2006 First Quarter Financial Results Conference Call May 11, 2006

Transcription

1 26 First Quarter Financial Results Conference Call May 11, 26 Canadian Tire Corporation, Limited

2 Forward-looking Information 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. These risks and uncertainties are disclosed in other public filings by the Company, such as Management s Discussion and Analysis in the 25 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 shop at the Company s stores or access financial products and services. Risk factors associated with the assumptions that underlie Canadian Tire s forecasted performance in 26, as outlined previously in this disclosure, and that have the potential to affect the operating performance and results of the Company s divisions include, but not limited to: Expansion activity planned for Mark s, PartSource, Petroleum and CTR s Concept 2/2 store format as well as the associated supply chain infrastructure could be affected by the Company s ability to acquire and develop real estate properties, municipal and other required government approvals, and the availability of construction 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 division s largest selling periods; Adverse environmental occurences could have the ability to 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; and The earnings of Financial Services could be affected by customers inability to repay their Canadian Tire credit card or personal loan balances. The Company has developed its 26 forecast on the assumption that there will not be a material deviation from 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. 2

3 Canadian Tire Corporation, Limited Thomas K. Gauld President and Chief Executive Officer

4 Highlights Canadian Tire has entered into the second year of our Strategic Plan. Our performance in executing our Plan, and our correlating business results, gives us confidence as we continue to execute our Strategic Plan. Over the course of our first Strategic Plan, which ended in 25, we generated cumulative total returns to shareholders of 286%. We ended 25 in the top-quartile of all North American retailers in total returns to shareholders. All businesses contributed to Canadian Tire s earnings performance this past quarter. 4

5 Financial & Operational Highlights (1) Consolidated Performance Q1 Retail sales 6.9% Gross operating revenue 4.2% Net earnings 34.9% Net earnings excluding non-operating items 35.5% First quarter performance gives confidence in Canadian Tire s ability to execute a challenging strategic agenda while keeping the business operating in top form. (1) All figures in this presentation represent year-over-year comparisons to First Quarter, 25 unless otherwise noted. 5

6 Outlook for 26 We are moving ahead with significant investments in strategic initiatives proven in our last Plan and in new initiatives that build for the future. We affirm our earnings forecast for 26 with earnings per share in the range of $4.2 to $4.35, excluding non-operating items. Our first quarter results show momentum in growth, however the first quarter typically has the smallest contribution to our full-year results. Our short-term expectations reflect the impact of store expansion activity, the consideration of investments in new products and services in Financial Services that will cause expenses to rise in 26 and more moderate full-year growth rates than previous high levels at both Mark s and Financial Services, although still very good performances. 6

7 Canadian Tire Corporation, Limited Huw Thomas Executive Vice-President, Finance & Administration & Chief Financial Officer

8 Consolidated Performance 2.5 ($ in billions) Retail Sales 2.5 Gross Operating Revenue ($ in billions) 6.9% 4.2% Q15 Q15 Net Earnings Basic Earnings Per Share 1 ($ in millions) % ($) %.58 Q15 Q15 8

9 Adjusted Consolidated Net Earnings ($ in millions except per share amounts) Q15 Change Net earnings $47.6 $ % Less after-tax adjustment for: Loss on sales of loans receivable (8.1) (1.1) Gain on disposals of property and equipment 2..2 Loss on medium term notes redemption - (3.5) Adjusted net earnings $53.7 $ % Basic earnings per share $.58 $ % Adjusted basic earnings per share $.66 $ % 9

10 Consolidated EBITDA (1) and minority interest ($ in millions) Q15 EBITDA and minority interest as a % of gross operating revenue EBITDA and minority interest 9.1% 8.3% $143.7 $125.1 Less: Depreciation and amortization expense Interest expense Earnings before income taxes and minority interest $78. $56.6 Canadian Tire had EBITDA growth of 14.8% for the quarter (1) EBITDA does not have a standardized meaning under Canadian generally accepted accounting principles (GAAP). With the exception of Financial Services, we consider EBITDA and minority interest to be an effective measure of the contribution of each of our businesses to our profitability on an operational basis, before allocating the cost of income taxes and capital investments. 1

11 Consolidated Balance Sheet As at As at As at ($ in millions, except per share amounts) April 1, 26 December 31, 25 April 2, 25 Long-term debt (including current portion) $1,174.1 $1,375.6 $876.4 Shareholders equity 2,54.7 2, ,289.1 Merchandise inventories Book value per share

12 Consolidated Balance Sheet Long-term debt is approximately 27.9% of total capitalization. In January 26, Canadian Tire repaid $2 million in medium term notes that had matured, and no significant long-term debt maturing over the next two years. $645 million in committed but unused lines of credit, with strong capital market interest in our funding program and excellent liquidity. $256 million in cash and cash equivalents. Capital expenditures totaled $6 million in Q1, a 24% decline from the $78 million spent in Q1 25. We continue to expect capital expenditures in 26 of $5 million to $525 million. 12

13 Canadian Tire Corporation, Limited Mike Arnett President Canadian Tire Retail

14 CTR Retail, Comparable and Same Store Sales (1) (% change over prior year period) Q15 Total retail sales Comparable store sales 4.7% 4.8% 2.7% 2.5% Same store sales 2.8% 3.1% Excluding the impact of 45 stores undergoing conversion to Concept 2/2, CTR same store sales would have been up 3.4% (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% in the past year. Comparable store sales include sales from stores that have been open for more than 53 weeks and that have not been expanded by more than 25 percent in the past year. 14

