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Metro Inc. – ‘F-8’ on 10/30/17 – ‘EX-3.10’

On:  Monday, 10/30/17, at 2:28pm ET   ·   Effective:  10/30/17   ·   Accession #:  1193125-17-324666   ·   File #:  333-221208

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

10/30/17  Metro Inc.                        F-8        10/30/17   20:8.3M                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-8         Registration Statement by a Foreign Private Issuer  HTML   1.62M 
                          for Securities Offered Pursuant to a                   
                          Transaction                                            
 2: EX-1.4      Underwriting Agreement                              HTML     30K 
 3: EX-1.5      Underwriting Agreement                              HTML    146K 
 4: EX-1.6      Underwriting Agreement                              HTML    170K 
 5: EX-3.1      Articles of Incorporation/Organization or By-Laws   HTML    252K 
14: EX-3.10     Articles of Incorporation/Organization or By-Laws   HTML    272K 
15: EX-3.12     Articles of Incorporation/Organization or By-Laws   HTML    603K 
 6: EX-3.2      Articles of Incorporation/Organization or By-Laws   HTML     35K 
 7: EX-3.3      Articles of Incorporation/Organization or By-Laws   HTML     14K 
 8: EX-3.4      Articles of Incorporation/Organization or By-Laws   HTML    549K 
 9: EX-3.5      Articles of Incorporation/Organization or By-Laws   HTML    171K 
10: EX-3.6      Articles of Incorporation/Organization or By-Laws   HTML    596K 
11: EX-3.7      Articles of Incorporation/Organization or By-Laws   HTML    178K 
12: EX-3.8      Articles of Incorporation/Organization or By-Laws   HTML    520K 
13: EX-3.9      Articles of Incorporation/Organization or By-Laws   HTML    182K 
16: EX-4.1      Instrument Defining the Rights of Security Holders  HTML     11K 
17: EX-4.2      Instrument Defining the Rights of Security Holders  HTML     10K 
18: EX-4.3      Instrument Defining the Rights of Security Holders  HTML     11K 
19: EX-4.4      Instrument Defining the Rights of Security Holders  HTML     11K 
20: EX-4.5      Instrument Defining the Rights of Security Holders  HTML     10K 

Exhibit 3.10

INTERIM REPORT

16-week period ended July 1, 2017

3^rd Quarter 2017

HIGHLIGHTS

REPORT TO SHAREHOLDERS

Dear Shareholders,

It is with pleasure that I present our interim report for the third quarter of fiscal 2017 ended July 1, 2017.

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 last year. Our food basket continued to experience a deflation of approximately 1% (inflation of 1.5% last year) which largely explains our lower sales growth.

We realized net earnings of $183.0 million in the third quarter of 2017, an increase of 3.7% from $176.5 million for the corresponding quarter of 2016, and fully diluted net earnings per share of $0.78 versus $0.72 in 2016, an increase of 8.3%.

Our financial position at the end of the third quarter of 2017 remains very solid. We had an unused authorized revolving credit facility of $600.0 million and our debt ratio (non-current debt/total capital) was 34.4%.

On August 14, 2017, the Board of Directors declared a quarterly dividend of $0.1625 per share, an increase of 16.1% over last year.

In a challenging environment marked by strong competition and continued food price deflation, the Company delivered sales and net earnings growth in the third quarter. We continue to invest to optimize our store network to better serve our customers, while exercising strong control over operating expenses. As the announced minimum wage increase in Ontario will put significant pressure on our industry in 2018, we will strive to mitigate this impact in order to continue⁽¹⁾ on our growth path.

Eric R. La Flèche

President and Chief Executive Officer

August 15, 2017

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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 July 1, 2017 and for the 16 and 40-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 16 and 40-week periods ended July 1, 2017 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 2016 Annual Report. Unless otherwise stated, the interim report is based upon information as at July 28, 2017.

Additional information, including the Certification of Interim Filings letters for quarter ended July 1, 2017 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 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 last year. Our food basket continued to experience a deflation of approximately 1% (inflation of 1.5% last year) which largely explains our lower sales growth.

Sales in the first 40 weeks of fiscal 2017 totalled $9,946.9 million versus $9,859.0 million for the corresponding period of fiscal 2016, an increase of 0.9%.

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND ASSOCIATE’S EARNINGS

This earnings measurement excludes financial costs, taxes, depreciation and amortization and associate’s earnings.

Operating income before depreciation and amortization and associate’s earnings (Alimentation Couche-Tard) for the third quarter of 2017 totalled $301.5 million or 7.4% of sales versus $297.4 million or 7.4% of sales for the same quarter last year, up 1.4%.

For the first 40 weeks of fiscal 2017, operating income before depreciation and amortization and associate’s earning totalled $730.3 million or 7.3% of sales versus $709.7 million or 7.2% of sales for the same period last year, up 2.9%.

Gross margins on sales for the third quarter and the first 40 weeks of 2017 were 19.5% and 19.7% respectively versus 19.6% and 19.7% for the corresponding periods of 2016. Operating expenses as a percentage of sales for the third quarter and the first 40 weeks of 2017 were 12.1% and 12.4% respectively versus 12.2% and 12.5% for the corresponding periods of 2016, reflecting strong expense control.

