Is there someone who can edit an accounting financial analysis or answer theses questions for this project on for the financial stamens in the Empire company?

Acctg 501 Fall 2016 Term Project This project is worth 20% of your mark and must be done in groups of 3-5 REQUIRED: WRITTEN REPORT 1. Choose any company that you find interesting (note that you may NOT use a company we have discussed in class e.g. Amazon, WestJet, etc.). The company must either use IFRS or ASPE. For ASPE reporting companies you may use your own company's financial statements if you are allowed to submit them as part of this project. Otherwise please use a publicly reporting IFRS based company. a) Obtain the most recent annual report for your company. The report should contain at least 2 years of income statements and balance sheets (statement of financial position). b) Justify your choice of company in a paragraph. Why did you choose this particular company? c) Choose ONE main user / group of users of your company's financial statements. Justify WHY you chose this user. This will be important for the financial analysis portion of this assignment. d) Perform a BRIEF SWOT analysis for this company. Pick out a maximum of two items from each category. This analysis should serve to frame the accounting discussion by giving it context. 2. Perform a trend analysis (using last year as the base year) using the income statement and balance sheet. Choose 5 items in total that would be important to YOUR USER (e.g. a mix of items from the B/S and I/S). Briefly explain why your user would care about each item and interpret each item using your trend analysis. You may of course link the B/S and I/S in this analysis (i.e. you don't have to treat each statement as stand alone). Also note that your trend analysis may include changes from the prior year and % relationships (e.g. an expenses as a % of sales, etc.) and remember that no change from the prior year might be interesting as well. 3. Perform a financial analysis using ratios and other methods you see fit. Please choose a maximum of 4 calculations. a) For each calculation justify why you chose to include that particular calculation for your company. b) Provide support for each calculation (e.g. an appendix that a reader could follow) c) Interpret and discuss each calculation. What does it mean? What can you infer about the company? 4. Analyze your company's cash flow statement by discussing and analyzing your top 3 observations. Do not choose net income or total cash on hand as your observations. a) Also, generally discuss whether you agree or disagree with the investing and financing strategies that your company appears to be employing. 1 4. Identify 2 (two) items NOT included in (or derived from) the financial statements that you think would be important to YOUR USER. Discuss your reasons for believing that these two items about the company would be important in making decisions. 5. Compare your company's financial statements with those of a competitor. a) Justify your choice of competitor by analyzing 3 main reasons. In other words what are the 3 reasons you think this company is a good comparison? b) If you were making a decision to invest in one of the two companies, which company would you choose? Why? (Note: your answer in this section must include THREE financial issues, but your answer need not be limited to a discussion of financial issues.) 6. Please make an overall conclusion / wrap up your discussion. You must include this and it must be insightful. Submission Notes: 1. You must submit the pages from the annual report / financial statements that you used to create your analysis. 2. Your analysis must include page references to relevant portions of the annual reports if needed, and the relevant portions of the annual reports must be highlighted if needed. Your report must also contain appropriate quotation marks for quoted material and appropriate citations for material taken from sources outside the financial statements. 3. You MUST reference your appendices in the body of your report. For example, if you calculate the current ratio and have an appendix for this calculation please including something like the following: \"As per Appendix A, the current ratio is 2:1\". 4. All appendices MUST be labeled appropriately (e.g. Appendix A: Current Ratio). 5. Please include a table of contents. 6. Your analysis is limited to 10 pages plus reasonable appendices, and must be typed, doublespaced, and have at least 11-point font and 1 inch margins. 2 EMPIRE COMPANY LIMITED 2015 ANNUAL REPORT 2015 ANNUAL REPORT Building a stronger platform for growth WHAT'S INSIDE About Empire Who we are What we do Where we do it A long-term track record of growth 2 4 6 8 A stronger platform for growth Letter to shareholders Strong vision Strong infrastructure Strong team 10 15 22 24 The value of strong governance Message from the Chair 26 Financial report Management's discussion and analysis Consolidated financial statements Shareholder information 30 77 IBC Strong vision Strong infrastructure Canadians want help making better food choices. Our mission is to make a difference in the lives of Canadians by helping them Eat Better, Feel Better and Do Better - see page 15. We're continuing to invest in state of the art technology and streamlining our processes so we can deliver our vision efficiently and cost-effectively from coast to coast - see page 22. About forward-looking statements This document includes statements about our objectives, plans, goals, strategies, future growth, financial condition, results of operations, cash flows, performance, business prospects and opportunities, including our anticipated benefits from the Canada Safeway acquisition. These statements are forward-looking because they are based on management's expectations about the future - they are not historical facts. Forward-looking statements usually include words like anticipates, expects, believes, estimates, could, intends, may, plans, predicts, projects, will, would, foresees and other similar expressions, or the negative of these words. For more information and a caution about using forward-looking information, see Forward-looking information on page 31. About non-GAAP measures Certain financial measures in this document are not defined terms under GAAP, so they are not a reliable way to compare us to other companies. See Non-GAAP financial measures on page 73 for more information. Helping Canadians Eat Better, Feel Better and Do Better Strong team A team of approximately 125,000 people have the passion, support and training they need to bring our vision to life - see page 24. At Empire, we have a clear vision, a strong infrastructure to support it, and the team to make it happen. The value to you, our shareholders, comes from delivering on that vision profitably. Fiscal 2015 was a successful year. Sales, earnings and free cash flow helped contribute to solid returns for shareholders. This year's annual report tells you about our many initiatives to improve the customer experience, the progress we've made on our integration of Safeway, and how we're executing our strategy to build a stronger platform for growth. 