15 CTR Performance Highlights 2 1 Retail Sales ($ in millions) 4.7% 1,151. 1, Gross Operating Revenue ($ in millions).3% Q Net Shipments (1) (year-over-year percentage change) -.1 Q15 EBITDA (2) and minority interest 2 ($ in millions) 13.3% Q15 Q15 (1) Shipments represent gross value of merchandise shipped, less discounts, returns and other items. (2) Refer to earlier note on EBITDA as a non-gaap measure. 15

16 CTR Earnings Performance (Before Tax) ($ in millions) 54.1% Retail sales growth of 4.7% due to strong marketing programs and the effect of new 38.5 Concept 2/2 stores opened in the quarter Q15 Adjustments $ (4.4) $ 3.4 Adjusted $29.4 $35.1 Earnings Strong sales growth in tools, home décor and kitchen and home appliance categories due to strong promotional activity, were partially offset by softer sales in winter outerwear and accessories due to milder weather conditions. Earnings improvements reflect enhanced margins from factors such as effective global sourcing initiatives and more favourable exchange rates. CTR s performance incorporates impacts from the early redemption of a medium term note in Q1 25 and higher yearover-year gains on the disposal of property and equipment in Q

17 Canadian Tire Corporation, Limited Mike Medline Executive Vice-President New Business Development

18 PartSource PartSource experienced double-digit growth fuelled by continued strength of commercial sales for the quarter. PartSource currently has 58 stores and is continuing to expand its store network, with plans to open eight new stores during 26, primarily in Ontario. PartSource now has five corporate stores opened. 18

19 Petroleum Performance Highlights 5 25 Retail Sales Gasoline Sales 5 ($ in millions) 13.1% (millions of litres).5% Q15 Q Gross Operating Revenue EBITDA (1) 1 ($ in millions) ($ in millions) 14.% 9.8% Q15 Q15 (1) Refer to earlier note on EBITDA as a non-gaap measure. 19

20 Petroleum Earnings Highlights (Before Taxes) 2 1 ($ in millions) 8.3% Petroleum s gasoline sales grew moderately in the quarter mainly due to new site openings and the re-branding of five competitor sites. Convenience store sales increased 9.2%, offset by 1.4% decrease in car wash sales due to extremely mild winter weather. Q15 Adjustments $ (.1) $ (.1) Pre-tax earnings increased 8.3% as a result of improved margins and higher non-gasoline sales, partially offset by planned higher operating costs associated with previous network expansion. Adjusted $ 1.7 $ 1.8 Earnings 2

21 Canadian Tire Corporation, Limited Mike Lambert President Mark s Work Wearhouse

22 Mark s Performance Highlights 2 ($ in millions) Retail Sales 11.4% 3 Same Store Sales (percentage growth) Q15 Q15 2 ($ in millions) EBITDA (1) 58.3% Q15 (1) Refer to earlier note on EBITDA as a non-gaap measure. 22

23 Mark s Earnings Highlights (Before Taxes) ($ in millions) 98.8% 8.4 Sales growth in all regions of the country and in major product categories contributed to Mark s retail sales increase of 11.4% for the quarter. The highest percentage growth occurred in women s sweaters, women s accessories and in men s dress pants % increase in pre-tax earnings attributable to same store sales increase of 1.% and an improved gross margin rate due primarily to ongoing global sourcing initiatives. 1 Q15 23

24 Canadian Tire Corporation, Limited Marco Marrone President Canadian Tire Financial Services

25 Financial Services Performance Highlights ($ in billions) % +2.5% Gross Ending Receivables 12 6 Operating Expenses (1) (as a % of gross average receivables) (percent) Q1 24 Q1 25 Q1 26 Net Write-Off Rate (1) (as a % of gross average receivables) (percent) Q1 24 Q1 25 Q1 26 Return on Managed Receivables (1) (as a % of gross average receivables, excl. gain/loss on securitization) (percent) Q1 24 Q1 25 Q1 26 Q1 24 Q1 25 Q1 26 (1) On a rolling 12 month basis. 25

26 Financial Services Performance Highlights Financial Services Earnings Before Taxes % ($ in millions) 25.8 Q Loss on securitization $(1.7) $(12.7) Loss on disposals of $(.1) $(.1) property and equipment Earnings before loss on $27.6 $42.2 securitization and disposals of property & equipment % Total managed portfolio of loans receivable grew 15.4% to $3.3 billion. Higher balances and an increase in the number of accounts with a balance contributed to the growth. Operating expense ratio declined to 8.27% in the past 12 months reflecting strong expense control and improved productivity. Net write-off rate of 5.98% for the past 12 months was slightly higher than prior period but within our target range. Earnings before loss on securitization and disposals of property and equipment increased by 52.5% for the first quarter. 26

27 Summary While the first quarter historically accounts for the smallest earnings contribution as part of our full-year results, our performance gives us confidence as we continue into 26. On track to meet our long-term Strategic Plan financial aspirations. Maintaining our 26 investment plan with the acceleration of proven strategies and new initiatives designed to test new products and services. We continue to expect 26 earnings per share in the range of $4.2 to $4.35, excluding non-operating items. 27

28 Questions & Answers 28