Canadian Tire Corporation Reports Strong Fourth Quarter and Full Year Results

  • Fourth quarter same store sales:
    • Canadian Tire up 8.1%
    • Mark's up 10.6%
    • FGL Sports up 5.1% (up 4.9% at Sport Chek)
  • Financial Services GAAR growth up 4.2%
  • Fourth quarter diluted earnings per share (EPS) was $3.46, up 15.1%
  • 2016 annual revenue of $12.7 billion, up 3.3%, or up 4.8% excluding Petroleum
  • Full year diluted EPS of $9.22, up 7.1%

TORONTO, Feb. 16, 2017 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.a) today released fourth quarter and full year results for the period ended December 31, 2016.

"I am very pleased with our results as they demonstrate the strength of our company and our unique ability to provide our customers with the products for life in Canada.  That strength, coupled with our expertise, and the power of our brand provides the foundation for our future growth," said Stephen Wetmore, President and CEO, Canadian Tire Corporation.

CONSOLIDATED OVERVIEW

FOURTH QUARTER

  • Consolidated revenue increased $260.8 million, or 7.7%, which includes a $25.1 million increase in Petroleum revenue resulting from higher per litre gas prices. Excluding Petroleum, consolidated revenue increased 7.9%.
  • Diluted EPS was $3.46 in the quarter, an increase of $0.45 per share, or 15.1%, compared to the prior year.

FULL YEAR

  • Consolidated revenue was up 4.8% for the full year, excluding Petroleum. Including Petroleum, consolidated revenue for the full year increased 3.3% or $401.4 million.
  • Consolidated retail sales for 2016 were up 5.9% excluding Petroleum.
  • Diluted EPS for the year increased 7.1% to $9.22 over the prior year, which included a $0.33 per share gain from the sale of surplus property.

RETAIL SEGMENT OVERVIEW

FOURTH QUARTER

  • Retail segment income before income taxes was up 6.3%, or $15.7 million, to $265.9 million, in the fourth quarter of 2016 compared to 2015.
  • Canadian Tire Retail's fourth quarter retail sales increased 9.6%. Same store sales were up 8.1% over 2015.
  • Retail and same store sales at FGL Sports were up 6.4% and 5.1% respectively. Same store sales at Sport Chek were up 4.9%.
  • Retail and same store sales at Mark's increased 10.8% and 10.6% respectively.

FULL YEAR

  • Retail segment earnings before income taxes increased 2.8%, or $16.9 million for the full year compared to 2015.
  • For the full year, Canadian Tire Retail sales were up 5.6% over 2015 results and same store sales increased 4.2%.
  • FGL Sports' 2016 retail sales were up 6.9% and same store sales increased 6.0%. Sport Chek banner same store sales increased 7.6%.
  • Full year retail sales at Mark's were up 6.0% and same store sales increased 6.1% over 2015.

CT REIT OVERVIEW

  • As disclosed in the Q4 2016 CT REIT earnings release on February 13, 2017, CT REIT completed 16 acquisitions, three developments and 10 intensifications during 2016 at a total cost of $598 million.

FINANCIAL SERVICES OVERVIEW

  • Income before income taxes for the quarter was up 6.8% or $5.5 million and decreased 2.4% for the full year over 2015.
  • Financial Services posted fourth quarter and full year gross average credit card receivables (GAAR) growth of 4.2% and 1.5% respectively reflecting the benefit from investments made during the year to stimulate new customer accounts and to drive GAAR growth.

CAPITAL ALLOCATION

CAPITAL EXPENDITURES

Total operating capital expenditures were $455.8 million for the year, down from $529.0 million in the prior year. Total capital expenditures for distribution capacity were $122.3 million, in line with the stated range of $100 million to $125 million

QUARTERLY DIVIDEND

On February 16, 2017, the Company declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $0.65 per share payable on June 1, 2017 to shareholders of record as of April 30, 2017.  The dividend is considered an "eligible dividend" for tax purposes.

SHARE REPURCHASE

During 2016, the Company completed its previously stated intention to purchase $550 million of its outstanding Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of 2016. 

In addition, the Company has also purchased a further $67.2 million of Class A Non-Voting Shares to date in partial fulfilment of its intention to repurchase a further $550 million of its Class A Non-Voting Shares, in excess of the amount required for anti-dilutive purposes, by the end of 2017, that was announced by the Company on November 10, 2016 (the "2017 Share Purchase Intention"). 

The purchase of the $67.2 million of Class A Non-Voting Shares referred to above, was completed pursuant to the Company's normal course issuer bid which began on March 2, 2016 and expires on March 1, 2017 (the "2016 NCIB").

