ANNUAL REPORT
2019
COMPANY PROFILE
METRO INC. is a food and pharmacy leader in Québec and Ontario. As a retailer, franchisor, distributor, and manufacturer,
the company operates or services a network of 950 food stores under several banners including Metro, Metro Plus,
Super C, Food Basics, Adonis and Première Moisson, as well as 650 drugstores primarily under the Jean Coutu, Brunet,
Metro Pharmacy and Food Basics Pharmacy banners, providing employment directly or indirectly to almost 90,000
people.
2019 HIGHLIGHTS
Sales of $16,767.5 million, up 16.6% and up 3.2% when excluding the Jean Coutu Group
Net earnings of $714.4 million
Adjusted net earnings(1) of $731.6 million, up 26.3%
Fully diluted net earnings per share of $2.78
Adjusted fully diluted net earnings per share(1) of $2.84, up 17.8%
Synergies of $58 million related to the Jean Coutu Group acquisition, $65 million(3) on an annualized basis
• Return on equity of 12.3%, exceeding 12% for the 27th consecutive year
• Dividends per share increase of 11.0%, the 25th consecutive year of dividend growth
RETAIL NETWORK
Québec
Ontario
New Brunswick Total
Supermarkets
Metro
Metro Plus
Adonis
195 Metro
10 Adonis
Discount stores
Super C
97 Food Basics
Neighbourhood
stores
Marché Richelieu
Marché Ami
56
297
Partner
Première Moisson
24 Première Moisson
Total food
Drugstores
Total drugstores
679
Brunet
Brunet Plus
Brunet Clinique
Clini Plus
PJC Jean Coutu
PJC Health
PJC Health & Beauty
Metro Pharmacy
Food Basics Pharmacy
163
PJC Jean Coutu
PJC Health
378
541
132
3
135
1
271
72
9
81
327
13
232
353
25
950
235
PJC Jean Coutu
PJC Health
PJC Health & Beauty
28
28
415
650
Forward-looking information: For any information on statements in this Annual Report that are of a forward-looking nature, see section on "Forward-
looking information" in the Management's Discussion and Analysis (MD&A).
- 2 -
FINANCIAL HIGHLIGHTS
OPERATING RESULTS
(Millions of dollars)
Sales
Operating income*
Net earnings
Adjusted net earnings(1)
Cash flows from operating activities
FINANCIAL STRUCTURE
(Millions of dollars)
Total assets
Non-current debt**
Equity
PER SHARE
(Dollars)
Basic net earnings
Fully diluted net earnings
Adjusted fully diluted net earnings(1)
Dividends
FINANCIAL RATIOS
(%)
Operating income*/ Sales
Return on equity
Non-current debt/total capital
SHARE PRICE
(Dollars)
High
Low
Closing price (At year-end)
2019
2018
2017
(53 weeks)
2016
2015
16,767.5
1,321.5
714.4
731.6
687.7
14,383.4
13,175.3
12,787.9
12,223.8
1,011.1
1,718.5
579.2
750.4
966.4
608.4
548.2
696.2
931.3
586.2
586.2
707.4
857.8
519.3
523.6
678.3
11,073.9
10,922.2
2,229.0
5,968.6
2,630.4
5,656.0
6,050.7
1,441.6
2,923.9
5,606.1
1,231.0
2,693.2
5,387.1
1,145.1
2,657.2
2.79
2.78
2.84
7.20
7.16
2.41
2.59
2.57
2.31
2.41
2.39
2.39
2.03
2.01
2.03
0.7800
0.7025
0.6275
0.5367
0.4500
7.9
12.3
30.6
58.94
39.04
57.91
7.0
40.1
31.7
45.44
38.32
40.18
7.3
21.7
33.0
47.41
38.00
42.91
7.3
21.9
31.4
48.19
35.61
44.09
7.0
19.4
30.1
38.10
24.27
35.73
* Operating income before depreciation and amortization and associate's earnings (OI)
**Including the Series E Notes that will be refinanced in 2020
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MESSAGE FROM THE CHAIR OF THE BOARD
Dear Shareholders,
METRO had another good year in 2019 as it exceeded established financial results and made significant progress with
regards to customer satisfaction in all banners. These excellent results are particularly outstanding given that all teams
were working on the integration of the activities of the Jean Coutu Group and of METRO following the acquisition of the
Jean Coutu Group in 2018. These results serve to reaffirm our belief that the strategic plan implemented by management
and supported by the Board is proving to be effective for the company’s growth.
Our results also reflect the competence and commitment of our employees, led by an experienced and passionate
management team. I would like to congratulate our President and Chief Executive Officer, Eric La Flèche, as well as all
of the members of the METRO team for these results and the work accomplished during the year.
Board of Directors
Ms. Marie-José Nadeau and Mr. Marc DeSerres, who have been directors of the Corporation respectively for 18 and 17
years, have decided to retire as directors of the Corporation and will not be director nominees at the Annual General
Meeting of shareholders. Ms. Nadeau has chaired the Corporate Governance and Nominating Committee since 2015
and ensured that METRO became an example of good governance. On behalf of my colleagues and our shareholders,
I would like to thank them for their contribution and for the leadership they have shown during their tenure. Their
professionalism and their experience were very valuable for the Corporation.
In order to ensure an organized and thoughtful transition, the Board appointed Mr. Pierre Boivin as a director last
September. Mr. Boivin therefore stands for election for the first time. Mr. Boivin is President and Chief Executive Officer
of Claridge Inc., a private placement firm. He also is a board member of the National Bank of Canada and of the Canadian
Tire Corporation, Limited, and has been involved in the development of artificial intelligence in Québec and in Canada
for several years. The second director seat will be left vacant and the Board will be reduced to 13 members. The Board
believes that this number is adequate to fulfill its mandate in an efficient manner.
Throughout the year, the Board of Directors has continued to oversee and support management in its various projects
and in the realization of the Corporation’s various business plans in order to ensure long-term value for shareholders.
This year, the Board of Directors has adopted a written policy on shareholder engagement which outlines how the Board
communicates with shareholders and how shareholders can communicate with the Board and management of METRO.
This policy also outlines the matters on which the Board of Directors can engage with shareholders, specifically: corporate
governance practices and disclosure; board performance; executive performance and compensation; and Board and
Committee composition and qualifications.
METRO recognizes the value of diversity, in particular with regards to experience, expertise and the representation of
men and women on the Board of Directors. This is why the Board has adopted in 2016 a minimum target of 30% for the
representation of men and women on the Board. Once again, this year, the Board will continue to meet this target as
there will be four women on the Board in 2020, representing 31% of board members.
I would like to thank all Board members for their collaboration and their commitment in making METRO a successful
and innovative company which continues to build for the future. Finally, thank you to our shareholders for their continued
trust.
Réal Raymond
Chair of the Board
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MESSAGE FROM THE PRESIDENT AND CEO
Dear Shareholders,
METRO had an outstanding year in 2019, both in terms of strategic progress and financial performance. We achieved
significant milestones with respect to the combination of our pharmacy activities following the acquisition of the Jean
Coutu Group, the modernization program for our Ontario distribution centres, and the deployment of online grocery
shopping. Our financial results and our customers satisfaction metrics demonstrate that our team successfully meets
the challenges that arise every day in the highly competitive food and pharmacy sectors.
2019 results
Sales for fiscal 2019 were $16,767.5 million, up 16.6%, or 3.2% excluding the Jean Coutu Group. Adjusted net earnings(1)
for fiscal 2019 stood at $731.6 million, and adjusted fully diluted net earnings per share(1) were $2.84, up 26.3% and
17.8%, respectively. Food same-store sales were up 3.6% while pharmacy same-store sales increased 2.4%, with
prescription drugs up 1.8% and in front-store sales up 3.4%.
We are very pleased with our 2019 results. Competition remains intense, consumer expectations are high and shift
rapidly, and we strive to execute our business plans well while innovating and adapting to market conditions.
We will shortly complete the purchase of our partners’ shares in Première Moisson. We would like to thank the Fiset
family for their collaboration since the beginning of our partnership in June 2014.
Combination of pharmacy activities
The combination of the activities of METRO, the Jean Coutu Group and McMahon is progressing as planned. We are
well on track to meet our $75 million synergy target after three years having reached an annual run rate of $65 million
after one year.
Our two organizations were highly complementary from a strategic, commercial and cultural standpoint. Combined, they
provide us with a remarkable springboard for the future by strengthening our competitive position. Our pharmacy division
now has 650 locations in Québec, Ontario and New Brunswick. It is focusing its efforts on developing the full potential
of our two main brands, Jean Coutu and Brunet, which hold strong connections with consumers. Furthermore, during
the last two quarters of the year, we celebrate the 50th anniversary of the Jean Coutu banner with a strong promotional
campaign.
We have made significant progress in establishing a unified operating platform. This involves putting in place structures,
systems and processes that will allow us to be more agile and efficient to fuel our growth. Accordingly, we have begun
to implement systems for pharmacy management as well as new point-of-sale and back office management systems
in the Brunet network. These are high performance applications, in use at Jean Coutu, that will help drive success for
our banners.
We have also laid the foundations of our cross-selling strategy, with the introduction of the Personnelle brand, Jean
Coutu’s emblematic private label, into the Brunet network and METRO’s Selection and Irresistibles private labels into
the Jean Coutu network. In June, we successfully transferred the supply of our Ontario pharmacies to the Jean Coutu
distribution centre in Varennes.
Following the transaction with the Jean Coutu Group, at the request of the Competition Bureau, we sold rights in regard
to ten pharmacies in fiscal 2019, including nine Brunet and one PJC Jean Coutu drugstores.
Modernization of our Ontario distribution network
Construction of our new fresh products distribution centre in Toronto got underway in September 2019, slightly behind
schedule due to delays in obtaining permits. Costing $400 million over six-years, this project also includes construction
of a new distribution centre for frozen products. Work on planning and developing new business processes has continued
as planned. The delay in the approval process resulted in deferring to 2020 a portion of the capital expenditures planned
for 2019.
Both centres will be automated or semi-automated and will feature leading-edge technology that will allow us to continue
to grow in the Ontario market while better servicing our retail network. We will be even better positioned to meet our
customers’ needs with greater efficiency and flexibility, to offer a wider variety of products and to be more accurate in
preparing orders.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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A leading-edge customer experience
Again this year, together with our affiliated retailers, we continued to invest in our retail network renovation and
improvement programs. We opened ten new food stores, including two relocations, and completed 20 major renovation
projects. We restructured our network in Ontario in order to better meet customers’ needs by having the right format and
banner in certain markets. The operation involved a dozen stores with significant investments for conversions to another
banner, relocations and a few closures.
In addition, six pharmacies in Quebec were remodeled and in Ontario, we added a pharmacy in a new Metro store, for
a total of 81 pharmacies in that province.
Work continued on improving and developing our online grocery shopping service. This service is now available to 60%
of the population of Québec and in the Greater Toronto Area. Orders are prepared by dedicated staff in seven Metro
stores in Quebec and two stores in Ontario with home-delivery service or collect in store. Sales are progressing well
and we believe our model allows us to meet customer demand while investing at a measured pace.
To develop and increase in-house data management and analytics expertise, we created a dedicated customer
intelligence team. This team will work closely with our partner Dunnhumby to better support our food and pharmacy
banners.
In 2019, all our food banners recorded improved customer satisfaction scores, a performance that we are proud of and
that shows that our customer-focused strategies are effective. The “WOW” index presented by the Léger polling firm in
Québec last November also confirmed as much. METRO maintained the first rank among large food distributors. The
Super C banner remained in first place among discounters. New this year, the survey also assessed e-commerce, and
Metro was ranked first among food retailers.
The first Canadian BrandZ report ranked Metro the most valuable grocery brand in Canada and 19th most valuable
Canadian brand overall. Super C, Food Basics and Jean Coutu were also among the Top 40 most valuable brands in
Canada. METRO was also placed 10th in a recent study by the Reputation Institute on the reputation of companies doing
business in Canada. These impressive results are a tribute to the collective commitment of our teams and their excellent
work.
We continued to invest in the development of our employees, with programs such as the METRO leadership training
program. After training store managers and franchisees across our food store network last year, we extended the training
to department managers this year in addition to launching a similar program for retail pharmacy management.
Financial position
Over the course of fiscal 2019, our share price traded within a range of $39.04 to $58.94 and closed the year at $57.91,
compared to $40.18 at the end of fiscal 2018, or an increase of 44% for the year, 135% over 5 years and 400% over
10 years.
Return for our shareholders remains a top priority for METRO. With this in mind, we increased our dividend by 11.0%
in 2019, the 25th consecutive year of dividend increase. Also, in November 2018, we reinstated our share buyback
program to provide us with an additional option for using excess funds. Under this program, we had repurchased
3.2 million shares at an average price of $50.31, for a total consideration of $159.7 million.
Our financial situation remains very solid with a strong balance sheet that enables our future growth and allows the
company to make strategic acquisitions if they arise.
Community investments
We continue to actively contribute to the economic and social wellbeing of the communities we operate in. We take great
pride in the “Thanks a Million!” award that METRO received from United Way Canada for a second consecutive year.
The award is presented each year to Canadian businesses that donate $1 million or more to United Way, an amount
that METRO and its team exceeded once again with a contribution of more than $1.9 million across Québec.
In June, 325 employees donated close to 1,250 hours to some 20 non-profit organizations as part of the second METRO
volunteer activity. We are very proud of the generosity of our people, a true reflection of the important role we play in
our communities.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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Outlook(3)
In Fiscal 2020, our teams will work to achieve our strategic priorities of combining pharmacy operations, modernizing
our distribution network, accelerating the growth of online shopping and developing talent, while continuing to grow all
our banners.
To do so, we will press ahead with Phase 2 of the work to combine our pharmacy activities and will continue to realize
synergies. Work will also continue to build the two new automated distribution centres in Toronto.
I would like to express my sincere gratitude to François J. Coutu, who retired as President of the Jean Coutu Group
(PJC) Inc. on May 31, 2019. François is a great builder and was a key contributor to the Group’s success since 1983.
We will continue to benefit from François’ expertise and unique experience as he remains a member of our Board of
Directors. I would like to extend a warm welcome to his successor as head of our pharmacy division, Alain Champagne,
who has 30 years’ experience within large international companies in pharmacy distribution and consumer packaged
goods. Alain will work to complete the integration and further develop our pharmacy business.
In closing, I would like to thank all our employees, our retailers and my management colleagues for their great work and
contribution to our success. I also want to thank our directors for their support of our strategic projects and for their sound
advice. Finally, thank you, dear shareholders, for your ongoing trust.
Eric R. La Flèche
President and Chief Executive Officer
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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CORPORATE RESPONSIBILITY
We have achieved to date many of the objectives set out in our 2016-2020 Corporate Responsibility (CR) Plan for each
of the four pillars on which our approach is based: delighted customers, respect for the environment, strengthened
communities and empowered employees. In 2019, we continued to integrate environmental, social and governance
(ESG) factors into our business practices, pursued the roll out of our programs and initiated new projects.
We released our Packaging and Printed Materials Management Policy, which covers all our activities and aims to both
reduce and optimize. Building on the many initiatives we have carried out over the years and specifically those related
to our private brand product packaging, we are confident that our measures will enable us to take on these challenges
responsibly and efficiently and contribute to the global movement to tackle single-use plastics.
Another key issue on which we focused our attention this year is food waste. Through our One More Bite food recovery
program, the equivalent of more than seven million meals were distributed by community organizations over one million
more than last year. Also, along with other industry members, we committed to reduce the food waste generated by our
activities by 50% by 2025 as compared to 2016. By donating unsold food products and managing our organic material,
we are providing people with food and reducing the environmental impacts of organic waste in landfills.
METRO has always been present in communities. In addition to the Corporation’s in cash and in-kind donations, we
were once again able to count on the generosity of our employees, customers and suppliers, who donated $4.6 million
in 2019. The second edition of our volunteering activity has seen an increase of three times more than in 2018 with 325
participating employees. Held during regular workhours, the volunteers gave close to 1,250 hours to support some
20 community organizations.
Again last year, it was very clear that our customers’ interest in health and wellness remained strong, and we therefore
continued to expand and promote our healthy product offer. Our food and pharmacy banners led actions to support
customers seeking to adopt a healthy lifestyle by providing information and advice.
Consumers are also very sensitive to the social and environmental impacts of the products they purchase matters we
tackle through our responsible procurement programs. In 2019, in addition to continuing to document practices across
our supply chain, we launched projects to promote our initiatives to customers. In Québec, we led the Freshness You
Can trace campaign to provide complete and transparent information on the provenance of our seafood products in
response to customer demand. We also vigorously pursued our efforts to support local purchasing and raise awareness
among our customers in Québec and Ontario.
We also made further progress on the roll out of our environmental programs in our stores and distribution centres. We
stepped up our efforts to increase our waste diversion rates and are encouraged by the performance of a number of
stores, since nearly half of our network of corporate and franchised food stores has a diversion rate of over 70%. This
past year also saw a number of transport efficiency initiatives that we intend to sustain to reduce the intensity of our
GHG emissions. With regard to the energy efficiency of our stores, our new construction standards confirm how effective
our measures are.
There was good progress in the implementation of our CR approach in 2019. As we enter the final year of our 2016-2020
plan, we remain focused on our priorities for each pillar.
More information on METRO’s directions and achievements is available in our corporate responsibility report for fiscal
year 2019 (available January 28, 2020) and background documents, which are available at https://corpo.metro.ca/en/
corporate-social-responsibility.html.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MANAGEMENT'S DISCUSSION AND ANALYSIS
AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 28, 2019
TABLE OF CONTENTS
Overview .......................................................................................................................................................
Goal, mission and strategy ............................................................................................................................
Key performance indicators ...........................................................................................................................
Key achievements .........................................................................................................................................
Selected annual information ..........................................................................................................................
Outlook ..........................................................................................................................................................
Operating results ...........................................................................................................................................
Quarterly highlights .......................................................................................................................................
Cash position ................................................................................................................................................
Financial position ...........................................................................................................................................
Sources of financing ......................................................................................................................................
Contractual obligations ..................................................................................................................................
Related party transactions .............................................................................................................................
Event after the reporting period .....................................................................................................................
Fourth quarter
...............................................................................................................................................
Derivative financial instruments .....................................................................................................................
New accounting standards ............................................................................................................................
Forward-looking information ..........................................................................................................................
Non-IFRS measurements ..............................................................................................................................
Controls and procedures ...............................................................................................................................
Significant judgements and estimates ...........................................................................................................
Risk management
.........................................................................................................................................
Management's responsibility for financial reporting .......................................................................................
Independent auditors' report
..........................................................................................................................
Annual consolidated financial statements ......................................................................................................
Page
11
11
12
12
13
14
15
18
20
21
24
25
25
25
25
27
27
29
30
30
30
32
35
36
39
.
The following Management's Discussion and Analysis sets out the financial position and consolidated results of METRO INC. for the
fiscal year ended September 28, 2019, and should be read in conjunction with the annual consolidated financial statements and the
accompanying notes as at September 28, 2019. This report is based upon information as at November 19, 2019 unless otherwise
indicated. Additional information, including the Annual Information Form and Certification Letters for fiscal 2019, is available on the
SEDAR website at www.sedar.com.
- 10 -
OVERVIEW
The Corporation is a leader in food and pharmaceutical industry in Québec and Ontario.
The Corporation, as a retailer, franchisor or distributor, operates under different grocery banners in the conventional
supermarket and discount segments. For consumers seeking a higher level of service and a greater variety of products,
we operate 327 supermarkets under the Metro and Metro Plus banners. The 232 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 Adonis banner, which currently has 13 stores, is specialized in fresh products and Mediterranean and Middle-Eastern
products. The majority of the stores are owned by the Corporation or by structured entities and their financial statements
are consolidated with those of the Corporation. Independent owners bound to the Corporation by leases or affiliation
agreements operate a large number of Metro and Metro Plus stores. Supplying these stores contributes to our sales.
The Corporation also acts as a distributor for independent neighborhood grocery stores. Their purchases are included
in the Corporation's sales. The Corporation also operates Première Moisson, a company specialized in premium quality
artisan bakery, pastry, and deli products. Première Moisson sells its products to the Corporation’s stores, to restaurants
and other chains as well as directly to consumers in its 25 stores.
The Corporation also acts as franchisor and distributor for 415 PJC Jean Coutu, PJC Health et PJC Health & Beauty
drugstores as well as 163 Brunet Plus, Brunet, Brunet Clinique, and Clini Plus drugstores, held by pharmacist owners.
The Corporation operates 72 drugstores in Ontario under Metro Pharmacy and Food Basics Pharmacy banners and
their sales are included in the Corporation's sales. Sales also include the supply of non-franchised drugstores and various
health centres. The Corporation is also active in generic drug manufacturing through its subsidiary Pro Doc Ltée.
GOAL, MISSION AND STRATEGY
The Corporation’s goal is to provide the best customer experience in each of its banners.
Our mission is to exceed our customers’ expectations every day to earn their long-term loyalty.
The four pillars of our business strategy are : customer focus, best team, operational excellence and efficiency.
We put the customer at the heart of every decision. Friendly service, a pleasant and efficient shopping experience,
quality products and competitive prices are our priorities.
The best team consists of leaders who put the Corporation’s interests first. Employee growth and leadership development
and succession planning ensure its continued strength.
Operational excellence and efficiency are achieved through high operating standards, a results-driven corporate culture,
engaging all employees and monitoring performance so as to react swiftly.
Our business strategy is founded on corporate responsibility. The fundamental purpose of our actions is to ensure
profitable growth for all: employees, shareholders, business partners and the communities that we serve.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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KEY PERFORMANCE INDICATORS
We evaluate the Corporation's overall performance using the following principal indicators:
• sales:
same-store sales growth;
average customer transaction size and number of transactions;
average weekly sales;
average weekly sales per square foot;
prescription count growth;
percentage of sales represented by customers who are loyalty program members;
market share;
customer satisfaction;
• gross margin percentage;
• sales per hour worked by store to assess productivity;
• operating income before depreciation and amortization and associate's earnings as a percentage of sales;
• net earnings as a percentage of sales;
• net earnings per share growth;
•
•
return on equity;
retail network investments:
dollar value and nature of store investments;
number of stores;
store square footage growth.
