George Weston Limited - 2012 Second Quarter Results(1).

    




 TORONTO, July 31, 2012 /CNW/ - George Weston Limited  ("GWL")  and its subsidiaries (collectively the "Company") today is announcing  its unaudited results for the 12 weeks ended June 16, 2012. 

 The Company's Q2 2012 Quarterly Report to Shareholders, including the  Company's unaudited interim period condensed consolidated financial  statements and Management's Discussion and Analysis ("MD&A") for the 12  and 24 weeks ended June 16, 2012, is available in the Investor Centre  section of the Company's website at www.weston.ca and has been filed with the System for Electronic Document Analysis and  Retrieval ("SEDAR") and will be available at www.sedar.com. 

 CONSOLIDATED RESULTS OF OPERATIONS George Weston Limited's second quarter 2012 adjusted basic net earnings  per common share((2)) were $1.06 compared to $1.34 in the same period in 2011, a decrease of  $0.28. The decrease was primarily attributable to a decline in the  operating performance of Loblaw Companies Limited ("Loblaw"). The  decline in the operating performance of Loblaw was primarily due to an  increase in labour and other operating costs, incremental costs related  to investments in information technology ("IT") and supply chain((3)), a decline in gross profit( )and a charge related to the transition of certain Ontario conventional  stores to the more cost effective and efficient operating terms of  collective agreements ratified in the third quarter of 2010. Increased  labour costs and the decline in gross profit included incremental  investments in Loblaw's customer proposition that were not covered by  operations. 





    (unaudited)                                                                                 

    ($ millions          12 Weeks Ended                          24 Weeks Ended                 
    except where
    otherwise
    indicated) 

                                                                                    

    As at or for     Jun. 16,     Jun. 18,       Change     Jun. 16,      Jun. 18,       Change 
    the periods          2012         2011                      2012          2011
    ended as
    indicated

    Sales        $      7,627 $      7,531         1.3% $     14,851  $     14,679          1.2%

    Operating    $        323 $        397              $        597  $        700       (14.7)%
    income                                      (18.6)%

    Adjusted     $        364 $        440              $        675  $        820       (17.7)%
    operating                                   (17.3)%
    income(2)

    Adjusted             4.8%         5.8%                      4.5%          5.6%              
    operating
    margin(2)

    Net interest $         72 $         98              $        116  $        164       (29.3)%
    expense and                                 (26.5)%
    other
    financing
    charges

    Income taxes $         55 $         69              $        114  $        141       (19.1)%
                                                (20.3)%

    Net earnings $        137 $        157              $        261  $        262        (0.4)%
    attributable                                (12.7)%
    to
    shareholders
    of the
    Company

    Net earnings $        196 $        230              $        367  $        395        (7.1)%
                                                (14.8)%

    Basic net    $       0.99 $       1.13              $       1.88  $       1.87          0.5%
    earnings per                                (12.4)%
    common share
    ($)

    Adjusted     $       1.06 $       1.34              $       1.95  $       2.41       (19.1)%
    basic net                                   (20.9)%
    earnings per
    common share
    (2) ($)

    Adjusted     $        556 $        612       (9.2)% $      1,051 $       1,158        (9.2)%
    EBITDA(2)

    Adjusted             7.3%         8.1%                      7.1%          7.9%              
    EBITDA
    margin(2)

                                                                                                






  

 The Company's basic net earnings per common share were $0.99 compared to  $1.13 in the same period in 2011, a decrease of $0.14, or 12.4%.  Adjusted basic net earnings per common share((2)) declined $0.28 and excluded the year-over-year favourable net impact of  certain items, primarily certain foreign currency translation gains and  the fair value adjustment of the forward sale agreement for 9.6 million  Loblaw common shares, partially offset by the accrual of a  multi-employer pension plan ("MEPP") withdrawal liability incurred by  Weston Foods in the second quarter of 2012. 

 The Company uses non-GAAP financial measures. See the "Non-GAAP  Financial Measures" section of this News Release for more information  on these non-GAAP financial measures. 

 OPERATING SEGMENTS 

 Weston Foods 





    (unaudited)           12 Weeks Ended                24 Weeks Ended

                                                               

    ($ millions)   Jun. 16,   Jun. 18, 2011   Jun. 16, 2012   Jun. 18, 2011
                       2012

    Sales        $      400 $           407 $           825 $           817

    Operating    $       12 $            55 $            72 $            74
    income

    Adjusted     $       65 $            65 $           124 $           122
    operating
    income(2)

    Adjusted          16.3%           16.0%           15.0%           14.9%
    operating
    margin(2)

    Adjusted     $       78 $            78 $           151 $           149
    EBITDA(2)

    Adjusted          19.5%           19.2%           18.3%           18.2%
    EBITDA
    margin(2)

                                                                           






  

 Weston Foods sales in the second quarter of 2012 decreased by 1.7% to  $400 million from $407 million in the same period in 2011. Foreign  currency translation positively impacted sales by approximately 1.6%.  Excluding this impact, sales decreased 3.3% mainly due to a decrease in  volumes of 3.9% compared to the same period in 2011. Pricing across  certain product categories contributed positively to sales growth by  0.6%. 

