The North West Company Inc.
2022 ANNUAL REPORT
Financial Highlights
All currency figures in this report are in Canadian dollars, unless otherwise noted
($ in thousands, except per share information)
RESULTS FOR THE YEAR
Year Ended
January 31, 2023
Year Ended
January 31, 2022
Year Ended
January 31, 2021
Sales
Same store sales % increase/(decrease) (1)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (2)
$
$
Earnings from operations (EBIT)
Net earnings
Net earnings attributable to The North West Company Inc.
Cash flow from operating activities (3)
FINANCIAL POSITION
$
$
2,352,760
(0.8) %
278,678
180,305
125,836
122,190
182,838
$
$
2,248,796
(0.4) %
311,375
220,425
157,451
154,802
224,135
2,359,239
19.0 %
301,427
209,349
143,560
139,874
338,718
Total assets
Debt
Total equity
FINANCIAL RATIOS
Debt-to-equity
Return on net assets (RONA) (2)
Return on average equity (ROE) (2)
Sales blend: Food
General Merchandise and other
PER SHARE ($) - DILUTED
EBITDA (2)
Net earnings attributable to shareholders
Cash flow from operating activities
Market price: January 31
high
low
$
1,336,890
$
1,219,273
$
1,191,168
290,050
647,900
235,640
580,204
281,422
505,231
.45:1
17.9 %
20.5 %
77.3 %
22.7 %
5.73
2.51
3.76
36.24
40.09
30.55
$
$
.41:1
23.8 %
29.0 %
76.7 %
23.3 %
6.35
3.16
4.57
35.05
38.20
30.24
$
.56:1
22.4 %
30.7 %
76.4 %
23.6 %
6.09
2.82
6.84
32.37
36.92
16.06
(1) All references to same store sales exclude the foreign exchange impact.
(2) See Non-GAAP Financial Measures section.
(3) See Consolidated Liquidity and Capital Resources.
THE NORTH WEST COMPANY INC. 2022
Annual Report
TABLE OF CONTENTS
Management's Discussion & Analysis
Forward-Looking Statements .....................................................................................
President & CEO Message ..........................................................................................
Chair of the Board Message .......................................................................................
Our Business Today ...................................................................................................
Vision, Principles and Strategies .................................................................................
Key Performance Drivers and Capabilities Required to Deliver Results ......................
Consolidated Results and Financial Performance ......................................................
Canadian Operations Financial Performance .............................................................
International Operations Financial Performance ........................................................
Consolidated Liquidity and Capital Resources ..........................................................
Quarterly Financial Information ..................................................................................
Fourth Quarter Highlights .........................................................................................
Disclosure Controls ...................................................................................................
Internal Controls Over Financial Reporting ................................................................
Outlook .....................................................................................................................
Risk Management .....................................................................................................
Corporate Social Responsibility & Sustainable Development .....................................
Critical Accounting Estimates ....................................................................................
Future Accounting Standards ....................................................................................
Non-GAAP Financial Measures ..................................................................................
Glossary of Terms & Abbreviations ............................................................................
Eleven-Year Financial Summary ................................................................................
Consolidated Financial Statements
Management’s Responsibility for Financial Statements .............................................
Independent Auditor’s Report ...................................................................................
Consolidated Balance Sheets .....................................................................................
Consolidated Statements of Earnings ........................................................................
Consolidated Statements of Comprehensive Income ...............................................
Consolidated Statements of Changes in Shareholders’ Equity ...................................
Consolidated Statements of Cash Flows ....................................................................
Notes to Consolidated Financial Statements .............................................................
Shareholder Information .......................................................................................
Corporate Governance ...........................................................................................
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MANAGEMENT'S DISCUSSION & ANALYSIS
FORWARD-LOOKING STATEMENTS
Inc. (“NWC”) and
Unless otherwise stated, this Management's Discussion & Analysis
its
(“MD&A”) for The North West Company
subsidiaries (collectively, “North West Company”, the “Company”,
“North West”, or “NWC”) is based on, and should be read in
conjunction with the 2022 annual audited consolidated financial
statements and accompanying notes. The Company's annual
audited consolidated financial statements and accompanying notes
for the year ended January 31, 2023 are in Canadian dollars, except
where otherwise indicated, and are prepared in accordance with
International Financial Reporting Standards (“IFRS”).
The Board of Directors, on the recommendation of its Audit
Committee, approved the contents of this MD&A on April 5, 2023
and the information contained in this MD&A is current to April 5,
2023, unless otherwise stated.
This MD&A contains forward-looking statements about North West
including its business operations, strategy and expected financial
performance and condition. Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, or include words such as “expects”,
“anticipates”, “plans”, “believes”, “estimates”, “intends”, “targets”,
“projects”, “forecasts” or negative versions thereof and other similar
expressions, or future or conditional future financial performance
(including sales, earnings, growth rates, capital expenditures,
dividends, debt levels, financial capacity, access to capital and
liquidity), ongoing business strategies or prospects, the Company's
intentions regarding a normal course issuer bid, the potential impact
of a pandemic on the Company's operations, supply chain and the
Company's related business continuity plans, the realization of cost
savings from cost reduction plans, and possible future action by the
Company.
Forward-looking statements are based on current expectations
and projections about future events and are inherently subject to,
among other things, risks, uncertainties and assumptions about the
Company, economic factors and the retail industry in general. They
are not guarantees of future performance, and actual events and
results could differ materially from those expressed or implied by
forward-looking statements made by the Company due to changes
in economic conditions, political and market factors in North
America and internationally. These factors include, but are not
limited to, changes in inflation, interest and foreign exchange rates,
the Company's ability to maintain an effective supply chain, changes
in accounting policies and methods used to report financial
condition, including uncertainties associated with critical accounting
assumptions and estimates, the effect of applying future accounting
changes, business competition, technological change, changes in
government regulations and
laws,
unexpected judicial or regulatory proceedings, catastrophic events,
the Company's ability to complete and realize benefits from capital
projects, E-Commerce investments, strategic transactions and the
integration of acquisitions, the Company's ability to realize benefits
from investments in information technology ("IT") and systems,
including IT system implementations, or unanticipated results from
these initiatives and the Company's success in anticipating and
managing the foregoing risks.
legislation, changes
in tax
The reader is cautioned that the foregoing list of important
factors is not exhaustive. Other risks are outlined in the Risk
Management section of this MD&A, in the Risk Factors sections of the
Annual Information Form and in our most recent consolidated
financial statements, management information circular, material
change reports and news releases. The reader is also cautioned to
consider these and other factors carefully and not place undue
reliance on forward-looking statements. Other than as specifically
required by applicable law, the Company does not intend to update
any forward-looking statements whether as a result of new
information, future events or otherwise.
Additional information on the Company, including our Annual
Information Form, can be found on SEDAR at www.sedar.com or on
the Company's website at www.northwest.ca.
2THE NORTH WEST COMPANY INC. - 2022 President & CEO Message
This past year reinforced what it means for us here at the North
West Company to be driven by one purpose: Making people’s lives
better in the communities we serve. As we emerged from the
pandemic we were met with lower government income support
payments, higher out-of-market travel, inflationary cost increases,
lingering supply chain disruptions and labor shortages.
Within this challenging environment and guided by our
purpose, we focused our attention on three key areas: Operational
Excellence, Growth, and Community. By concentrating on these
areas, we have been able to sustain and enhance the trust of the
communities we serve, while positioning the organization for the
future by uncovering additional potential in our core business and
building the capabilities to unlock it.
Operational Excellence – We firmly believe that our best
approach to address the challenges outlined above and to deliver
sustainable earnings growth and create long-term value, is to build
on our operational capabilities and core competencies.
Given the remote nature of the markets we serve, our
customers were not only
impacted by significant supplier
merchandise cost increases, but also by higher fuel-related freight
costs. In order to stay true to our purpose of making people’s lives
better in the communities we serve, our teams prioritized cost
control and worked closely with our vendor and carrier partners to
provide value for our customers within this higher cost inflation
environment.
More than ever, leveraging our supply chain capabilities was
crucial. To minimize costs, we accelerated projects to build local
warehouses in regional centers like Bethel, Alaska. This investment
enables us to optimize our transportation mix, by maximizing the
utilization of summer barges to ship durable goods, while reducing
utilization of higher cost air-freight. In Canada, we continued to focus
on optimizing load factors and aircraft utilization rates at North Star
Air, that was further enhanced by leveraging the investment in a
large cargo door ATR 72-500 series aircraft that enables loading and
unloading efficiencies and provides NSA with greater flexibility to
offer cargo service for larger items.
We also enhanced our product offering with expanded
assortments that include private label and club pack items and
increased promotions on essential products through our Price Drop
and Price-Lock campaigns.
While in the short-term, the impact of not fully passing on
inflationary cost increases has had a negative impact on our margins,
long-term and
we believe
is the right approach for the
the
demonstrates our commitment
communities we serve.
the customers and
to
it
Growth – At the core, an indomitable enterprising spirit has driven
the North West Company's successes over the years and continued
to be a key factor in 2022 as we expanded to new markets.
In Alaska, we opened stores in Toksook Bay and Metlakatla. The
latter is the only First Nation reserve community in the State of
Alaska and therefore carries a tremendous sense of pride for the
responsibility entrusted to North West by this community. In
addition to new stores, Alaska Commercial Company launched a
store-pick E-Commerce platform that leverages our logistics and
supply chain capability to expand B-to-B and B-to-C sales. The new
E-Commerce platform was implemented in the fourth quarter of
2022. We anticipate it is going to take some time for this new
channel to mature, however the application and functionality has
improved efficiencies, particularly in the shopping experience of
remote ‘bush’ ordering, and it has been well received by our
customers.
In Canada, we opened a store in a new market, Sheshatshiu,
Newfoundland and Labrador. We’re proud to have been selected by
the Innu First Nation to serve the community. We added new stores
in existing markets with the addition of Quickstop convenience
stores in Coral Harbour, Nunavut and Little Grand Rapids, Manitoba.
We also expanded our market share at North Star Air through new
third-party contracts for cargo transportation services and charter
passenger services.
Community – As part of our on-going efforts, we proudly support
a wide range of community events and causes – from traditional and
cultural celebrations to sports teams and healthy living activities. In
2022, we provided $2.2 million in donations and sponsorships in
addition to volunteer time from North West Company employees.
As a company that serves over 175,000 northern Indigenous
Peoples in Canada, one of our most meaningful accomplishments
this past year was the launch of “Our Promise to Indigenous
Peoples”: a reaffirmed commitment to building more collaborative
relationships that will enhance the inclusion and social well-being of
Indigenous People of Canada,
the spirit of Truth and
Reconciliation. It is not only the right thing to do, it is at the core of
who we are. We are guiding this commitment through three pillars:
in
•
•
•
Well-being & Security - a commitment to working
collaboratively with Indigenous Peoples to advance health
and well-being in the communities we serve;
Stronger Community Bonds - developing stronger
community bonds by
the past and
committing to a better future; and
Inclusion & Economic Success - improving Indigenous
inclusion in store and head office management while
encouraging Indigenous economic development.
recognizing
leaders,
Our Promise and pillars were developed in consultation with
Indigenous
including employees within our own
organization. With over 1,900 self-reported Indigenous employees,
we are the largest private employer of Indigenous Peoples in
Canada, and are committed to making sure that Our Promise is
embedded in everything that we do.
The Promise is woven into our sustainability strategy and
Environmental, Social and Governance (ESG) framework and is part
of our Diversity, Equity and Inclusion policy. It will guide meaningful
opportunities for impact, establish priorities for years to come and
will serve as a model for our global operations.
3ANNUAL REPORT Our journey ahead – I am excited about the opportunities
ahead and our value creation potential. We have ambitious goals to
deliver value for our customers and shareholders and to have a
material positive societal impact as we help improve lives of people
in the communities we serve.
Our history has proven time and time again that we are resilient.
Inflation and the potential of a global macroeconomic slowdown are
near-term headwinds but the resiliency of the food and essential
products and services that we provide to the communities we serve
will help mitigate these challenges. Looking forward, we are well-
positioned in 2023 given the expected tailwinds from government
transfer payments and higher
in
communities we serve.
infrastructure
spending
Maintaining a long-term view is what has made our Company
successful over the years and we will continue to solidify our core
retail business and identify further value creation opportunities. We
will deliver operational excellence with a focus on our product
offering by optimizing assortments and aligning value with customer
needs. We will continue enhancing our supply chain and logistics
capabilities to ensure availability of essential products on the most
efficient and cost effective basis. We will continue to modernize our
technology to enable greater efficiencies and provide scale and
capability for the future. All of these priorities strengthen our core
business and the capabilities that have enabled us to be the leading
provider of essential products and services to remote communities
and provide a solid foundation upon which to grow and provide
sustainable value creation.
Once again
I want to express my gratitude to our
passionate and committed leaders and teams. They are the ones that
make people’s lives better in the communities we serve. I’m
optimistic about the future. There is tremendous untapped potential
that we can unleash to drive efficiencies and grow, and the efforts
we have spearheaded over this past year confirm it.
Daniel G. McConnell
President & CEO
April 5, 2023
4THE NORTH WEST COMPANY INC. - 2022 Board succession and renewal has also continued at North
West in 2022. During the year, we were excited to welcome Rachel
Huckle to the Board. Ms. Huckle is the President and Chief Operating
Officer for Staples Canada ULC and brings with her over 25 years of
diverse retail experience. In her short time on the Board, Rachel has
already made great contributions, bringing additional retailing and
business insight to our discussions. I look forward to Rachel’s
continuing contributions and insights.
In closing, on behalf of the entire Board, I want to once
again thank all Nor’ Westers for their ongoing commitment to
making people’s lives better in the communities we serve, the
communities for allowing us the opportunity to serve them, and our
shareholders for their continued support.
Brock Bulbuck
Chair of the Board
April 5, 2023
Chair of the Board Message
I am honoured to write my first message as Chair of the
Board of Directors of The North West Company. As previously
announced, Sanford (Sandy) Riley retired as Chair of the Board of
Directors following the Company’s Annual General Meeting on June
8, 2022. Sandy was first elected as a Director in 2003 and served in
the role of Chair from 2008 until his retirement this year. On behalf of
the Board, I want to once again thank Sandy for his leadership and
for the many contributions he made during his 19 years on the Board
and in his role as Chair. I personally also want to thank Sandy for his
support and mentorship in my transition into the role of Chair.
As was reflected in the outlook in last year’s annual report,
the post-pandemic environment of 2022 brought the challenges of
lower government income support, higher out-of-market travel,
inflationary cost increases, continuing supply chain disruption and
labor shortages. Despite these challenges, the dedicated and
passionate team of Nor’ Westers worked hard to continue to deliver
on the Company’s main purpose: Making people’s lives better in the
communities we serve, and in doing so was also able to continue to
deliver impressive sales and earnings growth over pre-pandemic
levels. So, before I go on, I want to acknowledge the great work that
Nor’ Westers did once again in 2022, and thank them for their
continued efforts and dedication to North West’s vision and purpose.
In remote-market retailing, serving the customer also
means serving the community. North West continues to support
events and programs, organizations, schools and sports teams in the
communities we serve. Although there are a number of initiatives
that made a positive impact on the communities we serve in 2022,
one of the highlights of the year was the launch of “Our Promise to
Indigenous Peoples” which is a reaffirmed commitment to building
more collaborative relationships that will enhance the inclusion and
social well-being of Indigenous People of Canada. Our Promise to
Indigenous Peoples was developed in consultation with Indigenous
leaders, including employees, and reflects the spirit of reconciliation
contained in the Truth and Reconciliation Commission’s Calls to
Action. Our Promise to Indigenous Peoples was led by management
with full support and engagement from the Board and is integrated
within our ESG framework and the work we are doing to enhance
diversity, equity and inclusion within our Company.
2022 was our first full year with Dan McConnell as our CEO
leading the Company. CEO transition support and oversight
therefore continued to be a major focus of the Board for 2022. As we
mentioned
last year, Dan hit the ground running after his
appointment in mid-2021, and that pace continued throughout
2022. I am pleased to report that the transition to Dan in the role of
CEO has gone extremely well, with Dan and the Board very quickly
developing and maintaining a great working relationship, grounded
on a foundation of common goals and open and transparent
communication. The Board is excited to continue to work with Dan
and his high-energy leadership team to drive the Company forward
to continue to deliver value to the communities we serve and to our
shareholders and stakeholders.
5ANNUAL REPORT Management's
Discussion &
Analysis
OUR BUSINESS TODAY
The North West Company
leading retailer to rural and
is a
developing small population communities in the following regions:
northern Canada, rural Alaska, the South Pacific and the Caribbean.
Our stores offer a broad range of products and services with an
emphasis on food and a compelling value offer of being the best
local shopping choice for everyday household and lifestyle needs.
North West's core strengths include: our ability to adapt to
varied community preferences and priorities; our on-the-ground
presence with hard-to-replicate operating skills, customer insights
and facilities; our logistics capability in moving product to our
markets; and, our ability
these strengths within
complementary businesses.
to apply
North West has a rich enterprising legacy as one of the longest
continuing retail enterprises in the world. The Company traces its
roots back to 1668 and many of our stores in northern Canada have
been in operation for over 200 years.
Our stores in Alaska and northern Canada serve communities
with populations ranging from 300 to 9,000. A typical store is 6,500
square feet in size and offers food, family apparel, housewares,
appliances, outdoor products and services such as fuel, post offices,
pharmacies, income tax return preparation, quick-service prepared
food, prepaid card products, ATMs, cheque cashing and proprietary
credit programs.
Growth at North West is driven by market share capture within
existing locations and from applying our expertise and infrastructure
to new product categories, markets and complementary businesses.
The latter includes vertical investments in shipping and air cargo,
wholesaling to independent stores, and retailing through mid-sized
warehouse and supermarket format stores serving the South Pacific
islands and the Caribbean.
A key strength and ongoing strategy of North West is our ability
to seize unique community-by-community selling opportunities
better
than our competition. Flexible store models, store
management selection and education, store-level merchandise
ordering, community relations and incentive plans are all ingredients
of our approach to sustain a
leading market position. Our
enterprising culture, our execution skills in general, and our logistics
and selling skills specifically, are also essential components to
meeting customer needs within each market we serve.
North West delivers its products and services through the
following retail, wholesale and complimentary businesses:
Canadian Operations
•
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•
•
•
•
•
•
•
•
•
•
•
•
•
119 Northern stores, offering a combination of food, financial
services and general merchandise to remote northern Canadian
communities;
5 NorthMart stores, targeted at larger northern markets with an
emphasis on an expanded selection of fresh foods, apparel and
health products and services;
28 Quickstop convenience stores, offering extended hours,
in northern
ready-to-eat foods, fuel and related services
Canadian markets;
5 Giant Tiger ("GT") junior discount stores, offering family
fashion, household products and food in northern market
locations;
2 Valu Lots discount centers and direct-to-customer food
distribution outlets for remote communities in Canada;
1 Solo Market store, targeted at less remote, rural markets;
3 Pharmacy and Convenience stores, stand-alone northern
pharmacies and convenience stores;
1 NWC Motorsports dealership offering sales, service, parts and
accessories for Ski-doo, Honda, Can-am and other premier
brands;
Crescent Multi Foods ("CMF"), a distributor of produce and
fresh meats to independent grocery stores in Saskatchewan,
Manitoba and northwestern Ontario;
North West Tele-pharmacy Solutions, the leading provider of
contract tele-pharmacist services to rural hospitals and health
centres across Canada; and
Transport Nanuk Inc. and North Star Air Ltd. ("NSA"), water
and air-based transportation businesses, respectively, serving
northern Canada.
International Operations
32 Alaska Commercial Company ("AC") stores, similar to
Northern and NorthMart, offering a combination of food and
general merchandise to communities across remote and rural
regions of Alaska;
5 Quickstop convenience stores within rural Alaska;
Pacific Alaska Wholesale ("PAW"), a leading distributor to
independent grocery
stores, commercial accounts and
individual households in rural Alaska;
12 Cost-U-Less ("CUL") mid-size warehouse stores, offering
discount food and general merchandise products to island
communities in the South Pacific and the Caribbean; and
9 Riteway Food Markets and a significant wholesale
operation (collectively "RTW") in the British Virgin Islands.
6THE NORTH WEST COMPANY INC. - 2022 VISION
At North West our mission is to be a trusted provider of goods and
services within harder-to-access, under-served communities. Our
vision is to help our customers live better. This starts with our
customers' ability and desire to shop locally with us for the widest
possible range of products and services that meet their everyday
needs. We respond by being
innovative, reliable, convenient,
welcoming and adaptable, at the lowest local price, within what are
typically higher cost environments. For our associates, we strive to be
a preferred, fulfilling place to work. For our investors, we strive to
deliver sustainable, total returns through earnings growth, dividends
and disciplined capital allocation.
•
•
optimizing our IT infrastructure including the implementation
of next generation information technology for our stores and
support offices that deliver efficiencies and more streamlined
processes and drive improvements in category management,
pricing, data analytics and inventory management; and
delivering on the priorities aligned within our Environmental,
Social and Governance ("ESG") framework including ensuring
that we attract, develop and retain top talent that is inclusive of
the diverse peoples and cultures that are represented within
the communities we serve and that we are responsible towards
communities and other stakeholder interests.
Following is an update on the work in 2022 related to these strategic
priorities:
Operational Excellence Overall in-stock performance on essential
food items and categories such as transportation, home furnishings
and appliances remained strong despite supply chain disruptions
that impacted availability of merchandise. We continue to focus on
cost control and scrutinizing cost increases from suppliers in order to
provide value for our customers however, our gross profit rate
decreased compared to last year as the impact of higher cost
inflation was not fully passed on in retail prices.
Investing in Stores, Products and Services Stores were opened in
new markets in Metlakatla and Toksook Bay, Alaska and Sheshatshiu,
Newfoundland and Labrador. In addition, Quickstop convenience
stores were opened in Coral Harbour, Nunavut and Little Grand
Rapids, Manitoba. Investment in property and equipment increased
to $112.6 million compared to $87.3 million last year and included
the previously noted store openings, store renovations and
equipment replacements.
We also launched a new store-pick E-Commerce platform in
Alaska that leverages our logistics and supply chain capability to
expand B-to-B and B-to-C sales. The application and functionality has
been well received by customers and we continue to build customer
traffic.
Building a Superior Logistics and Supply Chain Capability NSA's
cargo aircraft utilization rates exceeded annual targets and delivered
consistent service to northern Canada stores and external customers.
An ATR 72-500 series aircraft that was put into operation in the
fourth quarter of 2021 has exceeded target utilization rates and
contributed to earnings gains in 2022. This aircraft was configured for
cargo and modified to include a large cargo door that enables
loading and unloading efficiencies and provides NSA with greater
flexibility to offer cargo service for larger items.
PRINCIPLES
The way we work at North West is shaped by six core principles:
Customer Driven, Enterprising, Passion, Accountability, Trust, and
Personal Balance.
Customer Driven refers to looking through the eyes of our
customers while
recognizing our presence as a supportive
community citizen.
Enterprising is our spirit of innovation, improvement and growth,
reflected in our unrelenting focus on new and better products,
services and processes.
Passion refers to how we value our work and the opportunity to
make a positive impact in our customers' lives.
Accountability is our management approach to getting work done
through effective roles, tasks and resources.
Trust at North West means doing what you say you will do, with
fairness, integrity, inclusion and respect.
Personal Balance is our commitment to sustaining ourselves and
our organization, so that we work effectively and sustainably in our
roles and for our customers and communities.
STRATEGIES
The strategies at North West are guided by our vision and aligned
with a total return approach to investment performance. We aim to
deliver top-quartile returns through earnings growth and dividend
yield with opportunities considered
in terms of their growth
potential and ability to sustain an attractive cash return within a
lower business risk profile.
The Company's overriding goal is to offer essential products
and services that help our customers to live better and our business
to grow through the following priorities:
•
•
•
striving for operational excellence in all facets of our business
with a priority on ensuring in-stock availability on essential
products that our customers rely on within global supply chain
disruptions and reducing costs to help offset the impact of
higher cost inflation and provide value to our customers;
investing to grow our business through store openings in new
and existing markets, store renovations, expanded product
categories and services, including pursuing wholesale and
B-to-B opportunities, consistent with our core capability as an
essential everyday products and service provider in remote
markets;
building a superior logistics and supply chain capability with an
ongoing focus on optimizing our transportation mix and air
cargo capability to provide faster, more reliable and lower cost
service to our stores and customers in remote markets;
7ANNUAL REPORT Optimizing our IT Infrastructure The implementation of a new
merchandise management system in AC which will enhance our
ability to optimize our assortment, pricing and promotions, and will
provide new data analytics capabilities was completed. The new
point-of-sale ("POS") was installed in 46 Northern stores with the
remaining stores under Project Enterprise expected to be completed
in 2023.
Our ability to build and maintain supportive community
relations: To preserve our community access we must be trusted,
open, respectful, adaptable and socially helpful. Store leases and
business licenses are often subject to community approval and
depend on our track record in these areas and the perceived
community and customer value of our retail store compared to other
options.
Environmental, Social and Governance ESG is integrated within
our strategies and work priorities and guide our decisions across the
Company. We recognize that one of the strengths of our Company is
the diversity of our workforce and that continuing to enhance a
culture of diversity, equity and inclusion is critical to our business and
our ability to attract, develop and retain top talent. In 2022, we
completed a corporate-wide employee engagement survey that
builds on the diversity, equity and inclusion survey completed last
year.
In 2022, we also formalized our Promise to Indigenous Peoples
which is a reaffirmed commitment to continue to build more
collaborative relationships that will enhance the inclusion and social
well-being of Indigenous People. Our Promise to Indigenous Peoples
was developed in consultation with Indigenous leaders and reflects
our commitment to the spirit of reconciliation contained in the Truth
and Reconciliation Commission’s Calls to Action and final report. Our
Promise is focused on three pillars:
Well-being & Security
- working collaboratively with
Indigenous Peoples to advance health and well-being in the
communities we serve;
Stronger Community Bonds
stronger
community bonds by recognizing the past and committing to a
better future; and
- developing
Our ability to develop highly capable store level employees and
work practices: Store work and related processes must drive sales
and efficiently enable our store-level personnel to manage the other
key facets of their store. This enables our full potential to realize local
selling opportunities, meet our customer service commitments and
build and maintain positive community relationships. It recognizes
that our store roles must be great jobs to offset other conditions that
create challenges in attracting and retaining the best people. Related
to this is our on-going ability to hire within-community and assist
local associates to reach their full potential.
Our ability to deliver merchandise and information through our
unique store network: The integration and build-out of our air
cargo capability in northern Canada enables us to deliver and receive
products faster, cheaper and more reliably compared to third-party
providers. Similar advantages are possible through our investment
in information technology.
Inclusion & Economic Success -
inclusion
encouraging Indigenous economic development.
Indigenous
in store and head office management while
improving
information on our ESG priorities
Further
in the
Corporate Social Responsibility and Sustainability Development
section on page 32.
is provided
KEY PERFORMANCE DRIVERS AND
CAPABILITIES REQUIRED TO DELIVER RESULTS
The financial capability to sustain the competitiveness of our
core strengths and to pursue growth: Our investment priorities
center on our store management and front line people, lower costs
to help mitigate inflationary price increases, next level technology
and superior logistics.
The ability to be a leading community store in every market we
serve: We strive to connect with the customers and communities
we serve in a highly valued way. It starts with being able to tailor our
store formats, product/service mix, community support and store
compensation, while still realizing the efficiencies of our size or the
size of our alliance partners. Investing in relationships, embracing a
broad range of products, services and store sizes, flexible technology
platforms and “best practice” work processes, are required to achieve
this goal.
8THE NORTH WEST COMPANY INC. - 2022 Consolidated Results
2022 Highlights
•
•
•
•
•
Six new stores were opened, three in Canada and three in
International Operations.
Return on equity(1) was 20.5% and has averaged 22.5% over the
past 10 years.
Return on net assets(1) was 17.9% and has averaged 18.6% over
the past five years.
Debt-to-Equity was 0.45 at January 31, 2023 and has remained
below 1.0 since 2000.
Quarterly dividends increased $0.01 per share or 2.7% to $0.38
per share in September 2022 and annual dividends per share
have increased 3.7% on a compound annual growth basis over
the past 10 years.
FINANCIAL PERFORMANCE
Some of the key performance indicators used by management to
assess results are summarized in the following table:
Key Performance Indicators and Selected Annual Information
($ in thousands, except per share)
2022
2021
2020
Sales
$ 2,352,760
$ 2,248,796
$ 2,359,239
Same store sales % increase/
(decrease)(2)
(0.8) %
(0.4) %
19.0 %
EBITDA(1)
$ 278,678
Earnings from operations
$ 180,305
$
$
$
311,375
$ 301,427
220,425
$ 209,349
157,451
$ 143,560
$ 125,836
Net earnings
Net earnings attributable to
shareholders of the
Company
Net earnings per share -
diluted
Cash flow from operating
activities(3)
$ 122,190
$
154,802
$ 139,874
$
2.51
$ 182,838
$
$
$
3.16
$
2.82
224,135
$ 338,718
1.46
$
1.38
Cash dividends per share
$
1.50
Total assets
$ 1,336,890
$ 1,219,273
$ 1,191,168
Total long-term liabilities
Return on net assets(1)
Return on average equity(1)
$ 440,384
$
344,579
$ 370,802
17.9 %
20.5 %
23.8 %
29.0 %
22.4 %
30.7 %
(1) See Non-GAAP Financial Measures section.
(2) All references to same store sales exclude the foreign exchange impact.
(3) See Consolidated Liquidity and Capital Resources.
Key Performance Factors The following factors had a significant
impact on the financial results over the past three years and are
referred to throughout this analysis:
COVID-19 As an essential service provider of food and everyday
products and services, sales were positively impacted by COVID-19-
related consumer spending changes in favour of in-community and
at-home activities resulting from travel restrictions and supported by
enhanced government income support payments to individuals.
These COVID-19-related factors contributed to significant sales gains
in 2020 and had a positive impact on sales in 2021 but to a lesser
extent due to fewer travel restrictions and the winding down of
consumer income support payments. These factors were partially
offset by periodic government mandated COVID-19-related
community curfews and store closures in 2020 and 2021, the impact
of wage premiums and bonuses paid to front-line associates to
recognize their critical role in serving our customers, and expenses
related to the purchase of protective equipment and enhanced
sanitation procedures. In 2022, COVID-19-related income support
payments have been phased out, travel restrictions have been
eliminated and COVID-19-related expenses have been substantially
reduced.
Giant Tiger Transaction On July 5, 2020, the Company completed
the sale of 36 of the Company's 46 Giant Tiger stores (the “Divested
Stores”) to Giant Tiger Stores Limited (“GTSL”). Of the remaining 10
GT locations, the Company (i) retained and operates five key stores in
northern market locations, (ii) converted one store to a Valu Lots
clearance center, and (iii) closed four stores in the third quarter of
2020. The Company recorded a pre-tax gain of $24.7 million or $20.0
million net of tax on the sale of the 36 stores and recorded a $9.4
million asset impairment and store closure provision substantially
related to a reduction in the carrying amount of fixtures and
equipment and right-of-use assets in 2020.
A comparison of sales and earnings financial measures to 2019 has
been provided to assist in interpreting the impact of COVID-19 and
the Giant Tiger Transaction on the financial results. The calculation of
same store sales compared to 2019 exclude the Divested Stores and
stores that were closed
in connection with the Giant Tiger
Transaction.
Consolidated Sales Sales for the year ended January 31, 2023
(“2022”) increased 4.6% to $2.353 billion compared to $2.249 billion
for the year ended January 31, 2022 (“2021”), but were down 0.3%
compared to $2.359 billion for the year ended January 31, 2021
(“2020”). The increase in sales compared to 2021 was largely due to
the impact of foreign exchange on the translation of International
Operations sales, an increase in other sales in Canadian Operations
which includes airline revenue, financial services, retail fuel and
pharmacy, and the impact of new stores. Higher inflation was also a
factor. Excluding the foreign exchange impact, sales increased 2.6%
from 2021 but were flat compared to 2020. The decrease in sales
compared to 2020 is primarily due to the COVID-19-related sales
factors previously noted and the impact of lower sales in Giant Tiger
stores resulting from the Giant Tiger Transaction.
9ANNUAL REPORT On a same store basis, sales were down 0.8% compared to a
same store sales decrease of 0.4% in 2021 and a 19.0% increase in
2020 as shown in the following table.
Same Store Sales
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2022
1.7 %
(13.3) %
(0.8) %
2021
0.4 %
(4.2) %
(0.4) %
2020
15.6 %
36.1 %
19.0 %
The decrease in same store sales in 2022 and 2021 is primarily
due to the impact of the COVID-19-related factors previously noted.
Although total same store sales over the past two years have
decreased compared to strong COVID-19-related sales gains in 2020,
they were up 18.6% this year compared to pre-COVID levels in 2019
with food same store sales up 18.4% and general merchandise same
store sales up 19.4%. The impact of higher merchandise and freight
cost inflation in 2022 resulted in changes in product sales blend as
consumers allocated more of their spending to food and reduced
purchases of general merchandise.
