canadian tire corporation
2020 REPORT TO SHAREHOLDERS
iii
iv
canadian tire corporation
2020 REPORT TO SHAREHOLDERS
01
MESSAGE FROM MAUREEN J. SABIA, CH AIRMAN OF THE BOAR D
DE AR SHA REHOLDERS,
We have all been through a tumultuous year. It has been challenging for my colleagues on the Board, for
our management and for all of you. It has been especially challenging for our CEO, Greg Hicks, who was
confronted, a mere day after he was appointed CEO, with leading the Company in a world dominated by
COVID-19 and the restrictions that followed in its wake. Greg understood how difficult the road ahead would
be, but viewed the situation as providing opportunities as well as challenges. Our strong results in 2020 have
shown how resilient Canadian Tire proved to be under his leadership, despite the unprecedented impacts on
the Company’s business.
Given the circumstances, your Board of Directors quickly stepped up and, in the first few months, held weekly
calls with management to address the Company’s response to the pandemic and to support management in its
efforts to operate the business in unprecedented times. The Board also established an ad hoc subcommittee
to serve as a resource to management on key strategic issues.
Throughout the year, the Board has continued to oversee the impacts of COVID-19 on the Company and
management’s responses thereto, with particular emphasis on its impacts on operations, customers, employees,
financial performance, risk management and liquidity. At the same time, the Board worked with management
on opportunities to grow the Company’s business, especially in eCommerce where Canadian Tire experienced
record growth. The Board spent much of its time on the strategic direction of the Tire both during and after
the pandemic and overseeing the huge number of internal communications with our employees and external
communications with our customers and shareholders.
With the support of the Board, our skilled management navigated through the pandemic effectively. The Company
was able to move with agility and purpose, implementing swift operational changes as circumstances changed.
Our goal was (and still is) to ensure that Canadian Tire remains strong and even more relevant to Canadians.
What we accomplished in 2020 could not have been done without hard work, and very long hours and days.
On behalf of the Board, I say a BIG thank you to our management at every level for their energy, their stamina
and their commitment to making the Tire resilient in the face of overwhelming adverse conditions. Their goal
was to ensure that Canadian Tire continued to be there for Canadians.
02
Going forward, Canadian Tire is committed to transforming the Company to focus on being customer-centric
and digitally savvy. We are committed to an omni-channel strategy which includes both bricks and mortar
stores and online business. This has served us very well during COVID-19 and will serve us well in the months
and years post the pandemic.
Based on my personal experience and the experience of many others, working from home is not sustainable. It is
stressful, time-consuming and lacks the value of human interaction. Working virtually made our job so much harder.
In spite of the fact that working from home has not been optimal, our employees have been magnificent in
ensuring that their work continued unabated. So many worked and are still working a seven-day week.
Our Associate Dealers worked tirelessly, often on short notice, to adapt to ever-changing circumstances in a
superb effort to continue to serve their customers. I am very proud of their efforts.
Given the importance of ESG-related issues, we have decided to transform the Board’s Brand and Community
Committee into a Brand and Corporate Responsibility Committee. This Committee will be responsible for all
matters that could impact our iconic brand. An important part of its duties will be ESG matters as we believe
these are critical to the health of our brand.
I have long believed that business must be successful in order to provide the jobs, products and services that
Canadians need. Therefore, business should be proactive in finding ways to encourage public policies that
promote business profitability and growth.
The private sector — and Canadian Tire in particular — has an important role to play in working with the public
sector to get Canada on the path to economic recovery. Indeed, only through a true partnership between
the private sector and governments at all levels can we overcome the challenges posed by the pandemic.
Jim Goodfellow will not be standing for re-election to our Board in May. Jim has been one of our leading
directors and he will be missed. He has had a long association with the Tire and my colleagues and I have
always considered him a mentor and a friend. He has contributed much to our success and I am pleased
that he has agreed to remain on the Board of Canadian Tire Bank.
It is with deep regret that we must say farewell to Claude L’Heureux. His place on the Board will be taken
by Sylvain Leroux, a fellow Associate Dealer, subject to shareholder approval. Claude has been the gold
standard of Associate Dealers on the Board. His knowledge of the Company, his courage, his insights and his
statesmanlike approach to issues made him a hugely valuable contributor to our discussions and decisions.
We will miss his wise counsel and his friendship.
I am very pleased to welcome Steve Frazier to our Board of Directors, subject to shareholder approval.
Mr. Frazier has recently retired from Amazon where for some 20 years he was a senior executive with both
international and domestic responsibilities. He led the U.K., China and Brazil businesses, private brands, and
Amazon’s B2B marketplace in multiple global markets.
Finally, I want to thank you, our shareholders, for your continued support and trust.
The resilience shown by Canadian Tire during 2020 is yet another indication of the strength of our iconic
Company, a company that refuses to accept anything less than the best it can be in the service of its
customers in spite of very challenging circumstances. In a matter of weeks, we ramped up our eCommerce
business to unprecedented levels — a billion dollars in 2020. Circumstances drove us to do in weeks what,
in normal circumstances, we planned to do in three years. As our founder A.J. Billes always counselled: strive
always to make things better. That counsel has become our mantra.
I want to say once again what a privilege it is for me to work for Canadian Tire, a company that is endlessly
fascinating, a company that has a tradition of going from success to success. It is a company that is, truly,
part of the fabric of Canada. I know that an even more impressive future lies ahead.
Maureen Sabia, Chairman of the Board
03
MESSAGE FROM GREG HICKS, PRESIDE NT AND CH IEF EXECUTIVE OFFICER
Striving Always
To Make Things Better
DE AR SHA REHOLDERS,
It is with great pride that I write my first letter to you as CEO of Canadian Tire
Corporation. It’s an honour and a privilege to lead an iconic Company that is
woven into the fabric of our nation’s culture.
2020 was a year unlike any other. We all faced significant personal and professional challenges, many of
which continue today. Although we were navigating uncharted waters, we had a powerful compass in the
words of our founder, A.J. Billes, who instilled in our great Company the value of “striving always to make
things better.” In turn, our team rallied around our purpose of being there for our customers, communities,
and each other. To our Associate Dealers and the tens of thousands of team members across our family
of companies: thank you. Thank you for your unshakeable resilience, grit and determination in the face
of complex and relentless obstacles.
04
W HAT 2020 TAUGHT US
Internally, the challenges of COVID-19 gave us an opportunity to reshape the culture of our Company,
including how we communicate, how we show up for each other, and how we work. Managing the crisis
snapped our teams together around shared objectives: no longer was there time for meetings before
meetings, vertical hierarchies and egos. By working horizontally towards common outcomes focused
on the customer, we were faster and more agile than ever before. We recognized that we were living in
a time that would redefine us and we weren’t going to waste the chance to learn, grow and, ultimately,
be better connected to our customers, our communities, and each other.
We aligned to a common goal: protecting the health and safety of our employees and customers while
ensuring Canadians had access to the products, services and support they needed. Our frontline store,
contact centre and Distribution Centre staff, as well as Dealers and corporate employees, collaborated
to solve problems and implement new and better processes for our customers. Our customers wanted
and needed more options when it came to how and when they could shop. So, in addition to enhancing
the capacity and stability of our website to process an unprecedented volume of eCommerce orders,
we launched Curbside Pick Up in a matter of days, enabling our customers to get products that simply
couldn’t wait for shipping.