 Weston Foods operating income in the second quarter of 2012 was $12  million compared to $55 million in the same period in 2011, a decrease  of $43 million. The decrease was mainly due to the accrual of a MEPP  withdrawal liability of $35 million recorded in the second quarter of  2012. 

 Weston Foods adjusted operating income((2)) remained flat at $65 million in the second quarter of 2012 compared to  the same period in 2011. Weston Foods adjusted operating margin((2)) was 16.3% compared to 16.0% in the same period in 2011. Adjusted  operating income((2)) in the second quarter of 2012 was positively impacted by the benefits  realized from productivity improvements and other cost reduction  initiatives. These benefits were offset by higher commodity and other  input costs and lower sales volumes compared to the same period in  2011. 

 Loblaw  





    (unaudited)                12 Weeks Ended              24 Weeks Ended

                                                               

    ($ millions)    Jun. 16, 2012 Jun. 18, 2011 Jun. 16, 2012 Jun. 18, 2011

    Sales           $       7,375 $       7,278 $      14,312 $      14,150

    Operating       $         288 $         343 $         525 $         644
    income

    Adjusted        $         299 $         375 $         551 $         698
    operating
    income(2)

    Adjusted                 4.1%          5.2%          3.8%          4.9%
    operating
    margin(2)

    Adjusted EBITDA $         478 $         534 $         900 $       1,009
    (2)

    Adjusted EBITDA          6.5%          7.3%          6.3%          7.1%
    margin(2)

                                                                           






 In the second quarter of 2012, Loblaw continued to execute on its plan.  Loblaw began to gain traction on sales, particularly in its core food  and drug businesses, as it continued its disciplined approach to  improving its customer proposition. 

 Loblaw sales in the second quarter of 2012 increased by 1.3% to $7,375  million from $7,278 million in the same period in 2011. Retail segment  sales increased by 1.1% and same-store sales growth was 0.2% (2011 -  0.4% decline). Sales growth in food was moderate, sales growth in  drugstore was modest, gas bar sales declined marginally, sales in  general merchandise, excluding apparel, declined moderately and sales  in apparel were flat. Loblaw experienced modest average quarterly  internal food price inflation during the second quarter of 2012 and  moderate average quarterly food price inflation during the second  quarter of 2011, lower than the average quarterly national food price  inflation of 2.5% (2011 - 4.0%) as measured by "The Consumer Price  Index for Food Purchased from Stores". In the last twelve months,  Loblaw opened 22 corporate and franchise stores and closed seven  corporate and franchise stores, resulting in a net increase of 0.4  million square feet, or 0.8%. Loblaw sales in the second quarter of  2012 were also positively impacted by an increase in revenue from its  Financial Services segment, which includes President's Choice Bank, a  subsidiary of Loblaw. The increase in Financial Services segment  revenue was primarily driven by higher interchange fee income, interest  income and PC Telecom revenues when compared to the same period in 2011. 

 Loblaw operating income in the second quarter of 2012 was $288 million  compared to $343 million in the same period in 2011, a decrease of $55  million. The decrease was mainly due to a decline in adjusted operating  income((2) )of $76 million, partially offset by the effect of certain prior years'  commodity tax matters of $15 million recorded in the second quarter of  2011. 

 Loblaw adjusted operating income((2)) was $299 million in the second quarter of 2012 compared to $375 million  in the same period in 2011, a decrease of $76 million. Loblaw adjusted  operating margin((2)) was 4.1% compared to 5.2% in the same period in 2011. The decreases in  adjusted operating income((2)) and adjusted operating margin((2)) were primarily attributable to an increase in labour and other  operating costs, incremental costs related to investments in IT and  supply chain((3)), a decline in gross profit, a decrease in foreign exchange gains and a  charge related to the transition of certain Ontario conventional stores  to the more cost effective and efficient operating terms of collective  agreements ratified in the third quarter of 2010, partially offset by  changes in the value of Loblaw's investments in its franchise business.  Increased labour costs and the decline in gross profit included an  estimated $5 million and $10 million, respectively, of incremental  investments in Loblaw's customer proposition that were not covered by  operations. 

