Company Profile
With over $11 billion in annual sales and more than 65,000 employees, METRO is a leader in the food and
pharmaceutical sectors in Québec and Ontario, where it operates a network of 566 supermarkets under
several banners, including Metro, Metro Plus, Super C and Food Basics, as well as 265 drugstores,
mainly under the Brunet, The Pharmacy and Drug Basics banners.
2010 Highlights
• Record sales of $11,342.9 million
• Net earnings of $391.8 million, up 10.6%
• Launched Dunnhumby Canada, which will help us better understand the shopping habits of our customers
and transform that knowledge into effective customer-centric strategies
• Launched the Metro & Moi loyalty program in Québec to complement the Air Miles ® program in Ontario
• Acquired and integrated 15 GP food stores in Eastern Québec
• Developed and implemented a Corporate Responsibility roadmap which articulates our commitment to the
sustainability of our activities
Number of Stores
Total Floor Space*
FOOD
QUÉBEC
ONTARIO
TOTAL
Supermarkets
Metro
224
Metro
155
379
Metro Plus
Discount Stores
Super C
71
Food Basics
TOTAL
Drugstores
* Millions of square feet
295
185
Pharmacy
Drug Basics
Brunet
Brunet Plus
Clini Plus
116
271
80
187
566
265
TOTAL
12.9
6.8
19.7
–
TA S T E S E R V I C E
M E T R O I N C . D I V I S I O N
FORWARD LOOKING INFORMATION: For any information on statements in this Annual Report that are of a forward-looking nature, please consult the section on
“Forward-looking information” on page 23 in the Management’s Discussion and Analysis (MD&A)
Financial Highlights from 2006 to 2010
2010
(52 weeks)
2009
(52 weeks)
2008
(52 weeks)
2007
(52 weeks)
2006
(53 weeks)
OPERATING RESULTS (Millions of dollars)
Sales
EBITDA(1) (2)
Operating income
Net earnings
Cash flows from operating activities
11,342.9
11,196.0
10,725.2
10,644.6
10,944.0
787.0
585.8
391.8
547.8
741.6
552.5
354.4
520.1
638.9
462.6
292.2
450.2
626.3
460.6
277.2
363.3
610.4
432.5
252.9
392.0
FINANCIAL STRUCTURE (Millions of dollars)
Total assets
Long-term debt
Shareholders’ equity
PER SHARE (Dollars)
Net earnings
Fully diluted net earnings
Book value
Dividend
FINANCIAL RATIOS (%)
EBITDA(1) (2)/sales
Operating income/sales
Return on shareholders’ equity
Long-term debt/total capital
SHARE PRICE (Dollars)
High
Low
Closing price (At year-end)
4,821.6
1,004.3
2,442.8
4,658.1
1,004.3
2,264.1
4,425.6
1,005.0
2,068.3
4,292.7
1,028.8
1,940.0
4,166.3
1,104.5
1,730.9
3.67
3.65
23.25
0.6475
6.9
5.2
16.6
29.1
47.01
33.02
45.15
3.21
3.19
20.85
0.5375
6.6
4.9
16.4
30.7
40.00
27.38
34.73
2.60
2.58
18.64
0.49
6.0
4.3
14.6
32.7
35.85
21.00
31.77
2.41
2.38
16.88
0.45
5.9
4.3
15.1
34.7
41.78
33.23
35.00
2.21
2.18
15.02
0.415
5.6
4.0
15.6
39.0
36.00
28.47
33.60
(1)
(2)
Earnings before financial costs, taxes, depreciation and amortization
See section on “Non-GAAP measurements” on page 22 in the MD&A
SALES
(Millions of dollars)
NET EARNINGS
(Millions of dollars)
FULLY DILUTED NET
EARNINGS PER SHARE
(Dollars)
0
.
4
4
9
,
0
1
6
.
4
4
6
,
0
1
2
.
5
2
7
,
0
1
0
.
6
9
1
,
1
1
9
.
2
4
3
,
1
1
9
.
2
5
2
2
.
7
7
2
2
.
2
9
2
4
.
4
5
3
8
.
1
9
3
8
1
.
2
8
3
.
2
8
5
.
2
9
1
.
3
5
6
.
3
06
07
08
09
10
06
07
08
09
10
06
07
08
09
10
73761_edit_EN.indd 1
08/12/10 10:41 PM
Letter to our
Shareholders
We are pleased to have this opportunity to report on METRO's activi-
ties and achievements in fiscal 2010. The priorities we established in
2009 were successfully addressed, our customer-first initiatives were
very well received, and the METRO team delivered record results.
Sales rose 1.3% to $11,342.9 million. Net earnings reached $391.8
million, up 10.6% from $354.4 million in 2009. Fully diluted net earn-
ings per share were $3.65, up 14.4% from $3.19 last year. Excluding
non-recurring items in 2010 and 2009, adjusted net earnings (1) for 2010
were $382.4 million compared to $359.0 million for 2009, an increase
of 6.5%. Adjusted fully diluted net earnings per share (1) were $3.56
compared to $3.23, an increase of 10.2%. Return on shareholders’
equity was 16.6% and our annualized dividend was $0.68 per share, an
increase of 23.6%. The stock market rewarded our performance as the
closing price of our shares at fiscal year-end was $45.15, compared
with $34.73 last year, an increase of 30.0%.
METRO's strong performance was realized in a challenging eco-
nomic environment. While our overall volumes increased, the
lingering effects of the recession caused consumers to remain cau-
tious. For the first time in our history, price deflation in certain food
categories—mostly due to currency fluctuations—persisted through
most of the year, and had a negative impact on same-store sales.
We successfully met these challenges by focussing on the needs of
our customers, by executing on our business objectives at all levels, by
engaging a committed group of employees, and by constantly striving
to create shareholder value.
2010 OPERATIONAL HIGHLIGHTS
Our customer-focussed strategy is at the foundation of our business
plan, and a key element in this strategy is Dunnhumby Canada. This
exclusive joint venture provides us with unique tools and expertise
(1) See section on “Non-GAAP measurements” on page 22 in the MD&A
Pierre H. Lessard, FCA
Executive Chairman of the Board
73761_edit_EN.indd 2
08/12/10 10:42 PM
We successfully met these challenges by focussing on the needs of our customers, by
executing on our business objectives at all levels, by engaging a committed group of
employees, and by constantly striving to create shareholder value.
to better understand the shopping habits of our customers and to
transform that knowledge into effective, customer-centric merchan-
dising and marketing strategies.
To leverage these capabilities, we introduced our proprietary Metro &
Moi loyalty program in Québec, which complements the Air Miles ®
reward program offered in our Ontario Metro supermarkets. These
programs give us the opportunity to collect specific transaction data
and to reward our loyal customers with personalized discount and
promotional offers. The Metro & Moi loyalty card launch was very
successful, and so far we are exceeding our objectives in terms of
enrollment, with nearly 900,000 members, card usage, and average
transaction size.
We made market-share gains in Québec in fiscal 2010. Our Metro and
Super C banners both outperformed the market, and to strengthen
our competitive position in Eastern Québec, we completed the
integration of the 15 GP food stores acquired early in the fiscal year
under the Metro banner.
Since the conversion of our Ontario supermarkets to the Metro
banner in 2009, we have maintained our position as the second
largest food retailer in the province and are working hard to
enhance our customers' shopping experience. The Ontario market
remains very challenging, characterized by intense competition in the
discount segment and an aggressive promotional environment.
To improve our competitiveness, in 2010 we negotiated a new
contract with our transport provider in Ontario which will reduce (1) our
operating expenses. We also successfully negotiated a new four-year
agreement with our warehouse employees in Toronto, which will
lower (1) our costs, provide us with greater operating flexibility and
ensure better service to our stores. >
(1) See section on “Forward-looking information” on page 23 in the MD&A
Eric R. La Flèche
President and Chief Executive Officer
73761_edit_EN.indd 3
10/12/10 1:24 AM
>
Over the past year METRO continued to strengthen its drugstore network. In Québec there are currently 125
drugstores under the Brunet and Brunet Plus banners, as well as 60 Clini Plus drugstores. In Ontario, our
network consists of 80 drugstores under the Pharmacy and Drug Basics banners. Drug payment reform in -
troduced in Ontario that reduces the price of generic drugs will have (1) an impact on our results and we
expect (1) to see similar legislation in Québec. In response, we have introduced cost-cutting initiatives to
lessen the impact on our drugstore results.
Finally, we developed a comprehensive Corporate Responsibility roadmap in fiscal 2010, which articulates our
commitment to the sustainability of our activities. The pillars of this roadmap are aligned to our business strate-
gy: Delighted Customers, Respect for the Environment, Strengthened Communities and Empowered Employees.
As part of this commitment, in September we put in place a sustainable fisheries policy and ceased selling seven
threatened species.
2011 PRIORITIES
Looking to the year ahead, we expect (1) that the slow economic recovery will continue to have an impact on
consumer spending. Nevertheless, we are confident (1) in our ability to meet our customers’ expectations.
Operating great stores remains our top priority. In fiscal 2011 we intend (1) to invest some $225 million (1) in
upgrading our network. We will strive (1) to expand our loyal customer base and increase their food spending with
us by leveraging our Metro & Moi and Air Miles ® loyalty programs. We are committed to the constant improvement
of our product offering, with a particular emphasis this year on fresh produce in all of our banners. We will also
rigorously control (1) our costs, develop (1) our human resources, and pursue (1) growth opportunities through
in-house innovation as well as strategic acquisitions. We believe (1) that executing on these priorities will continue (1)
to create value for our customers and shareholders alike.
ACKNOWLEDGEMENTS
We would like to take this opportunity to thank our customers for their continuing loyalty and our employees and
management team for their dedication and solid 2010 results. We also wish to thank the members of our Board
of Directors for their guidance. In particular, we would like to acknowledge the many contributions of Bernard
Roy, who will be retiring from the Board in January. Mr. Roy became a Director in 1990, served on several Board
Committees and was a keen supporter of the many changes the Company has undergone over the last 20 years.
His wise counsel will be missed.
In closing, we extend our thanks to you, our shareholders, for your continued confidence in METRO. n
Eric R. La Flèche
Pierre H. Lessard, FCA
President and Chief Executive Officer
Executive Chairman of the Board
(1) See section on “Forward-looking information” on page 23 in the MD&A
73761_edit_EN.indd 4
10/12/10 12:16 AM
Customer Focus
Strong Execution
Best Team
Shareholder Value
Review of
Operations
METRO’s vision is to be the best performing food retailer
in Canada.
Our mission is to satisfy our customers every day and earn
their long-term loyalty. To achieve these objectives, we
have developed a business strategy based on four opera-
tional pillars: Customer Focus, Strong Execution, Best Team
and Shareholder Value.
73761_edit_EN.indd 5
08/12/10 10:42 PM
Customer
Focus
METRO was founded over 60 years ago by independent grocers who prided
themselves on knowing their customers and providing them with superior service. In
today's highly competitive marketplace, achieving consistently strong results depends
more and more upon growing our loyal customer base and on inspiring those loyal
customers to increase their food spending with us. Delivering the right products, at the
right time, in the right store and at the right price, is essential.
This is why METRO launched the Dunnhumby Canada joint venture: to join forces with
experts in loyalty marketing to better understand our customers' needs and develop
customer-focussed strategies.
When our customers use their loyalty card in Metro supermarkets, we collect infor-
mation from which we gather insights that allow us to constantly improve and update
our product assortment, pricing and promotional offers. In addition, we are able to
establish one-on-one communication with our customers and tailor our promotional
programs to them.
Implementing the best loyalty programs is an integral part of our customer-first
commitment. In our Ontario Metro supermarkets we already offered the popular
Air Miles ® loyalty card, and in 2010 we launched Metro & Moi, a proprietary loyalty
card designed specifically for our Québec Metro supermarkets. With Metro & Moi
our customers collect ‘m’ points for every dollar spent and have the opportunity to earn
up to 10 times more ‘m’ points with special bonus offers. Their loyalty is rewarded with
cash vouchers redeemable in our Metro supermarkets as well as coupon offers
on the products they buy. The program has been met with great enthusiasm by our
customers, and has surpassed our targets in terms of enrolment, percentage of sales
that our customers have made on the card, and average basket size.
Strong customer focus also means delivering exceptional quality and value with
our Irresistibles and Selection private brands, as well as our Life Smart Mieux-Être,
BIO and Eco sub-brands. In 2010, our private-label product portfolio expanded to
approximately 4,400 items and sales outpaced our total sales growth. In addition to
providing our customers with great value, these sales enhance gross margins and
build loyalty to our stores. >
73761_edit_EN.indd 6
10/12/10 12:17 AM
>
Knowing that the fresh produce department
is increasingly important to our customers,
we have begun working on a range of initia-
tives, from sourcing and logistics to merchan-
dising and store execution, to ensure that our
produce offering meets our customers' high
expectations.
We have also stepped up efforts to communi-
cate directly with our shoppers through our
redesigned, consumer-friendly website, which
offers recipes, news on promotions and
events, weekly flyers, and a newsletter. We also
conduct online surveys to seek customer feed-
back and measure customer satisfaction. Finally,
we have established a dedicated Facebook page
that provides our customers with another way
to interact with METRO, and to make us a part
of their social network.
In listening closely to our customers and meet-
ing their needs, we are reasserting the values
that have made METRO strong from its very
beginnings, and that will enable (1) continued
growth going forward. n
73761_edit_EN.indd 7
08/12/10 10:43 PM
(1) See section on “Forward-looking information” on page 23 in
the MD&A
Strong
Execution
At METRO, our ability to execute has always been one of our strengths. Our corporate
culture is results-oriented and rewards operational excellence. This philosophy has
provided the foundation for our consistent growth over the past two decades.
The METRO team strives every day to provide its customers with quality products, great
value and an in-store experience that will make them want to return. At the same time,
we are relentlessly focussed on results, from our rigorous monitoring and control of
margins and costs, to our highly-disciplined allocation of capital.
To further enhance the METRO customer experience, in fiscal 2010 the Company and
its retailers invested $278.7 million to modernize and strengthen our retail network.
We opened 13 new stores during the year and undertook 35 expansions and reno-
vations. Further, we successfully integrated the GP food stores in Eastern Québec
that we acquired early in the fiscal year and converted them to the Metro GP
supermarket banner, while keeping their local flavour.
At the end of fiscal 2010, our network consisted of 566 food stores and 265 drugstores.
We are the market leader in Québec, where we again made market-share gains, and a
strong number two in Ontario.
To strengthen our competitive position in Ontario, we negotiated a new contract
with our transport provider which will result (1) in significant operational cost savings.
In addition, we reached a new four-year collective agreement with our warehouse
employees in Toronto which will reduce (1) our costs, increase our operating flexibility
and provide better service to our stores. Other initiatives in 2010 included extending
the mandate of our national procurement group to include not only the grocery sector
but also all perishable products. This is helping us to reduce our costs, to ensure
first-rate supply, and to implement best-practice exchange and transfer between
our divisions.
Our Distagro food-service division operates in an intensely competitive environment
as a supplier to restaurants and convenience stores, and we believe (1) that we can
successfully continue to grow this business.
Our operational expertise, financial strength and demonstrated ability to successfully
integrate new stores will help us continue (1) growing the Company both organically
and through strategic acquisitions that may present themselves. n
(1) See section on “Forward-looking information” on page 23 in the MD&A
73761_edit_EN.indd 8
10/12/10 12:18 AM
OUR FIVE CUSTOMER PROMISES
GREAT QUALITY FRESH PRODUCTS
THE PEOPLE ARE GREAT
IT’S EASY TO SHOP
CUSTOMERS GET WHAT THEY WANT
PRICES ARE GOOD
73761_edit_EN.indd 9
08/12/10 10:44 PM
Best
Team
Our network provides employment to over 65,000 people across Québec and Ontario.
Recruiting, training and retaining the best team in our industry is critical to our
success. We strive to create a dynamic culture within the Company where employees
feel valued and have opportunities for career advancement.
As such, we provide professional development programs and carry out annual
performance reviews to support the career development of our management
employees. We are continually upgrading our business and information systems, and
training our people to use this technology effectively is essential. Further, we provide
a range of training programs for our store managers to enhance their customer ser-
vice and leadership skills.
Maintaining a high level of morale in the retail industry, where there is considerable
turnover and a significant percentage of part-time employees, is always a challenge,
but at the same time critical to ensuring a positive in-store experience for our custom-
ers. Over the past year we conducted a pilot employee survey in some of our Québec
stores to assess employee engagement and build stronger relationships with our
people. The results were very positive, and we will be launching similar surveys in
our Ontario stores in 2011.
Our affiliated and franchised retailers in Québec are also a key part of the METRO team.
They make our programs and merchandising come alive at the store level and this
year, their enthusiastic support of the Metro & Moi loyalty program has contributed
significantly to its early success.
METRO's roots are in family-owned and operated food stores and pharmacies engaged
in their communities. We are committed to instilling the same culture throughout our
network, and to empowering our people to make a positive difference in the work-
place and in the communities we serve. n
73761_edit_EN.indd 10
08/12/10 10:44 PM
We strive to create a
dynamic culture within
the Company where
employees feel valued
and have opportunities
for career advancement.
73761_edit_EN.indd 11
08/12/10 10:44 PM
Shareholder
Value
Putting the customer first, executing well every day,
attracting and retaining a great team of people, exercising
sound financial control, and investing our capital wisely:
this is how METRO has, and will continue (1) to create long-
term value for its shareholders.
In fiscal 2010, adhering to these values helped us to
achieve record results. Adjusted fully diluted net earn-
ings per share (2) rose to $3.56, an increase of 10.2%
over 2009. Our annualized dividend reached $0.68 per
share, an increase of 23.6% over the prior year, marking
15 years of consecutive growth. Return on shareholders'
equity was 16.6%, marking the 17th consecutive year in
which it has exceeded 14.0%. At fiscal year-end, the price
of our shares was $45.15, an increase of 30.0% compared
to the previous year.
