The North West Company Inc.
2023 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, 2024
Year Ended
January 31, 2023
Year Ended
January 31, 2022
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
$
$
2,471,678
2.9 %
301,173
195,897
134,291
129,391
230,427
$
$
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
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
$
1,396,010
$
1,336,890
$
1,219,273
281,576
705,773
290,050
647,900
235,640
580,204
.40:1
17.7 %
19.9 %
76.9 %
23.1 %
6.22
2.67
4.76
38.89
40.49
29.58
$
$
.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
(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. 2023
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 & Sustainability ........................................................
Critical Accounting Estimates ....................................................................................
New Accounting Standards Implemented ................................................................
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 2023 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, 2024 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 10, 2024
and the information contained in this MD&A is current to April 10,
2024, 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.sedarplus.com or
on the Company's website at www.northwest.ca.
2THE NORTH WEST COMPANY INC. 2023 President & CEO Message
As I reflect over the results of this past year, I am
extremely proud of what we have been able to achieve: We
continue to deliver meaningful results for our shareholders,
while building organizational capabilities for the future, all
driven by an unwavering commitment to making a positive
impact in the communities we serve.
income support
The landscape in 2023 met us with diverse challenges
including decreased government
for
customers, inflationary cost increases, and several weather
events — from wildfires in Canada, to typhoons in Guam.
Throughout the rich history of the Company, our Nor’Wester
spirit has remained strong in testing times. Our organization
has proven to possess the resilience needed to adapt, evolve
and continue to provide essential goods and services.
We are building on top of this strong foundation by
focusing on our core competencies, and specifically in the
relationship between our enterprise, our stores, our
customers, and the communities we serve. Each of these are
central to our success and build on one another to give us our
unique value proposition.
•
•
•
At the Enterprise level — Sound capital allocation
principles to keep investing in business capabilities
to better serve our customers and provide top
quartile risk-adjusted return for our shareholders.
At the Store level — Deep understanding of our
customers, enables us to tailor offerings at a
community level and utilize our store footprint in
remote geographies and our logistics capability to
create convenient access for our customers.
And at the Customer and Community level — we
continue to strengthen the relationship with our
customers and the communities we serve by being a
trusted provider of essential products and services
and providing employment opportunities, all
aligned with our mission of making a positive
difference.
This focus has helped deliver $2.5 billion in sales and
$301.2 million in EBITDA in 2023 and an increase in earnings
per share of 8.6% on a compound annual basis over the past
five years, all accomplished with consistent growth
in
dividend payments to our shareholders.
To enable and sustain these results year-over-year, we
continue to focus on elevating Operational Excellence in
every area of our business. Our goal is to drive productivity
and efficiency gains for cost savings, optimize margins,
and
and deliver meaningful
Governance ("ESG") outcomes for the communities that we
serve.
Environmental,
Social
There has been good progress on our Operational
Excellence initiatives on all of these fronts, however, there is
still a lot of work to do. We are committed to enhancing these
capabilities and driving meaningful change which will have a
two-fold benefit: First, improving our customer offering and
providing more value by ensuring we carry the assortment
they desire, and merchandizing it more effectively. Secondly,
positioning the organization to capture value more efficiently
by adequately managing our cost structure, which will allow
us to grow our bottom-line and at the same time provide
value to our customers.
invested
Throughout 2023, we have also
in our
infrastructure, which includes our network of stores, supply
chain and IT Platforms. In Canada, we opened new stores in
Kugaaruk and Arviat, Nunavut and a new Motorsport store in
Thompson, Manitoba. Additionally, we also opened a
temporary store in Fox Lake, Alberta to keep serving the
community after our main store was destroyed by wildfires
earlier in the year.
We completed major store renovations to enhance our
customer value proposition in Wasagamack, South Indian
Lake, and Cross Lake, Manitoba, Moose Factory, Ontario and
Chisasibi, Quebec. I have received very positive feedback from
leaders in these communities, and that is evident in our
results.
In our International Operations, we opened a new store
in Point Hope, Alaska, added a small satellite Cost-U-Less store
in Fiji, and completed store renovations in the Barbados, St
Croix and stores on the British Virgin Islands, including a new
wholesale customer service center.
chain
supply
capabilities
Leveraging our
and
infrastructure is critical to enable our convenient customer
experience, in a way that also enhances productivity for the
organization. Efforts to optimize our transportation mix by
maximizing the utilization of summer barges to ship durable
goods have been underway in Canada and Alaska. In Canada,
we continued to focus on optimizing load factors and aircraft
utilization rates at North Star Air (“NSA”). This year NSA
implemented innovations to enhance flexibility of our assets,
including the introduction of a seat-configurable Dash-8
aircraft, that enables scaling cargo or passenger capacity
based on specific needs. They also expanded to provide
additional cargo services to net new
lanes within our
Canadian store network in Ontario and Nunavut, which
further allows us to create synergies and efficiencies on
freight costs.
As an organization, our goal is to make a positive impact
in the communities we serve. As part of our community and
ESG efforts, we are proud to support a wide range of
community events and causes ranging from traditional
and cultural celebrations to education programs, healthy
living initiatives and sports.
forefront of everything we do.
As one of the largest private employers of Indigenous
Peoples in Canada, with 2,300 self-identified Indigenous
employees, serving over 175,000 northern
Indigenous
Peoples in Canada, “Our Promise to Indigenous Peoples” is at
the
is a reaffirmed
commitment to building more collaborative relationships that
inclusion and social well-being of
will enhance
Indigenous People of Canada, in the spirit of Truth and
Reconciliation. The Promise is woven into our sustainability
strategy and ESG framework and is part of our Diversity, Equity
and Inclusion focus.
the
It
3ANNUAL REPORT Finally, I want to acknowledge and thank our passionate
and committed associates for their leadership. They truly
embody the Nor’Wester spirit day in and day out, and go
in the
above and beyond to make a positive
communities we serve. I also want to express my gratitude to
our customers, suppliers, shareholders and the communities
we serve for their partnership, support and trust. I am excited
about the opportunities and journey ahead, and our value
creation potential. We will evolve our business to drive
sustainable financial growth while continuing to deliver for
our customers across the communities we so proudly serve.
impact
We are building for the future.
Daniel G. McConnell
President & CEO
April 10, 2024
4THE NORTH WEST COMPANY INC. 2023 Chair of the Board Message
I take great pride
in sharing the Company’s
accomplishments over this past year, but first I would like to
express our sincere appreciation to Frank Coleman who
retired from the Board of Directors in February 2024. As the
President and CEO of the Coleman group of companies,
which is the largest independent grocery businesses in
Atlantic Canada, Frank brought a deep knowledge of retail
and a tremendous amount of experience to the Board. We
are extremely grateful for Frank’s contributions over his 25
years of service to North West and wish him our best in his
future endeavors.
Fiscal 2023 was another year of strong results for
North West. Sales increased 5.1% to $2.5 billion generated
from solid same store sales growth and sales from new stores
in both Canada and Alaska. Adjusted EBITDA(1), which
excludes the impact of share-based compensation and the
loss of a store in Fox Lake, Alberta due to wildfire, increased
9.0% to $318.0 million. For the second year in a row, the
strength of our Canadian Operations, both in core retailing
and at North Star Air, more than offset inflationary cost
pressures and softer sales performance in our International
Operations. The diversity of our business and strength of our
service offering once again
essential product and
demonstrated the sustainability of our financial performance.
Our company has consistently delivered strong
results for our shareholders, stakeholders, employees and the
communities we serve and we continue to be optimistic for
the future. We believe our consistent results and healthy
prospects make North West an attractive option for investors
looking for a stable dividend and future growth.
On behalf of the entire Board I would like to thank all
Nor’Westers for their exceptional contributions this year, and
for their ongoing commitment to making people’s lives better
in the communities we serve, the communities we serve for
continuing to give us the opportunity to serve them, and our
shareholders for entrusting us with their capital.
Brock Bulbuck
Chair of the Board
April 10, 2024
in our
This continued momentum
financial
performance, along with our exceptional team give me great
confidence that North West’s organizational focus is on the
right strategic path. Current organizational initiatives will
increase the Company’s capability to continue to deliver
sustainable financial growth through its strategic priorities of
operational excellence, investing in stores, building superior
logistics, optimizing information technology and progressing
on Environmental, Social and Governance (ESG) initiatives.
Continued investments in these areas will accelerate building
capability for the future.
This year, the Board was also focused on enhancing
our ESG Strategy. Our stores and associates are at the center
of the communities we serve, and addressing ESG in our
operations, policies and strategy is critical to ensure business
success, long-term value creation and community success. In
2023, the Company worked with community members,
associates and non-government organizations to prioritize
which ESG topics are the most important to the communities
we serve and other stakeholders and also have the greatest
impact on our business. Together, we’ve developed a shared-
value framework that focuses on People and our Planet which
we believe creates strong Partnerships for the future. This year
our ESG Strategy has been embedded across our operations,
with the communities we serve and our associates at the
heart of it. This work builds on North West’s “Promise to
Indigenous Peoples” which reaffirms our commitment to
building more collaborative relationships that enhance the
inclusion and social well-being of Indigenous People of
Canada.
(1) See Non-GAAP Financial Measures section.
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 complementary businesses:
Canadian Operations
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
121 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;
29 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;
2 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
33 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. 2023
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.
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.
•
•
•
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;
optimizing the IT infrastructure for our stores and support
offices to 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 developed around
People, Planet and Partnerships. This includes ensuring that we
attract, develop and retain top talent that is inclusive of the
diverse peoples and cultures that are represented in the
communities we serve and that we are responsible towards the
planet, the communities we serve and other stakeholder
interests.
Following is an update on the work in 2023 related to these strategic
priorities:
Operational Excellence We continue to focus on being in-stock on
food and other essential
items such as transportation, home
furnishings and appliances, while striving to provide value for our
customers within a high cost and high inflation environment by
minimizing as much as possible the impact of cost increases from
suppliers.
In-stock performance on essential food items and categories
such as transportation, home furnishings and appliances remained
strong. We increased the amount of food and other essential
products shipped on sealift and winter road by 6.8% compared to
last year to leverage lower freight costs and help mitigate higher
freight and merchandise cost inflation.
In addition, we continue to seek opportunities to deliver cost
savings in other aspects of our business through improved store
inventory shrink and other expense
labour planning,
management initiatives.
lower
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 to deliver
sustainable growth
through operational excellence and by
continuing to build capability for the future 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 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;
Investing in Stores, Products and Services Six new stores were
opened,
in
International Operations as follows:
in Canada and two stores
including four stores
•
•
•
•
•
a Northern store in Kugaaruk, Nunavut and an AC store in
Point Hope, Alaska, both new markets;
a motorsports dealership in Thompson, Manitoba;
a Northern store in Arviat, Nunavut offering an expanded
selection of motorsports, furniture, appliances and other
general merchandise;
a QuickStop convenience store in Taloyoak, Nunavut;
a small CUL store focused on B-to-B opportunities and
serving customers in Nadi, Fiji.
In addition, a new store was opened in Wasagamack, Manitoba
replacing a smaller store that was located on an island adjacent to
the community and major renovations were completed in South
Indian Lake and Cross Lake, Manitoba and Chisasibi and Puvirnituq,
Quebec. Overall, investment in property and equipment increased
to $114.2 million compared to $112.6 million last year.
Building a Superior Logistics and Supply Chain Capability NSA's
cargo aircraft utilization rates and service levels continue to exceed
targets and deliver consistent service to northern Canada stores. Five
Northern stores were added to the NSA logistics network in 2023.
NSA's service levels were a key factor in maintaining good in-stock
rates in our stores. Third party cargo, charter and scheduled
passenger revenues exceeded annual targets and contributed to
earnings gains in 2023.
7ANNUAL REPORT
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.
Optimizing our IT Infrastructure The roll-out of the point-of-sale
("POS") was completed in Northern stores. Investments are being
made
legacy software
including the planned implementation of pricing and data analytics
software in 2024.
in upgrading hardware and replacing
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 2023, we
completed a materiality assessment to determine which areas of ESG
have the greatest impact on our business and business partners,
including the communities we serve, employees and other
stakeholders. The results of the materiality assessment have been
incorporated into our ESG strategy and our work priorities.
As we continue to develop and implement our action plans, we
recognize that this is an ongoing learning process that requires
adaptability to make progress towards our ESG objectives. Our ESG
strategy also aims to complement "Our Promise to Indigenous
Peoples" and our commitment to building more collaborative
relationships that will enhance the inclusion and social well-being of
Indigenous People In Canada. North West is fully committed to the
spirit of reconciliation reflected in the Truth and Reconciliation
Commission of Canada's Call to Action and final report.
Further information on our ESG Strategy is provided in the Corporate
Social Responsibility and Sustainability section.
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.
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.
8THE NORTH WEST COMPANY INC. 2023
Consolidated Results
2023 Highlights
•
•
•
•
•
•
•
Six new stores were opened, four in Canada and two in
International Operations.
Sales increased 5.1%.
Net earnings increased $8.5 million or 6.7%.
Return on average equity(1) was 19.9%.
Return on net assets(1) was 17.7%.
Debt-to-Equity was 0.40 at January 31, 2024 and has remained
below 1.0 since 2000.
Quarterly dividends increased $0.01 per share or 2.6% to $0.39
per share in September 2023 and annual dividends per share
have increased 3.2% on a compound annual growth basis over
the past 10 years.
FINANCIAL PERFORMANCE
Some of the key performance indicators used by management to
assess results are summarized in the following table:
Key Performance Indicators and Selected Annual Information
($ in thousands, except per share)
2023
2022
2021
Sales
$ 2,471,678
$ 2,352,760
$ 2,248,796
Same store sales % increase/
(decrease)(2)
2.9 %
(0.8) %
(0.4) %
EBITDA(1)
$ 301,173
Earnings from operations
$ 195,897
$
$
$
278,678
$ 311,375
180,305
$ 220,425
125,836
$ 157,451
$ 134,291
Net earnings
Net earnings attributable to
shareholders of the
Company
Net earnings per share -
diluted
Cash flow from operating
activities(3)
$ 129,391
$
122,190
$ 154,802
$
2.67
$ 230,427
$
$
$
2.51
$
3.16
182,838
$ 224,135
1.50
$
1.46
Cash dividends per share
$
1.54
Total assets
$ 1,396,010
$ 1,336,890
$ 1,219,273
Total long-term liabilities
Return on net assets(1)
Return on average equity(1)
$ 439,579
$
440,384
$ 344,579
17.7 %
19.9 %
17.9 %
20.5 %
23.8 %
29.0 %
(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.
Following is an analysis of the significant factors that impacted the
financial results and key performance indicators:
Consolidated Sales Sales for the year ended January 31, 2024
(“2023”) increased 5.1% to $2.472 billion compared to $2.353 billion
for the year ended January 31, 2023 (“2022”), and were up 9.9%
compared to $2.249 billion for the year ended January 31, 2022
(“2021”). The increase in sales compared to 2022 was largely due to
same store sales gains in Canadian Operations, the impact of foreign
exchange on the translation of International Operations sales and
new store sales. Higher inflation was also a factor. These factors were
partially offset by the loss of our store in Fox Lake, Alberta in the
second quarter due to wild fire and the closure of our store in
Curacao, Netherlands early in the first quarter this year. Excluding the
foreign exchange impact, sales increased 4.2% from 2022 and were
up 6.9% compared to 2021. The increase in sales compared to 2021
is largely due to same store sales gains, new store sales and the
impact of higher inflation.
On a same store basis, sales were up 2.9% compared to a
same store sales decrease of 0.8% in 2022 and a 0.4% decrease in
2021 as shown in the following table.
