June 28, 2012 at 09:25 AM EDT
Empire Company Reports Fourth Quarter and Full Year Results

INCREASES DIVIDEND FOR THE 17TH CONSECUTIVE YEAR

STELLARTON, NS, June 28, 2012 /CNW/ - Empire Company Limited (TSX: EMP.A) today announced financial results for its fourth quarter and fiscal year ended May 5, 2012. For the 13 weeks ended May 5, 2012, the Company recorded net earnings, net of minority interest, of $92.1 million ($1.35 per share) compared to $82.5 million ($1.21 per share) for the 14 weeks ended May 7, 2011.

Adjusted net earnings, net of minority interest, for the 13 weeks ended May 5, 2012 were $89.5 million ($1.32 per share) compared to $81.3 million ($1.20 per share) recorded for the 14 weeks ended May 7, 2011. The fourth quarter last year contained an additional week of operations for wholly-owned Sobeys Inc. which served to positively impact last year's sales by $313.6 million and net earnings by approximately $6.3 million. Excluding the net earnings impact of the additional week of operations in the fourth quarter last year, adjusted net earnings, net of minority interest, increased $14.5 million or 19.3 percent.

Fourth Quarter Highlights (13 weeks versus 14 weeks last year)

  • Sales increased $106.6 million or 2.8 percent after adjusting for the impact of the additional week of operations last year and the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter of fiscal 2012.
  • Sobeys' same-store sales increased 0.7 percent.
  • Operating income (1) of $136.4 million versus $122.4 million last year.
  • Net earnings, net of minority interest, of $92.1 million ($1.35 per share) compared to $82.5 million ($1.21 per share) last year.
  • Adjusted net earnings (2), net of minority interest, of $89.5 million ($1.32 per share) versus $81.3 million ($1.20 per share) last year.
  • Funded debt to total capital ratio of 25.0 percent compared to 26.7 percent last year.
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(1)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).
(2)Excludes items which are considered not indicative of underlying business operating performance.


Net earnings, net of minority interest, for the 52 weeks ended May 5, 2012 were $339.4 million ($4.99 per share) compared to $400.6 million ($5.87 per share) recorded for the 53 weeks last year. Included in net earnings last year was a net gain on the sale of a 27.5 percent ownership interest in Wajax Income Fund ("Wajax") for $76.2 million.

Adjusted net earnings, net of minority interest, for the 52 weeks ended May 5, 2012 were $320.6 million ($4.71 per share) compared to $303.2 million ($4.45 per share) for the 53 weeks ended May 7, 2011. Excluding the impact of the additional week of operations last year, adjusted net earnings, net of minority interest, increased $23.7 million or 8.0 percent.

Fiscal 2012 Highlights (52 weeks versus 53 weeks last year)

  • Sales increased $474.9 million or 3.0 percent after adjusting for the impact of the additional week of operations last year and the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter of fiscal 2012.
  • Sobeys' same-store sales increased 1.4 percent.
  • Operating income (1) of $534.3 million versus $525.7 million last year.
  • Net earnings, net of minority interest, of $339.4 million ($4.99 per share) compared to $400.6 million ($5.87 per share) last year. Net earnings last year included a net gain on the sale of a 27.5 percent ownership interest in Wajax of $76.2 million.
  • Adjusted net earnings (2), net of minority interest, of $320.6 million ($4.71 per share) versus $303.2 million ($4.45 per share) last year.
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(1)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).
(2)Excludes items which are considered not indicative of underlying business operating performance.


"We are clearly pleased with our fourth quarter and fiscal 2012 operating performance as we continue to profitably grow our food retail business and our investments and other operations in a very competitive environment," stated Paul Sobey, President and CEO, Empire Company Limited.

Mr. Sobey continued, "On behalf of all our employees, franchisees and affiliates, along with the Board and the Sobey family, we extend our heartfelt appreciation and best wishes to Bill McEwan, who will step down as President and CEO of Sobeys Inc. on June 29, 2012, following more than 11 years of truly inspirational leadership."