NORMAL COURSE ISSUER BID

The Company announced its intention to make a normal course issuer bid (the "2017 NCIB") to purchase from March 2, 2017 to March 1, 2018 up to 6.0 million Class A Non-Voting Shares, which represents approximately 9.4% of the 63.9 million approximate public float of Class A Non-Voting Shares issued and outstanding as at February 14, 2017.  There were 66,864,281 Class A Non-Voting Shares issued and outstanding as at February 14, 2017.

The Company intends to purchase Class A Non-Voting Shares under the 2017 NCIB for two purposes: (i) to offset the dilutive effect of the issuance of Class A Non-Voting Shares pursuant to its stock option and dividend reinvestment plans, consistent with the Company's policy; and (ii) to purchase the balance of Class A Non-Voting Shares required to fulfill the 2017 Share Purchase Intention as part of its capital management plan.

Other than pursuant to private agreements under an issuer bid exemption order issued by a securities regulatory authority or such other means as permitted by the TSX or a securities regulatory authority in accordance with the rules of the TSX, purchases of Class A Non-Voting Shares pursuant to the 2017 NCIB will be made by means of open market transactions through the facilities of the TSX and/or alternative Canadian trading systems, if eligible, at the market price of the Class A Non-Voting Shares at the time of purchase or as otherwise permitted under the rules of the TSX and applicable securities laws.  For open market transactions, the Company will be subject to a daily purchase limit of 41,362 Class A Non-Voting Shares, which represents 25% of 165,450, the average daily trading volume of the Class A Non-Voting Shares on the TSX, net of purchases made by the Company through the TSX, for the six months ended January 31, 2017.  The Class A Non-Voting Shares purchased by the Company pursuant to the 2017 NCIB will be restored to the status of authorized but unissued shares.

The Company also announced that it will enter into an automatic share purchase plan (the "ASPP") with its designated broker to facilitate purchases of Class A Non-Voting Shares under the 2017 NCIB at times when the Company would not ordinarily be permitted to make such purchases due to its internal trading black-out periods or applicable regulatory restrictions. Pursuant to the ASPP, before entering into a black-out period, the Company may, but is not required to, instruct its designated broker to make purchases of Class A Non-Voting Shares under the 2017 NCIB during the ensuing black-out period.  Any such instructions will be subject to specified limits, including price, volume and frequency, as determined by the Company. Within these specified limits, the designated broker has discretion with respect to the purchase of the Class A Non-Voting Shares under the 2017 NCIB during the black-out period in accordance with the rules of the TSX.

The ASPP will commence on March 2, 2017 and terminate on the earliest of the date on which: (a) the purchase limit under the 2017 NCIB has been reached; (b) the 2017 NCIB expires; and (c) the Company terminates the ASPP in accordance with its terms. The ASPP constitutes an "automatic securities purchase plan" under applicable Canadian securities laws.

The Company's proposed 2017 NCIB and ASPP are subject to regulatory approval. 

To date, the Company has purchased a total of 3,307,756 Class A Non-Voting Shares under the Company's 2016 NCIB, at the weighted average price of $137.59.

To view a PDF version of Canadian Tire Corporation's full quarterly earnings report please see: http://files.newswire.ca/116/CTC_Q4_2016.pdf

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking statements are provided for the purposes of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of our anticipated financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Certain statements included in this press release other than statements of historical facts may constitute forward-looking information, including but not limited to, statements concerning the Company's intention to make a normal course issuer bid with respect to the purchase of its Class A Non-Voting Shares as well as statements concerning the Company's intention to enter into an automatic securities purchase plan pursuant to which the Company's designated broker may purchase Class A Non-Voting Shares under the Company's normal course issuer bid, under the heading "Normal Course Issuer Bid".

By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's assumptions, estimates, analyses, beliefs and opinions may not be correct and that the Company's expectations and plans will not be achieved. Although the Company believes that the forward-looking information in this press release is based on information, assumptions and beliefs which are current, reasonable and complete, this information is necessarily subject to a number of factors, risks and uncertainties that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information.

For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, refer to section 2.10 (Risk Factors) of our Annual Information Form for fiscal 2016 and to sections 7.2.4 (Retail segment business risks), 7.3.2 (CT REIT segment business risks), 7.4.3 (Financial Services segment business risks) and 12.0 (Enterprise risk management) and all subsections thereunder of our  Management's Discussion and Analysis for the year ended December 31, 2016, as well as the Company's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.

The forward-looking information contained herein is based on certain factors and assumptions as of the date hereof and does not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made have on the Company's business. The Company does not undertake to update any forward-looking information, whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, except as is required by applicable securities laws.

CONFERENCE CALL

Canadian Tire will conduct a conference call to discuss information included in this news release and related matters at 1:00 p.m. ET on February 16, 2017. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at http://corp.canadiantire.ca/EN/investors and will be available through replay at this website for 12 months.

