Canadian Tire 2006 net earnings rise 7.4% to $354.6 million; net operating earnings up 10.7%
-----------------------------------------------
Year-over- Year-over-
Consolidated 2006 year 2006 year
Highlights(1): 4th Quarter change Full year change
-------------------------------------------------------------------------
Retail sales $2.92 billion 5.9% $9.77 billion 7.4%
Gross operating
revenue(2) $2.43 billion 5.3% $8.27 billion 7.1%
Earnings before income
taxes and minority
interest $169.2 million (10.0)% $557.8 million 5.7%
Net earnings $108.3 million (8.4)% $354.6 million 7.4%
Net earnings excluding
non-operating gains and
losses(3) $98.8 million (6.8)% $347.5 million 10.7%
Basic earnings per share $1.33 (8.1)% $4.35 7.7%
Adjusted basic earnings
per share excluding
non-operating gains and
losses(3) $1.21 (6.5)% $4.26 11.0%
(1) All dollar figures in this table are rounded.
(2) Gross operating revenue numbers for 2005 have been restated for the
adoption of EIC-156, "Accounting by a Vendor for Consideration given
to a Customer", as required by the Canadian Institute of Chartered
Accountants (CICA).
(3) Non-GAAP measure, please refer to Section 12.0 of Management's
Discussion and Analysis contained in the 2005 Annual Report.TORONTO, Feb. 8 /CNW/ - Canadian Tire Corporation, Limited (CTC, CTC.a)
today reported 2006 net earnings of $354.6 million, an increase of 7.4 percent
compared to $330.1 million in 2005. Excluding non-operating gains and losses,
net earnings were $347.5 million, an increase of 10.7 percent compared to
$313.8 million last year.
Basic earnings per share were $4.35 in 2006, an increase of 7.7 percent
compared to $4.04 per share recorded in 2005. Excluding non-operating gains
and losses, adjusted basic earnings per share increased 11.0 percent to $4.26
compared to $3.84 the previous year.
Fourth quarter net earnings totaled $108.3 million, an 8.4 percent
decrease compared to $118.2 million for the corresponding 2005 period.
Excluding non-operating gains and losses, net earnings for the quarter were
$98.8 million, a 6.8 percent decrease compared to $106.1 million last year.
Basic earnings per share were $1.33, an 8.1 percent decrease from the $1.44
recorded in the same period last year. Excluding non-operating gains and
losses, adjusted basic earnings per share declined 6.5 percent to $1.21
compared to $1.30 in 2005.
"During 2006 we experienced sales and revenue growth across each of our
businesses reflecting healthy customer support for our products, services and
store formats," said Tom Gauld, president and CEO.
"Although the fourth quarter at Canadian Tire Retail was impacted by
unseasonably warm weather in Eastern Canada and lower than expected dealer
purchases in December, our consolidated 2006 net operating earnings grew by
approximately 11 percent on revenue growth of 7 percent. The fundamentals of
our business remain strong and our growth initiatives are working. In 2007, we
will continue to improve and expand the number of our Concept 20/20 stores as
well as the number of Mark's Work Wearhouse, PartSource and Petroleum outlets.
Expansion of the successful Gas Advantage MasterCard, the introduction of new
credit cards and the ongoing testing of high interest savings accounts,
guaranteed investment certificates and mortgages will fuel longer-term growth
at Financial Services while strengthening loyalty among our retail customers.
During 2007, we will also be introducing a number of initiatives within
Canadian Tire Retail to improve efficiency and productivity in our
operations," added Gauld.Business Overview
CANADIAN TIRE RETAIL (CTR)
Q4 Q4
($ in millions) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Retail sales $2,156.7 $2,065.5 4.4% $7,226.8 $6,855.6 5.4%
Same store
sales (1)
(year-over-year
% change) 2.2% 5.4% 3.5% 3.4%
Net shipments (2)
(year-over-year
% change) 3.8% 8.6% 4.9% 5.0%
Earnings before
income taxes
and minority
interest $71.5 $86.9 (17.8)% $306.1 $290.2 5.5%
-------------------------------------------------------------------------
Less adjustment for:
Gain on disposals
of property and
equipment $48.1 $7.0 $59.8 $12.4
Stock option
agreement
modification $(32.2) - $(32.2) -
Loss on medium
term notes
redemption - - - $(5.3)
-------------------------------------------------------------------------
Adjusted earnings
before income
taxes and
minority
interest $55.6 $79.9 (30.4)% $278.5 $283.1 (1.6)%
-------------------------------------------------------------------------
(1) Same store sales include sales from stores that have been open for
more than 53 weeks, including stores that have been expanded by more
than 25 percent in the last year.
(2) Net shipments are the total value of merchandise shipped to Canadian
Tire and franchise PartSource stores, and through our online web
store, less discounts and net of returns, recorded at the wholesale
price charged to Associate Dealers and PartSource franchisees. The
year-over-year percentage change for 2005 net shipments has been
adjusted for "EIC-156" as required by the CICA.CTR's fourth quarter retail sales grew to $2.16 billion from
$2.07 billion, an increase of 4.4 percent. Same store sales increased
2.2 percent in the quarter, led by strong sales in kitchen and home
appliances, Christmas seasonal décor, toys and sports equipment. Results in
the quarter were impacted by a decline in the sale of weather-related
merchandise in December, which typically accounts for 20 percent of sales in
the fourth quarter, due to the warm weather in Ontario and Quebec. For the
year, CTR's retail sales grew 5.4 percent to $7.23 billion from $6.86 billion
in 2005 while same store sales increased 3.5 percent.
CTR's fourth quarter pre-tax earnings of $71.5 million decreased 17.8
percent from $86.9 million in the comparable 2005 period. The decrease in
earnings largely reflects the reduced sales of weather-related products and a
considerable drawdown of inventory in stores. CTR's adjusted fourth quarter
pre-tax earnings of $55.6 million decreased 30.4 percent from $79.9 million in
the same period last year.
For the year, pre-tax earnings totaled $306.1 million, a 5.5 percent
increase over the $290.2 million recorded in 2005. Adjusted pre-tax earnings
in 2006 decreased 1.6 percent, to $278.5 million compared to $283.1 million in
the previous year. Adjusted pre-tax earnings exclude the gain on disposals of
property and equipment, which includes the sale of a strategic property in
Toronto that closed in the fourth quarter, and the impact of previously
disclosed amendments to the existing stock option agreements. In 2006, the
Company initiated a note repayment for a real-estate partnership in which
Canadian Tire was the general partner. Consolidated earnings benefited from
the related elimination of minority interest, however CTR's year-over-year
pre-tax earnings were negatively impacted by $9.4 million in costs associated
with this transaction.