To return additional value to our shareholders, in fiscal
2010 METRO repurchased approximately 4 million shares.
This brings the total number of shares repurchased
since fiscal 2005 to nearly 16 million, for a total amount
exceeding $500 million.
Finally, we concluded fiscal 2010 in a very sound financial
position, with a long-term debt to total capital ratio of
29.1%, cash and cash equivalents totalling $214.7 million,
and an unused $400.0 million revolving line of credit.
We have been prudent with capital, rigorously focussed
on the bottom line and able to move quickly when
market or other economic conditions threatened to erode
our margins. As a result, our balance sheet is strong,
which provides us with the financial flexibility to contin-
ue to invest in our retail network and our systems infra-
structure, and also enables us to seek new acquisition
opportunities. n
(1) See section on “Forward-looking information” on page 23 in the MD&A
(2) See section on “Non-GAAP measurements” on page 22 in the MD&A
73761_edit_EN.indd 12
10-12-10 2:10 PM
SHARE PRICE
(Dollars, at year-end closing price)
6
0
.
8
1
0
4
.
7
1
0
0
.
9
1
6
6
.
8
1
5
2
.
4
3
0
6
.
3
3
0
0
.
5
3
7
7
.
1
3
3
7
.
4
3
5
1
.
5
4
01
02
03
04
05
06
07
08
09
10
Compound annual growth rate: 10.7%
DIVIDEND PER SHARE
(Dollars)
5
2
7
1
.
0
1
2
.
0
5
6
2
.
0
5
2
3
.
0
5
8
3
.
0
5
1
4
.
0
5
4
.
0
9
4
.
0
5
7
3
5
.
0
5
7
4
6
.
0
01
02
03
04
05
06
07
08
09
10
Compound annual growth rate: 15.8%
RETURN ON
SHAREHOLDERS' EQUITY
(%)
1
.
4
2
0
.
4
2
2
.
4
2
1
.
1
2
0
.
6
1
6
.
5
1
1
.
5
1
6
.
4
1
4
.
6
1
6
.
6
1
01
02
03
04
05
06
07
08
09
10
73761_edit_EN.indd 13
08/12/10 10:45 PM
Corporate
Responsibility
For more than 60 years, METRO has acted responsibly in its business
activities. In 2006, we were the first large food retailer in Canada to
introduce reusable shopping bags. That same year we also addressed
air pollution and fuel consumption concerns by setting speed limits on
all our trucks. In 2007 we developed “Leave it Greener,” an employee
communications program designed to promote environmentally
responsible behaviour, and in 2009 we created the Green Apple School
program, awarding $1,000 grants to students in Québec and Ontario
who develop projects that promote a healthier environment.
On August 11, 2010, we took our environmental policies a step further
and formalized a comprehensive Corporate Responsibility roadmap to
set forth our commitments regarding the management of our environ-
mental, social and business activities.
We established four pillars aligned to our business strategy:
In total, METRO donated
Delighted Customers: This principle directs our efforts in the areas of
over $5 million in cash
promoting health and nutrition, responsible and earth-friendly product
and products to the Green
Apple School program and a
sourcing, and monitoring food quality and safety;
Respect for the Environment: This area of commitment includes
variety of charities focussed
initiatives for rethinking our packaging, addressing climate change and
on health and education.
managing waste;
Strengthened Communities: This priority helps focus the invest-
ments we make in our communities and guides us in our efforts to
support local suppliers; and
Empowered Employees: This commitment targets efforts to develop
and maintain safe, healthy and ethical work environments, and to
foster employee engagement.
73761_edit_EN.indd 14
08/12/10 10:45 PM
In 2010, as a part of our Corporate Responsibility program, we
implemented our sustainable fisheries policy. This policy is based on
four core criteria: procurement will be limited to fishing areas and
species whose renewal is ensured given their individual stocks and
catch rates; fisheries and aquafarms supplying METRO will have to
prove that they use sustainable fishing methods; the supply chain—
from the fishing area to the consumer—must be documented to
allow for informative and transparent labelling; and METRO's decisions
will take into account local economic issues. Our first action under this
policy was to cease selling seven threatened fish species in our stores.
Further, because our employees are best served by an ethical, safe
and healthy work environment, we conducted comprehensive
training sessions on health and safety issues in 2010. To emphasize
the importance of these issues, we also introduced a zero tolerance
policy regarding breaches of professional ethics and health and
safety standards. Our safety record continues to show marked
improvement year over year.
In addition, we increased our contributions to philanthropic initiatives
in 2010. In total, METRO donated over $5 million in cash and products
to the Green Apple School program and a variety of charities focussed
on health and education. During the year METRO's customers and
employees also donated $500,000 to Red Cross efforts in earthquake-
ravaged Haiti.
We are determined to improve our performance in the area of
Corporate Responsibility. This is a long-term commitment and more
initiatives will be developed over time. n
Fisheries and aquafarms
supplying METRO will have
to prove that they use
sustainable fishing methods.
73761_edit_EN.indd 15
09/12/10 1:52 AM
Directors and Officers
BOARD OF DIRECTORS
Marc DeSerres (2) (4)
Montréal, Québec
Claude Dussault (2) (4)
Toronto, Ontario
Serge Ferland (1)
Québec City, Québec
Paule Gauthier (3) (4)
Québec City, Québec
Paul Gobeil (1)
Ottawa, Ontario
Vice-Chairman of the Board
Christian W.E. Haub (1) (3)
Greenwich, Connecticut
Michel Labonté (2)
Montréal, Québec
Eric R. La Flèche (1)
Town of Mount-Royal, Québec
President and
Chief Executive Officer
Pierre H. Lessard (1)
Westmount, Québec
Executive Chairman of the Board
Marie-José Nadeau (2) (4)
Montréal, Québec
Christian M. Paupe (2)
Verdun, Québec
Réal Raymond (1) (3)
Montréal, Québec
Lead Director
Michael T. Rosicki (4)
Orillia, Ontario
Bernard A. Roy (1) (3)
Montréal, Québec
MANAGEMENT
OF METRO INC.
Eric R. La Flèche
President and
Chief Executive Officer
Robert Sawyer
QUÉBEC DIVISION
Christian Bourbonnière
Senior Vice-President
Serge Boulanger
Vice-President and
General Manager
Executive Vice-President and
McMahon Distributeur
Chief Operating Officer
pharmaceutique inc.
Ginette Richard
Vice-President and
General Manager
Food Services
ONTARIO DIVISION
Johanne Choinière
Senior Vice-President
Richard Beaubien
Senior Vice-President
Store Operations
Joe Fusco
Senior Vice-President
Merchandising
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Human Resources
Committee
(4) Member of the Corporate
Governance and Nominating
Committee
Christian Bourbonnière
Senior Vice-President
Québec Division
Johanne Choinière
Senior Vice-President
Ontario Division
Richard Dufresne
Senior Vice-President
Chief Financial Officer and Treasurer
Martin Allaire
Vice-President
Real Estate & Engineering
Jacques Couture
Vice-President
Information Systems
Paul Dénommée
Vice-President
Corporate Controller
Marc Giroux
Vice-President
Marketing
Alain Picard
Vice-President
Human Resources
Simon Rivet
Vice-President
General Counsel and Secretary
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Shareholder Information
Transfer agent and registrar
The Annual Information Form may
Annual meeting
Computershare
Investor Services
Stock listing
Toronto Stock Exchange
Ticker Symbol: MRU.A
Auditors
Ernst & Young LLP
Chartered Accountants
be obtained from the Investor
The Annual General Meeting of
Relations Department:
Tel.: (514) 643-1055
E-mail: finance@metro.ca
Shareholders will be held on
January 25, 2011 at 11:00 a.m. at:
Centre Mont-Royal
Vous pouvez vous procurer la
2200 Mansfield Street
version française de ce rapport
Montréal, Québec H3A 3R8
auprès du service des relations
avec les investisseurs.
Designed and written
With the assistance of
METRO INC.’s corporate information
MaisonBrison Communications
Head office address
11011 Maurice-Duplessis Blvd.
Montréal, Québec H1C 1V6
and press releases are available on
the Internet at the following address:
www.metro.ca
Dividends* 2011 fiscal year
Declaration Date
n January 24, 2011
n April 19, 2011
n August 9, 2011
n September 19, 2011
Record Date
n February 11, 2011
n May 16, 2011
n August 24, 2011
n October 26, 2011
* Subject to approval by the Board of Directors
Payment Date
n March 8, 2011
n June 7, 2011
n September 7, 2011
n November 16, 2011
MANAGEMENT’S DISCUSSION AND ANALYSIS
AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 25, 2010
Table of contents
Overview 2 Vision, mission and strategies 2 Principal performance indicators 2 Principal achievements in
fiscal 2010 3 Highlights 3 Outlook 4 Operating results 5 Quarterly highlights 7 Cash position 9 Financial
position 9 Sources of financing 11 Contractual obligations 12 Related party transactions 12 Fourth quarter 12
Derivative financial instruments 14 New accounting policies recently published 14 Non-GAAP measurements 22
Forward-looking information 23 Controls and procedures 23 Significant accounting estimates 23 Risk
management 25 Consolidated financial statements 28
The following Management’s Discussion and Analysis sets out the financial position and consolidated results of METRO INC. for the
fiscal year ended September 25, 2010, and should be read in conjunction with the annual consolidated financial statements and the
accompanying notes as at September 25, 2010. This report is based upon information as at December 3, 2010 unless otherwise
indicated. Additional information, including the Annual Information Form and Certification Letters for fiscal 2010, is available on the
SEDAR website at www.sedar.com.
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OVERVIEW
The Company is a leader in the food and pharmaceutical sectors in Québec and Ontario.
those consumers wanting service, variety,
The Company, as a retailer and a distributor, operates under different banners in the traditional supermarket and
discount segments. For
freshness and quality, we operate
379 supermarkets under the Metro and Metro Plus banners. The 187 discount stores operating under the Super C
and Food Basics banners offer products at low prices to consumers who are both cost and quality conscious. The
majority of these stores are owned by the Company or by variable interest entities (VIEs) and their financial
statements are consolidated with those of the Company. Independent owners bound to the Company by leases or
affiliation agreements operate a large number of Metro and Metro Plus stores. Supplying these stores contributes to
our sales. The Company also acts as a distributor by providing small-surface food stores and convenience stores with
banners that reflect their environment and customer base. Supplying these stores, as well as convenience stores
owned by oil companies and restaurant chains contributes to the Company’s sales.
The Company also acts as franchisor and distributor for 185 franchised Brunet and Clini Plus drugstores, owned by
independent pharmacists. Our sales include the service charges received from these franchisees as well as revenues
from our role as their supplier. The Company also operates 80 drugstores under the Pharmacy and Drug Basics
banners. Their sales are included in the Company’s. Supplying non-franchised drugstores and various health centres
also contributes to our sales.
VISION, MISSION AND STRATEGIES
The Company’s vision is to be best performing food retailer in Canada.
Our mission is to satisfy our customers every day and earn their long-term loyalty.
The four pillars of our business strategy are customer focus, strong execution, best team and shareholder value.
We put the customer at the heart of every decision. We ask for customer feedback and measure actions taken. In our
supermarkets and our discount stores, pricing, promotions, friendly service, and quality products are our priorities.
Strong execution means operating the best stores, a results-driven corporate culture, engaging all employees and
monitoring performance so as to react swiftly.
The best team consists of leaders who put the Company’s interests first. Employee growth and leadership
development opportunities and succession planning ensure its continued strength.
The creation of shareholder value includes sustained growth in earnings per share and significant return on
shareholders’ equity. Our investments and acquisitions are appropriate and beneficial in the long term.
PRINCIPAL PERFORMANCE INDICATORS
We evaluate the Company’s overall performance using the following principal indicators:
(cid:132) sales:
– sales growth;
– dollar value of the average basket (average customer transaction);
– average weekly sales per square foot;
– percentage of sales represented by customers who are loyalty program members;
– market share;
– customer satisfaction;
(cid:132) earnings before financial costs, taxes, depreciation and amortization (EBITDA)(1) as a percentage of sales;
(cid:132) net earnings as a percentage of sales;
(cid:132) earnings per share growth;
(cid:132) return on shareholders’ equity;
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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(cid:132) retail network investments:
– dollar value and nature of store investments;
– number of stores;
– average store square footage;
– network’s total square footage.
PRINCIPAL ACHIEVEMENTS IN FISCAL 2010
Despite persistent deflation in certain product categories and continued consumer caution, we achieved record net
earnings in 2010. Of the many projects realized, the principal were the following:
(cid:132) we acquired 15 GP stores at the start of the fiscal year and completed their integration over the year;
(cid:132) at the start of the fiscal year, we established an exclusive joint venture, Dunnhumby Canada, with Dunnhumby, an
international consulting and marketing firm, recognized worldwide for its know-how in developing business
decisions based on analysis of customer data. Over its first year, the joint venture has made a good start on its
mission to develop and implement strategies better meet customer needs and build strong loyalty;
(cid:132) at the end of the fiscal year, we launched our Metro & Moi loyalty program in Québec, a counterpart to the
Air Miles® card program in our Ontario stores. The Metro & Moi card, offered to Metro supermarkets customers,
allows them to accumulate points that can be applied to purchases in Metro supermarkets;
(cid:132) we introduced our philosophy on corporate responsibility, publishing a roadmap describing our future plans
towards sustainable development;
(cid:132) we again increased our market share in Québec and remain the leader there and second in Ontario;
(cid:132) we signed a four-year collective agreement with the union covering our five Toronto warehouses;
(cid:132) we negotiated a new commercial agreement with our carrier in Ontario to reduce our freight costs;
(cid:132) we made some changes to our organizational structure to strengthen central perishables procurement and
supervision of our Québec Metro supermarkets;
(cid:132) we increased our gross margins by improving store operating costs;
(cid:132) we improved the profitability of Distagro, our Food Services Division.
HIGHLIGHTS
(Millions of dollars, unless otherwise indicated)
Sales
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share (Dollars)
Adjusted fully diluted net earnings
per share(1) (Dollars)
Return on shareholders’ equity (%)
Dividend rate per share (Dollars)
Total assets
Long-term debt
2010
(52 weeks)
11,342.9
391.8
382.4
3.65
3.56
16.6
0.6475
4,821.6
1,004.3
2009
(52 weeks)
Change
(%)
2008
(52 weeks)
Change
(%)
11,196.0
354.4
359.0
3.19
3.23
16.4
0.5375
4,658.1
1,004.3
1.3
10.6
6.5
14.4
10.2
─
20.5
3.5
─
10,725.2
292.2
280.8
2.58
2.48
14.6
0.49
4,425.6
1,005.0
4.4
21.3
27.8
23.6
30.2
─
9.7
5.3
(0.1)
Sales were $11,342.9 million in 2010, a 1.3% increase compared with 2009. Sales for 2009 increased by 4.4%, to
$11,196.0 million compared to $10,725.2 million for 2008. The 2010 sales increase was achieved despite persistent
deflation in certain product categories and continued consumer caution. In 2009, sales got a boost from high food
price inflation and the temporary closing of several stores of a competitor due to a labour conflict.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Net earnings for fiscal 2010 reached $391.8 million, a 10.6% increase compared to fiscal 2009. Net earnings for fiscal
2009 reached $354.4 million compared to $292.2 million for fiscal 2008, an increase of 21.3%. Fully diluted net
earnings per share increased by 14.4% to $3.65 in 2010 compared with the previous fiscal year. Fully diluted net
earnings per share for 2009 increased by 23.6% to $3.19 compared to $2.58 in 2008.
The Company recorded non-recurring items for all three fiscal years. These items consisted of income tax expense
decreases of $10.0 million in 2010, $2.7 million in 2009 and $11.4 million in 2008, and pre-tax banner conversion
costs of $0.9 million in 2010 and $11.0 million in 2009. Excluding all of these items, adjusted net earnings(1) for fiscal
2010 were $382.4 million compared to $359.0 million in 2009 and $280.8 million in 2008. Adjusted fully diluted net
earnings per share(1) for fiscal 2010 were $3.56 compared to $3.23 in 2009 and $2.48 in 2008.
The increases in net earnings and adjusted net earnings(1) for 2010 compared to 2009 are due primarily to an
increase in our gross margins driven by our improved store operations. The increases in net earnings and adjusted
net earnings(1) for 2009 compared to 2008 were due to effective merchandising, ongoing efforts to improve execution
in Ontario, including gross margins, and to the difficulties encountered during the first two quarters of 2008.
Return on shareholders’ equity totalled 16.6% in 2010, 16.4% in 2009 and 14.6% in 2008. Annual dividends totalled
$69.2 million in 2010, $59.3 million in 2009 and $55.3 million in 2008, respectively representing 19.5%, 20.3%, and
19.9% of net earnings for the preceding fiscal years. Total assets were $4,821.6 million in 2010, $4,658.1 million in
2009 and $4,425.6 million in 2008. Long-term debt was $1,004.3 million in 2010 and 2009, and $1,005.0 million in
2008.
OUTLOOK
We expect(2), in the next fiscal year, the economic and competitive environments to remain challenging, consumers to
remain cautious and food prices to be relatively stable. We are nevertheless confident that we can continue(2) to grow
with our business strategy, Dunnhumby Canada joint venture, Metro & Moi loyalty program as well as the
commitment and quality of execution by our teams.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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OPERATING RESULTS
SALES
Sales were $11,342.9 million in 2010 compared to $11,196.0 million in 2009, an increase of 1.3%.