Knowing that being there for life in Canada is about more than the products we sell or services we
provide, our stores and Dealers stepped up for their communities with donations and support. In 2020
we launched Canadian Tire’s $5 million COVID-19 Response Fund and Jumpstart initiated its $8 million
Sport Relief Fund. And through the creation of a formal Diversity, Inclusion and Belonging (DIB) team
and ongoing DIB initiatives and programs, we embarked on a journey to ensure our culture is one where
our people feel seen, heard and that they belong.
Not all of our solutions were perfect, but we quickly realized that striving always to make things better
doesn’t mean striving always to make things perfect. We evolved — developing newfound agility by
embracing the mindset of progress over perfection.
05
OU R RESULTS
Although it was out of necessity that we embraced new ways of working, our results prove that
we have tapped into something powerful. Following decades of investment to build a resilient and
sustainable business model, our diversified segments serve as a strategic advantage and solid defence
against uncertainty. The year was unquestionably difficult: the challenges of 2020 impacted all parts
of our business. However, our core Retail segment proved integral, safely providing the products and
services Canadians needed throughout the pandemic. Our retail sales (excluding Petroleum) grew a
remarkable 11% in the year. We continued to make progress in improving our operating leverage, a goal
of our Operational Efficiency program, and achieved an impressive 15.7% growth in our normalized
retail income before tax. And while the first two quarters of the year were significantly impacted by
the pandemic, the team drove outstanding results in the second half, with EPS eclipsing 2019’s full
year performance and growing 48% year-over-year. Our full year normalized diluted EPS was $13.00,
essentially flat to the 2019 level of $13.04.
At the onset of the pandemic, there were questions about the risk in our Financial Services portfolio,
but our team navigated remarkably. With demonstrated risk management capabilities, access to
multiple sources of liquidity, and a robust provision for potential credit losses, we enter 2021 prepared
for the future.
We also welcomed 1.8 million new members into our Triangle Rewards credit card and loyalty program in
2020. The crisis reintroduced many Canadians to Canadian Tire. The real opportunity now is to engage
with and prove to new members that we have the right assortment of products for life in Canada, and the
omni-channel presence to enable shopping where and how they want. Customers experienced new ways of
shopping our family of companies, and our eCommerce business grew to $1.6 billion — a 183% increase over
the prior year.
06
Our differentiated Owned Brands portfolio performed extremely well, with penetration across our business
now at 37%. Our Helly Hansen business also demonstrated resiliency and is strengthening our core business
by differentiating our positioning at SportChek and Mark’s, and we see runway in the U.S. and internationally.
Foundational to our resilience is our capital strength. With $2 billion in cash and short-term investments,
and $3 billion, $3.9 billion and $299 million in liquidity at our Retail, Financial Services and REIT segments,
respectively, we have the capacity to absorb impacts of an uncertain environment while retaining the flexibility
to invest and grow in areas of strategic importance. Additionally, in November, we approved a 3.3% increase in
our annual dividend, reflecting 11 years of consecutive increases.
Despite the challenging retail environment, we remain focused on accelerating our shift to greater
digitization and delivering relevant experiences for our customers. We’re expediting larger structural cost
improvements and changing the way we work to make the efforts permanent. We are adopting hybrid,
agile work models across the enterprise, all focused on improving experiences for our customers.
07
BE IN G THERE FOR YOU: OUR SHAREHO LD ERS
I want to thank you — our shareholders — for your continued belief in, support of, and commitment to
CTC. We in turn are committed to you, and I want you to know what you can expect from me.
The crisis helped me recognize that the barriers to boldness and speed are less about technology, scale
and capital, and more about mindset regarding what is possible and what one is willing to do, including
being committed to collaboration and having the courage to challenge bureaucratic chains of command
and the processes that slow us down. This learning and the management of our Operational Efficiency
program serve as our blueprint for changing the way we operate to enable our strategy, become more
efficient, and secure our competitive position. Financially, Operational Efficiency is focused on stream-
lining our business, doing things once, and reducing our expenses to help us improve our bottom line
performance and return value to our shareholders, including over $200 million in run rate savings by 2022.
I will ensure we are good stewards of capital: COVID-19 pushed the organization’s focus on capital
into purview. I will urge our teams to prioritize the best areas of our business in which to invest. I will
challenge conventional capital allocation and eliminate the phrase “because we have always done it this
way” from our vocabulary.
Finally, I’ve heard from shareholders and investors that we have not been adequately telling our story.
Among the lessons of 2020 was the power of frequent and transparent communication with all our
stakeholders. My initial commitment to communication has not wavered over the last year, and I hope
you are beginning to feel the difference. Trust that going forward, we will be focused on furthering your
understanding of our performance and where we intend to go in the future.
08
TH E NEX T 100 YEARS
When we finally reach the other side of the pandemic, there will be another challenge, a new competitor,
the next disruption. But we will always overcome because CTC is nothing if not resilient. Between the
combination of our unique Dealer model, the strength of our Triangle Rewards program, and the relevance,
breadth and depth of our assortment, we are well-positioned to continue engaging with and supporting our
customers in 2021 and beyond.
Know that as CEO, my number one job is to bring together all our assets to deliver a truly connected
customer experience. To do this, we will need to invest accordingly and be bolder about our strategic
agenda. We need to focus and allocate greater resources to the businesses that maximize our potential
and are well-positioned to deliver strong returns. Given changing consumer needs, disruptive technologies
and competitors, our businesses must work together to ensure we are continuing to engage and drive
relevance with our customers. Consider for a moment our network of stores in a different way: we have
12.5 million square feet of warehouse space with $4 billion worth of inventory, all within a 15-minute
drive of 90% of Canadians. What’s more, these warehouses just happen to be attached to 34 million
square feet of product showrooms where customers can touch, feel, and buy product. Through Triangle
Rewards, over 70% of Canadian households, or 10 million Canadians, are enrolled in our best-in-class
loyalty program, and in 2020, we had 800 million visits to our websites. We have the assets needed to
compete. But if we want to win, we must connect these assets to create and deliver relevant experiences
for our customers.
In closing, I want to thank our Board of Directors for their confidence in me — both in March 2020 and
today, following more than a year of COVID-19 turbulence. I am extremely grateful for the Board’s
unwavering support and guidance.
For me, 2020 was a masterclass in leadership. The pandemic illuminated a fact that would have come
to light eventually: “the way we’ve always done things” was simply not going to work. So, we’ve changed
course when it comes to how we work and are charting a new path to growth. Know that we will
continue to be there for our employees, customers, communities and shareholders, not by standing still,
but by embracing progress over perfection, and striving always to make life in Canada better.
