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Metro Inc. – ‘F-8 POS’ on 4/24/18 – ‘EX-3.20’

On:  Tuesday, 4/24/18, at 4:35pm ET   ·   Effective:  4/24/18   ·   Accession #:  1193125-18-128879   ·   File #:  333-221208

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/24/18  Metro Inc.                        F-8 POS     4/24/18    2:686K                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-8 POS     Post-Effective Amendment No. 4 to Form F-8          HTML     43K 
 2: EX-3.20     Articles of Incorporation/Organization or By-Laws   HTML    373K 

Exhibit 3.20

INTERIM REPORT

12-week period ended March 17, 2018

2^nd Quarter 2018

HIGHLIGHTS

2018 SECOND QUARTER

2018 FIRST SEMESTER

REPORT TO SHAREHOLDERS

Dear Shareholders,

I am pleased to present our interim report for the second quarter of fiscal 2018 ended March 17, 2018.

Sales in the second quarter of 2018 reached $2,899.0 million, down 0.1% compared to $2,902.4 million in the second quarter of 2017. The small decrease in sales is due to the timing shift of the week before Christmas which fell in the first quarter this year, whereas it fell in the second quarter last year. Same-store sales for the second quarter were down 1.2% but would have been up 1.0% excluding the shift (increase of 0.3% in the same quarter last year). Our food basket experienced an inflation of about 0.8%, echoing the trend started in the fourth quarter of 2017. Sales in the first 24 weeks of fiscal 2018 totalled $6,010.8 million versus $5,873.7 million for the corresponding period of fiscal 2017, an increase of 2.3%. Same-store sales increased by 1.1%.

Second quarter net earnings were $106.9 million in 2018 versus $132.4 million in 2017, and fully diluted net earnings per share were $0.47 in 2018 versus $0.56 in 2017, down 19.3% and 16.1%, respectively. Excluding after-tax business acquisition-related costs and interest expenses of $1.2 million for the second quarter of 2018 and the $18.5 million after-tax share of an associate’s earnings (Alimentation Couche-Tard) for the second quarter of 2017, adjusted net earnings(1) for the second quarter of 2018 totalled $108.1 million compared with $113.9 million for the corresponding quarter of 2017, and adjusted fully diluted net earnings per share(1) amounted to $0.47 versus $0.48, down 5.1% and 2.1%, respectively. For the first 24 weeks of 2018, adjusted net earnings(1) totalled $261.5 million compared with $252.0 million for the corresponding quarter of 2017, and adjusted fully diluted net earnings per share(1) amounted to $1.14 versus $1.06, up 3.8% and 7.5%, respectively.

On April 23, 2018, the Board of Directors declared a quarterly dividend of $0.18 per share, an increase of 10.8% over the dividend declared for the same quarter last year.

Against a challenging backdrop marked by intense competition, same-store sales continued to increase in the second quarter, while our results were impacted by the shift of the Christmas week to the first quarter. We are confident in our ability to deliver long-term growth although changes in employment laws will put pressure on our operating costs.

Finally, we are pleased to announce that we received the authorization of the Competition Bureau and expect(3) to close the acquisition of the Jean Coutu Group on May 11, thereby opening an exciting new chapter in the history of METRO.

Eric R. La Flèche

President and Chief Executive Officer

April 24, 2018

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 2 -

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following Management’s Discussion and Analysis (MD&A) sets out the financial position and consolidated results of METRO INC. on March 17, 2018 and for the 12 and 24-week periods then ended. It should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes in this interim report.

The unaudited interim condensed consolidated financial statements for the 12 and 24-week periods ended March 17, 2018 have been prepared by management in accordance with IAS 34 “Interim Financial Reporting”. They should be read in conjunction with the audited annual consolidated financial statements and accompanying notes and the MD&A presented in the Corporation’s 2017 Annual Report. Unless otherwise stated, the interim report is based upon information as at April 13, 2018, except for the Competition Bureau authorization received on April 23, 2018 to proceed with the acquisition of the Jean Coutu Group.

Additional information, including the Certification of Interim Filings letters for quarter ended March 17, 2018 signed by the President and Chief Executive Officer and the Executive Vice-President, Chief Financial Officer and Treasurer, is also available on the SEDAR website at: www.sedar.com.

