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Canadian Tire Corporation, LimitedCanadian Tire Corporation, LimitedInternational Financial Reporting Standards
2010 Restated Financial Results
1
Marco Marrone, CFO and EVP Finance
Forward looking informationgIn this document, the terms “we”, “us”, “our”, “Company” and “CTC” refer to Canadian Tire Corporation, Limited and its business units and subsidiaries. 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 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 information including but not limited to statements concerningAll 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'sBy 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 towillingness 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”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 2010 and our 2010 Management's Discussion and Analysis, as well as Canadian Tire’s other public filings, available at www.sedar.comand 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.
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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.
Di l iDisclaimer
This presentation has the objective of introducing to the financial community the majorf f C Gidentified changes that the transition from Canadian GAAP to International Financial
Reporting Standards (IFRS) will have on the Company’s accounts in 2011 (and prioryear comparatives) and thereafter. Impacts contained herein are preliminary andunaudited – and the impact assessment is based on preliminary accounting policy andIFRS 1 h i d b h C b d d d d i i i dIFRS 1 choices made by the Company based on standards and interpretations issuedby the International Accounting Standards Board (IASB) that were in effect as atJanuary 1, 2011.
It h ld b t d h th t ti t d d d i t t ti lIt should be noted, however, that accounting standards and interpretations are alwayssubject to change and that the Company’s reporting under IFRS for the 2011 fiscalyear (and prior year comparatives presented) will be based on standards that areeffective at the end of 2011. The Company will thus continue to actively monitord l t i th t d d d d i d b th IASB lldevelopments in the standards as proposed and issued by the IASB as well asregulatory standards issued by Canadian Securities administrators and Office of theSuperintendent of Financial Institutions (OSFI). Accordingly, the financial informationcould be subject to change when the 2011 quarterly and year-end IFRS ConsolidatedFi i l St t t t d
3
Financial Statements are reported.
A d
Consolidated Opening Statement of Financial Position
Agenda
Consolidated Opening Statement of Financial Position
– Assets
– Liabilities
Sh h ld ’ E it– Shareholders’ Equity
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Q&A
4
K Hi hli h
Key findings remain consistent with those presented in the December 2010 S &
Key Highlights
IFRS education session and earlier disclosures in quarterly MD&A reports
New financial statement formats include:
– Statement of Financial Position format consistent with Canadian GAAP but i l d li i f i i h ld f l d iincludes new line items for provisions, assets held for sale and investment properties
– Statement of Income format enhanced including:
D li ti f t f d i d i• Delineation of cost of producing revenue and gross margin
• Segregation of passive finance income and finance costs (versus net interest expense)
O ti t i t d i t 3 li it• Operating expense categories separated into 3 line items
Significantly increased note disclosure including new operating segment format
5
O i C lid t d St t t f Fi i l P iti A t
Reference Item
Opening Consolidated Statement of Financial Position – Assets Key Impacts
A Consolidation of Glacier Credit Card Trust:- $1.7 billion increase in loans receivable- $16 million increase in cash- $40 million allowance for previously securitized loans p y
