choice Properties’ business strategy provides net asset value
appreciation, stable net operating income (“NOI”) growth and
capital preservation, all with a long term focus.
Key highlights for the year
Despite the continuous re-opening impacting the economy,
Choice Properties delivered strong operating results
demonstrating that its business model, stable tenant base
and disciplined approach to financial management continue
to position it well. Choice Properties’ development program
delivered high-quality real estate to its portfolio and substantial
progress was made on advancing its mixed-use and residential
zoning initiatives. Choice Properties continued executing its
capital recycling program and completed over $570 million of
real estate transactions. Choice Properties made significant
advancements in its Environmental, Social and Governance
program, including the issuance of its inaugural green bond
and announcing its commitment to set science-based emission
$1,500
1,200
900
600
300
0
reduction targets.
Top 10 tenants
1. Loblaw
2. Canadian Tire
3. TJX Companies
4. Dollarama
5. GoodLife
6. Staples
7. Canada Cartage
8. Liquor Control Board
of Ontario (LCBO)
9. TD Canada Trust
10. Lowe’s
14
Key performance indicators
As at or for the quarters (unaudited) and years ended December 31
($ millions except where otherwise indicated)
REVENUE
NET INCOME (LOSS)
$800
600
400
200
0
-200
-400
-600
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4 2021
Q4 2020
1,292
1,271
325
322
+1.7%
+0.9%
2021
2020
24
451
-94.7%
Q4 2021
(162)
Q4 2020
117
-238.5%
Performance in 2021
Performance in 2021
Revenue increased by
$21 million, primarily driven
by the contribution from
acquisition and development
transfers completed in 2020
and 2021, partially offset
by foregone revenue from
dispositions and vacancies
inselectofficeassets.
OCCUPANCY RATE
97.1% +0bps
vs. 2020
ChoiceProperties’financial
results are impacted by
adjustments to the fair value
of its Exchangeable Units.
Exchangeable Units are
recorded at their fair value
based on the market trading
price of Choice Properties’
Trust Units (“Trust Units”),
which results in a negative
impacttothefinancialresults
when the Trust Unit price rises
and a positive impact when
the Trust Unit price declines.
Net income decreased
compared to 2020 due
to an unfavourable fair
value adjustment for the
Exchangeable Units as the
Trust Unit price increased
during 2021, partially offset
by the favourable change
in the fair value adjustment
of investment properties,
a decline in expected credit
loss provisions and an
increase in rental revenue.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Choice Properties
$800
700
600
500
400
300
200
100
0
FUNDS FROM
OPERATIONS ( 1)
ADJUSTED FUNDS
FROM OPERATIONS (i)
SAME-ASSET NOI,
CASH BASIS (i)
ADJUSTED DEBT TO
TOTAL ASSETS(i)
$600
$1,000
100%
500
400
300
200
100
0
800
600
400
200
0
80
60
40
20
0
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
Q4
2021
Q4
2020
2021
2020
2021
2020
Q4 2021
Q4 2020
690
652
175
172
+5.8%
+1.7%
2021
2020
Q4 2021
Q4 2020
587
567
119
136
+3.5%
-12.6%
2021
2020
Q4 2021
Q4 2020
853
832
216
211
+2.5%
+2.6%
2021
2020
40.1%
42.7%
-260bps
Performance in 2021
Performance in 2021
Performance in 2021
Performance in 2021
FFO(1) increased by $38 million
compared to 2020, primarily
due to a decline in expected
credit loss provisions, savings
from lower borrowing costs and
contributions from acquisitions
and development transfers
completed in 2020 and 2021.
AFFO(i) increased mainly due
to an increase in funds from
operations, partially offset by
an increase in capital spending.
Same-asset NOI, cash basis(i)
increased compared to
2020 mainly due to the
contribution from contractual
rent steps and a decline in
expected credit loss provisions,
partially offset by a reduction
in occupancy in select
officeassets.
Adjusted debt to total assets(i)
improved due to an increase
in total assets, primarily
from fair value gains on
investment properties, and
debt repayment during
the year.
ADJUSTED DEBT
TO EBITDAFV(i)
DEBT SERVICE
COVERAGE (i)
7.2x
2021
-0.4x
vs. 2020
3.3x
2021
+0.1x
vs. 2020
1 See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
(i) For more information on these measures, see the 2021 Annual Report filed by Choice Properties, which is available on sedar.com or at choicereit.ca.
15
GEORGE WESTON LIMITED 2021 ANNUAL REPORT Financial Highlights(6)
As at or for the years ended December 31
($ millions except where otherwise indicated)
CONSOLIDATED OPERATING RESULTS
Revenue
Operating income
Adjusted EBITDA(i)
Depreciation and amortization(ii)
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(i)
Income taxes
Adjusted income taxes(i)
Net earnings
Continuing operations
Discontinued operations
Net earnings attributable to shareholders of the Company(iii) from
continuing operations
Net earnings available to common shareholders of the Company
Continuing operations
Discontinued operations
Adjusted net earnings available to common shareholders of
the Company(i) from continuing operations
CORPORATE
Cash flow from operating businesses(i) from continuing operations
CONSOLIDATED FINANCIAL POSITION AND CASH FLOWS
Cash and cash equivalents, short-term investments and
security deposits
Cash flows from operating activities(iv)
Capital investments from continuing operations
Free cash flow(i) from continuing operations
Total debt including lease liabilities
Total equity attributable to shareholders of the Company
Total equity
CONSOLIDATED PER COMMON SHARE ($)
Diluted net earnings per common share
Continuing operations
Discontinued operations
Adjusted diluted net earnings per common share(i) from continuing
operations
CONSOLIDATED FINANCIAL MEASURES AND RATIOS
Adjusted EBITDA margin(i) (%)
Adjusted return on average equity attributable to common
shareholders of the Company(i) (%)
Adjusted return on capital(i) (%)
REPORTABLE OPERATING SEGMENTS
Loblaw
Revenue
Operating income
Adjusted EBITDA(i)
Adjusted EBITDA margin(i) (%)
Depreciation and amortization(ii)
Choice Properties
Revenue
Net income
Funds from operations(i)
2021
2020(3,4)
(52 weeks)
(53 weeks)
% Change
$
53,748
4,027
5,995
2,307
1,650
1,050
630
851
1,425
1,747
(322)
753
387
709
(322)
1,232
53,270
2,875
5,356
2,254
829
1,115
470
648
1,582
1,576
6
957
919
913
6
993
0.9%
40.1%
11.9%
2.4%
99.0%
(5.8) %
34.0%
31.3%
(9.9) %
10.9%
(5,466.7) %
(21.3) %
(57.9) %
(22.3) %
(5,466.7) %
24.1%
579
$
622
(6.9%)
3,938
$
5,107
1,381
2,078
20,309
6,959
13,137
$
2.52
4.66
(2.14)
3,231
5,521
1,496
2,141
21,000
7,811
13,418
5.96
5.92
0.04
21.9%
(7.5) %
(7.7) %
(2.9) %
(3.3) %
(10.9) %
(2.1) %
(57.7) %
(21.3) %
(5,450.0) %
8.14
$
6.44
26.4%
11.2%
18.7%
12.6%
53,170
2,929
5,579
10.5%
2,664
1,292
24
690
$
$
10.1%
15.2%
10.7%
52,714
2,357
4,996
9.5%
2,596
1,271
451
652
0.9%
24.3%
11.7%
2.6%
1.7%
(94.7) %
5.8%
$
$
$
$
$
$
$
(i)
(ii)
(iii)
(iv)
See Section 14, “Non-GAAP Financial Measures”, of the Company’s 2021 Management’s Discussion and Analysis.
Depreciation and amortization includes $506 million (2020 – $509 million) of amortization of intangible assets, acquired with Shoppers Drug Mart
Corporation, recorded by Loblaw.
Includes net earnings available to common shareholders of the Company from continuing operations and preferred dividends.
Inclusive of discontinued operations.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 17
Management’s Discussion and Analysis
1.
Overall Financial Performance
1.1
1.2
1.3
Consolidated Results of Operations
Selected Annual Information
Consolidated Other Business Matters
2.
Results of Reportable Operating Segments
2.1
2.2
Loblaw Operating Results
Choice Properties Operating Results
3.
Liquidity and Capital Resources
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
Cash Flows
Liquidity
Components of Total Debt
Financial Condition
Credit Ratings
Share Capital
Off-Balance Sheet Arrangements
Contractual Obligations
4.
Quarterly Results of Operations
4.1
4.2
Quarterly Financial Information
Fourth Quarter Results
5.
Fourth Quarter Results of Reportable Operating Segments
5.1
5.2
Loblaw Fourth Quarter Operating Results
Choice Properties Fourth Quarter Operating Results
6.
7.
8.
9.
10.
11.
12.
13
Disclosure Controls and Procedures
Internal Control Over Financial Reporting
Enterprise Risks and Risk Management
8.1
8.2
8.3
COVID-19 Risks and Risk Management
Operating Risks and Risk Management
Financial Risks and Risk Management
Related Party Transactions
Critical Accounting Estimates and Judgments
Accounting Standards
Future Accounting Standard
Outlook
14.
Non-GAAP Financial Measures
14.1
14.2
Non-GAAP Financial Measures - Selected Comparative Reconciliation
Non-GAAP Financial Measures Policy Change Effective First Quarter of 2021
15.
16.
Forward-Looking Statements
Additional Information
18 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
19
20
26
29
31
31
33
34
34
35
37
40
40
41
44
45
46
46
48
56
56
58
58
59
60
61
62
71
73
75
77
78
78
79
88
92
95
96
1.
Overall Financial Performance
BUSINESS DEVELOPMENTS
Sale of Weston Foods On March 23, 2021, the Company announced its intention to launch a process to sell the Weston Foods
business, comprised of the fresh, frozen and ambient bakery businesses.
On December 10, 2021, the Company announced the sale of Weston Foods’ fresh and frozen bakery business to FGF Brands Inc.
for gross proceeds of $1,100 million, and on December 29, 2021, the Company announced the sale of Weston Foods’ ambient
business to affiliated entities of Hearthside Foods Solution, LLC for gross proceeds of $370 million. In aggregate, the Company
sold its entire Weston Foods bakery business for total gross proceeds of $1,470 million.
Upon the respective sale dates, the net assets of Weston Foods were de-recognized from the Company’s 2021 consolidated
balance sheet and the Weston Foods results, net of intersegment eliminations, were presented separately as discontinued
operations in the Company’s consolidated statement of earnings and comprehensive income in the current and comparative
periods.
The sale of Weston Foods resulted in a loss of $317 million, after income taxes, recorded in discontinued operations in 2021. For
further details of the sale, refer to Note 5, “Discontinued Operations” in the annual consolidated financial statements of this
Annual Report.
With the completion of the sale of the Weston Foods business, the Company will focus on its Retail and Real Estate businesses
going forward.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 19
Management’s Discussion and Analysis
1.1
Consolidated Results of Operations
The Company’s interest in Weston Foods is presented separately as discontinued operations in the Company’s current and
comparative results. Unless otherwise indicated, all financial information reflects the Company’s results from continuing
operations.
The Company’s results reflect:
•
•
the impact of COVID-19. Also refer to Section 1.3 “Consolidated Other Business Matters”, Section 2, “Results of Reportable
Operating Segments” and Section 8, “Enterprise Risks and Risk Management”, of this MD&A for more information; and
the year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the significant changes in
Choice Properties’ unit price, recorded in net interest expense and other financing charges. The Company’s results are
impacted by market price fluctuations of Choice Properties’ Trust Units on the basis that the Trust Units held by unitholders,
other than the Company, are redeemable for cash at the option of the holder and are presented as a liability on the
Company’s consolidated balance sheet. The Company’s financial results are negatively impacted when the Trust Unit price
rises and positively impacted when the Trust Unit price declines.
($ millions except where otherwise indicated)
For the years ended as indicated
Revenue
Operating income
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Depreciation and amortization(i)
Net interest expense and other financing charges
Adjusted net interest expense and other
financing charges(1)
Income taxes
Adjusted income taxes(1)
Adjusted effective tax rate(1)
Net earnings attributable to shareholders
of the Company from continuing operations
Net earnings available to common shareholders
of the Company
Continuing operations
Discontinued operations
Adjusted net earnings available to common
shareholders of the Company(1) from continuing
operations
Diluted net earnings per common share ($)
Continuing operations
Discontinued operations
Adjusted diluted net earnings per common share(1)
from continuing operations ($)
2021
2020(3,4)
(52 weeks)
(53 weeks)
$ Change
% Change
53,748
4,027
5,995
11.2%
2,307
1,650
1,050
630
851
27.1%
753
387
709
(322)
1,232
2.52
4.66
(2.14)
8.14
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
53,270
2,875
5,356
10.1%
2,254
829
1,115
470
648
26.0%
478
1,152
639
53
821
(65)
160
203
0.9%
40.1%
11.9%
2.4%
99.0%
(5.8) %
34.0%
31.3%
957
$
(204)
(21.3) %
919
913
6
993
5.96
5.92
0.04
$
$
$
$
$
$
$
(532)
(204)
(328)
239
(3.44)
(1.26)
(2.18)
(57.9) %
(22.3) %
(5,466.7) %
24.1%
(57.7) %
(21.3) %
(5,450.0) %
6.44
$
1.70
26.4%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(i) Depreciation and amortization includes $506 million (2020 – $509 million) of amortization of intangible assets, acquired with Shoppers Drug
Mart Corporation, recorded by Loblaw.
20 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
•
•
•
As a result of the Company’s reporting calendar, the fourth quarter and full year 2020 results included an extra week of
operations (the “53rd week”) compared to 2021. On consolidation, the 53rd week of 2020 resulted in an additional $878 million
of revenue, $67 million of operating income, and net earnings available to common shareholders of the Company from
continuing operations and diluted net earnings per common share from continuing operations of $18 million and $0.12 per
common share, respectively.
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS OF THE COMPANY FROM CONTINUING OPERATIONS
Net earnings available to common shareholders of the Company from continuing operations in 2021 were $709 million ($4.66
per common share), a decrease of $204 million ($1.26 per common share) compared to $913 million ($5.92 per common share)
in 2020. The decrease was due to the unfavourable year-over-year net impact of adjusting items totaling $443 million ($2.96 per
common share), partially offset by an improvement in the Company’s consolidated underlying operating performance of
$239 million ($1.70 per common share) described below.
The unfavourable year-over-year net impact of adjusting items totaling $443 million ($2.96 per common share) was
primarily due to:
◦
◦
the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability of $840 million ($5.56
per common share) as a result of the increase in Choice Properties’ unit price during 2021; and
the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement of Loblaw
common shares of $204 million ($1.36 per common share). The Company settled the net debt associated with the
forward sale agreement in the fourth quarter of 2021, see section 1.3 “Consolidated Other Business Matters” and
Section 3.3, “Components of Total Debt” of this MD&A;
partially offset by,
◦
the favourable year-over-year impact of the fair value adjustment on investment properties of $425 million ($2.82
per common share); and
the favourable impact of the recovery related to Glenhuron Bank Limited (“Glenhuron”) at Loblaw of $165 million
($1.10 per common share).
The improvement in the Company’s consolidated underlying operating performance of $239 million ($1.70 per common
share), which included the negative year-over-year impact of the 53rd week of $18 million ($0.12 per common share), was
due to:
the favourable underlying operating performance of Loblaw;
the favourable underlying operating performance of Choice Properties;
the favourable year-over-year impact of asset impairments, net of recoveries recorded on consolidation in Other
and Intersegment of $25 million, net of tax; and
a decrease in adjusted net interest expense and other financing charges(1);
◦
◦
◦
◦
◦
partially offset by,
◦
◦
◦
an increase in depreciation and amortization;
an increase in the adjusted effective tax rate(1); and
the unfavourable year-over-year impact of certain one-time gains recorded on consolidation in Other and
Intersegment related to Choice Properties’ transactions.
Diluted net earnings per common share from continuing operations also included the favourable impact of shares
purchased for cancellation over the last 12 months ($0.17 per common share) pursuant to the Company’s Normal Course
Issuer Bid (“NCIB”).
Adjusted net earnings available to common shareholders of the Company(1) from continuing operations in 2021 were
$1,232 million, an increase of $239 million, or 24.1%, compared to 2020. The increase was due to the improvement in the
Company’s consolidated underlying operating performance described above.
Adjusted diluted net earnings per common share(1) from continuing operations in 2021 were $8.14 per common share, an
increase of $1.70 per common share, or 26.4%, compared to 2020. The increase was due to the improvement in adjusted net
earnings available to common shareholders of the Company(1) from continuing operations and the favourable impact of share
repurchases.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 21
Management’s Discussion and Analysis
REVENUE
($ millions except where otherwise indicated)
For the years ended as indicated
Loblaw
Choice Properties
Other and Intersegment
Consolidated
2021
2020(4)
(52 weeks)
(53 weeks)
$ Change
% Change
$
$
$
$
53,170
1,292
(714)
53,748
$
$
$
$
52,714 $
1,271 $
(715)
456
21
0.9%
1.7%
53,270 $
478
0.9%
The Company’s 2021 consolidated revenue was $53,748 million, an increase of $478 million, or 0.9%, compared to 2020. The
increase included the negative year-over-year impact of the 53rd week of $878 million. The Company’s consolidated revenue
was impacted by each of the Company’s reportable operating segments as follows:
•
•
Positively by 0.9% due to revenue growth of 0.9% at Loblaw, driven by an increase in retail sales and an improvement in
financial services revenue. Retail sales increased by $410 million, or 0.8%, compared to 2020, which included the negative
year-over-year impact of the 53rd week of $878 million. The increase was driven by positive same-store sales growth and a
net increase in retail square footage. Food retail same-store sales growth was 0.3% (2020 – 8.6%). Sales were impacted by
lower eat-at-home trends after strong growth last year, offset by higher industry inflation levels. On a comparable week
basis, food retail basket size decreased and traffic increased in 2021. The Consumer Price Index (“CPI”) as measured by The
Consumer Price Index for Food Purchased from Stores was 2.2% (2020 – 2.4%), which was slightly lower than Loblaw’s
internal food inflation. Drug retail same-store sales growth was 5.0% (2020 – 4.9%). Pharmacy same-store sales growth
benefited from strong sales in pharmacy related services. Front store same-store sales growth benefited from the economic
re-opening in the third quarter of 2021.
Positively by a nominal amount due to growth in revenue of 1.7% at Choice Properties. The increase of $21 million was
mainly due to the contribution from acquisitions and development transfers completed in 2020 and 2021, partially offset by
declines due to foregone revenue from dispositions and vacancies in select office assets.
OPERATING INCOME
($ millions except where otherwise indicated)
For the years ended as indicated
Loblaw
Choice Properties
Other and Intersegment
Consolidated
2021
2020(4)
(52 weeks)
(53 weeks)
$ Change
% Change
$
$
$
$
2,929
1,400
(302)
4,027
$
$
$
$
2,357 $
622 $
(104)
572
778
24.3%
125.1%
2,875 $
1,152
40.1%
The Company’s 2021 operating income was $4,027 million compared to $2,875 million in 2020, an increase of $1,152 million, or
40.1%, The increase was mainly attributable to the improvement in underlying operating performance of $583 million and the
favourable year-over-year net impact of adjusting items totaling $569 million, as described below:
•
the improvement in underlying operating performance of $583 million, which included the negative year-over-year impact
of the 53rd week of $67 million, was due to:
◦
◦
◦
the favourable underlying operating performance of Loblaw;
the favourable underlying operating performance of Choice Properties: and
the favourable year-over-year impact of asset impairments, net of recoveries recorded on consolidation in Other
and Intersegment of $35 million;
partially offset by,
◦
◦
an increase in depreciation and amortization mainly at Loblaw; and
the unfavourable year-over-year impact of certain one-time gains recorded on consolidation in Other and
Intersegment related to Choice Properties’ transactions.
•
the favourable year-over-year net impact of adjusting items totaling $569 million was primarily due to:
◦
◦
◦
◦
the favourable year-over-year impact of the fair value adjustment of investment properties of $508 million;
the favourable year-over-year impact of restructuring and other related costs of $25 million;
the favourable year-over-year impact of the fair value adjustment of derivatives of $18 million; and
the favourable year-over-year impact of the fair value adjustment on non-operating properties of $11 million.
22 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
ADJUSTED EBITDA(1)
($ millions except where otherwise indicated)
For the years ended as indicated
Loblaw
Choice Properties
Other and Intersegment
Consolidated
2021
2020(3,4)
(52 weeks)
(53 weeks)
$ Change
% Change
$
$
$
$
5,579
903
(487)
5,995
$
$
$
$
4,996 $
879 $
(519)
583
24
11.7%
2.7%
5,356 $
639
11.9%
The Company’s 2021 adjusted EBITDA(1) was $5,995 million compared to $5,356 million in 2020, an increase of $639 million, or
11.9%, The increase was impacted by each of the Company’s reportable operating segments as follows:
•
•
Positively by 10.9% due to growth of 11.7% in adjusted EBITDA(1) at Loblaw driven by an increase in Loblaw retail, which was
negatively impacted by the 53rd week of $67 million, and an increase in financial services. The increase in Loblaw retail
adjusted EBITDA(1) was driven by an increase in retail gross profit, partially offset by an increase in retail selling, general and
administrative expenses (“SG&A”).
Positively by 0.4% due to an increase of 2.7% in adjusted EBITDA(1) at Choice Properties, primarily driven by the contribution
from acquisitions and development transfers completed in 2020 and 2021 and a decline in expected credit loss provisions,
partially offset by declines due to foregone revenue from dispositions.
DEPRECIATION AND AMORTIZATION
($ millions except where otherwise indicated)
For the years ended as indicated
Loblaw
Choice Properties
Other and Intersegment
Consolidated
2021
2020(4)
(52 weeks)
(53 weeks)
$ Change
% Change
$
$
$
$
2,664
3
(360)
2,307
$
$
$
$
2,596 $
3 $
(345)
2,254 $
68
—
53
2.6%
—%
2.4%
Depreciation and amortization in 2021 was $2,307 million, an increase of $53 million compared to 2020. Depreciation and
amortization in 2021 included $506 million (2020 – $509 million) of amortization of intangible assets related to the acquisition of
Shoppers Drug Mart Corporation (“Shoppers Drug Mart”) recorded by Loblaw. Excluding these amounts, depreciation and
amortization increased by $56 million primarily driven by an increase in depreciation of information technology (“IT”) and leased
assets at Loblaw and an increase in depreciation in Loblaw financial services due to the launch of the PC Money Account.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 23
Management’s Discussion and Analysis
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES
($ millions except where otherwise indicated)
For the years ended as indicated
2021
2020(4)
(52 weeks)
(53 weeks)
$ Change
% Change
Net interest expense and other financing charges
$
1,650
$
829 $
Add: Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale
agreement of Loblaw common shares
Recovery related to Glenhuron
Adjusted net interest expense and other
financing charges(1)
(601)
(188)
189
239
47
—
821
(840)
(235)
189
99.0%
(351.5) %
(500.0) %
100.0%
$
1,050
$
1,115 $
(65)
(5.8) %
Net interest expense and other financing charges in 2021 were $1,650 million, an increase of $821 million compared to 2020.
The increase was primarily due to the unfavourable year-over-year net impact of adjusting items totaling $886 million, itemized
in the table above, partially offset by a decrease in adjusted net interest expense and other financing charges(1) of $65 million.
The unfavourable impact of adjusting items was mainly due to the unfavourable year-over-year fair value adjustment of the Trust
Unit liability of $840 million, as a result of the increase in Choice Properties’ unit price during 2021.
Adjusted net interest expense and other financing charges(1) in 2021 decreased by $65 million, primarily driven by:
•
•
•
•
lower interest expense at Loblaw financial services;
a reduction in interest expense from lease liabilities at Loblaw, including Other and Intersegment adjustments;
a decrease in interest expense in Choice Properties, including Other and Intersegment adjustments, primarily related to the
special distribution in the fourth quarter of 2020; and
a decrease in interest expense in Choice Properties primarily due to a decline in fees incurred on early repayment of senior
unsecured debentures, lower overall debt levels compared to the prior year and the completion of refinancing activity over
the past year at lower interest rates;
partially offset by,
•
higher interest expense in Other and Intersegment adjustments, primarily related to interest expense on the financial
liabilities recognized on Choice Properties’ dispositions.
24 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
INCOME TAXES
($ millions except where otherwise indicated)
For the years ended as indicated
Income taxes
Add: Tax impact of items excluded from adjusted
earnings before taxes(i)
Recovery related to Glenhuron
Remeasurement of deferred tax balances
Outside basis difference in certain Loblaw shares
2021
2020(3,4)
(52 weeks)
(53 weeks)
$ Change
% Change
$
630
$
470
$
160
34.0%
99
128
—
(6)
173
—
7
(2)
(74)
128
(7)
(4)
203
(42.8) %
100.0%
(100.0) %
(200.0) %
31.3%
Adjusted income taxes(1)
$
851
$
648
$
Effective tax rate applicable to earnings before taxes
26.5%
23.0%
Adjusted effective tax rate applicable to adjusted
earnings before taxes(1)
27.1%
26.0%
(i)
See the adjusted EBITDA(1) table and the adjusted net interest expense and other financing charges(1) table included in Section 14, “Non-
GAAP Financial Measures”, of this MD&A for a complete list of items excluded from adjusted earnings before taxes(1).
The effective tax rate in 2021 was 26.5%, compared to 23.0% in 2020. The increase was primarily attributable to the impact of
the non-taxable fair value adjustment of the Trust Unit liability, an increase in tax expense related to temporary differences in
respect of GWL’s investment in certain Loblaw shares as a result of GWL’s participation in Loblaw’s NCIB program and the impact
of certain other non-deductible items, partially offset by a recovery of $128 million related to Glenhuron and the impact of the
reversal of the non-deductible interest related to Glenhuron.
The adjusted effective tax rate(1) in 2021 was 27.1%, compared to 26.0% in 2020. The increase was primarily attributable to an
increase in tax expense related to temporary differences in respect of GWL’s investment in certain Loblaw shares as a result of
GWL’s participation in Loblaw’s NCIB, the unfavourable year-over-year impact of the non-taxable portion of the gain from Choice
Properties’ transactions, and the impact of certain other non-deductible items.
Loblaw had been reassessed by the Canada Revenue Agency and the Ontario Ministry of Finance on the basis that certain
income earned by Glenhuron Bank Limited, a wholly owned Barbadian subsidiary of Loblaw that was wound up in 2013, should
be treated, and taxed, as income in Canada. The reassessments, which were received between 2015 and 2019, are for the 2000
to 2013 taxation years. On September 7, 2018, the Tax Court of Canada (“Tax Court”) released its decision relating to the 2000 to
2010 taxation years. The Tax Court ruled that certain income earned by Glenhuron should be taxed in Canada based on a
technical interpretation of the applicable legislation. On October 4, 2018, Loblaw filed a Notice of Appeal with the Federal Court
of Appeal. On October 15, 2019, the matter was heard by the Federal Court of Appeal, and on April 23, 2020, the Federal Court of
Appeal released its decision and reversed the decision of the Tax Court. On October 29, 2020, the Supreme Court of Canada
(“Supreme Court”) granted the Crown leave to appeal. On May 13, 2021, the Crown’s appeal was heard by the Supreme Court
and on December 3, 2021, the Supreme Court dismissed the Crown’s appeal. As a result, Loblaw has reversed $301 million of
previously recorded charges, of which $173 million is recorded as interest income and $128 million is recorded as income tax
recovery. In addition, interest of $16 million, before taxes, was recorded in respect of interest income earned on expected cash
refunds.
DISCONTINUED OPERATIONS Discontinued operations represent the results of Weston Foods, net of intersegment eliminations.
For further details of the sale, refer to Note 5, “Discontinued Operations” in the annual consolidated financial statements of this
Annual Report.
Net loss available to common shareholders of the Company from discontinued operations in 2021 was $322 million ($2.14 per
common share), compared to net earnings available to common shareholders of the Company from discontinued operations of
$6 million ($0.04 per common share) in 2020, a decrease of $328 million ($2.18 per common share). The decrease included the
loss on sale of Weston Foods of $317 million, after income taxes, and the operating performance of Weston Foods of $11 million
($0.07 per common share).
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 25
Management’s Discussion and Analysis
1.2
Selected Annual Information
The selected information presented below has been derived from and should be read in conjunction with the annual
consolidated financial statements of the Company dated December 31, 2021, 2020 and 2019. The analysis of the data contained
in the table focuses on the trends and significant events or items affecting the results of operations and financial condition of the
Company over the latest three year period. The Company’s interest in Weston Foods is presented separately as discontinued
operations in the Company’s current and comparative results. Unless otherwise indicated, all financial information reflects the
Company’s results from continuing operations.
For the years ended December 31
($ millions except where otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Depreciation and amortization(i)
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(1)
Income taxes
Adjusted income taxes(1)
Adjusted effective tax rate(1)
Net earnings
Continuing operations
Discontinued operations
Net earnings attributable to shareholders of the Company
Net earnings available to common shareholders of the Company
Continuing operations
Discontinued operations
Adjusted net earnings available to common shareholders
of the Company(1) from continuing operations
Net earnings per common share ($) - diluted
Continuing operations
Discontinued operations
Adjusted diluted net earnings per common share(1) from continuing
operations
Dividends declared per share ($):
Common shares
Preferred shares – Series I
Preferred shares – Series III
Preferred shares – Series IV
Preferred shares – Series V
Total Assets and Long-Term Financial Liabilities
Total assets
Total long-term debt
Financial liabilities
Lease liabilities
Trust Unit liability
Total long-term financial liabilities
2021
2020(3,4)
2019(3,4)
(52 weeks)
(53 weeks)
(52 weeks)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
53,748
4,027
5,995
11.2%
2,307
1,650
1,050
630
851
27.1%
1,425
1,747
(322)
431
387
709
(322)
1,232
2.52
4.66
(2.14)
8.14
2.300
1.45
1.30
1.30
1.1875
47,083
14,010
664
4,984
4,209
53,270
2,875
5,356
10.1%
2,254
829
1,115
470
648
26.0%
1,582
1,576
6
963
919
913
6
993
5.96
5.92
0.04
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
48,586
2,875
5,145
10.6%
2,173
1,702
1,069
417
588
24.4%
823
756
67
242
198
131
67
1,026
1.26
0.82
0.44
6.44
$
6.65
$
$
$
$
$
$
$
2.125
1.45
1.30
1.30
1.1875
48,078
14,443
666
5,005
3,600
2.090
1.45
1.30
1.30
1.1875
47,813
14,554
435
5,107
3,601
23,697
$
23,867
$
23,714
$
(i) Depreciation and amortization includes $506 million (2020 – $509 million; 2019 – $521 million) of amortization of intangible assets, acquired
with Shoppers Drug Mart, recorded by Loblaw.
26 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
REVENUE The Company’s reportable operating segments had the following sales trends over the last three years:
•
•
Loblaw’s retail sales have continued to grow despite the pressure of a competitive retail market and an uncertain economic
and regulatory environment over the last three years. In 2019, food retail prices were inflationary, while drug retail prices
were deflationary until the second quarter of 2019 when they returned to being inflationary. In 2020, the COVID-19
pandemic had a significant impact on Loblaw’s colleagues, customers, suppliers and other stakeholders. Loblaw
experienced sales volatility and changes in sales mix as the pandemic impacted consumer behaviour throughout the year.
In 2021, COVID-19 has continued to have a significant impact on Loblaw, continuing to accelerate some long-term trends,
enabling Loblaw to advance its strategic growth areas of Everyday Digital Retail, Connected Healthcare and Payments and
Rewards. In food retail, sales remained strong as eat-at-home trends remained elevated even in periods where social
restrictions loosened. In drug retail, sales benefited from growth in pharmacy services as COVID-19 testing and vaccinations
ramped up throughout the year. Higher margin front-store categories with drug retail, that had previously negatively
impacted earnings, increased sales momentum as the economy opened up. Despite supply chain and inflationary
pressures, Loblaw continued to deliver value in the categories that meant most to consumers over the course of the
pandemic. Loblaw’s financial services continued to grow in 2019, mainly driven by growth in the credit card portfolio and
The Mobile Shop kiosks. During 2020, Loblaw’s financial services revenue was negatively impacted by the COVID-19
pandemic from lower credit card related revenues from lower customer spending and lower sales attributable to the partial
closure of The Mobile Shop kiosks during the second quarter of 2020. Loblaw’s financial services also launched the
PC Money Account in the third quarter of 2020. In 2021, the underlying operating performance of Loblaw’s financial
services improved as it benefited from an increase in customer spending and higher sales attributable to The Mobile Shop
kiosks.
Choice Properties revenue grew in 2019 driven mainly through the addition of new properties as a result of the Canadian
Real Estate Investment Trust (“CREIT”) acquisition, an increase in base rents and recovery of property operating costs from
existing properties and additional revenue generated from properties acquired in 2018 and 2019 and from tenant openings
in newly developed leasable space. Choice Properties revenue decreased in 2020 primarily due to the foregone revenue
from a disposition of a portfolio of properties in the third quarter of 2019, partially offset by additional revenue generated
from properties acquired in 2019 and 2020 and from tenant openings in newly developed leasable space. Choice Properties
revenue increased in 2021 primarily due to the contribution from acquisition and development transfers completed in 2020
and 2021, partially offset by foregone revenue from dispositions and vacancies in select office assets.
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS OF THE COMPANY FROM CONTINUING OPERATIONS AND
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS Net earnings available to common
shareholders of the Company from continuing operations and diluted net earnings per common share from continuing
operations for the last three years were impacted by certain adjusting items as described in Section 14, “Non-GAAP Financial
Measures”, of this MD&A and by the underlying operating performance of each of the Company’s reportable operating segments.
Over the last three years, the Company’s underlying operating performance was impacted by the following:
•
◦
◦
changes in the underlying operating performance of Loblaw due to:
the impact of the 53rd week in fiscal year 2020;
changes in the underlying operating performance of Loblaw’s retail due to COVID-19. Loblaw’s financial results for
the years 2021 and 2020 had elevated revenue and cost of merchandise inventories sold when compared to 2019.
In addition, SG&A increased in 2020 as a result of the incremental cost of COVID-19 related investments to benefit
and protect colleagues and customers which have stabilized in 2021;
cost savings and operating efficiencies from process and efficiency initiatives and investments in and benefits from
strategic initiatives;
fluctuations in the performance of Loblaw’s financial services including the continued investments in strategic
initiatives; and
the 2021 reversal of certain commodity taxes accrued.
◦
◦
◦
•
changes in the underlying operating performance of Choice Properties:
◦
◦
◦
the favourable underlying operating performance in 2021 primarily due to the decline in expected credit losses
and an increase in revenue;
the unfavourable underlying operating performance in 2020 primarily due to COVID-19 related expected credit
losses, and
the favourable underlying operating performance in 2019, including the acquisition of CREIT in the second quarter
of 2018 and the contribution from completed developments.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 27
Management’s Discussion and Analysis
•
•
•
•
•
the impact of asset impairments, net of recoveries and certain one-time gains related to Choice Properties’ transactions
recorded on consolidation in Other and Intersegment;
changes in adjusted net interest and other financing charges(1) as follows:
◦
lower adjusted net interest and other financing charges(1) in 2021 due to:
•
•
•
lower interest expense at Loblaw financial services;
a reduction in interest expense from lease liabilities at Loblaw, including Other and Intersegment
adjustments; and
a decrease in interest expense in Choice Properties, including Other and Intersegment adjustments,
primarily related to the special distribution in the fourth quarter of 2020, a decline in fees incurred on
early repayment of senior unsecured debentures, lower overall debt levels compared to the prior year and
the completion of refinancing activity over the past year at lower interest rates;
partially offset by,
•
higher interest expense in Other and Intersegment adjustments, primarily related to interest expense on
the financial liabilities recognized on Choice Properties’ dispositions.
◦
◦
higher adjusted net interest expense and other financing charges(1) in 2020 due to:
•
•
an increase in interest expense in Other and Intersegment adjustments, primarily related to interest
expense on the financial liabilities recognized on Choice Properties’ dispositions; and
higher interest expense in the Choice Properties segment including Other and Intersegment
adjustments, primarily related to higher distributions.
higher adjusted net interest expense and other financing charges(1) in 2019 due to:
•
•
an increase in interest expense in the Choice Properties segment including Other and Intersegment
adjustments, primarily related to higher distributions, higher interest expense resulting from the issuance
of new debt and debt acquired related to the acquisition of CREIT; partially offset by the repayment of
senior unsecured debentures and interest income on the joint ventures assumed on the acquisition of
CREIT; and
higher interest expense in Loblaw’s financial services, primarily due to the growth in the credit card
portfolio.
higher adjusted income taxes(1) during 2021 primarily attributable to:
◦
◦
◦
an increase in tax expense related to temporary differences in respect of GWL’s investment in certain Loblaw
shares as a result of GWL’s participation in Loblaw’s NCIB;
the unfavourable year-over-year impact of the non-taxable portion of the gain from Choice Properties’ transactions;
and
the impact of certain other non-deductible items.
in 2021, diluted net earnings per common share included the favourable impact of shares purchased for cancellation; and
an increase in GWL’s ownership interest in Loblaw in 2020 and 2019 as a result of share repurchases. GWL’s ownership of
Loblaw was approximately 52.6% as at the end of 2021 (2020 – approximately 52.6% and 2019 – approximately 52.2%).
In 2021, total assets of $47,083 million decreased by 2.1% as compared to 2020. The decrease was primarily driven by the
decrease in fixed assets and intangible assets as a result of the disposal of the Weston Foods business, partially offset by higher
cash and cash equivalents and an increase in investment properties. Total long-term financial liabilities of $23,867 million
increased by 0.6% compared to 2020 driven by an increase in the Trust Unit liability as a result of the significant changes in
Choice Properties’ unit price, partially offset by a decrease in long-term debt driven by George Weston Series A debenture
repayments.
In 2020, total assets of $48,078 million increased by 0.6% as compared to 2019. The increase was primarily driven by the increase
in cash and cash equivalents and short-term investments, partially offset by a decrease in intangible assets driven by higher
depreciation and amortization and decline in credit card receivables as a result of lower customer spending due to COVID-19.
Total long-term financial liabilities of $23,714 million increased by 0.1% compared to 2019 driven by an increase in financial
liabilities recorded due to the consolidation impacts of Choice Properties’ dispositions in 2020.
The Trust Unit liability is recognized at fair value on the consolidated balance sheets and fluctuates due to issuances and
changes in the fair value of Choice Properties’ Trust Units. As at December 31, 2021, 276,927,432 Units were held by unitholders
other than the Company (2020 – 276,280,248, 2019 – 259,631,454) and the Company held an approximate 61.7% (2020 – 61.8%,
2019 – 62.9%) effective ownership interest in Choice Properties.
28 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
1.3
Consolidated Other Business Matters
COVID-19 RELATED COSTS The Company incurred COVID-19 related costs of approximately $9 million and $150 million in the
fourth quarter and year of 2021, respectively (2020 – $48 million and $466 million), primarily related to safety and security
measures to protect colleagues, customers, tenants and other stakeholders. The estimated COVID-19 related costs incurred by
each of the Company’s reportable operating segments were as follows:
(unaudited)
($ millions)
Loblaw(i)
Choice Properties(ii)
Consolidated
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2021
Dec. 31, 2020
(12 weeks)
(13 weeks)
(52 weeks)
(53 weeks)
$
$
8
1
9
$
$
45
3
48
$
$
145
$
5
150
$
445
21
466
(i)
Loblaw’s COVID-19 related costs included $25 million and $180 million related to one-time bonuses and benefits for store and distribution
centre colleagues in the second quarters of 2021 and 2020, respectively.
(ii) Choice Properties recorded a provision of $1 million (2020 – $3 million) and $5 million (2020 – $21 million) in the fourth quarter of 2021 and
year-to-date, respectively, for certain past due amounts, reflecting increased collectability risk and negotiated rent abatements.
GWL CORPORATE(2) FINANCING ACTIVITIES The Company completed the following financing activities during the periods
indicated below. The cash impacts of these activities are set out below:
(unaudited)
($ millions)
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2021
Dec. 31, 2020
(12 weeks)
(13 weeks)
(52 weeks)
(53 weeks)
Settlement of net debt associated with equity
forward sale agreement
$
(275)
$
GWL’s credit facility
GWL’s NCIB – purchased and cancelled(i)(ii)
GWL’s participation in Loblaw’s NCIB
121
(167)
89
—
—
(123)
75
$
(790)
$
121
(744)
563
Net cash flow (used in) from above activities
$
(232)
$
(48)
$
(850)
$
—
—
(123)
336
213
(i)
$6 million of cash consideration related to common shares repurchased under the NCIB for cancellation in the fourth quarter of 2021 was
paid in the first quarter of 2022.
(ii) $31 million of cash consideration related to common shares repurchased under the NCIB for cancellation in the third quarter of 2021 was
paid in the fourth quarter of 2021.
Settlement of Net Debt Associated with Equity Forward Sale Agreement In 2021, the Company settled the net debt
associated with the equity forward sale agreement. As a result, the 9.6 million Loblaw shares securing the net debt were released
from security and the Company’s economic interest in Loblaw is now equal to its voting interest. In aggregate, $790 million was
paid to settle the net debt, resulting in the extinguishment of the Series A Debentures ($466 million), Series B Debentures ($784
million), plus accrued interest, and the settlement of the equity forward sale agreement ($464 million gain).
Refer to Section 3.3, “Components of Total Debt” of this MD&A for more information.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 29
Management’s Discussion and Analysis
GWL’s Credit Facility In the third quarter of 2021, GWL entered into a $350 million revolving committed credit facility provided
by a syndicate of lenders with a maturity date of September 13, 2024. The credit facility contains certain financial covenants. In
the fourth quarter of 2021, the Company drew $275 million on its credit facility to fund the final settlement of the net debt
associated with the equity forward agreement. The credit facility was partially repaid in the fourth quarter of 2021 and at
December 31, 2021, $121 million was drawn. Subsequent to the end of the fourth quarter of 2021, the drawn balance was fully
repaid.
Refer to Section 3.3, “Components of Total Debt” of this MD&A for more information.
GWL’s NCIB - Purchased and Cancelled Shares In the fourth quarter of 2021, the Company purchased and cancelled 1.0 million
shares under its NCIB (2020 – 1.3 million shares). In 2021, the Company purchased and cancelled 5.9 million shares under its
NCIB (2020 - 1.3 million shares). As at December 31, 2021, the Company had 146.6 million shares outstanding (December 31,
2020 – 152.1 million).
Refer to Section 3.6, “Share Capital” of this MD&A for more information.
GWL’s Participation in Loblaw’s NCIB Commencing in the first quarter of 2020, the Company began participating in Loblaw’s
NCIB in order to maintain its proportionate percentage ownership interest. During the fourth quarter of 2021, GWL received
proceeds of $89 million (2020 – $75 million) from the sale of Loblaw shares. During 2021, GWL received proceeds of $563 million
(2020 - $336 million) from the sale of Loblaw shares.
CHOICE PROPERTIES’ SALE AND LEASEBACK TRANSACTIONS In the fourth quarter of 2021, Choice Properties disposed of
two properties to third parties for aggregate proceeds of $28 million. These transactions were accounted for as a disposition by
Choice Properties. On consolidation, the arrangements were accounted for as sale and leaseback transactions because Loblaw
continues to be a tenant on the properties. As a result, the Company recorded a lease liability of $19 million, and a gain of
$7 million in operating income.
30 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
2.
Results of Reportable Operating Segments
The following discussion provides details of the 2021 results of operations of each of the Company’s reportable operating
segments.
2.1
Loblaw Operating Results
($ millions except where otherwise indicated)
For the years ended as indicated
2021
2020(3)
(52 weeks)
(53 weeks)
$ Change
% Change
Revenue
Operating income
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Depreciation and amortization(i)
$
$
$
$
$
$
$
53,170
2,929
5,579
10.5%
$
$
$
52,714
2,357
4,996
9.5%
456
572
583
0.9%
24.3%
11.7%
2,664
$
2,596
$
68
2.6%
(i)
Depreciation and amortization includes $506 million (2020 – $509 million) of amortization of intangible assets acquired with Shoppers
Drug Mart.
Unless otherwise indicated, Loblaw’s operating results include the 53rd week in 2020.
REVENUE Loblaw revenue in 2021 was $53,170 million, an increase of $456 million, or 0.9%, compared to 2020, driven by an
increase in retail sales and an improvement in financial services revenue.
Retail sales were $52,269 million, an increase of $410 million, or 0.8%, compared to 2020, which was negatively impacted by
$878 million due to the 53rd week in 2020.
•
•
•
food retail sales were $37,481 million (2020 – $37,596 million) and retail same-store sales growth was 0.3% (2020 – 8.6%).
Sales were impacted by lower eat-at-home trends after strong growth last year, offset by higher industry inflation levels. The
two year food retail sales Compound Annual Growth Rate (“CAGR”) was 5.4%. On a comparable week basis, food retail
basket size decreased and traffic increased in 2021;
the CPI as measured by The Consumer Price Index for Food Purchased from Stores was 2.2% (2020 – 2.4%), which was
slightly lower than Loblaw’s internal food inflation; and
drug retail sales were $14,788 million (2020 – $14,263 million) and drug retail same-store sales growth was 5.0% (2020 –
4.9%). Pharmacy same-store sales growth benefited from strong sales in pharmacy related services. Front store same-store
sales growth benefited from the economic re-opening in the third quarter of 2021. Pharmacy same-store sales growth was
8.4% (2020 – 5.3%) and front store same-store sales growth was 2.1% (2020 – 4.5%). The two year drug retail sales CAGR was
5.3%.
In 2021, 23 food and drug stores were opened, and 24 food and drug stores were closed, resulting in a net increase in retail
square footage of 0.2 million square feet, or 0.3%.
Financial services revenue increased by $85 million, or 7.7%, compared to 2020, primarily driven by higher interchange income
due to an increase in customer spending, higher sales attributable to The Mobile Shop kiosks due to the temporary partial
shutdown of The Mobile Shop kiosks during the second and third quarter of 2020. This was partially offset by lower interest
income attributable to a lower revolving volume of credit card receivables.
OPERATING INCOME Loblaw operating income in 2021 was $2,929 million, an increase of $572 million, or 24.3%, compared to
2020, which was negatively impacted by $67 million due to the 53rd week in 2020. The increase included the improvements in
underlying operating performance of $512 million and the favourable year-over-year net impact of adjusting items totaling
$60 million, as described below:
•
•
the improvements in underlying operating performance of $512 million were primarily due to the following:
◦
◦
an improvement in the underlying operating performance of retail due to an increase in retail gross profit, partially
offset by an increase in SG&A and depreciation and amortization; and
an improvement in the underlying operating performance of financial services.
the favourable year-over-year net impact of adjusting items totaling $60 million was primarily due to:
the favourable year-over-year impact of restructuring and other related costs of $25 million;
the favourable year-over-year impact of the fair value adjustment of derivatives of $18 million; and
the favourable year-over-year impact of the fair value adjustment on non-operating properties of $11 million.
◦
◦
◦
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 31
Management’s Discussion and Analysis
ADJUSTED EBITDA(1) Loblaw adjusted EBITDA(1) in 2021 was $5,579 million, an increase of $583 million, or 11.7%, compared to
2020, which was negatively impacted by $67 million due to the 53rd week in 2020. The increase was primarily due to an
increase in retail of $477 million and an increase in financial services of $106 million.
Retail adjusted EBITDA(1) increased by $477 million driven by an increase in retail gross profit of $741 million, partially offset by
an increase in retail SG&A of $264 million.
•
•
retail gross profit percentage of 30.7% increased by 120 basis points compared to 2020, from favourable changes in sales
mix in both food and drug retail and improved business initiatives.
retail SG&A as a percentage of sales was 20.5%, an increase of 30 basis points compared to 2020. The unfavourable increase
was driven by higher expenses related to the normalization of post-lockdown operating conditions, corporate costs
including network optimization costs, and higher costs incurred in drug retail from providing pharmacy related services,
partially offset by a reduction in COVID-19 costs.
Financial services adjusted EBITDA(1) increased by $106 million compared to 2020, primarily driven by the reversal of certain
commodity tax accrued in the amount of $37 million, higher revenue as described above, the reduction of expected credit loss
provision in the current year and the lapping of an increase in expected credit loss provision from the previous year, lower
contractual charge-off and lower funding costs. This increase was partially offset by higher loyalty program costs and operating
costs, and higher customer acquisition costs.
Loblaw adjusted EBITDA(1) included no impact in 2021 and 2020 related to the sale and leaseback of properties to Choice
Properties.
DEPRECIATION AND AMORTIZATION Loblaw’s depreciation and amortization in 2021 was $2,664 million, an increase of
$68 million compared to 2020. The increase in depreciation and amortization in 2021 was primarily driven by an increase in
depreciation of IT and leased assets and an increase in depreciation in financial services due to the launch of the PC Money
Account.
Depreciation and amortization in 2021 included $506 million (2020 – $509 million) of amortization of intangible assets related to
the acquisition of Shoppers Drug Mart.
CONSOLIDATION OF FRANCHISES Loblaw has more than 500 franchise food retail stores in its network. Non-controlling
interests at Loblaw represents the share of earnings that relates to Loblaw’s food retail franchisees. Loblaw’s net earnings
attributable to non-controlling interests were $101 million in 2021. When compared to 2020, this represented an increase of
$17 million or 20.2%. The increases in non-controlling interests at Loblaw were primarily driven by an improvement in franchisee
earnings when compared to 2020.
LOBLAW OTHER BUSINESS MATTERS
Network Optimization In the fourth quarter of 2021, Loblaw finalized network optimization plans that will result in banner
conversions, closures and right-sizing of approximately 20 unprofitable retail locations across a range of banners and formats,
the majority of which will be banner conversions and 3 will be closures within food retail. Loblaw expects to record charges of
approximately $25 million to $35 million resulting from this network optimization. These charges will be recorded as incurred
and are expected to include equipment, severance, lease related and other costs and will not be considered an adjusting item.
Loblaw expects to realize approximately $25 million in annualized EBITDA run-rate savings related to these plans. In the fourth
quarter of 2021, Loblaw recorded charges of $19 million as a result of this network optimization project. Further charges will be
recorded as they are incurred throughout 2022.
32 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
2.2
Choice Properties Operating Results
($ millions except where otherwise indicated)
For the years ended as indicated
Revenue
Net interest expense and other financing charges(i)
Net income
Funds from Operations(1)
2021
2020
(52 weeks)
(52 weeks)
$ Change
% Change
$
$
$
$
1,292
1,377
24
690
$
$
$
$
1,271 $
173 $
451 $
652 $
21
1,204
(427)
38
1.7%
696.0%
(94.7) %
5.8%
(i) Net interest expense and other financing charges includes a fair value adjustment on Exchangeable Units.
REVENUE Revenue was $1,292 million in 2021, an increase of $21 million, or 1.7%, compared to 2020 and included
$722 million (2020 – $724 million) generated from tenants within Loblaw retail. The increase in revenue was primarily driven by:
the contribution from acquisitions and development transfers completed in 2020 and 2021;
•
partially offset by,
•
•
declines due to foregone revenue from dispositions; and
vacancies in select office assets.
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES Net interest expense and other financing charges in 2021 were
$1,377 million compared to $173 million in 2020. The increase of $1,204 million was primarily driven by the unfavourable year-
over-year impact of the fair value adjustment on the Class B LP units (“Exchangeable Units”) of $1,217 million, partially offset by a
decline in fees incurred on early repayment of senior unsecured debentures, the general reduction in indebtedness from a lower
balance on the credit facility and a decline in interest costs due to refinancing over the past year at lower interest rates.
NET INCOME Net income in 2021 was $24 million, compared to $451 million in 2020. The decrease of $427 million was
primarily driven by:
an increase in net interest expense and other financing charges as described above;
•
partially offset by,
•
the favourable year-over-year impact of the fair value adjustment on investment properties, including those held within
equity accounted joint ventures;
a decline in expected credit loss provisions; and
an increase in rental revenue as described above.
•
•
FUNDS FROM OPERATIONS(1) Funds from Operations(1) in 2021 was $690 million, an increase of $38 million compared to 2020,
primarily driven by a decline in expected credit loss provisions, savings from lower borrowing costs and contributions from
acquisitions and development transfers completed in 2020 and 2021.
CHOICE PROPERTIES OTHER BUSINESS MATTERS
Subsequent to year end, Choice Properties entered into an agreement to increase its interest in two of its residential projects for
consideration of $25 million. The agreement included the purchase of one of Choice Properties’ partners’ existing interest in the
projects and the cancellation of the same partners’ option to increase their equity interest in the projects. This transaction closed
in January 2022, following which Choice Properties’ interest in these projects is now 50%.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 33
Management’s Discussion and Analysis
3.
Liquidity and Capital Resources
The Company’s ownership in Weston Foods has been presented separately as discontinued operations in the Company’s current
and comparative results. Unless otherwise indicated, all financial information represents the Company’s results from continuing
operations.
3.1
Cash Flows
The following Cash Flow components are inclusive of continuing and discontinued operations.
($ millions)
For the years ended as indicated
Cash and cash equivalents, beginning of year
Cash flows from operating activities
Cash flows used in investing activities
Cash flows used in financing activities
Effect of foreign currency exchange rate changes on
cash and cash equivalents
Cash and cash equivalents, end of year
2021
2020
(52 weeks)
(53 weeks)
$ Change
$
$
$
$
$
$
2,581
5,107
(279)
(4,426)
1
2,984
$
$
$
$
$
$
1,834 $
5,521 $
(1,738) $
(3,035) $
(1) $
2,581 $
747
(414)
1,459
(1,391)
2
403
CASH FLOWS FROM OPERATING ACTIVITIES Cash flows from operating activities were $5,107 million in 2021, a decrease of
$414 million compared to 2020. The decrease in cash flows from operating activities was primarily driven by an increase in credit
card receivables from a rise in customer spending and higher income taxes paid, partially offset by higher cash earnings.
CASH FLOWS USED IN INVESTING ACTIVITIES Cash flows used in investing activities were $279 million in 2021, a decrease of
$1,459 million compared to 2020. The decrease in year-to-date cash flows used in investing activities was primarily due to net
consideration received from the disposal of the Weston Foods business and lower capital expenditures.
The following table summarizes the Company’s capital investments by each of its reportable operating segments:
($ millions)
For the years ended as indicated
Loblaw(i)
Choice Properties
Other and Intersegment
Capital investments from continuing operations
Discontinued operations
Total capital investments
2021
2020(4)
(52 weeks)
(53 weeks)
$
$
$
1,183
$
196
2
1,381
$
76
1,457
$
1,224
263
9
1,496
162
1,658
(i)
During 2021, additions to fixed assets in Loblaw included $1 million of prepayments that were made in 2020 and transferred from other
assets. During 2020, additions to fixed assets in Loblaw included prepayments that were made in 2019 and transferred from other assets of
$66 million.
CASH FLOWS USED IN FINANCING ACTIVITIES Cash flows used in financing activities were $4,426 million in 2021, an increase
of $1,391 million compared to 2020. The increase in cash flows used in financing activities was primarily driven by the net
settlement of net debt associated with the equity forward sale agreement, higher repurchases of the Company’s common
shares under its NCIB and higher proceeds received from Choice Properties’ transactions in the prior year.
The Company’s significant long-term debt transactions are set out in Section 3.3, “Components of Total Debt”.
34 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
FREE CASH FLOW(1)
($ millions)
For the years ended as indicated
Cash flows from operating activities
2021
2020(4)
(52 weeks)
(53 weeks)
$ Change
$
5,107
$
5,521 $
(414)
Less:
Cash flows from operating activities from discontinued
operations
Cash flows from operating activities from continuing operations
Less:
Interest paid
Capital Investments
Lease payments, net
—
5,107
853
1,381
795
157
5,364
883
1,496
844
Free cash flow(1) from continuing operations
$
2,078
$
2,141 $
(157)
(257)
(30)
(115)
(49)
(63)
Free cash flow(1)from continuing operations in 2021 was $2,078 million, a decrease of $63 million compared to 2020. The
decrease in free cash flow(1) was primarily driven by an increase in credit card receivables from a rise in customer spending and
higher income taxes paid, partially offset by lower capital expenditures and higher cash earnings.
3.2
Liquidity
The Company (excluding Loblaw and Choice Properties) expects that cash and cash equivalents, short-term investments, future
operating cash flows and the amounts available to be drawn against its committed credit facility will enable it to finance its
capital investment program and fund its ongoing business requirements, including working capital, pension plan funding
requirements and financial obligations, over the next 12 months. The Company (excluding Loblaw and Choice Properties) does
not foresee any impediments in obtaining financing to satisfy its long-term obligations.
Loblaw expects that cash and cash equivalents, short-term investments, future operating cash flows and the amounts available
to be drawn against committed credit facilities will enable it to finance its capital investment program and fund its ongoing
business requirements over the next 12 months, including working capital, pension plan funding requirements and financial
obligations. President’s Choice Bank (“PC Bank”) expects to obtain long-term financing for its credit card portfolio through the
issuance of Eagle notes and Guaranteed Investment Certificates (“GICs”).
Choice Properties expects to obtain long-term financing for the acquisition of properties primarily through the issuance of
unsecured debentures and equity.
For details on the Company’s cash flows, see Section 3.1 “Cash Flows”, of this MD&A.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 35
Management’s Discussion and Analysis
TOTAL DEBT The following table presents total debt, as monitored by management:
As at
Dec. 31, 2021
Dec. 31, 2020
($ millions)
Bank indebtedness
Demand deposits from customer
Short-term debt
Loblaw
Choice
Properties
Other and
Intersegment
$
52 $
— $
— $
75
450
—
—
—
—
Total
52
75
450
Loblaw
Choice
Properties
Other and
Intersegment
$
86 $
— $
24
575
—
—
— $
—
Total
86
24
760
1,335
Long-term debt due within one year
1,002
518
—
1,520
597
327
—
924
Long-term debt
Certain other liabilities(i)
6,211 5,709
570 12,490
6,449 6,155
915
13,519
74
664
—
738
71
666
—
737
Fair value of financial derivatives related
to the above debt
—
—
—
—
—
—
(630)
(630)
Total debt excluding lease liabilities
$ 7,864 $ 6,891 $
570 $ 15,325
$ 7,802 $ 7,148 $
1,045 $ 15,995
Lease liabilities due within one year(ii)
Lease liabilities(ii)
$
1,297 $
1 $
(556) $
742
$
1,379 $
1 $
(581) $
799
$ 7,542 $
1 $ (3,301) $ 4,242
$ 7,522 $
3 $
(3,319) $ 4,206
Total debt including total lease liabilities
$ 16,703 $ 6,893 $ (3,287) $ 20,309
$ 16,703 $ 7,152 $ (2,855) $ 21,000
(i)
(ii)
Includes financial liabilities of $664 million (December 31, 2020 – $666 million) recorded primarily as a result of Choice Properties’ transactions.
Lease liabilities due within one year of $2 million (December 31, 2020 – $3 million) and lease liabilities of $7 million (December 31, 2020 – $8 million)
relating to GWL Corporate are included in Other and Intersegment.
Management targets credit metrics consistent with those of an investment grade profile. GWL Corporate holds cash and cash
equivalents and short-term investments and as a result monitors its leverage on a net debt basis. GWL Corporate has total debt
including lease liabilities of $579 million (2020 – $1,056 million) and cash and cash equivalents and short-term investments of
$1,338 million (2020 – $1,013 million), resulting in a net cash position of $759 million (2020 – net debt of $43 million). The
settlement of the net debt associated with the equity forward sale agreement was offset by a reduction in cash and had no
impact on GWL Corporate(2) net debt. See Section 3.3, “Components of Total Debt” of this MD&A for details.