OPERATING RESULTS

SALES

Sales in the second quarter of 2018 reached $2,899.0 million, down 0.1% compared to $2,902.4 million in the second quarter of 2017. The small decrease in sales is due to the timing shift of the week before Christmas which fell in the first quarter this year, whereas it fell in the second quarter last year. Same-store sales for the second quarter were down 1.2% but would have been up 1.0% excluding the shift (increase of 0.3% in the same quarter last year). Our food basket experienced an inflation of about 0.8%, echoing the trend started in the fourth quarter of 2017.

Sales in the first 24 weeks of fiscal 2018 totalled $6,010.8 million versus $5,873.7 million for the corresponding period of fiscal 2017, an increase of 2.3%. Same-store sales increased by 1.1%.

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE’S EARNINGS

This earnings measurement excludes financial costs, taxes, depreciation and amortization, the share of earnings and gain on disposal of our investment in an associate (Alimentation Couche-Tard “ACT”) and the fair value revaluation gain on our residual investment in ACT.

Operating income before depreciation and amortization and associate’s earnings for the second quarter of 2018 totalled $206.5 million or 7.1% of sales versus $212.0 million or 7.3% of sales for the same quarter last year, down 2.6%. In the second quarter of 2018, $1.6 million in expenses were recognized in connection with the proposed acquisition of The Jean Coutu Group (PJC) Inc. (“PJC”). Excluding this item, adjusted operating income before depreciation and amortization and associate’s earnings⁽²⁾ totalled $208.1 million or 7.2% of sales, down 1.8% from 2017.

For the first 24 weeks of 2018, operating income before depreciation and amortization and associate’s earnings totalled $424.3 million or 7.1% of sales versus $428.8 million or 7.3% of sales for the same period last year, down 1.0%. During this period of 2018, we recorded a provision of $11.4 million for the Ontario distribution network modernization project and recognized expenses of $3.6 million in connection with the proposed acquisition of PJC. Excluding these items, the adjusted operating income before depreciation and amortization and associate’s earnings⁽²⁾ totalled $439.3 million or 7.3% of sales, up 2.4% from 2017.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 3 -

Operating income before depreciation and amortization and associate’s earnings adjustments (OI)⁽²⁾

Gross margin on sales for the second quarter and the first 24 weeks of 2018 were 20.2% and 19.8% respectively versus 20.1% and 19.9% for the corresponding periods of 2017.

Operating expenses as a percentage of sales for the second quarter were 13.1% versus 12.8% for the corresponding quarter of 2017. Excluding the $1.6 million in proposed business acquisition-related expenses recorded in the second quarter of 2018, operating expenses as a percentage of sales stood at 13.0%.

Operating expenses as a percentage of sales for the first 24 weeks of 2018 were 12.8% versus 12.6% for the corresponding period of 2017. Excluding the distribution network modernization project expenses of $11.4 million and the $3.6 million in proposed business acquisition-related expenses recorded in 2018, operating expenses as a percentage of sales stood at 12.5%.

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

Total depreciation and amortization expense for the second quarter and the first 24 weeks of 2018 were $47.2 million and $94.1 million respectively versus $44.7 million and $87.9 million for the corresponding periods of 2017.

Net financial costs for the second quarter of 2018 totalled $14.2 million compared to $15.5 million for the same quarter last year. In the second quarter of 2018, we registered $9.7 million in interest income on the short-term investments and security deposits resulting from the proceeds of the sale of the majority of our investment in ACT and the issuance of Series F, G and H notes to fund a portion of the PJC acquisition and recorded $9.8 million in interest on those notes.

Net financial costs for the first 24 weeks of 2018 totalled $26.5 million compared to $30.1 million for the same period last year. Certain items are specific to 2018. We registered $15.0 million in interest income on the short-term investments and security deposits resulting from the proceeds of the sale of the majority of our investment in ACT and the issuance of Series F, G and H notes to fund a portion of the PJC acquisition and recorded $12.0 million in interest on those notes. Furthermore, we paid $1.8 million in financial costs on the balance payable in connection with the settlement of the buyout of minority interests in Adonis and Phoenicia.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 4 -

SHARE OF EARNINGS, GAIN ON DISPOSAL OF AN INVESTMENT IN AN ASSOCIATE AND FAIR VALUE REVALUATION OF AN INVESTMENT

During the first quarter of 2018, to fund a portion of the PJC acquisition, we disposed of most of our investment in ACT, for net proceeds of $1,534.0 million and a gain of $1,107.4 million. As a result of this disposal, the Corporation no longer has significant influence over ACT. Our residual investment is now considered to be an available-for-sale financial asset, reported as an investment at fair value. As a result, the investment was re-evaluated at fair value on October 13, 2017, and the Corporation recorded a $225.6 million fair value revaluation gain in net earnings. Subsequent fair value revaluations of this investment was recognized in accumulated other comprehensive income.