Consolidated food sales increased 5.5% from 2021 and were up
3.0% excluding the foreign exchange impact. Same store food sales
increased 1.7% on top of a 0.4% increase last year. On a quarterly
basis, same store sales increased 2.5% compared to the first quarter
last year, decreased 1.3% in the second quarter and increased 1.5%
and 4.0% in the third and fourth quarters respectively. Canadian food
sales increased 1.9% and International food sales increased 4.4%
excluding the foreign exchange impact.
Consolidated general merchandise sales decreased 9.2%
compared to 2021 and were down 10.6% excluding the foreign
exchange impact. Same store general merchandise sales decreased
13.3% for the year compared to a 4.2% decrease last year. On a
quarterly basis, same store sales decreased 16.1% in the first quarter
followed by decreases of 18.8%, 13.2% and 6.1% in the last three
quarters. Canadian general merchandise sales decreased 10.7% and
International general merchandise sales decreased 10.3% excluding
the foreign exchange impact.
Other sales, which include airline revenue, financial services, fuel
and pharmacy, increased 18.0% compared to 2021 mainly due to
higher airline sales in North Star Air ("NSA"). An increase in retail fuel
sales was also a factor. Other sales increased 37.4% compared to
2020 mainly due to higher revenues in NSA and sales gains in fuel
and pharmacy.
Sales Blend The table below shows the consolidated sales blend
over the past three years:
Food
General merchandise and
other
2022
77.3 %
2021
76.7 %
2020
76.4 %
22.7 %
23.3 %
23.6 %
Canadian Operations accounted for 56.2% of total sales (57.4% in
2021 and 58.3% in 2020) while International Operations contributed
43.8% (42.6% in 2021 and 41.7% in 2020).
(1) See Non-GAAP Financial Measures section.
Gross Profit Gross profit
increased 1.4% to $747.9 million
compared to $737.8 million last year as higher sales more than offset
a 102 basis point decrease in gross profit rate. The lower gross profit
rate compared to last year was mainly due to changes in sales blend,
the impact of higher freight and merchandise cost inflation that was
not fully passed through in retail prices and higher markdowns.
from mark-to-market adjustments
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) of $567.6 million
increased $50.3 million or 9.7% compared to last year and were up
113 basis points as a percentage of sales. The increase in Expenses is
partially due to the impact of an $18.1 million insurance-related gain
last year and higher share-based compensation costs this year
(collectively "Non-
resulting
Comparable Factors"). Further
share-based
compensation costs is provided in Note 14 and Note 18 to the
consolidated financial statements. Excluding the Non-Comparable
Factors, Expenses increased $30.9 million or 5.9% compared to last
year primarily due to cost inflation, including higher fuel-based utility
expenses, the impact of foreign exchange on the translation of
International Operations expenses and new store expenses. These
factors were partially offset by lower annual incentive plan costs and
an $8.2 million decrease in COVID-19-related expenses.
information on
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations or earnings before interest and income taxes ("EBIT”)
decreased 18.2% to $180.3 million compared to $220.4 million last
year and decreased 13.9% compared to 2020. Earnings before
interest, income taxes, depreciation and amortization ("EBITDA(1)")
decreased 10.5% to $278.7 million compared to $311.4 million last
year and was down $22.7 million or 7.5% compared to 2020. The
decrease in EBIT and EBITDA compared to last year and 2020 is due
to the sales, gross profit and Expense factors previously noted.
Adjusted EBITDA(1), which excludes the impact of the previously
noted Non-Comparable Factors, decreased $13.3 million or 4.4%
compared to last year but was up $86.9 million or 42.4% compared
to pre-pandemic adjusted EBITDA in 2019. Additional information on
the financial performance of Canadian Operations and International
Operations is provided on pages 12 and 14 respectively.
Interest Expense Interest expense increased 13.6% to $14.8 million
compared to $13.1 million last year. This increase is due to higher
average debt levels and interest rates. Average debt levels increased
4.5% compared to last year mainly due to an increase in amounts
drawn on revolving loan facilities. The average cost of debt was 4.1%
compared to 3.4% last year. Further information on interest expense
is provided in Note 19 to the consolidated financial statements.
10THE NORTH WEST COMPANY INC. - 2022 Income Tax Expense Income taxes decreased to $39.6 million
compared to $49.9 million last year and the effective tax rate for the
year was 24.0% compared to 24.1% last year. The decrease in income
tax expense is primarily due to lower earnings. Changes in the
effective income tax rate may occur as a result of various factors,
including changes in tax law, the impact of discrete items, including
the taxation of share-based compensation and insurance gains,
changes in tax estimates and the blend of earnings across the
various tax rate jurisdictions. Further information on income tax
expense, the effective tax rate and deferred tax assets and liabilities is
provided in Note 10 to the consolidated financial statements.
(1) See Non-GAAP Financial Measures section.
(2) Net earnings attributable to shareholders of the Company.
Net Earnings Consolidated net earnings decreased 20.1% to
$125.8 million compared to $157.5 million last year and were down
12.3% or $17.7 million compared to 2020. Net earnings attributable
to shareholders of the Company were $122.2 million compared to
$154.8 million last year and diluted earnings per share were $2.51 per
share compared to $3.16 per share last year due to the factors
previously noted. Excluding the impact of the previously noted Non-
Comparable Factors, adjusted net earnings(1) decreased $17.4 million
or 11.3% compared to last year but was up $60.7 million or 80.5%
compared to pre-pandemic adjusted net earnings in 2019. In 2022,
the average exchange rate used to translate International Operations
sales and expenses was 1.3088 compared to 1.2526 last year and
1.3390 in 2020.
The Canadian dollar's depreciation versus the U.S. dollar compared
to 2021 had the following net impact on the 2022 results:
Sales........................................................................increase of $44.2 million or 4.5%
Earnings from operations..............................................increase of $2.6 million
Net earnings...........................................................................increase of $2.1 million
Diluted earnings per share...................................increase of $0.04 per share
Total Assets Consolidated total assets for the past three years is
summarized in the following table:
($ in thousands)
2022
2021
2020
Total assets
$ 1,336,890
$
1,219,273
$
1,191,168
Consolidated assets increased $117.6 million or 9.6% compared to
2021 and were up $145.7 million or 12.2% compared to 2020. The
increase in consolidated assets compared to last year and 2020 is
largely due to an increase in current assets, mainly driven by higher
inventories and accounts receivable, and an increase in property and
equipment. Further information on the change in current assets is
provided in the working capital section below. The increase in
property and equipment is primarily due to new stores, store
renovations and investments in fixtures and equipment. Further
information on property and equipment is provided in Note 7 to the
consolidated financial statements. The impact of foreign exchange
was also a factor as the year-end exchange rate used to translate
International Operations assets increased to 1.3382 compared to
1.2727 last year and 1.2776 in 2020.
Consolidated working capital for the past three years
is
summarized in the following table:
($ in thousands)
Current assets
Current liabilities
Working capital
2022
2021
2020
$ 474,844
$ 403,358
$ 396,860
$ (248,606)
$ (294,490)
$ (315,135)
$ 226,238
$ 108,868
$ 81,725
Working capital increased $117.4 million or 107.8% to $226.2
million compared to 2021 and increased $144.5 million or 176.8%
compared to 2020. Current assets increased $71.5 million or 17.7%
compared to last year and were up $78.0 million or 19.7% compared
to 2020. The increase in current assets compared to 2021 is
predominantly due to an increase in inventories, accounts receivable
and cash. Further
inventories and accounts
receivable is provided in the net assets employed section under
International Operations. Further
Canadian Operations and
information on the increase in cash is provided in the consolidated
statements of cash flows and the Liquidity and Capital Resources
section.
information on
Current liabilities decreased $45.9 million or 15.6% compared to
last year and were down $66.5 million or 21.1% compared to 2020.
The decrease compared to last year and 2020 is substantially due to
a decrease in the current portion of long-term debt related to the
$45.1 million loan facilities that matured on September 26, 2022 and
the $89.3 million (U.S. $70.0 million) senior notes that matured in
June 2021. Further information on long-term debt is provided in the
Consolidated Liquidity and Capital Resources section and in Note 12
to the consolidated financial statements. The decrease in current
portion of long-term debt was partially offset by an increase in
accounts payable and accrued liabilities mainly due to the timing of
payments of trade accounts payable. Further information on working
capital for the Canadian Operations and International Operations
is on page 13 and page 15 respectively.
11ANNUAL REPORT Return on net assets employed ("RONA") decreased to 17.9%
compared to 23.8% in 2021 due to an 18.2% decrease in EBIT offset
by an 8.9% increase in average net assets employed. Additional
information on net assets employed for the Canadian Operations
and International Operations is on page 13 and page 15 respectively.
Return on average equity ("ROE") decreased to 20.5% compared
to 29.0% in 2021 due to a 20.1% decrease in net earnings and higher
average equity mainly
retained
earnings compared to last year. Further information on shareholders'
equity is provided in the consolidated statements of changes in
shareholders' equity in the consolidated financial statements.
increase
related
to an
in
The decrease in RONA and ROE in 2022 compared to 2020 and
2021 as shown in the graph below is primarily due to the COVID-19-
related factors that contributed to higher earnings in 2020 and 2021.
The RONA of 17.9% and ROE of 20.5% in 2022 compare to RONA of
13.5% and ROE of 20.5% in pre-COVID 2019.
(1) See Non-GAAP Financial Measures section.
Total Long-Term Liabilities Consolidated total long-term liabilities
for the past three years is summarized in the following table:
($ in thousands)
2022
2021
2020
Total long-term liabilities
$ 440,384
$
344,579
$
370,802
Consolidated long-term liabilities increased $95.8 million or
27.8% to $440.4 million compared to 2021 and were up $69.6 million
or 18.8% from 2020.
The increase in long-term liabilities compared to 2021 and 2020
is substantially due to higher long-term debt resulting from an
increase in amounts drawn on revolving loan facilities and the
refinancing of loan facilities that were previously recorded as current
liabilities. The impact of foreign exchange rates on the translation of
U.S. denominated debt was also a factor. The increase in long-term
debt compared to 2020 was partially offset by a $20.2 million
decrease in defined benefit pension plan obligations mainly related
to an increase in the discount rate and a $10.4 million decrease in
lease liabilities. Additional information on defined benefit pension
plan obligations and lease liabilities is provided in Note 13 and Note
8 respectively to the consolidated financial statements.
Canadian Operations
FINANCIAL PERFORMANCE
Canadian Operations results for the year are summarized by the key
performance indicators used by management as follows:
Key Performance Indicators
($ in thousands)
Sales
Same store sales %
increase/(decrease)
EBITDA (1)
Earnings from operations
Return on net assets (1)
2022
2021
2020
$ 1,323,185
$ 1,291,139
$ 1,376,188
(2.4) %
(2.4) %
22.3 %
$ 185,458
$ 215,209
$ 206,498
$ 119,090
$ 153,328
$ 144,141
19.1 %
26.6 %
26.3 %
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased $32.0 million or 2.5% to
$1.323 billion compared to $1.291 billion in 2021 but were down
$53.0 million or 3.9% compared to 2020. The increase in sales
compared to 2021 was due to an increase in other sales substantially
due to higher airline revenue resulting from higher cargo and
passenger volumes combined with the impact of passing through
fuel cost increases. An increase in retail fuel sales and new stores
were also factors. The decrease in sales compared to 2020 is due to
lower sales in Giant Tiger stores as a result of the Giant Tiger
Transaction and lower same store sales compared to the COVID-19-
related sales gains in 2020.
Food sales accounted for 67.8% of total Canadian Operations
sales compared to 68.2% last year. The balance was made up of
general merchandise and other sales at 32.2% (31.8% in 2021). Other
sales consist primarily of airline revenue, financial services revenue,
fuel and pharmacy.
Food sales increased by 1.9% from 2021 but were down 4.1%
compared to 2020. Same store food sales increased 0.4% compared
to a 1.2% decrease in 2021 but were up 18.8% compared to 2019. On
a quarterly basis, same store food sales decreased 1.0% in the first
quarter and 2.6% in the second quarter, followed by increases of
1.0% and 4.3% in the third and fourth quarters respectively.
General merchandise sales decreased 10.7% from 2021 and
were down 30.9% compared to 2020 largely due to COVID-19-
related factors and the impact of the Giant Tiger Transaction as
previously noted. Same store sales decreased 13.3% compared to a
6.8% decrease in 2021 but were up 20.4% compared to 2019. On a
quarterly basis, same store general merchandise sales decreased
16.5% in the first quarter followed by decreases of 20.3%, 15.2% and
2.9% in the last three quarters.
Other sales increased 17.9% from 2021 largely due to an
increase in third-party cargo and passenger-related revenues in NSA
and retail fuel sales gains. Other sales increased 38.1% compared to
2020 primarily due to higher revenues in NSA and sales gains in fuel
and pharmacy.
12THE NORTH WEST COMPANY INC. - 2022 Sales Blend The table below shows the sales blend for the
Canadian Operations over the past three years:
Food
General merchandise and other
2022
67.8 %
32.2 %
2021
68.2 %
31.8 %
2020
68.0 %
32.0 %
Same Store Sales Canadian Operations same store sales for the
past three years are shown in the following table. The 2.4% decrease
in same store sales in 2022 and 2021 is due to the impact of the
COVID-19-related factors previously noted that contributed to
significant sales gains in 2020 and to a lesser but still meaningful
extent in 2021 however, total same store sales increased 19.1%
compared to pre-pandemic same store sales in 2019. In addition to
the impact of the COVID-19-related factors, in 2022 higher freight
and merchandise cost inflation contributed to a shift in consumer
spending from general merchandise to food.
Same Store Sales
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2022
0.4 %
(13.3) %
(2.4) %
2021
(1.2) %
(6.8) %
(2.4) %
2020
18.4 %
37.5 %
22.3 %
Gross Profit Gross profit dollars decreased by 1.6% as sales gains
were more than offset by a decrease in gross profit rate. The lower
gross profit rate was primarily due to changes in sales blend and the
impact of higher freight and merchandise cost inflation that was not
fully passed through in retail prices. Higher markdowns compared to
last year and 2020 was also a factor.
Selling, Operating and Administrative Expenses
Selling,
operating and administrative expenses (“Expenses”) increased 8.4%
from 2021 and were up 142 basis points as a percentage of sales.
The increase in Expenses is mainly due to the impact of an $18.1
million insurance-related gain last year and the impact of cost
inflation including higher fuel-based utility costs and higher staff
costs this year. The impact of new store expenses was also a factor.
These factors were partially offset by a decrease in COVID-19
expenses largely related to wage premiums and bonuses for front-
line associates and lower annual incentive plan costs. Excluding the
Non-Comparable Factors, which includes the insurance-related gains
and share-based compensation costs, Expenses
increased $7.7
million or 2.4% due to the factors previously noted.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations decreased $34.2 million or 22.3% to $119.1 million
compared to $153.3 million in 2021 and were down $25.1 million or
17.4% compared to 2020 due to the sales, gross profit and Expense
factors previously noted and in particular, the impact of the $18.1
million insurance-related gain last year. Earnings from operations as a
percentage of sales was 9.0% compared to 11.9% last year. EBITDA(1)
decreased $29.8 million or 13.8% to $185.5 million and was 14.0% as
a percentage of sales compared to 16.7% in 2021. Adjusted EBITDA(1),
which excludes the Non-Comparable Factors, decreased $10.8
million or 5.2% compared to last year due to the sales, gross profit
and Expense factors previously noted. An increase in airline-related
earnings as a result of higher third-party cargo and passenger
volumes were also factors.
(1) See Non-GAAP Financial Measures section.
Net Assets Employed Net assets employed increased 11.8% to
$649.2 million compared to $580.8 million last year and were up
16.0% compared to $559.8 million in 2020 as summarized in the
following table:
($ in millions at the end of the fiscal year)
2022
2021
2020
Property and equipment
$ 403.3
$
372.4
$
357.5
Right-of-use assets
Inventories
Accounts receivable
Other assets
Liabilities
50.8
169.3
94.9
125.9
51.1
136.7
83.6
135.3
50.9
127.4
73.4
148.7
(195.0)
(198.3)
(198.1)
Net assets employed
$ 649.2
$
580.8
$
559.8
The increase in property and equipment compared to last year
and 2020 was mainly due to investments in northern Canada stores
including store renovations, fixtures and equipment replacements,
investments in staff housing and three new stores.
Inventory increased $32.6 million compared to 2021 and was
up $41.9 million compared to 2020 partially due to the impact of
higher cost inflation, particularly on the re-supply of sealift inventory.
A substantial portion of the increase in inventories is in center store
grocery and categories such as transportation, specifically snow
machines, boats and motors, home furnishings and appliances that
were impacted by supply chain disruptions. Higher inventories in
other categories such as apparel and seasonal categories were also
factors but to a lesser extent. Average inventory levels in 2022
increased $22.1 million or 16.0% compared to 2021 and were up
$32.8 million or 25.8% compared to 2020. Inventory turnover
decreased to 5.3 times compared to 6.2 times last year and was
down compared to 7.4 times in 2020.
13ANNUAL REPORT Accounts receivable increased $11.3 million or 13.5% compared
to last year and were up $21.5 million or 29.3% compared to 2020.
The increase compared to last year and 2020 is largely due to the
current portion of the promissory note receivable from the Giant
Tiger Transaction and higher customer trade accounts receivable.
Average accounts receivable increased $11.1 million or 14.8%
compared to 2021 and were up $15.6 million or 22.2% compared to
2020.
Other assets decreased $9.4 million or 6.9% compared to last
year and were down $22.8 million or 15.3% compared to 2020. The
decrease compared to last year and 2020 is substantially due to the
current portion of the promissory note receivable from the Giant
Tiger Transaction recorded in accounts receivable and intangible
assets. These factors were partially offset by an increase in defined
benefit plan assets. Further information on defined benefit plan
assets and obligations is provided in Note 11 and Note 13 to the
consolidated financial statements. An increase in deferred tax assets
compared to 2020 was also a partially offsetting factor. Further
information on deferred tax assets and liabilities is provided in Note
10 to the consolidated financial statements.
Liabilities decreased $3.3 million or 1.7% from 2021 and were
down $3.1 million or 1.6% compared to 2020. The decrease
compared to 2020 is largely due to a reduction in the defined benefit
plan obligation mainly related to an increase in the discount rate and
a decrease in income tax payable due to the timing of installment
payments. These factors were partially offset by an increase in
accounts payable and accrued liabilities related to the timing of
payments. Further
information on the defined benefit plan
obligation is provided in Note 13 to the consolidated financial
statements.
Return on Net Assets (RONA(1)) The return on net assets
employed for Canadian Operations decreased to 19.1% from 26.6%
in 2021 due to a 22.3% decrease in EBIT and a $48.9 million or 8.5%
increase in average net assets compared to last year due to the
factors previously noted.
(1) See Non-GAAP Financial Measures section.
International Operations
(Stated in U.S. dollars)
FINANCIAL PERFORMANCE
International Operations results for the year are summarized by the
key performance indicators used by management as follows:
Key Performance Indicators
($ in thousands)
Sales
Same store sales % increase
EBITDA(1)
Earnings from operations
Return on net assets (1)
2022
2021
2020
$ 786,656
$ 764,535
$ 734,168
1.3 %
2.6 %
13.6 %
$
$
71,225
46,772
$ 76,786
$ 70,893
$ 53,566
$ 48,699
16.0 %
19.3 %
16.9 %
(1) See Non-GAAP Financial Measures section.
Sales International sales increased 2.9% to $786.7 million compared
to $764.5 million in 2021, and were up $52.5 million or 7.1%
compared to 2020 led by same store sales gains, new store sales in
Alaska and an improved tourism-driven economy mainly in the
British Virgin Islands and Alaska. Higher cost inflation and an increase
in the Alaska Permanent Fund Dividend ("PFD") to $3,284 compared
to $1,114 in 2021 and $992 in 2020 were also factors. Same store
sales increased 1.3% on top of a 2.6% increase in 2021 and a 13.6%
increase in 2020, and were up 17.8% compared to pre-pandemic
levels in 2019. Food sales accounted for 89.5% (88.2% in 2021) of
total sales with the balance comprised of general merchandise and
other sales at 10.5% (11.8% in 2021). Other sales consist primarily of
retail fuel and financial services revenue.
Food sales increased 4.4% from 2021 and were up 8.9%
compared to 2020. Same store food sales were up 3.3% which is on
top of a 2.5% increase in 2021. On a quarterly basis, same store food
sales increased 7.2% in the first quarter followed by increases of 0.4%,
2.1% and 3.7% in the second, third and fourth quarters respectively.
General merchandise sales decreased 10.3% from 2021 and
were down 7.5% from 2020 as the impact of higher inflation resulted
in a shift in consumer spending from general merchandise to food.
On a same store basis, general merchandise sales were down 13.3%
compared to a 3.0% increase in 2021. On a quarterly basis, same
store general merchandise sales decreased 15.2% in the first quarter
and 15.3%, 8.9% and 14.0% in the second, third and fourth quarters
respectively.
Other sales, which consist primarily of retail fuel sales and
financial services revenue, were up 15.0% from 2021 and up 22.5%
from 2020 due to higher fuel sales.
14THE NORTH WEST COMPANY INC. - 2022 Sales Blend The table below shows the sales blend for the
International Operations over the past three years:
Food
General merchandise and other
2022
89.5 %
10.5 %
2021
88.2 %
11.8 %
2020
88.1 %
11.9 %
Same Store Sales International Operations same store sales for the
past three years are shown in the following table. Same store sales in
2020 were impacted by the COVID-19-related factors previously
noted that contributed to significant sales gains. In 2022, higher
merchandise and freight cost inflation resulted in changes in
product sales blend as consumers allocated more of their spending
to food and reduced purchases of general merchandise.
Same Store Sales
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2022
3.3 %
(13.3) %
1.3 %
2021
2.5 %
3.0 %
2.6 %
2020
11.5 %
31.8 %
13.6 %
Gross Profit Gross profit dollars increased 2.0% as higher sales more
than offset a decrease in the gross profit rate. The decrease in the
gross profit rate is mainly related to changes in food and general
merchandise sales blend, an increase in markdowns on general
merchandise and the impact of higher merchandise and freight cost
inflation that was not fully passed through in retail prices.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) increased 6.9%
compared to last year and were up 83 basis points as a percentage
of sales. The increase in Expenses is mainly due to inflationary cost
pressures, including higher fuel-based utility expenses, staff costs,
and the impact of new stores. These factors were partially offset by
lower COVID-19 expenses related to wage premiums and bonuses
for front-line associates and a decrease in annual incentive plan
costs.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations decreased $6.8 million or 12.7% to $46.8 million
compared to 2021 and were down $1.9 million or 4.0% compared to
2020 due to the sales, gross profit and Expense factors previously
noted. Earnings from operations as a percentage of sales was 5.9%
compared to 7.0% last year. EBITDA(1) decreased $5.6 million or 7.2%
to $71.2 million and was 9.1% as a percentage of sales compared to
10.0% in 2021. Excluding the impact of share-based compensation
expense, adjusted EBITDA(1) decreased 6.8% compared to last year.
(1) See Non-GAAP Financial Measures section.
Net Assets Employed International Operations net assets
increased $25.6 million or 9.3%
employed of $299.9 million
compared to last year and were up $27.8 million or 10.2% compared
to 2020 as summarized in the following table:
($ in millions at the end of the fiscal year)
2022
2021
2020
Property and equipment
$ 151.7
$ 143.1
$ 136.4
Right-of-use assets
Inventories
Accounts receivable
Other assets
Liabilities
39.6
93.1
12.8
73.0
40.2
87.4
12.3
65.5
45.8
78.0
14.1
67.8
(70.3)
(74.2)
(70.0)
Net assets employed
$ 299.9
$ 274.3
$ 272.1
Property and equipment increased $8.6 million or 6.0% compared to
last year mainly due to three new stores in Alaska, investments in
store renovations and fixtures and equipment replacements.
Inventories increased $5.7 million or 6.5% compared to last year
and were up $15.1 million or 19.4% from 2020 due to cost inflation
and the impact of new stores. Average inventory levels in 2022
increased 12.8% compared to 2021 and were up 23.8% compared to
2020. Inventory turnover decreased to 5.8 times compared to 6.4
times in 2021 and 6.6 times in 2020.
Other assets increased $7.5 million or 11.5% compared to last
year and were up $5.2 million or 7.7% compared to 2020 primarily
due to higher cash.
Liabilities decreased $3.9 million or 5.3% compared to 2021
substantially due to lower trade accounts payable and income tax
payable related to the timing of payments but were up $0.3 million
or 0.4% compared to 2020.
15ANNUAL REPORT Return on Net Assets (RONA(1)) The return on net assets
employed
to 16.0%
compared to 19.3% in 2021 due to a 12.7% decrease in EBIT and a
$13.8 million or 5.0% increase in average net assets.
International Operations decreased
for
(1) See Non-GAAP Financial Measures section.
Consolidated Liquidity
and Capital Resources
The following table summarizes the major components of cash flow:
($ in thousands)
2022
2021
2020
Cash provided by (used in):
Operating activities before
change in non-cash working
capital and other
Change in non-cash working
capital
Operating activities
Investing activities
Financing activities
Change in other non-cash items
(373)
$ 234,116
$ 229,782
$ 271,652
(50,905)
182,838
(106,802)
(2,563)
(3,084)
224,135
(75,861)
58,975
8,091
338,718
(66,900)
(68,298)
(170,196)
(227,060)
Effect of foreign exchange
1,645
(188)
(1,409)
Net change in cash
$ 9,383
$ (22,110)
$ 43,349
Cash from Operating Activities Cash flow from operating
activities decreased $41.3 million or 18.4% to $182.8 million
compared to 2021 substantially due to the change in non-cash
working capital primarily related to the change in inventories,
accounts receivable and accounts payable and accrued liabilities
compared to the prior year. Further information on working capital is
provided in the Canadian and International net assets employed
sections on pages 13 and 15 respectively. The change in non-
cash working capital was partially offset by a $16.6 million
decrease in taxes paid primarily due to the timing of installments
related to the limited partnership year-end.
Cash flow from operating activities and unutilized credit
available on existing loan facilities are expected to be sufficient to
fund operating requirements, pension plan contributions, sustaining
and planned growth-related capital expenditures as well as
anticipated dividends during 2023.
investments
Cash Used in Investing Activities Net cash used in investing
activities was $106.8 million compared to $75.9 million in 2021 and
$66.9 million in 2020. The increase compared to 2021 is largely due
to
in new stores, store renovations, equipment
replacements and investments in staff housing. Net investing in
Canadian Operations was $73.8 million, net of $9.8 million in
proceeds from the promissory note receivable compared to $46.6
million net of $18.1 million in insurance proceeds in 2021 and $55.0
million net of $5.3 million in insurance proceeds in 2020. A summary
of the Canadian Operations investing activities is included in net
assets employed on page 13.
International
Operations was $33.0 million compared to $29.3 million in 2021
International
and $11.9 million
Operations investing activities is included in net assets employed on
page 15.
in 2020. A summary of the
Investing
in
The following table summarizes the number of stores and
selling square footage under North West's various retail banners at
the end of the fiscal year:
Number of Stores
Selling square footage
Northern
NorthMart
Quickstop
Giant Tiger
Alaska Commercial
Cost-U-Less
Riteway Food Market
Other Formats
2022
119
2021
118
5
33
5
32
12
9
7
5
30
5
30
12
9
7
2022
696,485
128,185
46,698
90,470
267,418
344,695
61,899
54,847
2021
693,389
128,185
41,092
90,470
260,544
344,695
61,899
54,847
Total at year-end
222
216
1,690,697
1,675,121
In Canadian Operations, two Quickstop convenience stores were
in Sheshatshiu,
opened and a Northern store was opened
Newfoundland and Labrador. Total selling square footage in Canada
increased to 1,004,397 compared to 997,834 in 2021 due to the new
stores.
In International Operations, an AC store and Quickstop were
opened in Metlakatla, Alaska and an AC store was opened in Toksook
Bay, Alaska. Total selling square footage increased to 686,300
compared to 677,287 last year due to the new stores.
16THE NORTH WEST COMPANY INC. - 2022 Cash Used in Financing Activities Cash used in financing activities
was $68.3 million compared to cash used of $170.2 million in 2021.
The change compared to last year is primarily due to a decrease in
long-term debt related to the repayment of the $85.4 million
(US$70.0 million) senior notes that matured on June 16, 2021 and a
$20.2 million decrease in shares purchased under a normal course
issuer bid. Further information on dividends, the normal course
issuer bid, interest and long-term debt is provided in the following
sections.
Shareholder Dividends The Company paid dividends of $71.8
million or $1.50 per share compared to $70.4 million or $1.46 per
in 2021. The following table shows the quarterly cash
share
dividends per share paid for the past three years:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
2022
$ 0.37
0.37
0.38
0.38
$ 1.50
2021
$ 0.36
$
0.36
0.37
0.37
$ 1.46
$
2020
0.33
0.33
0.36
0.36
1.38
The payment of dividends on the Company's common shares is
subject to the approval of the Board of Directors and is based on,
among other factors, the financial performance of the Company, its
current and anticipated future business needs and the satisfaction of
solvency tests imposed by the Canada Business Corporations Act
(“CBCA”) for the declaration of dividends. The dividends were
designated as eligible dividends in accordance with the provisions of
the Canadian Income Tax Act.
The following table shows dividends paid in comparison to
cash flow from operating activities for the past three years:
2022
2021
2020
Dividends
$ 71,805
$
70,420
$ 67,276
Cash flow from operating
activities
Dividends as a % of cash flow
from operating activities
$ 182,838
$ 224,135
$ 338,718
39.3 %
31.4 %
19.9 %
Dividends as a percentage of cash flow from operating activities
increased compared to 2021 and 2020 primarily due to the changes
in cash flow from operating activities which include the impact of
COVID-19-related factors as previously noted. Dividends as a
percentage of cash flow from operating activities of 39.3% in 2022 is
consistent with the 39.9% in pre-COVID 2019.
The Company has a well established track record of increasing
dividends. Over the past ten years, the dividend has increased at a
compound annual growth rate ("CAGR") of 3.7% as shown in the
following graph:
On April 5, 2023, the Board of Directors approved a quarterly
dividend of $0.38 per share to shareholders of record on April 17,
2023 and to be paid on April 27, 2023.
Normal Course Issuer Bid On November 10, 2022, the Company
received approval from the Toronto Stock Exchange to renew the
Normal Course Issuer Bid ("NCIB"). Under the NCIB, the Company
may acquire up to a maximum of 4,740,895 of its shares, or
approximately 10% of its float for cancellation over the following 12
months. During the year ended January 31, 2023, the Company
purchased 236,075 common shares having a book value of $0.9
million for cash consideration of $7.8 million. The excess of the
purchase price over the book value of the shares of $6.9 million was
charged to retained earnings. During the year ended January 31,
2022, the Company purchased 807,037 common shares having a
book value of $2.9 million for cash consideration of $28.1 million. The
excess of the purchase price over the book value of the shares of
$25.2 million was charged to retained earnings. All shares purchased
were cancelled.
In connection with the NCIB, the Company has established an
automatic securities purchase plan with its designated broker to
facilitate the purchase of shares under the NCIB at times when the
Company would ordinarily not be permitted to purchase its Shares
due to regulatory restrictions or self-imposed blackout periods.
Under the Plan, before entering a self-imposed blackout period, the
Company may, but is not required to, ask the designated broker to
make purchases under the NCIB within specific parameters.
Sources of Liquidity At January 31, 2023, the Company has
US$70.0 million in senior notes it issued in two tranches; US$35.0
million due June 16, 2027 with a fixed interest rate of 2.88% and
US$35.0 million due June 16, 2032 with a fixed interest rate of 3.09%.
Interest is payable semi-annually on both tranches. The Company
also has outstanding $100.0 million senior notes that mature
September 26, 2029 and have a fixed interest rate of 3.74%. All of the
senior notes are secured by certain assets of the Company and rank
pari passu with the Company's other senior debt comprised of the
$400.0 million loan facilities and the US$52.0 million loan facilities
(collectively "Senior Debt"). The US$70.0 million senior notes have
been designated as a hedge against the U.S. dollar investment in the
International Operations. For more information on the senior notes
instruments, see Note 12 and Note 15 to the
and financial
consolidated financial statements.
17ANNUAL REPORT
In March 2022, the Company extended the maturity date on its
committed, revolving loan facilities in Canadian Operations to March
1, 2027 and increased the amount available on these facilities from
$300.0 million to $400.0 million. These loan facilities bear a floating
rate of interest based on Bankers Acceptances rates plus a stamping
fee or the Canadian prime interest rate. These facilities are secured by
certain assets of the Company and rank pari passu with the
Company's other Senior Debt. At January 31, 2023, the Company had
$96.0 million outstanding on these facilities (January 31, 2022 - $45.1
million).
In March 2022, the Company also extended the maturity date
on its US$52.0 million committed, revolving loan facilities to March 1,
2027. These facilities, which bear interest at U.S. LIBOR or an
alternative reference rate plus a spread, are secured by certain assets
of the Company and rank pari passu with the Company's other
Senior Debt. At January 31, 2023, the Company had US$NIL
outstanding on these facilities (January 31, 2022 - US$NIL).
In January 2023, the Company extended the maturity date on
its committed, revolving loan facility in International Operations to
January 25, 2028 and increased the amount available on this facility
from US$40.0 million to US$50.0 million. This facility bears a floating
rate of interest based on SOFR plus a spread and is secured by
certain accounts receivable and inventories of the International
Operations. At January 31, 2023, the International Operations had
US$NIL million outstanding on this facility (January 31, 2022 -
US$NIL).