Loblaw’s management is focused on managing its capital structure on a segmented basis to ensure that each of its operating
segments is employing a capital structure that is appropriate for the industry in which it operates.
•
•
Loblaw targets maintaining retail segment credit metrics consistent with those of investment grade retailers. Loblaw
monitors the retail segment’s debt to retail adjusted EBITDA(1) ratio as a measure of the leverage being employed. Loblaw
retail segment debt to adjusted EBITDA(1) ratio decreased compared to 2020 primarily due to an improvement in adjusted
EBITDA(1).
PC Bank’s capital management objectives are to maintain a consistently strong capital position while considering the
economic risks generated by its credit card receivables portfolio and to meet all regulatory requirements as defined by the
Office of the Superintendent of Financial Institutions.
Choice Properties targets maintaining credit metrics consistent with those of investment grade Real Estate Investment
Trusts (“REIT”). Choice Properties monitors metrics relevant to the REIT industry including targeting an appropriate debt to total
assets ratio.
COVENANTS AND REGULATORY REQUIREMENTS The Company, Loblaw and Choice Properties are required to comply with
certain financial covenants for various debt instruments. As at year end 2021 and throughout the year, the Company, Loblaw and
Choice Properties were in compliance with their respective covenants.
As at year end 2021 and throughout the year, PC Bank and Choice Properties met all applicable regulatory requirements.
36 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
3.3
Components of Total Debt
DEBENTURES The following table summarizes the debentures issued in the years ended as indicated:
($ millions)
Loblaw Companies Limited notes
Choice Properties senior unsecured debentures
– Series N
– Series O
– Series P
– Series Q
Total debentures issued
Interest
Rate
2.28%
2.98%
3.83%
2.85%
2021
2020
Maturity
Date
Principal
Amount
Principal
Amount
May 7, 2030(i)
$
—
$
350
March 4, 2030
March 4, 2050
May 21, 2027
2.46%
November 30, 2026
—
—
—
350
350
400
100
500
—
$
1,350
$
(i)
In connection with this issuance, during 2020, $350 million of bond forward agreements were settled, resulting in a realized fair value loss of
$34 million before income taxes, which was cumulatively recorded in other comprehensive loss as unrealized prior to settlement. The loss will
be reclassified to the consolidated statements of earnings over the life of the May 7, 2030 notes. This settlement also resulted in a net effective
interest rate of 3.34% on the May 7, 2030 notes issued.
The following table summarizes the debentures repaid in the years ended as indicated:
($ millions)
George Weston debenture – Series A
Loblaw Companies Limited notes
Choice Properties senior unsecured debentures
– Series 8
– Series 9
– Series B-C
– Series C
– Series E
– Series I
Interest
Rate
7.00%
5.22%
3.60%
3.60%
4.32%
3.50%
2.30%
3.01%
Maturity
Date
November 10, 2031(i)
$
June 18, 2020
April 20, 2020
September 20, 2021(ii)
January 15, 2021
February 8, 2021
September 14, 2020
March 21, 2022(iii)
Total debentures repaid
$
2021
Principal
Amount
2020
Principal
Amount
466
—
—
200
—
—
—
300
966
$
—
350
300
—
100
250
250
—
$
1,250
(i) See Section 3.3, “Components of Total Debt – Net Debt Associated with Equity Forward Sale Agreement” for details on the settlement of the
Net debt associated with the equity forward sale agreement.
(ii) Choice Properties senior unsecured debentures Series 9 was redeemed on June 21, 2021.
(iii) Choice Properties senior unsecured debentures Series I was redeemed on December 10, 2021.
COMMITTED CREDIT FACILITIES The components of the committed lines of credit available as at year end 2021 and 2020 were
as follows:
As at
Dec. 31, 2021
Dec. 31, 2020
Maturity
Date
Available
Credit
Drawn
Available
Credit
Drawn
September 13, 2024(i)
$
350
$
121
$
—
$
October 7, 2023
June 24, 2026
1,000
1,500
—
—
1,000
1,500
—
—
—
—
Total committed credit facilities
$
2,850 $
121
$
2,500
$
($ millions)
George Weston
Loblaw
Choice Properties
(i)
Subsequent to year end, GWL repaid $121 million of its committed credit facility.
In 2021, GWL entered into a $350 million revolving committed credit facility provided by a syndicate of lenders with a maturity
date of September 13, 2024.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 37
Management’s Discussion and Analysis
INDEPENDENT SECURITIZATION TRUSTS Loblaw, through PC Bank, participates in various securitization programs that provide
a source of funds for the operation of its credit card business. PC Bank maintains and monitors a co-ownership interest in credit
card receivables with independent securitization trusts, including Eagle and the Other Independent Securitization Trusts, in
accordance with its financing requirements.
The following table summarizes the amounts securitized to independent securitization trusts:
($ millions)
Securitized to independent securitization trusts:
Securitized to Eagle Credit Card Trust ®
Securitized to Other Independent Securitization Trusts
Total securitized to independent securitization trusts
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
1,350
$
450
1,800
$
1,050
575
1,625
Under its securitization programs, PC Bank is required to maintain, at all times, a credit card receivable pool balance equal to a
minimum of 107% of the outstanding securitized liability. PC Bank was in compliance with this requirement as at year end 2021
and throughout the year.
During 2021, Eagle issued $300 million (2020 – $300 million) of senior and subordinated term notes with a maturity date of
June 17, 2026 (2020 – July 17, 2025) at a weighted average interest rate of 1.61% (2020 – 1.34%). In connection with this
issuance, $175 million (2020 – $200 million) of bond forward agreements were settled, resulting in a realized fair value loss of
$1 million (2020 – loss of $11 million) before income taxes, which was cumulatively recorded in other comprehensive loss as
unrealized prior to settlement. The loss will be reclassified to the consolidated statements of earnings over the life of the
aforementioned Eagle notes. This settlement also resulted in a net effective interest rate of 1.65% (2020 – 2.07%) on the Eagle
notes issued.
During 2020, $250 million of the senior and subordinated term notes at a weighted average interest rate of 2.23% previously
issued by Eagle, matured and were repaid on September 17, 2020. There were no repayments of notes issued by Eagle in 2021.
INDEPENDENT FUNDING TRUSTS As at year end 2021, the independent funding trusts had drawn $570 million (2020 –
$512 million) from the revolving committed credit facility that is the source of funding to the independent funding trusts.
Loblaw provides credit enhancement in the form of a standby letter of credit for the benefit of the independent funding trusts.
As at year end 2021, Loblaw provided a credit enhancement of $64 million (2020 – $64 million) for the benefit of the
independent funding trusts representing not less than 10% (2020 – not less than 10%) of the principal amount of the loans
outstanding.
The revolving committed credit facility relating to the independent funding trusts has a maturity date until May 27, 2022.
GUARANTEED INVESTMENT CERTIFICATES The following table summarizes PC Bank’s GIC activity, before commissions, for the
years ended as indicated:
($ millions)
Balance, beginning of year
GICs issued
GICs matured
Balance, end of year
2021
1,185
$
414
(603)
996
$
2020
1,311
410
(536)
1,185
$
$
As at year end 2021, $182 million in GICs were recorded as long-term debt due within one year (2020 – $597 million).
38 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
NET DEBT ASSOCIATED WITH EQUITY FORWARD SALE AGREEMENT In 2001, Weston Holdings Limited (“WHL”), a subsidiary of
GWL, issued $466 million of 7.00% Series A Debentures due 2031, which are serviced by the issuance of Series B Debentures. In
addition, WHL entered into an equity forward sale agreement with the lender to sell 9.6 million Loblaw common shares at an
initial forward sale price of $48.50 which increases by the interest rates on Series A Debentures and Series B Debentures.
In the second quarter of 2021, the Company began to settle the net debt associated with the equity forward sale agreement,
and was fully settled in the fourth quarter of 2021. The 9.6 million Loblaw shares have been released to the Company such that
its economic interest in Loblaw is now equal to its voting interest.
In aggregate, $790 million was paid to extinguish the net debt associated with the equity forward sale agreement. The following
table presents details of the settlements, redemptions and the net amount paid to extinguish the net debt associated with the
equity forward sale agreement.
12 Weeks Ended
16 Weeks Ended
12 Weeks Ended
($ millions except where otherwise indicated)
Jun. 19, 2021
Oct. 9, 2021
Dec. 31, 2021
Number of shares settled (millions)
Gain on settlement of shares
Series A Debentures redeemed
Series B Debentures redeemed
Net payment, including accrued interest
% settled
$
$
$
$
0.75
(43)
36
60
53
7.8%
$
$
$
$
5.83
(298)
283
475
462
60.7%
$
$
$
$
3.02
(123)
147
249
275
31.5%
$
$
$
$
Total
9.6
(464)
466
784
790
100%
The following table summarizes the Company’s (excluding Loblaw and Choice Properties) debt in Other and Intersegment:
($ millions)
Series A
Series B
Fair value of financial derivatives related to the above debt
Debt associated with equity forward sale agreement
Debentures
George Weston credit facility
Transaction costs and other
Other and Intersegment debt
Maturity Date
Dec. 31, 2021
Dec. 31, 2020
As at
2031
$
On demand
n/a
2024 - 2033
2024
n/a
$
$
$
—
—
—
—
450
121
(1)
466
760
(630)
596
450
—
(1)
$
570
$
1,045
Associate Guarantees Loblaw has arranged for its pharmacist owners of corporations licensed to operate retail drug stores at
specific location using Loblaw’s trademarks (“Associates”) to obtain financing to facilitate their inventory purchases and fund
their working capital requirements by providing guarantees to various Canadian chartered banks that support Associate loans.
As at year end 2021, Loblaw’s maximum obligation in respect of such guarantees was $580 million (2020 – $580 million) with an
aggregate amount of $469 million (2020 – $470 million) in available lines of credit allocated to the Associates by the various
banks. As at year end 2021, the Associates had drawn an aggregate amount of $52 million (2020 – $86 million) against these
available lines of credit. Any amounts drawn by the Associates are included in bank indebtedness on the Company’s
consolidated balance sheets. As recourse in the event that any payments are made under the guarantees, Loblaw holds a first-
ranking security interest on all assets of Associates, subject to certain prior-ranking statutory claims.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 39
Management’s Discussion and Analysis
3.4
Financial Condition
Adjusted return on average equity attributable to common shareholders of
the Company(1)
Adjusted return on capital(1)
As at
Dec. 31, 2021
Dec. 31, 2020(4)
18.7%
12.6%
15.2%
10.7%
The adjusted return on average equity attributable to common shareholders of the Company(1) increased as at year end 2021
compared to 2020 primarily due to an increase in adjusted net earnings(1) as a result of an improvement in the Company’s
consolidated underlying performance.
The adjusted return on capital(1) increased as at year end 2021 compared to 2020, primarily due to an increase in adjusted
operating income(1), a decrease in total debt, and an increase in cash and cash equivalents and short term investments.
3.5
Credit Ratings
The following table sets out the current credit ratings of GWL:
DBRS
S&P
Credit Ratings (Canadian Standards)
Credit Rating
Trend
Credit Rating
Outlook
Issuer rating
Medium term notes
Other notes and debentures
Preferred shares
BBB
BBB
BBB
Pfd-3
Stable
Stable
Stable
Stable
BBB
BBB-
BBB
P-3 (high)
Stable
n/a
n/a
n/a
During 2021, DBRS Morningstar (“DBRS”) confirmed the credit ratings and trend of GWL. Subsequent to 2021, S&P Global
Ratings (“S&P”) confirmed the credit ratings and outlook of GWL, including downgrading the medium term notes from BBB to
BBB-.
The following table sets out the current credit ratings of Loblaw:
DBRS
S&P
Credit Ratings (Canadian Standards)
Credit Rating
Trend
Credit Rating
Outlook
Issuer rating
Medium term notes
Other notes and debentures
Second Preferred shares, Series B
BBB (high)
BBB (high)
BBB (high)
Pfd-3 (high)
Stable
Stable
Stable
Stable
BBB
BBB
BBB
P-3 (high)
Stable
n/a
n/a
n/a
During 2021, DBRS confirmed the credit ratings and trend of Loblaw, and S&P confirmed the credit ratings and outlook of
Loblaw.
The following table sets out the current credit ratings of Choice Properties:
Credit Ratings (Canadian Standards)
Credit Rating
Trend
Credit Rating
Outlook
Issuer rating
Senior unsecured debentures
BBB (high)
BBB (high)
Stable
Stable
BBB
BBB
Stable
n/a
DBRS
S&P
During 2021, DBRS confirmed the credit ratings and trend of Choice Properties, and S&P confirmed the credit ratings and
outlook of Choice Properties.
40 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
3.6
Share Capital
OUTSTANDING SHARE CAPITAL AND CAPITAL SECURITIES GWL’s outstanding share capital is comprised of common shares
and preferred shares. The following table details the authorized and outstanding common shares and preferred shares as at
December 31, 2021:
(number of common shares)
Common shares
Preferred shares – Series I
– Series II
– Series III
– Series IV
– Series V
Authorized
Outstanding
Unlimited
146,789,503
10,000,000
9,400,000
10,600,000
—
10,000,000
8,000,000
8,000,000
8,000,000
8,000,000
8,000,000
COMMON SHARE CAPITAL Common shares issued are fully paid and have no par value. The following table summarizes the
activity in the Company’s common shares issued and outstanding for the years ended December 31, 2021 and December 31,
2020:
($ millions except where otherwise indicated)
Number of
Common
Shares
2021
Common
Share
Capital
Number of
Common
Shares
2020
Common
Share
Capital
Issued and outstanding, beginning of year
152,374,416 $
2,786
153,667,750
$
2,809
Issued for settlement of stock options
Purchased and cancelled(i)
Issued and outstanding, end of year
Shares held in trusts, beginning of year
Purchased for future settlement of RSUs and PSUs
Released for settlement of RSUs and PSUs
Shares held in trusts, end of year
Issued and outstanding, net of shares held in trusts,
323,461
(5,908,374)
146,789,503 $
(254,525)
—
113,419
(141,106)
36
(108)
2,714
(4)
—
2
(2)
6,666
(1,300,000)
1
(24)
152,374,416
$
2,786
(88,832)
(229,000)
63,307
(254,525)
—
(4)
—
(4)
end of year
146,648,397
$
2,712
152,119,891 $
2,782
Weighted average outstanding, net of shares
held in trusts
149,893,834
153,406,800
(i)
Includes 1,930 shares cancelled during 2021in a private transaction and are excluded from the Company’s NCIB.
PREFERRED SHARE CAPITAL GWL may, at its option, redeem for cash, in whole or in part, the preferred shares Series I, Series III,
Series IV and Series V outstanding on or after the redemption dates specified by the terms of each series of preferred shares.
GWL may at any time after issuance give the holders of these preferred shares the right, at the option of the holder, to convert
the holder’s preferred shares into preferred shares of a further series designated by GWL on a share-for-share basis on a date
specified by GWL.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 41
Management’s Discussion and Analysis
DIVIDENDS The declaration and payment of dividends on the Company’s common shares and the amount thereof are at the
discretion of the Company’s Board of Directors (“Board”) which takes into account the Company’s financial results, capital
requirements, available cash flow, future prospects of the Company’s business and other factors considered relevant from time
to time. Over time, it is the Company’s intention to increase the amount of the dividend while retaining appropriate free cash
flow to finance future growth. In the third quarter of 2021 and in the fourth quarter of 2020, the Board raised the quarterly
common share dividend by $0.050 to $0.60 and $0.025 to $0.55 per share, respectively. The Board declared dividends for the
years ended as follows:
($)
Dividends declared per share(i):
Common share
Preferred share:
Series I
Series III
Series IV
Series V
2021
2.30
1.45
1.30
1.30
1.1875
$
$
$
$
$
2020
2.125
1.45
1.30
1.30
1.1875
$
$
$
$
$
(i) Dividends declared on common shares and Preferred Shares, Series III, Series IV and Series V were payable on January 1, 2022 and
subsequently paid on January 4, 2022. Dividend declared on Preferred Shares, Series I was paid on December 15, 2021.
The following table summarizes the Company’s cash dividends declared subsequent to year end 2021:
($)
Dividends declared per share(i)
– Common share
– Preferred share:
Series I
Series III
Series IV
Series V
$
$
$
$
$
0.600
0.3625
0.3250
0.3250
0.296875
(i) Dividends declared on common shares and Preferred Shares, Series III, Series IV and Series V are payable on April 1, 2022. Dividends declared
on Preferred Shares, Series I are payable on March 15, 2022.
At the time such dividends are declared, GWL identifies on its website (www.weston.ca) the designation of eligible and ineligible
dividends in accordance with the administrative position of the Canada Revenue Agency.
42 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
NORMAL COURSE ISSUER BID PROGRAM The following table summarizes the Company’s activity under its NCIB for the years
ended as follows:
($ millions except where otherwise indicated)
Purchased for future settlement of RSUs and PSUs (number of shares)
Purchased for current settlement of RSUs and DSUs (number of shares)
Purchased and cancelled (number of shares)
Cash consideration paid
Purchased and held in trusts
Purchased and settled
Purchased and cancelled(i)
Premium charged to retained earnings
Purchased and held in trusts
Purchased and settled
Purchased and cancelled
Reduction in share capital
2021
2020
(52 weeks)
(53 weeks)
—
10,862
229,000
33,325
5,906,444
1,300,000
$
$
$
—
—
(744)
—
—
642
108
$
$
$
(21)
(3)
(123)
17
—
99
24
(i)
$6 million of cash consideration related to common shares repurchased under the NCIB for cancellation in the fourth quarter of 2021 was
paid in the first quarter of 2022.
In the second quarter of 2021, GWL renewed its NCIB to purchase on the TSX or through alternative trading systems up to
7,596,891 of its common shares, representing approximately 5% of issued and outstanding common shares. In accordance with
the rules of the TSX, the Company may purchase its common shares from time to time at the then market price of such shares.
As of December 31, 2021, 4,951,418 common shares were purchased under the Company’s current NCIB.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 43
Management’s Discussion and Analysis
3.7
Off-Balance Sheet Arrangements
The following is a summary of the Company’s off-balance sheet arrangements. Certain significant arrangements have also been
discussed in Section 3.3, “Components of Total Debt”.
LETTERS OF CREDIT Standby and documentary letters of credit are used in connection with certain obligations mainly related
to real estate transactions, benefit programs, purchase orders and performance guarantees, surety bond, securitization of
PC Bank’s credit card receivables and third-party financing made available to Loblaw’s franchisees. As at year end 2021, the
aggregate gross potential liability related to the Company’s letters of credit was approximately $629 million (2020 –
$638 million).
GUARANTEES In addition to the letters of credit mentioned above, the Company has entered into various guarantee
arrangements including obligations to indemnify third parties in connection with leases, business dispositions and other
transactions in the normal course of the Company’s business. Additionally, Loblaw has provided a guarantee on behalf of
PC Bank to MasterCard® International Incorporated (“MasterCard®”) for accepting PC Bank as a card member and licensee of
MasterCard®. As at year end 2021, the guarantee on behalf of PC Bank to MasterCard® was U.S. dollars $190 million (2020 – U.S.
dollars $190 million).
CPH Master Limited Partnership, a subsidiary of Choice Properties, guarantees certain debt assumed by purchasers in
connection with past dispositions of properties made by CREIT before the acquisition. These guarantees will remain until the
debt is modified, refinanced or extinguished. Credit risks arise in the event that the purchasers default on repayment of their
debt. These credit risks are mitigated by the recourse which Choice Properties has under these guarantees, in which case it
would have a claim against the underlying property. In the current year the debt associated with such guarantees has been fully
repaid. Therefore, the remaining exposure to credit risk is nil (2020 – $36 million).
LEASE OBLIGATIONS In connection with historical dispositions of certain of its assets, Loblaw has assigned leases to third
parties. Loblaw remains contingently liable for these lease obligations in the event any of the assignees are in default of their
lease obligations. Loblaw has guaranteed lease obligations of a third-party distributor in the amount of $2 million (2020 –
$3 million).
CASH COLLATERALIZATION As at year end 2021, GWL and Loblaw had agreements to cash collateralize certain uncommitted
credit facilities up to amounts of $45 million (2020 – $52 million) and $93 million (2020 – $102 million), respectively. As at year
end 2021, GWL and Loblaw had $45 million (2020 – $52 million) and a nominal amount (2020 – nominal) deposited with major
financial institutions, respectively, and classified as security deposits on the consolidated balance sheets.
44 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
3.8
Contractual Obligations
The following table summarizes certain of the Company’s significant contractual obligations and other obligations as at year
end 2021:
SUMMARY OF CONTRACTUAL OBLIGATIONS
($ millions)
Total debt(i)
Foreign exchange forward
contracts
Financial liabilities(ii)
Lease payments
Contracts for purchases of real
property and capital
investment projects(iii)
Purchase obligations(iv)
Payments due by year
2022
2023
2024
2025
2026
Thereafter
Total
$
2,192 $
2,484 $
2,495 $
1,591 $
1,171 $
8,109 $
18,042
321
44
751
311
689
—
48
770
327
676
—
49
662
286
607
—
53
599
—
48
—
220
321
462
456
1,802
5,040
206
508
46
500
—
15
1,176
2,995
Total contractual obligations
$
4,308 $
4,305 $
4,099 $
2,957 $
2,221 $
10,146 $
28,036
(i)
Includes short-term debt, bank indebtedness, demand deposits, Loblaw’s certain other liabilities and the fair value of the equity forward
included in other assets. Total debt also includes fixed interest payments on long-term debt which are based on the maturing face values and
annual interest for each instrument, including GICs, and an independent funding trust, as well as annual payment obligations for
consolidated structured entities and mortgages. Variable interest payments are based on the forward rates as at year end 2021.
(ii) Represents the contractual payments that Loblaw is committed to related to the Choice Properties’ dispositions.
(iii)
Includes agreements for the purchase of real property and capital commitments for construction, expansion and renovation of buildings.
These agreements may contain conditions that may or may not be satisfied. If the conditions are not satisfied, it is possible the Company will
no longer have the obligation to proceed with the underlying transactions.
Includes contractual obligations of a material amount to purchase goods or services where the contract prescribes fixed or minimum
volumes to be purchased or payments to be made within a fixed period of time for a set or variable price. These are only estimates of
anticipated financial commitments under these arrangements and the amount of actual payments will vary. The purchase obligations do not
include purchase orders issued or agreements made in the ordinary course of business which are solely for goods that are meant for resale,
nor do they include any contracts which may be terminated on relatively short notice or with insignificant cost or liability to the Company.
(iv)
As at year end 2021, the Company had additional long-term liabilities which included post-employment and other long-term
employee benefit plan liabilities, deferred vendor allowances, deferred income tax liabilities, Trust Unit liability and provisions,
including insurance liabilities. These long-term liabilities have not been included in the table above as the timing and amount of
future payments are uncertain.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 45
Management’s Discussion and Analysis
4.
Quarterly Results of Operations
4.1
Quarterly Financial Information
The Company’s year end is December 31. Activities are reported on a fiscal year ending on the Saturday closest to December 31.
As a result, the Company’s fiscal year is usually 52 weeks in duration but includes a 53rd week every five to six years. The years
ended December 31, 2021 and December 31, 2020 contained 52 weeks and 53 weeks, respectively. The 52-week reporting cycle
is divided into four quarters of 12 weeks each except for the third quarter, which is 16 weeks in duration. When a fiscal year
contains 53 weeks, the fourth quarter is 13 weeks in duration.
The following is a summary of selected consolidated financial information derived from the Company’s unaudited interim period
condensed consolidated financial statements for each of the eight most recently completed quarters. The Company’s interest in
Weston Foods is presented separately as discontinued operations in the Company’s current and comparative results. Unless
otherwise indicated, all financial information reflects the Company’s results from continuing operations.
($ millions except where
otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(1)
Depreciation and
amortization(i)
Net earnings (loss) from
continuing operations
Net (loss) earnings attributable
to shareholders of the
Company from continuing
operations
Net (loss) earnings available to
common shareholders of
the Company
Continuing operations
Discontinued operations
Net (loss) earnings per
common share ($) - basic
Continuing operations
Discontinued operations
Net (loss) earnings per
common share ($) - diluted
Continuing operations
Discontinued operations
Adjusted diluted net earnings
per common share(1) from
continuing operations ($)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2021
Total
(audited)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(audited)
2020(3,4)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(13 weeks)
(53 weeks)
$ 12,017
$ 12,637
$ 16,192
$ 12,902
$ 53,748
$ 11,942
$ 12,092
$ 15,806
$ 13,430
$ 53,270
$
$
828
1,300
$
$
1,065
1,462
$
$
1,125
$ 1,009
$ 4,027
1,780
$
1,453
$ 5,995
$
$
595
$
447
1,246
$ 1,070
$
$
964
1,644
$
$
869
$ 2,875
1,396
$ 5,356
$
525
$
541
$
704
$
537
$ 2,307
$
517
$
523
$
682
$
532
$ 2,254
$
118
$
361
$
513
$
755
$
1,747
$
741
$
(137) $
484
$
488
$
1,576
$
(52) $
125
$
252
$
428
$
753
$
590
$
(210) $
303
$
274
$
957
$
$
$
$
$
$
$
$
$
(62) $
(62) $
108
115
$
$
124
238
$
$
217
418
$
$
387
709
—
$
(7) $
(114) $
(201) $
(322)
(0.41) $
0.71
$ 0.83
(0.41) $ 0.75
$
1.59
$
$
1.48
2.84
$
$
2.59
4.73
$
$
$
$
$
582
580
2
3.79
3.78
—
$
(0.04) $
(0.76) $
(1.36) $
(2.14)
$ 0.01
(0.41) $ 0.70
$ 0.82
$
1.44
(0.41) $ 0.74
$
1.58
$ 2.80
$
$
2.52
4.66
$
$
3.78
3.77
—
$
(0.04) $
(0.76) $
(1.36) $
(2.14)
$ 0.01
$
$
$
$
$
$
$
$
$
(255) $
(220) $
(35) $
303
289
14
(1.66) $
(1.43) $
1.98
1.89
(0.23) $ 0.09
(1.66) $
(1.43) $
1.96
1.87
(0.23) $ 0.09
$
$
$
$
$
$
$
$
$
289
264
25
$
$
$
919
913
6
1.89
1.73
0.16
1.88
1.72
0.16
$ 5.99
$
5.95
$ 0.04
$ 5.96
$
5.92
$ 0.04
$
1.60
$
1.80
$
2.43
$
2.32
$
8.14
$
1.46
$
1.03
$
2.22
$
1.74
$ 6.44
(i)
Depreciation and amortization includes amortization of intangible assets acquired with Shoppers Drug Mart, recorded by Loblaw.
REVENUE Over the last eight quarters, consolidated revenue has been impacted by each of the Company’s reportable operating
segments as follows:
•
Loblaw’s revenue was impacted by various factors including the following:
COVID-19 pandemic related impacts on sales volume and sales mix;
seasonality, which was greatest in the fourth quarter and least in the first quarter;
the 53rd week in the fourth quarter of fiscal year 2020;
the timing of holidays;
◦
◦
◦
◦
◦ macro-economic conditions impacted food and drug retail prices; and
◦
changes in net retail square footage. Over the past eight quarters, Loblaw’s net retail square footage increased by
0.4 million square feet to 71.2 million square feet.
•
Choice Properties revenue was impacted by the contribution from acquisitions and development transfers completed in
2020 and 2021, foregone revenue from sold properties and vacancies in select office assets.
46 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
NET (LOSS) EARNINGS AVAILABLE TO COMMON SHAREHOLDERS OF THE COMPANY FROM CONTINUING OPERATIONS AND
DILUTED NET (LOSS) EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS Net (loss) earnings available to
common shareholders of the Company from continuing operations and diluted net (loss) earnings per common share from
continuing operations for the last eight quarters were impacted by the underlying operating performance of each of the
Company’s reportable operating segments and certain adjusting items as described in Section 14, “Non-GAAP Financial
Measures”, of this MD&A.
The Company’s underlying operating performance for the last eight quarters included the following:
•
change in Loblaw’s underlying operating performance was driven by:
◦
◦
◦
◦
◦
◦
◦
seasonality, which was greatest in the fourth quarter and least in the first quarter;
the impact of the 53rd week in the fourth quarter of fiscal year 2020;
the timing of holidays;
cost savings and operating efficiencies from process and efficiency initiatives and benefits from strategic initiatives;
Loblaw’s financial results for 2021 show increased revenue, driven by increased demand for Loblaw’s products, as
well as increased cost of merchandise inventories sold. In addition, SG&A had increased in 2020 as a result of the
incremental cost of COVID-19 related investments to benefit and protect colleagues and customers which have
stabilized in 2021;
fluctuations in the performance of the Loblaw’s financial services including the continued investments in strategic
initiatives; and
the 2021 reversal of certain commodity taxes accrued.
•
•
•
change in Choice Properties’ underlying operating performance was driven by:
the contribution from acquisitions and development transfers completed in 2020 and 2021; and
a decline in expected credit loss provisions;
◦
◦
partially offset by
◦
declines due to foregone revenue from dispositions.
the impact of asset impairments, net of recoveries and certain one-time gains related to Choice Properties’ transactions
recorded on consolidation in Other and Intersegment;
year-over year quarterly adjusted net interest and other financing charges(1) decreased during 2021 due to:
◦
◦
◦
lower interest expense at Loblaw financial services;
a reduction in interest expense from lease liabilities at Loblaw, including Other and Intersegment adjustments; and
a decrease in interest expense in Choice Properties, including Other and Intersegment adjustments, primarily
related to the special distribution in the fourth quarter of 2020, a decline in fees incurred on early repayment of
senior unsecured debentures, lower overall debt levels compared to the prior year and the completion of
refinancing activity over the past year at lower interest rates;
partially offset by,
◦
higher interest expense in Other and Intersegment adjustments, primarily related to interest expense on the
financial liabilities recognized on Choice Properties’ dispositions.
•
year-over-year quarterly adjusted effective tax rate(1) increased during 2021 due to:
◦
◦
◦
an increase in tax expense related to temporary differences in respect of GWL’s investment in certain Loblaw
shares as a result of GWL’s participation in Loblaw’s NCIB;
the unfavourable year-over-year impact of the non-taxable portion of the gain from Choice Properties’ transactions;
and
the impact of certain other non-deductible items.
•
during 2021, diluted net earnings per common share included the favourable impact of shares purchased for cancellation.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 47
Management’s Discussion and Analysis
4.2
Fourth Quarter Results
Loblaw experienced strong demand as consumers continued to eat-at-home, particularly over the holiday period. Loblaw’s focus
on retail excellence resulted in operational and financial improvements, despite supply chain and inflationary pressures. Loblaw’s
food retail performance was strong, driven by impactful promotional strategies, and benefited from the return of price-sensitive
customers. Loblaw’s drug retail sales benefited from the loosening of social restrictions in the quarter. Loblaw’s drug retail
business continued to play an important role in supporting communities nationwide with COVID-19 testing and vaccine
services. Additionally, Loblaw continued to progress its ambitious Environmental, Social and Governance (“ESG”) program by
announcing its intention to reach net-zero carbon emissions by 2050.
Choice Properties posted solid financial and operational performance driven by its portfolio of high-quality real estate assets.
Choice Properties completed over $275 million of real estate transactions and $115 million of new developments for the
quarter, continuing to improve its portfolio and delivering net asset growth. During the quarter, Choice Properties also advanced
its commitment to sustainability with the inaugural issuance of $350 million of green bonds and by committing to set enhanced
science-based emission reduction targets. Choice Properties’ balance sheet remains strong and is well positioned to support the
continued advancement of development initiatives.
The following is a summary of selected unaudited consolidated financial information for the fourth quarter. The analysis of the
data contained in the table focuses on the results of operations and changes in the financial condition and cash flows in the
fourth quarter.
48 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
The Company’s interest in Weston Foods is presented separately as discontinued operations in the Company’s current and
comparative results. Unless otherwise indicated, all financial information reflects the Company’s results from continuing
operations.
The Company’s results reflect the impact of COVID-19 and the year-over-year impact of the fair value adjustment of Trust Unit
liability.
(unaudited)
($ millions except where otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Depreciation and amortization(i)
Net interest expense and other financing charges
Adjusted net interest expense and other
financing charges(1)
Income taxes
Adjusted income taxes(1)
Adjusted effective tax rate(1)
Net earnings attributable to shareholders
of the Company from continuing operations
Net earnings available to common shareholders
of the Company
Continuing operations
Discontinued operations
Adjusted net earnings available to common
shareholders of the Company(1) from continuing
operations
Diluted net earnings per common share ($)
Continuing operations
Discontinued operations
Adjusted diluted net earnings per
common share(1) from continuing operations ($)
Dividends declared per share ($):
Common shares
Preferred shares – Series I
Preferred shares – Series III
Preferred shares – Series IV
Preferred shares – Series V
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(3,4)
(12 weeks)
(13 weeks)
$ Change
% Change
12,902
1,009
1,453
11.3%
537
190
253
64
204
$
$
$
$
$
$
$
$
13,430
869
1,396
10.4%
532
244
285
137
164
$
$
$
$
$
$
$
$
26.2%
23.6%
(528)
140
57
5
(54)
(32)
(73)
40
(3.9) %
16.1%
4.1%
0.9%
(22.1) %
(11.2) %
(53.3) %
24.4%
428
$
274
$
154
56.2%
217
418
(201)
347
1.44
2.80
(1.36)
2.32
0.600
0.3625
0.3250
0.3250
$
$
$
$
$
$
$
$
$
$
$
$
$
289
264
25
268
1.88
1.72
0.16
$
$
$
$
$
$
$
(72)
154
(226)
79
(0.44)
1.08
(1.52)
(24.9) %
58.3%
(904.0) %
29.5%
(23.4) %
62.8%
(950.0) %
1.74
$
0.58
33.3%
0.550
0.3625
0.3250
0.3250
0.296875
$ 0.296875
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(i)
Depreciation and amortization includes $117 million (2020 – $117 million) of amortization of intangible assets, acquired with Shoppers Drug
Mart, recorded by Loblaw
As a result of the Company’s reporting calendar, the fourth quarter of 2020 included a 53rd week. The 53rd week of 2020
resulted in an additional $878 million of revenue, $67 million of operating income, and net earnings available to common
shareholders of the Company from continuing operations and diluted net earnings per common share from continuing
operations of $18 million and $0.12 per common share, respectively.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 49
Management’s Discussion and Analysis
NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS OF THE COMPANY FROM CONTINUING OPERATIONS
In the fourth quarter of 2021, the Company recorded net earnings available to common shareholders of the Company from
continuing operations of $418 million ($2.80 per common share), an increase of $154 million ($1.08 per common share)
compared to the fourth quarter of 2020. The increase was due to the favourable year-over-year net impact of adjusting items
totaling $75 million ($0.50 per common share) and an improvement in the Company’s consolidated underlying operating
performance of $79 million ($0.58 per common share) described below.
•
The favourable year-over-year net impact of adjusting items totaling $75 million ($0.50 per common share) was due to:
◦
◦
the favourable impact of the recovery related to Glenhuron at Loblaw of $165 million ($1.12 per common share);
and
the favourable year-over-year impact of the fair value adjustment on investment properties of $69 million ($0.46
per common share);
partially offset by,
◦
the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability of $102 million ($0.70
per common share) as a result of the increase in Choice Properties’ unit price in the fourth quarter of 2021; and
the unfavourable year-over-year impact of the fair value adjustment of the forward sale agreement of Loblaw
common shares of $56 million ($0.36 per common share). The Company settled the net debt associated with the
forward sale agreement in the fourth quarter of 2021, see section 1.3 “Consolidated Other Business Matters” and
Section 3.3, “Components of Total Debt” of this MD&A.
The improvement in the Company’s consolidated underlying operating performance of $79 million ($0.58 per common
share), which included the negative year-over-year impact of the 53rd week of $18 million ($0.12 per common share), was
due to:
the favourable underlying operating performance of Loblaw;
the favourable year-over-year impact in Other and Intersegment, primarily driven by the year-over-year impact of
asset impairments, net of recoveries of $25 million, net of tax recorded on consolidation, and the gain related to
Choice Properties’ sale and leaseback transactions of $7 million, net of tax, as described in section 1.3,
“Consolidated Other Business Matters” of this MD&A; and
a decrease in adjusted net interest expense and other financing charges(1);
◦
partially offset by,
◦
an increase in the adjusted effective tax rate(1).
◦
◦
◦
•
•
Diluted net earnings per common share from continuing operations also included the favourable impact of shares
purchased for cancellation over the last 12 months ($0.09 per common share) pursuant to the Company’s NCIB.
Adjusted net earnings available to common shareholders of the Company(1) from continuing operations in the fourth quarter of
2021 were $347 million, an increase of $79 million, or 29.5%, compared to the fourth quarter of 2020. The increase was due to
the improvement in the Company’s consolidated underlying operating performance described above.
Adjusted diluted net earnings per common share(1) from continuing operations in the fourth quarter of 2021 were $2.32 per
common share, an increase of $0.58 per common share, or 33.3%, compared to the fourth quarter of 2020. The increase was due
to the improvement in adjusted net earnings available to common shareholders of the Company(1) from continuing operations
and the favourable impact of share repurchases.
50 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
REVENUE
(unaudited)
($ millions except where otherwise indicated)
Loblaw
Choice Properties
Intersegment
Consolidated
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$ Change
% Change
$
$
$
$
12,757
325
(180)
12,902
$
$
$
$
13,286 $
322 $
(178)
(529)
3
(4.0) %
0.9%
13,430 $
(528)
(3.9) %
Revenue in the fourth quarter of 2021 was $12,902 million, a decrease of $528 million, or 3.9%, compared to the fourth quarter
of 2020, The decrease in revenue was impacted by each of the Company’s reportable operating segments as follows:
•
•
Negatively by 3.9% due to revenue decline of 4.0% at Loblaw, The decline was primarily driven by a decrease in retail sales,
partially offset by an increase in financial services revenue. The decrease in retail sales included the negative year-over-year
impact of the 53rd week of $878 million, positive same-store sales growth and a net increase in retail square footage. Food
retail same-store sales growth was 1.1% (2020 – 8.6%) for the quarter. Sales were impacted by lower eat-at-home trends
after strong growth last year, offset by higher industry inflation levels. On a comparable week basis, food retail basket size
decreased and traffic increased in the quarter. The CPI as measured by The Consumer Price Index for Food Purchased from
Stores was 4.8% (2020 – 1.5%), which was slightly lower than Loblaw’s internal food inflation. Drug retail same-store sales
growth was 7.9% (2020 – 3.7%) for the quarter. Pharmacy same-store sales growth benefited from strong sales in pharmacy
related services. Front store same-store sales growth benefited from the economic re-opening in the third quarter of 2021.
Positively by a nominal amount due to the revenue growth of 0.9% at Choice Properties. The increase of $3 million was
primarily driven by increased occupancy in the industrial portfolio, partially offset by vacancies in the office portfolio.
OPERATING INCOME
(unaudited)
($ millions except where otherwise indicated)
Loblaw
Choice Properties
Other and Intersegment
Consolidated
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$ Change
% Change
$
$
$
$
703
336
(30)
1,009
$
$
$
$
700 $
332 $
(163)
3
4
0.4%
1.2%
869 $
140
16.1%
Operating income in the fourth quarter of 2021 was $1,009 million compared to $869 million in the fourth quarter of 2020, an
increase of $140 million, or 16.1%. The increase was mainly attributable to the favourable year-over-year net impact of adjusting
items totaling $88 million and the improvement in underlying operating performance of $52 million described below:
the favourable year-over-year net impact of adjusting items totaling $88 million was primarily due to:
the favourable year-over-year impact of the fair value adjustment of investment properties of $84 million; and
the favourable year-over-year impact of restructuring and other related costs of $16 million;
•
•
◦
◦
partially offset by,
◦
the unfavourable year-over-year impact of the fair value adjustment of derivatives of $13 million.
the improvement in underlying operating performance of $52 million, which included the negative year-over-year impact of
the 53rd week of $67 million, was due to:
◦
◦
the favourable year-over-year impact in Other and Intersegment, primarily driven by the year-over-year impact of
asset impairments, net of recoveries of $35 million, net of tax recorded on consolidation, and the gain related to
Choice Properties’ Sale and Leaseback Transactions of $7 million, net of tax, as described in Section 1.3
“Consolidated Other Business Matters”; and
the favourable underlying operating performance of Loblaw, including the negative year-over-year impact of the
53rd week;
partially offset by,
◦
an increase in depreciation and amortization at Loblaw.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 51
Management’s Discussion and Analysis
ADJUSTED EBITDA(1)
(unaudited)
($ millions except where otherwise indicated)
Loblaw
Choice Properties
Other and Intersegment
Consolidated
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(3,4)
(12 weeks)
(13 weeks)
$ Change
% Change
$
$
$
$
1,322
229
(98)
1,453
$
$
$
$
1,311 $
226 $
(141)
1,396 $
11
3
57
0.8%
1.3%
4.1%
Adjusted EBITDA(1) in the fourth quarter of 2021 was $1,453 million compared to $1,396 million in the fourth quarter of 2020, an
increase of $57 million, or 4.1%. The increase included the favourable year-over-year impact in Other and Intersegment, as
described above, and was also impacted by each of the Company’s reportable operating segments as follows:
•
•
Positively by 0.8% due to an increase of 0.8% in adjusted EBITDA(1) at Loblaw, primarily driven by improvements in Loblaw
financial services, partially offset by a decline in Loblaw retail. The decrease in Loblaw retail adjusted EBITDA(1) included the
negative year-over-year impact of the 53rd week of $67 million, an increase in retail SG&A, partially offset by an increase in
retail gross profit.
Positively by 0.2% due to an increase of 1.3% in adjusted EBITDA(1) at Choice Properties, primarily driven by the increase in
revenue, a decline in expected credit loss provisions and the reversal of an expected credit loss on a specific mortgage
receivable,
DEPRECIATION AND AMORTIZATION
(unaudited)
($ millions except where otherwise indicated)
Loblaw
Choice Properties
Other and Intersegment
Consolidated
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$ Change
% Change
$
$
$
$
623
—
(86)
537
$
$
$
$
609 $
1 $
(78)
532 $
14
(1)
5
2.3%
(100.0) %
0.9%
Depreciation and amortization in the fourth quarter of 2021 was $537 million, an increase of $5 million compared to the fourth
quarter of 2020. Depreciation and amortization in the fourth quarter included $117 million (2020 – $117 million) of amortization
of intangible assets related to the acquisition of Shoppers Drug Mart recorded by Loblaw. Excluding these amounts,
depreciation and amortization increased in the fourth quarter by $5 million driven by an increase in depreciation of IT and
leased assets at Loblaw and an increase in depreciation in Loblaw financial services due to the launch of the PC Money Account.
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES
(unaudited)
($ millions except where otherwise indicated)
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$ Change
% Change
Net interest expense and other financing charges
$
190
$
(122)
(4)
189
244 $
(20)
61
—
(54)
(102)
(65)
189
(22.1) %
(510.0) %
(106.6) %
100.0%
$
253
$
285 $
(32)
(11.2) %
Add: Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale
agreement for Loblaw common shares
Recovery related to Glenhuron
Adjusted net interest expense and other
financing charges(1)
52 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Net interest expense and other financing charges in the fourth quarter of 2021 were $190 million, a decrease of $54 million
compared to the fourth quarter of 2020. The decrease was primarily due to a decrease in adjusted net interest expense and
other financing charges(1) of $32 million and the favourable year-over-year impact of adjusting items totaling $22 million,
itemized in the table above. Included in the adjusting items was the favourable recovery of interest expense related to
Glenhuron of $189 million, partially offset by the unfavourable year-over-year fair value adjustment of the Trust Unit liability of
$102 million, as a result of the increase in Choice Properties’ unit price in the fourth quarter of 2021. The Company is exposed to
market price fluctuations as a result of units held by unitholders other than the Company which are redeemable for cash at the
option of the holder and are presented as a liability on the Company’s consolidated balance sheet.
Adjusted net interest expense and other financing charges(1) decreased by $32 million, primarily driven by a decrease in interest
expense in Choice Properties, including Other and Intersegment adjustments, mainly driven by the special distribution in the
fourth quarter of 2020.
INCOME TAXES
(unaudited)
($ millions except where otherwise indicated)
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(3,4)
(12 weeks)
(13 weeks)
$ Change
% Change
Income taxes
$
64
$
137
$
Add: Tax impact of items excluded from adjusted
earnings before taxes(i)
Recovery related to Glenhuron
Remeasurement of deferred tax balances
Outside basis difference in certain
Loblaw shares
Adjusted income taxes(1)
11
128
—
1
25
—
(2)
4
$
204
$
164
$
Effective tax rate applicable to earnings before taxes
7.8%
21.9%
Adjusted effective tax rate applicable to adjusted
earnings before taxes(1)
26.2%
23.6%
(73)
(14)
128
2
(3)
40
(53.3) %
(56.0) %
100.0%
100.0%
(75.0) %
24.4%
(i)
See the adjusted EBITDA(1) table and the adjusted net interest expense and other financing charges(1) table included in Section 14, “Non-
GAAP Financial Measures”, of this MD&A for a complete list of items excluded from adjusted earnings before taxes(1).
The effective tax rate in the fourth quarter of 2021 was 7.8%, compared to 21.9% in the fourth quarter of 2020. The decrease was
primarily attributable to a recovery of $128 million related to Glenhuron and the impact of the reversal of the non-deductible
interest related to Glenhuron, partially offset by the impact of the non-taxable fair value adjustment of the Trust Unit liability.
The adjusted effective tax rate(1) for the fourth quarter of 2021 was 26.2%, compared to 23.6% in the fourth quarter of 2020. The
increase was primarily attributable to the unfavourable year-over-year impact of the non-taxable portion of the gain from Choice
Properties’ transactions and the impact of certain other non-deductible items.
DISCONTINUED OPERATIONS Discontinued operations represent the results of Weston Foods, net of intersegment eliminations.
Net loss available to common shareholders of the Company from discontinued operations in the fourth quarter of 2021 was
$201 million ($1.36 per common share) compared to net earnings available to common shareholders of the Company from
discontinued operations of $25 million ($0.16 per common share) in the fourth quarter of 2020, a decrease of $226 million ($1.52
per common share). The decrease included the loss on the sale of Weston Foods of $204 million, after income taxes, recorded in
the fourth quarter of 2021, and the underlying operating performance of Weston Foods.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 53
Management’s Discussion and Analysis
CASH FLOWS The following Cash Flow components are inclusive of continuing and discontinued operations.
(unaudited)
($ millions)
Cash and cash equivalents, beginning of period
Cash flows from operating activities
Cash flows from (used in) investing activities
Cash flows used in financing activities
Effect of foreign currency exchange rate changes on
cash and cash equivalents
Cash and cash equivalents, end of period
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020
(12 weeks)
(13 weeks)
Change
$
$
$
$
$
$
2,013
1,155
687
(872)
1
2,984
$
$
$
$
$
$
2,436 $
1,574 $
(649) $
(779) $
(1) $
2,581 $
(423)
(419)
1,336
(93)
2
403
CASH FLOWS FROM OPERATING ACTIVITIES Cash flows from operating activities were $1,155 million in the fourth quarter of
2021, a decrease of $419 million compared to the fourth quarter of 2020. The decrease in cash flows from operating activities
was primarily due to an increase in credit card receivables from the rise in customer spending and higher income taxes paid.
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Cash flows from investing activities were $687 million in the fourth
quarter of 2021, an increase of $1,336 million compared to the fourth quarter of 2020. The increase in cash flows from investing
activities was primarily due to net consideration received from the disposal of the Weston Foods business.
The following table summarizes the Company’s capital investments by each of its reportable operating segments for the
quarters ended as indicated:
(unaudited)
($ millions)
Loblaw
Choice Properties
Other
Capital Investments from continuing operations
Discontinued operations
Total capital investments
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$
392
$
95
—
487
—
$
487
$
418
161
2
581
54
635
54 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
CASH FLOWS USED IN FINANCING ACTIVITIES Cash flows used in financing activities were $872 million in the fourth quarter of
2021, an increase of $93 million compared to the fourth quarter of 2020. The increase in cash flows used in financing activities
was primarily driven by the net settlement of net debt associated with the equity forward sale agreement, higher repurchases of
the Company’s common shares under its NCIB and higher proceeds received from Choice Properties’ investment property
dispositions in the prior year, partially offset by higher net repayments of debt in the prior year.
FREE CASH FLOW(1)
(unaudited)
($ millions)
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
Change
Cash flows from operating activities
$
1,155
$
1,574 $
Less:
Cash flows from operating activities from discontinued
operations
Cash flows from operating activities from continuing operations
Less:
Interest paid
Capital Investments
Lease payments, net
Free cash flow(1) from continuing operations
$
12
1,143
173
487
202
281
56
1,518
180
581
191
$
566 $
(419)
(44)
(375)
(7)
(94)
11
(285)
The year-over-year decrease in free cash flow(1) from continuing operations in the fourth quarter of 2021 was $285 million,
primarily due to an increase in credit card receivables from the rise in customer spending and higher income taxes paid,
partially offset by lower capital expenditures.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 55
Management’s Discussion and Analysis
5.
Fourth Quarter Results of Reportable Operating Segments
The following discussion provides details of the 2021 fourth quarter results of operations of each of the Company’s reportable
operating segments.
5.1
Loblaw Fourth Quarter Operating Results
(unaudited)
($ millions except where otherwise indicated)
Revenue
Operating income
Adjusted EBITDA(1)
Adjusted EBITDA margin(1)
Depreciation and amortization(i)
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020(3)
(12 weeks)
(13 weeks)
$ Change
% Change
$
$
$
$
12,757
703
1,322
10.4%
623
$
$
$
$
$
$
$
13,286
700
1,311
9.9%
609
$
(529)
3
11
14
(4.0) %
0.4%
0.8%
2.3%
(i) Depreciation and amortization includes $117 million (2020 – $117 million) of amortization of intangible assets acquired with Shoppers
Drug Mart.
Unless otherwise indicated, Loblaw’s operating results include the 53rd week in 2020.
REVENUE Loblaw revenue in the fourth quarter of 2021 was $12,757 million, a decrease of $529 million, or 4.0%, compared
to the fourth quarter of 2020. The decrease was primarily driven by a decrease in retail sales, partially offset by an improvement
in financial services revenue.
Retail sales were $12,486 million, a decrease of $557 million, or 4.3%, compared to the fourth quarter of 2020, which included
the negative impact of the 53rd week in 2020 of $878 million.
•
•
•
food retail sales were $8,742 million (2020 – $9,302 million) and food retail same-store sales growth was 1.1% (2020 – 8.6%)
for the quarter. Sales were impacted by lower eat-at-home trends after strong growth last year, offset by higher industry
inflation levels. The two year food retail sales CAGR was 4.8%. On a comparable week basis, food retail basket size decreased
and traffic increased in the quarter;
the CPI as measured by The Consumer Price Index for Food Purchased from Stores was 4.8% (2020 – 1.5%), which was
slightly lower than Loblaw’s internal food inflation; and
drug retail sales of $3,744 million (2020 – $3,741 million) and drug retail same-store sales growth was 7.9% (2020 – 3.7%) for
the quarter. Pharmacy same-store sales growth benefited from strong sales in pharmacy related services. Front store same-
store sales growth benefited from the economic re-opening in the third quarter of 2021. The two year drug retail sales
CAGR was 5.5%. Pharmacy same-store sales growth was 10.2% (2020 – 5.0%) and front store same-store sales growth was
6.1% (2020 – 2.8%).
In 2021, 23 food and drug stores were opened and 24 food and drug stores were closed, resulting in a net increase in retail
square footage of 0.2 million square feet, or 0.3%.
Financial services revenue in the fourth quarter of 2021 increased by $40 million compared to the fourth quarter of 2020 mainly
due to higher interchange income from an increase in customer spending and higher sales attributable to The Mobile Shop.
OPERATING INCOME Loblaw operating income in the fourth quarter of 2021 was $703 million, an increase of $3 million
compared to the fourth quarter of 2020, which was negatively impacted by $67 million due to the 53rd week in 2020. The
increase in operating income was driven by the favourable year-over-year net impact of adjusting items totaling $6 million,
partially offset by a decline in underlying operating performance of $3 million, as described below:
•
the favourable year-over-year net impact of adjusting items totaling $6 million was primarily due to the following:
the favourable year-over-year impact of restructuring and other related costs of $16 million; and
the favourable year-over-year impact of the fair value adjustment on non-operating properties of $11 million;
the unfavourable year-over-year impact of the fair value adjustment of derivatives of $13 million; and
the unfavourable year-over-year impact in net gain on sale of non-operating properties of $8 million.
partially offset by,
•
an overall decline in the underlying operating performance of retail primarily driven by the 53rd week in 2020. This was
partially offset by improvements in financial services.
56 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
◦
◦
partially offset by,
◦
◦
ADJUSTED EBITDA(1) Loblaw adjusted EBITDA(1) in the fourth quarter of 2021 was $1,322 million. When compared to the fourth
quarter of 2020, this represented an increase of $11 million, or 0.8%, which was negatively impacted by $67 million due to the
53rd week in 2020. The increase in adjusted EBITDA(1) was primarily due to an improvement in financial services of $18 million,
partially offset by a decline in retail of $7 million.
Financial services adjusted EBITDA(1) increased by $18 million compared to the fourth quarter of 2020, primarily driven by higher
revenue as described above, the reversal of commodity taxes that were accrued in the amount of $27 million, lower contractual
charge-off and lower funding costs. This was partially offset by higher loyalty program costs and operating costs.
Retail adjusted EBITDA(1) in the fourth quarter of 2021 decreased by $7 million, which included the negative impact of the 53rd
week in 2020 of $67 million. The decrease was driven by an increase in retail SG&A of $34 million, partially offset by an increase
in retail gross profit of $27 million.
•
•
retail SG&A as a percentage of sales was 20.9%, an increase of 110 basis points compared to the fourth quarter of 2020. The
unfavourable increase of 110 basis points was primarily driven by higher expenses related to the normalization of post-
lockdown operating conditions, corporate costs including network optimization costs and higher costs incurred in drug
retail from providing pharmacy related services, partially offset by a reduction in COVID-19 costs.
retail gross profit percentage of 30.9% increased by 150 basis points compared to the fourth quarter of 2020, from
favourable changes in sales mix in both food and drug retail and improved business initiatives.
Loblaw adjusted EBITDA(1) included no impact in the fourth quarter of 2021 and 2020 related to the sale and leaseback of
properties to Choice Properties.
DEPRECIATION AND AMORTIZATION Loblaw’s depreciation and amortization in the fourth quarter of 2021 was $623 million,
an increase of $14 million compared to the fourth quarter of 2020. The increase in depreciation and amortization in the fourth
quarter of 2021 was primarily driven by an increase in depreciation of IT and leased assets and an increase in depreciation in
financial services due to the launch of the PC Money Account.
Depreciation and amortization in the fourth quarter of 2021 included $117 million (2020 – $117 million) of amortization of
intangible assets related to the acquisition of Shoppers Drug Mart.
CONSOLIDATION OF FRANCHISES Loblaw recorded a net loss attributable to non-controlling interests of $28 million in the
fourth quarter of 2021. When compared to the fourth quarter of 2020, this represented a decrease of $74 million or 160.9%.
Loblaw’s franchisee earnings are impacted by the timing of when profit sharing with franchisees is agreed and finalized under
the terms of the agreements.
LOBLAW OTHER BUSINESS MATTERS
For details see Section 2.1, “Loblaw Operating Results”, of this MD&A.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 57
Management’s Discussion and Analysis
5.2
Choice Properties Fourth Quarter Operating Results
(unaudited)
Quarters Ended
Dec. 31, 2021
Dec. 31, 2020
($ millions except where otherwise indicated)
(12 weeks)
(12 weeks)
$ Change
% Change
Revenue
Net interest expense and other financing charges(i)
Net (loss) income
Funds from Operations(1)
$
$
$
$
325
499
(162)
175
$
$
$
$
322 $
217 $
117 $
172 $
3
282
(279)
3
0.9%
130.0%
(238.5) %
1.7%
(i) Net interest expense and other financing charges includes a fair value adjustment on Exchangeable Units.
REVENUE Revenue in the fourth quarter of 2021 was $325 million, an increase of $3 million, or 0.9%, compared to the fourth
quarter of 2020, and included $183 million (2020 – $180 million) generated from tenants within Loblaw retail. The increase in
revenue was primarily driven by increased occupancy in the industrial portfolio, partially offset by vacancies in the office
portfolio.
NET INTEREST EXPENSE AND OTHER FINANCING CHARGES Net interest expense and other financing charges in the fourth
quarter of 2021 were $499 million compared to $217 million in the fourth quarter of 2020. The increase of $282 million was
primarily driven by the unfavourable year-over-year impact of the fair value adjustment on Exchangeable Units of $285 million.
NET (LOSS) INCOME Net loss in the fourth quarter of 2021 was $162 million, compared to net income of $117 million in the
fourth quarter of 2020. The decrease of $279 million was primarily driven by higher interest expense and other financing charges
as described above.
FUNDS FROM OPERATIONS(1) Funds from Operations(1) in the fourth quarter of 2021 was $175 million, an increase of $3 million
compared to the fourth quarter of 2020, primarily driven by an increase in rental revenue as described above, a decline in
expected credit loss provisions and the reversal of an expected credit loss on a specific mortgage receivable, partially offset by
fees incurred on the early repayment of a debenture.
CHOICE PROPERTIES OTHER BUSINESS MATTERS
For details see Section 2.2 “Choice Properties Operating Results”, of this MD&A.
6.
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of disclosure controls and procedures to provide
reasonable assurance that all material information relating to the Company and its subsidiaries is gathered and reported to
senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.
As required by National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” (“NI 52-109”) the
Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) caused the effectiveness of the disclosure controls and
procedures to be evaluated. Based on that evaluation, they concluded that the design and operation of the system of disclosure
controls and procedures were effective as at December 31, 2021.
58 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
7.
Internal Control Over Financial Reporting
Management is also responsible for establishing and maintaining adequate internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for
external purposes in accordance with IFRS.
As required by NI 52-109, the Chairman and CEO and the CFO have caused the effectiveness of the internal controls over
financial reporting to be evaluated using the framework established in ‘Internal Control - Integrated Framework (COSO
Framework)’ published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO), 2013. Based on
that evaluation, they have concluded that the design and operation of the Company’s internal controls over financial reporting
were effective as at December 31, 2021.
In designing such controls, it should be recognized that due to inherent limitations, any control, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives and may not prevent or detect
misstatements. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Additionally, management is required to use judgment in evaluating controls and procedures.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in the Company’s internal controls
over financial reporting in 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 59
Management’s Discussion and Analysis
8.
Enterprise Risks and Risk Management
The Company is committed to maintaining a framework that ensures risk management is an integral part of its activities. The
Company’s Enterprise Risk Management (“ERM”) program assists all areas of the business in managing risks within appropriate
levels of tolerance by bringing a systematic approach and methodology for evaluating, measuring and monitoring key risks. The
results of the ERM program and other business planning processes are used to identify emerging risks to the Company, prioritize
risk mitigation activities and develop a risk-based internal audit plan.
Risks are not eliminated through the ERM program, but rather, are identified and managed in line with the Company’s Risk
Appetite Statement and within approved risk tolerances. The Risk Appetite Statement articulates key aspects of the Company’s
businesses, values and brands, and provides directional guidance on risk taking.