No share of an associate’s earnings was recorded in the second quarter of fiscal 2018 in comparison with a $21.4 million recorded in the corresponding quarter of fiscal 2017.

For the first 24 weeks of 2018, our share of an associate’s earnings (ACT) was $30.8 million versus $45.3 million for the corresponding period last year.

INCOME TAXES

The 2018 second quarter income tax expense of $38.2 million represented an effective tax rate of 26.3% compared with the 2017 second quarter tax expense of $40.8 million for an effective tax rate of 23.6%.

The 24-week period income tax expense of $261.5 million for 2018 and $85.6 million for 2017 represented effective tax rate of 15.7% and 24.0% respectively.The significant decline in the effective tax rate resulted from the gain on disposal of the majority of our investment in ACT and the fair value revaluation of our residual investment.

NET EARNINGS AND ADJUSTED NET EARNINGS⁽¹⁾

Net earnings for the second quarter of 2018 were $106.9 million, a decrease of 19.3% from $132.4 million for the second quarter of 2017. Fully diluted net earnings per share decreased by 16.1% to $0.47 from $0.56 last year. Excluding the specific items shown in the table below, adjusted net earnings(1) for the second quarter of 2018 totalled $108.1 million compared with $113.9 million for the corresponding quarter of 2017, and adjusted fully diluted net earnings per share(1) amounted to $0.47 versus $0.48, down 5.1% and 2.1%, respectively.

Net earnings for the first 24 weeks of 2018 were $1,406.0 million, an increase of 419.8% from $270.5 million for the first 24 weeks of 2017. Fully diluted net earnings per share rose 438.6% to $6.14 from $1.14 last year. Excluding the specific items shown in the table below, adjusted net earnings(1) for the first 24 weeks of 2018 totalled $261.5 million compared with $252.0 million for the corresponding period of 2017, and adjusted fully diluted net earnings per share(1) amounted to $1.14 versus $1.06, up 3.8% and 7.5%, respectively.

Net earnings adjustments⁽¹⁾

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 5 -

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 6 -

QUARTERLY HIGHLIGHTS

⁽⁴⁾ 12 weeks

⁽⁵⁾ 2017 - 13 weeks, 2016 - 12 weeks

⁽⁶⁾ 16 weeks

Sales in the second quarter of 2018 reached $2,899.0 million, down 0.1% compared to $2,902.4 million in the second quarter of 2017. The small decrease in sales is due to the timing shift of the week before Christmas which fell in the first quarter this year, whereas it fell in the second quarter last year. Same-store sales for the second quarter were down 1.2% but would have been up 1.0% excluding the shift (increase of 0.3% in the same quarter last year). Our food basket experienced an inflation of about 0.8%, echoing the trend started in the fourth quarter of 2017.

Sales in the first quarter of 2018 reached $3,111.8 million, up 4.7% compared to $2,971.3 million in the first quarter of 2017. Same-store sales increased by 3.4% compared to an increase of 0.7% in the same quarter last year. Our food basket experienced a slight inflation of about 0.5%, echoing the trend started in the fourth quarter of 2017. The increase in sales was also driven in part by the shift of the week before Christmas which fell in the first quarter of 2018 while last year, it was included in the second quarter. We estimate that same-store sales would have been 1.2% had it not been for the Christmas week shift.

Sales in the fourth quarter of 2017 reached $3,228.4 million, up 10.2% compared to $2,928.9 million in the fourth quarter of 2016. Excluding the extra 13th week in 2017, fourth quarter sales were up 1.4%. Same-store sales increased by 0.4% compared to an increase of 2.8% in the fourth quarter of 2016. Our food basket experienced a slight inflation of about 0.3%, compared to deflation in the three previous quarters.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 7 -

Sales in the third quarter of 2017 reached $4,073.2 million, up 1.4% compared to $4,015.4 million in the third quarter of 2016. Same-store sales decreased slightly by 0.2% compared to an increase of 3.9% in the same quarter of 2016. Our food basket continued to experience a deflation of approximately 1% (inflation of 1.5% in 2016) which largely explains our lower sales growth.

