Based on Loblaw's financial health and sources of cash, what position is loblaw in to consider a major acquisition

EXHIBIT 1A: LOBLAW CONSOLIDATED BALANCE SHEET, 2011/2012 (IN CDN$ MILLIONS) 2012 2011 For the period ended 12/29/2012 12/31/2011 Assets Current Assets Cash & Near Cash Items 1,079 966 Short-Term Investments 716 754 Accounts & Notes Receivable 456 467 Inventories 2,007 2,025 Other Current Assets 2,409 2,250 Total Current Assets 6,667 6,462 LT Investments & LT Receivables 463 413 Net Fixed Assets 8,973 8,725 Other Long-Term Assets 1,858 1,828 Total Assets 17,961 17,428 Liabilities & Shareholders' Equity Current Liabilities Accounts Payable 3,720 3,677 Short-Term Borrowings 1,577 992 Other Short-Term Liabilities 99 49 Total Current Liabilities 5,396 4,718 Long-Term Borrowings 4,997 5,493 Other Long-Term Liabilities 1, 151 1,210 Total Liabilities 11,544 11,421 Shareholder's Equity Share Capital & APIC 1,622 1,588 Retained Earnings & Other Equity 4,795 4,419 Total Equity 6,417 6,007 Total Liabilities & Equity 17,961 17,428 Source: Loblaw 2012 Annual Report - Financial Review, Pages 43-47EXHIBIT 1B: LOBLAW CONSOLIDATED STATEMENT OF EARNINGS, 2011/2012 (IN CDN$ MILLIONS) 2012 2011 For the period ended 12/29/2012 12/31/2011 Revenue 31,604 31,250 Cost of Merchandise Inventories Sold 24, 185 23,894 Gross Margin 7,419 7,356 Selling, General and Administrative Expenses 6,223 5,972 Operating Income 1, 196 1,384 Interest expense and other financing charges 331 327 Earnings before income tax 865 1,057 Income Tax 215 288 Net Earnings 650 769 Source: Loblaw 2012 Annual Report - Financial Review, Pages 43-47. EXHIBIT 1C: LOBLAW CONSOLIDATED STATEMENT OF CASH FLOWS, 2011/2012 (IN CDN$ MILLIONS) 2012 2011 For the period ended 12/29/2012 12/31/2011 Cash From Operating Activities Net Income 650 769 Depreciation & Amortization 777 699 Other Non-Cash Adjustments 155 338 Changes in Non-Cash Capital 55 8 Cash From Operations 1,637 1,814 Cash From Investing Activities Disposal of Fixed Assets 62 57 Capital Expenditures (1,017) (987) Increase in Investments Decrease in Investments Other Investing Activities (34) 74 Cash From Investing Activities (989) (856) Cash from Financing Activities Dividends Paid (177) (193) Change in Short-Term Borrowings 360 Increase in Long-Term Borrowings 111 287 Decrease in Long-term Borrowings (115) (909) Increase in Capital Stocks 22 21 Decrease in Capital Stocks Other Financing Activities (376) (415) Cash from Financing Activities (535) 849) Net Changes in Cash 113 109 Source: Loblaw 2012 Annual Report - Financial Review, Pages 43-47.EXHIBIT 1D: SELECTED LOBLAW RATIOS FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 For the period ended 12/29/2012 12/31/2011 1/1/2011 1/2/2010 1/3/2009 Liquidity Ratios Current ratio 1.24 1.37 1.20 1.20 1.23 Quick ratio 0.42 0.46 0.39 0.60 0.50 Cash flow from operations 0.30 0.38 0.41 0.53 0.31 Resource Management Ratios Days inventory 33 33 26 Days receivable 30 5 31 5 9 10 Days payable 56 56 53 50 36 Financial Capacity Ratios Debt to total capital 0.62 0.82 0.70 0.72 0.45 Debt to equity 1.62 1.70 1.17 1.24 0.81 Times interest earned 3.61 4.23 4.65 4.48 3.98 Operating cash flow to debt 0.16 0.18 0.20 0.25 0.21 Profitability analysis Earnings margin 3.78% 4.43% 4.09% 3.90% 3.42% Gross margin 23.47% 23.54% 24.53% 23.00% 