"Marc Poulin, currently President, Sobeys IGA Operations will replace Bill as the newly appointed President and CEO of Sobeys Inc. It is indeed a celebration of the depth of talent we have in the organization that we have such a highly qualified and proven food retailer to lead Sobeys' food-focused strategy forward. We are confident that Marc's knowledge of the industry and his proven leadership will serve Sobeys well in the years ahead," said Paul Sobey.

"Consistent with our growth and the improvement in our financial position, we are pleased to announce an increase in Empire's quarterly dividend per share, from 22.5 cents per share to 24.0 cents per share per quarter, a 6.7 percent increase. This marks the seventeenth consecutive year of Empire dividend increases."

Dividend Declaration

The Board of Directors declared a quarterly dividend of 24.0 cents per share on both the Non-Voting Class A shares and the Class B common shares that will be payable on July 31, 2012 to shareholders of record on July 13, 2012. These dividends are eligible dividends as defined for the purposes of the Income Tax Act (Canada) and applicable provincial legislation and, therefore, qualify for the favourable tax treatment applicable to such dividends.

With the transition to International Financial Reporting Standards ("IFRS" or "GAAP") effective the first quarter of fiscal 2012, the comparative figures in the financial results table below for the 14 and 53 weeks ended May 7, 2011 have been restated to conform with IFRS.

CONSOLIDATED FINANCIAL RESULTS

 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended  
($ in millions, except per share amounts) May 5, 2012 May 7, 2011 ($) Change May 5, 2012 May 7, 2011 ($) Change
Sales $4,073.8 $ 4,149.8 $ (76.0) $16,249.1 $ 15,956.8 $ 292.3
EBITDA (1) (2)224.2 209.8 14.4 876.6 863.0 13.6
Operating income (1) (2)136.4 122.4 14.0 534.3 525.7 8.6
Net earnings, net of minority interest (3)92.1 82.5 9.6 339.4 400.6 (61.2)
Adjusted net earnings, net of minority interest (4)89.5 81.3 8.2 320.6 303.2 17.4
EPS fully diluted $1.35 $ 1.21 $ 0.14 $4.99 $ 5.87 $ (0.88)
Adjusted EPS (fully diluted) (4)$1.32 $ 1.20 $ 0.12 $4.71 $ 4.45 $ 0.26
(1)See Non-GAAP Financial Measures contained in this news release.
(2)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).
(3)Net earnings, net of minority interest, for the 53 weeks ended May 7, 2011 includes a net gain on the sale of a 27.5 percent ownership interest in Wajax of $76.2 million.
(4)Excludes items which are considered not indicative of underlying business operating performance.


Sales

Consolidated sales for the 13 weeks ended May 5, 2012 were $4.07 billion compared to $4.15 billion for the 14 weeks ended May 7, 2011. Adjusting for the additional week of operations at Sobeys last year, which impacted sales by $313.6 million, and for the impact of sales relating to the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter this year, which amounted to $131.0 million, sales increased $106.6 million or 2.8 percent.

For the 52 weeks ended May 5, 2012, consolidated sales were $16.25 billion compared to $15.96 billion reported for the 53 weeks ended May 7, 2011. Adjusting for the additional week of operations at Sobeys last year and for the impact of sales relating to the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter this year, as mentioned, sales increased $474.9 million or 3.0 percent.

EBITDA

Consolidated EBITDA in the fourth quarter was $224.2 million compared to $209.8 million in the fourth quarter last year. For the fiscal year ended May 5, 2012, consolidated EBITDA was $876.6 million compared to $863.0 million last year. Adjusting EBITDA for items which are considered not indicative of underlying business operating performance, as outlined in the following table, resulted in fourth quarter adjusted EBITDA of $221.5 million compared to $208.4 million in the fourth quarter last year and annual adjusted EBITDA of $853.2 million compared to $837.7 million last fiscal year.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions) May 5, 2012 May 7, 2011 May 5, 2012 May 7, 2011
EBITDA (consolidated) (1)$224.2 $ 209.8 $876.6 $ 863.0
Adjustments:
Gain on disposal of assets (5.1) (0.5) (22.2) (19.6)
Sobeys' severance and store closure costs - 0.2 - 27.7
Post-retirement benefit amendment - - - (28.5)
Sobeys' organizational realignment costs 2.8 - 9.2 -
Dilution gains (0.4) (1.1) (10.4) (4.9)
(2.7) (1.4) (23.4) (25.3)
Adjusted EBITDA $221.5 $ 208.4 $853.2 $ 837.7
(1)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).