The loan facilities and senior notes contain covenants and
restrictions including the requirement to meet certain financial ratios
and financial condition tests. The financial covenants include a fixed
charge coverage ratio, a leverage test and a minimum net worth test.
At January 31, 2023, the Company is in compliance with the financial
covenants under these facilities. Current and forecasted debt levels
are regularly monitored for compliance with debt covenants.
Interest Costs and Coverage
Coverage ratio
2022
12.2
2021
16.8
2020
12.5
Earnings from operations ($ in millions) $ 180.3
$ 220.4
$ 209.3
Interest ($ in millions)
$
14.8
$
13.1
$
16.8
The coverage ratio of earnings from operations ("EBIT") to interest
expense has decreased to 12.2 times compared to 16.8 times in 2021
and 12.5 times in 2020. The decrease in the interest coverage ratio
compared to 2021 is due to a $1.7 million increase in interest
expense and a 18.2% decrease in consolidated EBIT as previously
noted. Additional information on interest expense is provided in
Note 19 to the consolidated financial statements.
Contractual Obligations and Other Commitments
Contractual obligations of the Company at January 31, 2023 are
listed in the chart below:
($ in thousands)
Total
0-1 Year
2-3 Years
4-5 Years
6 Years+
Long-term debt
$ 290,050 $
268 $
267 $ 142,774 $ 146,741
Lease payments
142,537
22,585
37,612
24,011
58,329
Other liabilities(1)
17,345
4,793
12,552
—
—
Total
$ 449,932 $ 27,646 $ 50,431 $ 166,785 $ 205,070
(1) At year-end, the Company had additional long-term liabilities of $39.4
million which include other liabilities, defined benefit plan obligations and
deferred income tax liabilities. These liabilities have not been included as the
timing and amount of the future payments are uncertain.
income taxes
in other comprehensive
Post-Employment Benefits
The Company sponsors defined
benefit and defined contribution pension plans covering the
majority of Canadian employees. The Company recorded net
actuarial gains on defined benefit pension plans of $7.9 million net of
deferred
income. This
compares to net actuarial gains on defined benefit pension plans of
$14.2 million in 2021 and $3.7 million in 2020, net of deferred income
taxes in other comprehensive income. These gains and losses in
other comprehensive income were immediately recognized in
retained earnings. Actuarial gains and losses occur primarily due to
changes in the discount rate used to calculate pension liabilities and
returns on pension plan assets.
In 2023, the Company will be
required to contribute
approximately $1.1 million to the defined benefit pension plans. In
addition to the cash funding, a portion of the pension plan
obligation may be settled by the issuance of a letter of credit in
accordance with pension legislation. In 2022, the Company's cash
contributions to the pension plan were $1.2 million compared to
$2.0 million in 2021 and $1.6 million in 2020. The actual amount of
the contribution may be different from the estimate based on
in
actuarial valuations, plan
discount rates, regulatory requirements and other factors. The
Company also expects to contribute approximately $6.8 million to
the defined contribution pension plan and U.S. employees savings
plan in 2023 compared to $6.2 million in 2022 and $6.3 million in
2021. Additional information regarding post-employment benefits is
provided in Note 13 to the consolidated financial statements.
investment performance, volatility
Director and Officer Indemnification Agreements The Company
has agreements with its current and former directors, trustees, and
officers to indemnify them against charges, costs, expenses, amounts
paid in settlement and damages incurred from any lawsuit or any
judicial, administrative or investigative proceeding in which they are
sued as a result of their service. Due to the nature of these
agreements, the Company cannot make a reasonable estimate of
the maximum amount it could be required to pay to counterparties.
The Company has also purchased directors', trustees' and officers'
liability insurance. No amount has been recorded in the consolidated
financial statements regarding these indemnification agreements.
18THE NORTH WEST COMPANY INC. - 2022 Other Indemnification Agreements The Company provides
indemnification agreements to counterparties for events such as
intellectual property right infringement, loss or damage to property,
claims that may arise while providing services, violation of laws or
regulations, or as a result of litigation that might be suffered by the
counterparties. The terms and nature of these agreements are based
on the specific contract. The Company cannot make a reasonable
estimate of the maximum amount it could be required to pay to
counterparties. No amount has been recorded in the consolidated
financial statements regarding these agreements.
Additional information on commitments, contingencies and
guarantees is provided in Note 22 to the consolidated financial
statements.
On a consolidated basis, the Company had $290.1 million in debt
and $647.9 million in equity at the end of the year and a debt-to-
equity ratio of 0.45:1 compared to 0.41:1 last year. From 2020 to 2022,
equity has increased $142.7 million or 28.2% and debt has increased
$8.6 million or 3.1%. During this same period, the Company has
made capital expenditures,
including acquisitions and net of
insurance and promissory note proceeds, of $253.2 million and has
paid dividends of $209.5 million. This reflects the Company's
balanced approach of investing to sustain and grow the business
while providing shareholders with an annual cash return.
The debt outstanding at the end of the fiscal year
is
summarized as follows:
Related Parties The Company has a 50% ownership interest in a
Canadian Arctic shipping company, Transport Nanuk
Inc. and
purchases freight handling and shipping services from Transport
Nanuk Inc. and its subsidiaries. The purchases are based on market
rates for these types of services in an arm's length transaction.
Additional
transactions with
Transport Nanuk Inc. is included in Note 23 to the consolidated
financial statements.
the Company's
information on
Letters of Credit In the normal course of business, the Company
issues standby letters of credit in connection with defined benefit
pension plans, purchase orders and performance guarantees. The
is
aggregate potential
approximately $19.0 million (January 31, 2022 - $22.0 million).
letters of credit
liability
related
to
Capital Structure The Company's capital management objectives
are to deploy capital to provide an appropriate total return to
shareholders while maintaining a capital structure that provides the
flexibility to take advantage of growth opportunities, sustain existing
assets, meet obligations and financial covenants and enhance
shareholder value. The capital structure of the Company consists of
bank advances,
long-term debt and shareholders' equity. The
Company manages capital to optimize efficiency through an
appropriate balance of debt and equity. In order to maintain or
adjust its capital structure, the Company may purchase shares for
cancellation pursuant to normal course issuer bids, issue additional
shares, borrow additional funds, adjust the amount of dividends paid
or refinance debt at different terms and conditions.
The Company's capital structure over the past three years is
summarized in the following graph.
(CAD$ in thousands at the end of
the fiscal year)
2022
2021
2020
CAD$ senior notes
$ 100,000
$ 100,000
$ 100,000
US$ senior notes
US$ senior notes
Canadian loan facilities
U.S. loan facilities
Promissory note payable
—
93,483
96,032
—
535
—
88,869
45,107
—
1,664
89,300
89,300
—
—
2,822
Total debt
$ 290,050
$ 235,640
$ 281,422
Consolidated debt at the end of the year increased $54.4 million or
23.1% to $290.1 million compared to $235.6 million in 2021, and was
up $8.6 million or 3.1% from $281.4 million in 2020. The increase in
debt is primarily due to an increase in amounts drawn on the
revolving loan facilities and the impact of foreign exchange on the
translation of U.S. denominated debt compared to 2021 and 2020.
The Company has US$70.4 million in debt at January 31, 2023
(January 31, 2022 - US$70.6 million, January 31, 2021 - US$140.8
million) that is exposed to changes in foreign exchange rates when
translated into Canadian dollars. The exchange rate used to translate
U.S. denominated debt into Canadian dollars at January 31, 2023
("2022") was 1.3382 compared to 1.2727 at January 31, 2022 ("2021")
and 1.2776 at January 31, 2021 ("2020"). The change in the foreign
exchange rate resulted in a $4.6 million increase in debt compared
to 2021 and a $4.3 million increase compared to 2020. Average debt
outstanding during the year excluding the foreign exchange impact
increased $13.6 million or 5.6% from 2021 but was down $61.0
million or 19.4% compared to 2020.
Lease liabilities at the end of the fiscal year are summarized as
follows:
(CAD$ in thousands at the end of
the fiscal year)
2022
2021
2020
Current portion of lease liability $ 18,644
$ 18,055
$ 16,393
Non-current lease liabilities
93,833
96,015
104,226
Total lease liabilities
$ 112,477
$ 114,070
$ 120,619
Lease liabilities decreased $1.6 million or 1.4% to $112.5 million
compared to $114.1 million in 2021 and were down $8.1 million or
6.8% compared to $120.6 million in 2020. The decrease compared to
2021 and 2020 is due to lease payments net of new leases. Further
information on
in Note 8 to the
liabilities
consolidated financial statements.
is provided
lease
19ANNUAL REPORT
is converted
Variable Voting Shares may only be held, beneficially owned or
controlled, directly or indirectly, by persons who are not Canadians
(within the meaning of the CTA). An issued and outstanding Variable
into one Common Voting Share
Voting Share
automatically and without any further act of the Company or the
holder, if such Variable Voting Share becomes held, beneficially
owned and controlled, directly or indirectly, otherwise than by way
of security only, by a Canadian, as defined in the CTA. Further
information on the Company's Variable Voting Shares and Common
Voting Shares is provided in the 2023 Management Information
Circular which
the Company's website at
www.northwest.ca or on SEDAR at www.sedar.com.
is available on
At January 31, 2023, there were 16,137,982 Variable Voting
Shares,
issued and
the
outstanding. Further information on the Company's share capital is
provided in Note 16 to the consolidated financial statements.
representing 33.8% of
total shares
Book value per share attributable to shareholders, on a diluted
basis, at the end of the year increased to $12.93 per share compared
to $11.49 per share in 2021. Total shareholders' equity increased
$67.7 million or 11.7% compared to 2021 primarily due to an
increase in retained earnings. Further information is provided in the
consolidated statements of changes in shareholders' equity in the
consolidated financial statements.
Shareholders' Equity The Company has an unlimited number of
authorized shares and had
issued and outstanding shares at
January 31, 2023 of 47,750,605 (January 31, 2022 - 47,878,650). The
Company has a Share Option Plan that provides for the granting of
options to certain officers and senior management. Each option is
exercisable into one common share of the Company at a price
specified in the option agreement. At January 31, 2023, there were
1,684,739 options outstanding representing 3.5% of the issued and
outstanding shares. In addition to share options, there were 337,331
in Performance Share Units ("PSUs") that may be settled by the
issuance of shares based on meeting certain performance criteria
and 258,689 in Director Deferred Share Units ("DDSUs") that may be
settled by the issuance of shares. Further information on share
options, PSUs and DDSUs is provided in Note 14 to the consolidated
financial statements.
Effective June 12, 2019, the Company amended the rights of its
shares to align them with the Canada Transportation Act ("CTA"), as
amended by the provisions of the Transportation Modernization Act
(Canada). The purpose of these amendments is to increase the
permitted level of foreign ownership allowed in respect of Canadian
air service from 25% to 49%, subject to certain restrictions.
The Company's share capital is comprised of Variable Voting
Shares and Common Voting Shares. The two classes of shares have
equivalent rights as shareholders except for voting rights. Holders of
Variable Voting Shares are entitled to one vote per share except
where (i) the number of outstanding Variable Voting Shares exceeds
49% of the total number of all issued and outstanding Variable
Voting Shares and Common Voting Shares, or (ii) the total number of
votes cast by or on behalf of the holders of Variable Voting Shares at
any meeting on any matter on which a vote is to be taken exceeds
49% of the total number of votes cast at such meeting.
formality. Under
If either of the above-noted thresholds is surpassed at any time,
the vote attached to each Variable Voting Share will decrease
automatically without
the
further act or
circumstances described in paragraph (i) above, the Variable Voting
Shares as a class cannot carry more than 49% of the total voting
rights attached to the aggregate number of issued and outstanding
Variable Voting Shares and Common Voting Shares of the Company.
Under the circumstances described in paragraph (ii) above, the
Variable Voting Shares as a class cannot, for the given Shareholders'
meeting, carry more than 49% of the total number of votes cast at
the meeting.
20THE NORTH WEST COMPANY INC. - 2022 QUARTERLY FINANCIAL INFORMATION
Historically, the Company's first quarter sales are the lowest and fourth quarter sales are the highest, reflecting consumer buying patterns. Due
to the remote location of many of the Company's stores, weather conditions are often more extreme compared to other retailers and can affect
sales in any quarter. Net earnings generally follow higher sales, but can be dependent on changes in merchandise sales blend, promotional
activity in key sales periods, variability in share-based compensation costs related to changes in the Company's share price and other factors
which can affect net earnings.
The following is a summary of selected quarterly financial information:
($ thousands)
Sales
2022
2021
EBITDA(1)
2022
2021
Earnings from operations (EBIT)
2022
2021
Net earnings
2022
2021
Net earnings attributable to shareholders of the Company
2022
2021
Earnings per share-basic
2022
2021
Earnings per share-diluted
2022
2021
(1) See Non-GAAP Financial Measures section.
Q1
Q2
Q3
Q4
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
552,016
550,988
64,945
78,669
41,431
56,312
28,161
40,288
27,380
39,656
0.57
0.82
0.57
0.80
$
$
$
$
$
$
$
$
$
$
$
$
$
$
578,874 $
586,706
565,109 $
553,680
70,444 $
81,100 $
69,829
78,642
46,095 $
58,462 $
44,955
56,063
32,371 $
42,400 $
30,175
39,155
31,395 $
41,850 $
29,485
38,715
0.66 $
0.86 $
0.64 $
0.86 $
0.61
0.81
0.61
0.79
$
$
$
$
$
$
$
$
$
$
$
$
$
$
635,164
579,019
73,460
72,964
47,824
49,588
35,129
35,608
33,930
34,581
0.71
0.72
0.69
0.71
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,352,760
2,248,796
278,678
311,375
180,305
220,425
125,836
157,451
122,190
154,802
2.55
3.21
2.51
3.16
21ANNUAL REPORT insurance-related gain
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased $18.2
million compared to last year and were up 80 basis points as a
percentage to sales. The increase in Expenses is mainly due to a $9.5
million
last year. Excluding the Non-
Comparable Factors which include the insurance-related gain and
share-based compensation, Expenses increased $8.5 million or 6.0%
compared to last year largely due to cost inflation, including higher
fuel-based utility expenses and staff costs, the impact of foreign
exchange on the translation of International Operations expenses
and new store expenses. These factors were partially offset by a
decrease in COVID-19-related expenses.
Earnings from operations and EBITDA(1) Earnings from operations
or earnings before interest and taxes ("EBIT") decreased $1.8 million
to $47.8 million compared to $49.6 million last year but EBITDA(1)
increased $0.5 million to $73.5 million due to the sales, gross profit
and Expense factors previously noted. Adjusted EBITDA(1), which
excludes insurance-related gains and share-based compensation
costs increased $10.3 million or 15.3% compared to last year and as a
percentage to sales was 12.2% compared to 11.6%.
Interest Expense Interest expense increased 32.2% to $4.2 million
compared to $3.2 million last year. The increase in interest expense is
mainly due to higher average debt levels related to amounts drawn
on revolving loan facilities and an increase in borrowing costs.
in Note 12 to the
Further
consolidated financial statements.
information on debt
is provided
Income Tax Expense
Income tax expense was $8.5 million
compared to $10.8 million last year and the consolidated effective
tax rate was 19.5% compared to 23.3% last year. The decrease in the
income tax rate was primarily due to lower Global Intangible Low-
Taxed Income tax and the blend of earnings in International
Operations across various tax rate jurisdictions.
Net Earnings Consolidated net earnings decreased $0.5 million to
$35.1 million. Net earnings attributable to shareholders were $33.9
million and diluted earnings per share were $0.69 per share
compared to $0.71 per share last year due to the factors noted
above. Adjusted net earnings(1), which excludes the impact of the
after-tax
insurance-related gains and the after-tax share-based
compensation costs, increased $5.8 million or 17.9% compared to
last year driven by earnings gains in Canadian Operations and the
impact of a lower effective tax rate as previously noted.
Fourth Quarter Highlights
CONSOLIDATED RESULTS FOURTH QUARTER
Key Performance Indicators and Selected Fourth Quarter
Information
($ in thousands, except per share)
2022
2021
2020
Sales
Same store sales % change(2)
Food
General Merchandise
Total
Gross profit
Selling, operating and
$ 635,164
$
579,019
$ 565,191
4.0 %
(6.1) %
2.1 %
2.6 %
(9.2) %
0.1 %
12.0 %
39.8 %
16.8 %
$ 201,177
$
184,714
$ 187,873
administrative expenses
(153,353)
(135,126)
(138,759)
EBITDA(1)
Earnings from operations
Interest expense
Income taxes
Net earnings
Net earnings attributable to
shareholders of the
Company
Net earnings per share - basic
Net earnings per share -
diluted
73,460
47,824
(4,192)
(8,503)
35,129
33,930
0.71
72,964
49,588
(3,170)
(10,810)
35,608
71,410
49,114
(3,448)
(12,834)
32,832
34,581
0.72
32,060
0.66
$
0.69
$
0.71
$
0.63
(1) See Non-GAAP Financial Measures section.
(2) All references to same store sales exclude the foreign exchange impact.
inflation
Consolidated Fourth Quarter Sales Sales for the quarter increased
9.7% to $635.2 million as higher
in Canadian and
International Operations contributed to same store sales gains. The
impact of foreign exchange on the translation of International
Operations sales, an increase in airline revenue and retail fuel sales in
Canadian Operations and the impact of new stores were also factors.
Excluding the foreign exchange impact, consolidated sales increased
7.1%. Same store sales were up 2.1%(2) compared to the fourth
quarter last year and were up 20.0% compared to the pre-pandemic
2019 fourth quarter. Food sales(2) increased 6.3% and were up 4.0%
on a same store basis compared to last year and increased 20.2%
compared to 2019. General merchandise sales(2) decreased 2.1% and
were down 6.1% on a same store basis but were up 19.3% compared
to 2019. Overall, sales were strong in the quarter compared to the
COVID-19-related factors that contributed to significant sales gains in
2020 and to a lesser but still meaningful extent in 2021. The impact
of higher merchandise and freight cost inflation continued to result
in changes in product sales blend as consumers allocated more of
their spending to
reduced purchases of general
merchandise.
food and
Gross Profit Gross profit increased 8.9% as the impact of sales gains
was partially offset by a 23 basis point decrease in gross profit rate
compared to last year. The decrease in gross profit rate was primarily
due to changes in sales blend, the impact of higher freight and
merchandise cost inflation that was not fully passed through in retail
in markdowns on seasonal general
prices and an
merchandise.
increase
22THE NORTH WEST COMPANY INC. - 2022
CANADIAN OPERATIONS FOURTH QUARTER
Canadian Operations results for the fourth quarter are summarized
by the following key performance indicators:
INTERNATIONAL OPERATIONS
FOURTH QUARTER
(Stated in U.S. dollars)
Key Performance Indicators
International Operations
summarized by the following key performance indicators:
results
the
for
fourth quarter are
($ in thousands)
Sales
2022
2021
2020
$ 361,397
$ 332,668
$ 328,429
Key Performance Indicators
Same store sales % change
Food
General Merchandise
Total
EBITDA (1)
Earnings from operations
4.3 %
(2.9) %
2.6 %
0.0 %
(12.0) %
(3.0) %
15.7 %
41.6 %
21.2 %
$
$
50,551
33,417
$ 36,276
$ 38,444
$ 52,208
$ 53,391
General Merchandise
($ in thousands)
Sales
2022
2021
2020
$ 203,064
$ 194,395
$ 183,929
Same store sales % change
Food
Total
EBITDA(1)
Earnings from operations
3.7 %
(14.0) %
1.4 %
6.1 %
(1.7) %
5.0 %
7.5 %
35.2 %
10.7 %
$
$
16,921
10,630
$ 16,336
$ 14,199
$ 10,456
$ 8,492
(1) See Non-GAAP Financial Measures section.
Sales International Operations fourth quarter sales increased 4.5% to
$203.1 million compared to $194.4 million in the fourth quarter last
year led by an increase in same store sales, higher inflation compared
to last year and the impact of new stores in Alaska. Same store sales
increased 1.4% on top of a 5.0% gain last year. Food sales increased
6.3% and were up 3.7% on a same store basis compared to a 6.1%
same store sales gain last year. General merchandise sales decreased
8.9% and were down 14.0% on a same store basis as the impact of
higher inflation resulted in a shift in consumer spending from
general merchandise to food.
Gross Profit Gross profit increased 6.6% compared to last year
driven by sales gains and an increase in gross profit rate. The increase
in gross profit rate is mainly due to changes in product sales blend
and higher pass through of inflationary cost increases compared to
last year partially offset by higher markdowns.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 7.8%
compared to last year primarily due to inflationary cost pressures
including higher fuel-based utility expenses and staff costs and the
impact of new store expenses. These factors were partially offset by a
decrease in COVID-19-related costs.
Earnings From Operations ("EBIT") and EBITDA(1) Earnings from
operations increased 1.7% to $10.6 million compared to $10.5 million
last year and EBITDA(1) increased to $16.9 million compared to $16.3
million in the fourth quarter last year due to the sales, gross profit
and Expense factors previously noted.
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased 8.6% to $361.4 million
driven by a 2.6% increase in same store sales and higher airline
revenue and fuel sales compared to the fourth quarter last year. The
increase in same store sales was largely due to higher inflation and
government inflation relief payments combined with a good in-
stock position. Food sales increased 6.2% and were up 4.3% on a
same store basis and general merchandise sales increased 0.7% but
were down 2.9% on a same store basis compared to last year. As
previously noted, the impact of higher merchandise and freight cost
inflation has continued to result in a shift in consumer spending
from general merchandise to food. The increase in airline revenue
was due to higher third-party cargo and passenger volumes and the
impact of passing through increases in aviation fuel costs.
Gross Profit Gross profit increased 6.4% as sales gains more than
offset the impact of a lower gross profit rate primarily related to
changes in sales blend as previously noted and the impact of higher
merchandise and freight cost inflation that was not fully passed
through in retail prices. Higher markdowns in general merchandise
were also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 12.7%
and were up 93 basis points as a percentage to sales compared to
the fourth quarter last year largely due to the impact of a $9.5 million
insurance-related gain last year and higher inflationary cost impacts
mainly related to fuel-based utilities and staff costs. These factors
were partially offset by lower COVID-19-related expenses compared
to last year and a decrease in annual incentive plan costs. Excluding
the insurance-related gains and share-based compensation costs,
Expenses increased 1.3% compared to last year.
Canadian Earnings from Operations (EBIT) and EBITDA(1)
Canadian fourth quarter earnings from operations decreased to
$33.4 million compared to $36.3 million last year and EBITDA(1)
decreased 3.2% to $50.6 million compared to $52.2 million in the
fourth quarter last year due to the sales, gross profit and Expense
factors previously noted and higher EBIT in NSA from improved
third-party cargo and passenger volumes. Adjusted EBITDA(1), which
excludes the impact of the insurance-related gains and share-based
compensation costs, increased $7.6 million or 16.6% compared to
last year.
23ANNUAL REPORT
CONSOLIDATED CASH FLOWS
FOURTH QUARTER
The following table summarizes the major components of the fourth
quarter cash flow:
Cash Used in Investing Activities
The following table summarizes the major components of the cash
flow used in investing activities in the fourth quarter:
($ in thousands)
2022
2021
2020
($ in thousands)
Operating activities
Investing activities
Financing activities
Effect of foreign exchange
Net change in cash
2022
2021
2020
$ 100,230
$ 84,704
$ 106,660
(51,907)
(38,500)
(43)
9,780
(15,142)
(77,935)
767
(7,606)
57,032
(11,904)
(81,765)
(1,167)
11,824
59,712
Cash, beginning of period
49,029
Purchase of property and
equipment
Intangible asset (additions)/
disposals
Proceeds from disposal of
property and equipment
Insurance proceeds, property
and equipment
$ (51,572)
$ (22,730)
$ (18,180)
(562)
(1,904)
226
744
—
9,492
5,306
227
—
Cash, end of period
$ 58,809
$ 49,426
$ 71,536
Cash used in investing activities $ (51,907)
$ (15,142)
$ (11,904)
Cash From Operating Activities
The following table summarizes the major components of the cash
flow from operating activities in the fourth quarter:
($ in thousands)
2022
2021
2020
Net earnings for the period
$ 35,129
$ 35,608
$ 32,832
Cash Used in Investing Activities Net cash used in the fourth
quarter for investing activities was $51.9 million compared to $15.1
million in 2021 and $11.9 million in 2020. There were no insurance
claim settlement proceeds
in 2022
in net
compared to $9.5 million in 2021 and $5.3 million in 2020. Investing
activities
include store renovations, equipment
replacements and investments in staff housing.
investing activities
in the quarter
Cash Used in Financing Activities
25,636
8,503
4,192
1,879
23,376
10,810
3,170
22,296
12,834
3,448
The following table summarizes the major components of the cash
flow used in financing activities in the fourth quarter:
1,684
1,545
($ in thousands)
2022
2021
2020
Adjustments for:
Amortization
Provision for income taxes
Interest expense
Equity settled share-based
compensation
Insurance proceeds,
property and equipment
Taxes paid
Loss on disposal of property
and equipment
Operating activities before
change in non-cash working
capital and other
Change in non-cash working
capital
—
(11,635)
(9,492)
(18,357)
(5,306)
(4,223)
144
32
596
63,848
46,831
64,022
Change in other non-cash items
(890)
37,272
37,471
402
37,118
5,520
Cash from operating activities
$ 100,230
$ 84,704
$ 106,660
Cash from Operating Activities Cash flow from operating
activities
increased $15.5 million or 18.3% to $100.2 million
compared to the fourth quarter of 2021 but was down $6.4 million or
6.0% compared to 2020. The increase compared to last year is largely
due to a $6.7 million decrease in taxes paid and the impact of $9.5
million in proceeds from an insurance settlement received in the
prior year. The decrease in taxes paid is primarily due to the timing of
installments related to the limited partnership year-end.
Net decrease in long-term debt $ (11,258)
$ (46,612)
$ (49,781)
Payment of lease liabilities,
principal
Payment of lease liabilities,
interest
Dividends
Dividends to non-controlling
interests
Interest paid
Issuance of common shares
Common shares purchased and
cancelled
(5,073)
(4,703)
(4,496)
(1,067)
(18,144)
—
(3,028)
70
—
(1,039)
(17,747)
—
(1,834)
—
(1,088)
(17,528)
(2,214)
(644)
—
(6,000)
(6,014)
Cash used in financing activities $ (38,500)
$ (77,935)
$ (81,765)
Cash Used in Financing Activities Cash used in financing activities
in the fourth quarter decreased to $38.5 million compared to cash
used of $77.9 million in 2021 and $81.8 million in 2020. The change
compared to the fourth quarter last year is primarily due to changes
in long-term debt resulting from amounts drawn on revolving loan
facilities and a decrease in shares purchased under a normal course
issuer bid compared to last year.
24THE NORTH WEST COMPANY INC. - 2022
DISCLOSURE CONTROLS
OUTLOOK
Management is responsible for establishing and maintaining a
system of disclosure controls and procedures to provide reasonable
assurance that material information relating to the Company is
reported to senior management, including the Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”) on a timely basis so
that decisions can be made regarding public disclosure. Based on an
evaluation of the Company's disclosure controls and procedures, as
required by National Instrument 52-109 (Certification of Disclosure in
Issuers' Annual and Interim Filings), the Company's CEO and CFO
have concluded that these controls and procedures were designed
and operated effectively as of January 31, 2023.
INTERNAL CONTROLS OVER
FINANCIAL REPORTING
financial statements
for external purposes
Management is also responsible for establishing and maintaining
internal controls over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the
in
preparation of
accordance with International Financial Reporting Standards. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be
effective can only provide reasonable assurance with respect to
financial reporting and may not prevent or detect misstatements.
Projections of any evaluations of effectiveness to future periods are
subject to the risk that controls may become ineffective because of
changes in conditions or the degree of compliance with policies and
procedures may deteriorate. Furthermore, management is required
to use judgment in evaluating controls and procedures. Based on an
evaluation of the Company's
financial
reporting using the
Integrated Framework
Internal Control -
published by The Committee of Sponsoring Organizations of the
Treadway Commission (“COSO Framework”), 2013, the Company's
CEO and CFO have concluded that the internal controls over
financial reporting were designed and operated effectively as at
January 31, 2023. There have been no changes in the internal
controls over financial reporting for the year ended January 31, 2023
that have materially affected or are reasonably likely to materially
affect the internal controls over financial reporting.
internal controls over
The Company's near-term outlook continues to be influenced by
inflationary cost pressures, global supply chain disruptions and the
cycling through the COVID-19-related income support payments
that positively impacted the first quarter results last year. The
Company expects to begin comparing to more normalized post-
COVID impacted earnings in the second quarter. There is uncertainty
to this outlook related to the impact of inflation, labour shortages,
supply chain disruptions and the availability of merchandise. The
impact of inflation may contribute to higher sales but may also result
in changes in sales blend and a lower gross profit rate if the full
impact of inflationary cost increases is not passed through in retail
prices. Uncertainty regarding the economy, particularly within
tourism-dependent countries and countries that do not have strong
government income support programs for individuals is difficult to
forecast however, the resiliency of the Company's essential everyday
product and service offering is expected to help mitigate some of
this uncertainty.
Beyond the duration of the current environment as previously noted,
the medium and longer-term outlook for the Company is favourable
based on the expected impact of government transfer payments
and higher infrastructure spending in Indigenous communities. The
Company continues to focus on executing on its core product and
service value offer and driving additional growth within the markets
we serve, optimizing our IT infrastructure and assessing new store
opportunities, acquisitions and other business venture opportunities
within its different businesses and retail divisions.
In 2023, the Company expects that capital expenditures, net of
expected proceeds from the promissory note receivable will be in
the $125.0 million range, (2022 - $106.8 million, net of $9.8 million in
proceeds from the promissory note receivable). The timing and
amount of store-based capital expenditures in 2023 are expected to
continue to be impacted by the availability of building materials and
labour shortages, in addition to other delays that can occur with
remote location capital projects.
25ANNUAL REPORT
RISK MANAGEMENT
The mandate of the Board of Directors includes ensuring that
processes are in place to identify and manage the principle risks of
the business, including environmental and climate-related risks, for
which the Board has delegated primary responsibility to the Audit
Committee. The North West Company maintains an Enterprise Risk
Management
identifying,
("ERM") program which assists
evaluating and managing risks that may reasonably have an impact
on the Company. Management is accountable for completing an
annual ERM assessment to evaluate risks and the potential impact
that the risks may have on the Company's financial performance and
ability to execute its strategies and achieve its objectives. The results
of this annual assessment and quarterly updates are presented to the
Audit Committee and reported to the Board of Directors. The
principle risks, including environmental and climate-related risks, and
the
the
Company's strategic planning process.
related mitigation strategies are
incorporated
into
in
The North West Company is exposed to a number of risks in its
business. The descriptions of the risks below are not the only ones
facing the Company. Additional risks and uncertainties not presently
known to the Company, or that the Company deems immaterial,
may also impair the operations of the Company. If any of such risks
actually occur, the business, financial condition, liquidity and results
of operations of the Company could be materially adversely affected.
Readers of this MD&A are also encouraged to refer to the Key
Performance Drivers and Capabilities Required to Deliver Results and
Outlook sections of this MD&A, as well as North West's Annual
Information Form, which provides further information on the risk
factors facing the Company. While the Company employs strategies
to minimize these risks, these strategies do not guarantee that
events or circumstances will not occur that could negatively impact
the Company's financial condition and performance.
risk, which could negatively affect
Careful consideration should be given to the risk factors below
including pandemic
the
operations and financial performance of the Company. A pandemic
is unique in that it could impact multiple risk factors that the
Company is exposed to. A pandemic outbreak of a contagious
disease could result in a widespread health crisis that could have an
adverse effect on the Company's operations and financial condition.
A pandemic could impact the health and wellness of the Company's
employees, result in labour shortages or result in the temporary
closure of stores, distribution facilities, airline or support offices and
could result
interruptions to the Company's supply chain,
including reduced availability of product or the temporary closure of
suppliers and transportation companies that are critical to the
operation of the business. Furthermore, a pandemic could result in
an economic downturn, restrictions on travel and trade, disruptions
to financial markets and negatively impact the availability and cost of
capital, which in turn could have an adverse impact on the
Company's financial results and condition.
in
The food and everyday products the Company provides are
essential, non-discretionary services in the communities we serve.
The Company has business continuity plans and safety protocols
however, there can be no assurance that these plans and protocols
will be sufficient to minimize the impact. Although the Company
foresees continued demand for the products and services it provides
based on its role as an essential service, there can be no assurance
that a pandemic will not have an adverse impact on the Company's
operations and financial condition.
These factors may include, but are not limited to:
Employee Development and Retention Attracting, retaining and
developing high caliber employees
is essential to effectively
managing our business, executing our strategies and meeting our
objectives. Due to the vast geography, small size and remoteness of
the Company's individual markets, there is an ongoing need for
capable staffing, particularly at the store management level. The
degree to which the Company is not successful in retaining and
developing employees and establishing appropriate succession
plans could lead to a lack of knowledge, skills and experience
required to effectively run our operations and execute our strategies
and could negatively affect financial performance. The Company's
overall priority on building and sustaining store people capability
reflects the
In addition to
compensation programs and investments in staff housing that are
designed to attract and retain qualified personnel, the Company also
continues to implement and refine initiatives such as comprehensive
store-based manager-in-training programs.
importance of mitigating this risk.