22.44% Pretax margin 2.70% 3.38% 3.21% 3.00% 2.50% Profit margin 2.10% 2.46% 2.20% 2.10% 1.80% Return on assets 3.67% 4.49% 4.24% 4.53% 3.98% Return on equity 10.46% 13.25% 11.37% 10.86% 9.69% Utilization Ratios Capital assets turnover 3.52 3.58 3.40 3.59 3.90 Total asset turnover 1.79 1.82 1.94 2.12 2.23 Basic EPS, ' GAAP? 2.31 2.73 2.42 2.39 2.01 EPS: earnings per share 2GAAP: generally accepted accounting principles Source: Bloomberg and case writer calculations.EXHIBIT 2A: SHOPPERS DRUG MART CONSOLIDATED BALANCE SHEETS, 2011/2012 (IN CDN$ MILLIONS) 2012 2011 For the period ended 12/29/2012 12/31/2011 Assets Current Assets Cash and Short Term Investments 105 119 Accounts Receivable-Trade, Net 470 493 Total Inventory 2,148 2,042 Prepaid Expenses 42 41 Total Current Assets 2,765 2,696 Property/Plant/Equipment, Total-Gross 3, 184 3,064 Accumulated Depreciation, Total Goodwill, Net (1,457) (1,286) 2,573 2,500 Intangibles, Net 340 282 Long Term Investments 7 6 Other Long Term Assets, Total 62 39 Total Assets 7,474 7,300 Liabilities & Shareholders' Equity Current Liabilities Accounts Payable and Accrued Liabilities 1,207 1,109 Notes Payable/Short Term Debt 421 Current Port. of LT Debt/Capital Leases 172 450 250 Associate Interest 174 153 Other Current liabilities, Total 83 92 Total Current Liabilities 2,335 1,776 Long Term Debt 247 696 Provisions 4 2 Other Long-term Liabilities 517 520 Deferred Income Tax 47 39 Total Liabilities 3,150 3,032 Shareholders' Equity Common Stock, Total 1,431 1,486 Additional Paid-In Capital 11 10 Retained Earnings (Accumulated Deficit) 2,916 2,806 Treasury Stock - Common 0 Accumulated other comprehensive loss (35) (5) (30) Total Equity Total Liabilities & Shareholders' Equity 4,323 4,268 7,474 7,300 Source: Shoppers Drug Mart Corporation Annual Report 2012, pages 67-70.EXHIBIT 2B: SHOPPERS DRUG MART CONSOLIDATED STATEMENT OF EARNINGS, 2011/2012 (IN CDN$ MILLIONS) FY 2012 FY 2011 12/29/2012 12/31/2011 Revenue 10,782 10,459 Cost of Revenue 6,609 6,416 Gross Profit 4,173 4,042 Operating Expenses 3,292 3,132 Operating Income 881 911 Interest Expense 58 64 Pretax Income 823 847 Income Tax Expense 215 233 Net Income 608 614 Source: Shoppers Drug Mart Corporation Annual Report 2012, pages 67-70. EXHIBIT 2C: SHOPPERS DRUG MART CONSOLIDATED STATEMENT OF CASH FLOWS, 2011/2012 (IN CDN$ MILLIONS) 2012 2011 For the period ended 12/29/2012 12/3 1/2011 Cash From Operating Activities Net Income 608 614 Depreciation & Amortization 318 296 Other Non-Cash Adjustments (25) 31 Changes in Non-Cash Capital 15 32 Cash From Operations 917 974 Cash From Investing Activities Disposal of Fixed Assets 51 55 Capital Expenditures (254) Increase in Investments 0 (342) Decrease in Investments 0 0 Other Investing Activities 192) (63) Cash From Investing Activities 395 (349) Cash from Financing Activities Dividends Paid (219) (211) Change in Short-Term Borrowings 248 (165 Increase in Long-Term Borrowings Decrease in Long-term Borrowings 0 (253) 0 (3) Increase in Capital Stocks Decrease in Capital Stocks (335) (207) Other Financing Activities 21 14 Cash from Financing Activities 536) (570) Net Changes in Cash (14) 54 Source: Shoppers Drug Mart Corporation Annual Report 2012, pages 67-70.EXHIBIT 2D: SELECTED SHOPPERS DRUG MART RATIOS FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 