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)(1)
EBITDA(1) for fiscal 2010 was $787.0 million or 6.9% of sales compared to $741.6 million or 6.6% of sales for fiscal
2009. Excluding non-recurring costs of $0.9 million and $11.0 million before taxes to convert our Ontario
supermarkets to the Metro banner in fiscal 2010 and 2009 respectively, adjusted EBITDA(1) represented 6.9% of
sales in 2010 and 6.7% in 2009.
Our share of earnings from our investment in Alimentation Couche-Tard for fiscal 2010 was $40.4 million compared
to $37.4 million last year. Excluding non-recurring items as well as our share of earnings from our investment in
Alimentation Couche-Tard, our adjusted EBITDA(1) for fiscal 2010 was $747.5 million or 6.6% of sales versus
$715.2 million or 6.4% of sales for fiscal 2009.
These increases are due mainly to an increase in our gross margins driven by our improved store operations.
EBITDA(1) adjustments
(Millions of dollars,
unless otherwise indicated)
EBITDA
Banner conversion costs
Adjusted EBITDA
Share of earnings
from our investment in
Alimentation Couche-Tard
Adjusted EBITDA excluding
share of earnings
2010
2009
EBITDA
Sales
787.0
11,342.9
0.9
─
787.9
11,342.9
EBITDA/
sales (%)
6.9
6.9
EBITDA
Sales
741.6
11,196.0
11.0
─
752.6
11,196.0
EBITDA/
sales (%)
6.6
6.7
(40.4)
─
(37.4)
─
747.5
11,342.9
6.6
715.2
11,196.0
6.4
DEPRECIATION AND AMORTIZATION AND FINANCIAL COSTS
Total amortization expenses for fiscal 2010 amounted to $201.2 million, compared with $189.1 million last year.
Financial costs for fiscal 2010 totalled $44.7 million compared to $48.0 million in 2009. Interest rates for fiscal 2010
averaged 4.0% compared to 4.4% last year.
INCOME TAX
Fiscal 2010 income tax expenses of $149.3 million represented an effective tax rate of 27.6%, compared to tax
expenses of $150.1 million and an effective tax rate of 29.8% in fiscal 2009. During these two fiscal years, fiscal
authorities approved reductions in the income tax rates applicable to business income and investment. These
reductions in tax rates reduced our net future income tax liabilities as well as our income tax expenses by
$10.0 million in 2010 and $2.7 million in 2009. Excluding these reductions, our effective tax rates were 29.4% for
fiscal 2010 and 30.3% for fiscal 2009.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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NET EARNINGS
Net earnings for fiscal 2010 reached $391.8 million versus $354.4 million last year, up 10.6%. Fully diluted net
earnings per share were $3.65 for 2010 compared to $3.19 last year, an increase of 14.4%. Excluding the income tax
expense decreases of $10.0 million in 2010 and $2.7 million in 2009 as well as pre-tax banner conversion costs of
(1) were $382.4 million for 2010, up 6.5% from
$0.9 million in 2010 and $11.0 million in 2009, adjusted net earnings
(1) were $3.56, up 10.2% from $3.23 last
$359.0 million for fiscal 2009. Adjusted fully diluted net earnings per share
year.
�
�
Net earnings adjustments
Net earnings
Banner conversion
costs after taxes
Decrease in tax expense
Adjusted net earnings
(1)
2010
2009
Change (%)
Fully
diluted
EPS
(Dollars)
Fully
diluted
EPS
(Dollars)
(Millions
of dollars)
(Millions
of dollars)
Net
earnings
Fully
diluted
EPS
391.8
3.65
354.4
3.19
10.6
14.4
0.6
─
7.3
0.06
(10.0)
(0.09)
(2.7)
(0.02)
382.4
3.56
359.0
3.23
6.5
10.2
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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QUARTERLY HIGHLIGHTS
(Millions of dollars, unless otherwise indicated)
2010
2009
Change (%)
Sales
Q1(3)
Q2(3)
Q3(4)
Q4(3)
Year
Net earnings
Q1(3)
Q2(3)
Q3(4)
Q4(3)
Year
Adjusted net earnings(1)
Q1(3)
Q2(3)
Q3(4)
Q4(3)
Year
Fully diluted net earnings per share (Dollars)
Q1(3)
Q2(3)
Q3(4)
Q4(3)
Year
Adjusted fully diluted net earnings per share(1) (Dollars)
Q1(3)
Q2(3)
Q3(4)
Q4(3)
Year
(3)
(4)
12 weeks
16 weeks
2,645.0
2,576.7
3,561.3
2,559.9
11,342.9
2,600.5
2,549.7
3,513.3
2,532.5
11,196.0
98.1
80.3
120.0
93.4
391.8
88.7
80.3
120.0
93.4
382.4
0.91
0.74
1.12
0.88
3.65
0.82
0.74
1.12
0.88
3.56
81.1
76.3
112.6
84.4
354.4
84.1
77.2
111.8
85.9
359.0
0.73
0.68
1.01
0.77
3.19
0.76
0.68
1.01
0.78
3.23
1.7
1.1
1.4
1.1
1.3
21.0
5.2
6.6
10.7
10.6
5.5
4.0
7.3
8.7
6.5
24.7
8.8
10.9
14.3
14.4
7.9
8.8
10.9
12.8
10.2
First, second, third and fourth quarter sales for 2010 were up 1.7%, 1.1%, 1.4% and 1.1% respectively over those in
fiscal 2009. These increases were achieved despite persistent deflation in certain product categories in 2010,
whereas last year, high food price inflation and the temporary closing of several stores of a competitor due to a labour
conflict had a positive impact on our sales for the corresponding quarters.
First quarter net earnings and fully diluted net earnings per share for 2010 were up 21.0% and 24.7% respectively
over those in fiscal 2009. Excluding banner conversion costs of $0.9 million and $4.5 million before taxes recorded
respectively in the first quarters of 2010 and 2009, as well as the income tax expense decrease of $10.0 million in the
first quarter of 2010 further to future decreases in the Ontario tax rate, adjusted net earnings(1) were up 5.5% and
adjusted fully diluted net earnings per share(1) were up 7.9%.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Second quarter net earnings and fully diluted net earnings per share for 2010 were up 5.2% and 8.8% respectively
from those in 2009.
Third quarter net earnings and fully diluted net earnings per share in 2010 were up 6.6% and 10.9% respectively from
2009. Excluding non-recurring items recorded in the third quarter of 2009, namely $2.9 million before taxes to convert
our Ontario supermarkets to the Metro banner as well as an income tax expense decrease of $2.7 million, net
earnings and fully diluted net earnings per share for the third quarter of 2010 were up 7.3% and 10.9%, compared to
adjusted net earnings(1) and adjusted fully diluted net earnings per share(1) for the third quarter of 2009.
Fourth quarter net earnings and fully diluted net earnings per share in 2010 were up 10.7% and 14.3% over those for
2009. Excluding 2009 fourth quarter banner conversion costs of $2.3 million before taxes, net earnings and fully
diluted net earnings per share for the fourth quarter of 2010 were up 8.7% and 12.8% over adjusted net earnings(1)
and adjusted fully diluted net earnings per share(1) for the fourth quarter of 2009.
(Millions of dollars)
Q1
Q2
Q3
Q4
Fiscal
year
Q1
Q2
Q3
Q4
Fiscal
year
2010
2009
98.1
Net earnings
Banner conversion costs
after taxes
Decrease in tax expenses (10.0)
Adjusted net earnings(1)
88.7
0.6
80.3
120.0
93.4
391.8
81.1
76.3
112.6 84.4 354.4
─
─
─
─
─
─
0.6
(10.0)
3.0
─
0.9
─
1.9
1.5
7.3
(2.7)
─
(2.7)
80.3
120.0
93.4
382.4
84.1
77.2
111.8 85.9 359.0
(Dollars and per share)
Q1
Q2
Q3
Q4
Fiscal
year
Q1
Q2
Q3
Q4
Fiscal
year
2010
2009
Fully diluted net earnings
Banner conversion costs
after taxes
Decrease in tax expenses
(0.09)
0.91
0.74
1.12
0.88
3.65
0.73
0.68
1.01
0.77
3.19
─
─
─
─
─
─
─
─
0.03
(0.09)
─
─
─
0.02 0.01
0.06
(0.02)
─
(0.02)
Adjusted fully diluted
net earnings(1)
0.82
0.74
1.12
0.88
3.56
0.76
0.68
1.01 0.78
3.23
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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CASH POSITION
OPERATING ACTIVITIES
Operating activities generated cash flows of $547.8 million for fiscal 2010, compared to $520.1 million for fiscal 2009.
This increase in 2010 fiscal year cash flows over the 2009 fiscal year is due primarily to increased net earnings and
variations in non-cash working capital.
INVESTING ACTIVITIES
Investing activities required outflows of $339.8 million for fiscal 2010 versus $258.8 million for fiscal 2009. The
increase in outflows for fiscal 2010 is due primarily to the acquisition of 18 stores for valuable cash consideration of
$152.3 million (net of cash acquired totalling $0.3 million).
During fiscal 2010, the Company and its retailers invested $278.7 million in our retail network, for a net expansion of
364,100 square feet or 1.9%. Major renovations and expansions of 35 stores were completed, and 13 new stores
were opened.
FINANCING ACTIVITIES
Financing activities required outflows of $234.7 million for fiscal 2010 versus $171.6 million for fiscal 2009. The
increase of outflows is attributable to a greater number of Class A Subordinate shares being repurchased, higher
dividends, and a decrease in issuance of shares in 2010 compared to 2009.
FINANCIAL POSITION
Despite the difficult economic environment, we do not anticipate(2) any liquidity risk and consider our financial position
at the end of fiscal 2010 as very solid. We had an unused authorized revolving line of credit of $400.0 million. Our
long-term debt corresponded to 29.1% of the combined total of long-term debt and shareholders’ equity (long-term
debt/total capital).
At the end of fiscal 2010, the main elements of our long-term debt were as follows:
Interest Rate
Balance
(Millions of dollars)
Maturity
Credit A Facility
Rates fluctuate with changes in
bankers’ acceptance rates
Series A Notes
Series B Notes
4.98% fixed rate
5.97% fixed rate
369.3
200.0
400.0
August 15, 2012
October 15, 2015
October 15, 2035
At the end of fiscal 2010, one interest rate swap agreement in the notional amount of $50.0 million was outstanding
under our Credit A Facility. This agreement provides for the exchange of variable interest payments for fixed interest
payments according to the following terms:
Fixed Rate
4.0425%
Notional Amount
(Millions of dollars)
50.0
Maturity
December 16, 2010
Giving effect to this swap agreement, at the end of fiscal 2010, long-term indebtedness comprised $650.0 million at
fixed rates ranging from 4.4925% to 5.97% and $319.3 million at variable rates which fluctuate with changes in
bankers’ acceptance rates.
At the end of fiscal 2010, we also had foreign exchange forward contracts to hedge against the effect of foreign
exchange rate fluctuations on our future U.S. dollar denominated purchases. The fair value of these short-term
foreign exchange forward contracts was insignificant.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Our main financial ratios were as follows:
Financial structure
Long-term debt (Millions of dollars)
Shareholders’ equity (Millions of dollars)
Long-term debt/total capital (%)
Results
EBITDA(1)/Financial costs (Times)
CAPITAL STOCK
(Thousands)
Balance – beginning of year
Share issue
Share redemption
Acquisition of treasury shares
Released treasury shares
Stock options exercised
Share conversion
Balance – end of year
Balance as at December 3, 2010 and December 4, 2009
STOCK OPTION PLAN
As at
September 25,
2010
As at
September 26,
2009
1,004.3
2,442.8
29.1
2010
17.6
1,004.3
2,264.1
30.7
2009
15.5
Class A
Subordinate Shares
Class B
Shares
2010
2009
2010
2009
107,830
10
(3,911)
─
54
368
87
104,438
103,787
109,806
33
(3,989)
(115)
52
2,011
32
107,830
107,055
718
─
─
─
─
─
(87)
631
631
750
─
─
─
─
─
(32)
718
642
Stock options (Thousands)
Exercise prices (Dollars)
Weighted average exercise price (Dollars)
PERFORMANCE SHARE UNIT PLAN
Performance share units (Thousands)
Weighted average maturity (Months)
As at
December 3,
2010
1,763
20.20 to 44.19
32.32
As at
September 25,
2010
1,777
20.20 to 44.19
32.29
As at
September 26,
2009
1,864
17.23 to 39.17
28.53
As at
December 3,
2010
As at
September 25,
2010
As at
September 26,
2009
309
14
309
16
268
18
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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NORMAL COURSE ISSUER BID PROGRAM
The Company decided to renew the issuer bid program as an additional option for using excess funds. Thus, we will
be able to decide, in the shareholders’ best interest, to reimburse debt or to repurchase Company shares. The Board
of Directors authorized the Company to repurchase, in the normal course of business, between September 8, 2010
and September 7, 2011, up to 6,000,000 of its Class A Subordinate Shares representing approximately 5.7% of its
issued and outstanding shares at the close of the Toronto Stock Exchange (TSX) on August 6, 2010. Repurchases
will be made through the stock exchange at market price, in accordance with its policies and regulations, as well as
by other means as may be permitted by TSX and any other securities regulatory authorities, including by private
agreements. The Class A Subordinate Shares so repurchased will be cancelled. Under the normal course issuer bid
program covering
the Company repurchased
4,030,600 Class A Subordinate shares at an average price of $40.42 per share for a total of $162.9 million. Under the
existing program covering the period from September 8, 2010 to September 7, 2011, the Company has repurchased,
as of December 3, 2010, 934,300 Class A Subordinate shares at an average price of $44.92 per share for a total of
$42.0 million.
from September 8, 2009
to September 7, 2010,
the period
DIVIDEND POLICY
The Company’s dividend policy is to pay an annual dividend representing approximately 20% of net earnings for the
preceding fiscal year before extraordinary items. For the sixteenth consecutive year, the Company paid quarterly
dividends to its shareholders. The annual dividend increased by 20.5%, to $0.6475 per share, compared to $0.5375
in 2009, for total dividends of $69.2 million in 2010 compared to $59.3 million in 2009, an increase of 16.7%.
Dividends paid in 2010 represented 19.5% of net earnings for the preceding fiscal year, compared to 20.3% in 2009.
SHARE TRADING
The value of METRO shares remained in the $33.02 to $47.01 range throughout fiscal 2010 ($27.38 to $40.00 in
2009). A total of 72.3 million shares traded on the TSX during this fiscal year (114.9 million in 2009). The closing price
on Friday, September 24, 2010 was $45.15, compared to $34.73 at the end of fiscal 2009. Since fiscal year-end, the
value of METRO shares has remained in the $43.50 to $47.47 range. The closing price on December 3, 2010 was
$46.40. METRO shares have maintained sustained growth over the last 10 years, reflecting a performance superior
to that of the S&P/TSX index and the Canadian Food Industry sector index.
COMPARATIVE SHARE PERFORMANCE (10 YEARS)*
550.84
192.63
149.07
00
01
02
03
04
Metro Inc.
S&P/TSX
S&P/TSX Food Retail
05
*
06
07
08
09
10
$100 invested on September 30, 2000 in shares,
including reinvestment of dividends and measured
each year on September 30.
SOURCES OF FINANCING
Our operating activities generated cash flows in the amount of $547.8 million in 2010. These cash flows were
sufficient to finance our investing activities, including the acquisition of $196.0 million in fixed and intangible assets
and the acquisition of 18 stores for valuable cash consideration of $152.3 million.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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At 2010 fiscal year-end, our financial position was principally comprised of cash and cash equivalents in the amount
of $214.7 million, an unused revolving line of credit in the amount of $400.0 million, Credit A Facility in the amount of
$369.3 million, $200.0 million in notes at a rate of 4.98% maturing in 2015, and $400.0 million in notes at a rate of
5.97% maturing in 2035.
Despite the current economic crisis, we do not anticipate(2) any liquidity risk and consider that our financial position at
the end of fiscal 2010 remains very solid.
We believe(2) that cash flows from next year’s operating activities should be sufficient to finance the Company’s
investing and financing activities, including investment of approximately $225 million(2) in fixed and intangible assets.
CONTRACTUAL OBLIGATIONS
Payment commitments by fiscal year (capital and interest)
(Millions
of dollars)
2011
2012
2013
2014
2015
2016 and
thereafter
Loans
Notes
13.9
381.9
1.0
0.9
0.7
14.6
413.0
33.8
33.8
33.8
33.8
33.8
1,077.8
1,246.8
Capital
lease
commitments
Service
contract
commitments
Operating
lease
commitments
Lease and
sublease
commitments(5)
5.1
5.1
5.1
4.6
4.6
19.4
43.9
66.8
48.8
46.6
46.4
44.9
163.8
155.5
138.8
122.6
106.9
40.3
39.4
36.0
32.6
29.0
Total
323.7
664.5
261.3
240.9
219.9
256.5
510.0
652.6
1,340.2
240.0
417.3
2,260.9
3,971.2
(5)
The Company has lease commitments with varying terms through 2031, to lease premises which it sublets to clients, generally under the same
conditions.
RELATED PARTY TRANSACTIONS
During fiscal 2010, sales to companies controlled by a member of the Board of Directors, specifically Serge Ferland,
totalled $26.7 million ($27.3 million in 2009). These transactions were conducted in the normal course of business
and were measured at the exchange amount. As at September 25, 2010, accounts receivable included a balance of
$0.9 million ($0.9 million as at September 26, 2009) resulting from these transactions.