receivable
B Consolidation of Franchise Trust:- $757 million increase to short-term and long-term g
loans receivable
C Reclassification of property and equipment to investment property and assets held for sale (new line item disclosures) -$86 million$86 million
D Combining current and long-term deferred tax assets & liabilities –net $33 million
E Property and equipment main impact due to assets underE Property and equipment main impact due to assets under finance leases (previously treated as operating leases) –$118 million
6
O i C lid t d St t t f Fi i l P itiOpening Consolidated Statement of Financial Position –Assets (Unaudited)Restated Consolidated Statement of Financial Position under IFRS
As at January 3, 2010(C$ in millions) CGAAP
Consolidation of additional entities Ref
IFRS Reclassifications Ref
IFRS Adjustments Ref IFRS
ASSETSCash and cash equivalents 869.7$ 16.3$ A (0.2)$ -$ 885.8$ Short-term investments 64.0 (3.3) A 0.2 - 60.9 Trade and other receivables 835 9 2 9 B 15 0 H - 853 8Trade and other receivables 835.9 2.9 B 15.0 H 853.8 Loans receivable 2,274.8 - - (1.4) 2,273.4 Glacier Credit Card Trust loans receivable - 1,733.0 A - (39.5) A 1,693.5 Current portion of loans receivable (Re: Franchise Trust) - 41.8 B - - 41.8 Merchandise inventories 933.6 - - (0.6) 933.0 Income taxes recoverable 94.7 - - - 94.7 Prepaid expenses and deposits 40.7 - 0.4 - 41.1 Deferred income taxes 82.8 - (82.8) D - -
5,196.2 1,790.7 (67.4) (41.5) 6,878.0 Assets classif ied as held for sale - - 15.0 C - 15.0 Total current assets 5,196.2 1,790.7 (52.4) (41.5) 6,893.0 Long-term receivables and other assets 109.9 (3.3) A (0.4) (19.5) A 86.7Long term receivables and other assets 109.9 (3.3) A (0.4) (19.5) A 86.7 Long-term loans receivable (Re: Franchise Trust) - 715.6 B - - 715.6 Other long-term investments 48.8 - - - 48.8 Intangible assets 337.2 - - (1.8) 335.4 Investment property - - 71.2 C - 71.2 Property and equipment 3,180.4 - (86.2) C 116.2 E 3,210.4 D f d i t 33 0 D 13 1 46 1
7
References to A, B, C, D, E, H – see slides 6 and 8 for explanation
Deferred income taxes - - 33.0 D 13.1 46.1 Total assets 8,872.5$ 2,503.0$ (34.8)$ 66.5$ 11,407.2$
O i C lid t d St t t f Fi i l P iti Li biliti
Reference Itemf
Opening Consolidated Statement of Financial Position – Liabilities Key Impacts
F Increases in current and long-term portion of long-term debt -$1.6 billion and commercial paper notes - $163 million due to consolidation of Glacier Credit Card Trust
G I i l bl d lid i f F hiG Increase in loans payable due to consolidation of Franchise Trust – $757 million
H Reclassification of certain existing liabilities and incremental i i lt i $248 illi f t d l tprovisions result in $248 million of current and long-term
provisions
I IFRS adjustments for finance lease obligations:C t d l t d bt i i t f $160 illi- Current and long-term debt - main impact of $160 million
- Immediate realization of unamortized deferred gains on certain sale/leaseback transactions where lease qualifies as operating lease under IFRS - $80 million
8
O i C lid d S f Fi i l P i iOpening Consolidated Statement of Financial Position –Liabilities & Shareholders’ Equity (Unaudited)Restated Consolidated Statement of Financial Position under IFRS
As at January 3, 2010(C$ in millions) CGAAP
Consolidation of additional entities Ref
IFRS Reclassifications Ref
IFRS Adjustments Ref IFRS