Sincerely,
Greg Hicks,
President and CEO, Canadian Tire Corporation
10
management’s discussion
and analysis
AND
consolidated financial
statements
Management’s Discussion and Analysis
Canadian Tire Corporation, Limited
Fourth Quarter and Full-Year 2020
Table of Contents
1.0
PREFACE
2.0
COMPANY AND INDUSTRY OVERVIEW
3.0
HISTORICAL PERFORMANCE HIGHLIGHTS
4.0
EVENTS THAT IMPACTED THE COMPANY THIS YEAR
5.0
FINANCIAL PERFORMANCE
5.1 Consolidated Financial Performance
5.2 Retail Segment Performance
5.3 Financial Services Segment Performance
5.4 CT REIT Segment Performance
6.0
BALANCE SHEET ANALYSIS, LIQUIDITY, AND CAPITAL RESOURCES
7.0
EQUITY
8.0
TAX MATTERS
9.0
ACCOUNTING POLICIES, ESTIMATES, AND NON-GAAP MEASURES
10.0
KEY RISKS AND RISK MANAGEMENT
11.0
INTERNAL CONTROLS AND PROCEDURES
12.0
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY
13.0
FORWARD-LOOKING STATEMENTS AND OTHER INVESTOR COMMUNICATION
14.0
RELATED PARTIES
1
3
4
6
8
8
14
20
23
26
34
35
35
46
56
57
58
60
MANAGEMENT'S DISCUSSION AND ANALYSIS
1.0 Preface
1.1 Definitions
In this document, the terms “we”, “us”, “our”, “Company”, “Canadian Tire Corporation”, “CTC”, and “Corporation”
refer to Canadian Tire Corporation, Limited, on a consolidated basis. This document also refers to the
Corporation’s three reportable operating segments: the “Retail segment”, the “Financial Services segment”, and
the “CT REIT segment”.
The financial results for the Retail segment are delivered by the businesses operated by the Company under the
Company’s retail banners, which include Canadian Tire, PartSource, Petroleum, Gas+, Party City, Mark’s, Mark’s
Work Wearhouse, L’Équipeur, Helly Hansen, SportChek, Sports Experts, Atmosphere, Pro Hockey Life (“PHL”),
National Sports, Sports Rousseau, and Hockey Experts.
In this document:
“Canadian Tire” refers to the general merchandise retail and services businesses carried on under the
Canadian Tire, PartSource, PHL, and Party City names and trademarks, and the retail petroleum business
carried on by Petroleum.
“Canadian Tire stores” and “Canadian Tire gas bars” refer to stores and gas bars (which may include
convenience stores, car washes, and propane stations) that operate under the Canadian Tire and Gas+ names
and trademarks.
“Owned brands” refers to brands owned by the Company and are managed by the consumer brands division of
the Retail segment.
“CT REIT” refers to the business carried on by CT Real Estate Investment Trust and its subsidiaries, including
CT REIT Limited Partnership (“CT REIT LP”).
“Financial Services” refers to the business carried on by the Company’s Financial Services subsidiaries, namely
Canadian Tire Bank (“CTB” or “the Bank”) and CTFS Bermuda Ltd. (“CTFS Bermuda”), a Bermuda reinsurance
company.
“Helly Hansen” refers to the international wholesale and retail businesses that operate under the Helly Hansen
and Musto brands.
“Jumpstart” refers to Canadian Tire Jumpstart Charities.
“Mark’s” refers to the retail and commercial wholesale businesses carried on by Mark’s Work Wearhouse Ltd.,
and “Mark’s stores” including stores that operate under the Mark’s, Mark’s Work Wearhouse, and L’Équipeur
names and trademarks.
“PartSource stores” refers to stores that operate under the PartSource name and trademarks.
“Party City” refers to the party supply business that operate under the Party City name and trademarks in
Canada.
“Petroleum” refers to the retail petroleum business carried on under the Canadian Tire and Gas+ names and
trademarks.
“SportChek” refers to the retail business carried on by FGL Sports Ltd., including stores that operate under the
SportChek, Sports Experts, Atmosphere, National Sports, Sports Rousseau, and Hockey Experts names and
trademarks.
Other terms that are capitalized in this document are defined the first time they are used.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 1 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
This document contains trade names, trademarks, and service marks of CTC and other organizations, all of which
are the property of their respective owners. Solely for convenience, the trade names, trademarks, and service
marks referred to herein appear without the ® or TM symbol.
1.2 Forward-Looking Statements
This Management’s Discussion and Analysis (“MD&A”) contains statements that are forward-looking and may
constitute “forward-looking information” within the meaning of applicable securities legislation. Actual results or
events may differ materially from those forecasted and from statements of the Company’s plans or aspirations that
are made in this MD&A because of the risks and uncertainties associated with the Corporation’s businesses and
the general economic environment. The Company cannot provide any assurance that any forecast financial or
operational performance, plans, or aspirations will actually be achieved or, if achieved, will result in an increase in
the Company’s share price. Refer to section 13.0 in this MD&A for a more detailed discussion of the Company’s
use of forward-looking statements.
1.3 Review and Approval by the Board of Directors
The Board of Directors, on the recommendation of its Audit Committee, approved the contents of this MD&A on
February 17, 2021.
1.4 Quarterly and Annual Comparisons in the MD&A
Unless otherwise indicated, all comparisons of results for Q4 2020 (14 weeks ended January 2, 2021) are
compared against Q4 2019 (13 weeks ended December 28, 2019) and all comparisons of results for the full year
2020 (53 weeks ended January 2, 2021) are compared against results for full year 2019 (52 weeks ended
December 28, 2019).
1.5 Accounting Framework
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), also referred to as Generally Accepted Accounting Principles (“GAAP”), using the accounting
policies described in Note 3 to the consolidated financial statements.
1.6 Accounting Estimates and Assumptions
The preparation of consolidated financial statements that conform to IFRS requires Management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses
during the reporting period. Refer to section 9.1 in this MD&A for further information.
1.7 Key Operating Performance Measures and Additional GAAP and Non-GAAP Financial Measures
The Company has identified several key operating performance measures and non-GAAP financial measures
which Management believes are useful in assessing the performance of the Company; however, readers are
cautioned that some of these measures may not have standardized meanings under IFRS and, therefore, may not
be comparable to similar terms used by other companies. Refer to section 9.3.1 and 9.3.2 for additional
information on these metrics.
1.8 Rounding and Percentages
Rounded numbers are used throughout the MD&A. All year-over-year percentage changes are calculated on
whole dollar amounts except in the presentation of basic and diluted earnings per share (“EPS”), in which year-
over-year percentage changes are based on fractional amounts.
2 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
2.0 Company and Industry Overview
Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: 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 & Gardening divisions. PartSource, Gas+, Party City and Pro Hockey Life are key
parts of the Canadian Tire network. The Retail segment also includes Mark's, a leading source for casual and
industrial wear; and SportChek, Hockey Experts, Sports Experts, National Sports, Intersport and Atmosphere,
which offer the best active wear brands. The approximately 1,741 retail and gasoline outlets are supported and
strengthened by our Financial Services division and the tens of thousands of people employed across Canada
and around the world by the Company and its Canadian Tire Associate Dealers (“Dealers”), franchisees and
petroleum retailers. In addition, Canadian Tire Corporation owns and operates Helly Hansen, a leading global
brand in sportswear and workwear based in Oslo, Norway. A description of the Company’s business and select
core capabilities can be found in the Company’s 2020 Annual Information Form (“2020 AIF”), including section 2
“Description of the Business” and on the Company’s Corporate (https://corp.canadiantire.ca/English/home/
default.aspx) and Investor Relations (https://corp.canadiantire.ca/English/investors/default.aspx) websites.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 3 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
3.0 Historical Performance Highlights
3.1 Selected Annual Consolidated Financial Trends
The following table provides selected annual consolidated financial and non-financial information for the last three
fiscal periods. The financial information has been prepared in accordance with IFRS. As a result of COVID-19,
consolidated earnings and EPS were impacted by a number of items in 2020, refer to section 4.0 in this MD&A for
further information regarding the events that impacted the Company in 2020. The fourth quarter and full year
2020 results include one additional week of retail operations compared to the fourth quarter and full year 2019
results.
