Annual Report
2020
COMPANY PROFILE
METRO INC. is a food and pharmacy leader in Québec and Ontario. As a retailer, franchisor, distributor, and
manufacturer, the Corporation operates or services a network of 953 food stores under several banners including
Metro, Metro Plus, Super C, Food Basics, Adonis and Première Moisson, as well as 648 drugstores primarily under
the Jean Coutu, Brunet, Metro Pharmacy and Food Basics Pharmacy banners, providing employment directly or
indirectly to almost 90,000 people.
2020 HIGHLIGHTS
∙ Sales of $17,997.5 million, up 7.3% or up 7.7% when excluding the impact of IFRS 16
∙ Net earnings of $796.4 million, up 11.5%
∙ Adjusted net earnings(1) of $829.1 million, up 13.3%
∙ Fully diluted net earnings per share of $3.14, up 12.9%
∙ Adjusted fully diluted net earnings per share(1) of $3.27, up 15.1%
• Expenses related to COVID-19 totalling $137 million
• Synergies of $69 million ($58 million in fiscal 2019) related to the Jean Coutu Group acquisition, $75 million(3) on
an annualized basis
• Return on equity of 13.1%, exceeding 12% for the 28th consecutive year
• Dividends per share increase of 12.2%, the 26th consecutive year of dividend growth
RETAIL NETWORK
Québec
Ontario
New Brunswick Total
Supermarkets
Metro
Metro Plus
Adonis
196 Metro
10 Adonis
Discount stores
Super C
98 Food Basics
130
4
138
Neighbourhood
stores
Marché Richelieu
Marché Ami
53
301
Specialized
stores
Total food
Drugstores
Première Moisson
22 Première Moisson
1
680
273
Brunet
Brunet Plus
Brunet Clinique
Clini Plus
Metro Pharmacy
Food Basics Pharmacy
160
74
326
14
236
354
23
953
234
PJC Jean Coutu
PJC Health
PJC Health & Beauty 377
PJC Jean Coutu
PJC Health
Total drugstores
537
PJC Jean Coutu
PJC Health
PJC Health & Beauty 28 414
28 648
9
83
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).
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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***
2020
2019
2018
2017
(53 weeks)
2016
17,997.5
16,767.5
14,383.4
13,175.3
12,787.9
1,683.6
1,321.5
1,011.1
796.4
829.1
1,474.1
714.4
731.6
794.6
1,718.5
579.2
750.4
966.4
608.4
548.2
696.2
13,423.9
11,073.9
10,922.2
6,050.7
2,612.0
2,629.0
2,630.4
1,441.6
931.3
586.2
586.2
707.4
5,606.1
1,231.0
—
Non-current lease liabilities****
1,811.4
—
—
—
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 and lease liabilities
/total capital****
SHARE PRICE
(Dollars)
High
Low
Closing price (At year-end)
6,155.4
5,968.6
5,656.0
2,923.9
2,693.2
3.15
3.14
3.27
2.79
2.78
2.84
7.20
7.16
2.41
2.59
2.57
2.31
2.41
2.39
2.39
0.8750
0.7800
0.7025
0.6275
0.5367
9.4
13.1
7.9
12.3
7.0
40.1
7.3
21.7
41.8
30.6
31.7
33.0
64.61
49.03
64.02
58.94
39.04
57.91
45.44
38.32
40.18
47.41
38.00
42.91
7.3
21.9
31.4
48.19
35.61
44.09
* Operating income before depreciation and amortization and associate's earnings (OI)
** Interest paid on debt and payments and interests on lease liabilities reclassified to financing activities as well as payments and interests received
from subleases reclassified to investing activities following the adoption of IFRS 16 Leases in the first quarter of fiscal 2020
*** Including in 2019 the current debt related to the Series E Notes refinanced in 2020
**** Ratio of 29.8% in 2020 when excluding non-current lease liabilities related to the adoption of IFRS 16
***** Ratio of 8.3% in 2020 when excluding the impact of the adoption of IFRS 16
(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,
2020 was anything but a normal year because of the COVID-19 pandemic. I wish to emphasize the exemplary work
of management, employees, our retailers and pharmacist owners in the face of this unprecedented situation. They
had to adapt to the situation in order to allow stores, pharmacies, distribution centres and offices to continue
operating; through their efforts and the necessary measures they put in place, they provided customers and
employees with a safe environment.
The Board of Directors was continuously engaged during the pandemic and supported management in its efforts. In
addition to the regular meetings of the Board of Directors during Fiscal 2020, the Board held three special meetings to
mainly discuss with management the impact of the COVID-19 pandemic on the Corporation’s operations. Besides
these meetings, Board members continued to be regularly engaged and informed on the pandemic through numerous
written updates from management.
While a part of the Corporation’s financial performance was fueled by additional sales as a result of the pandemic, it
is important to emphasize that, before the pandemic and to management’s credit, the Corporation was already well
on its way to meet and even exceed the financial objectives it had set for Fiscal 2020.
I would also like to highlight that the Corporation's long-term performance, both in terms of leadership and profitability
has been recognized in 2020 through the Financial Post's award to Mr Eric La Flèche, President and Chief Executive
Officer, as Canada's Outstanding CEO of the Year.
Board of Directors
Throughout the year, the Board of Directors continued to oversee and support management in the various projects
and in the realization of the Corporation’s business and strategic plans, including the $420 million investment over
five years announced last March for the construction of a new automated distribution centre for fresh and frozen
products which will be located in the greater Montréal area and for the expansion of the Laval produce and dairy
products distribution centre.
Environmental, social and governance (ESG) factors which are part of the Corporation’s Corporate Responsibility
approach have also attracted the attention of the Board of Directors this year. In addition to a training session on the
topic, directors have had multiple discussions with the Corporation’s management during meetings of the Board and
the Corporate Governance and Nominating Committee to whom the Board of Directors has given the mandate to
oversee the Corporation’s activities and disclosure on corporate responsibility.
In 2020, the Chair of the Corporate Governance and Nominating Committee met with certain major shareholders to
discuss matters related to the Board of Directors. This initiative is part of the Board’s efforts to engage in a
constructive dialogue with shareholders of the Corporation.
After 13 years as a director of the Corporation, I will retire as Chairman of the Board of Directors and as director at
the end of the upcoming Annual General Meeting of shareholders. I am proud of what the Corporation and its Board
have accomplished over this period which saw solid financial performance, transformative projects and major
acquisitions. Over this period the Board of Directors consolidated its governance and efficiency. We can certainly
qualify the group of directors currently sitting on the Board as a first-rate team.
Mr. Pierre Boivin will be my successor as Chairman of the Corporation’s Board of Directors. Pierre is a very
experienced director who has served on the board of large Canadian corporations and has also been appointed to
the most senior management positions of prestigious companies. I have no doubt that he will have the necessary
leadership so that directors continue to function in a cohesive, efficient, and productive manner. Also, the
management of the Corporation will benefit from his guidance and support.
(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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I thank all board members, current and past, for their support and their engagement over the years. I also want to
thank all the executives I have interacted with over the time I served on the Board; the quality of their work and their
cooperation have greatly helped me in my task. Finally, I also wish to thank shareholders for their trust over all these
years.
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,
This year, I would first like to address the close to 90,000 employees of METRO and our affiliated store and pharmacy
networks, as well as our affiliated retailers and pharmacist owners. Their exceptional sense of duty since the
beginning of the pandemic to provide essential food and pharmacy services has been truly inspiring. I couldn't be
more proud to lead this great team than I have been this year.
They have taken on their responsibilities with remarkable resilience and have exemplified METRO’s redefined
purpose: Nourish the health and well-being of our communities. METRO has been contributing to the economic and
social well-being of the communities in which we operate for nearly 75 years. Our purpose is simple, clear and
ambitious, which will guide our decisions with greater clarity and will continue to drive our teams to surpass
themselves. It goes beyond financial performance alone which remains essential in order to fulfill our mission over the
long term.
Responsibility
Our priority has been and remains the health and safety of our employees and customers. From the onset of the
pandemic, we quickly deployed numerous prevention measures in stores, pharmacies, distribution centres and
offices.
In a matter of days, our entire network was equipped with plexiglass panels at checkouts and service counters as well
as floor stickers to ensure social distancing. Cleaning measures were reinforced, and their frequency increased.
Additional staff was assigned to store entrances to greet and control the number of customers and to clean the carts.
We provided protective equipment to our employees such as masks, gloves, and hand sanitizer, and extended the
employee and family assistance program to all. Finally, we communicated frequently with our employees and
customers to inform them of the measures taken throughout the crisis.
To recognize the additional work and new tasks our teams performed at the beginning of the pandemic, we offered a
temporary premium of $2 per hour to 50,000 employees at our stores and distribution centres from March to June
2020. In the same spirit, we paid amounts ranging from $100 to $200 to these employees in June. Gift cards valued
at $75, $150 and $300 were also distributed to our store and distribution centre employees in December to thank
them and their loved ones for everything they did in 2020.
Our administrative teams were equipped with laptops and were able to work from home while remaining safely
connected to our networks. I would like to thank all of our colleagues who have worked tirelessly to enable us to
continue to serve our customers and support our operations under very tight timelines.
To support the relief efforts of our long-time community partners, METRO donated more than $4 million to Food
Banks of Québec, Feed Ontario and the United Way/Centraide emergency fund. These donations helped meet the
growing need for food support and other essential services such as assistance to seniors and mental health support.
We did not limit ourselves to the impact of the public health crisis. For example, thanks in large part to the generosity
of our customers, we donated more than $800,000 to the Canadian Red Cross for Lebanon, following the terrible
tragedy that swept its capital, Beirut.
Our employees demonstrated their generosity once again this year. METRO's 22nd Centraide campaign reached
record results, raising more than $2.1 million in Québec.
Resilience
The lockdown resulting from the pandemic has profoundly changed consumer behaviour: more meals eaten at home;
less frequent visits to the store but larger baskets; stockpiling of products in anticipation of possible shortages;
acceleration of online shopping, and so on.
Our procurement and logistics teams quickly adapted to these increased volumes and, with the collaboration of our
suppliers, we were able to offer an appropriate level of service to our stores, albeit not as good as they were used to.
In addition, food shortages were avoided, demonstrating the robustness and agility of our supply chain.
(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"
- 6 -
The importance of buying local has increased in this time of economic uncertainty caused by the pandemic. The
teams of our banners in Québec and Ontario went to great lengths to support local suppliers and provide our
customers with the local products they were looking for.
Healthy eating has continued to be at the heart of our customers' concerns. The launch of a renewed version of our
Life Smart brand that includes all of our healthier food products under one name and the introduction of the first line
of Personnelle branded organic baby products, a collaboration of the food and pharmacy teams, have allowed us to
add to our existing offering in order to better meet the needs of our customers
As a result of the lockdown, our online sales volume nearly tripled, reaching a level that we expected to achieve in
two to three years. We have taken several measures to increase the capacity of this service, enabling more
customers to benefit from it, particularly the most vulnerable: customers aged 70 and over, those with reduced
mobility, people diagnosed with COVID-19 or who were under mandatory quarantine. We have implemented the
Priority service in several Metro stores in Québec and Ontario, as well as at Super C and Adonis.
In the Jean Coutu and Brunet pharmacy networks, we launched the In-store Express Order service. In addition, we
signed an agreement with Cornershop, an on-demand delivery service. Metro, Jean Coutu and Brunet's product
offering is now available on their application, allowing us to serve more customers in the Greater Montréal and
Gatineau areas, as well as in Toronto and Ottawa.
On the other hand, the pandemic has caused minor delays in the construction of our automated distribution centres in
Ontario. The opening of the first center for produce, originally scheduled for September, is now scheduled for next
January. Nevertheless, during the year, we succeeded in opening 7 new stores, including 2 conversions from Metro
to Food Basics, in addition to completing 2 relocations, and 17 major renovations and expansions.
2020 Results
Fiscal 2020 got off to a good start with solid revenue growth in the first half of 4.4% (4.7% excluding the impact of
IFRS 16) and adjusted diluted earnings per share(1) up 12.6%.
The lockdown occurred at the very end of our second quarter and grocery sales increased significantly, in part due to
restaurant closures. Sales grew faster in our Metro stores than in our discount stores, although both were strong. We
are very satisfied with our relative performance which was reflected in our increased market share both in Québec
and Ontario.
The pharmacy sector was affected in a different way by the pandemic. Pharmacy teams remained focused on their
primary mission: treating patients. The quality of service was maintained at the height of the pandemic, particularly by
developing home delivery services, offering more online services and prioritizing prescription drugs. Front-store sales
were negatively impacted at the core of the pandemic but recovered in the fourth quarter thanks to strong marketing
and promotional programs. We nevertheless achieved our $75 million annualized synergy objective related to the
acquisition of the Jean Coutu Group.
The pandemic also generated additional operating costs, mainly temporary wage premiums offered to front-line
employees, protective equipment and cleaning and sanitation costs. These additional expenses
totalled
approximately $137 million for the year.
In Fiscal 2020, thanks to the agility and efforts of our teams, our adjusted net earnings(1) were $829.1 million, up
13.3%, and our adjusted diluted net earnings per share(1) were $3.27, up 15.1%.
The share price traded between $49.03 and $64.61, ending the year at $64.02, up 10.6% over the previous year.
In January 2020, the Board approved a new dividend policy to distribute between 30% and 40% of the prior year's
adjusted net earnings, compared to the previous policy of between 20% and 30%. At the same time, the dividend was
increased by 12.5% to $0.90 per share on an annual basis.
Total shareholder return was 12.3% for Fiscal 2020. Over five years, it was 14.2% a year, and over ten years, 17.5%
a year.
Our financial position remains very solid with a balance sheet that enables our future growth and allows the
Corporation to make strategic acquisitions should they arise.
(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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2021 outlook and priorities(3)
The pandemic has accelerated certain trends already observed in the market, such as a concern for buying local and
shopping in the community. These emerging trends position us well with consumers, thanks to our store formats, our
procurement programs and our roots in the communities we serve. Online shopping is another example of an already
emerging trend that has skyrocketed with the pandemic.
Some consumer behaviours are likely to change in the long term, particularly with the expansion of teleworking. We
believe this change is beneficial for us and that a portion of the sales from restaurants should remain in our networks
for some time. The pandemic was an opportunity to demonstrate our resilience and agility in turning challenges into
opportunities, constantly adapting our product and service offering.
For Fiscal 2021, our priorities are the following:
1. Ensure the safety of employees and customers
COVID-19 will be part of our lives for many months to come. The health and safety of our customers and employees
will remain the top priority, as it has been since the beginning of the health crisis last March.
2. Developing our banners
We will continue to invest in our retail networks, merchandising and loyalty programs, our digital strategy and
technology to deliver the best customer experience in each of our banners.
3. Complete the pharmacy combination
The pandemic forced us to interrupt several activities related to the combination of METRO, the Jean Coutu Group
and McMahon, to ensure service continuity to our franchisees and our customers during this critical period. During the
fourth quarter of 2020, we resumed the deployment of laboratory solutions in Brunet pharmacies and we intend to
complete it in 2021. In addition, following the ratification of a new five-year collective agreement at the Jean Coutu
distribution centre in Varennes, we can move forward with the combination of the distribution activities of our
McMahon distribution centre with those of Varennes in the coming year.
4. Continue to modernize our supply chain
Phase 1 of the automated fresh produce distribution centre in Toronto is scheduled to be operational in January 2021.
The construction of the new automated distribution centre for frozen products in Toronto is set for an opening in
January 2022. Finally, this year we will begin construction of the new automated distribution centre for fresh and
frozen products in Terrebonne, Québec, set to open in 2023.
5. Increase our e-commerce capacity
To meet the growing demand for online grocery orders, we are accelerating investments in our omnichannel strategy
and will be opening a dedicated store for online grocery in Montréal. This store is scheduled to open in the summer of
2021. In addition, we will offer click & collect service in most Metro stores in Québec and Ontario, including
approximately 100 by the end of Fiscal 2021.
6. Developing talent
Our success rests first and foremost on our ability to recruit, retain and develop talent at all levels of the Corporation
and the retail networks. The Metro banner has launched and continues an extensive recruitment campaign that
highlights our employer brand. At METRO, we foster an inclusive culture that values, respects and invests in the
diversity and differences of our employees as well as a team that reflects our customers and the communities we
serve.