1 WHO WE ARE Helping Canadians Eat Better, Feel Better and Do Better Proudly Canadian with 108 years in the food retailing business, Empire Company Limited (TSX: EMP.A) is headquartered in Stellarton, Nova Scotia. Our key businesses are food retailing and related real estate, through our wholly-owned subsidiary Sobeys Inc. and a 41.5% equity accounted interest in Crombie REIT. Food Fuel Five core retail food formats from full service to discount Over 350 retail fuel locations $23.9 billion in annual sales Grocery purchases generate fuel discounts coast to coast Approximately 1,500 stores in 10 provinces Pharmacy One of Canada's largest pharmacy retailers 3 banners Wholesale Only national full service wholesaler in Canada 348 in-store pharmacies Servicing small convenience/gas sites to large full service retail locations 79 Lawtons Drug Stores over 5,000 independent and retail chain accounts Liquor Real estate Growing liquor business Development and ownership 2 banners in Western Canada Strong real estate development team 3 store formats to meet the needs of customers 41.5% equity accounted interest in Crombie REIT You'll find the recipes at www.sobeys.com/en/recipes 2 EMPIRE COMPANY LIMITED ABOUT EMPIRE 2015 financial highlights For the 52 weeks ended ($ in millions of dollars, except per share amounts) May 2, 2015 $ Sales 23,928.8 May 3, 2014 (1) $\t20,957.8 May 4, 2013 (1)(2) $\t17,343.9 EBITDA(3) 1,226.1 755.3 918.1 Adjusted EBITDA(3) 1,327.9 1,055.6 942.9 Operating income (3) 743.6 328.5 573.2 Net earnings from continuing operations (4) 419.0 151.0 372.3 per share (fully diluted) 4.54 1.88 5.47 Net earnings (4) 419.0 235.4 379.5 per share (fully diluted) 4.54 2.93 5.58 Adjusted net earnings from continuing operations (3)(4) 518.9 391.4 390.7 per share (fully diluted) 5.62 4.88 5.74 Book value per share 64.81 61.75 54.82 Dividends per share (DPS) 1.08 1.04 0.96 Sales Adjusted net earnings from continuing operations(3)(4) ($ in billions) Dividends ($ per share) ($ in millions) +6.8% 25,000 +11.0% 600 CAGR (5) 20,000 +8.4% 1.20 CAGR (5) 500 1.00 400 0.80 300 0.60 200 0.40 100 0.20 CAGR (5) 15,000 10,000 5,000 0 06 07 08 32.6% 09 10 11 increase in adjusted net earnings(3)(4)(6) (1) (2) (3) (4) (5) (6) 12 13 14 15 100% technology integration complete 0 06 07 08 09 10 78.0% 11 growth in net earnings(4) 12 13 14 15 0 34.4% 06 reduction in funded debt(3) 07 08 09 10 11 12 13 14 15 27.4% growth in share value Amounts have been reclassified to correspond to the current period presentation on consolidated statement of earnings. Amounts have been restated as a result of a change in accounting policy and reclassification of discontinued operations. See \"Non-GAAP Financial Measures\" section of the Management's Discussion and Analysis (\"MD&A\"). Net of non-controlling interest. Compound annual growth rate. From continuing operations. 2015 ANNUAL REPORT 3 WHAT WE DO We are on a mission to bring better food to Canadians. At a time when processed food seems like the easiest choice, and fewer people are cooking and eating together, we want to improve the lives of Canadians by helping them Eat Better, Feel Better and Do Better. Before we began this mission we conducted research with Canadians and learned that: 73% of Canadians said they want to eat better than they currently do 1 in 5 Canadian youth aged 12 to 17 were overweight or obese more than 62% of dietary energy in Canada came from ultra-processed food only 18% of Canadians cooked meals from scratch You'll find the recipes at www.sobeys.com/en/recipes 4 EMPIRE COMPANY LIMITED ABOUT EMPIRE Our research has shown that Canadians want help making better food choices and are looking for leadership and advice from people they can trust. We're using our skills, experience and passion to change the relationship Canadians have with food. Better food Better service Delivered sustainably We're helping our customers experience better food by giving them more choices from better sources - better ingredients, more selection, healthier options and better value. We're making it easier for customers to make good food part of their daily lives - and serving that up with expertise and enthusiasm. We're offering customers more sustainable products and services - and backing them up with operations and responsible business practices that keep the future of our planet in mind. I'm helping Sobeys bring better food to Canadians - Jamie Oliver As an advocate for change and an international promoter of better food, Jamie Oliver is working with us to champion enhanced food knowledge, balanced nutrition, quality ingredients and cooking skills for Canadians. Photography 2015 David Loftus 2015 ANNUAL REPORT Le plaisir de mieux manger We're making eating and cooking healthy, quick, simple and easy Jose di Stasio, Christian Bgin and Stefano Faita - three Qubec food celebrities - have teamed up with IGA in Qubec as cartoon avatar ambassadors offering unique recipes and tips to get customers more interested in le plaisir de mieux manger, the Joy of Eating Better. 5 WHERE WE DO IT We reach Canadians from coast to coast. Locations by region QUBEC WESTERN CANADA 382 Corporate: 295 Franchised: 87 12.3M sq ft O N TA R I O 332 678 AT L A N T I C C A N A D A Head office Corporate: 178 Franchised: 500 11.2M sq ft Corporate: 335 Franchised: 85 5.3M sq ft Corporate: 100 Franchised: 232 8.9M sq ft Food Pharmacy 420 Liquor Fuel PHARMACY PHARMACY Shell Trade Marks reproduced by permission of Shell Brands International AG. 6 EMPIRE COMPANY LIMITED ABOUT EMPIRE By the numbers Our reach 1,800+ Our food retailing business under Sobeys Inc. is made up of a diversified and complementary group of businesses - food, pharmacy, wholesale, liquor and fuel - and we have a comprehensive logistics and distribution network to support it. locations* 38M total sq. footage 900+ communities 125,000 Our five core retail food formats ensure we have the right offering in the rightsized stores for each individual market we serve. From full service to discount, each format is tailored to satisfy the food shopping needs of Canadians. people *Includes over 350 retail fuel locations. Extra Our new concept Sobeys, Sobeys extra and IGA extra stores welcome customers into a world of food discovery and innovation with extra departments, products, services and savings that are designed to help them Eat Better, Feel Better and Do Better every day. From wellbeing counsellors and pharmacists, to chefs, expert butchers and cheese ambassadors, our employees bring added knowledge to help customers and enhance their overall experience. 2015 ANNUAL REPORT 7 A LONG-TERM TRACK RECORD OF GROWTH We take a long-term view. FISCAL 2006 $13.1 Sales ($ in billions) $202.0 Adjusted net earnings from continuing operations ($ in millions) $29.77 Book value ($ per share) Fiscal year 2006 2007 2008 2009 2010 March 2006 Crombie REIT completes its initial public offering. Empire sells 44 properties to Crombie REIT for $468.5 million and retains an initial 48.3% ownership interest. August 2006 Sobeys acquires Achille de la Chevrotire Lte, for $79.2 million. June 2007 Empire acquires the outstanding common shares of Sobeys that it did not own for $1.06 billion, achieving 100% ownership. March 2009 Empire issues 2.713 million Non-Voting Class A shares at $49.75 per share. Empire reduces its ratio of debt to capital to 32.7% from 39.8%. May 2010 Sobeys enjoys another record year and receives credit rating upgrades from Standard & Poor's and DBRS, with both ratings at investment grade. Empire reduces its ratio of debt to capital to 29.3% from 32.7%. September 2007 Sobeys acquires Thrifty Foods for $253.6 million. April 2008 Empire sells 61 properties for $428.5 million to Crombie REIT. 8 November 2009 Sobeys opens its first automated distribution centre in Vaughan, Ontario. EMPIRE COMPANY LIMITED ABOUT EMPIRE FISCAL 2015 $23.9 Sales ($ in billions) $518.9 Adjusted net earnings from continuing operations ($ in millions) 11.0% $64.81 CAGR 2005 to 2015 \u0007Adjusted net earnings from continuing operations Book value ($ per share) 2011 2012 2013 2014 2015 October 2010 Empire sells its investment in Wajax for net proceeds of $121.3 million. October 2011 Sobeys initiates an organizational realignment to optimize productivity and fully capitalize on its scale. November 2012 Sobeys begins shipping from its second fully-automated distribution centre in Terrebonne, Qubec. September 2013 Sobeys introduces the Better Food For All movement to Canadians. February 2015 Sobeys implements SAP at Safeway, bringing SAP coast to coast. November 2013 Sobeys completes the purchase of Canada Safeway for $5.8 billion. Empire completes the sale of Empire Theatres for a net gain of $104.2 million. March 2015 \t\u0007Sobeys becomes the first Canadian grocer to issue AIR MILES reward miles across Canada. May 2011 Sobeys completes the first year of the FreshCo discount banner in Ontario with a network of 57 stores in operation by fiscal year-end. March 2012 Sobeys purchases 236 Shell branded retail gas locations in Qubec and Atlantic Canada for $214.9 million. March 2013 Sobeys completes its national implementation of the SAP business platform to fully capitalize on its scale as a $17 billion organization. \u0007Trademarks of AIR MILES International Trading B.V. Used under license by LoyaltyOne, Co. and Sobeys Capital. 