LIABILITIESBank indebtedness 83.7$ -$ -$ -$ 83.7$ Deposits 863 4 863 4Deposits 863.4 - - - 863.4 Trade and other payables 1,391.4 19.2 A,B (212.2) H (5.5) A 1,192.9 Provisions - - 199.4 H 21.5 H 220.9 Commercial paper notes - 163.0 F - - 163.0 Loans payable (Re: Franchise Trust) - 757.4 G - - 757.4 Current portion of long-term debt (including Glacier) 309.3 365.0 F - 16.3 I 690.6 Total current liabilities 2 647 8 1 304 6 (12 8) 32 3 3 971 9Total current liabilities 2,647.8 1,304.6 (12.8) 32.3 3,971.9 Long-term provisions - - 22.0 H 4.7 H 26.7 Long-term debt (including Glacier) 1,101.2 1,198.4 F - 141.5 I 2,441.1 Long-term deposits 1,196.9 - - - 1,196.9 Deferred income taxes 49.8 - (49.8) D - - Other long-term liabilities 188.9 - 5.8 H (67.2) I 127.5 Total liabilities 5 184 6 2 503 0 (34 8) 111 3 7 764 1Total liabilities 5,184.6 2,503.0 (34.8) 111.3 7,764.1
SHAREHOLDERS' EQUITYShare capital 720.4 - - - 720.4 Contributed surplus 0.2 - - - 0.2 Accumulated other comprehensive income (loss) (46.4) - - 7.8 (38.6) Retained earnings 3 013 7 (52 6) 2 961 1
9References to A, B, D, F, G, H, I – see slides 6 and 8 for explanation
Retained earnings 3,013.7 - - (52.6) 2,961.1 Total shareholders' equity 3,687.9 - - (44.8) 3,643.1 Total liabilities and shareholders' equity 8,872.5$ 2,503.0$ (34.8)$ 66.5$ 11,407.2$
O i C lid d S f Fi i l P i iOpening Consolidated Statement of Financial Position –Shareholders’ Equity Reconciliation (Unaudited)
Reconciliation of Shareholders' Equity from CGAAP to IFRSReconciliation of Shareholders' Equity from CGAAP to IFRS
(C$ in millions) January 3, 2010Total Shareholders' Equity as reported under CGAAP 3,687.9$ Transitional adjustments:
Property and equipment (0.6) Impairment (1.3) Leases 35.4 Provisions (24.7) Loyalty programs (1 6)Loyalty programs (1.6) Employee benefits (14.2) Share-based payments (6.7) Consolidation - Securitization (49.2) Financial instruments 1.1 Foreign exchange translation 4.2 Income taxes 12.8
Total transitional adjustments (44.8) Total Shareholders' Equity as reported under IFRS 3 643 1$
10
Total Shareholders Equity as reported under IFRS 3,643.1$
Q1 2010 C lid t d St t t f I
Reference Item
Q1 2010 Consolidated Statement of IncomeKey Impacts
J Increase in revenue of $27 million due to revenue on loans receivable for Franchise Trust and Glacier Credit Card Trust- both of these are substantially offset by similar increases inboth of these are substantially offset by similar increases in finance costs
K Increase in finance costs of $22 million due to incremental interest costs for Franchise Trust and Glacier Credit Card Trustcosts for Franchise Trust and Glacier Credit Card Trust
- both of these are substantially offset by similar increases in revenue
L I i d l d k tiL Increase in revenue and sales and marketing expenses substantially due to customer loyalty programs expense reclassifications
11
Q1 2010 C lid d S f IQ1 2010 Consolidated Statement of Income (Unaudited)Restated Consolidated Statement of Income under IFRS
13-weeks ended April 3 2010 CGAAP function Consolidation of IFRS Adjustments/ 13-weeks ended April 3, 2010(C$ in millions)
CGAAP, function of expense format
Consolidation of additional entities Ref.
IFRS Adjustments/Reclassifications Ref. IFRS
Revenue 1,830.1$ 26.8$ J 32.1$ L 1,889.0$ Cost of producing revenue1 (1,304.1) - 2.1 (1,302.0) Gross margin 526.0 26.8 34.2 587.0
Other income (expenses) 0.5 (2.8) (0.5) (2.8)
Operating expenses Distribution costs (72.7) - 0.6 (72.1) Sales and marketing expenses (210.1) - (31.6) L (241.7) Administrative expenses (156.5) (0.9) 2.8 (154.6)
Total operating expenses (439.3) (0.9) (28.2) (468.4)
Operating income 87.2 23.1 5.5 115.8
Finance income 2.1 (1.3) 0.8 1.6 Finance costs1 (17.6) (22.0) K (3.6) (43.2)
Net finance costs (15 5) (23 3) (2 8) (41 6)Net finance costs (15.5) (23.3) (2.8) (41.6)
Income before income taxes 71.7 (0.2) 2.7 74.2
Income taxes (22.3) - (0.3) (22.6)
Net income 49.4$ (0.2)$ 2.4$ 51.6$
12References to J, K, L – see slide 11 for explanation1 Interest on bank deposits of $16.5 million reclassified from finance costs to cost of producing revenue.