KEY ACHIEVEMENTS
Sales for fiscal 2019 totalled $16,767.5 million versus $14,383.4 million for fiscal 2018, an increase of 16.6%. Excluding
from fiscal 2019 and fiscal 2018 sales of $3,121.8 million and $1,157.7 million, respectively, generated by the Jean Coutu
Group, sales were up 3.2%. Net earnings for fiscal 2019 were $714.4 million, a decrease of 58.4% from $1,718.5 million
for fiscal 2018. Fully diluted net earnings per share were $2.78 compared with $7.16, down 61.2%. Adjusted net earnings(1)
for fiscal 2019 totalled $731.6 million compared with $579.2 million for fiscal 2018, and adjusted fully diluted net earnings
per share(1) amounted to $2.84 versus $2.41, up 26.3% and 17.8%, respectively.
We realized several projects over the fiscal year, including the following major ones:
• We continued to combine pharmacy activities and share best practices between METRO and the Jean Coutu
Group. The first phase of the consolidation of our wholesale pharmaceutical business was completed the past
summer. Orders from over 300 Ontario clients are now centralized at our state-of-the-art Varennes distribution
centre. This constitutes the first step toward implementing an integrated operational chain for greater agility and
efficiency. Synergies generated in fiscal 2019 amounted to $58 million and to date, we have generated annualized
synergies of $65 million(3).
Pursuant to the agreement reached with Canada’s Commissioner of Competition following the Jean Coutu Group
acquisition, we completed the divestiture of rights in 10 pharmacies.
•
•
In October 2017, we announced a $400 million investment over six years in our Ontario distribution network. As
part of this investment, construction of the new semi-automated fresh food distribution centre located close to our
current Vickers Road facility in Toronto started in September 2019. Our new distribution centre equipped with state-
of-the-art technology will help us improve service to our store network and offer greater product freshness and
variety. METRO will be able to better meet the constantly evolving customer preferences and position itself as the
retailer providing the best customer experience in each of its banners.
• We continued to invest in our stores. In Québec, we relocated a Super C and an Adonis and carried out major
renovations at ten other stores. In Ontario, we opened two Metro and three Food Basics stores as well as an Adonis
store, converted two Metro stores into Food Basics and carried out major renovations at 10 other stores.
• With the opening of a bakery on Laurier Street in Montréal, Première Moisson now has 22 bakeries in the Montréal
area plus one in Québec City and two more in the Ottawa-Gatineau area.
• We launched our online grocery service in Ontario on May 7, 2019 and now 1.9 million households in the Greater
Toronto Area can benefit from this service. Customers can pick up their orders in one of two stores or have them
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 12 -
delivered. Products are selected by METRO employees specially trained to choose the freshest food in the store,
so that customers feel they have chosen their items themselves.
• METRO also placed 10th in a recent study on the reputation of companies doing business in Canada, by the
Reputation Institute. This was the first time we made the top 50. The first Canadian BrandZ report ranked Metro
the most valuable grocery brand in Canada and 19th most valuable Canadian brand overall.
The Jean Coutu Group celebrated 50 years of operations, namely 50 years of quality customer service, 50 years
of innovations, 50 years of friendships. During this holiday period, the Jean Coutu Group wishes, more than ever,
to clarify and reaffirm the philosophy that has been driving it since inception: At Jean Coutu, "you’ll find it all... even
a friend!”.
•
• We continued to implement our corporate responsibility plan and reiterated our commitment to help find solutions
to some of the most pressing issues in our industry. On January 17, 2019, along with other companies, we made
a public commitment to reduce by 50% food waste in our operations by 2025. We have already implemented major
projects to this end, namely our waste management program and the Récupartage food donation program. During
the year, we unveiled our packaging and print management policy and intend to reduce by 50% single-use plastic
bags in METRO's food and pharmacy banners by the end of fiscal 2023. These initiatives complement those
already in place, namely the energy efficiency of our buildings, a program for the packaging of our private label
food products and the opportunity for our customers in Québec's Metro stores to bring their reusable containers
to purchase fresh products.
SELECTED ANNUAL INFORMATION
2019
2018
Change
2017
Change
(Millions of dollars, unless otherwise indicated)
(52 weeks)
(52 weeks)
%
(53 weeks)
Sales
16,767.5
14,383.4
16.6
13,175.3
Net earnings attributable to equity holders of the parent
711.6
1,716.5
Net earnings attributable to non-controlling interests
Net earnings
Basic net earnings per share
Fully diluted net earnings per share
Adjusted net earnings(1)
Adjusted fully diluted net earnings per share(1)
Return on equity (%)
Dividends per share (Dollars)
Total assets
Current and non-current portions of debt
2.8
2.0
714.4
1,718.5
2.79
2.78
731.6
2.84
12.3
7.20
7.16
579.2
2.41
40.1
0.7800
0.7025
11,073.9
10,922.2
2,657.6
2,643.7
(58.5)
40.0
(58.4)
(61.3)
(61.2)
26.3
17.8
—
11.0
1.4
0.5
591.7
16.7
608.4
2.59
2.57
548.2
2.31
21.7
0.6275
6,050.7
1,454.5
%
9.2
190.1
(88.0)
182.5
178.0
178.6
5.7
4.3
—
12.0
80.5
81.8
Sales for fiscal 2019 totalled $16,767.5 million versus $14,383.4 million for fiscal 2018, an increase of 16.6%. Excluding
from fiscal 2019 and fiscal 2018 sales of $3,121.8 million and $1,157.7 million, respectively, generated by the Jean Coutu
Group, sales were up 3.2%. Sales for fiscal 2018 totalled $14,383.4 million versus $13,175.3 million for fiscal 2017, an
increase of 9.2%. Excluding $1,157.7 million in sales from fiscal 2018 resulting from the Jean Coutu Group as well as
the 53rd week of fiscal 2017, sales were up 2.4%.
Net earnings for fiscal 2019, 2018 and 2017 totalled $714.4 million, $1,718.5 million and $608.4 million, respectively,
while fully diluted net earnings per share amounted to $2.78, $7.16 and $2.57. Taking into account the items relating to
fiscal 2019 and fiscal 2018 shown in the “Net earnings adjustments” table in the “Operating results” section, as well as
the share of an associate’s (ACT) earnings for fiscal 2017, adjusted net earnings(1) for fiscal 2019 stood at $731.6 million
compared with $579.2 million for fiscal 2018 and $548.2 million for fiscal 2017, while adjusted fully diluted net earnings
per share(1) was $2.84 for 2019 compared with $2.41 for 2018 and $2.31 for 2017, up 17.8% and 4.3%. The 53rd week
of fiscal 2017 had a favourable impact of $11.9 million on net earnings and $0.05 on fully diluted net earnings per share.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 13 -
After performing exceptionally well at 40.1% in 2018 due to the gain on disposal of our investment in ACT in order to
pay part of the acquisition of the Jean Coutu Group, return on equity in 2019 was 12.3%, impacted by the 2018 share
issuance also in connection with acquisition of the Jean Coutu Group. This acquisition and the financing required explain
the increase in assets as well as in debt in 2018 compared with 2017.
OUTLOOK(3)
In Fiscal 2020, our teams will work to achieve our strategic priorities of combining pharmacy operations, modernizing
our distribution network, accelerating the growth of online shopping and developing talent, while continuing to grow all
our banners.
To do so, we will press ahead with Phase 2 of the work to combine our pharmacy activities and will continue to realize
synergies. Work will also continue to build the two new automated distribution centres in Toronto.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 14 -
OPERATING RESULTS
The Jean Coutu Group (PJC) Inc. (“Jean Coutu Group”) acquisition was completed on May 11, 2018, and its results
were consolidated with the Corporation’s results as of that date. As such, the fiscal 2018 results include the results of
the Jean Coutu Group for slightly more than 20 weeks. In addition, the results for the first quarter of 2018 include
significant gains following the disposal of our investment in Alimentation Couche-Tard (ACT).
SALES
Sales for fiscal 2019 totalled $16,767.5 million versus $14,383.4 million for fiscal 2018, an increase of 16.6%. Excluding
from fiscal 2019 and fiscal 2018 sales of $3,121.8 million and $1,157.7 million, respectively, generated by the Jean Coutu
Group, sales were up 3.2%. Food same-store sales were up 3.6%. Pharmacy same-store sales were up 2.4% with a
1.8% increase in prescription drugs (number of prescriptions were up 2.4%) and a 3.4% increase in front-store sales.
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATES' EARNINGS
This earnings measurement excludes financial costs, taxes, depreciation and amortization, the share of earnings and
gain on disposal of investments in associates as well as the gain on revaluation and disposal of an investment at fair
value.
Operating income before depreciation and amortization and associates' earnings for fiscal 2019 totalled $1,321.5 million
or 7.9% of sales compared with $1,011.1 million or 7.0% of sales for fiscal 2018. During fiscal 2019, we recorded retail
network restructuring expenses of $36.0 million and generated a net gain of $6.0 million on the divestiture of pharmacies
while for fiscal 2018, we recorded pharmacy network closure and restructuring expenses of $31.4 million, a $28.7 million
expense related to the Jean Coutu Group acquisition and a $11.4 million expense for distribution network modernization.
Excluding those items, adjusted operating income before depreciation and amortization and associates' earnings(2) for
fiscal 2019 totalled $1,351.5 million or 8.1% of sales, compared with $1,082.6 million or 7.5% of sales for fiscal 2018.
This increase was largely driven by the Jean Coutu Group acquisition.
Synergies related to the Jean Coutu acquisition generated in fiscal 2019 amounted to $58 million and to date, we have
generated annualized synergies of $65 million(3).
Operating income before depreciation and amortization and associates' earnings adjustments (OI)(2)
(Millions of dollars, unless otherwise indicated)
Operating income before depreciation and
amortization and associates' earnings
Retail network restructuring expenses
Gain on divestiture of pharmacies
Pharmacy network closure and restructuring
expenses
Business acquisition-related expenses
Distribution network modernization project
expenses
Adjusted operating income before depreciation
and amortization and associates' earnings(2)
2019
Sales
OI
1,321.5
16,767.5
(%)
7.9
2018
Sales
OI
1,011.1
14,383.4
(%)
7.0
36.0
(6.0)
—
—
—
—
—
31.4
28.7
11.4
1,351.5
16,767.5
8.1
1,082.6
14,383.4
7.5
Gross margin on sales for fiscal 2019 were 19.9% versus 19.7% for fiscal 2018.
For fiscal 2019, operating expenses as a percentage of sales was 12.0% compared with 12.6% for fiscal 2018. Excluding
from fiscal 2019 the retail network restructuring expenses of $36.0 million and the $6.0 million net gain generated from
the divestiture of pharmacies, and excluding from fiscal 2018 the $31.4 million for pharmacy network closure and
restructuring expenses, the $28.7 million expense related to the Jean Coutu Group acquisition and the $11.4 million
expense for distribution network modernization, operating expenses as a percentage of sales was 11.8% in 2019
compared with 12.1% in 2018. This difference is attributable to the inclusion of the Jean Coutu Group, partially offset
by higher transportation costs.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 15 -
DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS
Total depreciation and amortization expense for fiscal 2019 were $286.4 million versus $233.5 million for fiscal 2018.
Amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition amounted to $38.7 million
for fiscal 2019 compared with $15.0 million for fiscal 2018.
Net financial costs for fiscal 2019 were $103.8 million compared with $80.2 million for fiscal 2018. This increase stemmed
primarily from the notes issued for the Jean Coutu Group acquisition.
SHARE OF EARNINGS, GAIN ON DISPOSAL OF INVESTMENTS IN ASSOCIATES AND GAIN ON REVALUATION
AND DISPOSAL OF AN INVESTMENT AT FAIR VALUE
During fiscal 2019, the Company disposed of its investment in Colo-D Inc., an associate presented in other assets, for
a total cash consideration of $59.0 million. A gain before income taxes of $36.4 million on the disposal of this investment
was recognized in earnings.
During the first quarter of fiscal 2018, to fund a portion of the Jean Coutu Group acquisition, we disposed of most of our
investment in ACT, and recorded a gain of $1,107.4 million. As a result of this disposal, the Corporation no longer has
significant influence over ACT. Consequently, the investment was revalued at fair value and the Corporation recorded
a $241.1 million fair value revaluation gain in net earnings. In the fourth quarter of fiscal 2018, we disposed of the majority
of this investment at fair value and entered into a forward agreement with a financial institution for the disposal of the
remaining shares. The disposal was completed in the first quarter of fiscal 2019 and the final revaluation of the financial
liability resulted in a gain of $1.5 million recognized in net earnings.
No share of an associate's earnings was recorded in fiscal 2019 in comparison with a $30.8 million share recorded in
fiscal 2018.
INCOME TAXES
The income tax expense of $254.8 million for fiscal 2019 and $358.2 million for fiscal 2018 represented an effective tax
rate of 26.3% and 17.2% respectively. The low effective rate in 2018 resulted from the gain on disposal of the majority
of our investment in ACT and the gain on fair value revaluation and disposal of our residual investment.
NET EARNINGS AND ADJUSTED NET EARNINGS(1)
Net earnings for fiscal 2019 were $714.4 million, a decrease of 58.4% from $1,718.5 million for fiscal 2018. Fully diluted
net earnings per share were $2.78 compared with $7.16, down 61.2%. Excluding the specific items shown in the table
below, adjusted net earnings(1) for fiscal 2019 totalled $731.6 million compared with $579.2 million for fiscal 2018, and
adjusted fully diluted net earnings per share(1) amounted to $2.84 versus $2.41, up 26.3% and 17.8%, respectively.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 16 -
Net earnings adjustments(1)
Net earnings
714.4
2.78
1,718.5
7.16
(58.4)
(61.2)
2019
2018
Change (%)
(Millions of
dollars)
Fully
diluted EPS
(Dollars)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
Net
earnings
Fully
diluted
EPS
Retail network restructuring expenses, after
taxes
Gain on divestiture of pharmacies, after taxes
Pharmacy network closure and restructuring
expenses, after taxes
Business acquisition-related expenses, after
taxes
Distribution network modernization project
expenses, after taxes
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Income on business acquisition-related short-
term investments and security deposits,
after taxes
Interest on notes issued in connection with a
business acquisition, after taxes
Financial costs on the balance payable for
the buyout of minority interests, after taxes
Gain on the disposal of investments in
associates, after taxes
Gain on revaluation and disposal of an
investment at fair value, after taxes
Share of an associate's earnings, after taxes
Adjusted net earnings(1)
26.4
(4.7)
—
—
—
28.5
—
—
—
(31.9)
(1.1)
—
731.6
2.84
—
—
23.0
22.7
8.4
11.0
(15.6)
14.0
1.3
(968.1)
(209.3)
(26.7)
579.2
2.41
26.3
17.8
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 17 -
QUARTERLY HIGHLIGHTS
(Millions of dollars, unless otherwise indicated)
2019
2018 Change (%)
Sales
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Net earnings
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Adjusted net earnings(1)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Fully diluted net earnings per share (Dollars)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Adjusted fully diluted net earnings per share(1) (Dollars)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
(4) 12 weeks
(5) 16 weeks
3,977.7
3,701.6
5,229.3
3,858.9
3,111.8
2,899.0
4,636.4
3,736.2
16,767.5
14,383.4
27.8
27.7
12.8
3.3
16.6
203.1
121.5
222.4
167.4
714.4
172.2
155.1
230.3
174.0
731.6
0.79
0.47
0.86
0.66
2.78
0.67
0.60
0.90
0.68
2.84
1,299.1
(84.4)
106.9
167.5
145.0
13.7
32.8
15.4
1,718.5
(58.4)
126.7
108.1
183.4
161.0
579.2
5.67
0.47
0.69
0.56
7.16
0.55
0.47
0.75
0.63
2.41
35.9
43.5
25.6
8.1
26.3
(86.1)
—
24.6
17.9
(61.2)
21.8
27.7
20.0
7.9
17.8
Sales in the first quarter of fiscal 2019 reached $3,977.7 million, up 27.8% compared with $3,111.8 million in the first
quarter of fiscal 2018. Excluding $757.1 million in sales for the first quarter of 2019 resulting from the Jean Coutu Group,
sales were up 3.5%. In the first quarter, food same-store sales were up 3.2% and inflation in our food basket was
approximately 1.8%. Pharmacy same-store sales were up 1.5%, 0.8% for prescription drugs (2.2% for number of
prescriptions) and 2.0% for front store sales.
Sales in the second quarter of fiscal 2019 reached $3,701.6 million, up 27.7% compared to $2,899.0 million in the second
quarter of fiscal 2018. Excluding $686.4 million in sales for the second quarter of 2019 resulting from the Jean Coutu
Group, sales were up 4.0%. In the second quarter, food same-store sales were up 4.3% and inflation in our food basket
was approximately 2.5%. Pharmacy same-store sales were up 1.1%, with a 0.1% decline in prescription drugs (number
of prescriptions were up 2.2%) and a 3.6% increase in front-store sales.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 18 -
Sales in the third quarter of fiscal 2019 reached $5,229.3 million, up 12.8% compared to $4,636.4 million in the third
quarter of fiscal 2018. Excluding from 2019 and 2018 sales of $965.4 million and $467.0 million, respectively, generated
by the Jean Coutu Group, sales were up 2.3%. Food same-store sales were up 3.1% (2.0% in 2018) and inflation in our
food basket was approximately 2.5% (0.5% in 2018). Pharmacy same-store sales were up 3.4% (1.8% in 2018), with a
2.9% increase in prescription drugs (number of prescriptions were up 2.7%) and a 4.3% increase in front-store sales.
Sales in the fourth quarter of fiscal 2019 reached $3,858.9 million, up 3.3% compared to $3,736.2 million in the fourth
quarter of fiscal 2018. Food same-store sales were up 4.1% (2.1% in 2018) and inflation in our food basket was
approximately 2.8% (0.8% in 2018). Pharmacy same-store sales were up 3.4% (1.8% in 2018), with a 3.4% increase in
prescription drugs (number of prescriptions were up 2.4%) and a 3.4% increase in front-store sales.
Net earnings for the first quarter of fiscal 2019 were $203.1 million, a decrease of 84.4% from $1,299.1 million for the
first quarter of fiscal 2018. Fully diluted net earnings per share decreased by 86.1% to $0.79 from $5.67 in 2018. Excluding
from the first quarter of fiscal 2019 the $7.4 million gain on divestiture of pharmacies, $9.0 million in amortization of
intangible assets acquired in connection with the Jean Coutu Group acquisition, the $35.4 million gain on disposal of
the investment in associate Colo-D Inc., and the $1.5 million gain on revaluation and disposal of an investment at fair
value, and excluding from the first quarter of fiscal 2018 business acquisition-related expenses of $2.0 million, distribution
network modernization project expenses of $11.4 million, the $1,107.4 million gain on disposal of the majority of our
investment in ACT, the $225.6 million fair value revaluation gain on our residual investment in ACT, the $30.8 million
share of an associate’s earnings (ACT), $5.3 million in interest income on business acquisition-related short-term
investments and security deposits, $2.2 million in interest expense on the notes issued to complete the acquisition,
$1.8 million in financial costs on the balance payable in connection with the buyout of minority interests in Adonis and
Phoenicia, as well as income taxes relating to all these items, adjusted net earnings(1) for the first quarter of fiscal 2019
totalled $172.2 million compared with $126.7 million for the corresponding quarter of fiscal 2018 and adjusted fully diluted
net earnings per share(1) amounted to $0.67 compared with $0.55, up 35.9% and 21.8%, respectively.
Net earnings for the second quarter of fiscal 2019 were $121.5 million, an increase of 13.7% from $106.9 million for the
second quarter of fiscal 2018, while fully diluted net earnings per share were $0.47, the same as for the corresponding
quarter of fiscal 2018. Excluding from the second quarter of 2019 the retail network restructuring expenses of $36.0 million,
the $1.4 million loss on divestiture of pharmacies and $8.8 million in amortization of intangible assets acquired in
connection with the Jean Coutu Group acquisition, and excluding from the second quarter of fiscal 2018 $1.6 million
expenses related to the Jean Coutu Group acquisition, $9.7 million in interest income on business acquisition-related
short-term investments and security deposits and $9.8 million in interest expense on the notes issued to complete the
acquisition, as well as income taxes relating to all these items, adjusted net earnings(1) for the second quarter of fiscal
2019 totalled $155.1 million compared with $108.1 million for the corresponding quarter of fiscal 2018 and adjusted fully
diluted net earnings per share(1) amounted to $0.60 compared with $0.47, up 43.5% and 27.7%, respectively.
Net earnings for the third quarter of fiscal 2019 were $222.4 million, an increase of 32.8% from $167.5 million for the
third quarter of fiscal 2018, while fully diluted net earnings per share were $0.86, compared with $0.69 for the
corresponding quarter of fiscal 2018. Excluding from the third quarter of 2019 the $1.0 million gain resulting from the
selling price adjustment related to the investment in associate Colo-D Inc. and $11.9 million in amortization of intangible
assets acquired in connection with the Jean Coutu Group acquisition, and excluding from the third quarter of fiscal 2018
$25.1 million expenses related to the Jean Coutu Group acquisition, $6.0 million in amortization of intangible assets
acquired in connection with the Jean Coutu Group acquisition, $6.3 million in interest income on business acquisition-
related short-term investments and security deposits and $7.1 million in interest expense on the notes issued to complete
the acquisition, as well as income taxes relating to all these items, adjusted net earnings(1) for the third quarter of fiscal
2019 totalled $230.3 million compared with $183.4 million for the corresponding quarter of fiscal 2018 and adjusted fully
diluted net earnings per share(1) amounted to $0.90 compared with $0.75, up 25.6% and 20.0%, respectively.