2015 ANNUAL REPORT 9 We are building a stronger platform for growth. Summary of the year Priorities for fiscal 2016 Delivered solid returns for shareholders We are continuing to develop our vision, infrastructure and team as we build our strong platform for growth: Sold non-core assets and used the proceeds to reduce our debt Exceeded our cost synergy targets from the Safeway integration, remain on track to meet our three-year goal Completed our IT integration and now have a common business platform for our operations coast to coast Introduced many new initiatives that support our mission of helping Canadians Eat Better, Feel Better and Do Better, adding value and making us stronger as we grow 10 Deliver cost synergies from our integration of Canada Safeway Improve our efficiencies by harmonizing processes and optimizing distribution Invest strategically in systems and innovation Improve our full service offering and shopping experience Increase employee training and engagement to deliver best-in-class customer service and loyalty EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Letter to shareholders Marc Poulin President and Chief Executive Officer We all know it's a challenge to eat well in today's fast-paced world. We don't cook as often as we'd like and we rely too much on processed foods. The sad reality is that Canadian households don't cook or eat together as much as they used to, and in 2013, one in five Canadian youth aged 12 to 17 was overweight or obese. Our research shows, however, that Canadians want help - they want people they can trust to make it easier to make better food choices for themselves and their families. We're meeting that need by bringing food back to the centre of Canadians' lives, as an ingredient in a healthy lifestyle. Our vision is to set ourselves apart by offering products and services that help Canadians enjoy food in a way that makes their lives better. 2015 ANNUAL REPORT The value to you, our shareholders, comes from delivering on that vision profitably - on our ability to provide long-term, sustainable growth. And that's what this year's annual report is all about: the clarity of our vision, the strength of the infrastructure that supports it, and the commitment of a talented team with the expertise and the will to make it happen. Summary of the year We're very pleased with how we performed in fiscal 2015. Sales were up 14.2%, net earnings, net of non-controlling interest, increased by 78.0% and we were ahead of target for reducing our debt. Since the Canada Safeway acquisition we have reduced our funded debt by approximately $1.6 billion. Our share price increased by 27.4% by the end of the year and subsequent to year-end we increased our dividend by 11.1 %. 11 LETTER TO SHAREHOLDERS On track with the Safeway integration Synergies from real estate We made considerable progress on the integration of Safeway in fiscal 2015. Our relationship with Crombie REIT gives us access to capital that is accelerating the pace of Sobeys' expansion while, at the same time, allowing us to realize the fair value of our real estate assets. The relationship gives Crombie REIT preferred access to some of the most consistently performing real estate assets in the country - new, fully occupied and anchored by food and/or pharmacy retailers. We completed the technical integration of all Safeway stores, fuel stations and retail support centres in February 2015. This was a critical milestone for us in achieving the goal of uniform backend systems across our operations. Operating on a single system allows us to rationalize our operations, streamline our ordering and ultimately improve the service we provide to our customers - for example, getting fresher food into the right stores faster and more cost-effectively, and implementing promotions more quickly and efficiently. Sobeys, through its wholly-owned subsidiaries, sold 10 properties to and leased back eight from Crombie REIT for cash consideration of $105.8 million and applied most of this to debt reduction. Building value Synergies We're on target to meet our three-year synergy commitments. We know, however, that the second phase of our integration is going to be a lot of work and it won't happen overnight. We're working systematically to make sure we effectively realize the cost synergies from distribution and logistics (including building an automated warehouse in Alberta) and from harmonizing our store offerings and reducing sales, general and administrative costs. Reducing our debt This year we exceeded our debt reduction targets by using most of the proceeds from the sale of non-core assets to reduce debt. In fiscal 2015, we sold four Safeway dairy manufacturing facilities to Agropur for $344.2 million. We also sold two Safeway bread manufacturing facilities to Canada Bread for proceeds of $27.8 million. 12 We know that differentiating ourselves in our food offering will define our long-term success, and this year we made some significant steps toward implementing our vision of helping Canadians Eat Better, Feel Better and Do Better. We're working towards building our vision across all of our banners, from full service to discount, and in every region in which we operate, by offering better food and better service, and delivering them sustainably. Better, fresher foods combined with effective marketing, superior in-store service and targeted promotions encourage customers to try new things. Online tools and a network of support through social media show customers how easy and affordable it is to cook at home. And our full range of sustainable products and services, backed by our operations and responsible business practices, mean that customers can adopt a healthier lifestyle just by shopping with us. EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Our new concept stores present our vision of helping Canadians Eat Better, Feel Better and Do Better in a more powerful way - and we're very pleased by how well the new stores are resonating with customers and the positive effect that's having on our sales. We now have 15 new concept stores, including five new stores in the west, nine in Ontario, and one in Atlantic Canada. In addition to the successful introduction of our new concept stores, we also made headway on many other initiatives that support our vision. For example, we spent time sampling, testing and refining our private label portfolio this year. Our line-up of almost 5,000 products offers great quality and excellent value. We redesigned our online shopping platform through our IGA stores in Qubec and Thrifty Foods stores in British Columbia and are expanding it to other provinces. We made progress on an important initiative to streamline how we deal with produce - from vendor selection and shipping, to product knowledge and store handling - to be sure we can indeed offer the freshest produce at the best price. And as I mentioned earlier, we are now up and running on a single business platform which will allow us to deliver on our vision efficiently and cost-effectively across the country. Part of our focus on customers is our relationship with AIR MILES, and in March we became the first Canadian grocer to offer AIR MILES reward miles across Canada, through many of our banners. This is important for us because it builds customer loyalty and gives us valable information that helps us tailor our offerings to make these relationships even stronger. Better REWARDS are here We've had a relationship with AIR MILES