Canadian Tire Releases First Quarter Earnings

    
             Company Results Demonstrate Positive Trend for 2010

                     Adjusted pre-tax earnings up 13.0%
                     Canadian Tire Retail sales up 2.1%
                         Mark's retail sales up 3.8%
             Financial Services gross operating revenues up 3.8%
    

TORONTO, May 13 /CNW/ - Canadian Tire Corporation, Limited (CTC, CTC.a) today released positive first quarter results reflecting strong retail sales growth and an increase in earnings over Q1 2009. Adjusted earnings before taxes increased 13.0% from the prior year as a result of the strong performance in Financial Services, which was up 41.8% from the first quarter of 2009. Consolidated retail sales were up 5.7% compared to the same period last year principally due to an increase of 2.1% at Canadian Tire Retail, sales growth of 3.8% at Mark's and 19.5% in Petroleum.

"Our management team is committed to driving growth in the core Canadian Tire Retail business beyond historical norms," said Stephen Wetmore, President and CEO, Canadian Tire Corporation. "While I'm pleased with the positive first quarter results and momentum heading into Q2, we're still in the very early stages of the kind of growth we expect from the business."

Although consolidated adjusted earnings before income taxes were up in the quarter, basic earnings per share were flat in Q1 2010. In the first quarter of 2009, the Company benefited from a favourable tax adjustment of $4.6 million related to the taxation of capital gains realized from the disposition of MasterCard shares in 2006 and 2007.

    
                                    -----------------------------------------
                                         2010            2009
    Consolidated Highlights(1)       First Quarter   First Quarter    Change
    -------------------------------------------------------------------------
    CTC retail sales                 $1.89 billion   $1.79 billion      5.7%
    Gross operating revenue          $1.83 billion   $1.76 billion      4.1%
    Adjusted earnings before income
     taxes (excludes non-operating
     gains and losses)(2)            $74.7 million   $66.1 million     13.0%
    Net earnings                     $49.4 million   $49.7 million    (0.6)%
    Adjusted net earnings (excludes
     non-operating gains and losses) $51.5 million   $49.6 million      4.0%
    Basic earnings per share                 $0.61           $0.61         -
    Adjusted basic earnings per
     share (excludes non-operating
     gains and losses)(2)                    $0.63           $0.61      4.0%

    1.  All dollar figures in this table are rounded.
    2.  Non-GAAP measure. Please refer to section 15.0 of Management's
        Discussion and Analysis.
    

Canadian Tire Retail

Canadian Tire Retail total sales increased 2.1% and same store sales were up 1.7% compared to the same period last year. A decrease in gross operating revenue of 0.7% reflects a decrease in net shipments of 0.6% for the quarter in comparison to the first quarter of 2009.

While Canadian Tire Retail had a very slow start to the quarter due to soft sales in weather-related categories and in automotive, stronger sales in March positively impacted total first quarter results. For example, Canadian Tire's backyard businesses performed well late in the quarter with sales up significantly over last year. Positive customer response to our spring offerings has continued into the second quarter.

Adjusted earnings before taxes decreased $4.5 million due primarily to higher corporate charges related to the Company's stock-based compensation plans and increased promotional expenses during the Olympics.

Canadian Tire Retail is on track to open approximately 60 Smart store retrofits, three new Smart stores, five replaced or expanded stores and three new Small Market stores in 2010. The Automotive Initiative, a strategic priority that will improve technology and supply chain capability in Canadian Tire's core automotive business, progressed this quarter with a pilot in Dartmouth, Nova Scotia.

Petroleum plays a strategic role in increasing customer loyalty and driving traffic and transactions for Canadian Tire Retail and Financial Services. While sales volume was down slightly versus the same quarter in 2009, gross operating revenue increased 20.2% due to an increase in the cost per litre at the pump. Adjusted earnings before income taxes decreased $500,000 from the same period last year mostly due to gasoline margin pressure. Petroleum opened one new gas bar in the first quarter and, in April 2010, announced that it will expand its site network to include 23 stations along the 401 and 400 highways in Ontario. Seven sites will open by the fall of 2010 with 20 of 23 sites expected to open within the next three years.

Mark's

Through its continued network expansion and product innovations, Mark's is well positioned to continue to increase its market share as the Canadian apparel market recovers from the current recession.

Mark's first quarter total retail sales were up 3.8% to $174.9 million and same store sales were up 1.5% compared to Q1 2009, which pushed its gross operating revenue up by 4.5%. Gross operating revenue in 2010, however, includes ancillary franchise royalty fees, embroidery and alteration revenue net of sales return provision, which were reflected as an offset to operating costs in 2009. Excluding this factor, gross operating revenue would have increased by 2.4% and retail sales would have increased by 2.6%.

Adjusted pre-tax earnings were up 5.9%. Mark's improved sales results were driven by a 4.1% sales increase in industrial wear as resource-based customers returned to work and a 2.9% sales increase of ladies wear as customers responded well to the spring line of merchandise. Men's wear sales were down 2.1%, with outerwear and sweaters seeing the largest dollar decreases.

Financial Services

Financial Services had a strong first quarter with gross operating revenues of $225.4 million in Q1 2010, a 3.8% increase over the $217.3 recorded in the prior year. Adjusted pre-tax earnings for the quarter were $45.5 million, 41.8% higher than the first quarter of 2009, reflecting higher credit card interest and lower operating expenses due to tight expense control. Aging of the portfolio stabilized, negating the need to grow allowance for future losses during the quarter versus a year ago.

Financial Services' ending credit card portfolio grew 6.4%. The net write-off rate for the total credit card managed portfolio on a rolling 12 month basis was 8.01%, compared to 6.68% in the comparable 2009 period and 7.83% in the previous quarter.

Operating expenses are expected to increase throughout the fiscal year due to sales tax changes, migration to chip and PIN card technology and the implementation of processes to ensure compliance with new government regulations.

QUARTERLY DIVIDEND

Canadian Tire Corporation has declared a quarterly dividend of $0.21 per share on each Common and Class A Non-Voting share. The dividend is payable September 1, 2010 to Common and Class A shareholders of record as of July 31, 2010. The dividend is considered an "eligible dividend" for tax purposes.

    
    FINANCIAL CHARTS

    CANADIAN TIRE RETAIL

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales(1)                      $ 1,294.9    $ 1,267.9         2.1%
    Same store sales(2) (year-over-year
     % change)                                1.7%         2.5%
    Gross operating revenue              $ 1,092.2    $ 1,099.3       (0.7)%
    Net shipments (year-over-year
     % change)                              (0.6)%         2.0%
    -------------------------------------------------------------------------
    Earnings before income taxes         $    26.9    $    32.8      (18.0)%
    Less adjustment for:
      Loss on disposals of property and
       equipment(3)                           (1.5)        (0.4)
      Former CEO retirement obligation         0.2          0.5
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(4)                            $    28.2    $    32.7      (14.0)%
    -------------------------------------------------------------------------
    (1) Includes sales from Canadian Tire stores, PartSource stores, and the
        labour portion of CTR's auto service sales.
    (2) Same store sales include sales from all stores that have been open
        for more than 53 weeks.
    (3) Includes fair market value adjustments and impairments on property
        and equipment.
    (4) Non-GAAP measure. Please refer to section 15.0 in Management's
        Discussion and Analysis.

    PETROLEUM

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Sales volume (millions of litres)        406.4        408.8       (0.6)%
    Retail sales                         $   422.2    $   353.4        19.5%
    Gross operating revenue              $   386.9    $   321.9        20.2%
    -------------------------------------------------------------------------
    Earnings before income taxes         $     5.4    $     6.0      (10.7)%
    Less adjustment for:
      Loss on disposals of property and
       equipment(1)                           (0.1)           -
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(2)                            $     5.5    $     6.0       (8.7)%
    -------------------------------------------------------------------------
    (1) Includes asset impairment losses.
    (2) Non-GAAP measure. Please refer to section 15.0 in Management's
        Discussion and Analysis.

    MARK'S

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales(1)                      $   174.9    $   168.5         3.8%
    Same store sales(2) (year-over-year
     % change)                                1.5%       (4.1)%
    Gross operating revenue(3)           $   153.8    $   147.1         4.5%
    -------------------------------------------------------------------------
    Loss before income taxes             $    (4.7)   $    (4.9)        4.9%
    Less adjustment for:
      Loss on disposals of property
       and equipment                          (0.2)        (0.2)
    -------------------------------------------------------------------------
    Adjusted loss before income
     taxes(4)                            $    (4.5)   $    (4.7)        5.9%
    -------------------------------------------------------------------------
    (1) Includes retail sales from corporate and franchise stores.
    (2) Mark's same store sales exclude new stores, stores not open for the
        full period in each year and store closures.
    (3) Gross operating revenue includes retail sales at corporate stores
        only
    (4) Non-GAAP measure. Please refer to section 15.0 in Management's
        Discussion and Analysis.

    FINANCIAL SERVICES

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Total managed credit card portfolio
     (end of period)                     $ 3,962.6    $ 3,725.1         6.4%
    Gross operating revenue              $   225.4    $   217.3         3.8%
    -------------------------------------------------------------------------
    Earnings before income taxes         $    44.1    $    32.5        35.6%
    Less adjustment for:
      Loss on disposals of property and
       equipment                                 -         (0.1)
      Net effect of securitization
       activities(1)                          (1.4)         0.5
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(2)                            $    45.5    $    32.1        41.8%
    -------------------------------------------------------------------------
    (1) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability and gain/loss on reinvestment.
    (2) Non-GAAP measure. Please refer to section 15.0 in Management's
        Discussion and Analysis.
    

FORWARD-LOOKING STATEMENTS

This document contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. 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 financial position, results of operation and operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.

All statements other than statements of historical facts included in this document may constitute forward-looking information, including but not limited to, statements concerning management's expectations relating to possible or assumed future prospects and results, our strategic goals and priorities, our actions and the results of those actions and the economic and business outlook for us. Often but not always, forward-looking information can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made.

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 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 document is based on information and assumptions which are current, reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information for a variety of reasons. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - include (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of Canadian Tire to attract and retain quality employees, Dealers, Canadian Tire Petroleum agents and PartSource and Mark's Work Wearhouse store operators and franchisees, as well as our financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at our stores or acquire our financial products and services; (d) our margins and sales and those of our competitors; (e) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business disruption, our relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by Canadian Tire and the cost of store network expansion and retrofits and (f) our capital structure, funding strategy, cost management programs and share price. We caution that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect our results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on 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, please refer to the "Risk Factors" section of our Annual Information Form for fiscal 2009 and our 2009 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.

Statements that include forward-looking information do 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. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring after such statements are made.

The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. 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, unless required by applicable securities laws.

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 4:30 p.m. EST on May 13, 2010. 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

Canadian Tire Corporation, Limited (TSX: CTC.a, CTC), is one of Canada's most shopped general retailers with 480 Canadian Tire stores across the country. Our core retail and automotive operation is strengthened by PartSource, an automotive parts speciality chain; Canadian Tire Petroleum, one of the country's largest independent retailers of gasoline; Mark's "Clothes That Work," a leading retailer of men's, women's and work apparel; and, Canadian Tire Financial Services, which has issued over five million Canadian Tire MasterCard credit cards. More than 58,000 Canadians work across Canadian Tire's organization from coast-to-coast in the enterprise's retail, financial services and petroleum businesses.

    
    Management's discussion and analysis (MD&A)
    -------------------------------------------------------------------------
    

Introduction

This Management's Discussion and Analysis (MD&A) provides management's perspective on our Company, our performance and our strategy for the future.

Definitions

In this document, the terms "we", "us", "our", "Company" and "Canadian Tire" refer to Canadian Tire Corporation, Limited and its business units and subsidiaries. For commonly used terminology (such as retail sales and same store sales), see section 5.3 (Business segment performance) and the Glossary of Terms (pages 105 to 107) in our 2009 Financial Report, which can be found online on the SEDAR website at www.sedar.com and on our Canadian Tire website in the Investor Relations section at corp.canadiantire.ca/en/investors.

Review and approval by the Board of Directors

The Board of Directors, on the recommendation of its Audit Committee, approved the contents of this MD&A on May 13, 2010.

Quarterly and annual comparisons in this MD&A

Unless otherwise indicated, all comparisons of results for the first quarter (13 weeks ended April 3, 2010) are against results for the first quarter of 2009 (13 weeks ended April 4, 2009).

Accounting estimates and assumptions

The preparation of consolidated financial statements that conform with Canadian generally accepted accounting principles (GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. See section 12.0 in this MD&A for further information.

Forward-looking statements

This MD&A 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. See section 19.0 in this MD&A for additional important information and a caution on the use of forward-looking information.

We 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.

1.0 Our Company

1.1 Overview of the business

Canadian Tire has been in business for 88 years, offering everyday products and services to Canadians through its growing network of interrelated businesses. Canadian Tire, our Dealers, store operators, franchisees and Petroleum agents operate more than 1,200 general merchandise and apparel retail stores and gas bars. Canadian Tire Financial Services Limited and Canadian Tire Bank also offer a variety of financial services to Canadians, including the Canadian Tire Options(R) MasterCard(R), personal loans, lines of credit, insurance and warranty products, guaranteed investment certificates (GICs) offered through third-party brokers and directly to the public, and high-interest and tax-free savings accounts.

Canadian Tire's four main businesses are described below.

Canadian Tire Retail (CTR) is one of Canada's most shopped general merchandise retailers, with a network of 480 Canadian Tire stores that are operated by Dealers, who are independent business owners. Dealers buy merchandise from the Company and sell it to consumers in Canadian Tire stores. CTR includes PartSource. PartSource is a chain of 87 specialty automotive hard parts stores that cater to serious "do-it-yourselfers" and professional installers of automotive parts. The PartSource network consists of 26 franchise stores and 61 corporate stores.

Mark's Work Wearhouse (Mark's) is one of Canada's leading clothing and footwear retailers, operating 382 stores nationwide, including 339 corporate and 43 franchise stores, that offer men's wear, women's wear and industrial wear. Mark's operates under the banners "Mark's", "Mark's Work Wearhouse" and in Quebec, "L'Équipeur(R)". Mark's also conducts a business-to-business operation under the name "Imagewear, a Division of Mark's Work Wearhouse(TM)".

