Q3 2016 conf call slides final
- 1. Canadian Tire Corporation 2016 Third Quarter Financial Results November 10, 2016
- 2. Forward Looking Information This document contains forward-looking statements that reflect 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 the Company’s financial position, results of operations 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 statements, including but not limited to, statements concerning Management’s current expectations relating to possible or assumed future prospects and results, the Company’s strategic goals and priorities, its actions and the results of those actions and the economic and business outlook for the Company. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “believe”, “estimate”, “plan”, “can”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “aspire”, “foresee”, “continue”, “ongoing” or the negative of these terms or variations of them or similar terminology. Forward-looking statements are based on the reasonable assumptions, estimates, analyses, beliefs and opinions of Management, made in light of its experienceand 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 their very nature, forward-looking statements require Management to make assumptions and are 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. Examples of Management’s beliefs, which may prove to be incorrect, include, but are not limited to, beliefs about the effectiveness of certain performance measures, beliefs about current and future competitive conditions and the Company’s position in the competitive environment, beliefs about the Company’s core capabilities and beliefs regarding the availability of sufficient liquidity to meet the Company’s contractual obligations. Although the Company believes that the forward-looking statements in this document are based on information, assumptions and beliefs that are current, reasonable and complete, these statements are 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 statements. Some of the factors, many of which are beyond the Company’s 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 the Company to attract and retain high quality employees for all of its businesses, Dealers, Canadian Tire Petroleum retailers and Mark’s and FGL Sports franchisees, as well as the Company’s financial arrangements with such parties; (c) the growth of certain business categories and market segments and the willingness of customers to shop at its stores or acquire its financial products and services; (d) the Company’s margins and sales and those of its competitors; (e) the changing consumer preferences toward eCommerce, online retailing and the introduction of new technologies; (f) risks and uncertainties relating to information management, technology, cyber threats, property management and development, environmental liabilities, supply chain management, product safety, changes in law, regulation, competition, seasonality, weather patterns, commodity prices and business disruption, the Company’s relationships with suppliers, manufacturers, partners and other third parties, changes to existing accounting pronouncements, the risk of damage to the reputation of brands promoted by the Company and the cost of store network expansion and retrofits; (g) the Company’s capital structure, funding strategy, cost management programs and share price; and (h) the Company’s ability to obtain all necessary regulatory approvals. Management cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also adversely affect the Company’s results. Investors and other readers are urged to consider the foregoing risks, uncertainties, factors and assumptions carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. 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 the Company’s Annual Information Form for fiscal 2015, as well as the Company’s other public filings, available on the SEDAR (System for Electronic Document Analysis and Retrieval) website at www.sedar.comand at investors.canadiantire.ca Forward-looking statements 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 updateany forward-looking statements, 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.
- 3. Executive Participants Stephen Wetmore, President and CEO, Canadian Tire Corporation Dean McCann, Chief Financial Officer and EVP Allan MacDonald, President, Canadian Tire Duncan Fulton, President, FGL Sports Mary Turner, President, Canadian Tire Financial Services Rick White, President, Mark’s
- 4. Third Quarter Highlights Strong third quarter results reflecting strength of business fundamentals – Consolidated revenue, excluding Petroleum, increased $48.1M, or 1.8% – Retail gross margin rate, excluding Petroleum, increased 114bps reflecting a positive contribution from all retail banners – Diluted EPS was $2.44, down 6.7%. Excluding the $0.33 per share Q3 2015 gain from the sale of surplus property, diluted EPS increased 6.6% Third quarter same store sales — Canadian Tire up 3.5% — FGL Sports up 6.2% (up 7.7% at Sport Chek) — Mark’s up 4.3% — Consolidated up 4.1% Continued receivables growth at Financial Services − Gross average accounts receivable up 2.0%
- 5. Consolidated Financial Results 1 – Key operating performance measure. Refer to section 9.3.1 in the Q3 2016 MD&A for additional information. 2 – Not meaningful. Excluding the Q3 2015 $0.33 per share gain from the sale of surplus property, diluted EPS increased 6.6 percent, year- over-year, driven by strong revenue growth and improved gross margin contribution from the Retail and Financial Services segments, as well as the favourable impact of share repurchases on year-over-year diluted EPS; partially offset by increased selling, general and administrative expenses, and an increase in the effective tax rate.