(C$ in millions,
except per share amounts and number of retail locations)
Consolidated comparable sales growth2
Retail Sales excluding Petroleum
Revenue
Net income
Normalized4 net income
Basic EPS
Diluted EPS
Normalized3 diluted EPS
Total assets
Total non-current financial liabilities4
Financial Services gross average accounts receivables (total
portfolio)
Number of retail locations
20201
NM
2019
3.6%
2018
2.2%
$
$
15,172.7 $
13,669.0
14,871.0 $
14,534.4
$
$
13,151.1
14,058.7
862.6
904.9
12.35
12.31
13.00
20,377.1
8,353.3
6,008.6
1,741
894.8
923.3
12.60
12.58
13.04
19,518.3
7,535.3
6,253.5
1,746
783.0
870.4
10.67
10.64
11.95
17,286.8
7,597.1
5,825.3
1,700
Cash dividends declared per share
Stock price (CTC.A)5
1 The full year 2020 results include one additional week of retail operations compared to the full year 2019.
2 Does not include Helly Hansen. Due to the pervasive temporary store closures across all banners in the first half of 2020, Management believes that
4.5875 $
167.33
142.08
4.2500
140.63
3.7375
$
$
consolidated comparable sales growth for the full year 2020 is not a meaningful metric.
3 Refer to section 5.1.1 for details on normalized items.
4
Includes short and long-term deposits, long-term debt including the current portion, long-term derivative liabilities included in other long-term liabilities, and the
redeemable financial instrument.
5 Closing share price as of the date closest to the Company’s fiscal year end.
4 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
REVENUE BY BANNER/UNIT*
($ millions)
STORES AND RETAIL REVENUE
Retail revenue
($ billions)
Number of stores
Canadian Tire
Financial Services
SportChek
Mark’s
Petroleum
* Excludes CT REIT
Helly Hansen
**2020 results are based
on a 53 week period.
Store count
Retail revenue
* 2020 results are based on a 53 week
period.
FINANCIAL SERVICES GROSS AVERAGE
ACCOUNTS RECEIVABLE
($ millions)
NORMALIZED DILUTED EPS AND
DIVIDENDS PER SHARE
($ per share)
(Dividends $ per share)
Normalized Diluted EPS
Dividends per share
* 2020 results are based on a 53 week period.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 5 of 134
201820192020**05,00010,00015,00020,0002018201920204,5004,7505,0005,2505,5005,7506,0006,2506,500$12.8$13.2$13.6201820192020*10111213141650167517001725175017753.73754.25004.5875201820192020*$6$8$10$12$14$0$1$2$3$4$5
MANAGEMENT'S DISCUSSION AND ANALYSIS
4.0 Events that Impacted the Company this Year
During 2020, the Coronavirus (“COVID-19”) pandemic had an impact on the Canadian and global economies and
on consumer purchasing behaviours. These impacts, combined with the temporary closure of certain stores and
the introduction of new safety protocols, significantly affected the Company’s operations and financial
performance in the year.
In response to the COVID-19 pandemic, the Company implemented a number of comprehensive operational and
risk management strategies to support its businesses and to protect the health and well-being of its employees,
customers, Dealers and franchisees through the pandemic. These strategies also allowed the Company to
continue to provide Canadians and their communities with essential products and services and demonstrated the
resilience of the Company’s business model.
The issuance of COVID-19 related government guidelines and restrictions, as well as the Company’s focus on the
health and well-being of its employees, customers, Dealers and franchisees, impacted the Company’s operations
in several areas.
•
•
•
•
•
•
In the second quarter, 203 Canadian Tire Retail stores in Ontario were temporarily closed for five weeks
and, for the majority of the quarter, all SportChek and Mark’s were also temporarily closed. With the
resurgence of COVID-19 in the second half of the fourth quarter, stores across the Retail banners in
Manitoba, Ontario, and Quebec were subject to further restrictions and store closures. These restrictions
and closures in the fourth quarter did not have a material impact to the Company’s financial results.
Throughout this time, the Company continued to serve customers online, offering curbside pickup and
deliver-to-home across its Retail banners.
Helly Hansen operations were also impacted by store closures and restrictions throughout 2020, which
affected its stores as well as the stores and operations of its wholesale customers.
Reduced store hours and customer capacity limitations also impacted all banners.
The Company introduced enhanced cleaning protocols and actions to support physical distancing,
including the installation of plexiglass and floor decals.
The ability of Financial Services to acquire new credit card customers was affected by the temporary
store closures and reduced store hours throughout the year.
From March 22, 2020 to mid-August 2020 the Company and its Dealers implemented a special support
payment for all active front-line employees in recognition of their commitment to serve their communities
during the pandemic.
On April 9, 2020, the Company launched a $5 million Canadian Tire COVID-19 Response Fund to help Canadians
and their communities respond to the pandemic. The COVID-19 pandemic has also had a significant impact on
community sports and recreation. During the year, with the Company’s support, Jumpstart launched the $8
million Jumpstart Sport Relief Fund - a fund developed to help sport and recreation organizations deliver
programming. In December 2020, CTC donated $12 million of funding to the Jumpstart Sport Relief Fund to
provide further support of this initiative in 2021.
Impact on Customers
The Company’s multi-category assortment continues to provide Canadians with the things they need for the jobs
and joys of life in Canada. Throughout the year, the Company saw a significant shift in customer shopping
behaviour by increasingly moving to online purchasing. For the full year, eCommerce sales were approximately
$1.6 billion and penetration rates were more than double 2019 rates for all banners.
The Company’s ongoing ability to satisfy its customers’ shopping preferences and achieve its operational
objectives depends upon its ability to maintain key supply chain operations, distribution, logistics and
transportation arrangements. These arrangements were significantly challenged in 2020 by the COVID-19
pandemic as a result of unprecedented customer demand for certain products. The Company’s supply chain
processes and technologies provide visibility across the end-to-end supply chain network and support the
Company’s ability to proactively address potential disruptions as a result of consumer demand arising from the
6 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
COVID-19 pandemic. Key strategic relationships with vendors and the ability to utilize inventory across banners
aided the Company’s ability to address customer demand during the year.
The Financial Services segment continued to support its cardholders throughout the COVID-19 pandemic by
implementing various relief programs to meet cardholders’ needs.
Impact on Financial Performance
During the first three quarters of the year, Retail segment income before taxes was negatively impacted by $92.7
million, driven primarily by: (1) $59.5 million of additional selling, general and administrative expenses (“SG&A”)
attributable to the Company’s COVID-19 efforts in the second and third quarters of 2020, including special support
payments for active front-line employees which ended in August and enhanced safety protocols for employees
and customers; and (2) $27.9 million of impairment costs recognized in other expenses (income) during the
second quarter of 2020 related to the impact that the macro-economic environment is expected to have on the
timing of certain growth strategies related to the Company’s Musto sailing brand and on future cash flows of select
SportChek stores. While the Company continues to incur costs in relation to enhanced safety protocols, no
material non-recurring costs were incurred in the fourth quarter.
The Company also saw a reduction in customer spending in the Financial Services segment during the year due
to the COVID-19 pandemic and experienced lower account acquisition as a result of restrictions in the Company’s
store network. In the first quarter, at the onset of the pandemic, the Company recorded an expense of $44.9
million relating to an increase in the expected credit loss (“ECL”) allowance resulting from assumption changes
relating to COVID-19. Over the balance of the year, the Company continued to assess and update the underlying
assumptions in the ECL allowance in the normal course of business, including with regards to the impacts of the
COVID-19 pandemic.