 NET INTEREST EXPENSE AND OTHER FINANCING CHARGES  In the second quarter of 2012, net interest expense and other financing  charges decreased by $26 million to $72 million compared to the same  period in 2011. The decrease was mainly due to an increase of $22  million in non-cash income related to the fair value adjustment of the  forward sale agreement for 9.6 million Loblaw common shares. Excluding  this impact, net interest expense and other financing charges decreased  by $4 million compared to the same period in 2011, mainly due to GWL's  refinancing of certain long term debt through the issuance of new  Medium Term Notes in the fourth quarter of 2011 which resulted in lower  overall interest rates. 

 INCOME TAXES In the second quarter of 2012, income tax expense decreased to $55  million from $69 million, and the effective income tax rate decreased  to 21.9% from 23.1%, compared to the same period in 2011. The decreases  were primarily due to non-taxable foreign currency translation gains  recorded in the second quarter of 2012, reductions in the federal and  Ontario statutory income tax rates and a decrease in income tax expense  related to certain prior year income tax matters. The effective income  tax rate in the second quarter of 2011 was also impacted by the  utilization of realized foreign currency losses. 

 OUTLOOK((1)) This outlook reflects the underlying operating performance of the  Company's operating segments as discussed below. 

 For the full year 2012, Weston Foods expects to deliver sales in line  with 2011. Weston Foods will continue its efforts to reduce costs  through improved efficiencies and ongoing cost reduction initiatives in  an effort to achieve full year operating margins in line with those in  2011. 

 For the full year 2012, Loblaw estimates operating income to be down  year-over-year, with more pressure in the first half of the year, as it  does not expect its operations to cover incremental costs related to  investments in IT and supply chain and the ongoing investments in its  customer proposition. 

 For the full year 2012, George Weston Limited anticipates adjusted basic  net earnings per common share((2)) to be down year-over-year, primarily due to the impact of the  incremental costs and ongoing customer proposition investments at  Loblaw. 

 FORWARD-LOOKING STATEMENTS  This News Release contains forward-looking statements about the  Company's objectives, plans, goals, aspirations, strategies, financial  condition, results of operations, cash flows, performance, prospects  and opportunities. These forward-looking statements are typically  identified by words such as "anticipate", "expect", "believe",  "foresee", "could", "estimate", "goal", "intend", "plan", "seek",  "strive", "will", "may" and "should" and similar expressions, as they  relate to the Company and its management. In this News Release,  forward-looking statements include the Company's continued expectations  that for the full year 2012: 

 For Weston Foods: 




        --  sales will be in line with 2011; and
        --  efforts will be made to achieve full year operating margins in
            line with those in 2011.




 For Loblaw Companies Limited ("Loblaw"): 




        --  there will be incremental costs related to investments in IT
            and supply chain, as well as incremental investments in
            Loblaw's customer proposition; and
        --  operating income will be down year-over-year, with more
            pressure in the first half of the year, as a result of Loblaw's
            expectation that its operations will not cover the incremental
            costs related to the investments in IT and supply chain and its
            customer proposition.




 For the Company: 




        --  adjusted basic net earnings per common share(2) will be down
            year-over-year.




 These forward-looking statements are not historical facts but reflect  the Company's current expectations concerning future results and  events. They also reflect management's current assumptions regarding  the risks and uncertainties referred to below and their respective  impact on the Company. In addition, the Company's expectation with  regard to Weston Foods' operating margins in 2012 is based in part on  the assumptions that there will be no significant unanticipated  increase in the price of commodities and other input costs that Weston  Foods will not be able to offset through pricing, improved efficiencies  and ongoing cost reduction initiatives. The Company's expectation with  regard to Loblaw's operating income in 2012 is based in part on the  assumptions that Loblaw achieves its plan to increase net retail square  footage by 1% and there are no unexpected adverse events or costs  related to Loblaw's investments in IT and supply chain. The Company's  expectation with regard to adjusted basic net earnings per common share((2)) in 2012 is based in part on the assumption that interest rates, income  tax rates and the Company's ownership interest in Loblaw will be  similar to those in 2011. 

 These forward-looking statements are subject to a number of risks and  uncertainties that could cause actual results or events to differ  materially from current expectations, including, but not limited to: 