Canadian Tire Petroleum (Petroleum) is one of Canada's largest independent retailers of gasoline with a network of 273 gas bars, including 268 convenience stores and kiosks, 73 car washes, 11 Pit Stops and 90 propane stations. The majority of Petroleum's sites are co-located with Canadian Tire stores as a strategy to attract customers to Canadian Tire stores. All of Petroleum's sites are operated by agents.

Canadian Tire Financial Services Limited (Financial Services) markets a range of Canadian Tire-branded credit cards, including the Canadian Tire Options(R) MasterCard(R) and Gas Advantage(R) MasterCard(R). Financial Services also markets personal loans, lines of credit, insurance and warranty products and an emergency roadside assistance service called Canadian Tire Roadside Assistance(R). Canadian Tire Bank (CTB), a wholly-owned subsidiary of Financial Services, is a federally regulated bank that manages and finances Canadian Tire's consumer MasterCard, Visa and retail credit card portfolios, as well as the personal loan and line of credit portfolios, and is the issuer of GICs offered through third-party brokers. CTB also offers high-interest and tax-free savings accounts and retail GICs in all provinces except Quebec. CTB is a member of Canada Deposit Insurance Corporation (CDIC) and eligible deposit products issued by CTB qualify for CDIC insurance coverage.

As previously announced and highlighted at our recent Investor Conference and Media day on April 7, 2010, the Company has renewed its focus on the core automotive business and is in the process of aligning the organization and reporting to support this focus. The Automotive business comprises PartSource, Petroleum and the automotive segment of CTR and these businesses have been aligned under one corporate officer to oversee a coordinated strategy for the Company's automotive business. We will begin to report progress against the key strategic objectives related to the integrated automotive business later this year.

    
    1.2 Store network at a glance

                                                       April 3,      April 4,
    Number of stores and retail square footage             2010         2009
    -------------------------------------------------------------------------
    Consolidated store count
      CTR retail stores(1)                                  480          476
      PartSource stores                                      87           87
      Mark's retail stores(1)                               382          374
      Petroleum gas bar locations                           273          274
    -------------------------------------------------------------------------
    Total stores                                          1,222        1,211
    Consolidated retail square footage (in millions)
      CTR                                                  19.0         18.8
      PartSource                                            0.3          0.3
      Mark's                                                3.3          3.2
    -------------------------------------------------------------------------
    Total retail square footage(2) (in millions)           22.6         22.3
    -------------------------------------------------------------------------
    (1) Store count numbers reflect individual selling locations; therefore,
        both CTR and Mark's totals include stores that are co-located.
    (2) The average retail square footage for Petroleum's convenience stores
        was 458 square feet per store in Q1 2010.  It has not been included
        in the total above.

    1.3 Business unit performance at a glance

    (year-over-year percentage change)                  Q1 2010      Q1 2009
    -------------------------------------------------------------------------
    CTR retail sales(1)                                    2.1%         4.0%
    CTR gross operating revenue                          (0.7)%         2.6%
    CTR net shipments                                    (0.6)%         2.0%
    Mark's retail sales(2)                                 3.8%       (2.3)%
    Petroleum retail sales                                19.5%      (21.3)%
    Petroleum gasoline volume (litres)                   (0.6)%       (1.2)%
    Financial Services' credit card sales                  8.8%         4.5%
    Financial Services' gross average credit card
     receivables                                           5.9%         3.7%
    -------------------------------------------------------------------------
    (1) Includes sales from Canadian Tire stores, PartSource stores and the
        labour portion of CTR's auto service sales.
    (2) Includes retail sales from Mark's corporate and franchise stores.
    

2.0 Our Strategic Plan

2.1 Strategic Plan

The Strategic Plan outlines our strategy to build the Canadian Tire brand through a renewed focus on growth and productivity throughout the five-year plan period. Details of our Strategic Plan were announced at our investor conference and media day on April 7, 2010 and have been posted online on our website at:

http://corp.canadiantire.ca/EN/Investors/EventsPresentations/Documents/Canadian%20Tire%202010%20Investor%20Conference%20Presentation.pdf

Specific objectives related to the Strategic Plan are included in section 3.3 of this MD&A, section 4.0 of the MD&A contained in the 2009 Financial Report and on page 17 of the 2009 Annual Report.

2.2 Financial aspirations

The Strategic Plan includes financial aspirations for the Company for the five-year period ending in December 2014. These aspirations are not to be construed as guidance or forecasts for any individual year within the five-year period, but rather as long-term, rolling targets that we aspire to achieve over the life of the Strategic Plan, based on the successful execution of our various initiatives.

    
    Financial aspirations                                               Plan
    -------------------------------------------------------------------------
    CTR Retail sales (POS)                                          3% to 5%
    Consolidated adjusted EPS(1)                                   8% to 10%
    Retail return on invested capital (ROIC)                            10%+
    Financial Services return on receivables (ROR)              4.5% to 5.0%
    Total Return to Shareholders (TRS), including dividends       10% to 12%
    -------------------------------------------------------------------------
    (1) Excludes non-operating gains and losses on capital and intangible
        assets, the net effect of securitization activities and other unusual
        and/or non-recurring items not central to the Company's business.
    

We will report on our progress against these financial aspirations on an annual basis in our year-end Financial Report.

3.0 Our performance in 2010

    
    3.1 Consolidated financial results

    ($ in millions except per share
     amounts)                              Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales(1)                      $ 1,892.0    $ 1,789.8         5.7%
    Gross operating revenue                1,830.1      1,758.1         4.1%
    EBITDA(2)                                163.4        156.1         4.6%
    EBITDA, excluding Financial
     Services(2),(3)                         102.7        109.4       (6.1)%
    Earnings before income taxes              71.7         66.4         8.0%
    Effective tax rate                       31.0%        25.1%
    Net earnings                         $    49.4    $    49.7       (0.6)%
    Basic earnings per share             $    0.61    $    0.61           -%
    Adjusted basic earnings per share(2) $    0.63    $    0.61         4.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Represents retail sales at CTR (which includes PartSource), Mark's
        corporate and franchise stores and Petroleum's sites.
    (2) See section 15.0 for non-GAAP measures.
    (3) EBITDA excluding Financial Services has been reported in this table,
        as EBITDA is not the most relevant measure for Financial Services.
    

Consolidated gross operating revenue

Consolidated gross operating revenue for the quarter increased 4.1 per cent from the prior year as a result of a 20.2 per cent increase in Petroleum's revenue due to higher pump prices compared with the first quarter of 2009. Mark's gross operating revenue increased 4.5 per cent on the strength of resurgent workwear sales. Financial Services' gross operating revenue increased 3.8 per cent, primarily due to an increase in credit card interest earned from an increase in average credit card receivables. Partially offsetting this was the modest decline in CTR gross operating revenue of 0.7 per cent due to shipments to stores lagging behind the retail sales increases that occurred later in the quarter.

Consolidated net earnings

Consolidated net earnings for the quarter were essentially flat to the prior year, primarily as a result of the higher effective tax rate for the first quarter of 2010. In the first quarter of 2009, the Company benefited from a favourable tax adjustment of $4.6 million related to the taxation of capital gains realized from the disposition of MasterCard shares in 2006 and 2007. Consolidated earnings before taxes increased 8.0 per cent from the prior year as a result of the strong earnings performance in our Financial Services business, which was up 35.6 per cent from the first quarter of 2009. The stabilization in aging of receivables, a 5.9 per cent increase in average credit card receivables balance and lower operating expenses helped to contribute to Financial Services' strong earnings growth.

Impact of non-operating items

The following table shows our adjusted consolidated earnings on a pre-tax and after-tax basis, after taking into account certain non-operating and/or non-recurring and unusual items.

    
    Adjusted consolidated earnings before and after income taxes(1)

    ($ in millions except per share
     amounts)                              Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Earnings before income taxes         $    71.7    $    66.4         8.0%
    Less pre-tax adjustment for:
      Former CEO retirement obligation(2)      0.2          0.5
      Net effect of securitization
       activities(3)                          (1.4)         0.5
      Loss on disposals of property and
       equipment                              (1.8)        (0.7)
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(1)                            $    74.7    $    66.1        13.0%
    Income taxes                              23.2         16.5
    -------------------------------------------------------------------------
    Adjusted earnings after income
     taxes(1)                            $    51.5    $    49.6         4.0%
    -------------------------------------------------------------------------
    Basic earnings per share             $    0.61    $    0.61       (0.6)%
    Adjusted basic earnings per share(1) $    0.63    $    0.61         4.0%
    -------------------------------------------------------------------------
    (1) See section 15.0 on non-GAAP measures.
    (2) The former CEO retirement obligation has been recorded in CTR. See
        section 3.3.1.3.
    (3) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability and gain/loss on reinvestment.
    

Seasonal trend analysis

The second and fourth quarters of each year are typically when we experience stronger revenues and earnings in our retail businesses because of the seasonal nature of some merchandise at CTR and Mark's and the timing of marketing programs. The following table shows our financial performance by quarter for the last two years.

    
    Consolidated quarterly results(1)

    ($ in millions except
     per share amounts)       Q1 2010      Q4 2009      Q3 2009      Q2 2009
    -------------------------------------------------------------------------
    Gross operating
     revenue                $ 1,830.1    $ 2,437.7    $ 2,165.9    $ 2,324.8
    Net earnings                 49.4         96.2         85.4        103.7
    Adjusted net earnings(3)     51.5        104.4         91.0        103.0
    Basic and diluted
     earnings per share          0.61         1.18         1.04         1.27
    Adjusted basic and
     diluted earnings per
     share(3)                    0.63         1.28         1.11         1.26
    -------------------------------------------------------------------------


    ($ in millions except
     per share amounts)       Q1 2009      Q4 2008      Q3 2008      Q2 2008
    -------------------------------------------------------------------------
    Gross operating
     revenue                $ 1,758.1    $ 2,587.8    $ 2,257.5    $ 2,450.7
    Net earnings                 49.7        101.5        109.1         97.7
    Adjusted net earnings(3)     49.6        130.1        116.0         94.7
    Basic and diluted
     earnings per share          0.61         1.24         1.34         1.20
    Adjusted basic and
     diluted earnings per
     share(3)                    0.61         1.60         1.42         1.16
    -------------------------------------------------------------------------
    (1) 2008 quarterly results have been restated for the implementation, on
        a retrospective basis, of CICA HB 3064 - Goodwill and Intangible
        Assets and the amendments to CICA HB 1000 - Financial Statement
        Concepts. See sections 17.1 and 17.2 in the 2009 Financial Report for
        additional information.
    (2) See section 15.0 on non-GAAP measures.
    

Items that affected the usual seasonal pattern noted above that are not reflected in adjusted earnings include:

    
    -   Q2 2008 was negatively impacted by a $12.0 million pre-tax book-to-
        physical inventory adjustment at Mark's;
    -   Q2 2008 was negatively impacted by a $9.7 million pre-tax expense
        related to the Options MasterCard relaunch at Financial Services;
    -   Q3 2008 was positively impacted by an $8.6 million reduction in the
        tax provision, most of which related to the impact of the sale-
        leaseback transactions entered into since 2005; and
    -   Q1 2009 was positively impacted by a $4.6 million reduction in the
        tax provision related to the retroactive change in the taxation of
        gains realized from the disposition of shares during 2006 and 2007.
    

3.2 Business unit 2010 performance overview

    
    -------------------------------------------------------------------------
    Canadian Tire Retail                 Mark's Work Wearhouse
    -------------------------------------------------------------------------
    2010 Performance highlights          2010 Performance highlights

    -   signed an agreement with         -   design phase of the store
        dunnhumby, the world's               rebranding pilot is well
        leading provider of customer         underway. The pilot covers
        data analytics to support its        three metropolitan markets
        customer-centric retailing           and is on track to launch in
        initiative and the development       September 2010; and
        of a new loyalty program.        -   development of more than half
                                             a dozen CLOTHES THAT WORK(R)
    PartSource 2010 Performance              products is in progress.
    highlights                               Launch of these products will
                                             occur in future quarters.
    -   relocated and expanded one
        store into a hub store,
        bringing the total number of
        hub stores to 11.
    -------------------------------------------------------------------------
    Canadian Tire Financial Services     Petroleum
    -------------------------------------------------------------------------
    2010 Performance highlights          2010 Performance highlights

    -   gross ending credit card         -   grew car wash sales by 30.8
        receivables grew by 6.4 per          per cent over the prior year;
        cent; and                        -   grew convenience store sales
    -   stabilization of provision           by 12.5 per cent over the
        costs.                               prior year; and
                                         -   subsequent to quarter-end,
                                             executed an agreement to build
                                             23 state-of-the-art service
                                             centres along Ontario's two
                                             busiest highways (Highway 401
                                             and Highway 400).
    -------------------------------------------------------------------------
    

The following sections outlining the Company's business segments' performance highlight the respective segment's achievements to date against its key initiatives identified in our Strategic Plan. The initiatives have been divided into growth (increase sales primarily through network growth, new stores and new products) and productivity (improve customer service metrics, service levels, cost-effectiveness and rates of return).

3.3 Business segment performance

3.3.1 Canadian Tire Retail

3.3.1.1 Q1 2010 Strategic Plan performance

The following outlines CTR's performance for the first quarter of 2010 in the context of our Strategic Plan.

    
    -------------------------------------------------------------------------
    Canadian Tire Retail Growth Initiatives
    -------------------------------------------------------------------------
    New store program

    20/20 stores have been the cornerstone of CTR's growth agenda since 2003.
    This program is now complete and CTR has developed new store concepts
    which are designed to build on the successes of the 20/20 store program
    with a greater focus on improving sales and productivity at a lower
    capital cost. Plans for 2010 include opening new Smart store retrofits
    that will have the same focus on improving sales and productivity, as
    well as providing a more exciting customer experience, and Small Market
    stores which are designed to expand our presence in smaller markets.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    We plan to rollout our new concept   First quarter
    CTR stores:
    -   open approximately 60 Smart      During the first quarter CTR:
        store retrofits;                 -   initiated 39 Smart store
    -   open four incremental new            retrofit projects;
        Smart stores;                    -   replaced one traditional store
    -   replace or expand four stores;       with a new Smart store
        and                                  incorporating a full Mark's
    -   open three incremental new           store; and
        Small Market stores.             -   opened an incremental Small
                                             Market store incorporating a
                                             full Mark's store.