Net earnings for the second quarter of 2018 were $106.9 million, a decrease of 19.3% from $132.4 million for the second quarter of 2017. Fully diluted net earnings per share decreased by 16.1% to $0.47 from $0.56 last year. Excluding the 2018 second quarter proposed PJC acquisition-related expenses of $1.6 million, interest income of $9.7 million on short-term investments and security deposits related to the proposed business acquisition, and interest expense of $9.8 million on notes issued to complete the acquisition, and the 2017 second quarter $21.4 million share of an associate’s earnings and income tax on those items, adjusted net earnings(1) for the second quarter of 2018 totalled $108.1 million compared with $113.9 million in net earnings for the corresponding quarter of 2017, and adjusted fully diluted net earnings per share(1) amounted to $0.47 versus $0.48, down 5.1% and 2.1%, respectively.

Net earnings for the first quarter of 2018 were $1,299.1 million, an increase of 840.7% from $138.1 million for the first quarter of 2017. Fully diluted net earnings per share rose 877.6% to $5.67 from $0.58 last year. Excluding from 2018 first quarter results $11.4 million in distribution network modernization project expenses, $2.0 million in proposed acquisition-related expenses for PJC, the $1,107.4 million gain on disposal of the majority of our investment in ACT, the $225.6 million fair value revaluation gain on our residual investment in ACT, $5.3 million in interest income on the short-term investments and security deposits related to the proposed business acquisition, $2.2 million in interest expense on the notes issued to complete the acquisition, financial costs of $1.8 million related to the buyout of minority interests in Adonis and Phoenicia and income taxes on those items, adjusted net earnings(1) for the first quarter of 2018 totalled $153.4 million compared with $138.1 million in net earnings for the corresponding quarter of 2017, and adjusted fully diluted net earnings per share(1) amounted to $0.67 versus $0.58, up 11.1% and 15.5%, respectively.

Net earnings for the fourth quarter of 2017 were $154.9 million, an increase of 6.8% from $145.0 million for the fourth quarter of 2016. Fully diluted net earnings per share rose 10.0% to $0.66 from $0.60 in 2016. Excluding the 13th week results and $2.5 million before taxes for professional fees related to PJC acquisition and the modernization project of our distribution network in Ontario, net earnings would have been similar to the previous year and fully diluted net earnings per share, up 1.7%.

Net earnings for the third quarter of 2017 were $183.0 million, an increase of 3.7% from $176.5 million for the third quarter of 2016. Fully diluted net earnings per share rose 8.3% to $0.78 from $0.72 in 2016.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 8 -

CASH POSITION

OPERATING ACTIVITIES

Operating activities generated cash flows of $172.3 million in the second quarter and $214.7 million for the the first 24 weeks of fiscal 2018 compared to $189.3 million and $244.8 million for the corresponding periods of 2017. These differences are due mainly to the net change in non-cash working capital items.

INVESTING ACTIVITIES

In the second quarter of 2018, investment activities required outflows of $46.6 million compared to $59.9 million in the corresponding quarter of 2017. The $14.1 million decrease in fixed and intangible asset acquisitions accounts for most of the difference.

In the first 24 weeks of 2018, investing activities generated cash inflows of $37.5 million whereas they required the use of $140.8 million in the corresponding period of 2017. This difference resulted primarily from $1,534.0 million in net proceeds from the disposal of the majority of our investment in ACT, less $1,198.5 million in security deposits from the issuance of Series F, G and H notes and the $221.2 million settlement for the buyout of the minority interests in Adonis and Phoenicia. The remainder of the difference stemmed from the fact that additions to fixed and intangible assets were $43.0 million lower in 2018 than in 2017 and from $26.1 million in proceeds from asset disposals in 2018.

During the first 24 weeks of 2018, we and our retailers opened 4 new stores, carried out major expansions and renovations of 9 stores and closed 3 stores for a net increase of 30,700 square feet or 0.1% of our retail network.

FINANCING ACTIVITIES

In the second quarter of 2018, financing activities required outflows of $116.6 million compared with $81.4 million for the corresponding quarter of 2017. This difference is largely attributable to a $69.0 million net debt reduction in 2018 as opposed to a net debt increase of $85.7 million in 2017. Also, in 2017 share redemption represented $135.4 million in 2017, while there was no share redemption in 2018.