As disclosed in the third quarter, amendments to the Company's stock
option agreements impacted fourth quarter earnings by $40.5 million, of which
CTR's share was $32.2 million with the balance absorbed by Mark's and
Financial Services. The amendments will provide greater transparency to
shareholders on the cost of stock options and will result in lower
administrative costs and a more favourable tax treatment of stock option costs
for the Company.
CTR completed 73 Concept 20/20 projects during the year, opening seven
new stores, retrofitting 53 stores, replacing 12 and expanding one store. The
total number of Concept 20/20 stores now stands at 126. Sales at Concept 20/20
stores are higher than in previous store formats because the Concept 20/20
stores are larger, more modern and offer an expanded product assortment. In
2006, for example, same store sales at Concept 20/20 stores were up
8.0 percent. The strong sales performance of Concept 20/20 stores led to the
decision to accelerate the format rollout in 2006 and 2007. The CTR network
now totals 468 stores, including 23 Canadian Tire-Mark's Work Wearhouse
combination stores, with total retail space of 16.2 million square feet.
PartSource generated double-digit sales growth in the fourth quarter and
for the full year, driven by the continued expansion of the network and growth
in the commercial and retail customer segments. In 2006, PartSource opened six
new stores and converted three stores that were acquired in 2005 to the
PartSource banner, bringing the total network to 63 stores.CANADIAN TIRE PETROLEUM (Petroleum)
Q4 Q4
($ in millions) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales volume
(millions of
litres) 457.4 396.3 15.4% 1,701.2 1,592.3 6.8%
Retail sales $399.8 $367.5 8.8% $1,635.4 $1,444.2 13.2%
Earnings (loss)
before income
taxes $(6.0) $3.0 (299.4)% $(5.4) $7.5 (172.9)%
-------------------------------------------------------------------------
Less adjustment for:
Gain (loss) on
disposals of
property and
equipment $(0.3) $(0.2) $(0.6) $0.1
-------------------------------------------------------------------------
Adjusted earnings
(loss) before
income taxes $(5.7) $3.2 (279.9)% $(4.8) $7.4 (165.7)%
-------------------------------------------------------------------------Petroleum's gasoline sales volumes increased 15.4 percent during the
fourth quarter to 457.4 million litres from 396.3 million litres in the
comparable 2005 period. The increase reflects the cumulative effect of
Petroleum's expansion, strong customer response to the Gas Advantage
MasterCard in Ontario, and ongoing promotions designed to continue driving
sales at CTR and loans receivable at Financial Services. For the year,
gasoline sales volumes grew by 6.8 percent to 1.7 billion litres from
1.6 billion litres in 2005. Non-gasoline sales also increased, led by a
16.5 percent rise in convenience store sales for the quarter and a
14.8 percent increase for the year.
Petroleum recorded a pre-tax loss of $6.0 million for the quarter
compared to a pre-tax profit of $3.0 million in the same 2005 period. The
decrease was a result of significantly reduced gasoline margins in the highly
competitive regions of Ontario and Quebec, where the majority of Petroleum
sites are located, as well as increased environmental expenses, partially
offset by improved comparable site gasoline volumes. Adjusted earnings also
declined during the quarter with Petroleum reporting a loss of $5.7 million
compared to a profit of $3.2 million one year ago.
For the year, Petroleum posted a pre-tax loss of $5.4 million compared to
a pre-tax profit of $7.5 million in 2005. Adjusted earnings declined during
the year with Petroleum reporting a loss of $4.8 million compared to a profit
of $7.4 million in 2005.
Petroleum opened three new gas bars, four car washes and three
convenience stores, including one "Q" site, during 2006. Petroleum also
re-branded seven gas bars including five convenience stores and three car
washes during the year.MARK'S WORK WEARHOUSE (Mark's)
Q4 Q4
($ in millions) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Total retail
sales $367.2 $326.6 12.4% $903.0 $790.7 14.2%
Same store
sales(1)
(% increase over
prior year) 10.0% 17.4% 13.0% 17.4%
Earnings before
income taxes $50.0 $42.2 18.7% $90.1 $65.0 38.8%
-------------------------------------------------------------------------
Loss on disposal
of property and
equipment (0.5) (0.9) (1.2) (1.3)
Stock option
agreement
modification (2.7) - (2.7) -
-------------------------------------------------------------------------
Adjusted earnings
before income
taxes $53.2 $43.1 23.6% $94.0 $66.3 41.7%
-------------------------------------------------------------------------
(1) Mark's same store sales exclude new stores, stores not open for the
full period in each year and store closures.Mark's fourth quarter sales grew to $367.2 million, an increase of
12.4 percent from the $326.6 million recorded in the comparable 2005 period.
Total same store sales rose 10.0 percent in the quarter. Sales of winter
apparel and footwear, while up modestly in total, declined in Ontario and
Quebec due to the unusually warm weather during December. Mark's strongest
sales growth in the quarter was experienced in women's wear although growth in
both industrial and casual men's wear also had a positive impact in the
quarter. The opening of 15 new stores and the continued strong customer
response to Mark's "Clothes That Work" marketing and merchandising strategy
helped drive the growth in total retail sales in the fourth quarter.
Mark's total retail sales for 2006 were $903.0 million, a 14.2 percent
increase compared to $790.7 million a year ago, while total same store sales
increased 13.0 percent in 2006.
Mark's pre-tax earnings were $50.0 million for the quarter, an
18.7 percent increase over the $42.2 million recorded for the same period last
year. The growth in earnings is attributable to the increase in same store
sales and an improved gross margin rate. Adjusted fourth quarter pre-tax
earnings increased 23.6 percent to $53.2 million compared to $43.1 million in
the comparable 2005 period.
Mark's pre-tax earnings for the year were $90.1 million, a 38.8 percent
increase over the $65.0 million recorded in 2005. Adjusted pre-tax earnings in
2006 increased 41.7 percent, to $94.0 million compared to $66.3 million in the
previous year.