                                         We have made slight modifications
                                         to our store build program. Our
                                         forecast now includes:
                                         -   opening three incremental new
                                             Smart stores; and
                                         -   replacing or expanding five
                                             stores.
    -------------------------------------------------------------------------
    Enhance customer loyalty program

    Over 50 years ago, Canadian Tire's 'Money' loyalty program was launched
    as a customer traffic-builder for Canadian Tire's gas bars. Today,
    Canadian Tire 'Money' is one of Canada's most popular loyalty programs
    for customers who shop at our stores and fill up at our gas bars when
    they pay with cash or use their Canadian Tire-branded credit cards.
    Commencing in 2009 and continuing into 2010, we began development of a
    redesigned and enhanced loyalty program to provide deeper customer
    insights.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    CTR plans to develop a redesigned    First quarter
    and enhanced loyalty program and
    customer-centric retailing approach  During the first quarter, the
    to provide deeper customer           Company signed an agreement with
    insights. This includes:             dunnhumby, the world's leading
                                         provider of customer data analytics
    -   piloting the new loyalty         to support its customer-centric
        program in 2011; and             retailing initiative and the
    -   initiating the analysis of       development of a new loyalty program
        customer shopping data.          and the expertise to leverage the
                                         customer insights that it will
                                         generate. The appropriate processes
                                         and organizational structure have
                                         been put in place to support
                                         building this new capability.
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Canadian Tire Retail Productivity Initiatives
    -------------------------------------------------------------------------
    CTR Change program

    During 2007, CTR began to implement its multi-year productivity effort
    with projects designed to overhaul and upgrade internal processes and IT
    systems. The benefits of these projects include the ability to make
    faster and better decisions and improve our agility and speed to market.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    CTR will advance productivity and    First quarter
    control initiatives in the area of
    sales and operational planning;      Progress made on the CTR Change
    and analyze and build requirements   Program includes:
    for implementation in the areas of   -   delivered improved product
    promotional planning and vendor          messaging on customer
    engagement.                              receipts and online for
                                             returns and warranty
                                             exceptions;
                                         -   designed new promotional
                                             planning processes through
                                             lean methodology to increase
                                             productivity; and
                                         -   furthered new capability
                                             design activities in the
                                             areas of Merchandise Business
                                             Planning and Vendor Engagement.
    -------------------------------------------------------------------------
    Automotive Infrastructure initiative

    The Automotive Infrastructure initiative is intended to drive growth in
    the Company's automotive businesses and improve the automotive customer
    experience at Canadian Tire and PartSource stores. The program is
    comprised of three primary components:
    -   significantly expanding Canadian Tire's automotive parts assortment
        and replacing aging assortment planning technology with a
        commercially available, best-of-breed decision rule and predictive
        modelling-based solution;
    -   upgrading CTR's automotive retail operating systems by replacing
        legacy-based "green screen" applications with Windows-based
        automotive management software, parts application and data management
        technology to drive a stronger customer experience; and
    -   creating a network of approximately 23 PartSource hub stores across
        Canada to enhance supply of auto parts at the local market level and
        training CTR front-line automotive staff on associated new processes.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Establish two to four new            First quarter
    PartSource hub stores.
                                         Progress on the Automotive
    Implement Manhattan warehouse        Infrastructure initiative includes:
    management software (WMS) in the
    Calgary auto parts distribution      Emergency Supply Processes:
    centre.                              -   one PartSource hub store
                                             established in Dartmouth NS
    Work to commence on Montreal auto        serving 13 Canadian Tire Retail
    parts distribution centre WMS.           stores.

    Design and build an updated          Assortment Deployment Processes:
    automotive parts assortment          -   the Calgary automotive warehouse
    planning (APAP) model (testing           management technology was placed
    to commence in 2011).                    in production in February, 2010;
                                             and
    Design and build the technology      -   completed planning phase for the
    and processes necessary to pilot         automotive parts assortment
    the Customer Experience Process          planning initiative (APAP).
    solution (pilot to take place in
    2011).                               Customer Experience Processes:
                                         -   CTR and our chosen vendors are
                                             developing the technology to
                                             support an improved customer
                                             experience process for do-it-
                                             yourself (DIY) and do-it-for-me
                                             (DIFM) customers; and
                                         -   solution is currently proceeding
                                             through the design/build and
                                             test phase and is on track to
                                             pilot in 2011.
    -------------------------------------------------------------------------
    

3.3.1.2 Key performance indicators

The following are key measures of CTR's sales productivity:

    
    -   total same store sales growth;
    -   average retail sales per store; and
    -   average sales per square foot of retail space

    CTR total retail and same store sales

    (year-over-year percentage change)                  Q1 2010      Q1 2009
    -------------------------------------------------------------------------

    Total retail sales(1)                                  2.1%         4.0%

    Same store sales(2)                                    1.7%         2.5%
    -------------------------------------------------------------------------
    (1) Includes sales from Canadian Tire and PartSource stores and the
        labour portion of CTR's auto service sales.
    (2) Includes sales from Canadian Tire and PartSource stores, but exclude
        sales from the labour portion of CTR's auto service sales.
    

CTR retail sales

First quarter

CTR's total retail sales increased 2.1 per cent over the same quarter in 2009, reflecting strong growth in the home and leisure categories, offset by a decline in automotive. Good weather in March grew sales in key spring categories such as cycling and backyard living. However, the lack of winter weather in January and February impacted retail sales in light automotive maintenance parts (e.g. batteries) and outdoor tools (e.g. snow blowers). Overall same store sales were up 1.7 per cent compared to the first quarter of 2009.

On a regional basis, all provincial markets were up. We experienced strongest sales in Saskatchewan, Alberta and Manitoba versus last year as these commodity-based economies have started to recover in recent months.

PartSource experienced a decline in sales year-over-year, primarily driven by weather-related factors as the warm winter negatively impacted PartSource's seasonal sales.

CTR store network definitions

Our store network has evolved as we have introduced new store formats into our store categories, which we define in section 5.3.1.2 of the 2009 Financial Report

    
    CTR store count

                             Q1 2010      2009      2008      2007      2006
    -------------------------------------------------------------------------
    Updated and expanded
     stores                      363       363       393       381       363
    Traditional stores            70        71        76        92       105
    Smart stores                  37        36         2         -         -
    Small Market stores           10         9         4         -         -
    -------------------------------------------------------------------------
    Total updated and
     expanded, traditional,
     Small Market and Smart
     stores                      480       479       475       473       468
    PartSource stores             87        87        86        71        63
    -------------------------------------------------------------------------
    

CTR continues to retrofit its store network with a focus on converting selected traditional and "updated and expanded" existing stores to the latest formats. Customer reaction to the two new formats (Small Market and Smart store) has been especially well received and early sales results were very positive.

Average retail sales per CTR store(1),(2)

    
                                                        For the      For the
                                                      12 months    12 months
                                                          ended,       ended,
                                                        April 3,     April 4,
    ($ in millions)                                        2010         2009
    -------------------------------------------------------------------------
    Updated and expanded stores                       $    15.4    $    15.9
    Traditional stores                                      7.6          7.9
    -------------------------------------------------------------------------
    (1) Retail sales are shown on a 52-week basis in each year and exclude
        sales from PartSource stores and the labour portion of CTR's auto
        service sales.
    (2) Only includes stores that had been open for a minimum of two years as
        at the end of the period.
    

The "updated and expanded" stores typically experience higher customer traffic and increases in average transaction value compared to traditional store formats. For the rolling 12-month period, the average retail sales for the "updated and expanded" stores, as well as the traditional stores, experienced a decline, reflecting the weakened state of the economy throughout most of that period and unseasonable weather.

    
    Average sales per square foot of CTR retail space(1),(2),(3)

                                                        For the      For the
                                                      12 months    12 months
                                                          ended,       ended,
                                                        April 3,     April 4,
                                                           2010         2009
    -------------------------------------------------------------------------
    Retail square footage(1),(3) (millions of square
     feet)                                                 19.0         18.8
    Updated and expanded stores(2),(3) ($ sales per
     square foot)                                     $     366    $     377
    Traditional stores(2),(3)                               488          505
    -------------------------------------------------------------------------
    (1) Retail square footage is based on the total retail square footage
        including stores that had not been open for a minimum of two years.
        It represents a point in time (instead of a rolling 12-month period)
        as at the end of the year.
    (2) Retail sales are shown on a 52-week basis in each year for those
        stores that had been open for a minimum of two years as at the end of
        the current quarter. Sales from PartSource stores and the labour
        portion of CTR's auto service sales are excluded.
    (3) Retail space does not include warehouse, garden centre and auto
        service areas.
    

Retail square footage increased by approximately 0.2 million square feet year-over-year due to the network expansion and retrofit activities noted above.

Average sales per square foot of retail space in the larger "updated and expanded" store formats are lower than in traditional stores because additional space is designed to display more merchandise, accommodate wider aisles, include more appealing product displays and provide a more compelling shopping experience overall. The larger "updated and expanded" stores do however, on average, generate more total sales than the traditional stores. Declines in the sales per square foot for both store format types were for the reasons noted above.

    
    3.3.1.3 CTR's financial results

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales                         $ 1,294.9    $ 1,267.9         2.1%
    Net shipments (year-over-year %
     change)                                (0.6)%         2.0%
    Gross operating revenue                1,092.2      1,099.3       (0.7)%
    EBITDA(1)                                 89.9         96.8       (7.2)%
    -------------------------------------------------------------------------
    Earnings before income taxes              26.9         32.8      (18.0)%
    Less adjustment for:
      Loss on disposals of property and
       equipment                              (1.5)        (0.4)
      Former CEO retirement obligation         0.2          0.5
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(1)                            $    28.2    $    32.7      (14.0)%
    -------------------------------------------------------------------------
    (1) See section 15.0 on non-GAAP measures.
    

Explanation of CTR's financial results

First quarter

The decrease in gross operating revenue of 0.7 per cent in comparison to the first quarter of 2009 was due to reduced shipments to Dealers as a result of the lack of winter weather in January and February and its consequent impact on seasonal categories as noted above.

Earnings before income taxes in CTR decreased in the first quarter by 18.0 per cent versus the same quarter last year. Part of the decrease in earnings was caused by higher corporate charges related to the Company's stock-based compensation plans. Other operating expenses increased in areas such as advertising and general and administration. These costs were partially offset by a decrease in interest expense as a result of the early redemption of the $150 million of debentures in October 2009. Earnings were also impacted by the non-operating items noted in the table on the preceding page.

3.3.1.4 Business risks

CTR is exposed to a number of risks in the normal course of its business that have the potential to affect its operating performance. These include, but are not limited to, supply chain disruption, seasonality and environmental risks. Please see section 5.3.1.5 of our 2009 Financial Report for an explanation of these business-specific risks. See also section 11.0 of this MD&A for a discussion on Enterprise risk management and section 14.0 of the MD&A contained in our 2009 Financial Report for a discussion of some other industry-wide and Company-wide risks affecting the business.

3.3.2 Canadian Tire Petroleum

3.3.2.1 Q1 2010 Strategic Plan performance

Petroleum plays a strategic role in increasing customer loyalty and driving traffic and transactions for CTR and Financial Services. Petroleum increases Canadian Tire's total value proposition by offering Canadian Tire 'Money' loyalty rewards on gas purchases paid for in cash or by Canadian Tire's Options MasterCard. Petroleum also supports other cross-marketing promotions and joint product launches, such as Canadian Tire's Gas Advantage MasterCard, which has gained wide popularity since its introduction in Ontario in mid-2006. Customers who have a Canadian Tire MasterCard and purchase gas at Petroleum are Canadian Tire's most loyal and profitable customers.

The following outlines Petroleum's performance for the first quarter of 2010 in the context of our Strategic Plan.

    
    -------------------------------------------------------------------------
    Canadian Tire Petroleum Growth Initiatives
    -------------------------------------------------------------------------
    Network renewal and new store concept

    Petroleum's business is an integral part of the Canadian Tire
    organization as customers that use Petroleum's gas bars drive sales and
    traffic to our other business units. Over the Strategic Plan period,
    Petroleum will continue to develop its real estate plan, focusing on
    introducing new site concepts into its existing network of locations,
    while continuing to focus on renewing its current sites to enhance the
    customer experience.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Petroleum plans to strengthen the    First quarter
    existing network by opening new
    sites and refurbishing or            -   opened one new gas bar;
    rebuilding existing sites.           -   rebranded one site;
                                         -   refurbished one existing
                                             site; and
                                         -   closed one gas bar.
    -------------------------------------------------------------------------
    Supporting the Core - Canadian Tire Retail business

    Petroleum's business supports the core with customer count average of
    over one million per week at our Petroleum sites. Our loyalty programs
    and our customer service will continue to drive traffic to Canadian Tire
    Retail and support credit card receivables at Financial Services.
    Performance within this business will be driven by continued growth of
    gasoline volume and non-gas sales, and strong operating expense
    management.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    In 2010, Petroleum plans to          First quarter
    increase its gasoline volume and
    will drive non-gas sales by          Gasoline volume decreased by
    aggressively seeking out additional  0.6 per cent versus the first
    cross-marketing opportunities to     quarter of 2009.
    support the core business -
    Canadian Tire Retail.                Non-gas sales increased by 13.1
                                         per cent versus the first quarter
                                         of 2009, mostly due to strong
                                         growth in car wash sales and
                                         convenience store sales.
    -------------------------------------------------------------------------
    

3.3.2.2 Key performance indicators

Gasoline sales volume is a top-line performance indicator for Petroleum, as measured by the number of gasoline litres sold. Fluctuations in the wholesale and retail price of gasoline may result in fluctuations in Petroleum's margin and profitability.