These risks also impact the Company's airline operations.
Transport Canada issued Canadian Airline Regulations ("CAR") with
respect to pilot fatigue and flight duty times which have been
phased in from December 2020 to December 2022 based on the
type of aircraft. These regulations have resulted in an increase in the
number of pilots required by NSA which, combined with a Canada-
wide shortage of pilots, may result in higher recruitment and
compensation costs and have a negative impact on the Company's
financial performance. Changes to flight schedules, operating
schedules, fatigue management systems and employee recruiting,
compensation and training programs are expected to help mitigate
the impacts of the new regulations and employee development and
retention risk.
In addition to the foregoing, a pandemic could impact the
health and wellness of the Company's employees, result in labour
shortages or result in the temporary closure of stores, distribution
facilities, airline or support offices.
Competition The Company has a leading market position in a large
percentage of the markets it serves. Sustaining and growing this
position depends on our ability to continually improve customer
satisfaction while identifying and pursuing new sales opportunities.
We actively monitor competitive activity and we are proactive in
enhancing our value offer elements, ranging from in-stock position
to service and pricing. To the extent that the Company is not
effective in responding to consumer trends or enhancing its value
offer, it could have a negative impact on financial performance.
Furthermore, the entry of new competitors, an
in
competition, both local and outside the community, a significant
expansion of E-Commerce, or the introduction of new products and
services in the Company's markets could also negatively affect the
Company's financial performance.
increase
The Company relies on the
integrity and
Cyber-security
continuous availability of its IT systems. In the ordinary course of
business, the Company collects, processes, transmits and retains
confidential and personal information (collectively "Confidential
Information") regarding the Company and its customers, employees
and suppliers. The Company's IT systems are exposed to the risks of
“cyber-attack”, including viruses that can disrupt, paralyze or prevent
access to IT systems or result in unauthorized access to Confidential
Information.
26THE NORTH WEST COMPANY INC. - 2022
The Company has implemented security software and measures,
including monitoring, testing and employee training, to prevent
unauthorized access to its IT systems and Confidential Information,
and to reduce the likelihood of disruptions, and continues to make
investments in this area to mitigate cyber threats. Cyber-attacks are
constantly evolving and are becoming more
frequent and
sophisticated in nature and there is a risk that the Company's
security measures or its third party service providers' security
measures, may be breached or unauthorized access may not be
detected on a timely basis. Furthermore, employee error, faulty
password management or malfeasance may result in unauthorized
access to IT systems and Confidential Information. Any prolonged
failure relating to IT system availability, breaches of IT system security,
a significant loss of data, an impairment of data integrity or
unauthorized access to Confidential Information, could adversely
affect the financial performance, operations and reputation of the
Company and may result in regulatory enforcement actions or
litigation.
Community Relations A portion of the Company's sales are
derived from communities and regions that restrict commercial land
ownership and usage by non-Indigenous or non-local owned
businesses or which have enacted policies and regulations to
support locally-owned businesses. We successfully operate within
initiatives that promote positive
these environments through
community and customer relations. These
lease
arrangements with community-based development organizations
and initiatives to recruit local residents into management positions
and to incorporate community stakeholder advice into our business
at all levels. Further information on community relations is provided
under Corporate Social Responsibility and Sustainable Development
is not successful
on page 32. To the extent the Company
in maintaining these relations or
lease
agreements with community-based organizations, or is subject to
punitive fees or operating restrictions, it could have an adverse
effect on the Company's reputation and financial performance.
is unable to renew
include store
Climate Change, Natural Disasters and Fire The Company's
operations are exposed to extreme weather conditions ranging from
blizzards to hurricanes, typhoons and cyclones which can cause loss
of life, damage to or destruction of key stores and facilities, or
temporary business disruptions. The stores located in the South
Pacific, Caribbean and coastal areas of Alaska are also at risk of
earthquakes and tsunamis which can result in loss of life and
destruction of assets. The destruction of assets and the impact on
the local economy resulting from these types of extreme weather
conditions, particularly where more than one location is impacted,
could have a material adverse effect on the operations and financial
condition and performance of the Company. Severe weather
conditions can also have a negative impact on NSA's operations by
disrupting the transportation of merchandise and passengers.
The impact of warmer ocean water temperatures has increased
the risk of frequency, severity and duration of hurricanes and
typhoons especially in the northeastern Caribbean. Collectively the
stores in this region have sales of $373 million and assets of $180
million for the year-ended January 31, 2023. In 2017, islands in this
region were devastated by two category five hurricanes which
resulted in the destruction of the Company's CUL store in St. Thomas
and three RTW stores and significantly damaged a CUL store in St.
Maarten. Rebuilding has significantly increased resiliency to future
hurricanes however, these markets remain exposed to this risk.
The Company completed a specific climate-related
risk
management assessment of its stores in the northeastern Caribbean
and upgraded its most hurricane-vulnerable stores to improve the
building construction to a category five hurricane resiliency level.
These improvements help mitigate the impact of hurricanes on the
Company's stores however, there can be no certainty that the
damage from hurricanes will not include significant damage to or
loss of stores and warehouses. In addition, hurricanes can result in
significant damage to or destruction of important infrastructure,
including residences, which in turn may result in people relocating
from an island. Any prolonged reduction in population in the
communities the Company operates in could have a material impact
on the financial performance of the Company.
Longer-term global warming conditions would also have a
more pronounced effect, both positive and negative, on the
Company's most northern latitude stores. On the downside, global
warming will result in rising sea levels, which will cause flooding, and
melting permafrost which could damage or destroy the Company's
stores, warehouses and housing. The Company operates in 71
communities in northern Canada and 18 communities in Alaska that
are potentially exposed to changes in permafrost. Collectively, stores
in these communities have sales of $824 million and assets of $388
million for the year ended January 31, 2023. Rising sea levels and
melting permafrost would also have the same negative impact on
our customers which, combined with the potential damage to our
facilities, could have a material adverse effect on the Company's
operations, financial condition and performance. The Company has
in-depth knowledge of and expertise in construction in northern
markets and continues to
incorporate new engineering and
construction techniques in designing buildings and facilities to help
mitigate the
impact of changing permafrost conditions and
minimize damage to the permafrost.
The Company relies upon the availability of winter roads to 40
communities in northern Canada. Global warming conditions may
shorten or eliminate the availability of winter roads which would
result in higher transportation costs to these remote locations. To the
extent that higher transportation costs cannot be offset by other
cost reductions or passed on through higher prices, this may result in
lower operating margins which may have an adverse effect on the
Company's financial performance. This risk related to the availability
of winter roads is partially mitigated by the utilization of the
Company's wholly-owned airline to transport merchandise to its
stores.
On the upside, global warming could result in higher economic
growth in the Company's northern markets and would reduce some
operating expenses such as utility costs and enabling the Company
to use lower-cost sealift year-round to transport merchandise to the
Company's stores compared to higher cost air transportation.
The Company's stores in northern Canada and Alaska are
exposed to the risk of wild fires and other fire related losses. In many
of the Company's remote northern markets, there is limited fire
fighting equipment and capability. In the event of a fire, there is a
high risk of a complete loss of the building, equipment and
inventory. In 2018, the Company had three fires in northern Canada
which destroyed one store and significantly damaged two other
stores. Two of the fires were caused by electrical malfunction and
one was arson-related. The Company was able to re-open the stores
with reduced selling square footage and a limited merchandise
assortment while reconstruction and repairs were being completed.
fire
The Company completed an
mitigation policies and procedures to identify opportunities to
improve fire prevention in its northern Canada stores and has
upgraded facilities to reduce the risk of fire-related losses.
independent review of
its
27ANNUAL REPORT In addition to the risk mitigation activities previously noted, the
Company also maintains insurance to help mitigate the impact of
losses however, there can be no assurance that one or more large
claims or that any given loss will be mitigated in all circumstances.
Further information on insurance risk is provided below.
Logistics and Supply Chain The Company relies on a complex and
elongated outbound supply chain due to the remoteness of the
Company's stores. The delivery of merchandise to a substantial
portion of the Company's stores involves multiple carriers and
multiple modes of transportation including trucks, trains, aircraft,
ships and barges through various ports and transportation hubs. The
Company's reputation and financial performance can be negatively
impacted by supply chain events or disruptions outside of the
Company's control, including changes in foreign and domestic
regulations which increase the cost of transportation; the quality of
transportation infrastructure such as roads, ports and airports; labour
disruptions at transportation companies; the impact of a pandemic,
including COVID-19, that reduces the availability of product or
restricts transportation to distribution facilities or the communities
the Company serves; or the consolidation, financial difficulties or
bankruptcy of transportation companies. To help mitigate these risks,
the Company owns an airline, North Star Air Ltd., and has an
investment in Transport Nanuk Inc., an arctic shipping company,
which provides the Company with greater control over key
components of our logistics network and service to our stores in
northern Canada.
income,
Economic Environment External factors which affect customer
demand and personal disposable income, and over which the
Company exercises no influence, include government fiscal health,
general economic growth, changes in commodity prices, inflation,
unemployment rates, personal debt
levels of personal
levels,
interest rates and foreign exchange rates.
disposable
Changes
rates are
unpredictable and may impact the cost of merchandise and the
prices charged to consumers which in turn could negatively impact
sales and net earnings. A pandemic could result in an economic
downturn, restrictions on travel and trade, disruptions to financial
markets and negatively impact the availability and cost of capital,
which in turn could have an adverse impact on the Company's
financial results and condition.
foreign exchange
rates and
inflation
in
Our largest customer segments derive most of their income
directly or indirectly from government infrastructure spending or
direct payment to individuals in the form of social assistance, child
care benefits and old age security. While these tend to be stable
sources of income, independent of economic cycles, a decrease in
government income transfer payments to individuals, a recession, or
a significant and prolonged decline in consumer spending could
have an adverse effect on the Company's operations and financial
performance.
Furthermore, customers in many of the Company's markets
benefit from product cost subsidies through programs, such as
Nutrition North Canada ("NNC"), the U.S. Supplemental Nutrition
Assistance Program ("SNAP") and the by-pass mail system in Alaska,
which contribute to lower living costs for eligible customers. A
change in government policy could result in a reduction in financial
support for these programs which would have a significant impact
on the price of merchandise and consumer demand and could have
an adverse effect on the Company's operations and financial
condition.
infrastructure. This
A major source of employment income in the remote markets
where the Company operates is generated from local government
and spending on public
includes housing,
schools, health care facilities, military facilities, roads and sewers.
Local employment levels will fluctuate from year-to-year depending
on the degree of infrastructure activity and a community's overall
fiscal health. A similar fluctuating source of income is employment
related to tourism and natural resource development. A significant or
transfers, spending on
prolonged
infrastructure projects, natural resource development and tourism
spending would have a negative impact on consumer income which
in turn could result in a decrease in sales and gross profit, particularly
for more discretionary general merchandise items.
in government
reduction
Management regularly monitors economic conditions and
considers factors which can affect customer demand in making
operating decisions and the development of strategic initiatives and
long-range plans.
Business Model The Company sells a broad range of products and
services across geographically and culturally diverse markets.
Operational scale can be difficult to achieve and the complexity of
the Company's business model
is higher compared to more
larger retailers. Management continuously
narrowly-focused or
assesses the strength of its customer value offer to ensure that
specific markets, products and services are financially attractive. The
Company continues to focus on simplifying work across the
business, with an emphasis on store processes. Certain Company
initiatives may reduce the cost of operations and help ensure the
Company has an efficient operating structure. These initiatives may
include improving processes and generating efficiencies across the
Company’s administrative, store and distribution network. The
success of strategic initiatives is dependent on effective leadership
intended benefits.
and change management to realize their
Ineffective change management could result in a lack of integrated
processes and procedures, decreased employee engagement,
ineffective communication and training, result in a lack of requisite
knowledge or may not achieve the benefits intended. Any of the
foregoing could disrupt operations or increase the risk of customer
dissatisfaction. To the extent the Company is not successful in
developing and executing its strategies, it could have an adverse
effect on
financial
the
performance of the Company.
financial condition,
reputation and
Information Technology The Company relies on information
technology (“IT”) to support the current and future requirements of
the business. A significant or prolonged disruption in the Company's
current IT systems could negatively impact day-to-day operations of
the business which could adversely affect the Company's financial
performance and reputation.
The failure to successfully upgrade legacy systems, or to
migrate from legacy systems to new IT systems, could have an
adverse effect on the Company's operations, reputation and financial
performance. There is also a risk that the anticipated benefits, cost
savings or operating efficiencies
to upgrading or
implementing new IT systems may not be realized which could
adversely affect the Company's operations, financial performance or
reputation. To help mitigate these risks, the Company uses a
combination of specialized internal and external IT resources as well
as a strong governance structure and disciplined project
management.
related
The Company also depends on accurate and
reliable
information from its IT systems for decision-making and operating
the business. As the volume of data and the complexity and
integration of IT systems increases, there is a greater risk of errors in
data or misinterpretation of the data which could negatively impact
decision making and in turn, have an adverse effect on the
Company's financial performance.
28THE NORTH WEST COMPANY INC. - 2022 Furthermore, changes in legislation, including costs associated
with recycling and disposal of consumer goods packaging and food
waste, carbon taxes and the implementation of other greenhouse
gas reduction initiatives and regulations related to transitioning to a
low-carbon and more climate resilient future, could result
in
additional costs which could have a negative impact on the
Company's financial performance if the Company is not able to fully
pass on these additional costs to its customers or identify other
offsetting cost reductions and efficiencies.
Food, Drug, Product and Service Safety The Company is exposed
to risks associated with food and drug safety, product packaging,
storage and distribution, and general
labelling, handling,
merchandise product defects. The Company also operates
pharmacies and provides tele-pharmacy services and is subject to
risks associated with the distribution of prescription drugs, errors
made through medication dispensing or patient services and
consultation. Food sales represent approximately 77% of total
Company sales. A significant outbreak of a food-borne illness or food
safety
food tampering or contamination, or
increased public concerns with certain food products could have an
adverse effect on the reputation and financial performance of the
Company and could lead to unforeseen liabilities from legal claims.
The Company has food preparation, handling, dispensing and
storage procedures which help mitigate these risks.
including
issues
The Company also has product recall procedures in place in the
event of a food-borne illness outbreak or product defect. The
existence of these procedures does not eliminate the underlying
risks and the ability of these procedures to mitigate risk in the event
of a food-borne illness or product recall is dependent on their
successful execution.
Fuel and Utility Costs Compared to other retailers, the Company is
more exposed to fluctuations in the price of energy, particularly oil.
Due to the vast geography and remoteness of the store network,
expenses related to aviation fuel, diesel-generated electricity and
heating fuel costs are a more significant component of the
Company's and
its customers' expenses. To the extent that
escalating fuel and utility costs cannot be offset by alternative
energy sources, energy conservation practices or offsetting
productivity gains, this may result in higher retail prices or lower
operating margins which may affect the Company's financial
performance. In this scenario, consumer retail spending could also
be negatively affected by higher household energy-related expenses
which could have an adverse effect on the Company's financial
performance.
Social and political
Social
issues raise public awareness,
perspectives and actions through protests and/or media campaigns.
Issues that may relate to the Company’s business include, but are not
limited to food security, minimum wages, Indigenous rights, diversity
and inclusion, local and ethical sourcing, nutritional labelling and the
environment. Ineffective action or inaction on these matters could
adversely affect the Company’s reputation or financial performance.
Environmental The Company owns a large number of facilities and
real estate, particularly in remote locations, and is subject to
environmental risks associated with the contamination of such
facilities and properties. The Company operates retail fuel outlets in a
number of locations and uses fuel to heat stores and housing. The
Company also has aviation fuel storage containers and operates
aviation fuel dispensing equipment. Contamination resulting from
is possible. The Company
gasoline, heating and aviation fuel
employs operating, training, monitoring and testing procedures to
minimize the risk of contamination. The Company also operates
refrigeration equipment in its stores and distribution centres which, if
the equipment fails, could release gases that may be harmful to the
environment. The Company has monitoring and preventative
maintenance procedures to reduce the risk of this contamination
occurring. Even with these risk mitigation policies and procedures,
the Company could incur increased or unexpected costs related to
including
environmental
litigation and regulatory compliance costs, all of which could have
an adverse effect on the reputation and financial performance of the
Company.
remediation activities,
incidents and
Laws, Regulations and Standards The Company is subject to
various laws, regulations and standards administered by federal,
provincial and foreign regulatory authorities, including but not
limited to income, commodity and other taxes, securities laws,
repatriation, health and safety, employment
duties, currency
standards and minimum wage laws, Payment Card Industry ("PCI")
standards, anti-money
licensing
requirements, product packaging and labeling regulations and
zoning laws. New accounting standards and pronouncements or
changes in accounting standards may also impact the Company's
financial results.
laundering ("AML") regulations,
These laws, regulations and standards and their interpretation
by various courts and agencies are subject to change. In the course
of complying with such changes, the Company may incur significant
costs. Failure by the Company to fully comply with applicable laws,
regulations and standards could result
financial penalties,
assessments, sanctions, loss of operating licenses or legal action that
could have an adverse effect on the reputation and the financial
performance of the Company.
in
The Company is also subject to various privacy laws and
regulations regarding the protection of personal information of its
customers and employees. Any failure in the protection of this
information or non-compliance with laws or regulations could
financial
negatively affect
performance.
the Company's
reputation and
A portion of the Company's sales and net earnings are derived
from financial services and pharmacy operations, which are subject
to laws, regulations and standards. Changes in legislation regarding
financial services fees, including but not limited to ATM, pre-paid Visa
card and cheque-cashing fees and fees earned on customer
accounts receivable, could have an adverse
impact on the
Company's financial performance if other fees or offsetting cost
In Canada, on-going
implemented.
reductions cannot be
prescription drug reform, changes in dispensing fees, and the
potential implementation of a national pharmacare system could
have an adverse effect on the Company's financial performance if
other fees or offsetting cost reductions cannot be implemented.
The airline industry is also subject to extensive legal, regulatory
and administrative controls and oversight, including airline safety
standards. Failure by the Company to comply with these laws,
regulations and standards could result in the loss of operating
licenses and could have an adverse effect on the Company's financial
performance and reputation.
29ANNUAL REPORT
Insurance The Company manages its exposure to certain risks
through an integrated insurance program which combines an
appropriate level of self-insurance and the purchase of various
insurance policies. The Company's insurance program is based on
various lines and limits of coverage and is arranged with financially
stable insurance companies as rated by professional rating agencies.
Global insurance market conditions continue to be challenging as
insurance companies limit their capacity for underwriting risks in
certain geographic areas such as the Caribbean and northern
Canada or in sectors such as aviation. Insurance companies that do
provide coverage in these areas are requiring significantly higher
insurance premiums and higher self-insured retention levels from
companies. These factors are expected to continue to result in
higher insurance costs and, changes in self-insured retention levels
may result in greater earnings volatility in the event of future losses.
There can be no assurance that the Company's insurance program
will be sufficient to cover one or more large claims, or that any given
risk will be mitigated in all circumstances. There can also be no
assurance that the Company will be able to continue to purchase
insurance coverage at reasonable rates or maintain its self-insured
retention levels. To the extent that the Company's insurance policies
do not provide sufficient coverage for a loss, it could have an adverse
impact on the Company's operating results and financial condition.
Vendor and Third Party Service Partner Management The
Company relies on a broad base of manufacturers, suppliers and
operators of distribution facilities to provide goods and services.
Events, such as a pandemic, or disruptions affecting these suppliers
outside of the Company's control could in turn result in delays in the
delivery of merchandise to the stores and therefore negatively
impact the Company's reputation and financial performance. A
portion of the merchandise the Company sells is purchased offshore
which
including risks
associated with product safety and general merchandise product
defects, products that do not meet the required standards or non-
compliance with ethical and safe business practices. The Company
uses offshore consolidators and sourcing agents to monitor product
quality and ethical sourcing standards however, the Company does
not have any direct influence over how these vendors and service
partners are managed and there is no certainty that these risks can
be completely mitigated in all circumstances.
increases certain risks to the Company
NSA also relies upon suppliers and third party service partners
for specialized aviation parts and aircraft maintenance services. A
prolonged disruption affecting the supply of parts or provision of
maintenance services could negatively impact the availability of
aircraft to service the Company's customers, or result in higher than
anticipated costs, which could have an adverse effect on the
Company's financial performance and reputation.
Ethical Business Conduct The Company has a Code of Business
Conduct and Ethics policy which governs both employees and
Directors. The Company also has a Whistleblower Policy that
provides direct access to members of the Board of Directors.
Unethical business conduct could negatively impact the Company's
investors and
reputation and relationship with
employees, which in turn could have an adverse effect on the
financial performance of the Company.
its customers,
Income Taxes In the ordinary course of business, the Company is
subject to audits by tax authorities. The Company regularly reviews
its compliance with tax legislation, filing positions, the adequacy of
its tax provisions and the potential for adverse outcomes. While the
Company believes that its tax filing positions are appropriate and
supportable, the possibility exists that certain matters may be
reviewed and challenged by the tax authorities. If the final outcome
differs materially from the tax provisions, the Company's income tax
expense and its earnings could be affected positively or negatively in
the period in which the outcome is determined.
Litigation and Casualty Losses In the normal course of business,
the Company is subject to a number of claims and legal actions that
may be made by its customers, suppliers and others. The Company
records a provision for litigation claims if management believes the
Company has liability for such claim or legal action. If management's
assessment of liability or the amount of any such claim is incorrect, or
the Company is unsuccessful in defending its position, any difference
between the final judgment amount and the provision would
become an expense or a recovery in the period such claim was
resolved.
Consistent with risks inherent in the aviation industry, NSA
could be subject to large liability claims arising out of major
accidents or disasters involving aircraft which can result in serious
injury, death or destruction of property. Accidents and disasters may
occur from factors outside of the Company’s control such as severe
weather, lightning strikes, wind shear and bird strikes. Any such
accident or disaster could have a material adverse effect on the
Company’s
financial
condition.
from operations and
reputation,
results
Management of Inventory Success in the retail industry depends
on being able to select the right merchandise, in the correct
quantities in proportion to the demand for such merchandise. A
miscalculation of consumer demand for merchandise could result in
having excess
inventory for some products and missed sales
opportunities for others which could have an adverse effect on
operations and financial performance. Excess inventory may also
result in higher markdowns or inventory shrinkage all of which could
have an adverse effect on the financial performance of the Company.
Post-Employment Benefits The Company engages professional
investment advisors to manage the assets in the defined benefit
pension plans. The performance of the Company's pension plans
and the plan funding requirements are impacted by the returns on
plan assets, changes in the discount rate and regulatory funding
requirements. If capital market returns are below the level estimated
by management or if the discount rate used to value the liabilities of
the plans decreases, the Company may be required to make
contributions to its defined benefit pension plans in excess of those
currently contemplated, which may have an adverse effect on the
Company's financial performance.
30THE NORTH WEST COMPANY INC. - 2022 The Company regularly monitors and assesses the performance
of the pension plan assets and the impact of changes in capital
markets, changes
in plan member demographics, and other
economic factors that may impact funding requirements, benefit
plan expenses and actuarial assumptions. The Company makes cash
contributions to the pension plan as required and also uses letters of
credit to satisfy a portion of its funding obligations. Effective January
1, 2011, the Company entered into an amended and restated staff
pension plan and added a defined contribution plan. Under the
amended pension plan, all members who did not meet a qualifying
threshold based on number of years in the pension plan and age
were transitioned to the defined contribution pension plan effective
January 1, 2011 and no longer accumulate years of service under the
defined benefit pension plan. Effective January 1, 2022, the defined
benefit pension plan for Canadian-based executives was closed to
new members however, members prior to the closure will continue
to accumulate service in the plan until the end of their employment.
All of the Company's defined benefit pension plans are closed to
new members and all new eligible employees will participate in the
staff defined contribution plan. Further
information on post-
employment benefits is provided on page 33 and in Note 13 to
the consolidated financial statements.
Dependence on Key Facilities There are five major distribution
centres which are located in Winnipeg, Manitoba; Anchorage, Alaska;
San Leandro, California; Port of Tacoma, Washington; and a third
party managed facility in Fort Lauderdale, Florida. In addition, the
Company's Canadian Operations support office
in
Winnipeg, Manitoba, NSA's support office is located in Thunder Bay,
Ontario and the International Operations has support offices in
Anchorage, Alaska and Boca Raton, Florida. A significant or
prolonged disruption at any of these facilities due to fire, inclement
weather or otherwise could have a material adverse effect on the
financial performance of the Company.
located
is
Geopolitical Changes in the domestic or international political
environment may impact the Company's ability to source and
provide products and services. Acts of terrorism, riots, and political
instability, especially in less developed markets, could have an
adverse effect on the financial performance of the Company.
Financial Risks In the normal course of business, the Company is
exposed to financial risks that have the potential to negatively
impact its financial performance. The Company manages financial
risk with oversight provided by the Board of Directors, who also
approve specific financial transactions. The Company uses derivative
financial instruments only to hedge exposures arising in respect of
underlying business requirements and not for speculative purposes.
These risks and the actions taken to minimize the risks are described
below. Further information on the Company's financial instruments
and associated risks are provided in Note 15 to the consolidated
financial statements.
in relation to
Credit Risk Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet its
contractual obligations. The Company is exposed to credit risk
individual and commercial accounts
primarily
receivable. The Company manages credit risk by performing regular
credit assessments of its customers and provides allowances for
potentially uncollectible accounts receivable. The Company does not
have any individual customer accounts greater than 10% of total
accounts receivable.
to
credit
facilities
adequate
Liquidity Risk Liquidity risk is the risk that the Company will not be
able to meet its financial obligations as they come due or can do so
only at excessive cost. The Company manages liquidity risk by
maintaining
fund operating
requirements, pension plan contributions and planned sustaining
and growth-related capital expenditures, and regularly monitoring
actual and forecasted cash flow and debt levels. At January 31, 2023,
the Company had undrawn committed revolving loan facilities
available of $418.3 million (January 31, 2022 - $320.3 million). In
March 2022, the Company increased the capacity on its revolving
loan facilities in Canadian Operations from $300.0 million to $400.0
million and extended the maturity date to March 1, 2027. In January
2023, the Company extended the maturity date on its committed,
revolving loan facility in International Operations to January 25, 2028
and increased the amount available on this facility from US$40.0
million to US$50.0 million. The increases in the Canadian and
International loan facilities and the extension of the maturity dates
further reduces liquidity risk. Further information on liquidity is
provided
in the Consolidated Liquidity and Capital Resources
section.
Currency Risk Currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Company is exposed to currency risk,
primarily the U.S. dollar, through its net investment in International
Operations and
its U.S. dollar denominated borrowings. The
Company manages its exposure to currency risk by hedging the net
investment in foreign operations with a portion of U.S. dollar
denominated borrowings as described in the Sources of Liquidity
section. At January 31, 2023, the Company had US$70.4 million in
U.S. denominated debt compared to US$70.6 million at January 31,
2022 and US$140.8 million at January 31, 2021. Further information
on the impact of foreign exchange rates on the translation of U.S.
denominated debt is provided in the Capital Structure section.
The Company is also exposed to currency risk relating to the
translation of International Operations earnings to Canadian dollars.
In 2022, the average exchange rate used to translate U.S.
denominated earnings from the International Operations was 1.3088
compared to 1.2526 last year. The Canadian dollar's depreciation in
2022 compared to the U.S. dollar in 2021 positively impacted
consolidated net earnings by $2.1 million. In 2021, the average
exchange rate was 1.2526 compared to 1.3390 in 2020 which
resulted in a decrease in 2021 consolidated net earnings of $3.6
million compared to 2020.
31ANNUAL REPORT Interest Rate Risk Interest rate risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company is exposed to interest
rate risk primarily through its long-term borrowings. The Company
manages exposure to interest rate risk though a combination of fixed
and floating interest rate debt and may use interest rate swaps.
Further information on long-term debt is provided in Note 12 to the
consolidated financial statements. As at January 31, 2023, the
Company had no outstanding interest rate swaps.
CORPORATE SOCIAL RESPONSIBILITY &
SUSTAINABLE DEVELOPMENT
The North West Company opened its first store in 1668 as a trading
post in the Cree Nation of Waskaganish in northern Canada and
many of our stores in northern Canada and Alaska have been in
operation for over 200 years. Our continuing presence in the
communities we serve is based on sustainable practices that reflect
our adaptability and respect for the social license and underlying
trust we must earn.
The Company's social responsibility and sustainability objectives
are framed under the following four pillars:
•
•
•
•
Stronger Communities;
Better Quality of Life for our Customers;
Empowered Employees; and
Respect for the Environment.
A brief description of each pillar is as follows:
Stronger Communities We are committed to provide significant,
meaningful social benefit to the diverse communities we serve. We
believe that building strong, healthy and inclusive relationships
through listening and collaboration is an approach that adds value
for both the community and the Company in areas such as
employment, capital investment and sponsorship.
Better Quality of Life for our Customers We are committed to
provide reliable access to everyday products and services that meet
the lifestyle needs of our customers and that are as affordable as
possible. In addition, we advocate for inclusive policies and programs
that improve the quality of life for the people and communities we
serve. This goes to the heart of community and cultural sustainability
and to our role
in the
communities we serve.
in providing socio-economic benefits
Empowered Employees We are committed to enhance employee
satisfaction and effectiveness through our Company values of
customer service, trust, enterprising ideas, passion for what we do,
accountability and personal balance. We strive to provide our diverse
and talented employees with the best
job experiences and
opportunities, beginning with key roles in our stores.
Respect for the Environment We are committed to minimize our
environmental footprint in a way that accommodates the conflicting
realities of remote, costly-to-serve geographies populated by lower-
income communities. We look for innovation across our business
from efficient building design to eco-friendly energy alternatives and
limiting product packaging and waste.
The Board of Directors are accountable for overseeing the
Company's Corporate Social Responsibility and Sustainable
Development initiatives which are integrated within the Company's
risk management and strategic planning process. In addition to the
information provided on climate change and environmental risk
factors previously noted under Risk Management,
further
is available on the
information on the Sustainability Report
Company's website at www.northwest.ca.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS
requires management
to make estimates, assumptions and
judgments that affect the application of accounting policies and the
in the consolidated
reported amounts and disclosures made
financial statements and accompanying notes. Judgment has been
used in the application of accounting policy and to determine if a
transaction should be recognized or disclosed in the consolidated
financial statements while estimates and assumptions have been
used to measure balances recognized or disclosed. These estimates,
assumptions and judgments are based on management's historical
experience, knowledge of current events, expectations of future
outcomes and other factors that management considers reasonable
under
these estimates and
judgments by
assumptions
management about matters that are uncertain and changes in these
estimates could materially
financial
statements and disclosures. Management regularly evaluates the
estimates and assumptions it uses and revisions are recognized in
the period in which the estimates are reviewed and in any future
periods affected. The areas that management believes involve a
higher degree of judgment or complexity, or areas where the
estimates and assumptions may have the most significant impact on
the amounts recognized in the consolidated financial statements
include the following:
the circumstances. Certain of
impact the consolidated
subjective or complex
require
for
credit
losses
("ECL's")
expected
Valuation of Accounts Receivable The Company records an
allowance for doubtful accounts related to trade accounts receivable
that may potentially be impaired. The Company recognizes loss
allowances
on
accounts receivable. The change in ECL's is recognized in net
earnings and reflected as an allowance against accounts receivable.
The Company uses historical trends, timing of recoveries and
management's judgment as to whether current economic and credit
conditions are such that actual losses are likely to differ from
historical trends. A significant change in one or more of these
factors could impact the estimated allowances
for doubtful
the consolidated balance sheets and
accounts
the provisions
in the consolidated
statements of earnings. Additional information on the valuation
of accounts receivable is provided in Note 5 and the Credit Risk
section in Note 15 to the consolidated financial statements.
in
for debt
loss recorded
recorded
Valuation of Inventories Inventories are stated at the lower of cost
and net realizable value. Significant estimation is required in: (1) the
determination of margin factors used to convert inventory to cost;
(2) recognizing merchandise for which the customer's perception of
value has declined and appropriately marking the retail value of the
merchandise down to the perceived value; and (3) estimating
inventory
last
losses, or shrinkage, occurring between
physical count and the balance sheet date.
the
Inventory shrinkage is estimated as a percentage of sales for the
period from the date of the last physical inventory count to the
balance sheet date. The estimate is based on historical experience
and the most recent physical inventory results. To the extent that
those estimated, both
actual
inventories and cost of sales may be impacted.
losses experienced vary
from
32THE NORTH WEST COMPANY INC. - 2022 Changes or differences in these estimates may result in changes
to inventories on the consolidated balance sheets and a charge or
credit to cost of sales in the consolidated statements of earnings.
Additional information regarding inventories is provided in Note 6 to
the consolidated financial statements.
Post-Employment Benefits The defined benefit plan obligations
are accrued based on actuarial valuations which are dependent on
assumptions determined by management. These assumptions
include the discount rate used to calculate benefit plan obligations,
the rate of compensation increase, retirement ages and mortality
rates. These assumptions are reviewed by management and the
Company's actuaries.