Net income 49.4$ (0.2)$ 2.4$ 51.6$ Basic earnings per share 0.61$ - 0.02 0.63$ Diluted earnings per share 0.61$ - 0.02 0.63$
Full Year 2010 Consolidated Statement of Income (Unaudited)( )Restated Consolidated Statement of Income under IFRS
52-w eeks ended January 1, 2011(C$ in millions)
CGAAP, function of expense
formatConsolidation of additional entities
IFRS Adjustments/
Reclassif ications IFRS(C$ in millions) format additional entities Reclassif ications IFRS
Revenue 8,980.8$ 105.2$ 127.1$ 9,213.1$ Cost of producing revenue (6,425.0) - 2.9 (6,422.1) Gross margin 2,555.8 105.2 130.0 2,791.0
Other income (expenses) 15.5 (12.3) (2.1) 1.1
Operating expenses Distribution costs (298.6) - 2.3 (296.3) Sales and marketing expenses (956.9) - (133.5) (1,090.4) Administrative expenses (682.8) (2.9) 2.8 (682.9)
Total operating expenses (1,938.3) (2.9) (128.4) (2,069.6)
Operating income 633.0 90.0 (0.5) 722.5
Finance income 28.3 (0.2) 4.3 32.4 Finance costs (64 3) (90 0) (13 8) (168 1)Finance costs (64.3) (90.0) (13.8) (168.1)
Net finance costs (36.0) (90.2) (9.5) (135.7)
Income before income taxes 597.0 (0.2) (10.0) 586.8
Income taxes (143.4) - 0.8 (142.6)
13
Net income 453.6$ (0.2)$ (9.2)$ 444.2$ Basic earnings per share 5.56$ - (0.11) 5.45$ Diluted earnings per share 5.56$ - (0.14) 5.42$
2010 C lid d C h Fl S
Most significant adjustments relate to inclusion of Glacier Credit Card Trust and C f
2010 Consolidated Cash Flow Statement Key Impacts
Franchise Trust in Company’s results and elimination of securitization transactions reported under Canadian GAAP resulting in:
– Change in opening ‘cash and cash equivalents’ balance;
Ch i h d i h i d– Change in cash used in the period;
– Inclusion of issuance and repayment of Glacier Credit Card Trust indebtedness of $1.2 billion;
I l i f i d t f l bl l ti t F hi– Inclusion of issuance and repayment of loans payable relating to Franchise Trust of $248 million and $319 million, respectively; and
– Elimination of gain on sale of loans receivable of $34 million and securitization loans receivable of $31 millionsecuritization loans receivable of $31 million
Net finance costs and income tax expense are added back as adjustments to operating activities
Interest paid, interest received and income taxes paid are reported separatelyInterest paid, interest received and income taxes paid are reported separately
While cash used in the period does not change significantly under IFRS, the classification of some items between operating, investing and financing activities results in a net reduction in cash generated from operations 14
2010 S f C lid d C h Fl2010 Summary of Consolidated Cash Flows (Unaudited)
Excerpt from Restated Consolidated Statement of Cash Flows under IFRS
52 weeks ended January 1, 2011(C$ in millions)
IFRS Presentation
CGAAP Presentation
C h t d f ti ti iti b f i t t d t $ 973 4 N/ACash generated from operating activities before interest and taxes $ 973.4 N/AInterest paid (115.8) N/AInterest received 3.4 N/AIncome taxes paid (131.5) N/A
Cash generated from operating activities 729.5 991.2Cash generated from operating activities 729.5 991.2
Cash used for investing activities (443.2) (770.1)
Cash used for financing activities (638.0) (570.8)
Cash used in the period (351.7) (349.7) Cash and cash equivalents, net of bank indebtedness, beginning of period 802.1 786.0 Effect of exchange rate fluctuations on cash held 0.5 N/ACash and cash equivalents, net of bank indebtedness, end of period $ 450.9 $ 436.3
15
S f N Fi i l ISummary of Net Financial Impacts (Unaudited)
Financial Statement Increase/ (Decrease)
Opening Consolidated Statement of Financial Position C$ millions change
Assets
Liabilities
Shareholders’ Equity
$2,534.7
$2,579.5
$(44 8)
28.6%
49.8%
(1 2%)Shareholders Equity $(44.8) (1.2%)
Consolidated Full Year Statement of Income C$ millions change
Revenue $232.3 2.6%
Total operating expenses
Net income
$131.3
$(9.4 )
6.8%
(2.1%)
C lid t d St t t f C h Fl C$ illi hConsolidated Statement of Cash Flows C$ millions change
Cash used in the period $2.0 0.6%
16
IFRS Summary IFRS is an accounting change, not a strategic change
The application of IFRS does not change:
y
– How we manage our company and our company strategy
– Our capital management policy
– Our funding strategy
– Our dividend policy
– Our hedging strategy
Accounting standards and interpretations are always subject to change and the Company continues to actively monitor developments within the regulations and t d d di lstandards accordingly
Q1 2011 financial statements and notes and MD&A will be released in May 2011 under IFRS reporting (including IFRS-restated 2010 financial results)
F th i f ti l l ti d fi i l d t t i t i d t di th Further information, calculations and financial data to assist in understanding the IFRS changes is available through our investor relations website in the IFRS section at http://www.corp.canadiantire.ca/en/investors/IFRS
17
APPENDICESAPPENDICES
18
APPENDIX 1SUMMARY OF IFRS IMPACTS
19
A di 1Appendix 1Key fundamentals – what won’t change?