        --  failure to realize sales growth, anticipated cost savings or
            operating efficiencies from the Company's major initiatives,
            including investments in the Company's IT systems and the
            Company's IT systems implementation, or unanticipated results
            from these initiatives;
        --  the inability of the Company's IT infrastructure to support the
            requirements of the Company's business;
        --  unanticipated results associated with the Company's strategic
            initiatives and the impact of acquisitions or dispositions of
            businesses on the Company's future revenues and earnings;
        --  heightened competition, whether from current competitors or new
            entrants to the marketplace;
        --  changes in economic conditions including the rate of inflation
            or deflation, changes in interest and foreign currency exchange
            rates and changes in derivative and commodity prices;
        --  public health events;
        --  risks associated with product defects, food safety and product
            handling;
        --  failure to achieve desired results in labour negotiations,
            including the terms of future collective bargaining agreements
            which could lead to work stoppages;
        --  the inability of the Company to manage inventory to minimize
            the impact of obsolete or excess inventory and to control
            shrink;
        --  failure by the Company to maintain appropriate records to
            support its compliance with accounting, tax or legal rules,
            regulations and policies;
        --  the availability and increased costs relating to raw materials,
            ingredients and utilities, including electricity and fuel;
        --  failure of the Company's franchise stores to perform as
            expected;
        --  reliance on the performance and retention of third-party
            service providers including those associated with the Company's
            supply chain and apparel business;
        --  supply and quality control issues with vendors;
        --  changes to or failure to comply with laws and regulations
            affecting the Company and its businesses, including changes to
            the regulation of generic prescription drug prices and the
            reduction of reimbursement under public drug benefit plans and
            the elimination or reduction of professional allowances paid by
            drug manufacturers;
        --  changes in the Company's income, commodity, other tax and
            regulatory liabilities including changes in tax laws,
            regulations or future assessments;
        --  any requirement of the Company to make contributions to its
            registered funded defined benefit pension plans or the
            multi-employer pension plans in which it participates in excess
            of those currently contemplated;
        --  the risk that the Company would experience a financial loss if
            its counterparties fail to meet their obligations in accordance
            with the terms and conditions of their contracts with the
            Company; and
        --  the inability of the Company to collect on its credit card
            receivables.




 This is not an exhaustive list of the factors that may affect the  Company's forward-looking statements. Other risks and uncertainties not  presently known to the Company or that the Company presently believes  are not material could also cause actual results or events to differ  materially from those expressed in its forward-looking statements.  Additional risks and uncertainties are discussed in the Company's  materials filed with the Canadian securities regulatory authorities  from time to time, including the Enterprise Risks and Risk Management  section of the MD&A included in the Company's 2012 Second Quarter  Report to Shareholders and Section 12, "Enterprise Risks and Risk  Management", of the MD&A included in the Company's 2011 Annual Report.  Readers are cautioned not to place undue reliance on these  forward-looking statements, which reflect the Company's expectations  only as of the date of this News Release. The Company disclaims any  intention or obligation to update or revise these forward-looking  statements, whether as a result of new information, future events or  otherwise, except as required by law. 

  





    (1) This News Release contains forward-looking information. See
        Forward-Looking Statements for a discussion of material factors
        that could cause actual results to differ materially from the
        conclusions, forecasts and projections herein and of the material
        factors and assumptions that were applied in presenting the
        conclusions, forecasts and projections presented herein. This News
        Release must be read in conjunction with George Weston Limited's
        filings with securities regulators made from time to time, all of
        which can be found at
        www.weston.ca and
        www.sedar.com.

    (2)  See non-GAAP financial measures.

    (3)  Incremental costs related to investments in IT and supply chain
        include IT costs, depreciation and amortization and supply chain
        project costs.






  

 NON-GAAP FINANCIAL MEASURES In this News Release the Company uses the following non-GAAP financial  measures: adjusted operating income and adjusted operating margin,  adjusted EBITDA and adjusted EBITDA margin and adjusted basic net  earnings per common share. The Company believes these non-GAAP  financial measures provide useful information to both management and  investors in measuring the financial performance of the Company for the  reasons outlined below. 

 Certain expenses and income that must be recognized under GAAP are not  necessarily reflective of the Company's underlying operating  performance. For this reason, management uses certain non-GAAP  financial measures to exclude the impact of these items when analyzing  consolidated and segment underlying operating performance. These  non-GAAP financial measures are also helpful in assessing underlying  operating performance on a consistent basis. 

 From time to time, the Company may exclude additional items if it  believes doing so would result in a more effective analysis of  underlying operating performance. The exclusion of certain items does  not imply that they are non-recurring. Loblaw does not report its  results of operations on an adjusted basis, however the Company  excludes the impact of certain Loblaw items, as applicable, when  reporting its consolidated and segment results. 

 These non-GAAP financial 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 they should not be construed as an alternative to other financial  measures determined in accordance with GAAP. 

 Adjusted Operating Income and Adjusted EBITDA The Company believes adjusted operating income is useful in assessing  the Company's underlying operating performance and in making decisions  regarding the ongoing operations of its business. The Company believes  adjusted EBITDA is also useful in assessing the underlying operating  performance of the Company's ongoing operations and in assessing the  Company's ability to generate cash flows to fund its cash requirements,  including its capital investment program. 

 The following tables reconcile adjusted operating income and adjusted  EBITDA to GAAP net earnings attributable to shareholders of the Company  reported for the periods ended as indicated. 