The discount rate used to calculate benefit plan obligations and
the rate of compensation
increase are the most significant
assumptions. The discount rate used to calculate benefit plan
obligations and plan asset returns is based on market interest rates,
as at the Company's measurement date of January 31, 2023 on a
portfolio of Corporate AA bonds with terms to maturity that, on
average, matches the terms of the defined benefit plan obligations.
The discount rate used to measure the benefit plan obligations for
fiscal 2022 was 4.70% compared to 3.43% in 2021 and 2.72% in 2020.
Management assumed a rate of compensation increase of 4.0% for
fiscal 2020, 2021 and 2022.
These assumptions may change in the future and may result in
material changes in the defined benefit plan obligation on the
Company's consolidated balance sheets, the defined benefit plan
expense on the consolidated statements of earnings and the net
actuarial gains or losses recognized in comprehensive income and
retained earnings. Changes in financial market returns and interest
rates could also result in changes to the funding requirements of the
Company's defined benefit pension plans. Additional information
regarding the Company's post-employment benefits, including the
sensitivity of a 100 basis point change in the discount rate, is
provided in Note 13 to the consolidated financial statements.
Amortization of Long-lived Assets and Right-of-Use Assets The
Company makes estimates about the expected useful lives of long-
lived assets, including right-of-use assets and aircraft, the expected
residual values of the assets and the most appropriate method to
reflect the realization of the assets future economic benefit. This
includes using judgment to determine which asset components
constitute a significant cost in relation to the total cost of an asset.
Changes to these estimates, which can be significant, could be
caused by a variety of factors, including changes in expected useful
lives or residual values, changes to maintenance programs and
changes in utilization of the aircraft. Estimates and assumptions are
evaluated at least annually and any adjustments are accounted for as
a change in estimate, on a prospective basis, through amortization
expense in the Company's consolidated statements of earnings.
Business Combinations The Company accounts for business
combinations using the acquisition method of accounting which
requires the acquired assets and assumed liabilities to be recorded at
their estimated fair values. Judgment is required to determine the
fair value of the assets and liabilities with the most significant
judgment and assumptions required to determine the estimated fair
values of intangible assets, particularly trade names.
The Company uses the royalty relief method to determine the
fair value of the trade name intangible assets. This technique values
the intangible assets based on the present value of the expected
after-tax royalty cash flow stream using a hypothetical licensing
arrangement. Significant assumptions include, among others, the
determination of projected revenues, royalty rate, discount rates and
anticipated average income tax rates.
to
Impairment of Long-lived Assets The Company assesses the
recoverability of values assigned
long-lived assets after
considering potential impairment indicated by such factors as
business and market trends, future prospects, current market value
and other economic factors. Judgment is used to determine if a
triggering event has occurred requiring an impairment test to be
completed. If there is an indication of impairment, the recoverable
amount of the asset, which is the higher of its fair value less costs of
disposal and its value in use, is estimated in order to determine the
extent of the impairment loss. Where the asset does not generate
cash flows that are independent from other assets, the Company
estimates the recoverable amount of the cash-generating unit
("CGU") to which the asset belongs. For tangible and intangible
assets excluding goodwill, judgment is required to determine the
CGU based on the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets. To the extent that the
carrying value exceeds the estimated recoverable amount, an
impairment charge is recognized in the consolidated statements of
earnings in the period in which it occurs.
Various assumptions and estimates are used to determine the
recoverable amount of a CGU. The Company determines fair value
less costs of disposal using estimates such as market rental rates for
comparable properties, property appraisals and capitalization rates.
The Company determines value in use based on estimates and
assumptions regarding future financial performance. The underlying
estimates for cash flows include estimates for future sales, gross
margin rates and store expenses, and are based upon the stores' past
and expected future performance. Changes which may impact
future cash flows include, but are not limited to, competition,
general economic conditions and increases in operating costs that
cannot be offset by other productivity improvements. To the extent
that management's estimates are not realized, future assessments
could result in impairment charges that may have a significant
impact on the Company's consolidated balance sheets and
consolidated statements of earnings.
Goodwill Goodwill is not amortized but is subject to an impairment
test annually or whenever indicators of impairment are detected.
Judgment is required to determine the appropriate grouping of
CGUs for the purpose of testing for impairment. Judgment is also
required in evaluating indicators of impairment which would require
an impairment test to be completed. Goodwill is allocated to CGUs
that are expected to benefit from the synergies of the related
business combination and represents the lowest level within the
Company at which goodwill is monitored for internal management
purposes, which is both the Company's Canadian Operations and
International Operations segments before aggregation.
The value of the goodwill was tested by means of comparing
the recoverable amount of the operating segment to its carrying
value. The recoverable amount is the greater of its value in use or its
fair value less costs of disposal. The operating segment's recoverable
amount was based on fair value less costs of disposal. A range of fair
values was estimated by inferring enterprise values from the product
of financial performance and comparable trading multiples. Values
assigned to the key assumptions represent management's best
estimates and have been based on data from both external and
internal sources. Key assumptions used
in the estimation of
enterprise value include: budgeted financial performance, selection
of market trading multiples and costs to sell. To the extent that
management's estimates are not realized, future assessments could
result in impairment charges that may have a significant impact on
33ANNUAL REPORT FUTURE ACCOUNTING STANDARDS
In May 2021, the International Accounting Standards Board (IASB)
issued Deferred Tax related to Assets and Liabilities arising from a
Single Transaction, which amended IAS 12, Income Taxes (IAS 12).
The amendments are effective for periods beginning on or after
January 1, 2023, with early adoption permitted. The amendments
narrowed the scope of the recognition exemption so that it no
longer applies on initial recognition to transactions that give rise to
equal taxable and deductible temporary differences, such as leases.
In September 2022, the IASB issued amendments to IFRS 16, Leases
(IFRS 16) related to sale leaseback transactions for lessees. The
amendments require that subsequent remeasurement of the lease
liability does not result in a gain or loss that relates to the right of use
asset the lessee retains. The amendments are effective for periods
beginning on or after January 1, 2024, with early adoption permitted.
The Company does not expect adoption of these standards to have
a material
financial
statements.
impact on the Company's consolidated
There are no further IFRS or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on the
Company's consolidated financial statements.
the Company's consolidated balance sheets and consolidated
statements of earnings.
The Company performed the annual goodwill impairment test
in 2022 and determined that the recoverable amount exceeded its
carrying value. No goodwill
identified and
management considers any reasonably foreseeable changes in key
assumptions unlikely to produce a goodwill impairment.
impairment was
Income and Other Taxes Deferred tax assets and liabilities are
recognized for the future income tax consequences attributable to
temporary differences between the financial statement carrying
values of assets and liabilities and their respective income tax bases.
Deferred income tax assets or liabilities are measured using enacted
or substantively enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The calculation of current and
deferred income taxes requires management to use judgment
regarding the interpretation and application of tax legislation in the
various jurisdictions in which the Company operates. The calculation
of deferred income tax assets and liabilities is also impacted by
estimates of future financial results, expectations regarding the
timing of reversal of temporary differences, and assessing the
possible outcome of audits of tax filings by the regulatory agencies.
Changes or differences in these estimates or assumptions may
result in changes to the current or deferred income tax balances on
the consolidated balance sheets, a charge or credit to income tax
expense in the consolidated statements of earnings and may result
in cash payments or receipts. Additional information on income
taxes is provided in Note 10 to the consolidated financial statements.
Leases The values of right-of-use assets and lease liabilities are
measured based on whether renewal options are reasonably certain
of being exercised and an estimate of the incremental borrowing
rate specific to each leased asset if the interest rate in the lease is not
readily determined.
incremental borrowing rate for the
Canadian and International Operations is determined based on the
applicable corporate bond yield curve with an adjustment that
reflects the security.
The
Promissory Note Receivable This
includes
management's estimate of the fair value of contingent consideration
receivable for the sale of
Additional
information on the promissory note receivable is included in Note 15
and Note 24 to the consolidated financial statements.
its Giant Tiger stores.
financial asset
34THE NORTH WEST COMPANY INC. - 2022 NON-GAAP FINANCIAL MEASURES
These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies and should not be construed as an alternative to the other financial measures
determined in accordance with IFRS.
(1) Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Net Earnings are
not recognized measures under IFRS. Management uses these non-GAAP financial measures to exclude the impact of certain income and
expenses that must be recognized under IFRS. The excluded amounts are either subject to volatility in the Company's share price or may not
necessarily be reflective of the Company's underlying operating performance. These factors can make comparisons of the Company's financial
performance between periods more difficult. The Company may exclude additional items if it believes that doing so will result in a more
effective analysis and explanation of the underlying financial performance. The exclusion of these items does not imply that they are non-
recurring.
Reconciliation of earnings from operations to EBITDA and adjusted EBITDA
Fourth Quarter
Year-to-date
Canada
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
2022
2021
2019(1)
2022
2021
$
33,417 $
36,276 $
17,642
$
119,090
$
153,328
$
2019(1)
77,376
17,134
15,932
16,759
66,368
61,881
62,983
$
50,551 $
52,208 $
34,401
$
185,458
$
215,209
$
140,359
Gain on insurance settlement
Share-based compensation expense
—
3,049
(9,492)
3,268
(3,205)
136
—
10,983
(18,124)
10,136
(7,514)
3,025
Adjusted EBITDA
$
53,600 $
45,984 $
31,332
$
196,441
$
207,221
$
135,870
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
International (Stated in U.S. dollars)
Fourth Quarter
Year-to-date
2022
2021
2019(1)
2022
2021
$
10,630 $
10,456 $
6,939
$
46,772
$
53,566
$
6,291
5,880
5,273
24,453
23,220
$
16,921 $
16,336 $
12,212
$
71,225
$
76,786
$
Gain on insurance settlement
Share-based compensation expense
—
623
—
274
—
41
—
1,641
—
1,371
2019(1)
39,995
19,813
59,808
(8,000)
395
Adjusted EBITDA
$
17,544 $
16,610 $
12,253
$
72,866
$
78,157
$
52,203
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
Fourth Quarter
Year-to-date
Consolidated
2022
2021
2019(1)
2022
2021
2019(1)
$
47,824 $
49,588 $
26,734
$
180,305
$
220,425
$
130,353
25,636
23,376
23,699
98,373
90,950
89,222
$
73,460 $
72,964 $
50,433
$
278,678
$
311,375
$
219,575
Gain on insurance settlement
Share-based compensation expense
—
3,878
(9,492)
3,615
(3,205)
190
—
13,131
(18,124)
11,854
(18,170)
3,550
Adjusted EBITDA
$
77,338 $
67,087 $
47,418
$
291,809
$
305,105
$
204,955
(1) Pre-pandemic reconciliation of earnings from operations to EBITDA and Adjusted EBITDA.
35ANNUAL REPORT Reconciliation of consolidated net earnings to adjusted net earnings:
($ in thousands)
Net earnings
Fourth Quarter
Year-to-Date
2022
2021
2019(1)
2022
2021
$
35,129
$
35,608
$
17,263
$
125,836
$
157,451
$
Gain on insurance settlement, net of tax
Share-based compensation expense, net of tax
—
2,976
(6,152)
2,875
(2,340)
305
—
10,213
(13,275)
9,234
2019(1)
86,273
(13,887)
2,991
Adjusted Net Earnings
$
38,105
$
32,331
$
15,228
$
136,049
$
153,410
$
75,377
(1) Pre-pandemic reconciliation of net earnings to adjusted net earnings.
The Company recorded gains on insurance claims. These gains were due to the difference between the replacement cost of the assets
destroyed and their book value and also for the recovery of business interruption losses on certain insurance claims.
Certain share-based compensation costs are presented as liabilities on the Company's consolidated balance sheets. The Company is exposed
to market price fluctuations in its share price through these share-based compensation costs. These liabilities are recorded at fair value at each
reporting date based on the market price of the Company's shares at the end of each reporting period with the changes in fair value recorded
in selling, operating and administrative expenses. Further information on share-based compensation is provided in Note 14 and Note 18 to the
consolidated financial statements.
(2) Return on Net Assets (RONA) is not a recognized measure
under IFRS. Management believes that RONA is a useful measure to
evaluate the financial return on the net assets used in the business.
RONA is calculated as earnings from operations (EBIT) for the year
divided by average monthly net assets. The following table
reconciles net assets used in the RONA calculation to IFRS measures
reported in the consolidated financial statements as at January 31 for
the following fiscal years:
CUL Cost-U-Less store banner.
Debt covenants Restrictions written into banking facilities, senior notes
and loan agreements that prohibit the Company from taking actions that
may negatively impact the interests of the lenders.
Debt loss An expense resulting from the estimated loss on potentially
uncollectible accounts receivable.
($ in millions)
Total assets
2022
2021
2020
$ 1,336.9
$ 1,219.3
$ 1,191.2
Debt-to-equity ratio Provides information on the proportion of debt
and equity the Company is using to finance its operations and is
calculated as total debt divided by shareholders' equity.
Less: Total liabilities
(689.0)
Add: Total debt and lease liabilities
402.5
(639.1)
349.7
(685.9)
402.0
Net Assets Employed
$ 1,050.4
$
929.9
$
907.3
(3) Return on Average Equity (ROE) is not a recognized measure
under IFRS. Management believes that ROE is a useful measure to
evaluate
invested by
shareholders. ROE is calculated by dividing net earnings for the year
by average monthly total shareholders' equity. There is no directly
comparable IFRS measure for return on equity.
the amount
return on
financial
the
GLOSSARY OF TERMS & ABBREVIATIONS
AC Alaska Commercial Company store banner.
Diluted earnings per share The amount of net earnings for the period
attributable to shareholders of The North West Company Inc. divided by
the weighted-average number of shares outstanding during the period
including the impact of all potential dilutive outstanding shares at the
end of the period.
EBIT (Earnings From Operations Net earnings before interest and
income taxes provides an indication of the Company's performance prior
to interest expense and income taxes.
EBIT margin EBIT divided by sales.
EBITDA Net earnings before interest, income taxes, depreciation and
indication of the Company's operational
amortization provides an
performance before allocating the cost of interest, income taxes and
capital investments. See Non-GAAP Financial Measures section.
Basic earnings per share Net earnings attributable to shareholders of
The North West Company Inc. divided by the weighted-average number
of shares outstanding during the period.
EBITDA margin EBITDA divided by sales.
ESG Environmental, social and governance.
Basis point A unit of measure that is equal to 1/100th of one percent.
Book value per share Equity attributable to shareholders of The North
West Company Inc. divided by the number of shares, basic or diluted,
outstanding at the end of the year.
Fair value The amount of consideration that would be agreed upon in
an arm's length transaction between knowledgeable, willing parties who
are under no compulsion to act.
Gross profit Sales less cost of goods sold and inventory shrinkage.
B-to-B Business to business sales.
B-to-C Business to consumer sales.
Gross profit rate Gross profit divided by sales.
GT Giant Tiger store banner.
Compound Annual Growth Rate ("CAGR") The compound annual
growth rate is the year-over-year percentage growth rate over a given
period of time.
Hedge A risk management technique used to manage interest rate,
foreign currency exchange or other exposures arising from business
transactions.
36THE NORTH WEST COMPANY INC. - 2022 Interest coverage Net earnings before interest and income taxes
divided by interest expense.
IFRS (International Financial Reporting Standards Effective for the
2011 fiscal year, the consolidated financial statements were prepared in
accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board. Comparative financial
information for the year ended January 31, 2011 (“2010” previously
reported in the consolidated financial statements prepared in accordance
with CGAAP has been restated in accordance with the accounting
policies and financial statement presentation adopted under
IFRS.
Further information on the transition to IFRS and the impact on the
Company's consolidated financial statements is provided in the 2011
Annual Financial Report available on SEDAR at www.sedar.com or on the
Company's website at www.northwest.ca.
NSA North Star Air Ltd., a regional airline providing cargo and passenger
services in northern Canada.
Return on Average Equity ("ROE" Net earnings divided by average
shareholders' equity. See Non-GAAP Financial Measures section.
interest
Return on Net Assets ("RONA")
and income taxes divided by average net assets employed (total assets
less accounts payable and accrued liabilities, income taxes payable,
defined benefit plan obligations, deferred tax
liabilities, and other
long-term liabilities). See Non-GAAP Financial Measures section.
Net earnings before
RTW Roadtown Wholesale Trading Ltd. collectively consisting of the
Riteway Food Markets banner, a Cash and Carry store and a significant
wholesale operation.
Same store sales Is a supplementary financial measure of retail food and
general merchandise sales performance from stores that have been open
more than 52 weeks in the periods being compared, excluding the
impact of foreign exchange. Total same store sales consists of retail food
and general merchandise sales and excludes other sales.
SOFR Secured Overnight Financing Rate.
Working capital Total current assets less total current liabilities.
Year The fiscal year ends on January 31. Each fiscal year has 365 days of
operations with the exception of a "leap year" which has 366 days of
operations as a result of February 29. The following table summarizes the
fiscal year:
Fiscal
Year
2022
2021
2020
2019
2018
2017
Year-ended
January 31, 2023
January 31, 2022
January 31, 2021
January 31, 2020
January 31, 2019
January 31, 2018
Fiscal
Year
2016
2015
2014
2013
2012
2011
Year-ended
January 31, 2017
January 31, 2016
January 31, 2015
January 31, 2014
January 31, 2013
January 31, 2012
37ANNUAL REPORT Eleven-Year Financial Summary
Fiscal Year ($ in thousands )
Consolidated Statements of Earnings
Sales - Canadian Operations
Sales - International Operations
Sales - Total
EBITDA(2) - Canadian Operations
EBITDA(2) - International Operations
EBITDA(2) - Total Operations
Amortization - Canadian Operations
Amortization - International Operations
Amortization - Total
Interest
Income taxes
Net earnings attributable to shareholders of the Company
Cash flow from operating activities
Dividends paid during the year
Capital and intangible asset expenditures
Net change in cash
Consolidated Balance Sheets
Current assets
Property and equipment
Right-of-use assets
Promissory note receivable
Other assets, intangible assets and goodwill
Deferred tax assets
Current liabilities
Long-term debt and other liabilities
Total Equity
Consolidated Dollar Per Share ($)
Net earnings - basic
Net earnings - diluted
EBITDA(2),(3)
Cash flow from operating activities(3)
Dividends paid during the year(3)
Equity (basic shares outstanding end of year)
Market price at January 31
Statistics at Year End
Number of stores - Canadian
Number of stores - International
Selling square feet (000's) end of year - Canadian Stores
Selling square feet (000's) end of year - International Stores
Sales per average selling square foot - Canadian
Sales per average selling square foot - International
Number of employees - Canadian Operations
Number of employees - International Operations
Average shares outstanding (000's)
Shares outstanding at end of fiscal year (000's)
Shares traded during the year (000's)
Financial Ratios
EBITDA(2) (%)
Earnings from operations (EBIT) (%)
Total return on net assets(2) (%)
Return on average equity(2) (%)
Debt-to-equity
Dividends as % of cash flow from operating activities
Inventory turnover (times per year)
2022
2021
2020
2019
2018(1)
$ 1,323,185
1,029,575
2,352,760
185,458
93,220
278,678
66,368
32,005
98,373
14,836
39,633
122,190
182,838
71,805
117,112
9,383
$ 474,844
606,310
102,632
26,299
105,098
21,707
248,606
440,384
647,900
$
$
$
2.55
2.51
5.82
3.82
1.50
13.57
36.24
164
58
1,004
686
1,322
1,511
5,024
2,287
47,865
47,751
52,348
11.8
7.7
17.9
20.5
.45:1
39.3
5.6
$ 1,291,139 $ 1,376,188 $ 1,271,552 $ 1,246,133
767,353
2,013,486
130,399
87,623
218,022
57,577
24,444
82,021
19,640
25,738
86,739
155,725
62,329
103,219
13,288
822,841
2,094,393
140,359
79,216
219,575
62,983
26,239
89,222
20,948
23,132
82,724
161,117
64,351
121,605
(10,261)
957,657
2,248,796
215,209
96,166
311,375
61,881
29,069
90,950
13,058
49,916
154,802
224,135
70,420
94,070
(22,110)
983,051
2,359,239
206,498
94,929
301,427
62,357
29,721
92,078
16,808
48,981
139,874
338,718
67,276
75,244
43,349
$
$
$
$
403,358 $ 396,860 $ 399,593 $ 376,297
514,946
554,457
127,794
100,844
—
40,283
96,119
98,585
34,705
21,746
196,938
294,490
541,907
344,579
411,016
580,204
531,794
107,766
49,020
98,440
7,288
315,135
370,802
505,231
555,075
127,870
—
104,765
28,233
194,084
594,482
426,970
3.21 $
3.16
6.45
4.64
1.46
12.12
35.05
161
55
998
677
1,302 $
1,425 $
4,926
2,598
48,268
47,879
50,474
13.8
9.8
23.8
29.0
.41:1
31.4
6.3
2.87 $
2.82
6.18
6.95
1.38
10.39
32.37
1.70 $
1.68
4.50
3.30
1.32
8.76
27.56
159
53
986
667
1,057 $
1,479 $
4,735
2,204
48,758
48,613
60,827
198
51
1,617
662
798 $
1,236 $
5,587
2,046
48,751
48,751
45,013
12.8
8.9
22.4
30.7
.56:1
19.9
7.1
10.5
6.2
13.5
20.5
.96:1
39.9
5.8
1.78
1.77
4.47
3.19
1.28
8.43
31.17
193
52
1,571
669
798
1,148
5,672
2,253
48,697
48,751
46,269
10.8
6.8
15.3
23.2
.89:1
40.0
6.0
(1)
IFRS 16 - Leases was applied retrospectively with restatement of certain prior year figures as
described in Accounting Standard Changes Implemented in 2019 as disclosed in the 2019 Annual
Report. Amounts prior to 2018 have not been restated for IFRS 16. Certain 2017 amounts have
been restated upon the adoption of IFRS 15. Amounts prior to 2017 have not been restated for IFRS
15.
(2) See Non-GAAP Financial Measures on page 35.
38THE NORTH WEST COMPANY INC. - 2022 2017 (1)
2016
2015
2014
2013
2012
Fiscal Year ($ in thousands )
$ 1,199,473 $ 1,125,330 $ 1,089,898 $ 1,042,168 $ 1,022,985 $ 1,043,050
470,596
785,649
1,513,646
1,985,122
106,510
112,393
57,231
27,207
133,717
169,624
29,155
39,796
7,994
15,857
37,149
55,653
6,979
10,145
25,701
34,135
67,154
63,888
128,992
141,419
50,320
62,315
51,133
122,035
11,691
(5,083)
718,763
1,844,093
109,736
56,762
166,498
35,291
13,076
48,367
7,220
33,835
77,076
126,024
60,169
77,745
(7,000)
520,140
1,543,125
111,225
27,111
138,336
29,258
9,018
38,276
7,784
28,013
64,263
79,473
54,229
43,207
(16,322)
582,232
1,624,400
100,896
36,942
137,838
30,302
10,070
40,372
6,673
27,910
62,883
115,086
56,180
52,329
6,776
706,137
1,796,035
98,276
53,071
151,347
31,781
12,245
44,026
6,210
31,332
69,779
132,987
58,210
75,983
8,114
$ 335,003 $ 327,938 $ 335,581 $ 315,840 $ 299,071 $ 303,896
274,027
469,993
—
—
—
—
60,567
91,502
34,450
12,904
190,184
171,212
164,960
377,580
296,250
382,156
358,121
—
—
86,909
32,853
152,244
285,792
367,785
311,692
—
—
68,693
28,074
146,275
248,741
329,283
345,881
—
—
83,293
29,040
155,501
280,682
357,612
286,875
—
—
64,969
19,597
209,738
138,334
322,440
$
$
$
1.38 $
1.36
3.48
2.91
1.28
7.60
29.14
1.59 $
1.57
3.43
2.60
1.24
7.57
29.28
1.44 $
1.43
3.12
2.74
1.20
7.37
30.53
188
51
1,552
668
781 $
1,169 $
5,915
2,119
48,680
48,690
38,836
185
47
1,518
676
755 $
1,063 $
5,715
1,882
48,524
48,542
49,189
181
47
1,463
676
756 $
1,045 $
5,482
1,896
48,509
48,523
35,631
8.5
5.7
16.7
18.3
.82:1
44.1
6.0
9.0
6.4
20.1
21.8
.62:1
47.7
6.1
8.4
6.0
19.5
20.6
.63:1
43.8
6.2
(3) Based on average basic shares outstanding.
1.30 $
1.29
2.85
2.38
1.16
6.80
26.56
178
47
1,422
676
742 $
849 $
1.33 $
1.32
2.86
1.64
1.12
6.66
25.42
178
48
1,386
696
741 $
767 $
4,921
1,726
48,432
48,497
24,080
8.5
6.0
18.4
19.3
.61:1
48.8
5.7
4,839
1,853
48,413
48,426
17,623
9.0
6.5
20.0
21.0
.57:1
68.2
5.6
1.32
1.32
2.76
2.67
1.04
6.12
23.14
177
46
1,375
660
734
716
4,768
1,568
48,384
48,389
17,831
8.8
6.4
20.6
22.1
.55:1
39.0
5.8
Consolidated Statements of Earnings
Sales - Canadian Operations
Sales - International Operations
Sales - Total
EBITDA(2) - Canadian Operations
EBITDA(2) - International Operations
EBITDA(2) - Total Operations
Amortization - Canadian Operations
Amortization - International Operations
Amortization - Total
Interest
Income taxes
Net earnings attributable to shareholders of the Company
Cash flow from operating activities
Dividends paid during the year
Capital and intangible asset expenditures
Net change in cash
Consolidated Balance Sheets
Current assets
Property and equipment
Right-of-use assets
Promissory note receivable
Other assets, intangible assets and goodwill
Deferred tax assets
Current liabilities
Long-term debt and other liabilities
Total equity
Consolidated Dollar Per Share ($)
Net earnings - basic
Net earnings - diluted
EBITDA(2),(3)
Cash flow from operating activities(3)
Dividends paid during the year(3)
Equity (basic shares outstanding at end of year)
Market price at January 31
Statistics at Year End
Number of stores - Canadian
Number of stores - International
Selling square feet (000's) end of year - Canadian Stores
Selling square feet (000's) end of year - International Stores
Sales per average selling square foot - Canadian
Sales per average selling square foot - International
Number of employees - Canadian Operations
Number of employees - International Operations
Average shares outstanding (000's)
Shares outstanding at end of fiscal year (000's)
Shares traded during the year (000's)
Financial Ratios
EBITDA(2) (%)
Earnings from operations (EBIT) (%)
Total return on net assets(2) (%)
Return on average equity(2) (%)
Debt-to-equity
Dividends as % of cash flow from operating activities
Inventory turnover (times per year)
39ANNUAL REPORT
Management’s Responsibility for Financial Statements
The management of The North West Company Inc. is responsible for the preparation, presentation and integrity
of the accompanying consolidated financial statements and all other information in the annual report. The
consolidated financial statements have been prepared by management in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and include certain amounts that are
based on reasonable estimates and judgment by management.
In order to meet its responsibility and ensure integrity of financial information, management has established a
code of business ethics, and maintains appropriate internal controls and accounting systems. An internal audit
function is maintained that is designed to provide reasonable assurance that assets are safeguarded, transactions are
authorized and recorded and that the financial records are reliable.
Ultimate responsibility for financial reporting to shareholders rests with the Board of Directors. The Audit
Committee of the Board of Directors, consisting of independent Directors, meets periodically with management and
with the internal and external auditors to review the audit results, internal controls and the selection and consistent
application of appropriate accounting policies. Internal and external auditors have unlimited access to the Audit
Committee. The Audit Committee meets separately with management and the external auditors to review the
consolidated financial statements and other contents of the annual report and recommend approval by the Board of
Directors. The Audit Committee also recommends the independent auditor for appointment by the shareholders.
PricewaterhouseCoopers LLP, an independent firm of auditors appointed by the shareholders, have completed
their audit in accordance with Canadian generally accepted audited standards and submitted their report as follows.
Daniel G. McConnell
PRESIDENT & CEO
THE NORTH WEST COMPANY INC.
April 5, 2023
John D. King, CPA, CA, CMA
EXECUTIVE VICE-PRESIDENT &
CHIEF FINANCIAL OFFICER
THE NORTH WEST COMPANY INC.
40THE NORTH WEST COMPANY INC. - 2022
41CONSOLIDATED FINANCIAL STATEMENTS 42THE NORTH WEST COMPANY INC. - 2022 43CONSOLIDATED FINANCIAL STATEMENTS 44THE NORTH WEST COMPANY INC. - 2022 45CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets
($ in thousands)
CURRENT ASSETS
Cash
Accounts receivable (Note 5)
Inventories (Note 6)
Prepaid expenses
NON-CURRENT ASSETS
Property & Equipment (Note 7)
Right-of-use assets (Note 8)
Promissory note receivable (Note 24)
Goodwill (Note 9)
Intangible assets (Note 9)
Deferred tax asset (Note 10)
Other assets (Note 11)
TOTAL ASSETS
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Current portion of long-term debt (Note 12)
Current portion of lease liabilities (Note 8)
Income tax payable (Note 10)
NON-CURRENT LIABILITIES
Long-term debt (Note 12)
Lease liabilities (Note 8)
Defined benefit plan obligation (Note 13)
Deferred tax liability (Note 10)
Other long-term liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital (Note 16)
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Equity attributable to The North West Company Inc.
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board of Directors
“Annalisa King”
DIRECTOR
“Brock Bulbuck”
DIRECTOR
January 31, 2023
January 31, 2022
$
$
$
58,809
113,798
293,835
8,402
474,844
606,310
102,632
26,299
50,431
30,694
21,707
23,973
862,046
1,336,890
225,481
268
18,644
4,213
248,606
289,782
93,833
18,232
14,311
24,226
440,384
688,990
176,091
13,017
407,182
32,931
629,221
18,679
647,900
$
$
$
49,426
99,241
247,988
6,703
403,358
554,457
100,844
40,283
48,502
34,094
21,746
15,989
815,915
1,219,273
221,319
46,262
18,055
8,854
294,490
189,378
96,015
21,714
14,483
22,989
344,579
639,069
173,081
12,530
355,674
22,350
563,635
16,569
580,204
$
1,336,890
$
1,219,273
46THE NORTH WEST COMPANY INC. - 2022
Consolidated Statements of Earnings
($ in thousands, except per share amounts)
SALES
Cost of sales
Gross profit
Selling, operating and administrative expenses (Notes 17, 18)
Earnings from operations
Interest expense (Note 19)
Earnings before income taxes
Income taxes (Note 10)
NET EARNINGS FOR THE YEAR
NET EARNINGS ATTRIBUTABLE TO
The North West Company Inc.
Non-controlling interests
TOTAL NET EARNINGS
NET EARNINGS PER SHARE (Note 21)
Basic
Diluted
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING (000's)
Basic
Diluted
See accompanying notes to consolidated financial statements.
Year Ended
Year Ended
January 31, 2023
January 31, 2022
$ 2,352,760
$ 2,248,796
(1,604,845)
(1,511,045)
747,915
737,751
(567,610)
(517,326)
180,305
(14,836)
165,469
(39,633)
220,425
(13,058)
207,367
(49,916)
$ 125,836
$ 157,451
$ 122,190
3,646
$ 125,836
$ 154,802
2,649
$ 157,451
$
$
2.55
2.51
$
$
3.21
3.16
47,865
48,649
48,268
49,034
47CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
($ in thousands)
NET EARNINGS FOR THE YEAR
Other comprehensive income, net of tax:
Items that may be reclassified to net earnings:
Exchange differences on translation of foreign controlled subsidiaries
Items that will not be subsequently reclassified to net earnings:
Remeasurements of defined benefit plans (Note 13)
Remeasurements of defined benefit plans of equity investee
Total other comprehensive income, net of tax
COMPREHENSIVE INCOME FOR THE YEAR
OTHER COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO
The North West Company Inc.
Non-controlling interests
TOTAL OTHER COMPREHENSIVE INCOME
COMPREHENSIVE INCOME ATTRIBUTABLE TO
The North West Company Inc.
Non-controlling interests
TOTAL COMPREHENSIVE INCOME
See accompanying notes to consolidated financial statements.