Mark's opened 18 new stores in 2006, including 10 new Canadian
Tire-Mark's Work Wearhouse combination stores. Mark's also expanded or
renovated 13 stores and relocated 14 stores during the year, bringing the
total store network to 339 and total retail space to 2.7 million square feet.CANADIAN TIRE FINANCIAL SERVICES (Financial Services)
Q4 Q4
($ in millions) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Total managed
portfolio end
of period $3,632.5 $3,395.1 7.0%
Earnings before
income taxes $53.7 $55.8 (3.7)% $167.0 $165.0 1.2%
-------------------------------------------------------------------------
Less adjustment for:
Gain on redemption
of investment - - 6.9 -
Loss on disposals
of property
and equipment (0.3) - (0.6) (0.3)
Gain (loss) on
sale of loans
receivable 8.2 13.0 (12.7) 19.9
Stock option
agreement
modification (5.6) - (5.6) -
-------------------------------------------------------------------------
Adjusted earnings
before income
taxes $51.4 $42.8 20.1% $179.0 $145.4 23.1%
-------------------------------------------------------------------------Financial Services' total managed portfolio of loans receivable was
$3.6 billion at the end of 2006, a 7.0 percent increase over the $3.4 billion
portfolio at the end of 2005. The expansion of the total managed portfolio is
attributable to continued growth in the number of accounts carrying a balance
and an 8.2 percent increase in the average account balance to $1,837 at the
end of 2006 from $1,698 at the end of 2005. Portfolio growth also benefited
from the expansion of the new Gas Advantage MasterCard throughout Ontario.
Financial Services' pre-tax earnings for the fourth quarter were
$53.7 million, a 3.7 percent decrease from the $55.8 million recorded in the
fourth quarter of 2005. Continued portfolio growth, tight expense management
that resulted in a reduction in the operating expense ratio, and a substantial
improvement in the aging trends in loans receivable helped offset lower
year-over-year gains on the sale of loans receivable and $6.1 million in
expenses related to the retail banking initiative. Excluding the gain on sale
of loans receivable and Financial Services share of the impact of the stock
option agreement modification, the fourth quarter adjusted earnings before
income taxes increased 20.1 percent to $51.4 million from $42.8 million for
the same period last year.
For the year, Financial Services recorded pre-tax earnings of
$167.0 million, a 1.2 percent increase over the $165.0 million recorded in
2005. Adjusted earnings increased 23.1 percent to $179.0 million compared to
$145.4 million in the previous year.
The net write-off rate for 2006 was 6.0 percent, at the high end of the
targeted range of five to six percent.
Financial Services launched two initiatives during the year to enhance
the division's growth and profitability. The expansion of the Gas Advantage
MasterCard throughout Ontario continued to receive favourable customer
response at Petroleum's gas pumps. Financial Services also introduced retail
banking products in two pilot markets in the fall of 2006, including high
interest savings accounts, guaranteed investment certificates and mortgages.
The pilot represents an opportunity to leverage Financial Services'
capabilities and customer loyalty to drive growth beyond 2009.
2007 PLANS AND FORECAST
The Company's earnings forecast, based on its 2007 business plan, is in
the range of $4.65 to $4.85 per share, excluding non-operating items, and
contemplates the following key initiatives:- Continued roll-out of approximately 70 CTR Concept 20/20 projects, of
which nine will be additions to the chain. Total retail square feet
will increase approximately 10 percent by the end of the year.
- The addition of eight new PartSource stores and continued
acquisitions of small independent or regional competitors.
- Continued expansion of Mark's retail space through approximately 55
projects, of which 29 will be additions to the chain. Total retail
square feet will increase approximately 14 percent by the end of the
year.
- Developing and testing at least one new store format integrating the
complete Mark's concept with a larger Canadian Tire store.
- The addition of five new and five re-branded Petroleum sites, in line
with the interrelated marketing objective to enhance traffic and
customer loyalty for CTR and Financial Services credit cards.
- Further regional expansion of the Gas Advantage MasterCard business
and the testing of at least one additional new card product.
- The continued testing of the new high interest savings accounts,
guaranteed investment certificates and mortgages in the two pilot
regions.
In addition, a number of new initiatives will be launched within CTR to
enhance the long-term competitiveness and productivity of its operations,
including:
1) Upgrade and simplification of information technology (IT)
infrastructure and applications to reduce IT operating costs and
enhance the productivity of Canadian Tire's workforce.
2) Improvements to Dealer ordering and shipping processes to better
align the flow of product to the stores and customer purchase
patterns, thereby reducing corporate and store inventory levels and
operational complexity.
3) Enhancements to the automotive parts supply chain capabilities to
support PartSource expansion and continued growth and efficiencies at
CTR.The 2007 earnings forecast includes approximately $25 million in
expenses, or $0.20 per share, for the retail banking initiative. The forecast
also includes targeted incremental expenditures to support the productivity
and technology initiatives noted above.
Total projected capital spending for 2007 will be in the range of $580 to
$620 million, the majority of which will support store and network expansions
and the completion of the new Eastern Canada distribution centre planned to
open in 2008 and be fully operational in 2009.
"We have an aggressive plan this year designed to meet our short and
long-term growth objectives while balancing the need to improve operational
efficiencies and ensure we have robust and scaleable infrastructure for the
future," noted Gauld.
DIVIDENDS
The Board of Directors today approved an increase in the 2007 quarterly
dividend payments from $0.165 per share to $0.185 per share, an annualized
increase of 12 percent. The total annualized dividend payment will rise from
$0.66 per share to $0.74 per share. Declaration of the increased dividend is
expected in March 2007 for payment on June 1, 2007 to shareholders of record
as of April 30, 2007.
Canadian Tire's policy is to maintain dividend payments equal to
approximately 15 to 20 percent of the prior year's normalized basic net
earnings per share, after giving consideration to the period end cash
position, future cash requirements and investment opportunities. Normalized
net earnings per share for this purpose exclude gains and losses on the sale
of credit card and loans receivable and non-recurring items but include gains
and losses on the ordinary course disposition of property and equipment.
Dividends paid by the Corporation in 2006 and subsequent years are
considered "eligible dividends" under the draft federal tax legislation
contained in Bill C-28. Under the proposed legislation, eligible dividends
received by an individual are subject to a lower rate of tax than non-eligible
dividends.