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

Total depreciation and amortization expenses for the third quarter and the first 40 weeks of 2017 were $60.3 million and $148.2 million respectively versus $56.4 million and $138.9 million for the corresponding periods of 2016.

Net financial costs for the third quarter of 2017 and 2016 totalled $18.3 million. For the first 40 weeks of 2017, net financial costs totalled $48.4 million compared to $47.4 million in 2016.

SHARE OF AN ASSOCIATE’S EARNINGS

Our share of earnings in Alimentation Couche-Tard was $20.7 million for the third quarter of 2017 versus $15.5 million for the corresponding quarter of 2016.

For the first 40 weeks of 2017, our share of earnings in Alimentation Couche-Tard was $66.0 million versus $67.3 million in 2016.

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INCOME TAXES

The 2017 third quarter income tax expense of $60.6 million represented an effective tax rate of 24.9% compared with the 2016 third quarter tax expense of $61.7 million for an effective tax rate of 25.9%.

The 40-week period income tax expense of $146.2 million for 2017 and $149.5 million for 2016 represented effective tax rates of 24.4% and 25.3% respectively.

NET EARNINGS

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 last year.

Net earnings for the first 40 weeks of 2017 were $453.5 million, an increase of 2.8% over net earnings of $441.2 million for the same period of 2016. Fully diluted net earnings per share rose 6.7% to $1.91 from $1.79 last year.

QUARTERLY HIGHLIGHTS

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 last year. Our food basket continued to experience a deflation of approximately 1% (inflation of 1.5% last year) which largely explains our lower sales growth.

Sales in the second quarter of 2017 reached $2,902.4 million, up 0.7% compared to $2,882.0 million in the second quarter of 2016. Same-store sales were up 0.3% (5.0% in the same quarter last year). Our food basket experienced more deflation than in the previous quarter, at about 2.0% (inflation of 3.0% last year), which largely explains our modest sales growth.

Sales in the first quarter of 2017 reached $2,971.3 million, up 0.3% compared to $2,961.6 million in the first quarter of 2016. Same-store sales were up 0.7% (2.8% in the same quarter of 2016). Our aggregate food basket experienced deflation of 1.0% versus an inflation of 2.8% last year, which largely explains our lower sales growth. Certain other factors also impacted our sales negatively, namely our decision not to renew a supply agreement for a network of hospitals in our wholesale pharmaceutical business, as well as the closure for conversion of some Metro stores that has not been offset in the first quarter by sales of the newly-opened discount stores.

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Sales in the fourth quarter of 2016 reached $2,928.9 million, up 3.4% compared to $2,833.9 million in the fourth quarter of 2015. Same-store sales increased by 2.8% (3.4% in the same quarter of 2015), while our food basket inflation was 0.7%. Our effective merchandising strategies combined with solid store execution contributed to our sales growth.

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 last year.

Net earnings for the second quarter of 2017 were $132.4 million, an increase of 6.0% from $124.9 million for the second quarter of 2016. Fully diluted net earnings per share rose 9.8% to $0.56 from $0.51 last year.

Net earnings for the first quarter of 2017 were $138.1 million, a decrease of 1.2% from $139.8 million for the first quarter of 2016. Fully diluted net earnings per share rose 3.6% to $0.58 from $0.56 in 2016. The decrease in net earnings is due to a $6.7 million decline in our share of an associate’s earnings (Alimentation Couche-Tard).

Net earnings for the fourth quarter of 2016 were $145,0 million, an increase of 10.1% over net earnings of $131.7 million for the same quarter of 2015. Fully diluted net earnings per share rose 15.4% to $0.60 from $0.52 in 2015.

CASH POSITION

OPERATING ACTIVITIES

Operating activities generated cash flows of $214.6 million in the third quarter and $459.4 million over the first 40 weeks of fiscal 2017 compared to $232.7 million and $483.4 million for the corresponding periods of 2016. This difference is due mainly to the net change in non-cash working capital items.

INVESTING ACTIVITIES

Investing activities required outflows of $80.2 million in the third quarter and $221.0 million over the first 40 weeks of fiscal 2017 versus $91.2 million and $233.4 million for the corresponding periods of 2016. The third quarter difference is primarily due to fixed and intangible asset acquisitions that were $8.7 million lower in 2017 than in 2016, while the 40-week difference is attributable to fixed and intangible asset that were $24.9 million greater in 2017 and to $35.0 million in business acquisitions in 2016.

During the first 40 weeks of 2017, we and our retailers opened 8 new stores and carried out major expansions and renovations of 30 stores for a net increase of 179,500 square feet or 0.9% of our retail network.

FINANCING ACTIVITIES

In the third quarter of 2017, we utilized $127.1 million in funds versus $192.3 million for the corresponding quarter of 2016. This variance is attributable primarily to a $62.4 million lower redemption of shares in 2017 compared to 2016.

