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View Annual Report 15916 Empire_Cover 7/27/04 9:37 AM Page 1 EMPIRE COMPANY LIMITED EMPIRE ABOVE: Near Langford, British Columbia, 1939 EMILY CARR (1871 – 1945) From the collection of the Sobey Art Foundation, on display at Crombie House in Pictou County, Nova Scotia. What we value Emily Carr (1871 – 1945) of Victoria, British Columbia, her rental income she made pottery and carpets with studied at the San Francisco School of Art (1889 – 1894) west coast native designs. Carr continued to paint and and at the Westminster School of Art, London, which exhibit sporadically until 1927, when at her first Empire Company Limited 2004 Annual Report included other locations in England (1899 – 1904). exhibition in Eastern Canada, she met the members She returned to British Columbia after each period to of the Group of Seven. Lawren Harris in particular teach and to paint the Indian villages on the Pacific inspired her to develop her characteristic, monumental Coast. Carr then traveled to Europe to study briefly at style. She was also influenced by the American artist the Academie Colarossi in Paris (1910 – 1911) where Mark Tobey, who first visited her in 1928. In 1933, she aimed to discover the “new art” which today we call Carr joined Group of Seven artists in forming the post-Impressionism. She painted and traveled with several Canadian Group of Painters. artists in Sweden and in Brittany.The New Zealand artist According to Emily Carr’s biographer Maria Tippett, Frances Hodgkins provided considerable encouragement Carr’s failing health in the late 1930’s curtailed her to Carr, urging her to seek her own artistic independence. painting activities. However, in the summer of 1939, In October 1911, Carr was represented by two paintings Carr went camping near Langford, British Columbia, in the famous Salon d’Automne in Paris. However, and it is likely that this painting was completed at that upon her return to Canada, she considered her new time, or shortly thereafter, along with several other work to be unappreciated. canvasses. Her painting reflects Carr’s preoccupation Emily Carr held her first exhibition in Vancouver and with regeneration of logged-over areas and the spiritual painted the Indian villages in Fauve style. In 1913 she energy that emanates from the forest. Carr’s later returned to Victoria, where she built an apartment house work is known for its expansiveness of feeling, and ANNUAL REPORT (the “House of All Sorts”). In the 1920’s to supplement Near Langford is a very fine example of this. WE VALUE CANADIAN CULTURE 2004 Colour reproductions of this painting are available in limited numbers, upon request. Please write to: The Sobey Art Foundation, c/o Empire Company Limited, or visit our website at www.empireco.ca. 15916 Empire_Cover 7/27/04 9:37 AM Page 3 MISSION STATEMENT FINANCIAL HIGHLIGHTS Years Ended April 30 th ($ in millions, except per share amounts) 2004 2003 2002 Operations Revenue $11,284.0 $10,624.2 $ 9,926.5 Operating income 423.6 444.9 416.2 Operating earnings 163.9 159.9 132.2 Capital gain (loss) and other items, net of tax 9.2 (6.0) 13.7 Gain on sale of discontinued operations, net of tax – – 50.0 Net earnings 173.1 153.9 195.9 Financial Condition Total assets 4,681.7 4,516.1 4,318.0 Long-term debt 985.4 1,112.0 1,060.6 GOAL Shareholders’ equity 1,576.8 1,427.1 1,290.6 Per Share Information, basic and diluted Empire is committed to building shareholder value through long-term Operating earnings 2.49 2.43 2.00 Capital gain (loss) and other items, net of tax 0.14 (0.09) 0.21 profitability and growth by becoming a market leader in its core Gain on sale of discontinued operations, net of tax – – 0.76 Net earnings 2.63 2.34 2.97 operating businesses and by investing in other opportunities to augment Book value 23.81 21.54 19.47 Dividends 0.4000 0.3300 0.2138 this growth in value. Share Price High 29.50 33.25 33.30 HOW Low 23.10 23.70 15.75 Close 26.65 23.85 28.88 We believe that the three key factors in the creation of value are first, strong management, second, financial structures which facilitate growth and third, emphasis on long-term growth in cash flow that exceeds the EMPIRE COMPANY LIMITED IS A DIVERSIFIED CANADIAN COMPANY WHOSE KEY BUSINESSES INCLUDE FOOD after-tax dollar cost of capital. DISTRIBUTION, REAL ESTATE AND CORPORATE INVESTMENT ACTIVITIES. GUIDED BY CONSERVATIVE BUSINESS PRINCIPLES, OUR PRIMARY GOAL IS TO GROW LONG-TERM SHAREHOLDER VALUE THROUGH INCOME AND CASH VALUES FLOW GROWTH AND EQUITY PARTICIPATION IN BUSINESSES THAT HAVE THE POTENTIAL FOR LONG-TERM GROWTH AND PROFITABILITY. Empire will be a good corporate citizen, upholding the highest