Same Store Sales
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2023
3.4 %
(0.1) %
2.9 %
2022
1.7 %
(13.3) %
(0.8) %
2021
0.4 %
(4.2) %
(0.4) %
The impact of higher merchandise and freight cost inflation
over the past two years has resulted in changes in product sales
blend as consumers allocated more of their spending to food and
reduced purchases of general merchandise. The decrease in general
merchandise same store sales in 2022 and 2021 was also due to
cycling through the impact of COVID-19-related income support
payments that contributed to a 36.1% general merchandise same
store sales gain in 2020.
Consolidated food sales increased 4.5% from 2022 and were up
3.2% excluding the foreign exchange impact. Same store food sales
increased 3.4% on top of a 1.7% increase last year. On a quarterly
basis, same store sales increased 2.2% in the first quarter followed by
increases of 4.7%, 4.5% and 2.0% in the second, third and fourth
quarter respectively. Canadian food sales
increased 5.3% and
International food sales
increased 0.5% excluding the foreign
exchange impact.
Consolidated general merchandise sales
increased 2.5%
compared to 2022 and were up 2.9% excluding the foreign
exchange impact. Same store general merchandise sales decreased
0.1% for the year compared to a 13.3% decrease last year. On a
quarterly basis, same store general merchandise sales decreased
6.8% in the first quarter but were up 4.7% and 4.8% in the second
and third quarter respectively, followed by a 1.9% decrease in the
fourth quarter. Canadian general merchandise sales increased 9.5%
and
International general merchandise sales decreased 13.1%
excluding the foreign exchange impact.
Other sales, which include airline revenue, financial services, fuel
and pharmacy, increased 12.2% compared to 2022 mainly due to
higher airline revenue in North Star Air ("NSA"). An increase in
pharmacy sales was also a factor. Other sales increased 32.4%
compared to 2021 mainly due to higher revenues in NSA and sales
gains in pharmacy and fuel.
Sales Blend The table below shows the consolidated sales blend
over the past three years:
Food
General merchandise and
other
2023
76.9 %
2022
77.3 %
2021
76.7 %
23.1 %
22.7 %
23.3 %
Canadian Operations accounted for 57.4% of total sales (56.2% in
2022 and 57.4% in 2021) with International Operations accounting
for the remaining 42.6% (43.8% in 2022 and 42.6% in 2021).
9ANNUAL REPORT Income Tax Expense Income taxes increased to $42.6 million
compared to $39.6 million last year and the effective tax rate for the
year was 24.1% compared to 24.0% last year. The increase in income
tax expense is due to higher 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
income tax expense, the
effective tax rate and deferred tax assets and liabilities is provided in
Note 10 to the consolidated financial statements.
information on
(1) See Non-GAAP Financial Measures section.
(2) Net earnings attributable to shareholders of the Company.
Net Earnings Consolidated net earnings
increased 6.7% to
$134.3 million compared to $125.8 million last year but were down
14.7% or $23.2 million compared to 2021. Net earnings attributable
to shareholders of the Company were $129.4 million compared to
$122.2 million last year and diluted earnings per share were $2.67 per
share compared to $2.51 per share last year due to the factors
previously noted. Excluding the
impact of the share-based
compensation and Fox Lake fire loss, adjusted net earnings(1)
increased $11.0 million or 8.1% to $147.0 million compared to
$136.0 million last year, but were down $6.4 million or 4.2%
compared to 2021 adjusted net earnings(1) of $153.4 million. In
2023, the average exchange rate used to translate International
Operations sales and expenses was 1.3504 compared to 1.3088
last year and 1.2526 in 2021.
The Canadian dollar's depreciation versus the U.S. dollar compared
to 2022 had the following net impact on the 2023 results:
Sales........................................................................increase of $32.4 million or 3.2%
Earnings from operations..............................................increase of $1.9 million
Net earnings...........................................................................increase of $1.5 million
Diluted earnings per share...................................increase of $0.03 per share
Total Assets Consolidated total assets for the past three years is
summarized in the following table:
($ in thousands)
2023
2022
2021
Total assets
$ 1,396,010
$
1,336,890
$
1,219,273
(1) See Non-GAAP Financial Measures section.
Gross Profit Gross profit
increased 8.2% to $809.4 million
compared to $747.9 million last year due to higher sales and a 96
basis point increase in the gross profit rate. The higher gross profit
rate compared to last year was largely due to changes in sales blend
and an increase in the airline gross profit rate in Canadian Operations
resulting from higher third party cargo and passenger business. A
greater pass through of cost inflation in retail prices compared to last
year and a lower blend of Cost-U-Less sales which have a lower gross
profit rate consistent with a warehouse format were also factors.
These factors were partially offset by higher markdowns and
inventory shrink compared to last year.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) of $613.5 million
increased $45.9 million or 8.1% compared to last year and were up
69 basis points as a percentage of sales. The increase in Expenses is
mainly due to cost inflation impacts including higher staff costs and
fuel-based utility expenses, the impact of foreign exchange on the
translation of International Operations Expenses and new stores. An
increase in depreciation, the $3.7 million asset write-off from the loss
of our Fox Lake, Alberta store that was destroyed by wild fire and
higher annual incentive plan costs were also factors.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations or earnings before interest and income taxes ("EBIT”)
increased 8.6% to $195.9 million compared to $180.3 million last year
but decreased 11.1% compared to 2021. Earnings before interest,
income taxes, depreciation and amortization ("EBITDA(1)") increased
8.1% to $301.2 million compared to $278.7 million last year but was
down $10.2 million or 3.3% compared to 2021. The increase in EBIT
and EBITDA compared to last year is due to the sales, gross profit and
Expense factors previously noted. The decrease in EBIT and EBITDA
compared to 2021 is due to the impact of an $18.1 million insurance-
related gain and COVID-19-related income support payments to
individuals that contributed to increased consumer demand and
higher earnings. Adjusted EBITDA(1), which excludes the impact of
share-based compensation and the Fox Lake fire loss, increased
$26.2 million or 9.0% to $318.0 million compared to $291.8 million
last year and was up $12.9 million or 4.2% compared to 2021
excluding the insurance-related gain. 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 28.4% to $19.1 million
compared to $14.8 million last year. This increase is due to higher
average debt levels and interest rates. Average debt levels increased
12.9% compared to last year mainly due to an increase in amounts
drawn on revolving loan facilities. The average cost of debt was 4.7%
compared to 4.1% last year. Further information on interest expense
is provided in Note 19 to the consolidated financial statements.
10THE NORTH WEST COMPANY INC. 2023 Consolidated assets increased $59.1 million or 4.4% compared to
2022 and were up $176.7 million or 14.5% compared to 2021. The
increase in consolidated assets compared to last year and 2021 is
largely due to an increase in current assets, mainly driven by higher
inventories and accounts receivable, and an increase in property and
equipment. Further information on the change in current assets is
provided in the working capital section below. The increase in
property and equipment
largely due to new stores, store
renovations and investments in fixtures and equipment. Further
information on property and equipment is provided in Note 7 to the
consolidated financial statements. The impact of foreign exchange
was also a factor as the year-end exchange rate used to translate
International Operations assets increased to 1.3412 compared to
1.3382 last year and 1.2727 in 2021.
is
Consolidated working capital for the past three years
is
summarized in the following table:
($ in thousands)
Current assets
Current liabilities
Working capital
2023
2022
2021
$ 502,905
$ 474,844
$ 403,358
$ (250,658)
$ (248,606)
$ (294,490)
$ 252,247
$ 226,238
$ 108,868
Working capital increased $26.0 million or 11.5% to $252.2
million compared to 2022 and increased $143.4 million or 131.7%
compared to 2021. Current assets increased $28.1 million or 5.9%
compared to last year and were up $99.5 million or 24.7% compared
to 2021. The increase in current assets compared to 2022 is mainly
due to an increase in inventories, accounts receivable and prepaid
expenses, partially offset by a decrease in cash. Further information
on
is
inventories, accounts receivable and prepaid expenses
provided in the net assets employed section under Canadian
Operations and International Operations. Further information on the
decrease in cash is provided in the consolidated statements of cash
flows and the Liquidity and Capital Resources section.
Current liabilities increased $2.1 million or 0.8% compared to
last year but were down $43.8 million or 14.9% compared to 2021.
The decrease compared to 2021 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. 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 from 2021 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.
The following graph shows the RONA and ROE for the past
three years.
(1) See Non-GAAP Financial Measures section.
Return on net assets employed ("RONA") decreased to 17.7%
compared to 17.9% in 2022 due to an 8.6% increase in EBIT which
was more than offset by a 9.6% 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 19.9% compared
to 20.5% in 2022 due to the impact of higher average equity mainly
related to an increase in retained earnings compared to last year
partially offset by a 6.7% increase in net earnings. Further information
on shareholders' equity is provided in the consolidated statements
of changes in shareholders' equity in the consolidated financial
statements.
The decrease in RONA and ROE in 2023 compared to 2021 is
largely due to the impact of an $18.1 million insurance-related gain
income support
factors,
and the COVID-19-related
payments to individuals, that contributed to higher earnings in 2021.
including
Total Long-Term Liabilities Consolidated total long-term liabilities
for the past three years is summarized in the following table:
($ in thousands)
2023
2022
2021
Total long-term liabilities
$ 439,579
$
440,384
$
344,579
Consolidated long-term liabilities decreased $0.8 million or 0.2%
to $439.6 million compared to 2022 but were up $95.0 million or
27.6% from 2021.
The increase in long-term liabilities compared to 2021 is
substantially due to higher long-term debt resulting from an
increase in amounts drawn on revolving loan facilities and the
refinancing of loan facilities that were previously recorded as current
liabilities. The impact of foreign exchange rates on the translation of
U.S. denominated debt and an increase in lease liabilities were also
factors. Additional information on long-term debt and lease liabilities
is provided in Note 12 and Note 8 respectively to the consolidated
financial statements.
11ANNUAL REPORT Canadian Operations
Sales Blend The table below shows the sales blend for the
Canadian Operations over the past three years:
FINANCIAL PERFORMANCE
Canadian Operations results for the year are summarized by the key
performance indicators used by management as follows:
Key Performance Indicators
($ in thousands)
Sales
Same store sales %
increase/(decrease)
EBITDA (1)
Earnings from operations
Return on net assets (1)
2023
2022
2021
$ 1,418,961
$ 1,323,185
$ 1,291,139
5.7 %
(2.4) %
(2.4) %
$ 204,089
$ 185,458
$ 215,209
$ 133,909
$ 119,090
$ 153,328
19.8 %
19.1 %
26.6 %
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased $95.8 million or 7.2% to
$1.419 billion compared to $1.323 billion in 2022 and were up $127.8
million or 9.9% compared to 2021. The increase in sales compared to
2022 and 2021 was due to same store sales gains, an increase in
airline revenue and the impact of new stores. Higher inflation and an
increase in pharmacy sales were also factors. These factors were
partially offset by the loss of our store in Fox Lake, Alberta that was
destroyed by wild fire early in the second quarter.
Food sales accounted for 66.6% of total Canadian Operations
sales compared to 67.8% last year. The balance was made up of
general merchandise and other sales at 33.4% (32.2% in 2022). Other
sales consist primarily of airline revenue, financial services revenue,
fuel and pharmacy.
Food sales increased by 5.3% from 2022 and were up 7.3%
compared to 2021. Same store food sales increased 5.9% compared
to a 0.4% increase in 2022 and a 1.2% decrease in 2021. On a
quarterly basis, same store food sales increased 3.4% in the first
quarter followed by increases of 6.5% and 9.0% in the second quarter
and third quarter respectively, and a 4.4% increase in the fourth
quarter.
General merchandise sales increased 9.5% from 2022 but were
down 2.2% compared to 2021. Same store sales rebounded in 2023,
increasing 5.3% compared to a 13.3% decrease in 2022 and a 6.8%
decrease
in 2021. On a quarterly basis, same store general
merchandise sales decreased 3.4% in the first quarter but improved
in the remainder of the year with increases of 10.6%, 16.0% and 1.4%
in the last three quarters.
Other sales increased 12.8% from 2022 and were up 33.0%
compared to 2021 primarily due to an increase in airline revenue
largely related to higher third-party cargo volumes and higher
passenger-related revenues compared to last year. An increase in
pharmacy sales and higher retail fuel sales were also factors.
Food
General merchandise and other
2023
66.6 %
33.4 %
2022
67.8 %
32.2 %
2021
68.2 %
31.8 %
Same Store Sales Canadian Operations same store sales for the
past three years are shown in the following table. Sales in 2023 were
positively impacted by government inflation relief payments to
individuals to help mitigate higher cost of living and a strong in-
stock position. The decrease in general merchandise same store sales
in 2022 and 2021 was due to higher merchandise and freight cost
inflation that contributed to changes in sales blend as consumers
allocated more of their spending to food and reduced purchases of
general merchandise and cycling through the impact of COVID-19-
related income support payments that contributed to a 37.5%
general merchandise same store sales gain in 2020.
Same Store Sales
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2023
5.9 %
5.3 %
5.7 %
2022
0.4 %
(13.3) %
(2.4) %
2021
(1.2) %
(6.8) %
(2.4) %
Gross Profit Gross profit dollars increased 10.2% compared to last
year driven by sales gains and an increase in the gross profit rate. The
higher gross profit rate was largely due to changes in sales blend and
an increase in the airline gross profit rate. These factors were partially
offset by higher markdowns compared to last year.
Selling, Operating and Administrative Expenses
Selling,
operating and administrative expenses (“Expenses”) increased 9.4%
from 2022 and were up 52 basis points as a percentage of sales. The
increase in Expenses is mainly due to the impact of cost inflation,
including higher staff costs and higher fuel-based utility costs, an
increase in depreciation and the impact of new stores. The impact of
the $3.7 million asset write-off resulting from the Fox Lake fire loss
was also a factor.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations increased $14.8 million or 12.4% to $133.9 million
compared to $119.1 million in 2022 but were down $19.4 million or
12.7% compared to 2021. Earnings from operations as a percentage
of sales was 9.4% compared to 9.0% last year. EBITDA(1) increased
$18.6 million or 10.0% to $204.1 million compared to $185.5 million
last year and was 14.4% as a percentage of sales compared to 14.0%
in 2022. The increase in EBIT and EBITDA compared to 2022 was due
to the sales, gross profit and Expense factors previously noted and an
increase in airline-related earnings as a result of higher third-party
cargo and passenger volumes. The decrease in EBIT and EBITDA
compared to 2021 is largely due to the impact of an $18.1 million
insurance-related gain in 2021. Adjusted EBITDA(1), which excludes
the Fox Lake fire loss, share-based compensation and the insurance
gain in 2021, increased $22.3 million or 11.4% compared to last year
and was up $11.5 million or 5.6% compared to 2021.
12THE NORTH WEST COMPANY INC. 2023
Accounts receivable increased $9.0 million or 9.5% compared to
last year and were up $20.3 million or 24.3% compared to 2021. The
increase compared to last year and 2021 is largely due to the current
portion of the promissory note receivable and higher customer trade
accounts receivable. Further information on the promissory note
receivable is provided in Note 24 to the consolidated financial
statements. Average accounts receivable increased $13.0 million or
15.1% compared to 2022 and were up $24.1 million or 32.1%
compared to 2021.
Other assets decreased $20.9 million or 16.6% compared to last
year and were down $30.3 million or 22.4% compared to 2021. The
decrease compared to last year and 2021 is substantially due to the
current portion of the promissory note receivable recorded in
accounts receivable. The promissory note receivable decreased $21.7
million compared to 2022 and was down $35.7 million compared to
2021. A decrease in deferred tax assets and lower intangible assets
were also factors. Further information on deferred tax assets and
liabilities is provided in Note 10 to the consolidated financial
statements. These factors were partially offset by an increase in
prepaid expenses and 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.