                                                                        12 Weeks Ended

                                                              

                                               Jun. 16, 2012                              Jun. 18, 2011 

    (unaudited)       Weston            Other                  Weston              Other  
    ($ millions)       Foods   Loblaw    (1)    Consolidated   Foods    Loblaw     (1)     Consolidated 

    Net earnings                              $          137                             $           157
    attributable to
    shareholders of
    the Company

    Add impact of                                                                                       
    the following:

    Non-controlling                                       59                                          73
    interests

    Income taxes                                          55                                          69

    Net interest                                          72                                          98
    expense and
    other financing
    charges

    Operating       $     12 $    288 $    23 $          323 $     55 $    343 $     (1) $           397
    income (loss)

    Add (deduct)                                                                                        
    impact of the
    following:

    Restructuring          5        6                     11                 2                         2
    and other
    charges(2)

    Fair value             7                               7       12                                 12
    adjustment of
    commodity
    derivatives at
    Weston Foods

    Share-based            6        5                     11      (2)       15                        13
    compensation
    net of equity
    derivatives

    MEPP withdrawal       35                              35                                            
    liability
    incurred by
    Weston Foods

    Certain prior                                                           15                        15
    year's
    commodity tax
    matters at
    Loblaw

    Foreign                              (23)           (23)                           1               1
    currency
    translation
    (gain) loss

    Adjusted        $     65 $    299 $       $          364 $     65 $    375 $         $           440
    operating
    income

    Depreciation          13      179                    192       13      159                       172
    and
    amortization

    Adjusted EBITDA $     78 $    478 $       $          556 $     78 $    534 $         $           612

                     






  





    (1)      Operating income in the second quarter of 2012 included a gain
             of $23 million (2011 - loss of $1 million) related to the
             effect of foreign currency translation on a portion of the
             U.S. dollar denominated cash and short term investments held
             by foreign operations.

    (2)      Other charges at Loblaw in the second quarter of 2012 included
             $6 million (2011 - $2 million) related to changes in Loblaw's
             distribution network. Restructuring and other charges included
             $1 million (2011 - nil) of accelerated depreciation incurred
             by Weston Foods.










                                                                         24 Weeks Ended

                                                                                                         

                                               Jun. 16, 2012                               Jun. 18, 2011 

    (unaudited)       Weston            Other                   Weston              Other  
    ($ millions)       Foods   Loblaw    (1)    Consolidated    Foods    Loblaw     (1)     Consolidated 

    Net earnings                              $          261                              $           262
    attributable to
    shareholders of
    the Company

    Add impact of                                                                                        
    the following:

    Non-controlling                                      106                                          133
    interests

    Income taxes                                         114                                          141

    Net interest                                         116                                          164
    expense and
    other financing
    charges

    Operating       $     72 $    525 $       $          597  $     74 $    644 $    (18) $           700
    income (loss)

    Add (deduct)                                                                                         
    impact of the
    following:

    Restructuring          6        9                     15         6       31                        37
    and other
    charges(2)

    Fair value             4                               4        28                                 28
    adjustment of
    commodity
    derivatives at
    Weston Foods

    Share-based            7       17                     24        14        8                        22
    compensation
    net of equity
    derivatives

    MEPP withdrawal       35                              35                                             
    liability
    incurred by
    Weston Foods

    Certain prior                                                            15                        15
    year's
    commodity tax
    matters at
    Loblaw

    Foreign                                                                            18              18
    currency
    translation
    (gain) loss

    Adjusted        $    124 $    551 $       $          675  $    122 $    698 $         $           820
    operating
    income

    Depreciation          27      349                    376        27      311                       338
    and
    amortization

    Adjusted EBITDA $    151 $    900 $       $        1,051 $     149 $  1,009 $         $         1,158

                     






  





    (1)      Year-to-date operating income included a nominal gain (2011 -
             loss of $18 million) related to the effect of foreign currency
             translation on a portion of the U.S. dollar denominated cash
             and short term investments held by foreign operations.

    (2)      Year-to-date other charges at Loblaw included $9 million (2011
             - $23 million) related to changes in Loblaw's distribution
             network. Other charges in 2011 also included a charge of $8
             million related to an internal realignment of Loblaw's
             business centered around its two primary store formats,
             conventional and discount. Restructuring and other charges
             included $1 million (2011 - nil) of accelerated depreciation
             incurred by Weston Foods.






  

 The year-over-year changes in the following items influenced operating  income in the second quarter of 2012: 

 Restructuring and other charges  The Company continuously evaluates strategic and cost reduction  initiatives related to its store infrastructure, manufacturing assets,  distribution networks and administrative infrastructure with the  objective of ensuring a low cost operating structure. Restructuring  activities related to these initiatives are ongoing. The details of  restructuring and other charges are included in the "Reportable  Operating Segments" section of the MD&A included in the Company's Q2  2012 Quarterly Report to Shareholders. 