Suppliers
The partnership and collaboration that we and our suppliers have nurtured have enabled us to provide the food,
medicine and basic necessities that our customers have counted on throughout the year and particularly since the
beginning of the pandemic. We sincerely thank them for their support and commitment. We will continue to work in
partnership with them, as we have done nearly 75 years, to exceed our customers' expectations.
Some competitors have unilaterally imposed fees and rebates on their suppliers in recent months: we did not. This
has reignited the debate about the possibility of establishing a code of conduct governing relations between industry
stakeholders as is found in other countries.
(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"
- 8 -
Our relationships are based on trust, good faith, respect and fairness, which has always allowed us to develop win-
win solutions through mutually satisfactory agreements, without government intervention. We continue to support
such an open and constructive dialogue between the retailers and suppliers of the industry.
Acknowledgements
The Chair of our Board of Directors, Réal Raymond, will retire at the next Annual General Meeting after 13 years of
loyal service on the Board, the last six years as Chair. On behalf of his colleagues on the Board and the entire
METRO team, I would like to warmly thank him. With his extensive experience, Réal has contributed to the
Corporation's development, in addition to ensuring exemplary governance. We will miss his presence and sound
advice.
In addition to our employees, our affiliates and pharmacists, I would like to thank my management colleagues for their
excellent work accomplished this year under particularly demanding circumstances. I would also like to thank our
directors for their oversight and their support during this unprecedented year. Finally, thank you, dear shareholders,
for your ongoing trust.
Eric 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"
- 9 -
CORPORATE RESPONSIBILITY
Even in this unusual year, our teams remained focused on the objectives of the four pillars of our corporate
responsibility (CR) plan: customers, environment, communities and employees. Though some initiatives were slowed
so our teams could devote their time to the most pressing priorities, this exceptional situation did not lessen our
commitment to our approach, as evidenced by our many accomplishments in 2020.
At the very start of the pandemic, our business activities were deemed essential services—a challenge we
successfully met by relying on our resilience and the mobilization of our employees. Very quickly, we implemented
preventive measures to ensure the safety of the employees and customers in our establishments and made every
effort to keep our grocery and drug stores stocked.
The pandemic also demanded that we adapt our hiring methods to reach our recruitment targets and continue to
comply with health constraints. Through the new initiatives we set in motion, we were able to meet the significant
demand for personnel, including the positions in the stores and distribution centres, which were even more difficult to
fill than usual.
While METRO has always been committed to communities, our engagement in 2020 was unique owing to the glaring
needs that stemmed from the COVID-19 pandemic.
With the contributions made by our customers, we donated over $4 million at the onset of the crisis. We supported
our community partners to meet the rising need for food products and other essential services, including support for
seniors and mental health. Through our One More Bite program, we recovered and redistributed 3,950 tonnes of food
the equivalent of nearly 8 million meals.
Already very popular with customers, local purchasing generated even more interest lately. The teams in our food
banners continued to work in close collaboration with local suppliers, contributing to local economies and providing
our customers with the local products they seek.
As for the Packaging and Printed Materials Management Policy we introduced in spring 2019, it is already yielding
results. We observed a decrease of just over 10% in the total weight of paper used to print flyers for our food and
pharmacy banners as compared to 2018 and created a training module to help our private brand suppliers comply
with our ecoresponsible packaging requirements.
Finally, we recorded a reduction in the intensity of our greenhouse gas emissions by nearly 7% compared to the
previous year through our efficiency measures in the transport, waste management and building energy sectors and
the use of new refrigerants.
Fiscal 2020 also marks the 10th anniversary of our CR approach. In the past decade, we implemented strong
initiatives, released annual reports and brought our understanding of environmental, social and governance (ESG)
issues to a higher level. The knowledge and expertise we have acquired constitute solid foundations for the future.
Our intention was to bring our 2016–2020 CR plan to a close this year. However, with the pandemic, we have chosen
to add an extra year and we will release our next five-year plan in January 2022. We will make the most of 2021 to
continue to develop our approach. We want our actions to bring added value to METRO and all of society.
To learn more, visit the Corporate Responsibility section of our website at metro.ca. METRO’s CR report for fiscal
year 2020 will be available January 26, 2021.
(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"
- 10 -
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 26, 2020
TABLE OF CONTENTS
Overview..........................................................................................................................................................
Purpose, 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................................................................................................................................
Fourth quarter...................................................................................................................................................
Derivative financial instruments........................................................................................................................
New accounting standards...............................................................................................................................
Forward-looking information.............................................................................................................................
Non-IFRS measurements.................................................................................................................................
Controls and procedures..................................................................................................................................
Significant judgments and estimates................................................................................................................
Risk management............................................................................................................................................
Management's responsibility for financial reporting.........................................................................................
Independent auditors' report............................................................................................................................
Annual consolidated financial statements........................................................................................................
.
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The following Management's Discussion and Analysis sets out the financial position and consolidated results of METRO INC. for the
fiscal year ended September 26, 2020, and should be read in conjunction with the annual consolidated financial statements and the
accompanying notes as at September 26, 2020. This report is based upon information as at November 17, 2020 unless otherwise
indicated. Additional information, including the Annual Information Form and Certification Letters for fiscal 2020, is available on the
SEDAR website at www.sedar.com.
- 12 -
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 326 supermarkets under the Metro and Metro Plus banners. The 236 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 14 stores, is specialized in fresh products as well as
Mediterranean and Middle-Eastern products. The Corporation also operates Première Moisson, a banner 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 23 stores. 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 acts as franchisor and distributor for 414 PJC Jean Coutu, PJC Health and PJC Health &
Beauty drugstores as well as 160 Brunet Plus, Brunet, Brunet Clinique, and Clini Plus drugstores, held by pharmacist
owners. The Corporation operates 74 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.
PURPOSE, MISSION AND STRATEGY
As a leader in food and pharmacy in Eastern Canada, we provide essential services to the communities we serve and
who rely on us for advice and support. That is why we have adopted a new purpose, Nourish the health and well-
being of our communities, thereby redefining and updating our vision which was to offer the best customer experience
in each of our banners. Our purpose better reflects our aspirations while fitting perfectly in our corporate responsibility
framework. It is a purpose that is simple, clear and ambitious and which will continue to drive our teams to surpass
themselves. This purpose goes beyond financial performance which remains essential to fulfill our mission over the
long term.
Our mission, as it has been for years, 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 financial
discipline.
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 financial discipline 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"
- 13 -
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;
◦ 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 2020 totalled $17,997.5 million versus $16,767.5 million for fiscal 2019, an increase of 7.3%.
Excluding the impact of the adoption of IFRS 16, sales were up 7.7%. Net earnings for fiscal 2020 were $796.4
million, an increase of 11.5% from $714.4 million for fiscal 2019. Fully diluted net earnings per share were $3.14
compared with $2.78 last year, up 12.9%. Adjusted net earnings(1) for fiscal 2020 totalled $829.1 million compared
with $731.6 million for fiscal 2019, and adjusted fully diluted net earnings per share(1) amounted to $3.27 versus
$2.84, up 13.3% and 15.1%, respectively.
We realized several projects over the fiscal year, including the following major ones:
•
•
•
•
The crisis related to COVID-19 is unprecedented and has solicited all our resources to ensure the safety of our
employees and customers, the resilience of our supply chain and our ability to maintain in-store operations. All of
our employees, our retailers, and pharmacist owners, as well as our supplier partners, pulled together to provide
our customers the essential services of food and pharmacy while never compromising on safety.
Since the beginning of the pandemic, METRO has donated over $4 million to support communities. Answering
the call of these long-time community partners, the money was donated primarily to Feed Ontario, Food Banks
of Québec and to the emergency fund of United Way/Centraide.
In March 2020, METRO announced a $420 million investment over five years for the construction of a new,
automated distribution centre for fresh and frozen products in Terrebonne, just north of Montréal, and the
expansion of its produce and dairy products distribution centre in Laval. These investments will enable METRO
to better meet the expectations of its current and future customers and to continue its growth. The new
Terrebonne distribution centre will open in 2023, while the expansion of the Laval distribution centre will be
completed in 2024(3).
In October 2017, we announced a $400 million investment over six years in our Ontario distribution network.
Phase 1 of the project launched in 2019 was delayed slightly due to the pandemic but is now nearing
completion. The start-up of our new fresh distribution centre is planned for January 2021(3). Equipped with state-
of-the-art technology, this facility 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 have accelerated our plans to increase capacity of our online grocery service. During the year, we expanded
our service in Québec by adding hub stores in Québec City and Sherbrooke and will also be adding a third hub
(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 -
store in Ontario. We recently announced the opening of a dedicated store for online grocery to serve Montréal
next summer(3). This opening represents the next phase of our omnichannel strategy, efficiently adding capacity
in a large urban area by leveraging our in-store pick model. We are also expanding our click-and-collect service
from the 40 planned to more than 100 by the end of fiscal 2021(3).
• We continued to combine pharmacy activities and best practices between METRO and the Jean Coutu Group.
By the end of fiscal 2020, we had achieved our objective of generating $75 million of annual cost synergies
within three years of the acquisition.
• We continued to invest in our retail network. In Québec, we opened a Metro Plus and a Super C, we also
relocated a Metro Plus and a Super C, and we carried out major renovations and expansions at 8 other stores.
In Ontario, we opened a Metro, a Food Basics and an Adonis, converted 2 Metro stores into Food Basics and
carried out major renovations and expansions at 9 other stores.
• We acquired the minority interest in Groupe Première Moisson inc. during the first quarter.
• We pursued the implementation of our corporate responsibility plan while also adapting our programs in the
pandemic. We adopted a series of measures to ensure the safety of our customers and employees and revised
our hiring practices to attain our recruitment targets within the health constraints. Through our One More Bite
food donation program, the equivalent of nearly 8 million meals was distributed. During the fiscal year, we
continued to roll out our local purchasing, sustainable procurement and food waste reduction initiatives and
launched our actions to optimize our packaging and printed materials and decreased the intensity of our
greenhouse gas emissions. Fiscal 2020 also marked the 10th anniversary of our corporate responsibility
approach. The knowledge and expertise gained over the past decade constitute strong foundations for the
future.
SELECTED ANNUAL INFORMATION
(Millions of dollars, unless otherwise indicated)
%
%
Sales
17,997.5 16,767.5
7.3 14,383.4
16.6
Net earnings attributable to equity holders of the parent
795.2
711.6
11.7
1,716.5
(58.5)
Net earnings attributable to non-controlling interests
1.2
2.8
(57.1)
2.0
40.0
2020
2019
Change
2018
Change
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
796.4
714.4
11.5
1,718.5
3.15
3.14
2.79
2.78
829.1
731.6
3.27
13.1
2.84
12.3
12.9
12.9
13.3
15.1
—
7.20
7.16
579.2
2.41
40.1
(58.4)
(61.3)
(61.2)
26.3
17.8
—
0.8750
0.7800
12.2
0.7025
11.0
13,423.9 11,073.9
21.2 10,922.2
1.4
0.5
Current and non-current portions of debt
2,632.6
2,657.6
(0.9)
2,643.7
Sales for fiscal 2020 totalled $17,997.5 million versus $16,767.5 million for fiscal 2019, an increase of 7.3%.
Excluding the impact of IFRS 16 Leases adopted in the first quarter of fiscal 2020, sales were up 7.7%. Sales for
fiscal 2019 totalled $16,767.5 million versus $14,383.4 million for fiscal 2018, an increase of 16.6%. Excluding sales
generated by the Jean Coutu Group of $3,121.8 million in fiscal 2019 and $1,157.7 million in fiscal 2018, sales were
up 3.2%.
Net earnings for fiscal 2020, 2019 and 2018 totalled $796.4 million, $714.4 million and $1,718.5 million, respectively,
while fully diluted net earnings per share amounted to $3.14, $2.78 and $7.16. Taking into account the items relating
to fiscal 2020 and fiscal 2019 shown in the “Net earnings adjustments” table in the “Operating results” section, as well
as for fiscal 2018, principally the gain on disposal of the majority of our investment in Alimentation Couche-Tard
(ACT), the fair value revaluation gain on our residual investment in ACT, the share of an associate’s earnings (ACT),
(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 -
the pharmacy network closure and restructuring expenses and the expenses related to the Jean Coutu Group
acquisition, adjusted net earnings(1) for fiscal 2020 stood at $829.1 million compared with $731.6 million for
fiscal 2019 and $579.2 million for fiscal 2018, while adjusted fully diluted net earnings per share(1) was $3.27 for 2020
compared with $2.84 for 2019 and $2.41 for 2018, up 15.1% and 17.8% respectively.
Total assets reached $13,423.9 million in 2020 compared with $11,073.9 million in 2019, an increase of 21.2% mainly
attributable to the recognition in 2020 of right-of-use assets totalling $1,150.5 million and current and non-current
accounts receivable on subleases totalling $684.3 million following the adoption of IFRS 16.
Return on equity in 2020 was 13.1% compared with 12.3% in 2019 due to the strong increase in net earnings in the
current year and to the share buybacks carried out during fiscal 2020. 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.
OUTLOOK(3)
The ongoing pandemic continues to impact our business and we expect that in the short-term, food revenues will
continue to grow at higher-than-normal rates versus last year as a portion of restaurant and food service sales
continue to transfer to the grocery channel.
The pandemic has accelerated certain trends already observed in the market, such as a concern for buying local and
shopping in the community. These emerging trends position us well with consumers, thanks to our store formats, our
procurement programs and our roots in the communities we serve. Online shopping is another example of an already
emerging trend that has skyrocketed with the pandemic.
Some consumer behaviours are likely to change in the long term, particularly with the expansion of teleworking. We
believe this change is beneficial for us and that a portion of the sales from restaurants should remain in our networks
for some time. The pandemic was an opportunity to demonstrate our resilience and agility in turning challenges into
opportunities, constantly adapting our product and service offering.
(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 -
OPERATING RESULTS
Effective the first quarter of 2020, the Corporation adopted IFRS 16 Leases, which replaces IAS 17 Leases. The
Corporation adopted the standard using the modified retrospective approach. The operating results of the previous
fiscal year have not been restated.
SALES
Sales for fiscal 2020 totalled $17,997.5 million versus $16,767.5 million for fiscal 2019, an increase of 7.3%.
Excluding the impact of the adoption of IFRS 16, sales were up 7.7%. Food same-store sales were up 9.7% (3.6% in
2019). Online food sales have nearly tripled versus last year. Pharmacy same-store sales were up 4.3% (2.4% in
2019), with a 4.8% increase in prescription drugs and a 3.1% increase in front-store sales.
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE'S EARNINGS
This earnings measurement excludes financial costs, taxes, depreciation and amortization and the gain on disposal of
an investment in an associate, as well as the gain on revaluation and disposal of an investment at fair value.
Operating income before depreciation and amortization and associate's earnings for fiscal 2020 totalled $1,683.6
million or 9.4% of sales compared with $1,321.5 million or 7.9% of sales for fiscal 2019.
The adoption of IFRS 16 resulted in a $54.2 million decrease in sales related to sublease income for fiscal 2020, with
an equivalent reduction in gross margin. The adoption of IFRS 16 also resulted in a $244.6 million decrease in
operating expenses for fiscal 2020, as lease payments are now recorded as a reduction of lease liabilities. Together,
these two elements had a favorable impact of $190.4 million on operating income before depreciation and
amortization and associate’s earnings for fiscal 2020.
Impact of the adoption of IFRS 16
(Millions of dollars)
Sales
Operating income before depreciation and
amortization and associate's earnings
2020
IFRS 16
2020
excluding
IFRS 16
%
of sales
2019
%
of sales
17,997.5
(54.2) 18,051.7
16,767.5
1,683.6
190.4 1,493.2
8.3 1,321.5
7.9
During fiscal 2020, we recognized a loss of $7.5 million on disposal of our subsidiary MissFresh, while for 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. Excluding those items, adjusted operating income before depreciation and amortization
and associate's earnings(2) for fiscal 2020 totalled $1,691.1 million, or 9.4% of sales (8.3% excluding the impact of the
adoption of IFRS 16) compared with $1,351.5 million, or 8.1% of sales for fiscal 2019.