Over the first 40 weeks of 2017 , we utilized $204.0 million versus $271.5 million for the corresponding period of 2016. This variance is due in part to a $127.8 million net increase in debt compared with 2016. In 2017, there was a $736.9 million debt increase as well as a $533.0 million debt repayment compared to a $218.4 million increase and $142.3 million repayment in the third quarter of 2016. The greater debt increase and repayment in 2017, are due the issuance of unsecured notes. Also, redemption of shares was $43.0 million greater compared to 2016.

FINANCIAL POSITION

We do not anticipate⁽¹⁾ any liquidity risk and consider our financial position at the end of the third quarter of fiscal 2017 as very solid. We had an unused authorized revolving credit facility of $600.0 million. Our non-current debt corresponded to 34.4% of the combined total of non-current debt and equity (non-current debt/total capital).

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At the end of the third quarter of fiscal 2017, the main elements of our non-current debt were as follows:

Our main financial ratios were as follows:

CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

NORMAL COURSE ISSUER BID PROGRAM

Under its normal course issuer bid program, the Corporation may repurchase up to 12,000,000 of its Common Shares between September 12, 2016 and September 11, 2017. Between September 12, 2016 and July 28, 2017, the Corporation has repurchased 7,811,722 Common Shares at an average price of $40.82 for a total of $318.9 million. The Corporation intends to renew its normal course issuer bid program as an additional option for using excess funds.

NEW PARTNERSHIP - MissFresh

On August 1, 2017, the Company announced its partnership with MissFresh, a young company from Montréal, specializing in online sales and home delivery of meal kits. This partnership is part of our digital strategy and will be complementary to our in-store offer. This transaction will have no material effect on our short-term results.

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BUYOUT OF NON-CONTROLLING INTERESTS

As announced last quarter, the Corporation will acquire the minority interests in Adonis and Phoenicia shortly after the end of the current fiscal year. Consequently, the liability for these non-controlling interests has been reclassified in current liabilities.

DIVIDENDS

On August 14, 2017, the Corporation’s Board of Directors declared a quarterly dividend of $0.1625 per Common Share payable September 26, 2017, an increase of 16.1% over the dividend declared for the same quarter last year. On an annualized basis, this dividend represents approximately 25% of 2016 net earnings.

SHARE TRADING

The value of METRO shares remained in the $38.00 to $47.41 range over the first 40 weeks of 2017. During this period, a total of 118.9 million shares traded on the Toronto Stock Exchange. The closing price on July 28, 2017 was $42.09 compared with $44.09 at the end of fiscal 2016.

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 “continue”, “anticipate” 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 2017 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 2016 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.

OUTLOOK

In a challenging environment marked by strong competition and continued food price deflation, the Company delivered sales and net earnings growth in the third quarter. We continue to invest to optimize our store network to better serve our customers, while exercising strong control over operating expenses.We estimate the impact of the increase in the minimum wage recently announced in Ontario to be approximately $45 to $50 million⁽¹⁾ on an annualized basis for 2018. The Company is currently analyzing measures to be implemented to mitigate this impact in order to continue⁽¹⁾ on our growth path.

Montréal, August 15, 2017

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Interim Condensed Consolidated Financial Statements

METRO INC.

July 1, 2017

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Table of contents

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Condensed consolidated statements of income

Periods ended July 1, 2017 and July 2, 2016

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

See accompanying notes

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Condensed consolidated statements of comprehensive income

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars)

See accompanying notes

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Condensed consolidated statements of financial position

(Unaudited) (Millions of dollars)

See accompanying notes

- 13 -

Condensed consolidated statements of changes in equity

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars)

See accompanying notes

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Condensed consolidated statements of changes in equity

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars)

See accompanying notes

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Condensed consolidated statements of cash flows

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars)

See accompanying notes

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Notes to interim condensed consolidated financial statements

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars, unless otherwise indicated)

METRO INC. (the Corporation) is a company incorporated under the laws of Québec. The Corporation is one of Canada’s leading food retailers and distributors and operates a network of supermarkets, discount stores and drugstores. Its head office is located at 11011 Maurice-Duplessis Blvd., Montréal, Québec, Canada, H1C 1V6. Its various components constitute a single operating segment.

The unaudited interim condensed consolidated financial statements for the 16 and 40-week periods ended July 1, 2017 have been prepared by management in accordance with IAS 34 “Interim Financial Reporting” and using the same accounting policies as those used in preparing the audited annual consolidated financial statements for the year ended September 24, 2016. They should be read in conjunction with the audited annual consolidated financial statements and accompanying notes which were presented in the Corporation’s 2016 Annual Report.

In the first quarter of 2016, the Corporation acquired the assets of three affiliated stores in Québec which it already supplied, and of a food store from a competitor in Ontario. The total purchase price was $35.3, with a remaining balance of $0.1 to be paid as at July 1, 2017. The acquisition of these stores was accounted for using the purchase method. The stores’ results have been consolidated as of their respective acquisition dates.

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Notes to interim condensed consolidated financial statements

Periods ended July 1, 2017 and July 2, 2016

(Unaudited) (Millions of dollars, unless otherwise indicated)