- 6. Retail Segment Results Income before income taxes decreased $20.0 million, or 11.0 percent, compared to prior year as the prior year included a $29.2 million gain on the sale of surplus property. Excluding this gain, strong sales and revenue growth and improved gross margin contribution in Canadian Tire, FGL Sports, and Mark’s, as well as Petroleum’s higher per litre gas margins, were more than offset by an increase in selling, general and administrative expenses. 1 – Key operating performance measure. Refer to section 9.3.1 in the Q3 2016 MD&A for additional information.
- 7. CT REIT Segment Results Higher income before income taxes primarily due to properties acquired during 2016 and 2015 and an increase of $6.2 million in the fair market value adjustment over the prior year.
- 8. Financial Services Segment Results Income before income taxes was driven by both revenue and gross margin rate increases year-over-year, offset by increased selling, general and administrative expenses.
- 9. (C$ in millions) Q3 2016 Q3 2015 YTD Q3 2016 YTD Q3 2015 EBITDA1 $ 246.0 $ 259.3 $ 598.9 $ 578.6 Less: Depreciation and amortization2 90.7 88.1 273.6 254.3 Net finance (income) (6.9) (11.0) (30.6) (30.4) Income before income taxes $ 162.2 $ 182.2 $ 355.9 $ 354.7 Appendix Consolidated Adjusted EBITDA1 and Retail EBITDA1 Adjusted EBITDA1 Retail Segment EBITDA1 1 – Key operating performance measure. Refer to section 9.3.1 in the Q3 2016 MD&A for additional information. 2 – Includes $2.2 million reported in cost of producing revenue in the quarter (2015 - $2.2 million) and $6.1 million for Q3 YTD 2016 (2015 - $6.6 million). 1 – Key operating performance measure. Refer to section 9.3.1 in the Q3 2016 MD&A for additional information. 2 – Includes $2.2 million reported in cost of producing revenue in the quarter (2015 - $2.2 million) and $6.1 million for Q3 YTD 2016 (2015 - $6.6 million). (C$ in millions) Q3 2016 Q3 2015 YTD Q3 2016 YTD Q3 2015 Adjusted EBITDA1 $ 402.7 $ 415.1 $ 1,055.2 $ 1,044.8 Change in fair value of redeemable financial instrument - - - - EBITDA $ 402.7 $ 415.1 $ 1,055.2 $ 1,044.8 Less: Depreciation and amortization2 111.6 106.0 333.8 308.4 Net finance costs 24.8 24.2 68.5 70.5 Income before income taxes $ 266.3 $ 284.9 $ 652.9 $ 665.9 Income taxes 68.5 65.0 170.5 171.5 Effective tax rate 25.7% 22.8% 26.1% 25.8% Net income $ 197.8 $ 219.9 $ 482.4 $ 494.4
- 10. Appendix (cont’d) Consolidated and Retail Revenue Excluding Petroleum Revenue Consolidated Revenue excluding Petroleum Revenue (C$ in millions) Q3 2016 Q3 2015 Change YTD Q3 2016 YTD Q3 2015 Change Revenue $ 3,128.4 $ 3,126.8 0.1% $ 9,040.0 $ 8,899.4 1.6% Petroleum Revenue 429.6 476.1 (9.8)% 1,209.0 1,334.4 (9.4)% Revenue (excluding Petroleum) $ 2,698.8 $ 2,650.7 1.8% $ 7,831.0 $ 7,565.0 3.5% Retail Revenue excluding Petroleum Revenue (C$ in millions) Q3 2016 Q3 2015 Change YTD Q3 2016 YTD Q3 2015 Change Revenue $ 2,822.7 $ 2,826.3 (0.1)% $ 8,120.6 $ 7,988.3 1.7% Petroleum Revenue 429.6 476.1 (9.8)% 1,209.0 1,334.4 (9.4)% Revenue (excluding Petroleum) $ 2,393.1 $ 2,350.2 1.8% $ 6,911.6 $ 6,653.9 3.9%
- 11. Questions and Answers For more information http://investors.canadiantire.ca lisa.greatrix@cantire.com or (416) 480-8725 Download our Investor Relations App Follow us on twitter @CanTireCorp