Synergies related to the Jean Coutu acquisition generated during fiscal 2020 amounted to $69 million compared to
$58 million for fiscal 2019. To date, we have generated annualized synergies of $75 million(3). Having achieved our
publicly-stated objective of generating $75 million(3) of annual cost synergies within three years of the Jean Coutu
Group acquisition, we will no longer disclose the level of synergies going forward.
Operating income before depreciation and amortization and associate's earnings adjustments (OI)(2)
(Millions of dollars, unless otherwise indicated)
Operating income before depreciation and
amortization and associate's earnings
Loss on disposal of a subsidiary
Retail network restructuring expenses
Gain on divestiture of pharmacies
Adjusted operating income before depreciation
and amortization and associate's earnings(2)
OI
2020
Sales
(%)
OI
2019
Sales
(%)
1,683.6 17,997.5
9.4
1,321.5 16,767.5
7.9
7.5
—
—
—
36.0
(6.0)
1,691.1 17,997.5
9.4
1,351.5 16,767.5
8.1
(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 -
Gross margin on sales for fiscal 2020 was 19.9% (20.1% excluding the impact of the adoption of IFRS 16) versus
19.9% for fiscal 2019.
Operating expenses as a percentage of sales for fiscal 2020 was 10.5% compared with 12.0% for fiscal 2019.
Excluding from fiscal 2020 the $7.5 million loss on disposal of our subsidiary MissFresh, and 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, operating expenses as a percentage of sales was 10.5% for 2020 (11.8% excluding the
impact of the adoption of IFRS 16) compared with 11.8% in 2019. The costs related to COVID-19 for fiscal 2020 were
approximately $137 million.
DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS
Total depreciation and amortization expense for fiscal 2020 was $462.5 million, of which $149.2 million is an increase
resulting from the adoption of IFRS 16, versus $286.4 million for fiscal 2019.
Net financial costs for fiscal 2020 were $136.8 million, of which $33.5 million is an increase resulting from the
adoption of IFRS 16, compared with $103.8 million for fiscal 2019.
GAIN ON DISPOSAL OF AN INVESTMENT IN AN ASSOCIATE AND GAIN ON REVALUATION AND DISPOSAL
OF AN INVESTMENT AT FAIR VALUE
During fiscal 2019, the Corporation 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.
In the first quarter of fiscal 2019, we disposed of an investment at fair value and the final revaluation of the financial
liability resulted in a gain of $1.5 million recognized in net earnings.
INCOME TAXES
The income tax expense of $287.9 million for fiscal 2020 and $254.8 million for fiscal 2019 represented an effective
tax rate of 26.6% and 26.3% respectively. The impact of the adoption of IFRS 16 on the 2020 income tax expense is
not significant.
NET EARNINGS AND ADJUSTED NET EARNINGS(1)
Net earnings for fiscal 2020 were $796.4 million, an increase of 11.5% from $714.4 million for fiscal 2019. Fully
diluted net earnings per share were $3.14 compared with $2.78 last year, up 12.9%. Excluding the specific items
shown in the table below, adjusted net earnings(1) for fiscal 2020 totalled $829.1 million compared with $731.6 million
for fiscal 2019, and adjusted fully diluted net earnings per share(1) amounted to $3.27 versus $2.84, up 13.3% and
15.1%, respectively. The adoption of IFRS 16 had an insignificant impact on net earnings and adjusted on fiscal 2020
net earnings(1).
(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 -
Net earnings adjustments(1)
Net earnings
796.4
3.14
714.4
2.78
11.5
12.9
2020
2019
Change (%)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
Net
earnings
Fully
diluted
EPS
Loss on disposal of a subsidiary, after taxes
Retail network restructuring expenses, after
taxes
Gain on divestiture of pharmacies, after taxes
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Gain on the disposal of an investment in an
associate, after taxes
Gain on revaluation and disposal of an
investment at fair value, after taxes
Adjusted net earnings(1)
Impacts of the adoption of IFRS 16
4.2
—
—
28.5
—
—
—
26.4
(4.7)
28.5
(31.9)
(1.1)
829.1
3.27
731.6
2.84
13.3
15.1
(Millions of dollars, unless otherwise indicated)
2020
IFRS 16
2020
excluding
IFRS 16
2019
Sales
17,997.5
(54.2)
18,051.7
16,767.5
Operating income before depreciation and amortization
and associate's earnings
Adjusted operating income before depreciation and
amortization and associate's earnings(2)
Depreciation
Net financial costs
Income taxes
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share (Dollars)
Adjusted fully diluted net earnings per share(1) (Dollars)
1,683.6
190.4
1,493.2
1,321.5
1,691.1
190.4
1,500.7
1,351.5
462.5
136.8
287.9
796.4
829.1
3.14
3.27
(149.2)
(33.5)
(2.0)
5.7
5.7
0.02
0.02
313.3
103.3
285.9
790.7
823.4
3.12
3.25
286.4
103.8
254.8
714.4
731.6
2.78
2.84
(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 -
QUARTERLY HIGHLIGHTS
(Millions of dollars, unless otherwise indicated)
2020
2019
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
4,029.8
3,988.9
5,835.2
4,143.6
3,977.7
3,701.6
5,229.3
3,858.9
17,997.5
16,767.5
170.2
176.2
263.5
186.5
796.4
180.9
182.8
272.3
193.1
829.1
0.67
0.69
1.04
0.74
3.14
0.71
0.72
1.08
0.77
3.27
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
1.3
7.8
11.6
7.4
7.3
(16.2)
45.0
18.5
11.4
11.5
5.1
17.9
18.2
11.0
13.3
(15.2)
46.8
20.9
12.1
12.9
6.0
20.0
20.0
13.2
15.1
Sales in the first quarter of fiscal 2020 reached $4,029.8 million, up 1.3% compared to $3,977.7 million in the first
quarter of fiscal 2019. Excluding the impact of IFRS 16 Leases adopted in the first quarter of 2020, sales reached
$4,042.2 million, up 1.6%. Food same-store sales were up 1.4% (3.2% in 2019) and would have been up 2.0% taking
into account the shift in Christmas sales. Our food basket inflation was approximately 2.0% (1.8% in 2019). Pharmacy
same-store sales were up 3.6% (1.5% in 2019), with a 4.1% increase in prescription drugs and a 2.7% 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"
- 20 -
Sales in the second quarter of fiscal 2020 reached $3,988.9 million, up 7.8% compared to $3,701.6 million in the
second quarter of fiscal 2019. Excluding the impact of the adoption of IFRS 16 Leases, sales reached
$4,001.5 million, up 8.1%. Food same-store sales were up 9.7% (4.3% in 2019). The shift in Christmas sales
represents 0.6% of the same-store sales increase. Our food basket inflation was approximately 2.0% (2.5% in 2019).
Pharmacy same-store sales were up 7.9% (1.1% in 2019), with a 7.7% increase in prescription drugs and a 8.3%
increase in front-store sales.
Sales in the third quarter of fiscal 2020 reached $5,835.2 million, up 11.6% compared to $5,229.3 million in the third
quarter of fiscal 2019. Excluding the impact of the adoption of IFRS 16 Leases, sales reached $5,851.9 million, up
11.9%. Food same-store sales were up 15.6% (3.1% in 2019). Our food basket inflation was approximately 3.0%
(2.5% in 2019). Online food sales almost quadrupled in the quarter from a small base last year. Pharmacy same-store
sales were up 1.0% (3.4% in 2019), with a 2.7% increase in prescription drugs and a 2.5% decrease in front-store
sales.
Sales in the fourth quarter of fiscal 2020 reached $4,143.6 million, up 7.4% compared to $3,858.9 million in the fourth
quarter of fiscal 2019. Excluding the impact of the adoption of IFRS 16 Leases, sales reached $4,156.1 million, up
7.7%. Food same-store sales were up 10.0% (4.1% in 2019). Online food sales were up 160% versus last year. Our
food basket inflation was approximately 2.8% (2.8% in 2019). Pharmacy same-store sales were up 5.5% (3.4% in
2019), with a 5.3% increase in prescription drugs and a 6.0% increase in front-store sales.
Net earnings for the first quarter of fiscal 2020 were $170.2 million compared with $203.1 million for the first quarter of
fiscal 2019, while fully diluted net earnings per share were $0.67 compared with $0.79 in 2019, down 16.2% and
15.2%, respectively. Excluding from the first quarter of 2020 the $7.5 million loss on disposal of a subsidiary and the
amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $8.9 million and
from the first quarter of fiscal 2019 the $7.4 million gain on divestiture of pharmacies, the amortization of intangible
assets acquired in connection with the Jean Coutu Group acquisition of $9.0 million, 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, as well as income taxes relating to all these items, adjusted net earnings(1) for the first
quarter of fiscal 2020 totalled $180.9 million compared with $172.2 million for the corresponding quarter of fiscal 2019
and adjusted fully diluted net earnings per share(1) amounted to $0.71 compared with $0.67, up 5.1% and 6.0%,
respectively.
Net earnings for the second quarter of fiscal 2020 were $176.2 million compared with $121.5 million for the second
quarter of fiscal 2019, while fully diluted net earnings per share were $0.69 compared with $0.47 in 2019, up 45.0%
and 46.8%, respectively. Excluding from the second quarter of 2020 the amortization of intangible assets acquired in
connection with the Jean Coutu Group acquisition of $8.9 million, and from the second quarter of fiscal 2019 the retail
network restructuring expenses of $36.0 million, the $1.4 million loss on divestiture of pharmacies and the
amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $8.8 million, as well
as income taxes relating to all these items, adjusted net earnings(1) for the second quarter of fiscal 2020 totalled
$182.8 million compared with $155.1 million for the corresponding quarter of fiscal 2019 and adjusted fully diluted net
earnings per share(1) amounted to $0.72 compared with $0.60, up 17.9% and 20.0%, respectively.
Net earnings for the third quarter of fiscal 2020 were $263.5 million compared with $222.4 million for the third quarter
of fiscal 2019, while fully diluted net earnings per share were $1.04 compared with $0.86 in 2019, up 18.5% and
20.9%, respectively. Excluding from the third quarter of fiscal 2020 the amortization of intangible assets acquired in
connection with the Jean Coutu Group acquisition of $11.9 million, and from the third quarter of fiscal 2019 the
$1.0 million gain resulting from the selling price adjustment related to the investment in associate Colo-D Inc. and the
amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $11.9 million, as
well as income taxes relating to all these items, adjusted net earnings(1) for the third quarter of fiscal 2020 totalled
$272.3 million compared with $230.3 million for the corresponding quarter of fiscal 2019 and adjusted fully diluted net
earnings per share(1) amounted to $1.08 compared with $0.90, up 18.2% and 20.0%, respectively.
Net earnings for the fourth quarter of fiscal 2020 were $186.5 million compared with $167.4 million for the fourth
quarter of fiscal 2019, while fully diluted net earnings per share were $0.74 compared with $0.66 in 2019, up 11.4%
and 12.1%, respectively. Excluding from the fourth quarter of fiscals 2020 and 2019 the amortization of intangible
assets acquired in connection with the Jean Coutu Group acquisition of $9.0 million, as well as income taxes relating
to these items, adjusted net earnings(1) for the fourth quarter of fiscal 2020 totalled $193.1 million compared with
(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 -
$174.0 million for the corresponding quarter of fiscal 2019 and adjusted fully diluted net earnings per share(1)
amounted to $0.77 compared with $0.68, up 11.0% and 13.2%, respectively.
(Millions of dollars)
Net earnings
2020
2019
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
170.2 176.2 263.5 186.5
203.1 121.5 222.4 167.4
Retail network restructuring expenses, after
taxes
— — — —
— 26.4 — —
Loss on disposal of a subsidiary, after taxes
4.2 — — —
— — — —
Loss (gain) on divestiture of pharmacies, after
taxes
— — — —
(5.4)
0.7 — —
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Gain on disposal of an investment in an
associate, after taxes
Gain on revaluation and disposal of an
investment at fair value, after taxes
Adjusted net earnings(1)
6.5
6.6
8.8
6.6
6.6
6.5
8.8
6.6
— — — —
(31.0) —
(0.9) —
— — — —
(1.1) — — —
180.9 182.8 272.3 193.1
172.2 155.1 230.3 174.0
2020
2019
(Dollars)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Fully diluted net earnings per share
0.67 0.69 1.04 0.74
0.79 0.47 0.86 0.66
Adjustments impact
0.04 0.03 0.04 0.03
(0.12) 0.13 0.04 0.02
Adjusted fully diluted net earnings per
share(1)
0.71 0.72 1.08 0.77
0.67 0.60 0.90 0.68
CASH POSITION
OPERATING ACTIVITIES
Operating activities generated cash inflows of $1,474.1 million in fiscal 2020 compared with $794.6 million for fiscal
2019. This difference resulted primarily from the significant increase in earnings in 2020, payments and interests
received in respect of subleases reclassified to investing activities and payments and interests in respect of lease
liabilities reclassified to financing activities in 2020 following the adoption of IFRS 16, as well as, from the payment in
2019 of taxes payable as at September 29, 2018, which were higher due to the gain realized on the disposal of our
investment in Alimentation Couche-Tard in fiscal 2018.
INVESTING ACTIVITIES
In fiscal 2020, investing activities required cash outflows of $444.1 million compared with $308.5 million for fiscal
2019. This difference stemmed mainly from the buyout of minority interests in Groupe Première Moisson Inc. in the
amount of $51.6 million in 2020, the higher fixed assets and investment properties additions of $106.4 million in 2020,
and the proceeds of $59.0 million on disposal of our investment in associate Colo-D Inc. in 2019. These items offset
the impact of payments and interests in respect of sublease of $101.5 million reclassified from operating activities
following the adoption of IFRS 16 in 2020.
During fiscal 2020, we and our retailers opened 7 stores, carried out major expansions and renovations of 17 stores,
relocated 2 stores and closed 5 stores for a net increase of 168,800 square feet or 0.8% of our food retail network.
(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 -
FINANCING ACTIVITIES
Financing activities required cash outflows of $861.9 million in fiscal 2020 compared with $439.6 million for fiscal
2019. This difference resulted mainly from payments and interest in respect of lease liabilities of $304.0 million
reclassified from operating activities following the adoption of IFRS 16 and from higher share repurchases of $71.3
million in 2020.
FINANCIAL POSITION
We do not anticipate(3) any liquidity risk and consider our financial position at the end of fiscal 2020 as very solid. We
had an unused authorized revolving credit facility of $600.0 million. Our non-current debt and lease liabilities
represented 41.8% of the combined total of non-current debt, lease liabilities and equity (ratio of non-current debt and
lease liabilities/total capital).
At the end of fiscal 2020, the main elements of our non-current debt were as follows:
Revolving Credit Facility
Interest Rate
Rates fluctuate with changes in bankers'
Maturity
Series C Notes
Series F Notes
Series G Notes
Series B Notes
Series D Notes
Series H Notes
Series I 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
3.41% fixed rate
November 3, 2024
December 1, 2021
December 5, 2022
December 6, 2027
October 15, 2035
December 1, 2044
December 4, 2047
February 28, 2050
Balance
(Millions of dollars)
—
300.0
300.0
450.0
400.0
300.0
450.0
400.0
On February 26, 2020, the Corporation issued through a private placement Series I unsecured senior notes in the
aggregate principal amount of $400.0, bearing interest at a fixed nominal rate of 3.41%, maturing on
February 28, 2050, and redeemable at the issuer’s option at any time prior to maturity. On February 27, 2020, the
Corporation redeemed all of the Series E notes in the amount of $400.0 that matured on the same day.
Our main financial ratios were as follows:
Financial structure
Non-current debt (Millions of dollars)
Non-current lease liabilities (Millions of dollars)
Equity (Millions of dollars)
Non-current debt and lease liabilities/total capital (%)
As at
As at
September 26, 2020
September 28, 2019
2,612.0
1,811.4
4,423.4
6,155.4
41.8
2,629.0
—
2,629.0
5,968.6
30.6
As at September 28, 2019 the Corporation intended to refinance the Series E Notes presented under current debt,
the amount of $400.0 million was added to non-current debt when calculating the ratio of non-current debt and lease
liabilities/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"
- 23 -
Excluding the non-current lease liabilities related to the adoption of IFRS 16, the ratio stood at 29.8% as at
September 26, 2020.