FOURTH QUARTER
(Millions of dollars, unless otherwise indicated)
Sales
EBITDA(1)
Adjusted EBITDA(1)
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share (Dollars)
Adjusted fully diluted net earnings per share(1) (Dollars)
Cash flows from:
Operating activities
Investing activities
Financing activities
2010
2,559.9
185.6
185.6
93.4
93.4
0.88
0.88
179.3
(30.2)
(54.6)
2009
2,532.5
175.8
178.1
84.4
85.9
0.77
0.78
230.8
(94.8)
(58.7)
Change (%)
1.1
5.6
4.2
10.7
8.7
14.3
12.8
─
─
─
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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SALES
2010 fourth quarter sales reached $2,559.9 million compared to $2,532.5 million last year, an increase of 1.1%.
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)(1)
Fourth quarter EBITDA(1) in 2010 was $185.6 million, up 5.6% from $175.8 million for the same quarter last year.
Fourth quarter EBITDA(1) represented 7.3% of sales versus 6.9% last year. Excluding banner conversion costs of
$2.3 million before taxes in 2009, adjusted EBITDA(1) for the fourth quarter represented 7.0% of sales.
Our share of earnings from our investment in Alimentation Couche-Tard for the fourth quarter of 2010 was
$15.1 million compared to $11.7 million for the corresponding period of fiscal 2009. Excluding non-recurring items as
well as our share of earnings from our investment in Alimentation Couche-Tard, our adjusted EBITDA(1) for the fourth
quarter of 2010 was $170.5 million or 6.7% of sales versus $166.4 million or 6.6% of sales for the fourth quarter of
2009.
These increases are due mainly to an increase in our gross margins driven by our improved store operations.
EBITDA(1) adjustments
(Millions of dollars,
unless otherwise indicated)
EBITDA
Banner conversion costs
Adjusted EBITDA
Share of earnings from
our investment in
Alimentation Couche-Tard
Adjusted EBITDA excluding
share of earnings
4th quarter 2010
4th quarter 2009
EBITDA
Sales
185.6
─
185.6
2,559.9
─
2,559.9
EBITDA/
Sales (%)
7.3
7.3
EBITDA
Sales
175.8
2.3
178.1
2,532.5
─
2,532.5
EBITDA/
Sales (%)
6.9
7.0
(15.1)
─
(11.7)
─
170.5
2,559.9
6.7
166.4
2,532.5
6.6
DEPRECIATION AND AMORTIZATION AND FINANCIAL COSTS
The 2010 fourth quarter amortization expenses amounted to $45.3 million compared to $46.3 million for the same
period last year. Fourth quarter financial costs totalled $9.5 million versus $10.1 million last year.
INCOME TAXES
The 2010 fourth quarter income tax expenses of $37.4 million represented an effective tax rate of 28.6%. The
2009 fourth quarter tax expenses were $35.0 million, representing an effective tax rate of 29.3%.
NET EARNINGS
The 2010 fourth quarter net earnings were $93.4 million, compared to $84.4 million for the corresponding quarter last
year, an increase of 10.7%. Fully diluted net earnings per share rose 14.3% to $0.88, up from $0.77 last year.
Excluding banner conversion costs of $2.3 million before taxes recorded in the fourth quarter of 2009, our 2010 fourth
quarter net earnings and fully diluted net earnings per share rose 8.7% and 12.8% respectively.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Net earnings adjustment
Net earnings
Banner conversion
costs after taxes
Adjusted net earnings
(1)
CASH POSITION
4th quarter 2010
4th quarter 2009
Change (%)
Fully
diluted
EPS
(Dollars)
0.88
─
0.88
(Millions
of dollars)
93.4
─
93.4
Fully
diluted
EPS
(Dollars)
(Millions
of dollars)
Net
earnings
Fully
diluted
EPS
84.4
0.77
10.7
14.3
1.5
85.9
0.01
0.78
8.7
12.8
Operating activities
Operating activities generated cash flows of $179.3 million in the fourth quarter of 2010 compared to $230.8 million
for the same period in 2009. This decrease in fourth quarter cash flows compared to the same period in 2009 is due
primarily to variations in non-cash working capital.
Investing activities
Investing activities required outflows of $30.2 million in the fourth quarter of 2010 versus $94.8 million in the fourth
quarter of 2009. This decrease in outflows is due primarily to reduced acquisition of fixed assets in 2010.
Financing activities
Financing activities required outflows of $54.6 million in the fourth quarter of 2010 compared to $58.7 million in the
fourth quarter of 2009.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company adopted a risk management policy, approved by the Board of Directors in December 2005, setting
forth guidelines relating to its use of derivative financial instruments. These guidelines prohibit the use of derivatives
for speculative purposes. In 2010, the Company used derivative financial instruments as described in Notes 2 and 25
to the consolidated financial statements.
NEW ACCOUNTING POLICY RECENTLY PUBLISHED
International Financial Reporting Standards
On February 13, 2008, the Accounting Standards Board confirmed the date of the changeover from Canadian
Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). Canadian
enterprises with public disclosure obligations must adopt IFRS for their interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011. The Company’s IFRS changeover date will be the first
day of fiscal 2012, namely September 25, 2011.
We set up a project structure to achieve the changeover of our consolidated financial statements to IFRS. A
multidisciplinary working group analyzes, recommends accounting policy choices and implements each IFRS
standard. A steering committee made up of senior executives approves accounting policy choices and makes sure
that information technology, internal control, contractual and any other adjustments are made. The external auditors
are notified of our choices and consulted on them. The Company’s Audit Committee ensures that management fulfills
its responsibilities and successfully accomplishes the changeover to IFRS.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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We developed a work plan whose phases are outlined in the following tables, with actions, timetable and progress.
Phase 1: Preliminary Study and Diagnostic
Actions
Identification of the IFRS standards that will require changes with regard to measurement
in consolidated financial statements and disclosure.
Rank of standards based on their anticipated impact on our consolidated financial
statements and the effort their implementation requires.
Timetable
Progress
End of our 2008 fiscal year.
Completed.
Phase 2: Standards Analysis
Actions
Analysis of the differences between GAAP and IFRS.
Selection of the accounting policies that the Company will apply on an ongoing basis.
Company’s selection of IFRS 1, “First-time Adoption of IFRS” exemptions at the date of
transition.
Calculation of the quantitative impact on the consolidated financial statements.
Disclosure analysis.
information technology (IT);
internal control over financial reporting (ICFR);
Identification of the collateral impacts in the following areas:
•
•
• disclosure controls and procedures (DC&P);
•
•
•
contracts;
compensation;
training.
Timetable
Progress
We have prepared a detailed timetable that contemplates the bulk of the analysis that will
be completed by the end of September 2010. We prioritized standards based on their
ranking in the diagnostic, the time needed to complete the analysis and implementation
as well as working group members’ availability.
At the end of fiscal 2010, analysis of the majority of IFRS standards and interpretations
that may have an impact on our Company was completed.
As for ICFR and DC&P, analysis of IFRS standards and interpretations shows that the
impact will not be material. However, for the year of transition, we will have to implement
further controls regarding comparatives and additional information that will be disclosed.
The Company’s Audit Committee, Steering Committee and key personnel have received
ongoing training on the principal differences between GAAP and IFRS, the choices made
with regard to accounting policies and IFRS 1 exemptions at the date of transition.
Analysis of our contracts and compensation programs established that the impact will not
be material.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Phase 3: Implementation
Actions
Preparation of the opening balance sheet at the date of transition.
Compilation of the comparative financial data.
Production of the interim consolidated financial statements and the associated disclosure.
Production of the annual consolidated financial statements and the associated disclosure.
Implementation of changes regarding collateral impacts.
Timetable
At the end of fiscal 2011, our opening balance sheet, comparative financial data under
IFRS and changes regarding collateral impacts will be completed.
Progress
In fiscal 2012, we will produce our interim and annual consolidated financial statements
and disclosure in accordance with IFRS.
We have identified and implemented an IT solution that will allow us to run parallel
integrated GAAP and IFRS systems from the start of fiscal 2011 for the comparative
financial statements.
We have also prepared a preliminary version of our annual financial statements according
to IFRS standards.
We have noted the differences in accounting treatment and presentation between some IFRS standards and
interpretations and our current accounting policies and have made choices, as warranted, with regard to these
standards. The most significant differences and our main choices are set out in the following tables:
Differences in accounting treatment and choices made
Standards
Comparison between IFRS and GAAP
Preliminary Findings
Borrowing costs
Fixed and intangible
assets and investment
property
Fixed assets
IFRS: We have to capitalize borrowing costs
on qualifying assets, i.e. assets that require an
extended period of preparation before they are
usable or saleable.
GAAP: These borrowing costs may be
capitalized.
IFRS: After initial recognition, we can measure
our fixed and intangible assets and investment
property using
the
revaluation model.
GAAP: The revaluation model is not allowed.
the cost model or
IFRS: We have to amortize our fixed assets
based on their components.
GAAP: Component identification rules are less
stringent.
We will not capitalize borrowing costs
on qualifying assets, as
they are
deemed to be immaterial.
We will continue to use the cost model
in order
to avoid balance sheet
variations in the fair value of fixed and
investment
intangible assets and
property and the corresponding impact
on P&L statements.
The roof and HVAC system will be
amortized separately from the building.
The carrying value of these assets and
corresponding depreciation expense
will be different, but the impact should
not be material.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Impairment of assets
Share-based payment
Earnings per share
Customer loyalty
programs
Employee Benefits
identifiable group of assets
IFRS: Impairment testing of our assets is
conducted at the level of the cash generating
unit (CGU) or group of CGUs. A CGU is the
that
smallest
generates cash
largely
inflows
independent of the cash inflows from other
assets or groups of assets.
GAAP: Impairment testing is conducted at the
level of a group of assets or a reporting unit.
that are
impairment
testing will
be
Our
conducted at the level of each store
(CGU).
Impairment testing of warehouses will
be done at the level of a group of
CGUs.
Impairment testing of corporate assets
will be conducted at
level of
different groups of CGUs.
Impairment testing of goodwill will be
conducted at the level of our unique
operating segment.
Impairment
results will be
testing
different, but their impact should not be
material.
the
IFRS: When stock option awards vest
gradually, each tranche is to be considered as
a separate award.
GAAP: The gradually vested tranches may be
considered as a single award.
The compensation expense will have to
be recognized over the expected term
of each vested
It will be
different, but the impact should not be
material.
tranche.
IFRS: We have to independently determine, for
the interim period and the year-to-date, the
to
number of potentially dilutive shares
consider in calculating diluted earnings per
share.
GAAP: The
independently
determined for the interim period, but the year-
to-date is a weighted average of the periods.
number
is
Diluted earnings per share will be
different, but the impact should not be
material.
IFRS: For the loyalty programs, we have to
record the cost of points as a reduction in
sales.
GAAP: No standard exists, but the Canadian
practice is to record the cost of points in the
cost of sales and operating expenses.
IFRS: We have
the choice of deferring
recognition of actuarial gains and losses using
the corridor approach or of
immediately
recognizing actuarial gains and losses in full in
P&L or in comprehensive income.
GAAP: We have a similar choice of accounting
policy without the possibility of immediate
recognition to comprehensive income.
Sales will be different, but the impact
should not be material.
There will be no
earnings.
impact on net
We will recognize full actuarial gains
in
losses
and
comprehensive
without
impacting P&L.
immediately
income,
IFRS: We have to recognize past service cost
for vested benefits immediately in P&L.
GAAP: Past service cost has to be amortized
in a straight line over the average remaining
service period of active participants until the
full eligibility date, regardless of vesting.
the date of
At
transition, we will
recognize past service cost for vested
benefits in retained earnings. After the
changeover, past service cost
for
vested benefits will be recognized in
P&L.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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of
of
future
obligations
Valuation
calculated on a going concern and
solvency basis should decrease the
availability
contribution
reductions and increase our defined
benefit obligations. We will recognize
differences at the date of transition in
retained earnings, and future variations
in comprehensive income.
future
Our multi-employer plans are defined
benefit plans, however they will be
accounted for as if they were defined
sufficient
contribution plans
to
information
accurately determine our obligations.
Additional
information regarding
situation will have to be disclosed.
available
since
this
not
is
We will use the equity method.
There will be no material impact on the
presentation of financial statements and
no impact on net earnings.
The impact on our provisions should
not be material.
Some provisions might be presented
separately in the statement of financial
position.
Employee Benefits
(cont’d)
Joint ventures
Provisions
IFRS: Recognition of defined benefit assets is
limited to the availability of future contribution
reductions based on
future obligations
calculated on an accounting, going concern
and solvency basis.
GAAP: Recognition of defined benefit assets is
limited to the availability of future contribution
reductions based on
future obligations
calculated solely on an accounting basis.
to
if
implicit
IFRS: A multi-employer plan with
obligations shall be accounted for as a defined
sufficient
benefit plan. However, when
is not available,
information
it shall be
it were a defined
if
for as
accounted
contribution plan. Additional information shall
financial statements.
the
be added
Furthermore,
is a contractual
there
commitment, it shall be recognized in P&L.
GAAP: A multi-employer plan is generally
accounted for as a defined contribution plan
because information is usually not available.
However, if sufficient information is available, it
must be accounted for as a defined benefit
plan. The employee future benefits standard
doesn’t specifically address the accounting
treatment of a
contractual agreement.
However, other GAAP standards cover this
type of commitment and
the accounting
treatment is the same as IFRS.
IFRS: We may account for our interests in joint
ventures using proportionate consolidation or
the equity method.
GAAP: We have to account for them using
proportionate consolidation.
IFRS: We have to account for a provision
when we have a present obligation resulting
from a past event, it is more likely than not
(interpreted as 50% and more) that an outflow
of resources will be required to settle the
obligation and its amount can be reliably
estimated.
Moreover, we have to disclose total provisions
separately in the statement of financial position
(GAAP: balance sheet).
GAAP: The criteria are the same with the
exception of the high probability (interpreted as
approximately 75% and more) that an outflow
of resources will be required.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Business
combinations
Investments in
associates
Income taxes
issued stock
fair value of
IFRS: The
calculated at the date of acquisition.
GAAP: It’s calculated over a reasonable period
before and after the date of the transaction’s
announcement.
is
IFRS: Acquisition-related costs are expensed
when incurred.
GAAP: They are considered in the purchase
price allocation if they represent incremental
costs.
IFRS: The provision for restructuring costs,
considered in the purchase price allocation,
excludes costs
restructuring plan
for a
determined and developed by the acquirer.
GAAP: These restructuring costs can be
included in the purchase price allocation if they
meet certain conditions.
IFRS: In applying the equity method, the
difference between the associate’s reporting
date and the investor’s cannot be greater than
three months.
GAAP: No time limit is mentioned.
IFRS: Deferred tax (GAAP: future income tax)
is calculated on any temporary difference.
However, there are two exemptions where no
deferred tax is recognized:
•
• on an asset acquired outside a business
combination whose carrying amount and
tax base differ.
initially on goodwill;
GAAP: Future income tax is calculated on any
temporary difference. However, no
future
income tax is initially recognized for goodwill
and for intangible asset acquisition, deductible
from the cumulative eligible capital amount at
75% of its book value, as its tax basis is
adjusted with the result that it is deemed equal
to the carrying amount.
Moreover, when an asset is acquired outside a
business combination and its tax base differs
from its carrying amount, future income tax is
recognized on the variance and the cost of the
asset is adjusted in consideration.
IFRS: Deferred tax assets and liabilities are
measured using tax rates that have been
enacted or substantively enacted.
GAAP: A tax rate has effect or substantive
effect when a majority government bill is tabled
for first reading or when a minority government
bill is tabled for third reading.
There will be no impact on our past
business combinations, since we chose
to take advantage of the exemption
from retrospective application (IFRS 1).
It will have no impact on our investment
in Alimentation Couche-Tard, since the
difference between the two reporting
dates is always less than three months.
the date of
At
transition, we will
recognize a deferred tax adjustment for
the assets concerned. The
impact
should not be material.
taxes may be
Additional deferred
recognized for intangible assets that
are deductible
the cumulative
from
eligible capital acquired in a business
combination
assets
through
acquisition.
an
the date of
At
transition, we will
examine current bills, and adjust, if
necessary, our deferred taxes.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Income taxes (cont’d)
IFRS: Accounting for subsequent changes in
deferred tax of a transaction is consistent with
the accounting for the transaction itself, i.e. in
P&L, equity or other comprehensive income.
The impact of a change in rate or
regulations will have to be recognized
where
transaction was
the
recognized.
initial
GAAP: When a subsequent event affects the
amount of
initially
recognized, the adjustment of the amount must
be recognized in P&L.
income
future
tax
IFRS: Deferred tax should be recognized on
transactions between entities of a consolidated
group, whose profits are not realized, at the tax
rate of the corporation acquiring the assets.
GAAP: No future income tax is recognized on
transactions between entities of a consolidated
group whose profits are not realized.
Deferred tax at the rate of the entity
acquiring the assets will have to be
recognized
intercompany
transactions. The impact should not be
material.
on
The majority of our leases will continue
to be classified as operating leases and
the impact should not be material.
Leases
IFRS: A lease is classified as a finance lease
(GAAP: capital lease) if substantially all risks
to ownership are
and rewards
transferred to the lessee. For example:
•
incidental
the lease transfers ownership of the asset
to the lessee at the end of the lease term;
there is a bargain purchase option for the
lessee at the end of the lease term;
the lease term is for the major part of the
economic life of the leased asset;
the present value of the minimum lease
payments amounts to at least substantially
all of the fair value of the leased asset;
the leased asset is of such a specialized
nature that only the lessee can use it.
•
•
•
•
If the lease does not transfer substantially all
risks and rewards, then it is classified as an
operating lease.
GAAP: As well these criteria, quantitative
criteria are also used to determine whether
substantially all risks and rewards have been
transferred or not.
IFRS 1 provides exemptions from retrospective application of some of the above standards, from which we have
made the choices set out in the following table:
Optional Exemptions
Preliminary Findings
Borrowing costs
Deemed cost
This exemption allows us not to capitalize borrowing costs on our qualifying
assets before the IFRS transition date.