FORWARD-LOOKING STATEMENTS
This disclosure contains statements that are forward-looking. Actual
results or events may differ materially from those forecasted in this
disclosure because of the risks and uncertainties associated with Canadian
Tire's business and the general economic environment. Risks and uncertainties
are disclosed in other public filings by the Company, such as Management's
Discussion and Analysis in the Annual Report and include, but are not limited
to: changes in interest, currency exchange and tax rates; the ability of
Canadian Tire to attract and retain quality employees, Associate Dealers,
Petroleum agents and PartSource and Mark's Work Wearhouse store operators and
franchisees; and the willingness of customers to purchase the Company's
merchandise, financial products and services.
Risk factors associated with the assumptions that underlie Canadian
Tire's forecasted performance in 2007, as outlined previously, and that have
the potential to affect the operating performance and results of the Company's
divisions include:- expansion activity planned for Mark's, PartSource, Petroleum and CTR,
including the associated supply chain infrastructure, could be
affected by the Company's ability to acquire and develop suitable
real estate properties and obtain municipal and other required
government approvals, and the availability of construction material
and labour;
- unseasonable weather patterns could affect the sales of seasonal
merchandise at CTR and Mark's, particularly in the second and fourth
quarters which historically are these divisions' largest selling
periods;
- adverse environmental occurrences could damage the Company's
reputation or threaten its licenses to operate, particularly in the
Petroleum division;
- changes in commodity prices could affect the profitability of
Petroleum, CTR and Mark's;
- the earnings of Financial Services could be affected by customers'
inability to repay their Canadian Tire credit card or personal loan
balances or by an unsatisfactory response to the retail banking pilot
initiative; and
- failure to comply with applicable laws and regulations could result
in sanctions and financial penalties by regulatory bodies that could
impact the Company's earnings and reputation. Areas of compliance
include environment, health and safety, competition, transportation
of dangerous goods, tax, customs and excise and regulations governing
financial institutions.The Company has developed its 2007 forecast on the assumption that there
will not be a material deviation in the risks described in this disclosure
compared to the current operating environment. The Company cannot provide any
assurance that forecasted financial or operational performance will actually
be achieved, or if it is, that it will result in an increase in the price of
Canadian Tire shares.
REVIEW BY BOARD OF DIRECTORS
The Canadian Tire Board of Directors, on the recommendation of its Audit
Committee, has approved the contents of this disclosure.
CONFERENCE CALL
Canadian Tire will conduct a conference call to discuss information
included in this news release and related matters at 4:00 p.m. EST on
Thursday, February 8, 2007. The conference call will be available
simultaneously and in its entirety to all interested investors and the news
media through a webcast at http://investor.relations.canadiantire.ca, and will
be available through replay at this website for one week.
Canadian Tire Corporation, Limited (TSX: CTC, CTC.a), operates more than
1,100 stores, gas bars and car washes in an inter-related network of
businesses engaged in retail, financial services and petroleum. Canadian Tire
Retail, Canada's most shopped general merchandise retailer, with 468 stores
operated by Associate Dealers across Canada offers a unique mix of products
and services through three specialty categories in which the organization is
the market leader - Automotive, Sports and Leisure, and Home Products.
www.canadiantire.ca offers Canadians the opportunity to shop online.
PartSource is an automotive parts specialty chain with 63 stores designed to
meet the needs of purchasers of automotive parts - professional automotive
installers and serious do-it-yourselfers. Canadian Tire Petroleum is one of
the country's largest and most productive independent retailers of gasoline,
operating 260 gas bars, 251 convenience stores and kiosks, and 74 car washes.
Mark's Work Wearhouse is one of the country's leading apparel retailers
operating 339 stores in Canada. Under the Clothes that Work™ marketing
strategy, Mark's sells apparel and footwear in work, work-related, casual and
active-wear categories, as well as health-care and business-to-business
apparel. www.marks.com offers Canadians the opportunity to shop online.
Canadian Tire Financial Services manages over 4 million Canadian Tire
MasterCard accounts and markets related financial products and services for
retail and petroleum customers. Canadians can also access Financial Services
online at www.ctfs.com. Over 50,000 Canadians work across Canadian Tire's
organization from coast-to-coast in the enterprise's retail, financial
services, and petroleum businesses.2006 YEAR END
INTERIM REPORT FINANCIALS
Consolidated Statements of Earnings and Retained Earnings (Unaudited)
-------------------------------------------------------------------------
(Dollars in
millions except 13 weeks ended, 52 weeks ended,
per share December 30, December 31, December 30, December 31,
amounts) 2006 2005 2006 2005
-------------------------------------------------------------------------
(Restated (Restated
- Note 2) - Note 2)
Gross operating
revenue $ 2,426.1 $ 2,304.3 $ 8,269.1 $ 7,721.6
-------------------------------------------------------------------------
Operating expenses
Cost of
merchandise sold
and all other
operating
expenses except
for the
undernoted items 2,180.5 2,035.1 7,415.7 6,896.1
Interest
Long-term debt
(Note 5) 16.2 21.3 71.2 79.5
Short-term debt 2.4 1.7 4.5 4.6
Depreciation and
amortization 51.0 49.2 191.7 185.0
Employee profit
sharing plan 6.8 9.1 28.2 28.7
-------------------------------------------------------------------------
Total operating
expenses 2,256.9 2,116.4 7,711.3 7,193.9
-------------------------------------------------------------------------
Earnings before
income taxes and
minority interest 169.2 187.9 557.8 527.7
Income taxes
Current 80.0 74.0 222.7 187.2
Future (19.1) (6.3) (21.9) 2.8
-------------------------------------------------------------------------
Total Income taxes 60.9 67.7 200.8 190.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings
before minority
interest 108.3 120.2 357.0 337.7
-------------------------------------------------------------------------
Minority interest
(Note 11) - 2.0 2.4 7.6
-------------------------------------------------------------------------
Net earnings $ 108.3 $ 118.2 $ 354.6 $ 330.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings
per share $ 1.33 $ 1.44 $ 4.35 $ 4.04
Diluted earnings
per share
(Note 7) $ 1.32 $ 1.43 $ 4.31 $ 3.98
-------------------------------------------------------------------------