Net earnings for the fourth quarter of fiscal 2019 were $167.4 million, an increase of 15.4% from $145.0 million for the
fourth quarter of fiscal 2018, while fully diluted net earnings per share were $0.66, compared with $0.56 for the
corresponding quarter of fiscal 2018. Excluding from the fourth quarter of 2019 the amortization of intangible assets
acquired in connection with the Jean Coutu Group acquisition of $9.0 million and from the fourth quarter of fiscal 2018
the pharmacy network closure and restructuring expenses of $31.4 million, the amortization of intangible assets acquired
in connection with the Jean Coutu Group acquisition of $9.0 million, the gain on revaluation and disposal on an investment
at fair value of $15.5 million, as well as income taxes relating to all these items, adjusted net earnings(1) for the fourth
quarter of fiscal 2019 totalled $174.0 million compared with $161.0 million for the corresponding quarter of fiscal 2018
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 19 -
and adjusted fully diluted net earnings per share(1) amounted to $0.68 compared with $0.63, up 8.1% and 7.9%,
respectively.
(Millions of dollars)
Net earnings
Retail network restructuring expenses, after
taxes
Loss (gain) on divestiture of pharmacies,
after taxes
Pharmacy network closure and restructuring
expenses, after taxes
Business acquisition-related expenses, after
taxes
Distribution network modernization project
expenses, after taxes
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Income on business acquisition-related
short-term investments and security
deposits, after taxes
Interest on notes issued in connection with a
business acquisition, after taxes
Financial costs on the balance payable for
the buyout of minority interests, after
taxes
Gain on disposal of investments in
associates, after taxes
Gain on revaluation and disposal of an
investment at fair value, after taxes
Share of an associate's earnings, after taxes
Adjusted net earnings(1)
2019
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
203.1
121.5
222.4
167.4
1,299.1
106.9
167.5
145.0
— 26.4
(5.4)
0.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.5
8.4
—
—
—
—
—
—
—
— 23.0
1.1
20.1
—
—
—
—
6.6
6.5
8.8
6.6
—
—
4.4
6.6
—
—
—
(31.0)
(1.1)
—
—
—
—
—
—
—
—
—
—
(0.9)
—
—
—
—
—
—
—
—
(3.9)
(7.1)
(4.6)
1.6
7.2
5.2
—
(9.2)
1.3
(958.9)
(195.7)
(26.7)
—
—
—
—
— (13.6)
—
—
—
—
—
—
172.2
155.1
230.3
174.0
126.7
108.1
183.4
161.0
(Dollars)
Fully diluted net earnings per share
Adjustments impact
Adjusted fully diluted net earnings per
share(1)
2019
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
0.79
(0.12)
0.47
0.13
0.86
0.04
0.66
0.02
5.67
0.47
0.69
(5.12)
— 0.06
0.56
0.07
0.67
0.60
0.90
0.68
0.55
0.47
0.75
0.63
CASH POSITION
OPERATING ACTIVITIES
Operating activities generated cash inflows of $687.7 million in fiscal 2019 compared with $750.4 million in fiscal 2018.
The difference resulted primarily from the payment, in the first quarter of 2019, of taxes payable as at September 29, 2018,
which were higher due to the gain realized on the disposal of our investment in ACT in fiscal 2018.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 20 -
INVESTING ACTIVITIES
In fiscal 2019, investing activities required cash outflows of $308.5 million compared with $1,677.5 million for fiscal 2018.
This variation stemmed mainly from the $3,033.0 million business acquisition, net of cash acquired, the $221.2 million
settlement of the buyout of minority interests in Adonis and Phoenicia, and $1,791.6 million in net proceeds on disposal
of the investment in ACT, all in 2018, compared with $59.0 million in proceeds on disposal of the investment in associate
Colo-D Inc. in 2019.
During fiscal 2019, we and our retailers opened 8 stores and carried out major expansions and renovations of 20 stores,
2 stores were relocated and 9 stores were closed for a net decrease of 11,800 square feet or 0.1% of our food retail
network.
FINANCING ACTIVITIES
In fiscal 2019, financing activities required cash outflows of $332.7 million compared with cash inflows of $1,005.1 million
in 2018. This difference stemmed primarily from a $1,173.6 million net increase in debt in 2018 owing to the issuance
of Series F, G and H notes and to the term credit facility used to partly finance the Jean Coutu Group acquisition and
$145.9 million in share repurchase in 2019.
FINANCIAL POSITION
We do not anticipate(3) any liquidity risk and consider our financial position at the end of fiscal 2019 as very solid. We
had an unused authorized revolving credit facility of $600.0 million. Our non-current debt represented 30.6% of the
combined total of non-current debt and equity (non-current debt/total capital).
At the end of fiscal 2019, the main elements of our non-current debt were as follows:
Revolving Credit Facility
Interest Rate
Rates fluctuate with changes in bankers'
Maturity
Series E Notes
Rates fluctuate with changes in bankers'
acceptance rates
Series C Notes
Series F Notes
Series G Notes
Series B Notes
Series D Notes
Series H Notes
acceptance rates
3.20% fixed rate
2.68% fixed rate
3.39% fixed rate
5.97% fixed rate
5.03% fixed rate
4.27% fixed rate
Our main financial ratios were as follows:
Financial structure
Non-current debt (Millions of dollars)
Equity (Millions of dollars)
Non-current debt/total capital (%)
Balance
(Millions of dollars)
—
400.0
300.0
300.0
450.0
400.0
300.0
450.0
November 3, 2024
February 27, 2020
December 1, 2021
December 5, 2022
December 6, 2027
October 15, 2035
December 1, 2044
December 4, 2047
As at
September 28, 2019
As at
September 29, 2018
2,629.0
5,968.6
30.6
2,630.4
5,656.0
31.7
Since the Corporation intends to refinance the Series E Notes presented under non-current debt, the amount of
$400.0 million was added to non-current debt when calculating the ratio of non-current debt to total capital.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 21 -
Results
Operating income before depreciation and amortization and
associates' earnings/Financial costs (Times)
CAPITAL STOCK
(Thousands)
Balance – beginning of year
Share issue
Share redemption
Stock options exercised
Balance – end of year
Balance as at November 29, 2019 and November 30, 2018
(Thousands)
Balance – beginning of year
Acquisition
Release
Balance – end of year
Balance as at November 29, 2019 and November 30, 2018
2019
12.7
Common Shares issued
2019
256,253
—
(2,925)
1,112
254,440
254,222
Treasury shares
2019
603
115
(141)
577
577
2018
12.6
2018
227,719
28,031
—
503
256,253
256,272
2018
579
250
(226)
603
603
STOCK OPTIONS PLAN
Stock options (Thousands)
Exercise prices (Dollars)
As at
November 29, 2019
As at
September 28, 2019
As at
September 29, 2018
2,249
20.30 to 48.68
2,281
3,067
20.30 to 48.68
17.72 to 44.73
Weighted average exercise price (Dollars)
37.38
37.30
30.30
PERFORMANCE SHARE UNIT PLAN
Performance share units (Thousands)
605
605
579
As at
November 29, 2019
As at
September 28, 2019
As at
September 29, 2018
NORMAL COURSE ISSUER BID PROGRAM
Under the normal course issuer bid program covering the period between November 23, 2018 and November 22, 2019,
the Corporation repurchased 3,175,000 Common Shares at an average price of 50.31 $, for a total consideration of
$159.7 million.
The Corporation decided to renew the issuer bid program as an additional option for using excess funds. Thus, the
Corporation will be able to repurchase, in the normal course of business, between November 25, 2019 and
November 24, 2020, up to 7,000,000 of its Common Shares representing approximately 2.75 % of its issued and
outstanding shares on November 12, 2019. Repurchases will be made through the facilities of the Toronto Stock Exchange
at market price, in accordance with its policies and regulations, or through the facilities of alternative trading systems
as well as by other means as may be permitted by a securities regulatory authority, including by private agreements.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 22 -
BUYOUT OF NON-CONTROLLING INTEREST
The Corporation will acquire the minority interest in Groupe Première Moisson Inc. in the first quarter of fiscal 2020.
Consequently, the liability for this non-controlling interest has been reclassified in current liabilities.
DIVIDEND
For the 25th consecutive year, the Corporation paid quarterly dividends to its shareholders. The annual dividend increased
by 11.0%, to $0.7800 per share compared to $0.7025 in 2018, for total dividends of $198.9 million in 2019 compared to
$164.8 million in 2018.
SHARE TRADING
The value of METRO shares remained in the $39.04 to $58.94 range throughout fiscal 2019 ($38.32 to $45.44 in 2018).
A total of 139.6 million shares traded on the TSX during this fiscal year (120.4 million in 2018). The closing price on
Friday, September 27, 2019 was $57.91, compared to $40.18 at the end of fiscal 2018. Since fiscal year-end, the value
of METRO shares has remained in the $54.52 to $59.03 range. The closing price on November 29, 2019 was $58.18.
METRO shares have maintained sustained growth over the last 10 years.
COMPARATIVE SHARE PERFORMANCE (10 YEARS)*
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 23 -
CONTINGENCIES
In the normal course of business, various proceedings and claims are instituted against the Corporation. The Corporation
contests the validity of these claims and proceedings and at this stage, the Corporation does not believe that these
matters will have a material effect on the Corporation's financial position or on consolidated earnings. However, since
any litigation involves uncertainty, it is not possible to predict the outcome of these litigations or the amount of potential
losses. No accruals or provisions for contingent losses have been recognized in the Corporation’s annual consolidated
financial statements.
In May 2019, two proposed class actions relating to opioids were filed in Ontario and in Québec against a large group
of defendants including a subsidiary of the Corporation, Pro Doc Ltée. The allegations in these proposed class actions
are similar to the allegations contained in the proposed class action filed by the province of British Columbia in August
2018 against numerous manufacturers and distributors of opioids, including subsidiaries of the Corporation, Pro Doc
Ltée and The Jean Coutu Group (PJC) Inc. These proposed class actions contain allegations of breach of the Competition
Act, of fraudulent misrepresentation and deceit, and of negligence. The province of British Columbia seeks damages
(unquantified) on behalf of all federal, provincial and territorial governments and agencies for expenses allegedly incurred
in paying for opioid prescriptions and other healthcare costs that would be related to opioid addiction and abuse while
the Ontario and Québec proposed claims seek recovery of damages on behalf of opioid users directly. The Corporation
believes these proceedings are without merit and that, in certain cases, there is no jurisdiction.
In October 2017, the Canadian Competition Bureau began an investigation into the supply and sale of commercial bread
which involves certain Canadian suppliers and retailers, including the Corporation. The Corporation continues to fully
cooperate with the Competition Bureau. Class actions lawsuits have also been filed against the Corporation, suppliers
and other retailers. Based on the information available to date, the Corporation does not believe that it or any of its
employees have violated the Competition Act.
During the 2016 fiscal year, an application for authorization to institute a class action was served on the Jean Coutu
Group by Sopropharm, an association incorporated under the Professional Syndicates Act of which certain franchised
drugstore owners of the Jean Coutu Group are members. The application seeks to have the class action authorized in
the form of a declaratory action seeking amongst others (i) to set aside certain contractual provisions of the Jean Coutu
Group’s standard franchise agreements, including the clause providing for the payment of royalties on sales of medication
by franchised establishments; (ii) to restore certain benefits; and (iii) to reduce certain contractual obligations. On
November 1, 2018, the Court granted the application for authorization to institute a class action, the authorization process
being merely a procedural step and the judgment in no way decides the case on the merits. The Corporation intends to
contest this action on the merits.
SOURCES OF FINANCING
Our operating activities generated in 2019 cash flows in the amount of $687.7 million. These cash flows were used to
finance our investing activities, including $396.3 million in fixed and intangible assets acquisition, to redeem shares for
an amount of $145.9 million, to pay dividends of $198.9 million, and to carry out other investing and financing activities.
At 2019 fiscal year-end, our financial position mainly consisted of cash and cash equivalents in the amount of
$273.4 million, an unused authorized Revolving Credit Facility of $600.0 million maturing in 2024, Series E Notes in the
amount of $400.0 million maturing in 2020, Series C Notes in the amount of $300.0 million maturing in 2021, Series F
Notes in the amount of $300.0 million maturing in 2022, Series G Notes in the amount of $450.0 million maturing in
2027, Series B Notes in the amount of $400.0 million maturing in 2035, Series D Notes in the amount of $300.0 million
maturing in 2044 and Series H Notes in the amount of $450.0 million maturing in 2047. The Company intends to refinance
the Series E Notes presented under non-current debt.
We believe(3) that cash flows from next year's operating activities will be sufficient to finance the Corporation's current
investing activities.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 24 -
CONTRACTUAL OBLIGATIONS
Payment commitments by fiscal year (capital and interest)
(Millions of dollars)
2020
2021
2022
2023
2024
2025 and thereafter
Loans
25.9
3.3
2.3
1.8
1.5
Notes
495.5
91.1
383.1
374.8
73.4
26.5
61.3
2,661.4
4,079.3
Finance
lease
commitments
Service
contract
commitments
Operating
lease
commitments
4.9
3.5
2.3
2.0
2.0
14.4
29.1
141.9
109.2
84.4
68.9
67.8
10.3
194.6
187.9
169.6
147.4
124.2
573.2
482.5
1,396.9
Lease and
sublease
commitments(6)
99.5
92.8
84.0
75.3
66.1
Total
962.3
487.8
725.7
670.2
335.0
261.5
679.2
3,547.3
6,728.3
(6) The Corporation has lease commitments with varying terms through 2040, to lease premises which it sublets to clients, generally under the same
conditions.
RELATED PARTY TRANSACTIONS
During fiscal 2019, we supplied drugstores held by a member of the Board of Directors and paid fees to Dunnhumby
Canada Limited, a joint venture, for analysis of our customer sales data. These transactions were carried out in the
normal course of business and recorded at exchange value. They are itemized in note 26 to the consolidated financial
statements. The joint venture with Dunnhumby Canada Limited ended on February 28, 2019.
EVENT AFTER THE REPORTING PERIOD
On December 9, 2019, the Corporation closed the sale of MissFresh as part of a transaction involving all of MissFresh's
assets. The result of this transaction will be recorded in the first quarter of 2020.
FOURTH QUARTER
(Millions of dollars, except for net earnings per share)
Sales
Operating income before depreciation
and amortization and associate's earnings
Adjusted operating income before depreciation and amortization and
associate's earnings(1)
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share
Adjusted fully diluted net earnings per share(1)
Cash flows from:
Operating activities
Investing activities
Financing activities
2019
3,858.9
2018
3,736.2
321.6
321.6
167.4
174.0
0.66
0.68
228.9
(146.1)
(72.7)
266.5
297.9
145.0
161.0
0.56
0.63
250.9
207.1
(350.8)
Change
3.3
20.7
8.0
15.4
8.1
17.9
7.9
—
—
—
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 25 -
SALES
Sales in the fourth quarter of fiscal 2019 reached $3,858.9 million, up 3.3% compared to $3,736.2 million in the fourth
quarter of fiscal 2018. Food same-store sales were up 4.1% (2.1% in 2018) and inflation in our food basket was
approximately 2.8% (0.8% in 2018). Pharmacy same-store sales were up 3.4% (1.8% in 2018), with a 3.4% increase in
prescription drugs (number of prescriptions were up 2.4%) and a 3.4% increase in front-store sales.
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE'S EARNINGS
Operating income before depreciation and amortization and associates' earnings for the fourth quarter of fiscal 2019
totalled $321.6 million, or 8.3% of sales, versus $266.5 million, or 7.1% of sales, for the fourth quarter last year. During
the fourth quarter of fiscal 2018, we recorded pharmacy network closure and restructuring expenses of $31.4 million.
Excluding this item, adjusted operating income before depreciation and amortization and associates' earnings(2) for the
fourth quarter of fiscal 2018 totalled $297.9 million, or 8.0% of sales.
Synergies related to the Jean Coutu acquisition generated for the fourth quarter of fiscal 2019 amounted to $18 million
compared with $6.6 million for the corresponding quarter of fiscal 2018.
Operating income before depreciation and amortization and associates' earnings adjustments (OI)(2)
(Millions of dollars, unless otherwise indicated)
Operating income before depreciation and
amortization and associates' earnings
Pharmacy network closure and restructuring
expenses
Adjusted operating income before depreciation
and amortization and associates' earnings(2)
12 weeks / Fiscal Year
2019
Sales
OI
321.6
3,858.9
(%)
8.3
2018
Sales
OI
266.5
3,736.2
(%)
7.1
—
31.4
321.6
3,858.9
8.3
297.9
3,736.2
8.0
Gross margins on sales for the fourth quarter of 2019 were 20.2% versus 19.7% for the corresponding quarter of 2018.
Operating expenses as a percentage of sales for the fourth quarter of 2019 were 11.9% versus 12.6% for the
corresponding quarter of fiscal 2018 (11.7% excluding the pharmacy network closure and restructuring expenses of
$31.4 million). This variation was a result of the inclusion of the Jean Coutu Group partially offset by higher transportation
costs.
DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS
Total depreciation and amortization expense for the fourth quarter of fiscal 2019 were $68.5 million versus $65.0 million
for the corresponding quarter of fiscal 2018. Amortization of intangible assets acquired in connection with the Jean Coutu
Group acquisition amounted to $9.0 million for the fourth quarter of fiscal 2019 as well as for the fourth quarter of fiscal
2018.
Net financial costs for the fourth quarter of fiscal 2019 were $23.4 million compared with $23.9 million for the
corresponding quarter of fiscal 2018.
INCOME TAXES
The income tax expense of $62.3 million for the fourth quarter of fiscal 2019 represented an effective tax rate of 27.1%
compared with an income tax expense of $48.1 million in the fourth quarter of fiscal 2018 which represented an effective
tax rate of 24.9%. The lower rate for the fourth quarter of fiscal 2018 is related to the disposal of the investment in ACT.
NET EARNINGS AND ADJUSTED NET EARNINGS(1)
Net earnings for the fourth quarter of fiscal 2019 were $167.4 million, an increase of 15.4% from $145.0 million for the
fourth quarter of fiscal 2018, while fully diluted net earnings per share were $0.66, compared with $0.56 for the
corresponding quarter of fiscal 2018. Excluding the specific items shown in the table below, adjusted net earnings(1) for
the fourth quarter of fiscal 2019 totalled $174.0 million compared with $161.0 million for the corresponding quarter of
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 26 -
fiscal 2018, and adjusted fully diluted net earnings per share(1) amounted to $0.68 versus $0.63, up 8.1% and 7.9%,
respectively.
Net earnings adjustments(1)
12 weeks / Fiscal Year
2019
2018
Change (%)
(Millions of
dollars)
Fully
diluted EPS
(Dollars)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
167.4
0.66
145.0
0.56
Net
earnings
15.4
Fully
diluted
EPS
17.9
—
6.6
—
174.0
0.68
23.0
6.6
(13.6)
161.0
0.63
8.1
7.9
Net earnings
Pharmacy network closure and restructuring
expenses, after taxes
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Gain on revaluation and disposal of an
investment at fair value, after taxes
Adjusted net earnings(1)
CASH POSITION
Operating activities
Operating activities generated cash inflows of $228.9 million in the fourth quarter compared with $250.9 million for the
corresponding quarter of fiscal 2018. This difference is mainly due to a significant contribution to a pension plan.
Investing activities
Investing activities required cash outflows of $146.1 million for the fourth quarter of fiscal 2019 compared with cash
inflows of $207.1 million for the corresponding quarter of fiscal 2018. The difference stemmed mainly from the disposal,
in 2018, of a portion of the investment at fair value in ACT and the equity forward agreement entered into for the remaining
shares of this investment which generated cash flows of $257.6 million and $68.4 million, respectively.
Financing activities
In the fourth quarter of 2019, financing activities required cash outflows of $72.7 million compared with $350.8 million
in the corresponding quarter of 2018. This difference resulted primarily from a $302.9 million net decrease in debt in
2018 and $28.2 million in share repurchases in 2019.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation adopted a financial risk management policy, approved by the Board of Directors in April 2010, setting
forth guidelines relating to its use of derivative financial instruments. These guidelines prohibit the use of derivatives for
speculative purposes. During fiscal 2019, the Corporation used derivative financial instruments as described in notes 2
and 28 to the consolidated financial statements.
NEW ACCOUNTING STANDARDS
ACCOUNTING STANDARD ISSUED BUT NOT YET EFFECTIVE
Leases
In January 2016, the IASB issued IFRS 16, Leases, which replaces IAS 17, Leases and related interpretations. Under
IFRS 16, which provides a single accounting model for leases abolishing the current distinction between finance leases
and operating leases, most leases will be recognized in the statement of financial position. Certain exemptions will apply
for short-term leases and leases of low-value assets. The accounting requirements for lessors remain similar to those
under IAS 17. IFRS 16 applies to fiscal years beginning on or after January 1, 2019, which for the Corporation is fiscal
year beginning on September 29, 2019.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 27 -
Under IFRS 16 transitional provisions, the Corporation will adopt the standard using a modified retrospective approach,
and the cumulative impact of the initial application of the standard will be recognized as an adjustment to equity on
transition.
As a lessee, the Corporation will recognize right-of-use assets and lease liabilities in respect of operating leases for
property, vehicles and equipment. Depreciation expense for right-of-use assets and interest expense on lease liabilities
will replace rental expense previously recognized under IAS 17 on a straight-line basis over the lease term. The lease
liabilities will be measured at the present value of the remaining lease payments and the right-of-use assets will be
measured using the modified retrospective approach. The discount rate used will be the Corporation’s incremental
borrowing rate on the transition date of September 29, 2019.
As an intermediate lessor under several leases, the Corporation has assessed the classification of its sublease
agreements based on the right-of-use asset related to the main lease and not on the underlying asset. As a result of
this change, the Corporation expects an increase in current and non-current receivables recorded for leases that should
be classified as finance leases.
The Corporation will use the following practical expedients as permitted by IFRS 16 at the initial application date:
Apply IFRS 16 only to contracts that were previously identified as leases under IAS 17.
Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
•
•
• Rely on an existing assessment to determine whether a lease is onerous, instead of performing a review of
the impairment of the right-of-use assets.
Exclude leases which end within 12 months of the date of the initial application.