Given that we will not capitalize these borrowing costs, we will not use the
exemption.
On the IFRS transition date, we can recognize each fixed and intangible
asset and investment property at its deemed cost, which shall be its fair
value.
We have decided not to avail ourselves of this exemption.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Share-based payment
Employee benefits
Business combinations
This exemption would relieve us from applying the standard to equity
instruments acquired before the IFRS transition date.
We have decided not to avail ourselves of this exemption.
The exemption allows us to recognize all actuarial gains or losses at the
date of transition to IFRS in retained earnings, regardless of the subsequent
accounting treatment chosen.
We have chosen to take advantage of this exemption.
The exemption allows us to not apply the standard to business combinations
occurred before the date of transition to IFRS.
We have chosen to take advantage of this exemption for business
combinations concluded before September 26, 2010.
Differences in presentation and choices made
Standards
Comparison between IFRS and GAAP / choices made as warranted
Statement of financial position
IFRS: A statement of financial position as at the beginning of the
comparative period has to be presented when:
• an accounting policy is applied retrospectively;
•
GAAP: This third balance sheet column is not required.
items in financial statements are retrospectively restated or reclassified.
IFRS: Deferred tax assets (liabilities) are classified as non-current items
(GAAP: long-term).
GAAP: The short-term and long-term future income tax assets (liabilities)
are presented separately.
Statement of comprehensive income
in a single statement of comprehensive income; or
IFRS: All items of income and expense recognized in a period are to be
presented:
•
•
in two statements: a separate income statement and a second
statement beginning with net income and displaying components of
other comprehensive income.
immediately under total net income; or
GAAP: All comprehensive income items may be presented:
•
•
Choice: We will continue to present two separate statements.
in a separate statement beginning with net income.
Statement of changes in equity
IFRS: Expenses are classified based on their nature or their function.
GAAP: This classification of expenses is not required.
Choice: We will keep the existing income statement and will disclose,
through a note to the financial statements, expenses by nature or by
function.
IFRS: A statement of changes in equity must show reconciliation between
the carrying amount at the beginning and the end of the period for each
component of equity.
GAAP: Only a statement of retained earnings has to be presented.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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Statement of cash flows
Notes to financial statements
IFRS: In the statement of cash flows, interest and dividends may be
classified as follows:
•
interest and dividends paid: operating cash flows or financing cash
flows;
•
interest and dividends received: operating cash flows or investing cash
flows.
interest paid and received: operating cash flows;
GAAP: They may be classified as follows in the cash flow statement:
•
• dividends paid: financing cash flows;
• dividends received and included in net income: operating cash flows.
Choice: We will keep the existing classification of interest and dividends in
the statement of cash flows.
IFRS: Interim reports must present a statement of cash flows cumulatively
for the current financial year-to-date and for the comparable period of the
preceding financial year.
GAAP: Besides a cash flow statement cumulatively for the current financial
year-to-date and for the comparable period, interim reports must present a
cash flow statement for the interim period and one for the comparable
period.
IFRS: Reconciliations of the carrying amount at the beginning and end of
the period for several components of the statement of financial position are
presented in the notes to financial statements.
GAAP: Reconciliations are limited to certain balance sheet components.
IFRS: The total amount of key management personnel compensation must
be disclosed, by large categories, in the notes to financial statements.
GAAP: This information is not required in financial statements.
However, Canadian Securities Administrators National Instrument 51-102
demands disclosure of similar information in the proxy circular.
Amendments to IFRS standards by the International Accounting Standards Board, new information or other external
factors that may come to our attention through the changeover process to IFRS could change our preliminary
findings.
NON-GAAP MEASUREMENTS
In addition to the GAAP earnings measurements provided, we have included certain non-GAAP earnings
measurements. These measurements are presented for information purposes only. They do not have a standardized
meaning prescribed by GAAP and therefore may not be comparable to similar measurements presented by other
public companies.
EARNINGS BEFORE FINANCIAL COSTS, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)
EBITDA is a measurement of earnings that excludes financial costs, taxes, depreciation and amortization. We believe
that EBITDA is a measurement commonly used by readers of financial statements to evaluate a company’s
operational cash-generating capacity and ability to discharge its financial expenses.
ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER
SHARE
Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net earnings per share are earnings
measurements that exclude non-recurring items. We believe that presenting earnings without non-recurring items
leaves readers of financial statements better informed as to the current period and corresponding period’s earnings,
thus enabling them to better evaluate the Company’s performance and judge its future outlook.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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FORWARD-LOOKING INFORMATION
We have used, throughout this Annual Report, different statements that could, within the context of regulations issued
by the Canadian Securities Administrators, be construed as being forward-looking information. In general, any
statement contained in this Report that does not constitute a historical fact may be deemed a forward-looking
statement. Expressions such as “will reduce”, “will lower”, “will have”, “expect”, “are confident”, “intend”, “will strive”,
“will control”, will develop”, “will pursue”, “believe”, “will continue”, “will enable”, “will result”, “will be”, “should be”,
“anticipate”, “estimate”, and other similar expressions are generally indicative of forward-looking statements. The
forward-looking statements contained in this Report are based upon certain assumptions regarding the Canadian
food industry, the general economy, our annual budget, as well as our 2011 action plan.
These forward-looking statements do not provide any guarantees as to the future performance of the Company and
are subject to potential risks, known and unknown, as well as uncertainties that could cause the outcome to differ
significantly. An economic slowdown or recession, or the arrival of a new competitor, are examples described under
the “Risk Management” section of this Report that could have an impact on these statements. We believe these
statements to be reasonable and pertinent as at the date of publication of this Report and represent our expectations.
The Company does not intend to update any forward-looking statement contained herein, except as required by
applicable law.
CONTROLS AND PROCEDURES
The President and Chief Executive Officer, and the Senior Vice-President and Chief Financial Officer of the
Company, are responsible for the implementation and maintenance of disclosure controls and procedures (DC&P),
and of the internal control over financial reporting (ICFR), as provided for in National Instrument 52-109 regarding the
Certification of Disclosure in Issuers’ Annual and Interim Filings. They are assisted in this task by the Disclosure
Committee, which is comprised of members of the Company’s senior management.
An evaluation was completed under their supervision in order to measure the effectiveness of DC&P and ICFR.
Based on this evaluation, the President and Chief Executive Officer and the Senior Vice-President and Chief
Financial Officer of the Company concluded that the DC&P and the ICFR were effective as at the end of the fiscal
year ended September 25, 2010.
Therefore, the design of the DC&P provides reasonable assurance that material information relating to the Company
is made known to it by others, particularly during the period in which the annual filings are being prepared, and that
the information required to be disclosed by the Company in its annual filings, interim filings and other reports filed or
submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation.
Furthermore, the design of the ICFR provides reasonable assurance regarding the reliability of the Company’s
financial reporting and the preparation of its financial statements for external purposes in accordance with Canadian
GAAP.
SIGNIFICANT ACCOUNTING ESTIMATES
Our Management’s Discussion and Analysis is based upon our consolidated financial statements, prepared in
accordance with GAAP, and it is presented in Canadian dollars, our unit of measure. The preparation and
presentation of the consolidated financial statements and other financial information contained in this Management’s
Discussion and Analysis involves a judicious choice of appropriate accounting principles and methods whose
application requires the making of estimates and enlightened judgements. Our estimates are based upon
assumptions which we believe to be reasonable, such as those based upon past experience. These estimates
constitute the basis for our judgements regarding the carrying amount of assets and liabilities that would not
otherwise be readily available through other sources. Use of other methods of estimation might yield different
amounts than those presented. Actual results could differ from these estimates.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value. The cost of warehouse inventories is determined
by the average cost method net of certain considerations received from vendors. The cost of retail inventories is
valued at the retail price less the gross margin and certain considerations received from vendors. In addition, all costs
incurred in bringing the inventories to their present location and condition are included in the cost of warehouse and
retail inventories. Determination of gross margins requires, on the part of management, judgements and estimates,
which could affect inventory valuation on the balance sheet and also operating results.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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FIXED ASSETS AND INTANGIBLE ASSETS WITH DEFINITE LIVES
Fixed assets and intangible assets with definite lives are recorded at cost. They are depreciated and amortized on a
straight-line basis over their useful lives, which represents the period during which we anticipate an asset will
contribute to future cash flows for the Company. The use of different assumptions with regard to useful life could
result in different carrying amounts for these assets as well as for depreciation and amortization expenses.
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Intangible assets with indefinite lives are tested for impairment annually or whenever events or changes in
circumstances indicate that the asset might be impaired. When the carrying amount of an intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to the excess. To estimate fair value, we use the
royalty-free licence and capitalization of excess earnings before financial costs and income taxes methods. The use
of different assumptions and estimates such as the royalty rate and excess earnings before financial costs and
income taxes, could result in different fair values and, consequently, different carrying amounts for intangible assets
with indefinite lives, which could affect operating results.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is tested for
impairment annually or whenever events or changes in circumstances indicate that it might be impaired. The
impairment test first requires a comparison of the fair value of the reporting unit to which goodwill is assigned with its
carrying amount. When the carrying amount of a reporting unit exceeds its fair value, the fair value of the reporting
unit’s goodwill is compared with its carrying amount in order to estimate the impairment loss. To evaluate the fair
value of our reporting unit, we use the capitalization of indicated earnings method. The use of different assumptions
and estimates, such as the weighted average cost of capital and indicated earnings, could result in different fair
values and, consequently, different carrying amounts for goodwill, which could affect operating results.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, excluding goodwill and intangible assets with indefinite lives, are assessed for impairment
whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An
impairment loss is recognized in earnings when the carrying amount of a long-lived asset is greater than the
undiscounted future net cash flows expected to result from its use and eventual disposition. The amount of the
impairment loss represents the difference between the carrying amount and the discounted value of the future net
cash flows generated by the long-lived asset. The use of different assumptions and estimates such as the discount
rate and future net cash flows could result in different fair values and, consequently, different carrying amounts for
long-lived assets, which could affect operating results.
EMPLOYEE FUTURE BENEFITS
We offer several defined benefit and defined contribution plans, which provide pensions, other retirement benefits
and postemployment benefits to plan participants. The cost of pensions and other retirement benefits earned by
participants is determined from actuarial calculations using the projected benefit method prorated on services. This
method is based on management’s best-estimate assumptions regarding long-term returns on plan assets, salary
escalation, retirement ages of participants and expected health-care costs. The use of different assumptions could
result in different carrying amounts for accrued benefits, which could affect the defined benefit plan expense.
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
A compensation expense is recognized for all stock option awards. We calculate this expense based on the fair value
method, using the Black & Scholes model. In order to establish the fair value of stock options, we use assumptions
regarding the risk-free interest rate, expected life, expected volatility and expected dividend yield. The use of different
assumptions could affect the compensation expense in the consolidated statement of earnings.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under this method, future income tax
assets and liabilities are accounted for based on estimated taxes recoverable or payable that would result from the
recovery or settlement of the carrying amount of assets and liabilities. Future tax assets and liabilities are measured
using substantively enacted tax rates expected to be in effect when the temporary differences are expected to
reverse. Determination of income tax expense and future income taxes thus requires the use of estimates,
assumptions and judgements, which, if applied differently, could result in different carrying amounts for future income
taxes on the balance sheet and, consequently, affect income tax expense in the consolidated statement of earnings.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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FINANCIAL INSTRUMENTS
Cash and cash equivalents, interest rate swaps and foreign exchange forward contracts are valued at fair value.
Gains/losses resulting from revaluation at each period end are recorded in net earnings in the case of cash and cash
equivalents as well as foreign exchange forward contracts, and in comprehensive income in the case of interest rate
swaps. The use of different assumptions to estimate fair value, such as expected interest rates and the exchange
rate used by a financial institution to negotiate an identical contract at present, could result in different carrying
amounts, and, consequently, affect the consolidated statement of earnings or the consolidated comprehensive
income statement, as applicable.
RISK MANAGEMENT
The Board of Directors, Audit Committee and Steering Committee monitor business risks closely. Internal Audit has
the mandate to audit all business risks triennially. So each segment is audited every three years to ensure that
controls have been put in place to deal with the business risks related to its business area.
In the normal course of business, we are exposed to various risks, which are described below, that could have a
material impact on our earnings, financial position and cash flows. In order to counteract the principal risk factors, we
have implemented strategies specifically adapted to them.
MARKET AND COMPETITION
Intensifying competition, the possible arrival of new competitors and changing consumer needs are constant
concerns for us.
To cope with competition and maintain our leadership position in the Québec and Ontario markets, we are on the
alert for new ways of doing things and new sites. We have an ongoing investment program for all our stores to ensure
that our retail network remains one of the most modern in Canada. We have also developed a successful market
segmentation strategy. Our grocery banners, the conventional Metro supermarkets and Super C and Food Basics
discount banners, target two different market segments. In the pharmaceutical market, we have small and medium-
sized pharmacies, including our Brunet, Brunet Plus and Brunet Clinique banners.
One of the fundamental points of our business strategy is to have a customer focus approach. We are responsive to
their concerns, expectations and changing tastes and habits. Constantly endeavouring to renew our retail offering, we
have added new products to our Irresistibles and Selection private brand lines as well as prepared meals.
In the fall of 2009, we created an exclusive joint venture with Dunnhumby, an international marketing consulting
company. The joint venture’s mission is to develop and implement customer strategies to better meet consumer
needs and build loyalty. One customer focus approach achievement is the Québec-wide rollout at the end of
fiscal 2010 of our Metro & Moi loyalty program, allowing customers to collect points that are converted into dollars to
reduce their grocery bills.
ECONOMIC CONDITIONS
An economic slowdown or recession could affect our supermarkets and discount stores, however, they can adapt to
such conditions with appropriate merchandising strategies. Since food is a basic need, the food industry is affected
less by an economic slowdown or recession.
FOOD SAFETY
We are exposed to potential liability and costs regarding defective products, food safety, product contamination and
handling. Such liability may arise from product manufacturing, packaging and labelling, design, preparation,
warehousing, distribution and presentation. Food products represent the greater part of our sales and we could be at
risk in the event of a major outbreak of food-borne illness or food poisoning or an increase in public health concerns
regarding certain food products.
To counter these risks, we apply very strict food safety procedures and controls throughout the whole distribution
chain. All personnel receive continuous training in this area from Metro’s L’École des professionnels. Our main meat
processing and distribution facilities are HACCP (Hazard Analysis and Critical Control Point) accredited, the
industry’s highest international standard. Our systems also enable us to trace every meat product distributed from
any of our main distribution centres to its consumer point of sale.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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CORPORATE RESPONSIBILITY
If our actions do not respect our social, economic and environmental responsibilities, we are exposed to criticism,
claims, boycotts and even lawsuits, should we fail to adhere to our legal obligations.
We are aware that our business operations affect society and have increased our efforts regarding corporate
responsibility. In 2010, we published our corporate responsibility roadmap that defines our commitments to and
intentions around the social, economic and environmental sustainability of our business operations. Our roadmap is
available on our Web site at www.metro.ca. We expect(2) to issue our first corporate responsibility report in 2011.
In addition, the Company adopted a formal environmental policy several years ago that requires it to take necessary
measures in order to ensure compliance with applicable legislation and improve its environmental performance on a
continuing basis. A committee comprised of management staff ensures implementation of this policy and of programs
to reduce the impact of our operations on the environment. Environmental audits are conducted regularly in all of the
Company’s facilities and corrective action, if required, is quickly taken.
REGULATIONS
Changes are regularly brought about to accounting policies, laws, regulations, rules and policies impacting our
operations. We monitor these changes closely.
PRICE OF FUEL, ENERGY AND UTILITIES
We are a big consumer of utilities, electricity, natural gas and fuel. Increases in the price of these items may affect us.
LABOUR RELATIONS
The majority of our store and distribution centre employees are unionized. Collective bargaining may give rise to work
stoppages or slowdowns that could hurt us. We negotiate agreements with different maturity dates, conditions that
ensure our competitiveness and terms that promote a positive work environment in all our business segments. We
have experience some minor labour conflicts over the last few years but expect(2) to maintain good labour relations in
the future.
CRISIS MANAGEMENT
Events outside our control that could seriously affect our operations may arise. We have set up business recovery
plans for all our operations. These plans provide for several disaster recovery sites, generators in case of power
outages and back-up computers as powerful as the Company’s existing computers. A steering committee oversees
and regularly reviews all our recovery plans. We have also developed a contingency plan in the event of a pandemic
to minimize its impact.
FINANCIAL INSTRUMENTS
We are subject to the risk of interest rate fluctuations mainly because we contract loans with variable interest rates.
As well, we make some US dollar denominated purchases, exposing ourselves to exchange rate risks. In accordance
with our risk management policy, we use derivative financial instruments, namely interest rate swaps and foreign
exchange forward contracts to transform our variable interest payments into fixed interest payments and protect
ourselves against exchange rate variations for our future purchases in US currency. The policy’s guidelines prohibit
us from using derivative financial instruments for speculative purposes, but they do not guarantee that we will not
sustain losses as a result of our derivative financial instruments.
We hold receivables generated mainly from sales to affiliate customers. To guard against credit losses, we have
adopted a credit policy that defines mandatory credit requirements to be maintained and guarantees to be provided.
Affiliate customer assets guarantee the majority of our receivables.
We are also exposed to liquidity risk mainly through our long-term debt and creditors. We evaluate our cash position
regularly and estimate(2) that cash flows generated by our operating activities are sufficient to provide for all outflows
required by our financing activities. Our Credit A Facility and our Series A and Series B Notes mature only in 2012,
2015 and 2035 respectively. We also have access to an authorized revolving line of credit of $400.0 million.