Weighted average
number of Common
and Class A
Non-Voting Shares
outstanding 81,616,331 81,873,572 81,575,556 81,764,082
-------------------------------------------------------------------------
Retained earnings,
beginning of period $ 1,812.6 $ 1,546.9
Net earnings 354.6 330.1
Dividends (53.8) (47.4)
Repurchase of Class A
Non-Voting Shares (Note 8) (25.3) (17.0)
-------------------------------------------------------------------------
Retained earnings, end of period $ 2,088.1 $ 1,812.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
-------------------------------------------------------------------------
13 weeks ended, 52 weeks ended,
(Dollars in December 30, December 31, December 30, December 31,
millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
Cash generated from (used for):
Operating
activities
Net earnings $ 108.3 $ 118.2 $ 354.6 $ 330.1
Items not
affecting cash
Net provision
for loans
receivable 51.6 51.4 207.4 199.9
Depreciation and
amortization
of property
and equipment 50.1 48.6 189.1 182.0
Loss (gain) on
sales of loans
receivable
(Note 4) (8.2) (13.0) 12.7 (19.9)
Employee future
benefits expense
(Note 6) 1.8 1.2 7.2 6.2
Amortization of
other assets 0.9 1.3 4.7 5.8
Loss on sale of
Associate Dealer
receivables
(Note 3) 2.5 0.1 2.5 0.1
Other 0.1 8.3 (1.6) 4.6
Future income taxes (19.1) (6.3) (21.9) 2.8
Gain on disposals
of property and
equipment (47.0) (5.9) (57.4) (10.9)
-------------------------------------------------------------------------
Cash generated from
operations 141.0 203.9 697.3 700.7
-------------------------------------------------------------------------
Changes in other working
capital components 514.2 394.3 (14.8) (287.2)
-------------------------------------------------------------------------
Cash generated from
operating activities 655.2 598.2 682.5 413.5
-------------------------------------------------------------------------
Investing activities
Additions to property
and equipment (223.6) (120.1) (529.2) (387.0)
Investment in loans
receivable (224.8) (249.0) (442.4) (695.4)
Long-term receivables
and other assets (66.8) (19.8) (73.5) (24.7)
Purchases of stores (2.3) (3.6) (7.8) (4.9)
Asset retirement
obligations (1.0) (0.5) (2.1) (1.3)
Employee future
benefits (0.5) (0.4) (1.9) (1.7)
Securitization of
loans receivable 310.8 326.7 171.8 395.2
Proceeds on
disposition of
property and
equipment 86.8 20.3 340.1 78.2
Sale of Associate
Dealer receivables
(Note 3) 347.5 47.8 347.5 47.8
-------------------------------------------------------------------------
Cash generated from
(used for) investing
activities 226.1 1.4 (197.5) (593.8)
-------------------------------------------------------------------------
Financing activities
Commercial paper (113.0) - - -
Issuance of long-term
debt 0.3 0.8 1.2 516.4
Class A Non-Voting
Share transactions
(Note 8) (14.4) (42.7) (25.3) (23.3)
Dividends (13.5) (11.8) (52.2) (45.7)
Repayment of long-term
debt (Note 5) (1.3) (1.3) (205.4) (231.3)
Repayment of limited
partnership interest
(Note 11) - - (300.0) -
-------------------------------------------------------------------------
Cash generated from
(used for)
financing activities (141.9) (55.0) (581.7) 216.1
-------------------------------------------------------------------------
Cash generated (used)
in the period 739.4 544.6 (96.7) 35.8
Cash and cash
equivalents,
beginning of period 1.9 293.4 838.0 802.2
-------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 741.3 $ 838.0 $ 741.3 $ 838.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Balance Sheets (Unaudited)
-------------------------------------------------------------------------
(Dollars in millions) December 30, December 31,
As at 2006 2005
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 741.3 $ 838.0
Accounts receivable (Note 3) 340.5 652.8
Loans receivable (Note 4) 694.2 720.8
Merchandise inventories 667.3 675.5
Prepaid expenses and deposits 46.2 42.4
Future income taxes 51.5 43.6
-------------------------------------------------------------------------
Total current assets 2,541.0 2,973.1
-------------------------------------------------------------------------
Long-term receivables and other assets (Note 4) 283.5 140.0
Goodwill 46.4 46.2
Intangible assets 52.4 52.4
Property and equipment 2,881.3 2,743.9
-------------------------------------------------------------------------
Total assets $ 5,804.6 $ 5,955.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and other $ 1,579.5 $ 1,545.5
Income taxes payable 81.1 71.2
Current portion of long-term debt (Note 5) 3.0 204.3
-------------------------------------------------------------------------
Total current liabilities 1,663.6 1,821.0
-------------------------------------------------------------------------
Long-term debt (Note 5) 1,168.4 1,171.3
Future income taxes 75.0 89.0
Other long-term liabilities (Note 16) 112.4 63.2
-------------------------------------------------------------------------
Total liabilities 3,019.4 3,144.5
-------------------------------------------------------------------------
Minority interest (Note 11) - 300.0
SHAREHOLDERS' EQUITY
Share capital (Note 8) 702.7 702.7
Contributed surplus 0.1 1.5
Accumulated foreign currency translation
adjustment (5.7) (5.7)
Retained earnings 2,088.1 1,812.6
-------------------------------------------------------------------------
Total shareholders' equity 2,785.2 2,511.1
-------------------------------------------------------------------------
Total liabilities, minority interest and
shareholders' equity $ 5,804.6 $ 5,955.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notes to the Consolidated Financial Statements (Unaudited) (continued)
-------------------------------------------------------------------------
1. Basis of presentation
These unaudited interim consolidated financial statements (the
"financial statements") have been prepared by management in
accordance with Canadian generally accepted accounting principles
("GAAP") and include the accounts of Canadian Tire Corporation,
Limited and its subsidiaries and partnership (up until April 3, 2006
- see Note 11), collectively referred to as the "Company". These
financial statements do not contain all disclosures required by
Canadian GAAP for annual financial statements, and accordingly, the
financial statements should be read in conjunction with the most
recently prepared annual financial statements for the 52 weeks ended
December 31, 2005.
The preparation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from these
estimates. Estimates are used when accounting for items such as
income taxes, impairment of assets, employee benefits, product
warranties, inventory provisions, amortization, uncollectible credit
card receivables and personal loans, environmental reserves, asset
retirement obligations and the liability for the Company's loyalty
programs.
2. Accounting policies
These financial statements follow the same accounting policies and
methods of their application as the most recent annual financial
statements for the 52 weeks ended December 31, 2005, except as noted
below.