Year Ended
Year Ended
January 31, 2023
January 31, 2022
$ 125,836
$ 157,451
11,566
7,856
230
19,652
734
14,174
202
15,110
$ 145,488
$ 172,561
$
18,667
$
15,121
985
(11)
$
19,652
$
15,110
$ 140,857
$ 169,923
4,631
2,638
$ 145,488
$ 172,561
48THE NORTH WEST COMPANY INC. - 2022
Consolidated Statements of Changes in Shareholders' Equity
($ in thousands)
Share
Capital
Contributed
Surplus
Retained
Earnings
AOCI (1)
Total
Non-
Controlling
Interests
Total
Equity
Balance at January 31, 2022
$ 173,081 $
12,530 $ 355,674 $ 22,350 $ 563,635 $
16,569 $ 580,204
Net earnings for the year
Other comprehensive income
Other comprehensive income of
equity investee
Comprehensive income
Common shares purchased and
cancelled (Note 16)
Equity settled share-based payments
(Note 14)
Dividends (Note 20)
Issuance of common shares (Note 16)
Balance at January 31, 2023
—
—
—
—
—
—
—
122,190
—
122,190
3,646 125,836
7,856
10,581
18,437
985
19,422
230
—
230
—
230
—
130,276
10,581
140,857
4,631 145,488
(854)
—
(6,963)
(203)
—
4,067
2,656
—
—
(71,805)
(2,169)
—
—
—
—
—
(7,817)
—
(7,817)
2,453
—
2,453
(71,805)
(2,521)
(74,326)
1,898
—
1,898
3,010
(77,792)
$ 176,091 $ 13,017 $ 407,182 $ 32,931 $ 629,221 $ 18,679 $ 647,900
(75,271)
(78,768)
(2,521)
487
—
Balance at January 31, 2021
$ 174,213 $
13,394 $ 282,088 $ 21,605 $ 491,300 $
13,931 $ 505,231
Net earnings for the year
Other comprehensive income/(loss)
Other comprehensive income of
equity investee
Comprehensive income
Common shares purchased and
cancelled (Note 16)
Equity settled share-based payments
(Note 14)
Dividends (Note 20)
Issuance of common shares (Note 16)
—
—
—
—
(2,892)
(29)
—
1,789
(1,132)
—
—
—
154,802
—
154,802
2,649 157,451
14,174
745
14,919
(11)
14,908
202
—
202
—
202
—
169,178
745
169,923
2,638 172,561
—
80
—
(944)
(864)
(25,172)
—
(70,420)
—
(95,592)
—
—
—
—
—
(28,064)
—
(28,064)
51
(70,420)
845
(97,588)
—
—
—
51
(70,420)
845
—
(97,588)
Balance at January 31, 2022
$ 173,081 $
12,530 $ 355,674 $ 22,350 $ 563,635 $
16,569 $ 580,204
(1) Accumulated Other Comprehensive Income
See accompanying notes to consolidated financial statements.
49CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
($ in thousands)
CASH PROVIDED BY (USED IN)
Operating activities
Net earnings for the year
Adjustments for:
Amortization (Notes 7, 8, 9)
Provision for income taxes (Note 10)
Interest expense (Note 19)
Equity settled share-based compensation (Note 14)
Insurance proceeds, property and equipment (Note 17)
Taxes paid
(Gain)/Loss on disposal of property and equipment
Change in non-cash working capital
Change in other non-cash items
Cash from operating activities
Investing activities
Purchase of property and equipment (Note 7)
Goodwill and intangible asset additions (Note 9)
Proceeds from disposal of property and equipment
Proceeds from promissory note receivable
Insurance proceeds, property and equipment
Cash used in investing activities
Financing activities
Net increase in long-term debt (Note 12)
Debt repayment (Note 12)
Payment of lease liabilities, principal
Payment of lease liabilities, interest
Dividends (Note 20)
Dividends to non-controlling interests (Note 20)
Interest paid
Issuance of common shares (Note 16)
Common shares purchased and cancelled (Note 16)
Cash used in financing activities
Effect of changes in foreign exchange rates on cash
NET CHANGE IN CASH
Cash, beginning of year
CASH, END OF YEAR
See accompanying notes to consolidated financial statements.
Year Ended
Year Ended
January 31, 2023
January 31, 2022
$ 125,836
$ 157,451
98,373
39,633
14,836
2,453
—
(46,961)
(54)
234,116
(50,905)
(373)
182,838
(112,581)
(4,531)
510
9,800
—
(106,802)
49,436
—
(22,349)
(4,249)
(71,805)
(2,521)
(10,891)
1,898
(7,817)
(68,298)
1,645
9,383
49,426
90,950
49,916
13,058
51
(18,124)
(63,570)
50
229,782
(2,563)
(3,084)
224,135
(87,341)
(6,729)
85
—
18,124
(75,861)
44,071
(85,393)
(18,003)
(4,288)
(70,420)
—
(8,944)
845
(28,064)
(170,196)
(188)
(22,110)
71,536
$
58,809
$
49,426
50THE NORTH WEST COMPANY INC. - 2022
Notes to
Consolidated
Financial
Statements
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JANUARY 31, 2023 AND 2022
1. ORGANIZATION
The North West Company Inc. (NWC or the Company) is a
corporation amalgamated under the Canada Business Corporations
Act (CBCA) and governed by the laws of Canada. The Company,
through its subsidiaries, is a leading retailer to rural and remote
communities in the following regions: northern Canada, rural Alaska,
the South Pacific and the Caribbean. These regions comprise two
reportable operating
segments: Canadian Operations and
International Operations.
The address of its registered office is 77 Main Street, Winnipeg,
Manitoba. These consolidated financial statements have been
approved for issue by the Board of Directors of the Company on
April 5, 2023.
2. BASIS OF PREPARATION
(A) Statement of Compliance
These consolidated financial
in accordance with
statements have been prepared
International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board (IASB).
(B) Basis of Measurement The consolidated financial statements
have been prepared on a going concern basis, under the
historical cost convention, except for the following which are
measured at fair value, as applicable:
•
•
•
Liabilities for share-based payment plans (Note 14)
Defined benefit pension plan (Note 13)
Assets and liabilities acquired in a business combination
The methods used to measure fair values are discussed further
in the notes to these consolidated financial statements.
(C) Functional and Presentation Currency The presentation
currency of the consolidated financial statements is Canadian
dollars, which is the Company’s functional currency. All
financial information is presented in Canadian dollars, unless
otherwise stated, and has been rounded to the nearest
thousand.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied to all years
presented in these consolidated financial statements, and have been
applied consistently by both the Company and its subsidiaries using
uniform accounting policies for like transactions and other events in
similar circumstances.
(A) Basis of Consolidation Subsidiaries are entities controlled,
either directly or indirectly, by the Company. Control is
established when the Company has rights to an entity's variable
returns, and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company until
the date that control ceases. The Company assesses control on
an ongoing basis.
Net earnings or loss and each component of other
comprehensive income are attributed to the shareholders of
the Company and to the non-controlling interests. Total
comprehensive income is attributed to the shareholders of the
Company and to the non-controlling interests even if this
results in the non-controlling interests having a deficit balance
on consolidation.
A joint arrangement can take the form of a joint operation
or a joint venture. Joint ventures are those entities over which
the Company has joint control of the rights to the net assets of
the arrangement, rather than rights to its assets and obligations
for its liabilities. The Company’s 50% interest in Transport
Nanuk Inc. has been classified as a joint venture. Its results are
included in the consolidated statements of earnings using the
equity method of accounting. The consolidated financial
statements include the Company's share of both earnings and
other comprehensive income from the date that significant
influence or joint control commences until the date that it
ceases. Joint ventures are carried in the consolidated balance
sheets at cost plus post-acquisition changes in the Company’s
share of net assets of the entity, less any impairment in value.
All significant inter-company amounts and transactions
have been eliminated.
(B) Business Combinations
Business combinations are
accounted for using the acquisition method of accounting. The
consideration transferred is measured at the fair value of the
assets given, equity instruments issued and liabilities assumed
at the date of exchange. Acquisition costs incurred are
expensed and included in selling, operating and administrative
expenses. Any contingent consideration to be transferred by
the acquirer will be recognized at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent
consideration which is deemed to be an asset or liability will be
recognized in either net earnings or as a change to other
comprehensive income ("OCI"). If the contingent consideration
is classified as equity, it will not be remeasured and settlement
is accounted for within equity.
Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination, are measured
initially at their fair values at the acquisition date irrespective of
the extent of any non-controlling interest. The excess of the
cost of the acquisition over the fair value of the Company’s
share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognized directly in the consolidated statements of earnings.
51NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-controlling interests are measured either at fair value
or their proportionate share of the acquiree's identifiable net
assets at the date of acquisition.
(C) Revenue Recognition Revenue on the sale of goods and
services is recorded at the time the sale is made or service is
rendered to the customer. Sales are presented net of tax,
returns and discounts and are measured at the fair value of the
consideration received or receivable from the customer for the
products sold or services supplied.
Service charges on
customer account receivables are accrued each month on
balances outstanding at each account’s billing date.
(G)
(D)
Inventories Inventories are valued at the lower of cost and
net realizable value. The cost of warehouse inventories is
determined using the weighted-average cost method. The cost
of retail inventories is determined using the retail method of
inventories and the
accounting for general merchandise
weighted-average cost method for food inventories. Cost
includes the cost to purchase goods net of vendor rebates plus
other costs incurred in bringing inventories to their present
location and condition. Net realizable value is estimated based
on the amount at which inventories are expected to be sold,
taking into consideration decreases in retail prices due to
obsolescence, damage or seasonality.
Inventories are written down to net realizable value if net
When
realizable value declines below carrying amount.
circumstances that previously caused inventories to be written
down below cost no longer exist or when there is clear
evidence of an increase in selling price, the amount of the
write-down previously recorded is reversed.
(E) Vendor Rebates Consideration received from vendors related
to the purchase of merchandise is recorded on an accrual basis
as a reduction in the cost of the vendor’s products and reflected
as a reduction of cost of sales and related inventory when it is
probable they will be received and the amount can be reliably
estimated.
(F) Property and Equipment Property and equipment are stated
at cost less accumulated amortization and any impairment
losses. Cost includes any directly attributable costs, borrowing
costs on qualifying construction projects, and the costs of
dismantling and removing the items and restoring the site on
which they are located. When major components of an item of
property and equipment have different useful lives, they are
accounted for as separate items. Amortization methods, useful
lives and residual values are reviewed at each reporting date
and adjusted if appropriate. Assets under construction and land
are not amortized. Amortization is calculated from the dates
assets are available for use using the straight-line method to
allocate the cost of assets less their residual values over their
estimated useful lives.
Estimated useful lives of Property and Equipment are as follows:
Buildings 3.0% – 8.0%
Leasehold improvements 3.0% – 20.0%
Aircraft 3.3% – 20.0%
Fixtures and equipment 8.0% – 20.0%
Computer equipment 12.0% – 33.0%
Major aircraft maintenance overhaul expenditures, including
labour, are capitalized and depreciated over the expected life of
the maintenance cycle. Any remaining carrying value, if any, is
derecognized when the major maintenance overhaul occurs.
All other costs associated with maintenance of aircraft fleet
assets are charged to the consolidated statements of earnings
as incurred.
Impairment of Non-financial Assets Tangible assets and
definite life intangible assets are reviewed at each balance sheet
date to determine whether events or conditions indicate that
their carrying amount may not be recoverable. If any such
indication exists, the recoverable amount of the asset, which is
the higher of its fair value less costs of disposal and its value in
use, is estimated in order to determine the extent of the
impairment loss. Where the asset does not generate cash flows
that are independent from other assets, the Company estimates
the recoverable amount of the cash-generating unit (CGU) to
which the asset belongs. For tangible and intangible assets
excluding goodwill, the CGU is the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of
assets. CGU's may comprise individual stores or groups of
stores.
Goodwill and indefinite life intangible assets are not
amortized but are subject to an impairment test annually and
whenever indicators of impairment are detected. Goodwill is
allocated to CGUs that are expected to benefit from the
synergies of the related business combination and represents
the lowest level within the Company at which goodwill is
monitored for internal management purposes.
Any impairment charge is recognized in the consolidated
statement of earnings in the period in which it occurs, to the
extent that the carrying value exceeds its recoverable amount.
Where an impairment loss other than an impairment loss on
goodwill subsequently reverses due to a change in the original
estimate, the carrying amount of the asset is increased to the
revised estimate of
Impairment
charges on goodwill are not reversed.
its recoverable amount.
All impairment losses are recognized in the consolidated
loss, except an
statements of earnings.
impairment loss related to goodwill, is reversed if the reversal
can be related objectively to an event occurring after the
impairment loss was recognized.
impairment
An
(H) Leases At contract inception, the Company assesses whether a
contract is, or contains a lease and recognizes a right-of-use
asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to
dismantle and remove or restore the underlying asset, less any
lease incentives received.
Subsequent to initial measurement, the Company applies
the cost model. Right-of-use assets are subsequently amortized
using the straight-line method from the lease commencement
date to the earlier of the end of their useful life or the end of the
lease term. The estimated useful lives of right-of-use assets are
determined based on the shorter of the lease term and the
useful life of the underlying asset. Right-of-use assets may also
be
for
remeasurements of the lease liability, as applicable.
losses and adjusted
reduced by
impairment
52THE NORTH WEST COMPANY INC. - 2022
The lease liability is initially measured at the present value
of the lease payments unpaid at the commencement date
using the interest rate implicit in the lease or the Company's
incremental borrowing rate. Lease payments are comprised of
fixed payments including in-substance fixed payments, variable
lease payments based on an index or rate, amounts expected to
be payable under residual value guarantees and the exercise
price under a purchase option that the Company is reasonably
certain to exercise and certain early termination costs. The
period over which the lease payments are discounted is the
reasonably certain lease term, which may include lease renewal
options. Generally,
incremental
borrowing rate as the discount rate.
the Company uses
its
Each
lease payment
is apportioned between
the
repayment of the lease liability and a finance cost. The finance
cost is recognized in interest expense in the consolidated
statements of earnings using the effective interest rate method.
The lease liability is remeasured when there is a change in
future lease payments arising from a change in an index or rate,
a change in lease term, a change in the assessment of an option
to purchase the right-of-use asset or a change in an expected
residual value guarantee.
The Company has elected not to recognize right-of-use
assets and lease liabilities for certain short-term leases that have
a lease term of 12 months or less and leases of low-value assets.
Variable lease payments that do not depend on an index or rate
are also expensed as incurred. The Company recognizes these
lease payments as an expense in the consolidated statements
of earnings.
(L) Share-based Payment Transactions
Equity settled plans Certain stock options and certain
performance share units settled in common shares are equity
settled share-based payment plans. The grant date fair values
of these benefits are recognized as an employee expense over
the vesting period, with corresponding increases in equity.
The fair value of these plans is determined using an option
pricing model. Market conditions attached to certain equity-
settled share-based payments are taken into account when
estimating the fair value of the equity instruments granted.
Upon exercise or settlement of equity-based
instruments,
consideration
together with amounts
if any,
previously recorded in contributed surplus are recorded as an
increase to share capital.
received,
Cash settled plans Certain stock options, certain performance
share units, the executive deferred share unit plan and the
director deferred share unit plan are cash settled share-based
payments. These plans are measured at fair value at each
balance sheet date and a charge or recovery is recognized
through the consolidated statement of earnings over the
vesting period. A corresponding adjustment is reflected in
accounts payable and accrued liabilities or other long-term
liabilities.
Estimates related to vesting conditions are reviewed
regularly and the value of the charges under both cash settled
and equity settled plans are adjusted in the consolidated
statement of earnings to reflect expected and actual levels of
benefits vesting.
(I) Borrowing Costs Borrowing costs directly attributable to the
acquisition or construction of qualifying assets are capitalized as
part of the cost of the respective asset until it is ready for its
intended use. Qualifying assets are those assets that necessarily
take a substantial period of time to prepare for their intended
use. Borrowing costs are capitalized based on the Company’s
weighted-average cost of borrowing. All other borrowing costs
are expensed as incurred.
(J) Goodwill Goodwill represents the excess of the consideration
identifiable assets,
transferred over the fair value of the
including intangible assets, and liabilities of the acquiree at the
date of acquisition. Goodwill is not amortized but is subject to
an
indicators of
impairment are detected. Goodwill is carried at cost less
accumulated impairment losses.
impairment test annually and whenever
(K)
Intangible Assets Intangible assets with finite lives are carried
at cost less accumulated amortization and any impairment loss.
Amortization is recorded on a straight-line basis over the term
of the estimated useful life of the asset as follows:
(M) Foreign Currency Translation The accounts of foreign
operations have been translated into the presentation currency,
Canadian dollars. Assets and liabilities are translated at the
period-end exchange rate, and revenues and expenses at the
average rate for the period. Foreign exchange gains or losses
arising from the translation of the net investment in foreign
operations and the portion of the U.S. denominated borrowings
designated as a hedge against this investment are recorded in
equity as other comprehensive income. Foreign exchange
gains or losses recorded in accumulated other comprehensive
income (AOCI) are recognized in net earnings when there is a
reduction in the net investment in foreign operations.
Items included in the consolidated financial statements of
the Company and its subsidiaries are measured using the
currency of the primary economic environment in which the
entity operates (functional currency). Transactions in foreign
currencies are translated to the respective functional currencies
at exchange rates approximating the rates in effect at the
transaction dates. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to
the functional currency at the exchange rate ruling at that date.
Software
3 – 7 years
Non-compete agreements 3 – 5 years
Other
5 – 10 years
Intangible assets with indefinite lives comprise the Cost-U-Less
and Riteway Food Markets banners. These assets are not
amortized but instead tested for impairment annually or more
frequently if indicators of impairment are identified.
53NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(N)
Income Taxes Income tax expense includes taxes payable on
current earnings and changes in deferred tax balances. Current
income tax expense is the expected tax payable on taxable
income for the period, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous periods.
income
tax assets and
The Company accounts for deferred income taxes using
the liability method of tax allocation. Under the liability
liabilities are
method, deferred
determined based on the temporary differences between the
financial statement carrying values and tax bases of assets and
liabilities, and are measured using substantively enacted tax
rates and laws that are expected to be in effect in the periods in
which the deferred income tax assets or liabilities are expected
to be realized or settled. The measurement of deferred tax
reflects the tax consequences that would follow the manner in
which the Company expects to settle the carrying amount of its
assets and liabilities. A deferred tax asset is recognized to the
extent that it is probable that future taxable earnings will be
available against which the temporary difference can be
utilized. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by
the same taxation authority and there is a legally enforceable
right to offset the amounts.
Income tax expense is recognized in the consolidated
statement of earnings, except to the extent that it relates to
items recognized directly in other comprehensive income or in
equity, in which case the related income tax expense is also
recognized
in equity
respectively.
in other comprehensive
income or
(O) Employee Benefits The Company maintains either a defined
benefit or defined contribution pension plan for the majority of
its Canadian employees, and an employee savings plan for its
U.S. employees. Other benefits include employee bonuses,
employee share purchase plans and termination benefits.
Defined Benefit Pension Plan The actuarial determination of the
defined benefit obligations for pension benefits uses the
projected unit credit method prorated on services which
incorporates management’s best estimate of the discount rate,
salary escalation, retirement rates, termination rates and
retirement ages of employees. The discount rate used to value
the defined benefit obligation is derived from a portfolio of high
quality Corporate AA bonds denominated in the same currency
in which the benefits are expected to be paid and with terms to
maturity that, on average, match the terms of the defined
benefit plan obligations. Bonds included in the curve are
denominated in the currency in which the benefits will be paid
that have terms to maturity approximating the terms of the
related pension liability.
The amount recognized
in the consolidated balance
sheets at each reporting date represents the present value of
the defined benefit obligation, and is reduced by the fair value
of plan assets. Any recognized asset or surplus is limited to the
present value of economic benefits available in the form of any
future
future
the plan or
contributions. To the extent that there is uncertainty regarding
entitlement to the surplus, no asset is recorded. The Company’s
funding policy is in compliance with statutory regulations and
amounts funded are deductible for income tax purposes.
reductions
refunds
from
in
The actuarially determined expense for current service is
recognized annually in the consolidated statement of earnings.
The actuarially determined net interest costs on the net defined
benefit plan obligation are recognized in interest expense.
All actuarial remeasurements arising from defined benefit
plans are recognized in full in the period in which they arise in
the consolidated statements of comprehensive income, and
are immediately recognized in retained earnings. The effect of
the asset ceiling is also recognized in other comprehensive
income.
Defined Contribution Pension Plans The Company sponsors
defined contribution pension plans for eligible employees
where fixed contributions are paid into a registered plan. There
is no obligation for the Company to pay any additional amount
into these plans. Contributions to the defined contribution
pension plans are expensed as incurred.
Short-term Benefits An undiscounted liability is recognized for
the amount expected to be paid under short-term incentive
plans or employee share purchase plans if the Company has a
present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the
obligation can be estimated reliably.
Termination Benefits Termination benefits are expensed at the
earlier of when the Company can no longer withdraw the offer
of those benefits and when the Company recognizes costs for a
restructuring. If the effect is significant, benefits are discounted
to present value.
(P) Provisions A provision is recognized if, as a result of a past
event, the Company has a present
legal or constructive
obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the
obligation.
(Q) Financial Instruments
The Company
Recognition and derecognition
initially
recognizes financial instruments on the trade date at which it
becomes a party to the contractual provisions of the
instrument. Financial instruments are initially measured at fair
value. For financial assets or financial liabilities not at fair value
through profit or
loss, transaction costs that are directly
attributable to the acquisition or issue of the financial asset or
financial liability are included in the initial fair value.
Financial assets are derecognized when the contractual
rights to receive cash flows and benefits related from the
financial asset expire, or the Company transfers the control or
substantially all the risks and rewards of ownership of the
financial asset to another party.
liabilities are
derecognized when obligations under the contract expire, are
discharged or cancelled. Financial assets and liabilities are offset
and the net amount presented in the consolidated balance
sheets when the Company has a legal right to offset the
amounts and intends to either settle on a net basis or realize
the asset and settle the liability simultaneously.
Financial
Financial assets On initial recognition, all financial assets are
classified to be subsequently measured at amortized cost, fair
value through other comprehensive income or fair value
The Company’s financial assets
through profit and
comprised of cash, accounts receivable, promissory note
receivable and other financial assets are classified as amortized
cost. Interest revenue, consisting primarily of service charge
income on customer accounts receivable and interest imputed
on promissory note receivable are included in sales in the
loss.
54THE NORTH WEST COMPANY INC. - 2022
consolidated statements of earnings. The Company has no
significant assets measured at fair value.
losses
receivable and
(“ECL’s") on accounts
The Company recognizes loss allowances for expected
the
credit
promissory note receivable. The change in ECL’s is recognized
in net earnings and reflected as an allowance against accounts
receivable. The Company uses historical trends, timing of
recoveries and management’s judgment as to whether current
economic and credit conditions are such that actual losses are
likely to differ from historical trends.
Financial liabilities On initial recognition, financial liabilities are
classified to be subsequently measured at amortized cost or fair
value. The Company’s financial liabilities comprised of long-
term debt, accounts payable, accrued liabilities, lease liabilities
and certain other liabilities are classified as amortized cost.
Interest expense is recorded using the effective interest rate
in the consolidated statements of
method and
earnings as interest expense. The Company has no significant
liabilities measured at fair value.
included
Hedging The Company is exposed to financial risks associated
with movements in foreign exchange rates. The Company uses
a net investment hedge to counterbalance gains and losses
arising on the retranslation of foreign operations with gains and
losses on a financial liability. The Company has designated
certain U.S. denominated debt as a hedge of its net investment
in International Operations.
To the extent that the hedging relationship is effective, the
foreign exchange gains and losses arising from translation of
this debt are included in other comprehensive income and
presented within shareholders’ equity as accumulated other
comprehensive income. These gains and losses are fully or
partially reclassified to earnings on disposal or partial disposal of
foreign operations. Any ineffective portion of the changes in
fair value of the hedging item is recognized immediately in
earnings.
To qualify for hedge accounting, the Company documents
its risk management strategy, the relationship between the
hedging instrument and the hedged item and the nature of the
The Company also documents the
risks being hedged.
assessment of the effectiveness of the hedging relationship to
show that the hedge has been and will likely be highly effective
on an ongoing basis.
loss on the hedging
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative
gain or
in
accumulated other comprehensive income is retained in equity
until the forecasted transaction occurs. If a hedged transaction
is no longer expected to occur, the net cumulative gain or loss
recognized in other comprehensive income is transferred to the
consolidated statements of earnings for the period.
instrument recognized
(R) Cash Cash comprises cash on hand and balances with banks.
(S) Net Earnings Per Share Basic net earnings per share are
calculated by dividing the net earnings attributable to
shareholders of The North West Company Inc. by the weighted-
average number of common shares outstanding during the
period. Diluted net earnings per share is determined by
adjusting these net earnings and the weighted-average
number of common shares outstanding for the effects of all
potentially dilutive shares, which comprise potential shares
issued under the Share Option Plan, Performance Share Unit
Plan and Director Deferred Share Unit Plan.
(T) Dividends Dividends declared and payable to the Company's
shareholders are recognized as a liability in the consolidated
balance sheets in the period in which distributions are declared.
IFRS
requires management
(U) Use of Estimates, Assumptions & Judgment The
preparation of consolidated financial statements in conformity
to make estimates,
with
assumptions and judgments that affect the application of
accounting policies, the reported amounts of revenues and
expenses during the reporting period and disclosure of
contingent assets and liabilities in the consolidated financial
statements and notes. Judgment has been used in the
if a
application of accounting policy and to determine
transaction should be recognized or disclosed
in these
consolidated
statements while estimates and
assumptions have been used to measure balances recognized
or disclosed.
financial
Estimates, assumptions and judgments are based on
management’s historical experience, best knowledge of current
events, conditions and actions that the Company may
undertake in the future and other factors that management
believes are reasonable under the circumstances. Estimates
and underlying assumptions are reviewed on an ongoing basis.
Certain of these estimates require subjective or complex
judgments by management about matters that are uncertain
and changes in these estimates could materially impact the
consolidated financial statements and notes. Revisions to
accounting estimates are recognized in the period in which the
estimates are reviewed and in any future periods affected.
The areas that management believes involve a higher
degree of
judgment or complexity, or areas where the
estimates and assumptions may have the most significant
impact on the amounts recognized
in the consolidated
financial statements include the following:
•
•
•
•
Allowance for doubtful accounts is estimated based on an
expected credit loss impairment model based on historical
trends, timing of recoveries and management's judgment
as to whether current economic and credit conditions are
such that actual losses are likely to differ from historical
trends (Notes 5, 15)
Inventories are remeasured based on the lower of cost and
net realizable value (Note 6)
for property and equipment,
Amortization methods
including aircraft and right-of-use assets, are based on
management's estimate of the most appropriate method
to reflect the pattern of an asset's future economic benefit.
This
judgment of what asset components
constitute a significant cost in relation to the total cost of
an asset (Notes 7, 8)
Impairment of long-lived assets is influenced by judgment
in determining indicators of impairment and estimates
used to measure impairment losses, if any (Note 7)
includes
55NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IASB)
(X) Future Standards and Amendments In May 2021, the
International Accounting Standards Board
issued
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction, which amended IAS 12, Income Taxes (IAS
12). The amendments are effective for periods beginning on or
after January 1, 2023, with early adoption permitted. The
amendments narrowed
recognition
exemption so that it no longer applies on initial recognition to
transactions that give rise to equal taxable and deductible
temporary differences, such as leases.
scope of
the
the
In September 2022, the IASB issued amendments to IFRS 16,
Leases (IFRS 16) related to sale leaseback transactions for lessees.
The amendments require that subsequent remeasurement of
the lease liability does not result in a gain or loss that relates to
the right of use asset the lessee retains. The amendments are
effective for periods beginning on or after January 1, 2024, with
early adoption permitted.
The Company does not expect adoption of these standards to
have a material impact on the Company's consolidated financial
statements.
There are no further IFRS or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on
the Company's consolidated financial statements.
•
•
•
•
•
•
Recognition of identifiable assets and liabilities acquired in
a business combination requires judgment as to their fair
value
Goodwill and indefinite life intangible asset impairment is
dependent on judgment used to identify indicators of
impairment and estimates used to measure impairment
losses, if any (Note 9)
Income taxes have judgment applied to determine when
tax losses, credits and provisions are recognized based on
tax rules in various jurisdictions (Note 10)
Defined benefit pension plan obligation and expense
depends on assumptions used in the actuarial valuation
(Note 13)
Leases require assumptions and estimates in order to
determine the value of the right-of-use assets and lease
liabilities, the implicit and incremental borrowing rates, as
applicable, and whether renewal options are reasonably
certain of being exercised (Note 8)
Promissory note
includes management's
estimate of the fair value of contingent consideration
receivable for the sale of its Giant Tiger stores (Note 24)
receivable
(V) Share capital
Common shares are classified as equity.
Incremental costs directly attributable to the issue of ordinary
shares are recognized as a deduction from equity, net of any tax
effects. Share repurchases are deducted from share capital at
their historical average cost and the excess between the
repurchase price and historical average cost charged to
retained earnings.
(W) Government Grants The Company recognizes government
grants for expenses incurred in the consolidated statements of
earnings on a systematic basis in the periods in which the
associated expenses are recognized, provided the Company will
comply with the grant conditions and there is reasonable
assurance they will be received.
56THE NORTH WEST COMPANY INC. - 2022 4. SEGMENTED INFORMATION
5. ACCOUNTS RECEIVABLE
The Company is a retailer of food and everyday products and
services in two geographical segments, Canada and International.
The Canadian segment consists of subsidiaries operating retail stores
and complimentary businesses to serve northern Canada. The
International segment consists of subsidiaries operating in the
continental United States, Caribbean and South Pacific. Financial
information for these business segments is regularly reviewed by the
Company’s President and Chief Executive Officer
to assess
performance and make decisions about the allocation of resources.
The following key information is presented by geographic segment:
Consolidated Statements of Earnings
Year Ended
Sales
Canada
Food
January 31, 2023
January 31, 2022
$ 897,097
$
880,154
General merchandise and other
426,088
410,985
Canada
International
Food
$ 1,323,185
$ 1,291,139
$ 921,610
$
844,555
General merchandise and other
107,965
113,102
International
$ 1,029,575
$
957,657
January 31, 2023
January 31, 2022
Trade accounts receivable
$
92,573
$
86,841
Corporate and other accounts
receivable
Less: allowance for doubtful
accounts
32,610
24,565
(11,385)
(12,165)
$ 113,798
$
99,241
The carrying values of accounts receivable are a reasonable
approximation of their fair values. The maximum exposure to credit
risk at the reporting date is the carrying value of each class of
Credit risk for trade accounts
receivable mentioned above.
receivable is discussed in Note 15. Corporate and other accounts
receivable have a lower risk profile relative to trade accounts
receivable because they are largely due from government or
corporate entities.
Movements in the allowance for doubtful accounts for customer and
commercial accounts receivables are as follows:
Consolidated
$ 2,352,760
$ 2,248,796
January 31, 2023
January 31, 2022
Earnings before amortization, interest and income taxes
$ 185,458
$
215,209
93,220
96,166
$ 278,678
$
311,375
Balance, beginning of year
$
(12,165)
$
(11,130)
Net charge
Written off
(11,622)
12,402
(9,397)
8,362
Balance, end of year
$
(11,385)
$
(12,165)
$ 119,090
$
153,328
61,215
67,097
6.
INVENTORIES
$ 180,305
$
220,425
Canada
International
Consolidated
Earnings from operations
Canada
International
Consolidated
Supplemental Information
Inventories are valued at the lower of cost and net realizable value.
Valuing inventories requires the Company to use estimates related
to: the determination of margin factors used to convert inventory to
cost; future retail sales prices and reductions, inventory losses or
shrinkage during periods between the last physical count and the
balance sheet date; and vendor rebates based on the volume of
purchases during a period of time, product remaining in closing
inventory and the probability that funds will be collected from
vendors. Included in cost of sales for the year ended January 31,
2023, the Company recorded $4,049 (January 31, 2022 – $2,929) for
the write-down of inventories as a result of net realizable value being
lower than cost. There was no reversal of inventories written down
previously that are no longer estimated to sell below cost during the
year ended January 31, 2023 or 2022.
Assets
Canada(1)
International(1)
January 31, 2023
January 31, 2022
$ 841,543
$
775,806
495,347
443,467
Consolidated
$ 1,336,890
$ 1,219,273
Year Ended
January 31, 2023
January 31, 2022
Canada
Int'l
Canada
Int'l
Purchase of property and
equipment
$ 81,170 $ 31,411 $ 59,753 $ 27,588
Total amortization
$ 66,368 $ 32,005 $ 61,881 $ 29,069
(1) Canadian total assets includes goodwill of $11,025 (January 31,
2022 – $11,025). International total assets includes goodwill of
$39,406 (January 31, 2022 – $37,477).
57NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROPERTY & EQUIPMENT
January 31, 2023
Cost
Land
Buildings
Leasehold
improvements
Fixtures &
equipment
Aircraft
Computer
equipment
Construction
in process
Total
Balance, beginning of year
$ 19,905 $ 622,533
$ 67,204 $ 361,325 $ 120,470 $ 67,320
$ 27,552 $ 1,286,309
Additions
Disposals/retirements
Effect of movements in foreign exchange
113
(33)
553
36,782
(2,539)
9,682
2,543
(845)
1,189
28,297
(6,125)
5,813
7,857
(9,229)
—
4,663
(8,350)
1,576
32,326
112,581
—
554
(27,121)
19,367
Total January 31, 2023
$ 20,538 $ 666,458
$ 70,091 $ 389,310 $ 119,098 $ 65,209
$ 60,432 $ 1,391,136
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Effect of movements in foreign exchange
$
— $ 349,372
$ 37,932 $ 267,827 $ 34,850 $ 41,784
$
87 $ 731,852
—
—
—
25,404
(2,285)
4,505
5,225
19,807
(843)
688
(6,037)
4,075
14,043
(9,081)
—
5,034
(8,332)
858
—
(87)
—
69,513
(26,665)
10,126
Total January 31, 2023
$
— $ 376,996
$ 43,002 $ 285,672 $ 39,812 $ 39,344
$
— $ 784,826
Net book value January 31, 2023
$ 20,538 $ 289,462
$ 27,089 $ 103,638 $ 79,286 $ 25,865
$ 60,432 $ 606,310
January 31, 2022
Cost
Land
Buildings
Leasehold
improvements
Fixtures &
equipment
Aircraft
Computer
equipment
Construction
in process
Total
Balance, beginning of year
$ 18,847 $ 599,930
$ 59,443 $ 348,173 $ 102,805 $ 77,408
$ 20,946 $ 1,227,552
Additions
Disposals/retirements
Effect of movements in foreign exchange
1,058
23,341
—
—
(282)
(456)
7,907
(111)
(35)
17,952
(4,479)
(321)
21,493
8,984
6,606
87,341
(3,828)
(18,908)
—
(164)
—
—
(27,608)
(976)
Total January 31, 2022
$ 19,905 $ 622,533
$ 67,204 $ 361,325 $ 120,470 $ 67,320
$ 27,552 $ 1,286,309
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Effect of movements in foreign exchange
$
— $ 325,616
$ 34,256 $ 253,800 $ 26,217 $ 55,782
$
87 $ 695,758
—
—
—
24,294
(282)
(256)
3,780
(85)
(19)
18,603
(4,303)
(273)
12,461
5,052
(3,828)
(18,908)
—
(142)
—
—
—
64,190
(27,406)
(690)
Total January 31, 2022
$
— $ 349,372
$ 37,932 $ 267,827 $ 34,850 $ 41,784
$
87 $ 731,852
Net book value January 31, 2022
$ 19,905 $ 273,161
$ 29,272 $ 93,498 $ 85,620 $ 25,536
$ 27,465 $ 554,457
The Company reviews its property and equipment for indicators of impairment. No assets were identified as impaired for the years ended
January 31, 2023 and January 31, 2022.