The assertions underlying the financial statements themselves will not be changing –y g g gexistence, authorization, valuation etc.
Double entry bookkeeping will be maintained – debits balance credits in every recorded transaction
B l Sh t (B/S) ti f “A t Li biliti E it ” ill t h Balance Sheet (B/S) equation of “Assets = Liabilities + Equity” will not change
Key fundamentals – what will change? Inter-period matching of costs to revenues as well as the concept of conservatism
(erring on the side of the accounting treatment that produces a lower reported net income), for example, appear to have less bearing on the determination of standards under IFRS
Some changes to the definitions of assets, liabilities and equity
Substantially greater use of fair value concepts (vs. historical cost)
Slight changes to financial statement presentation (especially the income statement)S g c a ges o a c a s a e e p ese a o (espec a y e co e s a e e )
Substantially increased required disclosures (qualitative and quantitative) in the notes to the financial statements
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Appendix 1
Tangible Assets
Summary of key impacts of IFRS adoption
ConsolidationsIAS 27 & SIC 121
SecuritizationsIAS 391
Property, Plant & Equipment (PP&E)
IAS 161LeasesIAS 171
Borrowing CostsIAS 231
Change:Entities that were notconsolidated under C
Change:Securitizations of loans
receivable will not qualify for
Change:Assets are disaggregated into
more components and
Change:Certain operating leases reclassified as finance
Change:Capitalization of
borrowing costs isconsolidated under C-GAAP may be
consolidated under IFRS and vice-versa.
Impact on CTC:Franchise Trust and Gl i C dit C d
receivable will not qualify for off-balance sheet treatment.
Past securitization gains/losses will be
reversed.
Impact on CTC:B th l i bl d
more components and separately depreciated.
Impact on CTC:PP&E and shareholders’
equity marginally declines at the time of transition. Future
i b fit d t
reclassified as finance leases.
Impact on CTC:Financial leverage
metrics have increased.
Ch
borrowing costs is required on qualifying
assets.
Impact on CTC:Capitalize borrowing costs on real estate
j t ti thGlacier Credit Card Trust come on-balance
sheet, increasing financial leverage
metrics.
Both loans receivable and the related obligations are
shown on the B/S.
No material impact on shareholders’ equity and
earnings. However,
earnings may benefit due to lower depreciation expense.
Change:Certain land and buildingshave been designated as
investment property.
Change:In sale/leaseback
transactions that result in operating leases, the
gain/loss is immediately recognized in income.
projects meeting the qualifying asset criteria.
Borrowing cost capitalization extended
to other classes of assets (i.e. Major IT
financial leverage metrics will increase.
Securitizations will continue post-IFRS adoption to the
extent cost effective.
Impact on CTC:Fair values of investment
properties and related assumptions now disclosed in
notes.
Impact on CTC:Previously deferred
gains/losses have been recognized in equity.
EBITDA and cash flow from operations
projects) that meet qualifying asset criteria.
pincreased.
Some additional leases have been capitalized.
211 IAS and SIC refer to International Accounting Standards and Standing Interpretations Committee Standards respectively.
Appendix 1
ProvisionsIAS 371
Employee BenefitsIAS 191
Customer Loyalty ProgramsIFRIC 131
Share-Based Payments
IFRS 21
Impairment of AssetsIAS 361
ppSummary of other impacts of IFRS adoption
IAS 37 IAS 19 IFRIC 13 IFRS 2 IAS 36
Change:Can include legal or
constructive obligation. Requires recognition
based on certain criteria.
Change:Recognize deficit on-
balance sheet at the time of transition to IFRS.