Operating Income

Consolidated operating income in the fourth quarter was $136.4 million, an increase of $14.0 million from the $122.4 million recorded in the fourth quarter last year. For the 52 weeks ended May 5, 2012, consolidated operating income was $534.3 million, an increase of $8.6 million from the $525.7 million recorded last year. Adjusting operating income for items which are considered not indicative of underlying business operating performance, as outlined in the previous table for EBITDA, resulted in quarterly adjusted consolidated operating income of $133.7 million compared to $121.0 million in the fourth quarter last year. For the full year, adjusted consolidated operating income of $510.9 million compared to $500.4 million last fiscal year.

Net Earnings

Consolidated net earnings, net of minority interest, in the fourth quarter equalled $92.1 million ($1.35 per share) compared to $82.5 million ($1.21 per share) in the fourth quarter last year. For fiscal 2012, consolidated net earnings, net of minority interest, equalled $339.4 million ($4.99 per share) compared to $400.6 million ($5.87 per share) last year.

Fiscal 2011 net earnings were favourably impacted by an additional week of operating results by Sobeys, as mentioned. Management calculates the additional week of operations to have positively impacted fiscal 2011 net earnings, net of minority interest, by approximately $6.3 million.

The following table presents Empire's segmented net earnings, net of minority interest, for the 13 and 52 weeks ended May 5, 2012 compared to the 14 and 53 weeks ended May 7, 2011.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions, net of tax) May 5, 2012 May 7, 2011 ($) Change May 5, 2012 May 7, 2011 ($) Change
Food retailing $ 81.2 $ 76.0 $ 5.2 $ 304.1 $ 297.3 $ 6.8
Investments and other operations  10.9 6.5 4.4 35.3 103.3 (1) (68.0)
Consolidated $ 92.1 $ 82.5 $ 9.6 $ 339.4 $ 400.6 $ (61.2)
(1)Includes the net gain of $76.2 million from the sale of a 27.5 percent ownership interest in Wajax.


Adjusted Net Earnings

The table below adjusts reported net earnings, net of minority interest, for items which are considered not indicative of underlying business operating performance. Excluding the impact of the adjustments noted in the table, Empire recorded adjusted net earnings, net of minority interest, of $89.5 million ($1.32 per share) for the 13 weeks ended May 5, 2012 compared to $81.3 million ($1.20 per share) recorded in the fourth quarter last year. For fiscal 2012, adjusted net earnings, net of minority interest, were $320.6 million ($4.71 per share) compared to $303.2 million ($4.45 per share) last year.

After adjusting for the additional week of operations at Sobeys in fiscal 2011, adjusted net earnings, net of minority interest, on a comparable 13 and 52 week basis in fiscal 2011 would have been $75.0 million ($1.10 per share) and $296.9 million ($4.35 per share), respectively.

13 Weeks Ended  14 Weeks Ended 52 Weeks Ended  53 Weeks Ended
($ in millions, except per share amounts, net of tax) May 5, 2012 May 7, 2011 May 5, 2012 May 7, 2011
Net earnings, net of minority interest $92.1  $ 82.5  $339.4   $ 400.6
Adjustments:
Gain on sale of Wajax - - - (76.2)
Gain on disposal of assets (4.3) (0.5) (17.9) (16.4)
Sobeys' severance and store closure costs - 0.1 - 20.0
Post-retirement benefit amendment - - - (21.3)
Sobeys' organizational realignment costs 2.0 - 6.4 -
Dilution gains (0.3) (0.8) (7.3) (3.5)
(2.6)  (1.2)  (18.8)  (97.4)
Adjusted net earnings, net of minority interest $89.5  $ 81.3   $320.6  $ 303.2
Adjusted net earnings, net of minority interest, by division:
Food retailing $79.1 $ 75.5 $292.5 $ 280.8
Investments and other operations 10.4 5.8 28.1 22.4
Adjusted net earnings, net of minority interest $89.5 $ 81.3 $320.6 $ 303.2
Adjusted EPS (fully diluted) $1.32 $ 1.20 $4.71 $ 4.45