 Fair value adjustment of commodity derivatives at Weston Foods  Weston Foods is exposed to commodity price fluctuations primarily as a  result of purchases of certain raw materials, fuels and utilities. In  accordance with the Company's risk management strategy, Weston Foods  enters into commodity derivatives to reduce the impact of price  fluctuations in forecasted raw material purchases over a specified  period of time. These commodity derivatives are not acquired for  trading or speculative purposes. Hedge accounting is not applied to  these commodity derivatives and as a result, changes in their fair  value, which include realized and unrealized gains and losses related  to future purchases of raw materials, are recorded in operating income.  In the second quarter of 2012, Weston Foods recorded a charge of $7  million (2011 - $12 million) related to the fair value adjustment of  exchange traded commodity derivatives. Despite the impact of accounting  for these commodity derivatives on the Company's reported results, the  derivatives have the economic impact of largely mitigating the  associated risks arising from price fluctuations in the underlying  commodities during the period that the commodity derivatives are held. 

 Share-based compensation net of equity derivatives  Both GWL and Glenhuron Bank Limited have entered into equity derivatives  to partially hedge their exposure to the impact of increases in the  value of GWL and Loblaw common shares on share-based compensation cost.  The amount of net share-based compensation cost recorded in operating  income is mainly dependent upon changes in the value of GWL and Loblaw  common shares and the number and vesting of outstanding restricted  share units ("RSU") and performance share units ("PSU") relative to the  number of common shares underlying the equity derivatives. The Company  assesses stock option plan, RSU plan, PSU plan and equity derivative  impacts on a net basis and therefore the impact of stock options is  also excluded from operating income when management reviews  consolidated and segment operating performance. In the second quarter  of 2012, a charge of $11 million (2011 - $13 million) was recorded  related to share-based compensation net of equity derivatives. 

 Multi-employer pension plan withdrawal liability incurred by Weston  Foods  In the second quarter of 2012, Weston Foods recorded a charge of $35  million related to its withdrawal from a United States MEPP in which it  participated. 

 Certain prior years' commodity tax matters at Loblaw  In the second quarter of 2011, Loblaw recorded a charge of $15 million  related to certain prior years' commodity tax matters. 

 Foreign currency translation gain and loss  The Company's consolidated financial statements are expressed in  Canadian dollars. A portion of the Company's (excluding Loblaw's) net  assets are denominated in U.S. dollars and as a result, the Company is  exposed to foreign currency translation gains and losses. The impact of  foreign currency translation on a portion of the U.S. dollar  denominated net assets, primarily cash and short term investments, held  by foreign operations is recorded in operating income. In the second  quarter of 2012, a foreign currency translation gain of $23 million  (2011 - loss of $1 million) was recorded in operating income as a  result of the depreciation (2011 - appreciation) of the Canadian  dollar. 

 Adjusted Basic Net Earnings per Common Share The Company believes adjusted basic net earnings per common share is  useful in assessing the Company's underlying operating performance and  in making decisions regarding the ongoing operations of its business. 

 The following table reconciles adjusted basic net earnings per common  share to GAAP basic net earnings per common share reported for the  periods ended as indicated. 

  





    (unaudited)           12 Weeks Ended               24 Weeks Ended

                                                                         

    ($)                   Jun.         Jun.         Jun.         Jun. 18,
                      16, 2012     18, 2011     16, 2012             2011

    Basic net     $       0.99 $       1.13 $       1.88 $           1.87
    earnings per
    common share

    (Deduct) Add                                                         
    impact of the
    following(1):

    Fair value          (0.09)         0.04       (0.34)           (0.08)
    adjustment of
    the forward
    sale
    agreement for
    9.6 million
    Loblaw common
    shares

    Restructuring         0.05         0.01         0.07             0.14
    and other
    charges

    Fair value            0.04         0.06         0.02             0.15
    adjustment of
    commodity
    derivatives
    at Weston
    Foods

    Share-based           0.08         0.04         0.15             0.14
    compensation
    net of equity
    derivatives

    MEPP                  0.17                      0.17                 
    withdrawal
    liability
    incurred by
    Weston Foods

    Certain prior                      0.05                          0.05
    years'
    commodity tax
    matters at
    Loblaw

    Foreign             (0.18)         0.01                          0.14
    currency
    translation
    (gain) loss

    Adjusted      $       1.06 $       1.34 $       1.95 $           2.41
    basic net
    earnings per
    common share

                                                                         

     






 (1) Net of interest, income taxes and non-controlling interests, as  applicable. 