(i) Risks are assessed and evaluated based on the Company’s vulnerability to the risk and the potential impact that the underlying risks would
have on the Company’s ability to execute on its strategies and achieve its objectives.
(ii) Any of the key risks have the potential to negatively affect the Company and its financial performance. The Company has risk management
strategies in place for key risks. However, there can be no assurance that the risks will be mitigated or will not materialize or that events or
circumstances will not occur that could adversely affect the reputation, operations or financial condition or performance of the Company.
60 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
8.1
COVID-19 Risks and Risk Management
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. Since the onset of the pandemic, the
Company and its operating segments have taken and will continue to take actions to mitigate the effects of COVID-19 on day-
to-day business operations, with the best interests of its employees, customers, tenants, suppliers and other stakeholders at the
crux of every decision.
The duration and full impact of the COVID-19 pandemic remains unknown at this time. As such, it is not possible to reliably
estimate the length and severity of COVID-19 related impacts on the future financial results and operations of the Company. The
Company continues to closely monitor the situation as it continues to evolve and may take further actions in response to
directives of government and public health authorities or that the Company believes are in the best interests of its colleagues,
customers, suppliers or other stakeholders, as necessary.
Loblaw remains committed to keeping its grocery stores and pharmacies, including its Shoppers Drug Mart locations, open and
stocked, all while ensuring appropriate measures are in place to protect the health and safety of its frontline colleagues and
customers. A dedicated COVID-19 response team established by its management in the early stages of the pandemic continues
to coordinate Loblaw’s response. Loblaw also remains dedicated to promoting the health of the communities in which it
operates and has played an important role in administering COVID-19 testing and vaccinations in Canada.
Choice Properties introduced several protocols to protect its employees, tenants and guests including mandating that
employees work from home to the full extent possible, increasing sanitation and health and safety measures at its properties
and restricting access to its office buildings. Choice Properties established a COVID-19 response team to coordinate critical
aspects of crisis management and continues to actively execute its pandemic plan to ensure business continuity while
safeguarding the well-being of its employees, tenants, and guests. As the pandemic evolves, Choice Properties continues to
support its tenants and employees. Choice Properties implemented additional safety measures at all of its properties, including
increased frequency in cleaning and disinfecting as well as physical distancing practices and offering COVID-19 testing at certain
of its properties.
The COVID-19 pandemic has influenced and may continue to influence several of the risk factors set out in the “Operating Risks
and Risk Management” and “Financial Risks and Risk Management” sections below and in the AIF. Changes in the Company’s
operations in response to COVID-19 could materially impact financial results and may include temporary closures of facilities,
temporary or long-term labour shortages or disruptions, temporary or long-term impacts on supply chains and distribution
channels, temporary or long-term restrictions on cross-border commerce and travel including mandatory quarantine periods,
greater currency volatility, and increased risks to IT systems, networks and digital services. In addition, the COVID-19 pandemic
has changed consumer behaviours and accelerated the advancement of disruptive technologies and has resulted in a
significant increase in e-commerce competition. The Company’s inability to keep up with the pace of such behavioural changes
or technological advancements or with its competitors could adversely affect the Company’s operations or financial
performance. The Company’s performance may also be affected by the availability and efficacy of vaccines, including booster
shots, and the effectiveness of plans to administer those vaccines across the country.
The continuing spread of COVID-19 has caused economic uncertainty and increased volatility in financial markets. Governments
and central banks have responded with monetary and fiscal interventions intended to stabilize economic conditions. Although
the ultimate impact of COVID-19 on the global economy and its duration remains uncertain, disruptions caused by COVID-19
may adversely affect the performance of the Company.
Uncertain economic conditions resulting from the COVID-19 pandemic may, in the short or long term, adversely impact
operations and the financial performance of the Company, including by adversely impacting demand for certain of the
Company’s products and services and/or the debt and equity markets. Governmental interventions aimed at containing
COVID-19 could also impact the Company’s available workforce, its supply chain and distribution channels, the products and
services it is able to offer and/or its ability to engage in cross-border commerce.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 61
Management’s Discussion and Analysis
8.2
Operating Risks and Risk Management
OPERATING RISKS The following risks are a subset of the key risks identified through the ERM program. They should be read in
conjunction with the full set of risks inherent in the Company’s business, as included in the Company’s Annual Information Form
(“AIF”) for the year ended December 31, 2021, which is hereby incorporated by reference:
Cybersecurity, Privacy and Data Breaches
Property Development and Construction
Distribution and Supply Chain
Environmental and Social
Employee Attraction, Development and Succession Planning
Economic Conditions
Electronic Commerce and Disruptive Technologies
Inventory Management
IT Systems Implementation and
Service Providers
Data Management
Healthcare Reform
Competitive Environment and Strategy
Food, Drug, Product and Services Safety
Labour Relations
Legal Proceedings
Property Valuation
Capitalization Rate Risk
Franchisee Relationships
Associate-owned Drug Store Network and Relationships
with Associates
Change Management, Process and Efficiency
Tenant Concentration
Execution of Strategic Initiatives
Regulatory Compliance
CYBERSECURITY, PRIVACY AND DATA BREACHES The Company depends on the uninterrupted operation of its IT systems,
networks and services including internal and public internet sites, data hosting and processing facilities, and cloud-based
services and hardware, such as point-of-sale processing at stores, to operate its business.
In the ordinary course of business, the Company collects, processes, transmits and retains confidential, sensitive and personal
information (“Confidential Information”), including payment card industry data and personal health and financial information
regarding the Company and its employees, franchisees, Associates, vendors, customers, patients, credit card and PC Money
Account holders and loyalty program members. Some of this Confidential Information is held and managed by third party
service providers. As with other large companies, the Company is regularly subject to cyberattacks and such attempts are
occurring more frequently, are constantly evolving in nature and are becoming more sophisticated.
The Company has implemented security measures, including employee training, monitoring and testing, maintenance of
protective systems and contingency plans, to protect and to prevent unauthorized access of Confidential Information and to
reduce the likelihood of disruptions to its IT systems. The Company continues to make strategic investments in this area in order
to mitigate cyber threats. The Company also has security processes, protocols and standards that are applicable to its third party
service providers.
Despite these measures, all of the Company’s information systems, including its back-up systems and any third party service
provider systems that it employs, are vulnerable to damage, interruption, disability or failures due to a variety of reasons,
including physical theft, electronic theft, fire, power loss, computer and telecommunication failures or other catastrophic events,
as well as from internal and external security breaches, denial of service attacks, viruses, worms and other known or unknown
disruptive events.
The Company or its third party service providers may be unable to anticipate, timely identify or appropriately respond to one or
more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may
attempt to breach the Company’s security measures or its third party service providers’ information systems.
As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber threats might
defeat the Company’s security measures or those of its third party service providers. Moreover, employee error or malfeasance,
faulty password management or other irregularities may result in a breach of the Company’s or its third party service providers’
security measures, which could result in a breach of employee, franchisee, Associate, customer, patient, credit card or PC Money
Account holder or loyalty program member privacy or Confidential Information.
If the Company does not allocate and effectively manage the resources necessary to build and sustain reliable IT infrastructure,
fails to timely identify or appropriately respond to cybersecurity incidents, or the Company’s or its third party service providers’
information systems are damaged, destroyed, shut down, interrupted or cease to function properly, the Company’s business
could be disrupted and the Company could, among other things, be subject to: transaction errors; processing inefficiencies; the
loss of, or failure to attract new customers; the loss of revenue; the loss or unauthorized access to Confidential Information or
other assets; the loss of or damage to intellectual property or trade secrets; damage to its reputation; litigation; regulatory
enforcement actions; violation of privacy, security or other laws and regulations; and remediation costs. Any such occurrences
could adversely affect the reputation, operations or financial performance of the Company.
62 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
DISTRIBUTION AND SUPPLY CHAIN Loblaw’s ability to satisfy its customers’ demands and achieve its cost objectives depends
on its ability to maintain key logistic and transport arrangements. Loblaw’s distribution and supply chain could be negatively
affected by unforeseen disruptions due to fire, severe weather conditions, natural disasters, or other catastrophic events, public
health events, labour disagreements, or other transportation problems. The loss of or disruption to these types of arrangements
could interrupt product supply, which in turn could adversely affect the assortment and product availability at the store and
digital retail level. If not effectively managed or remedied, these events could negatively impact customer experience and
Loblaw’s ability to attract and retain customers, and could adversely affect the Company’s operations or financial performance.
EMPLOYEE ATTRACTION, DEVELOPMENT AND SUCCESSION PLANNING The Company’s operations and continued growth are
dependent on its ability to hire, retain and develop its leaders and other key personnel, including those with scarce and/or
specialized skill sets. Any failure to effectively attract and retain talented and experienced colleagues and to establish adequate
succession planning and retention strategies could result in a lack of requisite knowledge, skill and experience. This could erode
the Company’s competitive position or result in increased costs, competition for or high turn-over of colleagues. Any of the
foregoing could negatively affect the Company’s ability to operate its businesses and execute its strategies, which in turn, could
adversely affect the Company’s reputation, operations or financial performance.
ELECTRONIC COMMERCE AND DISRUPTIVE TECHNOLOGIES Loblaw’s e-commerce strategy is a growing business initiative.
Customers expect innovative concepts and a positive customer experience, including a user-friendly website, customer offerings
that are integrated with Loblaw’s loyalty program, reliable data, safe and reliable processing of payments and a well-executed
merchandise pick up or delivery process. If systems are damaged or cease to function properly, capital investment may be
required. Loblaw is also vulnerable to various additional uncertainties associated with e-commerce including website downtime
and other technical failures, changes in applicable federal and provincial regulations, security breaches, and consumer privacy
concerns. If these technology-based systems and related processes do not function effectively, or if Loblaw is unable to identify
and adapt to technological efficiencies, such as artificial/cognitive intelligence or automation in a timely manner, Loblaw’s ability
to grow its e-commerce business could be adversely affected. Loblaw has increased its investment in improving the digital
customer experience, but there can be no assurances that Loblaw will be able to recover the costs incurred to date.
A large portion of Choice Properties’ existing real estate portfolio is comprised of necessity-based retail tenants. Shifting
consumer preferences toward e-commerce may result in a decrease in the demand for physical space by retail tenants. The
failure of Choice Properties to adapt to changes in the retail landscape, including finding new tenants to replace any lost income
stream from existing tenants that reduce the amount of physical space they rent from Choice Properties, could adversely affect
Choice Properties’ operations or financial performance.
IT SYSTEMS IMPLEMENTATION AND DATA MANAGEMENT The operations of the Company are reliant on the continuous and
uninterrupted operations of critical technology systems. Any technology failure/outage pertaining to the availability, capacity or
sustainability of the Company’s IT systems may result in disruptions impacting the Company’s customers or financial
performance, or may negatively impact the Company’s reputation. The Company continues to make investments in new IT
systems to improve the operating effectiveness of the organization. Failure to successfully migrate from legacy systems to new IT
systems or a significant disruption in the Company’s current IT systems during the implementation of new systems could result
in a lack of accurate data to effectively manage day-to-day operations of the business or achieve its operational objectives,
causing significant disruptions to the business and potential financial losses.
Failure to successfully adopt or implement appropriate processes to support the new IT systems, or failure to effectively leverage
or convert data from one system to another, may preclude the Company from optimizing its overall performance and could
result in inefficiencies and duplication in processes, which in turn could adversely affect the reputation, operations or financial
performance of the Company. Failure to realize the anticipated strategic benefits including revenue growth, anticipated cost
savings or operating efficiencies associated with new IT systems could adversely affect the reputation, operations or financial
performance of the Company.
The Company also depends on relevant and reliable information to operate its business. As the volume of data being generated
and reported continues to increase across the Company, data accuracy, quality and governance are required for effective
decision making. Failure by the Company to leverage data, including customer data, in a timely manner may adversely affect the
Company’s ability to execute its strategy and therefore its financial performance. Moreover, lack of sensitive data classification,
protection and use case approval may result in operational or reputational risk.
HEALTHCARE REFORM Loblaw is reliant on prescription drug sales for a significant portion of its sales and profits. Prescription
drugs and their sales are subject to numerous federal, provincial, territorial and local laws and regulations. Changes to these laws
and regulations, including the potential implementation of a national pharmacare system, changes in the models used to fund
prescription drugs such as the introduction of a pharmacare system, or non-compliance with these laws and regulations, could
adversely affect the reputation, operations or financial performance of the Company.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 63
Management’s Discussion and Analysis
Federal and provincial laws and regulations that establish public drug plans typically regulate prescription drug coverage,
patient eligibility, pharmacy reimbursement, drug product eligibility and drug pricing. With respect to pharmacy
reimbursement, such laws and regulations typically regulate the allowable drug cost of a prescription drug product, the
permitted mark-up on a prescription drug product and the professional or dispensing fees that may be charged on prescription
drug sales to patients eligible under the public drug plan. With respect to drug product eligibility, such laws and regulations
typically regulate the requirements for listing the manufacturer’s products as a benefit or partial benefit under the applicable
governmental drug plan, drug pricing and, in the case of generic prescription drug products, the requirements for designating
the product as interchangeable with a branded prescription drug product. In addition, other federal, provincial, territorial and
local laws and regulations govern the approval, packaging, labeling, sale, marketing, advertising, handling, storage, distribution,
dispensing and disposal of prescription drugs.
Sales of prescription drugs, pharmacy reimbursement and drug prices may be affected by changes to the health care industry,
including legislative or other changes that impact patient eligibility, drug product eligibility, the allowable cost of a prescription
drug product, the mark-up permitted on a prescription drug product, the amount of professional or dispensing fees paid by
payers or the provision or receipt of manufacturer allowances by pharmacies and pharmacy suppliers.
The majority of prescription drug sales are reimbursed or paid by three types of payers: (i) government or public, (ii) private
insurers or employers, and (iii) out-of-pocket by the patient. These payers have pursued and continue to pursue measures to
manage the costs of their drug plans. Canada and each of the provinces has implemented legislative and/or other measures
directed towards managing pharmacy service costs and controlling increasing drug costs incurred by public drug plans and
private payers, which impact pharmacy reimbursement levels and the availability of manufacturer allowances. Legislative
measures to control drug costs include lowering of generic drug pricing. Additionally, the pan-Canadian Pharmaceutical
Alliance continues its work regarding cost reduction initiatives for pharmaceutical products and services.
Legislation in certain provincial jurisdictions establishes listing requirements that ensure that the selling price for a prescription
drug product will not be higher than any selling price established by the manufacturer for the same prescription drug product
under other provincial drug insurance programs. In some provinces, elements of the laws and regulations that impact pharmacy
reimbursement and manufacturer allowances for sales to the public drug plans are extended by legislation to sales to private
payers. Also, private payers (such as corporate employers and their insurers) are looking or may look to benefit from any
measures implemented by government payers to reduce prescription drug costs for public plans by attempting to extend these
measures to prescription drug plans they own or manage. Accordingly, changes to pharmacy reimbursement and manufacturer
allowances for a public drug plan could also impact pharmacy reimbursement and manufacturer allowances for private payers.
In addition, private payers could reduce pharmacy reimbursement for prescription drugs provided to their members or could
elect to reimburse members only for products included on closed formularies or available from preferred providers.
Changes impacting pharmacy reimbursement programs and prescription drug pricing, legislative or otherwise, are expected to
continue to put downward pressure on the value of prescription drug sales. These changes may have a material adverse effect
on Loblaw’s business, sales and profitability. In addition, Loblaw could incur significant costs in the course of complying with any
changes in the regulatory regime affecting prescription drugs and pharmacy services. Non-compliance with any such existing or
proposed laws or regulations, particularly those that provide for the licensing and conduct of wholesalers, the licensing and
conduct of pharmacists, the regulation and ownership of pharmacies, the advertising of pharmacies and prescription services,
the provision of information concerning prescription drug products, the pricing of prescription drugs, privacy and confidentiality
and interactions with provincial drug and eHealth systems, could result in audits, civil or regulatory proceedings, fines, penalties,
injunctions, recalls or seizures, any of which could adversely affect the reputation, operations or financial performance of the
Company.
COMPETITIVE ENVIRONMENT AND STRATEGY The Company operates in highly competitive industries.
Loblaw competes against a wide variety of retailers including supermarket and retail drug store operators, as well as mass
merchandisers, warehouse clubs, online retailers, mail order prescription drug distributors, limited assortment stores, discount
stores, convenience stores and specialty stores. Many of these competitors offer a selection of food, drug and general
merchandise, while others remain focused on supermarket-type merchandise. In addition, Loblaw is subject to competitive
pressures from new entrants into the marketplace and from the expansion or renovation of existing competitors, particularly
those expanding into the grocery and retail drug markets and those offering e-commerce retail platforms. Loblaw’s loyalty
program is a valuable offering to customers and provides a key differentiating marketing tool for the business. The marketing,
promotional and other business activities related to Loblaw’s loyalty program must be well managed and coordinated to
preserve positive customer perception. Loblaw has made significant investments in support of its strategic growth areas of
Everyday Digital Retail, Payments and Rewards and Connected Healthcare, which are all subject to competitive pressures.
Failure to achieve these or other strategic priorities could adversely affect the Company’s financial position and its
competitiveness.
64 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Loblaw’s inability to effectively predict market activity, leverage customer preferences and spending patterns and respond in a
timely manner to trends, or compete effectively with its current or future competitors could result in, among other things,
reduced market share and reduced profitability. If Loblaw is ineffective in responding to consumer trends or in executing its
strategic plans, its financial performance could be adversely affected. Loblaw’s failure to effectively respond to customer trends
may adversely impact Loblaw’s relationship with its customers. Loblaw closely monitors market developments and market share
trends.
Choice Properties competes with other investors, developers, managers and owners of properties in seeking tenants and for the
purchase and development of desirable real estate properties. Competitors may have newer or better located properties, greater
financial or other resources, or greater operating flexibility than Choice Properties. An increase in the availability of funds for
investment or an increase in interest in real estate property investments may increase the competition for real estate property
investments, thereby increasing purchase prices and reducing the yield on the investment. Increased competition to lease
properties could adversely impact Choice Properties’ ability to find suitable tenants at the appropriate rent and may negatively
impact the financial performance of Choice Properties.
Failure by Loblaw or Choice Properties to sustain their competitive position could adversely affect the Company’s financial
performance.
FOOD, DRUG, PRODUCT AND SERVICES SAFETY Loblaw’s products may expose it to risks associated with product safety and
defects and product handling in relation to the manufacturing, design, packaging and labeling, storage, distribution, and display
of products. Loblaw cannot be certain that active management of these risks, including maintaining strict and rigorous controls
and processes in its manufacturing facilities and distribution systems, will eliminate all the risks related to food and product
safety. Loblaw could be adversely affected in the event of a significant outbreak of food-borne illness or food safety issues,
including food tampering or contamination. In addition, failure to trace or locate any contaminated or defective products could
affect Loblaw’s ability to be effective in a recall situation. Loblaw is also subject to risk associated with the distribution of drug
products, errors related to medication dispensing or compounding, injections, patient services or consultation. The occurrence of
such events or incidents, as well as any failure to maintain the cleanliness and health standards at Loblaw’s store level, could
result in harm to customers and negative publicity, could adversely affect the Company’s brands, reputation, operations or
financial performance and could lead to unforeseen liabilities from legal claims or otherwise.
LABOUR RELATIONS Loblaw’s workforce is comprised of both unionized and non-unionized colleagues. With respect to those
colleagues that are covered by collective agreements, there can be no assurance as to the outcome of any labour negotiations or
the timing of their completion. Renegotiating collective agreements or the failure to successfully renegotiate collective
agreements and changes to business operations could result in strikes, work stoppages or business interruptions, and if any of
these events were to occur, they could adversely affect the reputation, operations and financial performance of Loblaw and the
financial performance of the Company. If non-unionized colleagues become unionized, the terms of the resulting collective
agreements would have implications for the affected operations such as higher labour costs.
LEGAL PROCEEDINGS In the ordinary course of business, the Company is involved in and potentially subject to legal
proceedings. The proceedings may involve suppliers, customers, patients, Associates, franchisees, regulators, tax authorities or
other persons. The potential outcome of legal proceedings and claims is uncertain.
Shoppers Drug Mart has been served with an Amended Statement of Claim in a class action proceeding that has been filed in
the Ontario Superior Court of Justice (“Superior Court”) by two licensed Associates, claiming various declarations and damages
resulting from Shoppers Drug Mart’s alleged breaches of the Associate Agreement, in the amount of $500 million. The class
action comprises all of Shoppers Drug Mart’s current and former licensed Associates residing in Canada, other than in Québec,
who are parties to Shoppers Drug Mart’s 2002 and 2010 forms of the Associate Agreement. On July 9, 2013, the Superior Court
certified as a class proceeding portions of the action. The Superior Court imposed a class closing date based on the date of
certification. New Associates after July 9, 2013 are not members of the class. Loblaw believes this claim is without merit and is
vigorously defending it. Loblaw does not currently have any significant accruals or provisions for this matter recorded in the
consolidated financial statements.
In 2017, the Company and Loblaw announced actions taken to address their role in an industry-wide price-fixing arrangement
involving certain packaged bread products. The arrangement involved the coordination of retail and wholesale prices of certain
packaged bread products over a period extending from late 2001 to March 2015. Under the arrangement, the participants
regularly increased prices on a coordinated basis. Class action lawsuits have been commenced against the Company and
Loblaw as well as a number of other major grocery retailers and another bread wholesaler. It is too early to predict the outcome
of such legal proceedings. Neither the Company nor Loblaw believes that the ultimate resolution of such legal proceedings will
have a material adverse impact on its financial condition or prospects. The Company’s cash balances far exceed any realistic
damages scenario and therefore it does not anticipate any impacts on its or Loblaw’s dividend, dividend policy or share buyback
plans. The Company has not recorded any amounts related to the potential civil liability associated with the class action lawsuits
in 2021 or prior on the basis that a reliable estimate of the liability cannot be determined at this time. The Company and Loblaw
will continue to assess whether a provision for civil liability associated with the class action lawsuits can be reliably estimated
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 65
Management’s Discussion and Analysis
and will record an amount in the period at the earlier of when a reliable estimate of liability can be determined or the matter is
ultimately resolved. As a result of admission of participation in the arrangement and cooperation in the Competition Bureau’s
investigation, the Company and Loblaw will not face criminal charges or penalties.
In August 2018, the Province of British Columbia filed a class action against numerous opioid manufacturers and distributors,
including Loblaw and its subsidiaries, Shoppers Drug Mart Inc. and Sanis Health Inc. The claim contains allegations of breach of
the Competition Act, fraudulent misrepresentation and deceit and negligence, and seeks unquantified damages for the
expenses incurred by the federal government, provinces, and territories of Canada in paying for opioid prescriptions and other
healthcare costs related to opioid addiction and abuse in Canada. During the second quarter of 2021, the claim against Loblaw
Companies Limited was discontinued. In May 2019, two further opioid-related class actions were commenced in each of Ontario
and Quebec against a large group of defendants, including Sanis Health Inc. In December 2019, a further opioid-related class
action was commenced in British Columbia against a large group of defendants, including Sanis Health Inc., Shoppers Drug
Mart Inc. and Loblaw. The allegations in the Ontario, Quebec and the civil British Columbia class actions are similar to the
allegations against manufacturer defendants in the Province of British Columbia class action, except that these May 2019 and
December 2019 claims seek recovery of damages on behalf of opioid users directly. In April 2021, Loblaw, Shoppers Drug Mart
Inc., and Sanis Health Inc. were served with another opioid-related class action that was started in Alberta against multiple
defendants. The claim seeks damages on behalf of municipalities and local governments in relation to public safety, social
service, and criminal justice costs allegedly incurred due to the opioid crisis. In September 2021, Loblaw, Shoppers Drug Mart Inc.
and Sanis Health Inc. were served with a class action started by Peter Ballantyne Cree Nation and Lac La Ronge Indian Band on
behalf of all Indigenous, Metis, First Nation and Inuit communities and governments in Canada to recover costs they have
incurred as a result of the opioid crisis, including healthcare costs, policing costs and societal costs. Loblaw believes these
proceedings are without merit and is vigorously defending them. Loblaw does not currently have any significant accruals or
provisions for these matters recorded in the consolidated financial statements.
Loblaw had been reassessed by the Canada Revenue Agency and the Ontario Ministry of Finance on the basis that certain
income earned by Glenhuron, a wholly owned Barbadian subsidiary of Loblaw that was wound up in 2013, should be treated,
and taxed, as income in Canada. The reassessments, which were received between 2015 and 2019, are for the 2000 to 2013
taxation years. On September 7, 2018, the Tax Court released its decision relating to the 2000 to 2010 taxation years. The
Tax Court ruled that certain income earned by Glenhuron should be taxed in Canada based on a technical interpretation
of the applicable legislation. On October 4, 2018, Loblaw filed a Notice of Appeal with the Federal Court of Appeal. On
October 15, 2019, the matter was heard by the Federal Court of Appeal and on April 23, 2020, the Federal Court of Appeal
released its decision and reversed the decision of the Tax Court. On October 29, 2020, the Supreme Court granted the Crown
leave to appeal. On May 13, 2021, the Crown’s appeal was heard by the Supreme Court and on December 3, 2021, the Supreme
Court dismissed the Crown’s appeal. As a result, Loblaw has reversed $301 million of previously recorded charges, of which
$173 million is recorded as interest income and $128 million is recorded as income tax recovery.
PROPERTY VALUATION Choice Properties conducts a valuation assessment of its properties on a quarterly basis. As property
values fluctuate over time in response to market factors, or as underlying assumptions and inputs to the valuation model
change, the fair value of Choice Properties’ portfolio could change materially. Choice Properties is responsible for the
reasonableness of the assumptions and for the accuracy of the inputs into the property valuation model. Errors in the inputs to
the valuation model or inappropriate assumptions may result in an inaccurate valuation of the properties. In addition to a
market activity report that is tailored to Choice Properties’ portfolio, management uses the market information obtained in
external appraisals, across multiple firms, commissioned during the reporting period to assess whether changes to market-
related assumptions are required for the balance of the portfolio. Choice Properties is responsible for monitoring the value of its
portfolio going forward and evaluating the impact of any changes in property value over time. Any changes in the value of the
properties may impact unitholder value.
A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the
underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by the
above-mentioned valuations.
CAPITALIZATION RATE RISK The fair market property valuation process is dependent on several inputs, including the current
market capitalization rate. Risks associated with Choice Properties’ property valuation model include fluctuations in the current
market capitalization rate which can significantly impact the value of Choice Properties’ overall real estate portfolio. In addition,
Choice Properties is subject to certain financial and non-financial covenants in Choice Properties’ existing financial instruments
that include maintaining certain leverage ratios. Changes in the market capitalization rate could impact Choice Properties’
property valuation which in turn could impact financial covenants.
PROPERTY DEVELOPMENT AND CONSTRUCTION Choice Properties engages in development, redevelopment and major
renovation activities with respect to certain properties. It is subject to certain risks, including: (a) the availability and pricing of
financing on satisfactory terms or availability at all; (b) the availability and timely receipt of zoning, occupancy, land use and
other regulatory and governmental approvals; (c) changes in zoning and land use laws; (d) the ability to achieve an acceptable
level of occupancy upon completion; (e) the potential that Choice Properties may fail to recover expenses already incurred if it
66 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
abandons redevelopment opportunities after commencing to explore them; (f) the potential that Choice Properties may expend
funds on and devote management time to projects which are not completed; (g) construction or redevelopment costs of a
project, including rising construction costs and development charges and shortages of experienced labour in certain
construction related trades, may exceed original estimates, possibly making the project less profitable than originally estimated,
or unprofitable; (h) the time required to complete the construction or redevelopment of a project or to lease-up the completed
project may be greater than originally anticipated, thereby adversely affecting Choice Properties’ cash flows and liquidity; (i) the
cost and timely completion of construction (including risks beyond Choice Properties’ control, such as weather, labour
conditions or material shortages); (j) contractor and subcontractor disputes, strikes, labour disputes or supply disruptions;
(k) occupancy rates and rents of a completed project may not be sufficient to make the project profitable; (l) Choice Properties’
ability to dispose of properties redeveloped with the intent to sell could be impacted by the ability of prospective buyers to
obtain financing given the current state of the credit markets; and (m) the availability and pricing of financing to fund Choice
Properties’ development activities on favourable terms or availability at all.
The above risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the
initiation of development activities or the completion of development activities once undertaken. In addition, development
projects entail risks that investments may not perform in accordance with expectations and can carry an increased risk of
litigation (and its accompanying risks) with contractors, subcontractors, suppliers, partners and others. Any failure by Choice
Properties to develop quality assets and effectively manage all development, redevelopment and major renovation initiatives
may negatively impact the reputation and financial performance of the Company.
ENVIRONMENTAL AND SOCIAL The Company and its operating segments are committed to creating positive environmental
and social change by focusing on issues that matter most to the Company’s customers, employees, communities and other
stakeholders, with a particular focus on combatting climate change and advancing social equity. Any failure or perceived failure
to advance the environmental and social priorities of the Company or its stakeholders may negatively affect the Company’s
reputation, operations or financial performance.
Environmental
The Company and its operating segments face environmental risks that could, directly or indirectly, negatively impact the
Company’s reputation, operations or performance over the short or long-term.
In particular, the Company and its operating segments are confronted with issues relating to climate change. The Company has
the opportunity to make a significant positive impact on the environment. To address this opportunity, the Company and its
operating segments are focused on several strategic initiatives, including reducing emissions, food and plastic waste. Federal
and provincial governments are also striving to combat climate change, including through the consideration and/or
implementation of carbon reduction targets and financial mechanisms to reduce carbon emissions, such as carbon taxes,
carbon pricing and caps and trade. In addition to its own initiatives, the Company and its operating segments may be required
to make operational changes and/or incur significant financial costs to comply with the various governmental reforms, which
may differ across jurisdictions. Additionally, certain global climate change patterns (e.g. rising sea levels, changing rain fall) may
impact sourcing of food and food ingredients. Any failure to meet its strategic objectives, adhere to climate change reforms or to
adapt to the impacts of climate change, such as failure to reduce emissions, eliminate food and plastic waste or mitigate
sourcing and supply chain disruptions, could result in fines or could adversely affect the Company’s reputation, operations or
financial performance.
The Company and its operating segments maintain a portfolio of real estate and other facilities and are subject to environmental
risks associated with the contamination of such properties and facilities, whether by previous owners or occupants,
neighbouring properties or by the Company itself. In particular, Loblaw has a number of underground fuel storage tanks, the
majority of which are used for its supply chain transport fleets. Contamination resulting from leaks from these tanks is possible.
Additional environmental issues relating to matters or sites may require the Company to incur significant additional costs.
Loblaw also operates refrigeration equipment in its stores and distribution centres to preserve perishable products as they pass
through the supply chain and ultimately to consumers. These systems contain refrigerant gases which could be released if
equipment fails or leaks. A release of these gases could have adverse effects on the environment. Failure to properly manage any
of these environmental risks could adversely affect the reputation, operations or financial performance of the Company.
Loblaw is subject to legislation that imposes liabilities on retailers, brand owners and importers for costs associated with
recycling and disposal of consumer goods packaging and printed materials distributed to consumers. There is a risk that the
Company will be subject to increased costs associated with these laws. In addition, the Company could be subject to increased
or unexpected costs associated with environmental incidents and the related remediation activities, including litigation and
regulatory related costs, all of which could adversely affect the reputation or financial performance of the Company.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 67
Management’s Discussion and Analysis
Social
The Company and its operating segments face risks associated with social issues and have established certain priorities in
response, including achieving adequate representation of traditionally under-represented groups in management positions and
the colleague population as a whole, building a culture of inclusion and investing in communities, particularly by supporting
women’s and children’s health. In the event that the Company is not perceived to have robust diversity and inclusion programs,
its ability to attract, develop and retain colleagues could be compromised. The Company recognizes its responsibility to respect
and protect the human rights of all people who support and intersect with the business, and is committed to not tolerating
abuse, discrimination or harassment in any form. Ineffective action or inaction in response to social matters, including a failure or
perceived failure to adequately address its priorities, could adversely affect the Company’s reputation or financial performance.
ECONOMIC CONDITIONS The Company’s revenue and profitability are impacted by consumer discretionary spending which is
influenced by general economic conditions. These economic conditions could include high levels of unemployment and
household debt, political uncertainty, fuel and energy costs, the impact of natural disasters or acts of terrorism, pandemics,
changes in interest rates, inflation, tax, exchange rates and access to consumer credit. A number of these conditions could
impact consumer spending and, as a result, payment patterns could deteriorate or remain unpredictable due to global, national,
regional or local economic volatility. Uncertain economic conditions may adversely impact demand for the Company’s products
and services which could adversely affect the Company’s operations or financial performance.
INVENTORY MANAGEMENT Loblaw is subject to risks associated with managing its inventory. Failure to successfully manage
such risks could result in shortages of inventory, excess or obsolete inventory which cannot be sold profitably or increases in
levels of inventory shrink. Any of these outcomes could adversely affect the financial performance of the Company. Although
Loblaw has implemented new IT systems, which are intended to provide increased visibility to integrated inventory and sales
information at store level, Loblaw’s failure to effectively implement such new IT systems and applicable processes may increase
the risks associated with managing inventory, including the risk that inaccurate inventory could result in inaccurate financial
statements.
Loblaw’s retail segment is also examining its fundamental processes related to article lifecycle management, with the goal of
making existing processes more efficient. This will impact existing workflow and system processes across procurement, supply
chain and merchandising. Such simplification and efficiency processes are critical to Loblaw’s ability to implement longer term
system solutions and achieve efficiencies across its retail divisions. Any failure to effectively deliver this enterprise core solution
could negatively impact Loblaw’s operations or financial performance.
SERVICE PROVIDERS The Company has a wide range of key business relationships with third parties including vendors,
suppliers, distributors and contractors. The Company relies on vendors, including offshore vendors in both mature and
developing markets, to provide the Company with goods and services. Offshore sourcing increases certain risks to the Company,
including risks associated with food safety and general merchandise product defects, non-compliance with ethical and safe
business practices and inadequate supply of products. The Company has no direct influence over how vendors are managed.
Negative events affecting vendors or inefficient, ineffective or incomplete vendor management strategies, policies and/or
procedures, including those related to ethical sourcing, could adversely impact the Company’s reputation and impair the
Company’s ability to meet customer needs or control costs and quality, which could adversely affect the reputation, operations
or financial performance of the Company.
Loblaw relies on service providers including transport carriers or other delivery service providers, logistic service providers and
operators of warehouses and distribution facilities. Ineffective selection, contractual terms or relationship management could
impact Loblaw’s ability to source products (both national brand and control brand products), to have products available for
customers, to market to customers or to operate efficiently and effectively. Disruption in services from suppliers could interrupt
the delivery of merchandise to stores or customers, which in turn could adversely affect the operations or financial performance
of the Company.
PC Bank uses third party service providers to process credit card transactions, operate call centres and operationalize certain risk
management strategies for the President’s Choice Financial Mastercard and PC Money Account. A significant disruption in
the services provided by third party service providers could adversely affect the financial performance of PC Bank and the
Company.
The Company has outsourced certain administrative functions of its business to service providers including account payments,
payroll services, IT support, investment management and custodial relationships, and benefit plan administration. Any disruption
in the services provided by these suppliers could adversely affect the return on these assets or liquidity of the Company.
FRANCHISEE RELATIONSHIPS Loblaw has entered into agreements with third party franchisees that permit the franchisees to
own and operate retail stores in accordance with prescribed procedures and standards. A substantial portion of Loblaw’s
revenues and earnings comes from amounts paid by franchisees in connection with their store operations and leased property.
Franchisees are independent operators and their operations may be negatively affected by factors beyond Loblaw’s control. If
franchisees do not operate their stores in accordance with Loblaw’s standards or otherwise in accordance with good business
68 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
practices, franchisee fees and rent paid to Loblaw could be negatively affected, which in turn could adversely affect the
Company’s reputation, operations or financial performance. In addition, the Company’s reputation could be harmed if a
significant number of franchisees were to experience operational failures, health and safety exposures or were unable to pay
Loblaw for products, fees or rent.
Loblaw’s franchise system is also subject to franchise legislation enacted by a number of provinces. Any new legislation or failure
to comply with existing legislation could adversely affect operations and could add administrative costs and burdens, any of
which could affect Loblaw’s relationship with its franchisees.
Supply chain or system changes by Loblaw could cause or be perceived to cause disruptions to franchised store operations and
could result in negative effects on the financial performance of franchisees. Relationships with franchisees could pose significant
risks if they are disrupted, which could adversely affect the reputation, operations or financial performance of the Company.
ASSOCIATE-OWNED DRUG STORE NETWORK AND RELATIONSHIPS WITH ASSOCIATES The success of Loblaw and the
reputation of its brands are closely tied to the performance of the Shoppers Drug Mart Associate-owned drug stores.
Accordingly, Loblaw relies on Associates to successfully operate, manage and execute retail programs and strategies at their
respective drug store locations. Associates are independent business operators that have entered into agreements with Loblaw
to own and operate retail stores in accordance with prescribed procedures and standards. The success of the operations and
financial performance of their respective drug stores may be beyond Loblaw’s control. In addition, Associates are subject to
franchise legislation. Disruptions to Loblaw’s relationships with Shoppers Drug Mart Associate-owned drug stores or changes in
legislation could negatively affect revenue from Associates, which in turn, could adversely affect the reputation, operations or
financial performance of the Company.
CHANGE MANAGEMENT, PROCESS AND EFFICIENCY Many initiatives are underway to reduce the complexity and cost of the
Company’s business operations, ensuring a low cost operating structure that allows for continued investments in the Company’s
strategic growth areas. These efforts include initiatives focused on improving processes and generating efficiencies across the
Company’s administrative, store, and distribution network infrastructures, and other organizational changes.
The success of these initiatives is dependent on effective leadership and realizing intended benefits. Ineffective change
management could result in a lack of integrated processes and procedures, unclear accountabilities and decision-making rights,
decreased colleague engagement, ineffective communication and training or a lack of requisite knowledge. Any of the
foregoing could disrupt operations, increase the risk of customer dissatisfaction, adversely affect the Company’s reputation or
financial performance or adversely affect the ability of the Company to implement and achieve its long-term strategic objectives.
TENANT CONCENTRATION Investment properties generate income through rent payments made by tenants, and particularly
rent payments made by Loblaw as Choice Properties’ largest tenant. Upon the expiry of any lease, there can be no assurance
that the lease will be renewed or the tenant replaced. Furthermore, the terms of any subsequent lease may be less favourable
than the existing lease, including the addition of restrictive covenants. In addition, historical occupancy rates and rents are not
necessarily an accurate prediction of future occupancy rates. Choice Properties’ cash flows and financial position would be
adversely affected if its tenants (and especially Loblaw) were to become unable to meet their obligations under their leases or if
a significant amount of available space in the properties was not able to be leased on economically favourable lease terms. In
the event of default by a tenant, Choice Properties may experience delays or limitations in enforcing its rights as lessor and incur
substantial costs in protecting its investment. In addition, restrictive covenants and the terms of a strategic alliance agreement
may narrow the field of potential tenants at a property and could contribute to difficulties in leasing space to new tenants.
Choice Properties’ net income could also be adversely affected in the event of a downturn in the business, or the bankruptcy or
insolvency, of Loblaw, as Choice Properties’ largest tenant. Choice Properties derives a large majority of its annual base minimum
rent from Loblaw. Consequently, revenues are dependent on the ability of Loblaw to meet its rent obligations and Choice
Properties’ ability to collect rent from Loblaw. The future financial performance and operating results of Loblaw are subject to
inherent risks, uncertainties, and other factors. If Loblaw were to terminate its tenancies, default on or cease to satisfy its
payment obligations, it would have a material adverse effect on Choice Properties’ financial condition or results of operations
and its ability to make distributions to unitholders.
The closing of an anchor store at a property could also have a material adverse effect on the value of that property. Vacated
anchor tenant space also tends to adversely affect the entire property because of the loss of the departed anchor tenant’s power
to draw customers to the property, which in turn may cause other tenants’ operations to suffer and adversely affect such other
tenants’ ability to pay rent or perform any other obligations under their leases. No assurance can be given that Choice Properties
will be able to quickly re-lease space vacated by an anchor tenant on favourable terms, if at all. In addition, certain leases contain
a provision requiring tenants to maintain continuous occupancy of leased premises, and there can be no assurance that such
tenants will continue to occupy such premises. Furthermore, at any time, an anchor tenant may seek the protection of
bankruptcy, insolvency or similar laws which could result in the rejection and termination of the lease of the tenant and thereby
cause a reduction in Choice Properties’ cash flows, financial condition or results of operations and its ability to make distributions
to unitholders.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 69
Management’s Discussion and Analysis
EXECUTION OF STRATEGIC INITIATIVES The Company undertakes from time to time acquisitions and dispositions that meet its
strategic objectives. The Company holds cash and short-term investments and is continuing to evaluate strategic opportunities
for the use or deployment of these funds. The use or deployment of the funds and the execution of the Company’s capital plans
could pose a risk if they do not align with the Company’s strategic objectives or if the Company experiences integration
difficulties on the acquisition of any businesses. Execution of the strategic plan requires prudent operational planning,
availability and attention of key personnel, timely implementation and effective change management. In addition, the Company
may not be able to realize upon the synergies, business opportunities and growth prospects expected from any such investment
opportunities or from the execution of the Company’s strategies. Finally, any acquisition or divestiture activities may present
unanticipated costs and managerial and operational risks, including the diversion of management’s time and attention from
day-to-day activities. If the Company’s strategies are not effectively developed and executed, it could negatively affect the
reputation, operations or financial performance of the Company.
REGULATORY COMPLIANCE The Company is subject to a wide variety of laws, regulations and orders across all countries in
which it does business, including those laws involving product liability, labour and employment, anti-trust and competition,
pharmacy, food safety, intellectual property, privacy, environmental and other matters.
The Company is subject to taxation by various taxation authorities in Canada and a number of foreign jurisdictions. Changes to
any of the laws, rules, regulations or policies applicable to the Company’s business, including tax laws, minimum wage laws, and
laws affecting the production, processing, preparation, distribution, packaging and labelling of food, pharmaceuticals, and
general merchandise products, could adversely affect the operations, financial condition or performance of the Company.
Failure by the Company to comply with applicable laws, regulations and orders could subject the Company to civil or regulatory
actions, investigations or proceedings, including fines, assessments, injunctions, recalls or seizures, which in turn could adversely
affect the reputation, operations or financial condition or performance of the Company. In the course of complying with changes
to laws, the Company could incur significant costs. Changing laws or interpretations of such laws or enhanced enforcement of
existing laws could restrict the Company’s operations or profitability and thereby threaten the Company’s competitive position
and ability to efficiently conduct business.
The Company is subject to tax audits from various tax authorities on an ongoing basis. As a result, from time to time, tax
authorities may disagree with the positions and conclusions taken by the Company in its tax filings or legislation could be
amended or interpretations of current legislation could change, any of which events could lead to reassessments.
Loblaw is subject to capital requirements from OSFI, the primary regulator of PC Bank. PC Bank’s capital management objectives
are to maintain a consistently strong capital position while considering the economic risks generated by its credit card
receivables portfolio and to meet all regulatory capital requirements as defined by OSFI. PC Bank uses Basel III as its regulatory
capital management framework which includes a target common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%
and a total capital ratio of 10.5%. In addition to the regulatory capital ratios requirement, PC Bank is subject to the Basel III
Leverage ratio and OSFI’s Guideline on Liquidity Adequacy Requirements (“LARs”). The LARs guideline establishes standards
based on the Basel III framework. PC Bank would be assessed fines and other penalties for non-compliance with these and other
regulations. In addition, failure by PC Bank to comply, understand, acknowledge and effectively respond to applicable
regulations could result in regulatory intervention and reputational damage.
Choice Properties is currently classified as a “unit trust” and a “mutual fund trust” under the Income Tax Act (Canada). It also
qualifies for the Real Estate Investment Trust Exception under the Income Tax Act (Canada) and as such is not subject to
specified investment flow-through rules. There can be no assurance that the Canadian federal income tax laws will not be
changed in a manner which adversely affects Choice Properties. If Choice Properties ceases to qualify for these and other
classifications and exceptions, the taxation of Choice Properties and unitholders, including the Company, could be materially
adversely different in certain respects, which could in turn materially adversely affect the trading price of the Trust Units.
70 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
8.3
Financial Risks and Risk Management
FINANCIAL RISKS The Company is exposed to a number of financial risks, including those associated with financial instruments,
which have the potential to affect its operating and financial performance. The Company uses over-the-counter derivative
instruments to offset certain of these risks. Policies and guidelines prohibit the use of any derivative instrument for trading or
speculative purposes. The fair value of derivative instruments is subject to changing market conditions which could adversely
affect the financial performance of the Company.
The following is a summary of the Company’s financial risks which are discussed in detail below:
Liquidity
Commodity Prices
Foreign Currency Exchange Rates
Credit
Trust Unit Prices
Interest Rates
Credit Rating
LIQUIDITY Liquidity risk is the risk that the Company is unable to generate or obtain sufficient cash or its equivalents in a cost
effective manner to fund its obligations as they come due. The Company is exposed to liquidity risk through, among other areas,
PC Bank, which requires a reliable source of funding for its credit card business. PC Bank relies on its securitization programs,
demand deposits from customers and the acceptance of GIC deposits to fund the receivables of its credit cards. The Company
would experience liquidity risks if it fails to maintain appropriate levels of cash and short-term investments, is unable to access
sources of funding or fails to appropriately diversify sources of funding. If any of these events were to occur, they could adversely
affect the financial performance of the Company.
Liquidity risk is mitigated by maintaining appropriate levels of cash and cash equivalents and short-term investments, actively
monitoring market conditions, and by diversifying sources of funding, including the Company’s committed credit facilities, and
maintaining a well diversified maturity profile of debt and capital obligations.
COMMODITY PRICES Loblaw is exposed to increases in the prices of commodities in operating its stores and distribution
networks, as well as to the indirect effect of changing commodity prices on the price of consumer products. Rising commodity
prices could adversely affect the financial performance of Loblaw. To manage a portion of this exposure, Loblaw uses purchase
commitments and derivative instruments in the form of exchange traded futures contracts and forward contracts to minimize
cost volatility related to commodities.
FOREIGN CURRENCY EXCHANGE RATES The Company’s consolidated financial statements are expressed in Canadian dollars,
however, a portion of the Company’s (excluding Loblaw’s) net assets are denominated in U.S. dollars through its foreign
subsidiaries with a functional currency that is the same as that of the Company. The U.S. dollar denominated net assets are
translated into Canadian dollars at the foreign currency exchange rate in effect at the balance sheet date. As a result, the
Company is exposed to foreign currency translation gains and losses. Those gains and losses arising from the translation of the
U.S. dollar denominated assets of foreign subsidiaries with a functional currency that is the same as that of the Company are
included in operating income, while translation gains and losses on the net investment in foreign operations in the U.S. are
recorded in accumulated other comprehensive income (loss).
Loblaw is exposed to fluctuations in the prices of U.S. dollar denominated purchases as a result of changes in U.S. dollar
exchange rates. A depreciating Canadian dollar relative to the U.S. dollar will negatively impact operating income and net
earnings, while an appreciating Canadian dollar relative to the U.S. dollar will have the opposite impact. Loblaw entered into
derivative instruments in the form of futures contracts and forward contracts to manage its current and anticipated exposure to
fluctuations in U.S. dollar exchange rates.
CREDIT The Company is exposed to credit risk resulting from the possibility that counterparties could default on their financial
obligations to the Company, including derivative instruments, cash and cash equivalents, short-term investments, security
deposits, PC Bank’s credit card receivables, Loblaw’s finance lease receivable, pension assets held in the Company’s defined
benefit plans, and Loblaw’s accounts receivable, including amounts due from non-consolidated franchisees, government and
third-party drug plans arising from prescription drug sales, independent accounts and amounts owed from vendors. Failure to
manage credit risk could adversely affect the financial performance of the Company.
The risk related to derivative instruments, cash and cash equivalents, short-term investments and security deposits is reduced by
policies and guidelines that require that the Company enters into transactions only with counterparties or issuers that have a
minimum long-term “A-” credit rating from a recognized credit rating agency and place minimum and maximum limits for
exposures to specific counterparties and instruments.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 71
Management’s Discussion and Analysis
Choice Properties mitigates the risk of credit loss relating to rent receivables by evaluating the creditworthiness of new tenants,
obtaining security deposits wherever permitted by legislation, ensuring its tenant mix is diversified and by limiting its exposure
to any one tenant, except Loblaw. Choice Properties establishes an allowance for doubtful accounts that represents the
estimated losses with respect to rents receivable. The allowance is determined on a tenant-by-tenant basis based on the specific
factors related to the tenant.
PC Bank manages its credit card receivable risk by employing stringent credit scoring techniques, actively monitoring the credit
card portfolio and reviewing techniques and technology that can improve the effectiveness of the collection process. In addition,
these receivables are dispersed among a large, diversified group of credit card customers.
Loblaw’s finance lease receivable and Loblaw’s accounts receivable including amounts due from non-consolidated franchisees,
government and third-party drug plans arising from prescription drug sales, independent accounts and amounts owed from
vendors and tenants, are actively monitored on an ongoing basis and settled on a frequent basis in accordance with the terms
specified in the applicable agreements.
Despite the mitigation strategies described above, it is possible that the Company’s financial performance could be negatively
impacted by the failure of a counterparty to fulfill its obligations.
TRUST UNIT PRICES The Company is exposed to market price risk from Choice Properties’ Trust Units that are held by
unitholders other than the Company. These Trust Units are presented as a liability on the Company’s consolidated balance
sheets as they are redeemable for cash at the option of the holders. The liability is recorded at fair value at each reporting period
based on the market price of Trust Units. The change in the fair value of the liability negatively impacts net earnings when the
Trust Unit price increases and positively impacts net earnings when the Trust Unit price declines.
INTEREST RATES The Company is exposed to interest rate risk from fluctuations in interest rates on its floating rate debt and
from the refinancing of existing financial instruments. The Company manages interest rate risk by monitoring the respective mix
of fixed and floating rate debt and by taking action as necessary to maintain an appropriate balance considering current market
conditions, with the objective of maintaining the majority of its debt at fixed interest rates.
CREDIT RATING Credit ratings assigned to the Company and any of its securities may be changed at any time based on the
judgment of the credit rating agencies and may also be impacted by a change in the credit rating of Loblaw, Choice Properties
and their respective affiliates. In addition, the Company, Loblaw, Choice Properties and their respective affiliates may incur
additional indebtedness in the future, which could impact current and future credit ratings. A reduction in credit ratings could
materially adversely affect the market value of the Company’s outstanding securities and the Company’s access to and cost of
financing.
72 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
9.
Related Party Transactions
Galen G. Weston beneficially owns or controls, directly and indirectly, through Wittington Investments, Limited (“Wittington”),
a total of 78,650,662 of GWL’s common shares, representing approximately 53.6% of GWL’s outstanding common shares
(2020 – 51.6%).
In the ordinary course of business, the Company enters into various transactions with related parties. These transactions are
measured at the exchange amount, which is the amount of consideration established and agreed upon by the related parties.
Transactions between the Company and its consolidated entities have been eliminated on consolidation and are not disclosed
below.
In 2021, the Company made nominal rental payments to Wittington (2020 – $3 million). As at year end 2021 and 2020, there
were no rental payments outstanding.
In 2021, inventory purchases from Associated British Foods plc, a related party by virtue of a common director of such entity’s
parent company and GWL’s parent company, amounted to $42 million (2020 – $51 million). As at year end 2021, $1 million
(2020 – $3 million) was included in trade payables and other liabilities relating to these inventory purchases.
TRANSACTION BETWEEN CHOICE PROPERTIES AND WITTINGTON In 2020, Choice Properties acquired two real estate assets
from Wittington Properties Limited, a subsidiary of Wittington, for an aggregate purchase price of $209 million, excluding
transaction costs, which was satisfied in full by the issuance of 16.5 million Trust Units of Choice Properties.
The assets acquired included: (i) the Weston Centre, an office and retail property in Toronto, Ontario for $129 million and (ii) the
remaining 60% interest in a joint venture between Choice Properties and Wittington Properties Limited for $80 million, less a
cost-to-complete receivable of $16 million, giving Choice Properties 100% ownership of the joint venture.
Weston Centre The Company had multiple lease arrangements with Wittington, in addition to existing leases with Choice
Properties at the Weston Centre. Upon acquisition of the property, in 2020, the Company recognized a gain of $6 million in
operating income from the derecognition of its net impact of lease obligations and right-of-use assets associated with the
property and ceased paying rents to Wittington. Due to continued tenancy on the property through its group of companies, in
2020, $51 million was recorded in fixed assets as own-use property and $78 million was recorded in investment properties.
Operating Lease Choice Properties entered into a ten-year lease for office space with Wittington that commenced in 2014.
Lease payments totaled $3 million over the term of the lease. As of the acquisition date, Choice Properties de-recognized its
right-of-use assets and lease liabilities with the office lease and ceased paying rents to Wittington.
Joint Venture In 2014, a joint venture, partnership known as West Block between Choice Properties and Wittington Properties
Limited, completed the acquisition of a parcel of land located on 500 Lakeshore Boulevard West in Toronto, Ontario from
Loblaw. Choice Properties used the equity method of accounting to record its 40% interest in the joint venture.
During the second quarter of 2020, Loblaw recognized $65 million of right-of-use assets and lease liabilities related to the leases
of retail stores and a corporate office with the joint venture.
During the third quarter of 2020, Choice Properties acquired the remaining 60% interest of the joint venture, after which the
investment was accounted for on a consolidated basis. As a result of the increase in ownership, in 2020 the Company recorded a
$5 million fair value loss before income taxes in other comprehensive income, and a gain of $4 million in operating income from
the derecognition of its net impact of lease obligations and right-of-use assets associated with the property and ceased paying
rents to Wittington. Due to continued tenancy on the property through its group of companies, in 2020 $95 million was
recorded in fixed assets as own-use property and $13 million was recorded in investment properties. Wittington continued to
act as the development and construction manager for the commercial space until development was completed.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 73
Management’s Discussion and Analysis
VENTURE FUND During the second quarter of 2020, GWL, Loblaw and a wholly-owned subsidiary of Wittington became limited
partners in a limited partnership formed by Wittington (“Venture Fund”). A wholly-owned subsidiary of Wittington is the general
partner of the Venture Fund, which hired an external fund manager to oversee the Venture Fund. The purpose of the Venture
Fund is to pursue venture capital investing in innovative businesses that are in technology-oriented companies at all stages of
the start-up life cycle that operate in commerce, healthcare, and food sectors and are based in North America. Each of the three
limited partners have a 33% interest in the Fund. The Company participates in the Fund’s Investment Committee which, among
other items, approves the initial investments. The Company uses the equity method of accounting to record its consolidated
66% interest in the Venture Fund. The Company has a consolidated capital commitment of $66 million over a 10-year period. To
date, on a consolidated basis, the Company invested $31 million in the Venture Fund, of which $18 million (2020 – $13 million)
was invested in 2021, which was recorded in other assets.
POST-EMPLOYMENT BENEFIT PLANS The Company sponsors a number of post-employment plans, which are related parties.
Contributions made by the Company to these plans are disclosed in the notes to the consolidated financial statements.
INCOME TAX MATTERS From time to time, the Company and Wittington may enter into agreements to make elections that are
permitted or required under applicable income tax legislation with respect to affiliated corporations.
COMPENSATION OF KEY MANAGEMENT PERSONNEL The Company’s key management personnel is comprised of certain
members of the executive team of GWL, Loblaw and Wittington, as well as members of the Boards of GWL, Loblaw and
Wittington to the extent that they have the authority and responsibility for planning, directing and controlling the day-to-day
activities of the Company.
Annual compensation of key management personnel that is directly attributable to the Company was as follows:
($ millions)
Salaries, director fees and other short-term employee benefits
Equity-based compensation
Total compensation
2021
2020
(52 weeks)
(53 weeks)
$
$
14
12
26
$
$
12
11
23
74 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
10.
Critical Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to make estimates and judgments in applying
the Company’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial
statements and accompanying notes.
Within the context of this MD&A, a judgment is a decision made by management in respect of the application of an accounting
policy, a recognized or unrecognized financial statement amount and/or note disclosure, following an analysis of relevant
information that may include estimates and assumptions. Estimates and assumptions are used mainly in determining the
measurement of balances recognized or disclosed in the consolidated financial statements and are based on a set of underlying
data that may include management’s historical experience, knowledge of current events and conditions and other factors that
are believed to be reasonable under the circumstances. Management continually evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that the Company
believes could have the most significant impact on the amounts recognized in the consolidated financial statements.
BASIS OF CONSOLIDATION
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining the entities that it
controls and therefore consolidates. The Company controls an entity when the Company has the existing rights that give it the
current ability to direct the activities that significantly affect the entity’s returns. The Company consolidates all of its wholly
owned subsidiaries. Judgment is applied in determining whether the Company controls the entities in which it does not have
ownership rights or does not have full ownership rights. Most often, judgment involves reviewing contractual rights to determine
if rights are participating (giving power over the entity) or protective rights (protecting the Company’s interest without giving it
power).
INVENTORIES
Key Sources of Estimation Inventories are carried at the lower of cost and net realizable value which requires the Company to
utilize estimates related to fluctuations in shrink, future retail prices, the impact of vendor rebates on cost, seasonality and costs
necessary to sell the inventory.
IMPAIRMENT OF NON-FINANCIAL ASSETS (GOODWILL, INTANGIBLE ASSETS, FIXED ASSETS AND RIGHT-OF-USE ASSETS)
Judgments Made in Relation to Accounting Policies Applied Management is required to use judgment in determining the
grouping of assets to identify their cash generating units (“CGU”) for the purposes of testing fixed assets and right-of-use assets
for impairment. Judgment is further required to determine appropriate groupings of CGUs for the level at which goodwill and
intangible assets are tested for impairment. The Company has determined that each retail location is a separate CGU for the
purposes of fixed asset and right-of-use asset impairment testing. For the purpose of goodwill and indefinite life intangible
assets impairment testing, CGUs are grouped at the lowest level at which goodwill and indefinite life intangible assets are
monitored for internal management purposes. In addition, judgment is used to determine whether a triggering event has
occurred requiring an impairment test to be completed.
Key Sources of Estimation In determining the recoverable amount of a CGU or a group of CGUs, various estimates are
employed. The Company determines fair value less costs to sell using such estimates as market rental rates for comparable
properties, recoverable operating costs for leases with tenants, non-recoverable operating costs, future cash flows, discount rates,
capitalization rates and terminal rates. The Company determines value in use by using estimates including projected future
revenues, earnings and capital investments consistent with approved strategic plans, and discount rates consistent with external
industry information reflecting the risk associated with the specific cash flows.