Elect not to apply IFRS 16 to leases for which the underlying asset is of low value.
Exclude initial direct costs from the measurement of right-of-use assets.
•
•
•
• Use hindsight, such as in determining the lease term where the contract contains options to extend or terminate
the lease.
We expect(3) increases in liabilities ranging from $2.1 billion to $2.3 billion and in assets, including right-of-use assets
as well as receivables (current and non-current) related to sublease agreements, ranging from $1.9 billion to $2.1 billion
with the net impact recorded in opening retained earnings. Actual results from the initial application of IFRS 16 may differ
from estimated amounts, the Corporation continues to perfect the estimates and input data that will be used in the
calculations.
ACCOUNTING STANDARDS ADOPTED IN 2019
Financial instruments
Effective the first quarter of 2019, the Corporation adopted IFRS 9, Financial Instruments, which replaces IAS 39,
Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after
January 1, 2018.
The Corporation adopted the new classification and valuation, impairment and general hedging requirements on
September 30, 2018 by applying the classification and valuation, including impairment, requirements retrospectively,
with the cumulative effect of initially applying the standard recognized in opening retained earnings as at
September 30, 2018 and without restatement of comparative information.
Classification of financial instruments
The adoption of IFRS 9 changes the Corporation’s accounting policies with respect to the classification of financial
instruments.
Following adoption, the Corporation’s classification is as follows:
• Cash and cash equivalents were classified as “Financial assets at fair value through profit and loss” before the
•
•
adoption of IFRS 9 and are now classified as subsequently measured at amortized cost.
Accounts receivable and loans to certain customers were classified as “Loans and receivables” before the
adoption of IFRS 9 and are now classified as subsequently measured at amortized cost.
The investment at fair value was classified as an “Available-for-sale financial asset” before the adoption of
IFRS 9 and is now classified as subsequently measured at fair value through other comprehensive income.
Accumulated other comprehensive income of $4.9 was therefore reclassified to retained earnings as at
September 30, 2018.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 28 -
•
Bank loans, accounts payable excluding deferred revenues, the revolving credit facility, notes and loans payable
were classified as “Other financial liabilities” before the adoption of IFRS 9 and are now classified as
subsequently measured at amortized cost.
• Non-controlling interests were classified as “Financial liabilities held for trading” before the adoption of IFRS 9
and are now classified as subsequently measured at fair value through profit and loss. Gains or losses resulting
from the revaluation at the end of each period recorded may be recognized in net earnings or retained earnings.
The Corporation has elected to record them in retained earnings.
• Derivative financial instruments not designated as hedges were classified as “Financial assets and liabilities
at fair value through profit and loss” before the adoption of IFRS 9 and are now classified as subsequently
measured at fair value through profit and loss.
The changes in classification and measurement criteria resulting from the adoption of IFRS 9 had no impact on the
measurement of financial instruments.
Impairment of financial assets
The adoption of IFRS 9 changes the method used to calculate the impairment of accounts receivable and loans to certain
customers.
At each reporting date, the Corporation estimates expected credit losses based on its credit loss history. Those expected
loses are adjusted to reflect factors that are specific to the accounts receivable and loans to certain customers, general
economic conditions as well as an assessment of both current and forecasted economic conditions at the reporting date,
including time value of money when appropriate. The evaluation is calculated using the simplified method for cash and
current assets and the general method for loans. The net change in expected credit losses on accounts receivable and
loans to certain customers is recognized in net earnings.
The adoption of IFRS 9 had no impact on the impairment of accounts receivable and loans to certain customers.
Revenue from contracts with customers
Effective the first quarter of 2019, the Corporation adopted IFRS 15, Revenue from Contracts with Customers. IFRS 15
replaces IAS 18, Revenue, IAS 11, Construction Contracts, and related interpretations. IFRS 15 is effective for annual
periods beginning on or after January 1, 2018.
The Corporation adopted IFRS 15 retrospectively in accordance with the transitional provisions thereof. The application
of IFRS 15 had no impact on the amounts recognized in the Corporation's consolidated financial statements, and no
amounts have been reclassified or restated.
Under IFRS 15, revenue is recognized when control of the goods or services is transferred to the customer. Retail sales
made by corporate stores and by stores qualifying as structured entities are recognized at the time of sale to the customer,
and sales to affiliated or franchised stores and to other customers are recognized when the goods are delivered to them.
Rebates granted by the Corporation are recorded as a reduction in sales.
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 "annualize", "continue", “anticipate”, "believe", "expect", "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 2020 action
plan.
These forward-looking statements do not provide any guarantees as to the future performance of the Corporation and
are subject to potential risks, known and unknown, as well as uncertainties that could cause the outcome to differ
significantly. The arrival of a new competitor is an example of those described under the “Risk Management” section of
this annual report that could have an impact on these statements. We believe these statements to be reasonable and
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 29 -
relevant as at the date of publication of this report and represent our expectations. The Corporation does not intend to
update any forward-looking statement contained herein, except as required by applicable law.
NON-IFRS MEASUREMENTS
In addition to the International Financial Reporting Standards (IFRS) earnings measurements provided, we have included
certain non-IFRS earnings measurements. These measurements are presented for information purposes only. They do
not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measurements
presented by other public companies.
ADJUSTED OPERATING
EARNINGS, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE
INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATES'
Adjusted operating income before depreciation and amortization and associates' earnings, adjusted net earnings and
adjusted fully diluted net earnings per share are earnings measurements that exclude some items that must be recognized
under IFRS. They are non-IFRS measurements. We believe that presenting earnings without these items, which are
not necessarily reflective of the Corporation's performance, leaves readers of financial statements better informed as
to the current period and corresponding prior year's period's operating earnings, thus enabling them to better perform
trend analysis, evaluate the Corporation's financial performance and judge its future outlook. The exclusion of these
items does not imply that they are non-recurring.
CONTROLS AND PROCEDURES
The President and Chief Executive Officer, and the Executive Vice President, Chief Financial Officer and Treasurer of
the Corporation, 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 Corporation'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 Executive Vice President, Chief Financial Officer
and Treasurer of the Corporation concluded that the DC&P and the ICFR were effective as at the end of the fiscal year
ended September 28, 2019.
Therefore, the design of the DC&P provides reasonable assurance that material information relating to the Corporation
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 Corporation 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 Corporation's financial
reporting and the preparation of its financial statements for external purposes in accordance with IFRS.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Our Management's Discussion and Analysis is based upon our annual consolidated financial statements, prepared in
accordance with IFRS, and it is presented in Canadian dollars, our unit of measure. The preparation of the consolidated
financial statements and other financial information contained in this Management's Discussion and Analysis requires
management to make judgements, estimates and assumptions that affect the recognition and valuation of assets,
liabilities, sales, other income and expenses. These estimates and assumptions are based on historical experience and
other factors deemed relevant and reasonable and are reviewed at every closing date. The use of different estimates
could produce different amounts in the consolidated financial statements. Actual results may differ from these estimates.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 30 -
JUDGEMENTS
In applying the Corporation's accounting policies, management has made the following judgements, which have the
most significant effect on the amounts recognized in the consolidated financial statements:
Consolidation of structured entities
The Corporation has no voting rights in certain food stores. However, the franchise contract gives it the ability to control
these stores' main activities. Its decisions are not limited to protecting its trademarks. The Corporation retains the majority
of stores' profits and losses. For these reasons, the Corporation consolidates these food stores in its financial statements.
The Corporation has no voting rights in the trust created for performance share unit plan participants. However, under
the trust agreement, it instructs the trustee as to the sale and purchase of Corporation shares and payments to
beneficiaries, gives the trustee money to buy Corporation shares, assumes vesting variability, and ensures that the trust
holds a sufficient number of shares to meet its obligations to the beneficiaries. For these reasons, the Corporation
consolidates this trust in its financial statements.
The Corporation also has an agreement with a third party that operates a plant exclusively for the needs and according
to the specifications of the Corporation, which assumes all costs and control the plant's main activities. For these reasons,
the Corporation consolidates it in the Corporation's financial statements.
Determination of the aggregation of operating segments
The Corporation uses judgment in determining the aggregation of business segments. The reportable operating segment
comprises the food operations segment and the pharmaceutical operations segment. The Corporation has aggregated
these two business segments due to the similar nature of their goods and services and similar economic characteristics:
operations are carried on primarily in Québec and Ontario and are therefore subject to the same regulatory environment
and competitive and economic market pressures, use the same product distribution methods and serve the same
customers.
ESTIMATES
The assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have
a significant risk of causing a material adjustment to the value of assets and liabilities within the next period, are discussed
below:
Impairment of assets
In testing for impairment of intangible assets with indefinite useful lives and goodwill, value in use and fair value less
costs of disposal are estimated using the discounted future cash flows model, the capitalized excess earnings before
financial costs and taxes (EBIT) and royalty-free licence methods. These methods are based on various assumptions,
such as the future cash flows estimate, excess EBIT, royalty rates, discount rate, earnings multiples and growth rates.
The key assumptions are disclosed in notes 13 and 14 to the annual consolidated financial statements.
Pension plans and other plans
Defined pension plans, ancillary retirements and other long-term benefits obligations and costs associated to these
obligations are determined from actuarial calculations according to the projected credit unit method. These calculations
are based on management's best assumptions relating to salary escalation, retirement age of participants, inflation rate
and expected health care costs. The key assumptions are disclosed in note 23 to the annual consolidated financial
statements.
Non-controlling interests
The non-current liability related to the non-controlling interest is calculated in relation to the price to be paid by the
Corporation for the non-controlling interest, which price is based mainly on the future earnings of MissFresh (MissFresh
and Première Moisson in 2018) as of the date the options will become exercisable. Given the uncertainty associated
with the estimation of these future earnings, the Corporation used, at the end of the fiscal year, its most probable estimate
and various other assumptions, including the discount rate, growth rate and capital investments. Additional information
is presented in note 28 to the annual consolidated financial statements.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 31 -
RISK MANAGEMENT
Management identifies the main risks to which the Corporation is exposed as well as the appropriate measures for
proactively managing these risks, and presents both the risks and risk reduction measures to the Audit Committee and
the Board of Directors on an ongoing basis. Internal Audit has the mandate to audit all business risks triennially. Hence,
each segment is audited every three years to ensure that controls have been implemented 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.
FOOD SAFETY
We are exposed to potential liability and costs regarding food safety, product contamination, handling and defective
products. 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 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.
Employees receive continuous training in this area from Metro's L'École des professionnels. Our main meat distribution
facilities are Hazard Analysis and Critical Control Point (HACCP) 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.
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 Corporation'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.
COMPUTER SYSTEMS
We rely on various computer systems that are necessary for our business activities and we could have to deal with
certain security risks, notably cyberattacks, which could harm the availability and integrity of the systems or compromise
data privacy.
In the normal course of our activities, we gather information that is confidential in nature concerning our customers,
suppliers, employees, partners and loyalty program participants. Personal and confidential data is also gathered from
customers who do business with the drugstores affiliated to one of our banners. Furthermore, the online shopping sites
represent an additional risk with respect to the security of our systems. As a result, we are even more exposed to the
risk of cyberattacks aimed at stealing information or interrupting our computer systems.
A systems breakdown could have a major impact on our business operations, while a cyberattack or an intrusion into
our systems could result in unauthorized persons altering our systems or gaining access to sensitive and confidential
information and then using or damaging it. Such situations could also affect third parties who provide essential services
for our operations or who store confidential information. These events could have a negative impact on our customers
and partners that could result in financial losses, reducing our competitive advantage or tarnishing our reputation.
In order to mitigate these risks, management deployed various technological security measures, which include a high-
availability environment for all of its critical systems, and has set up processes, procedures and controls related to the
various systems concerned. For instance, in addition to setting up strong controls with respect to systems access, the
Company has hired a specialized firm to carry out occasional intrusion tests. We have also implemented an information
security awareness and training program for our employees. Third parties integrated into our operations have been
selected by the computer systems team, taking their specific expertise into consideration.
No significant technology-related incident occurred over the course of the fiscal year. Considering the rapid evolution of
risks with respect to cybersecurity as well as the complexity of threats, we cannot guarantee that the measures taken,
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 32 -
by the Company and the third parties that it deals with, will be adequate enough to prevent or detect a cyberattack on
time. In that regard, we keep ourselves informed of the new information security trends and practices in order to take
proactive action.
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 impact negatively the Corporation. We negotiate agreements with different maturity
dates and conditions that ensure our competitiveness, and terms that promote a positive work environment in all our
business segments. We have experienced some minor labour conflicts over the last few years but expect(3) to maintain
good labour relations in the future.
OCCUPATIONAL HEALTH AND SAFETY
Workplace accidents may occur at any of our sites. To minimize this risk, we developed a worked-related accident
prevention policy. Furthermore at all of our sites, we have workplace health and safety committees responsible for
accident prevention.
HIRING, EMPLOYEE RETENTION , AND ORGANIZATION STRUCTURE
Our recruitment program, salary structure, performance evaluation programs, succession, and training plans all entail
risks which could negatively impact our capacity to execute our strategic plan as well as our ability to attract and retain
necessary qualified resources to sustain the Corporation's growth and success. We have proven practices to attract the
professionals necessary for our operations. We use performance evaluation practices supervised by our human
resources department. Our salary structure is regularly reviewed in order to ensure that we remain competitive on the
market. We have a succession plan in place to ensure we have well-identified resources for the key positions in the
Corporation.
CORPORATE RESPONSIBILITY
If our actions do not respect our environmental, social and economic responsibilities, we are exposed to criticism, claims,
boycotts and even lawsuits, should we fail to comply with our legal obligations.
In order to go beyond its role of distributor and become an active player in sustainable development, the Corporation
introduced in 2010 its Corporate Responsibility Roadmap. Closely linked to our business strategy, our approach is built
on four pillars: Delighted Customers, Respect for the Environment, Strengthened Communities and Empowered
Employees, all of which involve priorities. Since then, the Corporation has issued annual reports with status updates on
the various projects. For more information, visit metro.ca/Corporate Responsibility.
REGULATIONS
Changes are regularly brought to accounting policies, laws, regulations, rules or policies impacting our operations. We
monitor these changes closely.
With the acquisition of Jean Coutu Group, the Corporation is relying on prescription drug sales for a more significant
portion of its sales and operating income. The pharmacy activities are exposed to risks related to the regulated nature
of some of our activities and the activities of our pharmacist/owner franchisees.
Any changes to laws and regulations or policies regarding the Corporation's activities could have a material adverse
effect on its performance and on the sales growth. Processes are in place to ensure our compliance as well as to monitor
any and all changes to the laws and regulations in effect and any new laws and regulations.
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 33 -
We have also developed a successful market segmentation strategy. Our grocery banners: the conventional Metro
supermarkets, Super C and Food Basics discount banners, and Adonis ethnic food stores, target three different market
segments. In fiscal 2014, we acquired Première Moisson, a company specialized in bakery, pastry, charcutery and other
food offerings prepared on an artisanal basis and respectful of great traditions. In 2017, we acquired MissFresh, a
company specializing in the delivery of meal kits, allowing us to continue our efforts aimed at meeting all of the emerging
needs and behaviours in the food industry.
In the pharmacy market, we have large, medium, and small drugstores under the Jean Coutu, Brunet, Metro Pharmacy,
and Food Basics Pharmacy banners. We acquired in 2018 the Jean Coutu Group which operates a network of
415 franchised drugstores in Québec, New Brunswick and Ontario under the PJC Jean Coutu, PJC Santé and PJC
Santé Beauté banners.
With the metro&moi and Air Miles® loyalty programs in our Metro and Metro Plus supermarkets and our Jean Coutu
drugstores network, we are able to know the buying habits of loyal customers, offer them personalized promotions so
as to increase their purchases at our stores.
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.
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. 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 be in breach of certain provisions in the franchise or affiliation contracts,
such as purchasing policies and marketing plans. Non-compliance with such contracts may have an impact on us. A
team of retail operations advisers ensures our operating standards' consistent application in all of these stores.
FINANCIAL INSTRUMENTS
We make some foreign-denominated purchases of goods and services and we have, depending on market conditions,
US borrowings, exposing ourselves to exchange rate risks. According to our financial risk management policy, we may
use derivative financial instruments, such as foreign exchange forward contracts and cross currency interest rate swaps.
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 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 non-current debt and creditors. We evaluate our cash position
regularly and estimate(3) that cash flows generated by our operating activities are sufficient to provide for all outflows
required by our financing activities.
JEAN COUTU GROUP ACQUISITION
The successful combination of the Jean Coutu Group's activities requires significant efforts on the part of management
of the Corporation. Ineffective change management and poor integration decisions could cause disruptions to the
pharmacy activities of the Corporation. Failure to successfully execute enterprise integration, to realize the anticipated
strategic benefits or the synergies associated with this acquisition could adversely affect the reputation, operations or
financial performance of the Corporation. A project management office, under the leadership of the Corporation’s
management, ensures that all directions and decisions are aligned with the realization of anticipated strategic benefits.
Montréal, Canada, December 12, 2019
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization and associate's earnings adjustments" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 34 -
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 policies, 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
International Financial Reporting Standards 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 Corporation'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 Corporation 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 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
November 19, 2019
François Thibault
Executive Vice President,
Chief Financial Officer and Treasurer
- 35 -
INDEPENDENT AUDITORS' REPORT
To the shareholders of METRO INC.
Opinion
We have audited the consolidated financial statements of METRO Inc. and its subsidiaries (the “Group”), which comprise
the consolidated statements of financial position as at September 28, 2019 and September 29, 2018, and the consolidated
statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes
to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at September 28, 2019 and September 29, 2018, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting
Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to
our audit of the consolidated financial statements in Canada, and we have fulfilled our ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual
Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are required
to report that fact to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
- 36 -
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
•
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Martine Quintal.
Montréal, Canada
November 19, 2019
1 CPA auditor, CA, public accountancy permit no. A112005
- 37 -
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- 38 -
Annual Consolidated Financial Statements
METRO INC.
September 28, 2019
- 39 -
Table of contents
Consolidated statements of income ...............................................................................................................
Consolidated statements of comprehensive income ......................................................................................
Consolidated statements of financial position ................................................................................................
Consolidated statements of changes in equity ...............................................................................................
Consolidated statements of cash flows ..........................................................................................................
Notes to consolidated financial statements ....................................................................................................
1- Description of business ...........................................................................................................................
2- Significant accounting policies .................................................................................................................
3- New accounting standards ......................................................................................................................
4- Significant judgements and estimates .....................................................................................................
5- Business acquisition ................................................................................................................................
6- Additional information on the nature of earnings components ..................................................................
7- Income taxes ...........................................................................................................................................
8- Net earnings per share ............................................................................................................................
9- Inventories ...............................................................................................................................................
10- Investment at fair value ...........................................................................................................................
11- Fixed assets ............................................................................................................................................
12- Investment properties ..............................................................................................................................
13- Intangible assets .....................................................................................................................................
14- Goodwill
..................................................................................................................................................
15- Other assets ............................................................................................................................................
16- Bank loans ..............................................................................................................................................
17- Offsetting .................................................................................................................................................
18- Provisions
...............................................................................................................................................
19- Debt
........................................................................................................................................................
20- Other liabilities .........................................................................................................................................
21- Capital stock
...........................................................................................................................................
22- Dividends ................................................................................................................................................
23- Employee benefits ...................................................................................................................................
24- Commitments ..........................................................................................................................................
25- Contingencies .........................................................................................................................................
26- Related party transactions .......................................................................................................................
27- Management of capital
............................................................................................................................
28- Financial instruments ..............................................................................................................................
29- Approval of financial statements ..............................................................................................................