 In addition to the items described in the "Adjusted Operating Income and  Adjusted EBITDA" section above, the year-over-year change in the  following item also influenced basic net earnings per common share in  the second quarter of 2012: 

 Fair value adjustment of the forward sale agreement for 9.6 million  Loblaw common shares  The fair value adjustment of the forward sale agreement for 9.6 million  Loblaw common shares is non-cash and is included in consolidated net  interest expense and other financing charges. The adjustment is  determined by changes in the value of the underlying Loblaw shares. At  maturity, any cash paid under the forward sale agreement could be  offset by the sale of the underlying Loblaw common shares. In the  second quarter of 2012, income of $0.09 (2011 - charge of $0.04) was  recorded in net interest expense and other financing charges as a  result of the decrease (2011 - increase) in the market price of Loblaw  common shares. 

  

 SELECTED FINANCIAL INFORMATION The following includes selected quarterly financial information which is  prepared by management in accordance with International Financial  Reporting Standards ("IFRS") and is based on the Company's 2012 Second  Quarter Report to Shareholders. This financial information does not  contain all disclosures required by IFRS, and accordingly, this  financial information should be read in conjunction with the Company's  2011 Annual Report and 2012 Second Quarter Report to Shareholders  available in the Investor Centre section of the Company's website at www.weston.ca. 

 Condensed Consolidated Statements of Earnings  





    (unaudited)                            12 Weeks Ended       24 Weeks Ended

    (millions of Canadian dollars                                               

    except where otherwise                 Jun.         Jun.      Jun.      Jun.
    indicated)                         16, 2012     18, 2011       16,       18,
                                                                  2012      2011

    Revenue                        $      7,627 $      7,531 $  14,851 $  14,679

    Operating Expenses                                                          

           Cost of inventories            5,751        5,646    11,173    10,987
           sold

           Selling, general and           1,553        1,488     3,081     2,992
           administrative expenses

                                          7,304        7,134    14,254    13,979

    Operating Income                        323          397       597       700

    Net Interest Expense and Other           72           98       116       164
    Financing Charges

    Earnings Before Income Taxes            251          299       481       536

    Income Taxes                             55           69       114       141

    Net Earnings                            196          230       367       395

    Attributable to:                                                            

           Shareholders of the              137          157       261       262
           Company

           Non-Controlling                   59           73       106       133
           Interests

    Net Earnings                   $        196 $        230 $     367 $     395

    Net Earnings per Common Share                                               
    ($)

    Basic                          $       0.99 $       1.13 $    1.88 $    1.87

    Diluted                        $       0.98 $       1.08 $    1.87 $    1.86

                                                                                

     






 Condensed Consolidated Balance Sheets 





    (unaudited)                                           As at

                                                                           

    (millions of                 Jun. 16,         Jun. 18,         Dec. 31,
    Canadian dollars)                2012             2011             2011

    ASSETS                                                                 

    Current Assets                                                         

        Cash and cash   $           1,559 $          1,446 $          1,372
        equivalents

        Short term                  2,042            1,982            2,362
        investments

        Accounts                      557              510              559
        receivable

        Credit card                 2,058            1,974            2,101
        receivables

        Inventories                 1,996            2,060            2,147

        Income taxes                   53               46               37
        recoverable

        Prepaid                       154              146              122
        expenses and
        other assets

        Assets held for                23               66               32
        sale

    Total Current                   8,442            8,230            8,732
    Assets

    Fixed Assets                    9,219            8,861            9,172

    Investment                         95               73               82
    Properties

    Goodwill and                    1,587            1,546            1,555
    Intangible Assets

    Deferred Income                   335              277              295
    Taxes

    Security Deposits                 341              246              367

    Franchise Loans                   358              313              331
    Receivable

    Other Assets                      822              809              789

    Total Assets        $          21,199 $         20,355 $         21,323

    LIABILITIES                                                            

    Current Liabilities                                                    

        Bank                              $              2 $              3
        indebtedness

        Trade and other $           3,587            3,510            3,940
        payables

        Provisions                     71              107               67

        Short term debt             1,299            1,260            1,280

        Long term debt                226              381               87
        due within one
        year

    Total Current                   5,183            5,260            5,377
    Liabilities

    Provisions                         88               98               94

    Long Term Debt                  6,633            6,279            6,757

    Deferred Income                   167              157              160
    Taxes

    Other Liabilities               1,091              802            1,033

    Capital Securities                222              221              222

    Total Liabilities              13,384           12,817           13,643

    EQUITY                                                                 

    Share Capital                     950              951              950

    Contributed Surplus                21               25               24

    Retained Earnings               4,593            4,409            4,496

    Accumulated Other                (10)             (34)             (11)
    Comprehensive Loss

    Total Equity                    5,554            5,351            5,459
    Attributable to
    Shareholders of the
    Company

    Non-Controlling                 2,261            2,187            2,221
    Interests