CUSTOMER LOYALTY AWARDS PROGRAMS
Key Sources of Estimation Loblaw defers revenue at the time the award is earned by members based on the relative fair value
of the award. The relative fair value is determined by allocating consideration between the fair value of the loyalty awards earned
by loyalty program members, net of breakage, and the goods and services on which the awards were earned, based on their
relative stand-alone selling price. The estimated fair value per point for the PC Optimum® program is determined based on the
program reward schedule and is $1 for every 1,000 points earned. The breakage rate of the program is an estimate of the
amount of points that will never be redeemed. The rate is reviewed on an ongoing basis and is estimated utilizing historical
redemption activity and anticipated earn and redeem behaviour of members.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 75
Management’s Discussion and Analysis
IMPAIRMENT OF CREDIT CARD RECEIVABLES
Judgments Made in Relation to Accounting Policies Applied and Key Sources of Estimation In each stage of the impairment
model, impairment is determined based on the probability of default, loss given default, and expected exposures at default on
drawn and undrawn exposures on credit card receivables, discounted using an average portfolio yield rate. The application of
the expected credit loss (“ECL”) model requires management to apply the following significant judgments, assumptions and
estimations:
• Movement of impairment measurement between the three stages of the ECL model, based on the assessment of the
•
•
increase in credit risks on credit card receivables. The assessment of changes in credit risks includes qualitative and
quantitative factors of the accounts, such as historical credit loss experience and external credit scores;
Thresholds for significant increase in credit risks based on changes in probability of default over the expected life of the
instrument relative to initial recognition; and
Forecasts of future economic condition, namely the unemployment rate. Management uses unemployment rate forecasts
published by major Canadian Chartered Banks and the Conference Board of Canada to establish the base case scenario
and other representative ranges of possible forecast scenarios.
FAIR VALUE OF INCOME PRODUCING PROPERTIES
Key Sources of Estimation The fair value of income producing properties is dependent on future cash flows over the holding
period, terminal capitalization rates, and discount rates applicable to those assets. The review of future cash flows involves
assumptions relating to occupancy, rental rates, and residual value. In addition to reviewing future cash flows, management
assesses changes in the business climate and other factors, which may affect the ultimate value of the property. These
assumptions may not ultimately be achieved.
INCOME AND OTHER TAXES
Judgments Made in Relation to Accounting Policies Applied The calculation of current and deferred income taxes requires
management to make certain judgments regarding the tax rules in jurisdictions where the Company performs activities.
Application of judgments is required regarding the classification of transactions and in assessing probable outcomes of claimed
deductions including expectations about future operating results and the timing and reversal of temporary differences.
PROVISIONS
Judgments made in Relation to Accounting Policies Applied The recording of provisions requires management to make
certain judgments regarding whether there is a present legal or constructive obligation as a result of a past event, it is probable
that the Company will be required to settle the obligation and if a reliable estimate of the amount of the obligation can be
made. The Company has recorded provisions primarily in respect of restructuring, environmental and decommissioning
liabilities, certain onerous costs on leased properties and legal claims. The Company reviews the merits, risks and uncertainties of
each provision, based on current information, and the amount expected to be required to settle the obligation. Provisions are
reviewed on an ongoing basis and are adjusted accordingly when new facts and events become known to the Company.
LEASES
Judgments Made in Relation to Accounting Policies Applied Management exercises judgment in determining the appropriate
lease term on a lease by lease basis. Management considers all facts and circumstances that create an economic incentive to
exercise a renewal option or to not exercise a termination option including investments in major leaseholds, store performances
and past business practice and the length of time remaining before the option is exercisable. The periods covered by renewal
options are only included in the lease term if management is reasonably certain to renew. Management considers reasonably
certain to be a high threshold. Changes in the economic environment or changes in the retail industry may impact
management’s assessment of lease term, and any changes in management’s estimate of lease terms may have a material
impact on the Company’s consolidated balance sheets and statements of earnings.
Key Sources of Estimation In determining the carrying amount of right-of-use assets and lease liabilities, the Company is
required to estimate the incremental borrowing rate specific to each leased asset or portfolio of leased assets if the interest rate
implicit in the lease is not readily determined. Management determines the incremental borrowing rate using a base risk-free
interest rate estimated by reference to the Government of Canada bond yield with an adjustment that reflects the Company’s
credit rating, the security, lease term and value of the underlying leased asset, and the economic environment in which the
leased asset operates. The incremental borrowing rates are subject to change due to changes in the business and
macroeconomic environment.
76 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
11.
Accounting Standards
The following new amendment was issued and adopted in 2021: Interest Rate Benchmark Reform-Phase 2 – Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16:
Interbank Offered Rates (“IBORs”) reform is the market-wide reform of interest rate benchmarks in which some IBORs are
replaced with alternative risk-free rates. The replacement is expected to be mostly complete by the end of 2021. Consistent with
global efforts, in Canada, benchmark reform initiatives are being led by the Canadian Alternative Reference Rate Committee
(“CARR”), a group of financial sector firms and public sector institutions. CARR is tasked with promoting the use of the Canadian
Overnight Repo Rate Average as a key risk-free interest rate benchmark as well as analyzing the current status of the Canadian
Dollar Offered Rate (“CDOR”). As of May 17, 2021, the 6-month and 12-month CDOR tenors were discontinued on account of
their minimal use. The 1-month, 2-month and 3-month CDOR tenors will continue to be published, though their relevance may
decline or may ultimately be discontinued as well.
To address the impact IBOR reform has on financial reporting, in August 2020, the International Accounting Standards Board
issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9, “Financial Instruments”, IAS 39, “Financial Instruments:
Recognition and Measurement”, IFRS 7, “Financial Instruments: Disclosures”, IFRS 4, “Insurance Contracts” (“IFRS 4”) and IFRS 16,
“Leases”. These amendments became effective for annual periods beginning on or after January 1, 2021.
Phase 2 amendments provide certain practical reliefs related to modifications of financial asset or liability and lease contracts:
•
•
As a practical expedient, if the basis for determining the contractual cash flows of a financial asset or liability changes as a
direct consequence of the IBOR reform and on an economically equivalent basis, the financial asset or liability shall be
remeasured reflecting the updated effective interest rate prospectively with no immediate gain or loss recognized.
As a practical expedient, the lessee can account for a lease modification that is required by the IBOR reform through
revising the discount rate that reflects the change in interest rate and remeasure the lease liability prospectively with no
immediate gain or loss recognized. The amount of the remeasurement is recognized as an adjustment to the right-of-use
asset.
Additionally, phase 2 amendments provide a series of temporary exceptions from certain hedge accounting requirements when
a change required by the IBOR reform occurs to a hedged item and/or hedging instrument that permits the hedging
relationship to be continued without interruption.
The Company assessed the impacts of the IBOR reform on its financial instruments, leases, insurance contracts and hedges, and
noted only certain financial instruments and the interest rate swap hedge are directly or indirectly dependent on the 1-month or
3-month CDOR tenors. As a result, the Company is not immediately impacted by the IBOR reform. The Company will continue
to monitor future developments of CDOR and other applicable interest rate benchmarks, and will elect the practical reliefs
relating to financial instruments, leases, insurances and hedges when applicable.
The following accounting policy related to discontinued operations was applied during the third quarter of 2021:
A discontinued operation is a component of the Company’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Company and which: represents a separate major line of business or geographical area of
operations; is part of a single coordinated plan to dispose of a separate major line of business or geographic areas of operations;
or is a subsidiary acquired exclusively with a view to resale.
Classification as discontinued operations occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held for sale or distribution.
When an operation is classified as a discontinued operation, the comparative statements of earnings and comprehensive
income are re-presented as if the operation has been discontinued from the start of the comparative year.
The Company’s discontinued operations are excluded from the results of continuing operations and are presented as a single
amount, after income taxes, as net earnings from discontinued operations in the consolidated statements of earnings. The
consolidated statements of cash flows include cash flows of the discontinued operations, and has not been restated to reflect
discontinued operations. The details of the cash flows from discontinued operations are presented in the notes to the financial
statements. The consolidated balance sheets have not been restated to reflect discontinued operations.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 77
Management’s Discussion and Analysis
12.
Future Accounting Standard
IFRS 17 In 2017, the IASB issued IFRS 17, “Insurance Contracts” (“IFRS 17”) replacing IFRS 4. IFRS 17 introduces consistent
accounting for all insurance contracts. The standard requires a company to measure insurance contracts using updated
estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to these contracts. Additionally,
IFRS 17 requires an entity to recognize profits as it delivers insurance services, rather than when it receives premiums. The
standard is effective for annual reporting periods beginning on or after January 1, 2023 and is to be applied retrospectively.
While early adoption is permitted, the Company does not intend to early adopt IFRS 17. The Company is currently assessing the
impact of the standard on its consolidated financial statements.
13.
Outlook(5)
For 2022, the Company expects adjusted net earnings(1) from continuing operations to increase due to the results from its
operating segments, and to use excess cash to repurchase shares.
Loblaw Loblaw will continue to execute on retail excellence in its core grocery, pharmacy and apparel businesses while
advancing its growth initiatives in 2022. In the third year of the pandemic, Loblaw’s businesses remain well placed to service the
everyday needs of Canadians. However, Loblaw cannot predict the precise impacts of COVID-19 and the current industry
volatility on its 2022 financial results. Loblaw anticipates that in the first half of 2022 sales will benefit from the continued impact
of the pandemic and elevated industry-wide inflation. As economies reopen and Loblaw starts to lap elevated 2021 inflationary
prices and COVID-related drug pharmacy services, year on year revenue growth will be more challenged.
Loblaw expects:
•
•
•
its retail business to grow earnings faster than sales;
Earnings Per Share growth in the low double digits, with higher growth in the first half of the year;
to invest approximately $1.4 billion in capital expenditures, net of proceeds from property disposals, reflecting incremental
store and distribution network investments; and
to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.
•
Choice Properties Choice Properties’ goal is to provide net asset value appreciation, stable net operating income growth and
capital preservation, all with a long-term focus.
Although there remains uncertainty about the long-term impacts of the COVID-19 pandemic, Choice Properties is confident
that its business model, stable tenant base, and disciplined approach to financial management will continue to position it well.
At the end of 2021, Choice Properties’ diversified portfolio of retail, industrial, residential and office properties was 97.1%
occupied and leased to high-quality tenants across Canada. Choice Properties’ portfolio is primarily leased to necessity-based
tenants, and logistics providers, who continue to perform well in this environment and provide stability to Choice Properties’
overall portfolio. The stability is evident in Choice Properties’ financial results and rent collections, which were approximately
99% of contractual rents for the year. Despite the unpredictable re-opening of the economy, Choice Properties is encouraged by
high vaccination rates and anticipate the further lifting of re-opening measures.
Choice Properties continues to advance its development program, which provides Choice Properties with the best opportunity
to add high-quality real estate to its portfolio at a reasonable cost and drive net asset value appreciation over time. Choice
Properties has a mix of active development projects ranging in size, scale, and complexity, including retail intensification
projects, industrial development and rental residential projects located in urban markets with a focus on transit accessibility.
Underpinning all aspects of Choice Properties’ business model is a strong balance sheet and a disciplined approach to financial
management. Choice Properties takes a conservative approach to leverage and financing risk by maintaining strong leverage
ratios and a staggered debt maturity profile.
78 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
14.
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures and ratios in this document, such as: 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, adjusted return on average equity attributable
to common shareholders of the Company, adjusted return on capital, GWL Corporate free cash flow, free cash flow and Choice
Properties funds from operations, among others. 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 effective tax rate. The Company believes these non-GAAP
financial measures and ratios provide useful information to both management and investors with regard to accurately assessing
the Company’s financial performance and financial condition for the reasons outlined below.
Further, certain non-GAAP measures of Loblaw and Choice Properties are included in this document. For more information on
these measures, refer to the materials filed by Loblaw and Choice Properties, which are available on sedar.com or at loblaw.ca or
choicereit.ca, respectively.
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 underlying consolidated and segment operating performance, as the
excluded items are not necessarily reflective of the Company’s underlying operating performance and make comparisons of
underlying financial performance between periods difficult. The Company excludes 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 should not be construed as an alternative to other
financial measures determined in accordance with GAAP. The Company’s interest in Weston Foods is presented separately as
discontinued operations in the Company’s current and comparative results. Unless otherwise indicated, all financial information
represents the Company’s results from continuing operations.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 79
Management’s Discussion and Analysis
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 from continuing operations reported for the periods ended as indicated.
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other &
Intersegment
Consolidated
Loblaw
Choice
Properties
Other &
Intersegment
Consolidated
Net earnings attributable to shareholders of the
Company from continuing operations
$
428
$
274
Quarters Ended
Dec. 31, 2021
(12 weeks)
Dec. 31, 2020(3,4)
(13 weeks)
Add impact of the following:
Non-controlling interests
Income taxes
Net interest expense and other
financing charges
Operating income
Add impact of the following:
327
64
190
214
137
244
$ 703 $ 336 $
(30) $ 1,009
$ 700 $ 332 $
(163) $ 869
Amortization of intangible assets acquired
with Shoppers Drug Mart
$
117 $
— $
— $
117
$
117 $
— $
— $
117
Fair value adjustment on investment
properties
Gain on sale of non-operating properties
Fair value adjustment of derivatives
Fair value adjustment on non-operating
properties
Restructuring and other related costs
Foreign currency translation and other
company level activities
Adjusting items
—
(107)
20
(87)
—
(103)
100
—
6
(2)
(8)
—
—
—
—
(2)
—
—
—
—
—
—
$
113 $ (107) $
18 $
(2)
6
(2)
(8)
—
24
(8)
(7)
9
8
—
—
—
—
—
—
—
—
(3)
(8)
(7)
9
8
—
(4)
—
(4)
$
$
119 $ (107) $
100 $
112
819 $ 225 $
(63) $
981
Adjusted operating income
$ 816 $ 229 $
(12) $ 1,033
Depreciation and amortization excluding the
impact of the above adjustments(i)
506
—
(86)
420
492
1
(78)
415
Adjusted EBITDA
$ 1,322 $ 229 $
(98) $ 1,453
$
1,311 $ 226 $
(141) $ 1,396
(i)
Depreciation and amortization for the calculation of adjusted EBITDA excludes $117 million (2020 – $117 million) of amortization of
intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw.
80 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other &
Intersegment
Consolidated
Loblaw
Choice
Properties
Other &
Intersegment
Consolidated
Net earnings attributable to shareholders of the
Company from continuing operations
$
753
$
957
Years Ended
Dec. 31, 2021
(52 weeks)
Dec. 31, 2020(3,4)
(53 weeks)
Add impact of the following:
Non-controlling interests
Income taxes
Net interest expense and other
financing charges
Operating income
Add impact of the following:
994
630
1,650
619
470
829
$ 2,929 $ 1,400 $
(302) $ 4,027
$ 2,357 $ 622 $
(104) $ 2,875
Amortization of intangible assets acquired
with Shoppers Drug Mart
$ 506 $
— $
— $ 506
$ 509 $
— $
— $
509
Fair value adjustment on investment
properties
Gain on sale of non-operating properties
Fair value adjustment of derivatives
Fair value adjustment on non-operating
properties
Restructuring and other related costs
Acquisition transaction costs and other
related costs
Foreign currency translation and other
company level activities
—
(500)
177
(323)
—
257
(72)
185
(12)
(13)
(2)
13
—
—
—
—
(2)
—
—
—
—
—
—
—
—
—
(14)
(13)
(2)
13
—
—
(9)
5
9
38
—
—
—
—
—
—
—
—
(9)
5
9
38
—
2
—
2
—
(5)
2
(3)
Adjusting items
$ 492 $ (500) $
175 $
167
$
552 $ 254 $
(70) $
736
Adjusted operating income
$ 3,421 $ 900 $
(127) $ 4,194
$ 2,909 $ 876 $
(174) $ 3,611
Depreciation and amortization excluding the
impact of the above adjustments(i)
2,158
3
(360)
1,801
2,087
3
(345)
1,745
Adjusted EBITDA
$ 5,579 $ 903 $
(487) $ 5,995
$ 4,996 $ 879 $
(519) $ 5,356
(i)
Depreciation and amortization for the calculation of adjusted EBITDA excludes $506 million (2020 – $509 million) of amortization of
intangible assets, acquired with Shoppers Drug Mart, recorded by Loblaw.
The following items impacted adjusted EBITDA in 2021 and 2020:
Amortization of intangible assets acquired with Shoppers Drug Mart The acquisition of Shoppers Drug Mart in 2014 included
approximately $6 billion of definite life intangible assets, which are being amortized over their estimated useful lives. Annual
amortization associated with the acquired intangible assets will be approximately $500 million until 2024 and will decrease
thereafter.
Fair value adjustment on investment properties The Company measures investment properties at fair value. Under the fair
value model, investment properties are initially measured at cost and subsequently measured at fair value. Fair value is
determined based on available market evidence. If market evidence is not readily available in less active markets, the Company
uses alternative valuation methods such as discounted cash flow projections or recent transaction prices. Gains and losses on fair
value are recognized in operating income in the period in which they are incurred. Gains and losses from disposal of investment
properties are determined by comparing the fair value of disposal proceeds and the carrying amount and are recognized in
operating income.
Gain on sale of non-operating properties In 2021, Loblaw recorded a gain related to the sale of non-operating properties of
$12 million. In 2020, Loblaw disposed of non-operating properties to a third party and recorded a gain of $9 million related to
the sale.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 81
Management’s Discussion and Analysis
During 2021, Choice Properties disposed of properties and incurred a gain or loss for each property which was recognized in fair
value adjustment of investment properties. On consolidation, the Company recorded these properties as fixed assets and were
recognized at cost less accumulated depreciation. As a result, during 2021, on consolidation, a net gain of $2 million was
recognized in Other and Intersegment.
Fair value adjustment of derivatives Loblaw is exposed to commodity price and U.S. dollar exchange rate fluctuations. In
accordance with Loblaw’s commodity risk management policy, Loblaw enters into exchange traded futures contracts and
forward contracts to minimize cost volatility related to fuel prices and the U.S. dollar exchange rate. These derivatives are not
acquired for trading or speculative purposes. Pursuant to Loblaw’s derivative instruments accounting policy, changes in the fair
value of these instruments, which include realized and unrealized gains and losses are recorded in operating income. Despite
the impact of accounting for these commodity and foreign currency derivatives on Loblaw’s reported results, the derivatives
have the economic impact of largely mitigating the associated risks arising from price and exchange rate fluctuations in the
underlying commodities and U.S. dollar commitments.
Fair value adjustment on non-operating properties Loblaw measures non-operating properties, which are investment
properties and assets held for sale that were transferred from investment properties, at fair value. Under the fair value model,
non-operating properties are initially measured at cost and subsequently measured at fair value. Fair value using the income
approach include assumptions as to market rental rates for properties of similar size and condition located within the same
geographical areas, recoverable operating costs for leases with tenants, non-recoverable operating costs, vacancy periods, tenant
inducements and terminal capitalization rates. Gains and losses arising from changes in the fair value are recognized in
operating income in the period in which they arise.
Restructuring and other related costs The Company continuously evaluates strategic and cost reduction initiatives related to
its store infrastructure, distribution networks and administrative infrastructure with the objective of ensuring a low cost
operating structure. Only restructuring activities that are publicly announced related to these initiatives are considered adjusting
items.
In the fourth quarter of 2021, Loblaw recovered approximately $8 million of restructuring and other related recoveries related to
the previously announced closure of two distribution centres in Laval and Ottawa. The recovery is due to a true-up in estimate of
restructuring charges. The year-to-date restructuring and other related charges were $13 million. Loblaw is investing to build a
modern and efficient expansion to its Cornwall distribution centre to serve its food and drug retail businesses in Ontario and
Quebec. Volumes from the distribution centres in Laval will be transferred to Cornwall and Loblaw expects to incur additional
restructuring costs in 2022 related to these closures.
Acquisition transaction costs and other related costs Choice Properties recorded transaction and other related costs in
connection with the acquisition of Canadian Real Estate Investment Trust.
Foreign currency translation and other company level activities The Company’s consolidated financial statements are
expressed in Canadian dollars. A portion of the Company’s (excluding Loblaw’s) net assets are denominated in U.S. dollars and as
a result, the Company is exposed to foreign currency translation gains and losses. The impact of foreign currency translation on a
portion of the U.S. dollar denominated net assets, primarily cash and cash equivalents and short-term investments held by
foreign operations, is recorded in SG&A and the associated tax, if any, is recorded in income taxes. Other company level activities
include fair value adjustments related to investments and certain financial assets and liabilities held by the Company.
ADJUSTED NET INTEREST EXPENSE AND OTHER FINANCING CHARGES The Company believes adjusted net interest expense
and other financing charges is useful in assessing the ongoing net financing costs of the Company.
The following table reconciles adjusted net interest expense and other financing charges to GAAP net interest expense and
other financing charges reported for the periods ended as indicated.
(unaudited)
($ millions)
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020(4)
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
(52 weeks)
(53 weeks)
Net interest expense and other financing charges
$
190
$
244
$
1,650
$
Add: Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale
agreement for Loblaw common shares
Recovery related to Glenhuron
Adjusted net interest expense and other
financing charges
(122)
(4)
189
(20)
61
—
(601)
(188)
189
829
239
47
—
$
253
$
285
$
1,050
$
1,115
In addition to certain items described in the “Adjusted EBITDA” section above, the following items impacted adjusted net
interest expense and other financing charges in 2021 and 2020:
82 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Fair value adjustment of the Trust Unit liability The Company is exposed to market price fluctuations as a result of the Choice
Properties Trust Units held by unitholders other than the Company. These Trust Units are presented as a liability on the
Company’s consolidated balance sheets as they are redeemable for cash at the option of the holder, subject to certain
restrictions. This liability is recorded at fair value at each reporting date based on the market price of Trust Units at the end of
each period. An increase (decrease) in the market price of Trust Units results in a charge (income) to net interest expense and
other financing charges.
Fair value adjustment of the forward sale agreement for Loblaw common shares The fair value adjustment of the forward sale
agreement for Loblaw common shares is included in net interest expense and other financing charges. The adjustment is
determined by changes in the value of the underlying Loblaw common shares. An increase (decrease) in the market price of
Loblaw common shares results in a charge (income) to net interest expense and other financing charges. See Section 3.3,
“Components of Total Debt”, of this MD&A.
Recovery related to Glenhuron In the fourth quarter of 2021, Loblaw recorded a recovery of $301 million related to the
Supreme Court decision on Glenhuron. Of the total recovery, $173 million was recorded in net interest and other financing
charges and $128 million was recorded in income taxes. In addition, interest of $16 million, before taxes, was recorded in respect
of interest income earned on expected cash tax refunds.
ADJUSTED INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATE The Company believes the adjusted effective 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 tax rate applicable to adjusted earnings before taxes to the GAAP effective tax rate
applicable to earnings before taxes as reported for the periods ended as indicated.
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020(3,4)
Dec. 31, 2021
Dec. 31, 2020(3,4)
(12 weeks)
(13 weeks)
(52 weeks)
(53 weeks)
$
1,033
$
981
$
4,194
$
3,611
(unaudited)
($ millions except where otherwise indicated)
Adjusted operating income(i)
Adjusted net interest expense and other
financing charges(i)
Adjusted earnings before taxes
Income taxes
Add: Tax impact of items excluded from adjusted
earnings before taxes(ii)
Recovery related to Glenhuron
Remeasurement of deferred tax balances
Outside basis difference in certain
Loblaw shares
Adjusted income taxes
$
$
253
780
64
11
128
—
1
285
696
137
$
$
1,050
3,144
630
$
$
1,115
2,496
470
$
$
25
—
(2)
4
99
128
—
(6)
173
—
7
(2)
648
$
204
$
164
$
851
$
Effective tax rate applicable to earnings before taxes
7.8%
21.9%
26.5%
23.0%
Adjusted effective tax rate applicable to adjusted
earnings before taxes
26.2%
23.6%
27.1%
26.0%
(i)
(ii)
See reconciliations of adjusted operating income and adjusted net interest expense and other financing charges above.
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.
In addition to certain items described in the “Adjusted EBITDA” and “Adjusted Net Interest Expense and Other Financing
Charges” sections above, the following items impacted adjusted income taxes and the adjusted effective tax rate in 2021
and 2020:
Recovery related to Glenhuron In the fourth quarter of 2021, Loblaw recorded a recovery of $301 million related to the
Supreme Court decision on Glenhuron. Of the total recovery, $173 million was recorded in net interest and other financing
charges and $128 million was recorded in income taxes. In addition, interest of $16 million, before taxes, was recorded in respect
of interest income earned on expected cash tax refunds.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 83
Management’s Discussion and Analysis
Remeasurement of deferred tax balances In the third quarter of 2020, as a result of Choice Properties issuing Trust Units to a
related party, the Company recorded a tax recovery of $9 million related to the remeasurement of certain deferred income tax
balances resulting from the dilution of its interest in Choice Properties. In the fourth quarter of 2020, as a result of Choice
Properties issuing Class B partnership units to the Company, the Company recorded a tax expense of $2 million related to the
remeasurement of certain deferred income tax balances resulting from the change in its interest in Choice Properties.
Outside basis difference in certain Loblaw shares The Company recorded a deferred tax recovery of $1 million in the fourth
quarter of 2021 and $6 million of deferred tax expense year-to-date on temporary differences in respect of GWL’s investment in
certain Loblaw shares that are expected to reverse in the foreseeable future as a result of GWL’s participation in Loblaw’s NCIB.
ADJUSTED NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS FROM CONTINUING OPERATIONS AND ADJUSTED
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS The Company believes that adjusted net
earnings available to common shareholders from continuing operations and adjusted diluted net earnings per common share
from continuing operations are useful in assessing the Company’s underlying operating performance and in making decisions
regarding the ongoing operations of its business.
The following table reconciles adjusted net earnings available to common shareholders of the Company from continuing
operations and adjusted net earnings attributable to shareholders of the Company from continuing operations to net earnings
attributable to shareholders of the Company and then to net earnings available to common shareholders of the Company from
continuing operations reported for the periods ended as indicated.
(unaudited)
($ millions except where otherwise indicated)
Quarters Ended
Years Ended
Dec. 31, 2021 Dec. 31, 2020(3,4)
Dec. 31, 2021 Dec. 31, 2020(3,4)
(12 weeks)
(13 weeks)
(52 weeks)
(53 weeks)
Net earnings attributable to shareholders of the Company
$
227
$
299
$
431
$
Less: Net (loss) earnings from discontinued operations
(201)
25
(322)
963
6
Net earnings attributable to shareholders of the Company
from continuing operations
$
428
$
274
$
753
$
957
Less: Prescribed dividends on preferred shares in
share capital
Net earnings available to common shareholders
of the Company from continuing operations
(10)
(10)
(44)
$
418
$
264
$
709
$
Less: Reduction in net earnings due to dilution at Loblaw
(5)
(1)
(9)
(44)
913
(4)
Net earnings available to common shareholders from
continuing operations for diluted earnings per share
Net earnings attributable to shareholders of the Company
from continuing operations
Adjusting items (refer to the following table)
Adjusted net earnings attributable to shareholders
of the Company from continuing operations
Less: Prescribed dividends on preferred shares in
$
$
$
413
$
263
$
700
$
909
428
$
274
$
753
$
(71)
4
523
957
80
357
$
278
$
1,276
$
1,037
share capital
(10)
(10)
(44)
Adjusted net earnings available to common shareholders
of the Company from continuing operations
$
347
$
268
$
1,232
$
Less: Reduction in net earnings due to dilution at Loblaw
(5)
(1)
(9)
(44)
993
(4)
Adjusted net earnings available to common shareholders
for diluted earnings per share from continuing
operations
$
342
$
267
$
1,223
$
989
Diluted weighted average common shares outstanding
(in millions)
147.6
153.3
150.2
153.5
84 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
The following table reconciles adjusted net earnings available to common shareholders of the Company from continuing
operations and adjusted diluted net earnings per common share from continuing operations to GAAP net earnings available to
common shareholders of the Company from continuing operations and diluted net earnings per common share from
continuing operations as reported for the periods ended as indicated.
Quarters Ended
Dec. 31, 2021
(12 weeks)
Dec. 31, 2020(3,4)
(13 weeks)
$
$
(unaudited)
($ except where otherwise indicated)
Continuing Operations
Add (deduct) impact of the following(i):
Amortization of intangible assets acquired with Shoppers
Drug Mart
Fair value adjustment on investment properties
Gain on sale of non-operating properties
Fair value adjustment of derivatives
Fair value adjustment on non-operating properties
Restructuring and other related costs
Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale agreement for Loblaw
common shares
Outside basis difference in certain Loblaw shares
Remeasurement of deferred tax balances
Recovery related to Glenhuron
Foreign currency translation and other company level activities
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
418 $
2.80
$
264 $
1.72
47 $
0.31
$
45 $
(72)
(2)
1
—
(4)
122
3
(1)
—
(165)
—
(0.48)
(0.01)
0.01
—
(0.03)
0.83
0.02
(0.01)
—
(1.12)
—
(3)
(3)
(3)
4
3
20
(53)
(4)
2
—
(4)
0.29
(0.02)
(0.02)
(0.02)
0.03
0.02
0.13
(0.34)
(0.03)
0.01
—
(0.03)
0.02
1.74
Adjusting items Continuing Operations
Adjusted Continuing Operations
$
$
(71) $
(0.48) $
4 $
347 $
2.32
$
268 $
(i)
Net of income taxes and non-controlling interests, as applicable.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 85
Management’s Discussion and Analysis
Years Ended
Dec. 31, 2021
(52 weeks)
Dec. 31, 2020(3,4)
(53 weeks)
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
$
709 $
4.66
$
913 $
5.92
(unaudited)
($ except where otherwise indicated)
Continuing Operations
Add (deduct) impact of the following(i):
Amortization of intangible assets acquired with Shoppers
Drug Mart
$
196 $
1.30
$
195 $
Fair value adjustment on investment properties
Gain on sale of non-operating properties
Fair value adjustment of derivatives
Fair value adjustment on non-operating properties
Restructuring and other related costs
Acquisition transaction costs and other related costs
Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale agreement for Loblaw
common shares
Outside basis difference in certain Loblaw shares
Remeasurement of deferred tax balances
Recovery related to Glenhuron
Foreign currency translation and other company level activities
(270)
(7)
(6)
—
5
—
601
163
6
—
(165)
—
Adjusting items Continuing Operations
Adjusted Continuing Operations
$
$
523 $
1,232 $
(1.80)
(0.04)
(0.04)
—
0.03
—
4.00
1.09
0.04
—
(1.10)
—
3.48
8.14
155
(4)
2
4
14
2
(239)
(41)
2
(7)
—
(3)
$
$
80 $
993 $
1.28
1.02
(0.03)
0.01
0.03
0.09
0.01
(1.56)
(0.27)
0.01
(0.05)
—
(0.02)
0.52
6.44
(i)
Net of income taxes and non-controlling interests, as applicable.
FREE CASH FLOW FROM CONTINUING OPERATIONS The Company believes free cash flow is useful in assessing the Company’s
cash available for additional financing and investing activities.
The following table reconciles free cash flow to GAAP measures reported for the periods ended as indicated.
(unaudited)
($ millions)
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020(4)
Dec. 31, 2021
Dec. 31, 2020(4)
(12 weeks)
(13 weeks)
$ Change
(52 weeks)
(53 weeks)
$ Change
Cash flows from operating activities
$
1,155
$
1,574 $
(419) $
5,107
$
5,521 $
(414)
Less: Cash flows from operating activities from
discontinued operations
12
56
(44)
—
157
(157)
Cash flows from operating activities from
continuing operations
$
1,143
$
1,518 $
(375) $
5,107
$
5,364 $
(257)
Less: Interest paid
Capital Investments(i)
Lease payments, net
173
487
202
180
581
191
(7)
(94)
11
853
1,381
795
883
1,496
844
(30)
(115)
(49)
Free cash flow from continuing operations
$
281
$
566 $
(285) $ 2,078
$
2,141 $
(63)
(i)
During 2021, additions to fixed assets in Loblaw included $1 million of prepayments that were made in 2020 and transferred from other
assets. During 2020, additions to fixed assets in Loblaw included prepayments that were made in 2019 and transferred from other assets of
$66 million.
86 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
CHOICE PROPERTIES’ FUNDS FROM OPERATIONS Choice Properties considers Funds from Operations to be a useful measure
of operating performance as it adjusts for items included in net income that do not arise from operating activities or do not
necessarily provide an accurate depiction of its performance.
Funds from operations is calculated in accordance with the Real Property Association of Canada’s White Paper on Funds from
Operations & Adjusted Funds from Operations for IFRS issued in February 2019.
The following table reconciles Choice Properties’ Funds from Operations to net income for the periods ended as indicated.
(unaudited)
($ millions)
Net (loss) income
Add (deduct) impact of the following:
Fair value adjustment on Exchangeable Units
Unit distributions on Exchangeable Units
Fair value adjustment on investment properties
Fair value adjustment on investment property held in
equity accounted joint ventures
Internal expenses for leasing
Capitalized interest on equity accounted
joint ventures
Acquisition transaction costs and other related costs
Amortization of intangible assets
Foreign exchange gain
Other fair value (losses) gains, net
Income taxes
Funds from Operations
Quarters Ended
Years Ended
Dec. 31, 2021
Dec. 31, 2020
Dec. 31, 2021
Dec. 31, 2020
$
(162) $
117
$
24
$
451
372
73
(96)
(13)
3
—
—
—
—
(1)
(1)
87
73
(104)
—
2
1
—
—
—
(2)
(2)
863
293
(459)
(43)
8
3
—
1
—
1
(1)
(354)
289
220
37
7
5
2
1
(1)
(3)
(2)
$
175
$
172
$
690
$
652
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 87
Management’s Discussion and Analysis
14.1
Non-GAAP Financial Measures - Selected Comparative Reconciliation
The following table provides a reconciliation of adjusted EBITDA to operating income, which is reconciled to GAAP net earnings
attributable to shareholders of the Company from continuing operations reported for the periods ended as indicated.
(unaudited)
($ millions)
Net earnings (loss)
attributable to
shareholders of the
Company from continuing
operations
Add impact of the following:
Non-controlling interests
Income taxes
Net interest expense and
other financing charges
Operating income
Add impact of the following:
Amortization of intangible
assets acquired with
Shoppers Drug Mart
Fair value adjustment on
investment properties
Gain on sale of non-
operating properties
Fair value adjustment of
derivatives
Fair value adjustment on
non-operating properties
Restructuring and other
related costs
Acquisition transaction
costs and other related
costs
Foreign currency
translation and other
company level activities
Adjusting items
Adjusted operating income
Depreciation and
amortization excluding the
impact of the above
adjustments(i)
Adjusted EBITDA
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(13 weeks)
(53 weeks)
(52 weeks)
2021
2020(4)
2019(4)
$
(52) $
125 $
252 $
428 $
753 $
590 $
(210) $
303 $
274 $
957 $
175
$
$
$
$
170 $
236 $
261
327 $
994 $
151 $
73 $
181 $
214 $
619 $
165 $
201 $
200 $
64 $
630 $
112 $
64 $
157 $
137 $
470 $
581
417
545 $
503 $
412 $
190 $
1,650 $
(258) $
520 $
323 $
244 $
829 $
1,702
828 $
1,065 $
1,125 $
1,009 $ 4,027 $
595 $
447 $
964 $
869 $ 2,875 $ 2,875
$
117 $
117 $
155 $
117 $
506 $
119 $
118 $
155 $
117 $
509 $
508
(46)
(149)
(41)
(87)
(323)
102
(3)
—
(9)
(2)
(14)
(8)
(3)
(8)
6
(13)
—
4
—
—
—
8
—
—
—
9
—
—
(2)
(2)
(8)
13
—
—
—
—
—
15
—
15
2
—
93
—
(3)
—
9
—
1
(7)
(3)
185
100
(1)
(8)
(9)
(12)
—
—
6
—
—
(7)
9
8
—
5
9
—
(7)
38
10
2
9
(4)
(3)
(3)
64 $
(27) $
106 $
24 $
167 $
253 $
218 $
153 $
112 $
736 $
605
892 $
1,038 $
1,231 $
1,033 $
4,194 $
848 $
665 $
1,117 $
981 $
3,611 $ 3,480
408 $
424 $
549 $
420
1,801 $
398 $
405 $
527 $
415 $
1,745 $
1,665
1,300 $
1,462 $
1,780 $
1,453 $ 5,995 $
1,246 $
1,070 $
1,644 $
1,396 $
5,356 $
5,145
(i)
Depreciation and amortization for the calculation of adjusted EBITDA excludes the amortization of intangible assets, acquired with Shoppers
Drug Mart, recorded by Loblaw.
88 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
ADJUSTED NET INTEREST EXPENSE AND OTHER FINANCING CHARGES 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)
Dec. 31, 2021
Years Ended
Dec. 31, 2020(4)
Dec. 31, 2019(4)
(52 weeks)
(53 weeks)
(52 weeks)
Net interest expense and other financing charges
$
1,650
$
Add: Fair value adjustment of the Trust Unit liability
Fair value adjustment of the forward sale agreement for Loblaw
common shares
Recovery related to Glenhuron
Choice Properties issuance costs
(601)
(188)
189
—
829
239
47
—
—
1,702
(550)
(69)
—
(14)
Adjusted net interest expense and other financing charges
$
1,050
$
1,115
$
1,069
Choice Properties issuance costs Choice Properties incurred issuance costs of $14 million related to the offering of Trust Units
in 2019.
ADJUSTED INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATE The following table reconciles the effective tax rate
applicable to adjusted earnings before taxes to the GAAP effective tax rate applicable to earnings before taxes as reported for
the periods ended as indicated.
Dec. 31, 2021
Years Ended
Dec. 31, 2020(3,4)
Dec. 31, 2019(3,4)
(52 weeks)
(53 weeks)
(52 weeks)
(unaudited)
($ millions except where otherwise indicated)
Adjusted operating income(i)
Adjusted net interest expense and other financing charges(i)
Adjusted earnings before taxes
Income taxes
Add: Tax impact of items excluded from adjusted earnings before
taxes(ii)
Recovery related to Glenhuron
Remeasurement of deferred tax balances
Outside basis difference in certain Loblaw shares
$
$
$
4,194
$
3,611
$
1,050
3,144
630
$
$
1,115
2,496
470
$
$
99
128
—
(6)
173
—
7
(2)
Adjusted income taxes
$
851
$
648
$
Effective tax rate applicable to earnings before taxes
Adjusted effective tax rate applicable to adjusted earnings before taxes
26.5%
27.1%
23.0%
26.0%
3,480
1,069
2,411
417
156
—
15
—
588
35.5%
24.4%
(i)
(ii)
See reconciliations of adjusted operating income and adjusted net interest expense and other financing charges above.
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.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 89
Management’s Discussion and Analysis
The following tables reconcile adjusted net earnings available to common shareholders of the Company from continuing
operations and adjusted diluted net earnings per common share from continuing operations to GAAP net earnings available to
common shareholders of the Company from continuing operations and diluted net earnings per common share from
continuing operations as reported for the periods ended as indicated.
(unaudited)
($ millions)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2021
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total
2020(3,4)
2019(3,4)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(13 weeks)
(53 weeks)
(52 weeks)
Continuing Operations
$
(62) $
115 $
238 $
418 $
709 $
580 $
(220) $
289 $
264 $
913 $
131 $ —
Add (deduct) impact of the
following(i):
Amortization of intangible
assets acquired
with Shoppers Drug Mart
Fair value adjustment on
investment properties
Gain on sale of non-
operating properties
Fair value adjustment of
derivatives
Fair value adjustment on
non-operating properties
Restructuring and other
related costs
Acquisition transaction costs
and other related costs
Fair value adjustment of the
Trust Unit liability
Fair value adjustment of the
forward sale agreement for
Loblaw common shares
Outside basis difference in
certain Loblaw shares
Remeasurement of deferred
tax balances
Recovery related to
Glenhuron
Choice Properties issuance
costs
Foreign currency translation
and other company level
activities
Adjusting items Continuing
Operations
Adjusted Continuing
Operations
$
45 $
46 $
58 $
47 $
196 $
46 $
45 $
59 $
45 $
195 $
194
(38)
(125)
(35)
(72)
(270)
85
—
—
(5)
(2)
(3)
(1)
(3)
—
2
—
—
2
—
—
5
—
1
—
(4)
—
(7)
(6)
—
5
—
—
6
—
5
2
78
—
(1)
—
3
—
(5)
(3)
155
86
(1)
(3)
(4)
(5)
—
—
3
—
(3)
4
3
—
2
4
14
2
—
(3)
9
8
239
188
52
122
601
(504)
257
(12)
20
(239)
550
46
16
—
—
—
—
50
64
3
163
(9)
(2)
23
(53)
(41)
60
—
—
—
—
—
(9)
(1)
6
—
—
—
—
—
—
(165)
(165)
—
—
—
—
14
(4)
(4)
(4)
2
—
—
—
—
—
—
—
—
1
(9)
—
—
—
2
—
—
(7)
(15)
—
—
—
14
(4)
(3)
(3)
$
307 $
160 $
127 $
(71) $
523 $
(355) $
377 $
54 $
4 $
80 $
895
$
245 $
275 $
365 $
347 $
1,232 $
225 $
157 $
343 $
268 $
993 $
1,026
(i)
Net of income taxes and non-controlling interests, as applicable.
90 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
(unaudited)
($)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2021
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total
2020(3,4)
2019(3,4)
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
(12 weeks)
(12 weeks)
(16 weeks)
(13 weeks)
(53 weeks)
(52 weeks)
Continuing Operations
$
(0.41) $
0.74 $
1.58 $
2.80 $
4.66 $
3.77 $
(1.43) $
1.87 $
1.72 $
5.92 $ 0.82 $ —
Add (deduct) impact of the
following(i):
Amortization of intangible
assets acquired
with Shoppers Drug Mart
Fair value adjustment on
investment properties
Gain on sale of non-
operating properties
Fair value adjustment of
derivatives
Fair value adjustment on
non-operating properties
Restructuring and other
related costs
Acquisition transaction costs
and other related costs
Fair value adjustment of the
Trust Unit liability
Fair value adjustment of the
forward sale agreement for
Loblaw common shares
Outside basis difference in
certain Loblaw shares
Remeasurement of deferred
tax balances
Recovery related to
Glenhuron
Choice Properties issuance
costs
Foreign currency translation
and other company level
activities
Adjusting items Continuing
Operations
Adjusted Continuing
Operations
Diluted weighted common
shares (in millions)
$
0.29 $
0.31 $
0.39 $
0.31 $
1.30 $
0.30 $
0.29 $
0.38 $
0.29 $
1.28 $
1.26
(0.25)
(0.82)
(0.24)
(0.48)
(1.80)
0.56
0.51
(0.03)
(0.02)
1.02
0.57
—
—
(0.03)
(0.01)
(0.04)
—
—
(0.01)
(0.02)
(0.03)
(0.03)
(0.02)
(0.01)
(0.02)
0.01
(0.04)
0.04
(0.01)
—
—
—
—
—
—
—
—
—
(0.02)
0.01
—
0.03
0.03
(0.02)
0.01
0.01
0.03
(0.03)
0.03
0.03
0.02
0.03
0.02
0.09
0.06
—
—
—
—
—
0.01
—
—
—
0.01
0.05
1.57
1.24
0.35
0.83
4.00
(3.28)
1.68
(0.08)
0.13
(1.56)
3.58
0.30
0.33
0.43
0.02
1.09
(0.06)
(0.01)
0.15
(0.34)
(0.27)
0.39
0.11
—
—
—
—
—
—
—
—
—
(0.06)
(0.01)
0.04
0.09
(0.03)
(0.03)
(0.03)
0.01
—
—
—
—
—
—
—
(1.12)
(1.10)
—
—
—
—
—
—
—
—
—
—
—
(0.06)
0.01
(0.05)
(0.10)
—
—
—
—
—
—
—
0.09
0.01
—
(0.03)
(0.02)
(0.02)
$
2.01 $
1.06 $
0.85 $
(0.48) $
3.48 $
(2.31) $
2.46 $
0.35 $
0.02 $
0.52 $
5.83
$
1.60 $
1.80 $
2.43 $
2.32 $
8.14 $
1.46 $
1.03 $
2.22 $
1.74 $
6.44 $ 6.65
152.1
151.8
149.7
147.6
150.2
153.8
153.4
153.5
153.3
153.5
153.7
(i)
Net of income taxes and non-controlling interests, as applicable.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 91
Management’s Discussion and Analysis
14.2
Non-GAAP Financial Measures Policy Change Effective First Quarter of 2021
In 2020, management undertook a review of historical adjusting items as part of an effort to reduce the number of non-GAAP
items it adjusts for in its financial reporting. Management concluded that, in order to present adjusting items in a manner more
consistent with that of its Canadian and U.S. peers, the Company will no longer adjust for asset impairments (net of recoveries),
certain restructuring and other related costs, pension settlement costs, statutory corporate income tax rate changes or other
items.
Starting in the first quarter of 2021, restructuring and other related costs will be considered an adjusting item only if significant
and if part of a publicly announced restructuring plan. Other unusual items will be assessed on a case by case basis based on
their nature, magnitude and propensity to re-occur. This change took effect in the first quarter of 2021 with restatement of
comparative periods at that time.
The summaries below reconcile the non-GAAP financial measures as previously reported in 2020 and 2019 to those reported
under the new policy starting in the first quarter of 2021.
The Company’s interest in Weston Foods has been presented separately as discontinued operations in the Company’s current
and comparative results. As a result, all financial information represents the Company’s results from continuing operations unless
otherwise indicated, including the following previously reported Adjusted Operating Income and Adjusted EBITDA.
Adjusted Operating Income and Adjusted EBITDA:
Quarters Ended
March 21, 2020
(12 weeks)
June 13, 2020
(12 weeks)
October 3, 2020
(16 weeks)
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other
Consoli-
dated
Loblaw
Choice
Properties
Other
Consoli-
dated
Loblaw
Choice
Properties
Other
Consoli-
dated
Adjusted Operating income - Previously
Reported
$ 692 $ 226 $ (66) $ 852 $ 534 $
201 $ (62) $ 673 $ 882 $ 224 $
17 $ 1,123
Add (deduct) impact of the following:
Asset Impairments, net of recoveries
Restructuring and other related costs
—
(4)
—
—
—
—
—
(4)
—
(8)
—
—
—
—
—
(8)
—
(6)
—
—
—
—
—
(6)
Adjusting Items
$
(4) $
— $ — $
(4) $
(8) $
— $ — $
(8) $
(6) $
— $ — $
(6)
Adjusted operating income - Restated
$ 688 $ 226 $ (66) $ 848 $ 526 $
201 $ (62) $ 665 $ 876 $ 224 $
17 $ 1,117
Depreciation and amortization
594
1
(78)
517
598
—
(75)
523
795
1
(114)
682
Less: Amortization of intangible assets
acquired with Shoppers Drug Mart
(119)
—
—
(119)
(118)
—
—
(118)
(155)
—
—
(155)
Adjusted EBITDA - Restated
$ 1,163 $ 227 $ (144) $ 1,246 $ 1,006 $
201 $ (137) $ 1,070 $ 1,516 $ 225 $ (97) $ 1,644
Quarter Ended
December 31, 2020
(13 weeks)
Year Ended
December 31, 2020
(53 weeks)
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other Consolidated
Loblaw
Choice
Properties
Other Consolidated
Adjusted Operating income - Previously
Reported
Add (deduct) impact of the following:
Asset Impairments, net of recoveries
Restructuring and other related costs
Adjusting Items
Adjusted operating income - Restated
Depreciation and amortization
Less: Amortization of intangible assets acquired
with Shoppers Drug Mart
Adjusted EBITDA - Restated
$ 838 $
225 $
(57) $
1,006 $ 2,946 $
876
$
(168) $
3,654
(17)
(2)
—
—
(6)
—
(23)
(2)
(17)
(20)
(19) $
— $
(6) $
(25) $
(37) $
—
—
—
819 $
225 $
(63) $
981 $ 2,909 $
876
$
$
609
(117)
1
—
(78)
532
2,596
—
(117)
(509)
3
—
(6)
—
(6) $
(23)
(20)
(43)
(174) $
3,611
(345)
2,254
$
$
—
(509)
$
1,311 $
226 $
(141) $
1,396 $ 4,996 $
879
$
(519) $
5,356
92 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Quarters Ended
March 23, 2019
(12 weeks)
June 15, 2019
(12 weeks)
October 5, 2019
(16 weeks)
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other
Consoli-
dated
Loblaw
Choice
Properties
Other
Consoli-
dated
Loblaw
Choice
Properties
Other
Consoli-
dated
Adjusted Operating income - Previously
Reported
$ 577 $ 230 $ (81) $ 726 $ 709 $ 232 $ (63) $ 878 $ 872 $ 226 $ (12) $ 1,086
Add (deduct) impact of the following:
Asset Impairments, net of recoveries
Restructuring and other related costs
Pension annuities and buy-outs
Certain prior period items
—
(12)
(10)
—
—
—
—
—
—
—
—
—
—
(12)
(10)
—
—
(16)
—
15
—
—
—
—
—
—
—
—
—
—
(16)
(22)
—
15
—
—
—
—
—
—
—
—
—
—
—
(22)
—
—
Adjusting Items
$ (22) $
— $ — $
(22) $
(1) $
— $ — $
(1) $ (22) $
— $ — $
(22)
Adjusted operating income - Restated
$ 555 $ 230 $ (81) $ 704 $ 708 $ 232 $ (63) $ 877 $ 850 $ 226 $ (12) $ 1,064
Depreciation and amortization
580
—
(76)
504
580
1
(82)
499
775
—
(118)
657
Less: Amortization of intangible assets
acquired with Shoppers Drug Mart
(119)
—
—
(119)
(116)
—
—
(116)
(157)
—
—
(157)
Adjusted EBITDA - Restated
$ 1,016 $ 230 $ (157) $ 1,089 $ 1,172 $ 233 $ (145) $ 1,260 $ 1,468 $ 226 $ (130) $ 1,564
Quarter Ended
December 31, 2019
(12 weeks)
Year Ended
December 31, 2019
(52 weeks)
(unaudited)
($ millions)
Loblaw
Choice
Properties
Other Consolidated
Loblaw
Choice
Properties
Other Consolidated
Adjusted Operating income - Previously Reported $
730 $
225 $
(59) $
896 $ 2,888 $
913 $
(215) $
3,586
Add (deduct) impact of the following:
Asset Impairments, net of recoveries
Restructuring and other related costs
Pension annuities and buy-outs
Certain prior period items
(75)
(24)
—
7
—
—
—
—
38
—
—
(7)
(37)
(24)
—
—
(75)
(74)
(10)
22
—
—
—
38
—
—
— 0
(7)
(37)
(74)
(10)
15
Adjusting Items
$
(92) $
— $
31 $
(61) $
(137) $
— $
31 $
(106)
Adjusted operating income - Restated
$ 638 $
225 $
(28) $
835 $ 2,751 $
913 $
(184) $
3,480
Depreciation and amortization
Less: Amortization of intangible assets acquired
with Shoppers Drug Mart
Adjusted EBITDA - Restated
589
(116)
—
—
(76)
513
2,524
—
(116)
(508)
1
—
(352)
2,173
—
(508)
$
1,111 $
225 $
(104) $
1,232 $ 4,767 $
914 $
(536) $
5,145
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 93
Management’s Discussion and Analysis
Adjusted Net Earnings Available to Common Shareholders and Adjusted Diluted Net earnings per Common Share are presented
below:
Quarters Ended
Year Ended
March 21, 2020
June 13, 2020
October 3, 2020
December 31, 2020
December 31, 2020
(12 weeks)
(12 weeks)
(16 weeks)
(13 weeks)
(53 weeks)
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
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
Net Earnings
Available to
Common
Shareholders
of the
Company
($ millions)
Diluted
Net
Earnings
Per
Common
Share
(unaudited)
($ except where otherwise indicated)
Adjusted Total Company -
Previously Reported
$
239 $
1.55 $
142 $ 0.93 $
362 $ 2.35 $
312 $ 2.03 $
1,055 $ 6.85
Add (deduct) impact of the
following:
Asset impairments, net of
recoveries
Restructuring and other
related costs
Statutory corporate income
tax rate change
Adjusting items
Adjusted Total Company -
Restated
Continuing Operations
Discontinued Operations(i)
$
— $
— $
— $
— $
— $
— $
(11) $ (0.08) $
(11) $ (0.08)
(2)
(0.01)
(3)
(0.02)
(3)
(0.02)
2
0.01
—
—
(1)
(0.01)
—
1
—
(8)
(0.04)
0.01
2
0.01
— $
— $
(3) $ (0.02) $
(4) $ (0.03) $
(10) $ (0.07) $
(17) $
(0.11)
239 $
1.55 $
139 $ 0.91 $
358 $ 2.32 $
302 $
1.96 $
1,038 $ 6.74
225 $
1.46 $
157 $
1.03 $
343 $ 2.22 $
268 $
1.74 $
993 $ 6.44
14 $ 0.09 $
(18) $ (0.12) $
15 $ 0.10 $
34 $ 0.22 $
45 $ 0.30
$
$
$
$
(i)
The Company’s interest in Weston Foods presented separately as discontinued operations was not impacted as a result of the non-GAAP
financial measures policy change.
Quarters Ended
Year Ended
March 23, 2019
June 15, 2019
October 5, 2019
December 31, 2019
December 31, 2019
(12 weeks)
(12 weeks)
(16 weeks)
(12 weeks)
(52 weeks)
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
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
Net Earnings
Available to
Common
Shareholders
of the
Company
($ millions)
Diluted
Net
Earnings
Per
Common
Share
(unaudited)
($ except where otherwise indicated)
Adjusted Total Company -
Previously Reported
$
201 $
1.30 $
263 $
1.70 $
391 $ 2.54 $
262 $
1.69 $
1,117 $ 7.24
Add (deduct) impact of the
following:
Asset impairments, net of
recoveries
Restructuring and other
related costs
Pension annuities and
buy-outs
Certain prior period items
Reserve release related to
2014 tax audit
Statutory corporate income
tax rate change
Adjusting items
Adjusted Total Company -
Restated
Continuing Operations
Discontinued Operations(i)
$
— $
— $
— $
— $
— $
— $
(2) $ (0.01) $
(2) $ (0.01)
(5)
(0.03)
(6)
(0.04)
(7)
(0.05)
(10)
(0.07)
(28)
(0.18)
(4)
(0.03)
—
—
6
0.04
—
—
—
—
—
—
—
—
—
—
—
—
4
0.03
8
0.05
—
—
—
—
—
—
—
—
—
—
(4)
(0.03)
6
0.04
4
0.03
8
0.05
$
$
$
$
(9) $ (0.06) $
8 $ 0.05 $
(3) $ (0.02) $
(12) $ (0.08) $
(16) $ (0.10)
192 $
1.24 $
271 $
1.75 $
388 $ 2.52 $
250 $
1.61 $
1,101 $ 7.14
179 $
1.15 $
257 $
1.66 $
361 $ 2.34 $
229 $
1.48 $
1,026 $ 6.65
13 $ 0.09 $
14 $ 0.09 $
27 $ 0.18 $
21 $ 0.13 $
75 $ 0.49
(i)
The Company’s interest in Weston Foods presented separately as discontinued operations was not impacted as a result of this change.
There were no impacts to previously reported adjusted net interest expense and other financing charges as a result of this
change as reported in the Company’s 2020 annual and interim MD&A.
94 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
15.
Forward-Looking Statements
This Annual Report, including this MD&A, 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 Annual Report include, but are not limited to, statements with
respect to the Company’s anticipated future results, events and plans, strategic initiatives and restructuring, regulatory changes
including further healthcare reform, future liquidity, planned capital investments, and the status and impact of IT systems
implementation. These specific forward-looking statements are contained throughout this Annual Report including, without
limitation, in Section 3, “Liquidity and Capital Resources”, Section 13, “Outlook”, and Section 14, “Non-GAAP Financial Measures”,
of this MD&A. Forward-looking statements are typically identified by words such as “expect”, “anticipate”, “believe”, “foresee”,
“could”, “estimate”, “goal”, “intend”, “plan”, “seek”, “strive”, “will”, “may”, “should” and similar expressions, as they relate to the
Company and its management.
Forward-looking statements reflect the Company’s 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 estimates, beliefs and assumptions are inherently subject to significant
business, economic, competitive and other uncertainties and contingencies regarding future events, including the COVID-19
pandemic and as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions
will prove to be correct.
Numerous risks and uncertainties could cause the Company’s actual results to differ materially from those expressed, implied or
projected in the forward-looking statements, including those described in the “Enterprise Risks and Risk Management” of the
Company’s 2021 Annual Report and the Company’s AIF for the year ended December 31, 2021. Such risks and uncertainties
include:
•
duration and impact of the COVID-19 pandemic on the business, operations and financial condition of the Company, as
well as on vendor operations, consumer behaviour and the economy in general;
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 maintain an effective supply chain and consequently an appropriate assortment of available product at the store
and digital retail level;
failure to attract and retain talent for key roles that may impact the Company’s ability to effectively operate and achieve
financial performance goals;
failure to execute the Company’s e-commerce initiatives or to adapt its business model to shifts in the retail landscape
caused by digital advances;
failure to realize benefits from investments in the Company’s new IT systems and related processes;
changes to the regulation of generic prescription drug prices, the reduction of reimbursements under public drug benefit
plans and the elimination or reduction of professional allowances paid by drug manufacturers;
failure to effectively respond to consumer trends or heightened competition, whether from current competitors or new
entrants to the marketplace;
public health events including those related to food and drug safety;
errors made through medication dispensing or errors related to patient services or consultation;
failure to achieve desired results in labour negotiations, including the terms of future collective bargaining agreements;
adverse outcomes of legal and regulatory proceedings and related matters;
failure by Choice Properties to realize the anticipated benefits associated with its strategic priorities and major initiatives,
including failure to develop quality assets and effectively manage development, redevelopment, and renovation initiatives
and the timelines and costs related to such initiatives;
failure to adapt to environmental and social risks, including failure to execute against the Company’s climate change and
social equity initiatives;
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;
inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory or control shrink;
reliance on the performance and retention of third party service providers, including those associated with the Company’s
supply chain and apparel business and located in both advanced and developing markets;
failure to realize the anticipated benefits associated with the Company’s strategic priorities and major initiatives, including
revenue growth, anticipated cost savings and operating efficiencies, or organizational changes that may impact the
relationships with franchisees and Associates;
the inability of the Company to effectively develop and execute its strategy; and
changes to any of the laws, rules, regulations or policies applicable to the Company’s business.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 95
Management’s Discussion and Analysis
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, 2021. 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 MD&A. 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.
16.
Additional Information
Additional information about the Company has been filed electronically with various securities regulators in Canada through the
System for Electronic Document Analysis and Retrieval (SEDAR) and is available online at www.sedar.com.
This Annual Report includes selected information on Loblaw, a public company with shares trading on the TSX. For information
regarding Loblaw, readers should also refer to the materials filed by Loblaw on SEDAR from time to time. These filings are also
maintained on Loblaw’s website at www.loblaw.ca.
This Annual Report also includes selected information on Choice Properties, a public real estate investment trust with units
trading on the TSX. For information regarding Choice Properties, readers should also refer to the materials filed by Choice
Properties on SEDAR from time to time. These filings are also maintained on Choice Properties’ website at www.choicereit.ca.
Toronto, Canada
March 1, 2022
96 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Financial Results
Management’s Statement of Responsibility for Financial Reporting
Independent Auditors’ Report
Consolidated Financial Statements
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Nature and Description of the Reporting Entity
Significant Accounting Policies
Critical Accounting Estimates and Judgments
Future Accounting Standard
Discontinued Operations
Subsidiaries
Business Acquisitions
Net Interest Expense and Other Financing Charges
Income Taxes
Note 10.
Basic and Diluted Net Earnings per Common Share
Note 11.
Cash and Cash Equivalents, Short-Term Investments and Security Deposits
Note 12.
Accounts Receivable
Note 13.
Credit Card Receivables
Note 14.
Inventories
Note 15.
Assets Held for Sale
Note 16.
Fixed Assets
Note 17.
Investment Properties
Note 18.
Equity Accounted Joint Ventures
Note 19.
Intangible Assets
Note 20.
Goodwill
Note 21. Other Assets
Note 22.
Customer Loyalty Awards Program Liability
Note 23.
Provisions
Note 24.