On a full year basis, the Company has estimated that the above COVID-19 related net expenses have negatively
impacted consolidated results by $137.6 million, or $1.60 in earnings per share.
Given the considerable ongoing uncertainty regarding the duration and severity of COVID-19 and its impact on
the economy, consumer demand, and operations, the Company withdrew its financial aspirations previously
provided in the Company’s 2019 Report to Shareholders and does not believe it is appropriate at this time to
provide forward-looking information.
Impact on Liquidity
The heightened uncertainty arising from COVID-19 and its impact on the economic environment and capital
markets in 2020 led to an increased emphasis within the Company on liquidity and capital management.
Management believes the Company’s multi-category assortment, healthy balance sheet, Triangle Rewards
program, credit card value proposition, access to multiple sources of liquidity for all its businesses, and the
essential role it plays in communities across Canada have positioned the Company well to manage through these
unprecedented times.
During the year, the Company took appropriate actions to ensure a strong ongoing cash position and financial
flexibility, including reducing operating costs at head office and corporate stores, reducing discretionary capital
expenditures and working capital requirements across the Company, and pausing its share repurchases other
than for anti-dilutive purposes.
The Company is in a strong liquidity position with the ability to access capital from multiple sources as outlined in
Section 6.5 of this MD&A. To strengthen this position, in 2020, the Company secured additional credit by entering
into a committed bank credit facility for $710 million with five Canadian financial institutions. This facility is
available until June 30, 2022. The Company ended the year with a strong balance sheet, no outstanding
borrowing on any of its Canadian credit facilities and was in compliance with all of its financial covenants.
On March 31, 2020, related to the COVID-19 pandemic, S&P downgraded the Company’s long-term issuer rating
and medium-term notes rating from “BBB+” to “BBB” and placed a “Negative” outlook on the Company’s long-term
issuer rating. On April 7, 2020, related to the COVID-19 pandemic, DBRS Morningstar placed the Company’s
long-term issuer rating and medium-term notes rating to “under review with negative implications” and on June 5,
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 7 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
2020 downgraded the Company’s long-term issuer rating and medium-term notes rating from “BBB (high)” to
“BBB”, with “Stable” trends.
5.0 Financial Performance
5.1 Consolidated Financial Performance
The fourth quarter and full year 2020 results include one additional week of retail operations compared to the
fourth quarter and full year 2019 results.
5.1.1 Consolidated Financial Results
(C$ in millions, except where noted)
Retail sales1
Revenue
Gross margin dollars
Q4 2020
Q4 2019
Change
2020
2019
Change
$ 5,317.2 $ 4,838.2
9.9 % $ 16,864.4 $ 15,879.0
$ 4,874.5 $ 4,316.7
12.9 % $ 14,871.0 $ 14,534.4
$ 1,849.9 $ 1,503.0
23.1 % $ 5,076.6 $ 4,873.8
Gross margin as a % of revenue
37.9 %
34.8 % 313 bps
34.1 %
33.5 %
Other expense (income)
$
18.9 $
2.0
NM2 $
48.7 $
(13.4)
Selling, general and administrative expenses
1,053.6
58.8
943.7
66.0
11.6 % 3,599.3
3,437.5
(11.0) %
256.5
266.8
$
718.6 $
491.3
46.3 % $ 1,172.1 $ 1,182.9
196.8
27.4 %
125.4
25.5 %
57.0 %
309.5
26.4 %
288.1
24.4 %
$
521.8 $
365.9
42.6 % $
862.6 $
894.8
(3.6) %
6.2 %
2.3 %
4.2 %
60 bps
NM2
4.7 %
(3.9) %
(0.9) %
7.4 %
Net finance costs
Income before income taxes
Income taxes expense
Effective tax rate
Net income
Net income attributable to:
Shareholders of Canadian Tire Corporation
$
488.8 $
334.1
46.3 % $
751.8 $
778.4
Non-controlling interests
33.0
31.8
3.6 %
110.8
116.4
Basic EPS
Diluted EPS
Weighted average number of Common and
Class A Non-Voting Shares outstanding:
$
$
$
521.8 $
365.9
42.6 % $
862.6 $
894.8
8.04 $
7.97 $
5.42
5.42
48.2 % $
12.35 $
12.60
47.0 % $
12.31 $
12.58
(3.4) %
(4.8) %
(3.6) %
(2.0) %
(2.2) %
Basic
Diluted
60,807,577 61,592,583
61,358,623 61,669,335
NM2 60,896,809 61,794,565
NM2 61,090,111 61,861,486
NM2
NM2
1 Retail sales is a key operating performance measure. Refer to section 9.3.1 in this MD&A for additional information.
2 Not meaningful.
Non-Controlling Interests
The following table outlines the net income attributable to the Company’s non-controlling interests. For additional
details, refer to Note 15 to the Company’s 2019 consolidated financial statements.
(C$ in millions)
Financial Services
Q4 2020
Q4 2019
2020
2019
Non-controlling interest percentage 20.0% (2019 – 20.0%)
$
16.7 $
15.9 $
47.2 $
61.7
CT REIT
Non-controlling interest percentage 30.8% (2019 – 30.6%)
15.7
15.2
62.4
51.3
Retail segment subsidiary
Non-controlling interest percentage 50.0% (2019 – 50.0%)
Net income attributable to non-controlling interests
$
0.6
33.0 $
0.7
1.2
3.4
31.8 $
110.8 $
116.4
8 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operational Efficiency program
During 2020, the Company continued to focus on executing its Operational Efficiency program and related
initiatives and remains committed and on track to deliver its targeted $200+ million in annualized savings by 2022.
As part of this program, and, as the Company continues to evolve and grow its brand, a decision was made to
close all 18 National Sports retail stores and eCommerce channel to eliminate duplication across banners. The
costs associated with these closures included $9.5 million in inventory write-offs recorded in cost of producing
revenue and $17.2 million in asset write-offs recorded in other expenses (income). The items were considered
normalizing items as described in the next section.
Normalizing Items
The results of operations in 2020 and 2019 include costs related to the Company’s Operational Efficiency
program and Party City acquisition-related costs which were considered as normalizing items. The Company’s
Operational Efficiency program includes costs in relation to severance, consulting, IT-project related costs, and
the costs associated with the closure of the National Sports banner as described above.
(C$ in millions)
Q4 2020
Q4 2019
2020
Operating Efficiency program
$
35.3 $
6.5 $
56.7 $
Party City:
Acquisition-related costs
Fair value adjustment for inventories acquired1
—
—
—
2.4
—
—
2019
34.4
2.3
2.4
Total
$
35.3 $
8.9 $
56.7 $
39.1
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
Normalized results are non-GAAP measures and do not have standardized meanings under IFRS and, therefore,
may not be comparable to similar terms used by other companies. For further information and a reconciliation to
GAAP measures, refer to section 9.3.2 in this MD&A.