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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CLAIMS
In the normal course of business, we are exposed to various claims and proceedings. We limit our exposure by
maintaining insurance to cover the risk of claims related to our operations. Seven years ago, Regroupement des
marchands actionnaires Inc. instituted proceedings against the Company, alleging the right of certain retailer-
shareholders to re-convert into Class B Shares, which they had previously converted to Class A Subordinate Shares.
We are contesting the validity of this claim and we believe(2) that any forthcoming settlement in respect of this claim
will not have a material effect on our financial position or our earnings.
SUPPLIERS
Negative events could affect a supplier and lead to service breakdowns and store delivery delays. As a remedy for
this situation, we deal with several suppliers. So in the event of a supplier’s service breakdown, we can turn to
another supplier reasonably quickly.
FRANCHISEES AND AFFILIATES
Some of our franchisees and affiliates might breach prescribed clauses of franchise or affiliation contracts, such as
purchasing policies and marketing plans. Non-compliance with such clauses may have an impact on us. A team of
retail operations advisers ensures our operating standards’ consistent application in all of our stores.
Montréal, Canada, December 3, 2010
(1) See section on "Non-GAAP measurements" on page 22
(2) See section on "Forward-looking information" on page 23
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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The preparation and presentation of the consolidated financial statements of METRO INC. and the other financial
information contained in this Annual Report are the responsibility of management. This responsibility is based on a
judicious choice of appropriate accounting principles and methods, the application of which requires making
estimates and informed judgements. It also includes ensuring that the financial information in the Annual Report is
consistent with the consolidated financial statements. The consolidated financial statements were prepared in
accordance with Canadian generally accepted accounting principles and were approved by the Board of Directors.
METRO INC. maintains accounting systems and internal controls over the financial reporting process which, in the
opinion of management, provide reasonable assurance regarding the accuracy, relevance and reliability of financial
information and the well-ordered, efficient management of the Company’s affairs.
The Board of Directors fulfills its duty, to oversee management in the performance of its financial reporting
responsibilities and to review the consolidated financial statements and Annual Report, principally through its Audit
Committee. This Committee is comprised solely of directors who are independent of the Company and is also
responsible for making recommendations for the nomination of external auditors. Also, it holds periodic meetings with
members of management as well as internal and external auditors, to discuss internal controls, auditing matters and
financial reporting issues. The external and internal auditors have access to the Committee without management.
The Audit Committee has reviewed the consolidated financial statements and Annual Report of METRO INC. and
recommended their approval to the Board of Directors.
The enclosed consolidated financial statements were audited by Ernst & Young LLP, Chartered Accountants, and
their report indicates the extent of their audit and their opinion on the consolidated financial statements.
Eric R. La Flèche
President and Chief Executive Officer
Montréal, Canada, December 10, 2010
Richard Dufresne
Senior Vice-President,
Chief Financial Officer and Treasurer
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AUDITOR’S REPORT
To the shareholders of METRO INC.
the consolidated balance sheets of METRO
We have audited
INC. as at September 25, 2010 and
September 26, 2009, and the consolidated statements of earnings, retained earnings, comprehensive income and
cash flows for the year then ended. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of
the Company as at September 25, 2010 and September 26, 2009 and the results of its operations and its cash flows
for the years then ended in accordance with Canadian generally accepted accounting principles.
ERNST & YOUNG LLP(1)
Chartered Accountants
Montréal, Canada, November 16, 2010
(1)
CA auditor permit no. 8697
(1)
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Consolidated statements of earnings
Years ended September 25, 2010 and September 26, 2009
(Millions of dollars, except for net earnings per share)
Sales (notes 22 and 23)
Cost of sales and operating expenses (note 9)
Share of earnings in a public company subject to significant influence
Banner conversion costs (note 4)
Earnings before financial costs, taxes, depreciation and amortization
Depreciation and amortization (note 5)
Operating income
Financial costs, net (note 6)
Earnings before income taxes
Income taxes (note 7)
Net earnings
Net earnings per share (Dollars) (note 8)
Basic
Fully diluted
See accompanying notes
2010
2009
$ 11,342.9
(10,595.4)
40.4
(0.9)
787.0
(201.2)
585.8
(44.7)
541.1
(149.3)
391.8
$
$ 11,196.0
(10,480.8)
37.4
(11.0)
741.6
(189.1)
552.5
(48.0)
504.5
(150.1)
354.4
$
3.67
3.65
3.21
3.19
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Consolidated balance sheets
As at September 25, 2010 and September 26, 2009
(Millions of dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (notes 10 and 22)
Inventories (note 9)
Prepaid expenses
Income taxes receivable
Future income taxes (note 7)
Investments and other assets (note 10)
Fixed assets (note 11)
Intangible assets (note 12)
Goodwill
Future income taxes (note 7)
Accrued benefit asset (note 19)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Bank loans (note 13)
Accounts payable
Income taxes payable
Future income taxes (note 7)
Current portion of long-term debt (note 14)
Long-term debt (note 14)
Accrued benefit liability (note 19)
Future income taxes (note 7)
Other long-term liabilities (note 15)
Shareholders’ equity
Capital stock (note 16)
Contributed surplus (note 17)
Retained earnings
Accumulated other comprehensive income (note 18)
Commitments and contingencies (notes 20 and 21)
See accompanying notes
On behalf of the Board:
2010
2009
$
214.7
311.3
699.3
9.7
1.7
12.3
1,249.0
235.3
1,319.1
315.7
1,603.7
26.0
72.8
$ 4,821.6
$
1.0
1,073.3
50.8
12.8
4.7
1,142.6
1,004.3
48.5
162.2
21.2
2,378.8
$
241.4
315.8
681.3
8.3
6.6
22.6
1,276.0
204.0
1,305.8
325.4
1,478.6
2.7
65.6
$ 4,658.1
$
0.8
1,111.2
24.8
10.7
6.4
1,153.9
1,004.3
49.0
155.4
31.4
2,394.0
702.1
6.1
1,734.9
(0.3)
2,442.8
$ 4,821.6
716.7
3.7
1,545.7
(2.0)
2,264.1
$ 4,658.1
ERIC R. LA FLÈCHE
Director
MICHEL LABONTÉ
Director
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Consolidated statements of retained earnings
Years ended September 25, 2010 and September 26, 2009
(Millions of dollars)
Balance – beginning of year
Net earnings
Dividends
Share redemption premium (note 16)
Balance – end of year
See accompanying notes
Consolidated statements of comprehensive income
Years ended September 25, 2010 and September 26, 2009
(Millions of dollars)
Net earnings
Other comprehensive income (note 18)
Change in fair value of derivatives designated
as cash flow hedges
Corresponding income taxes
Comprehensive income
See accompanying notes
2010
2009
$ 1,545.7
391.8
(69.2)
(133.4)
$ 1,734.9
$ 1,366.8
354.4
(59.3)
(116.2)
$ 1,545.7
2010
2009
$ 391.8
$ 354.4
2.5
(0.8)
393.5
$
(1.4)
0.4
$ 353.4
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Consolidated statements of cash flows
Years ended September 25, 2010 and September 26, 2009
(Millions of dollars)
Operating activities
Net earnings
Non-cash items
Share of earnings in a public company subject
to significant influence
Depreciation and amortization
Amortization of deferred financing costs
Loss on disposal and write-off of fixed and intangible assets
Gain on disposal of investments
Interest income from investments
Future income taxes
Stock-based compensation cost
Difference between amounts paid for employee
future benefits and current period cost
Net change in non-cash working capital items related to operations
Investing activities
Business acquisition, net of cash acquired totalling $0.3 (note 3)
Net change in investments and other assets
Dividends from public company subject to significant influence
Additions to fixed assets
Proceeds on disposal of fixed assets
Additions to intangible assets
Financing activities
Net change in bank loans
Issuance of shares (note 16)
Redemption of shares (note 16)
Acquisition of treasury shares (note 16)
Performance share units cash settlement (note 17)
Increase in long-term debt
Repayment of long-term debt
Net change in other long-term liabilities
Dividends paid
Net change in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
Supplementary information
Interest paid
Income taxes paid
See accompanying notes
- 33 -
2010
2009
$ 391.8
$ 354.4
(40.4)
201.2
1.8
1.1
—
(0.2)
27.3
5.8
(7.7)
580.7
(32.9)
547.8
(152.3)
0.4
3.2
(165.4)
4.9
(30.6)
(339.8)
0.2
8.6
(159.5)
—
(0.5)
3.1
(10.1)
(7.3)
(69.2)
(234.7)
(26.7)
241.4
$ 214.7
(37.4)
189.1
2.0
3.0
(0.1)
(0.2)
32.1
5.0
(26.6)
521.3
(1.2)
520.1
—
(4.6)
2.9
(235.1)
14.8
(36.8)
(258.8)
(0.1)
44.0
(142.5)
(4.3)
(0.5)
5.3
(10.2)
(4.0)
(59.3)
(171.6)
89.7
151.7
$ 241.4
44.9
114.0
47.0
105.3
73761_fin_ang.indd 33
06/12/10 8:55 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
1- DESCRIPTION OF BUSINESS
METRO INC. (the Company) is one of Canada’s leading food retailers and distributors. The Company operates a
network of supermarkets, discount stores and drugstores. All components of the Company represent a unique
reportable segment.
2- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company, in Canadian dollars, have been prepared by management in
accordance with Canadian generally accepted accounting principles (GAAP) which require management to make
estimates and assumptions that affect the amounts recorded in the consolidated financial statements and presented
in the accompanying notes. Actual results could differ from these estimates. The Company’s consolidated financial
statements have been properly prepared within the reasonable limits of materiality and in conformity with the
accounting policies summarized below:
CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its
share of earnings in a joint venture, as well as those of variable interest entities (VIEs) for which the Company is the
primary beneficiary. All intercompany transactions and balances were eliminated on consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, bank balances, highly liquid investments (with an initial term of
three months or less), outstanding deposits and cheques in transit. They are classified as “Assets held for trading”
and are marked-to-market with resulting gains/losses recognized through net earnings at each period end.
ACCOUNTS RECEIVABLE
Accounts receivable are classified as “Loans and receivables”. After their initial fair value measurement, they are
measured at amortized cost using the effective interest rate method. For the Company, the measured amount
generally corresponds to cost.
INVENTORY VALUATION
Inventories are valued at the lower of cost and net realizable value. Warehouse inventories cost is determined by the
average cost method net of certain considerations received from vendors. Retail inventories cost is valued at the
retail price less the gross margin and certain considerations received from vendors. In addition, all costs incurred in
bringing the inventories to their present location and condition are included in the cost of warehouse and retail
inventories.
INVESTMENTS AND OTHER ASSETS
The investment in a public company subject to significant influence is accounted for using the equity method. Loans
to certain customers are classified as “Loans and receivables”. After their initial fair value measurement, they are
measured at amortized cost using the effective interest method. For the Company, the measured amount generally
corresponds to cost.
FIXED ASSETS
Fixed assets are recorded at cost. Buildings and equipment are amortized on a straight-line basis over their useful
lives. Leasehold improvements are amortized on a straight-line basis over the shorter of their useful lives or the
remaining lease term. The amortization method and estimate of useful life are reviewed annually.
Buildings
Equipment
Leasehold improvements
40 years
3 to 20 years
5 to 20 years
- 34 -
73761_fin_ang.indd 34
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
2- SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
LEASES
The Company accounts for capital leases in instances when it has acquired substantially all the benefits and risks
incident to ownership of the leased property. The cost of assets under capital leases represents the present value of
minimum lease payments and is amortized on a straight-line basis over the lease term. Assets under capital leases
are presented under “Fixed assets” in the consolidated balance sheet.
Leases that do not transfer substantially all the benefits and risks incident to ownership of the property are accounted
for as operating leases.
INTANGIBLE ASSETS
Intangible assets with definite useful lives are recorded at cost and are amortized on a straight-line basis over their
useful lives. The amortization method and estimate of the useful life are reviewed annually.
Leasehold rights
Software
Improvements and development of retail network loyalty
Prescription files
20 to 40 years
3 to 10 years
5 to 20 years
10 years
Intangible assets with indefinite lives, such as banners and private labels and some agreements, are recorded at cost
and are not subject to amortization. These assets are tested for impairment annually or more often if events or
changes in circumstances indicate that the asset might be impaired. When the impairment test indicates that the
carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to
the excess. The Company uses the royalty-free licensing method and the capitalization of excess earnings before
financial costs and income taxes method.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is tested for
impairment annually or more often if events or changes in circumstances indicate that it might be impaired. The
impairment test first consists of a comparison of the fair value of the reporting unit to which goodwill is assigned with
its carrying amount. When the carrying amount of a reporting unit exceeds its fair value, the fair value of the reporting
unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any. Any
impairment loss is charged to earnings in the period in which the loss is incurred. The Company uses the indicated
earnings method to determine the fair value of its reporting unit.
IMPAIRMENT OF LONG-LIVED ASSETS
The fixed assets and intangible assets with definite useful lives are assessed for impairment when events or changes
in circumstances indicate that their carrying amount may not be recoverable. When the carrying amount of long-lived
assets is greater than the undiscounted future net cash flows expected to be generated by assets’ use and potential
sale, an impairment loss is recognized in earnings. The amount of the impairment loss represents the difference
between the carrying amount and the discounted value of future net cash flows generated by long-lived assets.
DEFERRED FINANCING COSTS
Financing costs related to the long term debt are deferred and amortized using the effective interest method over the
term of the corresponding loans. When the Company repays one of its loans, the corresponding financing costs are
charged to earnings. Deferred financing costs are presented under “Long term debt” in the consolidated balance
sheet and the related amortization under “Financial costs, net” in the consolidated statement of earnings.
EMPLOYEE FUTURE BENEFITS
The Company accounts for employee future benefit plan assets and obligations and related costs of defined benefit
pension plans, and other retirement benefits and other post-employment benefit plans under the following accounting
policies:
- 35 -
73761_fin_ang.indd 35
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
2- SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
• Accrued benefit obligations and the cost of pension and other retirement benefits earned by participants are
determined from actuarial calculations according to the projected benefit method prorated on services. The
accrued benefit obligations under the post-employment benefit plans are determined from actuarial calculations
according to the accumulated benefit method. The calculations are based on management’s best estimate
assumptions relating to long term return on the plan assets, salary escalation, retirement age of participants and
estimated health-care costs.
• For the purpose of calculating the estimated rate of return on the plan assets, assets are measured at fair value.
• Pension obligations are discounted using current market interest rates.
• Actuarial gains or losses arise from the difference between the actual rate of return on plan assets for a period
and the expected rate of return on plan assets for that period, from changes in actuarial assumptions used to
determine accrued benefit obligations and from emerging experience different from the selected assumptions.
•
The excess of the net actuarial gain or loss over the higher of 10% of accrued benefit obligations or 10% of the
fair value of the plan assets is amortized over the average remaining service period of active participants. Past
service costs are amortized on a straight-line basis over the average remaining service period of active
participants. The average remaining service period of active participants covered by the pension plans is
13 years. The average remaining service period of active participants covered by the other retirement benefit
plans is 13 years, whereas it is 5 years under the other post-employment benefit plans.
• Past service costs arising from plan amendments are deferred and amortized on a straight-line basis over the
average remaining service period of the active participants at the date of amendment until the full eligibility date.
The cost of defined contribution pension plans, which includes multi-employer pension plans, is expensed as
contributions are due.
OTHER FINANCIAL LIABILITIES
Bank loans, accounts payable, the credit facility, notes, loans payable, and obligations under capital leases are
classified as “Other financial liabilities”. After their initial fair value measurement, they are measured at amortized cost
using the effective interest method. For the Company, the measured amount generally corresponds to cost.
SALES RECOGNITION
Retail sales made by corporate stores and stores for which the Company is the primary beneficiary are recognized at
the time of sale to the customer. Sales to affiliated stores and other customers are recognized when the goods are
delivered. The rebates granted by the Company to its retailers are recorded as a reduction in sales.
RECOGNITION OF CONSIDERATION RECEIVED FROM VENDORS
In some cases, a cash consideration received from vendors must be considered as an adjustment to the vendor’s
product pricing and is therefore characterized as a reduction of cost of sales and related inventories when recognized
in the consolidated financial statements. Certain exceptions apply if the cash consideration constitutes the
reimbursement of incremental costs incurred by the Company to promote the vendor’s products or a payment for
assets or services delivered to vendors. This other consideration received from vendors is accounted for, according
to its nature, under sales or as a reduction of cost of sales and operating expenses.
LOYALTY PROGRAMS
The Company has two loyalty programs. The first belongs to a third party and its cost is recorded in the Company’s
statement of earnings in the cost of sales and operating expenses. The second belongs to the Company. Its cost is
calculated based on the loyalty program redemption rate which is evaluated regularly, and recorded in the cost of
sales and operating expenses at the time of sale to the customer.
FOREIGN CURRENCY TRANSLATION
Monetary items on the balance sheet are translated at the exchange rate in effect at year-end, while non-monetary
items are translated at the historical exchange rates. Revenues and expenses are translated at the rates of exchange
in effect on the transaction date or at the average exchange rate for the period. Gains or losses resulting from the
translation are included in current period earnings.
- 36 -
73761_fin_ang.indd 36
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
2- SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under this method, future income tax
assets and liabilities are accounted for based on estimated taxes recoverable or payable that would result from the
recovery or settlement of the carrying amount of assets and liabilities. Future tax assets and liabilities are measured
using substantively enacted tax rates expected to be in effect when the temporary differences are expected to
reverse. Changes in these amounts are included in current period earnings.
STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS
The Company recognizes stock-based compensation expenses and other stock-based payments in earnings using
the fair value method for all stock options granted. The Black & Scholes model is used to determine the fair value on
the award date of stock options. Compensation expense is recognized over the expected term of the award.