Short-Term Debt
Note 25.
Long-Term Debt
Note 26. Other Liabilities
Note 27.
Share Capital
Note 28.
Loblaw Capital Transactions
Note 29.
Capital Management
Note 30.
Post-Employment and Other Long-Term Employee Benefits
Note 31.
Equity-Based Compensation
Note 32.
Employee Costs
Note 33.
Leases
Note 34.
Financial Instruments
Note 35.
Financial Risk Management
Note 36.
Contingent Liabilities
Note 37.
Financial Guarantees
Note 38.
Related Party Transaction
Note 39.
Segment Information
Note 40.
Subsequent Event
Three Year Summary
Glossary
98
99
102
102
102
103
104
105
106
106
106
119
121
121
123
124
124
125
127
128
129
129
131
131
132
134
135
136
137
138
138
139
140
141
144
145
148
149
150
156
161
162
165
167
169
171
173
175
177
178
180
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 97
Management’s Statement of Responsibility for Financial Reporting
Management of George Weston Limited is responsible for the preparation, presentation and integrity of the accompanying
consolidated financial statements, Management’s Discussion and Analysis and all other information in the Annual Report. This
responsibility includes the selection and consistent application of appropriate accounting principles and methods in addition
to making the judgments and estimates necessary to prepare the consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. It also includes ensuring
that the financial information presented elsewhere in the Annual Report is consistent with that in the consolidated financial
statements.
Management is also responsible for providing reasonable assurance that assets are safeguarded and that relevant and reliable
financial information is produced. Management is required to design a system of internal controls and certify as to the design
and operating effectiveness of internal controls over financial reporting. A dedicated control compliance team reviews and
evaluates internal controls, the results of which are shared with management on a quarterly basis.
KPMG LLP, whose report follows, were appointed as independent auditors by a vote of the Company’s shareholders to audit the
consolidated financial statements.
The Board of Directors, acting through an Audit Committee comprised solely of directors who are independent, are responsible
for determining that management fulfills its responsibilities in the preparation of the consolidated financial statements and
the financial control of operations. The Audit Committee recommends the independent auditors for appointment by the
shareholders. The Audit Committee meets regularly with senior and financial management, internal auditors and the
independent auditors to discuss internal controls, auditing activities and financial reporting matters. The independent auditors
and internal auditors have unrestricted access to the Audit Committee. These consolidated financial statements and
Management’s Discussion and Analysis have been approved by the Board of Directors for inclusion in the Annual Report based
on the review and recommendation of the Audit Committee.
[signed]
Galen G. Weston
Chairman and
Chief Executive Officer
Toronto, Canada
March 1, 2022
[signed]
Richard Dufresne
President and
Chief Financial Officer
98 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Independent Auditors’ Report
TO THE SHAREHOLDERS OF GEORGE WESTON LIMITED
Opinion
We have audited the consolidated financial statements of George Weston Limited (the “Entity”), which comprise:
•
•
•
•
•
• and notes to the consolidated financial statements, including a summary of significant accounting policies
the consolidated balance sheets as at December 31, 2021 and December 31, 2020
the consolidated statements of earnings for the years then ended
the consolidated statements of comprehensive income for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position
of the Entity as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our
auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.
Evaluation of Impairment of Certain Non-Financial Assets for Food Retail Locations
Description of the matter
We draw attention to Notes 2, 3, 16 and 33 to the financial statements. At each balance sheet date, the Entity reviews the
carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication
exists, the asset is then tested for impairment by comparing its recoverable amount to its carrying value. Fixed assets and right-
of-use assets are $10,782 million and $4,059 million, respectively. The Entity has determined that each retail location is a
separate cash generating unit (CGU) for purposes of impairment testing of non-financial assets for food retail locations. The
recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. In determining the recoverable
amount, various estimates are employed. The Entity’s estimates include:
• Discount rate, projected future sales and earnings for value in use
• Discount rate, capitalization rates, terminal capitalization rates, future cash flows over the holding period and market rental
rates for fair value less costs to sell.
Why the matter is a key audit matter
We identified the evaluation of impairment of certain non-financial assets, specifically fixed assets and right-of-use assets, for
food retail locations as a key audit matter. Food retail assets comprised the largest portion of the Loblaw operating segment
tested for impairment. This matter represented an area of significant risk of material misstatement due to the magnitude of the
balance and the high degree of estimation uncertainty in determining the recoverable amount. Significant auditor judgment
and the involvement of professionals with specialized skills and knowledge was required to evaluate the evidence supporting
the Entity’s estimates due to the sensitivity of the recoverable amount to minor changes in those estimates.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the design and tested the operating effectiveness of the control over the Entity’s review of the recoverable amount
of the CGU. This control included the review of estimates used to determine the recoverable amount.
For a selection of food retail locations, where value-in-use was used in the evaluation of impairment, we evaluated the
appropriateness of the:
• Projected future sales and earnings estimates used in determining value in use by comparing to the actual historical sales and
earnings generated by the food retail location. We took into account changes in conditions and events affecting the retail
location to assess the adjustments or lack of adjustments made in arriving at the projected future sales and earnings
estimates
• Discount rate by involving valuations professionals with specialized skills and knowledge by comparing it against a discount
rate range that was independently developed using publicly available market data for comparable entities.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 99
Independent Auditors’ Report
For a selection of food retail locations, where fair value less cost to sell was used in the evaluation of impairment, we evaluated
the appropriateness of the:
• Future cash flows over the holding period based on representative leases. We took into account the changes in conditions and
events affecting those future cash flows to assess the adjustments, or lack of adjustments, made by the Entity
• Terminal capitalization rates and discount rates on a portfolio basis by involving valuations professionals with specialized skills
and knowledge. These rates were evaluated by comparing them to published reports of real estate industry commentators
and considering the various characteristics of the portfolio
• Capitalization rates and market rental rates by comparing to external information such as industry reports and commercial
real estate property listings.
Evaluation of the fair value of income producing properties
Description of the matter
We draw attention to Note 2, 3, and Note 17 of the financial statements. The income producing properties are measured using
the fair value model. The Entity has recorded income producing properties at fair value for an amount of $5,183 million. The
Entity’s significant assumptions in evaluating the fair value of income producing properties include:
• Future cash flows over the holding period
• Terminal capitalization rates and discount rates applied to these cash flows.
Why the matter is a key audit matter
We identified the evaluation of the fair value of income producing properties as a key audit matter. This matter represented an
area of significant risk of material misstatement given the magnitude of income producing properties and the high degree of
estimation uncertainty in determining the fair value of income producing properties. Significant auditor judgment and
involvement of those with specialized skills and knowledge were required in evaluating the results of our audit procedures due
to the sensitivity of the fair value of income producing properties to minor changes in certain significant assumptions.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
For a selection of income producing properties, we assessed the Entity’s ability to accurately forecast by comparing the Entity’s
future cash flows over the holding period used in the prior year’s fair value of income producing properties to actual results.
For a selection of income producing properties, we compared the future cash flows over the holding period to the actual
historical cash flows generated by the income producing properties. We took into account the changes in conditions and events
affecting the income producing properties to assess the adjustments, or lack of adjustments, made by the Entity in arriving at
those future cash flows.
For a selection of income producing properties, we involved valuations professionals with specialized skills and knowledge, who
assisted in evaluating the terminal capitalization rates and discount rates. These rates were evaluated by comparing them to
published reports of real estate industry commentators and considering the features of the specific income producing property.
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a document entitled “2021
Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis and a document entitled “2021 Annual Report”
filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact in the auditors’ report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for
such internal control as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
100 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However,
future events or conditions may cause the Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
• Determine, from the matters communicated with those charged with governance, those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors’ report is Sebastian Distefano.
Toronto, Canada
March 1, 2022
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 101
Consolidated Statements of Earnings
For the years ended December 31
(millions of Canadian dollars except where otherwise indicated)
Revenue
Operating Expenses
Cost of inventories sold (note 14)
Selling, general and administrative expenses
Operating Income
Net Interest Expense and Other Financing Charges (note 8)
Earnings Before Income Taxes
Income Taxes (note 9)
Net Earnings from Continuing Operations
Net (Loss) Earnings from Discontinued Operations (note 5)
Net Earnings
Attributable to:
Shareholders of the Company (note 10)
Non-Controlling Interests
Net Earnings
Net Earnings (Loss) per Common Share - Basic ($) (note 10)
Continuing Operations
Discontinued Operations
Net Earnings (Loss) per Common Share - Diluted ($) (note 10)
Continuing Operations
Discontinued Operations
(i)
Comparative figures have been restated (note 5).
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Comprehensive Income
For the years ended December 31
(millions of Canadian dollars)
Net Earnings from Continuing Operations
Other comprehensive income (loss), net of taxes
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation adjustment (note 34)
Gains (losses) on cash flow hedges (note 34)
Items that will not be reclassified to profit or loss:
Net defined benefit plan actuarial gains (losses) (note 30)
Adjustment to fair value of investment properties
Other comprehensive income (loss) from continuing operations
Comprehensive Income from Continuing Operations
Net (Loss) Earnings from Discontinued Operations (note 5)
Other comprehensive loss from discontinued operations
Comprehensive (Loss) Income from Discontinued Operations
Total Comprehensive Income
Attributable to:
Shareholders of the Company
Non-Controlling Interests
Total Comprehensive Income
(i)
Comparative figures have been restated (note 5).
See accompanying notes to the consolidated financial statements.
102 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
2021
2020(i)
(52 weeks)
(53 weeks)
$
53,748
$
53,270
36,435
13,286
49,721
4,027
1,650
2,377
630
1,747
(322)
1,425
431
994
1,425
2.59
4.73
(2.14)
2.52
4.66
(2.14)
$
$
$
$
$
$
$
36,724
13,671
50,395
2,875
829
2,046
470
1,576
6
1,582
963
619
1,582
5.99
5.95
0.04
5.96
5.92
0.04
$
$
$
$
$
$
$
2021
2020(i)
(52 weeks)
(53 weeks)
$
1,747
$
1,576
3
9
293
50
355
2,102
(322)
(130)
(452)
1,650
521
1,129
1,650
$
(28)
(31)
(41)
17
(83)
1,493
6
(2)
4
1,497
910
587
1,497
$
Consolidated Balance Sheets
As at December 31
(millions of Canadian dollars)
ASSETS
Current Assets
Cash and cash equivalents (note 11)
Short-term investments (note 11)
Accounts receivable (note 12)
Credit card receivables (note 13)
Income taxes recoverable
Inventories (note 14)
Prepaid expenses and other assets
Assets held for sale (note 15)
Total Current Assets
Fixed Assets (note 16)
Right-of-Use Assets (note 33)
Investment Properties (note 17)
Equity Accounted Joint Ventures (note 18)
Intangible Assets (note 19)
Goodwill (note 20)
Deferred Income Taxes (note 9)
Security Deposits (note 11)
Other Assets (note 21)
Total Assets
LIABILITIES
Current Liabilities
Bank indebtedness (note 37)
Trade payables and other liabilities
Loyalty liability (note 22)
Provisions (note 23)
Income taxes payable
Demand deposits from customers
Short-term debt (note 24)
Long-term debt due within one year (note 25)
Lease liabilities due within one year (note 33)
Associate interest
Total Current Liabilities
Provisions (note 23)
Long-Term Debt (note 25)
Lease Liabilities (note 33)
Trust Unit Liability (note 34)
Deferred Income Taxes (note 9)
Other Liabilities (note 26)
Total Liabilities
EQUITY
Share Capital (note 27)
Retained Earnings
Contributed Surplus (notes 28 & 31)
Accumulated Other Comprehensive Income
Total Equity Attributable to Shareholders of the Company
Non-Controlling Interests
Total Equity
Total Liabilities and Equity
2021
2020(i)
$
2,984
$
879
1,010
3,443
301
5,166
348
91
14,222
10,782
4,059
5,344
564
6,430
4,479
113
75
1,015
$
$
47,083
$
52
$
5,923
190
119
269
75
450
1,520
742
433
9,773
90
12,490
4,242
4,209
2,003
1,139
33,946
3,529
4,808
(1,462)
84
6,959
6,178
13,137
2,581
575
1,183
3,109
—
5,385
304
108
13,245
11,943
4,043
4,930
573
7,032
4,772
139
75
1,326
48,078
86
6,026
194
98
128
24
1,335
924
799
349
9,963
116
13,519
4,206
3,600
2,059
1,197
34,660
3,599
5,226
(1,180)
166
7,811
5,607
13,418
$
47,083
$
48,078
(i)
Certain comparative figures have been restated to conform with current year presentation.
Contingent liabilities (note 36). Subsequent event (note 40).
See accompanying notes to the consolidated financial statements.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 103
Consolidated Statements of Changes in Equity
(millions of Canadian dollars except
where otherwise indicated)
Common
Shares
Preferred
Shares
Total
Share
Capital
Retained
Earnings
Contributed
Surplus
Foreign
Currency
Translation
Adjustment
Adjustment to
Fair Value on
Transfer of
Investment
Properties
Total
Accumulated
Other
Comprehensive
Income
Cash
Flow
Hedges
Non-
Controlling
Interests
Total
Equity
Balance as at Dec. 31, 2020
$ 2,782 $
817 $ 3,599 $
5,226 $
(1,180) $
153 $
(22) $
35 $
166 $
5,607 $
13,418
Net earnings
Other comprehensive income
(loss)(i)
—
—
—
—
—
—
431
160
—
—
—
(128)
—
8
—
50
—
994
1,425
(70)
135
225
Comprehensive income (loss)
$
— $
— $
— $
591 $
— $
(128) $
8 $
50 $
(70) $
1,129 $
1,650
Effect of equity-based
compensation (notes 27 & 31)
36
Shares purchased and
cancelled (note 27)
Net effect of shares held in
trusts (notes 27 & 31)
Loblaw capital transactions and
dividends (notes 28 & 31)
Transfer of remeasurement gain
on sale of investment properties
Dividends declared
Per common share ($) (note 27)
– $2.30
Per preferred share ($) (note 27)
– Series I – $1.45
– Series III – $1.30
– Series IV – $1.30
– Series V – $1.1875
(108)
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
36
—
(108)
(642)
2
—
—
—
—
—
—
—
9
—
12
(345)
(13)
(10)
(10)
(10)
6
—
—
(288)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance as at Dec. 31, 2021
$ 2,712 $
817 $ 3,529 $
4,808 $
(1,462) $
25 $
(14) $
$
(70) $
— $
(70) $
(1,009) $
(282) $
— $
— $
—
—
—
—
—
—
—
—
3
—
—
45
(750)
11
(561)
(849)
(12)
(12)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(345)
(13)
(10)
(10)
(10)
(12) $
73 $
(12) $
(558) $
(1,931)
84 $
6,178 $
13,137
(millions of Canadian dollars except
where otherwise indicated)
Common
Shares
Preferred
Shares
Total
Share
Capital
Retained
Earnings
Contributed
Surplus
Foreign
Currency
Translation
Adjustment
Cash
Flow
Hedges
Adjustment to
Fair Value on
Transfer of
Investment
Properties
Total
Accumulated
Other
Comprehensive
Income
Non-
Controlling
Interests
Total
Equity
Balance as at Dec. 31, 2019
$ 2,809 $
817 $ 3,626 $
4,766 $
(979) $
182 $
(4) $
18 $
196 $
5,566 $
13,175
Net earnings
Other comprehensive income
(loss)(i)
—
—
—
—
—
—
963
(23)
—
—
—
—
(29)
(18)
—
17
—
619
1,582
(30)
(32)
(85)
Comprehensive income (loss)
$
— $
— $
— $
940 $
— $
(29) $
(18) $
17 $
(30) $
587 $
1,497
Effect of equity-based
compensation (notes 27 & 31)
Shares purchased and
cancelled (note 27)
Net effect of shares held in
trusts (notes 27 & 31)
Loblaw capital transactions
and dividends (notes 28 & 31)
Dividends declared
Per common share ($) (note 27)
– $2.125
Per preferred share ($) (note 27)
– Series I – $1.45
– Series III – $1.30
– Series IV – $1.30
– Series V – $1.1875
1
(24)
(4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
(1)
12
(24)
(99)
(4)
(11)
—
—
—
—
—
—
—
—
—
(213)
(326)
(13)
(10)
(10)
(10)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
—
—
16
(123)
(15)
(550)
(763)
—
—
—
—
—
(326)
(13)
(10)
(10)
(10)
Balance as at Dec. 31, 2020
$ 2,782 $
817 $ 3,599 $
5,226 $
(1,180) $
153 $
(22) $
$
(27) $
— $
(27) $
(480) $
(201) $
— $
— $
— $
35 $
— $
(546) $
(1,254)
166 $
5,607 $
13,418
(i)
Other comprehensive income (loss) includes actuarial gain of $293 million (2020 – loss of $43 million), of which $160 million (2020 – loss of $23 million) is presented
in retained earnings, and $133 million (2020 – loss of $20 million) in non-controlling interests. Also included in non-controlling interests was a gain of $1 million on
foreign currency translation adjustments (2020 – gain of $1 million) and a gain of $1 million on cash flow hedges (2020 – loss of $13 million).
See accompanying notes to the consolidated financial statements.
104 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Consolidated Statements of Cash Flows
For the years ended December 31
(millions of Canadian dollars)
Operating Activities
Net earnings
Add (deduct):
Net interest expense and other financing charges (note 8)
Income taxes (note 9)
Depreciation and amortization
Loss on sale of discontinued operations, after income taxes (note 5)
Asset impairments, net of recoveries
Adjustment to fair value of investment properties and assets held for sale (notes 15 and 17)
Change in allowance for credit card receivables (note 13)
Change in provisions (note 23)
Change in gross credit card receivables (note 13)
Change in non-cash working capital
Income taxes paid
Interest received
Interest received from finance leases (note 33)
Other
Cash Flows from Operating Activities
Investing Activities
Fixed asset and investment properties purchases
Intangible asset additions
Cash assumed on initial consolidation of franchises (note 7)
Proceeds from disposal of assets
Net consideration from disposal of discontinued operations (note 5)
Lease payments received from finance leases (note 33)
Change in short-term investments (note 11)
Other
Cash Flows used in Investing Activities
Financing Activities
Change in bank indebtedness
Change in short-term debt (note 24)
Change in demand deposits from customers
Change in other financing (note 26)
Interest paid
Settlement of net debt associated with equity forward sale agreement (note 25)
Long-term debt – Issued (note 25)
– Repayments (note 25)
Cash rent paid on lease liabilities – Interest (note 33)
Cash rent paid on lease liabilities – Principal (note 33)
Share capital – Issued (notes 27 & 31)
– Purchased and held in trusts (note 27)
– Purchased and cancelled (note 27)
Loblaw common share capital – Issued (notes 28 & 31)
– Purchased and held in trusts (note 28)
– Purchased and cancelled (note 28)
Dividends – To common shareholders
– To preferred shareholders
– To non-controlling interests
Other
Cash Flows used in Financing Activities
Effect of foreign currency exchange rate changes on cash and cash equivalents
Change in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Period
Cash and Cash Equivalents, End of Period
See accompanying notes to the consolidated financial statements.
See note 5. Discontinued Operations for additional cash flow information.
2021
2020
(52 weeks)
(53 weeks)
$
1,425
$
1,582
1,651
629
2,419
317
25
(325)
(32)
10
6,119
(302)
13
(706)
18
3
(38)
5,107
(1,056)
(400)
—
334
1,207
10
(272)
(102)
(279)
(34)
(101)
51
(2)
(853)
(790)
1,440
(1,408)
(191)
(620)
32
—
(744)
102
(50)
(637)
(342)
(44)
(235)
—
(4,426)
1
403
2,581
$
2,984
$
831
475
2,427
—
39
194
41
(6)
5,583
368
(57)
(448)
25
3
47
5,521
(1,235)
(357)
14
301
—
5
(346)
(120)
(1,738)
68
(154)
24
231
(883)
—
2,492
(2,598)
(207)
(650)
1
(21)
(123)
30
(10)
(552)
(328)
(44)
(284)
(27)
(3,035)
(1)
747
1,834
2,581
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 105
Notes to the Consolidated Financial Statements
Note 1. Nature and Description of the Reporting Entity
George Weston Limited (“GWL” or the “Company”) is a Canadian public company incorporated in 1928, with its registered office
located at 22 St. Clair Avenue East, Toronto, Canada M4T 2S5. The Company’s parent is Wittington Investments, Limited
(“Wittington”).
The Company operates through its two reportable operating segments, Loblaw Companies Limited (“Loblaw”), and Choice
Properties Real Estate Investment Trust (“Choice Properties”). Other and Intersegment includes eliminations, intersegment
adjustments related to the consolidation and cash and short-term investments held by the Company. All other company level
activities that are not allocated to the reportable operating segments, such as interest expense, corporate activities and
administrative costs are included in Other and Intersegment.
Loblaw has two reportable operating segments, retail and financial services. Loblaw’s retail segment consists primarily of food
retail and drug retail. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise and
financial services.
Choice Properties owns, manages and develops a high-quality portfolio of commercial retail, industrial, office and residential
properties across Canada.
In December 2021, the Company completed the sale of the entire Weston Foods bakery business. Refer to note 5, “Discontinued
Operations” for details.
Note 2. Significant Accounting Policies
STATEMENT OF COMPLIANCE The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS” or “GAAP”) as issued by the International Accounting Standards Board (“IASB”) and using
the accounting policies described herein.
These consolidated financial statements were authorized for issuance by the Company’s Board of Directors (“Board”) on
March 1, 2022.
BASIS OF PREPARATION The consolidated financial statements were prepared on a historical cost basis except for the
following items that were measured at fair value:
•
•
•
•
investment properties as described in note 17;
defined benefit pension plan assets with the obligations related to these pension plans measured at their discounted
present value as described in note 30;
amounts recognized for cash-settled equity-based compensation arrangements as described in note 31; and
certain financial instruments as described in note 34.
The significant accounting policies set out below have been applied consistently in the preparation of the consolidated financial
statements for all years presented.
The consolidated financial statements are presented in Canadian dollars.
FISCAL YEAR The Company’s year end is December 31. Activities are reported on a fiscal year ending on the Saturday closest to
December 31.
As a result, the Company’s fiscal year is usually 52 weeks in duration but includes a 53rd week every five to six years. The years
ended December 31, 2021 and December 31, 2020 contained 52 weeks and 53 weeks, respectively.
BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of GWL and other entities that the
Company controls. Control exists when the Company has the existing rights that give it the current ability to direct the activities
that significantly affect the entities’ returns. The Company assesses control on an ongoing basis. The Company’s interest in the
voting share capital of its subsidiaries is 100%, except for Loblaw and Choice Properties (see note 6).
Structured entities are entities controlled by the Company which were designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity. Structured entities are consolidated if, based on an evaluation of the
substance of its relationship with the Company, the Company concludes that it controls the structured entity. Structured entities
controlled by the Company were established under terms that impose strict limitations on the decision-making powers of the
structured entities’ management and that results in the Company receiving the majority of the benefits related to the structured
entities’ operations and net assets, being exposed to the majority of risks incident to the structured entities’ activities, and
retaining the majority of the residual or ownership risks related to the structured entities or their assets.
Transactions and balances between the Company and its consolidated entities have been eliminated on consolidation.
106 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Non-controlling interests are recorded in the consolidated financial statements and represent the non-controlling shareholders’
portion of the net assets and net earnings of Loblaw. Transactions with non-controlling interests are treated as transactions with
equity owners of the Company. Changes in GWL’s ownership interest in its subsidiaries are accounted for as equity transactions.
Choice Properties’ Trust Units held by non-controlling interests are presented as a liability as the Trust Units are redeemable for
cash at the option of the holder, subject to certain restrictions.
Loblaw consolidates the Associates as well as the franchisees of its food retail stores that are subject to a simplified franchise
agreement implemented in 2015 (“Franchise Agreement”). An “Associate” is a pharmacist-owner of a corporation that is licensed
to operate a retail drug store at a specific location using Loblaw’s trademarks. The consolidation of Associates and franchisees is
based on the concept of control, for accounting purposes, which was determined to exist through the agreements that govern
the relationships between Loblaw and the Associates and franchisees. Loblaw does not have any direct or indirect shareholdings
in the corporations that operate the Associates. Associate interest reflects the investment the Associates have in the net assets of
their businesses. Under the terms of the Associate Agreements, Shoppers Drug Mart Inc. (or an affiliate thereof) agrees to
purchase the assets that the Associates use in store operations, primarily at the carrying value to the Associate, when Associate
Agreements are terminated by either party. The Associates’ corporations and the franchisees remain separate legal entities.
BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method as of the date when control
is transferred to the Company. The Company measures goodwill as the excess of the sum of the fair value of the consideration
transferred over the net identifiable assets acquired and liabilities assumed, all measured as at the acquisition date. Transaction
costs that the Company incurs in connection with a business combination, other than those associated with the issue of debt or
equity securities, are expensed as incurred.
ASSETS HELD FOR SALE Non-current assets are classified as assets held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. To qualify as assets held for sale, the sale must be
highly probable, assets must be available for immediate sale in their present condition and management must be committed to
a plan to sell assets that should be expected to close within one year from the date of classification. Assets that were previously
classified as investment properties are measured using the fair value model consistent with properties classified as investment
properties.
DISCONTINUED OPERATIONS A discontinued operation is a component of the Company’s business, the operations and cash
flows of which can be clearly distinguished from the rest of the Company and which: represents a separate major line of
business or geographical area of operations; is part of a single coordinated plan to dispose of a separate major line of business or
geographic areas of operations; or is a subsidiary acquired exclusively with a view to resale. Classification as discontinued
operations occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale or
distribution.
When an operation is classified as a discontinued operation, the comparative statements of earnings and comprehensive
income are re-presented as if the operation has been discontinued from the start of the comparative year.
The Company’s discontinued operations are excluded from the results of continuing operations and are presented as a single
amount, after income taxes, as net earnings from discontinued operations in the consolidated statements of earnings. The
consolidated statements of cash flows include cash flows of the discontinued operations, and has not been restated to reflect
discontinued operations. The details of the cash flows from discontinued operations are presented in the notes to the financial
statements. The consolidated balance sheets have not been restated to reflect discontinued operations.
NET EARNINGS PER COMMON SHARE (“EPS”) Basic EPS is calculated by dividing the net earnings available to common
shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by
adjusting the net earnings available to common shareholders and the weighted average number of common shares
outstanding for the effects of all potential dilutive instruments.
REVENUE RECOGNITION The Company recognizes revenue when control of the goods or services has been transferred.
Revenue is measured at the amount of consideration to which the Company expects to be entitled to, including variable
consideration to the extent that it is highly probable that a significant reversal will not occur.
Loblaw Retail revenue includes the sale of goods and services to customers through corporate stores and consolidated
franchise stores and Associates, and sales to non-consolidated franchise stores and independent wholesale account customers.
Revenue is measured at the amount of consideration to which the Company expects to be entitled to, net of estimated returns,
sales incentives and franchise fee reductions. The Company recognizes revenue made through corporate stores, consolidated
franchise stores and Associates at the time the point of sale is made or when service is delivered to the customers. The Company
recognizes revenue made through non-consolidated franchise stores and independent wholesale customers at the time of
delivery of inventory and when administrative and management services are rendered.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 107
Notes to the Consolidated Financial Statements
On the initial sale of franchising arrangements, the Company offered products and services as part of an arrangement with
multiple performance obligations. Prior to the implementation of the Franchise Agreement, the initial sale to non-consolidated
franchise stores were recorded using a relative fair value approach.
Customer loyalty awards are accounted for as a separate performance obligation of the sales transaction in which they are
granted. The Company defers revenue at the time the award is earned by members based on the relative fair value of the award.
The relative fair value is determined by allocating consideration between the fair value of the loyalty awards earned by loyalty
program members, net of breakage, and the goods and services on which the awards were earned, based on their relative
stand-alone selling price.
For certain sale of goods in which the Company earns commissions, including but not limited to lottery and third party gift
cards, the Company records net revenue as an agent on the basis that the Company does not control pricing or bear inventory
risk.
Loblaw Financial Services revenue includes interest income on credit card loans, credit card service fees, commissions, and
other revenue related to financial services. Interest income is recognized using the effective interest method. Credit card service
fees are recognized when services are rendered. Commission revenue is recorded on a net basis. Other revenue is recognized
periodically or according to contractual provisions.
Choice Properties revenue includes rental revenue on base rents earned from tenants under lease agreements, realty tax and
operating cost recoveries and other incidental income, including intersegment revenue earned from Loblaw’s Retail segment.
The rental revenue is recognized on a straight-line basis over the terms of the respective leases. Property tax and operating cost
recoveries are recognized in the period that recoverable costs are chargeable to tenants. Percentage participation rents are
recognized when tenants’ specified sales targets have been met as set out in the lease agreements.
INCOME TAXES Current and deferred taxes are recognized in the consolidated statements of earnings, except for current and
deferred taxes related to a business combination, or amounts charged directly to equity or other comprehensive income, which
are recognized in the consolidated balance sheets.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized using the asset and liability method of accounting on temporary differences arising between the
financial statement carrying values of existing assets and liabilities and their respective income tax bases. Deferred tax is
measured using enacted or substantively enacted income tax rates expected to apply in the years in which those temporary
differences are expected to be recovered or settled. A deferred tax asset is recognized for temporary differences as well as
unused tax losses and credits to the extent that it is probable that future taxable profits will be available against which they can
be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they
relate to income taxes levied by the same taxation authority on the same taxable entity, or on different taxable entities where
the Company intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is recorded on temporary differences arising on investments in subsidiaries, except where the timing of the reversal
of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the
foreseeable future.
Choice Properties qualifies as a “mutual fund trust” and a real estate investment trust (“REIT”) under the Income Tax Act
(Canada). Certain legislation relating to the federal income taxation of Specified Investment Flow Through trusts or partnerships
(“SIFT”) provides that certain distributions from a SIFT will not be deductible in computing the SIFT’s taxable income and that the
SIFT will be subject to tax on such distributions at a rate that is substantially equivalent to the general tax rate applicable to
Canadian corporations.
Under the SIFT rules, the taxation regime will not apply to a REIT that meets prescribed conditions relating to the nature of its
assets and revenue (the “REIT Conditions”) and distributions may be deducted against the REIT’s taxable income. Choice
Properties has reviewed the SIFT rules and has assessed its interpretation and application to Choice Properties’ assets and
revenue and has determined that it meets the REIT Conditions. The Trustees intend to annually distribute all taxable income
directly earned by Choice Properties to Unitholders and to deduct such distributions for income tax purposes and, accordingly,
no net current income tax expense or deferred income tax assets or liabilities have been recorded in the consolidated financial
statements of Choice Properties related to its Canadian investment properties.
108 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Choice Properties also consolidates certain taxable entities in Canada and in the United States for which current and deferred
income taxes are recorded. Current tax is the expected tax payable or receivable on the taxable income or loss for the period,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
CASH EQUIVALENTS Cash equivalents consist of highly liquid marketable investments with an original maturity date of 90 days
or less from the date of acquisition.
SHORT-TERM INVESTMENTS Short-term investments consist of marketable investments with an original maturity date greater
than 90 days and less than 365 days from the date of acquisition.
SECURITY DEPOSITS Security deposits consist of cash and cash equivalents and short-term investments. Security deposits also
include amounts which are required to be placed with counterparties as collateral to enter into and maintain certain
outstanding letters of credit and certain financial derivative contracts.
ACCOUNTS RECEIVABLE Accounts receivable consists primarily of receivables from Loblaw’s non-consolidated franchisees,
government and third-party drug plans arising from prescription drug sales, and independent accounts, and are recorded net of
allowances.
CREDIT CARD RECEIVABLES Loblaw, through President’s Choice Bank (“PC Bank”), a wholly-owned subsidiary of Loblaw, has
credit card receivables that are stated net of an allowance. Interest income is recorded in revenue and interest expense is
recorded in net interest expense and other financing charges using the effective interest method. The effective interest rate is
the rate that discounts the estimated future cash receipts through the expected life of the credit card receivable (or, where
appropriate, a shorter period) to the carrying amount. When calculating the effective interest rate, Loblaw estimates future cash
flows considering all contractual terms of the financial instrument, but not future credit losses. For credit-impaired credit card
receivables, a credit-adjusted effective interest rate is calculated using estimated future cash flows including expected credit
losses.
The Company applies the expected credit loss (“ECL”) model to assess for impairment on its credit card receivables at each
balance sheet date. Credit card receivables are assessed collectively for impairment by applying the three-stage approach. Refer
to the Impairment of Financial Assets policy for details of each stage. The application of the ECL model requires PC Bank to
apply significant judgments, assumptions and estimations (see note 3).
Impairment losses and reversals are recorded in selling, general and administrative expenses (“SG&A”) in the consolidated
statements of earnings with the carrying amount of the credit card receivables adjusted through the use of allowance accounts.
Loblaw, through PC Bank, participates in various securitization programs that provide the primary source of funds for the
operation of its credit card business. PC Bank maintains and monitors co-ownership interest in credit card receivables with
independent securitization trusts, in accordance with its financing requirements. PC Bank is required to absorb a portion of the
related credit losses. As a result, Loblaw has not transferred all of the risks and rewards related to these assets and continues to
recognize these assets in credit card receivables. The transferred receivables are accounted for as financing transactions. The
associated liabilities secured by these assets are included in either short-term debt or long-term debt based on their
characteristics and are carried at amortized cost. Loblaw provides a standby letter of credit for the benefit of the independent
securitization trusts.
PC Bank participates in a single seller revolving co-ownership securitization program with Eagle
Eagle Credit Card Trust®
Credit Card Trust® (“Eagle”) and continues to service the credit card receivables on behalf of Eagle, but does not receive any
fee for its servicing obligations and has a retained interest in the securitized receivables represented by the right to future cash
flows after obligations to investors have been met. Loblaw consolidates Eagle as a structured entity.
Other Independent Securitization Trusts The Other Independent Securitization Trusts administer multi-seller, multi-asset
securitization programs that acquire assets from various participants, including credit card receivables from PC Bank. These
trusts are managed by major Canadian chartered banks. PC Bank does not control the trusts through voting interests and does
not exercise any control over the trusts’ management, administration or assets. The activities of these trusts are conducted on
behalf of the participants and each trust is a conduit through which funds are raised to purchase assets through the issuance of
senior and subordinated short-term and medium term asset backed notes. These trusts are unconsolidated structured entities.
INVENTORIES The Company values inventories at the lower of cost and net realizable value. Cost includes the costs of
purchases net of vendor allowances plus other costs, such as transportation, that are directly incurred to bring inventories to
their present location and condition. Inventories are measured at weighted average cost.
Loblaw estimates net realizable value as the amount that inventories are expected to be sold taking into consideration
fluctuations in retail prices due to seasonality less estimated costs necessary to make the sale. Inventories are written down to
net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage or declining
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 109
Notes to the Consolidated Financial Statements
selling prices. When circumstances that previously caused inventories to be written down below cost no longer exist or when
there is clear evidence of an increase in selling prices, the amount of the write-down previously recorded is reversed. Storage
costs, indirect administrative overhead and certain selling costs related to inventories are expensed in the period that these costs
are incurred.
VENDOR ALLOWANCES The Company receives allowances from certain of its vendors whose products it purchases. These
allowances are received for a variety of buying and/or merchandising activities, including vendor programs such as volume
purchase allowances, purchase discounts, listing fees and exclusivity allowances. Allowances received from a vendor are a
reduction in the cost of the vendor’s products or services, and are recognized as a reduction in the cost of inventories sold and
the related inventory in the consolidated statements of earnings and the consolidated balance sheets, respectively, when it is
probable that they will be received and the amount of the allowance can be reliably estimated. Amounts received but not yet
earned are presented in other liabilities as deferred vendor allowances. Certain exceptions apply if the consideration is a
payment for goods or services delivered to the vendor or for direct reimbursement of selling costs incurred to promote goods.
The consideration is then recognized as a reduction of the cost incurred in the consolidated statements of earnings.
FIXED ASSETS Fixed assets are recognized and subsequently measured at cost less accumulated depreciation and any net
accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset,
including costs incurred to prepare the asset for its intended use and capitalized borrowing costs. The commencement date for
capitalization of costs occurs when the Company first incurs expenditures for the qualifying assets and undertakes the required
activities to prepare the assets for their intended use.
Borrowing costs directly attributable to the acquisition, construction or production of fixed assets, that necessarily take a
substantial period of time to prepare for their intended use and a proportionate share of general borrowings, are capitalized to
the cost of those fixed assets, based on a quarterly weighted average cost of borrowing. All other borrowing costs are expensed
as incurred and recognized in net interest expense and other financing charges.
The cost of replacing a fixed asset component is recognized in the carrying amount if it is probable that the future economic
benefits embodied within the component will flow to the Company and the cost can be measured reliably. The carrying amount
of the replaced component is derecognized. The cost of repairs and maintenance of fixed assets is expensed as incurred and
recognized in SG&A.
Gains and losses on disposal of fixed assets are determined by comparing the fair value of proceeds from disposal with the net
book value of the assets and are recognized net in operating income. For transactions in which the sale of a fixed asset satisfies
the requirements of IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”), and the asset is leased back by the Company,
the Company recognizes, in operating income, only the amount of gains or losses that relate to the rights transferred to the
purchaser.
Fixed assets are depreciated on a straight-line basis over their estimated useful lives to their estimated residual value when the
assets are available for use. When significant parts of a fixed asset have different useful lives, they are accounted for as separate
components and depreciated separately. Depreciation methods, useful lives and residual values are reviewed annually and are
adjusted for prospectively, if appropriate. Estimated useful lives are as follows:
Buildings
Equipment and fixtures
Building improvements
Leasehold improvements
up to 10 years
Lesser of term of the lease and useful life up to 25 years(i)
10 to 40 years
2 to 16 years
(i)
If it is reasonably certain that the Company will obtain ownership of the leased asset by the end of the lease term, the associated leasehold
improvements are depreciated over the useful life of the asset on the same basis as owned assets.
Fixed assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. Refer to the
Impairment of Non-Financial Assets policy.
110 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
LEASES
As a Lessee At inception of a contract, the Company determines whether a contract is or contains a lease. A contract is or
contains a lease if the contract gives the Company the right to control the use of an identified asset for the duration of the lease
term in exchange for consideration. When a contract contains both lease and non-lease components, the Company will allocate
the consideration in the contract to each of the components on the basis of the relative stand-alone price of the lease
component and the aggregate stand-alone price of the non-lease components. Relative stand-alone prices are determined by
maximizing the most observable supplier prices for a similar asset and/or service.
The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease payments when
the leased asset is available for use by the Company. Lease payments for assets that are exempt through the short-term or
low-value exemptions and variable payments not based on an index or rate are recognized in cost of inventories sold and
SG&A on the most systematic basis.
The measurement of lease liabilities includes the fixed and in-substance fixed payments and variable lease payments that
depend on an index or a rate, less any lease incentives receivable. If applicable, lease liabilities will also include a purchase
option exercise price if the Company is reasonably certain to exercise that option, termination penalties if the lease term also
reflects the termination option and amounts expected to be payable under a residual value guarantee. Subsequent to initial
measurement, the Company measures lease liabilities at amortized cost using the effective interest method. Lease liabilities
are remeasured when there is a change in Management’s assessment of whether it will exercise a renewal or termination
option or a change in future lease payments due to a change in index or rate. Right-of-use assets are adjusted by the same
remeasurement amount.
Right-of-use assets are measured at the initial amount of the lease liabilities plus any initial direct costs, lease payments made
at or before the commencement date net of lease incentives received, and decommissioning costs. Subsequent to initial
measurement, the Company applies the cost model with the exception of the fair value model application to right-of-use
assets that meet the definition of investment properties. Right-of-use assets are measured at cost less accumulated
depreciation, net of accumulated impairment losses and any remeasurements of lease liabilities. The assets are depreciated
on a straight-line basis over the earlier of the assets’ useful lives or the end of the lease terms. Right-of-use assets are reviewed
at each balance sheet date to determine whether there is any indication of impairment. Refer to the Impairment of Non-
Financial Assets policy.
Discount rates used in the present value calculation are the interest rates implicit in the leases, or if the rates cannot be
readily determined, the Company's incremental borrowing rates. Lease terms applied are the contractual non-cancellable
periods of the leases plus periods covered by an option to renew the leases if the Company is reasonably certain to exercise
that option and the periods covered by an option to terminate the leases if the Company is reasonably certain not to
exercise that option.
For sale and leaseback transactions, the Company applies the requirements of IFRS 15 to determine whether the transfer of the
asset should be accounted for as a sale. If the transfer of the asset is a sale in accordance with IFRS 15, the Company will
measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that
relates to the right of use retained by the Company. If the transfer of the asset is not a sale in accordance with IFRS 15, the
Company will continue to account for the asset under IAS 16, “Property, Plant and Equipment” and recognize the proceeds
received as financial liabilities.
As a Lessor At the date the Company makes the underlying leased asset available for use to the lessee, the Company classifies
each lease as either an operating lease or a finance lease. A lease is a finance lease if it transfers substantially all the risks and
rewards of the underlying asset to the lessee; otherwise, the lease is an operating lease. Rental income from operating leases is
recognized on a straight-line basis over the lease term. Rental income from finance leases is recognized on a systematic basis
that reflects the Company's rate of return on the net investment in the leased asset.
When the Company is an intermediate lessor, it will assess the sublease classification by reference to the right-of-use asset. The
Company considers factors such as whether the sublease term covers a major portion of the head lease term.
INVESTMENT PROPERTIES Investment properties include income producing properties and properties under development
that are owned by the Company and held to either earn rental income, capital appreciation, or both. The Company’s investment
properties include single tenant properties held to earn rental income and certain multiple tenant properties. Land and
buildings leased to franchisees are not accounted for as investment properties as these properties are related to the Company’s
operating activities.
Income producing properties are measured using the fair value model. Under the fair value model, investment properties are
initially measured at cost and subsequently measured at fair value. Fair value is determined based on available market evidence.
If market evidence is not readily available in less active markets, the Company uses alternative valuation methods such as
discounted cash flow projections or recent transaction prices. Under the discounted cash flow methodology, discount rates are
applied to the future cash flows over the holding period, generally over a minimum term of ten years, including a terminal value
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 111
Notes to the Consolidated Financial Statements
of the investment properties based on a terminal capitalization rate applied to the estimated net operating income, a non-GAAP
measure, in the terminal year. Gains and losses on fair value are recognized in operating income in the period in which they are
incurred. Gains and losses from disposal of investment properties are determined by comparing the fair value of disposal
proceeds and the carrying amount and are recognized in operating income.
When a property changes from own use to investment property, the property is remeasured to fair value. Any gain arising from
the remeasurement is recognized in operating income to the extent that it reverses a previous impairment loss on that property,
with any remaining gain recognized in the Company’s other comprehensive income. Any loss on remeasurement is recognized
in operating income. All subsequent changes in fair value of the property are recognized in operating income. Upon sale of an
investment property that was previously classified as fixed assets, amounts included in the revaluation reserve are transferred to
retained earnings.
When an investment property carried at fair value changes to own use, the property is recognized in fixed assets at the fair value
at the date of change in use. The property is subsequently accounted for under the significant accounting policies for fixed
assets.
Properties under development include specifically identifiable costs incurred in the period before construction is complete, and
are transferred to income producing properties at their fair value upon practical completion.
JOINT ARRANGEMENTS The Company, through Choice Properties, owns investments under joint arrangements. Joint
arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual sharing of
control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control. Joint arrangements are classified as either joint operations or joint ventures depending on Choice
Properties’ rights and obligations in the arrangement based on factors such as the structure, legal form and contractual terms of
the arrangement.
Joint Ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement.
Choice Properties’ investment in a joint venture is recorded using the equity method and is initially recognized in the
consolidated balance sheet at cost and adjusted thereafter to recognize Choice Properties’ share of the profit or loss and other
comprehensive income of the joint venture. The Company’s share of the joint venture’s profit or loss is recognized in the
Company’s operating income and other comprehensive income.
The financial statements of the equity-accounted investment are prepared for the same reporting period as Choice Properties.
Where necessary, adjustments are made to bring the accounting policies in line with those of the Company’s.
A joint venture is considered to be impaired if there is objective evidence of impairment, as a result of one or more events that
occurred after initial recognition of the joint venture, and that event has a negative impact on the future cash flows of the joint
venture that can be reliably estimated.
Joint Operations A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets
and obligations for the liabilities relating to the arrangement. The financial statements of the joint operations are prepared for
the same reporting period as Choice Properties. Where necessary, adjustments are made to bring the accounting policies in line
with those of the Company’s. The Company recognizes its proportionate share of assets, liabilities, revenues and expenses of the
joint operations.
INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD Investments accounted for under the equity method represent
an investment in an entity (“investee”) in which the Company has significant influence, but not control, over the financial and
operating policies. The investment is initially recognized in the consolidated balance sheets at cost, which includes transaction
costs. Subsequent to the initial recognition, the investment is adjusted to recognize the Company's share of the profit or loss and
other comprehensive income of the investee, until the date on which significant influence ceases. The Company’s share of the
investee’s profit or loss is recognized in SG&A. An investment is considered to be impaired if there are objective evidences of
impairments, as a result of one or more events that occurred after the initial recognition, and those events have negative impacts
on the future cash flows of the investee that can be reliably estimated. The investment is reviewed at each balance sheet date to
determine whether there is any indication of impairment. Refer to the Impairment of Non-Financial Assets policy.
GOODWILL Goodwill arising in a business combination is recognized as an asset at the date that control is acquired. Goodwill is
subsequently measured at cost less accumulated impairment losses. Goodwill is not amortized but is tested for impairment on
an annual basis or more frequently if there are indicators that goodwill may be impaired as described in the Impairment of Non-
Financial Assets policy.
INTANGIBLE ASSETS Intangible assets with finite lives are measured at cost less accumulated amortization and any
accumulated impairment losses. These intangible assets are amortized on a straight-line basis over their estimated useful lives,
ranging from three to 30 years, and are tested for impairment as described in the Impairment of Non-Financial Assets policy.
112 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Useful lives, residual values and amortization methods for intangible assets with finite useful lives are reviewed at least annually.
Amortization expense for intangible assets is recognized in SG&A.
Indefinite life intangible assets are measured at cost less any accumulated impairment losses. These intangible assets are tested
for impairment on an annual basis or more frequently if there are indicators that intangible assets may be impaired as described
in the Impairment of Non-Financial Assets policy.
IMPAIRMENT OF NON-FINANCIAL ASSETS At each balance sheet date, the Company reviews the carrying amounts of its non-
financial assets, other than inventories, deferred tax assets and investment properties, to determine whether there is any
indication of impairment. If any such indication exists, the asset is then tested for impairment by comparing its recoverable
amount to its carrying value. Goodwill and indefinite life intangible assets are tested for impairment at least annually.
For the purpose of impairment testing, assets, including right-of-use assets, are grouped together into the smallest group of
assets that generate cash inflows from continuing use that are largely independent of cash inflows of other assets or groups of
assets. This grouping is referred to as a cash generating unit (“CGU”). Loblaw has determined that each retail location is a
separate CGU for purposes of impairment testing.
Corporate assets, which include head office facilities and distribution centers, do not generate separate cash inflows. Corporate
assets are tested for impairment or reversals at the minimum grouping of CGUs to which the corporate assets can be reasonably
and consistently allocated. Goodwill arising from a business combination is tested for impairment at the minimum grouping of
CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of a CGU or CGU grouping is the higher of its value in use and its fair value less costs to sell. Value in use
is based on the estimated future cash flows from the CGU or CGU grouping, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU or CGU
grouping. If the CGU or CGU grouping includes right-of-use assets in its carrying amount, the pre-tax discount rate reflects the
risks associated with the exclusion of lease payments from the estimated future cash flows. The fair value less costs to sell is
based on the best information available to reflect the amount that could be obtained from the disposal of the CGU or CGU
grouping in an arm’s length transaction between knowledgeable and willing parties, net of estimates of the costs of disposal.
An impairment loss is recognized if the carrying amount of a CGU or CGU grouping exceeds its recoverable amount. For asset
impairments other than goodwill, the impairment loss reduces the carrying amounts of the non-financial assets in the CGU on a
pro-rata basis, up to an asset’s individual recoverable amount. Any loss identified from goodwill impairment testing is first
applied to reduce the carrying amount of goodwill allocated to the CGU grouping, and then to reduce the carrying amounts of
the other non-financial assets in the CGU or CGU grouping on a pro-rata basis.
For assets other than goodwill, an impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had
been recognized. An impairment loss in respect of goodwill is not reversed.
Impairment losses and reversals are recognized in SG&A.
BANK INDEBTEDNESS Bank indebtedness is comprised of balances outstanding on bank lines of credit drawn by Loblaw’s
Associates.
PROVISIONS Provisions are recognized when there is a present legal or constructive obligation as a result of a past event, it is
probable that the Company will be required to settle the obligation and a reliable estimate of the amount of the obligation can
be made. The amount recognized as a provision is the present value of the best estimate of the consideration required to settle
the present obligation at the end of the reporting period, taking into account the risks and uncertainties specific to the
obligation. The unwinding of the discount rate for the passage of time is recognized in net interest expense and other financing
charges.
DEMAND DEPOSITS FROM CUSTOMERS Demand deposits from customers are comprised of balances in customers’ PC Money
Account.
FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS Financial assets and liabilities are recognized when
the Company becomes party to the contractual provisions of the financial instrument. Upon initial recognition, financial
instruments, including derivatives and embedded derivatives in certain contracts, are measured at fair value plus or minus
transaction costs that are directly attributable to the acquisition or issue of financial instruments that are not classified as fair
value through profit or loss.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 113
Notes to the Consolidated Financial Statements
Classification and Measurement The classification and measurement approach for financial assets reflect the business model
in which assets are managed and their cash flow characteristics. Financial assets are classified and measured based on these
categories: amortized cost, fair value through other comprehensive income (“FVOCI”), or fair value through profit and loss
(“FVTPL”). Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are not separated,
but the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:
•
The financial asset is held within a business model whose objective is to hold assets in order to collect contractual cash
flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
•
A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
•
The financial asset is held within a business model in which assets are managed to achieve a particular objective by both
collecting contractual cash flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
•
A financial asset shall be measured at FVTPL unless it is measured at amortized cost or at FVOCI.
Financial assets are not reclassified subsequent to their initial recognition unless the Company identifies changes in its business
model in managing financial assets.
Financial liabilities are classified and measured based on two categories: amortized cost or FVTPL. A financial liability is classified
as FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses are recognized in profit or loss. Other financial liabilities are
subsequently measured at amortized cost using the effective interest method.
Fair values are based on quoted market prices where available from active markets, otherwise fair values are estimated using
valuation methodologies, primarily discounted cash flows taking into account external market inputs where possible. The
amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial
recognition, minus principal payments, plus or minus the cumulative amortization using the effective interest method of any
difference between the initial amount recognized and the maturity amount, minus any reduction for impairment.
The following table summarizes the classification and measurement of the Company’s financial assets and liabilities:
Asset / Liability
Classification / Measurement
Cash and cash equivalents
Short-term investments
Accounts receivable
Credit card receivables
Security deposits
Certain other assets
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss
Amortized cost / fair value through profit and loss
Certain long-term investments
Fair value through other comprehensive income
Bank indebtedness
Trade payables and other liabilities
Demand deposits from customers
Short-term debt
Long-term debt
Trust Unit liability
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss
Certain other liabilities
Amortized cost
Derivatives
Fair value through profit and loss / fair value through other comprehensive income
Financial derivative instruments in the form of forwards and futures, as well as non-financial derivatives in the form of futures
contracts, options contracts and forward contracts, are recorded at fair value on the consolidated balance sheet. The Company
does not use derivative instruments for speculative purposes. Embedded derivatives are separated from the host contract and
accounted for separately on the consolidated balance sheet at fair value if the host contract is not a financial asset. Derivative
instruments are recorded in current or non-current assets and liabilities based on their remaining terms to maturity. All changes
in fair values of the derivative instruments are recorded in net earnings unless the derivative qualifies and is effective as a
hedging item in a designated hedging relationship.
114 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
The Company has cash flow hedges which are used to manage exposure to fluctuations in foreign currency exchange and
interest rates. The effective portion of the change in fair value of the hedging item is recorded in other comprehensive income. If
the change in fair value of the hedging item is not completely offset by the change in fair value of the hedged item, the
ineffective portion of the hedging relationship is recorded in net earnings. Amounts accumulated in other comprehensive
income are reclassified to net earnings when the hedged item is recognized in net earnings. The Company ensures that the
hedge accounting relationships are aligned with the Company’s risk management objectives and strategy and applies a more
qualitative and forward-looking approach to assessing hedge effectiveness. The Company’s risk management strategy and
hedging activities are disclosed in Note 34 “Financial Instruments” and Note 35 “Financial Risk Management”.
Fair Value The Company measures financial assets and financial liabilities under the following fair value hierarchy. The different
levels have been defined as follows:
•
•
•
Fair Value Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Fair Value Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Fair Value Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The
classification of a financial instrument in the hierarchy is based upon the lowest level of input that is significant to the
measurement of fair value.
Gains and losses on FVTPL financial assets and financial liabilities are recognized in net earnings in the period in which they are
incurred. Settlement date accounting is used to account for the purchase and sale of financial assets. Gains or losses between
the trade date and settlement date on FVTPL financial assets are recorded in net earnings.
Valuation Process The determination of the fair value of financial instruments is performed by the Company’s treasury and
financial reporting departments on a quarterly basis. There was no change in the valuation techniques applied to financial
instruments during the current year. The following table describes the valuation techniques used in the determination of the fair
values of financial instruments:
Type
Valuation Approach
Cash and Cash Equivalents, Short-Term
Investments, Security Deposits, Accounts
Receivable, Credit Card Receivables, Bank
Indebtedness, Trade Payables and Other
Liabilities, Demand deposits from other
customers and Short-Term Debt
Derivatives
Long-Term Debt, Trust Unit Liability and certain
Other Financial Instruments
The carrying amount approximates fair value due to the short-term
maturity of these instruments.
Specific valuation techniques used to value derivative financial instruments
include:
Quoted market prices or dealer quotes for similar instruments; and
The fair values of other derivative instruments are determined based
on observable market information as well as valuations determined by
external valuators with experience in financial markets.
The fair value is based on the present value of contractual cash flows,
discounted at the Company’s current incremental borrowing rate for
similar types of borrowing arrangements or, where applicable, quoted
market prices.
Derecognition of Financial Instruments Financial assets are derecognized when the contractual rights to receive cash flows
and benefits from the financial asset expire, or if the Company transfers the control or substantially all the risks and rewards of
ownership of the financial asset to another party. The difference between the carrying amount of the financial asset and the sum
of the consideration received and receivable is recognized in earnings before income taxes.
Financial liabilities are derecognized when obligations under the contract expire, are discharged or cancelled. The difference
between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in
earnings before income taxes.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 115
Notes to the Consolidated Financial Statements
Impairment of Financial Assets The Company applies a forward-looking ECL model at each balance sheet date to financial
assets measured at amortized cost or those measured at FVOCI, except for investments in equity instruments.
The ECL model outlines a three-stage approach to reflect the increase in credit risks of a financial instrument:
•
•
•
Stage 1 is comprised of all financial instruments that have not had a significant increase in credit risks since initial
recognition or that have low credit risk at the reporting date. The Company is required to recognize impairment for Stage 1
financial instruments based on the expected losses over the expected life of the instrument arising from loss events that
could occur during the 12 months following the reporting date.
Stage 2 is comprised of all financial instruments that have had a significant increase in credit risks since initial recognition
but that do not have objective evidence of a credit loss event. For Stage 2 financial instruments the impairment is
recognized based on the expected losses over the expected life of the instrument arising from loss events that could occur
over the expected life. The Company is required to recognize a lifetime ECL for Stage 2 financial instruments.
Stage 3 is comprised of all financial instruments that have objective evidence of impairment at the reporting date. The
Company is required to recognize impairment based on a lifetime ECL for Stage 3 financial instruments.
The ECL model applied to financial assets requires judgment, assumptions and estimations on changes in credit risks, forecasts
of future economic conditions and historical information on the credit quality of the financial asset. Consideration of how
changes in economic factors affect ECLs are determined on a probability-weighted basis.
Impairment losses and reversals are recorded in SG&A with the carrying amount of the financial asset or group of financial assets
adjusted through the use of allowance accounts.
FOREIGN CURRENCY TRANSLATION The functional currency of the Company is the Canadian dollar.
Transactions in foreign currencies are translated into the functional currency at the foreign currency exchange rates that
approximate the rates in effect at the dates when such items are transacted. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at the exchange rate at the balance sheet date. Non-monetary
items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the
transaction. Foreign currency differences are recognized in operating income.
The assets and liabilities of foreign operations that have a functional currency different from that of the Company, including
goodwill and fair value adjustments arising on acquisition, are translated into the functional currency at the foreign currency
exchange rate in effect at the balance sheet date. The resulting foreign currency exchange gains or losses are recognized in the
foreign currency translation adjustment as part of other comprehensive income. When such foreign operation is disposed of, the
related foreign currency translation reserve is recognized in net earnings as part of the gain or loss on disposal. On the partial
disposal of such foreign operation, the relevant proportion is reclassified to net earnings.
SHORT-TERM EMPLOYEE BENEFITS Short-term employee benefits include wages, salaries, compensated absences, profit-
sharing and bonuses. Short-term employee benefit obligations are measured on an undiscounted basis and are recognized in
operating income as the related service is provided or capitalized if the service rendered is in connection with the creation of a
tangible or intangible asset. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-
sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
DEFINED BENEFIT POST-EMPLOYMENT PLANS The Company has a number of contributory and non-contributory defined
benefit post-employment plans providing pension and other benefits to eligible employees. The defined benefit pension plans
provide a pension based on length of service and eligible pay. The other defined benefits include health care, life insurance and
dental benefits provided to eligible employees who retire at certain ages having met certain service requirements. The
Company’s net defined benefit plan obligations (assets) for each plan are actuarially calculated by a qualified actuary at the end
of each annual reporting period using the projected unit credit method pro-rated based on service and management’s best
estimate of the discount rate, the rate of compensation increase, retirement rates, termination rates, mortality rates and
expected growth rate of health care costs. The discount rate used to value the defined benefit plan obligation for accounting
purposes is based on high quality corporate bonds denominated in the same currency with cash flows that match the terms of
the defined benefit plan obligations. Past service costs (credits) arising from plan amendments are recognized in operating
income in the year that they arise. The actuarially determined net interest costs on the net defined benefit plan obligation are
recognized in net interest expense and other financing charges.
The fair values of plan assets are deducted from the defined benefit plan obligations to arrive at the net defined benefit plan
obligations (assets). For plans that result in a net defined benefit asset, the recognized asset is limited to the present value of
economic benefits available in the form of future refunds from the plan or reductions in future contributions to the plan (“asset
ceiling”). If it is anticipated that the Company will not be able to recover the value of the net defined benefit asset, after
considering minimum funding requirements for future service, the net defined benefit asset is reduced to the amount of the
asset ceiling. When the payment in the future of minimum funding requirements related to past service would result in a net
116 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
defined benefit surplus or an increase in a surplus, the minimum funding requirements are recognized as a liability to the extent
that the surplus would not be fully available as a refund or a reduction in future contributions.
Remeasurements including actuarial gains and losses, the effect of the asset ceiling (if applicable) and the impact of any
minimum funding requirements are recognized through other comprehensive income and subsequently reclassified from
accumulated other comprehensive income to retained earnings.