Change2
12.9 %
7.2 %
23.5 %
Selected Normalized Metrics – Consolidated
(C$ in millions, except
where noted)
Q4 2020
Normalizing
Items1
Normalized
Q4 2020
Q4 2019
Normalizing
Items1
Normalized
Q4 2019
Revenue
$ 4,874.5 $
— $ 4,874.5 $ 4,316.7 $
— $ 4,316.7
Cost of producing revenue
3,024.6
(9.5)
3,015.1
2,813.7
(2.4)
2,811.3
Gross margin
Gross margin rate
Other expense
Selling, general and
$ 1,849.9 $
9.5 $ 1,859.4 $ 1,503.0 $
2.4 $ 1,505.4
37.9%
20 bps
38.1%
34.8%
6 bps
34.9%
327 bps
$
18.9 $
(17.2) $
1.7 $
2.0 $
(1.3) $
0.7
142.9 %
administrative expenses
1,053.6
(8.6)
1,045.0
Net finance costs
58.8
—
58.8
943.7
66.0
(5.2)
—
938.5
66.0
11.3 %
(11.0) %
Income before income taxes $
718.6 $
35.3 $
753.9 $
491.3 $
8.9 $
500.2
Income tax expense
196.8
8.7
205.5
125.4
2.4
127.8
Net income
$
521.8 $
26.6 $
548.4 $
365.9 $
6.5 $
372.4
Net income attributable to
shareholders of CTC
488.8
26.6
515.4
334.1
6.5
Diluted EPS
$
7.97 $
0.43 $
8.40 $
5.42 $
0.11 $
340.6
5.53
50.7 %
60.8 %
47.3 %
51.3 %
51.9 %
1 Refer to Normalizing Items table in this section for more details.
2 Change is between normalized results.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 9 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
(C$ in millions, except
where noted)
2020
Normalizing
Items1
Normalized
2020
2019
Normalizing
Items1
Normalized
2019 Change2
2.3 %
1.3 %
4.3 %
33.5% 64 bps
NM3
(14.7)
Revenue
$ 14,871.0 $
— $ 14,871.0 $ 14,534.4 $
— $ 14,534.4
Cost of producing revenue
9,794.4
(9.5)
9,784.9
9,660.6
(2.4)
9,658.2
Gross margin
Gross margin rate
$ 5,076.6 $
9.5 $
5,086.1 $ 4,873.8 $
2.4 $
4,876.2
34.1%
6 bps
34.2%
33.5%
2 bps
Other expense (income)
$
48.7 $
(17.2) $
31.5 $
(13.4) $
(1.3) $
Selling, general and
administrative expenses
3,599.3
(30.0)
3,569.3
3,437.5
(35.4)
3,402.1
4.9 %
Net finance costs
256.5
—
256.5
266.8
—
266.8
(3.9) %
Income before income taxes $ 1,172.1 $
56.7 $
1,228.8 $ 1,182.9 $
39.1 $
1,222.0
Income tax expense
309.5
14.4
323.9
288.1
Net income
$
862.6 $
42.3 $
904.9 $
894.8 $
Net income attributable to
shareholders of CTC
751.8
42.3
794.1
778.4
Diluted EPS
$
12.31 $
0.69 $
13.00 $
12.58 $
10.6
28.5 $
28.5
0.46 $
298.7
923.3
806.9
13.04
0.6 %
8.4 %
(2.0) %
(1.6) %
(0.3) %
1 Refer to Normalizing Items table in this section for more details.
2 Change is between normalized results.
3 Not meaningful.
10 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated Results Commentary
Diluted EPS for the fourth quarter of 2020 increased significantly, driven by shipments to Dealers at Canadian Tire
and strong sales at Mark’s. The Retail segment normalized income before taxes increased by 70.1 percent, with
Retail revenue growing by 20.1 percent and normalized gross margin rate (excluding Petroleum) increasing by
168 bps, led by strong performance at Canadian Tire. The Financial Services segment income before taxes grew
by 5.6 percent, driven mainly by a $27.3 million reduction in the allowance for loans receivable due largely to a
year over year decline in receivables. Despite lower growth in cardholder sales and receivables volume, Financial
Services’ aging metrics continued to be favourable.
Strong performance in the Retail segment in the last half of 2020 resulted in normalized diluted EPS of $13.00 for
the full year 2020, only slightly lower than 2019, despite the impact of the COVID-19 pandemic on the operations
and financial results of the Company in the first half of the year.
As a result of COVID-19, consolidated earnings and EPS were impacted by a number of items in 2020. Refer to
section 4.0 in this MD&A for further information regarding the events that impacted the Company this year. The
fourth quarter and full year 2020 results include one additional week of retail operations compared to the fourth
quarter and full year 2019 results.
Consol-
idated
Results
Summary
Q4 2020
Full Year
p Diluted EPS: $2.55 per share, or 47.0%
q Diluted EPS: $0.27 per share, or 2.2%
in
Consolidated revenue increased $557.8 million, or
12.9 percent. Excluding Petroleum, consolidated
revenue increased 17.4 percent mainly attributable
to exceptional revenue growth
the Retail
segment, partially offset by lower revenue in the
Financial Services segment. Retail segment
revenue increased mainly due to strong growth at
Canadian Tire driven primarily by higher shipments
and
the Company’s cost and margin-sharing
arrangement with its Dealers, an increase in
revenue at Mark’s and Helly Hansen, and one
additional week of retail operations, which were
partially offset by lower revenue at SportChek.
The revenue decline in the Financial Services
segment was mainly attributable to lower credit
charges and lower card sales revenue.
Consolidated gross margin dollars
increased
$346.9 million, or 23.1 percent. Normalized gross
increased by $354.0 million, or 23.5
margin
percent, which is primarily attributable to the Retail
segment driven primarily by growth at Canadian
Tire as well as Mark’s, Helly Hansen and one
additional week of retail operations. Gross margin
the Financial Services segment
increased
attributable mainly to a decrease in ECL allowance
compared to prior year.
in
Other expense increased by $16.9 million primarily
attributable to asset write-offs relating to the
Operational Efficiency program initiatives during
the quarter. Normalized other expense was
relatively flat compared to prior year with an
increase of $1.0 million.
2.3
percent.
Consolidated revenue increased $336.6 million,
or
Excluding
Petroleum,
increased 6.9 percent
consolidated revenue
driven by the exceptional revenue growth in the
Retail segment in the second half of the year
partially offset by a decline in revenue in the
Financial Services segment. Retail segment
revenue increase was driven by strong growth in
Canadian Tire, the inclusion of Party City, and
one additional week of retail operations partially
offset by temporary store closures during the
second quarter. The revenue decline in the
Financial Services
segment was mainly
attributable to lower card sales revenue and
lower credit charges.
Consolidated gross margin dollars increased
$202.8 million, or 4.2 percent. Normalized gross
margin increased by $209.9 million, or 4.3
percent, which is primarily attributable to the
Retail segment driven by strong growth at
Canadian Tire, inclusion of Party City, and, one
additional week of retail operations during the
year, partially offset by temporary store closures
during
The Financial
Services segment gross margin declined due to
lower revenue and an increase in the ECL
allowance compared to prior year.
the second quarter.