Interest Coverage Ratio
Operating income before depreciation and amortization and associate's
earnings/Financial costs (Times)
12.3
12.7
2020
2019
CAPITAL STOCK
(Thousands)
Balance – beginning of year
Share redemption
Stock options exercised
Balance – end of year
Balance as at November 27, 2020 and November 29, 2019
(Thousands)
Balance – beginning of year
Acquisition
Release
Balance – end of year
Balance as at November 27, 2020 and November 29, 2019
Common Shares issued
2020
254,440
(3,910)
265
250,795
249,746
Treasury shares
2020
577
112
(137)
552
552
2019
256,253
(2,925)
1,112
254,440
254,222
2019
603
115
(141)
577
577
STOCK OPTIONS PLAN
Stock options (Thousands)
Exercise prices (Dollars)
As at
November 27, 2020
As at
September 26, 2020
As at
September 28, 2019
2,310
2,322
2,281
21.90 to 56.92
21.90 to 56.92
20.30 to 48.68
Weighted average exercise price (Dollars)
41.26
41.27
37.30
PERFORMANCE SHARE UNIT PLAN
Performance share units (Thousands)
613
618
605
As at
November 27, 2020
As at
September 26, 2020
As at
September 28, 2019
BUYOUT OF NON-CONTROLLING INTEREST
In accordance with the shareholder agreement, the Corporation acquired the minority interest in Groupe Première
Moisson Inc. during the first quarter of fiscal 2020 for a cash consideration of $51.6 million.
MISSFRESH
The Corporation disposed of the assets of subsidiary MissFresh on December 9, 2019 for a cash consideration of
$3.5 million and recorded a loss on disposal of $7.5 million mainly related to tangible and intangible assets. The
Corporation also recognized a deferred tax asset of $3.3 million related to this subsidiary’s tax attributes.
(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 -
NORMAL COURSE ISSUER BID PROGRAM
the normal course
Under
November 24, 2020, the Corporation repurchased 4,560,000 Common Shares at an average price of $56.78, for a
total consideration of $258.9 million.
the period between November 25, 2019 and
issuer bid program covering
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, 2020 and
November 24, 2021, up to 7,000,000 of its Common Shares representing approximately 2.8% of its issued and
outstanding shares on November 11, 2020. 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. Between November 25, 2020 and November 27, 2020, the Corporation has repurchased
200,000 Common Shares at an average price of $59.75 for a total consideration of $11.9 million.
DIVIDEND
For the 26th consecutive year, the Corporation paid quarterly dividends to its shareholders. The annual dividend
increased by 12.2%, to $0.8750 per share compared to $0.7800 in 2019, for total dividends of $220.7 million in 2020
compared to $198.9 million in 2019.
SHARE TRADING
The value of METRO shares remained in the $49.03 to $64.61 range throughout fiscal 2020 ($39.04 to $58.94 in
2019). A total of 156.7 million shares traded on the TSX during this fiscal year (139.6 million in 2019). The closing
price on Friday, September 25, 2020 was $64.02, compared to $57.91 at the end of fiscal 2019. Since fiscal year-end,
the value of METRO shares has remained in the $59.54 to $66.25 range. The closing price on November 27, 2020
was $60.06. 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"
- 25 -
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 February 2020, a proposed class action relating to opioids was filed in British Columbia by opioid end users against
a large group of defendants including subsidiaries of the Corporation, Pro Doc Ltée. and The Jean Coutu Group
(PJC) Inc. In May 2019, two proposed class actions relating to opioids were also filed in Ontario and in Québec by
opioid end users 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, Québec and British Columbia
proposed claims filed by opioid end users seek recovery of damages on behalf of opioid end users in general. The
Corporation believes these proceedings are without merits and that, in certain cases, there is no jurisdiction. No
provision for contingent losses has been recognized in the Corporation’s annual consolidated financial statements.
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. Based on the information available to date, the Corporation does not
believe that it or any of its employees have violated the Competition Act. Class actions lawsuits have also been filed
against the Corporation, suppliers and other retailers. On December 19, 2019, the Québec Superior Court granted
the application for authorization to institute one of these class actions, 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 all
these actions on the merits. No provision for contingent losses has been recognized in the Corporation’s annual
consolidated financial statements.
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. No provision for contingent losses has been recognized
in the Corporation's annual consolidated financial statements.
SOURCES OF FINANCING
Our operating activities generated in 2020 cash flows in the amount of $1,474.1 million. These cash flows were used
to finance our investing activities, including $510.7 million in fixed asset and intangible asset acquisitions, to redeem
shares for an amount of $217.2 million, to pay dividends of $220.7 million, to reimburse interest on debt of
$107.1 million and to pay lease liabilities (principal and interest), nets of payments and interest received from
subleases totalling $202.5 million, as well as to carry out other investing and financing 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"
- 26 -
At the end of fiscal 2020, our financial position mainly consisted of cash and cash equivalents in the amount of
$441.5 million, an unused authorized Revolving Credit Facility of $600.0 million maturing in 2024, 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, Series H Notes in the amount of
$450.0 million maturing in 2047 and Series I Notes in the amount of $400.0 million maturing in 2050.
We believe(3) that cash flows from next year's operating activities will be sufficient to finance the Corporation's current
investing activities.
CONTRACTUAL OBLIGATIONS
Payment commitments by fiscal year (capital and interest)
(Millions of dollars)
2021
2022
2023
2024
2025
2026 and thereafter
Loans
Notes
21.7
104.7
2.8
396.7
3.4
388.4
1.6
1.3
87.1
87.1
22.5 3,321.4
Lease
liabilities
Service
contract
commitments
Total
306.3
303.5
298.1
275.2
241.7
917.6
100.2
532.9
91.7
794.7
70.5
760.4
10.0
373.9
6.4
336.5
0.2 4,261.7
53.3 4,385.4
2,342.4
279.0 7,060.1
RELATED PARTY TRANSACTIONS
During fiscal 2020, we supplied drugstores held by a member of the Board of Directors. 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.
FOURTH QUARTER
(Millions of dollars, except for net earnings per share)
2020
2019
Change (%)
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
4,143.6
3,858.9
403.5
321.6
403.5
186.5
193.1
0.74
0.77
415.8
(181.9)
(159.0)
321.6
167.4
174.0
0.66
0.68
232.4
(146.1)
(76.2)
7.4
25.5
25.5
11.4
11.0
12.1
13.2
—
—
—
(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 -
OPERATING RESULTS
Effective the first quarter of 2020, the Corporation adopted IFRS 16 Leases, which replaces IAS 17 Leases. The
Corporation adopted the standard using the modified retrospective approach. The operating results of the previous
fiscal year have not been restated.
SALES
Sales in the fourth quarter of fiscal 2020 reached $4,143.6 million, up 7.4% compared to $3,858.9 million in the fourth
quarter of fiscal 2019. Excluding the impact of IFRS 16 Leases adopted in the first quarter of 2020, sales reached
$4,156.1 million, up 7.7%. Food same-store sales were up 10.0% (4.1% in 2019). Online food sales were up 160%
versus last year. Our food basket inflation was approximately 2.8% (2.8% in 2019). Pharmacy same-store sales were
up 5.5% (3.4% in 2019), with a 5.3% increase in prescription drugs and a 6.0% increase in front-store sales.
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE'S EARNINGS
This earnings measurement excludes financial costs, taxes, depreciation and amortization and the gain on disposal of
an investment in an associate, as well as the gain on revaluation and disposal of an investment at fair value.
Operating income before depreciation and amortization and associate's earnings for the fourth quarter of fiscal 2020
totalled $403.5 million, or 9.7% of sales, versus $321.6 million, or 8.3% of sales for the corresponding quarter of fiscal
2019.
The adoption of IFRS 16 resulted in a $12.5 million decrease in sales related to sublease income for the fourth
quarter of fiscal 2020, with an equivalent reduction in gross margin. The adoption of IFRS 16 also resulted in a
decrease in operating expenses of $56.5 million for the fourth quarter of fiscal 2020, as lease payments are now
recorded as a reduction of the lease liabilities. Together, these two elements had a favorable impact of $44.0 million
on operating income before depreciation and amortization and associate’s earnings for the fourth quarter of fiscal
2020.
Impact of the adoption of IFRS 16
(Millions of dollars)
Sales
2020
IFRS 16
2020
excluding
IFRS 16
%
of sales
2019
%
of sales
4,143.6
(12.5) 4,156.1
3,858.9
Operating income before depreciation and
amortization and associate's earnings
403.5
44.0
359.5
8.6
321.6
8.3
12 weeks / Fiscal Year
No adjustment was recorded to operating income before depreciation and amortization and associate's earnings in
the 2020 and 2019 fourth quarters. Excluding the impact of the adoption of IFRS 16, operating income before
depreciation and amortization and associate's earnings for the fourth quarter of fiscal 2020 totalled $359.5 million, or
8.6% of sales compared with $321.6 million, or 8.3% of sales for the corresponding quarter of fiscal 2019.
Synergies related to the Jean Coutu acquisition generated for the fourth quarter of fiscal 2020 amounted to
$16 million compared to $18 million (including a certain retroactive amount) for the corresponding quarter of fiscal
2019.
Gross margin on sales for the fourth quarter of fiscal 2020 were 20.2% (20.4% excluding the impact of the adoption of
IFRS 16) versus 20.2% for the corresponding quarter of 2019.
Operating expenses as a percentage of sales for the fourth quarter of 2020 were 10.4% (11.8% excluding the impact
of the adoption of IFRS 16) versus 11.9% for the corresponding quarter of fiscal 2019. The costs related to COVID-19
for the fourth quarter of fiscal 2020 were approximately $27 million.
(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 -
DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS
Total depreciation and amortization expense for the fourth quarter of fiscal 2020 was $118.5 million, of which
$35.1 million is an increase resulting from the adoption of IFRS 16, versus $68.5 million for the corresponding quarter
of fiscal 2019. In the fourth quarter of 2020, we recorded accelerated amortization totalling $10.7 million, or $0.03 per
share, related to the forthcoming opening of our new fresh product distribution centre in Ontario. We have not
adjusted our 2020 earnings for this charge.
Net financial costs for the fourth quarter of 2020 were $30.8 million, of which $7.3 million is an increase resulting from
the adoption of IFRS 16, compared with $23.4 million for the corresponding quarter of fiscal 2019.
INCOME TAXES
The income tax expense of $67.7 million for the fourth quarter of fiscal 2020 represented an effective tax rate of
26.6% compared with an income tax expense of $62.3 million in the fourth quarter of fiscal 2019 which represented
an effective tax rate of 27.1%. The impact of the adoption of IFRS 16 on the fourth quarter of 2020 income tax
expense is not significant.
NET EARNINGS AND ADJUSTED NET EARNINGS(1)
Net earnings for the fourth quarter of fiscal 2020 were $186.5 million compared with $167.4 million for the
corresponding quarter of fiscal 2019, while fully diluted net earnings per share were $0.74 compared with $0.66 in
2019, up 11.4% and 12.1%, respectively. Excluding the specific items shown in the table below, adjusted net
earnings(1) for the fourth quarter of fiscal 2020 totalled $193.1 million compared with $174.0 million for the
corresponding quarter of fiscal 2019, and adjusted fully diluted net earnings per share(1) amounted to $0.77 versus
$0.68, up 11.0% and 13.2%, respectively. The adoption of IFRS 16 had an insignificant impact on the fourth quarter of
2020 net earnings and adjusted net earnings(1).
Net earnings adjustments(1)
12 weeks / Fiscal Year
2020
2019
Change (%)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
Net
earnings
Fully
diluted
EPS
Net earnings
186.5
0.74
167.4
0.66
11.4
12.1
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Adjusted net earnings(1)
6.6
6.6
193.1
0.77
174.0
0.68
11.0
13.2
(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 -
Impacts of the adoption of IFRS 16
(Millions of dollars, unless otherwise indicated)
2020
IFRS 16
2020
excluding
IFRS 16
2019
Sales
4,143.6
(12.5)
4,156.1
3,858.9
12 weeks / Fiscal Year
Operating income before depreciation and amortization
and associate's earnings
Adjusted operating income before depreciation and
amortization and associate's earnings(2)
Depreciation
Net financial costs
Income taxes
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share (Dollars)
Adjusted fully diluted net earnings per share(1)
(Dollars)
CASH POSITION
Operating activities
403.5
44.0
359.5
321.6
403.5
118.5
30.8
67.7
186.5
193.1
0.74
0.77
44.0
(35.1)
(7.3)
(0.4)
1.2
1.2
—
—
359.5
321.6
83.4
23.5
67.3
185.3
191.9
0.74
0.77
68.5
23.4
62.3
167.4
174.0
0.66
0.68
Operating activities generated cash inflows of $415.8 million in the fourth quarter of fiscal 2020 compared with
$232.4 million for the corresponding quarter of fiscal 2019. This difference resulted primarily from the significant
increase in earnings in the fourth quarter of fiscal 2020, the change in non-cash working capital items as well as, from
payments and interests received in respect of subleases reclassified to investing activities and payments and
interests in respect of lease liabilities reclassified to financing activities in 2020 following the adoption of IFRS 16 as
well as a significant contribution to a pension plan in 2019.
Investing activities
Investing activities required cash outflows of $181.9 million in the fourth quarter of fiscal 2020 compared with
$146.1 million for the corresponding quarter of fiscal 2019. This difference stemmed mainly from the higher fixed
assets and investment properties additions of $52.7 million in 2020.
Financing activities
In the fourth quarter of 2020, financing activities required cash outflows of $159.0 million compared with $76.2 million
in the corresponding quarter of 2019. This difference resulted mainly from payments and interests on lease liabilities
of $53.7 million reclassified from operating activities in 2020 following the adoption of IFRS 16.
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation adopted a financial risk management policy, approved by the Board of Directors in April 2010 and
amended in 2019, setting forth guidelines relating to its use of derivative financial instruments. These guidelines
prohibit the use of derivatives for speculative purposes. During fiscal 2020, the Corporation used derivative financial
instruments as described in notes 2 and 28 to the 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"
- 30 -
NEW ACCOUNTING STANDARDS
ACCOUNTING STANDARD ADOPTED IN 2020
Leases
In January 2016, the IASB issued IFRS 16, Leases, which replaces IAS 17, Leases and related interpretations. Under
IFRS 16, which provides for a single accounting model for leases abolishing the IAS 17 distinction between finance
leases and operating leases, most leases are recognized in the statement of financial position. Certain exemptions
apply for short-term leases and leases of low-value assets. The accounting requirements for lessors remain similar to
those under IAS 17, such as the distinction between operating leases and finance leases. 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 adopted the standard using a modified retrospective approach,
and the cumulative impact of the initial application of the standard has been recognized as an adjustment to equity on
transition. Comparative period numbers have not been restated.
As a lessee, the Corporation recognized right-of-use assets and lease liabilities in respect of operating leases under
IAS 17 for property, vehicles and equipment. Depreciation expense for right-of-use assets and interest expense on
lease liabilities replaced rental expense previously recognized under IAS 17 on a straight-line basis over the lease
term. As at September 29, 2019, lease liabilities have been measured at the present value of the remaining lease
payments and right-of-use assets have been measured using the modified retrospective approach. The discount rate
used was 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 recognized current and non-current accounts receivable related to subleases that should
have been classified as finance leases.
The Corporation used 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 assessment performed immediately before the initial application date to determine whether a
lease is onerous, instead of performing a review of the impairment of the right-of-use assets.
Exclude leases expiring within 12 months of the initial application date.
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.