Liabilities decreased $1.1 million or 0.6% from 2022 and were
down $4.4 million or 2.2% compared to 2021. The decrease
compared to 2022 and 2021 is mainly due to a decrease in income
tax payable partially offset by an increase in accounts payable and
accrued liabilities related to the timing of payments.
Return on Net Assets (RONA(1)) The return on net assets
employed for Canadian Operations increased to 19.8% from 19.1% in
2022 due to a 12.4% increase in EBIT and a $51.6 million or 8.3%
increase in average net assets compared to last year due to the
factors previously noted.
(1) See Non-GAAP Financial Measures section.
(1) See Non-GAAP Financial Measures section.
Net Assets Employed Net assets employed increased 3.6% to
$672.8 million compared to $649.2 million last year and were up
15.8% compared to $580.8 million in 2021 as summarized in the
following table:
($ in millions at the end of the fiscal year)
2023
2022
2021
Property and equipment
$ 417.5
$
403.3
$
372.4
Right-of-use assets
Inventories
Accounts receivable
Other assets
Liabilities
62.0
178.3
103.9
105.0
50.8
169.3
94.9
125.9
51.1
136.7
83.6
135.3
(193.9)
(195.0)
(198.3)
Net assets employed
$ 672.8
$
649.2
$
580.8
The increase in property and equipment compared to last year
and 2021 was mainly due to investments in stores including store
renovations, fixtures and equipment replacements, investments in
staff housing and four new stores.
leverage
lower freight costs and an
Inventory increased $9.0 million or 5.3% compared to 2022 and
was up $41.6 million or 30.4% compared to 2021 mainly due to the
impact of higher cost inflation, new stores, an increase in sealift
inventory to
in
categories such as transportation, specifically snow machines, ATVs,
boats and motors, home furnishings and appliances that were
impacted by supply chain disruptions in 2021. Higher inventories in
other categories such as apparel and seasonal categories were also
factors compared to 2021 but to a lesser extent compared to 2022.
Average inventory levels in 2023 increased $25.6 million or 16.0%
compared to 2022 and were up $47.7 million or 34.6% compared to
2021. Inventory turnover decreased to 4.9 times compared to 5.3
times last year and was down compared to 6.2 times in 2021.
increase
13ANNUAL REPORT
$ 71,225
$ 76,786
Same Store Sales
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 %
(decrease)/increase
EBITDA(1)
Earnings from operations
Return on net assets (1)
2023
2022
2021
$ 779,559
$ 786,656
$ 764,535
(1.1) %
1.3 %
2.6 %
$
$
71,893
45,903
$ 46,772
$ 53,566
14.5 %
16.0 %
19.3 %
(1) See Non-GAAP Financial Measures section.
Sales International sales decreased 0.9% to $779.6 million
compared to $786.7 million in 2022, but were up $15.0 million or
2.0% compared to 2021. The decrease compared to 2022 is due to
the closure of a Cost-U-Less ("CUL") store in Curacao, Netherlands in
the first quarter this year and lower same store sales. These factors
were partially offset by new store sales in Alaska. Sales were
negatively impacted by lower Supplemental Nutrition Assistance
Program ("SNAP") benefits within Alaska and the U.S. territories
served by CUL compared to last year. Sales in Alaska stores were also
negatively impacted by a 60.0% decrease in the Alaska Permanent
Fund Dividend ("PFD") paid to individuals to $1,312 compared to
$3,284 in 2022. The increase in sales compared to 2021 is mainly due
to new stores in Alaska partially offset by the closure of the CUL store
earlier this year as previously noted. A 17.8% increase in the PFD
from $1,114 in 2021 was also a factor. Same store sales decreased
1.1% compared to a 1.3% increase in 2022 and a 2.6% increase in
2021. Food sales accounted for 90.7% (89.5% in 2022) of total sales
with the balance comprised of general merchandise and other sales
at 9.3% (10.5% in 2022). Other sales consist primarily of retail fuel and
financial services revenue.
Food sales increased 0.5% from 2022 and were up 4.9%
compared to 2021 due to new stores and the impact of higher
inflation. Same store food sales were up 0.3% compared to a 3.3%
increase in 2022 and 2.5% increase in 2021. On a quarterly basis,
same store food sales increased 0.6% and 2.4% in the first and
second quarter followed by decreases of 1.1% and 0.9% in the third
and fourth quarter respectively.
General merchandise sales decreased 13.1% from 2022 and
were down 22.0% from 2021 as the impact of lower SNAP benefits
and PFD payments combined with higher cost inflation contributed
to 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 13.3% decrease in 2022 and a 3.0% increase in 2021.
On a quarterly basis, same store general merchandise sales
decreased 16.5% in the first quarter and were down 9.0%, 17.1% and
11.2% in the second, third and fourth quarter respectively.
Other sales, which consist primarily of retail fuel sales and
financial services revenue, were down 7.1% from 2022 but up 6.9%
from 2021 primarily due to higher retail fuel sales.
Sales Blend The table below shows the sales blend for the
International Operations over the past three years:
Food
General merchandise and other
2023
90.7 %
9.3 %
2022
89.5 %
10.5 %
2021
88.2 %
11.8 %
Same Store Sales International Operations same store sales for the
past three years are shown in the following table. Same store sales
were impacted by the factors previously noted including lower SNAP
benefits and PFD payments combined with higher merchandise and
freight cost inflation which resulted in changes in product sales
blend as consumers allocated more of their spending to food and
reduced purchases of general merchandise.
(% increase/(decrease))
Food
General merchandise (GM)
Total food & GM sales
2023
0.3 %
(13.3) %
(1.1) %
2022
3.3 %
(13.3) %
1.3 %
2021
2.5 %
3.0 %
2.6 %
Gross Profit Gross profit dollars increased 1.8% as the impact of
lower sales was more than offset by an increase in the gross profit
rate mainly due to a greater pass through of freight and merchandise
cost inflation in retail prices compared to last year and a lower blend
of CUL sales which have a lower gross profit rate consistent with a
warehouse format.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses (“Expenses”) increased 2.8%
compared to last year and were up 83 basis points as a percentage
of sales. The increase in Expenses is largely due to inflationary cost
pressures, including higher staff costs and insurance expense, and
the impact of new stores. These factors were partially offset by the
CUL store closure and a decrease in annual incentive plan costs.
Earnings from Operations (EBIT) and EBITDA(1) Earnings from
operations decreased $0.9 million or 1.9% to $45.9 million compared
to 2022 and were down $7.7 million or 14.3% compared to 2021 due
to the sales, gross profit and Expense factors previously noted.
Earnings from operations as a percentage of sales remained flat at
5.9% compared to last year. EBITDA(1) increased $0.7 million or 0.9%
to $71.9 million and was 9.2% as a percentage of sales compared to
9.1% in 2022.
(1) See Non-GAAP Financial Measures section.
14THE NORTH WEST COMPANY INC. 2023
Net Assets Employed International Operations net assets
employed of $326.9 million
increased $27.0 million or 9.0%
compared to last year and were up $52.6 million or 19.2% compared
to 2021 as summarized in the following table:
Consolidated Liquidity
and Capital Resources
The following table summarizes the major components of cash flow:
($ in thousands)
2023
2022
2021
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
$ 256,402
$ 234,116
$ 229,782
(23,233)
(50,905)
230,427
182,838
(107,701)
(106,802)
(2,563)
(3,084)
224,135
(75,861)
(128,270)
(68,298)
(170,196)
Change in other non-cash items
(2,742)
(373)
Effect of foreign exchange
94
1,645
(188)
Net change in cash
$
(5,450)
$
9,383
$ (22,110)
Cash from Operating Activities Cash flow from operating
activities
increased $47.6 million or 26.0% to $230.4 million
compared to 2022 primarily due to higher earnings and the change
in non-cash working capital largely related to the change in
inventories and accounts receivable compared to the prior year.
These factors were partially offset by an increase in prepaid expenses
compared to last year. Further information on working capital is
provided in the Canadian and International net assets employed
sections on pages 13 and 15 respectively.
Cash flow from operating activities and unutilized credit
available on existing loan facilities are expected to be sufficient to
fund operating requirements, pension plan contributions, sustaining
and planned growth-related capital expenditures as well as
anticipated dividends during 2024.
($ in millions at the end of the fiscal year)
2023
2022
2021
Property and equipment
$ 169.4
$ 151.7
$ 143.1
Right-of-use assets
Inventories
Accounts receivable
Other assets
Liabilities
39.4
100.7
13.2
73.2
39.6
93.1
12.8
73.0
40.2
87.4
12.3
65.5
(69.0)
(70.3)
(74.2)
Net assets employed
$ 326.9
$ 299.9
$ 274.3
Property and equipment increased $17.7 million or 11.7% compared
to
in new stores, store
renovations and fixtures and equipment replacements.
last year mainly due to
investments
Inventories increased $7.6 million or 8.2% compared to last year
and were up $13.3 million or 15.2% from 2021 primarily due to cost
inflation and the impact of new stores, partially offset by the CUL
store closure. Average inventory levels in 2023 decreased 0.2%
compared to 2022 but were up 12.5% compared to 2021. Inventory
turnover decreased to 5.7 times compared to 5.8 times in 2022, and
was down compared to 6.4 times in 2021.
Other assets increased $0.2 million or 0.3% compared to last
year and were up $7.7 million or 11.8% compared to 2021 mainly
due to an increase in cash and prepaid expenses.
Liabilities decreased $1.3 million or 1.8% compared to 2022 and
were down $5.2 million or 7.0% compared to 2021 primarily due to
lower trade accounts payable related to the timing of payments.
Return on Net Assets (RONA(1)) The return on net assets
employed
to 14.5%
compared to 16.0% in 2022 due to a 1.9% decrease in EBIT and a
$25.1 million or 8.6% increase in average net assets.
International Operations decreased
for
(1) See Non-GAAP Financial Measures section.
15ANNUAL REPORT investments
Cash Used in Investing Activities Net cash used in investing
activities was $107.7 million compared to $106.8 million in 2022 and
$75.9 million in 2021. The increase compared to 2022 and 2021 is
in new stores, store renovations,
largely due to
equipment replacements and investments in staff housing and
information technology. Net investing in Canadian Operations was
$59.4 million, net of $15.0 million in proceeds from the promissory
note receivable compared to $73.8 million net of $9.8 million in
proceeds from the promissory note receivable in 2022 and $46.6
million net of $18.1 million in insurance proceeds in 2021. A
summary of the Canadian Operations investing activities is included
in
in
International Operations was $48.3 million compared to $33.0 million
in 2022 and $29.3 million in 2021. The increase compared to 2022
and 2021 is primarily due to new stores and store renovations. A
summary of the International Operations
is
included in net assets employed on page 15.
investing activities
on page
employed
Investing
assets
net
13.
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:
Northern
NorthMart
Quickstop
Giant Tiger
Alaska Commercial
Cost-U-Less
Riteway Food Market
Other Formats
Number of Stores
Selling square footage
2023
121
2022
119
5
34
5
33
12
9
8
5
33
5
32
12
9
7
2023
701,484
128,185
47,604
90,470
274,783
318,846
61,899
62,902
2022
696,485
128,185
46,698
90,470
267,418
344,695
61,899
54,847
Total at year-end
227
222
1,686,173
1,690,697
In Canadian Operations, Northern stores were opened in Kugaaruk
and Arviat, Nunavut, a motorsports dealer opened in Thompson,
Manitoba and a Quickstop convenience store opened in Taloyoak,
Nunavut. Total selling square footage in Canada increased to
1,018,357 compared to 1,004,397 in 2022 due to the new stores.
In International Operations, an AC store opened in Point Hope,
Alaska, a small CUL store was opened in Nadi, Fiji and a CUL store
was closed in Curacao, Netherlands. Total selling square footage
decreased to 667,816 compared to 686,300 last year due to the CUL
store closure.
Cash Used in Financing Activities Cash used in financing activities
increased to $128.3 million compared to $68.3 million in 2022
substantially due to changes in long-term debt related to amounts
drawn on revolving loan facilities and a $3.6 million increase in
interest paid. 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 $73.5
million or $1.54 per share compared to $71.8 million or $1.50 per
share
in 2022. The following table shows the quarterly cash
dividends per share paid for the past three years:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
2023
$ 0.38
0.38
0.39
0.39
2022
$ 0.37
$
0.37
0.38
0.38
$ 1.54
$ 1.50
$
2021
0.36
0.36
0.37
0.37
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 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:
2023
2022
2021
Dividends
$ 73,533
$
71,805
$ 70,420
Cash flow from operating
activities
Dividends as a % of cash flow
from operating activities
$ 230,427
$ 182,838
$ 224,135
31.9 %
39.3 %
31.4 %
Dividends as a percentage of cash flow from operating activities of
31.9% decreased compared to 39.3% in 2022 but was up compared
to 31.4% in 2021 substantially due to the changes in cash flow from
operating activities as previously noted. Dividends as a percentage of
cash flow from operating activities has averaged 38.7% over the past
ten years.
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 3.2% as shown in the
following graph:
On April 10, 2024, the Board of Directors approved a quarterly
dividend of $0.39 per share to shareholders of record on April 18,
2024 and to be paid on April 29, 2024.
16THE NORTH WEST COMPANY INC. 2023 Normal Course Issuer Bid On November 15, 2023, the Company
renewed its Normal Course Issuer Bid ("NCIB"). Under the NCIB, the
Company may acquire up to a maximum of 4,733,380 of its shares, or
approximately 10% of its float for cancellation over the following 12
months. During the year ended January 31, 2024, the Company
purchased 153,998 common shares having a book value of $0.6
million for cash consideration of $5.0 million. The excess of the
purchase price over the book value of the shares of $4.4 million was
charged to retained earnings. 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. 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, 2024, 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
and financial
instruments, see Note 12 and Note 15 to the
consolidated financial statements.
floating rate of
Canadian Operations have $400.0 million
in committed,
revolving loan facilities that mature on March 1, 2027. These loan
interest based on Bankers
facilities bear a
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, 2024, the Company had $87.6 million outstanding on
these facilities (January 31, 2023 - $96.0 million).
Canadian Operations also have US$52.0 million committed,
revolving loan facilities that mature on March 1, 2027. These loan
facilities, which bear interest at SOFR plus a spread, are secured by
certain assets of the Company and rank pari passu with the
Company's other Senior Debt. At January 31, 2024, the Company had
US$NIL outstanding on these facilities (January 31, 2023 - US$NIL).
International Operations have a US$50.0 million loan facility
that matures January 25, 2028. This facility bears a floating rate of
interest based on SOFR plus a spread and is secured by certain
accounts receivable and inventories of the International Operations.
At January 31, 2024, the International Operations had US$NIL
outstanding on this facility (January 31, 2023 - US$NIL).
The loan facilities and senior notes contain covenants and
restrictions including the requirement to meet certain financial ratios
and financial condition tests. The financial covenants include an
interest coverage ratio and a leverage test. At January 31, 2024, the
Company is in compliance with the financial covenants under these
facilities. Current and forecasted debt levels are regularly monitored
for compliance with debt covenants.
Interest Costs and Coverage
Coverage ratio
2023
10.3
2022
12.2
2021
16.8
Earnings from operations ($ in millions) $ 195.9
$ 180.3
$ 220.4
Interest ($ in millions)
$
19.1
$
14.8
$
13.1
The coverage ratio of earnings from operations ("EBIT") to interest
expense decreased to 10.3 times compared to 12.2 times in 2022
and 16.8 times in 2021. The decrease in the interest coverage ratio
compared to 2022 is due to a $4.3 million or 29.1% increase in
interest expense and an 8.6% increase in consolidated EBIT as
previously noted. Additional information on interest expense is
provided in Note 19 to the consolidated financial statements.