Over the first 24 weeks of 2018, financing activities generated cash inflows of $1,251.6 million whereas they required the use of $76.9 million in the corresponding period of 2017. This difference resulted primarily from a $1,335.0 million net increase in debt in 2018 owing to the issuance of the Series F, G and H notes versus $267.0 million in 2017 due to the issuance of the Series E notes. In addition, in 2017, share redemptions required cash outflows of $278.3 million, whereas there were no share redemptions in 2018.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 9 -

FINANCIAL POSITION

We do not anticipate⁽³⁾ any liquidity risk and consider our financial position at the end of the second quarter of 2018 as very solid. We had an unused authorized revolving credit facility of $444.3 million. Our non-current debt corresponded to 39.5% of the combined total of non-current debt and equity (non-current debt/total capital). This ratio doesn’t take into account the net proceeds on disposal of the majority of our investment in ACT of $1,534.0 million in cash and cash equivalents and the security deposits of $1,198.5 million.

On December 4, 2017, the Corporation issued a private placement of a $300.0 million aggregate principal amount of Series F unsecured senior notes, bearing interest at a fixed nominal rate of 2.68% and maturing in 2022; a $450.0 million aggregate principal amount of Series G unsecured senior notes, bearing interest at a fixed nominal rate of 3.39% and maturing in 2027; and a $450.0 million aggregate principal amount of Series H unsecured senior notes, bearing interest at a fixed nominal rate of 4.27% and maturing in 2047. The proceeds of these issues were placed in escrow and will be released once the conditions for completion of the business combination agreement for the PJC acquisition have been satisfied.

At the end of the second quarter of fiscal 2018, the main elements of our non-current debt were as follows:

The Corporation also has access to a $500.0 million term credit facility consisting of a 1-year $100.0 million Tranche A, a 2-year $200.0 million Tranche B and a 3-year $200.0 million Tranche C, and a 1-month $250.0 million bridge term facility. These funds will be drawn down upon completion of the business combination agreement for the PJC acquisition.

Our main financial ratios were as follows:

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 10 -

CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

BUSINESS ACQUISITION AND SUBSEQUENT EVENT

On October 2, 2017, the Corporation and The Jean Coutu Group (PJC) Inc. announced that they had entered into a definitive combination agreement pursuant to which the Corporation will acquire all of the outstanding PJC Class A subordinate voting shares and all of the outstanding PJC Class B shares for $24.50 per PJC share, representing a total consideration of approximately $4,500.0 million, based on METRO’s closing common share price on that date, subject to the completion of customary closing conditions, including regulatory and PJC shareholder approvals. Under the terms of the acquisition, the PJC shareholders will receive an aggregate consideration which will consist of 75% of the purchase price in cash and 28 million common shares of the Corporation representing approximately 25% of the total consideration. The PJC shareholders approved the acquisition on November 29, 2017 and subsequently, the Competition Bureau granted its authorization on April 23, 2018 to proceed with the acquisition of the Jean Coutu Group.

To fund the cash component of the purchase price, the Corporation disposed of the majority of its investment in ACT for proceeds net of fees and commissions amounting to $1,534.0 million. The Corporation also issued a private placement of unsecured senior notes of a $1,200.0 million aggregate principal amount with maturities ranging from 5 to 30 years. It also has access to a term credit facility totalling $500.0 million comprising three tranches with maturities of 1 to 3 years and a one-month $250.0 million bridge loan.

BUYOUT OF NON-CONTROLLING INTERESTS

In accordance with the shareholder agreement, the Corporation acquired the minority interests in Adonis and Phoenicia during the first quarter of the year for a cash consideration of $221.2 million. Additionally, financial costs of $1.8 million, calculated on the balance payable as at September 30, 2017 until payment in December 2017, were recognized in net earnings.

DIVIDENDS

On April 23, 2018, the Corporation’s Board of Directors declared a quarterly dividend of $0.18 per Common Share payable on May 25, 2018 to shareholders of record on May 3, 2018, an increase of 10.8% over the dividend declared for the same quarter last year. On an annualized basis, this dividend represents approximately 27% of 2017 net earnings.