With the transition to IFRS, the Company now has two reportable operating segments:

1) Food Retailing, which consists of wholly-owned Sobeys Inc. ("Sobeys"), and
2) Investments and Other Operations, the principal components of which include investments in Crombie REIT (44.3 percent ownership interest; 40.7 percent fully diluted), an approximate 40.0 percent ownership interest in Genstar Development Partnership ("Genstar"), as well as wholly-owned ETL Canada Holdings Limited ("Empire Theatres").


FOOD RETAILING

The following table presents the food retailing segment's contribution to Empire's consolidated sales, EBITDA, adjusted EBITDA, operating income, adjusted operating income, net earnings, net of minority interest, and adjusted net earnings, net of minority interest.

 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended  
($ in millions) May 5, 2012 May 7, 2011 ($) Change May 5, 2012 May 7, 2011 ($) Change
Sales $4,023.2 $ 4,102.6 $ (79.4) $16,044.6 $ 15,756.3 $ 288.3
EBITDA (1)203.7 193.5 10.2 801.8 793.6 8.2
Adjusted EBITDA (2)201.6 193.1 8.5 788.6 775.1 13.5
Operating income (1)120.0 111.3 8.7 475.8 473.4 2.4
Adjusted operating income (2)117.9 110.9 7.0 462.6 454.9 7.7
Net earnings, net of minority interest 81.2 76.0 5.2 304.1 297.3 6.8
Adjusted net earnings, net of minority interest (2)79.1 75.5 3.6 292.5 280.8 11.7
(1)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).
(2)Excludes items which are considered not indicative of underlying business operating performance.


Sales

Empire's food retailing division achieved sales of $4.02 billion in the fourth quarter of fiscal 2012. After adjusting for the additional week of operations last year and the impact of the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter of fiscal 2012, sales were up $103.2 million or 2.7 percent. During the fourth quarter, same-store sales increased 0.7 percent.

For the 52 weeks ended May 5, 2012, Sobeys achieved sales of $16.04 billion. After adjusting for the additional week of operations last year and the impact of the acquisition of 236 retail gas locations and related convenience store operations in the fourth quarter of fiscal 2012, sales were up $470.9 million or 3.0 percent. During the fiscal year, same-store sales increased 1.4 percent.

EBITDA

Sobeys contributed EBITDA to Empire in the fourth quarter of $203.7 million compared to $193.5 million last year. Sobeys recorded gains on the disposal of assets in the current quarter of $4.9 million (fiscal 2011 - $0.5 million). Adjusting for this and other items which are considered not indicative of underlying business operating performance, as outlined in the following table, resulted in an adjusted EBITDA contribution from Sobeys to Empire of $201.6 million in the fourth quarter compared to a $193.1 million contribution in the fourth quarter last year.

For fiscal 2012, Sobeys contributed EBITDA to Empire of $801.8 million compared to $793.6 million last year. Included in EBITDA for fiscal 2012 were organizational realignment costs of $9.2 million (fiscal 2011 - $nil) and gains on the disposal of assets of $22.0 million (fiscal 2011 - $18.0 million). Adjusting for these and other items which are considered not indicative of underlying business operating performance, as outlined in the following table, resulted in an adjusted EBITDA contribution from Sobeys to Empire of $788.6 million for fiscal 2012 compared to a $775.1 million contribution last year.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions) May 5, 2012 May 7, 2011 May 5, 2012 May 7, 2011
EBITDA (contributed by Sobeys) (1)$203.7 $ 193.5 $801.8 $ 793.6
Adjustments:
Gain on disposal of assets (4.9) (0.5) (22.0) (18.0)
Sobeys' severance and store closure costs - 0.2 - 27.7
Post-retirement benefit amendment - - - (28.0)
Sobeys' organizational realignment costs 2.8 - 9.2 -
Dilution gains - (0.1) (0.4) (0.2)
(2.1) (0.4) (13.2) (18.5)
Adjusted EBITDA $201.6 $ 193.1 $788.6 $ 775.1
(1)Certain balances have been reclassified for changes to comparative figures (see Note 20 to the Company's fourth quarter unaudited consolidated financial statements).