    
    Gasoline sales volume

                                           Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Sales volume (millions of litres)        406.4        408.8       (0.6)%
    -------------------------------------------------------------------------
    

Petroleum has continued to hold its market share in a mature market, largely due to our loyalty program, customer service experience at our gas bars and a combined penetration rate on our Canadian Tire Options MasterCard and Gas Advantage MasterCard. Gasoline sales volumes during the first quarter were down slightly due to pump prices being up by over 20 per cent year-over-year.

    
    Petroleum's convenience and car wash sales

    (year-over-year percentage change)                  Q1 2010      Q1 2009
    -------------------------------------------------------------------------

    Total retail sales
      Convenience store sales                             12.5%        16.8%
      Car wash sales                                      30.8%        16.4%

    Same store sales
      Convenience store sales(1)                          11.5%        14.1%
      Car wash sales                                      31.6%        16.4%
    -------------------------------------------------------------------------
    (1) Convenience same store sales excludes three "Q" convenience stores.
    

Convenience store sales were strong in the first quarter of 2010, mainly due to sales increases in the tobacco category and continued steady growth in the confectionary categories. Car wash sales were very strong in the first quarter of 2010 when compared to the prior year, driven by favourable weather conditions for the car wash business.

    
    3.3.2.3 Petroleum's financial results

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales                         $   422.2    $   353.4        19.5%
    Gross operating revenue                  386.9        321.9        20.2%
    EBITDA(1)                                  9.7         10.4       (6.7)%
    -------------------------------------------------------------------------
    Earnings before income taxes               5.4          6.0      (10.7)%
    Less adjustment for:
      Loss on disposals of property and
       equipment                              (0.1)           -
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(1)                            $     5.5    $     6.0       (8.7)%
    -------------------------------------------------------------------------
    (1) See section 15.0 on non-GAAP measures.
    

Explanation of Petroleum's financial results

First quarter

Petroleum's gross operating revenue increased 20.2 per cent in the first quarter of 2010 compared to the prior year, primarily due to an increase in pump prices. Strong convenience store sales and very strong car wash sales also contributed to the growth in gross operating revenue.

Petroleum's pre-tax earnings, however, were down 10.7 per cent, mostly due to gasoline margin pressure in the market. Operating expenses were well managed despite increasing credit card fees, which are a function of higher gasoline prices and moderate Petroleum's operating margins.

Subsequent to quarter-end, Petroleum executed an agreement to build 23 state-of-the-art service centres along Ontario's two busiest highways (Highway 401 and Highway 400). These service centres will feature a Canadian Tire gas bar and a convenience store. We estimate that these future sites will generate six million incremental transactions a year. There are 78 Canadian Tire Retail stores serving communities in close proximity to the new service centres.

3.3.2.4 Business risks

Petroleum is exposed to a number of risks in the normal course of its business that have the potential to affect its operating performance. These include, but are not limited to, environmental and commodity price and disruption risks. Please see section 5.3.3.5 of our 2009 Financial Report for an explanation of these business-specific risks. See also section 11.0 of this MD&A for a discussion on Enterprise risk management and section 14.0 of the MD&A contained in our 2009 Financial Report for a discussion of some other industry-wide and Company-wide risks affecting the business.

3.3.3 Mark's Work Wearhouse

3.3.3.1 Q1 2010 Strategic Plan performance

The following outlines Mark's performance for the first quarter of 2010 in the context of our Strategic Plan.

    
    -------------------------------------------------------------------------
    Mark's Work Wearhouse Growth Initiatives
    -------------------------------------------------------------------------
    Network expansion

    A critical aspect of Mark's growth plan revolves around its objective of
    capturing an increasingly significant share of overall apparel sales in
    each geographic market in which Mark's competes. To increase Mark's
    market presence, the Company plans to continue with its goal of expanding
    the network of Mark's stores.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Mark's will continue network         First quarter
    development through opening new
    stores, relocating or expanding      -   opened four new corporate
    existing stores and renovating           stores, two of which are
    older stores to the newest               Combo stores with CTR (one
    Mark's format. For 2010, we              Smart store and one Small
    planned to:                              Market store); and
    -   open 7 new stores; and           -   relocated one corporate store.
    -   relocate/renovate 1 store.
    -------------------------------------------------------------------------
    Enhancing the brand and the customer experience

    Enhancing the brand will centre on continuing to develop the CLOTHES THAT
    WORK(R) ("CTW") store concept and the communication of this to Mark's
    customers in-store and through consistent marketing addressing the
    innovations found in Mark's products. Mark's customer focus to enhance
    customer experience will continue with the implementation of improved
    reporting tools that will help Mark's stay in touch with both current
    shoppers and non-shoppers to constantly improve product offering and
    store experience.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Mark's plans to develop the Clothes  First quarter
    That Work strategy to enhance the
    brand and customer experience.       -   product development is a
    Mark's will accomplish this by:          corner stone to CTW
    -   growing the number of                differentiating Mark's products
        innovations engineered that          through innovation, quality and
        support Clothes that Work; and       comfort. The development of more
    -   pilot the store rebranding           than a half dozen CTW products
        "Mark's Work Wearhouse" to           in 2010 is in process. Launches
        "Mark's".                            of these products will occur in
                                             future quarters; and
                                         -   the detail design phase of the
                                             store rebranding pilot is well
                                             underway. This pilot covers
                                             three metropolitan markets and
                                             is on track to launch in
                                             September 2010.                  
-------------------------------------------------------------------------
    Category expansion

    Mark's growth goals for the Strategic Plan period will be supported by
    category expansion in its three major product lines. Women's wear will be
    the fastest growing segment of the business over the Plan period as it is
    the least developed of the Mark's main category lines. Improvements in
    the product assortment and fit in the women's wear category will be the
    foundation for growth during the Plan period.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    In 2010, Mark's plans to expand its  First quarter - corporate sales
    product assortment in the three
    main categories of apparel and       -   sales of women's wear increased
    footwear with a focus on the             by 2.9 per cent;
    Clothes That Work campaign.          -   sales of industrial wear
                                             increased by 4.1 per cent; and
                                         -   sales of men's wear decreased
                                             by 2.1 per cent.
    -------------------------------------------------------------------------
    

3.3.3.2 Key performance indicators

The following are key performance indicators for Mark's:

    
    -   retail and same store sales growth;
    -   average sales per corporate store; and
    -   average sales per square foot of retail space

    Mark's retail and same store sales growth

    (year-over-year percentage change)                  Q1 2010      Q1 2009
    -------------------------------------------------------------------------

    Total retail sales(1)                                  3.8%       (2.3)%

    Same store sales(2)                                    1.5%       (4.1)%
    -------------------------------------------------------------------------
    (1) Includes retail sales from corporate and franchise stores.
    (2) Mark's same store sales exclude new stores, stores not open for the
        full period in each year and store closures.
    

First quarter

Mark's total retail sales increased by 3.8 per cent in the first quarter of 2010 compared to the same quarter in 2009. Retail sales for 2010, however, now include ancillary embroidery and alteration revenue net of sales return provision, which were reflected as offsets to costs in the prior year. Excluding this factor, retail sales would have increased by 2.6 per cent. Corporate store sales in industrial wear grew by 4.1 per cent with the men's industrial footwear showing the largest dollar increase. This is reflective of the improving economy and employment market, especially in the commodity-driven western provinces of Alberta and Saskatchewan. Women's wear corporate store sales grew by 2.9 per cent with the largest dollar increases occurring in women's accessories, knit tops and denim. Men's wear posted a corporate store sales decrease of 2.1 per cent. The largest dollar decreases were in men's outerwear, sweaters and fleece.

Mark's continues to focus on its "CLOTHES THAT WORK(R)" strategy and has maintained its pricing to support the brand and to focus on optimizing margins rather than driving unprofitable sales volumes.

    
    Average corporate store sales(1)

                              For the      For the      For the      For the
                            12 months    12 months    12 months    12 months
                                ended,       ended,       ended,       ended,
                              April 3,   January 2,     April 4,    March 29,
                                 2010         2010         2009         2008
    -------------------------------------------------------------------------
    Average retail sales per
     store ($ thousands)(2) $   2,556    $   2,510    $   2,716    $   2,743
    Average sales per square
     foot ($)(3)                  287          288          314          327
    -------------------------------------------------------------------------
    (1) Calculated on a rolling 12-month basis.
    (2) Average retail sales per corporate store include corporate stores
        that have been open for 12 months or more.
    (3) Average sales per square foot is based on sales from corporate
        stores. We have prorated square footage for corporate stores that
        have been open for less than 12 months.
    

Mark's average retail sales per store and average sales per square foot had been declining since the end of the second quarter of 2007, primarily due to the economic slowdown which began then, combined with the fact that Mark's has, through new stores, store relocations, store expansions and franchise repatriations, increased its corporate store retail square footage by 24.2 per cent over that time frame.

Comparing the 12 months ended April 3, 2010 to the 12 months ended January 3, 2010, the decline now appears to have abated and Mark's believes that, with its continued network expansion and product innovation through the economic downturn period, it is well positioned to increase its market share and resume improving its average retail sales per store and average sales per square foot as the Canadian apparel market recovers from the current recession.

    
    3.3.3.3 Mark's financial results

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Retail sales(1)                      $   174.9    $   168.5         3.8%
    Gross operating revenue(2)               153.8        147.1         4.5%
    EBITDA(3)                                  3.1          2.2        43.6%
    -------------------------------------------------------------------------
    Loss before income taxes                  (4.7)        (4.9)        4.9%
    Less adjustment for:
      Loss on disposals of property and
       equipment                              (0.2)        (0.2)
    -------------------------------------------------------------------------
    Adjusted loss before income taxes(3) $    (4.5)  $     (4.7)        5.9%
    -------------------------------------------------------------------------
    (1) Includes retail sales from corporate and franchise stores.
    (2) Gross operating revenue includes retail sales at corporate stores
        only.
    (3) See section 15.0 on non-GAAP measures.
    

Explanation of Mark's financial results

First quarter

Gross operating revenue increased 4.5 per cent in the first quarter of 2010 compared to the prior year. Gross operating revenue in 2010, however, includes ancillary franchise royalty fees, embroidery and alteration revenue net of sales return provision, which were reflected as an offset to operating costs in 2009. Excluding this factor, gross operating revenue would have increased by 2.4 per cent. Mark's was encouraged by the 4.1 per cent corporate sales increase posted by its industrial wear category, which occurred mostly in the month of March as this may be the first indication that Mark's core industrial customer is getting back to work. Also, the 2.9 per cent corporate store sales increase in women's wear showed signs of good consumer acceptance of Mark's ladies fashion must haves and all-season basics.

Mark's pre-tax loss decreased in the first quarter of 2010 as a result of the aforementioned increase in gross operating revenue and an improvement in the gross profit margin rate. The gross margin rate on merchandise sold increased 150 basis points due to lower markdowns, lower customer adjustments and improved net freight costs, offset to some extent by a lower initial purchase markup rate.

Total operating expenses increased during the first quarter of 2010 compared to the first quarter of 2009, due to an increase in depreciation resulting from a change in estimate of the useful lives of capital assets, as well as increased occupancy, payroll, distribution and system expenses. These were offset, in part, by a decrease in advertising and interest expense.

3.3.3.4 Business risks

Mark's is exposed to a number of risks in the normal course of its business that have the potential to affect its operating performance. These include, but are not limited to, seasonality and market obsolescence risks. Please see section 5.3.2.5 of our 2009 Financial Report for an explanation of these business-specific risks. See also section 11.0 of this MD&A for a discussion on Enterprise risk management and section 14.0 of the MD&A contained in our 2009 Financial Report for a discussion of some other industry-wide and Company-wide risks affecting the business.

3.3.4 Canadian Tire Financial Services

3.3.4.1 Q1 2010 Strategic Plan performance

The following outlines Financial Services' performance for the first quarter of 2010 in the context of our Strategic Plan.

    
    -------------------------------------------------------------------------
    Canadian Tire Financial Services Growth Initiatives
    -------------------------------------------------------------------------
    Increase the average credit card balance

    Financial Services plans to rely on the strength of its risk management
    capabilities to execute targeted programs to selectively grow average
    credit card balances.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Average balance growth will be       First quarter
    achieved through:
    -   ongoing selective credit         The average credit card account
        limit increases;                 balance grew by 9.6 per cent in
    -   balance transfer offers; and     the first quarter.
    -   pricing initiatives.
    -------------------------------------------------------------------------
    Increase the number of active credit card accounts

    Financial Services will leverage its proven in-store account acquisition
    channel to grow the number of active credit card accounts.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Growth in the number of active       First quarter
    credit card accounts will be
    achieved through:                    The average number of active
    -   improvements to in-store         accounts on the credit card loans
        acquisition techniques;          receivable decreased by 3.5
    -   implementation of in-store       per cent.
        instant credit account
        acquisition; and
    -   targeted retention programs
        to lower account attrition
        rates.
    -------------------------------------------------------------------------
    Integrated customer-centric approach to long-term growth

    Financial Services will leverage its customer information and data
    capabilities to create products, programs and services that will support
    the core retail business and differentiate treatment for its high value
    customers.
    -------------------------------------------------------------------------
    2010 Key initiatives                 2010 Performance
    -------------------------------------------------------------------------
    Initiatives include:                 Measurement will be monitored via:
    -   in-store financing programs      -   gross average credit card
        to support the core retail           receivables growth; and
        business and generate credit     -   active account growth.
        card accounts and balance
        growth for CTFS;                 Investigation of new products is
    -   customer segmentation to         on-going.
        identify and differentiate
        treatment for high value
        customers; and
    -   investigation of new products
        that will enhance the
        Canadian Tire brand.
    -------------------------------------------------------------------------
    

3.3.4.2 Key performance indicators

The following are key indicators of Financial Services' performance:

    
    -   size of the total managed credit card receivables portfolio;
    -   profitability of the portfolio; and
    -   quality of the portfolio.
    

The total managed portfolio of loans receivable consists of credit card loans, personal loans, line of credit loans, and, until the end of the third quarter of 2009, mortgage loans. Since the majority of the total managed portfolio of loans receivable is credit card loans, the following table reports our portfolio for the credit card loans receivable.