Effective January 1, 2006, the Company implemented, on a retroactive
basis, the Emerging Issues Committee of the Canadian Institute of
Chartered Accountants' Abstract 156 (EIC-156) "Accounting by a Vendor
for Consideration Given to a Customer (Including a Reseller of the
Vendor's Products)". This Abstract requires a vendor to generally
record cash consideration given to a customer as a reduction to the
selling price of the vendor's products or services and reflect it as
a reduction of revenue when recognized in the income statement.
Certain exceptions apply where the vendor receives an identifiable
benefit in exchange for the consideration and the vendor can
reasonably estimate the fair value of the identifiable benefit. The
Abstract must be applied retroactively to annual and interim
financial statements beginning on or after January 1, 2006.
As a result of the retroactive implementation of this new standard,
the impact on the Consolidated Statements of Earnings for the
13 weeks ended December 30, 2006 was to decrease both "gross
operating revenue" and "cost of merchandise sold and all other
operating expenses except for the undernoted items" by $15.1 million
(2005 - $14.9 million). For the 52 weeks ended December 30, 2006,
both "gross operating revenue" and "cost of merchandise sold and all
other operating expenses except for the undernoted items" were
decreased by $57.1 million (2005 - $53.0 million). There was no
impact on net earnings or earnings per share.
3. Accounts Receivable
During the fourth quarter, the Company sold certain Associate Dealer
receivables to independent investors. According to the terms of the
sale, the Company retained full servicing responsibility for which it
received no compensation. For the quarter and year ended December 30,
2006, the Company recognized a loss of $2.5 million (2005 -
$0.1 million) on the sale of Associate Dealer receivables, which
assumes no expected credit losses and a servicing liability at
1.0 percent. Quantitative information about accounts receivable
managed by the Company is as follows:
Total principal
amount of receivables
December 30, December 31,
(Dollars in millions) 2006 2005
---------------------------------------------------------------------
Associate Dealer receivables $ 579.9 $ 570.2
Associate Dealer receivables sold (350.0) (47.9)
Other accounts receivable 110.6 130.5
---------------------------------------------------------------------
Receivables held $ 340.5 $ 652.8
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Loans Receivable
The Company sells pools of loans receivable ("the Loans") to third
party trusts ("the Trusts") in transactions known as securitizations.
Loans include both credit card and personal loans receivable. The
transactions are accounted for as sales in accordance with Accounting
Guideline 12, "Transfers of Receivables" ("AcG-12"), and the Loans
are removed from the Consolidated Balance Sheets. The Company retains
the interest-only strip, and for the personal loan securitization, a
subordinated interest in the loans sold (the "seller's interest") and
cash deposited with one of the Trusts (the "securitization reserve"),
all of which are retained interests. The seller's interest and
securitization reserve provide that Trust with a source of funds in
the event that the interest and principal collected on the Loans is
not sufficient to pay the Trust's creditors. The Trusts' recourse to
the Company is limited to the retained interests. The Company also
assumes responsibility for servicing the Loans, for which it does not
receive any direct compensation.
The proceeds of the sale are deemed to be the cash received,
interest-only strip and securitization reserve, less any servicing
obligation assumed. The proceeds are allocated between the Loans,
interest-only strip, seller's interest and securitization reserve
based on their relative fair value at the date of sale, with any
excess or deficiency recorded as a gain or loss on sale respectively.
The Company estimates fair values by discounting future cash flows or
comparing the appropriate yield curves to matching maturity terms.
Retained interests are measured at fair value and are reviewed for
impairment on a quarterly basis. For the 13 weeks ended December 30,
2006, the Company recognized a pre-tax gain of $8.2 million (2005 -
$13.0 million pre-tax gain) on the securitization of the Loans. For
the 52 weeks ended December 30, 2006, the Company recognized a pre-
tax loss of $12.7 million (2005 - $19.9 million pre-tax gain).
As the Company does not control the Trusts, they have not been
consolidated in these financial statements.
Quantitative information about loans managed and securitized by the
Company is as follows:
(Dollars in Total principal Average balances
millions) amount of for the
receivables as at(1) 52 weeks ended
------------------------- -------------------------
December 30, December 31, December 30, December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Total net managed
credit card
loans $ 3,372.3 $ 3,143.4 $ 3,115.8 $ 2,818.2
Credit card loans
sold (2,702.9) (2,422.8) (2,413.7) (2,224.2)
------------ ------------ ------------ ------------
Credit card loans
held 669.4 720.6 702.1 $ 594.0
Net managed
personal and
mortgage loans(2) 226.9 216.5 256.7 190.0
Loans sold (124.5) (206.1) (164.6) (8.6)
------------ ------------ ------------ ------------
Loans held 102.4 10.4 92.1 181.4
Total loans
receivable 771.8 731.0 $ 794.2 $ 775.4
------------ ------------
Less: long-term ------------ ------------
portion(3) 77.6 10.2
------------ ------------
Current portion
of loans
receivable $ 694.2 $ 720.8
------------ ------------
------------ ------------
(1) Amounts shown are net of allowance for credit losses.
(2) Personal loans are unsecured loans that are provided to
qualified existing credit cardholders for terms of three to five
years. Personal loans have fixed monthly payments of principal
and interest; however, the personal loans can be repaid at any
time without penalty. Mortgage loans are issued for terms of up
to ten years, have fixed or variable interest rates and are
secured.
(3) The long-term portion of loans is included in "Long-term
receivables and other assets".
Net credit losses for the 13 weeks ended December 30, 2006 were
$53.7 million (2005 - $47.8 million). Net credit losses for the
52 weeks ended December 30, 2006 were $204.8 million (2005 -
$182.1 million). Net credit losses are charge-offs net of recoveries
and are based on the total managed portfolio of loans.
5. Long-Term Debt
On January 16, 2006, medium term notes totaling $200.0 million
matured and were repaid.
On March 31, 2006, a mortgage payable on a shopping centre in
Kitchener, Ontario with a maturity date of October 2011 and an
interest rate of 7.6 percent that was assumed in 2005, was refinanced
with a promissory note with the same terms and conditions. The
promissory note is secured by a portfolio of bonds and cash totaling
$16.2 million, which is included in long-term receivables and other
assets.
6. Employee Future Benefits
The net employee future benefit expense for the 13 weeks and 52 weeks
ended December 30, 2006 was $1.8 million (2005 - $1.2 million) and
$7.2 million (2005 - $6.2 million), respectively.