Other income decreased by $62.1 million mainly
related to the Retail segment, mainly attributable
to asset write-offs related to the Operational
Efficiency program initiatives in fourth quarter of
2020, an impairment charge of $27.9 million in
the second quarter of 2020, higher real estate
gains related to property disposition incurred in
the prior year, and, higher non-operating foreign
exchange losses at Helly Hansen.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 11 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Consolidated Results Commentary (continued)
Q4 2020
Full Year
Consolidated SG&A expenses
increased by
$109.9 million, or 11.6 percent. Normalized
consolidated SG&A increased $106.5 million, or
11.3 percent. The increase was mainly attributable
to an increase in personnel costs driven by one
additional week of retail operations in the quarter
and the impact of higher shipment volumes on
supply chain costs, an increase in IT-related costs,
marketing spend and other expenses which
include a donation made to Jumpstart in the
lower variable
quarter, partially offset by
compensation
and Operational
Efficiency program savings compared to the prior
year.
expenses
Net finance costs during the quarter decreased
primarily due to lower medium-term and short-term
funding volume and rates compared to the prior
year.
Income taxes for the quarter was an expense of
$196.8 million, compared to $125.4 million in the
prior year. The increase in income tax expense
was primarily due to higher income and higher
the
non-deductible stock-option expense
quarter.
in
Normalized diluted EPS for the quarter was $8.40,
an increase of $2.87, or 51.9 percent from prior
year. The increase in earnings was primarily
driven by strong growth in the Retail segment
driven by Canadian Tire and one additional week
of retail operations during the quarter, partially
offset by, lower earnings in the Financial Services
segment and higher income taxes.
Consolidated SG&A expenses
increased by
$161.8 million or 4.7 percent. Normalized
consolidated SG&A expenses
increased by
$167.2 million, or 4.9 percent. This increase was
mainly attributable to higher SG&A expenses in
the fourth quarter of 2020 and included net costs
in relation to the events that impacted the year.
Net finance costs were lower compared to the
prior year mainly attributable to lower medium-
term and short-term funding volume and rates
which was partially offset by a one-time benefit of
$6.9 million relating to interest income on tax
settlement in the prior year.
Income taxes for the period was $309.5 million
compared to $288.1 million, an increase of $21.4
million compared to the prior year due to higher
non-deductible stock-option expense, favourable
tax settlement in the prior year which was
partially offset by higher non-controlling interest
relating to CT REIT.
Normalized diluted EPS was $13.00, a decrease
of $0.04, or 0.3 percent from prior year. Earnings
were relatively flat for the full year as the growth
in the Retail segment in the second half of the
year was offset by temporary store closures in
the Retail segment banners during the first half of
the year, and, higher income taxes. Diluted EPS
and Normalized diluted EPS was negatively
impacted by $1.60, due to the net expenses
relating to events that impacted the Company
this year. Refer to Section 4.0 of this MD&A for
further details on the events that impacted the
Company this year.
5.1.2 Consolidated Key Operating Performance Measures, Excluding Petroleum
Key operating performance measures do not have standard meanings under IFRS and, therefore, may not be
comparable to similar terms used by other companies. Refer to section 9.3.1 in this MD&A for definitions and
further information.
(C$ in millions) increase/(decrease)
Normalized1 SG&A expenses adjusted for rent expense2 (excluding
depreciation and amortization3) and excluding Petroleum, as a
percentage of revenue4, 5
Q4 2020
Q4 2019
Change
21.4 %
22.4 %
(102) bps
Normalized1 EBITDA adjusted for rent expense2 and excluding
Petroleum, as a percentage of revenue4, 5
1 Refer to section 5.1.1 for a description of normalizing items.
2 Adjustments to SG&A include an addition of depreciation on right-of-use assets and net finance costs relating to lease liability as an estimate for rent expense.
3 Depreciation and amortization excluded amounted to $100.3 million (2019 - $100.7 million).
4 Revenue excludes Petroleum revenue, EBITDA excludes Petroleum gross margin.
5 Normalized SG&A adjusted for rent expense and normalized EBITDA adjusted for rent expense are non-GAAP measures; refer to section 9.3.2 in this MD&A
299 bps
15.7 %
18.7 %
for a reconciliation of these non-GAAP measures to the related GAAP measure and additional information.
12 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
(C$ in millions) increase/(decrease)
Normalized1 SG&A expenses adjusted for rent expense2 (excluding
depreciation and amortization3) and excluding Petroleum, as a
percentage of revenue4, 5
2020
2019
Change
24.1 %
24.7 %
(53 bps)
Normalized1 EBITDA adjusted for rent expense2 and excluding
Petroleum, as a percentage of revenue4, 5
1 Refer to section 5.1.1 for a description of normalizing items.
2 Adjustments to SG&A include an addition of depreciation on right-of-use assets and net finance costs relating to lease liability as an estimate for rent expense.
3 Depreciation and amortization excluded amounted to $399.8 million (2019 - $385.1 million).
4 Revenue excludes Petroleum revenue, Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) excludes Petroleum gross margin.
5 Normalized SG&A adjusted for rent expense and normalized EBITDA adjusted for rent expense are non-GAAP measures; refer to section 9.3.2 in this MD&A
12.8 %
(67) bps
12.1 %
for a reconciliation of these non-GAAP measures to the related GAAP measure and additional information.
Consolidated Key Operating Performance Measures, Excluding Petroleum, Commentary
As a result of COVID-19, key operating performance measures, excluding Petroleum, were impacted by a number
of items. Refer to section 4.0 in this MD&A for further information regarding the events that impacted the
Company this year.
Q4 2020
Full Year
Normalized SG&A
expenses adjusted
for rent expense
(excluding
depreciation and
amortization) and
excluding
Petroleum
as a percentage of
Revenue
as
(excluding
depreciation
the growth
and Petroleum,
q 102 bps
Normalized SG&A expenses adjusted for
and
rent
amortization)
a
percentage of revenue, decreased 102 bps.
The decrease in rate was mainly attributable
revenue, excluding
to
Petroleum of $671.3 million, or 17.4 percent
compared to prior year driven by the Retail
segment attributable mainly to Canadian Tire
and Mark’s. The rate of growth in revenue
in SG&A which
outpaced
benefited from lower variable compensation
expenses
and Operational Efficiency
program savings compared to the prior year.
increase
the
in
as
(excluding
depreciation
and Petroleum,
q 53 bps
Normalized SG&A expenses adjusted for
and
rent
amortization)
a
percentage of revenue, decreased 53 bps.
The decrease in rate was mainly attributable
revenue, excluding
to
Petroleum compared to prior year driven by
the Retail segment.
in
revenue was partially offset by an increase
in SG&A, which included net costs in relation
to events that impacted the Company during
the year as outlined in section 4.0 of this
MD&A.
increase
increase
The
the
in
Normalized EBITDA
adjusted for rent
expense and
excluding
Petroleum, as a
percentage of
Revenue
p 299 bps
for
rent
Normalized EBITDA adjusted
expense as a percentage of
revenue,
excluding Petroleum, increased 299 bps.
The increase in rate was mainly driven by
the increase in Retail segment revenue
in
attributable mainly
Canadian Tire and Mark’s.
to strong growth
The rate also benefited from lower variable
compensation expenses and Operational
Efficiency program savings in the Retail
segment which was partially offset by lower
earnings in Financial Services segment.
q 67 bps
for
rent
Normalized EBITDA adjusted
expense as a percentage of
revenue,
excluding Petroleum decreased 67 bps. The
decrease in rate was mainly attributable to
the increase in SG&A which included net
costs of $137.6 million relating to events that
impacted the Company this year and lower
the Financial Services
earnings
segment compared
last year. These
to
decreases were partially offset by an
increase in earnings in the Retail segment
driven by strong growth at Canadian Tire.
from
5.1.3 Seasonal Trend Analysis
The following table shows the consolidated financial performance of the Company by quarter for the last two
years. The quarterly trend could be impacted by non-operational items, such as those items referenced in section
4.0 of this MD&A.