    
    Financial Services' portfolio of credit card loans receivable

    ($ in millions, except where noted)    Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Average number of accounts with a
     balance (thousands)                     1,712        1,773       (3.5)%
    Average account balance ($)          $   2,324    $   2,120         9.6%
    Gross average receivables              3,979.2      3,758.9         5.9%
    Total managed portfolio (end of
     period)                               3,962.6      3,725.1         6.4%
    -------------------------------------------------------------------------
    

Gross average credit card loans receivable grew 5.9 per cent to $4.0 billion at the end of the first quarter primarily due to a 9.6 per cent increase in the average account balance compared to the previous year. This growth in average balance offset the impact of a lower average number of accounts with a balance. The increase in average balance reflected the increased sales activity of customers on our cards and the impact of selective limit increases.

Financial Services' profitability

Financial Services' profitability measures are tracked as a percentage of GAR, shown in the table below.

    
    Profitability of total managed portfolio(1)

                             Q1 2010   Q1 2009   Q1 2008   Q1 2007   Q1 2006
    -------------------------------------------------------------------------
    Total revenue as a %
     of GAR(2)                25.18%    24.59%    24.54%    24.96%    25.22%
    Gross margin as a % of
     GAR(2)                   10.59%    12.02%    12.63%    13.12%    13.31%
    Operating expenses as a
     % of GAR                  6.70%     7.33%     7.79%     7.89%     8.33%
    Return on average total
     managed portfolio(2),(3)  3.89%     4.71%     4.84%     5.25%     4.98%
    -------------------------------------------------------------------------
    (1) Figures are calculated on a rolling 12-month basis and comprise the
        total managed portfolio of loans receivable.
    (2) Excludes the net effect of securitization activities, gain on
        disposal/redemption of investment, costs associated with the sale of
        the mortgage portfolio and gain/loss on disposal of assets.
    (3) Return is calculated as adjusted earnings before taxes as a
        percentage of GAR.
    

The return on the total managed portfolio has decreased in comparison to 2009. In 2009, the Canadian economy was challenged with an increase in unemployment rates resulting in rising consumer bankruptcies, a deterioration of the aging of receivables and increased write-offs. Improvements in revenues from selective pricing and terms changes as well as a reduction of operating expenses offset some of the negative economic impact. As a result, the rolling 12-month return on the average total managed portfolio of receivables declined to 3.89 per cent in Q1 2010.

Financial Services' credit card accounts (MasterCard, Visa and proprietary store cards) provide increased earnings potential through the cross-selling of balance-based insurance products and other financial services being offered by Financial Services. As Financial Services introduces lower rate credit cards and other loans receivable, the reduction in gross margin as a percentage of gross average receivables will be offset by continued growth in loans receivable, higher sales of insurance and warranty products and ongoing improvements in the operating expense ratio.

As part of the strategic planning process, management set a long-term goal of managing Financial Services' pre-tax return on the average total managed portfolio in the target range of 4.5 to 5.0 per cent. As shown in the table above, Financial Services has met or exceeded this target over four of the last five years but missed the target in the most recent rolling 12-month period ending Q1 2010 due to the negative economic conditions of 2009. Management believes the pre-tax return on the average total managed portfolio will recover to the target range in the medium term as unemployment levels and consumer spending behaviour return to historical norms.

    
    Portfolio quality

                             Q1 2010   Q1 2009   Q1 2008   Q1 2007   Q1 2006
    -------------------------------------------------------------------------
    Net write-off rate
     (rolling 12-month
     basis)                    7.83%     6.52%     5.83%     5.95%     5.98%
    Account balances less
     than 30 days overdue
     at end of period         95.85%    95.86%    96.10%    96.29%    96.31%
    Allowance rate             3.14%     2.69%     2.61%     2.48%     2.55%
    -------------------------------------------------------------------------
    

The 2010 rolling 12-month net write-off rate on the total loans portfolio was negatively impacted by an increase in write-offs and consumer bankruptcies as a result of a significantly more challenging economic environment and rising unemployment levels over that period.

While bankruptcy costs increased, analysis of the business segment's performance versus national statistics indicates that Financial Services continues to experience lower costs than would be expected compared to its peers due to its effective credit risk strategies over the past few years, which improved the quality of the loan portfolio.

Periodic fluctuations in write-offs, aging and allowances occur as a result of a variety of economic influences such as job growth or losses, personal debt levels and personal bankruptcy rates, as well as changes caused by adjustments to collection strategies. The increase in the allowance rate compared to Q1 2009 reflects the build up of allowance through 2009 to provide for increased write-offs of past due accounts. A number of actions have already been taken to manage the quality of the portfolio and write-off rates are expected to decline over the medium term.

    
    3.3.4.3 Financial Services' financial results

    ($ in millions)                        Q1 2010      Q1 2009       Change
    -------------------------------------------------------------------------
    Gross operating revenue              $   225.4    $   217.3         3.8%
    EBITDA(1)                                 60.7         46.7        29.8%
    -------------------------------------------------------------------------
    Earnings before income taxes              44.1         32.5        35.6%
    Less adjustment for:
      Loss on disposals of property and
       equipment                                 -         (0.1)
      Net effect of securitization
       activities(2)                          (1.4)         0.5
    -------------------------------------------------------------------------
    Adjusted earnings before income
     taxes(1)                            $    45.5    $    32.1        41.8%
    -------------------------------------------------------------------------
    (1) See section 15.0 on non-GAAP measures.
    (2) Includes initial gain/loss on the sale of loans receivable,
        amortization of servicing liability and gain/loss on reinvestment.
    

Explanation of Financial Services' financial results

First quarter

Financial Services' gross operating revenue increased by 3.8 per cent over the first quarter of 2009 largely as a result of an increase in credit card interest earned from higher average credit card receivables. This was partially offset by the loss of the earnings stream associated with the mortgage portfolio, which was sold in Q4 2009.

Adjusted pre-tax earnings for the quarter was $45.5 million, 41.8 per cent higher than the first quarter of 2009, reflecting higher credit card interest as noted above and lower operating expenses due to tight expense control. Aging of the portfolio stabilized negating the need to grow allowance for future losses during the quarter versus a year ago.

3.3.4.4 Business risks

Financial Services is exposed to a number of risks in the normal course of its business that have the potential to affect its operating performance. These include, but are not limited to, consumer credit, securitization funding, interest rate and regulatory risk. Please see section 5.3.4.8 of our 2009 Financial Report for an explanation of these business-specific risks as well as section 5.1.4 of this MD&A for a description of the securitization program and Canadian Tire's liquidity and capital market activity. Also see section 11.0 of this MD&A for a discussion on Enterprise risk management and section 14.0 of the MD&A contained in our 2009 Financial Report for a discussion of some other industry-wide and Company-wide risks affecting the business.

4.0 Capital management

In order to support our growth agenda and meet the objectives enumerated in our Strategic Plan, the Company actively manages its capital. The Company's objectives are:

    
    -   ensuring sufficient liquidity to support its financial obligations
        and execute its operating and strategic plans;
    -   maintaining healthy liquidity reserves and access to capital; and
    -   minimizing the after-tax cost of capital while taking into
        consideration current and future industry, market and economic risks
        and conditions.
    

The current economic environment has not changed the Company's objectives in managing capital, although the Company did place greater emphasis on the second of these objectives when credit markets were constrained in 2008 and much of 2009.

The definition of capital varies from company to company and from industry to industry. Our definition of capital includes the current-portion of long-term debt, long-term deposits, long-term liabilities that are derivative or hedge instruments related to capital items only, share capital, contributed surplus, components of accumulated other comprehensive income (loss) related to capital items only, and retained earnings.

Under the existing debt agreements, key financial covenants are monitored on an ongoing basis by Management to ensure compliance with the agreements. The Company was in compliance with these covenants during the first quarter of 2010.

The Company's wholly-owned subsidiary, CTB, manages its capital under guidelines established by the Office of the Superintendent of Financial Institutions Canada (OSFI). The regulatory capital guidelines measure capital in relation to credit, market and operational risks. CTB has a capital management policy, an internal capital adequacy assessment process and procedures and controls which it utilizes to achieve its goals and objectives. CTB's objectives include:

    
    -   providing sufficient capital to maintain the confidence of
        depositors;
    -   being an appropriately capitalized institution, as measured
        internally, defined by regulatory authorities and compared with CTB's
        peers; and
    -   achieving the lowest overall cost of capital consistent with
        preserving the appropriate mix of capital elements to meet target
        capitalization levels.
    

During the first quarter of 2010 and for the comparative period, CTB complied with the capital guidelines issued by OSFI under the "International Convergence of Capital Measurement and Capital Standards - A Revised Framework" (Basel II).

For further information on capital management, see section 7.0 (Capital Management) of the MD&A contained in our 2009 Financial Report.

5.0 Financing

Credit markets have shown consistent improvement from mid-2009 and onwards and Canadian Tire's financing capabilities remain strong. A number of other alternative financing sources are available to the Company and CTB to ensure that the appropriate level of liquidity is available to meet our strategic objectives. These sources are identified in section 8.0 of the MD&A contained in our 2009 Financial Report.

As of April 3, 2010, the Company had $1.17 billion in committed bank lines of credit, $800 million of which is available under a two-year syndicated credit facility. The syndicated facility is available to the Company until June 2012 and can be extended for an additional 364-day period annually. The balance of credit lines has been established pursuant to bilateral credit facility agreements that are available to the Company until late 2010. Each quarter, the company has the ability to request an extension of each of the bilateral credit facilities for an additional 90-day period.

As of April 3, 2010, the Glacier Credit Card Trust (Glacier) commercial paper program has access of up to $800 million of the total Canadian Tire committed credit lines. Glacier has achieved compliance with Dominion Bond Rating Service (DBRS(R)) Global Liquidity Standards.

Debt market conditions

Credit markets have shown signs of marked improvement over the course of 2009 and 2010 to date as evidenced by reduced credit spreads and higher investor demand and general oversubscription of bond transactions. Similarly, credit spreads in the asset-backed securities market have tightened and investor demand is improving. Canadian Tire participates in the asset-backed security markets through the use of commercial paper and issuance of MTNs. Throughout 2008 and 2009, Glacier has continued to refinance its maturing commercial paper and had $163 million of commercial paper outstanding as of April 3, 2010 ($63 million of commercial paper outstanding as of April 4, 2009), fully backed by the bank credit lines. In November 2010, a five-year $365 million Glacier-issued MTN series will be maturing. As per the Series Purchase Agreement, Glacier is required to accumulate the principal liquidation amounts for these notes from credit card collections over the two or three months preceding maturity in the Liquidation Principal Funding account.

Should the Company not seek to complete a credit card securitization transaction in the near-to-medium term, the Company has access to other sufficient sources of financing, including broker and retail deposits.

In December 2009, Canadian Tire received confirmation from Standard & Poor's on its various funding programs, all of which had a stable outlook, and the DBRS rating remains stable. As at April 3, 2010 there has been no change in the ratings.

The Company has a $300 million medium-term note at 5.22 per cent that will mature in October 2010. Based on funding requirements, we do not plan to refinance this debt.

For information related to our broker and retail deposits, see section 8.0 of the MD&A contained in our 2009 Financial Report.

5.1 Funding program

5.1.1 Funding requirements

We fund our capital expenditures, working capital needs, dividend payments and other financing needs, such as debt repayments and Class A Non-Voting Share purchases under the Normal Course Issuer Bid (NCIB), from a combination of sources. In the first quarter of 2010, the primary sources of funding were:

    
    -   $146 million of cash generated from operating activities before other
        changes in working capital; and
    -   $71 million of cash arising from the net collections of loans
        receivable.
    

5.1.2 Cash and cash equivalents

The table below shows the cash and cash equivalents at the end of the first quarter of 2010 compared to the first quarter of 2009.

    
                                                        April 3,     April 4,
    ($ in millions)                                        2010         2009
    -------------------------------------------------------------------------
    Cash and cash equivalents                         $   745.4    $   519.5
    Commercial paper                                          -         81.9
    Glacier commercial paper                              163.3         62.7
    -------------------------------------------------------------------------
    

During the first quarter of 2010, we used cash primarily for the following:

    
    -   $81 million for the repayment of deposits;
    -   $60 million for additions to property and equipment;
    -   $43 million for changes in other working capital components;
    -   $43 million for the purchase of short-term investments;
    -   $17 million in dividends paid; and
    -   $11 million for additions to intangible assets, primarily computer
        software.
    

5.1.3 Working capital

Optimizing our working capital continues to be a long-term priority in order to maximize cash flow for use in the operations of the Company. The table below shows the change in the value of our working capital components at the end of the first quarter of 2010 from the first quarter of 2009.

    
    Comparable working capital components

                                                                    Increase/
                                                                   (decrease)
                                           April 3,     April 4,  in working
    ($ in millions)                           2010         2009      capital
    -------------------------------------------------------------------------
    Short-term investments               $   106.6  $         -    $   106.6
    Accounts receivable                      548.8        731.0       (182.2)
    Merchandise inventories                1,089.3      1,104.4        (15.1)
    Income taxes recoverable                  98.0        109.8        (11.8)
    Prepaid expenses and deposits             75.3         73.5          1.8
    Accounts payable and other            (1,243.3)    (1,157.9)       (85.4)
    -------------------------------------------------------------------------
                                                                   $  (186.1)
    -------------------------------------------------------------------------
    

The short-term investments increase, as well as the cash and cash equivalents increase, is reflective of the increase in deposits and the corresponding requirement for liquidity reserves. The short-term investments balance sheet classification includes investments with an original term to maturity of more than three months and a remaining term to maturity of less than one year.

The decrease in accounts receivable was largely attributable to a decrease in amounts due from counterparties for foreign exchange derivatives and a decrease in Dealer receivables as there was extended payment terms provided in 2009 that were not repeated in 2010.

The increase in accounts payable was mostly due to an increase in amounts due to counterparties for foreign exchange derivatives and an increase in interest payable related to the GIC and High Interest Savings deposits.