PERFORMANCE SHARE UNIT PLAN
The Company determines the value of the compensation under the performance share unit (PSU) plan based on the
market value of the Company’s Class A Subordinate Shares at grant date. Compensation expense is recognized on a
straight-line basis over the vesting period. The impact of any changes in the number of PSUs is recorded in the
period where the estimate is revised. The grant qualifies as an equity instrument.
EARNINGS PER SHARE
Net earnings per share are calculated using the weighted average number of Class A Subordinate Shares and
Class B Shares outstanding during the year. Fully diluted net earnings per share are calculated using the treasury
stock method, giving effect to the exercise of all dilutive factors.
FINANCIAL INSTRUMENTS
In accordance with its risk management strategy, the Company uses derivative financial instruments for hedging
purposes. On inception of a hedging relationship, the Company indicates whether or not it will apply hedge
accounting to the relationship. The Company formally documents several factors, such as the election to apply hedge
accounting, the hedged item, the hedging item, the risks being hedged and the term over which the relationship is
expected to be effective, as well as risk management objectives and strategy.
The Company measures the effectiveness of the hedging relationship at its inception to determine whether it will be
highly effective over the term of the relationship. In addition, the Company assesses the hedging relationship
periodically to ensure that hedge accounting is still appropriate. The Company formally documents the results of its
assessments.
The derivative financial instruments used by the Company primarily consist of interest rate swaps under which the
Company substitutes variable rate interest payments with fixed rate interest payments. The Company has decided to
apply hedge accounting to its interest rate swaps and treat them as cash flow hedges. These swaps are marked-to-
market with resulting gains/losses recognized through other comprehensive income at each period end, provided that
the hedge is deemed effective.
The company also uses foreign exchange forward contracts to hedge against foreign exchange rate fluctuations in
respect of future purchases denominated in U.S. dollars. Given their short-term maturity, the Company elected not to
apply hedge accounting to its foreign exchange forward contracts. These derivative financial instruments are
classified as “Assets held for trading” and marked-to-market with resulting gains/losses recognized through net
earnings at each period end.
FISCAL YEAR
The Company’s fiscal year ends on the last Saturday of September. The fiscal years ended September 25, 2010 and
September 26, 2009 included 52 weeks of operations.
- 37 -
73761_fin_ang.indd 37
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
3- BUSINESS ACQUISITION
In the first quarter of 2010, the Company acquired 18 affiliated stores which it already supplied. The total purchase
price was $152.2 in cash.
The acquisition was accounted for using the purchase method. The stores’ results have been consolidated as of their
respective acquisition dates. The final total purchase price allocation was as follows:
Cash
Inventories
Other current assets
Fixed assets
Trade name
Goodwill
Future income tax assets
Short-term liabilities assumed
Integration and rationalization plan-related liabilities
Total net assets acquired
Cash consideration
Acquisition costs
Consideration and acquisition costs
$
0.3
14.9
0.3
12.1
1.3
122.3
6.3
(3.6)
(1.3)
$ 152.6
$ 152.2
0.4
$ 152.6
The tax treatment of the goodwill is considered eligible capital property with the related tax deductions.
4- BANNER CONVERSION COSTS
In the first quarter of 2010, the Company completed the conversion of its 159 stores of its five Ontario banners to the
Metro banner begun in the summer of 2008. For fiscal 2010, conversion costs totalled $0.9 (2009 − $11.0).
5- DEPRECIATION AND AMORTIZATION
Fixed assets
Intangible assets
6-
FINANCIAL COSTS, NET
Short-term interest
Long-term interest
Amortization of deferred financing costs
Interest income
- 38 -
2010
159.5
41.7
201.2
2009
$ 148.9
40.2
$ 189.1
2010
1.3
43.5
1.8
(1.9)
44.7
2009
1.7
46.1
2.0
(1.8)
48.0
$
$
$
$
$
$
73761_fin_ang.indd 38
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
7-
INCOME TAXES
The main components of the income tax expense were as follows:
Current
Future
The effective income tax rates were as follows:
(Percentage)
Combined statutory income tax rate
Changes
Impact on future taxes of 4.0% total future decreases
in Ontario tax rate ($10.0 in 2010)
Impact on future taxes of 4.35% decrease in Québec
tax rate on investment income ($2.7 in 2009)
Share of earnings in a public company subject to
significant influence
Others
2010
$ 122.0
27.3
$ 149.3
2009
118.0
32.1
150.1
$
$
2010
30.4
(1.8)
—
(1.3)
0.3
27.6
2009
31.3
—
(0.5)
(1.3)
0.3
29.8
Future income taxes reflect the net tax impact of timing differences between the value of assets and liabilities for
accounting and tax purposes. The main components of the Company’s future tax assets and liabilities were as
follows:
Future income tax assets and liabilities
Accrued expenses, provisions and other reserves that
are tax-deductible only at the time of disbursement
Tax losses carry forwards
Inventories
Excess of tax value over net book value of assets
under capital leases
Interest rate swaps
Employee future benefits
Share of accumulated earnings in a public company
subject to significant influence
Excess of net book value over tax value
Fixed assets
Intangible assets
Goodwill
Future income tax short-term assets
Future income tax short-term liabilities
Future income tax long-term assets
Future income tax long-term liabilities
- 39 -
2010
2009
$
20.1
11.6
(7.7)
5.8
0.1
(7.6)
$
(4.6)
24.6
(8.7)
6.9
0.9
(3.5)
(27.4)
(22.0)
(57.0)
(58.6)
(16.0)
$ (136.7)
$
12.3
(12.8)
26.0
(162.2)
$ (136.7)
(57.5)
(62.1)
(14.8)
$ (140.8)
$
22.6
(10.7)
2.7
(155.4)
$ (140.8)
73761_fin_ang.indd 39
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
8- NET EARNINGS PER SHARE
Basic net earnings per share and fully diluted net earnings per share were calculated using the following number of
shares:
(Millions)
Weighted average number of shares outstanding – Basic
Dilutive effect under stock option and PSU plans
Weighted average number of shares outstanding – Diluted
9-
INVENTORIES
Inventories were detailed as follows:
Wholesale inventories
Retail inventories
The cost of inventories expensed for fiscal 2010 totalled $9,272.6 (2009 – $9,218.0).
10-
INVESTMENTS AND OTHER ASSETS
Investment in public company subject to significant influence,
including share of earnings until July 18, 2010 (July 19, 2009) (quoted market
value: $491.5 as at September 25, 2010; $394.9
as at September 26, 2009)
Loans to certain customers bearing interest at floating rates,
repayable in monthly instalments, maturing through 2030
Other assets
Current portion included in accounts receivable
2010
106.9
0.5
107.4
2009
110.4
0.7
111.1
2010
2009
$ 296.3
403.0
$ 699.3
$ 304.0
377.3
$ 681.3
2010
2009
$ 219.5
$ 182.3
24.7
0.5
244.7
9.4
$ 235.3
24.0
1.5
207.8
3.8
$ 204.0
11- FIXED ASSETS
2010
2009
Cost
Accumulated Net book
amortization
value
Cost
Accumulated Net book
amortization
value
— $ 168.3 $ 168.0 $
—
118.3
502.5
192.5
15.7
$1,319.1 $2,134.8 $ 829.0
421.3
988.1
521.9
35.5
310.4
497.0
326.1
17.3
126.6
605.4
236.5
18.2
986.7
$ 168.0
303.0
485.6
329.4
19.8
$1,305.8
Land
Buildings
Equipment
Leasehold improvements
Assets under capital leases
$ 168.3 $
437.0
1,102.4
562.6
35.5
$ 2,305.8
$
- 40 -
73761_fin_ang.indd 40
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
12-
INTANGIBLE ASSETS
Intangible assets with
definite lives
Leasehold rights
Software
Improvements and development
of retail network loyalty
Prescription files
Intangible assets with
indefinite lives
Banners
Private labels and agreements
2010
2009
Cost
Accumulated Net book
amortization
value
Cost
Accumulated Net book
amortization
value
$
74.9
164.0
$
35.8
117.1
$
39.1 $ 75.3 $ 33.5
98.8
46.9
156.1
$ 41.8
57.3
231.6
7.4
477.9
114.4
3.4
270.7
117.2
4.0
207.2
218.0
7.4
456.8
105.0
2.6
239.9
113.0
4.8
216.9
53.3
55.2
108.5
$ 586.4
—
—
—
$ 270.7
53.3
55.2
108.5
—
53.3
—
55.2
—
108.5
$ 315.7 $ 565.3 $ 239.9
53.3
55.2
108.5
$ 325.4
Net additions of intangible assets excluded from the consolidated statement of cash flows amounted to $3.5 in 2010
(2009 – $2.5).
13- BANK LOANS
The Company benefits from a $400.0 revolving line of credit, expiring August 15, 2012, as well as a Credit A Facility
amounting to $369.3 ($369.3 as at September 26, 2009) as discussed in note 14. The credit facilities bear interest at
rates that fluctuate with changes in banker’s acceptance rates and are unsecured. As at September 25, 2010 and
September 26, 2009, the revolving line of credit was undrawn. The consolidated VIEs have credit margins totalling
$6.6 ($6.2 as at September 26, 2009) bearing interest at prime, unsecured and maturing on various dates through
2011. As at September 25, 2010, $1.0 ($0.8 as at September 26, 2009) had been drawn down under credit margins
at an interest rate of 2.90% (2.25% as at September 26, 2009).
- 41 -
73761_fin_ang.indd 41
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
14- LONG-TERM DEBT
Credit A Facility, bearing interest at a weighted average rate of 1.04%
(2009 – 1.91%) repayable on August 15, 2012 or earlier
Series A Notes, bearing interest at a fixed nominal rate of 4.98%,
maturing on October 15, 2015 and redeemable at the issuer’s
option at fair value at any time prior to maturity
Series B Notes, bearing interest at a fixed nominal rate of 5.97%,
maturing on October 15, 2035 and redeemable at the issuer’s
option at fair value at any time prior to maturity
Loans, maturing on various dates through 2019, bearing interest
at an average rate of 3.38% (2.9% as at September 26, 2009)
Obligations under capital leases, bearing interest at an effective
rate of 11.2% (2009 – 11.2%)
Deferred financing costs
Current portion
2010
2009
$
369.3
$
369.3
200.0
200.0
400.0
400.0
15.8
15.7
28.1
(4.2)
1,009.0
4.7
$ 1,004.3
31.7
(6.0)
1,010.7
6.4
$ 1,004.3
Minimum required payments on long-term debt in the upcoming fiscal years will be as follows:
2011
2012
2013
2014
2015
2016 and thereafter
Loans
Notes
Obligations under
capital leases
Total
$
2.4
370.4
0.6
0.5
0.3
10.9
$ 385.1
$
—
—
—
—
—
600.0
$ 600.0
$
$
5.1
5.1
5.1
4.6
4.6
19.4
43.9
$
7.5
375.5
5.7
5.1
4.9
630.3
$ 1,029.0
The minimum payments in respect of the obligations under capital leases included interest amounting to $15.8 on
these obligations (2009 – $18.8).
15- OTHER LONG-TERM LIABILITIES
Lease liabilities
Interest rate swaps
Other liabilities
2010
2009
$
$
19.3
—
1.9
21.2
$
$
21.2
2.9
7.3
31.4
In 2010, the interest rate swap is presented in accounts payable given its short term maturity.
- 42 -
73761_fin_ang.indd 42
06/12/10 8:56 PM
Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
16- CAPITAL STOCK
AUTHORIZED
Unlimited number of First Preferred Shares, non-voting, without par value, issuable in series.
Unlimited number of Class A Subordinate Shares, bearing one voting right per share, participating, convertible into
Class B Shares in the event of a takeover bid involving Class B Shares, without par value.
Unlimited number of Class B Shares, bearing 16 voting rights per share, participating, convertible in the event of
disqualification into an equal number of Class A Subordinate Shares on the basis of one Class A Subordinate Share
for each Class B Share held, without par value.
OUTSTANDING
Balance as at September 27, 2008
Shares issued for cash
Shares redeemed for cash, excluding
premium of $116.2
Acquisition of treasury shares, excluding
premium of $3.6
Released treasury shares
Stock options exercised
Conversion of Class B Shares into
Class A Subordinate Shares
Balance as at September 26, 2009
Shares issued for cash
Shares redeemed for cash, excluding
premium of $133.4
Released treasury shares
Stock options exercised
Conversion of Class B Shares into
Class A Subordinate Shares
Class A
Subordinate Shares
Number
(Thousands)
Class B
Shares
Number
(Thousands)
Total
109,806
33
$ 696.1
1.1
750
—
$
1.5
—
$ 697.6
1.1
(3,989)
(26.3)
(115)
52
2,011
(0.7)
0.3
44.7
—
—
—
—
32
0.1
(32)
107,830
10
(3,911)
54
368
87
715.3
0.3
(26.1)
0.3
10.9
718
—
—
—
—
—
—
—
—
(0.1)
1.4
—
—
—
—
(26.3)
(0.7)
0.3
44.7
—
716.7
0.3
(26.1)
0.3
10.9
0.1
(87)
(0.1)
—
Balance as at September 25, 2010
104,438
$ 700.8
631
$
1.3
$ 702.1
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
16- CAPITAL STOCK (Cont'd)
STOCK OPTION PLAN
The Company has a stock option plan for certain Company employees providing for the grant of options to purchase
up to 10,000,000 Class A Subordinate Shares. The subscription price of each Class A Subordinate Share under an
option granted pursuant to the plan is equal to the market price of the shares on the day prior to option grant date and
must be paid in full at the time the option is exercised. While the Board of Directors determines other terms and
conditions for the exercise of options, no options may have a term of more than five years from the date the option
may initially be exercised, in whole or in part, and the total term may in no circumstances exceed ten years from the
option grant date. Options may generally be exercised two years after their grant date and vest at the rate of 20% per
year.
The outstanding options and the changes during the year were summarized as follows:
Balance as at September 27, 2008
Granted
Exercised
Cancelled
Balance as at September 26, 2009
Granted
Exercised
Cancelled
Balance as at September 25, 2010
Number
(Thousands)
Weighted average
exercise price
(Dollars)
3,534
343
(2,011)
(2)
1,864
283
(368)
(2)
1,777
23.63
36.78
21.31
34.86
28.53
44.06
22.35
31.78
32.29
The table below summarizes information regarding the stock options outstanding and exercisable as at
September 25, 2010:
Range of
exercise prices
(Dollars)
20.20 to 24.73
26.40 to 35.71
37.22 to 44.19
Outstanding options
Exercisable options
Weighted
average
remaining
period
(Months)
47.0
39.9
67.1
52.2
Weighted
average
exercise
price
(Dollars)
24.32
29.35
40.24
32.29
Weighted
average
exercise
price
(Dollars)
23.55
28.35
37.65
28.10
Number
(Thousands)
135
266
57
458
Number
(Thousands)
448
643
686
1,777
The weighted average fair value of $10.39 per option (2009 – $7.88) for stock options granted during the year was
determined at the time of grant using the Black & Scholes model and the following weighted average assumptions:
risk-free interest rate of 3.0% (2009 – 2.3%), expected life of six years (2009 – six years), expected volatility of 23%
(2009 – 22%) and expected dividend yield of 1.5% (2009 – 1.4%). Compensation expense for these options
amounted to $2.5 for fiscal 2010 (2009 – $2.3).
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
16- CAPITAL STOCK (Cont'd)
PERFORMANCE SHARE UNIT PLAN
The Company has a PSU plan. Under this program, senior executives and other key employees (participants)
periodically receive a given number of PSUs which may increase if the Company meets certain financial performance
indicators. The PSUs entitle the participant to Class A Subordinate Shares of the Company, or at the latter’s
discretion, the cash equivalent. PSUs vest at the end of a period of three years.
PSUs outstanding and changes during the year were summarized as follows:
Balance as at September 27, 2008
Granted
Settled
Cancelled
Balance as at September 26, 2009
Granted
Settled
Cancelled
Balance as at September 25, 2010
Number
(Units)
257,986
97,394
(64,177)
(23,633)
267,570
107,583
(65,860)
(389)
308,904
Class A Subordinate Shares of the Company are held in trust for participants until the PSUs vest or are cancelled.
The trust, considered a VIE, is consolidated in the Company’s financial statements with the cost of the acquired
shares recorded as treasury shares as a reduction capital stock.
The number of treasury shares and changes during the year were summarized as follows:
Balance as at September 27, 2008
Acquisition of treasury shares
Released treasury shares
Balance as at September 26, 2009
Released treasury shares
Balance as at September 25, 2010
Number
(Units)
194,000
115,000
(51,745)
257,255
(53,707)
203,548
The compensation expense comprising all of these PSUs amounted to $3.3 for fiscal 2010 (2009 – $2.7).
17- CONTRIBUTED SURPLUS
Balance – beginning of year
Stock-based compensation cost
Stock options exercised
Acquisition of treasury shares
Released treasury shares
PSUs cash settlement
Balance – end of year
2010
2009
$
3.7
5.8
(2.6)
—
(0.3)
(0.5)
$
4.9
5.0
(1.8)
(3.6)
(0.3)
(0.5)
$
6.1
$
3.7
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
18- ACCUMULATED OTHER COMPREHENSIVE INCOME
Derivatives designated as cash flow hedges constitute the sole component of Accumulated Other Comprehensive
Income. The changes during the year were as follows:
Balance – beginning of year
Change in fair value of designated derivatives,
net of income taxes of $0.8 (2009 – $0.4)
Balance – end of year
19- EMPLOYEE FUTURE BENEFITS
2010
2009
$
(2.0)
$
(1.0)
1.7
(1.0)
$
(0.3)
$
(2.0)
The Company maintains several defined benefit and defined contribution plans for eligible employees, which provide
most participants with pension and other retirement benefits, and other post-employment benefits which in certain
cases are based on the number of years of service or final average salary. The defined benefit pension plans are
funded by the Company’s contributions, with some plans also funded by participants’ contributions. The Company
also provides eligible employees and retirees with health care, life insurance and other benefits.