Contractual Obligations and Other Commitments
Contractual obligations of the Company at January 31, 2024 are
listed in the chart below:
($ in thousands)
Total
0-1 Year
2-3 Years
4-5 Years
6 Years+
Long-term debt
$ 281,972 $
268 $ — $ 134,762 $ 146,942
Lease payments
159,750
24,201
37,007
27,664
70,878
Other liabilities(1)
15,902
3,340
12,562
—
—
Total
$ 457,624 $ 27,809 $ 49,569 $ 162,426 $ 217,820
(1) At year-end, the Company had additional long-term liabilities of $39.1
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 $5.8 million net of
deferred
income. This
compares to net actuarial gains on defined benefit pension plans of
$7.9 million in 2022 and $14.2 million in 2021, 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.
17ANNUAL REPORT In 2024, the Company will be not be required to contribute to
the defined benefit pension plans. In addition to 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 2023, the Company's cash contributions to the pension plan were
$0.8 million compared to $1.2 million in 2022 and $2.0 million in
2021. The actual amount of the contribution may be different from
the estimate based on actuarial valuations, plan
investment
performance, volatility in discount rates, regulatory requirements and
other
to contribute
approximately $7.1 million to the defined contribution pension plan
and U.S. employees savings plan in 2024 compared to $6.8 million in
2023 and $6.2 million in 2022. Additional information regarding post-
employment benefits is provided in Note 13 to the consolidated
financial statements.
factors. The Company also expects
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.
Other Indemnification Agreements The Company provides
indemnification agreements to counterparties for events such as
intellectual property rights 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.
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, 2023 - $19.0 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.
On a consolidated basis, the Company had $281.6 million in debt
and $705.8 million in equity at the end of the year and a debt-to-
equity ratio of 0.40:1 compared to 0.45:1 last year. From 2021 to 2023,
equity has increased $125.6 million or 21.6% and debt has increased
$45.9 million or 19.5%. During this same period, the Company has
made capital expenditures,
including acquisitions and net of
insurance and promissory note proceeds, of $291.7 million and has
paid dividends of $215.8 million. This reflects the Company's
balanced approach of investing to sustain and grow the business
while providing shareholders with an annual cash return.
The debt outstanding at the end of the fiscal year
is
summarized as follows:
(CAD$ in thousands at the end of
the fiscal year)
CAD$ senior notes
US$ senior notes
Canadian loan facilities
Promissory note payable
2023
2022
2021
$ 100,000
$ 100,000
$ 100,000
93,701
87,607
268
93,483
96,032
535
88,869
45,107
1,664
Total debt
$ 281,576
$ 290,050
$ 235,640
Consolidated debt at the end of the year decreased $8.5 million or
2.9% to $281.6 million compared to $290.1 million in 2022, but was
up $45.9 million or 19.5% from $235.6 million in 2021. The change in
debt is largely due to changes in amounts drawn on the revolving
loan facilities and the impact of foreign exchange on the translation
of U.S. denominated debt compared to 2022 and 2021. The
in debt at January 31, 2024
Company has US$70.2 million
(January 31, 2023 - US$70.4 million, January 31, 2022 - US$70.6
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, 2024
("2023") was 1.3412 compared to 1.3382 at January 31, 2023 ("2022")
and 1.2727 at January 31, 2022 ("2021"). The change in the foreign
exchange rate resulted in a $0.2 million increase in debt compared
to 2022 and a $4.8 million increase compared to 2021. Average debt
outstanding during the year excluding the foreign exchange impact
18THE NORTH WEST COMPANY INC. 2023
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.
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
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 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 2024 Management Information
Circular which
the Company's website at
is available on
www.northwest.ca or on SEDAR+ at www.sedarplus.com.
At January 31, 2024, there were 17,649,571 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 37.0% of
total shares
Book value per share attributable to shareholders, on a diluted
basis, at the end of the year increased to $14.14 per share compared
to $12.93 per share in 2022. Total shareholders' equity increased
$57.9 million or 8.9% compared to 2022 primarily due to an increase
in the
in retained earnings. Further
consolidated statements of changes in shareholders' equity in the
consolidated financial statements.
is provided
information
increased $32.7 million or 12.9% from 2022 and was up $46.3 million
or 19.3% compared to 2021.
Lease liabilities at the end of the fiscal year are summarized as
follows:
(CAD$ in thousands at the end of
the fiscal year)
2023
2022
2021
Current portion of lease liability $ 19,408
$ 18,644
$ 18,055
Non-current lease liabilities
104,483
93,833
96,015
Total lease liabilities
$ 123,891
$ 112,477
$ 114,070
Lease liabilities increased $11.4 million or 10.1% to $123.9 million
compared to $112.5 million in 2022 and were up $9.8 million or 8.6%
compared to $114.1 million in 2021. The increase compared to 2022
and 2021 is due to new leases net of lease payments. Further
information on
in Note 8 to the
liabilities
consolidated financial statements.
is provided
lease
Shareholders' Equity The Company has an unlimited number of
authorized shares and had
issued and outstanding shares at
January 31, 2024 of 47,711,467 (January 31, 2023 - 47,750,605). 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, 2024, there were
1,402,250 options outstanding representing 2.9% of the issued and
outstanding shares. In addition to share options, there were 326,611
in Performance Share Units ("PSUs") that may be settled by the
issuance of shares based on meeting certain performance criteria
and 264,838 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.
19ANNUAL REPORT
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
2023
2022
EBITDA(1)
2023
2022
Earnings from operations (EBIT)
2023
2022
Net earnings
2023
2022
Net earnings attributable to shareholders of the Company
2023
2022
Earnings per share-basic
2023
2022
Earnings per share-diluted
2023
2022
(1) See Non-GAAP Financial Measures section.
Q1
Q2
Q3
Q4
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
593,564
552,016
58,952
64,945
33,768
41,431
22,197
28,161
20,894
27,380
0.44
0.57
0.43
0.57
$
$
$
$
$
$
$
$
$
$
$
$
$
$
618,095 $
616,910
578,874 $
586,706
80,108 $
70,444 $
82,977
69,829
54,686 $
46,095 $
55,746
44,955
38,045 $
32,371 $
38,038
30,175
36,777 $
31,395 $
37,228
29,485
0.77 $
0.66 $
0.76 $
0.64 $
0.78
0.61
0.77
0.61
$
$
$
$
$
$
$
$
$
$
$
$
$
$
643,109
635,164
79,136
73,460
51,697
47,824
36,011
35,129
34,492
33,930
0.72
0.71
0.71
0.69
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,471,678
2,352,760
301,173
278,678
195,897
180,305
134,291
125,836
129,391
122,190
2.71
2.55
2.67
2.51
20THE NORTH WEST COMPANY INC. 2023 Fourth Quarter Highlights
CONSOLIDATED RESULTS FOURTH QUARTER
Key Performance Indicators and Selected Fourth Quarter
Information
($ in thousands, except per share)
2023
2022
2021
Sales
Same store sales % change(2)
Food
General Merchandise
Total
Gross profit
Selling, operating and
$ 643,109
$
635,164
$ 579,019
2.0 %
(1.9) %
1.4 %
4.0 %
(6.1) %
2.1 %
2.6 %
(9.2) %
0.1 %
$ 214,692
$
201,177
$ 184,714
administrative expenses
(162,995)
(153,353)
(135,126)
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
79,136
51,697
(4,894)
(10,792)
36,011
34,492
0.72
73,460
47,824
(4,192)
(8,503)
35,129
33,930
0.71
72,964
49,588
(3,170)
(10,810)
35,608
34,581
0.72
$
0.71
$
0.69
$
0.71
(1) See Non-GAAP Financial Measures section.
(2) All references to same store sales exclude the foreign exchange impact.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased $9.6
million compared to last year and were up 120 basis points as a
percentage to sales. The increase in Expenses is largely due to cost
inflation impacts, including higher staff costs, new store expenses, an
increase in depreciation and higher incentive plan costs. These
factors were partially offset by the Fox Lake fire loss and CUL store
closure previously noted.
Earnings from operations and EBITDA(1) Earnings from operations
or earnings before interest and taxes ("EBIT") increased $3.9 million or
8.1% to $51.7 million compared to $47.8 million last year and
EBITDA(1) increased $5.7 million or 7.7% to $79.1 million compared to
$73.5 million last year due to the sales, gross profit and Expense
factors previously noted. Adjusted EBITDA(1), which excludes share-
based compensation costs increased $6.4 million or 8.2% compared
to last year and as a percentage to sales was 13.0% compared to
12.2% last year.
Interest Expense Interest expense increased 16.7% to $4.9 million
compared to $4.2 million last year. The increase in interest expense is
due to higher average debt levels related to amounts drawn on
revolving loan facilities and an increase in borrowing costs. Further
information on debt is provided in Note 12 to the consolidated
financial statements.
Income Tax Expense Income tax expense was $10.8 million
compared to $8.5 million last year and the consolidated effective tax
rate was 23.1% compared to 19.5% last year. The increase in the
income tax rate was primarily due to the blend of earnings in
International Operations across various tax rate jurisdictions and the
impact of Global Intangible Low-Taxed Income ("GILTI") tax last year.
Net Earnings Consolidated net earnings increased $0.9 million or
2.5% to $36.0 million compared to $35.1 million last year. Net
earnings attributable to shareholders were $34.5 million and diluted
earnings per share were $0.71 per share compared to $0.69 per share
last year due to the factors noted above. Adjusted net earnings(1),
which excludes
share-based
compensation costs, increased $1.4 million or 3.8% compared to last
year due to earnings gains in Canadian Operations which was
partially offset by the impact of a higher effective tax rate as
previously noted.
the after-tax
impact of
the
impact of new stores
first quarter. Excluding
Consolidated Fourth Quarter Sales Sales for the quarter increased
1.3% to $643.1 million led by same store sales gains in Canadian
Operations and the
in Canadian and
International Operations. These factors were partially offset by the
loss of our store in Fox Lake, Alberta in the second quarter due to
wildfire and the closure of our CUL store in Curacao, Netherlands in
the
impact,
the
consolidated sales increased 1.6% with food sales increasing 1.2%
and general merchandise and other sales increasing 2.8%. Same
store sales were up 1.4%(2) compared to the fourth quarter last year,
as a 3.7% increase in same store sales in Canadian Operations more
than offset a 2.0% decrease in same store sales in International
Operations. On a same store basis, food sales(2) increased 2.0% and
general merchandise sales(2) decreased 1.9%.
foreign exchange
Gross Profit Gross profit increased 6.7% due to sales gains and a 171
basis point increase in gross profit rate compared to last year. The
increase in gross profit rate was largely due to changes in sales
blend, an increase in the airline gross profit rate in Canadian
Operations and
lower markdowns on seasonal merchandise
compared to last year. A greater pass through of cost inflation in
retail prices compared to last year and a lower blend of CUL sales
which have a lower gross profit rate consistent with a warehouse
format were also factors.
21ANNUAL REPORT
CANADIAN OPERATIONS
FOURTH QUARTER
INTERNATIONAL OPERATIONS
FOURTH QUARTER
(Stated in U.S. dollars)
Canadian Operations results for the fourth quarter are summarized
by the following key performance indicators:
International Operations
summarized by the following key performance indicators:
results
the
for
fourth quarter are
Key Performance Indicators
Key Performance Indicators
($ in thousands)
Sales
Same store sales % change
Food
General Merchandise
Total
EBITDA (1)
Earnings from operations
2023
2022
2021
($ in thousands)
2023
2022
2021
$ 375,950
$ 361,397
$ 332,668
Sales
$ 197,750
$ 203,064
$ 194,395
4.4 %
1.4 %
3.7 %
4.3 %
(2.9) %
2.6 %
0.0 %
(12.0) %
(3.0) %
$ 50,551
$ 52,208
$
$
55,253
37,166
Same store sales % change
Food
General Merchandise
Total
EBITDA(1)
(0.9) %
(11.2) %
(2.0) %
3.7 %
(14.0) %
1.4 %
6.1 %
(1.7) %
5.0 %
$
$
17,449
10,755
$ 16,921
$ 16,336
$ 10,630
$ 10,456
$ 33,417
$ 36,276
Earnings from operations
(1) See Non-GAAP Financial Measures section.
(1) See Non-GAAP Financial Measures section.
Sales Canadian Operations sales increased 4.0% to $376.0 million
led by a 3.7% increase in same store sales, the impact of new stores
and higher airline revenue and pharmacy sales compared to the
fourth quarter last year. Food sales increased 3.0% as same store sales
gains of 4.4% were partially offset by the loss of our Fox Lake store
due to wildfire and lower wholesale sales. General merchandise and
other sales increased 5.8% compared to last year led by an increase
in airline revenue from higher third-party cargo and passenger
revenues, and a general merchandise same store sales increase of
1.4%.
Gross Profit Gross profit increased 10.2% due to sales gains and an
increase in gross profit rate largely related to changes in sales blend,
lower markdowns and inventory shrink compared to last year, and an
increase in airline gross profit.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 9.9%
and were up 143 basis points as a percentage to sales compared to
the fourth quarter last year mainly due to cost inflation impacts,
higher depreciation, the impact of new stores and an increase in
annual incentive plan costs. These factors were partially offset by a
decrease in Expenses due to the Fox Lake fire loss.
Canadian Earnings from Operations (EBIT) and EBITDA(1)
Canadian fourth quarter earnings from operations increased $3.8
million or 11.2% to $37.2 million compared to $33.4 million last year
and EBITDA(1) increased $4.7 million or 9.3% to $55.3 million
compared to $50.6 million in the fourth quarter last year due to the
sales, gross profit and Expense factors previously noted. Adjusted
EBITDA(1), which excludes the impact of share-based compensation
costs and insurance-related gains in 2021, increased $5.3 million or
9.8% compared to last year and was up $12.9 million or 28.0%
compared to 2021.
Sales International Operations fourth quarter sales decreased 2.6%
to $197.8 million compared to $203.1 million in the fourth quarter
last year primarily due to a 2.0% decrease in same store sales and the
previously noted closure of a CUL store in Curacao, Netherlands.
These factors were partially offset by the impact of new stores in
Alaska. Food sales decreased 1.1% and were down 0.9% on a same
store basis compared to a 3.7% same store sales gain last year.
General merchandise sales decreased 14.9% and were down 11.2%
on a same store basis compared to last year. Similar to previous
quarters, the impact of lower SNAP benefits combined with higher
inflation continued to result in a shift in consumer spending from
general merchandise to food.
Gross Profit Gross profit increased 0.7% compared to last year as the
impact of lower sales was more than offset by an increase in gross
profit rate. The increase in gross profit rate is mainly due to changes
in sales blend, including a lower blend of CUL sales which have a
lower gross profit rate consistent with a warehouse format, and a
greater pass through of inflationary cost increases compared to last
year. Lower markdowns on general merchandise was also a factor.
Selling, Operating and Administrative Expenses Selling,
operating and administrative expenses ("Expenses") increased 0.6%
compared to last year mainly due to inflationary cost pressures and
the impact of new store expenses. These factors were partially offset
by the CUL store closure previously noted.
Earnings From Operations ("EBIT") and EBITDA(1) Earnings from
operations increased 1.2% to $10.8 million compared to $10.6 million
last year and EBITDA(1) increased 3.1% to $17.4 million compared to
$16.9 million in the fourth quarter last year due to the sales, gross
profit and Expense factors previously noted.