Page
41
42
43
44
46
47
47
47
52
54
55
57
58
59
60
60
61
62
63
64
65
65
65
66
67
68
69
71
72
76
77
78
79
80
82
- 40 -
Consolidated statements of income
Years ended September 28, 2019 and September 29, 2018
(Millions of dollars, except for net earnings per share)
Sales (notes 6 and 26)
Cost of sales and operating expenses (notes 6 and 26)
Retail network restructuring expenses (notes 6 and 18)
Gain on divestiture of pharmacies (notes 5 et 6)
Pharmacy network closure and restructuring expenses (notes 6 and 18)
Distribution network modernization project expenses (notes 6 and 18)
Operating income before depreciation and amortization and
associate's earnings
Depreciation and amortization (note 6)
Financial costs, net (note 6)
Gain on disposal of the majority of the investment in an associate (notes 6, 10 and
15)
Gain on revaluation and disposal of an investment at fair value (notes 6 and 10)
Share of an associate's earnings (notes 6 and 10)
Earnings before income taxes
Income taxes (note 7)
Net earnings
Attributable to:
Equity holders of the parent
Non-controlling interests
Net earnings per share (Dollars) (notes 8 and 21)
Basic
Fully diluted
See accompanying notes
2019
2018
16,767.5
14,383.4
(15,416.0)
(13,329.5)
(36.0)
6.0
—
—
1,321.5
(286.4)
(103.8)
36.4
1.5
—
969.2
(254.8)
714.4
711.6
2.8
714.4
2.79
2.78
—
—
(31.4)
(11.4)
1,011.1
(233.5)
(80.2)
1,107.4
241.1
30.8
2,076.7
(358.2)
1,718.5
1,716.5
2.0
1,718.5
7.20
7.16
- 41 -
Consolidated statements of comprehensive income
Years ended September 28, 2019 and September 29, 2018
(Millions of dollars)
Net earnings
Other comprehensive income
Items that will not be reclassified to net earnings
Changes in defined benefit plans
Actuarial gains (losses)
Asset ceiling effect
Minimum funding requirement
Loss on disposal of the investment at fair value (note 10)
Corresponding income taxes
Items that will be reclassified later to net earnings
Fair value revaluation of investment (note 10)
Reclassification of the change in investment at fair value to net earnings
following the disposal of a portion of the investment (note 10)
Reclassification of shares of an associate's other comprehensive income to net
earnings (note 10)
Corresponding income taxes
Comprehensive income
Attributable to:
Equity holders of the parent
Non-controlling interests
See accompanying notes
2019
714.4
2018
1,718.5
(97.9)
4.3
(0.6)
(1.3)
25.2
(70.3)
—
—
—
—
—
(70.3)
644.1
641.3
2.8
644.1
37.2
(2.1)
(0.2)
—
(9.2)
25.7
22.8
(17.1)
(3.9)
(0.4)
1.4
27.1
1,745.6
1,743.6
2.0
1,745.6
- 42 -
Consolidated statements of financial position
As at September 28, 2019 and September 29, 2018
(Millions of dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (notes 15 and 26)
Inventories (note 9)
Prepaid expenses
Current taxes
Non-current assets
Fixed assets (note 11)
Investment properties (note 12)
Intangible assets (note 13)
Goodwill (note 14)
Deferred taxes (note 7)
Defined benefit assets (note 23)
Investment at fair value (note 10)
Other assets (note 15)
LIABILITIES AND EQUITY
Current liabilities
Bank loans (note 16)
Accounts payable (notes 17 and 26)
Deferred revenues
Current taxes
Provisions (note 18)
Current portion of debt (note 19)
Non-controlling interests (note 28)
Non-current liabilities
Debt (note 19)
Defined benefit liabilities (note 23)
Provisions (note 18)
Deferred taxes (note 7)
Other liabilities (note 20)
Non-controlling interests (note 28)
Equity
Attributable to equity holders of the parent
Attributable to non-controlling interests
Commitments and contingencies (notes 24 and 25)
See accompanying notes
On behalf of the Board
2019
2018
273.4
611.2
1,126.0
33.2
44.5
2,088.3
2,657.8
41.5
2,889.0
3,306.5
2.8
25.6
—
62.4
11,073.9
—
1,331.4
22.3
33.3
10.9
428.6
51.1
1,877.6
2,229.0
113.0
30.2
842.7
12.8
—
5,105.3
5,955.2
13.4
5,968.6
11,073.9
226.9
538.1
1,099.1
32.1
20.6
1,916.8
2,523.4
46.1
2,914.4
3,302.2
4.5
55.1
66.9
92.8
10,922.2
0.1
1,268.3
90.2
254.8
8.0
13.3
—
1,634.7
2,630.4
81.3
22.3
846.5
11.7
39.3
5,266.2
5,642.8
13.2
5,656.0
10,922.2
ERIC R. LA FLÈCHE
Director
RUSSELL GOODMAN
Director
- 43 -
Consolidated statements of changes in equity
Years ended September 28, 2019 and September 29, 2018
(Millions of dollars)
Attributable to the equity holders of the parent
Capital
stock
(note 21)
Treasury
shares
(note 21)
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income
Non-
controlling
interests
Total
Total
equity
1,724.1
(24.9)
20.3
3,918.4
Balance as at
September 29, 2018
Net earnings
Other comprehensive
income
Comprehensive income
Stock options exercised
Shares redeemed
Share redemption premium
Acquisition of treasury shares
Share-based compensation
cost
Performance share units
settlement
Dividends
Adoption of IFRS 9 "Financial
instruments" on the
investment at fair value
(note 3)
Change in fair value of non-
controlling interests liability
(note 28)
Sale of shares in joint
ventures
Balance as at
September 28, 2019
See accompanying notes
—
—
—
28.0
(19.8)
—
—
—
—
—
—
—
—
8.2
—
—
—
—
—
—
(5.6)
—
5.9
—
—
—
—
0.3
—
—
—
(4.0)
—
—
—
8.6
711.6
(70.3)
641.3
—
—
(126.1)
—
—
(5.7)
(0.2)
—
(198.9)
4.9
—
—
—
—
—
—
—
—
—
—
5,642.8
13.2
5,656.0
711.6
(70.3)
641.3
24.0
(19.8)
(126.1)
(5.6)
8.6
—
2.8
—
2.8
—
—
—
—
—
—
714.4
(70.3)
644.1
24.0
(19.8)
(126.1)
(5.6)
8.6
—
(198.9)
(2.1)
(201.0)
—
—
—
4.9
(4.9)
—
—
—
(11.1)
—
—
—
(11.1)
(0.7)
(11.8)
—
0.2
0.2
(1.1)
(331.4)
(4.9)
(328.9)
(2.6)
(331.5)
1,732.3
(24.6)
19.2
4,228.3
— 5,955.2
13.4
5,968.6
- 44 -
Consolidated statements of changes in equity
Years ended September 28, 2019 and September 29, 2018
(Millions of dollars)
Attributable to the equity holders of the parent
Capital
stock
(note 21)
Treasury
shares
(note 21)
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income
Non-
controlling
interests
Total
Total
equity
565.8
(21.9)
19.8
2,343.9
3.5
2,911.1
12.8
2,923.9
—
—
—
1,147.9
10.4
—
—
—
—
—
—
—
—
—
—
—
(10.2)
—
7.2
—
—
—
1,158.3
(3.0)
— 1,716.5
— 1,716.5
2.0
1,718.5
—
25.7
— 1,742.2
—
(1.6)
—
9.1
(0.2)
—
—
—
(7.0)
—
(0.2)
(164.8)
—
—
0.5
(2.5)
—
(167.7)
1.4
1.4
27.1
1,743.6
— 1,147.7
—
2.0
27.1
1,745.6
— 1,147.7
—
—
—
—
—
—
—
—
8.8
(10.2)
9.1
—
—
—
—
—
8.8
(10.2)
9.1
—
(164.8)
(4.8)
(169.6)
(2.5)
—
988.1
2.9
0.3
0.4
0.3
(1.6)
986.5
1,724.1
(24.9)
20.3
3,918.4
4.9
5,642.8
13.2
5,656.0
Balance as at
September 30, 2017
Net earnings
Other comprehensive
income
Comprehensive income
Shares issued (note 5)
Stock options exercised
Acquisition of treasury
shares
Share-based compensation
cost
Performance share units
settlement
Dividends
Change in fair value of non-
controlling interests liability
(note 28)
Sale of shares in joint
ventures
Balance as at
September 29, 2018
See accompanying notes
- 45 -
Consolidated statements of cash flows
Years ended September 28, 2019 and September 29, 2018
(Millions of dollars)
Operating activities
Earnings before income taxes
Non-cash items
Gain on disposal of a portion of the investment in an associate (notes 10 and 15)
Gain on revaluation and disposal of an investment at fair value (note 10)
Share of an associate's earnings (note 10)
Gain on divestiture of pharmacies (note 5)
Depreciation and amortization
Gain on disposal and write-offs of fixed and intangible assets and investment
properties
Impairment losses on fixed assets
Impairment loss reversals on fixed and intangible assets
Share-based compensation cost
Difference between amounts paid for employee benefits and current year cost
Retail network restructuring expenses (note 18)
Pharmacy network closure and restructuring expenses (note 18)
Distribution network modernization project expenses (note 18)
Financial costs, net
Net change in non-cash working capital items
Interest paid
Income taxes paid
Investing activities
Business acquisition (note 5)
Proceeds on disposal of a portion of the investment in an associate and the
investment at fair value (note 10)
Equity forward transaction on the investment at fair value (note 10)
Proceeds on divestiture of pharmacies (note 5)
Sale of shares in joint ventures
Buyout of minority interests (note 28)
Net change in other assets
Additions to fixed assets and investment properties
Disposals of fixed assets and investment properties
Additions to intangible assets
Financing activities
Net change in bank loans
Shares issued (note 21)
Shares redeemed (note 21)
Acquisition of treasury shares (note 21)
Increase in debt
Repayment of debt
Net change in other liabilities
Dividends (note 22)
Net change in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
See accompanying notes
- 46 -
2019
2018
969.2
2,076.7
(36.4)
(1.5)
—
(6.0)
286.4
(0.8)
2.1
(0.1)
8.6
(35.1)
36.0
—
—
103.8
1,326.2
(54.5)
(106.9)
(477.1)
687.7
(1,107.4)
(241.1)
(30.8)
—
233.5
(15.7)
7.8
(1.9)
9.1
4.2
—
31.4
11.4
80.2
1,057.4
(54.3)
(90.5)
(162.2)
750.4
—
(3,033.0)
59.0
—
14.0
0.2
—
9.2
(356.9)
5.4
(39.4)
(308.5)
(0.1)
24.0
(145.9)
(5.6)
46.6
(53.9)
1.1
(198.9)
(332.7)
46.5
226.9
273.4
1,791.6
68.4
—
0.1
(221.2)
(0.6)
(286.1)
34.6
(31.3)
(1,677.5)
(1.0)
8.8
—
(10.2)
2,168.8
(995.2)
(1.3)
(164.8)
1,005.1
78.0
148.9
226.9
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
1. DESCRIPTION OF BUSINESS
METRO INC. (the Corporation) is a company incorporated under the laws of Québec. One of Canada’s leading food
and pharmacy retailers and distributors, the Corporation operates a network of supermarkets, discount stores and
drugstores. Its head office is located at 11011 Maurice-Duplessis Blvd., Montréal, Québec, Canada, H1C 1V6. Its two
business segments, food operations and pharmaceutical operations, are combined into one reportable operating segment
due to the similar nature of their operations (see note 4).
2.
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements, in Canadian dollars, have been prepared by management in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements have been prepared within the reasonable limits of materiality, on a historical cost
basis, except for certain financial instruments and defined benefit plan assets measured at fair value and defined benefit
obligations measured at present value. The significant accounting policies are summarized below:
Consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries, as well as those of
structured entities (notes 4 and 26). All intercompany transactions and balances were eliminated on consolidation.
Sales recognition
Sales come essentially from the sale of goods and services. Retail sales made by corporate stores and stores that are
structured entities are recognized at the time of sale to the customer, and sales to affiliated stores and other customers
when the goods are delivered. Rebates granted by the Corporation are recorded as a reduction in sales.
Recognition of considerations from vendors
Cash considerations from vendors are considered as an adjustment to the vendor's product pricing and are therefore
characterized as a reduction of cost of sales and related inventories when recognized in the consolidated financial
statements.
Loyalty programs
The Corporation has two loyalty programs.
The first program, for which the Corporation acts as an agent, belongs to a third party and its cost is recorded as a
reduction in sales at the time of sale to the customer.
The second program belongs to the Corporation. At the time of a sale to the customer, part of it is recorded as deferred
revenue equal to the fair value of the program's issued points. This fair value is determined based on the exchange
value of the points awarded and the expected redemption rate which are regularly remeasured. The deferred revenue
is recognized as sales when the points are redeemed.
Foreign currency translation
The consolidated financial statements are presented in Canadian dollars, the Corporation's functional currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the
transaction. At each closing, monetary items denominated in foreign currency are translated using the exchange rate
at the closing date. Non-monetary items that are measured at historical cost in foreign currency are translated using the
exchange rate at the date of the transaction. Gains or losses resulting from currency translations are recognized in net
earnings.
Income taxes
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to determine these amounts are those that are
enacted or substantively enacted by tax authorities by the closing date.
The Corporation follows the liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are accounted for based on estimated taxes recoverable or payable that would result from the recovery or
- 47 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
settlement of the carrying amount of assets and liabilities. Deferred 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 net earnings in the period in which they occur. The carrying amount of deferred
tax assets is reviewed at every closing date and reduced to the extent that it is no longer probable that sufficient earnings
will be available to allow all or part of the deferred tax assets to be utilized.
Income tax relating to items recognized directly in equity is recognized in equity.
Share-based payment
A share-based compensation expense is recognized for the stock option and performance share unit (PSU) plans offered
to certain employees as well as a deferred share unit (DSU) plan offered to directors.
Stock option awards vest gradually over the vesting term and each tranche is considered as a separate award. The
value of the remuneration expense is calculated based on the fair value of the stock options at the option grant date and
using the Black-Scholes valuation model. The compensation expense is recognized over the vesting term of each
tranche.
The compensation expense for the PSU plan is determined based on the market value of the Corporation's Common
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.
The compensation expense and corresponding liability for the DSU plan are recognized on the grant date and determined
based on the grant date market value of the Corporation’s Common Shares. The DSU liability is included in accounts
payable and is periodically adjusted to reflect any changes in the stock market valuation of the Corporation’s Common
Shares.
Net earnings per share
Basic net earnings per share is calculated by dividing the net earnings attributable to equity holders of the parent by the
weighted average number of Common Shares outstanding during the year. For the fully diluted net earnings per share,
the net earnings attributable to equity holders of the parent and the weighted average number of Common Shares
outstanding are adjusted to reflect all potential dilutive shares.
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) and outstanding deposits. They are classified as “Financial assets at fair value through net earnings”
and measured at amortized cost, with revaluation at the end of each period.
Accounts receivable
Accounts receivable and 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 Corporation, the
measured amount generally corresponds to cost.
Inventories
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. All costs incurred in bringing the inventories
to their present location and condition are included in the cost of warehouse and retail inventories.
Investments in joint ventures
The Corporation has interests in joint ventures, whereby the venturers have a contractual agreement that establishes
joint control over the economic activities of the entity. These investments are accounted for using the equity method and
are presented in other assets.
Fixed assets
Fixed assets are initially recorded at cost. Principal components of a fixed asset with different useful lives are depreciated
separately. Buildings and equipment are depreciated on a straight-line basis over their useful lives. Leasehold
- 48 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the remaining
lease term. The depreciation method and estimate of useful lives are reviewed annually.
Buildings
Equipment
Leasehold improvements
Leases
20 to 50 years
3 to 20 years
5 to 20 years
Leases are classified as finance leases if substantially all risks and rewards incidental to ownership are transferred to
the lessee. At the moment of initial recognition, the lessee records the leased item as an asset at the lower of the fair
value of the asset and the present value of the minimum lease payments. A corresponding liability to the lessor is recorded
in the consolidated statement of financial position as a finance lease obligation. In subsequent periods, the asset is
depreciated on a straight-line basis over the term of the lease and interest on the obligation is expensed through net
earnings.
Leases are classified as operating leases if substantially all risks and rewards incidental to ownership are not transferred
to the lessee. The lease payments are recognized as an expense on a straight-line basis over the lease term.
Investment properties
Investment properties are held for capital appreciation and to earn rentals. They are not occupied by the owner for its
ordinary activities. They are recognized at cost. Principal components, except for land which is not depreciated, are
depreciated on a straight-line basis over their respective useful lives which vary from 20 to 50 years. The depreciation
method and estimates of useful lives are reviewed annually.
Intangible assets
Intangible assets with finite useful lives are recorded at cost and amortized on a straight-line basis over their useful lives.
The amortization method and estimates of useful lives are reviewed annually.
Leasehold rights
Software
Retail network retention premiums
Customer relationships
20 to 40 years
3 to 7 years
5 to 30 years
10 to 27 years
The banners that the Corporation intends to keep and operate, the private labels for which it continues to develop new
products and the loyalty programs it intends to maintain qualify as intangible assets with indefinite useful lives. They are
recorded at cost and not amortized.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of the acquired enterprise's identifiable net
assets at the date of acquisition, is recognized at cost and is not amortized.
Impairment of non financial assets
At each reporting date, the Corporation must determine if there is any indication of depreciation of its fixed assets,
intangible assets with finite useful lives, investment properties and investment in an associate. If any indication exists,
the Corporation has to test the assets for impairment. Impairment testing of intangible assets with indefinite useful lives
and goodwill is to be done at least annually, regardless of any indication of depreciation.
Impairment testing is conducted at the level of the asset itself, a cash generating unit (CGU) or group of CGUs. A CGU
is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows
from other assets or groups of assets. Each store is a separate CGU. Impairment testing of warehouses is conducted
at the level of the different groups of CGUs. Impairment testing of common assets is conducted at the level of the smallest
CGU. Impairment testing of goodwill resulting from a business acquisition is conducted at the level of the smallest CGU.
Impairment testing of investment properties, banners, private labels and loyalty programs is conducted at the level of
the asset itself.
- 49 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
To test for impairment, the carrying amount of an asset, CGU or group of CGUs is compared with its recoverable amount.
The recoverable amount is the higher of the value in use and the fair value less costs of disposal. The value in use
corresponds generally to the pre-tax cash flow projections from the management-approved budgets for the next fiscal
year. These projections reflect past experience and are discounted at a pre-tax rate corresponding to the expected
market rate for this type of investment. The recoverable amount of investment properties, investment in an associate,
banners, private labels and loyalty programs is these assets' fair value less costs of disposal. If the carrying amount
exceeds the recoverable amount, an impairment loss in the amount of the excess is recognized in net earnings. CGU
or group of CGUs' impairment losses are allocated pro rata to the assets of the CGU or group of CGUs, without however
reducing the carrying amount of the assets below the highest of their fair value less costs of disposal, their value in use,
and zero.
Except for goodwill, any reversal of an impairment loss is recognized immediately in net earnings. A reversal of an
impairment loss for a CGU or group of CGUs is allocated pro rata to the assets of the CGU or group of CGUs. The
recoverable amount of an asset increased by a reversal of an impairment loss may not exceed the carrying amount that
would have been determined, net of depreciation and amortization, if no impairment loss had been recognized for the
asset in prior years.
Deferred financing costs
Financing costs related to debt are deferred and amortized using the effective interest method over the term of the
corresponding loans. When one of these loans is repaid, the corresponding financing costs are charged to net earnings.
Employee benefits
Employee benefits include short-term employee benefits which correspond to wages and fringe benefits and are
recognized immediately in net earnings as are termination benefits which are also recorded as a liability when the
Corporation cannot withdraw the offer of termination.
Employee benefits also include post-employment benefits which comprise pension benefits (both defined benefit and
defined contribution plans) and ancillary benefits such as post-employment life and medical insurance. Employee benefits
also comprise other long-term benefits, namely long-term disability benefits not covered by insurance plans and ancillary
benefits provided to employees on long-term disability. Assets and obligations related to employee defined benefit plans,
ancillary retirement benefits and other long-term benefits plan are accounted for using the following accounting policies:
• Defined benefit obligations and the cost of pension, ancillary retirement benefits and other long-term benefits earned
by participants are determined from actuarial calculations according to the projected credit unit method. The
calculations are based on management’s best assumptions relating to salary escalation, retirement age of
participants, inflation and expected health care costs.
• Defined benefit obligations are discounted using high-quality corporate bond yield rates with cash flows that match
the timing and amount of expected benefit payments.
• Defined benefit plan assets or liabilities recognized in the consolidated statement of financial position correspond
to the difference between the present value of defined benefit obligations and the fair value of plan assets. In the
case of a surplus funded plan, these assets are limited at the lesser of the actuarial value determined for accounting
purposes or the value of the future economic benefit by way of surplus refunds or contribution holidays. Furthermore,
an additional liability could be recorded when minimum funding requirements for past services exceed economic
benefits available.
•
•
The interest expense on defined benefit obligations, on the asset ceiling and on the minimum funding requirement
is net of interest income on plan assets, which is calculated by applying the same rate used to evaluate the obligations,
and is recognized as financing costs.
Actuarial gains or losses on pension plans and ancillary post-employment benefits arise from changes to current
year end actuarial assumptions used to determine the defined benefit obligations. They also arise from variances
between the experience adjustments of the plans for the current year and the assumptions defined at the end of
the previous fiscal year to determine the employee benefit expense for the current fiscal year and the defined benefit
obligations at the previous fiscal year end.
• Remeasurements of defined benefit net liabilities include actuarial gains or losses, the yield on plan assets, and
asset ceiling and minimum funding requirement changes, excluding the amount already recorded in net interest.
Remeasurements are recognized under other comprehensive income during the period in which they occur and
reclassified from accumulated other comprehensive income to retained earnings at the end of each period.
•
Actuarial gains or losses to other long-term employee benefits are recognized in full immediately in net earnings.
- 50 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
•
Past service amendment costs are recognized immediately in net earnings.
• Defined contribution plan costs, including those of multi-employer plans, are recorded when the contributions are
due. As sufficient information to reliably determine multi-employer defined benefit plan obligations and assets is not
available and as there is no actuarial valuation according to IFRS, these plans are accounted for as defined
contribution plans and the Corporation participation is limited to the negotiated contributions. The vast majority of
the Corporation's contributions to multi-employer plans are paid into the Canadian Commercial Workers Industry
Pension Plan (CCWIPP). The Corporation and its franchisees represent approximately 25% of the Plan’s total
number of participants.
Deferred revenues
The portion of revenue that is unearned is recorded in deferred revenue when payments are received. This includes
prepayments received by the Corporation for future periods for which revenue is recognized when the goods are delivered
or services are rendered. Deferred revenue also includes loyalty points issued as part of the Corporation’s loyalty
programs and gift cards outstanding as of year end for which revenue is recognized upon redemption. As at
September 29, 2018, deferred revenue included the amount received related to the equity forward agreement for the
Alimentation Couche-Tard shares.
Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive) resulting from a past
event, will likely have to settle the obligation and the amount of which can be reliably estimated. The amount recognized
as provision is the best estimate of the expense required to settle the present obligation at the closing date. When a
provision is measured based on estimated cash flows required to settle the present obligation, its carrying amount is
the discounted value of these cash flows.
Present obligations resulting from onerous contracts are accounted for and measured as provisions. A contract is said
to be onerous when the costs involved in fulfilling the terms and conditions of the contract are higher than the contract's
expected economic benefits.
Other financial liabilities
Bank loans, accounts payable excluding deferred revenues, revolving credit facility, notes and loans payable are classified
as “Liabilities measured at amortized cost”. After their initial fair value measurement, they are measured at amortized
cost using the effective interest method.
Non-controlling interests
Non-controlIing interests are generally recognized in equity. However, with respect to its interests in Première Moisson
and MissFresh, the Corporation has the option to buy out the minority interests and the minority shareholders in these
companies have the option to be bought out by the Corporation under certain conditions as of the options’ exercisable
dates. Given these options, the non-controlling interests become a financial liability that is classified as "Liabilities
measured at fair value through profit and loss" and measured at fair value. Gains or losses resulting from the revaluation
at the end of each period recorded in net earnings or in retained earnings. The Corporation elected to record them in
retained earnings.