7. Diluted Earnings Per Share
The reconciliation of the number of shares used in the diluted
earnings per share calculation is as follows:
13 weeks 13 weeks 52 weeks 52 weeks
ended ended ended ended
December 30, December 31, December 30, December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Average number of
shares for basic
earnings per
share
calculations 81,616,331 81,873,572 81,575,556 81,764,082
Dilutive options 252,782 968,521 640,953 1,132,320
------------ ------------ ------------ ------------
Average number of
shares for
dilutive earnings
per share
calculations 81,869,113 82,842,093 82,216,509 82,896,402
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
8. Share Capital
(Dollars in millions) December 30, December 31,
2006 2005
------------ ------------
Authorized
3,423,366 Common Shares
100,000,000 Class A Non-Voting Shares
Issued
3,423,366 Common Shares
(December 31, 2005 - 3,423,366) $ 0.2 $ 0.2
78,047,456 Class A Non-Voting Shares
(December 31, 2005 - 78,032,724) 702.5 702.5
------------ ------------
$ 702.7 $ 702.7
------------ ------------
------------ ------------
The Company issues and repurchases Class A Non-Voting Shares. The net
excess of the repurchase price over the issue price is allocated to
retained earnings.
The following transactions occurred with respect to Class A Non-
Voting shares:
(Dollars in 52 weeks ended 52 weeks ended
millions) December 30, 2006 December 31, 2005
------------------------- -------------------------
Number $ Number $
------------ ------------ ------------ ------------
Shares outstanding
at the beginning
of the period 78,032,724 702.5 77,699,631 708.8
Issued 1,222,032 57.4 1,617,593 60.4
Repurchased (1,207,300) (82.7) (1,284,500) (83.7)
Excess of
repurchase price
over issue price - 25.3 - 17.0
------------ ------------ ------------ ------------
Shares outstanding
at the end of
the period 78,047,456 702.5 78,032,724 702.5
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
9. Stock-based Compensation Plans
Stock options (referred to as "stock options with tandem stock
appreciation rights") were granted in 2006, with a feature that
enables the employee to exercise the stock option or receive a cash
payment equal to the difference between the market price of a Class A
Non-Voting share at the exercise date and the exercise price of the
stock option. As the employee can demand settlement in cash and the
Company is obligated to pay cash upon demand, compensation expense is
accrued over the vesting period of the stock options based on the
expected total compensation to be paid upon the stock options being
exercised.
On November 9, 2006, the Board of Directors approved an amendment to
the Company's stock options issued prior to 2006, providing employees
holding such stock options the right to elect to surrender options
and receive a direct cash payment in lieu of exercising the options
in the traditional fashion. The cash payment is calculated as the
difference between the exercise price of the stock option and the
market price of the Company's Class A Non-Voting shares as calculated
on the date of surrender, multiplied by the number of Class A Non-
Voting shares covered by the stock options surrendered. Upon
amendment to the stock option plan, the Company was required to
recognize an obligation and corresponding expense for the current
intrinsic value of stock options subject to vesting. The obligation
will be revalued at each reporting period based on the changes in the
market price of the Company's Class A Non-Voting shares for the
unexercised stock options subject to vesting. The Company recorded a
pre-tax expense for these options of $40.5 million in the fourth
quarter of 2006.
The compensation expense recorded for stock options for the 13 weeks
ended and 52 weeks ended December 30, 2006 was $40.9 million and
$41.6 million, respectively.
For a description of the Company's stock-based compensation plans,
see the most recent annual audited financial statements for the year
ended December 31, 2005.
10. Pro forma Stock Option Disclosure
With the amendments to the Company's stock options effective
November 9, 2006, the Company now expenses the intrinsic value of
stock options over their respective vesting periods. Consequently,
there is no longer a requirement to provide proforma stock option
disclosure.
11. Minority Interest
In November 2001, the Company formed a limited partnership for the
purpose of raising $300 million of capital in relation to a portfolio
of its retail properties. The Company was the general partner in this
partnership. A third party investor group invested $300 million in
the partnership for a limited partnership interest with preferential
rights to distribution of income and capital.
The limited partnership interest was entitled to a cumulative,
quarterly preferred distribution on its capital account
(approximately 4.89% annualized year to date up to the date of Note
repayment (2005 - 3.98%)) and the partnership followed a full
distribution policy. The partnership invested in the retail
properties by way of a note and equity in an entity that owns the
portfolio of properties. The partnership had an indefinite life, but
could be liquidated in certain circumstances including shortfalls in
cash flows generated by the retail properties and repayment of the
note. The assets and liabilities, results of operations and cash
flows of the partnership were included in the financial statements of
the Company. The preferred interest was treated as minority interest
on the Consolidated Balance Sheets and in the Consolidated Statements
of Earnings.
On April 3, 2006, the note was repaid and the equity was redeemed.
The limited partnership repaid the limited partners. Accordingly, the
minority interest ceased to be reflected on the Consolidated Balance
Sheets after April 3, 2006, and no further charge has been reflected
in the Consolidated Statements of Earnings after April 3, 2006.
12. Segmented Information - Income Statement
---------------------------------------------------------------------
13 weeks 13 weeks 52 weeks 52 weeks
ended ended ended ended
December 30, December 31, December 30, December 31,
2006 2005 2006 2005
(Dollars in (Restated (Restated
millions) Note 2) Note 2)
---------------------------------------------------------------------
Gross operating
revenue(1)
CTR $ 1,576.8 $ 1,516.9 $ 5,355.4 $ 5,093.9
Financial
Services 198.0 190.6 721.7 685.8
Petroleum 375.1 346.9 1,545.3 1,361.3
Mark's 309.5 275.0 762.3 664.4
Eliminations (33.3) (25.1) (115.6) (83.8)
---------------------------------------------------
Total gross
operating
revenue $ 2,426.1 $ 2,304.3 $ 8,269.1 $ 7,721.6
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before
income taxes and
minority interest
CTR $ 71.5 $ 86.9 $ 306.1 $ 290.2
Financial
Services 53.7 55.8 167.0 165.0
Petroleum (6.0) 3.0 (5.4) 7.5
Mark's 50.0 42.2 90.1 65.0
---------------------------------------------------
Total earnings
before income
taxes and
minority
interest $ 169.2 $ 187.9 $ 557.8 $ 527.7
Income taxes 60.9 67.7 200.8 190.0
Minority interest - 2.0 2.4 7.6
---------------------------------------------------
Net earnings $ 108.3 $ 118.2 $ 354.6 $ 330.1
---------------------------------------------------------------------
---------------------------------------------------------------------
Interest expense
CTR $ 24.9 $ 26.1 $ 97.9 $ 96.5
Financial
Services 4.9 4.0 20.3 13.5
Petroleum - - - -
Mark's 0.6 1.0 3.0 2.6
Eliminations (11.8) (8.1) (45.5) (28.5)
---------------------------------------------------
Total interest
expense $ 18.6 $ 23.0 $ 75.7 $ 84.1
---------------------------------------------------------------------
---------------------------------------------------------------------
Depreciation and
amortization
expense
CTR $ 38.7 $ 38.1 $ 147.7 $ 143.5
Financial
Services 3.9 3.1 13.0 12.5
Petroleum 4.1 4.0 15.2 14.4
Mark's 4.3 4.0 15.8 14.6
---------------------------------------------------
Total
depreciation and
amortization
expense $ 51.0 $ 49.2 $ 191.7 $ 185.0
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Gross operating revenue includes dividend and interest income.