(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 -
The impact of the adoption of IFRS 16 on the Corporation’s financial position as at September 29, 2019 was as
follows:
Increase (Decrease)
ASSETS
Current assets
Accounts receivable on subleases
Non-current assets
Fixed assets
Right-of-use assets
Intangible assets
Deferred taxes
Accounts receivable on subleases
Other assets
LIABILITIES AND EQUITY
Current liabilities
Deferred revenues
Provisions
Current portion of debt
Current portion of lease liabilities
Non-current liabilities
Debt
Lease liabilities
Provisions
Deferred taxes
Other liabilities
Equity
Retained earnings
As at
September 29, 2019
86.4
86.4
(16.6)
1,222.4
(13.5)
38.1
645.6
(0.1)
1,962.3
(0.7)
(0.9)
(3.6)
250.1
244.9
(17.2)
1,949.7
(9.5)
(24.1)
(12.1)
2,131.7
(169.4)
1,962.3
We recorded an increase of $2,131.7 million in liabilities and $1,962.3 million in assets, including right-of-use-assets
and accounts receivable (current and non-current) on subleases, with a net impact of $169.4 million recorded in
opening retained earnings.
The Corporation used its incremental borrowing rate as at September 29, 2019 to measure the lease liabilities. The
weighted average incremental borrowing rate was 2.42%. The weighted average remaining lease term was 9 years
as at 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"
- 32 -
The table below shows the reconciliation between operating lease commitments under IAS 17 as at September 28,
2019 and the lease liabilities recognized as at September 29, 2019:
Operating lease commitments as at September 28, 2019
Impact of discounting using the incremental borrowing rate
Renewal options reasonably certain to be exercised
Finance lease liabilities recognized as at September 28, 2019
Lease liabilities recognized as at September 29, 2019
Current portion of lease liabilities
Lease liabilities
Total lease liabilities
2,076.1
(257.9)
360.7
20.9
2,199.8
250.1
1,949.7
2,199.8
The impact of the adoption of IFRS 16 on the results for fiscal year ended September 26, 2020 was as follows:
Increase (Decrease)
Sales and gross margin
Occupancy charges
Depreciation
Financial costs
Description
(54.2) Sublease income now accounted as interest income and
accounts receivable on subleases
(244.6) Rental expense replaced by depreciation and financial costs
149.2 Depreciation of right-of-use assets
33.5 Interest expense on lease liabilities net of interest income on
subleases
Earnings before income taxes
7.7 IFRS 16 impact before income taxes
Income taxes
Net earnings
2.0
5.7 IFRS 16 net impact
Net earnings per share - Fully
diluted
0.02 Diluted net earnings per share impact
The net financial costs included the financial costs of $49.5 million related to lease liabilities and the interest revenues
of $16.0 million on subleases classified as finance leases for fiscal 2020.
Changes in significant accounting policies relating to leases
Following adoption of IFRS 16, the Corporation updated its accounting policies relating to leases effective
September 29, 2019:
The Corporation as lessee
The Corporation recognizes right-of-use assets and the corresponding lease liabilities at the lease inception date, the
date at which the lessor makes available the leased asset to the Corporation. Rental payments under short-term
leases or leases with low-value underlying assets and variable payments that are not based on an index or rate are
recorded in operating expenses on a straight line basis over the duration of the lease.
Lease liabilities represent the present value of fixed and variable lease payments that are based on an index or rate,
net of lease incentives receivable. Subsequent to the initial measurement, the Corporation measures the lease
liabilities at amortized cost using the effective interest method. Lease liabilities are remeasured when a change is
made to the lease agreement. Lease payments are discounted at the lessee’s incremental borrowing rate at lease
inception. The interest expense is recognized in net financial costs. The lease term includes renewal options that the
Corporation is reasonably certain to exercise.
Right-of-use assets are measured at the initial value of the lease liabilities, less lease incentives received and
restoration costs. Subsequent to initial measurement, the Corporation applies the cost model to right-of-use assets.
(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 -
Right-of-use assets are measured at cost less accumulated amortization, accumulated impairment losses and any
remeasurement of lease liabilities. Assets are depreciated from the lease inception date on a straight-line basis over
the shorter of the asset’s useful life and the lease term.
The Corporation as lessor
For subleases, for which the Corporation acts as an intermediate lessor, it evaluates the classification in relation to
the right-of-use assets arising from the main lease. The Corporation accounts for the main lease and the sublease as
two separate leases. A sublease contract is classified as a finance lease if substantially all risks and rewards
incidental to the underlying asset are transferred to the lessee. Otherwise, leases are classified as operating leases
and rental income is recognized on a straight-line basis over the lease term.
For subleases that are classified as finance leases, the Corporation derecognizes the corresponding right-of-use
assets and records a net investment in the subleases. Interest income is recorded in net financial costs. The net
investment is presented in current and non-current accounts receivable on subleases.
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 2021 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 the risks described under the “Risk Management”
section of this annual report that could have an impact on these statements. As with the preceding risks, the
COVID-19 pandemic constitutes a risk that could have an impact on the business, operations, projects, synergies and
performance of the Corporation as well as on the realization of forward-looking statements contained in this
document.
We believe these statements to be reasonable and 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 INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE'S
EARNINGS, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE
Adjusted operating income before depreciation and amortization and associate's 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.
(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 -
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 26, 2020.
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 JUDGMENTS 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 judgments, 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.
JUDGMENTS
In applying the Corporation's accounting policies, management has made the following judgments, 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
(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"
- 35 -
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 license 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.
Leases
The application of IFRS 16 requires the use of estimates that affect the measurement of right-of-use-assets and lease
liabilities, including the appropriate discount rate used to measure lease liabilities. The Corporation discounts lease
payments at its incremental borrowing rate, which is based on estimates of the risk-free interest rate, credit spreads
and lease terms. In addition, it assesses the duration of the lease based on the terms of the contract and the renewal
options it has reasonable certainty to exercise. A change in these assumptions could affect the amounts recorded.
The key assumptions are disclosed in note 12.
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 a 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
(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"
- 36 -
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 beyond our control that could seriously affect the continuity of our operations may arise. We have set up
business continuity plans for all our operations. These plans provide for some disaster alternative physical sites,
generators in case of power outages and back-up computers as powerful as the Corporation's existing computers. A
steering committee oversees our business continuity plans and their objectives, and ensures their regular review.
Amid the current pandemic environment, we have created a strategic committee responsible for overseeing the
management and coordination of the actions required to protect the Corporation's employees, customers and
partners from the effects of COVID-19. This committee is composed of executives from the Corporation's various
business units.
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 business, 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 system 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 to 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. A committee comprised of executives from the Corporation oversees cybersecurity
activities, including Information Security Service activities. This service sets up and coordinates prevention, detection
and remediation measures in the area of cybersecurity. Cybersecurity measures include, among others, setting up
strong controls with respect to systems access and hiring a specialized firm to carry out occasional intrusion tests.
We have also implemented an information security awareness and training program for our employees.
No significant incident attributable to the Corporation's technology occurred over the past 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, by the Corporation and third parties it deals with, will be sufficient to prevent or detect a
cyberattack. In that regard, we stay current with the latest 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 negatively impact the Corporation. We negotiate collective 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 develop contingency plans to minimize the impact of possible labour
conflicts. We have experienced some labour conflicts over the last few years and we expect(3) to maintain good labour
relations in the future.
(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"
- 37 -
OCCUPATIONAL HEALTH AND SAFETY
Workplace accidents may occur at any of our sites. To minimize this risk, we have developed a worked-related
accident prevention policy. Furthermore, at all of our sites, we have workplace health and safety committees
responsible for setting-up action and accident prevention plans.
HIRING, EMPLOYEE RETENTION AND ORGANIZATION STRUCTURE
Our recruitment program, salary structure, performance evaluation programs, succession plan and training plan 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. Our performance evaluation practices are 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
Corporation's key positions.
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 made 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, COMPETITION AND PRICES
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.
Increased competition could lead to pressure on retail prices and margins. As a result, we adopt innovative marketing
strategies to better meet the evolving needs of consumers and protect our market shares.
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 international food stores, target three different
market segments. The Première Moisson banner is specialized in bakery, pastry, deli products and other food
offerings prepared on an artisanal basis and respectful of great traditions.
(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"
- 38 -
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 414 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
drugstore 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.
Our online grocery service, websites and various mobile applications are part of the Corporation's overall digital
strategy, which aims to position METRO as the retailer that offers the food experience most suited to the needs and
behaviors of consumers.
MODERNIZATION OF OUR DISTRIBUTION FACILITIES
Investments in the modernization of our distribution centres in Québec and Ontario translate into large-scale projects.
Poor management of human, material and financial resources could turn into significant costs and not meet our
objective. Efficient project management and adequate change management of these new technologies, including
automation, will allow us to achieve the expected results according to our business plan.
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. To remediate 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 will be sufficient to provide for
all outflows required by our financing 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"
- 39 -
JEAN COUTU GROUP ACQUISITION
The successful combination with the Jean Coutu Group's activities requires significant efforts from the Corporation's
management. 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 11, 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"
- 40 -
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 judgments. 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 La Flèche
President and Chief Executive Officer
November 17, 2020
François Thibault
Executive Vice President,
Chief Financial Officer and Treasurer
- 41 -
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 26, 2020 and September 28, 2019, 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 26, 2020 and September 28, 2019, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards (IFRS).
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:
•
•
The information included in the 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
identified above, 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 on this other information, 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 the Annual Report, we conclude that there is a material misstatement of this 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.
- 42 -
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 17, 2020
1 CPA auditor, CA, public accountancy permit no. A112005
- 43 -
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- 44 -
Annual Consolidated Financial Statements
METRO INC.
September 26, 2020
- 45 -
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 judgments and estimates..........................................................................................................
5- Additional information on the nature of earnings components...................................................................
6- Income taxes..............................................................................................................................................
7- Net earnings per share...............................................................................................................................
8- Inventories..................................................................................................................................................
9- Investment at fair value..............................................................................................................................
10- Fixed assets...............................................................................................................................................
11- Investment properties.................................................................................................................................
12- Leases........................................................................................................................................................
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- Comparative figures...................................................................................................................................
30- Approval of financial statements................................................................................................................
Page
47
48
49
50
52
53
53
53
59
61
63
64
65
66
66
67
68
68
71
72
73
73
73
74
75
76
76
79
79
83
83
84
85
86
88
88
- 46 -
Consolidated statements of income
Years ended September 26, 2020 and September 28, 2019
(Millions of dollars, except for net earnings per share)
Sales (notes 5 and 26)
Cost of sales and operating expenses (notes 5 and 26)
Loss on disposal of a subsidiary (notes 5 and 14)
Retail network restructuring expenses (notes 5 and 18)
Gain on divestiture of pharmacies (note 5)
Operating income before depreciation and amortization and
associate's earnings
Depreciation and amortization (note 5)
Financial costs, net (note 5)
Gain on disposal of an investment in an associate (notes 5 and 15)
Gain on revaluation and disposal of an investment at fair value (notes 5 and 9)
Earnings before income taxes
Income taxes (note 6)
Net earnings
Attributable to:
Equity holders of the parent
Non-controlling interests
Net earnings per share (Dollars) (notes 7 and 21)
Basic
Fully diluted
See accompanying notes
2020
2019
17,997.5
16,767.5
(16,306.4)
(15,416.0)
(7.5)
—
—
—
(36.0)
6.0
1,683.6
1,321.5
(462.5)
(136.8)
—
—
1,084.3
(287.9)
796.4
795.2
1.2
796.4
3.15
3.14
(286.4)
(103.8)
36.4
1.5
969.2
(254.8)
714.4
711.6
2.8
714.4
2.79
2.78
- 47 -
Consolidated statements of comprehensive income
Years ended September 26, 2020 and September 28, 2019
(Millions of dollars)
Net earnings
Other comprehensive income
Items that will not be reclassified to net earnings
Changes in defined benefit plans
Actuarial losses
Asset ceiling effect
Minimum funding requirement
Loss on disposal of an investment at fair value (note 9)
Corresponding income taxes
Comprehensive income
Attributable to:
Equity holders of the parent
Non-controlling interests
See accompanying notes
2020
2019
796.4
714.4
(15.5)
(0.3)
0.8
—
4.1
(10.9)
785.5
784.3
1.2
785.5
(97.9)
4.3
(0.6)
(1.3)
25.2
(70.3)
644.1
641.3
2.8
644.1
- 48 -
Consolidated statements of financial position
As at September 26, 2020 and September 28, 2019
(Millions of dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (notes 15 and 26)
Accounts receivable on subleases (note 12)
Inventories (note 8)
Prepaid expenses
Current taxes
Non-current assets
Fixed assets (note 10)
Investment properties (note 11)
Right-of-use assets (note 12)
Intangible assets (note 13)
Goodwill (note 14)
Deferred taxes (note 6)
Defined benefit assets (note 23)
Accounts receivable on subleases (note 12)
Other assets (note 15)
LIABILITIES AND EQUITY
Current liabilities
Bank loans (note 16)
Accounts payable (note 17)
Deferred revenues
Current taxes
Provisions (note 18)
Current portion of debt (note 19)
Current portion of lease liabilities (note 12)
Non-controlling interest (note 28)
Non-current liabilities
Debt (note 19)
Lease liabilities (note 12)
Defined benefit liabilities (note 23)
Provisions (note 18)
Deferred taxes (note 6)
Other liabilities (note 20)
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
2020
2019
441.5
641.8
88.0
1,268.2
45.0
16.0
2,500.5
2,860.8
40.2
1,150.5
2,850.2
3,300.7
43.5
19.7
596.3
61.5
13,423.9
0.4
1,458.9
38.0
81.7
2.5
20.6
258.0
—
1,860.1
2,612.0
1,811.4
129.9
19.2
833.9
2.0
7,268.5
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
6,142.2
13.2
6,155.4
13,423.9
5,955.2
13.4
5,968.6
11,073.9
ERIC LA FLÈCHE
Director
RUSSELL GOODMAN
Director
- 49 -
Consolidated statements of changes in equity
Years ended September 26, 2020 and September 28, 2019
(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
1,732.3
(24.6)
19.2 4,228.3
— 5,955.2
13.4 5,968.6
—
—
—
795.2
—
795.2
1.2
796.4
—
—
8.2
(26.7)
—
—
—
—
—
—
—
(10.9)
—
(10.9)
—
(10.9)
—
784.3
—
784.3
1.2
785.5
(1.0)
—
—
—
—
7.2
—
7.2
—
(26.7)
—
(26.7)
—
(190.5)
—
(190.5)
—
(190.5)
—
(6.2)
—
—
—
(6.2)
—
(6.2)
—
—
9.5
—
—
9.5
—
9.5
—
—
5.7
—
(5.5)
(0.2)
—
—
—
—
—
(220.7)
—
(220.7)
(1.4)
(222.1)
—
—
—
(169.4)
—
(169.4)
—
(169.4)
—
—
—
(0.5)
—
(0.5)
—
(0.5)
(18.5)
(0.5)
3.0
(581.3)
—
(597.3)
(1.4)
(598.7)
1,713.8
(25.1)
22.2 4,431.3
— 6,142.2
13.2 6,155.4
Balance as at
September 28, 2019
Net earnings
Other comprehensive
income (loss)
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 16
"Leases" (note 3)
Change in fair value of non-
controlling interest liability
(note 28)
Balance as at
September 26, 2020
See accompanying notes
- 50 -
Consolidated statements of changes in equity
Years ended September 26, 2020 and September 28, 2019
(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
4.9 5,642.8
13.2 5,656.0
—
—
—
711.6
—
711.6
2.8 714.4
—
—
28.0
(19.8)
—
—
—
—
—
—
—
—
(4.0)
—
—
(70.3)
641.3
—
—
—
—
—
—
(70.3)
641.3
24.0
(19.8)
—
(70.3)
2.8 644.1
—
—
24.0
(19.8)
(126.1)
—
(126.1)
—
(126.1)
—
(5.6)
—
—
—
(5.6)
—
(5.6)
—
—
8.6
—
—
8.6
—
8.6
—
—
5.9
—
(5.7)
(0.2)
—
(198.9)
—
—
—
—
—
(198.9)
(2.1)
(201.0)
—
—
—
4.9
(4.9)
—
—
—
—
—
—
(11.1)
—
(11.1)
(0.7)
(11.8)
—
8.2
—
0.3
—
—
—
—
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
Balance as at
September 29, 2018
Net earnings
Other comprehensive
income (loss)
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
Change in fair value of non-
controlling interests liability
(note 28)
Sales of shares in joint
ventures
Balance as at
September 28, 2019
See accompanying notes
- 51 -
Consolidated statements of cash flows
Years ended September 26, 2020 and September 28, 2019
(Millions of dollars)
Operating activities
Earnings before income taxes
Non-cash items
Gain on disposal of an investment in an associate (note 15)
Gain on revaluation and disposal of an investment at fair value (note 9)
Loss on disposal of a subsidiary (note 14)
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 and right-of-use 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)
Financial costs, net
Net change in non-cash working capital items
Income taxes paid
Investing activities
Net proceeds on disposal of a subsidiary (note 14)
Proceeds on disposal of an investment in an associate (note 15)
Proceeds on divestiture of pharmacies (note 5)
Sale of shares in joint ventures
Buyout of a minority interest (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
Payments received from subleases
Interests received from subleases
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
Interest paid on debt (note 29)
Payment of lease liabilities (principal)
Payment of lease liabilities (interest)
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
- 52 -
2020
2019
1,084.3
969.2
—
—
7.5
—
462.5
(4.5)
3.0
—
9.5
3.8
—
136.8
1,702.9
(34.5)
(194.3)
1,474.1
3.5
—
—
—
(51.6)
0.8
(463.3)
12.4
(47.4)
85.6
15.9
(444.1)
0.4
7.2
(217.2)
(6.2)
413.1
(428.7)
(107.1)
(252.9)
(51.1)
1.3
(220.7)
(861.9)
168.1
273.4
441.5
(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)
(477.1)
794.6
—
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)
(106.9)
—
—
1.1
(198.9)
(439.6)
46.5
226.9
273.4
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
1. DESCRIPTION OF BUSINESS
METRO INC. (the Corporation), incorporated under the laws of Québec, is 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.