standards of integrity and ethical conduct. CONTENTS A View of Empire 2 Management’s and Auditors’ Reports 48 Letter to Shareholders 4 Consolidated Balance Sheets 49 Message from Operating Management 8 Consolidated Statements of Retained Earnings 50 Long-term Progress 12 Consolidated Statements of Earnings 51 Message from the Chairman 14 Consolidated Statements of Cash Flows 52 Corporate Governance 17 Notes to the Consolidated Financial Statements 53 Board of Directors 18 Eleven-year Financial Review 64 Community Involvement 20 Investor Information 66 Corporate Officers 22 Mission Statement 67 Management’s Discussion and Analysis 23 EMPIRE www.empireco.ca COMPANY LIMITED 15916 p01_23 ENG 7/21/04 2:39 PM Page 1 What we value At Empire, our business and investment philosophy is very simple and straightforward – there is no mystery as to what we value in our core businesses and our investments. We value businesses we know and understand – solid businesses in fundamental industry sectors that are often undervalued. We value strong management and dedicated people – reflecting the basic values of good corporate citizenship and social responsibility. We value disciplined financial management and conservative business principles. We value consistent, steady, long-term performance. We value our legacy of value creation, and we value our prospects for future growth. PAUL D. SOBEY DONALD R. SOBEY PRESIDENT AND C.E.O. CHAIRMAN 1 EMPIRE COMPANY LIMITED ANNUAL REPORT 2004 15916 p01_23 ENG 7/21/04 2:39 PM Page 2 A view of Empire Food Distribution Real Estate Sobeys Inc. (“Sobeys”), a 65%-owned subsidiary of Empire, is a Empire owns one of the largest portfolio’s of prime retail properties leading national grocery retailer and food distribution company in in Eastern Canada through wholly-owned Crombie Properties Limited Canada with annual revenue of $11 billion. Headquartered in (“Crombie”) and its affiliates. Crombie and its affiliates own and Stellarton, Nova Scotia, Sobeys owns or franchises more than operate a diversified portfolio which includes shopping centres and 1,300 stores in all 10 provinces under retail banners that include office properties. The real estate division, through Crombie, also Sobeys, IGA extra, IGA and Price Chopper. During fiscal 2004, owns Atcan self-storage and 35.8% of Genstar Development Empire increased its ownership in Sobeys to 65% from 62% Partnership (“Genstar”), a residential land development business a year earlier. with operations primarily in Western Canada. FOOD DISTRIBUTION FOOD DISTRIBUTION REAL ESTATE REVENUE (1) OPERATING INCOME REAL ESTATE REVENUE(1) OPERATING INCOME ($ in millions) ($ in millions) ($ in millions) ($ in millions) 324.7 111.1 210.5 1,061.4 1 198.6 103.8 295.4 294.5 100.6 0,414.5 1 185.1 9,732.0 9,163.0 165.8 8,942.0 82.3 157.1 239.2 229.7 70.1 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH (1) Includes gain of $14.6 million on sale of (1) Revenue is before inter-segment elimination. redundant real estate in fiscal 2004. 2 EMPIRE COMPANY LIMITED ANNUAL REPORT 2004 15916 p01_23 ENG 7/21/04 2:39 PM Page 3 Other Operations Investments Empire’s other operations consist primarily of wholly-owned Empire manages an investment portfolio that carried a market Empire Theatres Limited (“Empire Theatres”), the leading movie value of $390.9 million as at fiscal 2004 year-end. Empire is exhibitor in Atlantic Canada with 149 screens in 22 locations at committed to maintaining a high quality, liquid investment fiscal year-end. Empire Theatres is committed to providing its portfolio that offers a combination of yield and attractive growth customers with an enjoyable movie-going experience by offering characteristics, providing Empire with a pool of capital to support modern stadium-style seating, a broad concession variety, and the growth and development of our operating businesses and to exceptional customer service. enhance shareholder net asset value. OTHER OPERATIONS OTHER OPERATIONS INVESTMENT PORTFOLIO REVENUE OPERATING INCOME INVESTMENT INCOME(1) TOTAL RETURN* ($ in millions) ($ in millions) ($ in millions) VS. BENCHMARKS 38.2 TOTAL EMPIRE 9.8 INVESTMENT COMPANY 64.4 37.9 INCOME INVESTMENT 9.0 9.0 60.5 PORTFOLIO $180 56.2 EQUITY S&P/TSX INDEX EARNINGS S&P 500 INDEX 29.8 49.1 (in Canadian $) $146.39 46.0 $150 6.5 5.7 8.0 $120 1 5.7 15.8 1 4.9 1 $100 $96.89 $90 $73.99 5.1 0.6 3.0 $60 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH YEAR ENDED APRIL 30TH (1) The decline in equity earnings is related *$100 invested on 04/30/2000 in Empire to the sale of Empire’s investment in Company investment portfolio or the index, Hannaford Bros.
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