5.1.4 Loans receivable

Our loans receivable securitization program is designed to provide a cost-effective source of funding for Financial Services. Loans receivable were as follows at the indicated dates:

    
    Financial Services' net managed portfolio of loans receivable

                                                        April 3,     April 4,
    ($ in millions)                                        2010         2009
    -------------------------------------------------------------------------
    Securitized                                       $ 1,694.6    $ 2,214.8
    Non-securitized                                     2,184.5      1,657.2
    -------------------------------------------------------------------------
    Net managed loans receivable                      $ 3,879.1    $ 3,872.0
    -------------------------------------------------------------------------
    

At the end of the first quarter of 2010, net managed loans receivable were relatively flat in comparison to the end of the first quarter of 2009 as loan growth during the period was offset by the sale of the mortgage receivable portfolio in Q4 2009.

For more information related to our loans receivable portfolio, see Note 3 in the Notes to the Consolidated Financial Statements as well as section 8.1.5 of the MD&A contained in our 2009 Financial Report.

6.0 Equity

The book value of Common and Class A Non-Voting Shares at the end of the first quarter of 2010 was $45.54 per share compared to $43.61 at the end of the first quarter of 2009.

For information related to the number of shares outstanding for the Class A Non-Voting Shares (CTC.A) and the Common Shares (CTC), see Note 4 in the Notes to the Consolidated Financial Statements.

For information related to our policy of repurchasing Class A Non-Voting Shares and our dividend policy, see section 9.0 of the MD&A contained in our 2009 Financial Report.

Dividends

Dividends declared on Common and Class A Non-Voting Shares in the first quarter of 2010 remained consistent with the first quarter of 2009 at $0.21 per share, reflecting the Board of Directors' decision in February 2010 to maintain the quarterly dividend rate at $0.21 per share.

The following chart summarizes our quarterly dividend distribution in 2010 payable to the shareholders as of the record date:

    
                                                                     Amount
    Quarterly       Date of                                          payable
    dividend        declaration     Record date      Date payable   per share
    -------------------------------------------------------------------------
    First Quarter   March 11, 2010  April 30, 2010   June 1, 2010    $  0.21
    Second Quarter  May 13, 2010    July 31, 2010    September 1,    $  0.21
                                                      2010
    -------------------------------------------------------------------------
    

7.0 Investing activities

7.1 Q1 2010 Capital expenditures

Canadian Tire's capital expenditures, on an accrual basis, totaled $51 million in the first quarter of 2010 (including intangible assets such as software acquisitions), approximately 35 per cent lower than the $79 million spent in the first quarter of 2009. These capital expenditures were comprised of:

    
    -   $31 million for real estate projects, including projects associated
        with the rollout of CTR's new store formats;
    -   $8 million for CTR supply chain and distribution centres;
    -   $6 million for information technology;
    -   $3 million for Automotive Infrastructure; and
    -   $3 million for other purposes.
    

7.2 2010 Capital expenditures plan

We continue to invest in our retail store network by converting older format stores to the new Smart and Small Market stores. In addition, we plan to invest in productivity and efficiency initiatives such as information technology and the automotive infrastructure program. Our 2010 capital plan is in the range of $280 million to $300 million and consists of:

    
    -   $161 million for real estate projects, including $122 million
        associated with the rollout of CTR's new store formats;
    -   $63 million for information technology;
    -   $28 million for CTR distribution centres;
    -   $15 million for Automotive Infrastructure;
    -   $11 million for CTR change program; and
    -   up to $22 million for other purposes.
    

8.0 Foreign operations

The Company has established operations outside of Canada including offshore activities in Bermuda and the Pacific Rim. For an overview of our foreign operations, see section 11.0 of the MD&A contained in the 2009 Financial Report.

9.0 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 Company regularly reviews the potential for adverse outcomes in respect of tax matters. The Company believes that the ultimate disposition of any tax matters in dispute with tax authorities 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 tax liability materially differ from the provision, the Company's effective tax rate and its earnings could be affected positively or negatively in the period in which the matters are resolved.

There have been no substantial changes in the status of ongoing audits by tax authorities as disclosed in Note 14 of the most recently issued annual financial statements for the 52 weeks ended January 2, 2010 contained in our 2009 Annual Report.

The tax provision for the quarter ended April 4, 2009 was reduced by $4.6 million due to the retroactive change in the taxation of gains realized from the disposition of shares during 2006 and 2007. This is why the effective tax rate of 31.0 per cent in Q1 2010 is higher than the effective tax rate of 25.1 per cent in the prior year.

10.0 Off-balance sheet arrangements

10.1 Glacier Credit Card Trust

Glacier was formed to buy co-ownership interests in our credit card loans, and it issues debt to third-party investors to fund its purchases. Refer to sections 8.1.5 and 13.1 of the MD&A contained in our 2009 Financial Report for additional information on Glacier.

10.2 Trust financing for Dealers

A financing program is in place to provide an efficient and cost-effective way for Dealers to access the majority of the financing they require for their store operations. The agreement with the Trust and the participating banks for the Trust financing program for Dealers has been amended and extended until December 31, 2010.

Please see section 13.2 of the MD&A contained in our 2009 Financial Report for additional information on this program.

10.3 Bank financing for Dealers

We have guaranteed the bank debt of some Dealers. The total is approximately $36 million. Refer to MD&A section 13.3 of our 2009 Financial Report for additional information on this program.

11.0 Enterprise risk management

The Company approaches the management of risk strategically through its Enterprise Risk Management (ERM) framework in order to mitigate the impact of principal risks on its business and operations. The ERM framework sets out principles and tools for identifying, evaluating, prioritizing, monitoring and managing risk effectively and consistently across the Company.

The ERM framework and the principal risks that the Company manages on an ongoing basis are described in detail in sections 14.0 and 14.2, respectively, in the MD&A contained in our 2009 Financial Report.

Management reviews risks on an ongoing basis and did not identify any new principal risks during the first quarter of 2010.

12.0 Critical accounting estimates

The Company estimates certain amounts reflected in its financial statements using detailed financial models that are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. In our judgment, the accounting policies and estimates detailed in Note 1 of the Notes to the Consolidated Financial Statements for the year ended January 2, 2010 do not require us to make assumptions about matters that are highly uncertain and accordingly none of the estimates is considered a "critical accounting estimate" as defined in Form 51-102F1 published by the Ontario Securities Commission, except as noted below.

In view of the recent turmoil in credit markets and economic recession being experienced in Canada, the Company reviewed the allowance for credit losses at Financial Services and considers it to be a "critical accounting estimate". The allowance for credit losses adjusts the value of the Financial Services loan portfolio to reflect its estimated realizable value. Financial Services' allowance for impaired loans receivable for each of credit card, personal and line of credit loans is determined using historical loss experience of account balances based on the aging and arrears status, with certain adjustments for other relevant circumstances influencing the recoverability of the loans receivables. A robust model is used and is based on economic conditions and trends specific to Financial Services. The allowance for impaired credit card loans (the largest portfolio) is comprised of general, bankruptcy and fraud risk components. Changes in circumstances including, but not limited to, changes in the aging of accounts and changes in the bankruptcies experienced may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or decrease in the allowance for credit losses. The impairment provisions for personal loans and line of credit loans operate in similar fashion.

Further details on consumer credit risk may be found in section 5.3.4.8 (Financial Services' business risk) of the MD&A contained in our 2009 Financial Report.

13.0 Contractual obligations

The Company has a number of obligations related to long-term debt, capital lease obligations, operating leases, purchase obligations, Financial Services' deposits and other obligations. For a complete description of amounts outstanding for the year-ended January 2, 2010, see section 16.0 of the MD&A contained in our 2009 Financial Report.

At the end of the first quarter of 2010, there have been no material changes since the year-ended January 2, 2010.

14.0 Changes in accounting policies

The numbers reflected in this MD&A have been calculated using the same accounting policies and methods of their application as the most recently issued annual financial statements for the 52 weeks ended January 2, 2010 (contained in our 2009 Financial Report), except for changes noted in section 14.2.

14.1 International Financial Reporting Standards (IFRS)

In February 2008, the CICA announced that Canadian GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2011. Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to the Company's reporting for the first quarter of 2011, for which the current and comparative information will be prepared under IFRS. The Company expects the transition to IFRS to impact accounting, financial reporting, internal control over financial reporting, taxes, information systems and processes as well as certain contractual arrangements.

For details of our conversion plan to IFRS as well as the expected impact of IFRS on the 2011 Consolidated Financial Statements, please see sections 17.9 and 17.10, respectively, of the MD&A contained in our 2009 Financial Report.

Progress made in Q1 2010 continues to track our enunciated plan and the key focus in Q2 will be the verification of our opening IFRS Balance Sheet and ongoing training and systems changes.

We will also continue to actively monitor changes in the IFRS environment and adapt our implementation strategy accordingly.

15.0 Non-GAAP measures

The following measures included in this MD&A do not have a standardized meaning under Canadian generally accepted accounting principles (GAAP) and may not be comparable to similar measures presented by other companies:

    
    -   EBITDA (earnings before interest, income taxes, depreciation and
        amortization);
    -   adjusted earnings; and
    -   same store sales.
    

EBITDA

With the exception of Financial Services, we consider EBITDA 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. EBITDA is also commonly regarded as an indirect measure of operating cash flow, a significant indicator of success for many businesses.

A reconciliation of EBITDA to the most comparable GAAP measure (earnings before income taxes) is provided as follows:

    
    Reconciliation of EBITDA to GAAP measures(1)

    ($ in millions)                                     Q1 2010      Q1 2009
    -------------------------------------------------------------------------
    EBITDA(2)
      CTR                                             $    89.9    $    96.8
      Petroleum                                             9.7         10.4
      Mark's                                                3.1          2.2
      Financial Services                                   60.7         46.7
    -------------------------------------------------------------------------
      Total EBITDA                                    $   163.4    $   156.1
    -------------------------------------------------------------------------
    Less: Depreciation and amortization expense
        CTR                                           $    46.3    $    45.9
        Petroleum                                           4.3          4.4
        Mark's                                              7.7          6.5
        Financial Services                                  1.4          2.5
    -------------------------------------------------------------------------
        Total depreciation and amortization expense   $    59.7    $    59.3
    -------------------------------------------------------------------------
      Interest expense(2)
        CTR                                           $    16.7    $    18.1
        Mark's                                              0.1          0.6
        Financial Services                                 15.2         11.7
    -------------------------------------------------------------------------
        Total interest expense                        $    32.0    $    30.4
    -------------------------------------------------------------------------
    Earnings (loss) before income taxes
      CTR                                             $    26.9    $    32.8
      Petroleum                                             5.4          6.0
      Mark's                                               (4.7)        (4.9)
      Financial Services                                   44.1         32.5
    -------------------------------------------------------------------------
    Total earnings before income taxes                $    71.7    $    66.4
    -------------------------------------------------------------------------
    (1) Differences may occur due to rounding.
    (2) Eliminations of inter-company transactions (e.g. a loan of funds from
        one business unit to another), previously disclosed as a separate
        line item, are now presented net of these transactions.
    

References to adjusted earnings

In several places in this MD&A, we refer to adjusted pre-tax and after-tax earnings before the impact of non-operating items. Historically, non-operating items have included the net effect of securitization activities and dispositions of surplus property and equipment. The timing and amount of gains and losses from these items are not consistent from quarter to quarter. We believe the adjusted figures allow for a clearer assessment of earnings for each of our businesses and provide a more meaningful measure of our consolidated and segmented operating results.

From time to time adjusted earnings may also contain additional unusual and/or non-recurring items which are explained in detail at that time.

Same store sales

Same store sales is the metric used by management, and most commonly used in the retail industry, to compare retail sales growth in a more consistent manner across the industry. CTR's same store sales includes sales from all CTR and PartSource stores that have been open for more than 53 weeks and therefore allows for a more consistent comparison to other stores open during the period and to results in the prior year. CTR's same store sales exclude the sales from the labour portion of CTR's auto service sales.

16.0 Controls and procedures

Changes in internal control over financial reporting

During the first quarter of 2010, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

17.0 Environmental sustainability

The Company continues to make business sustainability a focus of its corporate strategy. Recent initiatives that have been undertaken to reduce the Company's environmental footprint focus on the transportation of product to Canadian Tire Retail stores, including:

    
    -   The winter tire program - Canadian Tire Retail's Transportation
        Division collaborated with one of its largest suppliers of winter
        tires to increase the efficiency of the supply chain and reduce the
        carbon footprint associated with delivering the season's winter tires
        to the stores. The collaboration reduced transportation costs by
        approximately 41 per cent and the associated greenhouse gas emissions
        by approximately 37 per cent. Insights from this work will be applied
        to other products and suppliers;
    -   Reduced damage in supply chain - Canadian Tire Retail's
        Transportation division collaborated with one of its largest
        suppliers of outdoor car shelters to reduce the damage to these
        large, heavy products during shipping. Analysis revealed that the
        appropriate use of clamping machines in the distribution centres was
        still a significant cause of damage. Reducing the clamping touches
        and other process changes resulted in a 55 per cent reduction in the
        damage rate for five products and the associated waste stream,
        greenhouse gas emissions and costs that result from shipping products
        that cannot be sold. Insights from this work will be applied to other
        products and suppliers;
    -   Long-combination trucks - Canadian Tire Retail is one of the first
        companies to test the use of long-combination vehicles (LCV) on
        select routes in a pilot with the Ontario Ministry of Transportation.
        On May 1st, 2010, we were the first carrier to expand the pilot from
        across Eastern Canada to Halifax. An LCV consists of two 53-foot
        containers in tandem attached to one truck. With a combined vehicle
        length of approximately 127 feet, these special vehicles result in a
        33 per cent estimated reduction in fossil fuels and the associated
        greenhouse gas emissions. Since the pilot program began, CTC has run
        over 186,000 incident free kilometres between our Brampton and
        Montreal DCs, resulting in an estimated reduction of greenhouse gases
        of 120 metric tonnes and avoided consuming over 40,000 litres of
        fuel. Statistically, LCVs have lower collision rates and the
        combined, double load is distributed over more axles, which reduces
        stress on our roads and infrastructure; and
    -   Low diesel emission trucks - Canadian Tire Retail is replacing 30 of
        its trucks with the new vehicles possessing the latest generation low
        emissions diesel engine technology. This technology generates the
        lowest emissions in nitrogen oxides and particulate matter as well as
        offers 5 per cent in fuel savings. In addition, 27 of these trucks
        have the latest generation automatic transmissions, which optimize
        vehicle performance, increase fuel economy, lower operating costs and
        reduces greenhouse gas emissions. A recent comparison of this
        transmission technology to other trucks with similar applications in
        the Canadian Tire Retail fleet has proven significant fuel reduction
        opportunities in fuel savings per year.
    