Operating Income

Sobeys' operating income contribution to Empire in the fourth quarter was $120.0 million compared to $111.3 million in the same quarter last year, an increase of $8.7 million or 7.8 percent. Operating margin for the fourth quarter equalled 2.98 percent versus 2.71 percent in the same period last year.

For the 52 weeks ended May 5, 2012, Sobeys' operating income contribution to Empire was $475.8 million compared to $473.4 million last year, an increase of $2.4 million or 0.5 percent. Operating margin for fiscal 2012 equalled 2.97 percent versus 3.00 percent in the same period last year.

Adjusting Sobeys' operating income for items which are considered not indicative of underlying business operating performance, as outlined in the previous table for EBITDA, resulted in adjusted operating income contribution of $117.9 million (2.93 percent of sales) in the fourth quarter compared to $110.9 million (2.70 percent of sales) in the fourth quarter last year. On an annual basis, adjusted operating income contribution was $462.6 million (2.88 percent of sales) for fiscal 2012 compared to $454.9 million (2.89 percent of sales) last year.

Net Earnings

During the fourth quarter of fiscal 2012, Sobeys contributed net earnings, net of minority interest, to Empire of $81.2 million versus $76.0 million in the fourth quarter last year, an increase of $5.2 million or 6.8 percent. Sobeys contributed adjusted net earnings, net of minority interest, to Empire of $79.1 million versus $75.5 million in the fourth quarter last year, an increase of $3.6 million or 4.8 percent.

For the 52 weeks ended May 5, 2012, Sobeys contributed net earnings, net of minority interest, of $304.1 million to Empire, an increase of $6.8 million or 2.3 percent from the $297.3 million recorded in the prior year. Sobeys contributed adjusted net earnings, net of minority interest, to Empire of $292.5 million versus $280.8 million last year, an increase of $11.7 million or 4.2 percent.

Adjusting for the additional week of operations at Sobeys in fiscal 2011, adjusted net earnings, net of minority interest, on a comparable 13 and 52 week basis in fiscal 2011 would have been $69.2 million and $274.5 million, respectively.

INVESTMENTS AND OTHER OPERATIONS

The table below presents the investments and other operations segment's contribution to Empire's consolidated sales, EBITDA, adjusted EBITDA, operating income, net earnings and adjusted net earnings.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions) May 5, 2012 May 7, 2011 ($) Change May 5, 2012 May 7, 2011 ($) Change
Sales $50.6 $ 47.2 $ 3.4 $204.5 $ 200.5 $ 4.0
EBITDA 20.5 16.3 4.2 74.8 69.4 5.4
Adjusted EBITDA (1)19.9 15.3 4.6 64.6 62.6 2.0
Operating income
Crombie REIT (2)4.9 5.1 (0.2) 19.7 18.4 1.3
Real estate partnerships (3)13.2 17.7 (4.5) 30.0 32.1 (2.1)
Wajax - - - - 8.6 (8.6)
Other operations, net of corporate expenses (4)(1.7) (11.7) 10.0 8.8 (6.8) 15.6
16.4 11.1 5.3 58.5 52.3 6.2
Net earnings (5)10.9 6.5 4.4 35.3 103.3 (68.0)
Adjusted net earnings (1)10.4 5.8 4.6 28.1 22.4 5.7
(1)Excludes items which are considered not indicative of underlying business operating performance.
(2)44.3 percent (40.7 percent fully diluted) equity accounted interest in Crombie REIT (May 7, 2011 - 46.4 percent interest).
(3)40.7 percent equity accounted interest in Genstar Development Partnership, 45.9 percent equity accounted interest in Genstar Development Partnership II, 42.1 percent equity accounted interest in each of GDC Investments 4, L.P., GDC Investments 5, L.P. and GDC Investments 6, L.P., and 42.5 percent equity accounted interest in GDC Investments 7, L.P. (collectively referred to as "Genstar").
(4)Other operations (net of corporate expenses) operating income for the 13 and 52 weeks ended May 5, 2012 includes an impairment charge related to an investment of $1.1 million (14 and 53 weeks ended May 7, 2011 - $9.6 million). The fourth quarter of fiscal 2012 includes dilution gains of $0.4 million (fiscal - $1.0 million) and a gain on the disposal of assets of $0.2 million (fiscal 2011 - $nil). Fiscal 2012 includes dilution gains of $10.0 million (fiscal 2011 - $4.7 million), a gain on the disposal of assets of $0.2 million (fiscal 2011 - $1.6 million) and a post-retirement benefit amendment of $nil (fiscal 2011 - $0.5 million).
(5)Net earnings for the 53 weeks ended May 7, 2011 includes a net gain on the sale of a 27.5 percent ownership interest in Wajax of $76.2 million.