Revenue from contracts with customers
Revenue from contracts with customers are accounted for when control of goods or services is transferred to the
customer. Retail sales of corporate stores and stores that qualify as structured entities are recorded at the time of
sale to the consumer. Sales to unconsolidated affiliated or franchised stores and other customers are recorded when
the goods are delivered to them. Discounts granted by the Corporation are recorded as a reduction in revenue.
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.
- 53 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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 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”.
Accounts receivable
Accounts receivable, accounts receivable on subleases 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 using
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.
- 54 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Investment in a joint venture
The Corporation has an investment in a joint venture, whereby the venturers have a contractual agreement that
establishes joint control over the economic activity of the entity. The investment is accounted for using the equity
method and is 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 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
Policy in effect prior to September 29, 2019:
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. Upon 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 lease term 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.
Policy in effect as of September 29, 2019:
For the year ended September 26, 2020, the Corporation adopted IFRS 16, Leases. The accounting standards that
were applied are disclosed Note 3.
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.
- 55 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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 and indefinite useful lives, investment properties, right-of-use assets and goodwill. 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 to which assets have been allocated. Impairment testing of goodwill resulting from a business
acquisition is conducted at the level of the smallest CGU to which the goodwill relates. Impairment testing of
investment properties, banners, private labels and loyalty programs is conducted at the level of the asset itself.
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, banners, private
labels and loyalty programs is these assets' fair value less costs of disposal. Fair value represents the price that
would be obtained for the sale of an asset in an arm's length transaction. 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.
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.
- 56 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
•
•
•
•
•
•
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 related to other long-term employee benefits are recognized in full immediately in net
earnings.
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 revenues 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 revenues also include loyalty points issued as part of the Corporation’s
loyalty programs and gift cards outstanding as at year end for which revenue is recognized upon redemption.
Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive) resulting from a past
event, when it 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, the revolving credit facility, notes and loans payable are classified as “Liabilities
measured at amortized cost” and initially measured at fair value less financing costs. They are subsequently
measured at amortized cost using the effective interest method.
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.
Non-controlling interests
Non-controlIing interests are recognized in equity.
Financial instruments
Financial assets and liabilities are recognized when the Corporation becomes a party to the contractual provisions of
a financial instrument. Upon initial recognition, financial instruments are measured at fair value adjusted for
transaction costs that are directly attributable to the acquisition or issue of financial instruments that are not classified
- 57 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
as fair value through profit or loss (FVTPL). Subsequently, financial assets are measured on the basis of their
classification, which is included in one of the following categories: at amortized cost, at fair value through other
comprehensive income (FVOCI), and at FVTPL.
Financial assets that are not designated as FVTPL upon initial recognition, are classified and measured at amortized
cost if they are held within a business model whose objective is to hold assets to collect contractual cash flows, and
the contractual terms give rise, on specified dates, to cash flows that correspond only to payments of principal and
interest. Otherwise, they are classified and measured at FVOCI, as long as the asset is held within a business model
whose objective is achieved by both the collection of contractual cash flows and the sale of financial assets, and the
contractual terms, on specified dates, give rise to cash flows that correspond only to payments of principal and
interest. Classification and measurement of financial liabilities are based on amortized cost or FVTPL.
In summary, the Corporation's assets and liabilities are classified and measured valued as follows:
•
•
•
•
•
•
Cash and cash equivalents are classified and measured at amortized cost;
Accounts receivable, accounts receivable on subleases and loans to certain customers are classified and
measured at amortized cost;
The investment at fair value is classified and measured at FVOCI;
Bank loans, accounts payable except deferred revenues, the revolving credit facility, notes and loans are
classified and measured at amortized cost;
Non-controlling interests are classified and measured at FVTPL. Gains and losses from the remeasurement at
the end of each period are recorded through retained earnings;
Derivative financial instruments that are not designated as hedges are classified and measured at FVTPL.
Impairment of financial assets
At the end of each reporting period, the Corporation estimates expected credit losses (ECL) based on lifetime credit
losses. ECLs are adjusted for factors specific to receivables, receivables on subleases and loans to certain
customers, the general economic condition and an assessment of the current and expected economic conditions at
the reporting date, including the time value of the money, if applicable. The measurement is carried out using the
simplified method for cash and current assets and the general method for loans. The net change in ECLs on
receivables, receivables on subleases and loans to certain customers is recorded in net income.
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 a 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 FVTPL" and measured at fair value
with revaluation at the end of each period. Resulting gains or losses are recorded in net earnings.
Fiscal year
The Corporation's fiscal year ends on the last Saturday of September. The fiscal years ended September 26, 2020
and September 28, 2019 included 52 weeks of operations.
- 58 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
3. NEW ACCOUNTING STANDARDS
ACCOUNTING STANDARDS ADOPTED IN 2020
Leases
In January 2016, the IASB issued IFRS 16, Leases, which replaces IAS 17, Leases and related interpretations. Under
IFRS 16, which provides for a single accounting model for leases abolishing the IAS 17 distinction between finance
leases and operating leases, most leases are recognized in the statement of financial position. Certain exemptions
apply for short-term leases and leases of low-value assets. The accounting requirements for lessors remain similar to
those under IAS 17, such as the distinction between operating leases and finance leases. 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 adopted the standard using a modified retrospective approach,
and the cumulative impact of the initial application of the standard has been recognized as an adjustment to equity on
transition. Comparative period numbers have not been restated.
As a lessee, the Corporation recognized right-of-use assets and lease liabilities in respect of operating leases under
IAS 17 for property, vehicles and equipment. Depreciation expense for right-of-use assets and interest expense on
lease liabilities replaced rental expense previously recognized under IAS 17 on a straight-line basis over the lease
term. As at September 29, 2019, lease liabilities have been measured at the present value of the remaining lease
payments and right-of-use assets have been measured using the modified retrospective approach. The discount rate
used was 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 recognized current and non-current accounts receivable related to subleases that should
have been classified as finance leases.
The Corporation used 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 assessment performed immediately before the initial application date to determine whether a
lease is onerous, instead of performing a review of the impairment of the right-of-use assets.
Exclude leases expiring within 12 months of the initial application date.
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.
- 59 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
The impact of the adoption of IFRS 16 on the Corporation’s financial position as at September 29, 2019 was as
follows:
Increase (Decrease)
ASSETS
Current assets
Accounts receivable on subleases
Non-current assets
Fixed assets
Right-of-use assets
Intangible assets
Deferred taxes
Accounts receivable on subleases
Other assets
LIABILITIES AND EQUITY
Current liabilities
Deferred revenues
Provisions
Current portion of debt
Current portion of lease liabilities
Non-current liabilities
Debt
Lease liabilities
Provisions
Deferred taxes
Other liabilities
Equity
Retained earnings
As at
September 29, 2019
86.4
86.4
(16.6)
1,222.4
(13.5)
38.1
645.6
(0.1)
1,962.3
(0.7)
(0.9)
(3.6)
250.1
244.9
(17.2)
1,949.7
(9.5)
(24.1)
(12.1)
2,131.7
(169.4)
1,962.3
We recorded an increase of $2,131.7 in liabilities and $1,962.3 in assets, including right-of-use-assets and accounts
receivable (current and non-current) on subleases, with a net impact of $169.4 recorded in opening retained earnings.
The Corporation used its incremental borrowing rate as at September 29, 2019 to measure the lease liabilities. The
weighted average incremental borrowing rate was 2.42%. The weighted average remaining lease term was 9 years
as at September 29, 2019.
- 60 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
The table below shows the reconciliation between operating lease commitments under IAS 17 as at September 28,
2019 and the lease liabilities recognized as at September 29, 2019:
Operating lease commitments as at September 28, 2019
Impact of discounting using the incremental borrowing rate
Renewal options reasonably certain to be exercised
Finance lease liabilities recognized as at September 28, 2019
Lease liabilities recognized as at September 29, 2019
Current portion of lease liabilities
Lease liabilities
Total lease liabilities
Changes in significant accounting policies relating to leases
2,076.1
(257.9)
360.7
20.9
2,199.8
250.1
1,949.7
2,199.8
Following adoption of IFRS 16, the Corporation updated its accounting policies relating to leases effective
September 29, 2019:
The Corporation as lessee
The Corporation recognizes right-of-use assets and the corresponding lease liabilities at the lease inception date, the
date at which the lessor makes available the leased asset to the Corporation. Rental payments under short-term
leases or leases with low-value underlying assets and variable payments that are not based on an index or rate are
recorded in operating expenses on a straight line basis over the duration of the lease.
Lease liabilities represent the present value of fixed and variable lease payments that are based on an index or rate,
net of lease incentives receivable. Subsequent to the initial measurement, the Corporation measures the lease
liabilities at amortized cost using the effective interest method. Lease liabilities are remeasured when a change is
made to the lease agreement. Lease payments are discounted at the lessee’s incremental borrowing rate at lease
inception. The interest expense is recognized in net financial costs. The lease term includes renewal options that the
Corporation is reasonably certain to exercise.
Right-of-use assets are measured at the initial value of the lease liabilities, less lease incentives received and
restoration costs. Subsequent to initial measurement, the Corporation applies the cost model to right-of-use assets.
Right-of-use assets are measured at cost less accumulated amortization, accumulated impairment losses and any
remeasurement of lease liabilities. Assets are depreciated from the lease inception date on a straight-line basis over
the shorter of the asset’s useful life and the lease term.
The Corporation as lessor
For subleases, for which the Corporation acts as an intermediate lessor, it evaluates the classification in relation to
the right-of-use assets arising from the main lease. The Corporation accounts for the main lease and the sublease as
two separate leases. A sublease contract is classified as a finance lease if substantially all risks and rewards
incidental to the underlying asset are transferred to the lessee. Otherwise, leases are classified as operating leases
and rental income is recognized on a straight-line basis over the lease term.
For subleases that are classified as finance leases, the Corporation derecognizes the corresponding right-of-use
assets and records a net investment in the subleases. Interest income is recorded in net financial costs. The net
investment is presented in current and non-current accounts receivable on subleases.
4.
SIGNIFICANT JUDGMENTS AND ESTIMATES
The preparation of the consolidated financial statements requires management to make judgments, 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
- 61 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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.
JUDGMENTS
In applying the Corporation's accounting policies, management has made the following judgments, 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 license 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.
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.
Leases
The application of IFRS 16 requires the use of estimates that affect the measurement of right-of-use-assets and lease
liabilities, including the appropriate discount rate used to measure lease liabilities. The Corporation discounts lease
payments at its incremental borrowing rate, which is based on estimates of the risk-free interest rate, credit spreads
and lease terms. In addition, it assesses the duration of the lease based on the terms of the contract and the renewal
options it has reasonable certainty to exercise. A change in these assumptions could affect the amounts recorded.
The key assumptions are disclosed in note 12.
- 62 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
5. 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)
Rent and occupancy charges (notes 3 et 12)
Retail network restructuring expenses (note 18)
Gain on divestiture of pharmacies
Loss on disposal of a subsidiary (note 14)
Other
Operating income before depreciation and amortization
and an associate's earnings
Depreciation and amortization
Fixed assets (note 10)
Investment properties (note 11)
Right-of-use assets (note 12)
Intangible assets (note 13)
Financial costs, net
Current interest
Non-current interest
Net interest on lease liabilities (note 12)
Interest on defined benefit obligations net of plan assets (note 23)
Amortization of deferred financing costs
Interest income
Passage of time
Gain on disposal of an investment in an associate (note 15)
Gain on revaluation and disposal of an investment at fair value
(note 9)
Earnings before income taxes
2020
%
2019
%
17,997.5
(14,415.7)
16,767.5
(13,438.8)
3,581.8
19.9
3,328.7
19.9
(954.9)
(96.9)
(296.2)
—
—
(7.5)
(542.7)
(880.6)
(85.8)
(529.2)
(36.0)
6.0
—
(481.6)
(1,898.2)
10.5
(2,007.2)
12.0
1,683.6
9.4
1,321.5
7.9
(232.3)
(0.6)
(154.2)
(75.4)
(462.5)
(3.1)
(103.4)
(34.9)
(4.0)
(2.4)
11.2
(0.2)
(136.8)
—
—
1,084.3
(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
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 a $6.0 gain before income taxes in fiscal 2019 following the disposal of leases and buildings
and the termination of franchise agreements related to these pharmacies, for a total cash consideration of $14.0.
- 63 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
6.
INCOME TAXES
The effective income tax rates were as follows:
(Percentage)
Combined statutory income tax rate
Changes
Loss on disposal of a subsidiary (note 14)
Gain on disposal of an investment in an associate (note 15)
Other
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 losses
Asset ceiling effect
Minimum funding requirement
Loss on disposal of an investment at fair value
- 64 -
2020
26.5
(0.3)
—
0.4
26.6
2019
26.6
—
(0.5)
0.2
26.3
2020
2019
271.1
231.7
16.8
287.9
23.1
254.8
2020
2019
(4.2)
(0.1)
0.2
—
(4.1)
(25.9)
1.1
(0.1)
(0.3)
(25.2)
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(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 26, 2020
As at
September 28, 2019
2020
2019
Accrued expenses, provisions and
other reserves that are tax-
deductible only at the time of
disbursement
Lease liabilities
Deferred tax losses
Inventories
Employee benefits
Accounts receivable on subleases
Investment in a joint venture and an
associate
Difference between net carrying value
and tax value
Fixed assets
Investment properties
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
Deferred tax liabilities
21.3
546.4
8.8
(11.3)
27.5
(181.3)
1.0
(219.9)
0.3
(305.0)
(624.8)
(53.4)
(790.4)
43.5
(833.9)
(790.4)
23.0
—
0.8
(11.4)
21.0
—
1.0
(1.7)
(24.5)
8.0
0.1
2.4
9.5
—
5.3
—
(3.3)
(0.2)
(9.9)
—
9.4
(194.4)
(23.7)
(27.9)
0.2
11.1
5.1
(3.3)
(16.8)
—
—
6.5
(3.0)
(23.1)
0.1
—
(629.9)
(50.1)
(839.9)
2.8
(842.7)
(839.9)
7. 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
2020
2019
252.1
254.9
0.7
0.5
0.8
0.6
253.3
256.3
- 65 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
8.
INVENTORIES
Wholesale inventories
Retail inventories
2020
808.1
460.1
2019
655.1
470.9
1,268.2
1,126.0
9.
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. Finalization 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.