reward miles for several years through our stores in Qubec and Atlantic Canada, and Safeway in Western Canada has been an AIR MILES partner for many years. In fiscal 2015, we consolidated all of our loyalty programs to AIR MILES and now offer it in every region we operate in, through many of our banners. Customers earn reward miles when they buy groceries, and can earn bonus reward miles on hundreds of products in-store and through cross-promotions with our other banners and Shell fuel locations, for example. Customers can redeem their reward miles for AIR MILES Cash and get free groceries at the check-out, or build their AIR MILES for dream rewards like vacations, electronics and more. 2015 ANNUAL REPORT 13 LETTER TO SHAREHOLDERS Positioned for growth This has been a year of exciting initiatives that are adding value and making us stronger and helping drive growth. But we also know that we're not just in the food business - we're in the retail business, which means we're in the people business. One of our key differentiators is our people, and we know that engaged employees improve the customer experience, which directly impacts our financial results. We focus on employee and customer engagement, and build that into our compensation programs to drive it home. Having employees who are engaged is a top priority for Empire. I want to thank the approximately 125,000 people we and our franchisees and affiliates employ for their energy and enthusiasm, which we're depending on to make our vision a reality. And there's plenty more to do - taking us through the next phase of our integration of Safeway, continuing to streamline our operations and reduce our costs, building out our retail locations, and refining the products and services we offer our customers. Our pharmacy, liquor and fuel banners, often located in or near our grocery stores, support our vision by offering our grocery customers a onestop shopping experience. Our large network of convenience stores and our food wholesaling business - the largest full service wholesaler in Canada - extend our reach and add considerable value to our business. Subsequent to year-end our latest acquisition, completed on June 21, 2015, of five full service grocery stores, five fuel stations and other assets from Co-op Atlantic adds to the mix. The good news is there's lots of opportunity to continue to build long-term value for our shareholders - and we have the vision, the infrastructure and the team we need to make that happen. On behalf of the management team and the dedicated employees across Empire and our franchisees and affiliates, I would like to thank David and Donald Sobey for their lifetime of commitment to this business and to the communities we serve. Their legacy to us is the strength of our culture and our commitment to Empire's long-term growth. (signed) \"Marc Poulin\" Marc Poulin President and Chief Executive Officer Empire Company Limited June 24, 2015 14 EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Strong vision We're on a mission to help Canadians Eat Better, Feel Better and Do Better Sobeys wants to be Canada's destination for better food by delivering on our seven promises. 1. The fresher, the better, the tastier. Sobeys is committed to helping you find and choose the best quality for everything you make and put on your table. 2. Save time. Eat well. Every day. Being busy is no reason to settle for food that isn't good for us or doesn't taste good. Sobeys is going to make sure you have great ideas every week on how to cook good food fast. 3. Choose the healthy life. You'll find more products made with natural sources arriving in Sobeys stores each week. These are products made without additives or preservatives. 4. We live here too. Since J.W. Sobey began delivering refrigerated meat to people's homes in 1907, Sobeys has been focused on bringing fresh food innovation to its customers. That rich tradition continues today as Sobeys becomes Canada's better food destination: Helping Canadians Eat Better, Feel Better and Do Better. 5. We make sustainable attainable. Feeding ourselves well doesn't mean we can't support our rich planet. Our oceans are precious, and you won't find any endangered species in our store. 6. Good food is not a luxury. It's a right. A community grocery store should bring its customers good food and good food ideas every week, affordably. 7. Even our guarantee is guaranteed. Sobeys is proud to offer the freshest and best ingredients without condition or compromise. 100% Satisfaction. Zero Excuses. 2015 ANNUAL REPORT 15 STRONG VISION Better food We're helping our customers experience better food by giving them more choices from better sources, better ingredients, more selection, healthier options and better value. Freshness and variety We aim to set the standard for exceptional freshness, and scour the world for exciting ideas that will encourage our customers to go on a culinary journey to eat better and try new things. We offer more than 3,500 health and wellness products - including products from natural sources with no additives or preservatives, gluten-free and sugar-free products - and a full range of health and beauty, baby and eco-friendly household items. Feature: Food is fresher when it's locally sourced Feature: Making Compliments even better We buy local first when we can be sure that our food safety and quality standards are met and the supply is consistent, reliable and competitively priced. Over the past 18 months we've been harmonizing the Compliments private label portfolio of products with Safeway's private label offering. That process involved taste testing, reformulating and improving almost 1,500 different products. We now have a line of almost 5,000 Compliments private label products that offer the best quality and value. For example, our relationship with Pentlatch Seafoods, a shellfish aquaculture company wholly-owned and operated by the K'moks First Nation, gives our customers exclusive access to the 'Komo Gway' brand of premium oysters and clams at all Thrifty Foods stores in British Columbia. The shellfish are harvested from the nutrient-rich waters of Baynes Sound, Vancouver Island, by the K'moks First Nation using traditional and sustainable harvesting practices to help preserve the beauty of those waters for generations to come. 16 Healthy We're also minimizing the use of sodium, sugars, transfats, hydrogenated fats or oils, and removing unnecessary additives and preservatives in many of our Compliments products - all while making sure we don't compromise on taste, food safety, quality and price. EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Sustainable We offer a wide selection of organic products, which are grown and harvested without pesticides, responsibly sourced and with the welfare of animals and the environment in mind. Value We deliver good food more affordably, without compromising on quality and experience, and that commitment extends across all of our banners - from full service to discount. Feature: Certified Humane Feature: Quality for every budget Better food comes from better sources. Products that are Certified HumaneTM are from animals treated with respect and raised right with no growth hormones, all-vegetable feed and no antibiotics or steroids. FreshCo stands behind its promise \"Fresher. Cheaper.\" If our customers aren't satisfied with the freshness of our products, we'll refund their money, period. Prices are as low as, or lower than our discount competitors and we price check every week to make sure we're delivering on that promise. \" Sobeys tops our list as the most committed retailer to ethicallysourced food in North America. As the only major retailer offering Certified HumaneTM beef, pork and poultry, Sobeys demonstrates its ongoing commitment to providing their customers with high-quality foods that meet only the highest of humane standards.