Canadian Tire Corporation Delivers Another Record Year Same store sales for fourth quarter up in all retail banners over a strong Q4 2013: o 2.8% at Canadian Tire o 4.9% at FGL Sports (9.4% at Sport Chek) o 1.2% at Mark s Fourth quarter diluted earnings per share (EPS) up 5.1% or 12.8% after normalizing for nonoperational costs despite dilutive effects of selling 20% of Financial Services business 2014 annual revenue of $12.5 billion, income before tax (IBT) of $878.2 million and diluted EPS of $7.59 exceed strong results achieved in 2013 Financial Services achieves a record $5 billion in gross ending accounts receivable TORONTO, February 26, 2015 Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.a) today released fourth quarter and full year results for the period ended January 3, 2015. Reported results include an additional week of operations while same store sales are reported on a comparative basis. We delivered another record fourth quarter and impressive annual results, despite unseasonable weather compared to last December. We continue to put the numbers on the board by effectively executing our strategic priorities and I m proud of how our team has continued to innovate and adapt in a rapidly changing retail environment. We re entering 2015 in a position of operational strength, said Michael Medline, President and CEO, Canadian Tire Corporation. Our investments in digital are paying off in-store and through marketing campaigns, both of which are exciting our customers and driving sales. That said, we have a long way to go in e-commerce and you will see us put our brand and our assets to work as we continue to evolve and become a world-class online retailer, concluded Medline. 1
CONSOLIDATED OVERVIEW FOURTH QUARTER Consolidated revenue increased 9.8% or $325.1 million to $3.7 billion in the fourth quarter over the same period last year, as a result of higher shipments at Canadian Tire, strong sales at FGL Sports and increased sales at Mark s. Fourth quarter consolidated retail sales increased 7.3%, up $289.6 million to $4.3 billion. This is attributed to enhanced assortments and successful marketing campaigns that drove higher sales at all retail banners as well as an additional week of retail sales during the quarter. Diluted EPS was $2.44 in the quarter, up 5.1% over the fourth quarter of 2013 and up 12.8% after normalizing for the non-operational costs associated with the fair value adjustment on the Scotiabank redeemable financial instrument and costs related to the formation of CT REIT in the prior year. EPS performance reflects strong revenue and gross margin contribution from both the Retail and Financial Services segments. FULL YEAR Consolidated revenue for the full year increased 5.7% over 2013 to $12.5 billion, reflecting a strong contribution from the Retail segment, led by Canadian Tire and FGL Sports. Consolidated retail sales for 2014 were up 4.8%, or $631.3 million, to $13.9 billion, due to sales growth across the retail banners. Diluted EPS for the year increased 9.8% to $7.59, or 13.1% after normalizing for the nonoperational costs associated with the fair value adjustment on the Scotiabank redeemable financial instrument, the premium on the early redemption of medium term notes in Q2 2014 and costs related to the formation of CT REIT in the prior year. EPS performance reflects strong revenue and gross margin contribution from both the Retail and Financial Services segments. 2
RETAIL SEGMENT OVERVIEW FOURTH QUARTER Retail segment income before income taxes was up 21.8%, or $41.7 million, to $234.5 million in the fourth quarter of 2014 compared to 2013, or 19.5% after normalizing for the onetime costs associated with the formation of CT REIT in the prior year. Canadian Tire retail saw fourth quarter retail sales increase 8.3% and same store sales were up 2.8% over 2013. Retail and same store sales at FGL Sports were up 15.0% and 4.9% respectively for the quarter due to increases across all categories and led by strong same store sales of 9.4% at Sport Chek. Mark s retail sales in the fourth quarter grew 5.4% and same store sales were up 1.2% over the prior year. Petroleum retail sales decreased 3.6% in the quarter, due to the sharp decline in gas prices and lower gasoline volumes. FULL YEAR Retail segment earnings before income taxes increased 14.7% to $531.5 million for the full year compared to 2013, or 15% after normalizing for non-operational costs associated with the early redemption of medium-term notes and the formation of CT REIT. For the full year, Canadian Tire retail sales were up 4.4% over 2013 results and same store sales increased 2.4%. FGL Sports 2014 retail sales were up 11.5% (17.7% at Sport Chek) and same store sales increased 6.9% (10.6% at Sport Chek) over a strong 2013. Mark s full year retail and same store sales were up 4.5% and 3.1%, respectively, over 2013. CT REIT OVERVIEW As disclosed in the Q4 2014 CT REIT release issued on February 23, 2015, CT REIT completed two land acquisitions, two developments and six intensifications in the fourth quarter at a total cost of $36.1 million. On a full year basis, CT REIT completed thirteen property acquisitions, two land acquisitions, two developments and six intensifications at a total cost of $264.6 million. In its first full year of operations, CT REIT exceeded its financial forecast and ended the year well-positioned for 2015. 3
FINANCIAL SERVICES OVERVIEW Financial Services posted strong fourth quarter gross average credit card receivables growth of 7.0%, driven by increased average account balances and credit charges. Income before income taxes for the quarter was flat compared to the strong growth achieved in 2013. Fourth quarter 2014 earnings results reflected increased investments in receivables via deferred financing and balance transfer offers that result in immediate revenue deferral. For the full year, income before income taxes was up 7.8% over 2013 reflecting strong gross average accounts receivable growth and investment in account acquisition. CAPITAL ALLOCATION CAPITAL EXPENDITURES Total capital expenditures for 2014 were $721.8 million compared to $544.1 million in 2013, reflecting increased store network growth and accelerated information technology project spending, investment in additional distribution capacity and investments related to properties acquired by CT REIT from vendors other than CTC. QUARTERLY DIVIDEND On February 26, 2015, the Company declared quarterly dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate of $0.525 per share payable on June 1, 2015 to shareholders of record as of April 30, 2015. The dividend is considered an eligible dividend for tax purposes. Over the course of 2014, the Company declared dividends to shareholders of $154 million, an increase of 29% over the prior year. The current annual dividend rate on Common shares and Class A Non-Voting shares of the Company is $2.10 per share. SHARE REPURCHASE During 2014, CTC purchased Class A Non-Voting Shares at a cost of $283.7 million, including $83.7 million in connection with its announcement in October that it intended to repurchase a further $400 million of its Class A Non-Voting Shares through to the end of 2015. In addition, the Company repurchased Class A Non-Voting Shares at a cost of $6.9 million for anti-dilutive purposes during the year. 4