Sales

Investments and other operations' sales, primarily generated by Empire Theatres, equalled $50.6 million in the fourth quarter ended May 5, 2012 versus $47.2 million in the fourth quarter last year, a $3.4 million or 7.2 percent increase. For fiscal 2012, investments and other operations reported sales of $204.5 million, an increase of $4.0 million or 2.0 percent from the $200.5 million reported last year.

EBITDA

Investments and other operations contributed EBITDA to Empire in the fourth quarter of $20.5 million compared to $16.3 million last year. Adjusting for items which are considered not indicative of underlying business operating performance, as outlined in the following table, resulted in adjusted EBITDA from investments and other operations of $19.9 million compared to $15.3 million last year.

For the 52 weeks ended May 5, 2012, investments and other operations contributed EBITDA to Empire of $74.8 million compared to $69.4 million last year. Fiscal 2012 EBITDA from investments and other operations included $10.0 million (fiscal 2011 - $4.7 million) in dilution gains resulting from a change in the ownership level in Crombie REIT. Adjusting for this and other items which are considered not indicative of underlying business operating performance resulted in adjusted EBITDA from investments and other operations of $64.6 million compared to $62.6 million last year.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions) May 5, 2012 May 7, 2011 May 5, 2012 May 7, 2011
EBITDA (investments and other operations) $20.5  $ 16.3  $74.8  $ 69.4
Adjustments:      
Gain on disposal of assets (0.2)  -  (0.2)  (1.6)
Post-retirement benefit amendment -   -  -  (0.5)
Dilution gains (0.4)  (1.0)  (10.0)  (4.7)
(0.6)  (1.0)  (10.2)  (6.8)
Adjusted EBITDA $19.9  $ 15.3  $64.6  $ 62.6


Operating Income

Investments and other operations contributed operating income of $16.4 million in the fourth quarter ended May 5, 2012 compared to $11.1 million in the fourth quarter last year, an increase of $5.3 million. For the 52 weeks ended May 5, 2012, investments and other operations' operating income contribution to Empire was $58.5 million compared to $52.3 million last year, an increase of $6.2 million.

Adjusting investments and other operations' operating income for items which are considered not indicative of underlying business operating performance, as outlined in the previous table for EBITDA, resulted in an adjusted operating income contribution during the fourth quarter of $15.8 million versus $10.1 million last year. For fiscal 2012, adjusted operating income contribution was $48.3 million compared to $45.5 million last year.

Net Earnings

Investments and other operations contributed net earnings of $10.9 million to Empire's consolidated fourth quarter fiscal 2012 net earnings compared to a $6.5 million contribution in the fourth quarter last year. Adjusted net earnings contribution from investments and other operations was $10.4 million versus $5.8 million in the fourth quarter last year.