OTHER LONG-TERM EMPLOYEE BENEFIT PLANS The Company offers other long-term employee benefits including
contributory long-term disability benefits and non-contributory continuation of health care and dental benefits to employees
who are on long-term disability leave. As the amount of the long-term disability benefit does not depend on length of service,
the obligation is recognized when an event occurs that gives rise to an obligation to make payments. The accounting for other
long-term employee benefit plans is similar to the method used for defined benefit plans except that all actuarial gains and
losses are recognized in operating income.
DEFINED CONTRIBUTION PLANS The Company maintains a number of defined contribution pension plans for employees in
which the Company pays fixed contributions for eligible employees into a registered plan and has no further significant
obligation to pay any further amounts. The costs of benefits for defined contribution plans are expensed as employees have
rendered service.
MULTI-EMPLOYER PENSION PLANS The Company participates in multi-employer pension plans (“MEPP”) which are accounted
for as defined contribution plans. The Company’s responsibility to make contributions to these plans is limited to amounts
established pursuant to its collective agreements. Defined benefit MEPPs are accounted for as defined contribution plans as
adequate information to account for the Company’s participation in the plans is not available due to the size and number of
contributing employers in the plans. The contributions made by the Company to MEPPs are expensed as contributions are due.
TERMINATION BENEFITS Termination benefits are recognized as an expense at the earlier of when the Company can no longer
withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. Benefits payable are
discounted to their present value when the effect of the time value of money is material.
EQUITY-SETTLED EQUITY-BASED COMPENSATION PLANS Stock options, Restricted Share Units (“RSUs”), Performance Share
Units (“PSUs”), Director Deferred Share Units (“DSUs”) and Executive Deferred Share Units (“EDSUs”) issued by the Company are
substantially all settled in common shares and are accounted for as equity-settled awards.
The Company and Loblaw’s stock options outstanding have a seven year term to expiry, vest 20% cumulatively on each
anniversary date of the grant and are exercisable at the designated common share price, which is based on the greater of the
volume weighted average trading prices of the GWL or Loblaw common shares for either the five trading days prior to the date
of grant or the trading day immediately preceding the grant date. The fair value of each tranche of options granted is measured
separately at the grant date using a Black-Scholes option pricing model, and includes the following assumptions:
•
•
•
•
The expected dividend yield is estimated based on the expected annual dividend prior to the option grant date and the
closing share price as at the option grant date;
The expected share price volatility is estimated based on the historical volatility of GWL or Loblaw over a period consistent
with the expected life of the options;
The risk-free interest rate is estimated based on the Government of Canada bond yield in effect at the grant date for a term
to maturity equal to the expected life of the options; and
The effect of expected exercise of options prior to expiry is incorporated into the weighted average expected life of the
options, which is based on historical experience and general option holder behaviour.
RSUs and PSUs vest after the end of a three year performance period. The number of PSUs that vest is based on the
achievement of specified performance measures. The fair value of each RSU and PSU granted is measured separately at the
grant date based on the market value of a GWL or Loblaw common share. Dividends paid may be reinvested in RSUs and PSUs
and are treated as capital transactions.
GWL and Loblaw established trusts for each of their RSU and PSU plans to facilitate the purchase of shares for future settlement
upon vesting. Each company is the sponsor of their respective trusts and has assigned Computershare Trust Company of Canada
as the trustee. GWL and Loblaw fund the purchase of shares for settlement and earn management fees from the trusts. The
trusts are considered structured entities and are consolidated in the Company’s financial statements with the cost of the
acquired shares recorded at book value as a reduction to share capital. Any premium on the acquisition of the shares above
book value is applied to retained earnings until the shares are issued to settle RSU and PSU obligations.
Members of GWL’s, Loblaw’s and Choice Properties’ Board, who are not management, may elect to receive a portion of
their annual retainers and fees in the form of DSUs. Eligible executives of the Company may elect to defer up to 100% of the
Short-Term Incentive Plan earned in any year into the EDSU plan. Dividends paid earn fractional DSUs and EDSUs, respectively
and are treated as capital transactions. DSUs and EDSUs vest upon grant.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 117
Notes to the Consolidated Financial Statements
The compensation expense for equity-settled plans is prorated over the vesting or performance period, with a corresponding
increase to contributed surplus. Forfeitures are estimated at the grant date and are revised to reflect changes in expected or
actual forfeitures.
Upon exercise of options, the amount accumulated in contributed surplus for the award plus the cash received upon exercise is
recognized as an increase in share capital. Upon settlement of RSUs and PSUs, the amount accumulated in contributed surplus
for the award is reclassified to share capital, with any premium or discount applied to retained earnings.
CASH-SETTLED EQUITY-BASED COMPENSATION PLANS Unit Options, Restricted Units (“RUs”), Performance Units (“PUs”),
Trustee Deferred Units (“DUs”), and Unit-Settled Restricted Units (“URUs”) issued by Choice Properties, and certain DSUs and
stock options are accounted for as cash-settled awards. The fair value of the amount payable to recipients in respect of these
cash settled awards is re-measured at each balance sheet date, and a compensation expense is recognized in SG&A over the
vesting period for each tranche with a corresponding change in the liability.
Choice Properties’ Unit Options have a five to ten year term, vest 25% cumulatively on each anniversary date of the grant and are
exercisable at the designated Unit price, which is based on the greater of the volume weighted average trading price of a Unit
for the five trading days prior to the date of grant or the trading day immediately preceding the grant date. The fair value of each
tranche is valued separately using a Black-Scholes option pricing model, and includes the following assumptions:
•
•
•
•
The expected distribution yield is estimated based on the expected annual distribution prior to the balance sheet date and
the closing Unit price as at the balance sheet date;
The expected Unit price volatility is estimated based on the average volatility of Choice Properties unit price over a period
consistent with the expected life of the options;
The risk-free interest rate is estimated based on the Government of Canada bond yield in effect at the balance sheet date
for a term to maturity equal to the expected life of the options; and
The effect of expected exercise of options prior to expiry is incorporated into the weighted average expected life of the
options, which is based on expectations of option holder behaviour.
RUs entitle certain employees to receive the value of the RU award in cash or Units at the employee’s discretion at the end of
the applicable vesting period, which is usually three years in length. The RU plan provides for the crediting of additional RUs in
respect of distributions paid on Units for the period when an RU is outstanding. The fair value of each RU granted is measured
based on the market value of a Unit at the balance sheet date.
PUs entitle certain employees to receive the value of the PU award in cash or Units at the end of the applicable performance
period, which is usually three years in length, based on Choice Properties achieving certain performance conditions. The PU plan
provides for the crediting of additional PUs in respect of distributions paid on Units for the period when a PU is outstanding. The
fair value of each PU granted is measured based on the market value of a Unit and an estimate of the performance conditions
being met at the balance sheet date.
Members of the Choice Properties’ Board of Trustees, who are not management of Choice Properties, are required to receive a
portion of their annual retainer in the form of DUs and may also elect to receive up to 100% of their remaining fees in DUs.
Distributions paid earn fractional DUs, which are treated as additional awards. DUs vest upon grant. The fair value of each DU
granted is measured based on the market value of a Unit at the balance sheet date.
URUs are accounted for as cash-settled awards. Typically, full vesting of the URUs would not occur until the employee had
remained with Choice Properties for three or five years from the grant date. Depending on the nature of the grant, the URUs are
subject to a six- or seven-year holding period during which the Units cannot be disposed. The fair value of each URU granted is
measured based on the market value of a Unit at the balance sheet date, less a discount to account for the vesting and holding
period restriction placed on the URUs.
EMPLOYEE SHARE OWNERSHIP PLAN (“ESOP”) GWL’s and Loblaw’s contributions to the ESOPs are measured at cost and
recorded as compensation expense in operating income when the contribution is made. The ESOPs are administered through a
trust which purchases GWL’s and Loblaw’s common shares on the open market on behalf of its employees.
118 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
NEW AMENDMENT ISSUED AND ADOPTED IN 2021
Interest Rate Benchmark Reform-Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16
Interbank Offered Rates (“IBORs”) reform is the market-wide reform of interest rate benchmarks in which some IBORs are
replaced with alternative risk-free rates. The replacement is expected to be mostly complete by the end of 2021. Consistent with
global efforts, in Canada, benchmark reform initiatives are being led by the Canadian Alternative Reference Rate Committee
(“CARR”), a group of financial sector firms and public sector institutions. CARR is tasked with promoting the use of the Canadian
Overnight Repo Rate Average as a key risk-free interest rate benchmark as well as analyzing the current status of the Canadian
Dollar Offered Rate (“CDOR”). As of May 17, 2021, the 6-month and 12-month CDOR tenors were discontinued on account of
their minimal use. The 1-month, 2-month and 3-month CDOR tenors will continue to be published, though their relevance may
decline or may ultimately be discontinued as well.
To address the impact IBOR reform has on financial reporting, in August 2020, the International Accounting Standards Board
issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9, “Financial Instruments”, IAS 39, “Financial Instruments:
Recognition and Measurement”, IFRS 7, “Financial Instruments: Disclosures”, IFRS 4, “Insurance Contracts” (“IFRS 4”) and IFRS 16,
“Leases”. These amendments became effective for annual periods beginning on or after January 1, 2021.
Phase 2 amendments provide certain practical reliefs related to modifications of financial asset or liability and lease contracts:
•
•
As a practical expedient, if the basis for determining the contractual cash flows of a financial asset or liability changes as a
direct consequence of the IBOR reform and on an economically equivalent basis, the financial asset or liability shall be
remeasured reflecting the updated effective interest rate prospectively with no immediate gain or loss recognized.
As a practical expedient, the lessee can account for a lease modification that is required by the IBOR reform through
revising the discount rate that reflects the change in interest rate and remeasure the lease liability prospectively with no
immediate gain or loss recognized. The amount of the remeasurement is recognized as an adjustment to the right-of-use
asset.
Additionally, phase 2 amendments provide a series of temporary exceptions from certain hedge accounting requirements when
a change required by the IBOR reform occurs to a hedged item and/or hedging instrument that permits the hedging
relationship to be continued without interruption.
The Company assessed the impacts of the IBOR reform on its financial instruments, leases, insurance contracts and hedges, and
noted only certain financial instruments and the interest rate swap hedge are directly or indirectly dependent on the 1-month or
3-month CDOR tenors. As a result, the Company is not immediately impacted by the IBOR reform. The Company will continue
to monitor future developments of CDOR and other applicable interest rate benchmarks, and will elect the practical reliefs
relating to financial instruments, leases, insurances and hedges when applicable.
Note 3. Critical Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to make estimates and judgments in applying
the Company’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial
statements and accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in respect of the
application of an accounting policy, a recognized or unrecognized financial statement amount and/or note disclosure, following
an analysis of relevant information that may include estimates and assumptions. Estimates and assumptions are used mainly in
determining the measurement of balances recognized or disclosed in the consolidated financial statements and are based on a
set of underlying data that may include management’s historical experience, knowledge of current events and conditions and
other factors that are believed to be reasonable under the circumstances. Management continually evaluates the estimates and
judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that the Company
believes could have the most significant impact on the amounts recognized in the consolidated financial statements. The
Company’s significant accounting policies are disclosed in note 2.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 119
Notes to the Consolidated Financial Statements
BASIS OF CONSOLIDATION
Judgments Made in Relation to Accounting Policies Applied The Company uses judgment in determining the entities that it
controls and therefore consolidates. The Company controls an entity when the Company has the existing rights that give it the
current ability to direct the activities that significantly affect the entity’s returns. The Company consolidates all of its wholly
owned subsidiaries. Judgment is applied in determining whether the Company controls the entities in which it does not have
ownership rights or does not have full ownership rights. Most often, judgment involves reviewing contractual rights to determine
if rights are participating (giving power over the entity) or protective rights (protecting the Company’s interest without giving it
power).
INVENTORIES
Key Sources of Estimation Inventories are carried at the lower of cost and net realizable value which requires the Company to
utilize estimates related to fluctuations in shrink, future retail prices, the impact of vendor rebates on cost, seasonality and costs
necessary to sell the inventory.
IMPAIRMENT OF NON-FINANCIAL ASSETS (GOODWILL, INTANGIBLE ASSETS, FIXED ASSETS AND RIGHT-OF-USE ASSETS)
Judgments Made in Relation to Accounting Policies Applied Management is required to use judgment in determining the
grouping of assets to identify their CGUs for the purposes of testing fixed assets and right-of-use assets for impairment.
Judgment is further required to determine appropriate groupings of CGUs for the level at which goodwill and intangible assets
are tested for impairment. The Company has determined that each retail location is a separate CGU for the purposes of fixed
asset and right-of-use asset impairment testing. For the purpose of goodwill and indefinite life intangible assets impairment
testing, CGUs are grouped at the lowest level at which goodwill and indefinite life intangible assets are monitored for internal
management purposes. In addition, judgment is used to determine whether a triggering event has occurred requiring an
impairment test to be completed.
Key Sources of Estimation In determining the recoverable amount of a CGU or a group of CGUs, various estimates are
employed. The Company determines fair value less costs to sell using such estimates as market rental rates for comparable
properties, recoverable operating costs for leases with tenants, non-recoverable operating costs, future cash flows, discount rates,
capitalization rates and terminal rates. The Company determines value in use by using estimates including projected future
revenues, earnings and capital investments consistent with approved strategic plans, and discount rates consistent with external
industry information reflecting the risk associated with the specific cash flows.
CUSTOMER LOYALTY AWARDS PROGRAMS
Key Sources of Estimation Loblaw defers revenue at the time the award is earned by members based on the relative fair value
of the award. The relative fair value is determined by allocating consideration between the fair value of the loyalty awards earned
by loyalty program members, net of breakage, and the goods and services on which the awards were earned, based on their
relative stand-alone selling price. The estimated fair value per point for the PC Optimum
program reward schedule and is $1 for every 1,000 points earned. The breakage rate of the program is an estimate of the
amount of points that will never be redeemed. The rate is reviewed on an ongoing basis and is estimated utilizing historical
redemption activity and anticipated earn and redeem behaviour of members.
program is determined based on the
®
IMPAIRMENT OF CREDIT CARD RECEIVABLES
Judgments Made in Relation to Accounting Policies Applied and Key Sources of Estimation In each stage of the impairment
model, impairment is determined based on the probability of default, loss given default, and expected exposures at default on
drawn and undrawn exposures on credit card receivables, discounted using an average portfolio yield rate. The application of
the ECL model requires management to apply the following significant judgments, assumptions and estimations:
•
•
•
Movement of impairment measurement between the three stages of the ECL model, based on the assessment of the
increase in credit risks on credit card receivables. The assessment of changes in credit risks includes qualitative and
quantitative factors of the accounts, such as historical credit loss experience and external credit scores;
Thresholds for significant increase in credit risks based on changes in probability of default over the expected life of the
instrument relative to initial recognition; and
Forecasts of future economic condition, namely the unemployment rate. Management uses unemployment rate forecasts
published by major Canadian Chartered Banks and the Conference Board of Canada to establish the base case scenario
and other representative ranges of possible forecast scenarios.
FAIR VALUE OF INCOME PRODUCING PROPERTIES
Key Sources of Estimation The fair value of income producing properties is dependent on future cash flows over the holding
period, terminal capitalization rates, and discount rates applicable to those assets. The review of future cash flows involves
assumptions relating to occupancy, rental rates, and residual value. In addition to reviewing future cash flows, management
assesses changes in the business climate and other factors, which may affect the ultimate value of the property. These
assumptions may not ultimately be achieved.
120 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
INCOME AND OTHER TAXES
Judgments Made in Relation to Accounting Policies Applied The calculation of current and deferred income taxes requires
management to make certain judgments regarding the tax rules in jurisdictions where the Company performs activities.
Application of judgments is required regarding the classification of transactions and in assessing probable outcomes of claimed
deductions including expectations about future operating results and the timing and reversal of temporary differences.
PROVISIONS
Judgments made in Relation to Accounting Policies Applied The recording of provisions requires management to make
certain judgments regarding whether there is a present legal or constructive obligation as a result of a past event, it is probable
that the Company will be required to settle the obligation and if a reliable estimate of the amount of the obligation can be
made. The Company has recorded provisions primarily in respect of restructuring, environmental and decommissioning
liabilities, certain onerous costs on leased properties and legal claims. The Company reviews the merits, risks and uncertainties of
each provision, based on current information, and the amount expected to be required to settle the obligation. Provisions are
reviewed on an ongoing basis and are adjusted accordingly when new facts and events become known to the Company.
LEASES
Judgments Made in Relation to Accounting Policies Applied Management exercises judgment in determining the appropriate
lease term on a lease by lease basis. Management considers all facts and circumstances that create an economic incentive to
exercise a renewal option or to not exercise a termination option including investments in major leaseholds, store performances
and past business practice and the length of time remaining before the option is exercisable. The periods covered by renewal
options are only included in the lease term if management is reasonably certain to renew. Management considers reasonably
certain to be a high threshold. Changes in the economic environment or changes in the retail industry may impact
management’s assessment of lease term, and any changes in management’s estimate of lease terms may have a material
impact on the Company’s consolidated balance sheets and statements of earnings.
Key Sources of Estimation In determining the carrying amount of right-of-use assets and lease liabilities, the Company is
required to estimate the incremental borrowing rate specific to each leased asset or portfolio of leased assets if the interest rate
implicit in the lease is not readily determined. Management determines the incremental borrowing rate using a base risk-free
interest rate estimated by reference to the Government of Canada bond yield with an adjustment that reflects the Company’s
credit rating, the security, lease term and value of the underlying leased asset, and the economic environment in which the
leased asset operates. The incremental borrowing rates are subject to change due to changes in the business and
macroeconomic environment.
Note 4. Future Accounting Standard
IFRS 17 In 2017, the IASB issued IFRS 17, “Insurance Contracts” (“IFRS 17”) replacing IFRS 4. IFRS 17 introduces consistent
accounting for all insurance contracts. The standard requires a company to measure insurance contracts using updated
estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to these contracts. Additionally,
IFRS 17 requires an entity to recognize profits as it delivers insurance services, rather than when it receives premiums. The
standard is effective for annual reporting periods beginning on or after January 1, 2023 and is to be applied retrospectively.
While early adoption is permitted, the Company does not intend to early adopt IFRS 17. The Company is currently assessing the
impact of the standard on its consolidated financial statements.
Note 5. Discontinued Operations
WESTON FOODS On March 23, 2021, the Company announced its intention to launch a process to sell the Weston Foods
business, comprised of the fresh, frozen and ambient bakery businesses.
On December 10, 2021, the Company announced the sale of Weston Foods’ fresh and frozen bakery business to FGF Brands Inc.
for gross proceeds of $1,100 million, and on December 29, 2021, the Company announced the sale of Weston Foods’ ambient
business to affiliated entities of Hearthside Foods Solution, LLC for gross proceeds of $370 million. In aggregate, the Company
sold its entire Weston Foods bakery business for total gross proceeds of $1,470 million. Upon closing of each respective
transaction, the respective purchaser entered into a supply agreement with Loblaw. After closing adjustments, net consideration
was $1,207 million and a loss on sale of $317 million, after income taxes, was included in discontinued operations within the
consolidated statements of earnings.
Upon the respective sale dates, the net assets of Weston Foods were de-recognized from the Company’s 2021 consolidated
balance sheet and the Weston Foods results, net of intersegment eliminations, were presented separately as discontinued
operations in the Company’s consolidated statement of earnings and comprehensive income in the current and comparative
periods. Unless otherwise specified, all other notes to the consolidated financial statements include amounts from both
continuing and discontinued operations.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 121
Notes to the Consolidated Financial Statements
The results of Discontinued Operations presented in the consolidated statements of earnings is as follows:
($ millions)
Revenue
Operating Expenses
Cost of inventories sold
Selling, general and administrative expenses
Operating (Loss) Income
Net interest expense and other financing charges
(Loss) Earnings before Income Taxes
Income tax (recovery) expense
Net (Loss) Earnings after Income Taxes
Loss on sale after income taxes
Net (Loss) Earnings from Discontinued Operations
Years Ended
Dec. 31, 2021
(52 weeks)
Dec. 31, 2020
(53 weeks)
Weston
Foods
Intersegment
Eliminations
Discontinued
Operations
Weston
Foods
Intersegment
Eliminations
Discontinued
Operations
$
1,868 $
(552) $
1,316
$ 2,062 $
(627) $
1,435
1,389
(541)
491
(18)
848
473
1,482
(623)
577
(14)
859
563
$
1,880 $
(559) $
1,321
$ 2,059 $
(637) $
1,422
$
$
$
(5)
1
(6)
(1)
(5)
(317)
$
(322)
The loss on sale after income taxes is comprised of the following components:
($ millions)
Gross proceeds
Less: Certain other amendments, including an adjustment to the working capital provisions(i)
Less: Transaction and other related costs
Net consideration(ii)
Less: Net assets of the discontinued operations
Loss on sale before tax and the undernoted(iii)
Reclassification of foreign currency translation gain
Income tax expense
Loss on sale after income taxes
$
$
$
$
13
2
11
5
6
—
6
2021
1,470
(210)
(53)
1,207
(1,615)
(408)
130
(39)
(317)
$
$
$
$
(i)
(ii)
(iii)
Net consideration reflects management’s best estimate of working capital adjustments and subject to finalization, in accordance with the
sale agreements.
Includes $32 million of consideration receivable.
Loss on sale before tax and the undernoted includes $87 million non-cash goodwill impairment charge, recorded in the third quarter of 2021.
The Company reclassified the accumulated foreign currency translation gain from accumulated other comprehensive income to
the discontinued operations as all foreign operations were disposed in the transactions.
Transaction and other related costs of $53 million were incurred in connection with the sale of Weston Foods.
The net cash flows (used in) provided by the Discontinued Operations, excluding the net consideration above, are as follows:
($ millions)
Cash flows from operating activities
Cash flows used in investing activities
Cash flows used in financing activities
Effect of foreign currency rate changes on cash and cash equivalents
Cash flows used in Discontinued Operations
122 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Years Ended
Dec. 31, 2021
Dec. 31, 2020
(52 weeks)
(53 weeks)
$
$
$
$
$
—
(122)
(6)
2
(126)
$
$
$
$
$
157
(160)
(8)
3
(8)
Note 6. Subsidiaries
The table below summarizes the Company’s principal subsidiaries. The proportion of ownership interests held equals the voting
rights held by the Company. GWL’s ownership in Loblaw and Choice Properties is impacted by changes in Loblaw’s common
share equity and Choice Properties’ Trust Units, respectively.
As at
Dec. 31, 2021
Dec. 31, 2020
Number
of shares /
units held
Ownership
interest
Number
of shares /
units held
Ownership
interest
Loblaw
Common shares(i)
175,475,019
52.6%
182,874,456
52.6%
Class B LP Units(ii)
395,786,525
n/a
395,786,525
Trust Units
50,661,415
n/a
50,661,415
n/a
n/a
Choice Properties
446,447,940
61.7%
446,447,940
61.8%
(i)
(ii)
In 2021, GWL settled the equity forward sale agreement, releasing all Loblaw common shares pledged under the equity forward sale
agreement (December 31, 2020 – 9.6 million Loblaw common shares pledged) (see note 25). Additionally, commencing in the first quarter of
2020, GWL participated in Loblaw’s Normal Course Issuer Bid (“NCIB”) program, in order to maintain its proportionate percentage ownership
(see note 28).
Class B LP Units (“Exchangeable Units”) are economically equivalent to Trust Units, receive distributions equal to the distributions paid on
Trust Units and are exchangeable, at the holder's option, into Trust Units.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 123
Notes to the Consolidated Financial Statements
Note 7. Business Acquisitions
CONSOLIDATION OF FRANCHISES Loblaw accounted for the consolidation of existing franchises as business acquisitions and
consolidated its franchises as of the date the franchisee entered into a Franchise Agreement with Loblaw. The assets acquired
and liabilities assumed through the consolidation were valued at the acquisition date using fair values, which approximated the
franchise carrying values at the date of acquisition. The results of operations of the acquired franchises have been included in
Loblaw’s results of operations from the date of acquisition.
Loblaw has more than 500 franchise food retail stores in its network. As at the end of the first quarter of 2020, Loblaw
consolidated all of its remaining franchisees for accounting purposes under the Franchise Agreement.
The following table summarizes the amounts recognized for the assets acquired, liabilities assumed and non-controlling
interests recognized at the acquisition dates:
($ millions)
Net assets acquired:
Cash and cash equivalents
Inventories
Fixed assets (note 16)
Trade payables and other liabilities(i)
Other liabilities(i)
Non-controlling interests
Total net assets acquired
2021
2020
—
—
—
—
—
—
—
$
$
14
42
44
(54)
(30)
(16)
—
$
$
(i)
On consolidation, trade payables and other liabilities and other liabilities eliminated against existing accounts receivable, franchise loans
receivable and franchise investments held by Loblaw.
Note 8. Net Interest Expense and Other Financing Charges
The components of net interest expense and other financing charges were as follows:
($ millions)
Interest expense:
Long-term debt
Lease liabilities (note 33)
Borrowings related to credit card receivables
Trust Unit distributions
Independent funding trusts
Post-employment and other long-term employee benefits (note 30)
Bank indebtedness
Financial liabilities (note 26)
Capitalized interest (capitalization rate 3.6% (2020 – 3.7%)) (notes 16 & 19)
Interest income:
Accretion income
Short-term interest income
Forward sale agreement(ii)
Fair value adjustment of the Trust Unit liability (note 34)
Recovery related to Glenhuron Bank Limited (note 9)
2021
2020(i)
(52 weeks)
(53 weeks)
$
580
$
191
37
205
13
9
4
46
(3)
638
205
48
223
14
9
4
31
(4)
1,082
$
1,168
(6)
$
$
$
(18)
(24)
180
601
(189)
(5)
(24)
(29)
(71)
(239)
—
829
$
$
$
$
Net interest expense and other financing charges from Continuing Operations
$
1,650
$
(i)
(ii)
Certain comparative figures have been restated to conform with current year presentation.
See note 25 for details on the settlement of the net debt associated with the equity forward sale agreement. Included is a charge of
$188 million (2020 – income of $47 million) related to the fair value adjustment of the forward sale agreement, forward accretion income of
$24 million (2020 – $46 million), and the forward fee of $16 million (2020 – $22 million), associated with the forward sale agreement.
124 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 9. Income Taxes
The components of income taxes recognized in the consolidated statements of earnings from continuing operations were as
follows:
($ millions)
Current income taxes
Current period
Recovery related to Glenhuron Bank Limited
Adjustment in respect of prior periods
Deferred income taxes
Origination and reversal of temporary differences
Effect of change in income tax rates
Adjustment in respect of prior periods
Income taxes from Continuing Operations
2021
2020(i)
(52 weeks)
(53 weeks)
$
791
$
(128)
10
(37)
—
(6)
$
630
$
546
—
(18)
(68)
(3)
13
470
(i)
Certain comparative figures have been restated to conform with current year presentation.
Loblaw had been reassessed by the Canada Revenue Agency and the Ontario Ministry of Finance on the basis that certain
income earned by Glenhuron Bank Limited (“Glenhuron”), a wholly owned Barbadian subsidiary of Loblaw that was wound up in
2013, should be treated, and taxed, as income in Canada. The reassessments, which were received between 2015 and 2019, are
for the 2000 to 2013 taxation years. On September 7, 2018, the Tax Court of Canada (“Tax Court”) released its decision relating to
the 2000 to 2010 taxation years. The Tax Court ruled that certain income earned by Glenhuron should be taxed in Canada based
on a technical interpretation of the applicable legislation. On October 4, 2018, Loblaw filed a Notice of Appeal with the Federal
Court of Appeal. On October 15, 2019, the matter was heard by the Federal Court of Appeal, and on April 23, 2020, the Federal
Court of Appeal released its decision and reversed the decision of the Tax Court. On October 29, 2020, the Supreme Court of
Canada (“Supreme Court”) granted the Crown leave to appeal. On May 13, 2021, the Crown’s appeal was heard by the Supreme
Court and on December 3, 2021, the Supreme Court dismissed the Crown’s appeal. As a result, Loblaw has reversed $301 million
of previously recorded charges, of which $173 million is recorded as interest income and $128 million is recorded as income tax
recovery. In addition, interest of $16 million, before taxes, was recorded in respect of interest income earned on expected cash
tax refunds (see note 36).
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 125
Notes to the Consolidated Financial Statements
Income tax expense recognized in other comprehensive income from continuing operations was as follows:
($ millions)
Net defined benefit plan actuarial gains (losses) (note 30)
Adjustment to fair value on transfer of investment properties
Gains (losses) on cash flow hedges (note 34)
Total income tax expense (recoveries) recognized in other comprehensive income
2021
2020
(52 weeks)
(53 weeks)
$
$
104
$
10
1
115
$
(15)
3
(10)
(22)
The effective tax rates in the consolidated statements of earnings from continuing operations were reported at rates different
than the weighted average basic Canadian federal and provincial statutory income tax rates for the following reasons:
Weighted average basic Canadian federal and provincial statutory income tax rate
Net (decrease) increase resulting from:
Effect of tax rate in foreign jurisdictions
Recovery related to Glenhuron
Non-deductible and non-taxable items
Impact of fair value adjustment of Trust Unit liability
Impact of income tax rate changes on deferred income tax balances
Adjustments in respect of prior periods
Other
2021
26.5%
2020(i)
26.6%
(0.1)
(5.4)
(2.3)
6.7
—
0.2
0.9
—
—
(0.1)
(3.1)
(0.2)
(0.1)
(0.1)
Effective tax rate applicable to earnings before income taxes
26.5%
23.0%
(i)
Certain comparative figures have been restated to conform with current year presentation.
Deferred income tax assets which were not recognized on the consolidated balance sheets were as follows:
($ millions)
Deductible temporary differences
Income tax losses and credits
Unrecognized deferred income tax assets
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
12
$
166
178
$
15
171
186
The portion of the income tax losses and credits which have a limited carry-forward period expire in the years 2026 to 2041. The
deductible temporary differences do not expire under current income tax legislation. Deferred income tax assets were not
recognized in respect of these items because it is not probable that future taxable income will be available to the Company to
utilize the benefits.
126 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Deferred income tax assets and liabilities recognized on the consolidated balance sheets were attributable to the following:
($ millions)
Trade payables and other liabilities
Other liabilities
Lease liabilities
Fixed assets
Right-of-use assets
Goodwill and intangible assets
Non-capital losses carried forward (expiring 2026 to 2041)
Capital losses carried forward
Other
Net deferred income tax liabilities
Recorded on the consolidated balance sheets as follows:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liabilities
Note 10. Basic and Diluted Net Earnings per Common Share
($ millions except where otherwise indicated)
Net earnings attributable to shareholders of the Company
Less: Discontinued Operations (note 5)
Net earnings from continuing operations attributable to shareholders of the Company
Prescribed dividends on preferred shares in share capital
Net earnings from continuing operations available to common shareholders of the
Company
Reduction in net earnings due to dilution at Loblaw
Net earnings from continuing operations available to common shareholders
for diluted earnings per share
Weighted average common shares outstanding (in millions) (note 27)
Dilutive effect of equity-based compensation(ii)
(in millions)
Diluted weighted average common shares outstanding (in millions)
Net earnings (loss) per common share – Basic ($)
Continuing Operations
Discontinued Operations
Net earnings (loss) per common share – Diluted ($)
Continuing Operations
Discontinued Operations
As at
Dec. 31, 2021
Dec. 31, 2020
$
80
261
1,296
(1,225)
(1,049)
(1,336)
48
14
21
82
372
1,301
(1,153)
(1,064)
(1,559)
97
19
(15)
(1,890)
$
(1,920)
113
$
(2,003)
(1,890)
$
139
(2,059)
(1,920)
2021
2020(i)
(52 weeks)
(53 weeks)
431
$
(322)
753
$
(44)
709
$
(9)
700
$
149.9
0.3
150.2
4.73
(2.14)
4.66
(2.14)
$
$
$
$
963
6
957
(44)
913
(4)
909
153.4
0.1
153.5
5.95
0.04
5.92
0.04
$
$
$
$
$
$
$
$
$
$
$
$
(i)
(ii)
Certain comparative figures have been restated to conform with current year presentation.
Excluded from the computation of diluted net earnings per common share were nominal (2020 – 1.4 million) potentially dilutive instruments,
as they were anti-dilutive.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 127
Notes to the Consolidated Financial Statements
Note 11. Cash and Cash Equivalents, Short-Term Investments and Security Deposits
The components of cash and cash equivalents, short-term investments and security deposits were as follows:
As at
Dec. 31, 2021
Dec. 31, 2020
$
1,255
$
1,228
632
1,073
3
21
—
758
570
—
22
3
$
2,984
$
2,581
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
776
97
1
5
—
485
81
1
7
1
$
879
$
575
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
46
29
75
$
$
52
23
75
CASH AND CASH EQUIVALENTS
($ millions)
Cash
Cash equivalents:
Government treasury bills
Bankers’ acceptances
Corporate commercial paper
Guaranteed investment certificates
Other
Cash and cash equivalents
SHORT-TERM INVESTMENTS
($ millions)
Government treasury bills
Bankers’ acceptances
Corporate commercial paper
Guaranteed Investment Certificates
Other
Short-term investments
SECURITY DEPOSITS
($ millions)
Cash
Government treasury bills
Total security deposits
128 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 12. Accounts Receivable
The following is an aging of the Company’s accounts receivable:
($ millions)
0 - 90 days
> 90 days > 180 days
Total 0 - 90 days
> 90 days
> 180 days
Total
Accounts receivable, net
$
909 $
60 $
41 $
1,010 $
1,073 $
53 $
57 $
1,183
As at
Dec. 31, 2021
Dec. 31, 2020(i)
(i)
Certain comparative figures have been restated to conform with current year presentation.
The following are continuities of the Company’s allowances for uncollectible accounts receivable:
($ millions)
Allowance, beginning of year
Transfer to assets held for sale (note 5)
Net (additions) write-offs
Allowance, end of year
Credit risk associated with accounts receivable is discussed in note 35.
Note 13. Credit Card Receivables
The components of credit card receivables were as follows:
($ millions)
Gross credit card receivables
Allowance for credit card receivables
Credit card receivables
Securitized to independent securitization trusts:
Securitized to Eagle Credit Card Trust ® (note 25)
Securitized to Other Independent Securitization Trusts (note 24)
Total securitized to independent securitization trusts
2021
(31)
$
11
(3)
(23)
$
2020
(34)
—
3
(31)
As at
Dec. 31, 2021
Dec. 31, 2020
3,648
$
(205)
3,443
$
1,350
$
450
1,800
$
3,346
(237)
3,109
1,050
575
1,625
$
$
$
$
$
$
Loblaw, through PC Bank, participates in various securitization programs that provide a source of funds for the operation of its
credit card business. PC Bank maintains and monitors a co-ownership interest in credit card receivables with independent
securitization trusts, including Eagle and the Other Independent Securitization Trusts, in accordance with its financing
requirements.
The associated liability of Eagle is recorded in long-term debt (see note 25). The associated liabilities of credit card receivables
securitized to the Other Independent Securitization Trusts are recorded in short-term debt (see note 24).
The securitization agreements between PC Bank and the Other Independent Securitization Trusts are renewed and extended
on an annual basis. The existing agreements were renewed in 2021, with their respective maturity dates extended to 2023 and
with all other terms and conditions remaining substantially the same.
On a year-to-date basis in 2021, PC Bank recorded a $125 million net decrease of co-ownership interest in the securitized
receivables held with the Other Independent Securitization Trusts as a result of issuance of Eagle notes in 2021.
The undrawn commitments on facilities available from the Other Independent Securitization Trusts at year end 2021 were
$250 million (2020 – $400 million).
Loblaw has arranged letters of credit on behalf of PC Bank for the benefit of the Independent Securitization Trusts (see note 37).
Under its securitization programs, PC Bank is required to maintain, at all times, a credit card receivable pool balance equal to a
minimum of 107% of the outstanding securitized liability. PC Bank was in compliance with this requirement as at year end 2021
and throughout the year.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 129
Notes to the Consolidated Financial Statements
The following is an aging of gross credit card receivables:
As at
Dec. 31, 2021
Dec. 31, 2020
1-90 days > 90 days
1-90 days > 90 days
($ millions)
Current
past due past due
Total
Current
past due
past due
Total
Gross credit card receivables
$
3,477 $
146 $
25 $ 3,648
$
3,169 $
150 $
27 $
3,346
The following are continuities of Loblaw’s allowances for credit card receivables for the years ended December 31, 2021 and
December 31, 2020:
($ millions)
Stage 1
Stage 2
Stage 3
Balance, beginning of the year
$
90
$
116 $
31
$
Increase / (Decrease) during the year:
Transfers(i)
To Stage 1
To Stage 2
To Stage 3
New loans originated(ii)
New remeasurements(iii)
Write-offs
Recoveries
Balance, end of year
44
(5)
(1)
7
(60)
—
—
(44)
7
(18)
14
23
—
—
$
75
$
98 $
—
(2)
19
2
65
(108)
25
32
$
Transfers reflect allowance movements between stages for loans that were recognized as of the beginning of the year.
(i)
(ii) New loans originated reflect the stage of loan, and the related loan balance, as of the end of the year.
(iii) Net remeasurement of loss allowance includes impact from changes in loan balances and credit quality during the year.
($ millions)
Stage 1
Stage 2
Stage 3
Balance, beginning of the year
$
72 $
92 $
32
$
Increase / (Decrease) during the year:
Transfers(i)
To Stage 1
To Stage 2
To Stage 3
New loans originated(ii)
New remeasurements(iii)
Write-offs
Recoveries
Balance, end of year
33
(5)
(1)
7
(16)
—
—
(33)
7
(18)
16
52
—
—
$
90 $
116 $
—
(2)
19
1
93
(138)
26
31
$
2021
Total
237
—
—
—
23
28
(108)
25
205
2020
Total
196
—
—
—
24
129
(138)
26
237
Transfers reflect allowance movements between stages for loans that were recognized as of the beginning of the year.
(i)
(ii) New loans originated reflect the stage of loan, and the related loan balance, as of the end of the year.
(iii) Net remeasurement of loss allowance includes impact from changes in loan balances and credit quality during the year.
The allowances for credit card receivables recorded on the consolidated balance sheets are maintained at a level which is
considered adequate to endure credit-related losses on credit card receivables.
130 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 14. Inventories
The components of inventories were as follows:
($ millions)
Finished goods
Raw materials and supplies
Inventories
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
5,166
$
—
5,166
$
5,314
71
5,385
As at year end 2021, Loblaw recorded an inventory provision of $67 million (December 31, 2020 – $34 million) for the write-down
of inventories below cost to net realizable value. The write-down was included in cost of inventories sold. There were no reversals
of previously recorded write-downs of inventories during the year ended December 31, 2021 and December 31, 2020.
Note 15. Assets Held for Sale
Loblaw classifies certain assets, primarily land and buildings, that it intends to dispose of in the next 12 months, as assets held
for sale. These assets were either originally used in Loblaw’s retail business segment or held in investment properties. In 2021,
Loblaw recorded a net gain of $12 million (2020 – net gain of $9 million) from the sale of these assets. Net fair value gain of
$1 million (2020 – fair value write-down of $20 million) was recognized on investment properties held for sale in 2021.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 131
Notes to the Consolidated Financial Statements
Note 16. Fixed Assets
The following is a continuity of the cost and accumulated depreciation and impairment losses of fixed assets for the year ended
December 31, 2021:
Buildings
($ millions)
Cost, beginning of year
Additions(i)
Disposals
Transfer to assets held for sale
Net transfer to investment properties (note 17)
Transfer from assets under construction
Impact of foreign currency translation
Land
building
improvements
and
Equipment
and
fixtures
Leasehold
improvements
Assets
under
construction
Total
$ 2,082 $
9,394 $
10,391 $
2,393 $
649 $ 24,909
9
(47)
(25)
(22)
14
—
16
(22)
28
(93)
(384)
(1,627)
(93)
214
(5)
—
681
(9)
17
(14)
(35)
—
899
(3)
969
(179)
(124)
(2,195)
(1)
(116)
102
(1,011)
—
(3)
—
(17)
Cost, end of year
$ 2,011 $
9,120 $
9,371 $
2,463 $
406 $ 23,371
Accumulated depreciation and impairment
losses, beginning of year
$
3 $
3,897 $
7,566 $
1,497 $
3 $ 12,966
Depreciation
Impairment losses
Reversal of impairment losses
Disposals
Transfer to assets held for sale
Transfer to investment properties (note 17)
Impact of foreign currency translation
Accumulated depreciation and impairment
losses, end of year
Carrying amount as at:
December 31, 2021
—
—
—
—
—
—
—
234
585
—
(9)
(11)
29
(7)
(91)
(148)
(996)
(59)
(3)
—
(10)
152
4
(4)
(14)
(29)
—
—
—
—
—
—
—
—
—
971
33
(20)
(116)
(1,173)
(59)
(13)
$
3 $
3,901 $
7,076 $
1,606 $
3 $ 12,589
$ 2,008 $
5,219 $
2,295 $
857 $
403 $ 10,782
(i)
Additions to fixed assets in Loblaw includes $1 million prepayment that was made in 2020. The balance was transferred from other assets
in 2021.
132 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
The following is a continuity of the cost and accumulated depreciation and impairment losses of fixed assets for the year ended
December 31, 2020:
Buildings
($ millions)
Cost, beginning of year
Additions(i)
Disposals
Transfer to assets held for sale
Net transfer from investment properties
(note 17)
Transfer from assets under construction
Business acquisitions
Impact of foreign currency translation
Land
building
improvements
and
Equipment
and
fixtures
Leasehold
improvements
Assets
under
construction
Total
$ 2,071 $
9,062 $
9,648 $
2,347 $
713 $ 23,841
1
(2)
(29)
11
30
—
—
2
(43)
—
42
340
—
(9)
145
(63)
—
—
640
44
(23)
32
(26)
—
920
1,100
(7)
—
(141)
(29)
—
75
128
40
(1,050)
—
—
—
(2)
—
44
(34)
Cost, end of year
$ 2,082 $
9,394 $
10,391 $
2,393 $
649 $ 24,909
Accumulated depreciation and impairment
losses, beginning of year
$
2 $
3,680 $
7,000 $
1,383 $
3 $ 12,068
Depreciation
Impairment losses
Reversal of impairment losses
Disposals
Net transfer to investment properties (note 17)
Impact of foreign currency translation
Accumulated depreciation and impairment
losses, end of year
Carrying amount as at:
December 31, 2020
—
1
—
—
—
—
268
632
6
(9)
(22)
(23)
(3)
12
(2)
(63)
—
(13)
134
9
(4)
(25)
—
—
—
—
—
—
—
—
1,034
28
(15)
(110)
(23)
(16)
$
3 $
3,897 $
7,566 $
1,497 $
3 $ 12,966
$ 2,079 $
5,497 $
2,825 $
896 $
646 $
11,943
(i)
Additions to fixed assets in Loblaw includes $66 million prepayment that was made in 2019. The balance was transferred from other assets
in 2020.
ASSETS UNDER CONSTRUCTION The cost of additions to properties under construction for 2021 was $899 million (2020 –
$920 million). Included in this amount were capitalized borrowing costs of $3 million (2020 – $4 million) with a weighted
average capitalization rate of 3.6% (2020 – 3.7%) (see note 8).
SECURITY AND ASSETS PLEDGED As at year end 2021, the Company had fixed assets with a carrying amount of $51 million
(2020 – $52 million) which were encumbered by mortgages of $37 million (2020 - $38 million) (see note 25).
FIXED ASSET COMMITMENTS As at year end 2021, the Company had entered into commitments of $1,176 million (2020 –
$502 million) for the construction, expansion and renovation of buildings and the purchase of real property.
IMPAIRMENT LOSSES AND REVERSALS OF FIXED ASSETS AND RIGHT-OF-USE ASSETS In 2021, the Company recorded
$18 million (2020 – $20 million) of impairment losses on fixed assets and $6 million (2020 – $20 million) of impairment losses on
right-of-use assets (see note 33) in respect of 10 CGUs (2020 – 23 CGUs). The recoverable amount was based on the greater of the
CGU’s fair value less costs to sell and its value in use. Approximately 10% (2020 – 13%) of impaired CGUs had carrying values
which were $1 million (2020 – $5 million) greater than their fair value less costs to sell. The remaining 90% (2020 – 87%) of
impaired CGUs had carrying values which were $23 million (2020 – $35 million) greater than their value in use.
In 2021, the Company recorded $20 million (2020 – $15 million) of impairment reversals on fixed assets and $8 million (2020 –
$2 million) of impairment reversals on right-of-use assets (see note 33) in respect to 14 CGUs (2020 – 10 CGUs). Impairment
reversals are recorded where the recoverable amount of the retail location exceeds its carrying values. Approximately 14%
(2020 – 50%) of CGUs with impairment reversals had fair value less costs to sell greater than their carrying values of $5 million
(2020 – $8 million). The remaining 86% (2020 – 50%) of CGUs with impairment reversals had value in use of $23 million (2020 –
$9 million) greater than their carrying values.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 133
Notes to the Consolidated Financial Statements
When determining the value in use of a retail location, the Company develops a discounted cash flow model for each CGU.
The duration of the cash flow projections for individual CGUs varies based on the remaining useful life of the significant assets
within the CGU. Projected future sales and earnings for cash flows are based on actual operating results, operating budgets, and
long-term growth rates that are consistent with industry averages, all of which are consistent with strategic plans presented to
GWL’s and Loblaw’s Boards. The estimate of the value in use of relevant CGUs was determined using a pre-tax discount rate
of 7.9% to 8.4% at the end of 2021 (2020 – 8.0% to 8.5%).
Additional impairment losses on fixed assets of $15 million (2020 – $8 million) were incurred related to Loblaw’s store closures,
renovations, conversions of retail locations and restructuring activities. No impairment losses (2020 – $3 million) were recognized
on right-of-use assets (see note 33) related to restructuring activities.
Note 17. Investment Properties
The following are continuities of investment properties for the years ended December 31, 2021 and December 31, 2020:
($ millions)
Balance, beginning of the year
Adjustment to fair value of investment properties
Additions(i)
Disposals
Net transfer from (to) fixed assets(ii) (note 16)
Net transfer to other assets
Net transfer to assets held for sale
Net transfer from equity accounted joint ventures
Other
Balance, end of the year(iii)
2021
$
4,930
$
283
88
(193)
117
(10)
(18)
143
4
2020
4,888
(138)
444
(159)
(125)
—
(25)
43
2
$
5,344
$
4,930
(i)
(ii)
(iii)
In 2020, additions to investment properties includes $243 million of non-cash consideration.
Includes the fair value gain of $60 million (2020 – $20 million) recognized in other comprehensive income related to transfer of fixed assets to
investment properties.
Includes $5,183 million (2020 – $4,832 million) of income producing properties and $161 million (2020 – $98 million) of properties under
development.
During 2021, the Company recognized in operating income $408 million (2020 – $394 million) of rental revenue and incurred
direct operating costs of $104 million (2020 – $137 million) related to its investment properties. In addition, the Company
recognized direct operating costs of $2 million (2020 – $2 million) related to its investment properties for which no rental
revenue was earned.
INTERNAL APPRAISALS
Investment properties are measured at fair value, which was primarily determined by using the discounted cash flow method.
Management reviews the valuation process and results prepared by the internal valuation team at least once per quarter. The
valuations exclude any portfolio premium or value for the management platform and reflect the highest and best use for each
of the Company’s investment properties. As part of the internal valuation process, Management considers external valuations
performed by independent national real estate valuation firms for a cross-section of properties that represent different
geographical locations and asset classes across the Company’s portfolio. On a quarterly basis, the internal valuation team reviews
and updates, as deemed necessary, the valuation models to reflect current market data. Updates may be made to capitalization
rates, discount rates, market rents, as well as current leasing and/or development activity, renewal probability, downtime on
lease expiry, vacancy allowances, and expected maintenance costs.
INDEPENDENT APPRAISALS
Properties are typically independently appraised at the time of acquisition. In addition, the Company has engaged independent
nationally-recognized valuation firms to appraise its investment properties such that the majority of the portfolio will be
independently appraised at least once over a four-year period. When an independent appraisal is obtained, the internal
valuation team assesses all major inputs used by the independent valuators in preparing their reports and holds discussions with
them on the reasonableness of their assumptions. Where warranted, adjustments will be made to the internal valuations to
reflect the assumptions contained in the external valuations. The Company will record the internal value in its consolidated
financial statements.
134 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 18. Equity Accounted Joint Ventures
Choice Properties accounts for its investments in joint ventures using the equity method. These investments hold primarily
development properties and some income-producing properties. The table below summarizes Choice Properties’ investment in
joint ventures.
Retail
Industrial
Residential
Land, held development
Total equity accounted joint ventures
Investment in equity accounted joint
ventures ($ millions)
As at
Dec. 31, 2021
Dec. 31, 2020
Number of
joint
ventures
15
1
3
2
21
Ownership
interest
25% - 75%
50%
47% - 50%
50% - 85%
Number of
joint
ventures
16
2
3
1
22
Ownership
interest
25% - 75%
50%
47% - 50%
50%
$
564
$
573
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 135
Notes to the Consolidated Financial Statements
Note 19. Intangible Assets
The following is a continuity of the cost and accumulated amortization and impairment losses of intangible assets for the year
ended December 31, 2021:
($ millions)
Cost, beginning of year
Additions
Business acquisitions
Impact of foreign currency translation
Transfer to assets held for sale (note 5)
Cost, end of year
Accumulated amortization and impairment
losses, beginning of year
$
$
Amortization
Impairment losses
Impact of foreign currency translation
Transfer to assets held for sale (note 5)
Accumulated amortization and impairment
Indefinite
life
intangible
assets
Definite life
internally
generated
intangible
assets
Definite
life
trademarks
and brand
names
Software
Other
definite
life
intangible
assets
Total
$
3,491 $
20 $
20 $
3,535 $
6,024 $
13,090
—
—
—
—
—
—
—
—
7
—
—
393
—
—
—
1
(1)
400
1
(1)
(27)
(105)
(123)
(255)
3,491 $
20 $
— $
3,823 $
5,901 $
13,235
— $
20 $
12 $
2,446 $
3,580 $
6,058
—
—
—
—
—
—
—
—
—
—
—
(12)
351
13
—
(45)
505
856
—
(1)
13
(1)
(64)
(121)
losses, end of year
Carrying amount as at:
December 31, 2021
$
— $
20 $
— $
2,765 $
4,020 $
6,805
$
3,491 $
— $
— $
1,058 $
1,881 $
6,430
The following is a continuity of the cost and accumulated amortization and impairment losses of intangible assets for the year
ended December 31, 2020:
($ millions)
Cost, beginning of year
Additions
Business acquisitions
Impact of foreign currency translation
Indefinite
life
intangible
assets
Definite life
internally
generated
intangible
assets
Definite
life
trademarks
and brand
names
Software
Other
definite
life
intangible
assets
Total
$
3,490 $
20 $
20 $
3,186 $
6,018 $
12,734
—
1
—
—
—
—
—
—
—
350
—
(1)
7
2
(3)
357
3
(4)
Cost, end of year
$
3,491 $
20 $
20 $
3,535 $
6,024 $
13,090
Accumulated amortization and impairment
losses, beginning of year
$
— $
20 $
11 $
2,142 $
3,073 $
5,246
Amortization
Impairment losses
Impact of foreign currency translation
Accumulated amortization and impairment
losses, end of year
Carrying amount as at:
December 31, 2020
—
—
—
—
—
—
1
—
—
304
510
—
—
1
(4)
815
1
(4)
$
— $
20 $
12 $
2,446 $
3,580 $
6,058
$
3,491 $
— $
8 $
1,089 $
2,444 $
7,032
136 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
INDEFINITE LIFE INTANGIBLE ASSETS Indefinite life intangible assets recorded by Loblaw are comprised of brand names,
trademarks, import purchase quotas and certain liquor licenses. The brand names and trademarks are a result of Loblaw’s
acquisition of Shoppers Drug Mart Corporation (“Shoppers Drug Mart”) and T&T Supermarket Inc. Loblaw expects to renew the
registration of the brand names, trademarks, import purchase quotas and liquor licenses at each expiry date indefinitely, and
expects these assets to generate economic benefit in perpetuity. As such, Loblaw assessed these intangibles to have indefinite
useful lives.
The Company completed its annual impairment tests for indefinite life intangible assets and concluded there was no
impairment.
Key Assumptions The key assumptions used to calculate the fair value less costs to sell are those regarding cash flow forecasts,
growth rates, discount rates, and terminal rate. These assumptions are consistent with the assumptions used to calculate fair
value less costs to sell for goodwill (see note 20).
SOFTWARE Software is comprised of software purchases and development costs. There were no capitalized borrowing costs
included in 2021 (2020 – nil).
OTHER DEFINITE LIFE INTANGIBLE ASSETS Other definite life intangible assets recorded by Loblaw primarily consist of
prescription files, the customer loyalty awards program and customer relationships.
Note 20. Goodwill
The following are continuities of the cost and accumulated impairment losses of goodwill for the years ended December 31,
2021 and December 31, 2020:
($ millions)
Cost, beginning of year
Business acquisitions
Transfer to assets held for sale (note 5)
Impact of foreign currency translation
Cost, end of year
Accumulated impairment losses, beginning of year
Impairment losses
Accumulated impairment losses, end of year
Carrying amount as at:
December 31
2020
5,842
2
—
(5)
5,839
1,067
—
2021
$
5,839
$
1
(290)
(4)
5,546
1,067
—
$
$
$
$
$
$
1,067
$
1,067
4,479
$
4,772
The carrying amount of goodwill attributed to each CGU was as follows:
($ millions)
Shoppers Drug Mart
Market
Discount
T&T Supermarket Inc.
Other
Discontinued Operations (note 5)
As at
Dec. 31, 2021
Dec. 31, 2020
$
2,976
$
2,976
376
461
129
537
—
375
461
129
533
298
Carrying amount of goodwill, as at the end of year
$
4,479
$
4,772
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 137
Notes to the Consolidated Financial Statements
KEY ASSUMPTIONS The key assumptions used to calculate the fair value less costs to sell are cash flow forecasts, growth rates,
discount rate, and terminal rate. These assumptions are considered to be Level 3 in the fair value hierarchy.
The weighted average cost of capital was determined to be 7.1% to 7.9% (2020 – 7.1% to 9.3%) and is based on a risk-free rate,
an equity risk premium adjusted for betas of comparable publicly traded companies, an unsystematic risk premium, an after-tax
cost of debt based on corporate bond yields and the capital structure of comparable public traded companies.
Cash flow projections were discounted using a rate derived from an after-tax weighted average cost of capital. As at year end
2021, the after-tax discount rate used in the recoverable amount calculations was 7.1% to 7.9% (2020 – 7.1% to 9.3%). The pre-
tax discount rate was 9.7% to 10.8% (2020 – 9.7% to 12.7%).
The Company included a minimum of three years of cash flows in its discounted cash flow models. The cash flow forecasts were
extrapolated beyond the three year period using an estimated long-term growth rate of 2.0% (2020 – 2.0%). The budgeted
adjusted EBITDA(i) growth was based on the strategic plans approved by GWL’s or Loblaw’s Board.
(i)
Excludes certain items and is used internally by management when analyzing segment underlying operating performance.
Note 21. Other Assets
The components of other assets were as follows:
($ millions)
Sundry investments and other receivables(i)
Net accrued benefit plan asset (note 30)
Finance lease receivable
Mortgages, loans and notes receivable
Other
Fair value of equity forward(ii)
Total Other Assets
Current portion of mortgages, loans and notes receivable(iii)
Other Assets
As at
Dec. 31, 2021
Dec 31, 2020(iv)
$
$
$
$
206
495
67
187
138
—
1,093
$
(78)
1,015
$
157
184
77
168
159
630
1,375
(49)
1,326
(i)
In 2020, Shoppers Drug Mart Inc. agreed to invest a total of $75 million in Maple Corporation (“Maple”), the leading virtual care provider in
Canada, in exchange for a significant minority stake. In 2021, Loblaw executed the remaining investment of $14 million. As at December 31,
2021, Loblaw had invested $75 million in exchange for approximately 30% of the ownership interest in Maple.
See note 25 for details on the settlement of the net debt associated with the equity forward sale agreement.
(ii)
(iii) Current portion of mortgages, loans and notes receivable are included in prepaid expenses and other assets in the consolidated balance
sheets.
(iv) Certain comparative figures have been restated to conform with current year presentation.
Note 22. Customer Loyalty Awards Program Liability
The carrying amount of the liability associated with Loblaw’s customer loyalty awards programs (“loyalty liability”) was as follows:
($ millions)
Loyalty liability
As at
Dec. 31, 2021
Dec. 31, 2020
$
190
$
194
The majority of the Company’s loyalty liability, which is a contract liability, is expected to be redeemed and recognized as
revenue within one year of issuance.
138 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 23. Provisions
The following are continuities of provisions for the years ended December 31, 2021 and December 31, 2020:
($ millions)
Provisions, beginning of year
Additions
Payments
Reversals
Reclasses
Transfer to assets held for sale (note 5)
Provisions, end of year
($ millions)
Carrying amount of provisions recorded in:
Current provisions
Non-current provisions
Provisions
$
$
2021
214
74
(57)
(11)
(1)
(10)
$
209
$
2020(i)
237
106
(98)
(19)
(12)
—
214
As at
Dec. 31, 2021
Dec. 31, 2020(i)
$
$
$
119
90
209
$
98
116
214
(i)
Certain comparative figures have been restated to conform with current year presentation.
Provisions consist primarily of amounts recorded in respect of restructuring, self-insurance, environmental and decommissioning
liabilities, certain onerous costs on leased properties, legal claims, the Loblaw Card Program and a MEPP withdrawal liability.
The Company’s accrued insurance liabilities were $91 million (2020 – $86 million), of which $46 million (2020 – $47 million) was
included in non-current provisions and $45 million (2020 – $39 million) in current provisions. Included in total accrued insurance
liabilities were $17 million (2020 – $19 million) of U.S. workers’ compensation liabilities. The related cost and accrued workers’
compensation liabilities are based on actuarial valuations which are dependent on assumptions determined by management.
The discount rate used in determining the 2021 U.S. workers’ compensation cost and liability was 2.0% (2020 – 2.0%). The total
workers’ compensation liability is equal to the ultimate actuarial loss estimate less any actual losses paid to date. Any change in
the workers’ compensation liability is recognized immediately in operating income.
In 2021, the U.S. workers’ compensation cost associated with the worker’s compensation liabilities was $3 million (2020 –
$4 million).
COMPETITION BUREAU INVESTIGATION In 2017, the Company and Loblaw announced actions taken to address their
involvement in an industry-wide price-fixing arrangement. In connection with the arrangement, Loblaw offered customers a
$25 Loblaw Card, which can be used to purchase items sold in Loblaw grocery stores across Canada. As at December 31, 2021,
the Loblaw Card Program liability is $15 million (2020 – $15 million). Loblaw expects that Loblaw Cards issued to customers will
be an offset against civil liability. The charge recorded for the Loblaw Card Program should not be viewed as an estimate of
damages (see note 36).
RESTRUCTURING AND OTHER RELATED COSTS The Company continuously evaluates strategic and cost reduction initiatives
that focus on improving processes and generating efficiencies across administrative, store, manufacturing and distribution
network infrastructure with the objective of ensuring a low cost operating structure. Restructuring activities related to these
initiatives are ongoing. As at December 31, 2021, the provision related to restructuring and other related costs was $56 million
(2020 – $59 million).