NORMAL COURSE ISSUER BID CTC intends to make a normal course issuer bid to purchase from March 2, 2015 to March 1, 2016, through the facilities of the Toronto Stock Exchange (the TSX ) or alternative trading systems, if eligible, certain of its outstanding Class A Non-Voting Shares (the 2015 NCIB ). The number of Class A Non-Voting Shares which may be purchased during the period the 2015 NCIB is outstanding will not exceed 4.0 million Class A Non-Voting Shares, which is approximately 5.6% of 70.9 million shares, the approximate public float of Class A Non-Voting Shares issued and outstanding as at February 25, 2015. CTC has a policy of purchasing Class A Non-Voting Shares to offset the dilutive effect of the issuance of Class A Non-Voting Shares pursuant to its stock option plan and dividend reinvestment plan. CTC intends to continue that policy. CTC may also purchase additional Class A Non-Voting Shares if, after consideration of various factors, CTC determines that the purchase would be expected to be in the best interests of CTC and contribute to enhancing the value of the remaining Class A Non-Voting Shares. The total number of Class A Non-Voting Shares purchased during 2014 by CTC was 2,600,000, consisting of 100,000 shares purchased under its NCIB which expired on February 25, 2014, and 2,500,000 shares purchased under its NCIB which expired on February 25, 2015. The weighted average price at which the 2,600,000 Class A Non-Voting Shares were purchased was $111.80. Any purchases of Class A Non-Voting Shares by CTC pursuant to the 2015 NCIB will be made through open market transactions at the market price of the Class A Non-Voting Shares at the time of the acquisition or as otherwise permitted under the rules of the TSX. For open market transactions, CTC will be subject to a daily repurchase restriction of 50,858 Class A Non-Voting Shares, which represents 25% of the average daily trading volume of the Class A Non-Voting Shares on the TSX, net of NCIB purchases, for the six months ended January 31, 2015. The Class A Non-Voting Shares acquired by CTC pursuant to the 2015 NCIB will be restored to the status of authorized but unissued shares. CTC s 2015 NCIB is subject to regulatory approval. For additional information, refer to the Company s Q4 2014 Management s Discussion and Analysis. 5
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. Forwardlooking statements are provided for the purposes of providing information about management's current expectations and plans and allowing investors and others to get a better understanding of our anticipated financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other purposes. All statements other than statements of historical facts included in this document may constitute forwardlooking information, including but not limited to, statements concerning the Company s intention to make a normal course issuer bid (including statements regarding the Company s intention to continue its policy of purchasing Class A Non-Voting Shares to offset the dilutive effect of the issuance of Class A Non- Voting Shares pursuant to its stock option plan and dividend reinvestment plan and statements regarding the Company s potential purchase of additional Class A Non-Voting Shares under the heading Normal Course Issuer Bid ) and other 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. Forward-looking information is based on the reasonable assumptions, estimates, analyses, beliefs 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 information is provided. By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the Company's assumptions, estimates, analyses, beliefs and opinions may not be correct and that the Company's expectations and plans will not be achieved. Although the Company believes that the forward-looking information in this document is based on information, assumptions and beliefs which are current, reasonable and complete, this information is necessarily subject to a number of factors, risks and uncertainties that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information. For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations, refer to section 2.10 (Risk Factors) of our Annual Information Form for fiscal 2014 and to sections 6.4.1.3 (Retail segment business risks), 6.4.2.3 (CT REIT segment business risks), 6.4.3.3 (Financial Services segment business risks) and 10.0 (Enterprise Risk Management) and all subsections thereunder of our 2014 Management's Discussion and Analysis, as well as the Company 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, except as is required by applicable securities laws. CONFERENCE CALL Canadian Tire will conduct a conference call to discuss information included in this news release and related matters at 12:00 p.m. ET on February 26, 2015. 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. 6
ABOUT CANADIAN TIRE CORPORATION Canadian Tire Corporation, Limited, (TSX:CTC.A) (TSX:CTC) or "CTC," is a family of businesses that includes a retail segment, a financial services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal categories. PartSource and Gas+ are key parts of the Canadian Tire network. The retail segment also includes Mark's, a leading source for casual and industrial wear, and FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere), which offers the best active wear brands. The 1,700 retail and gasoline outlets are supported and strengthened by our Financial Services division and the tens of thousands of people employed across the Company. For more information, visit Corp.CanadianTire.ca. FOR MORE INFORMATION Media: Sandra Buckler, 416-480-3559, sandra.buckler@cantire.com Investors: Lisa Greatrix, 416-480-8725, lisa.greatrix@cantire.com 7