22THE NORTH WEST COMPANY INC. 2023
CONSOLIDATED CASH FLOWS
FOURTH QUARTER
The following table summarizes the major components of the fourth
quarter cash flow:
($ in thousands)
Operating activities
Investing activities
Financing activities
Effect of foreign exchange
Net change in cash
2023
2022
2021
$ 90,481
$ 100,230
$ 84,704
(41,606)
(66,916)
(1,450)
(19,491)
(51,907)
(38,500)
(43)
9,780
49,029
(15,142)
(77,935)
767
(7,606)
57,032
Cash, beginning of period
72,850
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)
2023
2022
2021
Purchase of property and
equipment
$ (36,937)
$ (51,572)
$ (22,730)
Intangible asset additions
(4,731)
(562)
(1,904)
Proceeds from disposal of
property and equipment
Insurance proceeds, property
and equipment
62
—
227
—
—
9,492
Cash, end of period
$ 53,359
$ 58,809
$ 49,426
Cash used in investing activities $ (41,606)
$ (51,907)
$ (15,142)
Cash From Operating Activities
The following table summarizes the major components of the cash
flow from operating activities in the fourth quarter:
($ in thousands)
2023
2022
2021
Cash Used in Investing Activities Net cash used in the fourth
quarter for investing activities was $41.6 million compared to $51.9
million in 2022 and $15.1 million in 2021. Investing activities in the
quarter
replacements,
investments in staff housing and intangible assets primarily related
to software.
renovations, equipment
include store
Net earnings for the period
$ 36,011
$ 35,129
$ 35,608
Cash Used in Financing Activities
Adjustments for:
Amortization
27,439
Provision for income taxes
10,792
Interest expense
Equity settled share-based
compensation
Insurance proceeds,
property and equipment
4,894
245
—
25,636
8,503
4,192
23,376
10,810
3,170
1,879
1,684
The following table summarizes the major components of the cash
flow used in financing activities in the fourth quarter:
($ in thousands)
2023
2022
2021
Net decrease in long-term debt $ (39,278)
$ (11,258)
$ (46,612)
Taxes paid
(11,089)
(11,635)
Loss on disposal of property
and equipment
Operating activities before
change in non-cash working
capital and other
Change in non-cash working
capital
—
(9,492)
(18,357)
Payment of lease liabilities,
principal
Payment of lease liabilities,
1,185
144
32
interest
Dividends
Interest paid
69,477
63,848
46,831
Issuance of common shares
Common shares purchased and
cancelled
(5,607)
(5,073)
(4,703)
(1,165)
(18,607)
(3,126)
867
—
(1,067)
(18,144)
(3,028)
70
—
(1,039)
(17,747)
(1,834)
—
(6,000)
Change in other non-cash items
1,157
(890)
19,847
37,272
37,471
402
Cash from operating activities
$ 90,481
$ 100,230
$ 84,704
Cash from Operating Activities Cash flow from operating
activities decreased $9.7 million or 9.7% to $90.5 million compared to
the fourth quarter of 2022 but was up $5.8 million or 6.8% compared
to 2021. The decrease compared to last year is substantially due to
the change in non-cash working capital largely related to changes in
inventories, accounts receivable and accounts payable and accrued
liabilities compared to the prior year.
Cash used in financing activities $ (66,916)
$ (38,500)
$ (77,935)
Cash Used in Financing Activities Cash used in financing activities
in the fourth quarter increased to $66.9 million compared to $38.5
million in 2022 but was down compared to $77.9 million in 2021. The
change compared to the fourth quarter last year is substantially due
to changes in long-term debt resulting from amounts drawn on
revolving loan facilities compared to last year.
DISCLOSURE CONTROLS
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, 2024.
23ANNUAL REPORT
INTERNAL CONTROLS OVER
FINANCIAL REPORTING
OUTLOOK
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
preparation of
in
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, 2024. There have been no changes in the internal
controls over financial reporting for the year ended January 31, 2024
that have materially affected or are reasonably likely to materially
affect the internal controls over financial reporting.
internal controls over
The near-term outlook continues to be influenced by uncertainty
related to the economy and the impact of inflation, particularly in
tourism-dependent countries and countries that do not have strong
government income support programs for individuals within our
International Operations however, the resiliency of the Company's
essential everyday product and service offering is expected to help
mitigate some of this uncertainty. The Canadian Operations are
expected to be impacted by increased consumer demand arising
from the First Nations Drinking Water Settlement which impacts
approximately 30 communities served by the Company's stores.
Payments have started to be issued to some individuals who filed
their claim early, however the volume of payments issued is low. It is
expected that the remaining settlement payments will be issued in
2024 and 2025. The timing of these payments, which represents a
substantial portion of the claims, is uncertain as the period for filing
claims ended in March 2024.
On August 4, 2023, the Government of Canada released draft
legislation under the Global Minimum Tax Act for consultation. This
legislation is intended to follow the Pillar Two model rules from the
Organization for Economic Cooperation and Development ("OECD")
which applies a minimum income tax rate of 15% in each jurisdiction
the company operates in. Although it is intended for Canada's
principal Pillar Two rules to take effect on January 1, 2024, Canada
has not yet enacted or substantively enacted Pillar Two legislation
nor have the Company's other jurisdictions enacted or substantively
enacted it. The Company operates retail stores in the Cayman
Islands, Barbados and British Virgin Islands jurisdictions which may be
impacted by the Global Minimum Tax - Pillar Two legislation. If
enacted, the implementation of the Global Minimum Tax - Pillar Two
legislation is expected to result in a decrease in consolidated net
earnings of the Company. However, it is uncertain whether or not
these jurisdictions will enact the Global Minimum Tax - Pillar
Two legislation or what the final form of the legislation and the
the Government of
timing of enacting
Canada will be. Further
is
information on
provided under Future Accounting Standards.
legislation by
legislation
this
the
Beyond the near-term outlook previously noted, the medium
and longer-term outlook for the Company is favourable based on
impact of government transfer and settlement
the expected
payments and higher
Indigenous
communities, the resiliency of our essential everyday product and
service value offer and the upside expected from enhancing our core
capabilities to deliver operational excellence and sustainable
earnings growth aligned with our strategic priorities.
infrastructure spending
in
In 2024, the Company expects that capital expenditures, net of
expected proceeds from the promissory note receivable will be in
the $130.0 million range (2023 - $107.7 million, net of $15.0 million in
proceeds from the promissory note receivable). The timing and
amount of store-based capital expenditures in 2024 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.
24THE NORTH WEST COMPANY INC. 2023 RISK MANAGEMENT
These factors may include, but are not limited to:
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 and which is hereby incorporated by
reference. 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.
Careful consideration should be given to the risk factors below
including pandemic
risk, which could negatively affect 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.
Employee Development and Retention Attracting, retaining and
is essential to effectively
developing high caliber employees
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. These regulations have
resulted in an increase in the number of pilots required by NSA
which, combined with a Canada-wide shortage of pilots and aircraft
mechanics, 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
recruiting,
compensation and training programs are expected to help mitigate
the impacts of the new regulations and employee development and
retention risk.
employee
systems
and
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.
in
Furthermore, the entry of new competitors, an
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
Cyber-security
integrity and
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.
25ANNUAL REPORT
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 Sustainability on page
31. To the extent the Company is not successful 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 $390 million and assets of $197
million for the year-ended January 31, 2024. 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 72
communities in northern Canada and 19 communities in Alaska that
are potentially exposed to changes in permafrost. Collectively, stores
in these communities have sales of $876 million and assets of $442
million for the year ended January 31, 2024. 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 2023, the Company's store in Fox Lake, Alberta was
destroyed by wildfire. In 2018, the Company also 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. The Company completed an independent review
of its fire 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.
26THE NORTH WEST COMPANY INC. 2023 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.
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,
price increases from suppliers, unemployment rates, personal debt
levels, levels of personal disposable income, interest rates and
foreign exchange rates. Changes in inflation rates, price increases
from suppliers and foreign exchange rates are unpredictable and
may impact the cost of merchandise and the prices charged to
consumers which in turn could negatively impact the Company's
reputation and financial results. 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.
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. If these
subsidies and programs are not adjusted for cost inflation, or if there
are changes in government policy that result in a reduction in
financial support for these programs, there could be an increase in
the price of merchandise which would have a negative impact on
consumer demand and could have an adverse effect on the
Company's operations, financial condition and reputation.
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 and Change Management 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 narrowly-focused or larger retailers.
Management continuously 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
improving processes and generating
efficiencies across
the Company’s administrative, store and
distribution network. The success of strategic initiatives is dependent
on effective leadership and change management to realize their
intended benefits. 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 the financial condition, reputation and financial
performance of the Company.
include
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.
27ANNUAL REPORT 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.
issues
Social and political
Social
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
gasoline, heating and aviation fuel
is possible. The Company
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
environmental
including
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,
duties, currency
labour and
employment standards, minimum wage laws, Payment Card Industry
("PCI") standards, anti-money
regulations,
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.
repatriation, health and safety,
laundering
("AML")
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,
financial penalties,
regulations and standards could result
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
negatively affect
financial
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
reductions cannot be
In Canada, on-going
implemented.
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.
28THE NORTH WEST COMPANY INC. 2023
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.
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 may be sourced from
less developed countries which
increases certain risks to the
Company including risks associated with product safety, general
merchandise product defects and products that do not meet the
required standards. Additionally, products sourced
less
developed countries may have an increased risk of non-compliance
with human rights, forced labour, child labour and ethical and safe
business practices which could negatively impact the Company's
reputation. 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.
from
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
reputation and relationship with
investors and
employees, which in turn could have an adverse effect on the
financial performance of the Company.
its customers,
29ANNUAL REPORT 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 32 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, 2024,
the Company had undrawn committed revolving loan facilities
available of $433.9 million (January 31, 2023 - $418.3 million). The
undrawn capacity on existing loan facilities and the maturity dates of
these facilities helps reduce 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, 2024, the Company had US$70.2 million in
U.S. denominated debt compared to US$70.4 million at January 31,
2023 and US$70.6 million at January 31, 2022. 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 2023, the average exchange rate used to translate U.S.
denominated earnings from the International Operations was 1.3504
compared to 1.3088 last year. The Canadian dollar's depreciation in
2023 compared to the U.S. dollar in 2022 positively impacted
consolidated net earnings by $1.5 million. In 2022, the average
exchange rate was 1.3088 compared to 1.2526 2021 which resulted
in an increase in 2022 consolidated net earnings of $2.1 million
compared to 2021.
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, 2024, the
Company had no outstanding interest rate swaps.
30THE NORTH WEST COMPANY INC. 2023 CORPORATE SOCIAL RESPONSIBILITY &
SUSTAINABILITY
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.
for the
Our ESG strategy aims to achieve positive change through a
shared-value framework that benefits people, our planet and
future. Community and
creating strong partnerships
employee experience are at the heart of our ESG strategy,
representing an opportunity to secure and enhance the trust and
loyalty of our partners, while also delivering business value. Through
in the
our ESG strategy, we seek to drive positive change
communities we serve by supporting their journey for improved
health, nutrition and overall quality of life. We also seek to improve
the experience of our employees by creating a more diverse,
equitable and inclusive work environment, where employees can
further develop their skills and grow their careers within our
organization. Our ESG strategy is embedded across our business
operations and influences our unique business model to support
underserved communities
locations.
Recognizing that we have a responsibility to promote health and
nutrition in the communities we serve, supporting social equality
and inclusion, and protecting the natural environment, we have
identified and selected material ESG topics for our ESG Strategy
Framework.
remote geographical
in
Our ESG Strategy is defined by a clear pathway to drive our
efforts towards a more sustainable and equitable future, accelerating
progress to benefit people, the planet and our business
partnerships.
Help employees and community members advance
People
towards a healthier,
future, creating
meaningful relationships and positive impacts in the communities
we serve. We seek to promote food security, contribute to health
and nutrition and accelerate diversity, equality and inclusion.
inclusive and equitable
Planet Protect the environment and address climate change by
striving to reduce Green House Gas ("GHG") emissions and waste
across our business operations.
Partnerships Maintain trust with our business partners by ensuring
ethical and safe business practices in our supply chains and
operations, including protecting personal and company information.
for overseeing the
The Board of Directors are accountable
Company's Corporate Social Responsibility and Sustainability
initiatives which are
risk
integrated within
management and strategic planning process. In addition to the
information provided on climate change and environmental risk
factors previously noted under Risk Management,
further
information on the Sustainability Report
is available on the
Company's website at www.northwest.ca.
the Company's
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS
to make estimates, assumptions and
requires management
judgments that affect the application of accounting policies and the
reported amounts and disclosures made
in the consolidated
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
these estimates and
under
assumptions
judgments by
management about matters that are uncertain and changes in these
financial
estimates could materially
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
losses
for expected credit
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
("ECL's") 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
in the
consolidated balance sheets and the provisions for debt loss
recorded 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.
for doubtful accounts 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 losses, or shrinkage, occurring between the last physical
count and the balance sheet date.
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
actual
those estimated, both
inventories and cost of sales may be impacted.
losses experienced vary
from
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.
31ANNUAL REPORT
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
increase are the most significant
the rate of compensation
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, 2024 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 2023 was 4.88% compared to 4.70% in 2022 and 3.43% in 2021.
Management assumed a rate of compensation increase of 4.0% for
fiscal 2021, 2022 and 2023.
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
the Company's consolidated balance sheets and consolidated
statements of earnings.
32THE NORTH WEST COMPANY INC. 2023
FUTURE ACCOUNTING STANDARDS
In September 2022, the IASB issued amendments to IFRS 16 - Leases
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 this standard to have a
material
financial
statements.
the Company's consolidated
impact on
In May 2023, the IASB issued amendments to IAS 12 - Income Taxes
which introduced a mandatory temporary exception from the
recognition and disclosure of deferred taxes related to the
implementation of Pillar Two model rules. These rules were
developed by the Organization for Economic Co-operation and
Development (OECD) and were designed to ensure that large,
multinational enterprises would be subject to a minimum income
tax rate of 15% in each jurisdiction they operate. The IAS 12
amendments require that the Company separately disclose the
current tax expense/income related to Pillar Two income taxes. On
August 4, 2023, the Government of Canada released draft legislation
under the Global Minimum Tax Act for consultation, which is
intended to follow the Pillar Two model rules from the OECD.
Although it was intended for Canada's principal Pillar Two rules to
take effect on January 1, 2024, Canada has not yet enacted or
substantively enacted Pillar Two legislation nor have the Company's
other jurisdictions enacted or substantively enacted it. The Company
has yet to apply the temporary exemption required by IAS 12 and
accordingly has not accounted for any related deferred income tax
assets or liabilities. The Company will disclose known or reasonably
estimable information related to the Company's exposure to Pillar
Two income taxes when it is applicable and will disclose separately
current tax related to Pillar Two income taxes when it is in effect.
In October 2022, the IASB issued amendments to IAS 1 - Presentation
of Financial Statements, which specifies that covenants whose
compliance is assessed after the reporting date do not affect the
classification. The Company does not expect adoption of this
standard to have a material impact on the Company's consolidated
financial statements.
further
There are no
IFRIC
interpretations that are not yet effective that would be expected to
have a material impact on the Company's consolidated financial
statements.
IFRS Accounting Standards or
The Company performed the annual goodwill impairment test
in 2023 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
NEW ACCOUNTING STANDARDS IMPLEMENTED
The Company adopted the narrow-scope amendments to IAS 8 -
in Accounting Estimates and Errors
Accounting Policies, Change
effective February 1, 2023.
These amendments clarify how
companies distinguish changes in accounting policies from changes
in accounting estimates. These amendments had no material impact
on the consolidated financial statements.
The Company also adopted amendments to IAS 1 - Presentation of
Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgments effective February 1, 2023. These amendments require
companies to disclose their material accounting policy information
rather than their significant accounting policies. The adoption of
impact on the
these amendments did not have a material
Company’s consolidated financial statements.