    Total Equity                    7,815            7,538            7,680

    Total Liabilities   $          21,199 $         20,355 $         21,323
    and Equity

                                                                           

       






  

 Condensed Consolidated Statements of Cash Flow 





    (unaudited)                    12 Weeks Ended           24 Weeks Ended

                                                                             

    (millions of Canadian         Jun.         Jun.         Jun.         Jun.
    dollars)                       16,     18, 2011     16, 2012     18, 2011
                                  2012

    Operating Activities                                                     

      Net earnings            $    196 $        230 $        367 $        395

      Income taxes                  55           69          114          141

      Net interest expense          72           98          116          164
      and other financing
      charges

      Depreciation and             193          172          377          338
      amortization

      Foreign currency            (23)            1                        18
      translation (gain) loss

      Income taxes paid           (63)         (66)        (136)        (144)

      Interest received             25           29           34           46

      Change in credit card       (71)         (87)           43           23
      receivables

      Change in non-cash           292           95        (288)        (446)
      working capital

      Fixed assets and other                      5            3            9
      related impairments

      (Gain) loss on disposal      (2)            1          (2)            1
      of assets

      Other                       (11)          (7)          (3)         (11)

    Cash Flows from Operating      663          540          625          534
    Activities

    Investing Activities                                                     

      Fixed asset purchases      (254)        (170)        (398)        (332)

      Change in short term         217          338          320        1,239
      investments

      Business acquisition  -                                            (12)
      net of cash acquired

      Proceeds from fixed           15            1           16            6
      asset sales

      Change in franchise           20           28            3           28
      investments and other
      receivables

      Change in security            12            1           26          184
      deposits

      Intangible asset            (41)          (4)         (41)          (5)
      additions

      Other                                       7                          

    Cash Flows (used in) from     (31)          201         (74)        1,108
    Investing Activities

    Financing Activities                                                     

      Change in bank                 1            2          (3)          (9)
      indebtedness

      Change in short term           9            9           19          389
      debt

      Long term  - Issued           14          159           37          216
      debt

                 - Retired        (44)          (7)         (73)        (865)

      Share capital issued                        1                         1

      Subsidiary - Issued            2           16            4           19
      share
      capital 

                 - Retired         (2)          (3)          (4)          (3)

      Interest paid              (117)        (155)        (209)        (266)

      Dividends  - To common      (46)         (47)         (92)      (1,093)
                 shareholders

                 - To             (11)         (11)         (22)         (22)
                 preferred
                 shareholders

                 - To             (22)         (14)         (22)         (14)
                 minority
                 shareholders

    Cash Flows used in           (216)         (50)        (365)      (1,647)
    Financing Activities

    Effect of foreign                9            1            1          (2)
    currency exchange rate
    changes on cash and cash
    equivalents

    Change in Cash and Cash        425          692          187          (7)
    Equivalents

    Cash and Cash                1,134          754        1,372        1,453
    Equivalents, Beginning of
    Period

    Cash and Cash             $  1,559 $      1,446 $      1,559 $      1,446
    Equivalents, End of
    Period

                                                                             

     






 2012 SECOND QUARTER REPORT TO SHAREHOLDERS  The Company's 2011 Annual Report and 2012 Second Quarter Report to  Shareholders are available in the Investor Centre section of the  Company's website at www.weston.ca and have been filed with SEDAR and will be available at www.sedar.com. 

 INVESTOR RELATIONS Shareholders, security analysts and investment professionals should  direct their requests to Mr. Geoffrey H. Wilson, Senior Vice President,  Financial Control and Investor Relations, at the Company's Executive  Office or by e-mail at [e-mail]. 

 Additional financial information has been filed electronically with the  Canadian securities regulatory authorities in Canada through SEDAR.  This News Release includes selected information on Loblaw Companies  Limited, a 63.0%-owned public reporting subsidiary company with shares  trading on the Toronto Stock Exchange. For information regarding  Loblaw, readers should also refer to the materials filed by Loblaw with  the Canadian securities regulatory authorities from time to time. These  filings are also maintained at Loblaw's corporate website at www.loblaw.ca. 

 CONFERENCE CALL AND WEBCAST PRESENTATION George Weston Limited will host a conference call as well as an audio  webcast on Tuesday, July 31, 2012 at 11:00 a.m. (EST). To access via  tele-conference, please dial [phone]. The playback will be  available two hours after the event at [phone], passcode:  94021980#. To access via audio webcast, please visit the Investor  Centre section of www.weston.ca. Pre-registration will be available.  

George Weston Limited


CONTACT:  Mr. Geoffrey H. Wilson, Senior Vice President, Financial ControlandInvestor Relations, at the Company's Executive Office or by e-mailat [e-mail] 


    

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