For a comprehensive overview of our business sustainability program, refer to section 20.0 of the MD&A contained in our 2009 Financial Report.

18.0 Community Activities - Jumpstart

Canadian Tire's charitable efforts are reflected in the work of Canadian Tire Jumpstart Charities. The Jumpstart organization, formerly the Canadian Tire Foundation for Families, underwent a name change in 2009 to reflect the success of the Jumpstart program, which helps financially disadvantaged children gain the life benefits that are associated with participating in organized sports and recreation activities. National in scope but local in focus, Canadian Tire Jumpstart has delivered support since 2005 to children through a Canada-wide network of local chapters. To date, 301 Jumpstart chapters have been created in communities across the country and have contributed to help over 227,565 children.

During 2010, Jumpstart has raised over $1.2 million across Canada ($1.9 million during 2009), helping over 10,888 children participate in sports and recreation programs (8,435 children helped during 2009). Jumpstart continues to grow and help more children. In 2010, Jumpstart Charities has a target to help over 95,000 children by covering registration, equipment and transportation costs for sport and recreation activities.

19.0 Other Investor Communication

Caution regarding forward-looking information

This document contains forward-looking information that reflects management's current expectations related to matters such as future financial performance and operating results of the Company. Specific forward-looking statements included or incorporated by reference in this document include, but are not limited to, statements with respect to:

    
    -   financial aspirations listed in section 2.2
    -   the Company's Strategic Plan objectives for 2010, listed throughout
        section 3.3 (Business segment performance); and
    -   capital expenditures plan listed in section 7.2.
    

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 financial position, results of operation and operating environment. Readers are cautioned that such information may not be appropriate for other circumstances.

All statements other than statements of historical facts included in this document may constitute forward-looking information, including but not limited to, statements concerning management's expectations relating to possible or assumed future prospects and results, our strategic goals and priorities, our actions and the results of those actions and the economic and business outlook for us. Often but not always, forward-looking information can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made.

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 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 document is based on information and assumptions which are current, reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information for a variety of reasons. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - include (a) credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates; (b) the ability of Canadian Tire to attract and retain quality employees, Dealers, Canadian Tire Petroleum agents and PartSource and Mark's Work Wearhouse store operators and franchisees, as well as our financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at our stores or acquire our financial products and services; (d) our margins and sales and those of our competitors; (e) risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, competition, seasonality, commodity price and business disruption, our relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by Canadian Tire and the cost of store network expansion and retrofits and (f) our capital structure, funding strategy, cost management programs and share price. We caution that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect our results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on 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, please refer to sections 3.3.1.4 (CTR's business risks), 3.3.2.4 (Petroleum's business risks), 3.3.3.4 (Mark's business risks), 3.3.4.4 (Financial Services' business risks) and 11.0 (Enterprise risk management) and all subsections thereunder of this MD&A. Please also refer to the "Risk Factors" section of our Annual Information Form for fiscal 2009 and our 2009 Management's Discussion and Analysis, as well as Canadian Tire's other public filings, available at www.sedar.com and at www.corp.canadiantire.ca.

Statements that include forward-looking information do 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. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other charges announced or occurring after such statements are made.

The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. 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, unless required by applicable securities laws.

Information contained in or otherwise accessible through the websites referenced above does not form part of this MD&A. All references in this MD&A to websites are inactive textual references and are for your information only.

Commitment to disclosure and investor communication

Canadian Tire strives to maintain a high standard of disclosure and investor communication and has been recognized as a leader in financial reporting practices. In many cases, the Company's disclosure practices exceed the requirements of current legislation. Reflecting our commitment to full and transparent disclosure, the Investor Relations section of the Company's website includes the following documents and information of interest to investors:

    
    -   Annual Information Form;
    -   Management Information Circular;
    -   quarterly reports;
    -   quarterly fact sheets; and
    -   conference call webcasts (archived for one year).
    

The Company's Annual Information Form, Management Information Circular and quarterly reports are also available on the SEDAR (System for Electronic Disclosure and Retrieval) website at www.sedar.com and the Company's own website for investor information at corp.canadiantire.ca/en/investors.

If you would like to contact the Investor Relations department directly, call Karen Meagher at (416) 480-8058 or email investor.relations@cantire.com.

    
                             2010 FIRST QUARTER

                          INTERIM REPORT FINANCIALS


    Consolidated Statements of Earnings (Unaudited)
    -------------------------------------------------------------------------

                                                          13 weeks ended,
                                                        April 3,     April 4,
    (Dollars in millions except per share amounts)         2010         2009
    -------------------------------------------------------------------------

    Gross operating revenue                         $   1,830.1  $   1,758.1
    -------------------------------------------------------------------------

    Operating expenses
      Cost of merchandise sold and all other
       operating expenses except for the
       undernoted items (Note 8)                        1,662.2      1,597.8
      Net interest expense (Note 5)                        32.0         30.4
      Depreciation and amortization                        59.7         59.3
      Employee Profit Sharing Plan                          4.5          4.2
    -------------------------------------------------------------------------
    Total operating expenses                            1,758.4      1,691.7

    Earnings before income taxes                           71.7         66.4

    Income taxes
      Current                                              22.3          7.4
      Future                                                  -          9.3
    -------------------------------------------------------------------------
    Income taxes                                           22.3         16.7
    -------------------------------------------------------------------------

    Net earnings                                    $      49.4  $      49.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted earnings per share            $      0.61  $      0.61
    -------------------------------------------------------------------------

    Weighted average number of Common and
     Class A Non-Voting Shares outstanding           81,625,769   81,630,771
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows (Unaudited)
    -------------------------------------------------------------------------

                                                          13 weeks ended,
                                                        April 3,     April 4,
    (Dollars in millions)                                  2010         2009
    -------------------------------------------------------------------------

    Cash generated from (used for):

    Operating activities
      Net earnings                                  $      49.4  $      49.7
      Items not affecting cash
        Depreciation                                       47.5         46.7
        Net provision for loans receivable (Note 2)        47.3         38.3
        Amortization of intangible assets                  12.2         12.6
        Changes in fair value of derivative
         instruments                                        2.0            -
        Employee future benefits expense                    1.6          1.5
        Impairments on property and equipment               1.3          0.7
        Loss (gain) on disposals of property and
         equipment                                          0.5         (0.1)
        Future income taxes                                   -          9.3
        Other                                              (0.2)         8.6
        (Recovery) impairment loss of other
         long-term investments                             (0.6)         0.5
        Gain on sales of loans receivable (Note 2)         (7.0)       (13.3)
        Securitization loans receivable                    (8.1)       (10.8)
    -------------------------------------------------------------------------
                                                          145.9        143.7
    -------------------------------------------------------------------------
    Changes in other working capital components           (43.4)      (492.7)
    -------------------------------------------------------------------------
    Cash generated from (used for) operating
     activities                                           102.5       (349.0)
    -------------------------------------------------------------------------

    Investing activities
      Additions to property and equipment (Note 9)        (59.9)       (76.1)
      Short-term investments                              (42.6)           -
      Additions to intangible assets (Note 9)             (11.4)       (19.3)
      Long-term receivables and other assets               (1.0)        (8.3)
      Other                                                (0.8)        (0.9)
      Purchases of stores                                  (0.2)        (0.6)
      Other long-term investments                           0.1        (50.1)
      Net securitization of loans receivable                2.6          0.3
      Investment in loans receivable, net                  70.6        137.8
      Proceeds on disposition of property and
       equipment                                              -          0.7
    -------------------------------------------------------------------------
    Cash used for investing activities                    (42.6)       (16.5)
    -------------------------------------------------------------------------

    Financing activities
      Class A Non-Voting Share transactions                 0.2          0.1
      Issuance of long-term debt                              -          0.1
      Repayment of long-term debt                          (2.9)        (5.2)
      Dividends                                           (17.1)       (17.1)
      Net change in deposits                              (80.7)       396.2
      Commercial paper                                        -         81.9
    -------------------------------------------------------------------------
    Cash (used for) generated from financing
     activities                                          (100.5)       456.0
    -------------------------------------------------------------------------

    Cash (used) generated in the period                   (40.6)        90.5
    Cash and cash equivalents, beginning of period        786.0        429.0
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period
     (Note 6)                                       $     745.4  $     519.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Income (Unaudited)
    -------------------------------------------------------------------------

                                                          13 weeks ended,
                                                        April 3,     April 4,
    (Dollars in millions)                                  2010         2009
    -------------------------------------------------------------------------

    Net earnings                                    $      49.4  $      49.7
    Other comprehensive income (loss), net of taxes
      (Loss)/gain on derivatives designated as cash
       flow hedges, net of tax of $11.6 (2009 - $7.4)     (25.6)        15.5
      Reclassification to non-financial asset of
       loss/(gain) on derivatives designated as
       cash flow hedges, net of tax of $8.8
       (2009 - $25.4)                                      20.1        (53.4)
      Reclassification to earnings of loss/(gain)
       on derivatives designated as cash flow
       hedges, net of tax of $0.6 (2009 - $0.1)             1.4            -
    -------------------------------------------------------------------------
    Other comprehensive loss                               (4.1)       (37.9)
    -------------------------------------------------------------------------
    Comprehensive income                            $      45.3  $      11.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
    -------------------------------------------------------------------------

                                                          13 weeks ended,
                                                        April 3,     April 4,
    (Dollars in millions)                                  2010         2009
    -------------------------------------------------------------------------

    Share capital
    Balance, beginning of period                    $     720.4  $     715.4
    Transactions, net (Note 3)                              0.3          4.4
    -------------------------------------------------------------------------
    Balance, end of period                          $     720.7  $     719.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contributed surplus
    Balance, beginning of period                    $       0.2  $         -
    Transactions, net                                      (0.1)           -
    -------------------------------------------------------------------------
    Balance, end of period                          $       0.1  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
    Balance, beginning of period                    $   3,013.7  $   2,752.4
    Transitional adjustment on adoption of
     new accounting policies - EIC 173                        -          1.1
    Net earnings for the period                            49.4         49.7
    Dividends                                             (17.1)       (17.1)
    Repurchase of Class A Non-Voting Shares                   -         (4.3)
    -------------------------------------------------------------------------
    Balance, end of period                          $   3,046.0  $   2,781.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)
    Balance, beginning of period                    $     (46.4) $      97.2
    Transitional adjustment on adoption of new
     accounting policies - EIC 173                            -         (2.5)
    Other comprehensive loss for the period                (4.1)       (37.9)
    -------------------------------------------------------------------------
    Balance, end of period                          $     (50.5) $      56.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Retained earnings and accumulated other
     comprehensive income (loss)                    $   2,995.5  $   2,838.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Balance Sheets (Unaudited)
    -------------------------------------------------------------------------

    (Dollars in millions)                  April 3,     April 4,   January 2,
    As at                                     2010         2009         2010
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Cash and cash equivalents
       (Note 6)                        $     745.4  $     519.5  $     786.0
      Short-term investments (Note 6)        106.6            -         64.0
      Accounts receivable                    548.8        731.0        835.9
      Loans receivable (Note 2)            2,174.6      1,544.0      2,274.8
      Merchandise inventories              1,089.3      1,104.4        933.6
      Income taxes recoverable                98.0        109.8         94.7
      Prepaid expenses and deposits           75.3         73.5         40.7
      Future income taxes                     85.0         30.1         82.8
    -------------------------------------------------------------------------
      Total current assets                 4,923.0      4,112.3      5,112.5
    -------------------------------------------------------------------------
    Long-term receivables and other
     assets                                  106.5        235.2        110.6
    Other long-term investments, net          49.3         74.8         48.8
    Goodwill                                  71.9         70.8         71.8
    Intangible assets                        264.4        255.1        265.4
    Property and equipment, net            3,173.0      3,213.7      3,180.4
    -------------------------------------------------------------------------
      Total assets                     $   8,588.1  $   7,961.9  $   8,789.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Commercial paper                 $         -  $      81.9  $         -
      Deposits                               760.3        658.3        863.4
      Accounts payable and other           1,243.3      1,157.9      1,391.4
      Current portion of long-term debt      307.6         11.4        309.3
    -------------------------------------------------------------------------
      Total current liabilities            2,311.2      1,909.5      2,564.1
    -------------------------------------------------------------------------
    Long-term debt                         1,099.7      1,373.8      1,101.9
    Future income taxes                       49.8         45.2         49.8
    Long-term deposits                     1,220.1        878.2      1,196.9
    Other long-term liabilities              191.0        196.8        188.9
    -------------------------------------------------------------------------
      Total liabilities                    4,871.8      4,403.5      5,101.6
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Share capital (Note 3)                   720.7        719.8        720.4
    Contributed surplus                        0.1            -          0.2
    Accumulated other comprehensive
     income (loss)                           (50.5)        56.8        (46.4)
    Retained earnings                      3,046.0      2,781.8      3,013.7
    -------------------------------------------------------------------------
      Total shareholders' equity           3,716.3      3,558.4      3,687.9
    -------------------------------------------------------------------------
      Total liabilities and
       shareholders' equity            $   8,588.1  $   7,961.9  $   8,789.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to the Consolidated Financial Statements (Unaudited)
    -------------------------------------------------------------------------

    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, collectively referred to as the "Company". These
        financial statements follow the same accounting policies and methods
        of their application as the most recently issued annual financial
        statements for the 52 weeks ended January 2, 2010. These financial
        statements do not contain all disclosures required by Canadian GAAP
        for annual financial statements and accordingly, these financial
        statements should be read in conjunction with the most recently
        issued annual financial statements for the 52 weeks ended January 2,
        2010 contained in our 2009 Annual Report.

        The preparation of the financial statements in conformity with
        Canadian 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 a number of items
        including, but not limited to, income taxes, impairment of assets
        (including goodwill), employee benefits, product warranties,
        inventory provisions, amortization, uncollectible loans,
        environmental reserves, asset retirement obligations, financial
        instruments, and the liability for the Company's loyalty programs.