SHARE TRADING

The value of METRO shares remained in the $38.32 to $43.33 range over the first 24 weeks of fiscal 2018. During this period, a total of 58.7 million shares were traded on the Toronto Stock Exchange. The closing price on April 13, 2018 was $41.51 compared with $42.91 at the end of fiscal 2017.

CONTINGENCY

In October 2017, the Canadian Competition Bureau began an investigation into the supply and sale of commercial bread which involves certain Canadian suppliers and retailers, including the Corporation. The Corporation continues to fully cooperate with the Competition Bureau. Class actions lawsuits have also been filed against the Corporation, suppliers and other retailers. Based on the information available to date, the Corporation does not believe that it or any of its employees have violated the Competition Act. At this stage, the Corporation does not believe that these matters will have a material adverse effect on the Corporation’s business, results of operations or financial condition.

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 11 -

FORWARD-LOOKING INFORMATION

We have used, throughout this report, different statements that could, within the context of regulations issued by the Canadian Securities Administrators, be construed as being forward-looking information. In general, any statement contained herein that does not constitute a historical fact may be deemed a forward-looking statement. Expressions such as “plan”, “expect” and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements contained herein are based upon certain assumptions regarding the Canadian food industry, the general economy, our annual budget, as well as our 2018 action plan.

These forward-looking statements do not provide any guarantees as to the future performance of the Corporation and are subject to potential risks, known and unknown, as well as uncertainties that could cause the outcome to differ significantly. The arrival of a new competitor is an example described under the “Risk Management” section of the 2017 Annual Report which could have an impact on these statements. We believe these statements to be reasonable and pertinent as at the date of publication of this report and represent our expectations. The Corporation does not intend to update any forward-looking statement contained herein, except as required by applicable law.

NON-IFRS MEASUREMENTS

In addition to the International Financial Reporting Standards (IFRS) earnings measurements provided, we have included certain non-IFRS earnings measurements. These measurements are presented for information purposes only. They do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measurements presented by other public companies.

ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE’S EARNINGS, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE

Adjusted operating income before depreciation and amortization and associate’s earnings, adjusted net earnings and adjusted fully diluted net earnings per share are earnings measurements that exclude some items that must be recognized under IFRS. They are non-IFRS measurements. We believe that presenting earnings without these items, that are not necessarily reflective of the Corporation’s performance, leaves readers of financial statements better informed as to the current period and corresponding prior year’s period’s operating earnings, thus enabling them to better perform trend analysis, evaluate the Corporation’s financial performance and judge its future outlook. The exclusion of these items does not imply that they are non-recurring.

OUTLOOK

Against a challenging backdrop marked by intense competition, same-store sales continued to increase in the second quarter, while our results were impacted by the shift of the Christmas week to the first quarter. We are confident in our ability to deliver long-term growth although changes in employment laws will put pressure on our operating costs.

Finally, we are pleased to announce that we received the authorization of the Competition Bureau and expect⁽³⁾ to close the acquisition of the Jean Coutu Group on May 11, thereby opening an exciting new chapter in the history of METRO.

Montréal, April 24, 2018

⁽¹⁾ See table on “Net earnings adjustments” and section on “Non-IFRS Measurements”

⁽²⁾ See table on “Operating income before depreciation and amortization and associate’s earnings adjustments” and section on “Non-IFRS Measurements”

⁽³⁾ See section on “Forward-looking Information”

- 12 -

Interim Condensed Consolidated Financial Statements

METRO INC.

March 17, 2018

- 13 -

Table of contents

- 14 -

Condensed consolidated statements of income

Periods ended March 17, 2018 and March 11, 2017

(Unaudited) (Millions of dollars, except for net earnings per share)

See accompanying notes

- 15 -

Condensed consolidated statements of comprehensive income

Periods ended March 17, 2018 and March 11, 2017

(Unaudited) (Millions of dollars)

See accompanying notes

- 16 -

Condensed consolidated statements of financial position

(Unaudited) (Millions of dollars)

See accompanying notes

- 17 -

Condensed consolidated statements of changes in equity

Periods ended March 17, 2018 and March 11, 2017

(Unaudited) (Millions of dollars)

See accompanying notes

- 18 -

Condensed consolidated statements of changes in equity

Periods ended March 17, 2018 and March 11, 2017

(Unaudited) (Millions of dollars)

See accompanying notes

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Condensed consolidated statements of cash flows

Periods ended March 17, 2018 and March 11, 2017

(Unaudited) (Millions of dollars)