Derivative financial instruments
In accordance with its risk management strategy, the Corporation uses derivative financial instruments for hedging
purposes. On inception of a hedging relationship, the Corporation indicates whether or not it will apply hedge accounting
to the relationship. Should there be any, the Corporation 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 effectiveness of the hedging relationship is measured at its inception to determine whether it will be highly effective
over the term of the relationship and assessed periodically to ensure that hedge accounting is still appropriate. The
results of these assessments are formally documented.
The Corporation could use foreign exchange forward contracts, cross currency interest rate swaps and equity forward
transaction. Given their short-term maturity, the Corporation elected not to apply hedge accounting. These derivative
financial instruments are classified as "Financial assets or liabilities measured at fair value through profit and loss" and
measured at fair value with revaluation at the end of each period. Resulting gains or losses are recorded in net earnings.
- 51 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Fair value measurements hierarchy
Fair value measurements of assets and liabilities recognized at fair value in the consolidated statements of financial
position or whose fair value is presented in the notes to the consolidated financial statements are categorized in
accordance with the following hierarchy:
•
•
•
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).
Fiscal year
The Corporation's fiscal year ends on the last Saturday of September. The fiscal year ended September 28, 2019 included
52 weeks of operations and the fiscal year ended September 29, 2018 included 52 weeks of operations.
3. NEW ACCOUNTING STANDARDS
ACCOUNTING STANDARD ISSUED BUT NOT YET EFFECTIVE
Leases
In January 2016, the IASB issued IFRS 16, Leases, which replaces IAS 17, Leases and related interpretations. Under
IFRS 16, which provides a single accounting model for leases abolishing the current distinction between finance leases
and operating leases, most leases will be recognized in the statement of financial position. Certain exemptions will apply
for short-term leases and leases of low-value assets. The accounting requirements for lessors remain similar to those
under IAS 17. IFRS 16 applies to fiscal years beginning on or after January 1, 2019, which for the Corporation is fiscal
year beginning on September 29, 2019.
Under IFRS 16 transitional provisions, the Corporation will adopt the standard using a modified retrospective approach,
and the cumulative impact of the initial application of the standard will be recognized as an adjustment to equity on
transition.
As a lessee, the Corporation will recognize right-of-use assets and lease liabilities in respect of operating leases for
property, vehicles and equipment. Depreciation expense for right-of-use assets and interest expense on lease liabilities
will replace rental expense previously recognized under IAS 17 on a straight-line basis over the lease term. The lease
liabilities will be measured at the present value of the remaining lease payments and the right-of-use assets will be
measured using the modified retrospective approach. The discount rate used will be the Corporation’s incremental
borrowing rate on the transition date of September 29, 2019.
As an intermediate lessor under several leases, the Corporation has assessed the classification of its sublease
agreements based on the right-of-use asset related to the main lease and not on the underlying asset. As a result of
this change, the Corporation expects an increase in current and non-current receivables recorded for leases that should
be classified as finance leases.
The Corporation will use the following practical expedients as permitted by IFRS 16 at the initial application date:
Apply IFRS 16 only to contracts that were previously identified as leases under IAS 17.
Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
•
•
• Rely on an existing assessment to determine whether a lease is onerous, instead of performing a review of
the impairment of the right-of-use assets.
Exclude leases which end within 12 months of the date of the initial application.
Elect not to apply IFRS 16 to leases for which the underlying asset is of low value.
Exclude initial direct costs from the measurement of right-of-use assets.
•
•
•
• Use hindsight, such as in determining the lease term where the contract contains options to extend or terminate
the lease.
We expect(3) increases in liabilities ranging from $2.1 billion to $2.3 billion and in assets, including right-of-use assets
as well as receivables (current and non-current) related to sublease agreements, ranging from $1.9 billion to $2.1 billion
with the net impact recorded in opening retained earnings. Actual results from the initial application of IFRS 16 may differ
from estimated amounts, the Corporation continues to perfect the estimates and input data that will be used in the
calculations.
- 52 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
ACCOUNTING STANDARDS ADOPTED IN 2019
Financial instruments
Effective the first quarter of 2019, the Corporation adopted IFRS 9, Financial Instruments, which replaces IAS 39,
Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after
January 1, 2018.
The Corporation adopted the new classification and valuation, impairment and general hedging requirements on
September 30, 2018 by applying the classification and valuation, including impairment, requirements retrospectively,
with the cumulative effect of initially applying the standard recognized in opening retained earnings as at
September 30, 2018 and without restatement of comparative information.
Classification of financial instruments
The adoption of IFRS 9 changes the Corporation’s accounting policies with respect to the classification of financial
instruments.
Following adoption, the Corporation’s classification is as follows:
• Cash and cash equivalents were classified as “Financial assets at fair value through profit and loss” before the
•
•
•
adoption of IFRS 9 and are now classified as subsequently measured at amortized cost.
Accounts receivable and loans to certain customers were classified as “Loans and receivables” before the
adoption of IFRS 9 and are now classified as subsequently measured at amortized cost.
The investment at fair value was classified as an “Available-for-sale financial asset” before the adoption of
IFRS 9 and is now classified as subsequently measured at fair value through other comprehensive income.
Accumulated other comprehensive income of $4.9 was therefore reclassified to retained earnings as at
September 30, 2018.
Bank loans, accounts payable excluding deferred revenues, the revolving credit facility, notes and loans payable
were classified as “Other financial liabilities” before the adoption of IFRS 9 and are now classified as
subsequently measured at amortized cost.
• Non-controlling interests were classified as “Financial liabilities held for trading” before the adoption of IFRS 9
and are now classified as subsequently measured at fair value through profit and loss. Gains or losses resulting
from the revaluation at the end of each period recorded may be recognized in net earnings or retained earnings.
The Corporation has elected to record them in retained earnings.
• Derivative financial instruments not designated as hedges were classified as “Financial assets and liabilities
at fair value through profit and loss” before the adoption of IFRS 9 and are now classified as subsequently
measured at fair value through profit and loss.
The changes in classification and measurement criteria resulting from the adoption of IFRS 9 had no impact on the
measurement of financial instruments.
Impairment of financial assets
The adoption of IFRS 9 changes the method used to calculate the impairment of accounts receivable and loans to certain
customers.
At each reporting date, the Corporation estimates expected credit losses based on its credit loss history. Those expected
loses are adjusted to reflect factors that are specific to the accounts receivable and loans to certain customers, general
economic conditions as well as an assessment of both current and forecasted economic conditions at the reporting date,
including time value of money when appropriate. The evaluation is calculated using the simplified method for cash and
current assets and the general method for loans. The net change in expected credit losses on accounts receivable and
loans to certain customers is recognized in net earnings.
The adoption of IFRS 9 had no impact on the impairment of accounts receivable and loans to certain customers.
Revenue from contracts with customers
Effective the first quarter of 2019, the Corporation adopted IFRS 15, Revenue from Contracts with Customers. IFRS 15
replaces IAS 18, Revenue, IAS 11, Construction Contracts, and related interpretations. IFRS 15 is effective for annual
periods beginning on or after January 1, 2018.
- 53 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
The Corporation adopted IFRS 15 retrospectively in accordance with the transitional provisions thereof. The application
of IFRS 15 had no impact on the amounts recognized in the Corporation's consolidated financial statements, and no
amounts have been reclassified or restated.
Under IFRS 15, revenue is recognized when control of the goods or services is transferred to the customer. Retail sales
made by corporate stores and by stores qualifying as structured entities are recognized at the time of sale to the customer,
and sales to affiliated or franchised stores and to other customers are recognized when the goods are delivered to them.
Rebates granted by the Corporation are recorded as a reduction in sales.
4.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of the consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the recognition and valuation of assets, liabilities, sales, other income and expenses. These
estimates and assumptions are based on historical experience and other factors deemed relevant and reasonable and
are reviewed at every closing date. The use of different estimates could produce different amounts in the consolidated
financial statements. Actual results may differ from these estimates.
JUDGEMENTS
In applying the Corporation's accounting policies, management has made the following judgements, which have the
most significant effect on the amounts recognized in the consolidated financial statements:
Consolidation of structured entities
The Corporation has no voting rights in certain food stores. However, the franchise contract gives it the ability to control
these stores' main activities. Its decisions are not limited to protecting its trademarks. The Corporation retains the majority
of stores' profits and losses. For these reasons, the Corporation consolidates these food stores in its financial statements.
The Corporation has no voting rights in the trust created for PSU plan participants. However, under the trust agreement,
it instructs the trustee as to the sale and purchase of Corporation shares and payments to beneficiaries, gives the trustee
money to buy Corporation shares, assumes vesting variability, and ensures that the trust holds a sufficient number of
shares to meet its obligations to the beneficiaries. For these reasons, the Corporation consolidates this trust in its financial
statements.
The Corporation also has an agreement with a third party that operates a plant exclusively for the needs and according
to the specifications of the Corporation, which assumes all costs and control the plant's main activities. For these reasons,
the Corporation consolidates it in the Corporation's financial statements.
Determination of the aggregation of operating segments
The Corporation uses judgment in determining the aggregation of business segments. The reportable operating segment
comprises the food operations segment and the pharmaceutical operations segment. The Corporation has aggregated
these two business segments due to the similar nature of their goods and services and similar economic characteristics:
operations are carried on primarily in Québec and Ontario and are therefore subject to the same regulatory environment
and competitive and economic market pressures, use the same product distribution methods and serve the same
customers.
ESTIMATES
The assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have
a significant risk of causing a material adjustment to the value of assets and liabilities within the next period, are discussed
below:
Impairment of assets
In testing for impairment of intangible assets with indefinite useful lives and goodwill, value in use and fair value less
costs of disposal are estimated using the discounted future cash flows model, the capitalized excess earnings before
financial costs and taxes (EBIT) and royalty-free licence methods. These methods are based on various assumptions,
such as the future cash flows estimate, excess EBIT, royalty rates, discount rate, earnings multiples and growth rates.
The key assumptions are disclosed in notes 13 and 14.
- 54 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Pension plans and other plans
Defined pension plans, ancillary retirements and other long-term benefits obligations and costs associated to these
obligations are determined from actuarial calculations according to the projected credit unit method. These calculations
are based on management's best assumptions relating to salary escalation, retirement age of participants, inflation rate
and expected health care costs. The key assumptions are disclosed in note 23.
Non-controlling interests
The non-current liability related to the non-controlling interest is calculated in relation to the price to be paid by the
Corporation for the non-controlling interest, which price is based mainly on the future earnings of MissFresh (MissFresh
and Première Moisson in 2018) as of the date the options will become exercisable. Given the uncertainty associated
with the estimation of these future earnings, the Corporation used, at the end of the fiscal year, its most probable estimate
and various other assumptions, including the discount rate, growth rate and capital investments. Additional information
is presented in note 28.
5. BUSINESS ACQUISITION
In 2018, the Corporation completed the acquisition of The Jean Coutu Group (PJC) Inc. ("Jean Coutu Group”) a for a
total consideration of $4,525.1. Under the terms of the acquisition, the aggregate consideration transferred to the Jean
Coutu Group shareholders consisted of $3,377.2 in cash and the issuance of approximately 28 million common shares
of the Corporation representing $1,147.9.
The following table shows the final fair values of identifiable assets acquired and liabilities assumed at the acquisition
date:
Net assets acquired at their value
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Other assets
Fixed assets
Investment properties
Intangible assets
Goodwill
Accounts payable
Deferred taxes
Other liabilities
Cash consideration
Share consideration
- 55 -
344.2
219.3
228.3
13.5
55.4
687.4
31.4
2,544.8
1,323.5
(277.9)
(642.0)
(2.8)
4,525.1
3,377.2
1,147.9
4,525.1
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Details regarding the intangible assets are as follows:
Banner
Private labels
Customer relationships
Loyalty program
Software
Intangible assets
Estimated
useful life
Indefinite
Indefinite
27 years
Indefinite
3 to 7 years
1,340.0
82.0
1,040.0
60.0
22.8
2,544.8
Pursuant to the agreement reached with the Commissioner of Competition of Canada on April 23, 2018, the Corporation
was required to divest its rights in 10 locations where drugstores are operated. During fiscal 2019, the Corporation
completed the divestiture of rights in the 10 locations where pharmacies are in operation. Consequently, the Corporation
recorded in fiscal 2019 a $6.0 gain before income taxes following the disposition of leases and buildings and the
termination of franchise agreements related to these pharmacies, for a total consideration in cash of $14.0.
For fiscal 2018, expenses related to the Jean Coutu Group acquisition of $28.7 were recorded in operating expenses.
Since the acquisition date, the Jean Coutu Group results are included in the consolidated financial statement. For fiscal
2018, sales and net earnings of the Jean Coutu Group were $1,157.7 $ and $80.8 respectively, excluding the amortization
of intangible assets resulting from the purchase price allocation.
- 56 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
6. ADDITIONAL INFORMATION ON THE NATURE OF EARNINGS COMPONENTS
Sales
Cost of sales
Gross margins
Operating expenses
Wages and fringe benefits
Employee benefits expense (note 23)
Rents and occupancy charges
Retail network restructuring expenses
Gain on divestiture of pharmacies
Pharmacy network closure and restructuring expenses
Distribution network modernization project expenses
Others
Operating income before depreciation and amortization
and associate's earnings
Depreciation and amortization
Fixed assets (note 11)
Investment properties (note 12)
Intangible assets (note 13)
Financial costs, net
Current interest
Non-current interest
Interests on defined benefit obligations net of plan assets (note 23)
Amortization of deferred financing costs
Interest income
Passage of time
Gain on disposal of a portion of the investment in an associate
(note 10)
Gain on revaluation and disposal of an investment at fair value
(note 10)
Share of an associate’s earnings (note 10)
Earnings before income taxes
2019
%
2018
%
16,767.5
(13,438.8)
14,383.4
(11,556.5)
3,328.7
19.9
2,826.9
19.7
(880.6)
(85.8)
(529.2)
(36.0)
6.0
—
—
(481.6)
(779.3)
(83.6)
(475.8)
—
—
(31.4)
(11.4)
(434.3)
(2,007.2)
12.0
(1,815.8)
12.6
1,321.5
7.9
1,011.1
7.0
(210.3)
(0.7)
(75.4)
(286.4)
(2.9)
(103.5)
(2.1)
(2.9)
7.8
(0.2)
(103.8)
36.4
1.5
—
969.2
(185.0)
(0.2)
(48.3)
(233.5)
(4.3)
(99.0)
(3.2)
(2.2)
28.8
(0.3)
(80.2)
1,107.4
241.1
30.8
2,076.7
- 57 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
7.
INCOME TAXES
The effective income tax rates were as follows:
(Percentage)
Combined statutory income tax rate
Changes
Gain on disposal of a portion of the investment in an associate (note 10)
Gain on revaluation and disposal of an investment at fair value (note 10)
Share of an associate's earnings
Others
The main components of the income tax expense were as follows:
Consolidated income statements
Current
Current tax expense
Deferred
Adjustment related to temporary differences
Consolidated comprehensive income statements
Deferred tax related to items reported directly in other
comprehensive income during the year
Changes in defined benefit plans
Actuarial gains (losses)
Asset ceiling effect
Minimum funding requirement
Loss on disposal of the investment at fair value
Fair value revaluation of investment
Reclassification of the change in investment at fair value to net earnings
following the disposal of a portion of the investment
Reclassification of shares of an associate's other comprehensive income to net
earnings
2019
26.6
(0.5)
—
—
0.2
26.3
2018
26.7
(7.5)
(1.6)
(0.2)
(0.2)
17.2
2019
2018
231.7
421.6
23.1
254.8
(63.4)
358.2
2019
2018
(25.9)
1.1
(0.1)
(0.3)
—
—
—
(25.2)
9.9
(0.6)
(0.1)
—
3.0
(2.1)
(0.5)
9.6
- 58 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Deferred income taxes reflect the net tax impact of temporary differences between the value of assets and liabilities for
accounting and tax purposes. The main components of the deferred tax expense and deferred tax assets and liabilities
were as follows:
Consolidated statements
of financial position
Consolidated statements
of income
As at
September 28, 2019
As at
September 29, 2018
2019
2018
Accrued expenses, provisions and
other reserves that are tax-
deductible only at the time of
disbursement
Deferred tax losses
Inventories
Employee benefits
Investment in an associate
Difference between net carrying value
and tax value
Fixed assets
Investment properties
Intangible assets
Goodwill
Deferred tax assets
Deferred tax liabilities
5.3
(3.3)
(0.2)
(9.9)
9.4
(27.9)
—
6.5
(3.0)
(23.1)
18.5
3.1
—
3.0
54.1
(15.2)
0.7
2.9
(3.7)
63.4
23.0
0.8
(11.4)
21.0
1.0
(194.4)
0.1
(629.9)
(50.1)
(839.9)
2.8
(842.7)
(839.9)
17.7
4.1
(11.2)
6.0
(8.7)
(166.5)
0.1
(636.4)
(47.1)
(842.0)
4.5
(846.5)
(842.0)
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 plan
Performance share unit plan
Weighted average number of shares outstanding – Fully diluted
2019
254.9
0.8
0.6
256.3
2018
238.3
0.9
0.6
239.8
- 59 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
9.
INVENTORIES
Wholesale inventories
Retail inventories
2019
655.1
470.9
2018
642.9
456.2
1,126.0
1,099.1
10.
INVESTMENT AT FAIR VALUE
During the first quarter of 2019, the Corporation finalized the disposal of the entire investment at fair value in Alimentation
Couche Tard Inc. (ACT) for final proceeds of $65.7, an amount of $68.4 was received in the fourth quarter of fiscal 2018
and recorded as a deferred revenue upon entering into a forward agreement. The revaluation of this agreement as at
September 29, 2018 gave rise to the recording of a loss and a financial liability in the amount of $1.6. The completion
of this agreement following the disposal of the investment resulted in a revaluation gain of $1.5 before income taxes in
2019 presented in earnings as a gain on revaluation and disposal of an investment at fair value. A loss on disposal of
$1.3 before income taxes was recognized in accumulated other comprehensive income.
During the first quarter of fiscal 2018, to fund a portion of the Jean Coutu Group acquisition, the Corporation disposed
of most of its investment in ACT, and recorded a gain of $1,107.4. As a result of this disposal, the Corporation no longer
has significant influence over ACT. Consequently, the investment was revalued at fair value and the Corporation recorded
a $225.6 fair value revaluation gain in net earnings.
In the fourth quarter of fiscal 2018, the Corporation disposed of approximately 4 million shares of the investment
accounted for at fair value for a cash consideration of $257.6 and a gain on disposal before income taxes of $17.1.
- 60 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
11. FIXED ASSETS
Land
Buildings
Equipment
Leasehold
improvements
Cost
Balance as at September 30, 2017
Acquisitions
Acquisitions through business
combinations (note 5)
Disposals and write-offs
261.8
7.8
210.7
(6.6)
722.5
57.7
422.1
(13.6)
Balance as at September 29, 2018
473.7
1,188.7
Acquisitions
Transfers to Investment properties
Disposals and write-offs
7.7
(0.5)
(0.5)
88.9
—
(1.0)
Balance as at September 28, 2019
480.4
1,276.6
Accumulated depreciation and
impairment
Balance as at September 30, 2017
Depreciation
Disposals and write-offs
Impairment losses
Impairment loss reversals
Balance as at September 29, 2018
Depreciation
Disposals and write-offs
Impairment losses
Balance as at September 28, 2019
Net carrying value
—
—
—
—
—
—
—
—
—
—
(204.5)
(28.2)
4.3
—
0.6
(227.8)
(53.0)
0.4
(1.4)
(281.8)
1,336.0
157.3
50.2
(35.9)
1,507.6
167.6
—
(117.8)
1,557.4
(757.8)
(100.7)
32.1
(3.5)
0.4
(829.5)
(111.8)
111.4
(0.5)
(830.4)
Buildings
under
finance
leases
50.7
4.6
0.5
—
Total
3,158.4
286.8
687.4
(70.1)
55.8
4,062.5
—
—
—
356.8
(0.5)
(186.8)
55.8
4,232.0
787.4
59.4
3.9
(14.0)
836.7
92.6
—
(67.5)
861.8
(403.3)
(31.3)
(1,396.9)
(52.2)
12.7
(4.3)
0.5
(3.9)
(185.0)
49.1
(7.8)
1.5
—
—
(446.6)
(35.2)
(1,539.1)
(41.5)
65.5
(0.2)
(4.0)
(210.3)
—
—
177.3
(2.1)
(422.8)
(39.2)
(1,574.2)
Balance as at September 29, 2018
Balance as at September 28, 2019
473.7
480.4
960.9
994.8
678.1
727.0
390.1
439.0
20.6
16.6
2,523.4
2,657.8
Impairment losses were on food store assets where cash flows decreased due to local competition. As food stores'
profitability improved, impairment loss reversals were posted on previously impaired food store assets.
Net additions of fixed assets excluded from the consolidated statements of cash flow was nil ($5.0 in 2018).
- 61 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
12.
INVESTMENT PROPERTIES
Balance as at September 30, 2017
Acquisitions
Acquisitions through business combinations (note 5)
Disposals and write-offs
Depreciation
Balance as at September 29, 2018
Acquisitions
Transfers from fixed assets
Disposals and write-offs
Depreciation
Balance as at September 28, 2019
Cost
24.3
4.3
31.4
(13.1)
—
46.9
0.1
0.5
(4.6)
—
42.9
Accumulated
depreciation
Net carrying
value
(9.3)
—
—
8.7
(0.2)
(0.8)
—
—
0.1
(0.7)
(1.4)
15.0
4.3
31.4
(4.4)
(0.2)
46.1
0.1
0.5
(4.5)
(0.7)
41.5
The fair value of investment properties was $45.4 as at September 28, 2019 ($50.8 as at September 29, 2018). The
Corporation categorized the fair value measurement in Level 2, as it is derived from observable market inputs, i.e. recent
transactions on these assets or similar assets.
- 62 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
13.
