Canadian Tire Corporation, Limited Canadian Tire Corporation, - - PowerPoint PPT Presentation

Canadian Tire Corporation, Limited Canadian Tire Corporation, Limited

International Financial Reporting Standards 2010 Restated Financial Results

1

Marco Marrone, CFO and EVP Finance

Forward looking information g

In 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

• ur 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 concerning 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 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 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” 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.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

• ccurring after such statements are made.

2

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 i Disclaimer

This presentation has the objective of introducing to the financial community the major f f C G identified changes that the transition from Canadian GAAP to International Financial Reporting Standards (IFRS) will have on the Company’s accounts in 2011 (and prior year comparatives) and thereafter. Impacts contained herein are preliminary and unaudited – and the impact assessment is based on preliminary accounting policy and IFRS 1 h i d b h C b d d d d i i i d IFRS 1 choices made by the Company based on standards and interpretations issued by the International Accounting Standards Board (IASB) that were in effect as at January 1, 2011. It h ld b t d h th t ti t d d d i t t ti l It should be noted, however, that accounting standards and interpretations are always subject to change and that the Company’s reporting under IFRS for the 2011 fiscal year (and prior year comparatives presented) will be based on standards that are effective at the end of 2011. The Company will thus continue to actively monitor d l t i th t d d d d i d b th IASB ll developments in the standards as proposed and issued by the IASB as well as regulatory standards issued by Canadian Securities administrators and Office of the Superintendent of Financial Institutions (OSFI). Accordingly, the financial information could be subject to change when the 2011 quarterly and year-end IFRS Consolidated Fi 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 i includes 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 under E 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 iti Opening 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 ASSETS Cash 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 8

Trade 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 classified 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 86.7 Long 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 Item f

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 hi G 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 t provisions 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

• perating lease under IFRS - $80 million

8

O i C lid d S f Fi i l P i i Opening 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 LIABILITIES Bank indebtedness 83.7 $

• $
• $
• $

83.7 $ Deposits 863 4 863 4 Deposits 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 9 Total 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 1 Total liabilities 5,184.6 2,503.0 (34.8) 111.3 7,764.1 SHAREHOLDERS' EQUITY Share 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

9

References 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 i Opening Consolidated Statement of Financial Position – Shareholders’ Equity Reconciliation (Unaudited)

Reconciliation of Shareholders' Equity from CGAAP to IFRS Reconciliation of Shareholders' Equity from CGAAP to IFRS (C$ in millions) January 3, 2010 Total 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 Income Key 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 in

both 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 Trust costs 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 ti L Increase in revenue and sales and marketing expenses substantially due to customer loyalty programs expense reclassifications

11

Q1 2010 C lid d S f I Q1 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

• f 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 $

12 References to J, K, L – see slide 11 for explanation

1 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

• f expense

format Consolidation of additional entities IFRS Adjustments/ Reclassifications IFRS (C$ in millions) format additional entities Reclassifications 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 million securitization loans receivable of $31 million  Net finance costs and income tax expense are added back as adjustments to

• perating activities

 Interest paid, interest received and income taxes paid are reported separately Interest 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 Fl 2010 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/A Cash generated from operating activities before interest and taxes $ 973.4 N/A Interest paid (115.8) N/A Interest received 3.4 N/A Income taxes paid (131.5) N/A Cash generated from operating activities 729.5 991.2 Cash 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/A Cash and cash equivalents, net of bank indebtedness, end of period $ 450.9 $ 436.3

15

S f N Fi i l I Summary 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 h Consolidated 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 l standards 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

APPENDICES APPENDICES

18

APPENDIX 1

SUMMARY OF IFRS IMPACTS

19

A di 1 Appendix 1 Key fundamentals – what won’t change?

 The assertions underlying the financial statements themselves will not be changing – y g g g existence, 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

20

Appendix 1

Tangible Assets

Summary of key impacts of IFRS adoption

Consolidations IAS 27 & SIC 121 Securitizations IAS 391 Property, Plant & Equipment (PP&E) IAS 161 Leases IAS 171 Borrowing Costs IAS 231

Change: Entities that were not consolidated 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 is consolidated 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

• ff-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 th Glacier 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 buildings have been designated as investment property. Change: In sale/leaseback transactions that result in

• perating 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. p increased. Some additional leases have been capitalized.

21

1 IAS and SIC refer to International Accounting Standards and Standing Interpretations Committee Standards respectively.

Appendix 1

Provisions IAS 371 Employee Benefits IAS 191 Customer Loyalty Programs IFRIC 131 Share-Based Payments IFRS 21 Impairment of Assets IAS 361

pp Summary 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

• f 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

• f asset aggregation and

time value of money and lli t li itl Impact 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.

• n 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. p Some additional

• bligations have been

reflected on B/S. g p financial statements. y

22

1 IAS and SIC refer to International Accounting Standards and Standing Interpretations Committee Standards respectively.

APPENDIX 2

Q2 TO Q4 2010 QUARTERLY IFRS RESTATED Q2 TO Q4 2010 QUARTERLY IFRS RESTATED CONSOLIDATED STATEMENTS OF INCOME

23

Appendix 2 pp

Q2 2010 Consolidated Statement of Income (Unaudited)

Restated Consolidated Statement of Income under IFRS 13-w eeks ended July 3 2010 CGAAP, function

• f expense

Consolidation of IFRS Adjustments/ 13 w eeks ended July 3, 2010 (C$ in millions)

• f expense

format Consolidation of additional entities Adjustments/ Reclassifications 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 2 Appendix 2

Q3 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)

• f expense

format Consolidation of additional entities Adjustments/ Reclassifications 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 2 Appendix 2

Q4 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)

• f expense

format Consolidation of additional entities Adjustments/ Reclassifications 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 2 Appendix 2

2010 Consolidated Statement of Income Quarterly 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 3

CLOSING CONSOLIDATED STATEMENT OF CLOSING CONSOLIDATED STATEMENT OF FINANCIAL POSITION

28

Appendix 3 Appendix 3

2010 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 IFRS Restated Consolidated Statement of Financial Position under IFRS As at January 1, 2011 (C$ in millions) CGAAP

Consolidation

• f additional

entities IFRS Reclassifications IFRS Adjustments

IFRS ASSETS Cash 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 0 Merchandise 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 classified 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 3 Appendix 3

2010 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

• f additional

entities IFRS Reclassifications IFRS Adjustments

IFRS LIABILITIES Bank indebtedness 118.0 $

• $
• $
• $

118.0 $ Deposits 615 6 615 6 Deposits 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' EQUITY Share 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 $