For fiscal 2012, investments and other operations contributed net earnings of $35.3 million to Empire's consolidated net earnings compared to a $103.3 million contribution last year. Last year's net earnings included the net gain on the sale of Wajax for $76.2 million. Adjusted net earnings contribution from investments and other operations was $28.1 million versus $22.4 million last year.

CONSOLIDATED FINANCIAL CONDITION

The Company's overall financial condition has improved since the start of the fiscal year as evidenced by the capital structure and key financial condition measures presented in the table below.

($ in millions, except per share and ratio calculations) May 5, 2012 May 7, 2011
Shareholders' equity, net of minority interest $3,396.3 $ 3,162.1
Book value per common share  $49.98 $ 46.48
Bank indebtedness $4.4 $ -
Long-term debt, including current portion (1)$1,126.4 $ 1,152.4
Funded debt to total capital 25.0%  26.7%
Net funded debt to net total capital ratio (2)15.4%  14.5%
Funded debt to EBITDA 1.3x 1.3x
EBITDA to net finance costs 14.6x 11.4x
Total assets $6,913.1 $ 6,518.6
(1)Includes liabilities relating to assets held for sale.
(2)Net funded debt to net total capital reduces funded debt by cash and cash equivalents.


Book value per common share was $49.98 at May 5, 2012 compared to $46.48 at May 7, 2011. The 7.5 percent increase in book value in the current fiscal year largely reflects the Company's earnings growth.

The ratio of funded debt to total capital has improved 1.7 percentage points to 25.0 percent from 26.7 percent at the end of fiscal 2011 as a result of the $234.2 million increase in shareholders' equity levels and a $21.6 million decline in funded debt from last fiscal year.

Consolidated free cash flow generation in the fourth quarter of fiscal 2012 was $189.4 million compared to $171.4 million in the fourth quarter last year. This $18.0 million increase was due to a $25.5 million increase in cash flow from operations, partially offset by an increase in property, equipment and investment property purchases of $7.5 million.

For the 52 weeks ended May 5, 2012, free cash flow generation was $225.1 million compared to $210.3 million for the 53 weeks ended May 7, 2011. The $14.8 million increase in free cash flow from fiscal 2011 was due to a $51.9 million increase in cash flow from operations, partially offset by a $37.1 million increase in property, equipment and investment property purchases.

The following table reconciles free cash flow to GAAP cash flows used in operating activities for the 13 and 52 weeks ended May 5, 2012 and the 14 and 53 weeks ended May 7, 2011.

13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
($ in millions) May 5, 2012 May 7, 2011 May 5, 2012 May 7, 2011
Cash flow from operating activities $370.9 $ 345.4 $814.6 $ 762.7
Less: property, equipment and investment property purchases 181.5 174.0 589.5 552.4
Free cash flow $189.4  $ 171.4  $225.1  $ 210.3


SUBSEQUENT EVENT

On June 12, 2012, the Company agreed to purchase $24.0 million of convertible unsecured subordinated debentures (the "Debentures") from Crombie REIT, pursuant to a bought-deal prospectus offering for a total of $60.0 million. The Debentures have a maturity date of September 30, 2019. The Debentures have a coupon of 5.00 percent per annum and each $1,000 principal amount of Debenture is convertible into approximately 49.7512 units of Crombie REIT, at any time, at the option of the holder, based on a conversion price of $20.10 per unit.

FORWARD-LOOKING INFORMATION

This news release contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. Expressions such as "anticipates", "expects", "believes", "estimates", "could", "intend", "may", "plans", "will", "would" and other similar expressions or the negative of these terms are generally indicative of forward-looking statements. Forward-looking statements contained in this press release include those relating to Sobeys' expectations that it will continue to focus on disciplined cost management initiatives, supply chain and retail productivity improvements, and migration of best practices to continue to fund investments to drive sales and improve margins over time which could be impacted by the final scope and scale of these initiatives; and the Company's expectations that cost productivity, growth and innovation initiatives will continue to enrich the customers' experience and ensure our competitive position which may be impacted by economic and competitive conditions.