ABOUT CANADIAN TIRE CORPORATION

Canadian Tire Corporation, Limited, (TSX:CTC.A) (TSX:CTC) or "CTC," is a family of businesses that includes a retail segment, a financial services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal categories. PartSource and Gas+ are key parts of the Canadian Tire network. The retail segment also includes Mark's, a leading source for casual and industrial wear, and FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere), which offers the best active wear brands. The 1,700 retail and gasoline outlets are supported and strengthened by our Financial Services division and the tens of thousands of people employed across the Company. For more information, visit Corp.CanadianTire.ca.

CANADIAN TIRE CORPORATION, LIMITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Q4 2016

 

Condensed Consolidated Balance Sheets (Unaudited)




As at (C$ in millions)

December 31, 2016

January 2, 2016




ASSETS



Cash and cash equivalents

$

829.7

$

900.6

Short-term investments

117.2

96.1

Trade and other receivables

690.8

915.0

Loans receivable

5,138.4

4,875.5

Merchandise inventories

1,710.7

1,764.5

Income taxes recoverable

42.5

42.2

Prepaid expenses and deposits

103.8

96.1

Assets classified as held for sale

4.6

2.3

Total current assets

8,637.7

8,692.3

Long-term receivables and other assets

763.7

731.2

Long-term investments

175.2

153.4

Goodwill and intangible assets

1,280.3

1,246.8

Investment property

266.4

137.8

Property and equipment

4,097.2

3,978.2

Deferred income taxes

82.3

48.1

Total assets

$

15,302.8

$

14,987.8




LIABILITIES



Bank indebtedness

$

5.9

$

Deposits

950.7

880.7

Trade and other payables

1,856.9

1,957.1

Provisions

253.2

216.1

Short-term borrowings

199.4

88.6

Loans payable

700.3

655.5

Income taxes payable

61.1

61.5

Current portion of long-term debt

653.4

24.3

Total current liabilities

4,680.9

3,883.8

Long-term provisions

45.9

45.7

Long-term debt

2,667.1

2,971.4

Long-term deposits

1,230.8

1,372.2

Deferred income taxes

104.2

111.1

Other long-term liabilities

836.6

813.9

Total liabilities

9,565.5

9,198.1




EQUITY



Share capital

648.1

671.2

Contributed surplus

2.9

2.9

Accumulated other comprehensive income

36.7

148.1

Retained earnings

4,250.9

4,172.0

Equity attributable to shareholders of Canadian Tire Corporation

4,938.6

4,994.2

Non-controlling interests

798.7

795.5

Total equity

5,737.3

5,789.7

Total liabilities and equity

$

15,302.8

$

14,987.8

 

 

Condensed Consolidated Statements of Income (Unaudited)




For the

13 weeks ended

52 weeks ended

(C$ in millions, except per share amounts)

December 31,
2016

January 2, 2016

December 31,
2016

January 2, 2016






Revenue

$

3,641.0

$

3,380.2

$

12,681.0

$

12,279.6

Cost of producing revenue

2,344.3

2,202.6

8,288.5

8,144.3






Gross margin

1,296.7

1,177.6

4,392.5

4,135.3






Other expense (income)

2.4

(3.9)

(4.3)

(54.9)

Selling, general and administrative expenses

910.8

823.8

3,291.9

3,096.1

Net finance costs

25.4

22.3

93.9

92.8






Income before income taxes

358.1

335.4

1,011.0

1,001.3






Income taxes

93.0

93.9

263.5

265.4

Net income

$

265.1

$

241.5

$

747.5

$

735.9

Net income attributable to:






Shareholders of Canadian Tire Corporation

$

246.8

$

225.2

$

669.1

$

659.4


Non-controlling interests

18.3

16.3

78.4

76.5


$

265.1

$

241.5

$

747.5

$

735.9

Basic EPS

$

3.47

$

3.02

$

9.25

$

8.66

Diluted EPS

$

3.46

$

3.01

$

9.22

$

8.61

Weighted average number of Common and Class A Non-Voting Shares outstanding:






Basic

71,101,887

74,638,445

72,360,303

76,151,321


Diluted

71,249,119

74,939,608

72,555,732

76,581,602

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)




For the

13 weeks ended

52 weeks ended

(C$ in millions)

December 31,
2016

January 2, 2016

December 31,
2016

January 2, 2016






Net income

$

265.1

$

241.5

$

747.5

$

735.9






Other comprehensive income (loss), net of taxes










Items that may be reclassified subsequently to net income:





Cash flow hedges and available-for-sale financial assets:






Gains (losses)

71.7

85.9

(40.5)

275.1


Reclassification of gains to non-financial assets

(9.8)

(48.7)