- 66 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
10. FIXED ASSETS
Land
Buildings
Equipment
Leasehold
improvements
Buildings
under
finance
leases
Total
Cost
Balance as at September 29, 2018
473.7
1,188.7
1,507.6
836.7
55.8
4,062.5
Acquisitions
Transfer to investment properties
Disposals and write-offs
7.7
(0.5)
(0.5)
88.9
—
(1.0)
167.6
—
(117.8)
92.6
—
(67.5)
—
—
—
356.8
(0.5)
(186.8)
Balance as at September 28, 2019
480.4
1,276.6
1,557.4
861.8
55.8
4,232.0
Acquisitions
Disposals and write-offs
Adoption of IFRS16 (note 3)
8.8
(2.0)
—
171.6
(12.5)
—
198.4
(79.4)
—
84.5
(43.3)
—
—
463.3
(137.2)
—
(55.8)
(55.8)
Balance as at September 26, 2020
487.2
1,435.7
1,676.4
903.0
—
4,502.3
Accumulated depreciation and
impairment
Balance as at September 29, 2018
Depreciation
Disposals and write-offs
Impairment losses
Balance as at September 28, 2019
Depreciation
Disposals and write-offs
Impairment losses
Adoption of IFRS16 (note 3)
Balance as at September 26, 2020
Net carrying value
—
—
—
—
—
—
—
—
—
—
(227.8)
(53.0)
0.4
(1.4)
(281.8)
(49.9)
10.6
—
—
(829.5)
(111.8)
111.4
(0.5)
(830.4)
(122.0)
76.6
(1.0)
—
(446.6)
(35.2)
(1,539.1)
(41.5)
(4.0)
(210.3)
65.5
(0.2)
—
—
177.3
(2.1)
(422.8)
(39.2)
(1,574.2)
(60.4)
40.8
(1.2)
—
—
—
—
39.2
(232.3)
128.0
(2.2)
39.2
(321.1)
(876.8)
(443.6)
—
(1,641.5)
Balance as at September 28, 2019
480.4
994.8
Balance as at September 26, 2020
487.2
1,114.6
727.0
799.6
439.0
459.4
16.6
2,657.8
—
2,860.8
Impairment losses were recorded on food store assets where cash flows decreased due to local competition. As food
stores' profitability improved, impairment loss reversals can be recognized on previously impaired food store assets.
As at September 26, 2020, work in progress not yet amortized included in buildings, equipment and leasehold
improvements totalled $176.5, $64.2 and $2.2, respectively.
Net additions of fixed assets excluded from the consolidated statements of cash flow was nil in 2020 and 2019.
As at September 26, 2020, the Corporation had contractual commitments to purchase fixed assets totaling $120.7 in
2021, consisting mainly of buildings and equipment.
- 67 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
11.
INVESTMENT PROPERTIES
Balance as at September 29, 2018
Acquisitions
Disposals and write-offs
Depreciation
Balance as at September 28, 2019
Disposals and write-offs
Depreciation
Balance as at September 26, 2020
Cost
46.9
0.1
(4.6)
—
42.9
(0.9)
—
42.0
Accumulated
depreciation
Net carrying
value
(0.8)
—
0.1
(0.7)
(1.4)
0.2
(0.6)
(1.8)
46.1
0.1
(4.5)
(0.7)
41.5
(0.7)
(0.6)
40.2
The fair value of investment properties was $45.6 as at September 26, 2020 ($45.4 as at September 28, 2019). The
Corporation classified 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.
12. LEASES
The Corporation as lessee
The main right-of-use assets held under the Corporation's leases are real estate, vehicles and equipment.
As at September 26, 2020, changes in right-of-use assets were as follows:
Balance at September 29, 2019
New leases
Terminations and adjustments
Impairment losses
Depreciation
Balance as at September 26, 2020
Buildings
Rolling stock and
other
1,194.4
85.2
(15.5)
(0.8)
(143.7)
1,119.6
28.0
13.4
—
—
(10.5)
30.9
Total
1,222.4
98.6
(15.5)
(0.8)
(154.2)
1,150.5
The Corporation has variable lease payments for property taxes, common operating costs and insurance costs for
leased properties. The Corporation also has variable lease payments that vary according to a percentage of retail
sales. These expenses are recorded in operating expenses and totalled $111.2 in 2020.
- 68 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
As at September 26, 2020, changes in lease liabilities were as follows:
Balance at September 29, 2019
New leases
Terminations and adjustments
Lease payments
Interest expense on lease liabilities
Balance at September 26, 2020
Current portion
Non-current portion
2,199.8
150.1
(27.6)
(303.7)
50.8
2,069.4
258.0
1,811.4
The weighted average incremental borrowing rate was 2.35% as at September 26, 2020. The weighted average
remaining contractual life as at September 26, 2020 was 8 years.
Contractual undiscounted payments under leases defined above will be as follows:
2021
2022
2023
2024
2025
2026 and thereafter
306.3
303.5
298.1
275.2
241.7
917.6
2,342.4
The Corporation has also entered into short-term leases or leases with underlying low-value asset, specifically for the
rental of machinery and equipment, as well as vehicles and trailers. These leases were recorded in operating
expenses for a total of $5.3 in 2020.
- 69 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
The Corporation as lessor
The Corporation acted as intermediate lessor for real estate subleases.
Finance leases
Finance income for the year ended in 2020 was $15.9. Future minimum lease payments receivable by the
Corporation relating to subleased properties to third parties will be as follows:
2021
2022
2023
2024
2025
2026 and thereafter
Total undiscounted lease payments receivable
Unearned finance income
Accounts receivable on subleases
Current portion
Non-current portion
Operating leases
102.9
103.0
101.9
95.4
87.3
272.7
763.2
(78.9)
684.3
88.0
596.3
The Corporation leases buildings under operating leases. The Corporation recorded rental income of $51.2 in 2020
($51.7 in 2019).
The lease payments expected to be received over the next five fiscal years for owned properties will be as follows:
2021
2022
2023
2024
2025
2026 and thereafter
45.3
37.1
27.1
16.4
9.1
58.9
193.9
- 70 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
13.
INTANGIBLE ASSETS
Intangible assets with finite useful lives were as follows:
Cost
Balance as at September 29, 2018
Acquisitions
Disposals and write-offs
Balance as at September 28, 2019
Acquisitions
Disposals and write-offs
Adoption of IFRS16 (note 3)
Leasehold
rights
Software
Retail network
retention
premiums
Customer
relationships
Total
58.5
—
(1.1)
57.4
—
—
(57.4)
231.1
16.7
(1.5)
246.3
37.9
(2.2)
—
247.2
1,067.4
1,604.2
34.7
(19.3)
—
—
51.4
(21.9)
262.6
1,067.4
1,633.7
14.5
(13.6)
—
—
—
—
52.4
(15.8)
(57.4)
Balance as at September 26, 2020
—
282.0
263.5
1,067.4
1,612.9
(33.0)
(40.9)
—
—
(73.9)
(40.8)
—
—
(368.1)
(75.4)
20.4
0.1
(423.0)
(75.4)
13.5
43.9
Accumulated amortization
and impairment
Balance as at September 29, 2018
(43.0)
(170.3)
(121.8)
Amortization
Disposals and write-offs
Impairment loss reversals (note 10)
(1.9)
0.9
0.1
(13.8)
0.6
—
(18.8)
18.9
—
Balance as at September 28, 2019
(43.9)
(183.5)
(121.7)
Amortization
Disposals and write-offs
Adoption of IFRS16 (note 3)
Balance as at September 26, 2020
Net carrying value
Balance as at September 28, 2019
Balance as at September 26, 2020
—
—
43.9
—
(16.1)
0.3
—
(18.5)
13.2
—
(199.3)
(127.0)
(114.7)
(441.0)
13.5
—
62.8
82.7
140.9
136.5
993.5
1,210.7
952.7
1,171.9
Net additions of intangible assets excluded from the consolidated statement of cash flows amounted to $5.6 in 2020
($18.3 in 2019).
As at September 26, 2020, work in progress for software not yet amortized totalled $20.0.
Intangible assets with indefinite useful lives were as follows:
Balances as at September 28, 2019 and
September 26, 2020
1,473.3
121.5
83.5 1,678.3
Banners
Private labels
Loyalty programs
Total
- 71 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Impairment testing of loyalty programs and exclusive private labels was conducted at the individual asset level. 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 22.9 and 15.9 (17.2 and 13.0 in 2019) considering a growth rate of 2.0%
(2.0% in 2019) corresponding to the consumer price index. For the private labels, the earnings multiples used were
19.5 and 25.0 (14.3 and 17.4 in 2019) considering a growth rate of 2.0% (2.0% in 2019) corresponding to the
consumer price index. The Corporation classified 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 license 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 2019) and the multiples
used were between 21.6 and 25.0 (15.4 and 17.4 in 2019) considering growth rate of 2.0% (2.0% in 2019)
corresponding to the consumer price index. The Corporation classified the fair value measurement in Level 3, as it is
derived from unobservable market inputs.
No reasonably possible change in 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
Disposals
Balance – end of year
2020
2019
3,306.5
3,302.2
0.6
(6.4)
6.3
(2.0)
3,300.7
3,306.5
The Corporation disposed of the assets of subsidiary MissFresh on December 9, 2019 for a cash consideration of
$3.5 and recorded a loss on disposal of $7.5 mainly related to tangible and intangible assets. The Corporation also
recognized a deferred tax asset of $3.3 related to this subsidiary’s fiscal attributes.
For impairment testing, goodwill with a carrying amount of $1,977.4 ($1,983.2 as at September 28, 2019) was
allocated 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 8.2% (10.5% in 2019) was used.
No reasonably possible change in 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 ($1,323.3 as at September 28, 2019) was
allocated to the operating segment related to pharmaceutical 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. Cash flows for subsequent years are based on forecasts reflecting past experience
and 2% growth in line with the consumer price index. A pre-tax discount rate of 8.8% (8.7% in 2019) was used. No
reasonably possible change in any of these assumptions would result in a carrying amount higher than the
recoverable amount.
- 72 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
15. OTHER ASSETS
Loans to certain customers, bearing interest at floating rates, weighted average rate
of 3.52% in 2020 repayable in monthly installments, maturing through 2031
Investment in a joint venture
Other assets
Current portion included in accounts receivable
2020
2019
59.8
8.4
3.4
71.6
10.1
61.5
62.8
6.9
3.3
73.0
10.6
62.4
During the first quarter of fiscal 2019, the Corporation disposed of its investment in Colo-D Inc., an associate reported
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 of fiscal 2019, 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 26, 2020 and September 28, 2019, the Corporation's bank loans were the credit margins of
structured entities. The consolidated structured entities have credit margins
totaling $8.4 ($8.4 as at
September 28, 2019), bearing interest at prime plus 0.5%, unsecured and maturing on various dates through 2021.
As at September 26, 2020, $0,4 had been drawn down under credit margins (nil as at September 28, 2019) at an
interest rate of 3.0% (4.5% as at September 28, 2019).
17. OFFSETTING
Accounts payable (gross)
Vendor rebate receivables
Accounts payable (net)
2020
2019
1,521.0
1,389.7
(62.1)
(58.3)
1,458.9
1,331.4
- 73 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
18. PROVISIONS
Retail
network
restructuring
expenses
Pharmacy
network
closure and
restructuring
expenses
Distribution
network
modernization
project
expenses
Other
onerous
leases
Total
—
24.9
(9.9)
(0.2)
14.8
5.1
9.7
14.8
14.8
(6.8)
(5.6)
—
2.4
1.5
0.9
2.4
13.9
—
(2.3)
—
11.6
4.0
7.6
11.6
11.6
(2.5)
(2.1)
—
7.0
1.0
6.0
7.0
11.7
—
(0.1)
0.4
12.0
—
12.0
12.0
12.0
—
—
0.3
12.3
—
12.3
12.3
4.7
—
25.6
24.9
(2.0)
(12.3)
—
2.7
1.8
0.9
2.7
2.7
—
(2.7)
—
—
—
—
—
0.2
38.4
9.1
29.3
38.4
38.4
(9.3)
(7.7)
0.3
21.7
2.5
19.2
21.7
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
Balance as at September 28, 2019
Amounts used
Adoption of IFRS16 (note 3)
Passage of time
Balance as at September 26, 2020
Current provisions
Non-current provisions
Balance as at September 26, 2020
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 an $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 three Brunet
drugstores and the divestiture of ten 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 2024, building a new fresh
distribution centre and a new frozen distribution centre. During the first quarter of 2018, the Corporation recorded an
$11.4 before taxes provision related to termination and retirement benefits in connection with the modernization of the
Ontario distribution network.
- 74 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(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%, 2.53% in 2020 (2.65% in 2019), maturing on
February 27, 2020
Series C Notes, bearing interest at a fixed nominal rate of 3.20%, maturing on
December 1, 2021
Series F Notes, bearing interest at a fixed nominal rate of 2.68%, maturing on
December 5, 2022
Series G Notes bearing interest at a fixed nominal rate of 3.39%, maturing on
December 6, 2027
Series B Notes, bearing interest at a fixed nominal rate of 5.97%, maturing on
October 15, 2035
Series D Notes, bearing interest at a fixed nominal rate of 5.03%, maturing on
December 1, 2044
Series H Notes, bearing interest at a fixed nominal rate of 4.27%, maturing on
December 4, 2047
Series I Notes, bearing interest at a fixed nominal rate of 3.41%, maturing on
February 28, 2050
Loans, maturing on various dates through 2031, bearing interest at an average
rate of 2.11% (2.50% in 2019)
Obligations under finance leases, bearing interest at an effective rate of 7.67% in
2019 (note 3 - adoption of IFRS16)
Deferred financing costs
Current portion
2020
2019
—
400.0
300.0
300.0
300.0
300.0
450.0
450.0
400.0
400.0
300.0
300.0
450.0
450.0
400.0
—
47.2
51.0
—
(14.6)
20.9
(14.3)
2,632.6
2,657.6
20.6
428.6
2,612.0
2,229.0
On February 26, 2020, the Corporation issued through a private placement Series I unsecured senior notes in the
aggregate principal amount of $400.0, bearing interest at a fixed nominal rate of 3.41%, maturing on
February 28, 2050. On February 27, 2020, the Corporation redeemed all of the Series E notes in the amount of
$400.0 that matured on the same day.
The Notes of the Corporation are redeemable at the issuer's option prior to maturity at the prices, terms and
conditions specified for each series.
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 26, 2020 and September 28, 2019,
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.
The debt related to the acquisition of intangible assets, excluded from debt changes presented at the consolidated
statements of cash flows, totaled $5.6 in 2020 ($18.3 in 2019).
- 75 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Repayments of debt in the upcoming fiscal years will be as follows:
2021
2022
2023
2024
2025
2026 and thereafter
20. OTHER LIABILITIES
Lease liabilities (note 3 - adoption of IFRS16)
Deferred revenues
Loans
Notes
Total
21.1
2.2
3.0
1.1
0.9
18.9
47.2
—
300.0
300.0
—
—
21.1
302.2
303.0
1.1
0.9
2,000.0
2,018.9
2,600.0
2,647.2
2020
—
2.0
2.0
2019
12.1
0.7
12.8
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 29, 2018
Shares redeemed for cash, excluding premium of $126.1
Stock options exercised
Balance as at September 28, 2019
Shares redeemed for cash, excluding premium of $190.5
Stock options exercised
Balance as at September 26, 2020
Number
(Thousands)
256,253
1,724.1
(2,925)
1,112
(19.8)
28.0
254,440
1,732.3
(3,910)
265
(26.7)
8.2
250,795
1,713.8
- 76 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Treasury shares
The treasury shares changes during the year are summarized as follows:
Balance as at September 29, 2018
Acquisitions
Released
Balance as at September 28, 2019
Acquisitions
Released
Balance as at September 26, 2020
Number
(Thousands)
603
115
(141)
577
112
(137)
552
(24.9)
(5.6)
5.9
(24.6)
(6.2)
5.7
(25.1)
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 26, 2020, a balance of 3,923,996 shares could be
issued following the exercise of stock options (4,189,336 as at September 28, 2019). 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.