I t CTC
Change:Sale of eligible
merchandise that triggers awards of loyalty points is
treated as a multiple l t t
Change:All stock-based awards must be recorded at fair
value
I t CTC
Change:Impairment testing is
performed at a lower level of asset aggregation and time value of money and
lli t li itlImpact on CTC:
Reclassification of a portion of A/P and
Accruals to new caption provisions.
Impact on CTC:Decline in book equity
values. ROE metrics have increased.
Change:Record all future actuarial
element arrangement.
Revenue has been split with a portion allocated to the awards credit given to
the customers and a portion deferred until the
Impact on CTC:No significant impact on
financial statements.
Change:Share based awards
where recipient has choice
selling costs are explicitly considered.
Impact on CTC:Expect more frequent
impairment losses.
Change:Recognized additional provisions on balance
sheet at the time of transition to IFRS.
Impact on CTC:
gains/losses in equity, with no impact to earnings.
Impact on CTC:Future earnings will
increase.
award credits are redeemed.
Impact on CTC:Net impact to CTC
earnings is not significant.
on settlement is recorded as a compound instrument with a debt component and
an equity component.
Impact on CTC:No significant impact on
Change:Non-goodwill impairment losses can be reversed.
Impact on CTC:May lead to earnings
volatility.pSome additional
obligations have been reflected on B/S.
g pfinancial statements.
y
22
1 IAS and SIC refer to International Accounting Standards and Standing Interpretations Committee Standards respectively.
APPENDIX 2Q2 TO Q4 2010 QUARTERLY IFRS RESTATEDQ2 TO Q4 2010 QUARTERLY IFRS RESTATED CONSOLIDATED STATEMENTS OF INCOME
23
Appendix 2ppQ2 2010 Consolidated Statement of Income (Unaudited)
Restated Consolidated Statement of Income under IFRS
13-w eeks ended July 3 2010CGAAP, function
of expense Consolidation ofIFRS
Adjustments/13 w eeks ended July 3, 2010(C$ in millions)
of expense format
Consolidation of additional entities
Adjustments/Reclassif ications IFRS
Revenue 2,414.1$ 25.5$ 30.1$ 2,469.7$ Cost of producing revenue (1,747.0) - 8.9 (1,738.1) Gross margin 667.1 25.5 39.0 731.6
Other income (expenses) 6.6 (2.9) - 3.7
Operating expenses Distribution costs (74.8) - 0.4 (74.4) Sales and marketing expenses (239.6) - (31.5) (271.1) Ad i i t ti (172 9) (0 7) (0 3) (173 9)Administrative expenses (172.9) (0.7) (0.3) (173.9)
Total operating expenses (487.3) (0.7) (31.4) (519.4)
Operating income 186.4 21.9 7.6 215.9
Finance income 2.4 0.2 0.8 3.4 Finance costs (15.2) (22.5) (3.3) (41.0)
Net finance costs (12.8) (22.3) (2.5) (37.6)
Income before income taxes 173.6 (0.4) 5.1 178.3
Income taxes (53.7) - (1.8) (55.5)
24
Net income 119.9$ (0.4)$ 3.3$ 122.8$ Basic earnings per share 1.47$ - 0.04 1.51$ Diluted earnings per share 1.47$ - 0.03 1.50$
Appendix 2Appendix 2Q3 2010 Consolidated Statement of Income (Unaudited)
Restated Consolidated Statement of Income under IFRS
CGAAP, function IFRS 13-w eeks ended October 2, 2010(C$ in millions)
of expense format
Consolidation of additional entities
Adjustments/Reclassif ications IFRS