The Company’s defined contribution plan and defined benefit plan expense as at measurement dates was as follows:
Defined contribution plans
Defined benefit plans
Current service costs
Actuarial loss
Plan amendments
Interest cost
Actual return on plan assets
Change in valuation allowance
Difference between pension cost
and cost recognized for the year
regarding the undernoted items:
Actuarial loss
Plan amendments
Difference between expected return
and actual return on plan assets
2010
2009
Pension plans Other plans Pension plans Other plans
$ 27.7
$ 0.6
$ 30.0
$ 0.6
23.1
46.6
4.0
35.3
(36.3)
(0.9)
71.8
1.9
2.9
—
2.1
—
—
6.9
21.0
25.8
0.1
33.6
(40.1)
(0.1)
40.3
1.5
0.8
—
2.2
—
—
4.5
(45.9)
(2.9)
(5.3)
17.7
$ 45.4
(3.0)
(0.2)
—
3.7
4.3
$
(25.3)
0.8
1.3
17.1
$ 47.1
(1.1)
(0.3)
—
3.1
$ 3.7
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
19- EMPLOYEE FUTURE BENEFITS (Cont’d)
The information on defined benefit plans was summarized as follows:
2010
2009
Pension plans Other plans Pension plans Other plans
Accrued benefit obligations
Balance - beginning of year
Current service costs
Interest cost
Participant contributions
Plan amendments
Benefits paid
Actuarial loss
Balance - end of year
Plan assets
Fair value - beginning of year
Actual return on plan assets
Employer contributions
Participant contributions
Benefits paid
Plan’s administration fees
Fair value - end of year
Funded status (deficit)
Unamortized past service costs
Unamortized net actuarial loss
Valuation allowance
Accrued benefit asset (liability)
Accrued benefit asset
Accrued benefit liability
$ 571.6
23.1
35.3
3.4
4.0
(27.0)
46.6
657.0
587.2
36.3
26.8
3.4
(27.0)
—
626.7
(30.3)
10.8
81.0
(0.1)
61.4
72.8
$ (11.4)
$
36.5
1.9
2.1
—
—
(2.3)
2.9
41.1
—
—
2.3
—
(2.3)
—
—
(41.1)
(0.4)
4.4
—
(37.1)
—
$ (37.1)
$
$ 513.5
20.4
33.6
3.7
0.1
(25.5)
25.8
571.6
$ 35.5
1.5
2.2
—
—
(3.5)
0.8
36.5
526.2
40.1
43.3
3.7
(25.5)
(0.6)
587.2
15.6
7.9
29.8
(1.0)
52.3
65.6
(13.3)
—
—
3.5
—
(3.5)
—
—
(36.5)
(0.6)
1.4
—
(35.7)
—
(35.7)
$
The pension plans were allocated as follows:
Plans with accrued benefit obligations
exceeding fair value of assets
Plans with fair value of assets exceeding
accrued benefit obligations
2010
Accrued
benefit
obligations
Fair value
of assets
2009
Accrued
benefit
obligations
Fair value
of assets
486.2
211.9
388.3
238.4
357.8
292.3
250.3
294.9
The defined benefit plans other than pension plans were not funded.
Total cash payments for employee future benefits, consisting of cash contributed by the Company to its funded
pension plans and cash payments directly to beneficiaries for its unfunded other benefit plans amounted to $29.1 in
2010 (2009 – $46.8).
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
19- EMPLOYEE FUTURE BENEFITS (Cont’d)
The most recent actuarial valuations for funding purposes in respect of the Company’s pension plans were prepared
on various dates from December 2007 to June 2010. The next valuations will be conducted on dates ranging from
December 2010 to June 2012.
Plan assets are held in trust and their weighted average distributions as at the measurement dates,
September 25, 2010, and September 26, 2009, were as follows:
Assets classes (Percentage)
Shares
Bonds
Others
2010
2009
56
39
5
56
40
4
The principal actuarial assumptions used by the Company were as follows:
(Percentage)
Accrued benefit obligations
Discount rate
Rate of compensation increase
Cost of benefits
Discount rate
Projected long-term return on plan assets
Rate of compensation increase
2010
2009
Pension plans Other plans Pension plans Other plans
5.25
3.0
6.0
7.25
3.5
5.25
3.0
6.0
—
3.5
6.0
3.5
6.4
7.5
3.75
6.0
3.5
6.4
—
3.75
For valuation purposes, the assumed health care cost trend rates per participant was set at 8.6% in 2010 (2009 –
9.3%). Under the assumption used, this rate should gradually decline to 4.5% in 2018 and remain at that level
thereafter. A 1% increase or decrease in the assumed health care cost trend rates would have the following effects:
(Millions of dollars)
Effect on current service cost and interest cost
Effect on accrued benefit obligations
1% increase
1% decrease
0.2
2.0
(0.2)
(1.8)
20- COMMITMENTS
OBLIGATIONS UNDER LEASES AND SERVICE AGREEMENTS
for business purposes. The balance of minimum
The Company has operating lease commitments, with varying terms through 2033, to lease premises and equipment
used
to $1,340.2 as at
September 25, 2010 ($1,299.5 as at September 26, 2009). The minimum lease payments over the upcoming fiscal
years will be as follows: 2011 - $163.8; 2012 - $155.5; 2013 - $138.8; 2014 - $122.6; 2015 - $106.9; and 2016 and
thereafter - $652.6.
lease payments amounted
In addition, the Company has committed to leases for premises with varying terms through 2031, that it sublets to
clients, generally under the same terms and conditions. The balance of minimum lease payments under these leases
amounted to $417.3 as at September 25, 2010 ($446.8 as at September 26, 2009) and the average annual payments
for the next five years will be $35.5.
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
20- COMMITMENTS (Cont’d)
The Company also has commitments under service contracts staggered over various periods through 2021. These
commitments amounted to $510.0 as at September 25, 2010 ($610.2 as at September 26, 2009). The commitments
mature as follows over the upcoming fiscal years: 2011 - $66.8; 2012 - $48.8; 2013 - $46.6; 2014 - $46.4; 2015 -
$44.9; and 2016 and thereafter - $256.5.
21- CONTINGENCIES
GUARANTEES
For certain customers with established business relationships, the Company is contingently liable as guarantor in
connection with lease agreements with varying terms through 2019 for which the average annual minimum lease
payments for the next five years will be $0.4 (2009 – $0.5). The maximum contingent liability under these guarantees
as at September 25, 2010 was $3.4 ($4.1 as at September 26, 2009). In addition, the Company has guaranteed
loans granted to certain customers by financial institutions, with varying terms through 2022. The balance of these
loans amounted to $12.9 as at September 25, 2010 ($12.3 as at September 26, 2009). No liability has been recorded
in respect of these guarantees for the years ended September 25, 2010 and September 26, 2009.
CLAIMS
In the normal course of business, various proceedings and claims are instituted against the Company. The Company
contests the validity of these claims and proceedings and management believes that any forthcoming settlement in
respect of these claims will not have a material effect on the Company’s financial position or on consolidated
earnings.
22- RELATED PARTY TRANSACTIONS
During fiscal 2010, sales to companies controlled by a member of the Board of Directors totalled $26.7 (2009 –
$27.3). These transactions were in the normal course of business and were measured at the exchange amount. As at
September 25, 2010, accounts receivable included a balance of $0.9 ($0.9 as at September 26, 2009) resulting from
these transactions.
23- PRODUCTS SUBJECT TO PRICE REGULATION
The Company sells certain products subject to price regulation:
DRUGS
In Québec, the Minister of Health and Social Services establishes, by regulation, the list of drugs whose cost is
covered by the basic prescription drug insurance plan and regulates the selling price of such drugs. The list of drugs
is established pursuant to the Act respecting prescription drug insurance. A profit margin, under the government-
determined ceiling, may be added to the set price pursuant to the Regulation respecting the conditions on which
manufacturers and wholesalers of medications shall be recognized.
In Ontario, the Ministry of Health and Long-Term Care establishes, by regulation, the list of drugs whose cost is
covered by the Ontario Drug Benefit Act and regulates the selling price of such drugs.
MILK
Milk prices are regulated by the Act respecting the marketing of agricultural, food and fish products and the
Règlement sur les prix du lait aux consommateurs. The Régie des marchés agricoles et alimentaires du Québec sets
milk prices by determining the minimum and maximum prices based on the three regions comprising the Province of
Québec.
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
23- PRODUCTS SUBJECT TO PRICE REGULATION (Cont’d)
BEER
Beer prices are regulated by the Act respecting liquor permits and the Regulation respecting promotion, advertising
and educational programs relating to alcoholic beverages. The Régie des alcools, des courses et des jeux du
Québec sets beer prices based on the percentage of alcohol content.
WINE
Wine prices are regulated by the Act respecting the Société des alcools du Québec and the Regulation respecting the
terms of sale of alcoholic beverages by holders of a grocery permit. The retail price of permitted alcoholic beverages
may not be less than the retail price set by the Société des alcools du Québec.
The product price lists mentioned above are periodically updated. Sales of products subject to price regulation
totalled $1,028.5 in 2010 (2009 – $1,014.6). Sales recognition is the same whether the price is regulated or not.
24- MANAGEMENT OF CAPITAL
The Company aims to maintain a capital level that enables it to meet several objectives, namely:
• Striving for a percentage of long-term debt to total combined long-term debt and shareholders’ equity (long-term
debt/total capital ratio) of less than 50%.
• Maintaining an investment grade credit rating for its term notes.
• Paying total annual dividends representing approximately 20% of net earnings for the previous fiscal year before
extraordinary items.
In its capital structure, the Company considers its stock option and PSU plans for key employees and officers. In
addition, the Company’s stock redemption plan is one of the tools it uses to achieve its objectives.
The Company is not subject to any capital requirements imposed by a regulator.
The Company’s fiscal 2010 annual results regarding its capital management objectives were as follows:
•
•
•
a long-term debt/total capital ratio of 29.1% (30.7% as at September 26, 2009);
a BBB credit rating confirmed by S&P and DBRS during 2010 fiscal year (same rating during fiscal 2009);
a dividend representing 19.5% of net earnings for the previous fiscal year (2009 – 20.3%).
The capital management objectives remain the same as for the previous fiscal year.
25- FINANCIAL INSTRUMENTS
FAIR VALUE
The fair value of cash and cash equivalents, accounts receivable, bank loans and accounts payable approximates
their carrying value because of the short-term maturity of these instruments.
The fair value of loans to certain customers, the credit facility and loans payable is equivalent to their carrying value
since their interest rates are comparable to market rates.
The fair value of interest rate swaps is measured using a generally accepted valuation technique, that is, the
discounted value of the difference between the value of the swap based on variable interest rates (estimated using
the yield curve for anticipated interest rates) and the value of the swap based on the swap’s fixed interest rate. The
Company’s credit risk is also taken into consideration in determining fair value.
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
25- FINANCIAL INSTRUMENTS (Cont’d)
The fair value of foreign exchange forward contracts is measured using a generally accepted valuation technique,
that is, the discounted value of the difference between the contract’s value at maturity based on the foreign exchange
rate set out in the contract and the contract’s value at maturity based on the foreign exchange rate that the financial
institution would use if it were to renegotiate the same contract at today’s date under the same conditions. The
financial institution’s credit risk is also taken into consideration in determining fair value.
The fair value of notes represents the obligations that the Company would have to meet in the event of the
negotiation of similar notes under current market conditions.
The fair value of the obligations under capital leases represents the obligations that the Company would have to face
in the event of the negotiation of similar leases under current market conditions.
The financial instruments’ book and fair values were as follows:
Investments and other assets
Loans and receivables
Loans to certain customers
Other long-term liabilities
Derivatives designated as cash flow hedges
Interest rate swaps
Long-term debt
Other financial liabilities
Credit A Facility
Series A Notes
Series B Notes
Loans
Obligations under capital leases
As at September 25, 2010
As at September 26, 2009
Book
value
Fair
value
Book
value
Fair
value
24.7
24.7
24.0
24.0
0.4
0.4
2.9
2.9
$
369.3
200.0
400.0
15.8
28.1
$ 1,013.2
$
369.3
218.2
412.7
15.8
35.7
$ 1,051.7
$
369.3
200.0
400.0
15.7
31.7
$ 1,016.7
$
369.3
210.0
367.0
15.7
39.5
$ 1,001.5
The foreign exchange forward contracts, classified as “Assets held for trading”, are not shown in the above table, as
they are insignificant in value.
FAIR VALUE HIERARCHY
Fair value measurements recognized in the balance sheet must be categorized in accordance with the following
levels:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
For the interest rate swaps and foreign exchange forward contracts, the Company categorized the fair value
measurements in Level 2, as they are primarily derived from observable market inputs, that is, interest rates and
foreign exchange rates.
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
25- FINANCIAL INSTRUMENTS (Cont’d)
INTEREST RATE RISK
In the normal course of business, the Company is exposed primarily to interest rate fluctuation risks as a result of
loans and receivables that it grants, as well as loans payable that it contracts at variable interest rates.
In accordance with its risk management policy, the Company uses derivative financial instruments, consisting of
interest rate swaps, to lock in a portion of its borrowing cost and reduce its interest rate risk, swapping its Credit A
Facility variable interest rate payments for fixed interest rate payments. The Company has decided to designate its
interest rate swaps as a cash flow hedge. Policy guidelines prohibit the Company from entering into derivative
financial instruments for speculative purposes.
At the end of every quarter, the Company provides the Audit Committee with a detailed report on all of its derivative
financial instruments along with their respective fair value. The report as at September 25, 2010 presented the
following information:
Fixed rate
(Percentage)
Average
exchange
rate
(Percentage)
Notional
amount
Maturity
2010
2009
Fair value
Interest rate swap
4.0425
0.5531
50.0
December 16,
2010
(0.4)
(2.4)
A fluctuation in interest rates would have an impact on the Company’s net earnings and other comprehensive income
items. A 0.5% interest rate change would have the following effects:
Impact on net earnings
Impact on other comprehensive income
CREDIT RISK
LOANS AND RECEIVABLES / GUARANTEES
2010
2009
0.5%
increase
0.5%
decrease
0.5%
increase
0.5%
decrease
(1.1)
—
1.1
—
(0.5)
0.3
0.5
(0.3)
The Company sells products to consumers and merchants in Canada. When it sells products, it gives merchants
credit. In addition, to help certain merchants finance business acquisitions, the Company grants them long-term loans
or guarantees loans obtained by them from financial institutions. Hence, the Company is subject to credit risk.
To mitigate such risk, the Company performs ongoing credit evaluations of its customers and has adopted a credit
policy that defines the credit conditions to be met and the required guarantees. As at September 25, 2010 and
September 26, 2009, no customer accounted for over 10% of total loans and receivables.
To cover its credit risk, the Company holds guarantees from its clients’ assets in the form of deposits, movable
hypothecs on the Company stock and/or second hypothecs on their inventories, movable property, intangible assets
and receivables.
In recent years, the Company has not suffered any material losses related to credit risk.
As at September 25, 2010 and September 26, 2009, without taking into account the guarantees held, the maximum
credit risk exposure for loans and receivables was equal to their carrying amount. As at September 25, 2010, the
maximum potential liability under guarantees provided amounted to $12.9 ($12.3 as at September 26, 2009) and no
liability had been recognized as at that date.
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Notes to consolidated financial statements
September 25, 2010 and September 26, 2009
(Millions of dollars, unless otherwise indicated)
25- FINANCIAL INSTRUMENTS (Cont’d)
DERIVATIVES DESIGNATED AS CASH FLOW HEDGES / ASSETS HELD FOR TRADING
With regard to its derivative financial instruments designated as cash flow hedges, consisting of the interest rate
swaps, as well as its assets held for trading, consisting of foreign exchange forward contracts, the Company is
subject to credit risk when these swaps result in receivables from financial institutions. In accordance with its risk
management policy, the Company entered into these agreements with major Canadian financial institutions to reduce
its credit risk.
As at September 25, 2010 and September 26, 2009, the Company was not exposed to credit risk in respect of its
interest rate swaps, as they resulted in amounts payable. As at September 25, 2010 and September 26, 2009, the
maximum exposure to credit risk for the foreign exchange forward contracts was equal to their carrying amount.
LIQUIDITY RISK
The Company is exposed to liquidity risk primarily as a result of its long-term debt and trade accounts payable.
The Company regularly assesses its cash position and feels that its cash flows from operating activities are sufficient
to fully cover its cash requirements as regards its financing activities. Its Credit A Facility, and Series A and Series B
Notes do not mature until 2012, 2015 and 2035, respectively. In addition, the Company has access to a $400.0
unused authorized revolving line of credit.
Undiscounted cash flows (capital and interest)
Accounts
payable
Loans
Notes
Capital lease
commitments
Total
$ 1,073.3
—
—
—
$ 1,073.3
$ 13.9 $
386.3
2.3
10.5
33.8
454.8
238.8
519.4
$ 413.0 $ 1,246.8
$
$
5.1
38.8
—
—
43.9
$ 1,126.1
879.9
241.1
529.9
$ 2,777.0
Maturing under 1 year
Maturing in 1 to 10 years
Maturing in 11 to 20 years
Maturing over 20 years
FOREIGN EXCHANGE RISK
Given that some of its purchases are denominated in U.S. dollars, the Company is exposed to foreign exchange risk.
In accordance with its risk management policy, the Company uses derivative financial instruments, consisting of
foreign exchange forward contracts, to hedge against the effect of foreign exchange rate fluctuations on its future
U.S. dollar denominated purchases.
As at September 25, 2010 and September 26, 2009, the fair value of foreign exchange forward contracts was
insignificant.
26- COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the presentation adopted in the current year.
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