Segmented Information - Total Assets
-------------------------------------------
(Dollars in As at As at
millions) December 30, December 31,
2006 2005
-------------------------------------------
CTR $ 4,502.5 $ 4,604.7
Financial
Services 1,476.0 1,350.9
Petroleum 477.9 494.5
Mark's 406.7 342.9
Eliminations (1,058.5) (837.4)
-------------------------
Total $ 5,804.6 $ 5,955.6
-------------------------------------------
13. Supplementary Cash Flow Information
The Company paid income taxes during the 13 weeks ended December 30,
2006, amounting to $51.6 million (2005 - $43.2 million) and made
interest payments of $27.1 million (2005 - $25.1 million). For the
52 weeks ended December 30, 2006, the Company paid income taxes
amounting to $212.5 million (2005 - $155.8 million) and made interest
payments of $87.3 million (2005 - $83.5 million). The Company
incurred capital expenditures on property and equipment of
$275.9 million for the 13 weeks ended December 30, 2006, of which
$223.6 million had been paid for by the end of the quarter (2005 -
$142.9 million of which $120.1 million had been paid for by the end
of the quarter). For the 52 weeks ended December 30, 2006, property
and equipment acquired totaled $557.4 million, of which
$529.2 million had been paid for by the end of the year (2005 -
$391.1 million, of which $387.0 million had been paid for by the end
of the year).
14. Legal Matters
The Company and certain of its subsidiaries are party to a number of
legal proceedings. The Company believes that each such proceeding
constitutes a routine legal matter incidental to the business
conducted by the Company and that the ultimate disposition of the
proceedings will not have a material effect on the Company's
consolidated earnings, cash flow or financial position.
15. Tax Matters
In the ordinary course of business, the Company is subject to ongoing
audits by tax authorities. While the Company believes that its tax
filing positions are appropriate and supportable, from time to time
certain matters are reviewed and challenged by the tax authorities.
The Canada Revenue Agency (CRA) has reassessed and is also expected
to reassess the Company regarding the tax treatments of commissions
paid to foreign subsidiaries of the Company (covering periods from
1995 onwards), and dividends received on an investment made by a
wholly-owned subsidiary of the Company related to reinsurance
(covering periods from 1999 to 2003). The applicable provincial tax
authorities are expected to reassess for the corresponding periods.
The Company does not have a significant exposure on these matters
subsequent to the 2003 taxation year. The reassessment and expected
reassessments in these matters are based on multiple grounds, some of
which are highly unusual and the Company will appeal these
reassessments as and when they are received.
If the CRA (and applicable provincial tax authorities) were entirely
successful in their reassessments - an outcome that the Company and
its tax advisors believe to be very unlikely - it is estimated that
the total liability of the Company for additional taxes, interest and
penalties could be approximately $258 million. Although the Company
will appeal these reassessments, current tax legislation requires the
Company to remit to the CRA and its provincial counterparts
approximately $161 million, of which $69 million has already been
remitted. The timing of future remittances will be determined by the
receipt of the reassessments. In the event that the Company is
successful in its appeal, in whole or in part, some, or all of the
funds remitted to the various tax authorities will be refunded to the
Company.
The Company regularly reviews the potential for adverse outcomes in
respect of tax matters. The Company believes that the ultimate
disposition of these reassessments will not have a material adverse
effect on its liquidity, consolidated financial position or results
of operations because the Company believes that it has adequate
provision for these tax matters. Should the ultimate outcome
materially differ from the provisions, the Company's effective tax
rate and its earnings could be affected positively or negatively in
the period in which the matters are resolved.
16. Disposition of Properties
On November 29, 2005, the Company announced its agreement to sell and
leaseback two distribution centres to a third party. On January 31,
2006, the Company and the third party completed the sale and
leaseback agreements for the two distribution centres. The proceeds
from the sale of the two distribution centres totaled $229.1 million,
resulting in a net pre-tax gain of approximately $46.3 million. As
the Company entered into long-term leasebacks of the two distribution
centres from the third party, the gain is being amortized over the
lease terms. The unamortized gain is included in other long-term
liabilities.
On October 30, 2006, the Company announced an agreement to sell
surplus land at one of its locations in Toronto, Ontario. On
December 7, 2006, the Company completed the sale of this surplus land
for total proceeds of $149.7 million, of which $134.7 million took
the form of an interest-free mortgage in favour of the Company. A
gain of $119.6 million will be recorded on the transaction, with
$49.2 million recognized on closing. The balance will be reflected as
imputed interest income on the interest-free mortgage, the principal
amount of which is payable over 10 years, or earlier, at the option
of the purchaser.
17. Comparative Figures
Certain of the prior period's figures have been reclassified to
conform to the current year presentation.Interest Coverage Exhibit to the Consolidated Financial Statements
-------------------------------------------------------------------------
The Company's long-term interest requirements for the 52 weeks ended
December 30, 2006, after annualizing interest on long-term debt issued and
retired during this period, amounted to $76.5 million. The Company's earnings
before interest on long-term debt, income taxes and minority interest for the
52 weeks then ended were $626.8 million, which is 8.2 times the Company's
long-term interest requirements for this period.
%SEDAR: 00000534EF
For further information:
For further information: Media: Caroline Casselman, Director, Community & Public Affairs, (416) 480-8159, caroline.casselman@cantire.com; Investors: Michelle Dodokin, Director, Investor Relations, (416) 480-3070, michelle.dodokin@cantire.com