For the period ended 12/29/2012 12/31/2011 1/1/2011 1/2/2010 1/3/2009 Liquidity Ratios Current Ratio 1.18 1.52 1.92 1.62 ick Ratio 1.29 0.25 0.34 0.36 0.33 0.26 Cash flow from operations 0.39 0.55 0.53 0.41 0.26 Resource Management Ratios Days inventory 115 15 113 17 110 110 107 Days receivable 15 Days payable 63 55 18 18 59 57 62 Financial Capacity Ratios Debt to total capital 0.37 0.37 0.38 0.52 0.56 Debt to equity 0.60 0.58 0.61 1.09 1.29 Times interest earned 15.30 14.22 14.80 15.38 13.56 Operating cash flow to debt 0.36 0.39 0.33 0.26 0.19 Profitability Analysis Earnings margin 5.64% 5.87% 5.81% 5.86% 38.70% 6.00% Gross margin 38.65% 38.35% 37.53% 36.92% Pretax margin 7.64% 8.10% 8.21% 7.64% 7.64% Profit margin 5.64% 5.87% 5.81% 5.64% 5.64% Return on assets 8.24% 8.51% 8.47% 8.24% Return on equity 14.17% 8.24% 14.46% 14.70% 14.17% 14.17% Utilization Ratios Capital assets turnover 6.28 5.92 5.96 6.38 7.08 Total asset turnover 1.46 1.45 1.46 1.51 1.57 Basic EPS, GAAP 2.92 2.84 2.72 2.69 2.55 Source: Bloomberg and case writer calculations.EXHIBIT 3: SHOPPERS DRUG MART STOCK CHART Shoppers Drug Mart Stock Price 70 60 50 40 30 Closing share price 20 10 0 1/2/200 1/2/20 2/2006 1/2/2007 1/2/2008 2009 1/2/2010 1/2/2013 1/2 1/2/20 1/2/2011 1/2/2012 Source: https://ca.finance.yahoo.com/q/hp?s=L.TO, accessed June 26, 2014 EXHIBIT 4: LOBLAW STOCK CHART Loblaw Stock Price 90 80 70 60 50 40 30 Closing share price 20 70 O 1/2/2 1/2/2005 1/2/2006 1/2/2007 1/2/2008 1/2/2009 1/2/2010 1/2/2011 1/2/2012 1/2/2013 Source: https://ca.finance.yahoo.com/q/hp?s=SC.TO, accessed June 25, 2014EXHIBIT 5: SELECTED COMPETITOR FINANCIAL INFORMATION North American Food Retailers Relative Valuations (May 1, 2013) P/E EV/EBITDA (X) EBITDA ROE Mkt Cap Margin Company (US$) Ticker Share Price ($) LTM CFY NFY TTM CFY (TTM) ($M) Whole Foods Market WFM 89.02 31.2 31 26.2 13.3 12.8 9.62 16.4 16,498 Costco Wholesale COST 108.22 24.9 23.8 21.5 12 11.4 3.76 17.1 47,224 Loblaw Cos Ltd (C$) 44.75 16.3 17.4 15.8 CO 8.3 6.45 F 12,623 Wal-Mart Stores Inc WMT 78.06 15.5 14.6 13.3 8.5 8.2 7.74 23 257,008 Metro Inc. (C$) MRU 68.26 13.5 13.6 12.6 8.4 8.2 7.03 18.8 6,513 Empire Co Ltd (C$) EMP.A 68.4 12.7 13.1 12.4 6.3 5.8 4.88 10.5 4.648 Safeway Inc. SWY 22.7 10.2 9.4 5.1 5.2 5.01 17.7 5,471 North American Drugstores Relative Valuations (May 10, 2013) P/E EV/EBITDA (x) EBITDA ROE Mkt Cap Margin Company (US$) Ticker Share Price ($) LTM CFY NFY TTM CFY (TTM) ($M) Rite Aid Corp RAD 2.56 9.5 18.6 12.7 4.46 N/A 2,316 Shoppers Drug Mart SC 46.67 15.8 15.7 14.8 8.9 11.05 14.2 9,448 Walgreen Co WAG 48.72 19.9 13.2 11.1 6.38 13.4 46, 161 Jean Coutu Group PJC.A 16.82 16 14 9.6 11.79 23.9 3,605 CVS Caremark Corp CVS 58.03 17.1 14.6 13.1 7.6 11.2 71,052 P/E = Price to Earnings EV/EBITDA = Economic Value to Earnings before interest, taxes, depreciation and amortization EBITDA = Earnings before interest, taxes, depreciation and amortization ROE = Retum on equity Mkt Cap = Market Capitalization LTM = Last twelve months CFY = Current fiscal year NFY = Next fiscal year TTM = Trailing twelve months Source: Keith Howlett and Kane Rao, "Loblaw Companies Limited," Morning Pulse, Desjardins Capital Markets, May 2, 2013; Keith Howlett and Kane Rao, "Shoppers Drug Mart Corporation," Morning Pulse, Desjardins Capital Markets, May 13, 2013