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 139
Notes to the Consolidated Financial Statements
Note 24. Short-Term Debt
The components of short-term debt were as follows:
($ millions)
Other Independent Securitization Trusts
Series B Debentures(i)
(note 13)
Short-term debt
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
450
$
—
450
$
575
760
1,335
(i)
See note 25 for details on the settlement of net debt associated with the equity forward sale agreement, including the Series B Debentures.
OTHER INDEPENDENT SECURITIZATION TRUSTS The outstanding short-term debt balances relate to credit card receivables
securitized to the Other Independent Securitization Trusts with recourse (see note 13).
140 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 25. Long-Term Debt
The components of long-term debt were as follows:
($ millions)
Debentures
George Weston Limited Notes
Loblaw Companies Limited Notes
Choice Properties Debentures
Long-Term Debt Secured by Mortgage
Series A, 7.00%, due 2031
4.12%, due 2024
7.10%, due 2032
6.69%, due 2033
4.86%, due 2023
3.92% due 2024
6.65%, due 2027
6.45%, due 2028
4.49%, due 2028
6.50%, due 2029
2.28%, due 2030
11.40%, due 2031
Principal
Effect of coupon repurchase
6.85%, due 2032
6.54%, due 2033
8.75%, due 2033
6.05%, due 2034
6.15%, due 2035
5.90%, due 2036
6.45%, due 2039
7.00%, due 2040
5.86%, due 2043
Series B 4.90%, due 2023
Series D 4.29%, due 2024
Series F 4.06%, due 2025
Series G 3.20%, due 2023
Series H 5.27%, due 2046
Series I 3.01%, due 2022
Series J 3.55%, due 2025
Series K 3.56%, due 2024
Series L 4.18%, due 2028
Series M 3.53%, due 2029
Series N 2.98%, due 2030
Series O 3.83%, due 2050
Series P 2.85%, due 2027
Series Q 2.46%, due 2026
Series 9 3.60%, due 2021
Series 10 3.60%, due 2022
Series D-C 2.95%, due 2023
2.04% - 5.60%, due 2022 - 2038 (note 16)
Guaranteed Investment Certificates
0.10% - 3.78%, due 2022 - 2026
2.71%, due 2022
3.10%, due 2023
2.28%, due 2024
1.34%, due 2025
1.61%, due 2026
Independent Securitization Trust (note 13)
Independent Funding Trusts
George Weston Limited Credit Facility
Choice Properties Construction Loans
Transaction costs and other
Total long-term debt
Less amount due within one year
Long-term debt
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
—
200
150
100
800
400
100
200
400
175
350
151
32
200
200
200
200
200
300
200
150
55
200
200
200
250
100
—
350
550
750
750
400
100
500
350
—
300
125
1,112
996
250
250
250
300
300
570
121
13
(40)
14,010
1,520
12,490
$
$
$
$
466
200
150
100
800
400
100
200
400
175
350
151
33
200
200
200
200
200
300
200
150
55
200
200
200
250
100
300
350
550
750
750
400
100
500
—
200
300
125
1,207
1,185
250
250
250
300
—
512
—
25
(41)
14,443
924
13,519
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 141
Notes to the Consolidated Financial Statements
Significant long-term debt transactions are described below:
DEBENTURES The following table summarizes the debentures issued in the years ended as indicated:
($ millions)
Loblaw Companies Limited notes
Choice Properties senior unsecured debentures
– Series N
– Series O
– Series P
– Series Q
Total debentures issued
Interest
Rate
2.28%
2.98%
3.83%
2.85%
2.46%
Maturity
Date
2021
Principal
Amount
2020
Principal
Amount
May 7, 2030(i)
$
—
$
350
March 4, 2030
March 4, 2050
May 21, 2027
November 30, 2026
—
—
—
350
350
400
100
500
—
$
1,350
$
(i)
In connection with this issuance, during 2020, $350 million of bond forward agreements were settled, resulting in a realized fair value loss of
$34 million before income taxes, which was cumulatively recorded in other comprehensive loss as unrealized prior to settlement. The loss will
be reclassified to the consolidated statements of earnings over the life of the May 7, 2030 notes. This settlement also resulted in a net effective
interest rate of 3.34% on the May 7, 2030 notes issued.
The following table summarizes the debentures repaid in the years ended as indicated:
($ millions)
George Weston debenture – Series A
Loblaw Companies Limited notes
Choice Properties senior unsecured debentures
– Series 8
– Series 9
– Series B-C
– Series C
– Series E
– Series I
Interest
Rate
7.00%
5.22%
3.60%
3.60%
4.32%
3.50%
2.30%
3.01%
Maturity
Date
2021
Principal
Amount
2020
Principal
Amount
November 10, 2031(i)
$
466
$
June 18, 2020
April 20, 2020
September 20, 2021(ii)
January 15, 2021
February 8, 2021
September 14, 2020
March 21, 2022(iii)
—
—
200
—
—
—
300
—
350
300
—
100
250
250
—
Total debentures repaid
$
966
$
1,250
(i)
In 2021, the Company settled the net debt associated with the equity forward sale agreement. As a result, the 9.6 million Loblaw shares
securing the net debt were released from security and the Company’s economic interest in Loblaw is now equal to its voting interest. In
aggregate, $790 million was paid to settle the net debt, resulting in the extinguishment of the Series A Debentures ($466 million), Series B
Debentures ($784 million), plus accrued interest, and the settlement of the equity forward sale agreement ($464 million gain).
(ii) Choice Properties senior unsecured debentures Series 9 was redeemed on June 21, 2021.
(iii) Choice Properties senior unsecured debentures Series I was redeemed on December 10, 2021.
GUARANTEED INVESTMENT CERTIFICATES (“GICs”) The following table summarizes PC Bank’s GIC activity, before
commissions, for the years ended as indicated:
($ millions)
Balance, beginning of year
GICs issued
GICs matured
Balance, end of year
2021
$
1,185
$
414
(603)
$
996
$
2020
1,311
410
(536)
1,185
142 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
INDEPENDENT SECURITIZATION TRUST The notes issued by Eagle are debentures, which are collateralized by PC Bank’s credit
card receivables (see note 13).
During 2021, Eagle issued $300 million (2020 – $300 million) of senior and subordinated term notes with a maturity date of
June 17, 2026 (2020 – July 17, 2025) at a weighted average interest rate of 1.61% (2020 – 1.34%). In connection with this
issuance, $175 million (2020 – $200 million) of bond forward agreements were settled, resulting in a realized fair value loss of
$1 million (2020 – loss of $11 million) before income taxes, which was cumulatively recorded in other comprehensive loss as
unrealized prior to settlement. The loss will be reclassified to the consolidated statements of earnings over the life of the
aforementioned Eagle notes. This settlement also resulted in a net effective interest rate of 1.65% (2020 – 2.07%) on the Eagle
notes issued (see note 34).
During 2020, $250 million of the senior and subordinated term notes at a weighted average interest rate of 2.23% previously
issued by Eagle, matured and were repaid on September 17, 2020. There were no repayments of notes issued by Eagle in 2021.
INDEPENDENT FUNDING TRUSTS As at year end 2021, the independent funding trusts had drawn $570 million (2020 –
$512 million) from the revolving committed credit facility that is the source of funding to the independent funding trusts.
The revolving committed credit facility relating to the independent funding trusts has a maturity date until May 27, 2022.
COMMITTED CREDIT FACILITIES The components of the committed lines of credit available as at year end 2021 and 2020 were
as follows:
As at
Dec. 31, 2021
Dec. 31, 2020
Maturity
Date
Available
Credit
Drawn
Available
Credit
Drawn
September 13, 2024(i)
$
350
$
121
$
—
$
October 7, 2023
June 24, 2026
1,000
1,500
—
—
1,000
1,500
—
—
—
—
Total committed credit facilities
$
2,850 $
121
$
2,500
$
($ millions)
George Weston
Loblaw
Choice Properties
(i)
Subsequent to year end, GWL repaid $121 million of its committed credit facility.
These facilities contain certain financial covenants (see note 29).
In 2021, GWL entered into a $350 million revolving committed credit facility provided by a syndicate of lenders with a maturity
date of September 13, 2024.
LONG-TERM DEBT DUE WITHIN ONE YEAR The components of long-term debt due within one year were as follows:
($ millions)
Debentures
GICs
Independent Securitization Trust
Independent funding trusts
Long-term debt secured by mortgage
Construction Loans
Long-term debt due within one year
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
296
182
250
570
217
5
$
1,520
$
196
597
—
—
106
25
924
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 143
Notes to the Consolidated Financial Statements
SCHEDULE OF REPAYMENTS The schedule of repayment of long-term debt, based on maturity is as follows:
($ millions)
2022
2023
2024
2025
2026
Thereafter
Long-Term Debt (excludes transaction costs)
See note 34 for the fair value of long-term debt.
$
Dec. 31, 2021
1,524
1,985
2,075
1,226
828
6,412
$
14,050
RECONCILIATION OF LONG-TERM DEBT The following table reconciles the changes in cash flows from financing activities for
long-term debt for the years ended as indicated:
($ millions)
Total long-term debt, beginning of year
Long-term debt issuances(i)
Long-term debt repayments(ii)
Total cash flow (used in) from long-term debt financing activities
Other non-cash changes
Total long-term debt, end of year
2021
$
14,443
$
1,440
(1,874)
(434)
1
2020
14,554
2,492
(2,598)
(106)
(5)
$
14,010
$
14,443
(i)
(ii)
Includes net movements from the independent funding trust, which are revolving debt instruments.
Includes George Weston Series A debenture repayments of $466 million in 2021 which are presented within the line “Settlement of net debt
associated with equity forward sale agreement” in the consolidated statements of cash flows.
Note 26. Other Liabilities
The components of other liabilities were as follows:
($ millions)
Financial liabilities(i)
Net defined benefit plan obligation (note 30)
Other long-term employee benefit obligation
Equity-based compensation liability (note 31)
Other
Other liabilities
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
660
340
115
6
18
661
382
129
7
18
$
1,139
$
1,197
(i)
Financial liabilities represent land and buildings disposed or partially disposed of by Choice Properties to third parties. On consolidation, these
transactions were not recognized as a sale of assets as under the terms of the leases, the Company did not relinquish control of the properties
for purposes of IFRS 16 “Leases” and IFRS 15 “Revenue from Contracts with Customers”. Instead, the proceeds from the transactions were
recognized as financial liabilities and as at December 31, 2021, $4 million (December 31, 2020 – $5 million) was recorded in trade payables
and other liabilities and $660 million (December 31, 2020 – $661 million) was recorded in other liabilities.
144 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
2020
Common
Share
Capital
2,809
1
(24)
6,666
(1,300,000)
152,374,416 $
2,786
(88,832)
(229,000)
63,307
(254,525)
—
(4)
—
(4)
Note 27. Share Capital
The components of share capital were as follows:
($ millions)
Common share capital
Preferred shares, Series I
Preferred shares, Series III
Preferred shares, Series IV
Preferred shares, Series V
Share capital
As at
Dec. 31, 2021
Dec. 31, 2020
$
2,712
$
2,782
228
196
197
196
228
196
197
196
$
3,529
$
3,599
COMMON SHARE CAPITAL (AUTHORIZED – UNLIMITED) Common shares issued are fully paid and have no par value.
The following table summarizes the activity in the Company’s common shares issued and outstanding for the years ended
December 31, 2021 and December 31, 2020:
($ millions except where otherwise indicated)
2021
Number of
Common
Shares
Common
Share
Capital
Number of
Common
Shares
Issued and outstanding, beginning of year
152,374,416 $
2,786
153,667,750 $
Issued for settlement of stock options (note 31)
Purchased and cancelled(i)
323,461
(5,908,374)
Issued and outstanding, end of year
146,789,503 $
Shares held in trusts, beginning of year
Purchased for future settlement of RSUs and PSUs
Released for settlement of RSUs and PSUs (note 31)
Shares held in trusts, end of year
Issued and outstanding, net of shares held in trusts,
(254,525)
—
113,419
(141,106)
36
(108)
2,714
(4)
—
2
(2)
end of year
146,648,397
$
2,712
152,119,891
$
2,782
Weighted average outstanding, net of shares held
in trusts
149,893,834
153,406,800
(i)
Includes 1,930 shares cancelled during 2021in a private transaction and are excluded from the Company’s NCIB.
Preferred Shares, Series I (authorized – 10.0 million) GWL has 9.4 million 5.80% non-voting Preferred Shares, Series I
outstanding, with a face value of $235 million, which entitle the holders to a fixed cumulative preferred cash dividend of $1.45
per share per annum which will, if declared, be payable quarterly. GWL may, at its option, redeem for cash, in whole or in part,
these outstanding preferred shares at $25.00 per share, together with all accrued and unpaid dividends to the redemption date.
At any time after issuance, GWL may, at its option, give the holders of these preferred shares the right, at the option of the
holders, to convert their preferred shares into preferred shares of a further series designated by GWL on a share-for-share basis on
a date specified by GWL.
Preferred Shares, Series III (authorized – 10.0 million) GWL has 8.0 million 5.20% non-voting Preferred Shares, Series III
outstanding, with a face value of $200 million, which entitle the holders to a fixed cumulative preferred cash dividend of $1.30
per share per annum which will, if declared, be payable quarterly. GWL may, at its option, redeem for cash, in whole or in part,
these outstanding preferred shares at $25.00 per share, together with all accrued and unpaid dividends to the redemption date.
At any time after issuance, GWL may, at its option, give the holders of these preferred shares the right, at the option of the
holders, to convert their preferred shares into preferred shares of a further series designated by GWL on a share-for-share basis on
a date specified by GWL.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 145
Notes to the Consolidated Financial Statements
Preferred Shares, Series IV (authorized – 8.0 million) GWL has 8.0 million 5.20% non-voting Preferred Shares, Series IV
outstanding, with a face value of $200 million, which entitle the holders to a fixed cumulative preferred cash dividend of $1.30
per share per annum which will, if declared, be payable quarterly. GWL may, at its option, redeem for cash, in whole or in part,
these outstanding preferred shares at $25.00 per share, together with all accrued and unpaid dividends to the redemption date.
At any time after issuance, GWL may, at its option, give the holders of these preferred shares the right, at the option of the
holders, to convert their preferred shares into preferred shares of a further series designated by GWL on a share-for-share basis on
a date specified by GWL.
Preferred Shares, Series V (authorized – 8.0 million) GWL has 8.0 million 4.75% non-voting Preferred Shares, Series V
outstanding, with a face value of $200 million, which entitle the holders to a fixed cumulative preferred cash dividend of $1.1875
per share per annum which will, if declared, be payable quarterly. GWL may, at its option, redeem for cash, in whole or in part,
these outstanding preferred shares at $25.00 per share, together with all accrued and unpaid dividends to the redemption date.
At any time after issuance, GWL may, at its option, give the holders of these preferred shares the right, at the option of the
holders, to convert their preferred shares into preferred shares of a further series designated by GWL on a share-for-share basis on
a date specified by GWL.
DIVIDENDS The declaration and payment of dividends on the Company’s common shares and the amount thereof are at the
discretion of the Company’s Board which takes into account the Company’s financial results, capital requirements, available
cash flow, future prospects of the Company’s business and other factors considered relevant from time to time. Over time, it is
the Company’s intention to increase the amount of the dividend while retaining appropriate free cash flow to finance future
growth. In the third quarter of 2021 and in the fourth quarter of 2020, the Board raised the quarterly common share dividend by
$0.050 to $0.60 and $0.025 to $0.55 per share, respectively. The Board declared dividends for the years ended as follows:
($)
Dividends declared per share(i):
Common share
Preferred share:
Series I
Series III
Series IV
Series V
2021
2020
2.30
$
2.125
1.45
1.30
1.30
1.1875
$
$
$
$
1.45
1.30
1.30
1.1875
$
$
$
$
$
(i) Dividends declared on common shares and Preferred Shares, Series III, Series IV and Series V were payable on January 1, 2022 and
subsequently paid on January 4, 2022. Dividend declared on Preferred Shares, Series I was paid on December 15, 2021.
The following table summarizes the Company’s cash dividends declared subsequent to year end 2021:
($)
Dividends declared per share(i)
– Common share
– Preferred share:
Series I
Series III
Series IV
Series V
$
$
$
$
$
0.600
0.3625
0.3250
0.3250
0.296875
(i) Dividends declared on common shares and Preferred Shares, Series III, Series IV and Series V are payable on April 1, 2022. Dividends declared
on Preferred Shares, Series I are payable on March 15, 2022.
146 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
NORMAL COURSE ISSUER BID PROGRAM The following table summarizes the Company’s activity under its NCIB for the years
ended as follows:
($ millions except where otherwise indicated)
Purchased for future settlement of RSUs and PSUs (number of shares)
Purchased for current settlement of RSUs and DSUs (number of shares)
Purchased and cancelled (number of shares)
Cash consideration paid
Purchased and held in trusts
Purchased and settled
Purchased and cancelled(i)
Premium charged to retained earnings
Purchased and held in trusts
Purchased and settled
Purchased and cancelled
Reduction in share capital
2021
2020
(52 weeks)
(53 weeks)
—
10,862
229,000
33,325
5,906,444
1,300,000
$
$
$
—
—
(744)
—
—
642
108
$
$
$
(21)
(3)
(123)
17
—
99
24
(i)
$6 million of cash consideration related to common shares repurchased under the NCIB for cancellation in the fourth quarter of 2021 was
paid in the first quarter of 2022.
In the second quarter of 2021, GWL renewed its NCIB to purchase on the Toronto Stock Exchange (“TSX”) or through alternative
trading systems up to 7,596,891 of its common shares, representing approximately 5% of issued and outstanding common
shares. In accordance with the rules of the TSX, the Company may purchase its common shares from time to time at the then
market price of such shares.
As of December 31, 2021, 4,951,418 common shares were purchased under the Company’s current NCIB.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 147
Notes to the Consolidated Financial Statements
Note 28. Loblaw Capital Transactions
LOBLAW PREFERRED SHARES As at year end of 2021, the Second Preferred Shares, Series B in the amount of $221 million
net of $4 million of after-tax issuance costs, and related cash dividends, were presented as a component of non-controlling
interests in the Company’s condensed consolidated balance sheet. In 2021, Loblaw declared dividends of $12 million (2020 –
$12 million) related to the Second Preferred Shares, Series B.
LOBLAW COMMON SHARES The following table summarizes Loblaw’s common share activity under its equity-based
compensation arrangements and NCIB, and includes the impact on the Company’s consolidated financial statements for the
years ended as indicated:
($ millions except where otherwise indicated)
Issued (number of shares)
Purchased and held in trusts (number of shares)
Purchased and cancelled(i)
(number of shares)
Cash consideration received (paid)
Equity-based compensation
Purchased and held in trusts
Purchased and cancelled
Increase (decrease) in contributed surplus
Equity-based compensation
Purchased and held in trusts
Purchased and cancelled
2021
2020
(52 weeks)
(53 weeks)
2,416,459
(510,000)
1,187,274
(145,000)
(15,663,281)
(13,304,751)
(13,756,822)
(12,262,477)
$
$
$
$
$
102
(50)
(1,200)
(1,148)
$
$
38
(17)
(309)
(288)
$
30
(10)
(888)
(868)
16
(3)
(226)
(213)
(i)
Includes 15,395 shares cancelled during the third quarter of 2021 in a private transaction and are excluded from Loblaw’s Normal Course
Issuer Bid.
NORMAL COURSE ISSUER BID During the first quarter of 2020, the TSX accepted an amendment to Loblaw’s NCIB. The
amendment permitted Loblaw to purchase its common shares from GWL under Loblaw’s NCIB, pursuant to an automatic
disposition plan agreement among Loblaw’s broker, Loblaw and GWL (“ADP Agreement”), in order for GWL to maintain its
proportionate ownership interest in Loblaw.
In the second quarter of 2021, Loblaw renewed its NCIB to purchase on the TSX or through alternative trading systems up to
17,106,459 of Loblaw’s common shares, representing approximately 5% of issued and outstanding common shares. In
accordance with the rules of the TSX, Loblaw may purchase its common shares from time to time at the then market price of
such shares. Loblaw will continue to be permitted to purchase its common shares from GWL in accordance with the exemption
granted by the TSX. Purchases from GWL will be made pursuant to the ADP Agreement. As at December 31, 2021, Loblaw had
purchased 10,276,022 common shares for cancellation under its current NCIB.
During the year ended 2021, 15,647,886 (2020 – 13,304,751) Loblaw common shares were purchased under the Loblaw NCIB for
cancellation, for aggregate consideration of $1,200 million (2020 – $888 million), including 7,399,437 (2020 – 4,940,680) Loblaw
common shares purchased from GWL, for aggregate consideration of $563 million (2020 – $336 million).
During 2020, pursuant to an exemption granted by the Ontario Securities Commission (“OSC”), Loblaw purchased, for
cancellation, 3,269,208 common shares from an entity controlled by Mr. W. Galen Weston, the then controlling shareholder of
Weston. Total aggregate cash consideration paid was $205 million. The common shares were purchased at a price approved by
the OSC and count towards the common shares Loblaw is entitled to purchase under its NCIB.
148 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 29. Capital Management
In order to manage its capital structure, the Company may, among other activities, adjust the amount of dividends paid to
shareholders, purchase shares for cancellation pursuant to its NCIB, issue new shares or issue or repay long-term debt with the
objective of:
•
• maintaining financial capacity and flexibility through access to capital to support future development of the business;
• minimizing the after-tax cost of its capital while taking into consideration current and future industry, market and
ensuring sufficient liquidity is available to support its financial obligations and to execute its operating and strategic plans;
economic risks and conditions;
utilizing short-term funding sources to manage its working capital requirements and long-term funding sources to manage
the long-term capital investments of the business; and
targeting an appropriate leverage and capital structure for the Company and each of its reportable operating segments.
•
•
The Company has policies in place which govern debt financing plans and risk management strategies for liquidity, interest
rates and foreign exchange. These policies outline measures and targets for managing capital, including a range for leverage
consistent with the desired credit rating. Management and the Audit Committee regularly review the Company’s compliance
with, and performance against, these policies. In addition, management regularly reviews these policies to ensure they remain
consistent with the risk tolerance acceptable to the Company.
The following table summarizes the Company’s total capital under management:
($ millions)
Bank indebtedness
Demand deposits from customer
Short-term debt
Long-term debt due within one year
Long-term debt
Certain other liabilities(i)
Fair value of financial derivatives related to the above debt
Total debt excluding lease liabilities
Lease liabilities due within one year
Lease liabilities
Total debt including lease liabilities
Equity attributable to shareholders of the Company
Total capital under management
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
52
75
450
1,520
12,490
738
—
86
24
1,335
924
13,519
737
(630)
$
15,325
$
15,995
742
4,242
799
4,206
$
$
20,309
$
21,000
6,959
27,268
$
7,811
28,811
(i)
Includes financial liabilities of $664 million (December 31, 2020 – $666 million) recorded primarily as a result of Choice Properties’
transactions.
COVENANTS AND REGULATORY REQUIREMENTS The Company and Loblaw are subject to certain key financial and non-
financial covenants under their existing credit facilities, certain debentures and letters of credit. These covenants, which
include interest coverage and leverage ratios, as defined in the respective agreements, are measured by the Company and
Loblaw on a quarterly basis to ensure compliance with these agreements. As at year end 2021 and throughout the year, the
Company and Loblaw were in compliance with each of their covenants under their agreements.
Loblaw is subject to externally imposed capital requirements from the Office of the Superintendent of Financial Institutions
(“OSFI”), the primary regulator of PC Bank. PC Bank’s capital management objectives are to maintain a consistently strong
capital position while considering the economic risks generated by its credit card receivables portfolio and to meet all
regulatory capital requirements as defined by OSFI. PC Bank uses Basel III as its regulatory capital management framework,
which includes a target common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5% and a total capital ratio of
10.5%. In addition to the regulatory capital ratios requirement, PC Bank is subject to the Basel III Leverage ratio. PC Bank is
also subject to the OSFI’s Guideline on Liquidity Adequacy Requirements (“LARs”). The LARs guideline establishes standards
based on the Basel III framework, including a Liquidity Coverage Ratio standard. As at year end 2021 and throughout the year,
PC Bank has met all applicable regulatory requirements.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 149
Notes to the Consolidated Financial Statements
Choice Properties has certain key financial covenants in its debentures and committed credit facility which include debt service
ratios and leverage ratios, as defined in the respective agreements. These ratios are measured by Choice Properties on an on-
going basis to ensure compliance with the agreements. As at year end 2021 and throughout the year, Choice Properties was in
compliance with each of the key financial covenants under these agreements.
In addition, the Company has wholly-owned subsidiaries that engage in insurance related activities. These subsidiaries each
exceeded their minimum regulatory capital and surplus requirements as at year end 2021.
Note 30. Post-Employment and Other Long-Term Employee Benefits
POST-EMPLOYMENT BENEFITS The Company sponsors a number of pension plans, including registered defined benefit
pension plans, registered defined contribution pension plans and supplemental unfunded arrangements providing pension
benefits in excess of statutory limits. Certain obligations of the Company under these supplemental pension arrangements are
secured by a standby letter of credit issued by a major Canadian chartered bank.
GWL’s and Loblaw’s Pension Committees (“the Committees”) oversee the Company’s pension plans. The Committees are
responsible for assisting GWL’s and Loblaw’s Boards in fulfilling their general oversight responsibilities for the plans. The
Committees assist the Boards with oversight of management’s administration of the plans, pension investment and monitoring
responsibilities, and compliance with legal and regulatory requirements.
The Company’s defined benefit pension plans are primarily funded by the Company, predominantly non-contributory and the
benefits are, in general, based on career average earnings subject to limits. The funding is based on a solvency valuation for
which the assumptions may differ from the assumptions used for accounting purposes as detailed in this note.
The Company also offers certain other defined benefit plans other than pension plans. These other defined benefit plans are
generally not funded, are mainly non-contributory and include health care, life insurance and dental benefits. Employees eligible
for these other defined benefit plans are those who retire at certain ages having met certain service requirements. The majority
of other defined benefit plans for current and future retirees include a limit on the total benefits payable by the Company.
The Company’s defined benefit pension plans and other defined benefit plans expose it to a number of actuarial risks, such as
longevity risk, interest rate risk and market risk.
In Canada, the Company also has a national defined contribution plan for salaried employees. All newly hired salaried employees
are only eligible to participate in this defined contribution plan.
The Company also contributes to various MEPPs, which are administered by independent boards of trustees generally consisting
of an equal number of union and employer representatives. The Company’s responsibility to make contributions to these plans is
limited by amounts established pursuant to its collective agreements.
The Company expects to make contributions in 2022 to its defined benefit and defined contribution plans and the MEPPs in
which it participates as well as make benefit payments to the beneficiaries of the supplemental unfunded defined benefit
pension plans, other defined benefit plans and other long-term employee benefit plans.
OTHER LONG-TERM EMPLOYEE BENEFITS The Company offers other long-term employee benefit plans that include long-term
disability benefits and continuation of health care and dental benefits while on disability.
150 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
DEFINED BENEFIT PENSION PLANS AND OTHER DEFINED BENEFIT PLANS Information on the Company’s defined benefit
pension plans and other defined benefit plans, in aggregate, is summarized as follows:
($ millions)
Present value of funded obligations
Present value of unfunded obligations
As at
Dec. 31, 2021
Dec. 31, 2020
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
$
(1,740) $
—
$ (2,026) $
—
(187)
(149)
(208)
(168)
Total present value of defined benefit obligations
$
(1,927) $
(149)
$
(2,234) $
(168)
Fair value of plan assets
2,232
—
2,207
—
Total funded status of surpluses (obligations)
$
305 $
(149)
$
(27) $
(168)
Assets not recognized due to asset ceiling
(1)
—
(3)
—
Total net defined benefit plan surpluses (obligations)
$
304 $
(149)
$
(30) $
(168)
Recorded on the consolidated balance sheets as follows:
Other assets (note 21)
Other liabilities (note 26)
$
$
495 $
—
(191) $
(149)
$
$
184 $
—
(214) $
(168)
The following are the continuities of the fair value of plan assets and the present value of the defined benefit plan obligations:
($ millions)
Changes in the fair value of plan assets
Fair value, beginning of year
Employer contributions
Employee contributions
Benefits paid
Interest income
Actuarial gains in other comprehensive income(i)
Settlements(ii)
Other
Settlement related to sale of Weston Foods
Fair value, end of year
Changes in the present value of the
defined benefit plan obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Employee contributions
Actuarial (gains) losses in other comprehensive
income(i)
Settlements(ii)
Curtailment gain(iii)
Settlement related to sale of Weston Foods
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
2021
Total
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
2020
Total
$ 2,207 $
— $ 2,207
$
1,899 $
— $
1,899
27
3
(51)
55
34
—
(4)
(39)
—
—
—
—
—
—
—
—
27
3
(51)
55
34
—
(4)
(39)
47
4
(52)
62
252
(1)
(4)
—
—
—
—
—
—
—
—
—
47
4
(52)
62
252
(1)
(4)
—
$
2,232 $
— $
2,232
$
2,207 $
— $
2,207
$
2,234 $
73
168 $ 2,402
78
5
$
1,866 $
67
156 $
4
2,022
71
57
(63)
3
4
(5)
—
61
(68)
3
62
(64)
4
(338)
(23)
(361)
300
—
(2)
(37)
—
—
—
—
(2)
(37)
(1)
—
—
5
(7)
—
10
—
—
—
67
(71)
4
310
(1)
—
—
Balance, end of year
$
1,927 $
149 $ 2,076
$
2,234 $
168 $
2,402
(i)
Included in the 2020 actuarial (gains) losses in other comprehensive income is $2 million of actuarial losses related to discontinued
operations.
Settlements relate to annuity purchases in 2020.
(ii)
(iii) Curtailment gain relates to the sale of Weston Foods and was remeasured as at November 30, 2021 using a discount rate of 3.50%.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 151
Notes to the Consolidated Financial Statements
In 2021, Weston Foods completed an annuity purchase and paid $39 million from the impacted plans’ assets to settle
$37 million of pension obligations. Weston Foods recognized a loss of $2 million on completion of annuity purchase in
discontinued operations (see note 5).
In 2020, the Company completed annuity purchases with respect to former employees. These activities are designed to reduce
the Company’s defined benefit pension plan obligations and decrease future risks and volatility associated with these
obligations. In 2020, the Company paid $1 million from the impacted plans’ assets to settle $1 million of pension obligations and
recorded nominal settlement charge in SG&A. The settlement charges resulted from the difference between the amount paid
for the annuity purchases and the value of the Company’s defined benefit plan obligations related to these annuity purchases at
the time of the settlement.
For the year ended 2021, the actual return on plan assets was $89 million (2020 – $314 million).
The net defined benefit obligation can be allocated to the plans’ participants as follows:
•
•
•
Active plan participants – 60% (2020 – 63%)
Deferred plan participants – 12% (2020 – 12%)
Retirees – 28% (2020 – 25%)
During 2022, the Company expects to contribute approximately $2 million (2021 – contributed $27 million) to its registered
defined benefit pension plans. The actual amount of contributions may vary from the estimate depending on the funded
positions of the plans, filing of any actuarial valuations, any new regulatory requirements or other factors.
The net cost recognized in net earnings before income taxes from continuing operations for the Company’s defined benefit
pension plans and other defined benefit plans was as follows:
2021
(52 weeks)
2020
(53 weeks)
($ millions)
Current service cost
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
Total
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
$
73 $
5 $
78
$
65 $
4 $
Interest cost on net defined benefit plan obligations
Settlement charges(i)
Curtailment gain(ii)
Other
2
2
(2)
4
4
—
—
—
Net post-employment defined benefit costs
$
79 $
9 $
6
2
(2)
4
88
—
—
—
4
5
—
—
—
Total
69
5
—
—
4
$
69 $
9 $
78
(i)
(ii)
Relates to annuity purchases.
Curtailment gain relates to the sale of Weston Foods and was remeasured as at November 30, 2021 using a discount rate of 3.50%.
152 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
The actuarial (gains) losses recognized in other comprehensive income from continuing operations for defined benefit plans
were as follows:
($ millions)
Return on plan assets excluding amounts included
2021
(52 weeks)
2020
(53 weeks)
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
Total
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
Total
in interest income
Experience adjustments
$
(34) $
(45)
— $
(8)
(34)
(53)
$
(250) $
— $
(250)
—
(3)
(3)
Actuarial (gains) losses from change in financial
assumptions
(293)
(15)
(308)
Change in liability arising from asset ceiling
(2)
—
(2)
296
—
13
—
309
—
Total net actuarial (gains) losses recognized in other
comprehensive income before income taxes
$
(374) $
(23) $
(397)
$
46 $
10 $
56
Income tax expenses (recoveries) on actuarial (gains)
losses (note 9)
98
6
104
(13)
(2)
(15)
Actuarial (gains) losses net of income tax expenses
(recoveries)
$
(276) $
(17) $
(293)
$
33 $
8 $
41
The cumulative actuarial (gains) losses before income taxes recognized in equity for the Company’s defined benefit plans were
as follows:
($ millions)
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
2021
Total
Defined
Benefit
Pension
Plans
Other
Defined
Benefit
Plans
2020
Total
Cumulative amount, beginning of year
$
(11) $
(71) $
(82)
$
(57) $
(81) $
(138)
Net actuarial (gains) losses recognized in
the year before income taxes
(374)
(23)
(397)
46
10
Cumulative amount, end of year
$
(385) $
(94) $
(479)
$
(11) $
(71) $
56
(82)
COMPOSITION OF PLAN ASSETS The defined benefit pension plan assets are held in trust and consist of the following asset
categories:
($ millions except where otherwise indicated)
Dec. 31, 2021
Dec. 31, 2020
As at
Equity securities
Canadian – pooled funds
Foreign
– pooled funds
Total equity securities
Debt securities
Fixed income securities – government
– corporate
Total debt securities
Other investments
Cash and cash equivalents
Total
$
47
2%
$
13
1,172
$
1,219
53%
55%
1,195
$
1,208
731
81
812
158
43
$
$
$
$
$
33%
$
3%
36%
7%
2%
$
$
$
$
743
79
822
125
52
2,232
100%
2,207
100%
1%
53%
54%
34%
4%
38%
6%
2%
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 153
Notes to the Consolidated Financial Statements
As at year end 2021 and 2020, the defined benefit pension plans did not directly include any GWL, Loblaw or Choice Properties
securities.
All equity and debt securities and other investments are valued based on quoted prices (unadjusted) in active markets for
identical assets or liabilities or based on inputs other than quoted prices in active markets that are observable for the asset or
liability, either directly as prices or indirectly, either derived from prices or as per agreements for contractual returns.
The Company’s asset allocation reflects a balance of interest rate sensitive investments, such as fixed income investments, and
equities, which are expected to provide higher returns over the long-term. The Company’s targeted asset allocations are actively
monitored and adjusted on a plan by plan basis to align the asset mix with the liability profiles of the plans.
PRINCIPAL ACTUARIAL ASSUMPTIONS The principal actuarial assumptions used in calculating the Company’s defined benefit
plan obligations and net defined benefit plan cost for the year were as follows (expressed as weighted averages):
Defined
Benefit
Pension
Plans
3.30%
3.00%
2021
Other
Defined
Benefit
Plans
3.20%
n/a
Defined
Benefit
Pension
Plans
2.50%
3.00%
2020
Other
Defined
Benefit
Plans
2.50%
n/a
CPM-RPP2014Pub/Priv CPM-RPP2014Pub/Priv
CPM-RPP2014Pub/Priv CPM-RPP2014Pub/Priv
Generational
Generational
Generational
Generational
2.50%
3.00%
2.50%
n/a
3.25%
3.00%
3.00%
n/a
CPM-RPP2014Pub/Priv CPM-RPP2014Pub/Priv
CPM-RPP2014Pub/Priv CPM-RPP2014Pub/Priv
Generational
Generational
Generational
Generational
Defined Benefit Plan Obligations
Discount rate
Rate of compensation increase
Mortality table(i)
Net Defined Benefit Plan Cost
Discount rate
Rate of compensation increase
Mortality table(i)
n/a – not applicable
(i)
Public or private sector mortality table is used depending on the prominent demographics of each plan.
The weighted average duration of the defined benefit obligations as at year end 2021 is 17.0 years (2020 – 19.1 years).
The growth rate of health care costs, primarily drug and other medical costs, for the other defined benefit plan obligations as at
year end 2021 was estimated at 4.50% and is expected to increase to 4.60% as at year end 2022.
SENSITIVITY OF KEY ACTUARIAL ASSUMPTIONS The following table outlines the key assumptions for 2021 (expressed as
weighted averages) and the sensitivity of a 1% change in each of these assumptions on the defined benefit plan obligations and
the net defined benefit plan cost.
The sensitivity analysis provided in the table is hypothetical and should be used with caution. The sensitivities of each key
assumption have been calculated independently of any changes in other key assumptions. Actual experience may result in
changes in a number of key assumptions simultaneously. Changes in one factor may result in changes in another, which could
amplify or reduce the impact of such assumptions.
Defined Benefit Pension Plans
Other Defined Benefit Plans
Increase (Decrease)
($ millions)
Plan
Obligations
Defined
Benefit
Discount rate
Impact of:
1% increase
1% decrease
Expected growth rate of health care costs
Impact of:
1% increase
1% decrease
n/a – not applicable
3.30%
(293)
376
$
$
$
$
n/a
n/a
Net
Defined
Benefit
Defined
Benefit
Plan Cost(i)
Plan
Obligations
2.50%
3.20%
Net
Defined
Benefit
Plan Cost(i)
2.50%
(28)
29
n/a
n/a
$
$
$
$
(18)
23
4.50%
14
(11)
$
$
$
$
—
—
4.50%
1
(1)
(i)
Discount rate and expected growth rate of health care costs sensitivity is for current service and interest costs only.
154 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
MULTI-EMPLOYER PENSION PLANS During 2021, the Company recognized an expense of $73 million (2020 – $74 million) in
operating income from continuing operations, which represents the contributions made in connection with MEPPs. During
2021, the Company expects to continue to make contributions into these MEPPs.
Loblaw, together with its franchises, is the largest participating employer in the Canadian Commercial Workers Industry Pension
Plan (“CCWIPP”), with approximately 56,000 (2020 – 60,000) employees as members. Included in the 2021 expense described
above are contributions of $72 million (2020 – $73 million) to CCWIPP.
POST-EMPLOYMENT AND OTHER LONG-TERM EMPLOYEE BENEFIT COSTS The net cost recognized in net earnings before
income taxes from continuing operations for the Company’s post-employment and other long-term employee benefit plans was
as follows:
($ millions)
Net post-employment defined benefit cost(i)
Defined contribution costs(ii)
Multi-employer pension plan costs(iii)
Total net post-employment benefit costs
Other long-term employee benefit costs(iv)
Net post-employment and other long-term employee benefit costs
Recorded on the consolidated statements of earnings as follows:
Operating income (note 32)
Net interest expense and other financing charges (note 8)
Net post-employment and other long-term employee benefits costs
2021
2020
(52 weeks)
(53 weeks)
$
$
$
$
88
30
73
191
31
222
213
9
222
$
78
29
74
181
30
211
202
9
211
$
$
$
$
$
(i)
Includes $2 million settlement charge (2020 – nominal) related to annuity purchases and $2 million curtailment gain related to the sale of
Weston Foods.
(ii) Amounts represent the Company’s contributions made in connection with defined contribution plans.
(iii) Amounts represent the Company’s contributions made in connection with MEPPs.
(iv) Other long-term employee benefit costs include $3 million (2020 – $4 million) of net interest expense and other financing charges.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 155
Notes to the Consolidated Financial Statements
Note 31. Equity-Based Compensation
The Company’s equity-based compensation arrangements include stock option plans, RSU plans, PSU plans, DSU plans,
EDSU plans and Choice Properties’ unit-based compensation plans. The Company’s costs recognized in SG&A related to
its equity-based compensation arrangements in 2021 were $78 million (2020 – $65 million).
The following is the carrying amount of the Company’s equity-based compensation arrangements:
($ millions)
Trade payables and other liabilities
Other liabilities (note 26)
Contributed surplus
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
$
11
6
131
$
$
$
9
7
125
Details related to the equity-based compensation plans of GWL and Loblaw are as follows:
STOCK OPTION PLANS GWL maintains a stock option plan for certain employees. Under this plan, GWL may grant options for
up to 6,453,726 of its common shares.
Loblaw maintains a stock option plan for certain employees. Under this plan, Loblaw may grant options for up to 28,137,162 of
its common shares.
The following is a summary of GWL’s stock option plan activity:
Outstanding options, beginning of year
Granted
Exercised
Forfeited/cancelled
Outstanding options, end of year
Options exercisable, end of year
2021
Weighted
Average
Exercise
Price/ Share
101.44
100.92
98.18
109.75
101.89
103.63
Options
(number
of shares)
1,746,483
397,956
(323,461)
(3,430)
1,817,548
640,091
$
$
$
$
$
$
Options
(number
of shares)
1,246,718
548,868
(6,666)
(42,437)
1,746,483
674,386
$
$
$
$
$
$
The following table summarizes information about GWL’s outstanding stock options:
2020
Weighted
Average
Exercise
Price/Share
100.22
104.15
84.20
103.33
101.44
101.41
2021
Range of Exercise Prices ($)
$93.17 - $100.73
$100.74 - $104.48
$104.49 - $132.17
Outstanding Options
Exercisable Options
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price/Share
Number of
Exercisable
Options
Weighted
Average
Exercise
Price/Share
3
6
2
$
$
$
$
94.82
102.71
108.89
101.89
254,176
91,417
294,498
640,091
$
$
$
$
96.46
104.14
109.66
103.63
Number of
Options
Outstanding
505,246
908,871
403,431
1,817,548
During 2021, GWL issued common shares on the exercise of stock options with a weighted average market share price of
$129.12 (2020 – $93.05) per common share and received cash consideration of $32 million (2020 – $1 million).
156 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
During 2021, GWL granted stock options with a weighted average exercise price of $100.92 (2020 – $104.15) per common share
and a fair value of $6 million (2020 – $6 million). The assumptions used to measure the grant date fair value of the GWL options
granted during the years ended under the Black-Scholes stock option valuation model were as follows:
Expected dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of options
2021
2.2%
2020
2.0%
18.8 - 19.4%
14.3% - 14.9%
0.9% - 1.1%
0.9%
4.9 - 6.7 years
4.9 - 6.7 years
Estimated forfeiture rates are incorporated into the measurement of stock option plan expense. The forfeiture rate applied as at
year end 2021 was 1.4% (2020 – 1.4%).
The following is a summary of Loblaw’s stock option plan activity:
Outstanding options, beginning of year
Granted
Exercised
Forfeited/cancelled
Outstanding options, end of year
Options exercisable, end of year
Options
(number
of shares)
7,259,645
1,926,951
(1,829,170)
(925,977)
6,431,449
2,285,608
$
$
$
$
$
$
2021
Weighted
Average
Exercise
Price/Share
61.19
64.27
56.02
64.22
63.15
59.79
Options
(number
of shares)
6,317,922
1,851,415
(601,756)
(307,936)
7,259,645
2,758,738
$
$
$
$
$
$
The following table summarizes information about Loblaw’s outstanding stock options:
2020
Weighted
Average
Exercise
Price/Share
57.57
70.03
50.32
61.28
61.19
55.99
2021
Range of Exercise Prices ($)
$53.41 - $60.40
$60.41 - $65.57
$65.58 - $97.44
Outstanding Options
Exercisable Options
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price/Share
2
5
5
$
$
$
$
56.92
63.93
70.90
63.15
Number of
Exercisable
Options
1,674,267
360,807
250,534
2,285,608
Weighted
Average
Exercise
Price/Share
$
$
$
$
57.03
65.52
69.98
59.79
Number of
Options
Outstanding
2,392,382
2,352,559
1,686,508
6,431,449
During 2021, Loblaw issued common shares on the exercise of stock options with a weighted average market share price of
$81.97 (2020 – $68.22) per common share and received cash consideration of $102 million (2020 – $30 million).
During 2021, Loblaw granted stock options with a weighted average exercise price of $64.27 (2020 – $70.03) per common share
and a fair value of $17 million (2020 – $13 million). The assumptions used to measure the grant date fair value of the Loblaw
options granted during the years ended as indicated under the Black-Scholes stock option valuation model were as follows:
Expected dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of options
2021
1.7%
2020
1.9%
18.3% - 20.6%
13.5% - 20.1%
0.6% - 1.6%
0.3% - 1.2%
3.8 - 6.2 years
3.7 - 6.2 years
Estimated forfeiture rates are incorporated into the measurement of stock option plan expense. The forfeiture rate applied as at
year end 2021 and 2020 was 9.0%.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 157
Notes to the Consolidated Financial Statements
RESTRICTED SHARE UNIT PLANS The following is a summary of GWL’s and Loblaw’s RSU plan activity:
(Number of awards)
Outstanding RSUs, beginning of year
Granted
Reinvested
Settled
Forfeited
Outstanding RSUs, end of year
GWL
Loblaw
2021
133,038
32,444
2,364
(99,471)
(38,598)
29,777
2020
136,788
47,957
2,741
(48,291)
(6,157)
133,038
2021
894,272
372,015
14,835
(371,474)
(110,303)
799,345
2020
1,032,832
242,797
23,666
(367,020)
(38,003)
894,272
The fair value of GWL’s and Loblaw’s RSUs granted during 2021 was $3 million (2020 – $5 million) and $25 million (2020 –
$17 million), respectively.
PERFORMANCE SHARE UNIT PLANS The following is a summary of GWL’s and Loblaw’s PSU plan activity:
(Number of awards)
Outstanding PSUs, beginning of year
Granted
Reinvested
Settled
Forfeited
Outstanding PSUs, end of year
GWL
Loblaw
2021
151,058
58,335
3,455
(23,606)
(5,401)
183,841
2020
114,473
58,555
3,026
(20,425)
(4,571)
151,058
2021
666,400
281,099
11,177
(231,952)
(110,307)
616,417
2020
662,695
237,391
16,301
(218,955)
(31,032)
666,400
The fair value of GWL’s and Loblaw’s PSUs granted during 2021 was $6 million (2020 – $6 million) and $18 million (2020 –
$17 million), respectively.
SETTLEMENT OF AWARDS FROM SHARES HELD IN TRUSTS The following table summarizes GWL’s settlement of RSUs and
PSUs from shares held in trusts for the years ended as indicated:
(Number of awards)
Settled
Released from trusts (note 27)
2021
123,077
113,419
2020
68,716
63,307
During 2021, the settlement of awards from shares held in trusts resulted in a $9 million increase (2020 – $6 million) in retained
earnings and a $2 million increase (2020 – nominal) in share capital.
DIRECTOR DEFERRED SHARE UNIT PLANS The following is a summary of GWL’s and Loblaw’s DSU plan activity:
(Number of awards)
Outstanding DSUs, beginning of year
Granted
Reinvested
Settled
Outstanding DSUs, end of year
GWL
Loblaw
2021
149,537
15,902
2,864
—
168,303
2020
155,418
22,878
3,111
(31,870)
149,537
2021
380,481
32,829
6,162
(58,156)
361,316
2020
336,897
35,008
8,576
—
380,481
The fair value of GWL’s and Loblaw’s DSUs granted during 2021 was $2 million (2020 – $2 million) and $2 million (2020 –
$2 million), respectively.
158 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
EXECUTIVE DEFERRED SHARE UNIT PLANS The following is a summary of GWL’s and Loblaw’s EDSU plan activity:
(Number of awards)
Outstanding EDSUs, beginning of year
Granted
Reinvested
Settled
Outstanding EDSUs, end of year
GWL
Loblaw
2021
44,911
—
820
(1,204)
44,527
2020
43,947
—
964
—
2021
56,856
5,399
1,066
(848)
44,911
62,473
2020
45,258
10,310
1,288
—
56,856
There were no GWL EDSUs granted in 2021 and 2020. The fair value of Loblaw’s EDSUs granted during 2021 was nominal
(2020 – $1 million).
CHOICE PROPERTIES The following are details related to the unit-based compensation plans of Choice Properties:
UNIT OPTION PLAN Choice Properties maintains a Unit Option plan for certain employees. Under this plan, Choice Properties
may grant Unit Options totaling up to 19,744,697 Units, as approved at the annual and special meeting of Unitholders on
April 29, 2015. The Unit Options vest in tranches over a period of four years.
The following is a summary of Choice Properties’ Unit Option plan activity:
Outstanding Unit Options, beginning of year
Exercised
Cancelled
Expired
Outstanding Unit Options, end of year
Unit Options exercisable, end of year
2021
Weighted
average
exercise
price/unit
12.54
12.34
—
—
12.84
13.13
Number of
awards
1,082,640
(647,184)
—
—
435,456
292,592
$
$
$
$
$
$
2020
Weighted
average
exercise
price/ unit
12.51
12.09
13.15
13.93
12.54
12.56
Number of
awards
1,287,314
(148,794)
(54,414)
(1,466)
1,082,640
706,804
$
$
$
$
$
$
The assumptions used to measure the fair value of the Unit Options under the Black-Scholes model were as follows:
Expected average distribution yield
Expected average Unit price volatility
Average risk-free interest rate
Expected average life of options
2021
5.0%
2020
5.5%
13.4% - 21.5%
15.6% - 35.0%
0.001% - 0.8%
0.01% - 0.3%
0.1 - 1.7 years
0.1 - 2.7 years
RESTRICTED UNIT PLAN RUs entitle certain employees to receive the value of the RU award in cash or Units at the end of the
applicable vesting period, which is usually three years in length. The RU plan provides for the crediting of additional RUs in
respect of distributions paid on Units for the period when a RU is outstanding. The fair value of each RU granted is measured
based on the market value of a Trust Unit at the balance sheet date. There were no RUs vested as at year end 2021 and 2020.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 159
Notes to the Consolidated Financial Statements
The following is a summary of Choice Properties’ RU plan activity:
(Number of awards)
Outstanding RUs, beginning of year
Granted
Reinvested
Exercised
Cancelled
Outstanding RUs, end of year
2021
405,713
119,134
22,014
(104,563)
(2,724)
439,574
2020
484,544
69,227
24,451
(161,044)
(11,465)
405,713
UNIT-SETTLED RESTRICTED UNIT PLAN Under the terms of the URU plan, certain employees are granted URUs, which are
subject to vesting conditions and disposition restrictions. Typically, full vesting of the URUs would not occur until the employee
has remained with Choice Properties for three or five years from the date of grant. Depending on the nature of the grant, the
URUs are subject to a six or seven-year holding period during which the Units cannot be disposed. There were 996,896 URUs
vested, but still subject to disposition restrictions as at year end 2021 (2020 – 764,385).
The following is a summary of Choice Properties’ URU plan activity for units not yet vested:
(Number of awards)
Outstanding URUs, beginning of year
Granted
Vested
Outstanding URUs, end of year
2021
588,534
189,887
(177,502)
600,919
2020
624,419
159,083
(194,968)
588,534
PERFORMANCE UNIT PLAN PUs entitle certain employees to receive the value of the PU award in cash or Units at the end of
the applicable performance period, which is usually three years in length, based on Choice Properties achieving certain
performance conditions. The PU plan provides for the crediting of additional PUs in respect of distributions paid on Units for the
period when a PU is outstanding. The fair value of each PU granted is measured based on the market value of a Trust Unit at the
balance sheet date. There were no PUs vested as at year end 2021 and 2020.
The following is a summary of Choice Properties’ PU plan activity:
(Number of awards)
Outstanding PUs, beginning of year
Granted
Reinvested
Exercised
Cancelled
Added by performance factor
Outstanding PUs, end of year
2021
135,695
82,847
9,403
2020
103,868
59,273
7,241
(30,336)
(40,205)
—
—
(3,543)
9,061
197,609
135,695
160 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
TRUSTEE DEFERRED UNIT PLAN Non-management members of the Choice Properties’ Board of Trustees are required to
receive a portion of their annual retainer in the form of DUs and may also elect to receive up to 100% of their remaining fees in
DUs. Distributions paid earn fractional DUs, which are treated as additional awards. The fair value of each DU granted is
measured based on the market value of a Unit at the balance sheet date. All DUs vest when granted, however, they cannot be
exercised while Trustees are members of the Board.
The following is a summary of Choice Properties’ DU plan activity:
(Number of awards)
Outstanding Trustee DUs, beginning of year
Granted
Reinvested
Exercised
Outstanding Trustee DUs, end of year
Note 32. Employee Costs
2021
368,290
82,969
18,942
(80,739)
389,462
2020
277,139
76,632
17,338
(2,819)
368,290
Included in operating income were the following employee costs from continuing operations:
($ millions)
Wages, salaries and other short-term employee benefits
Post-employment benefits (note 30)
Other long-term employee benefits (note 30)
Equity-based compensation
Capitalized to fixed assets and intangible assets
Employee costs
2021
2020(i)
(52 weeks)
(53 weeks)
$
7,065
$
6,926
185
28
69
(112)
176
26
59
(69)
$
7,235
$
7,118
(i)
Certain comparative figures have been restated to conform with current year presentation.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 161
Notes to the Consolidated Financial Statements
Note 33. Leases
The Company leases certain of Loblaw’s retail stores and distribution centres, corporate offices, passenger vehicles, trailers and IT
equipment. Leases of Loblaw’s retail stores are a substantial portion of the Company’s lease portfolio. Loblaw retail store leases
typically have an initial lease term with additional renewal options available thereafter.
The Company has owned and leased properties that are leased and subleased to third parties, respectively. Owned properties
are held to either earn rental income, for capital appreciation, or both. Subleases are primarily related to non-consolidated
franchise stores, medical centres and ancillary tenants within Loblaw stores.
AS A LESSEE
Right-of-Use Assets The following is a continuity of the cost and accumulated depreciation of right-of-use assets for the year
ended December 31, 2021:
($ millions)
Cost
Balance, beginning of year
Lease additions, net of terminations
Lease extensions and other items
Transfers to assets held for sale
Balance, end of year
Accumulated depreciation
Balance, beginning of year
Depreciation
Impairment reversals, net of losses (note 16)
Transfers to assets held for sale
Balance, end of year
Carrying amount as at December 31, 2021
Property
Other
2021
Total
$
5,139 $
87 $
5,226
121
499
(42)
—
12
—
121
511
(42)
5,717 $
99 $
5,816
1,138 $
45 $
574
(2)
(16)
1,694 $
4,023 $
18
—
—
63
36
$
$
1,183
592
(2)
(16)
1,757
4,059
$
$
$
$
The following is a continuity of the cost and accumulated depreciation of right-of-use assets for the year ended December 31,
2020:
($ millions)
Cost
Balance, beginning of year
Lease additions, net of terminations
Lease extensions and other items
Balance, end of year
Accumulated depreciation
Balance, beginning of year
Depreciation
Impairment losses, net of reversals (note 16)
Balance, end of year
Carrying amount as at December 31, 2020
Property
Other
2020
Total
$
4,588 $
70 $
4,658
165
386
—
17
165
403
5,139 $
87 $
5,226
560 $
24 $
557
21
1,138 $
4,001 $
21
—
45 $
42 $
584
578
21
1,183
4,043
$
$
$
$
162 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Lease Liabilities The following is the continuity of lease liabilities for the year ended December 31, 2021 and December 31,
2020:
($ millions)
Balance, beginning of year
Lease additions, net of terminations
Lease extensions and other items
Lease payments
Interest expense on lease liabilities (note 8)
Transfers to liabilities held for sale
Balance, end of year
Lease liabilities due within one year
Lease liabilities
Total lease liabilities
Liquidity The future undiscounted contractual lease payments are as follows:
2020
5,107
161
387
(857)
207
—
5,005
799
4,206
5,005
2021
$
5,005
$
128
500
(811)
191
(29)
4,984
742
4,242
$
$
4,984
$
As at
$
$
$
($ millions)
2022
2023
2024
2025
2026 Thereafter
Total
Lease payments
$
751 $ 770 $ 662 $ 599 $ 456 $
1,802
$
5,040
$
Total
5,044
Payments due by year
Dec. 31, 2021
Dec. 31, 2020
As at December 31, 2021, the Company also had commitments of $223 million (December 31, 2020 – $270 million) related to
leases not yet commenced.
Short-Term Leases The Company has short-term leases that are primarily related to trailer rentals and certain properties. During
2021, $26 million (2020 – $25 million) was recognized in cost of inventories sold and SG&A.
Variable Lease Payments The Company makes variable lease payments for property tax and insurance charges on leased
properties. The Company also has certain retail store leases where portions of the lease payments are contingent on a
percentage of retail sales. During 2021, $238 million (2020 – $235 million) was recognized in SG&A.
Extension Options Substantially all of Loblaw’s retail store leases have extension options for additional lease terms. As at
December 31, 2021, approximately 14% (December 31, 2020 – 15%) of the lease liabilities are related to extension options that
were deemed reasonably certain to be exercised.
As at December 31, 2021, approximately $6 billion (December 31, 2020 – $6 billion) of discounted future lease payments are
related to extension options that were not deemed to be reasonably certain to be exercised and were not included in lease
liabilities. These future lease payments are discounted at the incremental borrowing rates associated with the current lease
liability profile.
Sale and Leaseback Transactions During 2021, the Company disposed of and leased back four retail properties, and recognized
a gain of $8 million (2020 – loss of $1 million) in SG&A.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 163
Notes to the Consolidated Financial Statements
AS A LESSOR
Finance Leases Finance lease receivable is included in other assets on the Company’s consolidated balance sheet (see note 21).
During 2021, the Company recognized finance interest income of $3 million (2020 – $3 million) and nil impairment losses
(2020 – $5 million). The future finance lease payments to be received by the Company relating to properties that are subleased
to third parties are as follows:
($ millions)
2022
2023
2024
2025
2026 Thereafter
Total
Total
Payments to be received by year
Dec. 31, 2021
Dec. 31, 2020
Finance lease payments
to be received
$
14 $
15 $
9 $
6 $
4 $
270
$
318
$
332
Less: unearned finance
interest income
(3)
(3)
(2)
(2)
(2)
(236)
(248)
(252)
Total finance lease
receivable (note 21)
$
11 $
12 $
7 $
4 $
2 $
34
$
70
$
80
As at
Operating Leases During 2021, the Company recognized operating lease income of $383 million (2020 – $373 million), of which
$20 million (2020 – $20 million) is related to subleases of right-of-use assets.
The future undiscounted operating lease payments to be received by the Company are as follows:
($ millions)
2022
2023
2024
2025
2026 Thereafter
Total
Operating lease income
$ 352 $ 322 $ 283 $ 246 $
194 $
594
$
1,991
$
Total
2,147
Payments to be received by year
Dec. 31, 2021
Dec. 31, 2020
As at
The Company has certain owned land and buildings that it leases to third parties, which as at December 31, 2021 had a net
carrying amount of $1 billion (2020 – $1 billion).
164 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 34. Financial Instruments
The following table presents the fair value and fair value hierarchy of the Company’s financial instruments and excludes financial
instruments measured at amortized cost that are short-term in nature. The carrying values of the Company’s financial
instruments approximate their fair values except for long-term debt.