\" - Adele Douglass, Executive Director, Humane Farm Animal Care. 2015 ANNUAL REPORT 17 STRONG VISION Better service We're making it easier for customers to make good food part of their daily lives - offering convenience, becoming part of the community and working to stay connected - and serving that up with expertise and enthusiasm. Convenience We want to make it easy for our customers to eat well at home. We offer prepared ingredients that make cooking faster and easier, as well as great tasting, restaurantquality prepared meals that are a snap to stop by and pick up. Either way - our customers have all kinds of delicious, cost-effective alternatives to dining out. One of the things that keeps customers coming back is customer interaction - and we view each of our stores as a hub for the community it serves. While all of our employees are knowledgeable and eager to help, the produce experts, cheese ambassadors, expert butchers, in-store chefs and wellbeing counsellors in our new concept Sobeys and Sobeys extra stores each have specialized expertise that make these stores unique. Feature: Prepared foods for every appetite Feature: Focus on healthy living We offer prepared food for every appetite - including Italian, Japanese, Indian, Mediterranean and many others - for customers who are time pressed, looking to satisfy a craving or not sure what to have for dinner that night. Our wellbeing counsellors are there to answer customer questions about healthy living - from balanced nutrition to special diets, food allergies and intolerances - and will work with our in-store chefs and pharmacists to provide comprehensive solutions that look at overall health. They're also experts in our Natural Source products - our comprehensive selection of products that are free from artificial colours, flavours and preservatives, and contain minimally processed, natural ingredients or are certified organic. For example, with more than 140 sushi counters in Qubec alone, IGA customers can choose from a variety of sushi made fresh that day by highly trained sushi chefs. Or they can customize their order on the spot or even order ahead for dinner or a special occasion. Our sushi is made with sustainably harvested fish - we won't use any fish that doesn't meet our rigorous sustainable fishing criteria. 18 Community EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Putting customers first Experience has shown us that there's a direct correlation between customer experience and financial performance. That's why we track customer engagement across the country, and motivate and train our employees to keep their focus on the customer. We hear from customers across the country, three times a year, and use what we learn to improve the products and services we offer - all to help us achieve our vision of helping Canadians Eat Better, Feel Better and Do Better. Connection In fiscal 2015, we heard from more than 200,000 customers from coast to coast, and our customer KPIs showed solid progress, telling us that we're on the right track. More people are using social media to discover new things and keep informed. We connect with our customers in every market - and help them connect with each other - through websites, Instagram, Facebook, Twitter, and other apps and tools. The result is a sophisticated digital network of useful information about food and special dietary needs, videos, recipes, meal planning ideas, online shopping tools and more - all of which inspire and motivate our customers to Eat Better, Feel Better and Do Better. Feature: Shopping online In February 2015, we re-launched IGA Online in Qubec with a new, sophisticated platform that offers over 30,000 products and integrates flyer specials, recipes, AIR MILES Bonus Miles and a handy tool for making special requests like local products or the ripeness of fruit. Customers can shop by category, theme, product or their own shopping list from any digital device, and have the products delivered or ready for pick up from the store. We now have close to 300 stores offering online ordering in Qubec and British Columbia (through Thrifty Foods) - all fully integrated with our systems so our customers get better quality information and our stores can pick products more efficiently. 2015 ANNUAL REPORT 19 STRONG VISION Delivered sustainably We're helping our customers adopt a more sustainable lifestyle by offering more sustainable products and services - and backing them up with operations and responsible business practices that keep the future of our planet in mind. Our sustainability strategy is a part of how we function every day - from the products we offer and the communities we work with, to the way we operate. You can read more about our approach to sustainability at sobeyssustainability.com/en/home.apsx Supply chain We focus our efforts on the responsible sourcing of products, packaging and ingredients. Animal welfare - we're committed to the humane and respectful treatment of all livestock animals and their products in our supply chain: beef, milk, eggs, poultry and pork. Sobeys is the only major Canadian retailer to offer beef, pork, turkey and chicken that meet Certified HumaneTM standards. Certified HumaneTM raised and handled meat and poultry meets the Humane Farm Animal Care Program standards, which include a nutritious diet without antibiotics, animals raised with shelter, resting areas, sufficient space and the ability to engage in natural behaviours. In the case of beef, this also includes not using any hormones or other growth promotants in cattle raising. Deforestation - we support the Consumer Goods Forum's initiative of net zero deforestation by 2020. Our current focus is on the amount and sources of palm oil and soy we use in our private label products. Feature: Using palm oil responsibly The growing use of palm oil as a fat source in food, cosmetics and other products has increased the development of new palm plantations, resulting in significant tropical deforestation in Southeast Asia. This has eliminated valuable biodiversity and resulted in the release of large amounts of C02 from clear cutting and slash burning. Palm oil production also contributes to issues related to soil degradation, land rights and endangered species. As a member of the Roundtable on Sustainable Palm Oil, we're mapping our sources of palm oil, building a list of responsible palm producers and implementing responsible sourcing guidelines for our procurement teams, with the goal of having a palm oil supply chain by 2020 that is sourced entirely from responsible and sustainable sources. 20 Packaging and material stewardship - we're becoming increasingly active with industry organizations such as Stewardship Ontario in looking to improve the systems and processes used to manage end-of-life consumer packaging. Communities - we care about the impact we have on the local, national and international communities we source our products from, and work collaboratively with suppliers, industry groups, factories and non-governmental organizations to continuously improve our approach. Feature: Dealing fairly with Fairtrade IGA and IGA extra are the only major grocery stores in Canada to sell Fairtrade bananas across the store network. Fairtrade stimulates economic activity for marginalized small producers in the developing world, because it makes sure growers are paid fairly, and pricing includes a $1 per case premium that is pooled by members of the cooperative, and invested in community development projects and improving working conditions on the plantations. The IGA and IGA extra Fairtrade banana programs have provided income to several hundred banana producers and in fiscal 2015, contributed nearly $30,000 in social premiums to the development of those communities. EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Operations With approximately 1,500 food stores from coast to coast, our operations and business practices can have a significant impact on the environment. We work to reduce our impact by reducing our greenhouse gas (GHG) emissions and the waste we generate. Greenhouse gas emissions - we reduce