33ANNUAL REPORT
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
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
Fox Lake wildfire asset write-off
Gain on insurance settlement
Share-based compensation expense
Fourth Quarter
Year-to-date
Consolidated
2023
2022
2021
2023
2022
2021
$
51,697 $
47,824 $
49,588
$
195,897 $
180,305 $
220,425
27,439
25,636
23,376
105,276
98,373
90,950
$
79,136 $
73,460 $
72,964
$
301,173 $
278,678 $
311,375
—
—
4,558
—
—
3,878
—
(9,492)
3,615
3,694
—
13,167
—
—
13,131
—
(18,124)
11,854
Adjusted EBITDA
$
83,694 $
77,338 $
67,087
$
318,034 $
291,809 $
305,105
Fourth Quarter
Year-to-date
Canada
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
Fox Lake wildfire asset write-off
Gain on insurance settlement
Share-based compensation expense
2023
2022
2021
2023
2022
2021
$
37,166 $
33,417 $
36,276
$
133,909 $
119,090 $
153,328
18,087
17,134
15,932
70,180
66,368
61,881
$
55,253 $
50,551 $
52,208
$
204,089 $
185,458 $
215,209
—
—
3,605
—
—
3,049
—
(9,492)
3,268
3,694
—
10,971
—
—
10,983
—
(18,124)
10,136
Adjusted EBITDA
$
58,858 $
53,600 $
45,984
$
218,754 $
196,441 $
207,221
($ in thousands)
Earnings from operations
Add:
Amortization
EBITDA
Share-based compensation expense
Adjusted EBITDA
International (Stated in U.S. dollars)
Fourth Quarter
Year-to-date
2023
2022
2021
2023
2022
2021
$
10,755 $
10,630 $
10,456
$
45,903 $
46,772 $
53,566
6,694
6,291
5,880
25,990
24,453
17,449 $
16,921 $
16,336
$
71,893 $
71,225 $
707
623
274
1,626
1,641
18,156 $
17,544 $
16,610
$
73,519 $
72,866 $
$
$
23,220
76,786
1,371
78,157
34THE NORTH WEST COMPANY INC. 2023 Reconciliation of consolidated net earnings to adjusted net earnings:
($ in thousands)
Net earnings
Fourth Quarter
Year-to-Date
2023
2022
2021
2023
2022
2021
$
36,011 $
35,129 $
35,608
$
134,291 $
125,836 $
157,451
Fox Lake wildfire asset write-off, net of tax
Gain on insurance settlement, net of tax
—
—
—
—
Share-based compensation expense, net of tax
3,523
2,976
—
(6,152)
2,875
2,551
—
—
—
10,177
10,213
—
(13,275)
9,234
Adjusted Net Earnings
$
39,534 $
38,105 $
32,331
$
147,019 $
136,049 $
153,410
On May 5, 2023, the Company's store in Fox Lake, Alberta was destroyed by wildfire which resulted in a write-off of assets.
In 2021, 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:
($ in millions)
Total assets
2023
2022
2021
$ 1,396.0
$ 1,336.9
$ 1,219.3
Less: Total liabilities
(690.2)
Add: Total debt and lease liabilities
405.5
(689.0)
402.5
(639.1)
349.7
Net Assets Employed
$ 1,111.3
$ 1,050.4
$
929.9
(3) Return on Average Equity (ROE) is not a recognized measure
under IFRS. Management believes that ROE is a useful measure to
invested by
evaluate
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
growth rate is the year-over-year percentage growth rate over a given
period of time.
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.
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.
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.
GLOSSARY OF TERMS & ABBREVIATIONS
EBIT margin EBIT divided by sales.
AC Alaska Commercial Company store banner.
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.
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.
B-to-B Business to business sales.
B-to-C Business to consumer 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.
EBITDA margin EBITDA divided by sales.
ESG Environmental, social and governance.
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.
Gross profit rate Gross profit divided by sales.
Compound Annual Growth Rate ("CAGR") The compound annual
GT Giant Tiger store banner.
35ANNUAL REPORT Hedge A risk management technique used to manage interest rate,
foreign currency exchange or other exposures arising from business
transactions.
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.sedarplus.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.
Return on Net Assets ("RONA") Net earnings before interest 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.
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
2023
2022
2021
2020
2019
2018
Year-ended
January 31, 2024
January 31, 2023
January 31, 2022
January 31, 2021
January 31, 2020
January 31, 2019
Fiscal
Year
2017
2016
2015
2014
2013
2012
Year-ended
January 31, 2018
January 31, 2017
January 31, 2016
January 31, 2015
January 31, 2014
January 31, 2013
36THE NORTH WEST COMPANY INC. 2023
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)
2023
2022
2021
2020
2019
$ 1,418,961
1,052,717
2,471,678
204,089
97,084
301,173
70,180
35,096
105,276
19,051
42,555
129,391
230,427
73,533
123,411
(5,450)
$ 502,905
644,681
114,501
4,558
112,536
16,829
250,658
439,579
705,773
$
$
$
2.71
2.67
6.31
4.83
1.54
14.79
38.89
168
59
1,018
668
1,404
1,555
5,070
2,312
47,747
47,711
46,137
12.2
7.9
17.7
19.9
.40:1
31.9
5.2
$ 1,323,185 $ 1,291,139 $ 1,376,188 $ 1,271,552
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)
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
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)
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 $ 403,358 $ 396,860 $ 399,593
555,075
606,310
127,870
102,632
—
26,299
104,765
105,098
28,233
21,707
194,084
248,606
594,482
440,384
426,970
647,900
554,457
100,844
40,283
98,585
21,746
294,490
344,579
580,204
531,794
107,766
49,020
98,440
7,288
315,135
370,802
505,231
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
3.21 $
3.16
6.45
4.64
1.46
12.12
35.05
2.87 $
2.82
6.18
6.95
1.38
10.39
32.37
161
55
998
677
1,302 $
1,425 $
4,926
2,598
48,268
47,879
50,474
159
53
986
667
1,057 $
1,479 $
4,735
2,204
48,758
48,613
60,827
13.8
9.8
23.8
29.0
.41:1
31.4
6.3
12.8
8.9
22.4
30.7
.56:1
19.9
7.1
1.70
1.68
4.50
3.30
1.32
8.76
27.56
198
51
1,617
662
798
1,236
5,587
2,046
48,751
48,751
45,013
10.5
6.2
13.5
20.5
.96:1
39.9
5.8
(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 34.
37ANNUAL REPORT 2018(1)
2017 (1)
2016
2015
2014
2013
Fiscal Year ($ in thousands )
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
1,199,473
785,649
1,985,122
112,393
57,231
169,624
39,796
15,857
55,653
10,145
34,135
67,154
141,419
62,315
122,035
(5,083)
1,125,330
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)
1,089,898
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
1,042,168
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
1,022,985
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)
$ 376,297 $ 335,003 $ 327,938 $ 335,581 $ 315,840 $ 299,071
286,875
—
—
64,969
19,597
209,738
138,334
322,440
311,692
—
—
68,693
28,074
146,275
248,741
329,283
345,881
—
—
83,293
29,040
155,501
280,682
357,612
469,993
—
—
91,502
34,450
171,212
377,580
382,156
514,946
127,794
—
96,119
34,705
196,938
541,907
411,016
358,121
—
—
86,909
32,853
152,244
285,792
367,785
$
$
$
1.78 $
1.77
4.47
3.19
1.28
8.43
31.17
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
193
52
1,571
669
798 $
1,148 $
5,672
2,253
48,697
48,751
46,269
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
10.8
6.8
15.3
23.2
.89:1
40.0
6.0
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 $
4,921
1,726
48,432
48,497
24,080
8.5
6.0
18.4
19.3
.61:1
48.8
5.7
1.33
1.32
2.86
1.64
1.12
6.66
25.42
178
48
1,386
696
741
767
4,839
1,853
48,413
48,426
17,623
9.0
6.5
20.0
21.0
.57:1
68.2
5.6
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)
38THE NORTH WEST COMPANY INC. 2023 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 10, 2024
John D. King, CPA, CA, CMA
EXECUTIVE VICE-PRESIDENT,
CHIEF FINANCIAL OFFICER &
CORPORATE SECRETARY
THE NORTH WEST COMPANY INC.
39CONSOLIDATED FINANCIAL STATEMENTS
40THE NORTH WEST COMPANY INC. 2023 41CONSOLIDATED FINANCIAL STATEMENTS 42THE NORTH WEST COMPANY INC. 2023 43CONSOLIDATED FINANCIAL STATEMENTS 44THE NORTH WEST COMPANY INC. 2023 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, 2024
January 31, 2023
$
$
$
53,359
121,606
313,414
14,526
502,905
644,681
114,501
4,558
50,519
29,768
16,829
32,249
893,105
1,396,010
228,297
268
19,408
2,685
250,658
281,308
104,483
18,725
13,383
21,680
439,579
690,237
177,951
9,359
464,556
32,826
684,692
21,081
705,773
$
$
$
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
$
1,396,010
$
1,336,890
45CONSOLIDATED FINANCIAL STATEMENTS
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, 2024
January 31, 2023
$ 2,471,678
$ 2,352,760
(1,662,259)
(1,604,845)
809,419
747,915
(613,522)
(567,610)
195,897
(19,051)
176,846
(42,555)
180,305
(14,836)
165,469
(39,633)
$ 134,291
$ 125,836
$ 129,391
4,900
$ 134,291
$ 122,190
3,646
$ 125,836
$
$
2.71
2.67
$
$
2.55
2.51
47,747
48,431
47,865
48,649
46THE NORTH WEST COMPANY INC. 2023
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:
Year Ended
Year Ended
January 31, 2024
January 31, 2023
$ 134,291
$ 125,836
Exchange differences on translation of foreign controlled subsidiaries
(10)
11,566
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 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.
5,848
111
5,949
7,856
230
19,652
$ 140,240
$ 145,488
$
5,854
$
18,667
95
985
$
5,949
$
19,652
$ 135,245
$ 140,857
4,995
4,631
$ 140,240
$ 145,488
47CONSOLIDATED FINANCIAL STATEMENTS
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, 2023
$ 176,091 $
13,017 $ 407,182 $ 32,931 $ 629,221 $
18,679 $ 647,900
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)
—
—
—
—
—
—
—
129,391
—
129,391
4,900 134,291
5,848
(105)
5,743
95
5,838
111
—
111
—
111
—
135,350
(105)
135,245
4,995 140,240
(557)
—
(4,443)
(226)
(2,980)
—
—
—
(5,000)
—
(5,000)
(3,206)
—
(3,206)
—
2,643
1,860
(76,126)
—
1,965
(678)
(3,658)
(82,367)
9,359 $ 464,556 $ 32,826 $ 684,692 $ 21,081 $ 705,773
(73,533)
1,965
(79,774)
(73,533)
—
(77,976)
(2,593)
—
(2,593)
—
—
—
Balance at January 31, 2024
$ 177,951 $
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)
—
—
—
—
—
—
—
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
3,010
2,656
—
(2,169)
487
—
(71,805)
—
(78,768)
—
—
—
—
—
(7,817)
—
(7,817)
2,453
(71,805)
1,898
—
2,453
(2,521)
—
(74,326)
1,898
(75,271)
(2,521)
(77,792)
Balance at January 31, 2023
$ 176,091 $
13,017 $ 407,182 $ 32,931 $ 629,221 $
18,679 $ 647,900
(1) Accumulated Other Comprehensive Income
See accompanying notes to consolidated financial statements.
48THE NORTH WEST COMPANY INC. 2023
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)
Taxes paid
Loss/(Gain) 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)
Intangible asset additions (Note 9)
Proceeds from disposal of property and equipment
Proceeds from promissory note receivable
Cash used in investing activities
Financing activities
Net (decrease)/increase in long-term debt (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, 2024
January 31, 2023
$ 134,291
$ 125,836
105,276
42,555
19,051
(3,206)
(43,065)
1,500
256,402
(23,233)
(2,742)
230,427
98,373
39,633
14,836
2,453
(46,961)
(54)
234,116
(50,905)
(373)
182,838
(114,199)
(112,581)
(9,212)
710
15,000
(4,531)
510
9,800
(107,701)
(106,802)
(8,891)
(20,936)
(4,821)
(73,533)
(2,593)
(14,461)
1,965
(5,000)
(128,270)
94
(5,450)
58,809
49,436
(22,349)
(4,249)
(71,805)
(2,521)
(10,891)
1,898
(7,817)
(68,298)
1,645
9,383
49,426
$
53,359
$
58,809
49CONSOLIDATED FINANCIAL STATEMENTS Notes to
Consolidated
Financial
Statements
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JANUARY 31, 2024 AND 2023
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 10, 2024.
2. BASIS OF PREPARATION
(A) Statement of Compliance
The consolidated
financial
in accordance with
statements have been prepared
International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting
Standards").
(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. MATERIAL 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.
50THE NORTH WEST COMPANY INC. 2023
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% – 8%
Leasehold improvements 3% – 20%
Aircraft
3% – 20%
Fixtures and equipment 8% – 20%
Computer equipment 12% – 33%
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
51NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
52THE NORTH WEST COMPANY INC. 2023
(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 material, 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.
53NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consolidated statements of earnings. The Company has no
material 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 material
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.
judgments
that affect
(U) Use of Estimates, Assumptions & Judgment The
preparation of consolidated financial statements in conformity
with IFRS Accounting Standards requires management to make
estimates, assumptions and
the
application of accounting policies, the reported amounts of
revenues and expenses during the reporting period and
disclosure of contingent assets and
the
consolidated financial statements and notes. Judgment has
been used in the application of accounting policy and to
determine if a transaction should be recognized or disclosed in
these consolidated financial statements while estimates and
assumptions have been used to measure balances recognized
or disclosed.
liabilities
in
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 material 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 material 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
54THE NORTH WEST COMPANY INC. 2023
In May 2023, the IASB issued amendments to IAS 12 - Income
Taxes which introduced a mandatory temporary exception from
the recognition and disclosure of deferred taxes related to the
implementation of Pillar Two model rules. These rules were
developed by the Organization for Economic Co-operation and
Development (OECD) and were designed to ensure that large,
multinational enterprises would be subject to a minimum
income tax rate of 15% in each jurisdiction they operate. The
IAS 12 amendments require that the Company separately
disclose the current tax expense/income related to Pillar Two
income taxes. On August 4, 2023, the Government of Canada
released draft legislation under the Global Minimum Tax Act for
consultation, which is intended to follow the Pillar Two model
rules from the OECD. Although it is intended for Canada's
principal Pillar Two rules to take effect on January 1, 2024,
Canada has not yet enacted or substantively enacted Pillar Two
legislation nor have the Company's other jurisdictions enacted
or substantively enacted it. The Company has yet to apply the
temporary exemption required by IAS 12 and accordingly has
not accounted for any related deferred income tax assets or
liabilities. The Company will disclose known or reasonably
estimable information related to the Company's exposure to
Pillar Two income taxes when it is applicable and will disclose
separately current tax related to Pillar Two income taxes when it
is in effect.
In October 2022, the IASB issued amendments to IAS 1 -
Presentation of Financial Statements, which specifies that
covenants whose compliance is assessed after the reporting
date do not affect the classification. The Company does not
expect adoption of this standard to have a material impact on
the Company's consolidated financial statements.
There are no further IFRS Accounting Standards or IFRIC
interpretations that are not yet effective that would be
expected to have a material
impact on the Company's
consolidated financial statements.
•
•
•
•
•
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.
(X) New Standards Impemented The Company adopted the
narrow-scope amendments to IAS 8 - Accounting Policies,
Change in Accounting Estimates and Errors effective February 1,
2023. These amendments clarify how companies distinguish
changes in accounting policies from changes in accounting
estimates. These amendments had no material impact on the
consolidated financial statements.
The Company also adopted amendments to IAS 1 Presentation
of Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgments effective February 1, 2023. These
amendments require companies to disclose their material
accounting policy information rather than their significant
accounting policies. The adoption of these amendments did
not have a material impact on the Company’s consolidated
financial statements.