INTANGIBLE ASSETS
Intangible assets with finite useful lives were as follows:
Leasehold
rights
Software
Retail network
retention
premiums
Customer
relationships
Cost
Balance as at September 30, 2017
Acquisitions
Acquisitions through business
combinations (note 5)
Disposals and write-offs
Balance as at September 29, 2018
Acquisitions
Disposals and write-offs
Balance as at September 28, 2019
Accumulated amortization
and impairment
Balance as at September 30, 2017
Amortization
Disposals and write-offs
Impairment loss reversals (note 11)
Balance as at September 29, 2018
Amortization
Disposals and write-offs
Impairment loss reversals (note 11)
58.1
—
—
0.4
58.5
—
(1.1)
57.4
(41.3)
(2.1)
—
0.4
(43.0)
(1.9)
0.9
0.1
195.9
15.0
22.8
(2.6)
231.1
16.7
(1.5)
246.3
(161.9)
(10.1)
1.7
—
(170.3)
(13.8)
0.6
—
Total
528.8
34.3
247.4
19.3
27.4
—
—
1,040.0
1,062.8
(19.5)
247.2
34.7
(19.3)
262.6
(116.8)
(19.1)
14.1
—
(121.8)
(18.8)
18.9
—
—
(21.7)
1,067.4
1,604.2
—
—
51.4
(21.9)
1,067.4
1,633.7
(16.0)
(17.0)
—
—
(33.0)
(40.9)
—
—
(336.0)
(48.3)
15.8
0.4
(368.1)
(75.4)
20.4
0.1
Balance as at September 28, 2019
(43.9)
(183.5)
(121.7)
(73.9)
(423.0)
Net carrying value
Balance as at September 29, 2018
Balance as at September 28, 2019
15.5
13.5
60.8
62.8
125.4
140.9
1,034.4
993.5
1,236.1
1,210.7
Net additions of intangible assets excluded from the consolidated statement of cash flows amounted to $18.3 in 2019
($8.4 in 2018).
Intangible assets with indefinite useful lives were as follows:
Banners
Private labels
Loyalty programs
Total
Balance as at September 30, 2017
Acquisitions through business combinations
(note 5)
Balances as at September 29, 2018 and
September 28, 2019
39.5
82.0
121.5
23.5
196.3
60.0
1,482.0
83.5
1,678.3
133.3
1,340.0
1,473.3
- 63 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Impairment testing of loyalty programs and exclusive private labels was conducted at the level of the asset itself. The
recoverable amount was determined based on its fair value less costs of disposal, which was calculated using the
capitalized excess EBIT method. The estimated EBIT directly allocated to the programs and private labels, after deduction
of the return on contributory assets, was based on historical data reflecting past experience. For loyalty programs, the
earnings multiples used were 17.2 and 13.0 (13.6 in 2018) considering a growth rate of 2.0% (2.0% in 2018) corresponding
to the consumer price index. For these private labels, the earnings multiples used were 14.3 and 17.4 (12.8 and 15.4
in 2018) considering a growth rate of 2.0% (2.0% in 2018) corresponding to the consumer price index. The Corporation
categorized the fair value measurement in Level 3, as it is derived from unobservable market inputs.
Impairment testing of banners and other private labels were conducted at the level of the asset itself. The recoverable
amount was determined based on its fair value calculated using the royalty-free licence method. The estimated royalty
rate was based on information from external sources and historical data reflecting past experience. For the banners and
these private labels, the royalty rate used was 1.0% to 3.0% (1.0% to 3.0% in 2018) and the multiples used were between
15.4 and 17.4 (13.3 and 15.4 in 2018) considering growth rate of 2.0% (2.0% in 2018) corresponding to the consumer
price index. The Corporation categorized the fair value measurement in Level 3, as it is derived from unobservable
market inputs.
No reasonably possible change of any of these assumptions would result in a carrying amount higher than the recoverable
amount.
14. GOODWILL
Balance – beginning of year
Acquisitions through business combinations (note 5)
Disposals
Balance – end of year
2019
2018
3,302.2
6.3
(2.0)
1,973.8
1,328.9
(0.5)
3,306.5
3,302.2
For impairment testing, goodwill with a carrying amount of $1,983.2 ($1,976.9 as at September 29, 2018) was attributed
to the operating segment related to food operations. The recoverable amount was determined based on its value in use,
which was calculated using pre-tax cash flow forecasts from the management-approved budgets for the next fiscal year.
The forecasts reflected past experience. A pre-tax discount rate of 10.5% (11.6% in 2018) was used and any growth
rate was taken into consideration. No reasonably possible change of any of these assumptions would result in a carrying
amount higher than the recoverable amount.
For impairment testing, goodwill with a carrying amount of $1,323.3 ($1,325.3 as at September 28, 2019) was attributed
to the operating segment related to pharmaceutical operations. The recoverable amount was determined based on its
fair value less costs of exit, which was calculated using pre-tax cash flow forecasts from the management-approved
budgets for the next fiscal year. The forecasts reflected past experience. The earnings multiple used was 11.5 (14.0 in
2018) considering a growth rate of 2.0% (2.0% in 2018) corresponding to the consumer price index. The Corporation
categorized the fair value measurement in Level 3, as it is derived from unobservable market inputs. A decrease of 1.0
in the earnings multiple used, excluding the change in other assumptions, would not result in a carrying amount higher
than the recoverable amount.
- 64 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
15. OTHER ASSETS
Loans to certain customers, bearing interest at floating rates,
repayable in monthly instalments, maturing through 2031
Investments in joint ventures and associates acquired through business
combinations
Other assets
Current portion included in accounts receivable
2019
2018
62.8
6.9
3.3
73.0
10.6
62.4
64.5
35.7
4.3
104.5
11.7
92.8
During the first quarter of fiscal 2019, the Company disposed of its investment in Colo-D Inc., an associate presented
in other assets, for a total cash consideration of $58.0 and a gain of $35.4 before income taxes ($31.0 after income
taxes). A selling price adjustment was made during the third quarter, bringing the total cash consideration to $59.0 and
the gain before income taxes to $36.4 ($31.9 after taxes).
16. BANK LOANS
As at September 28, 2019 and September 29, 2018, the Corporation's bank loans were the credit margins of structured
entities. The consolidated structured entities have credit margins totaling $8.4 ($8.3 as at September 29, 2018), bearing
interest at prime plus 0.5%, unsecured and maturing on various dates through 2020. As at September 28, 2019, none
($0.1 as at September 29, 2018) had been drawn down under credit margins at an interest rate of 4.5% (4.2% as at
September 29, 2018).
17. OFFSETTING
Accounts payable (gross)
Vendor rebate receivables
Accounts payable (net)
2019
2018
1,389.7
(58.3)
1,331.4
1,320.9
(52.6)
1,268.3
- 65 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
18. PROVISIONS
Onerous
leases
Retail network
restructuring
expenses
Pharmacy
network closure
and restructuring
expenses
Distribution
network
modernization
project expenses
Balance as at
September 30, 2017
Acquisitions through business
combinations (note 5)
Additional provisions
Amounts used
Passage of time
Balance as at
September 29, 2018
Current provisions
Non-current provisions
Balance as at
September 29, 2018
Balance as at
September 29, 2018
Additional provisions
Amounts used
Passage of time
Balance as at
September 28, 2019
Current provisions
Non-current provisions
Balance as at
September 28, 2019
4.7
2.9
0.4
(3.3)
—
4.7
2.4
2.3
4.7
4.7
—
(2.0)
—
2.7
1.8
0.9
2.7
—
—
—
—
—
—
—
—
—
—
24.9
(9.9)
(0.2)
14.8
5.1
9.7
14.8
—
—
13.9
—
—
13.9
5.6
8.3
13.9
13.9
—
(2.3)
—
11.6
4.0
7.6
11.6
Total
4.7
2.9
25.7
(3.3)
0.3
30.3
8.0
22.3
30.3
30.3
24.9
(14.3)
0.2
—
—
11.4
—
0.3
11.7
—
11.7
11.7
11.7
—
(0.1)
0.4
12.0
41.1
—
12.0
12.0
10.9
30.2
41.1
Onerous leases correspond to leases for premises that are no longer used for the Corporation's operations. The amount
of the provision for these leases equals the discounted present value of the future lease payments less the estimated
future sublease income. The estimate may vary with the sublease assumptions. The remaining terms of these leases
are from one to 8 years.
During the second quarter of fiscal 2019, the Corporation recorded retail network restructuring expenses of $36.0 before
taxes, comprising a $24.9 provision for severance and occupancy costs and a $11.1 provision, netted against assets,
for asset and inventory write-offs resulting from the conversion, relocation or closure of a dozen stores.
During the fourth quarter of 2018, the Corporation recorded store closure and restructuring expenses of $31.4 before
taxes, comprising a $13.9 provision for severance and occupancy costs and a $17.5 provision, netted against assets,
for asset and inventory write-offs resulting from the future transfer of pharmaceutical operations from the McMahon
warehouse to the Jean Coutu Group warehouse, the reduction of administrative positions, the closure of 3 Brunet
drugstores and the divestiture of 10 drugstores.
The Corporation announced in October 2017, a projected $400.0 investment over six years in its Ontario distribution
network. The Corporation will modernize its Toronto operations between 2018 and 2023, building a new fresh distribution
centre and a new frozen distribution centre. During the first quarter of 2018, the Corporation recorded a $11.4 before
taxes provision related to termination and retirement benefits in connection with the modernization of the Ontario
distribution network.
- 66 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
19. DEBT
Series E Notes, bearing interest at a floating rate equal to the 3-month bankers'
acceptance rate plus 0.57%, 2.65% in 2019 (2.16% in 2018), maturing on
February 27, 2020 and redeemable at the issuer's option at fair value at any
time prior to maturity
Series C Notes, bearing interest at a fixed nominal rate of 3.20%, maturing on
December 1, 2021 and redeemable at the issuer's option at fair value at any
time prior to maturity
Series F Notes, bearing interest at a fixed nominal rate of 2.68%, maturing on
December 5, 2022 and redeemable at the issuer's option at fair value at any
time prior to maturity
Series G Notes bearing interest at a fixed nominal rate of 3.39%, maturing on
December 6, 2027 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
Series D Notes, bearing interest at a fixed nominal rate of 5.03%, maturing on
December 1, 2044 and redeemable at the issuer's option at fair value at any
time prior to maturity
Series H Notes, bearing interest at a fixed nominal rate of 4.27%, maturing on
December 4, 2047 and redeemable at the issuer's option at fair value at any
time prior to maturity
Loans, maturing on various dates through 2027, bearing interest at an average
rate of 2.50% (2.64% in 2018)
Obligations under finance leases, bearing interest at an effective rate of 7.67%
(7.71% in 2018)
Deferred financing costs
Current portion
2019
2018
400.0
400.0
300.0
300.0
300.0
300.0
450.0
450.0
400.0
400.0
300.0
300.0
450.0
51.0
20.9
(14.3)
2,657.6
428.6
2,229.0
450.0
35.2
25.7
(17.2)
2,643.7
13.3
2,630.4
The Corporation reclassified the Series E Notes of $400.0 to current portion of the debt as it matures in fiscal 2020. The
Corporation intends to refinance the Series E Notes.
The Corporation has access to an unsecured revolving credit facility with a maximum of $600.0 bearing interest at rates
that fluctuate with changes in bankers' acceptance rates. As at September 28, 2019 and September 29, 2018, the
authorized revolving credit facility was unused. Given that the Corporation frequently increases and decreases this credit
facility through bankers' acceptances with a minimum of 30 days and to simplify its presentation, the Corporation found
that it is preferable for the understanding of its financing activities to present the consolidated statement of cash flows
solely with net annual changes. On October 10, 2019, the maturity of the revolving credit facility was extended to
November 3, 2024.
The amortization of deferred financing fees and the debt related to the acquisition of intangible assets, excluded from
the consolidated statements of cash flows, totalled $21.2 in 2019 ($15.6 in 2018).
- 67 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Repayments of debt in the upcoming fiscal years will be as follows:
2020
2021
2022
2023
2024
2024 and thereafter
Loans
25.1
2.6
1.7
1.1
0.9
19.6
51.0
Notes
400.0
—
300.0
300.0
—
1,600.0
2,600.0
Obligations under
finance leases
4.9
3.5
2.3
2.0
2.0
14.4
29.1
Total
430.0
6.1
304.0
303.1
2.9
1,634.0
2,680.1
The minimum payments in respect of the obligations under finance leases included interest amounting to $8.2 on these
obligations in 2019 ($9.1 in 2018).
20. OTHER LIABILITIES
Lease liabilities
Other liabilities
2019
10.4
2.4
12.8
2018
9.6
2.1
11.7
- 68 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
21. CAPITAL STOCK
The authorized capital stock of the Corporation was summarized as follows:
• unlimited number of Common Shares, bearing one voting right per share, participating, without par value;
• unlimited number of Preferred Shares, non-voting, without par value, issuable in series.
Common Shares issued
The Common Shares issued and the changes during the year were summarized as follows:
Balance as at September 30, 2017
Shares issued for cash
Stock options exercised
Balance as at September 29, 2018
Shares redeemed for cash, excluding premium of $126.1
Stock options exercised
Balance as at September 28, 2019
Treasury shares
The treasury shares changes during the year were summarized as follows:
Balance as at September 30, 2017
Acquisition
Release
Balance as at September 29, 2018
Acquisition
Release
Balance as at September 28, 2019
Number
(Thousands)
227,719
28,031
503
256,253
(2,925)
1,112
565.8
1,147.9
10.4
1,724.1
(19.8)
28.0
254,440
1,732.3
Number
(Thousands)
579
250
(226)
603
115
(141)
577
(21.9)
(10.2)
7.2
(24.9)
(5.6)
5.9
(24.6)
Treasury shares are held in trust for the PSU plan. They will be released into circulation when the PSUs settle. The trust,
considered a structured entity, is consolidated in the Corporation's financial statements.
Stock option plan
The Corporation has a stock option plan for certain Corporation employees providing for the grant of options to purchase
up to 30,000,000 Common Shares. As at September 28, 2019, a balance of 4,189,336 shares could be issued following
the exercise of stock options (5,300,796 as at September 29, 2018). The subscription price of each Common Share
under an option granted pursuant to the plan is equal to the market price of the shares on the day prior to the 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, in general 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.
- 69 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
The outstanding options and the changes during the year were summarized as follows:
Balance as at September 30, 2017
Granted
Exercised
Balance as at September 29, 2018
Granted
Exercised
Cancelled
Balance as at September 28, 2019
Weighted
average
exercise
price
Number
(Thousands)
(Dollars)
3,180
390
(503)
3,067
416
(1,112)
(90)
2,281
26.94
41.16
17.49
30.30
47.56
21.55
40.71
37.30
The information regarding the stock options outstanding and exercisable as at September 28, 2019 was summarized
below:
Range of exercise prices
(Dollars)
20.30 to 24.69
35.42 to 48.68
Outstanding options
Exercisable options
Weighted
average
remaining
period
(Months)
Weighted
average
exercise
price
(Dollars)
17.4
52.8
45.8
22.00
41.03
37.30
Number
(Thousands)
447
1,834
2,281
Weighted
average
exercise
price
(Dollars)
21.98
37.74
30.86
Number
(Thousands)
323
417
740
The weighted average fair value of $6.57 per option ($5.73 in 2018) for stock options granted during fiscal 2019 was
determined at the time of grant using the Black-Scholes model and the following weighted average assumptions: risk-
free interest rate of 1.8% (2.2% in 2018), expected life of 5.5 years (5.4 years in 2018), expected volatility of 16.1%
(15.7% in 2018) and expected dividend yield of 1.7% (1.8% in 2018). The expected volatility is based on the historic
share price volatility over a period similar to the life of the options.
Compensation expense for these options amounted to $2.0 for fiscal 2019 ($2.0 in 2018).
- 70 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Performance share unit plan
The Corporation has a PSU plan. Under this program, senior executives and other key employees (participants)
periodically receive a given number of PSUs. The PSUs entitle the participant to Common Shares of the Corporation,
or at the latter's discretion, the cash equivalent, if the Corporation meets certain financial performance indicators. 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 30, 2017
Granted
Settled
Cancelled
Balance as at September 29, 2018
Granted
Settled
Cancelled
Balance as at September 28, 2019
Number
(Thousands)
547
230
(193)
(5)
579
226
(141)
(59)
605
The weighted average fair value of $47.57 per PSU ($41.16 in 2018) for PSUs granted during fiscal 2019 was the stock
market valuation of a Common Share of the Corporation at grant date.
The compensation expense comprising all of these PSUs amounted to $6.6 for fiscal 2019 ($7.1 in 2018).
Deferred Share Unit Plan
The Corporation has a DSU plan designed to encourage stock ownership by directors who are not Corporation officers.
Under this program, directors who meet the stock ownership guidelines may choose to receive all or part of their
compensation in DSUs. DSUs vest when granted. On leaving, a director receives a lump-sum cash payout from the
Corporation.
The DSU expense totalled $6.2 for fiscal 2019 ($0.7 in 2018).
As at September 28, 2019, the DSU liability amounted to $17.3 ($13.4 as at September 29, 2018).
22. DIVIDENDS
In fiscal 2019, the Corporation paid $198.9 in dividends to holders of Common Shares ($164.8 in 2018), or $0.7800 per
share ($0.7025 in 2018). On September 30, 2019, the Corporation's Board of Directors declared a quarterly dividend of
$0.2000 per Common Share payable on November 12, 2019.
- 71 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
23. EMPLOYEE BENEFITS
The Corporation maintains several defined benefit and defined contribution plans for eligible employees, which provide
most participants with pension, ancillary retirement benefits, and other long-term employee benefits which in certain
cases are based on the number of years of service or final average salary. The defined benefit plans are funded by the
Corporation's contributions, with some plans also funded by participants' contributions. The Corporation also provides
eligible employees and retirees with health care, life insurance and other long-term benefits. Ancillary retirement benefits
plans and other long-term employee benefits are not funded and are presented in other plans. Pension committees
made up of employer and employee representatives are responsible for all administrative decisions concerning certain
plans.
Defined benefit pension plans and ancillary retirement benefit plans expose the Corporation to actuarial risks such as
interest rate risk, longevity risk, investment risk and inflation risk. Consequently, the Corporation’s investment policy
provides for a diversified portfolio whose bond component matches the expected timing and payments of benefits.
The changes in present value of the defined benefit obligation were as follows:
2019
2018
Pension
plans
Other
plans
Pension
plans
Other
plans
Balance – beginning of year
1,262.7
35.0
1,170.9
Acquisitions through business combinations (note 5)
Participant contributions
Benefits paid
Items in net earnings
Current service cost
Interest cost
Past service cost
Actuarial losses (gains)
Items in comprehensive income
Actuarial gains from demographic assumptions
Actuarial losses (gains) from financial assumptions
Adjustments due to experience
Balance – end of year
—
7.8
—
—
(49.2)
(3.7)
43.8
50.3
—
—
94.1
(0.1)
199.4
(2.7)
196.6
1,512.0
2.5
1.4
0.2
(1.3)
2.8
(1.3)
2.1
—
0.8
34.9
47.5
7.1
(47.6)
40.2
47.3
1.7
—
89.2
(1.2)
(2.1)
(1.1)
(4.4)
1,262.7
34.1
—
—
(3.3)
2.0
1.3
0.2
0.9
4.4
(0.5)
(0.1)
0.4
(0.2)
35.0
The present value of the defined benefit obligation may be reflected as follows:
(Percentage)
Active plan participants
Deferred plan participants
Retirees
2019
2018
Pension
plans
Other
plans
Pension
plans
Other
plans
59
5
36
71
—
29
61
4
35
71
—
29
- 72 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
The changes in the fair value of plan assets were as follows:
Fair value – beginning of year
Acquisitions through business combinations (note 5)
Employer contributions
Participant contributions
Benefits paid
Items in net earnings
Interest income
Administration costs
Items in comprehensive income
Return on plan assets, excluding the amounts included in
interest income
Fair value – end of year
2019
2018
Pension
plans
Other
plans
1,290.6
—
78.1
7.8
—
—
3.7
—
Pension
plans
1,167.8
47.2
39.2
7.1
Other
plans
—
—
3.3
—
(49.2)
(3.7)
(47.6)
(3.3)
50.3
(1.4)
48.9
99.4
1,475.6
—
—
—
—
—
46.0
(1.7)
44.3
32.6
1,290.6
—
—
—
—
—
The changes in the asset ceiling and the minimum funding requirement for pension plans were as follows:
Balance - beginning of year
Interests
Change in defined benefit assets
Change in defined benefit liabilities
Balance - end of year
2019
2018
Asset
ceiling
Minimum
funding
requirement
Asset
ceiling
Minimum
funding
requirement
(18.9)
(0.7)
4.3
—
(15.3)
(0.2)
(16.2)
—
—
(0.6)
(0.8)
(0.6)
(2.1)
—
(18.9)
—
—
—
(0.2)
(0.2)
The value of the economic benefit that determined the asset ceiling represents the present value of future contribution
holidays, and the minimum funding requirement represents the present value of required contributions under the law,
which do not result, once made, in an economic benefit for the Corporation.
- 73 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
The changes in the defined benefit plans' funding status were as follows:
Balance of defined benefit obligation – end of year
Fair value of plan assets – end of year
Funding position
Asset ceiling effect
Minimum funding requirement
Defined benefit assets
Defined benefit liabilities
2019
2018
Pension
plans
Other
plans
Pension
plans
(1,512.0)
1,475.6
(36.4)
(15.3)
(0.8)
(52.5)
25.6
(78.1)
(52.5)
(34.9)
(1,262.7)
—
(34.9)
—
—
(34.9)
—
(34.9)
(34.9)
1,290.6
27.9
(18.9)
(0.2)
8.8
55.1
(46.3)
8.8
Other
plans
(35.0)
—
(35.0)
—
—
(35.0)
—
(35.0)
(35.0)
The defined contribution and defined benefit plans expense recorded in net earnings was as follows:
Defined contribution plans, including multi-employer plans
Defined benefit plans
Current service cost
Past service cost
Actuarial losses (gains)
Administration costs
Employee benefits expense
Interest on obligations, asset ceiling effect and minimum
funding requirement net of plans assets, presented in
financial costs
Net total expense
2019
Pension
plans
39.2
43.8
—
—
1.4
45.2
84.4
0.7
85.1
Other
plans
—
2.5
0.2
(1.3)
—
1.4
1.4
1.4
2.8
The remeasurements recognized as other comprehensive income were as follows:
2019
2018
Pension
plans
Other
plans
Pension
plans
Actuarial losses (gains) on obligations incurred
Return on plan assets
Change in the effect of the asset ceiling
Change in the minimum funding requirement
196.6
(99.4)
(4.3)
0.6
93.5
0.8
—
—
—
0.8
(34.7)
(0.2)
Total cash payments for employee benefits, consisting of cash contributed by the Corporation to its funded pension plans
and cash payments directly to beneficiaries for its unfunded other benefit plans, amounted to $81.8 in 2019 ($42.5 in
2018). The Corporation plans to contribute $54.4 to the defined benefit plans during the next fiscal year and $28.5 to
multi-employer plans.