our GHG emissions by reducing electricity consumption in our stores, reducing the carbon footprint of our fleet, and reducing refrigerant losses. We introduced a new paperless system that automates the scheduling of facility maintenance and energy management, and will eliminate the paper used for 70,000 work orders, 4,400 utility bills and 7,700 technicians every year. Waste management - reducing and diverting waste from landfills has environmental, social and financial benefits. In the past year we, and our waste management partners have reduced the amount of paper, cardboard, plastic and organic waste sent to landfill. Feature: New Mississauga office designed for sustainability We've designed our new office in Mississauga, Ontario to minimize the building's carbon footprint and create a healthy and comfortable indoor environment. It uses 20% less energy and 40% less water than traditional buildings, and staff are provided with recycling options to maximize the amount of waste that can be diverted from landfills and waste incineration. The building also features a reflective white roof to limit the amount of solar radiation and provide a habitat for birds. The building was designed to meet the Leadership in Energy and Environmental Design (LEED) certification, a voluntary, consensus-based standard administered by the Canada Green Building Council that represents environmental sustainability and corporate responsibility. Feature: Reducing GHG across our operations Traditional refrigerant systems are known for their high greenhouse gas impact, and were contributing nearly 25% of our carbon footprint - in 2010, we committed to replacing them with natural refrigeration systems in all new builds by 2015. The natural refrigeration systems have also reduced energy, maintenance and installation costs and we've received recognition for our leadership from the United Nations Environmental Program, the United States Environmental Protection Agency and the Retail Council of Canada winning their Excellence in Retailing award for Energy and Environmental Sustainability in 2013. In May of 2015, Sobeys success in this area was featured in the Climate Change booklet published by the Consumer Goods Forum. 2015 ANNUAL REPORT 21 Strong infrastructure We're investing in technology and streamlining our processes so we can deliver our vision efficiently and cost effectively - from coast to coast. Fully integrated IT Building state-of-the-art distribution In February, we achieved a significant milestone in our technology integration by successfully bringing our Safeway stores, fuel sites, and retail support centres acquired in the Canada Safeway acquisition on to the SAP platform ahead of schedule. Integrating our point-of-sale infrastructure with distribution and logistics is key to making sure we deliver the right products to our stores at the right time. We also integrated key finance processes, transitioned employees to a new payroll system and converted 10 retail support centres to the EXE warehouse management system. The last phase of the SAP implementation included training 20,000 employees. All of our businesses in all regions now operate on the same business platform. And we're the only major food retailer in Canada with SAP coast to coast, giving us a distinct competitive advantage. SAP supports all aspects of our business, including operations, merchandising, distribution, human resources and administration, and is at the core of our system-wide business process optimization initiative. It gives us a complete view of the business, which gives us better information that helps us make better decisions. It has already helped improve our performance over the past five years and we expect to realize more benefits now that the full implementation is complete. Our two automated distribution centres for dry groceries (Vaughan, Ontario and Terrebonne, Qubec) are the first of their kind in Canada and are scalable as our business grows. Our transportation department and fleet management professionals use sophisticated technology to support the way we fulfill deliveries, mapping the most efficient routes for travel and managing information for the many tonnes of grocery products destined for approximately 1,500 stores in over 900 communities. In January 2014, we announced the expansion of the Vaughan distribution centre adding 270,000 sq ft, to be completed in the summer of 2016. The expansion will allow it to handle frozen, dairy and deli products in addition to the current range of products. After year-end we acquired a distribution centre in Rocky View, Alberta, just north of Calgary, that we're retro-fitting to become our third automated distribution centre, opening in 2017. TERREBONNE DISTRIBUTION CENTRE Our automated distribution centre in Terrebonne, Qubec uses WITRON Integrated Logistics warehousing and picking technology to improve the accuracy and timing of deliveries. Technological advancements include the ability to pick even a single box of product, a distinct inventory management advantage. Working smart with SAP We use the following SAP-enabled tools to help us manage our business more efficiently: workforce management - to analyze historical shopping patterns so we can understand customer behaviour and make better decisions about staffing; fresh item management - to make sure we always have the freshest products in-store; and computer assisted ordering - to manage inventory more precisely, improving in-store service and lowering distribution costs. 22 EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH Focus on produce: bringing freshness from farm to plate From our procurement practices to our shipping methods and produce displays, we're working on improving every aspect of how we deal with produce, so our customers will always have the freshest produce at the best possible value: We're spending more time in the fields with growers to ensure quality control right at the source and create the relationships that will guarantee access to their best products. 2015 ANNUAL REPORT We're combining the purchasing power of all our business units so we can leverage our scale to secure the best quality produce at an affordable price for our customers. We're focusing on logistics and transportation so we can bring great produce to our stores faster, reducing spoilage and providing customers with a longer shelf life at home. We're providing employees in-depth training so they learn how to handle produce to keep it fresher, how to merchandise and display it in the most impactful way, and have the knowledge they need to offer expert advice to our customers in-store. 23 Strong team Our people have the passion, support and training they need to bring our vision to life. A dedicated team of approximately 125,000 people across Empire and our franchisees and affiliates have a common passion and shared values that guide our actions every day: always place the customer first get it done with passion and integrity stay real proudly serve our communities. Our pride in our knowledge, experience, dedication and commitment are what set us apart in creating a fulfilling shopping experience for our customers and a great place to work. We believe these elements are key in achieving our goal to help Canadians Eat Better, Feel Better and Do Better. Customer-focused culture Strong and enduring relationships with customers help us differentiate their shopping experience, whether it's online or in-store. Surveying customers for their insights and feedback, building our product knowledge and using new technology in strategic ways are playing a key role in strengthening our relationships with customers. The importance of employee engagement Engaged employees are more enthusiastic and committed to our success - and they engage more with customers, which improves customer service, earns customer loyalty, and has a direct impact on our financial results. Several years ago, we launched a program to help employees learn and grow as individuals and as a team, to increase employee engagement. A large part of this process is measuring what matters most to employees and helping them understand our strategy and our progress. Formal on-the-job training, leadership and other programs provide coaching and other tools to help employees enhance their knowledge and skills. We're also building strong leaders by focusing on individual development - meeting foundational needs, providing constructive feedback and increasing leader accountability - while using team action planning and follow-up to encourage strong teamwork, leadership development and increase accountability index scores. Measuring engagement We measure employee engagement every year based on 12 elements that matter most to employees to assess how engaged our employee teams are. We know from experience strong engagement helps us deliver the best food shopping experience for customers, ultimately driving stronger financial performance. 