Revenue 2,201.0$ 26.5$ 38.6$ 2,266.1$ Cost of producing revenue (1,559.3) - (8.5) (1,567.8) Gross margin 641.7 26.5 30.1 698.3
Other income (expenses) 2.4 (3.4) 0.1 (0.9)
Operating expenses Distribution costs (73.2) - 0.6 (72.6) Sales and marketing expenses (229.9) - (34.9) (264.8) Administrative expenses (184.4) (0.7) 1.2 (183.9)
Total operating expenses (487.5) (0.7) (33.1) (521.3)
Operating income 156.6 22.4 (2.9) 176.1
Finance income 3.0 0.2 1.3 4.5 ( ) ( ) ( ) ( )Finance costs (16.2) (22.8) (3.1) (42.1)
Net finance costs (13.2) (22.6) (1.8) (37.6)
Income before income taxes 143.4 (0.2) (4.7) 138.5
Income taxes (40.2) - 2.2 (38.0)
25
Net income 103.2$ (0.2)$ (2.5)$ 100.5$ Basic earnings per share 1.27$ - (0.04) 1.23$ Diluted earnings per share 1.27$ - (0.04) 1.23$
Appendix 2Appendix 2Q4 2010 Consolidated Statement of Income (Unaudited)
Restated Consolidated Statement of Income under IFRS
CGAAP, function IFRS 13-w eeks ended January 1, 2011(C$ in millions)
of expense format
Consolidation of additional entities
Adjustments/Reclassif ications IFRS
Revenue 2,535.6$ 26.4$ 26.3$ 2,588.3$ Cost of producing revenue (1,814.6) - 0.4 (1,814.2) Gross margin 721.0 26.4 26.7 774.1
Other income (expenses) 6.0 (3.2) (1.7) 1.1
Operating expenses Distribution costs (77.9) - 0.7 (77.2) Sales and marketing expenses (277.3) - (35.5) (312.8) Ad i i t ti (169 0) (0 6) (0 9) (170 5)Administrative expenses (169.0) (0.6) (0.9) (170.5)
Total operating expenses (524.2) (0.6) (35.7) (560.5)
Operating income 202.8 22.6 (10.7) 214.7
Finance income 20.8 0.7 1.4 22.9 Finance costs (15 3) (22 7) (3 8) (41 8)Finance costs (15.3) (22.7) (3.8) (41.8)
Net finance costs 5.5 (22.0) (2.4) (18.9)
Income before income taxes 208.3 0.6 (13.1) 195.8
Income taxes (27.2) - 0.7 (26.5)
26
Net income 181.1$ 0.6$ (12.4)$ 169.3$ Basic earnings per share 2.22$ - (0.14) 2.08$ Diluted earnings per share 2.22$ - (0.15) 2.07$
Appendix 2Appendix 22010 Consolidated Statement of IncomeQuarterly and Full Year (Unaudited)Restated Consolidated Statement of Income under IFRS
(C$ in millions) Q1 Q2 Q3 Q4 YTD CGAAP
Revenue 1,889.0$ 2,469.7$ 2,266.1$ 2,588.3$ 9,213.1$ 8,980.8$ Cost of producing revenue (1,302.0) (1,738.1) (1,567.8) (1,814.2) (6,422.1) (6,425.0) Gross margin 587.0 731.6 698.3 774.1 2,791.0 2,555.8
IFRS Restated
g , ,
Other income (expenses) (2.8) 3.7 (0.9) 1.1 1.1 15.5
Operating expenses Distribution costs (72.1) (74.4) (72.6) (77.2) (296.3) (298.6) Sales and marketing expenses (241.7) (271.1) (264.8) (312.8) (1,090.4) (956.9) Administrative expenses (154 6) (173 9) (183 9) (170 5) (682 9) (682 8)Administrative expenses (154.6) (173.9) (183.9) (170.5) (682.9) (682.8)
Total operating expenses (468.4) (519.4) (521.3) (560.5) (2,069.6) (1,938.3)
Operating income 115.8 215.9 176.1 214.7 722.5 633.0
Finance income 1.6 3.4 4.5 22.9 32.4 28.3 Finance costs (43.2) (41.0) (42.1) (41.8) (168.1) (64.3)
Net finance costs (41 6) (37 6) (37 6) (18 9) (135 7) (36 0)Net finance costs (41.6) (37.6) (37.6) (18.9) (135.7) (36.0)
Income before income taxes 74.2 178.3 138.5 195.8 586.8 597.0
Income taxes (22.6) (55.5) (38.0) (26.5) (142.6) (143.4)
Net income 51.6$ 122.8$ 100.5$ 169.3$ 444.2$ 453.6$ Basic earnings per share 0 63$ 1 51$ 1 23$ 2 08$ 5 45$ 5 56$