($ millions)
Financial assets
Amortized cost:
Certain other assets(ii)
Fair value through other comprehensive income:
Certain long-term investments and other assets(ii)
Derivatives included in prepaid expenses and other assets
Fair value through profit and loss:
Security deposits
Certain long-term investments and other assets(ii)
Derivatives included in accounts receivable
Derivatives included in prepaid expenses and other assets
Derivatives included in other assets
Financial liabilities
Amortized cost:
As at
Dec. 31, 2021
Dec. 31, 2020(i)
Level 1 Level 2 Level 3
Total
Level 1 Level 2 Level 3
Total
$
— $
— $
89 $
89
$
— $
— $
113 $
113
96
—
75
—
—
3
—
—
1
—
20
—
4
—
—
—
—
119
—
—
—
96
1
75
139
—
7
—
117
—
—
—
—
20
—
—
75
—
3
—
—
—
—
—
73
—
3
117
—
75
93
3
3
630
—
630
Long-term debt
Certain other liabilities(ii)
Fair value through other comprehensive income:
Derivatives included in trade payables and other liabilities
Fair value through profit and loss:
Trust Unit liability
Derivatives included in trade payables and other liabilities
—
15,170
—
15,170
— 16,389
— 16,389
—
—
4,209
—
—
668
668
—
—
671
671
5
—
—
—
5
—
—
—
—
—
4,209
3,600
—
—
4
—
16
— 3,600
—
20
(i)
(ii)
Certain comparative figures have been restated to conform with current year presentation.
Certain other assets, certain other long-term investments and other assets, and certain other liabilities are included in the consolidated
balance sheets in Other Assets and Other Liabilities, respectively.
There were no transfers between the levels of the fair value hierarchy during the years presented.
During 2021, a loss of $1 million (2020 – loss of $2 million) was recognized in operating income on financial instruments
designated as amortized cost. In addition, a net loss of $774 million (2020 – net gain of $268 million) was recognized in earnings
before income taxes from continuing operations on financial instruments required to be classified as fair value through profit
or loss.
Cash and Cash Equivalents, Short-Term Investments and Security Deposits As at the end of 2021, the Company had cash and
cash equivalents, short-term investments and security deposits of $3,938 million (2020 – $3,231 million), including U.S. dollars of
$221 million (2020 – $199 million).
During 2021, a gain of $3 million (2020 – loss of $28 million) was recognized in other comprehensive income related to the effect
of foreign currency translation on the Company’s U.S. net investment in foreign operations.
Embedded Derivatives The Level 3 financial instruments classified as fair value through profit or loss consist of Loblaw
embedded derivatives on purchase orders placed in neither Canadian dollars nor the functional currency of the vendor. These
derivatives are valued using a market approach based on the differential in exchange rates and timing of settlement. The
significant unobservable input used in the fair value measurement is the cost of purchase orders. Significant increases
(decreases) in any one of the inputs would result in a significantly higher (lower) fair value measurement.
During 2021, a loss of $3 million (2020 – gain of $2 million) was recorded in operating income related to these derivatives. In
addition, as at year end 2021, a corresponding $1 million liability was included in trade payables and other liabilities (2020 –
$3 million asset). As at year end 2021, a 1% increase (decrease) in foreign currency exchange rates would result in a gain (loss) in
fair value of $1 million.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 165
Notes to the Consolidated Financial Statements
Trust Unit Liability In 2021, a fair value loss of $601 million (2020 – gain of $239 million) was recorded in net interest expense
and other financing charges (see note 8).
Other Derivatives The Company uses bond forwards and interest rate swaps to manage its anticipated exposure to fluctuations
in interest rates on future debt issuances. The Company also uses futures, options and forward contracts to manage its
anticipated exposure to fluctuations in commodity prices and exchange rates in its underlying operations. The following is a
summary of the fair values recognized in the consolidated balance sheet and the net realized and unrealized gains (losses)
before income taxes from continuing operations related to the Company’s other derivatives:
($ millions)
Derivatives designated as cash flow hedges
Foreign Exchange Currency Risk - Foreign Exchange Forwards(i)
Interest Rate Risk - Bond Forwards(ii)
Interest Rate Risk - Interest Rate Swaps(iii)
Total derivatives designated as cash flow hedges
Derivatives not designated in a formal hedging relationship
Foreign Exchange and Other Forwards
Other Non-Financial Derivatives
Total derivatives not designated in a formal hedging relationship
Total derivatives
Net
asset
(liability)
fair value
Gain/
(loss)
recorded
in OCI
Dec. 31, 2021
Gain/(loss)
recorded in
operating
income
$
—
$
— $
(1)
2
1
2
3
5
6
$
$
$
$
6
7
13 $
— $
—
— $
13 $
$
$
$
$
(1)
(7)
—
(8)
1
18
19
11
(i)
(ii)
PC Bank uses foreign exchange forwards, with a notional amount of $19 million USD, to manage its foreign exchange risk related to certain
U.S. payables. The fair value of the derivatives is included in prepaid expenses and other assets.
PC Bank uses bond forwards, with a notional value of $120 million, to manage its interest risk related to future debt issuances. The fair value of
the derivatives is included in trade payables and other liabilities. During 2021, PC Bank settled $175 million of bond forward (see note 25).
(iii) PC Bank uses interest rate swaps, with notional value of $225 million, to manage its interest risk related to future debt issuances. The fair value
of the derivatives is included in prepaid expenses and other assets. Choice Properties uses interest rate swaps, with a notional value of
$62 million, to manage its interest risk related to variable rate mortgages. The fair value of the derivatives is included in the other assets or
other liabilities.
($ millions)
Derivatives designated as cash flow hedges
Interest Rate Risk - Bond Forwards(i)
Interest Rate Risk - Interest Rate Swaps(ii)
Total derivatives designated as cash flow hedges
Derivatives not designated in a formal hedging relationship
Foreign Exchange and Other Forwards
Other Non-Financial Derivatives
Total derivatives not designated in a formal hedging relationship
Total derivatives
Dec. 31, 2020
Net
asset
(liability)
fair value
Gain/
(loss)
recorded
in OCI
Gain/(loss)
recorded in
operating
income
$
$
$
$
$
—
7
7
$
(40) $
(3)
$
(43) $
(6) $
— $
(4)
—
(10) $
— $
(3) $
(43) $
(5)
(4)
(9)
(4)
(20)
(24)
(33)
(i)
(ii)
PC Bank uses bond forwards, with a notional value of $25 million, to manage its interest rate risk related to future debt issuances. The fair
value of the derivatives is included in trade payables and other liabilities. During 2020, PC Bank settled $200 million of bond forward and the
Company issued and settled $350 million of bond forward. The Company has concluded that these hedges were effective as at their
respective settlement date.
PC Bank uses interest rate swaps, with a notional value of $225 million, to manage its interest risk related to future debt issuances. The fair
value of the derivatives is included in trade payables and other liabilities. Choice Properties uses interest rate swaps, with a notional value of
$129 million, to manage its interest risk related to variable rate mortgages. The fair value of the derivatives is included in the other assets or
other liabilities.
166 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 35. Financial Risk Management
As a result of holding and issuing financial instruments, the Company is exposed to certain risks. The following is a description
of those risks and how the exposures are managed:
LIQUIDITY RISK Liquidity risk is the risk that the Company is unable to generate or obtain sufficient cash or its equivalents in a
cost effective manner to fund its obligations as they come due. The Company is exposed to liquidity risk through, among other
areas, PC Bank, which requires a reliable source of funding for its credit card business. PC Bank relies on its securitization
programs, demand deposits from customers and the acceptance of GIC deposits to fund the receivables of its credit cards. The
Company would experience liquidity risks if it fails to maintain appropriate levels of cash and short-term investments, is unable
to access sources of funding or fails to appropriately diversify sources of funding. If any of these events were to occur, they could
adversely affect the financial performance of the Company.
Liquidity risk is mitigated by maintaining appropriate levels of cash and cash equivalents and short-term investments, actively
monitoring market conditions, and by diversifying sources of funding, including the Company’s committed credit facilities, and
maintaining a well diversified maturity profile of debt and capital obligations.
Maturity Analysis The following are the undiscounted contractual maturities of significant financial liabilities as at
December 31, 2021:
($ millions)
Long-term debt including
interest payments(i)
Foreign exchange forward contracts
Short-term debt (note 24)
Financial liabilities(iii)
Bank indebtedness
Demand deposits from customers
Certain other liabilities
Total
2022
2023
2024
2025
2026 Thereafter
Total(ii)
$
2,062 $
2,484 $
2,495 $
1,591 $
1,163 $
8,117 $
17,912
321
450
44
52
75
3
—
—
48
—
—
—
—
—
49
—
—
—
—
—
53
—
—
—
—
—
48
—
—
—
—
—
220
—
—
—
321
450
462
52
75
3
$
3,007 $
2,532 $
2,544 $
1,644 $
1,211 $
8,337 $
19,275
(i)
(ii)
Fixed interest payments are based on the maturing face values and annual interest for each instrument, including GICs, long-term
independent securitization trusts and an independent funding trust, as well as annual payment obligations for structured entities and
mortgages. Variable interest payments are based on the forward rates as at year end 2021.
The Trust Unit liability has been excluded as this liability does not have a contractual maturity date. The Company also excluded trade
payables and other liabilities, which are due within the next 12 months.
(iii) Represents the contractual payments that Loblaw is committed to related to the Choice Properties’ dispositions (see note 26).
FOREIGN CURRENCY EXCHANGE RATE RISK The Company’s consolidated financial statements are expressed in Canadian
dollars, however, a portion of the Company’s (excluding Loblaw’s) net assets are denominated in U.S. dollars through its foreign
subsidiaries with a functional currency that is the same as that of the Company. The U.S. dollar denominated net assets are
translated into Canadian dollars at the foreign currency exchange rate in effect at the balance sheet date. As a result, the
Company is exposed to foreign currency translation gains and losses. Those gains and losses arising from the translation of the
U.S. dollar denominated assets of foreign subsidiaries with a functional currency that is the same as that of the Company are
included in operating income, while translation gains and losses on the net investment in foreign operations in the U.S. are
recorded in accumulated other comprehensive income (loss). The Company estimates that based on the U.S. net assets held by
foreign operations that have the same functional currency as that of the Company at the end of 2021, an appreciation of the
Canadian dollar of one cent relative to the U.S. dollar would result in a nominal loss in earnings before income taxes.
Loblaw is exposed to fluctuations in the prices of U.S. dollar denominated purchases as a result of changes in U.S. dollar
exchange rates. A depreciating Canadian dollar relative to the U.S. dollar will negatively impact operating income and net
earnings, while an appreciating Canadian dollar relative to the U.S. dollar will have the opposite impact. Loblaw entered into
derivative instruments in the form of futures contracts and forward contracts to manage its current and anticipated exposure to
fluctuations in U.S. dollar exchange rates.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 167
Notes to the Consolidated Financial Statements
CREDIT RISK The Company is exposed to credit risk resulting from the possibility that counterparties could default on their
financial obligations to the Company, including derivative instruments, cash and cash equivalents, short-term investments,
security deposits, PC Bank’s credit card receivables, Loblaw’s finance lease receivable, pension assets held in the Company’s
defined benefit plans, and Loblaw’s accounts receivable, including amounts due from non-consolidated franchisees,
government and third-party drug plans arising from prescription drug sales, independent accounts and amounts owed from
vendors. Failure to manage credit risk could adversely affect the financial performance of the Company.
The risk related to derivative instruments, cash and cash equivalents, short-term investments and security deposits is reduced by
policies and guidelines that require that the Company enters into transactions only with counterparties or issuers that have a
minimum long-term “A-” credit rating from a recognized credit rating agency and place minimum and maximum limits for
exposures to specific counterparties and instruments.
Choice Properties mitigates the risk of credit loss relating to rent receivables by evaluating the creditworthiness of new tenants,
obtaining security deposits wherever permitted by legislation, ensuring its tenant mix is diversified and by limiting its exposure
to any one tenant, except Loblaw. Choice Properties establishes an allowance for doubtful accounts that represents the
estimated losses with respect to rents receivable. The allowance is determined on a tenant-by-tenant basis based on the specific
factors related to the tenant.
PC Bank manages its credit card receivable risk by employing stringent credit scoring techniques, actively monitoring the credit
card portfolio and reviewing techniques and technology that can improve the effectiveness of the collection process. In addition,
these receivables are dispersed among a large, diversified group of credit card customers.
Loblaw’s finance lease receivable and Loblaw’s accounts receivable including amounts due from non-consolidated franchisees,
government and third-party drug plans arising from prescription drug sales, independent accounts and amounts owed from
vendors and tenants, are actively monitored on an ongoing basis and settled on a frequent basis in accordance with the terms
specified in the applicable agreements.
The Company’s maximum exposure to credit risk as it relates to derivative instruments is approximated by the positive fair
market value of the derivatives on the consolidated balance sheets (see note 34).
Refer to notes 12 and 13 for additional information on the credit quality performance of Loblaw’s credit card receivables and
other receivables, mentioned above, of Loblaw.
TRUST UNIT PRICE RISK The Company is exposed to market price risk from Choice Properties’ Trust Units that are held by
unitholders other than the Company. These Trust Units are presented as a liability on the Company’s consolidated balance
sheets as they are redeemable for cash at the option of the holders. The liability is recorded at fair value at each reporting period
based on the market price of Trust Units. The change in the fair value of the liability negatively impacts net earnings when the
Trust Unit price increases and positively impacts net earnings when the Trust Unit price declines. A one dollar increase in the
market value of Trust Units, with all other variables held constant, would result in an increase of $277 million in net interest
expense and other financing charges.
INTEREST RATE RISK The Company is exposed to interest rate risk from fluctuations in interest rates on its floating rate debt
and from the refinancing of existing financial instruments. The Company manages interest rate risk by monitoring the respective
mix of fixed and floating rate debt and by taking action as necessary to maintain an appropriate balance considering current
market conditions, with the objective of maintaining the majority of its debt at fixed interest rates. The Company estimates that
a 1% increase (decrease) in short-term interest rates, with all other variables held constant, would result in a decrease (increase)
of $27 million in net interest expense and other financing charges.
COMMODITY PRICE RISK Loblaw is exposed to increases in the prices of commodities in operating its stores and distribution
networks, as well as to the indirect effect of changing commodity prices on the price of consumer products. Rising commodity
prices could adversely affect the financial performance of Loblaw. To manage a portion of this exposure, Loblaw uses purchase
commitments and derivative instruments in the form of exchange traded futures contracts and forward contracts to minimize
cost volatility related to commodities. Loblaw estimates that based on the outstanding derivative contracts held as at year end
2021, a 10% decrease in relevant commodity prices, with all other variables held constant, would result in a net loss of $4 million
in earnings before income taxes. This amount excludes the offsetting impact of the commodity price risk inherent in the
transactions being hedged.
168 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 36. Contingent Liabilities
In the ordinary course of business, the Company is involved in and potentially subject to, legal actions and proceedings. In
addition, the Company is subject to tax audits from various tax authorities on an ongoing basis. As a result, from time to time, tax
authorities may disagree with the positions and conclusions taken by the Company in its tax filings or legislation could be
amended or interpretations of current legislation could change, any of which events could lead to reassessments.
There are a number of uncertainties involved in such matters, individually or in aggregate, and as such, there is a possibility that
the ultimate resolution of these matters may result in a material adverse effect on the Company’s reputation, operations,
financial condition or performance in future periods. It is not currently possible to predict the outcome of the Company’s legal
actions and proceedings with certainty. Management regularly assesses its position on the adequacy of accruals or provisions
related to such matters and will make any necessary adjustments.
The following is a description of the Company’s significant legal proceedings:
Shoppers Drug Mart has been served with an Amended Statement of Claim in a class action proceeding that has been filed
in the Ontario Superior Court of Justice (“Superior Court”) by two licensed Associates, claiming various declarations and
damages resulting from Shoppers Drug Mart’s alleged breaches of the Associate Agreement, in the amount of $500 million.
The class action comprises all of Shoppers Drug Mart’s current and former licensed Associates residing in Canada, other than
in Québec, who are parties to Shoppers Drug Mart’s 2002 and 2010 forms of the Associate Agreement. On July 9, 2013, the
Superior Court certified as a class proceeding portions of the action. The Superior Court imposed a class closing date based
on the date of certification. New Associates after July 9, 2013 are not members of the class. Loblaw believes this claim is
without merit and is vigorously defending it. Loblaw does not currently have any significant accruals or provisions for this
matter recorded in the consolidated financial statements.
In 2017, the Company and Loblaw announced actions taken to address their role in an industry-wide price-fixing
arrangement involving certain packaged bread products. The arrangement involved the coordination of retail and wholesale
prices of certain packaged bread products over a period extending from late 2001 to March 2015. Under the arrangement,
the participants regularly increased prices on a coordinated basis. Class action lawsuits have been commenced against the
Company and Loblaw as well as a number of other major grocery retailers and another bread wholesaler. It is too early to
predict the outcome of such legal proceedings. Neither the Company nor Loblaw believes that the ultimate resolution of
such legal proceedings will have a material adverse impact on its financial condition or prospects. The Company’s cash
balances far exceed any realistic damages scenario and therefore it does not anticipate any impacts on its or Loblaw’s
dividend, dividend policy or share buyback plans. The Company has not recorded any amounts related to the potential civil
liability associated with the class action lawsuits in 2021 or prior on the basis that a reliable estimate of the liability cannot be
determined at this time. The Company and Loblaw will continue to assess whether a provision for civil liability associated
with the class action lawsuits can be reliably estimated and will record an amount in the period at the earlier of when a
reliable estimate of liability can be determined or the matter is ultimately resolved. As a result of admission of participation in
the arrangement and cooperation in the Competition Bureau’s investigation, the Company and Loblaw will not face criminal
charges or penalties.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 169
Notes to the Consolidated Financial Statements
In August 2018, the Province of British Columbia filed a class action against numerous opioid manufacturers and distributors,
including Loblaw and its subsidiaries, Shoppers Drug Mart Inc. and Sanis Health Inc. The claim contains allegations of breach of
the Competition Act, fraudulent misrepresentation and deceit and negligence, and seeks unquantified damages for the
expenses incurred by the federal government, provinces, and territories of Canada in paying for opioid prescriptions and other
healthcare costs related to opioid addiction and abuse in Canada. During the second quarter of 2021, the claim against Loblaw
Companies Limited was discontinued. In May 2019, two further opioid-related class actions were commenced in each of Ontario
and Quebec against a large group of defendants, including Sanis Health Inc. In December 2019, a further opioid-related class
action was commenced in British Columbia against a large group of defendants, including Sanis Health Inc., Shoppers Drug
Mart Inc. and Loblaw. The allegations in the Ontario, Quebec and the civil British Columbia class actions are similar to the
allegations against manufacturer defendants in the Province of British Columbia class action, except that these May 2019 and
December 2019 claims seek recovery of damages on behalf of opioid users directly. In April 2021, Loblaw, Shoppers Drug Mart
Inc., and Sanis Health Inc. were served with another opioid-related class action that was started in Alberta against multiple
defendants. The claim seeks damages on behalf of municipalities and local governments in relation to public safety, social
service, and criminal justice costs allegedly incurred due to the opioid crisis. In September 2021, Loblaw, Shoppers Drug Mart Inc.
and Sanis Health Inc. were served with a class action started by Peter Ballantyne Cree Nation and Lac La Ronge Indian Band on
behalf of all Indigenous, Metis, First Nation and Inuit communities and governments in Canada to recover costs they have
incurred as a result of the opioid crisis, including healthcare costs, policing costs and societal costs. Loblaw believes these
proceedings are without merit and is vigorously defending them. Loblaw does not currently have any significant accruals or
provisions for these matters recorded in the consolidated financial statements.
Loblaw had been reassessed by the Canada Revenue Agency and the Ontario Ministry of Finance on the basis that certain
income earned by Glenhuron, a wholly owned Barbadian subsidiary of Loblaw that was wound up in 2013, should be treated,
and taxed, as income in Canada. The reassessments, which were received between 2015 and 2019, are for the 2000 to 2013
taxation years. On September 7, 2018, the Tax Court released its decision relating to the 2000 to 2010 taxation years. The
Tax Court ruled that certain income earned by Glenhuron should be taxed in Canada based on a technical interpretation
of the applicable legislation. On October 4, 2018, Loblaw filed a Notice of Appeal with the Federal Court of Appeal. On
October 15, 2019, the matter was heard by the Federal Court of Appeal and on April 23, 2020, the Federal Court of Appeal
released its decision and reversed the decision of the Tax Court. On October 29, 2020, the Supreme Court granted the Crown
leave to appeal. On May 13, 2021, the Crown’s appeal was heard by the Supreme Court and on December 3, 2021, the Supreme
Court dismissed the Crown’s appeal. As a result, Loblaw has reversed $301 million of previously recorded charges, of which
$173 million is recorded as interest income and $128 million is recorded as income tax recovery.
INDEMNIFICATION PROVISIONS The Company from time to time enters into agreements in the normal course of its business,
such as service and outsourcing arrangements, lease agreements in connection with business or asset acquisitions or
dispositions, and other types of commercial agreements. These agreements by their nature may provide for indemnification of
counterparties. These indemnification provisions may be in connection with breaches of representations and warranties or in
respect of future claims for certain liabilities, including liabilities related to tax and environmental matters. The terms of these
indemnification provisions vary in duration and may extend for an unlimited period of time. In addition, the terms of these
indemnification provisions vary in amount and certain indemnification provisions do not provide for a maximum potential
indemnification amount. Indemnity amounts are dependent on the outcome of future contingent events, the nature and
likelihood of which cannot be determined at this time. As a result, the Company is unable to reasonably estimate its total
maximum potential liability in respect of indemnification provisions. Historically, the Company has not made any significant
payments in connection with these indemnification provisions.
170 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 37. Financial Guarantees
The Company established letters of credit used in connection with certain obligations mainly related to real estate transactions,
benefit programs, purchase orders and guarantees with a gross potential liability of approximately $424 million (2020 –
$425 million). In addition, Loblaw and Choice Properties have provided to third parties the following significant guarantees:
ASSOCIATE GUARANTEES Loblaw has arranged for its Associates to obtain financing to facilitate their inventory purchases and
fund their working capital requirements by providing guarantees to various Canadian chartered banks that support Associate
loans. As at year end 2021, Loblaw’s maximum obligation in respect of such guarantees was $580 million (2020 – $580 million)
with an aggregate amount of $469 million (2020 – $470 million) in available lines of credit allocated to the Associates by the
various banks. As at year end 2021, the Associates had drawn an aggregate amount of $52 million (2020 – $86 million) against
these available lines of credit. Any amounts drawn by the Associates are included in bank indebtedness on the Company’s
consolidated balance sheets. As recourse in the event that any payments are made under the guarantees, Loblaw holds a first-
ranking security interest on all assets of Associates, subject to certain prior-ranking statutory claims.
INDEPENDENT FUNDING TRUSTS The full balance relating to the debt of the independent funding trusts has been
consolidated on the balance sheets of the Company (see note 25). As at year end 2021, Loblaw has agreed to provide a credit
enhancement of $64 million (2020 – $64 million) in the form of a standby letter of credit for the benefit of the independent
funding trusts representing not less than 10% (2020 – not less than 10%) of the principal amount of the loans outstanding. This
credit enhancement allows the independent funding trusts to provide financing to Loblaw’s franchisees. As well, each franchisee
provides security to the independent funding trusts for its obligations by way of a general security agreement. In the event that a
franchisee defaults on its loan and Loblaw has not, within a specified time period, assumed the loan, or the default is not
otherwise remedied, the independent funding trusts would assign the loan to Loblaw and draw upon this standby letter of
credit. This standby letter of credit has never been drawn upon. Loblaw has agreed to reimburse the issuing bank for any
amount drawn on the standby letter of credit.
LEASE OBLIGATIONS In connection with historical dispositions of certain of its assets, Loblaw has assigned leases to third
parties. Loblaw remains contingently liable for these lease obligations in the event any of the assignees are in default of their
lease obligations. Loblaw has guaranteed lease obligations of a third-party distributor in the amount of $2 million (2020 –
$3 million).
GLENHURON BANK LIMITED SURETY BOND In connection with the Canada Revenue Agency’s reassessment of Loblaw on
certain income earned by Glenhuron (see note 36), Loblaw arranged for a surety bond to the Ministry of Finance in order to
appeal the reassessments. As a result of the decision of the Tax Court and incremental payments by Loblaw, the amount of the
surety bond is $56 million (2020 – $52 million). Loblaw expects the surety bond to be released in 2022 as a result of the
favourable decision of the Supreme Court (see note 36).
CASH COLLATERALIZATION As at year end 2021, GWL and Loblaw had agreements to cash collateralize certain uncommitted
credit facilities up to amounts of $45 million (2020 – $52 million) and $93 million (2020 – $102 million), respectively. As at year
end 2021, GWL and Loblaw had $45 million (2020 – $52 million) and a nominal amount (2020 – nominal) deposited with major
financial institutions, respectively, and classified as security deposits on the consolidated balance sheets.
FINANCIAL SERVICES Loblaw has provided a guarantee on behalf of PC Bank to MasterCard® International Incorporated
(“MasterCard®”) for accepting PC Bank as a card member and licensee of MasterCard®
behalf of PC Bank to MasterCard® was U.S. dollars $190 million (2020 – U.S. dollars $190 million).
As at year end 2021, the guarantee on
.
Loblaw had in place an irrevocable standby letter of credit from a major Canadian chartered bank on behalf of one of its wholly-
owned subsidiaries in the amount of $11 million (2020 – $11 million).
Letters of credit for the benefit of independent securitization trusts with respect to the securitization programs of PC Bank have
been issued by major financial institutions. These standby letters of credit can be drawn upon in the event of a major decline in
the income flow from or in the value of the securitized credit card receivables. Loblaw has agreed to reimburse the issuing banks
for any amount drawn on the standby letters of credit. The aggregate gross potential liability under these arrangements for the
Other Independent Securitization Trusts was $41 million (2020 – $52 million), which represented approximately 9% (2020 – 9%)
of the securitized credit card receivables amount (see note 13).
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 171
Notes to the Consolidated Financial Statements
CHOICE PROPERTIES Letters of credit to support guarantees related to its investment properties including maintenance and
development obligations to municipal authorities are issued by Choice Properties. As at year end 2021, the aggregate gross
potential liability related to these letters of credit totaled $33 million (2020 – $34 million).
Choice Properties’ credit facility and debentures are guaranteed by each of the General Partner, the Partnership and any other
person that becomes a subsidiary of Choice Properties (with certain exceptions). In the case of default by Choice Properties, the
indenture trustee will be entitled to seek redress from the guarantors for the guaranteed obligations in the same manner and
upon the same terms that it may seek to enforce the obligations of Choice Properties. These guarantees are intended to
eliminate structural subordination, which would otherwise arise as a consequence of Choice Properties’ assets being primarily
held in its various subsidiaries.
CPH Master Limited Partnership, a subsidiary of Choice Properties, guarantees certain debt assumed by purchasers in
connection with past dispositions of properties made by CREIT before the acquisition. These guarantees will remain until the
debt is modified, refinanced or extinguished. Credit risks arise in the event that the purchasers default on repayment of their
debt. These credit risks are mitigated by the recourse which Choice Properties has under these guarantees, in which case it
would have a claim against the underlying property. In the current year the debt associated with such guarantees has been fully
repaid. Therefore, the remaining exposure to credit risk is nil (2020 – $36 million).
172 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 38. Related Party Transaction
Galen G. Weston beneficially owns or controls, directly and indirectly, through Wittington, a total of 78,650,662 of GWL’s common
shares, representing approximately 53.6% of GWL’s outstanding common shares (2020 – 51.6%).
In the ordinary course of business, the Company enters into various transactions with related parties. These transactions are
measured at the exchange amount, which is the amount of consideration established and agreed upon by the related parties.
Transactions between the Company and its consolidated entities have been eliminated on consolidation and are not disclosed
in this note.
In 2021, the Company made nominal rental payments to Wittington (2020 – $3 million). As at year end 2021 and 2020, there
were no rental payments outstanding.
In 2021, inventory purchases from Associated British Foods plc, a related party by virtue of a common director of such entity’s
parent company and GWL’s parent company, amounted to $42 million (2020 – $51 million). As at year end 2021, $1 million
(2020 – $3 million) was included in trade payables and other liabilities relating to these inventory purchases.
TRANSACTION BETWEEN CHOICE PROPERTIES AND WITTINGTON In 2020, Choice Properties acquired two real estate assets
from Wittington Properties Limited, a subsidiary of Wittington, for an aggregate purchase price of $209 million, excluding
transaction costs, which was satisfied in full by the issuance of 16.5 million Trust Units of Choice Properties.
The assets acquired included: (i) the Weston Centre, an office and retail property in Toronto, Ontario for $129 million and (ii) the
remaining 60% interest in a joint venture between Choice Properties and Wittington Properties Limited for $80 million, less a
cost-to-complete receivable of $16 million, giving Choice Properties 100% ownership of the joint venture.
Weston Centre The Company had multiple lease arrangements with Wittington, in addition to existing leases with Choice
Properties at the Weston Centre. Upon acquisition of the property, in 2020, the Company recognized a gain of $6 million in
operating income from the derecognition of its net impact of lease obligations and right-of-use assets associated with the
property and ceased paying rents to Wittington. Due to continued tenancy on the property through its group of companies, in
2020, $51 million was recorded in fixed assets as own-use property and $78 million was recorded in investment properties.
Operating Lease Choice Properties entered into a ten-year lease for office space with Wittington that commenced in 2014.
Lease payments totaled $3 million over the term of the lease. As of the acquisition date, Choice Properties de-recognized its
right-of-use assets and lease liabilities with the office lease and ceased paying rents to Wittington.
Joint Venture In 2014, a joint venture, partnership known as West Block between Choice Properties and Wittington Properties
Limited, completed the acquisition of a parcel of land located on 500 Lakeshore Boulevard West in Toronto, Ontario from
Loblaw. Choice Properties used the equity method of accounting to record its 40% interest in the joint venture.
During the second quarter of 2020, Loblaw recognized $65 million of right-of-use assets and lease liabilities related to the leases
of retail stores and a corporate office with the joint venture.
During the third quarter of 2020, Choice Properties acquired the remaining 60% interest of the joint venture, after which the
investment was accounted for on a consolidated basis. As a result of the increase in ownership, in 2020 the Company recorded a
$5 million fair value loss before income taxes in other comprehensive income, and a gain of $4 million in operating income from
the derecognition of its net impact of lease obligations and right-of-use assets associated with the property and ceased paying
rents to Wittington. Due to continued tenancy on the property through its group of companies, in 2020 $95 million was
recorded in fixed assets as own-use property and $13 million was recorded in investment properties. Wittington continued to
act as the development and construction manager for the commercial space until development was completed.
VENTURE FUND During the second quarter of 2020, GWL, Loblaw and a wholly-owned subsidiary of Wittington became limited
partners in a limited partnership formed by Wittington (“Venture Fund”). A wholly-owned subsidiary of Wittington is the general
partner of the Venture Fund, which hired an external fund manager to oversee the Venture Fund. The purpose of the Venture
Fund is to pursue venture capital investing in innovative businesses that are in technology-oriented companies at all stages of
the start-up life cycle that operate in commerce, healthcare, and food sectors and are based in North America. Each of the three
limited partners have a 33% interest in the Fund. The Company participates in the Fund’s Investment Committee which, among
other items, approves the initial investments. The Company uses the equity method of accounting to record its consolidated
66% interest in the Venture Fund. The Company has a consolidated capital commitment of $66 million over a 10-year period. To
date, on a consolidated basis, the Company invested $31 million in the Venture Fund, of which $18 million (2020 – $13 million)
was invested in 2021, which was recorded in other assets.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 173
Notes to the Consolidated Financial Statements
POST-EMPLOYMENT BENEFIT PLANS The Company sponsors a number of post-employment plans, which are related parties.
Contributions made by the Company to these plans are disclosed in note 30.
INCOME TAX MATTERS From time to time, the Company and Wittington may enter into agreements to make elections that are
permitted or required under applicable income tax legislation with respect to affiliated corporations.
COMPENSATION OF KEY MANAGEMENT PERSONNEL The Company’s key management personnel is comprised of certain
members of the executive team of GWL, Loblaw and Wittington, as well as members of the Boards of GWL, Loblaw and
Wittington to the extent that they have the authority and responsibility for planning, directing and controlling the day-to-day
activities of the Company.
Annual compensation of key management personnel that is directly attributable to the Company was as follows:
($ millions)
Salaries, director fees and other short-term employee benefits
Equity-based compensation
Total compensation
2021
2020
(52 weeks)
(53 weeks)
$
$
14
12
26
$
$
12
11
23
174 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Note 39. Segment Information
The Company has two reportable operating segments: Loblaw and Choice Properties. Other and Intersegment includes
eliminations, intersegment adjustments related to the consolidation, cash and short-term investments held by the Company
and all other company level activities that are not allocated to the reportable operating segments, as further illustrated below.
The accounting policies of the reportable operating segments are the same as those described in the Company’s summary of
significant accounting policies (see note 2). The Company measures each reportable operating segment’s performance based on
adjusted EBITDA(i) and adjusted operating income(i). No reportable operating segment is reliant on any single external customer.
2021
(52 weeks)
2020(iii)
(53 weeks)
($ millions)
Revenue
Loblaw
Choice
Properties
Other and
Intersegment
Total
Loblaw
Choice
Properties
Other and
Intersegment
Total
$ 53,170 $ 1,292 $
(714) $ 53,748
$ 52,714 $
1,271 $
(715) $ 53,270
Operating income (loss)
$ 2,929 $ 1,400 $
(302) $ 4,027
$ 2,357 $
622 $
(104) $ 2,875
Net interest expense (income) and other
financing charges
495
1,377
(222)
1,650
742
173
(86)
829
Earnings (loss) before income taxes
$ 2,434 $
23 $
(80) $ 2,377
$
1,615 $
449 $
(18) $ 2,046
Operating income (loss)
$ 2,929 $ 1,400 $
(302) $ 4,027
$ 2,357 $
622 $
(104) $ 2,875
Depreciation and amortization
2,664
3
(360)
2,307
2,596
3
(345)
2,254
Adjusting items(i)
Adjusted EBITDA(i)
Depreciation and amortization(ii)
Adjusted operating income (loss)(i)
(14)
(500)
175
(339)
43
254
(70)
227
$ 5,579 $ 903 $
(487) $ 5,995
$ 4,996 $
879 $
(519) $ 5,356
2,158
3
(360)
1,801
2,087
3
(345)
1,745
$ 3,421 $ 900 $
(127) $ 4,194
$ 2,909 $
876 $
(174) $
3,611
(i)
Certain items are excluded from operating income (loss) to derive adjusted EBITDA(1). Adjusted EBITDA(1) is used internally by management
when analyzing segment underlying operating performance.
Excludes $506 million (2020 – $509 million) of amortization of intangible assets acquired with Shoppers Drug Mart, recorded by Loblaw.
(ii)
(iii) Certain comparative figures have been restated to conform with current year presentation.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 175
Notes to the Consolidated Financial Statements
Other and Intersegment includes the following items:
($ millions)
Revenue
Operating
Income
2021
(52 weeks)
Net Interest
Expense
and Other
Financing
Charges
2020(i)
(53 weeks)
Net Interest
Expense
and Other
Financing
Charges
Revenue
Operating
Income
Elimination of internal lease arrangements
$
(508) $
(87) $
(108) $
(513) $
(95) $
(132)
Elimination of cost recovery
(206)
—
(202)
—
Recognition of depreciation on Choice Properties’
investment properties classified as fixed assets by the
Company and measured at cost
Fair value adjustment on investment properties
Elimination of fair value adjustment on Choice Properties’
Exchangeable Units
Fair value adjustment on Trust Unit liability
Elimination of unit distributions on Exchangeable Units
paid by Choice Properties to GWL
Unit distributions on Trust Units paid by Choice
Properties, excluding amounts paid to GWL
Fair value adjustment of the forward sale agreement for
9.6 million Loblaw common shares
Asset impairments, net of recoveries
Gain on sale of a property
Other
Total Consolidated
—
—
—
(863)
601
(293)
205
188
—
—
48
—
—
—
—
—
—
—
—
—
—
(39)
(177)
—
—
—
—
—
29
—
(28)
—
—
—
(45)
72
—
—
354
(239)
—
(289)
—
223
—
(6)
15
(45)
(47)
—
—
44
—
—
—
—
—
—
—
—
—
—
$
(714) $
(302) $
(222) $
(715) $
(104) $
(86)
(i)
Certain comparative figures have been restated to conform with current year presentation.
($ millions)
Total Assets
Loblaw
Choice Properties
Other and Intersegment
Consolidated
As at
Dec. 31, 2021
Dec. 31, 2020(i)
$
36,777
$
16,173
(5,867)
36,021
15,647
(3,590)
$
47,083
$
48,078
(i)
Certain comparative figures have been restated to conform with current year presentation.
176 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
($ millions)
Additions to Fixed Assets, Investment Properties and Intangible Assets
Loblaw(i)
Choice Properties(ii)
Other and Intersegment
Discontinued Operations
Consolidated
2021
2020(iii)
(52 weeks)
(53 weeks)
$
1,183
$
1,224
196
2
76
$
1,457
$
506
9
162
1,901
(i)
During 2021, additions to fixed assets in Loblaw includes prepayments that were made in 2020 and transferred from other assets in 2020 of
$1 million. During 2020, additions to fixed assets in Loblaw includes prepayments that were made in 2019 and transferred from other assets
in 2020 of $66 million.
(ii) During 2020, additions to investment properties in Choice Properties includes non-cash consideration of $243 million.
(iii) Certain comparative figures have been restated to conform with current year presentation.
($ millions)
Fixed Assets, Goodwill and Intangible Assets
Canada
United States
Consolidated
Note 40. Subsequent Event
As at
Dec. 31, 2021
Dec. 31, 2020
$
$
21,691
$
22,862
—
885
21,691
$
23,747
CHOICE PROPERTIES Subsequent to year end, Choice Properties entered into an agreement to increase its interest in two of its
residential projects for consideration of $25 million. The agreement included the purchase of one of Choice Properties’ partners’
existing interest in the projects and the cancellation of the same partners’ option to increase their equity interest in the projects.
This transaction closed in January 2022, following which Choice Properties’ interest in these projects is now 50%.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 177
Three Year Summary
The Company’s interest in Weston Foods is presented separately as discontinued operations in the Company’s current and
comparative results. Unless otherwise indicated, all financial information represents the Company’s results from continuing
operations
CONSOLIDATED INFORMATION(i)
As at or for the years ended December 31
($ millions except where otherwise indicated)
Operating Results
Revenue
Operating income
Adjusted EBITDA(iii)
Depreciation and amortization(iv)
Net interest expense and other financing charges
Adjusted net interest expense and other financing charges(iii)
Income taxes
Adjusted income taxes(iii)
Net earnings (loss)
Continuing operations
Discontinued operations
Net earnings attributable to shareholders of the Company from
continuing operations
Net earnings (loss) available to common shareholders of the Company
Continuing operations
Discontinued operations
Adjusted net earnings available to common shareholders of
the Company(iii) from continuing operations
Financial Position(v)
Fixed assets
Goodwill and intangible assets
Total assets
Cash and cash equivalents, short-term investments and
security deposits
Total debt including lease liabilities
Total equity attributable to shareholders of the Company
Total equity
Cash Flows(v)
Cash Flows from operating activities
Capital Investments
Consolidated Per Common Share ($)
Diluted net earnings (loss) per common share
Continuing operations
Discontinued operations
Adjusted diluted net earnings per common share(iii) from continuing
operations
Consolidated Financial Measures and Ratios
Adjusted EBITDA margin(iii) (%)
Adjusted return on average equity attributable to common
shareholders of the Company(ii)(iii) (%)
Adjusted return on capital(ii)(iii) (%)
2021
(52 weeks)
2020(ii)
2019(ii)
(53 weeks)
(52 weeks)
53,748
4,027
5,995
2,307
1,650
1,050
630
851
1,425
1,747
(322)
753
387
709
(322)
1,232
10,782
10,909
47,083
3,938
20,309
6,959
13,137
5,107
1,457
2.52
4.66
(2.14)
8.14
11.2
18.7
12.6
53,270
2,875
5,356
2,254
829
1,115
470
648
1,582
1,576
6
957
919
913
6
993
11,943
11,804
48,078
3,231
21,000
7,811
13,418
5,521
1,658
5.96
5.92
0.04
6.44
10.1
15.2
10.7
48,586
2,875
5,145
2,173
1,702
1,069
417
588
823
756
67
175
198
131
67
1,026
11,773
12,263
47,813
2,139
21,131
7,609
13,175
4,555
1,571
1.26
0.82
0.44
6.65
10.6
15.5
9.5
For financial definitions and ratios refer to the Glossary beginning on page 180.
Certain comparative figures have been restated to conform with current year presentation.
(i)
(ii)
(iii) See Section 14. “Non-GAAP Financial Measures” of the Company’s 2021 Annual Management’s Discussion and Analysis. Certain comparative
figures have been restated due to a non-GAAP policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change Effective First
Quarter of 2021” of the Company’s 2021 Annual MD&A.
(iv) Depreciation and amortization for the calculation of EBITDA excludes $506 million (2020 – $509 million, 2019 - $508 million) of amortization
of intangible assets, acquired with Shoppers Drug Mart Corporation, recorded by Loblaw.
Inclusive of Discontinued Operations.
(v)
178 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
SEGMENT INFORMATION(i)
As at or for the years ended December 31
($ millions except where otherwise indicated)
OPERATING RESULTS
Revenue
Operating income
Adjusted EBITDA(iii)
Adjusted EBITDA Margin (%)(iii)
Depreciation and Amortization(iv)
FINANCIAL POSITION
Total Assets
CASH FLOWS
Capital Expenditures
Loblaw
Choice Properties
Other & Intersegment
Consolidated
Loblaw
Choice Properties
Other & Intersegment
Consolidated
Loblaw
Choice Properties
Other & Intersegment
Consolidated
Loblaw
Loblaw
Choice Properties
Other & Intersegment
Consolidated
Loblaw
Choice Properties
Other & Intersegment(v)
Consolidated
Loblaw
Choice Properties
Other & Intersegment
Consolidated
2021
2020(ii)
2019(ii)
(52 weeks)
(53 weeks)
(52 weeks)
53,170
1,292
(714)
53,748
2,929
1,400
(302)
4,027
5,579
903
(487)
5,995
10.5
2,664
3
(360)
2,307
36,777
16,173
(5,867)
47,083
1,183
196
2
1,381
52,714
1,271
(715)
53,270
2,357
622
(104)
2,875
4,996
879
(519)
5,356
9.5
2,596
3
(345)
2,254
36,021
15,647
(3,590)
48,078
1,224
263
9
1,496
48,037
1,289
(740)
48,586
2,262
890
(277)
2,875
4,767
914
(536)
5,145
9.9
2,524
1
(352)
2,173
36,451
15,575
(8,474)
43,552
1,206
163
8
1,377
For financial definitions and ratios refer to the Glossary beginning on page 180.
Certain comparative figures have been restated to conform with current year presentation.
(i)
(ii)
(iii) See Section 14. “Non-GAAP Financial Measures” of the Company’s 2021 Management’s Discussion and Analysis (“MD&A”). Certain comparative
figures have been restated due to a non-GAAP policy change. See section 14.2, “Non-GAAP Financial Measures Policy Change Effective First
Quarter of 2021” of the Company’s 2021 Annual MD&A.
Includes $506 million (2020 – $509 million; 2019 – $508 million) of amortization of intangible assets, acquired with Shoppers Drug Mart
Corporation, recorded by Loblaw.
(iv)
(v) Other includes cash and cash equivalents and short-term investments held by foreign operations.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 179
Glossary
Term
Adjusted diluted net earnings per common share
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted income taxes
Adjusted effective tax rate
Adjusted net earnings attributable to shareholders
of the Company
Definition
Adjusted net earnings available to common shareholders of the Company including
the effect of all dilutive instruments divided by the weighted average number of
common shares outstanding during the period adjusted for the impact of dilutive
items (see Section 14, “Non-GAAP Financial Measures”, of the Company’s
Management’s Discussion and Analysis).
Adjusted operating income before depreciation and amortization (see Section 14,
“Non-GAAP Financial Measures”, of the Company’s Management’s Discussion and
Analysis).
Adjusted EBITDA divided by sales (see Section 14, “Non-GAAP Financial Measures”,
of the Company’s Management’s Discussion and Analysis).
Income taxes adjusted for the tax impact of items included in adjusted operating
income less adjusted net interest and other financing charges (see Section 14,
“Non-GAAP Financial Measures”, of the Company’s Management’s Discussion and
Analysis).
Adjusted income taxes divided by adjusted operating income less adjusted net
interest and other financing charges (see Section 14, “Non-GAAP Financial
Measures”, of the Company’s Management’s Discussion and Analysis).
Net earnings attributable to shareholders of the Company adjusted for items that
are not necessarily reflective of the Company’s underlying operating performance
(see Section 14, “Non-GAAP Financial Measures”, of the Company’s Management’s
Discussion and Analysis).
Adjusted net earnings available to common
shareholders of the Company
Adjusted net earnings attributable to shareholders of the Company less preferred
dividends (see Section 14, “Non-GAAP Financial Measures”, of the Company’s
Management’s Discussion and Analysis).
Adjusted net interest expense and other
financing charges
Adjusted operating income
Adjusted return on average equity attributable
to common shareholders of the Company
Adjusted return on capital
Net interest expense and other financing charges adjusted for items that are not
necessarily reflective of the Company’s ongoing net financing costs (see Section 14,
“Non-GAAP Financial Measures”, of the Company’s Management’s Discussion and
Analysis).
Operating income adjusted for items that are not necessarily reflective of the
Company’s underlying operating performance (see Section 14, “Non-GAAP Financial
Measures”, of the Company’s Management’s Discussion and Analysis).
Adjusted net earnings available to common shareholders of the Company for the
last four quarters divided by average total equity attributable to common
shareholders of the Company (see Section 3.4, “Financial Condition” and Section 14,
“Non-GAAP Financial Measures”, of the Company’s Management’s Discussion and
Analysis).
Tax-effected adjusted operating income for the last four quarters divided by average
capital where capital is defined as total debt, plus equity attributable to
shareholders of the Company, less cash and cash equivalents, and short-term
investments (see Section 3.4, “Financial Condition” and Section 14, “Non-GAAP
Financial Measures”, of the Company’s Management’s Discussion and Analysis).
Annualized credit loss rate on average quarterly
gross credit card receivables
Total credit card losses year-to-date divided by the number of days year-to-date
times 365 divided by average quarterly gross credit card receivables.
Annualized yield on average quarterly gross credit
card receivables
Interest earned on credit card receivables year-to-date divided by the number of
days year-to-date times 365 divided by average quarterly gross credit card
receivables.
Average article price
The year over year growth in Loblaw food retail revenue over the average number of
articles sold in Loblaw’s stores in the quarter. Average Article Price is calculated by
dividing Sales in Scope by Article Count for the timeframe chosen.
Basic net earnings per common share
Net earnings available to common shareholders of the Company divided by the
weighted average number of common shares outstanding during the period.
Capital
Compound Average Growth Rate
Total debt, plus total equity attributable to shareholders of the Company, less cash
and cash equivalents, short-term investments and amounts held in escrow.
Measure of annualized growth over a period longer than one year. It is the mean
annual growth rate over a two year period, 2019 to 2021.
Capital under management
Total debt plus total equity attributable to shareholders of the Company.
Capital investment
Fixed asset purchases, investment properties purchases and intangible asset
additions.
180 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Term
Definition
Choice Properties’ Funds from Operations
Choice Properties’ net income (loss) adjusted for items that are not necessarily
reflective of Choice Properties’ underlying operating performance capital (see
Section 14, “Non-GAAP Financial Measures”, of the Company’s Management’s
Discussion and Analysis).
Choice Properties’ Funds From Operations per
unit - diluted
Choice Properties’ Funds from Operations available to unit holders adjusted for the
impact of dilutive items divided by the weighted average number of average unit
outstanding during the period adjusted for the impact of dilutive items.
Choice Properties’ Net Operating income for same
properties, excluding development activities
Choice Properties’ net operating income for same properties, adjusting for the
impact of recent property acquisition and disposition transactions.
Control brand
Conversion
Diluted net earnings per common share
Diluted weighted average common shares
outstanding
Free cash flow
A brand and associated trademark that is owned by Loblaw for use in connection
with its own products and services.
A store that changes from one Loblaw banner to another Loblaw banner.
Net earnings available to common shareholders of the Company adjusted for the
impact of dilutive items divided by the weighted average number of common
shares outstanding during the period adjusted for the impact of dilutive items.
Weighted average number of common shares outstanding including the effects of
all dilutive instruments.
Cash flows from operating activities less intangible asset additions, fixed asset and
investment properties purchases, interest paid, and net lease payments (see
Section 14, “Non-GAAP Financial Measures”, of the Company’s Management’s
Discussion and Analysis).
Net earnings attributable to shareholders of
Net earnings less non-controlling interests.
the Company
Net earnings available to common shareholders
Net earnings attributable to shareholders of the Company less preferred dividends.
of the Company
Operating income
Renovation
Retail debt to adjusted EBITDA
Retail segment adjusted gross profit
Net earnings before net interest expense and other financing charges and
income taxes.
A capital investment in a store resulting in no significant change to the store square
footage.
Loblaw retail total debt divided by Loblaw retail adjusted EBITDA for the last four
quarters.
Loblaw retail segment gross profit, adjusted for items that are not necessarily
reflective of the Company’s underlying operating performance (see Section 14
“Non-GAAP Financial Measures” of the Company’s Management’s Discussion and
Analysis).
Retail segment adjusted gross profit percentage
Loblaw retail segment adjusted gross profit divided by Retail segment sales.
Retail segment gross profit
Loblaw retail segment sales less cost of merchandise inventories sold.
Retail square footage
Same-store sales
Retail square footage includes Loblaw’s corporate stores, franchised stores and
associate-owned drug stores.
Loblaw retail sales from the same location for stores in operation in that location in
both periods excluding sales from a store that has undergone a major expansion/
contraction in the period.
Total equity attributable to common shareholders
Total equity less preferred shares outstanding and non-controlling interests.
of the Company
Total equity attributable to shareholders of
Total equity less non-controlling interests.
the Company
Weighted average common shares outstanding
Year
The number of common shares outstanding determined by relating the portion of
time within the period the common shares were outstanding to the total time in
that period.
The Company’s year end is December 31. Activities are reported on a fiscal year
ending on the Saturday closest to December 31, usually 52 weeks in duration
but includes a 53rd week every five to six years. The years ended December 31, 2021
and December 31, 2020 contained 52 weeks and 53 weeks, respectively.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 181
Corporate Directory
Board of Directors
Galen G. Weston, B.A., M.B.A.
Chairman and Chief Executive Officer of the
Corporation; Chairman and President, Loblaw
Companies Limited; Chairman, Wittington
Investments, Limited; Director, Selfridges
Group Limited; President, W. Garfield Weston
Foundation; former Chairman, President’s
Choice Bank; former Chairman, Choice
Properties Real Estate Investment Trust.
Paviter S. Binning(3*)
Deputy Chairman and Director, Wittington
Investments, Limited, former President of
Wittington Investments, Limited; former
President and, Chief Executive Officer and
Chief Financial Officer of the Corporation;
Director, Loblaw Companies Limited; former
Chief Financial Officer and Chief
Restructuring Officer, Nortel Networks
Corporation; former Chief Financial Officer,
Hanson plc and Marconi Corporation plc.
Andrew Ferrier(1)
Executive Chairman of Canz Capital Limited;
Chair, New Zealand Trade and Enterprise;
former Chief Executive Officer of Fonterra
Co-operative Group Limited; former President
and Chief Executive Officer, GSW Inc.; former
Director, Orion Health Group Limited and
Bunge Limited.
(1) Audit Committee
(2) Governance, Human Resource,
Nominating and Compensation
Committee
(3) Pension Committee
* Chair of the Committee
Nancy H.O. Lockhart, O. Ont.(2, 3)
Corporate Director; Trustee, Choice
Properties Real Estate Investment Trust;
Chair of Alignvest Student Housing; Director,
Atrium Mortgage Investment Corporation,
and The Royal Conservatory of Music; Chair
Emeritus, Crow’s Theatre Company; former
Chief Administrative Officer, Frum
Development Group, former Vice President,
Shoppers Drug Mart Corporation; former
Chair, Ontario Science Centre and Canadian
Film Centre; former President, Canadian Club
of Toronto; former Director, Loblaw
Companies Limited, Gluskin Sheff &
Associates Inc., Barrick Gold Corporation,
Canada Deposit Insurance Corporation,
Centre for Addiction and Mental Health
Foundation, and the Loran Scholars
Foundation.
Sarabjit (Sabi) S. Marwah(1, 2)
Senator with the Senate of Canada; former
Vice-Chairman and Chief Operating Officer of
The Bank of Nova Scotia; Director, Cineplex
Inc.; former Director, TELUS Corporation;
former Trustee and Chair, Hospital for Sick
Children; former Chair, Humber River
Regional Hospital; former member of the
Board of Directors, C.D.Howe Institute and
Toronto International Film Festival.
Gordon M. Nixon, C.M., O.Ont.(2*)
Corporate Director; Chair, BCE Inc. and
Director, BlackRock, Inc.; former President
and Chief Executive Officer, Royal Bank of
Canada; Advisory Board, KingSett Canadian
Real Estate Income Fund L.P.; Trustee, Art
Gallery of Ontario.
J. Robert S. Prichard, O.C., O.Ont., LL.B., M.B.A.,
LL.M., LL.D.(2, 3)
Non-Executive Chair, Torys LLP; former Chair,
Bank of Montreal; Director, Onex Corporation;
Director, Alamos Gold Inc.; President Emeritus,
University of Toronto; Chair and Trustee,
Hospital for Sick Children; former Chair,
President and Chief Executive Officer,
Metrolinx; former Director, President and Chief
Executive Officer, Torstar Corporation.
Christi Strauss(1)
Corporate Director; former President and Chief
Executive Officer, Cereal Partners Worldwide, a
General Mills joint venture with Nestlé;
Director of two not-for-profit organizations,
Social Venture Partners Minnesota and Health
Partners International; past Chair, Advertising
Standards Canada; past Chair, Canadian Food
Information Council; former Board member;
The Stratford Festival and Food and Consumer
Products of Canada.
Barbara Stymiest, C.M., F.C.A., F.C.P.A.(1*,2)
Corporate Director; Director, Blackberry
Limited; Director, Sun Life Financial Inc.;
Director, President’s Choice Bank; former
Member, Group Executive, Royal Bank of
Canada; former Chief Executive Officer, TMX
Group Inc., former Executive Vice-President
and Chief Financial Officer, BMO Capital
Markets; former Partner, Ernst & Young LLP;
Director, Canadian Institute for Advanced
Research; A Vice Chair, University Health
Network; Director, Advisory Council for the Ivey
Institute for Leadership.
Corporate Officers
Galen G. Weston
Khush Dadyburjor
Jeff Gobeil
Chairman and Chief Executive Officer
Chief Strategy Officer
Group Head, Tax
Richard Dufresne
John Williams
Anemona Turcu
President
and Chief Financial Officer
Group Treasurer and
Head of Corporate Finance
Group Chief Risk Officer
Gordon A.M. Currie
Executive Vice President
and Chief Legal Officer
Rashid Wasti
Executive Vice President
and Chief Talent Officer
Lina Taglieri
Group Head, Controller
Andrew Bunston
Vice President,
General Counsel and Secretary
182 GEORGE WESTON LIMITED 2021 ANNUAL REPORT
Shareholder and Corporate Information
Executive Office
George Weston Limited
22 St. Clair Avenue East
Toronto, Canada M4T 2S5
Tel: 416.922.2500
www.weston.ca
Stock Exchange Listing and Symbols
The Company’s common and preferred shares are listed on the
Toronto Stock Exchange and trade under the symbols: “WN”,
“WN.PR.A”, “WN.PR.C”, “WN.PR.D” and “WN.PR.E”.
Common Shares
At year end 2021, there were 146,789,503 common shares issued
and outstanding, which reflects 41,700 shares repurchased for
cancellation in 2021, and settled after year end 2021.
The average 2021 daily trading volume of the Company’s common
shares was 182,322.
Preferred Shares
As at year end 2021, there were 9,400,000 preferred shares Series I,
8,000,000 preferred shares Series III, 8,000,000 preferred shares
Series IV and 8,000,000 preferred shares Series V issued and
outstanding.
The average 2021 daily trading volume of the Company’s preferred
shares was:
Series I:
Series III:
Series IV:
Series V:
5,815
3.481
3,936
5,447
Preferred Dividend Dates
The declaration and payment of quarterly preferred dividends are
made subject to approval by the Board of Directors. The record and
payment dates for 2022 are:
Series I
Record Date
Payment Date
Feb. 28
May 31
Aug. 31
Nov. 30
March 15
June 15
Sept. 15
Dec. 15
Series III, Series IV and Series V
Record Date
Payment Date
March 15
June 15
Sept. 15
Dec. 15
April 1
July 1
Oct. 1
Jan. 1
Common Dividend Policy
The declaration and payment of dividends on the Company’s
common shares and the amount thereof are at the discretion of the
Board of Directors which takes into account the Company’s
financial results, capital requirements, available cash flow, future
prospects of the Company’s business and other factors considered
relevant from time to time. Over time, it is the Company’s intention
to increase the amount of the dividend while retaining appropriate
free cash flow to finance future growth.
Common Dividend Dates
The declaration and payment of quarterly common dividends are
made subject to approval by the Board of Directors. The anticipated
record and payment dates for 2022 are:
Record Date
Payment Date
March 15
June 15
Sept. 15
Dec. 15
April 1
July 1
Oct. 1
Jan. 1
Printing: TC Transcontinental Printing www.tc.tc
Normal Course Issuer Bid
The Company has a Normal Course Issuer Bid on the Toronto Stock
Exchange.
Value of Common Shares
For capital gains purposes, the valuation day (December 22, 1971)
cost base for the Company, adjusted for the 4 for 1 stock split
(effective May 27, 1986) and the 3 for 1 stock split (effective
May 8, 1998), is $1.50 per share. The value on February 22, 1994
was $13.17 per share.
Registrar and Transfer Agent
Computershare Investor Services Inc.
100 University Avenue
Toronto, Canada M5J 2Y1
1.800.564.6253 (Canada and U.S.A.)
Toll Free Tel:
International Tel: 514.982.7555 (direct dial)
Fax:
Toll Free Fax:
416.263.9394
1.888.453.0330
To change your address or eliminate multiple mailings,
or for other shareholder account inquiries, please contact
Computershare Investor Services Inc.
Annual Meeting
The 2022 Annual Meeting of Shareholders of George Weston
Limited will be held on Tuesday, May 11, 2022 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 and virtually via a live webcast.
Trademarks
George Weston Limited, Loblaw Companies Limited, Choice
Properties Real Estate Investment Trust and their respective
subsidiaries own a number of trademarks. These trademarks are the
exclusive property of George Weston Limited, Loblaw Companies
Limited, Choice Properties Real Estate Investment Trust and their
respective subsidiary companies. Trademarks where used in this
report are in italics.
Investor Relations
Shareholders, security analysts and investment professionals should
direct their requests to Roy MacDonald, Group Vice-President,
Investor Relations, at the Company’s Executive Office or by e-mail at
investor@weston.ca.
Additional financial information has been filed electronically with
the Canadian securities regulatory authorities in Canada through
the System for Electronic Document Analysis and Retrieval (SEDAR).
The Company holds an analyst call shortly following the release of
its quarterly results. These calls are archived in the Investor Centre
section of the Company’s website.
This Annual Report includes selected information on Loblaw
Companies Limited, a public company with shares, and Choice
Properties Real Estate Investment Trust, a public entity with units,
both of which are traded on the Toronto Stock Exchange.
Ce rapport est disponible en français.
GEORGE WESTON LIMITED 2021 ANNUAL REPORT 183
Cashier in Loblaw at the West Block, Toronto, Ontario
GEORGE WESTON LIMITED
22 St Clair Ave E,
Toronto, ON M4T 2S5
Tel: (416) 922-2500
www.weston.ca