(Y) Future Standards and Amendments In September 2022, the
IASB issued amendments to IFRS 16 - Leases 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 this
standard to have a material
impact on the Company's
consolidated financial statements.
55NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. SEGMENTED INFORMATION
5. ACCOUNTS RECEIVABLE
$ 955,321
$
921,610
Movements in the allowance for doubtful accounts for customer and
commercial accounts receivables are as follows:
January 31, 2024
January 31, 2023
Trade accounts receivable
$
96,324
$
92,573
Corporate and other accounts
receivable
Less: allowance for doubtful
accounts
37,991
32,610
(12,709)
(11,385)
$ 121,606
$
113,798
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
receivable mentioned above. Credit risk for trade accounts 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.
January 31, 2024
January 31, 2023
Balance, beginning of year
$
(11,385)
$
(12,165)
Net charge
Written off
(10,940)
9,616
(11,622)
12,402
Balance, end of year
$
(12,709)
$
(11,385)
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,
2024, the Company recorded $3,476 (January 31, 2023 – $4,049) 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, 2024 or 2023.
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, 2024
January 31, 2023
$ 944,325
$
897,097
General merchandise and other
474,636
426,088
$ 1,418,961
$ 1,323,185
Canada
International
Food
General merchandise and other
97,396
107,965
International
$ 1,052,717
$ 1,029,575
Consolidated
$ 2,471,678
$ 2,352,760
Earnings before amortization, interest and income taxes
$ 204,089
$
185,458
97,084
93,220
$ 301,173
$
278,678
Canada
International
Consolidated
Earnings from operations
Canada
International
Consolidated
Supplemental Information
Assets
Canada(1)
International(1)
January 31, 2024
January 31, 2023
$ 865,040
$
841,543
530,970
495,347
Consolidated
$ 1,396,010
$ 1,336,890
Year Ended
January 31, 2024
January 31, 2023
Canada
Int'l
Canada
Int'l
Purchase of property and
equipment
$ 68,451 $ 45,748 $ 81,170 $ 31,411
Total amortization
$ 70,180 $ 35,096 $ 66,368 $ 32,005
(1) Canadian total assets includes goodwill of $11,025 (January 31,
2023 – $11,025). International total assets includes goodwill of
$39,494 (January 31, 2023 – $39,406).
$ 133,909
$
119,090
6.
INVENTORIES
61,988
61,215
$ 195,897
$
180,305
56THE NORTH WEST COMPANY INC. 2023
7. PROPERTY & EQUIPMENT
January 31, 2024
Cost
Land
Buildings
Leasehold
improvements
Fixtures &
equipment
Aircraft
Computer
equipment
Construction
in process
Total
Balance, beginning of year
$ 20,538
$ 666,458
$ 70,091 $ 389,310 $ 119,098 $ 65,209
$ 60,432 $ 1,391,136
Additions/(transfers)
Disposals/retirements
Reclassification
Effect of movements in foreign exchange
1,288
(211)
—
18
64,228
(1,733)
—
111
11,493
41,597
(1,618)
(13,273)
—
482
—
450
6,919
(1,188)
(1,250)
—
7,322
(887)
—
41
(18,648)
114,199
—
—
—
(18,910)
(1,250)
1,102
Total January 31, 2024
$ 21,633
$ 729,064
$ 80,448 $ 418,084 $ 123,579 $ 71,685
$ 41,784 $ 1,486,277
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Reclassification
Effect of movements in foreign exchange
$
—
—
—
—
—
$ 376,996
$ 43,002 $ 285,672 $ 39,812 $ 39,344
$
— $ 784,826
27,603
(1,410)
—
107
4,453
21,721
(1,263)
(12,118)
—
162
—
240
14,239
(1,053)
(868)
—
5,787
(856)
—
26
—
—
—
—
73,803
(16,700)
(868)
535
Total January 31, 2024
$
—
$ 403,296
$ 46,354 $ 295,515 $ 52,130 $ 44,301
$
— $ 841,596
Net book value January 31, 2024
$ 21,633 $ 325,768
$ 34,094 $ 122,569 $ 71,449 $ 27,384
$ 41,784 $ 644,681
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/(transfers)
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
The Company reviews its property and equipment for indicators of impairment. No assets were identified as impaired for the years ended
January 31, 2024 and January 31, 2023.
Interest capitalized
Interest attributable to the construction of qualifying assets was capitalized using an average rate of 5.1% and 4.1% for the years ended
January 31, 2024 and 2023 respectively. Interest capitalized in additions amounted to $315 (January 31, 2023 – $226). Accumulated interest
capitalized in the cost total above amounted to $3,663 (January 31, 2023 – $3,348).
57NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RIGHT-OF-USE ASSETS & LEASE LIABILITIES
Right-of-use assets
January 31, 2024
Cost
Balance, beginning of year
Additions
Disposals/retirements
Lease extensions and other items
Effect of movements in foreign exchange
Total January 31, 2024
Accumulated amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Impairment losses
Effect of movements in foreign exchange
Total January 31, 2024
Net book value January 31, 2024
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
Land & buildings
Fixtures &
equipment
Aircraft
Total
$
197,358 $
9,251 $
— $
206,609
15,742
(4,595)
14,948
237
2,579
(1,325)
—
—
—
—
—
—
18,321
(5,920)
14,948
237
$
$
$
$
223,690 $
10,505 $
— $
234,195
100,324 $
3,653 $
— $
103,977
19,252
(3,414)
(860)
30
2,034
(1,325)
—
—
—
—
—
—
21,286
(4,739)
(860)
30
115,332 $
4,362 $
— $
119,694
108,358 $
6,143 $
— $
114,501
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
58THE NORTH WEST COMPANY INC. 2023
Lease liabilities
The total current and long-term lease liability is $19,408 (January 31,
2023 – $18,644) and $104,483 (January 31, 2023 – $93,833),
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, 2024, lease
liabilities reflect a weighted-average risk-free rate of 4.1% (January 31,
2023 – 3.8%) and weighted-average remaining lease term of 10.5
years (January 31, 2023 – 9.8 years).
9. GOODWILL & INTANGIBLE ASSETS
Goodwill
January 31, 2024
January 31, 2023
Balance, beginning of year
$
50,431
$
48,502
Effect of movements in foreign
exchange
88
1,929
Maturity analysis - contractual undiscounted cash flows
Balance, end of year
$
50,519
$
50,431
0-1 year
2-3 years
4-5 years
6 years+
January 31, 2024
$
24,201
37,007
27,664
70,878
Total undiscounted cash flows
$ 159,750
Variable Lease Expense
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 had variable lease expense not included in lease
liabilities of $6,145 (January 31, 2023 – $5,919).
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.
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 $39,494 (January 31, 2023 – $39,406)
relates to acquisition of subsidiaries by the Company's International
Operations. A goodwill asset balance of $11,025 (January 31, 2023 –
$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.
Other leases
Short-term and low value lease payments are not material.
No impairment has been identified on goodwill, and management
considers reasonably foreseeable changes in key assumptions are
unlikely to produce a goodwill impairment.
59NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets
January 31, 2024
Cost
Balance, beginning of year
Additions
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2024
Accumulated Amortization
Balance, beginning of year
Amortization expense
Disposals/retirements
Effect of movements in foreign exchange
Total January 31, 2024
Software
Store banners
Non-Compete and
Other
Total
$ 61,728
$ 10,291
$ 15,517
$ 87,536
8,772
(1,578)
39
—
—
24
440
—
15
9,212
(1,578)
78
$ 68,961
$ 10,315
$ 15,972
$ 95,248
$ 45,818
9,087
(1,578)
22
$ 53,349
$
$
—
—
—
—
—
$ 11,024
$ 56,842
1,100
—
7
10,187
(1,578)
29
$ 12,131
$ 65,480
Net book value January 31, 2024
$ 15,612
$ 10,315
$
3,841
$ 29,768
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
Non-Compete and
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
Work in process
As at January 31, 2024, the Company had
incurred $1,788
(January 31, 2023 – $537) 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.
60THE NORTH WEST COMPANY INC. 2023
10. INCOME TAXES
The following are the major components of income tax expense:
Year Ended
January 31, 2024
January 31, 2023
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 provision in prior years
$ 43,543
$ 44,392
124
(2,893)
216
(2,358)
$ 40,774
$ 42,250
$
(775)
$
(3,231)
(8)
2,564
(46)
660
$ 1,781
$
(2,617)
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 $4,655 (January 31, 2023 – $5,179) arising from
certain foreign income tax losses were not recognized on the
consolidated balance sheets. The income tax losses expire from
2025 – 2032.
Deferred income tax charged (credited) to other comprehensive
income during the year is as follows:
Year Ended
January 31, 2024
January 31, 2023
Net investment hedge:
Origination and reversal of
temporary difference
$
(28)
$
(616)
Impact of change in tax rates
—
2
$
(28)
$
(614)
Income taxes
$ 42,555
$ 39,633
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:
Defined benefit plan
actuarial gain:
Origination and reversal of
temporary difference
Impact of change in tax rates
$ 2,151
$ 2,883
1
—
$ 2,152
$ 2,883
Year Ended
January 31, 2024
January 31, 2023
Earnings before income taxes
$ 176,846
$ 165,469
Combined statutory income
tax rate
23.9 %
24.5 %
Expected income tax expense
$ 42,259
$ 40,588
Increase (decrease) in income taxes resulting from:
Non-deductible expenses
$
693
$
879
Unrecognized income tax gains
Withholding taxes
Impact of change in tax rates
GILTI tax (1)
Over provision in prior years
Other
(269)
124
(8)
—
(329)
85
(308)
216
(46)
3
(1,698)
(1)
Provision for income taxes
$ 42,555
$ 39,633
Income tax rate
24.1 %
24.0 %
(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.
61NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
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, 2023
Taxes (charged)
credited to net
earnings
Taxes (charged)/
credited to OCI
Other
adjustments
January 31, 2024
$
$
$
$
$
10,913
27,425
4,557
6,419
4,044
2,676
1,674
797
$
$
1,082
2,351
758
(47)
329
345
(1,674)
444
$
—
—
—
—
(2,152)
—
—
—
(4)
33
4
3
—
4
—
(8)
$
11,991
29,809
5,319
6,375
2,221
3,025
—
1,233
58,505
$
3,588
$
(2,152)
$
32
$
59,973
(1,458)
$
(16,320)
(25,426)
(153)
(2,189)
—
(5,563)
(51,109)
7,396
$
$
9
655
(2,209)
—
(77)
(2,929)
(818)
(5,369)
(1,781)
$
$
$
—
—
—
28
—
—
—
28
(2,124)
$
$
$
(3)
(15)
(33)
—
(15)
—
(11)
(77)
(45)
$
(1,452)
(15,680)
(27,668)
(125)
(2,281)
(2,929)
(6,392)
(56,527)
3,446
$
$
January 31, 2024
January 31, 2023
$
16,829
(13,383)
$
3,446
$
$
21,707
(14,311)
7,396
62THE NORTH WEST COMPANY INC. 2023
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 loss
Investment in joint venture
Deferred limited partnership earnings
Other
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
57,022
$
3,335
$
(2,883)
$
1,031
(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
—
—
—
$
(69)
(307)
(565)
—
(31)
810
(1,084)
614
$
(1,246)
(2,269)
$
(215)
$
$
$
$
$
10,913
27,425
4,557
6,419
4,044
2,676
1,674
—
797
58,505
(1,458)
(16,320)
(25,426)
(153)
(2,189)
—
(5,563)
(51,109)
7,396
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 $303,835 at
January 31, 2024 (January 31, 2023 – $266,420).
11. OTHER ASSETS
Investment in joint venture (Note 23)
Defined benefit plan asset (Note 13)
Other
January 31, 2024
January 31, 2023
$ 16,903
$ 16,220
13,365
1,981
6,044
1,709
$ 32,249
$ 23,973
63NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. LONG-TERM DEBT
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
The defined benefit pension
defined benefit pension plan.
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. 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, 2024 and January 31, 2023. The accrued pension
benefits and funding requirements were last determined by actuarial
valuation as at December 31, 2022. The next actuarial valuation is
required as at December 31, 2025. 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, 2024, the Company
contributed $816 to its defined benefit pension plans (January 31,
2023 – $1,160). During the year ended January 31, 2024, the
Company contributed $6,767 to its defined contribution pension
plans and U.S. employees savings plans (January 31, 2023 – $6,199).
There are no funding obligations for the defined benefit pension
plans for the year commencing February 1, 2024. 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.
Current:
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, 2024
January 31, 2023
$
268
$
268
$
—
—
87,607
93,701
$
—
—
96,032
93,483
100,000
100,000
—
267
$ 281,308
$ 289,782
Total
$ 281,576
$ 290,050
loan facility provides the
(1) The committed, revolving U.S.
International Operations with up to US$50,000 for working capital
requirements and general business purposes. This facility matures
January 25, 2028, bears a floating rate of interest based on SOFR plus
a spread and
is secured by certain accounts receivable and
inventories of the International Operations. At January 31, 2024, the
International Operations had drawn US$NIL (January 31, 2023 –
US$NIL) on this facility.
(2) The US$52,000 loan facilities mature March 1, 2027 and bear
interest at SOFR 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 $400,000 Canadian Operations loan facilities. At
January 31, 2024, the Company had drawn US$NIL (January 31, 2023
– US$NIL) on these facilities.
loan
revolving
facilities provide
(3) These committed,
the
Company's Canadian Operations with up to $400,000 for working
capital and general business purposes. 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 mature March
interest rate based on Bankers
1, 2027 and bear a floating
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.
64THE NORTH WEST COMPANY INC. 2023
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 12.7 years
(January 31, 2023 – 13.6 years).
January 31, 2024
January 31, 2023
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
$ 94,712
$ 101,351
January 31, 2024
January 31, 2023
Accrued interest on assets
Benefits paid
Plan administration costs
Employer contributions
Employee contributions
Return on assets (less than)/
greater than discount rate
4,377
(4,204)
(590)
816
1
4,190
3,432
(4,819)
(529)
1,160
1
(5,884)
Fair value, end of year
$ 99,302
$ 94,712
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
$ (106,900)
$ (123,065)
(1,654)
(1)
(4,907)
4,990
1,379
2,431
(2,403)
(1)
(4,138)
6,084
(4,137)
20,760
$ (104,662)
$ (106,900)
Plan deficit
$
(5,360)
$
(12,188)
As presented on consolidated balance sheet:
Other asset (Note 11)
$
13,365
$
6,044
Defined benefit plan obligation
(18,725)
(18,232)
January 31, 2024
January 31, 2023
Average life expectancies at age 65 for current pensioners:
Male
Female
21.7
24.1
Average life expectancies at age 65 for current members aged 45:
Male
Female
22.8
25.2
21.6
24.1
22.8
25.2
Assumptions regarding future mortality experience are set based on
actuarial advice
in accordance with published statistics and
experience. For the years ended January 31, 2024 and 2023,
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
$
(5,360)
$
(12,188)
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
$ (12,005)
$ 14,752
$
$
(1,026)
704
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, 2024
January 31, 2023
January 31, 2024
January 31, 2023
Discount rate on plan liabilities
Rate of compensation increase
Discount rate on plan expense
Inflation assumption
4.88 %
4.00 %
4.70 %
2.00 %
4.70 %
4.00 %
3.43 %
2.00 %
Plan assets:
Canadian equities (pooled)
Global equities (pooled)
Real estate equities (pooled)
Debt securities
19.4 %
38.9 %
9.4 %
32.3 %
20.1 %
36.9 %
10.5 %
32.5 %
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 %
65NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 long
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, 2024
January 31, 2023
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
$ 1,654
$
2,403
590
5,034
1,733
529
4,624
1,575
$ 9,011
$
9,131
The following amounts have been included in other comprehensive
income:
January 31, 2024
January 31, 2023
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
$
4,190
$
(5,884)
1,379
2,431
(4,137)
20,760
(2,152)
(2,883)
$
5,848
$
7,856
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
$ 22,655
$ 14,655
(8,174)
(6,022)
$ 14,481
$
8,633
The actual return on the plans assets is summarized as follows:
January 31, 2024
January 31, 2023
Accrued interest on assets
$
4,377
$
3,432
Return on assets greater than
discount rate
4,190
(5,884)
Actual return on plan assets
$
8,567
$
(2,452)
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, 2024 was $13,167 (January 31, 2023 –
$13,131). 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:
$
(4,377)
$
(3,432)
4,907
4,138
$
530
$
706
Accounts payable and accrued
liabilities
Other long-term liabilities
Contributed surplus
January 31, 2024
January 31, 2023
$ 3,340
12,562
10,255
$ 4,793
12,552
11,217
Total
$ 26,157
$ 28,562
66THE NORTH WEST COMPANY INC. 2023
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, 2024 are $7,465 (January 31, 2023 – $7,882). Equity
settled PSUs are redeemed with shares transferred from a trust
established for this plan or by issuing shares from treasury. There
were 195,752 PSUs (January 31, 2023 – 60,993) partially settled by
releasing 96,070 shares (January 31, 2023 – 29,849) from the
employee trust during the year ended January 31, 2024. There were
no PSUs (January 31, 2023 - 55,903) partially settled by releasing
shares issued from treasury (January 31, 2023 - 27,748). The total
number of PSUs outstanding at January 31, 2024 that may be settled
in treasury shares is 326,611 (January 31, 2023 – 337,331).