- 74 -
2018
Pension
plans
Other
plans
36.3
40.2
1.7
—
1.7
43.6
79.9
1.9
81.8
(4.4)
(32.6)
2.1
0.2
0.6
2.0
0.2
0.9
—
3.1
3.7
1.3
5.0
Other
plans
(0.2)
—
—
—
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Weighted average duration of defined benefit obligations was 16 years as at September 28, 2019 (15 years as at
September 29, 2018).
The most recent actuarial valuations for funding purposes in respect of the Corporation's pension plans were performed
on various dates between December 2017 and September 2019. The next valuations will be performed in
December 2019.
Plan assets, evaluated at level 1 as it is based on quoted market prices in an active market for the shares and at level
2 for bonds and others as it is derived from observable market inputs, held in trust and their weighted average allocation
as at the measurement dates were as follows:
Asset categories (Percentage)
Shares in Canadian corporations
Shares in foreign corporations
Government and corporation bonds
Others
2019
2018
18
22
51
9
21
24
48
7
Pension plan assets included shares issued by the Corporation with a fair value of $6.1 as at September 28, 2019
($4.3 as at September 29, 2018).
The principal actuarial assumptions used in determining the defined benefit obligation and service costs were the
following:
(Percentage)
Pension plans
Other plans
Pension plans
Other plans
2019
2018
Discount rate on defined benefit obligation
Discount rate on service costs
Rate of compensation increase
3.01
3.96
3.00
3.01
3.96
3.00
3.90
4.00
3.00
3.90
4.00
3.00
Mortality table
CPM2014Priv CPM2014Priv
CPM2014Priv CPM2014Priv
To determine the most suitable discount rate, management considers the interest rates for high-quality bonds issued by
entities operating in Canada with cash flows that match the timing and amount of expected benefit payments. The
mortality rate is based on available mortality tables. Projected inflation rates are taken into account in establishing future
wage and pension increases.
A 1% change in the discount rate, taking into consideration any modifications to other assumptions, would have the
following effects:
Pension plans
Other plans
1% increase
1% decrease
1% increase
1% decrease
Effect on defined benefit obligation
(222.9)
268.9
(3.0)
3.6
The assumed annual health care cost trend rate per participant was set at 5.5% (5.6% in 2018). Under the assumption
used, this rate should gradually decline to 4.0% in 2040 and remain at that level thereafter. A 1% change in this rate
would have the following effects:
Effect on defined benefit obligation
1% increase
1% decrease
(1.7)
1.5
- 75 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
24. COMMITMENTS
Operating leases
The Corporation has operating lease commitments, with varying terms through 2041 and one to 14 five-year renewal
options, to lease premises and equipment used for business purposes. The Corporation does not have an option to
purchase the leased assets when the leases expire, but it has the right of first refusal in certain cases. Future minimum
lease payments under these operating leases will be as follows:
Under 1 year
Between 1 and 5 years
Over 5 years
2019
194.6
629.1
573.2
2018
188.4
589.3
522.0
1,396.9
1,299.7
In addition, the Corporation has committed to leases for premises, with varying terms through 2040 and one to 17 five-
year lease renewal options, which it sublets to clients generally under the same terms and conditions. Future minimum
lease payments under these operating leases will be as follows:
Under 1 year
Between 1 and 5 years
Over 5 years
Finance leases
2019
99.5
318.2
261.5
679.2
2018
100.5
326.5
308.7
735.7
The Corporation has finance lease commitments, with varying terms through 2036 and three to seven five-year renewal
options, to lease premises used for business purposes and IT equipment. The Corporation does not have an option to
purchase the leased assets when the leases expire. Future minimum lease payments under these finance leases and
the present value of net minimum lease payments will be as follows:
Under 1 year
Between 1 and 5 years
Over 5 years
Minimum lease payments
Future financial costs
Present value of minimum lease payments
Service contracts
Minimum lease payments
Present value of
minimum lease payments
2019
2018
2019
2018
4.9
9.8
14.4
29.1
(8.2)
20.9
6.2
12.5
16.1
34.8
(9.1)
25.7
3.6
6.3
11.0
20.9
—
20.9
4.6
8.8
12.3
25.7
—
25.7
The Corporation has service contract commitments essentially for transportation and IT, with varying terms through 2030
and no renewal option. Future minimum payments under these service contracts will be as follows:
Under 1 year
Between 1 and 5 years
Over 5 years
- 76 -
2019
141.9
330.3
10.3
482.5
2018
121.4
161.4
27.4
310.2
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
25. CONTINGENCIES
Guarantees
The Corporation has guaranteed loans granted to certain customers by financial institutions, with varying terms through
2030. The balance of these loans amounted to $24.1 as at September 28, 2019 ($22.1 as at September 29, 2018). No
liability has been recorded in respect of these guarantees for the years ended September 28, 2019 and
September 29, 2018.
Buyback agreements
Under inventory repurchase agreements, the Corporation has undertaken with respect to financial institutions to
repurchase at cost the inventories of certain customers, when they are in default, up to the amount drawn on lines of
credit granted to these same customers by the financial institutions. As at September 28, 2019, inventory financing
amounted to $192.4 ($201.9 as at September 29, 2018). However, under these agreements, the Corporation has not
undertaken to make up for any deficit created if the value of inventories falls below the amount of the advances.
Under buyback agreements, the Corporation is committed to financial institutions to purchase equipment held by
customers and financed by finance leases not exceeding 5 years and loans not exceeding 15 years. For finance leases,
the buyback value is linked to the net balance of the lease at the date of the buyback. For equipment financed by bank
loans, the minimum buyback value is either set by contract with the financial institutions, or linked to the loan balance
at the buyback date. As at September 28, 2019, financing related to the equipment amounted to $44.6 ($50.7 as at
September 29, 2018).
No liability has been recorded in respect of these guarantees for the years ended September 28, 2019 and
September 29, 2018 and historically, the Corporation has not made any indemnification payments under such
agreements.
Claims
In the normal course of business, various proceedings and claims are instituted against the Corporation. The Corporation
contests the validity of these claims and proceedings and at this stage, the Corporation does not believe that these
matters will have a material effect on the Corporation's financial position or on consolidated earnings. However, since
any litigation involves uncertainty, it is not possible to predict the outcome of these litigations or the amount of potential
losses. No accruals or provisions for contingent losses have been recognized in the Corporation’s annual consolidated
financial statements.
In May 2019, two proposed class actions relating to opioids were filed in Ontario and in Québec against a large group
of defendants including a subsidiary of the Corporation, Pro Doc Ltée. The allegations in these proposed class actions
are similar to the allegations contained in the proposed class action filed by the province of British Columbia in August
2018 against numerous manufacturers and distributors of opioids, including subsidiaries of the Corporation, Pro Doc
Ltée and The Jean Coutu Group (PJC) Inc. These proposed class actions contain allegations of breach of the Competition
Act, of fraudulent misrepresentation and deceit, and of negligence. The province of British Columbia seeks damages
(unquantified) on behalf of all federal, provincial and territorial governments and agencies for expenses allegedly incurred
in paying for opioid prescriptions and other healthcare costs that would be related to opioid addiction and abuse while
the Ontario and Québec proposed claims seek recovery of damages on behalf of opioid users directly. The Corporation
believes these proceedings are without merit and that, in certain cases, there is no jurisdiction.
In October 2017, the Canadian Competition Bureau began an investigation into the supply and sale of commercial bread
which involves certain Canadian suppliers and retailers, including the Corporation. The Corporation continues to fully
cooperate with the Competition Bureau. Class actions lawsuits have also been filed against the Corporation, suppliers
and other retailers. Based on the information available to date, the Corporation does not believe that it or any of its
employees have violated the Competition Act.
During the 2016 fiscal year, an application for authorization to institute a class action was served on the Jean Coutu
Group by Sopropharm, an association incorporated under the Professional Syndicates Act of which certain franchised
drugstore owners of the Jean Coutu Group are members. The application seeks to have the class action authorized in
the form of a declaratory action seeking amongst others (i) to set aside certain contractual provisions of the Jean Coutu
Group’s standard franchise agreements, including the clause providing for the payment of royalties on sales of medication
by franchised establishments; (ii) to restore certain benefits; and (iii) to reduce certain contractual obligations. On
November 1, 2018, the Court granted the application for authorization to institute a class action, the authorization process
- 77 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
being merely a procedural step and the judgment in no way decides the case on the merits. The Corporation intends to
contest this action on the merits.
26. RELATED PARTY TRANSACTIONS
The Corporation has significant interest in the following subsidiaries and joint venture:
Names
Subsidiaries
Metro Richelieu Inc.
Metro Ontario Inc.
Groupe Jean Coutu Inc.
McMahon Distributeur pharmaceutique Inc.
Pro Doc Ltée
RX Information Centre Ltd.
Metro Québec Immobilier Inc.
Metro Ontario Real Estate Limited
Metro Ontario Pharmacies Limited
Groupe Adonis Inc.
Groupe Phoenicia Inc.
Groupe Première Moisson Inc.
MissFresh Inc.
Joint venture
Dunnhumby Canada Limited
Medicus Group Inc.
Country of
incorporation
Percentage of
interest in the capital
Percentage of
voting rights
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
100.0
100.0
100.0
100.0
100.0
100,0
100.0
100.0
100.0
100.0
100.0
75.0
70.0
50.0
46.5
100.0
100.0
100.0
100.0
100.0
100,0
100.0
100.0
100.0
100.0
100.0
75.0
70.0
50.0
46.5
The joint venture with Dunnhumby Canada Limited ended on February 28, 2019.
In the normal course of business, the following transactions have been entered into with related parties:
Joint venture
Companies controlled by a member of
the Board of Directors
Joint venture
Companies controlled by a member of
the Board of Directors
2019
2018
Sales
Services
received
—
66.6
66.6
5.2
—
5.2
Sales
—
25.1
25.1
Services
received
9.6
—
9.6
2019
2018
Accounts
receivable
Accounts
payable
Accounts
receivable
Accounts
payable
—
4.9
4.9
—
—
—
—
5.1
5.1
(2.6)
—
(2.6)
- 78 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
Compensation for the principal officers and directors was as follows:
Compensation and current benefits
Post-employment benefits
Share-based payment
2019
2018
8.3
0.8
6.2
15.3
5.7
2.7
6.0
14.4
27. MANAGEMENT OF CAPITAL
The Corporation aims to maintain a capital level that enables it to meet several objectives, namely:
•
Striving for a percentage of non-current debt to total combined non-current debt and equity (non-current debt/total
capital ratio) of less than 50%.
• Maintaining an adequate credit rating to obtain an investment grade rating for its term notes.
•
Paying total annual dividends representing a range of 20% to 30% of the prior fiscal year's net earnings, excluding
non recurring items, with a target of 25%.
In its capital structure, the Corporation considers its stock option and PSU plans for key employees and officers. In
addition, the Corporation's stock redemption plan is one of the tools it uses to achieve its objectives.
The Corporation is not subject to any capital requirements imposed by a regulator.
The Corporation's fiscal 2019 annual results regarding its capital management objectives were as follows:
•
•
•
a non-current debt/total capital ratio of 30.6% (31.7% as at September 29, 2018);
a BBB credit rating confirmed by S&P and DBRS (same rating in 2018);
a dividend representing 34.3% of net earnings, excluding non recurring items, for the previous fiscal year (27.1%
in 2018).
The capital management objectives remain the same as for the previous fiscal year.
- 79 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
28. FINANCIAL INSTRUMENTS
FAIR VALUE
The non current financial instruments' book and fair values were as follows:
Investment at fair value
Asset subsequently measured at fair value through
comprehensive income (note 10)
Other assets
Assets measured at amortized cost
Loans to certain customers (note 15)
Non-controlling interests
Liabilities measured at fair value through profit and
loss
Debt (note 19)
Liabilities measured at amortized cost
Series E Notes
Series C Notes
Series F Notes
Series G Notes
Series B Notes
Series D Notes
Series H Notes
Loans
2019
2018
Book value
Fair value
Book value
Fair value
—
—
66.9
66.9
62.8
62.8
64.5
64.5
—
—
39.3
39.3
400.0
300.0
300.0
450.0
400.0
300.0
450.0
51.0
400.3
305.2
302.4
466.8
512.0
362.6
491.8
51.0
400.0
300.0
300.0
450.0
400.0
300.0
450.0
35.2
401.2
300.6
292.9
432.8
474.7
323.5
432.5
35.2
2,651.0
2,892.1
2,635.2
2,693.4
The fair value of loans to certain customers and loans payable is equivalent to their carrying value since their interest
rates are comparable to market rates. The Corporation categorized the fair value measurement in Level 2, as it is derived
from observable market inputs.
The investment’s fair value was measured using the closing quoted bid price of the shares of ACT which are listed on
the TSX. The Corporation categorized the fair value measurement in Level 1, as it is derived from quoted prices in active
markets.
The fair value of notes represents the obligations that the Corporation would have to meet in the event of the negotiation
of similar notes under current market conditions. The Corporation categorized the fair value measurement in Level 2,
as it is derived from observable market inputs.
The fair value of the non-controlling interest-related non-current liability is equivalent to the estimated price to be paid,
which is based mainly on the discounted value of the projected future earnings of MissFresh (MissFresh and Première
Moisson in 2018), as of the date the options will become exercisable. The Corporation categorized the fair value
measurement in Level 3, as it is derived from data that is not observable.
- 80 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
The changes of the non-controlling interest-related liability were as follows:
Balance – beginning of year
Buyout of minority interests
Change in fair value
Balance – end of year
Current portion
Non-current portion
Balance – end of year
2019
39.3
—
11.8
51.1
51.1
—
51.1
2018
260.9
(221.2)
(0.4)
39.3
—
39.3
39.3
During the second quarter of fiscal 2019, the Corporation reclassified as current the liability related to the non-controlling
interest in Première Moisson given that under the shareholders’ agreement, the Corporation will acquire the minority
interest effective in the first quarter of fiscal 2020. The fair value of the non-controlling interest-related current liability
corresponds to an estimation of price to be paid based on Première Moisson fiscal 2019 results in accordance with the
agreement between the parties.
In accordance with the shareholder agreement, the Corporation acquired the minority interests in Adonis and Phoenicia
during the first quarter of fiscal 2018 for a cash consideration of $221.2.
INTEREST RATE RISK
In the normal course of business, the Corporation is exposed primarily to interest rate fluctuations risk as a result of
loans and receivables that it grants, as well as revolving credit facility and loans payable that it contracts at variable
interest rates.
The Corporation keeps a close watch on interest rate fluctuations and, if warranted, uses derivative financial instruments
such as interest rate swap contracts. As at September 28, 2019 and September 29, 2018, there were no outstanding
interest rate swap contracts.
CREDIT RISK
Loans and receivables / Guarantees
The Corporation 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 Corporation grants them long-term loans
or guarantees loans obtained by them from financial institutions. Hence, the Corporation is subject to credit risk.
To mitigate such risk, the Corporation 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 28, 2019 and
September 29, 2018, no customer accounted for over 10% of total loans and receivables.
To cover its credit risk, the Corporation holds guarantees over its clients' assets in the form of deposits, movable hypothecs
on the Corporation stock and/or second hypothecs on their inventories, movable property, intangible assets and
receivables.
In recent years, the Corporation has not suffered any material losses related to credit risk.
As at September 28, 2019, the maximum potential liability under guarantees provided amounted to $24.1 ($22.1 as at
September 29, 2018) and no liability had been recognized as at that date.
Financial assets at fair value through net earnings
With regard to its financial assets at fair value through net earnings, consisting of foreign exchange forward contracts
and cross currency interest rate swaps, the Corporation is subject to credit risk when these contracts result in receivables
from financial institutions.
- 81 -
Notes to consolidated financial statements
September 28, 2019 and September 29, 2018
(Millions of dollars, unless otherwise indicated)
In accordance with its financial risk management policy, the Corporation entered into these agreements with major
Canadian financial institutions to reduce its credit risk.
As at September 28, 2019, the maximum exposure to credit risk for the foreign exchange forward contracts was equal
to their carrying amount. As at September 29, 2018, the Corporation was not exposed to credit risk in respect of its
foreign exchange forward contracts, as they resulted in amounts payable.
LIQUIDITY RISK
The Corporation is exposed to liquidity risk primarily as a result of its debt, non-controlling interest-related liabilities and
trade accounts payable.
The Corporation 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 revolving credit facility and its Series E, C, F,
G, B, D and H Notes mature only in 2024, 2020, 2021, 2022, 2027, 2035, 2044 and 2047, respectively. The Corporation
also has an unused authorized balance of $600.0 on its revolving credit facility.
Undiscounted cash flows (capital and interest)
Accounts
payable
Loans
Notes
Finance lease
commitments
Non-
controlling
interests
Total
Maturing under 1 year
1,331.4
Maturing in 1 to 10 years
Maturing in 11 to 20 years
Maturing over 20 years
—
—
—
1,331.4
25.9
8.9
4.3
22.2
61.3
495.5
922.4
789.2
1,872.2
4,079.3
4.9
9.8
12.4
2.0
29.1
51.1
1,908.8
—
—
—
51.1
941.1
805.9
1,896.4
5,552.2
FOREIGN EXCHANGE RISK
Given that some of its purchases are denominated in foreign currencies and that it has, depending on market conditions,
US borrowings on its revolving credit facility, the Corporation is exposed to foreign exchange risk.
In accordance with its financial risk management policy, the Corporation could use derivative financial instruments,
consisting of foreign exchange forward contracts and cross currency interest rate swaps, to hedge against the effect of
foreign exchange rate fluctuations on its future foreign-denominated purchases of goods and services and on its US
borrowings. As at September 28, 2019 and September 29, 2018, the fair value of foreign exchange forward contracts
was insignificant.
29. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements of fiscal year ended September 28, 2019 (including comparative figures) were
approved for issue by the Board of Directors on November 19, 2019.
- 82 -
DIRECTORS AND OFFICERS
Board of Directors
Maryse Bertrand(1)(3)
Westmount, Québec
Pierre Boivin (2)(3)
Montréal, Québec
François J. Coutu
Montréal, Québec
Michel Coutu
Montréal, Québec
Stephanie Coyles(1)
Toronto, Ontario
Marc DeSerres(2)
Montréal, Québec
Claude Dussault(2)(3)
Québec, Québec
Russell Goodman(1)(3)
Mont-Tremblant, Québec
Marc Guay(1)(2)
Oakville, Ontario
Christian W.E. Haub(2)
Greenwich, Connecticut
Eric R. La Flèche
Town of Mount-Royal,
Québec President and
Chief Executive Officer
Christine Magee(3)
Oakville, Ontario
Marie-José Nadeau(3)
Montréal, Québec
Réal Raymond
Montréal, Québec
Chair of the Board
Line Rivard(1)(2)
Montréal, Québec
(1) Member of the Audit
Committee
(2) Member of the Human
Resources Committee
(3) Member of the Corporate
Governance and Nominating
Committee
Management of METRO INC.
Eric R. La Flèche
President and Chief
Executive Officer
François Thibault
Executive Vice President,
Chief Financial Officer and
Treasurer
Marc Giroux
Executive Vice President
and Quebec Division Head
and eCommerce
Carmine Fortino
Executive Vice President,
Ontario Division Head and
National Supply Chain
Serge Boulanger
Senior Vice President,
National Procurement and
Corporate Brands
Martin Allaire
Vice President, Real Estate
and Engineering
Marie-Claude Bacon
Vice President, Public Affairs
and Communications
Mireille Desjarlais
Vice President, Corporate
Controller
Éric Legault
Vice President,
Technology Infrastructure
Frédéric Legault
Vice President, Information
Systems
Genevieve Bich
Vice President, Human
Resources
Gino Plevano
Vice President, Digital
Strategy and Online
Shopping, METRO
Simon Rivet
Vice President, General
Counsel and Corporate
Secretary
Alain Tadros
Vice President,
Marketing, METRO
Yves Vézina
National Vice President,
Logistics and
Distribution
SHAREHOLDER INFORMATION
The corporate information, annual and quarterly reports, the annual information form, and press releases are available on
the Internet at the following address: www.metro.ca
Les renseignements sur la Société, les rapports annuels et trimestriels, la notice annuelle et les communiqués de presse sont disponibles sur Internet à
l’adresse suivante : www.metro.ca
Head Office
11011 Maurice-Duplessis Blvd.
Montréal, Québec H1C 1V6
Tel: (514) 643-1000
Transfer agent and
registrar
AST Trust Company
(Canada)
Auditors
Ernst & Young LLP
Stock listing
Toronto Stock Exchange
Ticker Symbol: MRU
Annual meeting
The Annual General Meeting of
Shareholders will be held on
January 28, 2020 at 10:00 a.m.
at:
Centre Mont-Royal
2200 Mansfield Street
Montréal, Québec H3A 3R8
DIVIDENDS*
2020 FISCAL YEAR
Declaration Date
January 27, 2020
April 21, 2020
August 11, 2020
September 28, 2020
Record Date
February 13, 2020
May 21, 2020
September 2, 2020
October 23, 2020
Payment Date
March 10, 2020
June 12, 2020
September 23, 2020
November 10, 2020
* Subject to approval by the Board of Directors
- 83 -