Interest capitalized
Interest attributable to the construction of qualifying assets was capitalized using an average rate of 4.1% and 3.7% for the years ended
January 31, 2023 and 2022 respectively. Interest capitalized in additions amounted to $226 (January 31, 2022 – $95). Accumulated interest
capitalized in the cost total above amounted to $3,348 (January 31, 2022 – $3,122).
58THE NORTH WEST COMPANY INC. - 2022
8. RIGHT-OF-USE ASSETS & LEASE LIABILITIES
Right-of-use assets
January 31, 2023
Cost
Balance, beginning of year
Additions
Disposals/retirements
Lease extensions and other items
Effect of movements in foreign exchange
Total January 31, 2023
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Impairment losses
Effect of movements in foreign exchange
Total January 31, 2023
Net book value January 31, 2023
January 31, 2022
Cost
Balance, beginning of year
Additions
Disposals/retirements
Lease extensions and other items
Effect of movements in foreign exchange
Total January 31, 2022
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Impairment losses
Effect of movements in foreign exchange
Total January 31, 2022
Net book value January 31, 2022
Land & buildings
Fixtures &
equipment
Aircraft
Total
$
179,682 $
8,217 $
1,494 $
189,393
11,366
(3,798)
5,478
4,630
2,591
(1,567)
10
—
—
(1,494)
—
—
13,957
(6,859)
5,488
4,630
$
$
$
$
197,358 $
9,251 $
— $
206,609
83,943 $
3,394 $
1,212 $
17,651
(3,174)
(230)
2,134
1,826
(1,567)
—
—
282
(1,494)
—
—
88,549
19,759
(6,235)
(230)
2,134
100,324 $
3,653 $
— $
103,977
97,034 $
5,598 $
— $
102,632
Land & buildings
Fixtures &
equipment
Aircraft
Total
$
172,099 $
6,668 $
3,059 $
181,826
7,249
(1,776)
2,515
(405)
3,171
(1,290)
(330)
(2)
—
(1,626)
61
—
10,420
(4,692)
2,246
(407)
$
$
$
$
179,682 $
8,217 $
1,494 $
189,393
69,408 $
3,305 $
1,347 $
16,145
(1,327)
(263)
(20)
1,667
(1,577)
—
(1)
726
(861)
—
—
74,060
18,538
(3,765)
(263)
(21)
83,943 $
3,394 $
1,212 $
88,549
95,739 $
4,823 $
282 $
100,844
59NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease liabilities
The total current and long-term lease liability is $18,644 (January 31,
2022 – $18,055) and $93,833 (January 31, 2022 – $96,015),
respectively. The Company's lease liabilities are discounted at its
incremental borrowing rate, generally calculated from applicable
Canadian and U.S. corporate bond yields. At January 31, 2023, lease
liabilities reflect a weighted-average risk-free rate of 3.8% (January 31,
2022 – 3.6%) and weighted-average remaining lease term of 9.8
years (January 31, 2022 – 9.6 years).
Maturity analysis - contractual undiscounted cash flows
0-1 year
2-3 years
4-5 years
6 years+
January 31, 2023
$
22,585
37,612
24,011
58,329
Total undiscounted cash flows
$ 142,537
Variable Lease Payments
Some property leases contain variable payment terms that are linked
to sales generated from a store. For individual stores, up to 100% of
lease payments are on the basis of variable payment terms. Variable
payment terms are used for a variety of reasons,
including
minimizing the fixed costs base for newly established stores.
Variable lease payments that depend on sales are recognized in net
earnings in the period in which the condition that triggers those
payments occurs. Some aircraft leases also contain variable payment
terms based on usage and are recognized as operating expenses.
The Company made variable lease payments not included in lease
liabilities of $5,919 (January 31, 2022 – $6,890).
Extension Options
Some store leases contain extension options exercisable by the
Company up to one year before the end of the non-cancellable
contract period. Where practicable, the Company seeks to include
extension options in new leases to provide operational flexibility.
The extension options held are exercisable only by the Company
lease
and not by the
commencement whether it is reasonably certain to exercise the
extension options. The extension options included by the Company
do not extend the lease beyond ten years. The Company reassesses
whether it is reasonably certain to exercise the options if there is a
significant event or significant change in circumstances within its
control.
The Company assesses at
lessors.
Other leases
Short-term and low value lease payments are not material.
9. GOODWILL & INTANGIBLE ASSETS
Goodwill
January 31, 2023
January 31, 2022
Balance, beginning of year
$
48,502
$
48,263
Additions
Effect of movements in foreign
exchange
—
1,929
382
(143)
Balance, end of year
$
50,431
$
48,502
Goodwill represents the excess of the consideration transferred to
acquire businesses over the fair value of their identifiable assets.
Goodwill Impairment Testing
A goodwill asset balance of $39,406 (January 31, 2022 – $37,477)
relates to acquisition of subsidiaries by the Company's International
Operations. A goodwill asset balance of $11,025 (January 31, 2022 –
$11,025) relates to acquisitions by the Company's Canadian
Operations. These balances were tested by means of comparing the
recoverable amount of the operating segment to its carrying value.
The recoverable amount was based on its fair value less costs to sell.
The recoverable amount was estimated from the product of financial
performance and trading multiples observed for both the Company
and other publicly traded retail companies. Values assigned to the
key assumptions represent management's best estimates and have
been based on data from both external and internal sources. This
fair value measurement was categorized as a Level 3 fair value
measurement based on the inputs in the valuation technique used.
Key assumptions used in the estimation of enterprise value are as
follows:
•
•
•
Financial performance was measured with actual and
budgeted earnings based on sales and expense growth
specific to each store and the Company's administrative
offices. Financial budgets and forecasts are approved by
senior management and consider historical sales volume
and price growth;
The ratio of enterprise value to financial performance was
determined using a range of market trading multiples from
the Company and other public retail companies; and
Costs to sell have been estimated as a fixed percentage of
enterprise value. This is consistent with the approach of an
independent market participant.
No impairment has been identified on goodwill, and management
considers reasonably foreseeable changes in key assumptions are
unlikely to produce a goodwill impairment.
60THE NORTH WEST COMPANY INC. - 2022
Intangible assets
January 31, 2023
Cost
Balance, beginning of year
Additions
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2023
Accumulated Amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2023
Software
Store banners
Other
Total
$ 68,148
$
9,787
$ 14,661
$ 92,596
3,941
(11,329)
968
—
—
504
590
—
266
4,531
(11,329)
1,738
$ 61,728
$ 10,291
$ 15,517
$ 87,536
$ 48,546
8,170
(11,329)
431
$ 45,818
$
$
—
—
—
—
—
$
9,956
$ 58,502
931
—
137
9,101
(11,329)
568
$ 11,024
$ 56,842
Net book value January 31, 2023
$ 15,910
$ 10,291
$
4,493
$ 30,694
Intangible assets
January 31, 2022
Cost
Balance, beginning of year
Additions
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2022
Accumulated Amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2022
Net book value January 31, 2022
Software
Store banners
Other
Total
$ 66,888
$
9,825
$ 13,163
$ 89,876
4,832
(3,572)
—
—
—
(38)
1,515
—
(17)
6,347
(3,572)
(55)
$ 68,148
$
9,787
$ 14,661
$ 92,596
$ 44,624
7,357
(3,435)
—
$ 48,546
$ 19,602
$
$
$
—
—
—
—
—
9,787
$
9,101
$ 53,725
865
—
(10)
$
$
9,956
4,705
8,222
(3,435)
(10)
$ 58,502
$ 34,094
Work in process
As at January 31, 2023, the Company had incurred $537 (January 31,
2022 – $283) for intangible assets that were not yet available for use,
and therefore not subject to amortization.
This method
from Royalty approach.
Intangible Asset Impairment Testing
The Company determines the fair value of the store banners using
requires
the Relief
management to make long-term assumptions about future sales,
terminal growth rates, royalty rates and discount rates. Sales
forecasts for the following financial year together with medium and
terminal growth rates ranging from 2% to 5% are used to estimate
future sales, to which a royalty rate of 0.5% is applied. The present
value of this royalty stream is compared to the carrying value of the
asset. No impairment has been identified on intangible assets and
management considers reasonably foreseeable changes in key
assumptions are unlikely to produce an intangible asset impairment.
61NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the combined statutory income tax rate primarily reflect
changes in earnings of the Company's subsidiaries across various tax
jurisdictions.
Deferred tax assets of $5,179 (January 31, 2022 – $5,618) arising from
certain foreign income tax losses were not recognized on the
consolidated balance sheets. The income tax losses expire from
2024 – 2033.
Deferred income tax charged (credited) to other comprehensive
income during the year is as follows:
Year Ended
January 31, 2023
January 31, 2022
Net investment hedge:
Origination and reversal of
temporary difference
$
(616)
$ 1,915
Impact of change in tax rates
2
4
$
(614)
$ 1,919
Defined benefit plan
actuarial gain:
Origination and reversal of
temporary difference
Impact of change in tax rates
$ 2,883
$ 5,206
—
25
$ 2,883
$ 5,231
10. INCOME TAXES
The following are the major components of income tax expense:
Year Ended
January 31, 2023
January 31, 2022
Current tax expense:
Current tax on earnings for
the year
Withholding taxes
Over provision in prior years
Deferred tax expense:
Origination and reversal of
temporary differences
Impact of change in tax rates
Under/(over) provision in prior
years
$ 44,392
$ 70,842
216
(2,358)
652
(1,843)
$ 42,250
$ 69,651
$
(3,231)
$ (19,669)
(46)
660
8
(74)
$
(2,617)
$ (19,735)
Income taxes
$ 39,633
$ 49,916
Income tax expense varies from the amounts that would be
computed by applying the statutory income tax rate to earnings
before taxes for the following reasons:
Year Ended
January 31, 2023
January 31, 2022
Earnings before income taxes
$ 165,469
$ 207,367
Combined statutory income
tax rate
24.5 %
24.7 %
Expected income tax expense
$ 40,588
$ 51,321
Increase (decrease) in income taxes resulting from:
Non-deductible expenses/
(non-taxable income)
Unrecognized income tax
(gains)/losses
Withholding taxes
Impact of change in tax rates
GILTI tax (1)
Over provision in prior years
Other
$
879
$ (1,342)
(308)
216
(46)
3
(1,698)
(1)
275
652
8
883
(1,917)
36
Provision for income taxes
$ 39,633
$ 49,916
Income tax rate
24.0 %
24.1 %
(1) The Company is subject to the Global Intangible Low-Taxed
Income provision ("GILTI") enacted as part of the US Tax Cuts and
Jobs Act in December 2017. This tax is imposed on the foreign
earnings of a controlled foreign corporation. The Company has the
option to account for the GILTI tax as a period cost, if and when
incurred, or to recognize deferred taxes for outside basis temporary
differences expected to reverse as GILTI. The Company has elected
to account for GILTI as a period cost.
62THE NORTH WEST COMPANY INC. - 2022
Income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows:
Deferred tax assets:
Property & equipment
Lease obligation
Inventory
Share-based compensation and long-term incentive plans
Defined benefit plan obligation
Accrued liabilities
Deferred limited partnership earnings
Unrealized foreign exchange loss
Other
Deferred tax liabilities:
Goodwill & intangible assets
Property & equipment
Right-of-use assets
Unrealized foreign exchange gain
Investment in joint venture
Deferred limited partnership earnings
Other
As presented on consolidated balance sheet:
Year Ended
Deferred tax assets
Deferred tax liabilities
February 1, 2022
Taxes (charged)
credited to net
earnings
Taxes (charged)/
credited to OCI
Other
adjustments
January 31, 2023
$
$
$
$
$
$
10,051
27,216
3,245
6,774
6,467
2,296
—
1
972
$
847
(423)
1,210
(404)
460
252
1,674
—
(281)
$
—
—
—
—
(2,883)
—
—
—
—
15
632
102
49
—
128
—
(1)
106
$
10,913
27,425
4,557
6,419
4,044
2,676
1,674
—
797
57,022
$
3,335
$
(2,883)
$
1,031
$
58,505
(1,301)
$
(16,390)
(24,492)
(767)
(1,951)
(810)
(4,048)
(49,759)
7,263
$
$
(88)
377
(369)
—
(207)
—
(431)
(718)
2,617
$
$
$
—
—
—
614
—
—
—
614
(2,269)
$
$
$
(69)
(307)
(565)
—
(31)
810
(1,084)
(1,246)
(215)
$
(1,458)
(16,320)
(25,426)
(153)
(2,189)
—
(5,563)
(51,109)
7,396
$
$
January 31, 2023
January 31, 2022
$
21,707
(14,311)
$
7,396
$
$
21,746
(14,483)
7,263
63NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets:
Property & equipment
Lease obligation
Inventory
Share-based compensation and long-term incentive plans
Defined benefit plan obligation
Accrued liabilities
Unrealized foreign exchange loss
Other
Deferred tax liabilities:
Goodwill & intangible assets
Property & equipment
Right-of-use assets
Unrealized foreign exchange loss
Investment in joint venture
Deferred limited partnership earnings
Other
February 1, 2021
Taxes (charged)
credited to net
earnings
Taxes
(charged)/
credited to OCI
Other
adjustments
January 31, 2022
$
$
$
$
$
11,976
27,954
2,598
6,700
10,914
2,337
1,153
3,008
$
(1,466)
$
(677)
651
(374)
784
(31)
—
(1,973)
—
—
—
—
(5,231)
—
(1,919)
—
$
(459)
$
(61)
(4)
448
—
(10)
767
(63)
66,640
$
(3,086)
$
(7,150)
$
618
(1,162)
$
(141)
$
(14,617)
(25,355)
—
(1,685)
(24,676)
(4,345)
(71,840)
(5,200)
(1,795)
805
—
(239)
23,866
325
22,821
19,735
$
$
$
$
—
—
—
—
—
—
—
—
(7,150)
$
$
$
2
22
58
(767)
(27)
—
(28)
(740)
(122)
$
$
$
$
10,051
27,216
3,245
6,774
6,467
2,296
1
972
57,022
(1,301)
(16,390)
(24,492)
(767)
(1,951)
(810)
(4,048)
(49,759)
7,263
In assessing the recovery of deferred income tax assets, management considers whether it is probable that the deferred income tax assets
will be realized. The recognition and measurement of the current and deferred tax assets and liabilities involves dealing with uncertainties in
the application of complex tax regulations and in the assessment of the recoverability of deferred tax assets. The ultimate realization of
deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences
are deductible.
Actual income taxes could vary from these estimates as a result of future events, including changes in income tax laws or the outcome of
tax reviews by tax authorities and related appeals. To the extent the final outcome is different from the amounts initially recorded, such
differences, which could be significant, will impact the tax provision in the period in which the outcome is determined.
No deferred tax has been recognized in respect of temporary differences between the carrying value and tax value of investments in
subsidiaries. The Company is in a position to control the timing and reversal of these differences and believes it is probable that they will not
reverse in the foreseeable future. The temporary differences associated with the Company’s foreign subsidiaries are approximately $266,420 at
January 31, 2023 (January 31, 2022 – $230,282).
11. OTHER ASSETS
Investment in joint venture (Note 23)
Defined benefit plan asset (Note 13)
Other
January 31, 2023
January 31, 2022
$ 16,220
$ 14,456
6,044
1,709
—
1,533
$ 23,973
$ 15,989
64THE NORTH WEST COMPANY INC. - 2022
12. LONG-TERM DEBT
Current:
Revolving loan facility (3)
Promissory note payable (6)
Non-current:
Revolving loan facility (1)
Revolving loan facilities (2)
Revolving loan facilities (3)
Senior notes (4)
Senior notes (5)
Promissory notes payable (6)
January 31, 2023
January 31, 2022
$
—
268
$ 45,107
1,155
$
268
$ 46,262
$
—
—
96,032
93,483
$
—
—
—
88,869
100,000
100,000
267
509
$ 289,782
$ 189,378
Total
$ 290,050
$ 235,640
(1) The committed, revolving U.S.
loan facility provides the
International Operations with up to US$50,000 (January 31, 2022 –
US$40,000) for working capital requirements and general business
purposes. This facility matures January 25, 2028, bears a floating rate
of interest based on SOFR plus a spread and is secured by certain
accounts receivable and inventories of the International Operations.
At January 31, 2023, the International Operations had drawn US$NIL
(January 31, 2022 – US$NIL) on this facility.
(2) In March 2022, the Company extended the maturity date of the
US$52,000 loan facilities. These facilities mature March 1, 2027 and
bear interest at U.S LIBOR or an alternative reference rate plus a
spread. These committed loan facilities are secured by certain assets
of the Company and rank pari passu with the $100,000 senior notes,
the US$70,000 senior notes due in 2027 and 2032, and the $400,000
Canadian Operations loan facilities. At January 31, 2023, the
Company had drawn US$NIL (January 31, 2022 – US$NIL) on these
facilities.
(3) These committed, revolving loan facilities provide the Company's
Canadian Operations with up to $400,000 (January 31, 2022 –
$300,000) for working capital and general business purposes. In
March 2022, the Company extended the maturity date of these
facilities to March 1, 2027. These facilities are secured by certain
assets of the Company and rank pari passu with the $100,000 senior
notes, the US$70,000 senior notes due in 2027 and 2032 and the
US$52,000 loan facilities. These facilities bear a floating interest rate
based on Bankers Acceptances rates plus stamping fees or the
Canadian prime interest rate.
(4) These US$70,000 senior notes comprise US$35,000 due June 16,
2027 with a fixed interest rate of 2.88% and US$35,000 due June 16,
2032 with a fixed interest rate of 3.09%. The senior notes are secured
by certain assets of the Company and rank pari passu with the
$400,000 Canadian Operations loan facilities, the $100,000 senior
notes and the US$52,000 loan facilities.
(5) The $100,000 senior notes mature September 26, 2029, have a
fixed interest rate of 3.74%, are secured by certain assets of the
Company and rank pari passu with the $400,000 Canadian
Operations loan facilities, the US$70,000 senior notes due in 2027
and 2032 and the US$52,000 loan facilities.
(6) Promissory notes payable are non-interest bearing, have annual
principal payments and are secured by certain assets of the
Company.
13. POST-EMPLOYMENT BENEFITS
The Company sponsors defined benefit and defined contribution
pension plans covering the majority of Canadian employees.
Effective January 1, 2011, the Company entered into an amended
and restated staff pension plan, which incorporated legislated
changes, administrative practice, and added a defined contribution
provision (the “Amended Plan”). Under the Amended Plan, all
members as of December 31, 2010 who did not meet a qualifying
threshold based on number of years in the pension plan and age
were transitioned to the defined contribution pension plan effective
January 1, 2011 and no longer accumulate years of service under the
defined benefit pension plan.
The defined benefit pension
previously earned by members transitioned to the defined
contribution plan, will continue to accrue in accordance with the
terms of the plan based on the member’s current pensionable
earnings. Members who met the qualifying threshold on January 1,
2011, elected between accruing a defined contribution benefit and
continuing to accrue a defined benefit pension in accordance with
the provisions of the Amended Plan. As of January 1, 2022 all of the
Company's defined benefit pension plans are closed to new
members.
The defined benefit pension plans are based on years of service
and final average salary. The Company uses actuarial reports
prepared by independent actuaries for accounting purposes as at
January 31, 2023 and January 31, 2022. The accrued pension
benefits and funding requirements were last determined by actuarial
valuation as at December 31, 2021. The next actuarial valuation is
required as at December 31, 2024. The Company also sponsors an
employee savings plan covering certain U.S. employees with at least
six months of service. Under the terms of the plan, the Company is
obligated to make contributions that range between 3% and 5% of
eligible compensation.
During the year ended January 31, 2023, the Company
contributed $1,160 to its defined benefit pension plans (January 31,
2022 – $1,955). During the year ended January 31, 2023, the
Company contributed $6,199 to its defined contribution pension
plans and U.S. employees savings plans (January 31, 2022 – $6,303).
The current best estimate of the Company's funding obligation for
the defined benefit pension plans for the year commencing
February 1, 2023 is $1,054. The actual amount paid may vary from
the estimate based on actuarial valuations being completed,
investment performance, volatility in discount rates, regulatory
requirements and other factors.
65NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Movement in plan assets and defined benefit obligation
Information on the Company’s defined benefit plans, in aggregate, is
as follows:
benefit obligation at the end of the reporting period is 13.6 years
(January 31, 2022 – 15.7 years).
January 31, 2023
January 31, 2022
The average life expectancy in years of a member who reaches
normal retirement age of 65 is as follows:
Plan assets:
Fair value, beginning of year
$ 101,351
$ 97,527
January 31, 2023
January 31, 2022
Accrued interest on assets
Benefits paid
Plan administration costs
Employer contributions
Employee contributions
Return on assets (less than)/
greater than discount rate
3,432
(4,819)
(529)
1,160
1
(5,884)
2,621
(6,273)
(518)
1,955
2
6,037
Fair value, end of year
$ 94,712
$ 101,351
Plan obligations:
Defined benefit obligation,
beginning of year
Current service costs
Employee contributions
Interest on plan liabilities
Benefits paid
Actuarial remeasurement due to:
Plan experience
Financial assumptions
Defined benefit obligation, end of
year
$ (123,065)
$ (135,973)
(2,403)
(1)
(4,138)
6,084
(4,137)
20,760
(3,829)
(2)
(3,637)
7,008
(929)
14,297
$ (106,900)
$ (123,065)
Plan deficit
$ (12,188)
$
(21,714)
As presented on consolidated balance sheet:
Other asset (Note 11)
$
6,044
$
—
Defined benefit plan obligation
(18,232)
(21,714)
January 31, 2023
January 31, 2022
Average life expectancies at age 65 for current pensioners:
Male
Female
21.6
24.1
Average life expectancies at age 65 for current members aged 45:
Male
Female
22.8
25.2
21.5
24.0
22.7
25.1
Assumptions regarding future mortality experience are set based on
actuarial advice
in accordance with published statistics and
experience. For the years ended January 31, 2023 and 2022,
mortality assumptions have been estimated at 106% of the base
mortality rates in the CPM2014PRIV table based on pension size and
industry classification.
Sensitivity of key assumption
The following table outlines the sensitivity of a 1% change in the
discount rate used to measure the defined benefit plan obligation
and cost for the defined benefit pension plans. The table reflects the
impact on both the current service and interest cost expense
components.
The sensitivity analysis provided in the key assumption table is
hypothetical and should be used with caution. The sensitivities have
been calculated independently of any changes in other assumptions.
Actual experience may result in changes in a number of key
assumptions simultaneously. Changes in one factor may result in
changes in another, which could amplify or reduce the impact of
such assumptions.
Defined benefit
plan obligation
Benefit plan cost
Plan deficit
$
(12,188)
$
(21,714)
Discount rate:
Registered plans are funded in accordance with the applicable
statutory funding rules and regulations governing the particular
plans.
Defined benefit obligation
The following actuarial assumptions were employed to measure the
plan:
Impact of:
1% increase
1% decrease
$ (12,980)
$ 16,101
$
$
(882)
805
Plan assets
The major categories of plan assets as a percentage of total plan
assets are listed below. The pension plans have no direct investment
in the shares of the Company.
January 31, 2023
January 31, 2022
January 31, 2023
January 31, 2022
Discount rate on plan liabilities
Rate of compensation increase
Discount rate on plan expense
Inflation assumption
4.70 %
4.00 %
3.43 %
2.00 %
3.43 %
4.00 %
2.72 %
2.00 %
Plan assets:
Canadian equities (pooled)
Global equities (pooled)
Real estate equities (pooled)
Debt securities
20.1 %
36.9 %
10.5 %
32.5 %
19.4 %
36.8 %
9.9 %
33.9 %
The assumptions used are the best estimates chosen from a range of
possible actuarial assumptions, which may not necessarily be borne
out in practice. The weighted-average duration of the defined
Total
100.0 %
100.0 %
66THE NORTH WEST COMPANY INC. - 2022
Governance and plan management
The Company's Pension Committees oversee the pension plans.
These committees are responsible for assisting the Board of Directors
to fulfill its governance responsibilities for the plans. The committees
assist with plan administration, regulatory compliance, pension
investment and monitoring responsibilities.
Plan assets are subject to the risk that changes in market prices,
such as interest rates, foreign exchange and equity prices will affect
their value. A Statement of Investment Policy and Procedures (SIPP)
guides the investing activity of the defined benefit pension plans to
mitigate market risk. Assets are expected to achieve, over moving
three to four-year periods, a return at least equal to a composite
benchmark made up of passive investments in appropriate market
indices. These indices are consistent with the policy allocation in the
SIPP.
Periodically, an Asset-Liability Modeling study is done to update
the policy allocation between liability hedging assets and return
seeking assets. This is consistent with managing both the funded
status of the defined benefit pension plans and the Company's long-
It assists with adequately securing benefits and
term costs.
mitigating year-to-year
the Company's cash
in
contributions and pension expense. The defined benefit plans are
subject to, and actively manage, the following specific market risks:
fluctuations
Interest rate risk:
is managed by allocating a portion of plan
investments to liability hedging assets, comprised of a passive
universe bond fund.
Currency risk: is managed through asset allocation. A significant
portion of plan assets are denominated in the same currency as plan
obligations.
Equity price risk: The defined benefit pension plans are directly
exposed to equity price risk on return seeking assets. Fair value or
future cash flows will fluctuate due to changes in market prices
in obligations.
because they may not be offset by changes
Investment management of plan assets
to
independent managers.
is outsourced
Statements of earnings and comprehensive income
The following pension expenses have been charged to the
consolidated statements of earnings:
January 31, 2023
January 31, 2022
Employee costs (Note 18)
Defined benefit pension plan,
current service costs included
in post-employment benefits
Plan administration costs
Defined contribution pension
plan
Savings plan for U.S. employees
Interest expense (Note 19)
Accrued interest on assets
Interest on plan liabilities
$ 2,403
$
3,829
529
4,624
1,575
518
4,783
1,520
$ 9,131
$ 10,650
The following amounts have been included in other comprehensive
income:
January 31, 2023
January 31, 2022
Current Year:
Return on assets (less than)/
greater than discount rate
Actuarial remeasurement due to:
Plan experience
Financial assumptions
Taxes on actuarial remeasurement
in OCI
Net actuarial remeasurement
recognized in OCI
$
(5,884)
$
6,037
(4,137)
20,760
(929)
14,297
(2,883)
(5,231)
$
7,856
$ 14,174
Cumulative gains/(losses) recognized in AOCI:
Cumulative gross actuarial
remeasurement in AOCI
Taxes on cumulative actuarial
remeasurement in AOCI
Total actuarial remeasurement
recognized in AOCI, net
$ 14,655
$
3,916
(6,022)
(3,139)
$
8,633
$
777
The actual return on the plans assets is summarized as follows:
January 31, 2023
January 31, 2022
Accrued interest on assets
$
3,432
$
2,621
Return on assets greater than
discount rate
(5,884)
6,037
Actual return on plan assets
$
(2,452)
$
8,658
14. SHARE-BASED COMPENSATION
The Company offers the following share-based payment plans:
Performance Share Units (PSUs); Share Options; Director Deferred
Share Units (DDSUs); Executive Deferred Share Units (EDSUs) and an
Employee Share Purchase Plan. The purpose of these plans is to
directly align the interests of the participants and the shareholders of
the Company by providing compensation that is dependent on the
performance of the Company’s common shares.
The total expense relating to share–based payment plans for
the year ended January 31, 2023 was $13,131 (January 31, 2022 –
$11,854). The carrying amount of the Company’s share-based
compensation arrangements including PSU, share option, DDSU and
EDSU plans are recorded on the consolidated balance sheets as
follows:
$
(3,432)
$
(2,621)
4,138
3,637
$
706
$
1,016
Accounts payable and accrued
liabilities
Other long-term liabilities
Contributed surplus
January 31, 2023
January 31, 2022
$ 4,793
12,552
11,217
$ 7,586
12,321
10,933
Total
$ 28,562
$ 30,840
67NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance Share Units
The Company has granted PSUs to officers and senior management.
Each PSU entitles the participant to receive either a cash payment
equal to the market value of the number of notional units granted or
one share of the Company for each notional unit granted at the end
of the vesting period based on the achievement of specific
performance based criteria. The PSU account for each participant
includes the value of dividends from the Company as if reinvested in
additional PSUs. PSU awards vest with the employee on the third
fiscal year following the date of the grant to which the award relates.
Compensation expense is measured based on the grant date fair
market value of the award and recognized over the vesting period
to be paid.
based on
Compensation costs related to the PSUs for the year ended
January 31, 2023 are $7,882 (January 31, 2022 – $6,626). Equity
settled PSUs are redeemed with shares transferred from a trust
established for this plan or by issuing shares from treasury. There
were 60,993 PSUs (January 31, 2022 – 155,490) partially settled by
releasing 29,849 shares (January 31, 2022 – 76,629) from the
employee trust during the year ended January 31, 2023. There were
55,903 PSUs (January 31, 2022 - 21,032) partially settled by releasing
27,748 shares issued from treasury (January 31, 2022 - 13,815). The
total number of PSUs outstanding at January 31, 2023 that may be
settled in treasury shares is 337,331 (January 31, 2022 – 263,373).
total compensation
the estimated
Director Deferred Share Unit Plan
This Plan is available for independent Directors. Participants are
credited with deferred share units for the amount of the annual
equity retainer, and for the portion of the annual cash retainer and
fees each participant elects to allocate to the DDSU plan. Each
deferred share unit entitles the holder to receive a share of the
Company. The DDSUs are exercisable by the holder at any time but
no later than December 31 of the first calendar year commencing
after the holder ceases to be a Director. A participant may elect at
the time of exercise of any DDSUs, subject to the consent of the
Company, to have the Company pay an amount in cash equal to the
aggregate current market value of the shares, determined based on
the closing price of the shares on the TSX on the trading day
preceding the exercise date. This cash payment is in consideration
for the surrender by the participant to the Company the right to
receive shares from exercising the DDSUs. Effective December 2016,
the Plan was amended for those DDSUs credited to participants for
the portion of the annual cash retainer and fees each participant
elects to allocate to the Plan. The holder of these DDSUs is entitled
to receive at the time of exercise, an amount in cash equal to the
aggregate current market value of the shares, determined based on
the closing price of the shares on the TSX on the trading day
preceding the exercise date.
Compensation expense is initially measured at the time of the
grant. Subsequent changes in the fair value of the DDSUs based on
changes in the market value of the Company's shares are recognized
at each reporting date. The DDSU plan compensation costs for the
year ended January 31, 2023 are $2,000 (January 31, 2022 – $2,022).
The total number of deferred share units outstanding at January 31,
2023 is 258,689 (January 31, 2022 – 308,258). There were 93,743
DDSUs exercised in cash during the year ended January 31, 2023
(January 31, 2022 – 48,388).
Executive Deferred Share Unit Plan
The EDSU plan was implemented to assist executive management to
meet the Company's minimum share ownership guidelines. This
plan provides for the granting of deferred share units to those
executives who elect to receive a portion of their annual short-term
incentive payment in EDSUs, subject to plan limits. Effective April
2016, participants are credited with EDSUs based on the amount of
their annual short-term incentive payment allocated to the plan and
the fair market value of the Company's shares. The EDSU account
for each participant includes the value of dividends from the
Company as if reinvested in additional EDSU's. The EDSUs are
exercisable at any time after the executive ceases to be an employee
of the Company, but no later than December 31 of the first calendar
year commencing after the holder ceased to be an employee. Each
EDSU entitles the holder to a cash payment equal to the market
value of the equivalent number of the Company's shares,
determined based on their closing price on the TSX on the trading
day preceding the exercise date.
Total compensation expense is measured at the time of the
grant. Subsequent changes in the fair value of the EDSUs based on
changes in the market value of the Company's shares are recognized
at each reporting date. The EDSU plan compensation costs for the
year ended January 31, 2023 are $38 (January 31, 2022 – $67).