(67.9)

(207.4)


Reclassification of gains to income

(0.4)

(0.2)

(1.7)

(3.0)

Item that will not be reclassified subsequently to net income:






Actuarial (losses) gains

(3.0)

0.8

(3.0)

0.8

Other comprehensive income (loss)

58.5

37.8

(113.1)

65.5






Other comprehensive income (loss) attributable to:






Shareholders of Canadian Tire Corporation

$

52.3

$

39.1

$

(114.3)

$

68.0


Non-controlling interests

6.2

(1.3)

1.2

(2.5)


$

58.5

$

37.8

$

(113.1)

$

65.5

Comprehensive income

$

323.6

$

279.3

$

634.4

$

801.4






Comprehensive income attributable to:






Shareholders of Canadian Tire Corporation

$

299.1

$

264.3

$

554.8

$

727.4


Non-controlling interests

24.5

15.0

79.6

74.0


$

323.6

$

279.3

$

634.4

$

801.4

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)




For the

13 weeks ended

52 weeks ended

(C$ in millions)

December 31,
2016

January 2, 2016

December 31,
2016

January 2, 2016






Cash generated from (used for):










Operating activities





Net income

$

265.1

$

241.5

$

747.5

$

735.9

Adjustments for:






Depreciation of property and equipment and investment property

89.9

86.2

330.8

312.8


Income tax expense

93.0

93.9

263.5

265.4


Net finance costs

25.4

22.3

93.9

92.8


Amortization of intangible assets

33.2

30.1

126.1

111.9


Changes in fair value of derivative instruments

(7.7)

(17.9)

(15.8)

6.9


(Gain) on disposal of property and equipment, investment property, assets held for sale, intangible assets, and lease terminations

(2.6)

(4.5)

(14.9)

(43.9)


Interest paid

(31.3)

(24.1)

(114.0)

(101.4)


Interest received

0.8

2.0

6.5

8.4


Income taxes paid

(34.2)

(50.4)

(262.8)

(284.0)


Other

3.8

4.7

5.6

14.6


Total adjustments, except as noted below

435.4

383.8

1,166.4

1,119.4


Change in operating working capital and other

598.0

406.6

126.1

(115.3)


Change in loans receivable

(259.3)

(169.4)

(306.1)

(25.2)

Cash generated from operating activities

774.1

621.0

986.4

978.9






Investing activities






Additions to property and equipment and investment property

(147.6)

(164.6)

(617.3)

(515.9)


Additions to intangible assets

(36.6)

(35.3)

(163.5)

(94.7)


Total additions

(184.2)

(199.9)

(780.8)

(610.6)


Acquisition of short-term investments

(19.5)

(62.4)

(422.3)

(177.4)


Proceeds from the maturity and disposition of short-term investments

79.1

103.6

441.4

426.6


Acquisition of long-term investments

(20.0)

(14.9)

(61.4)

(35.0)


Proceeds on disposition of property and equipment, investment property, and assets held for sale

14.8

42.7

32.8

101.5


Other

(0.5)

25.6

7.5

(4.1)

Cash (used for) investing activities

(130.3)

(105.3)

(782.8)

(299.0)






Financing activities






Dividends paid

(38.8)

(37.0)

(157.5)

(152.2)


Distributions paid to non-controlling interests

(20.7)

(16.9)

(76.4)

(53.8)


Total dividends and distributions paid

(59.5)

(53.9)

(233.9)

(206.0)


Net issuance (repayment) of short-term borrowings

93.1

(34.1)

110.7

(111.2)


Issuance of loans payable

53.1

68.7

288.3

270.1


Repayment of loans payable

(52.5)

(47.3)

(243.5)

(219.0)


Issuance of long-term debt

1.3

350.0

856.1


Repayment of long-term debt and finance lease liabilities

(5.6)

(270.6)

(24.5)

(588.5)


Payment of transaction costs related to long-term debt

(0.1)

(0.5)

(3.2)

(6.5)


Repurchase of share capital

(116.6)

(116.7)

(449.4)

(434.6)


Change in deposits

6.4

30.2

(74.9)

12.5

Cash (used for) financing activities

(81.7)

(422.9)

(280.4)

(427.1)

Cash generated (used) in the period

562.1

92.8

(76.8)

252.8

Cash and cash equivalents, net of bank indebtedness, beginning of period

261.7

807.8

900.6

647.8

Cash and cash equivalents, net of bank indebtedness, end of period

$

823.8

$

900.6

$

823.8

$

900.6

 

SOURCE CANADIAN TIRE CORPORATION, LIMITED

For further information: Media: Jane Shaw, 416-480-8581, jane.shaw@cantire.com; Investors: Lisa Greatrix, 416-480-8725, lisa.greatrix@cantire.com

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