27
Basic earnings per share 0.63$ 1.51$ 1.23$ 2.08$ 5.45$ 5.56$ Diluted earnings per share 0.63$ 1.50$ 1.23$ 2.07$ 5.42$ 5.56$
APPENDIX 3CLOSING CONSOLIDATED STATEMENT OFCLOSING CONSOLIDATED STATEMENT OF FINANCIAL POSITION
28
Appendix 3Appendix 32010 Closing Consolidated Statement of Financial Position –Assets (Unaudited)
R t t d C lid t d St t t f Fi i l P iti d IFRSRestated Consolidated Statement of Financial Position under IFRS
As at January 1, 2011(C$ in millions) CGAAP
Consolidation of additional
entitiesIFRS
ReclassificationsIFRS
Adjustments IFRSASSETSCash and cash equivalents 554.3$ 15.4$ (0.8)$ -$ 568.9$ Short-term investments 195.9 - 0.8 - 196.7 Trade and other receivables 662.3 2.0 9.6 - 673.9 Loans receivable 2,481.2 - - (1.5) 2,479.7 Glacier Credit Card Trust loans receivable - 1,570.7 - (35.5) 1,535.2 Current portion of loans receivable (Re: Franchise Trust) - 36.1 - - 36.1 M h di i t i 901 5 (0 5) 901 0Merchandise inventories 901.5 - - (0.5) 901.0 Income taxes recoverable 99.4 - - (0.1) 99.3 Prepaid expenses and deposits 37.6 - 0.3 (0.3) 37.6 Deferred income taxes 72.4 - (72.4) - -
5,004.6 1,624.2 (62.5) (37.9) 6,528.4 Assets classif ied as held for sale - - 20.8 - 20.8 Total current assets 5,004.6 1,624.2 (41.7) (37.9) 6,549.2 Long-term receivables and other assets 100.9 (2.8) (0.4) (21.7) 76.0 Long-term loans receivable (Re: Franchise Trust) - 650.9 - - 650.9 Other long-term investments 75.8 - - - 75.8 Intangible assets 363.0 - - (1.6) 361.4 I t t t (1 5)
29
Investment property - - 70.1 (1.5) 68.6 Property and equipment 3,219.8 - (90.9) 103.1 3,232.0 Deferred income taxes - - 17.8 16.8 34.6 Total assets 8,764.1$ 2,272.3$ (45.1)$ 57.2$ 11,048.5$
Appendix 3Appendix 32010 Closing Consolidated Statement of Financial Position – Liabilities and Shareholders’ Equity (Unaudited)
Restated Consolidated Statement of Financial Position under IFRS
As at January 1, 2011(C$ in millions) CGAAP
Consolidation o f additional
entitiesIFRS
ReclassificationsIFRS
Adjustments IFRS
LIABILITIESBank indebtedness 118.0$ -$ -$ -$ 118.0$ Deposits 615 6 615 6Deposits 615.6 - - - 615.6 Trade and other payables 1,355.9 18.6 (187.6) (7.0) 1,179.9 Provisions - - 174.8 21.4 196.2 Commercial paper notes - 100.6 - - 100.6 Loans payable (Re: Franchise Trust) - 687.0 - - 687.0 Income taxes payable - - - - - Current portion of long-term debt (including Glacier) 22.6 317.5 - 14.1 354.2 Total current liabilities 2,112.1 1,123.7 (12.8) 28.5 3,251.5 Long-term provisions - - 18.2 6.9 25.1 Long-term debt (including Glacier) 1,079.4 1,148.8 - 137.2 2,365.4 Long-term deposits 1,264.5 - - - 1,264.5 Deferred income taxes 54.6 - (54.6) - - Other long-term liabilities 186.8 - 4.1 (53.8) 137.1 Total liabilities 4,697.4 2,272.5 (45.1) 118.8 7,043.6
SHAREHOLDERS' EQUITYShare capital 711.6 - - - 711.6 Contributed surplus 0.3 - - - 0.3
30
Accumulated other comprehensive income (loss) (38.7) - 0.1 0.1 (38.5) Retained earnings 3,393.5 (0.2) (0.1) (61.7) 3,331.5 Total shareholders' equity 4,066.7 (0.2) - (61.6) 4,004.9 Total liabilities and shareholders' equity 8,764.1$ 2,272.3$ (45.1)$ 57.2$ 11,048.5$