Share Option Plan
The Company has a Share Option Plan that provides for the granting
of options to certain officers and senior management. Options are
granted at fair market value based on the volume weighted-average
closing price of the Company’s shares for the five trading days
preceding the grant date. Effective June 14, 2011, the Share Option
Plan was amended and restated. The amendments afford the Board
of Directors the discretion to award options giving the holder the
choice, upon exercise, to either deduct a portion of all dividends
declared after the grant date from the options exercise price or to
exercise the option at the strike price specified at the grant date
("Declining Strike Price Options"). Options issued prior to June 14,
2011 and certain options issued subsequently are standard options
("Standard Options"). Each option is exercisable into one share of the
Company at the price specified in the terms of the option. Declining
Strike Price options allow the employee to acquire shares or receive a
cash payment based on the excess of the fair market value of the
Company’s shares over the exercise price.
The
fair value of the Declining Strike Price Options
is
remeasured at the reporting date and recognized both in net
earnings and as a liability over the vesting period. The grant date fair
value of the Standard Options is recognized in net earnings and
contributed surplus over the vesting period.
The maximum number of shares available for issuance is a fixed
number set at 4,354,020, representing 9.1% of the Company’s issued
and outstanding shares at January 31, 2023. Fair value of the
Company's options is determined using an option pricing model.
Share options granted vest on a graduated basis over four to five
years and are exercisable over a period of seven years. The share
option compensation costs for the year ended January 31, 2023 are
$2,279 (January 31, 2022 – $2,165). The fair values for options issued
during the year were calculated based on the following assumptions:
January 31, 2023
January 31, 2022
Fair value of options granted
Exercise price
Dividend yield
Annual risk-free interest rate
Expected share price volatility
$
$
5.19
35.83
$
$
4.2 %
2.2 %
24.1 %
4.67
35.51
4.1 %
1.1 %
25.2 %
68THE NORTH WEST COMPANY INC. - 2022 The assumptions used to measure options at the balance sheet
dates are as follows:
January 31, 2023
January 31, 2022
Dividend yield
Annual risk-free interest rate
4.2 %
3.7%
4.2 %
1.3%
Expected share price volatility
13.4% to 23.2%
15.9% to 22.2%
The expected dividend yield is estimated based on the quarterly dividend rate and the closing share price on the date the options are granted.
The expected share price volatility is estimated based on the Company's historical volatility over a period consistent with the expected life of
the options. The risk-free interest rate is estimated based on the Government of Canada bond yield for a term to maturity equal to the
expected life of the options.
The following continuity schedules reconcile the movement in outstanding options during the year:
Number of options outstanding
Declining Strike Price Options
Standard Options
Outstanding options, beginning of year
Granted
Exercised
Forfeited or cancelled
Outstanding options, end of year
Exercisable at end of year
January 31, 2023 January 31, 2022 January 31, 2023 January 31, 2022
589,588
—
815,272
—
1,274,837
238,024
(287,905)
(225,684)
(120,446)
—
—
(9,359)
1,237,366
329,846
(165,170)
(127,205)
301,683
589,588
1,383,056
1,274,837
301,683
452,203
648,793
419,792
The weighted-average share price on the dates options were exercised during the year was $36.99 (January 31, 2022 – $36.22).
Weighted-average exercise price
Declining Strike Price Options
Standard Options
Outstanding options, beginning of year
$
31.06
$ 30.15
$
30.13
$ 28.51
January 31, 2023 January 31, 2022 January 31, 2023 January 31, 2022
Granted
Exercised
Forfeited or cancelled
Outstanding options, end of year
Exercisable at end of year
Summary of options outstanding by grant year
—
28.13
—
—
27.32
—
35.64
28.05
35.48
35.39
27.95
30.88
$
$
31.71
$ 31.06
27.27
$ 26.78
$
$
31.22
$ 30.13
29.28
$ 28.39
Outstanding
Exercisable
Range of
exercise price
Number
outstanding
Weighted-average
remaining
contractual years
Weighted-average
exercise price
Options
exercisable
Weighted-average
exercise price
$
$
$
$
$
$
$
23.80-23.80
27.36-32.40
27.77-27.77
28.13-30.02
29.23-29.23
34.67-35.51
32.79-35.83
55,679
266,176
182,201
282,615
380,225
284,757
233,086
0.2
1.4
2.2
3.3
4.4
5.3
6.3
$ 23.80
$ 28.38
$ 27.77
$ 28.20
$ 29.23
$ 35.38
$ 35.64
55,679
266,176
182,201
189,449
187,113
69,858
—
$ 23.80
$ 28.38
$ 27.77
$ 28.21
$ 29.23
$ 35.37
$
—
Grant
year
2016
2017
2018
2019
2020
2021
2022
69NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Share Purchase Plan
The Employee Share Purchase Plan provides participants with the opportunity to acquire an ownership interest in the Company. The Company
contributes an additional 33% of the amount invested, subject to a maximum annual contribution of 2% of the participants' base salary. The
plan is administered by a trustee who uses the funds received to purchase shares on the TSX on behalf of the participating employees. These
shares are registered in the name of the plan trustee on behalf of the participants.
The Company’s contribution to the plan is recorded as compensation expense. The employee share purchase plan compensation costs
for the year ended January 31, 2023 are $932 (January 31, 2022 – $974).
15. FINANCIAL INSTRUMENTS
The Company's activities expose it to a variety of financial risks including liquidity risk, credit risk and market risk. The Company's overall risk
management program focuses on minimizing potential adverse effects on financial performance.
The Company manages funding and financial risk management with oversight provided by the Board of Directors, who also approve
specific financial transactions. The Company uses derivative financial instruments only to hedge exposures arising in respect of underlying
business requirements and not for speculative purposes.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due or can do so only at excessive cost.
The Company’s operational cash flow is reasonably stable and predictable. This reflects the business risk profile of the majority of markets in
which the Company operates and its product mix. Cash flow forecasts are produced regularly and reviewed against the Company’s debt
portfolio capacity and maturity profile to assist management in identifying future liquidity requirements. The Company’s funding strategy is to
ensure a mix of funding sources offering flexibility and cost effectiveness to match the business requirements.
The Company is financed by a combination of cash flow from operating activities, bank advances, senior notes and committed revolving
loan facilities. At January 31, 2023, the Company had undrawn committed revolving loan facilities available of $418,250 (January 31, 2022 –
$320,309) which mature in 2027 and 2028 (Note 12). The undrawn available capacity is net of the aggregate potential liability for letters of
credit of $18,738 (January 31, 2022 – $21,557).
The following table analyzes the Company’s financial liabilities into relevant maturity groupings based on the remaining period from the
balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows or an
estimation in respect of floating interest rate liabilities, and as a result may not agree to the amounts disclosed on the balance sheet.
2023
2024
2025
2026
2027
2028+
Total
Accounts payable and accrued liabilities
$
225,481 $
Current portion of long-term debt (Note 12)
Long-term debt (Note 12)
Total
268
12,269
— $
—
— $
—
— $
—
— $
—
— $ 225,481
—
268
12,536
12,269
12,269
149,006
157,975
356,324
$
238,018 $
12,536 $
12,269 $
12,269 $
149,006 $
157,975 $ 582,073
amount, $13,399 (January 31, 2022 – $9,839) is more than 60 days
past due. The Company has recorded an allowance against its
maximum exposure to credit risk of $11,385 (January 31, 2022 –
$12,165) which is based on expected credit losses for similar financial
assets.
The Company has an unsecured, non-interest bearing
promissory note receivable of $41,299 (January 31, 2022 – $50,092)
from Giant Tiger Stores Limited of which $15,000 (January 31, 2022 –
$9,809) has been reclassified to accounts receivable and $26,299
(January 31, 2022 – $40,283) is classified as a non-current asset. This
promissory note is considered to have a low credit risk based on the
high credit quality of its counterparty. See Note 24.
As at January 31, 2023 and 2022, the Company has no
significant credit risk related to derivative financial instruments.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Company’s exposures to credit risk arise primarily
from holdings of cash, customer and commercial accounts
receivable and promissory note receivable.
To mitigate credit risk, the Company maintains deposits with
financial institutions with minimum equivalent short-term credit
ratings of “A1”. The maximum exposure on cash is equal to the
carrying amount of these instruments.
It is the Company’s policy that customers who wish to trade on
credit terms are subject to credit verification procedures including
policies governing: credit approvals, limits, collections and fraud
prevention. The Company provides impairment allowances for
potentially uncollectible accounts receivable. Receivable balances
are comprised of approximately forty thousand customers spread
across a wide geography, substantially reducing the Company’s risk
through the diversity of its customer base. Further, receivables are
centrally monitored on an ongoing basis with the result that the
is generally not
Company’s exposure to
significant. The maximum exposure net of impairment allowances is
$113,798 (January 31, 2022 – $99,241). The Company does not have
any
individual customers greater than 10% of total accounts
receivable. At January 31, 2023, the Company’s gross maximum
credit risk exposure is $125,183 (January 31, 2022 – $111,406). Of this
individual customers
70THE NORTH WEST COMPANY INC. - 2022
Market risk
(a) Currency risk The Company operates internationally and is
exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the U.S. dollar. Foreign
exchange risk arises from U.S. dollar denominated borrowings
and net investments in foreign operations.
Management is responsible for managing foreign currency
risk. The Company’s U.S. dollar net investment is exposed to
foreign currency translation risk. The Company has hedged
US$70,000 of this risk with U.S. dollar denominated borrowings.
No ineffectiveness was recognized from the net investment
hedge.
In respect of recognized foreign currency assets and
liabilities, the Company has limited exposure. Procurement
and related borrowing activity are generally conducted in
currencies matching cash flows generated by underlying
operations, providing
hedge without
sophisticated treasury management. Short-term imbalances in
foreign currency holdings are rectified by buying or selling at
spot rates when necessary.
economic
an
to
relative
Management considers a 10% variation in the Canadian
dollar
reasonably possible.
the U.S. dollar
Considering all major exposures to the U.S. dollar as described
above, a 10% appreciation of the Canadian dollar against the
U.S. dollar in the year-end rate would cause net earnings to
decrease by approximately $100 (January 31, 2022 - $100). A
10% depreciation of the Canadian dollar against the U.S. dollar
year-end rate would cause net earnings to
increase by
approximately $100 (January 31, 2022 – $100).
The Company may use derivative financial instruments to
manage market risk. These transactions are approved by the
Board of Directors. The derivatives are entered into with
financial institution counter parties rated AA-.
(b)
Interest rate risk Interest rate risk is the risk that the fair value of
future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Company is exposed to
interest rate risk primarily through its long-term borrowings.
The Company manages exposure to interest rate risk by
monitoring its blend of fixed and floating interest rates, and
may modify this blend using interest rate swaps. The goal of
management is to manage the trade-off between obtaining the
most beneficial effective rates of interest, while minimizing the
impact of interest rate volatility on earnings.
Management considers a 100 basis point change in
interest rates reasonably possible.
Considering all major
exposures to interest rates as described above, based on
floating rate borrowings outstanding at January 31, 2023 a 100
basis point increase in the risk-free rate would cause net
earnings to decrease by approximately $702 (January 31, 2022 –
$330). A 100 basis point decrease would cause net earnings to
increase by approximately $702 (January 31, 2022 – $330).
(c) Accounting classifications and fair value estimation The following
table comprises the carrying amounts of the Company’s
financial instruments. Financial instruments are either carried at
amortized cost using the effective interest rate method or fair
value.
The Company uses a three-level hierarchy to categorize
financial instruments carried at fair value as follows:
•
•
•
Level 1 – Fair values measured using quoted prices
(unadjusted) in active markets for identical instruments
Level 2 – Fair values measured using directly or
indirectly observable inputs, other than those included
in Level 1
Level 3 – Fair values measured using inputs that are not
based on observable market data
These amounts represent point-in-time estimates and may not reflect fair value in the future. These calculations are subjective in nature,
involve uncertainties and are a matter of significant judgment.
January 31, 2023
Cash
Accounts receivable (1)
Promissory note receivable (1)
Other financial assets
Accounts payable and accrued liabilities
Current portion of long-term debt
Long-term debt
Assets (Liabilities) carried at
amortized cost
Maturity Carrying amount
Fair value
Short-term
Short-term
Long-term
Long-term
Short-term
Short-term
Long-term
$
58,809
$
58,809
113,798
26,299
1,523
(220,688)
(268)
(289,782)
113,798
26,299
1,523
(220,688)
(268)
(269,462)
(1) At January 31, 2023, $15,000 of the promissory note receivable due within the next 12 months is included in accounts receivable (January 31, 2022 – $9,809).
71NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2022
Cash
Accounts receivable
Promissory note receivable
Other financial assets
Accounts payable and accrued liabilities
Current portion of long-term debt
Long-term debt
Assets (Liabilities) carried at
amortized cost
Maturity Carrying amount
Fair value
Short-term
Short-term
Long-term
Long-term
Short-term
Short-term
Long-term
$
49,426
$
49,426
99,241
40,283
1,422
(213,733)
(46,262)
(189,378)
99,241
40,283
1,422
(213,733)
(46,262)
(184,448)
The methods and assumptions used in estimating the fair value of the Company’s financial instruments are as follows:
•
•
•
The fair value of short-term financial instruments approximates their carrying values due to their immediate or short-term period to
maturity. Any differences between fair value and book values of short-term financial instruments are considered to be insignificant.
The fair value of long-term debt with fixed interest rates is estimated by discounting the expected future cash flows using the current risk-
free interest rate on an instrument with similar terms adjusted for an appropriate risk premium. This is considered a level 2 fair value
estimate.
The carrying value of the promissory note receivable is a reasonable approximation of fair value. The fair value when recognized was
estimated by calculating the present value of the future expected cash flows using an effective interest rate derived from comparable
debt issuances.
leverage test and a minimum net worth test. Compliance with
financial covenants is reported quarterly to the Board of
Directors. During the years ended January 31, 2023 and 2022,
the Company is in compliance with all financial covenants.
Other than the requirements imposed by these borrowing
agreements and solvency tests imposed by the CBCA, the
Company is not subject to any externally imposed capital
requirements.
Capital management objectives are reviewed on an annual basis.
The capital management objectives were substantially unchanged
for the year ended January 31, 2023.
Capital management
The Company’s objectives in managing capital are to deploy capital
to provide an appropriate total return to shareholders while taking
into consideration key risks, including the duration and severity of
COVID-19. Management maintains a capital structure that provides
the flexibility to take advantage of the growth opportunities of the
business, maintain existing assets, meet obligations and financial
covenants and enhance shareholder value. The capital structure of
the Company consists of bank advances, long-term debt and
shareholders’ equity. The Company manages capital to optimize
efficiency through an appropriate balance of debt and equity. In
order to maintain or adjust its capital structure, the Company may
purchase shares for cancellation pursuant to normal course issuer
bids,
funds, adjust
discretionary capital spending and adjust the amount of dividends
paid or refinance debt at different terms and conditions.
issue additional shares, borrow additional
The Company’s process and policies for managing capital are
monitored by management and are reflected in the following
measures:
(a) Debt-to-equity ratio At January 31, 2023, the debt-to-equity ratio
was 0.45 compared to 0.41 last year. The debt-to-equity ratio is
within the Company’s objectives. The debt-to-equity ratio is
calculated as follows:
Current portion of long-term
debt (Note 12)
Long-term debt (Note 12)
Total debt
Total equity
Debt-to-equity ratio
January 31, 2023
January 31, 2022
$
$
$
268
$
289,782
290,050
647,900
0.45
$
$
46,262
189,378
235,640
580,204
0.41
(b)
Financial covenants As a result of borrowing agreements
entered into by the Company, there are certain financial
covenants that must be maintained. Financial covenants
include a fixed charge coverage ratio, minimum current ratio, a
72THE NORTH WEST COMPANY INC. - 2022
16. SHARE CAPITAL
Authorized – The Company has an unlimited number of Common
Voting Shares and Variable Voting Shares.
January 31, 2022
Purchased and cancelled (1)
Issued under share-based compensation
plans (Note 14)
Shares
Consideration
47,878,650
$ 173,110
(236,075)
108,030
(854)
4,067
Balance at January 31, 2023
47,750,605
$ 176,323
Shares held in trust, January 31, 2022
Purchased for future settlement of PSUs
Released for settlement of PSUs (Note 14)
(8,371)
(87,000)
29,849
Shares held in trust, January 31, 2023
(65,522)
$
(29)
(311)
108
(232)
Issued and outstanding, net of shares
held in trust, January 31, 2023
47,685,083
$ 176,091
January 31, 2021
Purchased and cancelled (1)
Issued under share-based compensation
plans (Note 14)
48,613,319
$
174,213
(807,037)
(2,892)
72,368
1,789
Balance at January 31, 2022
47,878,650
$
173,110
Shares held in trust, January 31, 2021
Purchased for future settlement of PSUs
Released for settlement of PSUs (Note 14)
Shares held in trust, January 31, 2022
Issued and outstanding, net of shares
held in trust, January 31, 2022
—
(85,000)
76,629
(8,371)
47,870,279
—
(304)
275
(29)
173,081
$
$
(1) Variable voting shares and common voting shares purchased pursuant to
NCIB program. The Company records shares repurchased on a transaction
date basis.
Voting rights
The Company's share capital is comprised of Variable Voting Shares
and Common Voting Shares. The two classes of shares have
equivalent rights as shareholders except for voting rights. Holders of
Variable Voting Shares are entitled to one vote per share except
where (i) the number of outstanding Variable Voting Shares exceeds
49% of the total number of all issued and outstanding Variable
Voting Shares and Common Voting Shares, or (ii) the total number of
votes cast by or on behalf of the holders of Variable Voting Shares at
any meeting on any matter on which a vote is to be taken exceeds
49% of the total number of votes cast at such meeting.
formality.
If either of the above-noted thresholds is surpassed at any time,
the vote attached to each Variable Voting Share will decrease
automatically without
the
further act or
circumstances described in paragraph (i) above, the Variable Voting
Shares as a class cannot carry more than 49% of the total voting
rights attached to the aggregate number of issued and outstanding
Variable Voting Shares and Common Voting Shares of the Company.
Under the circumstances described in paragraph (ii) above, the
Variable Voting Shares as a class cannot, for the given Shareholders'
meeting, carry more than 49% of the total number of votes cast at
the meeting.
Under
is converted
Variable Voting Shares may only be held, beneficially owned or
controlled, directly or indirectly, by persons who are not Canadians
(within the meaning of the Canada Transportation Act). An issued
and outstanding Variable Voting Share
into one
Common Voting Share automatically and without any further act of
the Company or the holder, if such Variable Voting Share becomes
indirectly,
held, beneficially owned and controlled, directly or
otherwise than by way of security only, by a Canadian, as defined in
the Canada Transportation Act ("CTA").
At January 31, 2023 shares outstanding of 47,750,605 included
16,137,982 (January 31, 2022 – 14,973,056) Variable Voting Shares,
representing 33.8% (January 31, 2022 – 31.3%) of the total shares
issued and outstanding.
Normal Course Issuer Bid
On November 10, 2022, the Company renewed its Normal Course
Issuer Bid ("NCIB"). Under the NCIB, the Company may acquire up to
a maximum of 4,740,895 of its shares, or approximately 10% of its
float for cancellation over the following 12 months. During the year
ended January 31, 2023, the Company purchased 236,075 common
shares having a book value of $854 for cash consideration of $7,817.
The excess of the purchase price over the book value of the shares of
$6,963 was charged to retained earnings. During the year ended
January 31, 2022, the Company purchased 807,037 common shares
having a book value of $2,892 for cash consideration of $28,064. The
excess of the purchase price over the book value of the shares of
$25,172 was charged to retained earnings. All shares purchased
were cancelled.
In connection with the NCIB, the Company has established an
automatic securities purchase plan with its designated broker to
facilitate the purchase of shares under the NCIB at times when the
Company would ordinarily not be permitted to purchase its shares
due to regulatory restrictions or self-imposed blackout periods.
Under the plan, before entering a self-imposed blackout period, the
Company may, but is not required to, ask the designated broker to
make purchases under the NCIB within specific parameters.
17. EXPENSES BY NATURE
Year Ended
January 31, 2023
January 31, 2022
Employee costs (Note 18)
$ 329,209
$ 325,862
Amortization
Operating lease rentals
Gain on insurance settlement (1)
98,373
5,314
—
90,950
5,479
(18,124)
(1) The Company recorded gains on insurance claims. These gains were due
to the difference between the replacement cost of the assets destroyed
and their net book values and also for recovery of business interruption
losses on certain insurance claims.
73NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. EMPLOYEE COSTS
20. DIVIDENDS
Year Ended
January 31, 2023 January 31, 2022
Wages, salaries and benefits
including bonus
$ 306,947
$ 303,358
Post-employment benefits (Note 13)
Share-based compensation (Note 14)
9,131
13,131
10,650
11,854
Included in the above are the following amounts in respect of key
management compensation:
Wages, salaries and benefits
including bonus
Post-employment benefit expense
Share-based compensation
$
6,377
$
731
5,908
7,970
1,732
6,912
Shareholder dividends
Dividends per share
following
The
shareholders' equity and paid in cash:
is a summary of the dividends recorded
in
Year Ended
January 31, 2023
January 31, 2022
Dividends recorded in equity
and paid in cash
Less: Dividends paid to non-
controlling interests
$ 74,326
$ 70,420
(2,521)
—
$ 71,805
$
1.50
$ 70,420
$
1.46
The payment of dividends on the Company’s common shares is
subject to the approval of the Board of Directors and is based upon,
among other factors, the financial performance of the Company, its
current and anticipated future business needs, and the satisfaction of
solvency tests imposed by the CBCA for the declaration of dividends.
Dividends are recognized as a liability in the consolidated financial
statements in the year in which the dividends are approved by the
Board of Directors.
On April 5, 2023, the Board of Directors declared a dividend of
$0.38 per common share to paid on April 27, 2023 to shareholders of
record as of the close of business on April 17, 2023.
Key management personnel are those individuals who have the
authority and responsibility for planning, directing and controlling
the activities of the Company. The Company’s key management
personnel are comprised of the Board of Directors, Chief Executive
Officer and the senior officers of the Company.
19. INTEREST EXPENSE
Year Ended
January 31, 2023
January 31, 2022
Interest on long-term debt
$ 11,123
$
Interest on lease liabilities
Net interest on defined benefit
plan obligation
Interest imputed on promissory
note receivable
Interest capitalized
4,249
706
(1,016)
(226)
8,950
4,288
1,016
(1,101)
(95)
Interest expense
$ 14,836
$ 13,058
21. NET EARNINGS PER SHARE
Basic net earnings per share is calculated based on the weighted-average shares outstanding during the year. The diluted net earnings per
share takes into account the dilutive effect of all potential ordinary shares. The average market value of the Company’s shares for purposes of
calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding.
($ and shares in thousands, except earnings per share)
Year Ended
Diluted earnings per share calculation:
January 31, 2023
January 31, 2022
Net earnings attributable to shareholders for the year (numerator for diluted earnings per share)
$ 122,190
$ 154,802
Weighted-average shares outstanding (denominator for basic earnings per share)
Dilutive effect of share-based compensation
Denominator for diluted earnings per share
Basic earnings per share
Diluted earnings per share
47,865
784
48,649
48,268
766
49,034
$
$
2.55
2.51
$
$
3.21
3.16
74THE NORTH WEST COMPANY INC. - 2022
22. COMMITMENTS, CONTINGENCIES AND
GUARANTEES
Contingencies
In the ordinary course of business, the Company is subject to audits
by taxation authorities. While the Company believes that its filing
positions are appropriate and supportable, the possibility exists that
certain matters may be reviewed and challenged by the taxation
authorities. The Company regularly reviews the potential for adverse
outcomes and the adequacy of its tax provisions. The Company
believes that it has adequately provided for these matters. If the final
outcome differs materially from the provisions, the Company’s
income tax expense and its earnings could be affected positively or
negatively in the period in which the matters are resolved.
The Company is involved in various legal matters arising in the
normal course of business. The occurrence of the confirming future
events is not determinable or it is not possible to determine the
amounts that may ultimately be assessed against the Company. The
resolution of these matters is not expected to have a material
adverse effect on the Company’s financial position, results of
operations or cash flows.
Guarantees
The Company has provided the following guarantees to third parties:
The Company has entered into indemnification agreements
with its current and former directors and officers to indemnify them,
to the extent permitted by law, against any and all charges, costs,
expenses, amounts paid in settlement and damages incurred by the
directors and officers as a result of any lawsuit or any judicial,
administrative or investigative proceeding in which the directors and
officers are sued as a result of their service. These indemnification
claims will be subject to any statutory or other legal limitation period.
The nature of the
indemnification agreements prevents the
Company from making a reasonable estimate of the maximum
potential amount it could be required to pay to counterparties. The
Company has purchased director and officer liability insurance. No
amount has been recorded in the consolidated financial statements
with respect to these indemnification agreements.
In the normal course of operations, the Company provides
indemnification agreements to counterparties for various events
such as intellectual property right infringement, loss or damages to
property, claims that may arise while providing services, violation of
laws or regulations, or as a result of litigation that might be suffered
by
these
indemnification agreements prevents the Company from making a
reasonable estimate of the maximum potential amount it could be
required to pay to counterparties. No amount has been recorded in
the consolidated
financial statements with respect to these
indemnification agreements.
terms and nature of
the counterparties.
The
75NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23. SUBSIDIARIES AND JOINT VENTURES
The Company’s principal operating subsidiaries are set out below:
NWC GP Inc.
North West Company Holdings Inc.
The North West Company LP
NWC (U.S.) Holdings Inc.
The North West Company (International) Inc.
Roadtown Wholesale Trading Ltd.
North Star Air Ltd.
Activity Country of Organization
Company
Subsidiary
Proportion of voting rights held by:
General Partner
Holding Company
Retailing
Holding Company
Retailing
Retailing
Airline
Canada
Canada
Canada
United States
United States
British Virgin Islands
Canada
100 %
100 %
100 % (less one unit)
100 %
100 %
77 %
100 %
The investment in joint venture comprises a 50% interest in a Canadian Arctic shipping company, Transport Nanuk Inc. At January 31, 2023, the
Company’s share of the net assets of its joint venture amount to $16,220 (January 31, 2022 – $14,456) comprised assets of $18,856 (January 31,
2022 - $17,074) and liabilities of $2,636 (January 31, 2022 – $2,618). During the year ended January 31, 2023, the Company purchased freight
handling and shipping services from Transport Nanuk Inc. and its subsidiaries of $9,546 (January 31, 2022 – $9,362).
24. PROMISSORY NOTE RECEIVABLE
On July 5, 2020, the Company sold 36 of its 46 Giant Tiger stores to Giant Tiger Stores Limited for cash consideration of $45,000, subject to
working capital adjustments, and additional contingent consideration payable of up to $22,500. The remaining cash consideration is payable
in two $15,000 installments on July 5, 2023 and July 5, 2024. Subject to meeting certain profitability milestones the additional contingent
consideration is payable in installments on July 5, 2024 and July 5, 2025.
The consideration has been recorded as an unsecured, non-interest bearing promissory note receivable comprised of the net present value of
the estimated installments, discounted using an interest rate specific to the counterparty. For the year-ended January 31, 2023 the Company
recognized interest income of $1,016 (January 31, 2022 - $1,101) on the promissory note receivable (Note 19) and it had a fair value of $41,299,
of which $15,000 has been reclassified to accounts receivable.
76THE NORTH WEST COMPANY INC. - 2022 Shareholder Information
Fiscal Year
Quarter Ended
2022
April 30, 2022
July 31, 2022
October 31, 2022
January 31, 2023
2021
April 30, 2021
July 31, 2021
October 31, 2021
January 31, 2022
2020
April 30, 2020
July 31, 2020
October 31, 2020
January 31, 2021
Share
Price High
Share
Price Low
Share
Price Close
Volume
EPS1
$40.09
$30.55
$36.24
52,348,183
$2.51
40.09
36.70
36.72
38.34
34.80
32.91
30.55
34.61
35.83
34.48
35.45
36.24
18,392,266
12,240,571
13,111,355
8,603,991
0.57
0.64
0.61
0.69
$38.20
$30.24
$35.05
50,473,763
$3.16
37.82
36.93
37.00
38.20
30.24
34.16
32.93
32.90
35.40
36.36
33.63
35.05
14,615,387
13,211,437
10,437,988
12,208,951
0.80
0.86
0.79
0.71
$36.92
$16.06
$32.37
60,827,077
$2.82
28.23
32.01
36.92
35.97
16.06
24.60
27.78
31.40
26.30
29.80
32.85
32.37
18,232,655
15,500,127
14,079,055
13,015,240
0.23
1.25
0.71
0.63
1 Net earnings per share are on a diluted basis.
Total Return Performance (% at January 31)
This chart illustrates the relative performance of shares of The North
West Company Inc. over the past five years. The index incorporates
the reinvestment of dividends.
The North West Company Inc.
Anticipated Dividend Dates*
Record Date: April 17, 2023
Payment Date: April 27, 2023
Record Date: June 30, 2023
Payment Date: July 14, 2023
Record Date: September 29, 2023
Payment Date: October 13, 2023
Record Date: December 29, 2023
Payment Date: January 15, 2024
*Dividends are subject to approval by the
Board of Directors
The 2022 Annual General Meeting of
Shareholders of The North West Company Inc.
will be held on Wednesday, June 7, 2023 at
11:30 am (Central Time) by virtual only meeting
via live audio webcast online at:
https:web.lumiagm.com/434747831
Transfer Agent and Registrar
TSX Trust Company
600 The Dome Tower
333-7th Ave SW
Calgary, AB
Toll-free: 1 800 387 0825
www.tsxtrust.com
Stock Exchange Listing
The Toronto Stock Exchange
Stock Symbol NWC
ISIN #: CA6632782083
CUSIP #: 663278208
Number of shares issued and outstanding at
January 31, 2023: 47,750,605
Auditors
PricewaterhouseCoopers LLP
Five Year Compound Annual Growth (%)
77ANNUAL REPORT
Corporate Governance
Complete disclosure of The North West Company Inc's. corporate governance is provided in the Company’s Management Information Circular,
which is available on the Canadian Securities Administrators’ website at www.sedar.com or in the investor section of the Company’s website at
www.northwest.ca.
EXECUTIVES
EXECUTIVES
Daniel G. McConnell
President & Chief Executive Officer
Jim Caldwell
President, Canadian Retail
Laurie J. Kaminsky
Vice-President, NWC Health Products &
Services
Frank W. Kelner
Chair & Chief Executive Officer,
North Star Air Ltd.
Kyle A. Hill
President, Alaska Commercial Company
Thomas J. Meilleur
Vice-President, North Star Air Ltd.
J. Kevin Proctor
President, Cost-U-Less & Riteway
Walter E. Pickett
Vice-President & General Manager,
Alaska Commercial Company
BOARD OF DIRECTORS
Brock Bulbuck, Chair
Deepak Chopra1, 3
Frank J. Coleman 2, 3
Stewart F. Glendinning 1, 2
Rachel L. Huckle 2, 3
Annalisa King 1, 2
Violet A. M. Konkle 1, 3
Steven Kroft 2, 3
John D. King
Executive Vice President &
Chief Financial Officer
Alison F. Coville
Chief People Officer
Vineet Gupta
Chief Information Officer
Randy L. Roller
Vice-President & General Manager, Facilities
and Store Planning
Daniel G. McConnell
Jennefer Nepinak 1, 3
Douglas S. Ruckle
Vice-President, Procurement and Marketing -
Alaska Commercial Company
Victor Tootoo1, 2
Nicolas Sabogal
Vice-President of Strategy,
Planning and Analytics
Cole J.A. Akerstream
Vice-President, Corporate Development
Kevin T. Sie
Vice-President, Finance
Michael T. Beaulieu
Vice-President, Canadian Store Operations
Jeffrey B. Stout
President & Chief Operating Officer,
North Star Air Ltd.
David M. Chatyrbok
Vice-President, Canadian Procurement &
Marketing
Leanne G. Flewitt
Vice-President, Logistics, Supply Chain
& Distribution (Canadian Operations)
Matt D. Johnson
Vice-President, Cost-U-Less Procurement &
Marketing
Amanda E. Sutton
Vice-President, Legal & Corporate Secretary
James W. Walker
Vice-President & General Manager,
Wholesale Operations (International
Operations)
BOARD COMMITTEES
1 Governance and Nominating
2 Audit
3 Human Resources, Compensation and
Pension
For additional copies of this report or for
general information about the Company,
contact the Corporate Secretary:
The North West Company Inc.
Gibraltar House, 77 Main Street
Winnipeg, Manitoba Canada R3C 2R1
T 204 934 1756 F 204 934 1317
board@northwest.ca
Company Website: www.northwest.ca
78THE NORTH WEST COMPANY INC. - 2022 Nor'Westers are associated with the vision,
perseverance, and enterprising spirit of the original
North West Company and Canada's early fur trade.
We trace our roots to 1668, and the establishment of
one of North America's early trading posts at
Waskaganish on James Bay. Today, we continue to
embrace this pioneering culture as true "frontier
merchants."
The North West Company Inc.
Gibraltar House, 77 Main Street
Winnipeg, Manitoba Canada R3C 2R1
T 204 934 1756 F 204 934 1317
Toll -free 1 800 563 0002
investorrelations@northwest.ca
www.northwest.ca