The outstanding options and the changes during the year were summarized as follows:
Weighted
average
exercise
price
(Dollars)
Number
(Thousands)
3,067
416
(1,112)
(90)
2,281
355
(265)
(49)
2,322
30.30
47.56
21.55
40.71
37.30
56.92
27.35
45.08
41.27
Balance as at September 29, 2018
Granted
Exercised
Cancelled
Balance as at September 28, 2019
Granted
Exercised
Cancelled
Balance as at September 26, 2020
- 77 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
The information regarding the stock options outstanding and exercisable as at September 26, 2020 is summarized
below:
Outstanding options
Exercisable options
Range of exercise prices
(Dollars)
Number
(Thousands)
Weighted
average
remaining
period
(Months)
Weighted
average
exercise
price
(Dollars)
21.90 to 24.69
35.42 to 40.31
41.16 to 56.92
271
964
1,087
2,322
6.8
28.8
63.5
42.5
21.98
38.59
48.47
41.27
Weighted
average
exercise
price
(Dollars)
21.98
38.05
41.37
33.46
Number
(Thousands)
271
553
73
897
The weighted average fair value of $8.10 per option ($6.57 in 2019) for stock options granted during fiscal 2020 was
determined at the time of grant using the Black-Scholes model and the following weighted average assumptions: risk-
free interest rate of 1.7% (1.8% in 2019), expected life of 5.5 years (5.5 years in 2019), expected volatility of 16.0%
(16.1% in 2019) and expected dividend yield of 1.4% (1.7% in 2019). 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 $2.3 for fiscal 2020 ($2.0 in 2019).
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 are summarized as follows:
Balance as at September 29, 2018
Granted
Settled
Cancelled
Balance as at September 28, 2019
Granted
Settled
Cancelled
Balance as at September 26, 2020
Number
(Thousands)
579
226
(141)
(59)
605
205
(137)
(55)
618
The weighted average fair value of $54.11 per PSU ($47.57 in 2019) for PSUs granted during fiscal 2020 was the
stock market valuation of a Common Share of the Corporation at grant date.
The compensation expense comprising all PSUs amounted to $7.2 for fiscal 2020 ($6.6 in 2019).
- 78 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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 $2.9 for fiscal 2020 ($6.2 in 2019).
As at September 26, 2020, the DSU liability amounted to $17.5 ($17.3 as at September 28, 2019).
22. DIVIDENDS
In fiscal 2020, the Corporation paid $220.7 in dividends to holders of Common Shares ($198.9 in 2019), or $0.8750
per share ($0.7800 in 2019). On September 28, 2020, the Corporation's Board of Directors declared a quarterly
dividend of $0.2250 per Common Share payable on November 10, 2020.
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:
Balance – beginning of year
Participant contributions
Benefits paid
Items in net earnings
Current service cost
Interest cost
Past service cost
Actuarial gains
Items in comprehensive income
Actuarial gains from demographic assumptions
Actuarial losses from financial assumptions
Adjustments due to experience
Balance – end of year
- 79 -
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
1,512.0
9.6
(55.2)
56.2
46.9
—
—
103.1
—
74.9
0.2
75.1
1,644.6
34.9
—
(3.5)
2.5
1.1
—
(1.4)
2.2
(2.2)
0.7
1.4
(0.1)
33.5
1,262.7
7.8
(49.2)
43.8
50.3
—
—
94.1
(0.1)
199.4
(2.7)
196.6
35.0
—
(3.7)
2.5
1.4
0.2
(1.3)
2.8
(1.3)
2.1
—
0.8
1,512.0
34.9
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
The present value of the defined benefit obligation may be reflected as follows:
(Percentage)
Active plan participants
Deferred plan participants
Retirees
The changes in the fair value of plan assets were as follows:
Fair value – beginning of year
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
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
59
5
36
70
—
30
59
5
36
71
—
29
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
1,475.6
52.0
9.6
(55.2)
44.5
(2.0)
42.5
59.5
1,584.0
—
3.5
—
(3.5)
—
—
—
—
—
1,290.6
78.1
7.8
(49.2)
50.3
(1.4)
48.9
99.4
1,475.6
—
3.7
—
(3.7)
—
—
—
—
—
The changes in the asset ceiling and the minimum funding requirement for pension plans were as follows:
Balance - beginning of year
Interest
Change in defined benefit assets
Change in defined benefit liabilities
Balance - end of year
2020
2019
Asset
ceiling
Minimum
funding
requirement
Asset
ceiling
Minimum
funding
requirement
(15.3)
(0.8)
(18.9)
(0.5)
(0.3)
—
(16.1)
—
—
0.8
—
(0.7)
4.3
—
(15.3)
(0.2)
—
—
(0.6)
(0.8)
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.
- 80 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(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
(1,644.6)
(33.5)
(1,512.0)
(34.9)
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
Fair value of plan assets – end of year
1,584.0
—
1,475.6
Funded status
Asset ceiling effect
Minimum funding requirement
Defined benefit assets
Defined benefit liabilities
—
(34.9)
—
—
(60.6)
(16.1)
—
(33.5)
—
—
(36.4)
(15.3)
(0.8)
(76.7)
(33.5)
(52.5)
(34.9)
19.7
(96.4)
(76.7)
—
(33.5)
(33.5)
25.6
(78.1)
(52.5)
—
(34.9)
(34.9)
The defined contribution and defined benefit plans expense recorded in net earnings was as follows:
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
Defined contribution plans, including multi-employer plans
37.6
—
39.2
—
Defined benefit plans
Current service cost
Past service cost
Actuarial 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
56.2
—
—
2.0
58.2
95.8
2.9
98.7
2.5
—
(1.4)
—
1.1
1.1
1.1
2.2
43.8
—
—
1.4
45.2
84.4
0.7
85.1
2.5
0.2
(1.3)
—
1.4
1.4
1.4
2.8
The remeasurements recognized as other comprehensive income were as follows:
Actuarial losses (gains) on accrued obligation
Return on plan assets
Change in the effect of the asset ceiling
Change in the minimum funding requirement
2020
2019
Pension
plans
Other
plans
Pension
plans
Other
plans
75.1
(59.5)
0.3
(0.8)
15.1
(0.1)
—
—
—
(0.1)
196.6
(99.4)
(4.3)
0.6
93.5
0.8
—
—
—
0.8
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 $55.5 in 2020
($81.8 in 2019). The Corporation plans to contribute $53.1 to the defined benefit plans and $30.6 to multi-employer
plans during the next fiscal year.
- 81 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Weighted average duration of defined benefit obligations was 16 years as at September 26, 2020 and
September 28, 2019.
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 December 2019. The next valuations will be performed in
December 2020.
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 other 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
Other
2020
2019
19
25
49
7
18
22
51
9
Pension plan assets included shares issued by the Corporation with a fair value of $6.3 as at September 26, 2020
($6.1 as at September 28, 2019).
The principal actuarial assumptions used in determining the defined benefit obligation and service costs were as
follows:
(Percentage)
Pension plans
Other plans
Pension plans
Other plans
2020
2019
Discount rate on defined benefit obligation
Discount rate on service costs
Rate of compensation increase
2.74
3.30
3.00
2.74
3.30
3.00
3.01
3.96
3.00
3.01
3.96
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
(246.5)
298.3
(3.0)
3.7
The assumed annual health care cost trend rate per participant was set at 5.5% (5.5% in 2019). 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)
1.4
- 82 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
24. COMMITMENTS
Service contracts
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
25. CONTINGENCIES
Guarantees
2020
100.2
178.6
0.2
279.0
2019
141.9
330.3
10.3
482.5
The Corporation has guaranteed loans granted to certain customers by financial institutions, with varying terms
through 2030. The balance of these loans amounted to $23.5 as at September 26, 2020 ($24.1 as at
September 28, 2019). No liability has been recorded in respect of these guarantees for the years ended
September 26, 2020 and September 28, 2019.
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 26, 2020, inventory financing
amounted to $159.3 ($192.4 as at September 28, 2019). 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 five 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 financial institutions or linked to the loan
balance at the buyback date. As at September 26, 2020, financing related to the equipment amounted to $36.2 ($44.6
as at September 28, 2019).
No liability has been recorded in respect of these guarantees for the years ended September 26, 2020 and
September 28, 2019 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 February 2020, a proposed class action relating to opioids was filed in British Columbia by opioid end users against
a large group of defendants including subsidiaries of the Corporation, Pro Doc Ltée. and The Jean Coutu Group
(PJC) Inc. In May 2019, two proposed class actions relating to opioids were also filed in Ontario and in Québec by
opioid end users 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
- 83 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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, Québec and British Columbia
proposed claims filed by opioid end users seek recovery of damages on behalf of opioid end users in general. The
Corporation believes these proceedings are without merits and that, in certain cases, there is no jurisdiction. No
provision for contingent losses has been recognized in the Corporation’s annual consolidated financial statements.
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. Based on the information available to date, the Corporation does not
believe that it or any of its employees have violated the Competition Act. Class actions lawsuits have also been filed
against the Corporation, suppliers and other retailers. On December 19, 2019, the Québec Superior Court granted
the application for authorization to institute one of these class actions, 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 all
these actions on the merits. No provision for contingent losses has been recognized in the Corporation’s annual
consolidated financial statements.
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. No provision for contingent losses has been recognized
in the Corporation's annual consolidated financial statements.
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.
Joint venture
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
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Canada
46.5
46.5
- 84 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
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
Companies controlled by a member of
the Board of Directors
2020
2019
Sales
Services
received
Sales
Services
received
—
32.8
32.8
—
—
—
—
66.6
66.6
5.2
—
5.2
2020
2019
Accounts
receivable
Accounts
payable
Accounts
receivable
Accounts
payable
2.1
2.1
—
—
4.9
4.9
—
—
Compensation for the principal officers and directors was as follows:
Compensation and current benefits
Post-employment benefits
Share-based payment
2020
2019
6.1
1.3
5.8
8.3
0.8
6.2
13.2
15.3
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 target range of 30% to 40% of the prior fiscal year's adjusted net
earnings(1), excluding non-recurring items.
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 2020 annual results regarding its capital management objectives were as follows:
•
non-current debt and lease liabilities/total capital ratio of 41.8%, 29.8% excluding lease liabilities (30.6% as at
September 28, 2019);
a BBB credit rating confirmed by S&P and DBRS (same rating in 2019);
a dividend representing 30.2% of the previous year adjusted net earnings(1), excluding non-recurring items
(34.3% in 2019).
•
•
- 85 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
28. FINANCIAL INSTRUMENTS
FAIR VALUE
The non-current financial instruments' book and fair values were as follows:
Other assets
Assets measured at amortized cost
Loans to certain customers (note 15)
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
Series I Notes
Loans
2020
2019
Book value
Fair value
Book value
Fair value
59.8
59.8
62.8
62.8
—
300.0
300.0
450.0
400.0
300.0
450.0
400.0
47.2
—
307.9
311.0
503.6
542.8
391.0
536.6
416.5
47.2
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
2,647.2
3,056.6
2,651.0
2,892.1
Fair value measurements hierarchy
Fair value measurements of those 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 classified
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); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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 classified the fair value measurement in Level 2, as it is
derived from observable market inputs.
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 classified the fair value measurement in
Level 2, as it is derived from observable market inputs.
The changes of the current non-controlling interest-related liability were as follows:
Balance – beginning of year
Buyout of minority interests
Change in fair value
Balance – end of year
- 86 -
2020
51.1
(51.6)
0.5
—
2019
39.3
—
11.8
51.1
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Under the shareholder agreement, the Corporation acquired the minority interest in Première Moisson during the first
quarter of fiscal 2020 for a cash consideration of $51.6, which represents the price payable based on Première
Moisson’s fiscal 2019 results.
INTEREST RATE RISK
In the normal course of business, the Corporation is exposed primarily to interest rate risk as a result of loans and
receivables that it grants, as well as the 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 26, 2020 and September 28, 2019, there were no
outstanding interest rate swap contracts.
CREDIT RISK
Loans and receivables / Guarantees
The Corporation sells products to consumers and retailers in Canada. When it sells products, it gives retailers credit.
In addition, to help certain retailers 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 terms to be met and the required guarantees. As at September 26, 2020 and
September 28, 2019, 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 recognized any material losses related to credit risk.
As at September 26, 2020, the maximum potential liability under guarantees provided amounted to $23.5 ($24.1 as
at September 28, 2019) and no liability had been recognized as at that date.
Financial assets at fair value through profit and loss
With regard to its financial assets at fair value through profit and loss, consisting of cash equivalents, 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.
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 26, 2020, the maximum exposure to credit risk for the foreign exchange forward contracts was equal
to their carrying amount. As at September 28, 2019, 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, lease 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 C, F, G, B, D, H and I Notes mature only in 2024, 2021, 2022, 2027, 2035, 2044, 2047 and 2050, respectively.
The Corporation also has an unused authorized balance of $600.0 on its revolving credit facility.
- 87 -
Notes to consolidated financial statements
September 26, 2020 and September 28, 2019
(Millions of dollars, unless otherwise indicated)
Undiscounted cash flows (capital and interest)
Accounts
payable
Loans
Notes
Lease
liabilities
Total
1,458.9
21.7
104.7
306.3
1,891.6
—
—
—
1,458.9
9.0
3.0
19.6
53.3
1,801.6
1,790.3
3,600.9
1,000.0
1,479.1
237.3
1,240.3
8.5
1,507.2
4,385.4
2,342.4
8,240.0
Maturing under 1 year
Maturing in 1 to 10 years
Maturing in 11 to 20 years
Maturing over 20 years
FOREIGN EXCHANGE RISK
Given that some of its purchases are denominated in 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 26, 2020 and September 28, 2019, the fair value of foreign exchange forward
contracts was insignificant.
29. COMPARATIVE FIGURES
Interest paid on debt was reclassified from operational activities to financing activities in the consolidated statements
of cash flows.
30. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements for the fiscal year ended September 26, 2020 (including comparative figures)
were approved for issue by the Board of Directors on November 17, 2020.
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DIRECTORS AND OFFICERS
Board of Directors
Maryse Bertrand(1)(3)
Westmount, Québec
Stephanie Coyles(1)
Toronto, Ontario
Christian W.E. Haub(2)
Greenwich, Connecticut
Pierre Boivin (2)(3)
Montréal, Québec
François J. Coutu
Montréal, Québec
Michel Coutu
Montréal, Québec
Claude Dussault(2)(3)
Québec, Québec
Russell Goodman(1)(3)
Mont-Tremblant, Québec
Marc Guay(1)(2)
Oakville, Ontario
Eric La Flèche
Town of Mount-Royal,
Québec President and
Chief Executive Officer
Christine Magee(3)
Oakville, Ontario
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 La Flèche
President and Chief
Executive Officer
Alain Champagne
President of The Jean Coutu
Group (PJC) Inc.
François Thibault
Executive Vice President,
Chief Financial Officer and
Treasurer
Serge Boulanger
Senior Vice President,
National Procurement and
Corporate Brands
Christina Bédard
Vice President,
eCommerce and Digital
Strategy
Éric Legault
Vice President,
Technology
Infrastructure, METRO
Genevieve Bich
Vice President, Human
Resources
Frédéric Legault
Vice President,
Information Systems
Marc Giroux
Executive Vice President
and Québec Division Head
and eCommerce
Carmine Fortino
Executive Vice President,
Ontario Division Head and
National Supply Chain
Martin Allaire
Vice President, Real Estate
and Engineering
Dan Gabbard
Vice President, Supply
Chain, METRO
Marie-Claude Bacon
Vice President, Public Affairs
and Communications
Karin Jonsson
Vice President, Corporate
Controller
Simon Rivet
Vice President, General
Counsel and Corporate
Secretary
Alain Tadros
Vice President,
Marketing
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
our website: 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
Annual meeting
The Annual General Meeting of
Shareholders will be held virtually
via a live webcast on
January 26, 2021 at 10:00 a.m.
Stock listing
Toronto Stock Exchange
Ticker Symbol: MRU
DIVIDENDS*
2021 FISCAL YEAR
Declaration date
January 25, 2021
April 20, 2021
August 10, 2021
September 27, 2021
Record date
February 11, 2021
May 20, 2021
September 1, 2021
October 22, 2021
Payment date
March 8, 2021
June 11, 2021
September 22, 2021
November 9, 2021
* Subject to approval by the Board of Directors
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