24 The Sobeys & Empire Work Experience & Scholarship Program offers scholarships to student employees every year across Canada. In addition to tuition assistance scholarships, the Company offers Future Leader Awards which provide financial support and summer internship employment opportunities. In fiscal 2015, there were 60 scholarships granted or renewed. The Sobeys' Chartered Professional Accountant Training Office program gives new graduates the opportunity to earn their CPA designation while gaining experience working with us. Since its launch in 2008, nine students have successfully completed the CPA program and six remain employees of Sobeys Inc. Today, we have four CPA and three CA students in various Finance rotations and two more students beginning in September 2015. EMPIRE COMPANY LIMITED A STRONGER PLATFORM FOR GROWTH , We re bringing our vision to every Canadian through the Sobeys Inc. Better Food Fund. Launched in October 2014, the Sobeys Inc. Better Food Fund and our company-wide community investment strategy focuses our efforts on helping Canadians nationally, regionally and locally. Every Canadian - regardless of income, age or ability - should have access to affordable wholesome food, basic cooking skills and nutrition education that will help them reach their greatest potential. Eat Better - we support local food banks and meal programs across the country by donating money and food Feel Better - we aim to fund research that focuses on the prevention of food-related diseases and conditions Do Better - in partnership with community groups and organizations across the country, we help to increase food literacy through nutrition education and cooking skills programs for a diverse group of Canadians. The Sobeys Inc. Better Food Fund and our strategy ensures our community giving is aligned with our purpose to help Canadians Eat Better, Feel Better and Do Better. Together we will: Bring together the efforts of all our businesses Leverage our size to make a meaningful difference in the communities we proudly serve Harmonize our approach to make the greatest impact Increase our presence in the community and build from the tremendous legacy of supporting our neighbours You can read more about the Sobeys Inc. Better Food Fund at sobeys.com/betterfoodfund Change begins with reaching children - by giving them the tools and support to improve their relationship with food. Sobeys has partnered with Free The Children to develop a curriculum-based program that will provide students aged 12 to 17 years from across Canada with nutrition literacy food awareness and better cooking skills. The program supports the Do Better pillar of the Sobeys Inc. Better Food Fund, helping young people: Learn: providing nutrition literacy to understand what we consume and the impact it has on our minds and bodies. Make: creating a healthy connection and relationship with food through the development of cooking skills and learning how to prepare meals. Change: inspiring local and global action by directing food and nutrition literacy in a positive way (by using cooking skills and nutrition literacy to make the world a better place). Our hope is that by providing young people with these essential skills, through the Home Cook Heroes Program we will inspire more Canadians to establish a healthier long-term relationship with food. You can read more about our partnership at Home Cook Heroes at weday.com/home-cook-heroes. 2015 ANNUAL REPORT 25 MESSAGE FROM THE CHAIR The value of strong governance Robert P. Dexter Chair Empire Company Limited At Empire, our goal is to create long-term, sustainable value through our steadfast focus on food retailing and related real estate, and a commitment to excellent customer service. Empire shares delivered a total return of 29.1% in fiscal 2015, compared to 6.9% for the S&P/TSX Composite Index, and an average annual compound return of 15.3% for the last 20 years. Empire's Board includes members of the Sobey family, but the majority of directors are independent. All of the directors are passionate about food and the food business, and the Board is committed to strong stewardship and Empire's continued success. To that end, the Board is actively involved in setting Empire's long-term goals and objectives, and overseeing management in the development and execution of the corporate strategy. Empire has national reach and a presence in key markets coast to coast. Yet despite our size and the benefit of our many decades of experience in this business, food retailing in Canada is more competitive than ever. 26 Strategic focus We know that operational excellence and a differentiated food offering that resonates with customers are critical to long-term success in this business. The long-term investment made in Sobeys' infrastructure several years ago provided an important foundation for building future growth because we now have a scalable national business platform and a modern distribution infrastructure that supports all of our businesses and ensures operating efficiency. This year's successful integration of the Safeway operations to a common business platform marks the completion of a significant milestone. Through the Safeway integration and the system-wide business process optimization and rationalization initiative, we are achieving operational efficiencies and cost synergies. The work continues to realize even further benefits from an expanded, yet streamlined network. EMPIRE COMPANY LIMITED Empire is striving to be Canada's Better Food destination through a compelling and highly differentiated food experience that helps Canadians Eat Better, Feel Better and Do Better every day. Our focus on delivering Better Food for All in our full service stores under the Sobeys banner and le plaisir de mieux manger in IGA stores in Qubec is striking a chord with consumers, due in large part to our investments in our infrastructure and a workforce that is knowledgeable, enthusiastic and highly engaged. Plans are already underway to expand our new concept Sobeys extra stores and expanded brand positioning. Strong leadership Empire made significant progress in fiscal 2015 under the strong leadership of Marc Poulin. Working as one team with a clear vision and focus, management achieved a number of strategic priorities that provide a strong foundation for building our future growth. The Board is also tasked with overseeing succession planning and is confident that Empire has a strong team in place to advance the strategy. Committed to strong governance The Board has also focused on its own skills and has added more diversity over the past few years. This year, we welcomed two new directors to the Board to expand the unique mix of skills. Sue Lee is a seasoned business executive with more than 30 years experience in human resources, compensation, communications and the energy sector. Bill Linton brings more than 30 years of business experience in telecommunications and systems and finance. David Ferguson retired this month after nine years of distinguished service. David joined