By its very nature, forward-looking information requires the Company to make assumptions and is subject to inherent risks and uncertainties which give rise to the possibility that the Company's expectations or objectives will not prove to be accurate. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and risks are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including the Risk Management section of the annual Management's Discussion and Analysis.

Readers are urged to consider these and other risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information. The forward-looking information in this press release reflects the Company's expectations as of June 28, 2012 and is subject to change after this date. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company other than as required by applicable securities laws.

NON-GAAP FINANCIAL MEASURES

There are measures included in this press release that do not have a standardized meaning under GAAP and therefore may not be comparable to similarly titled measures presented by other publicly traded companies. The Company includes these measures because it believes certain investors use these measures as a means of assessing financial performance.

Empire's definition of the non-GAAP terms are as follows:

  • Same-store sales are sales from stores in the same locations in both reporting periods.
  • Gross profit is calculated as sales less cost of sales.
  • Operating income, or earnings before interest and taxes ("EBIT"), is calculated as net earnings before minority interest, finance costs (net of finance income) and income taxes.
  • Operating income margin is operating income divided by sales.
  • Adjusted operating income is operating income excluding items which are considered not indicative of underlying business operating performance.
  • Earnings before interest, taxes, depreciation and amortization ("EBITDA") is calculated as EBIT plus depreciation and amortization of intangibles.
  • Adjusted EBITDA is EBITDA excluding items which are considered not indicative of underlying business operating performance.
  • Funded debt is all interest bearing debt, which includes bank loans, bankers' acceptances, long-term debt and debt related to assets held for sale.
  • Net funded debt is calculated as funded debt less cash and cash equivalents.
  • Total capital is calculated as funded debt plus shareholders' equity, net of minority interest.
  • Adjusted net earnings are net earnings excluding items which are considered not indicative of underlying business operating performance.
  • Net total capital is total capital less cash and cash equivalents.
  • Free cash flow is calculated as cash flows from operating activities, less property, equipment and investment property purchases.
  • Book value per common share is shareholders' equity, net of minority interest, less preferred shares, divided by total common shares outstanding.


CONFERENCE CALL INFORMATION

The Company will hold an analyst call on Thursday, June 28, 2012 beginning at 1:00 p.m. (Eastern Daylight Time) during which senior management will discuss the Company's financial results for the fourth quarter and full year ended May 5, 2012. To join this conference call dial (888) 231-8191 outside the Toronto area or (647) 427-7450 from within the Toronto area. You may also listen to a live audiocast of the conference call by visiting the Company's website located at www.empireco.ca. Replay will be available by dialing (855) 859-2056 and entering passcode 91624078 until midnight July 5, 2012, or on the Company's website for 90 days following the conference call.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

To view and download the Company's fourth quarter and full year fiscal 2012 unaudited consolidated financial statements, please access the following link:

Q4 and Fiscal 2012 Unaudited Consolidated Financial Statements

This information can also be downloaded at www.sedar.com or by accessing the Investor Centre of the Company's website at www.empireco.ca.

2012 ANNUAL REPORT

The Company's audited consolidated financial statements and the notes thereto for the fiscal year ended May 5, 2012 will be available on or before August 3, 2012. Management's Discussion and Analysis for the year ended May 5, 2012, which includes discussion and analysis of results of operations, financial position and cash flows, will also be available on or before August 3, 2012. Both documents will be contained in the Company's 2012 Annual Report and can be accessed through the Investor Centre section of the Company's website at www.empireco.ca and also at www.sedar.com.

ABOUT EMPIRE

Empire Company Limited (TSX:EMP.A) is a Canadian company headquartered in Stellarton, Nova Scotia. Empire's core businesses include food retailing and related real estate. With over $16 billion in annual sales and approximately $6.9 billion in assets, Empire and its subsidiaries directly employ approximately 47,000 people.

Additional financial information relating to Empire, including the Company's Annual Information Form, can be found on the Company's website at www.empireco.ca or at www.sedar.com.

SOURCE EMPIRE COMPANY LIMITED

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