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 either a cash
payment equal to the market value of the number of DDSUs granted
or one share of the Company. The DDSUs are exercisable by the
holder at any time after they cease to be a Director, but no later than
December 31 of the first calendar year commencing after they leave
the Company. 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, 2024 are $2,766 (January 31, 2023 – $2,000).
The total number of deferred share units outstanding at January 31,
2024 is 264,838 (January 31, 2023 – 258,689). There were 52,214
DDSUs exercised during the year ended January 31, 2024
(January 31, 2023 – 93,743), of which 25,000 units were settled in
cash. The DDSUs exercised for the year-ended January 31, 2023 were
settled in cash.
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, 2024 are $65 (January 31, 2023 – $38).
Share Option Plan
The Company has a Share Option Plan (the "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
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"). No Declining Strike Price Options
have been issued since 2017 and all 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.
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
The maximum number of shares available for issuance under
the Plan is a fixed number set at 4,354,020, representing 9.1% of the
Company’s issued and outstanding shares at January 31, 2024. 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,
2024 are $1,930 (January 31, 2023 – $2,279). The fair values for
options issued during the year were calculated based on the
following assumptions:
January 31, 2024
January 31, 2023
Fair value of options granted
Exercise price
Dividend yield
Annual risk-free interest rate
Expected share price volatility
$
$
6.05
39.05
$
$
4.2 %
2.7 %
24.6 %
5.19
35.83
4.2 %
2.2 %
24.1 %
67NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The assumptions used to measure options at the balance sheet
dates are as follows:
January 31, 2024
January 31, 2023
Dividend yield
Annual risk-free interest rate
4.0 %
4.0 %
4.2 %
3.7%
Expected share price volatility
18.2% to 25.6%
13.4% to 23.2%
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, 2024 January 31, 2023 January 31, 2024 January 31, 2023
301,683
—
589,588
—
(251,125)
(287,905)
—
—
1,383,056
211,484
(224,923)
(17,925)
1,274,837
238,024
(120,446)
(9,359)
50,558
301,683
1,351,692
1,383,056
50,558
301,683
743,499
648,793
The weighted-average share price on the dates options were exercised during the year was $38.99 (January 31, 2023 – $36.99).
Weighted-average exercise price
Declining Strike Price Options
Standard Options
Outstanding options, beginning of year
$
31.71
$ 31.06
$
31.22
$ 30.13
January 31, 2024 January 31, 2023 January 31, 2024 January 31, 2023
Granted
Exercised
Forfeited or cancelled
Outstanding options, end of year
Exercisable at end of year
Summary of options outstanding by grant year
—
27.82
—
—
28.13
—
39.05
28.73
35.69
35.64
28.05
35.48
$
$
27.24
$ 31.71
27.24
$ 27.27
$
$
32.80
$ 31.22
30.39
$ 29.28
Outstanding
Exercisable
Range of
exercise price
Number
outstanding
Weighted-average
remaining
contractual years
Weighted-average
exercise price
Options
exercisable
Weighted-average
exercise price
$
$
$
$
$
$
$
27.24-35.83
27.77-27.77
28.13-30.02
29.23-29.23
34.67-35.51
32.79-35.83
39.05-39.05
74,280
135,782
213,823
271,025
275,575
226,286
205,479
0.4
1.2
2.3
3.4
4.3
5.3
6.2
$ 29.04
$ 27.77
$ 28.18
$ 29.23
$ 35.37
$ 35.63
$ 39.05
74,280
135,782
213,823
177,585
136,013
56,574
—
$ 29.04
$ 27.77
$ 28.18
$ 29.23
$ 35.37
$ 35.63
$
—
Grant
year
2017
2018
2019
2020
2021
2022
2023
68THE NORTH WEST COMPANY INC. 2023
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, 2024 are $941 (January 31, 2023 – $932).
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, 2024, the Company had undrawn committed revolving loan facilities available of $433,935 (January 31, 2023 –
$418,250) which mature in 2027 and 2028 (Note 12). The undrawn available capacity is net of the aggregate potential liability for letters of
credit of $18,051 (January 31, 2023 – $18,738).
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.
2024
2025
2026
2027
2028
2029+
Total
Accounts payable and accrued liabilities
$
228,297 $
Current portion of long-term debt (Note 12)
Long-term debt (Note 12)
Total
268
12,251
— $
—
— $
—
— $
—
12,251
12,251
140,901
— $
—
5,191
— $ 228,297
—
268
152,900
335,745
$
240,816 $
12,251 $
12,251 $
140,901 $
5,191 $
152,900 $ 564,310
amount, $12,456 (January 31, 2023 – $13,399) is more than 60 days
past due. The Company has recorded an allowance against its
maximum exposure to credit risk of $12,709 (January 31, 2023 –
$11,385) which is based on expected credit losses for similar financial
assets.
The Company has an unsecured, non-interest bearing
promissory note receivable of $27,058 (January 31, 2023 – $41,299)
from Giant Tiger Stores Limited of which $22,500 (January 31, 2023 –
$15,000) has been reclassified to accounts receivable and $4,558
(January 31, 2023 – $26,299) 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, 2024 and 2023, 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
$121,606 (January 31, 2023 – $113,798). The Company does not
have any individual customers greater than 10% of total accounts
receivable. At January 31, 2024, the Company’s gross maximum
credit risk exposure is $134,315 (January 31, 2023 – $125,183). Of this
individual customers
69NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2023 - $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, 2023 – $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, 2024 a 100
basis point increase in the risk-free rate would cause net
earnings to decrease by approximately $642 (January 31, 2023 –
$702). A 100 basis point decrease would cause net earnings to
increase by approximately $642 (January 31, 2023 – $702).
(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, 2024
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
$
53,359
$
53,359
121,606
4,558
1,830
(224,957)
(268)
(281,308)
121,606
4,558
1,830
(224,957)
(268)
(261,628)
(1) At January 31, 2024, $22,500 of the promissory note receivable due within the next 12 months is included in accounts receivable (January 31, 2023 – $15,000).
See Note 24.
70THE NORTH WEST COMPANY INC. 2023
January 31, 2023
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
$
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)
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.
(b)
interest coverage ratio and a
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 an
leverage test.
Compliance with financial covenants is reported quarterly to
the Board of Directors. During the years ended January 31, 2024
and 2023, 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, 2024.
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. 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, lease liabilities 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 discretionary capital
spending and adjust the amount of dividends paid or refinance debt
at different terms and conditions all subject to market conditions
and the terms of any underlying agreements..
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, 2024, the debt-to-equity ratio
was 0.40 compared to 0.45 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, 2024
January 31, 2023
$
$
$
268
$
281,308
281,576
705,773
0.40
$
$
268
289,782
290,050
647,900
0.45
71NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. SHARE CAPITAL
Authorized – The Company has an unlimited number of Common
Voting Shares and Variable Voting Shares.
January 31, 2023
Purchased and cancelled (1)
Issued under share-based compensation
plans (Note 14)
Shares
Consideration
47,750,605
$ 176,323
(153,998)
114,860
(557)
2,643
Balance at January 31, 2024
47,711,467
$ 178,409
Shares held in trust, January 31, 2023
(65,522)
Purchased for future settlement of PSUs
(160,000)
Released for settlement of PSUs (Note 14)
96,070
Shares held in trust, January 31, 2024
(129,452)
$
(232)
(571)
345
(458)
Issued and outstanding, net of shares
held in trust, January 31, 2024
47,582,015
$ 177,951
January 31, 2022
Purchased and cancelled (1)
Issued under share-based compensation
plans (Note 14)
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)
Shares held in trust, January 31, 2023
Issued and outstanding, net of shares
held in trust, January 31, 2023
(8,371)
(87,000)
29,849
(65,522)
47,685,083
(29)
(311)
108
(232)
176,091
$
$
(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
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").
is converted
At January 31, 2024 shares outstanding of 47,711,467 included
17,649,571 (January 31, 2023 – 16,137,982) Variable Voting Shares,
representing 37.0% (January 31, 2023 – 33.8%) of the total shares
issued and outstanding.
Normal Course Issuer Bid
On November 15, 2023, the Company renewed its Normal Course
Issuer Bid ("NCIB"). Under the NCIB, the Company may acquire up to
a maximum of 4,733,380 of its shares, or approximately 10% of its
float for cancellation over the following 12 months. During the year
ended January 31, 2024, the Company purchased 153,998 common
shares having a book value of $557 for cash consideration of $5,000.
The excess of the purchase price over the book value of the shares of
$4,443 was charged to retained earnings. 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. 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, 2024
January 31, 2023
Employee costs (Note 18)
$ 355,498
$ 329,209
Amortization
Operating lease rentals
105,276
5,653
98,373
5,314
72THE NORTH WEST COMPANY INC. 2023
18. EMPLOYEE COSTS
20. DIVIDENDS
Year Ended
January 31, 2024 January 31, 2023
Wages, salaries and benefits
including bonus
$ 333,320
$ 306,947
Post-employment benefits (Note 13)
Share-based compensation (Note 14)
9,011
13,167
9,131
13,131
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
$
7,348
$
6,377
661
7,050
731
5,908
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, 2024
January 31, 2023
Dividends recorded in equity
and paid in cash
Less: Dividends paid to non-
controlling interests
$ 76,126
$ 74,326
(2,593)
(2,521)
$ 73,533
$
1.54
$ 71,805
$
1.50
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 10, 2024, the Board of Directors declared a dividend of
$0.39 per common share to paid on April 29, 2024 to shareholders of
record as of the close of business on April 18, 2024.
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, 2024
January 31, 2023
Interest on long-term debt
$ 14,775
$ 11,123
Interest on lease liabilities
Net interest on defined benefit
plan obligation
Interest imputed on promissory
note receivable
Interest capitalized
4,821
530
(760)
(315)
4,249
706
(1,016)
(226)
Interest expense
$ 19,051
$ 14,836
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, 2024
January 31, 2023
Net earnings attributable to shareholders for the year (numerator for diluted earnings per share)
$ 129,391
$ 122,190
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
47,747
684
48,431
47,865
784
48,649
$
$
2.71
2.67
$
$
2.55
2.51
73NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
74THE NORTH WEST COMPANY INC. 2023 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, 2024, the
Company’s share of the net assets of its joint venture amount to $16,903 (January 31, 2023 – $16,220) comprised assets of $18,603 (January 31,
2023 - $18,856) and liabilities of $1,700 (January 31, 2023 – $2,636). During the year ended January 31, 2024, the Company purchased freight
handling and shipping services from Transport Nanuk Inc. and its subsidiaries of $10,050 (January 31, 2023 – $9,546).
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 of $15,000
is payable 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, 2024 the Company
recognized interest income of $760 (January 31, 2023 – $1,016) on the promissory note receivable (Note 19) and it had a fair value of $27,088
(January 31, 2023 – $41,299), of which $22,500 (January 31, 2023 – $15,000) has been reclassified to accounts receivable.
75NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Shareholder Information
Fiscal Year
Quarter Ended
2023
April 30, 2023
July 31, 2023
October 31, 2023
January 31, 2024
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
Share
Price High
Share
Price Low
Share
Price Close
Volume
EPS1
$40.49
$29.58
$38.89
46,137,203
$2.67
40.49
39.86
36.43
39.96
34.50
30.38
29.58
34.77
39.74
32.10
35.36
38.89
11,059,985
15,947,371
11,605,807
7,524,040
0.43
0.76
0.77
0.71
$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
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 18, 2024
Payment Date: April 29, 2024
Record Date: June 28, 2024
Payment Date: July 15, 2024
Record Date: September 30, 2024
Payment Date: October 15, 2024
Record Date: December 31, 2024
Payment Date: January 15, 2025
*Dividends are subject to approval by the
Board of Directors
The 2024 Annual General Meeting of
Shareholders of The North West Company Inc.
will be held on Wednesday, June 5, 2024 at
11:30 am (Central Time) by virtual only meeting
via live audio webcast online at:
https://web.lumiagm.com/#/454508265
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, 2024: 47,711,467
Auditors
PricewaterhouseCoopers LLP
Five Year Compound Annual Growth (%)
76THE NORTH WEST COMPANY INC. 2023
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
Shannon L. Earle
Vice-President, People & Culture
BOARD OF DIRECTORS
Brock Bulbuck, Chair
Jim R. Caldwell
President, Canadian Retail
Matt D. Johnson
Vice-President, Cost-U-Less Merchandising
Deepak Chopra1, 3
Kyle A. Hill
President, Alaska Commercial Company
Frank W. Kelner
Chair & Chief Executive Officer,
North Star Air Ltd.
J. Kevin Proctor
President, Cost-U-Less & Riteway
Thomas J. Meilleur
Vice-President, North Star Air Ltd.
John D. King
Executive Vice President,
Chief Financial Officer & Corporate Secretary
Walter E. Pickett
Vice-President & General Manager,
Alaska Commercial Company
Alison F. Coville
Chief People Officer
Vineet Gupta
Chief Information Officer
Randy L. Roller
Vice-President & General Manager, Facilities
and Store Planning
Douglas S. Ruckle
Vice-President, Alaska Commercial Company
Merchandising
Cole J.A. Akerstream
Vice-President, Corporate Development
Nicolas Sabogal
Vice-President of Strategy,
Planning and Analytics
Michael T. Beaulieu
Vice-President, Canadian Store Operations
Kevin T. Sie
Vice-President, Finance
David M. Chatyrbok
Vice-President, Canadian Merchandising
Leanne G. Flewitt
Vice-President and
Chief Transformation Officer
Jeffrey B. Stout
President & Chief Operating Officer,
North Star Air Ltd.
James W. Walker
Vice-President & General Manager,
Wholesale Operations (International
Operations)
Stewart F. Glendinning 1, 2
Rachel L. Huckle 2, 3
Annalisa King 1, 2
Violet A. M. Konkle 1, 3
Steven Kroft 2, 3
Daniel G. McConnell
Jennefer Nepinak 1, 3
Victor Tootoo1, 2
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
77ANNUAL REPORT 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
78THE NORTH WEST COMPANY INC. 2023