        Future Accounting Changes

        International Financial Reporting Standards

        In February 2008, the CICA announced that Canadian GAAP for publicly
        accountable enterprises will be replaced by International Financial
        Reporting Standards (IFRS) for fiscal years beginning on or after
        January 1, 2011. Accordingly, the conversion from Canadian GAAP to
        IFRS will be applicable to the Company's reporting for the first
        quarter of 2011, for which the current and comparative 2010
        information will be prepared under IFRS. The Company expects the
        transition to IFRS to impact accounting, financial reporting,
        internal control over financial reporting, taxes, information systems
        and processes as well as certain contractual arrangements. The
        Company is currently assessing the impact of the transition to IFRS
        in the above areas and has deployed additional trained resources and
        formal project management practices and governance to ensure the
        timely conversion to IFRS.

    2.  Loans Receivable

        The Company sells co-ownership interests in a pool of credit card
        receivables to a third party Trust (the Trust) in transactions known
        as securitizations. The transactions are accounted for as sales in
        accordance with CICA Accounting Guideline 12 (AcG-12), Transfers of
        Receivables, and the receivables are removed from the Consolidated
        Balance Sheets.

        For additional information on Loans Receivable, see Note 1 of the
        most recently issued annual financial statements for the 52 weeks
        ended January 2, 2010 contained in our 2009 Annual Report.

        Quantitative information about loans managed and securitized by the
        Company is as follows:

                                               Total principal amount
        ($ in millions)                        of receivables as at(1)
                                       --------------------------------------
                                           April 3,     April 4,   January 2,
                                              2010         2009         2010
                                       ------------ ------------ ------------
        Total net managed credit
         card loans                    $   3,839.3  $   3,621.7  $   3,932.8
        Credit card loans sold            (1,694.6)    (2,214.8)    (1,693.4)
                                       ------------ ------------ ------------
        Credit card loans held             2,144.7      1,406.9      2,239.4

        Total net managed personal
         loans(2)                             25.6         67.9         34.0
                                       ------------ ------------ ------------
        Total net managed mortgage
         loans(3)                                -        163.1            -
                                       ------------ ------------ ------------
        Total net managed line of
         credit loans                         14.2         19.3         15.6
                                       ------------ ------------ ------------

        Total loans receivable             2,184.5      1,657.2      2,289.0


        Less: long-term portion(4)            (9.9)      (113.2)       (14.2)
                                       ------------ ------------ ------------
        Current portion of loans
         receivable                    $   2,174.6  $   1,544.0  $   2,274.8
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------


                                         Average balances for
        ($ in millions)                   the 13 weeks ended
                                       -------------------------
                                           April 3,     April 4,
                                              2010         2009
                                       ------------ ------------
        Total net managed credit
         card loans                    $   3,853.8  $   3,659.4
        Credit card loans sold            (1,694.4)    (2,215.6)
                                       ------------ ------------
        Credit card loans held             2,159.4      1,443.8

        Total net managed personal
         loans(2)                             29.8         75.8
                                       ------------ ------------
        Total net managed mortgage
         loans(3)                                -        150.4
                                       ------------ ------------
        Total net managed line of
         credit loans                         14.8         20.0
                                       ------------ ------------

        Total loans receivable         $   2,204.0  $   1,690.0
                                       ------------ ------------
                                       ------------ ------------
        Less: long-term portion(4)

        Current portion of loans
         receivable

        (1) Amounts shown are net of allowance for credit losses.
        (2) Personal loans are unsecured loans that are provided to qualified
            existing credit card holders 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.
        (3) Mortgage loans are issued for terms of up to ten years, have
            fixed or variable interest rates, are secured and include a mix
            of both high and low ratio loans. High ratio loans are fully
            insured and low ratio loans are partially insured. The Company
            sold its mortgage portfolio in 2009.
        (4) The long-term portion of loans is included in long-term
            receivables and other assets.

        Net credit losses for the owned portfolio for the 13 weeks ended
        April 3, 2010 were $47.3 million (2009 - $38.3 million). Net credit
        losses for the total managed portfolio for the 13 weeks ended April
        3, 2010 were $79.5 million (2009 - $79.2 million). Net credit losses
        consist of total write-offs (including regular and bankruptcy
        write-offs and consumer proposals), net of recoveries and any changes
        in allowances.

    3.  Share Capital

                                           April 3,     April 4,   January 2,
        ($ in millions)                       2010         2009         2010
                                       ------------ ------------ ------------
        Authorized
          3,423,366 Common Shares
          100,000,000 Class A
           Non-Voting Shares
        Issued
          3,423,366 Common Shares
           (April 4, 2009 - 3,423,366) $       0.2  $       0.2  $       0.2
          78,178,223 Class A Non-Voting
           Shares (April 4, 2009 -
           78,174,354)                 $     720.5        719.6        720.2
                                       ------------ ------------ ------------
                                       $     720.7  $     719.8  $     720.4
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

        The Company issues and repurchases Class A Non-Voting Shares. The net
        excess of the issue price over the repurchase price results in
        contributed surplus. The net excess of the repurchase price over the
        issue price is allocated first to contributed surplus, if any, with
        any remainder allocated to retained earnings.

        The following transactions occurred with respect to shares:

                                       13 weeks ended       13 weeks ended
        ($ in millions)                 April 3, 2010        April 4, 2009
                                    -------------------- --------------------
                                       Number       $       Number       $
                                    ------------ ------- ------------ -------
        Class A Non-Voting Shares
          Shares outstanding at the
           beginning of the period   78,178,066   720.2   78,178,066   715.2
          Issued                        123,457     6.7      218,388     9.0
          Repurchased                  (123,300)   (6.5)    (222,100)   (8.9)
          Excess of repurchase
           price over issue price             -     0.1            -     4.3
                                    ------------ ------- ------------ -------
          Shares outstanding at
           the end of the period     78,178,223   720.5   78,174,354   719.6
                                    ------------ ------- ------------ -------
        Common Shares
          Shares outstanding at
           the beginning and end
           of the period              3,423,366     0.2    3,423,366     0.2
                                    ------------ ------- ------------ -------

    4.  Stock-based Compensation Plans

        All stock-based compensation plans are as disclosed in the most
        recently issued annual financial statements for the 52 weeks ended
        January 2, 2010 except as follows:

        2010 Performance Share Unit Plan

        The Company has granted 2010 Performance Share Units (2010 PSUs) to
        certain employees. Each 2010 PSU entitles the participant to receive
        a cash payment in an amount equal to the weighted average closing
        price of Class A Non-Voting Shares traded on the Toronto Stock
        Exchange for the 20-day period commencing the day after the last day
        of the performance period, multiplied by an applicable multiplier
        determined by specific performance-based criteria. Compensation
        expense related to 2010 PSUs is accrued over the performance period
        based on the expected total compensation to be paid out at the end of
        the performance period. For the 13 weeks ended April 3, 2010,
        $0.3 million of compensation expense was recorded for the 2010 PSUs.

    5.  Segmented Information - Statement of Earnings

        ---------------------------------------------------------------------
                                                       13 weeks     13 weeks
                                                          ended        ended
                                                        April 3,     April 4,
        ($ in millions)                                    2010         2009
        ---------------------------------------------------------------------
        Gross operating revenue
          CTR                                       $   1,092.2  $   1,099.3
          Petroleum                                       386.9        321.9
          Mark's                                          153.8        147.1
          Financial Services                              225.4        217.3
          Eliminations                                    (28.2)       (27.5)
        ---------------------------------------------------------------------
          Total gross operating revenue             $   1,830.1  $   1,758.1
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings (loss) before income taxes
          CTR                                       $      26.9  $      32.8
          Petroleum                                         5.4          6.0
          Mark's                                           (4.7)        (4.9)
          Financial Services                               44.1         32.5
        ---------------------------------------------------------------------
          Total earnings before income taxes               71.7         66.4
          Income taxes                                     22.3         16.7
        ---------------------------------------------------------------------
          Net earnings                              $      49.4  $      49.7
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Net Interest expense(1)
          CTR                                       $      16.7  $      18.1
          Mark's                                            0.1          0.6
          Financial Services                               15.2         11.7
        ---------------------------------------------------------------------
          Total interest expense                    $      32.0  $      30.4
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Depreciation and amortization expense
          CTR                                       $      46.3  $      45.9
          Petroleum                                         4.3          4.4
          Mark's                                            7.7          6.5
          Financial Services                                1.4          2.5
        ---------------------------------------------------------------------
          Total depreciation and amortization
           expense                                  $      59.7  $      59.3
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Net interest expense includes interest on short-term and
            long-term debts, offset by passive interest income (includes
            interest income earned on bank deposits, ancillary investments
            and all inter-company interest income). Interest on long-term
            debt for the 13 weeks ended April 3, 2010 was $28.5 million
            (2009 - $27.4 million).


        Segmented Information - Total Assets

        ---------------------------------------------------------------------
                                           April 3,     April 4,   January 2,
        ($ in millions)                       2010         2009         2010
        ---------------------------------------------------------------------

        CTR                            $   6,100.2  $   5,900.4  $   5,810.7

        Petroleum                            272.7        261.9        279.7

        Mark's                               520.6        550.6        493.3

        Financial Services                 3,509.6      2,942.4      3,319.0

        Eliminations                      (1,815.0)    (1,693.4)    (1,113.2)

        ---------------------------------------------------------------------
        Total                          $   8,588.1  $   7,961.9  $   8,789.5
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  Cash and Cash Equivalents

        The components of cash and cash equivalents are:

                                           April 3,     April 4,   January 2,
        ($ in millions)                       2010         2009         2010
                                       ------------ ------------ ------------

        Cash (bank overdraft)          $     (58.1) $     (48.9) $     (48.5)
        Cash equivalents                     803.5        568.4        834.5
                                       ------------ ------------ ------------
        Cash and cash equivalents      $     745.4  $     519.5  $     786.0
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

        Cash equivalents are highly liquid and rated certificates of deposit
        or commercial paper with an original term to maturity of 3 months or
        less.

        Investments in highly liquid and rated certificates of deposits,
        commercial paper or other securities with an original term to
        maturity of more than 3 months and a remaining term to maturity of
        less than one year are classified as short-term investments.

    7.  Capital Management

        The Company's objectives when managing capital and the definition of
        capital are the same as described in Note 18 of the most recently
        issued annual financial statements for the 52 weeks ended January 2,
        2010 contained in our 2009 Annual Report.

        The Company is in compliance with key covenants under its existing
        debt agreements during the quarter. Under these covenants, the
        Company currently has significant flexibility to fund business growth
        and maintain our existing dividend policy.

        The Company is in compliance with regulatory requirements associated
        with the operations of Canadian Tire Bank (the Bank), its federally
        chartered bank, and other regulatory requirements that impact its
        business operations.

        The Bank's ratios are above internal minimum targets for Tier 1 and
        Total capital ratios and below its internal maximum targets for the
        assets to capital multiple. OSFI's minimum Tier 1 and Total capital
        ratios for Canadian banks are 7 per cent and 10 per cent,
        respectively. During the 3 months ended April 3, 2010 and the
        comparative period, the Bank complied with the capital guidelines
        issued by OSFI under the "International Convergence of Capital
        Measurement and Capital Standards - A Revised Framework" (Basel II).

    8.  Merchandise Inventory

        Included in "cost of merchandise sold and all other operating
        expenses except for the undernoted items" for the 13 weeks ended
        April 3, 2010 is $1,197.0 million (2009 - $1,137.7 million) of
        inventory recognized as an expense, which included $14.0 million
        (2009 - $13.6 million) of write-downs of inventory as a result of net
        realizable value being lower than cost. Inventory write-downs
        recognized in previous years and reversed in the current quarter and
        the comparative quarter were insignificant.

    9.  Supplementary Cash Flow Information

        The Company paid income taxes during the 13 weeks ended April 3, 2010
        of $27.1 million (2009 - $52.1 million) and made interest payments of
        $31.2 million (2009 - $56.2 million).

        During the 13 weeks ended April 3, 2010, property and equipment were
        acquired at an aggregate cost of $40.6 million (2009 -
        $59.5 million). The amount of property and equipment acquired that is
        included in accounts payable and other at April 3, 2010 was
        $4.7 million (2009 - $22.0 million).

        During the 13 weeks ended April 3, 2010, intangible software was
        acquired at an aggregate cost of $10.7 million (2009 -
        $19.9 million). The amount of intangible software acquired that is
        included in accounts payable and other at April 3, 2010 was
        $1.9 million (2009 - $0.7 million).

    10. 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 its consolidated
        earnings, cash flows, or financial position.

        There have been no material changes in any legal matters disclosed in
        Note 21 of the most recently issued annual financial statements for
        the 52 weeks ended January 2, 2010 contained in our 2009 Annual
        Report.

    11. 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.

        There have been no material changes in ongoing audits by tax
        authorities as disclosed in Note 14 of the most recently issued
        annual financial statements for the 52 weeks ended January 2, 2010
        contained in our 2009 Annual Report.

        The Company regularly reviews the potential for adverse outcomes in
        respect of tax matters. The Company believes that the ultimate
        disposition of any tax matters in dispute with tax authorities 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 tax liability materially differ from the provision, the
        Company's effective tax rate and its earnings could be affected
        positively or negatively in the period in which the matters are
        resolved.

        Interest Coverage Exhibit to the Consolidated Financial Statements
        (unaudited)
        ---------------------------------------------------------------------

        The Company's long-term interest requirements for the 52 weeks ended
        April 3, 2010, after annualizing interest on long-term debt issued
        and retired during this period, amounted to $114.1 million. The
        Company's earnings before interest on long-term debt and income taxes
        for the 52 weeks ended April 3, 2010 were $614.6 million, which is
        5.4 times the Company's long-term interest requirements for this
        period.
    

%SEDAR: 00000534EF

SOURCE Canadian Tire Corporation, Limited

For further information: For further information: Media: Amy Cole, (m) (416) 997-9825, (416) 544-7655, amy.cole@cantire.com; Investors: Karen Meagher, (m) (416) 561-6843, (416) 480-8058, karen.meagher@cantire.com

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