the Sobeys Board in 2006 and the Empire Board in 2007, and currently serves as a member of the Human Resources, Corporate Governance and Nominating Committees. He brought extensive insights to Canadian and international retailing as a former President and CEO of Walmart Canada and Walmart Europe. David Sobey, Chair Emeritus of Sobeys Inc., and Donald Sobey, Chair Emeritus of Empire Company Limited, are retiring from the Board this year. Both David and Donald have been directors of Empire since 1963, and together with their late brother Bill have been the driving force behind what we have come to know as Empire Company Limited. They have left a tremendous legacy in business, education, the arts and broader community. On behalf of the Board, I would like to extend our deep gratitude and appreciation for their guidance and wisdom over the many years. On a personal note, I have known David and Donald and the Sobey family for many years and would like to thank them for their trust and support. I would also like to thank the thousands of people throughout Empire's operations, franchisees and affiliates for their extraordinary work over the past year and their commitment to our future success. Sincerely, (signed) \"Robert P. Dexter\" Robert P. Dexter Chair Empire Company Limited June 24, 2015 We are also taking pause to extend our sincere appreciation to three directors who are retiring from the Board. 2015 ANNUAL REPORT 27 TRIBUTE With sincere thanks This year, Empire Company Limited pays distinct tribute to David Sobey, CM and Donald Sobey, CM for their service to Empire Company Limited and Sobeys Inc. With careers spanning childhood duties at their father's stores in Pictou County, Nova Scotia to their roles in Empire and Sobeys, David and Donald exemplify the Sobey family's commitment to long-term growth. Through each of their roles in management and in governance, David and Donald have made enduring contributions to the stewardship of Empire and Sobeys. Their tenure has been marked by a legacy of long-term growth, as well as an enduring belief in supporting communities through personal and corporate philanthropy. Since 1963, David and Donald have ensured that Empire has always remembered to give back to the people and communities who have helped us achieve our success. 28 As proud Atlantic Canadians, each of them has championed access to post-secondary education for Atlantic Canadians and they have personally touched the lives of countless individuals through numerous commitments to communities across their home region. The Board, shareholders, employees, franchisees and affiliates of Empire and Sobeys sincerely thank David and Donald for their lifetime commitment to this business and to the communities that have helped it to thrive. EMPIRE COMPANY LIMITED THE VALUE OF STRONG GOVERNANCE Committed to strong stewardship and the continued success of Empire Directors of Empire Company Limited as of June 24, 2015 Robert P. Dexter, Chair Halifax, Nova Scotia \tDirector since 1987 \tChair & Chief Executive Officer of Maritime Travel Inc. Bonnie Brooks 3,5,7 Toronto, Ontario \tDirector since 2012 \tVice Chairman of Hudson's Bay Company Cynthia Devine 2,5,7 Toronto, Ontario \tDirector since 2013 \tChief Financial Officer of RioCan Real Estate Investment Trust David S. Ferguson 3,5,7 Atlanta, Georgia, U.S.A. \tDirector since 2007 \tPrincipal of D.S. Ferguson Enterprises, LLC Sue Lee 3 Calgary, Alberta \tDirector since 2014 \tCorporate director William Linton 1 Toronto, Ontario \tDirector since 2015 \tCorporate director Kevin Lynch 3,6,8 Ottawa, Ontario \tDirector since 2013 \tVice Chairman of BMO Financial Group Marc Poulin Montral, Qubec \tDirector since 2012 \tPresident and Chief Executive Officer of Empire Company Limited and Sobeys Inc. Stephen J. Savidant 4,5,7 Calgary, Alberta \tDirector since 2004 \tChair of the Board of Enerflex Ltd. David F. Sobey New Glasgow, Nova Scotia \tDirector since 1963 \tChair Emeritus of Sobeys Inc. Donald R. Sobey Pictou County, Nova Scotia \tDirector since 1963 \tChair Emeritus of Empire Company Limited Frank C. Sobey 5 Pictou County, Nova Scotia \tDirector since 2007 \tChairman of Crombie REIT John R. Sobey 1 Pictou County, Nova Scotia \tDirector since 1979 \tCorporate director Karl R. Sobey 3 Halifax, Nova Scotia \tDirector since 2001 \tCorporate director Paul D. Sobey 5 Pictou County, Nova Scotia \tDirector since 1993 \tCorporate director Robert G. C. Sobey 3,5 Stellarton, Nova Scotia \tDirector since 1998 \tCorporate director Martine Turcotte 1,5,7 Verdun, Qubec \tDirector since 2012 \tVice Chair, Qubec of BCE Inc. and Bell Canada 1 Audit Committee member 2 Audit Committee Chair 3 Human Resources Committee member 4 Human Resources Committee Chair 5 Corporate Governance Committee member 6 Corporate Governance Committee Chair 7 Nominating Committee member 8 Nominating Committee Chair To learn more, please visit www.empireco.ca/governance Corporate Officers as of June 24, 2015 Robert P. Dexter Chair 2015 ANNUAL REPORT Marc Poulin President and Chief Executive Officer Franois Vimard Chief Financial and Administrative Officer Clinton Keay Executive Vice President, Finance Karin McCaskill Senior Vice President, General Counsel and Secretary L. Jane McDow Assistant Secretary 29 management's discussion and analysis Management's Discussion and Analysis Table of Contents Forward-Looking Information 31 Strategic Direction 32 Overview of the Business Food Retailing Investments and Other Operations 33 33 35 Discontinued Operations 36 Consolidated Operating Results 36 Outlook 38 Shareholder Return 38 Management's Explanation of Consolidated Operating Results Sales EBITDA Operating Income Finance Costs Income Taxes Net Earnings and Adjusted Net Earnings from Continuing Operations Net Earnings Financial Performance by Segment Food Retailing Sales Gross Profit EBITDA Operating Income Net Earnings Investments and Other Operations Operating Income Net Earnings 39 39 39 40 40 40 41 42 42 42 43 43 44 44 44 45 46 46 Quarterly Results of Operations 47 Results of Fourth Quarter Operations Consolidated Operating Results Sales Gross Profit EBITDA Operating Income Finance Costs Income Taxes Net Earnings and Adjusted Net Earnings from Continuing Operations Net Earnings 48 48 48 49 49 50 50 50 Liquidity and Capital Resources Operations Investment Financing Guarantees and Commitments Guarantees Commitments Free Cash Flow 52 52 53 54 55 55 56 56 30 50 52 Consolidated Financial Condition Capital Structure Key Financial Condition Measures Shareholders' Equity Financial Instruments 57 57 57 59 60 Business Acquisition Canada Safeway Acquisition 61 61 Accounting Standards and Policies \u0007Accounting Standards and Policies Adopted During Fiscal 2015 Future Accounting Policies Critical Accounting Estimates Disclosure Controls and Procedures Internal Control over Financial Reporting 62 62 62 63 64 65 Related Party Transactions 65 \u0007Key Management Personnel Compensation 66 Indemnities\t66 Contingencies 66 Risk Management Competition Food Safety and Security Human Resources Operations Technology Information Management Supply Chain Product Costs Economic Environment Liquidity Risk Interest Rate Fluctuation Business Continuity Insurance Ethical Business Conduct Environmental, Health and Safety Occupational Health and Safety Real Estate Legal, Taxation and Accounting Utility and Fuel Prices Credit Rating Foreign Currency Capital Allocation Seasonality Foreign Operations Drug Regulation Pension Plans Leverage Risk Integration of the Combined Business 66 66 67 67 68 68 68 68 68 69 69 69 69 69 69 69 70 70 70 70 71 71 71 71 71 71 71 72 72 Employee Future Benefit Obligations 72 Subsequent Events 72 Designation for Eligible Dividends 73 Non-GAAP Financial Measures 73 EMPIRE COMPANY LIMITED management's discussion and analysis The following is Management's Discussion and Analysis (\"MD&A\") of the consolidated financial results of Empire Company Limited and its subsidiaries, including wholly-owned Sobeys Inc. (\"Empire\