(C$ in millions, except per share
amounts)
Revenue
Q4 20201 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
$ 4,874.5 $ 3,986.4 $ 3,161.8 $ 2,848.3 $ 4,316.7 $ 3,636.7 $ 3,686.6 $ 2,894.4
521.8
Net income
Normalized net income2
Diluted EPS
Normalized diluted EPS2
1 The fourth quarter of 2020 results include one additional week of retail operations compared to the fourth quarter of 2019.
2 Refer to section 5.1.1 for a description of normalizing items.
548.4
331.9
372.4
326.3
365.9
(0.33)
(0.22)
(0.25)
(0.13)
4.84
17.7
4.93
7.97
5.42
8.40
5.53
12.2
6.9
2.3
227.7
203.8
243.8
209.7
3.20
3.46
2.87
2.97
97.4
97.4
1.12
1.12
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 13 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.2 Retail Segment Performance
The fourth quarter and full year 2020 results include one additional week of retail operations compared to the
fourth quarter and full year 2019 results except for comparable sales growth and comparable gasoline volume
growth.
5.2.1 Retail Segment Financial Results
(C$ in millions)
Retail sales1
Revenue
Q4 2020
Q4 2019
Change
2020
2019
Change
$ 5,317.2 $ 4,838.2
9.9% $ 16,864.4 $ 15,879.0
$ 4,582.2 $ 3,989.2
14.9% $ 13,620.0 $ 13,209.8
6.2 %
3.1 %
6.9 %
Gross margin dollars
$ 1,630.3 $ 1,304.2
25.0% $ 4,358.7 $ 4,075.8
Gross margin as a % of revenue
35.6%
32.7%
289 bps
32.0 %
30.9 %
115 bps
Other (income)
$
(10.1) $
(28.3)
(64.0%) $
(70.8) $
(138.8)
(49.0) %
Selling, general and administrative
expenses
Net finance costs
1,011.9
50.6
923.0
57.9
Income before income taxes
$
577.9 $
351.6
64.4 % $
738.3 $
1 Retail sales is a key operating performance measure. Refer to section 9.3.1 in this MD&A for additional information.
9.7%
3,471.0
3,326.6
(12.7%)
220.2
240.2
647.8
4.3 %
(8.3) %
14.0 %
Normalized results are non-GAAP measures and do not have standardized meanings under IFRS and, therefore,
may not be comparable to similar terms used by other companies. For further information and a reconciliation to
GAAP measures, refer to section 9.3.2 in this MD&A.
Selected Normalized Metrics – Retail
(C$ in millions, except where
noted)
Q4 2020
Normalizing
Items1
Normalized
Q4 2020 Q4 2019
Normalizing
Items1
Normalized
Q4 2019
Revenue
$ 4,582.2 $
— $
4,582.2 $ 3,989.2 $
— $
3,989.2
Cost of producing revenue
2,951.9
(9.5)
2,942.4
2,685.0
(2.4)
2,682.6
Gross margin
Gross margin rate
Other (income)
Selling, general and
$ 1,630.3 $
9.5 $
1,639.8 $ 1,304.2 $
2.4 $
1,306.6
35.6%
20 bps
35.8%
32.7%
6 bps
32.8%
303 bps
$
(10.1) $
(17.2) $
(27.3) $
(28.3) $
(1.3) $
(29.6)
(7.8) %
administrative expenses
1,011.9
(8.6)
1,003.3
Net finance costs
50.6
—
50.6
923.0
57.9
(5.2)
—
917.8
9.3 %
57.9
(12.7) %
Income before income taxes $
577.9 $
35.3 $
613.2 $
351.6 $
8.9 $
360.5
70.1 %
1 Refer to section 5.1.1 for a description of normalizing items.
2 Change is between normalized results.
(C$ in millions, except where
noted)
Normalizing
Items1
Normalized
2020
2020
Normalizing
Items1
Normalized
2019
2019
Revenue
$ 13,620.0 $
— $ 13,620.0 $ 13,209.8 $
— $ 13,209.8
Cost of producing revenue
9,261.3
(9.5)
9,251.8
9,134.0
(2.4)
9,131.6
Gross margin
Gross margin rate
Other (income)
Selling, general and
$ 4,358.7 $
9.5 $
4,368.2 $ 4,075.8 $
2.4 $
4,078.2
32.0%
7 bps
32.1%
30.9%
2 bps
30.9% 120 bps
$
(70.8) $
(17.2) $
(88.0) $ (138.8) $
(1.3) $
(140.1)
(37.2%)
administrative expenses
3,471.0
(30.0)
3,441.0
3,326.6
(35.4)
3,291.2
Net finance costs
220.2
—
220.2
240.2
—
Income before income taxes $
738.3 $
56.7 $
795.0 $
647.8 $
39.1 $
240.2
686.9
4.6%
(8.3%)
15.7%
1 Refer to section 5.1.1 for a description of normalizing items.
2 Change is between normalized results.
14 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Change2
14.9 %
9.7 %
25.5 %
Change2
3.1%
1.3%
7.1%
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.2.2 Retail Segment Key Operating Performance Measures
Key operating performance measures do not have standard meanings under IFRS and, therefore, may not be
comparable to similar terms used by other companies. Refer to section 9.3.1 in this MD&A for further information.
Due to the pervasive temporary store closures across all banners in the first half of the year, Management
believes that comparable sales year to date is not a meaningful metric. Due to the fact that the Company’s sales
per square foot metric utilizes comparable sales, Management believes that the metric is also materially impacted
by store closures during the year. The fourth quarter and full year 2020 results include one additional week of
retail operations compared to the fourth quarter and full year 2019 results, except for comparable sales growth
and comparable gasoline volume growth, which are calculated on a comparable 13 week and 52 week period for
the quarter and full year respectively.
(Year-over-year percentage change,
C$ in millions, except as noted)
Revenue1
Revenue, excluding Petroleum
Q4 2020
Q4 2019
Change
2020
2019
Change
$ 4,582.2 $ 3,989.2
14.9 % $ 13,620.0 $ 13,209.8
4,227.3
3,520.8
20.1 % 12,261.3
11,315.3
3.1 %
8.4 %
Store count
Retail square footage (in millions)
Retail sales growth
Retail sales growth, excluding Petroleum
Consolidated comparable sales growth2
Retail ROIC3
Revenue1, 4
Store count5
Retail square footage (in millions)
Sales per square foot6
Retail sales growth7
Comparable sales growth2
Revenue1
Store count
Retail square footage (in millions)
Sales per square foot8
Retail sales growth9
Comparable sales growth2
Revenue1, 10
Store count
Retail square footage (in millions)
Sales per square foot8
Retail sales growth11
Comparable sales growth2
1,741
34.5
9.9 %
13.6 %
9.5 %
9.4 %
1,746
34.6
4.3 %
5.1 %
3.9 %
9.0 %
$ 2,864.0 $ 2,233.7
$
$
$
$
$
667
23.4
$
501
17.1 %
12.8 %
604.8 $
397
7.5
$
277
0.5 %
(3.0) %
533.4 $
381
3.6
$
334
11.9 %
7.6 %
667
23.5
441
6.6 %
4.8 %
619.4
402
7.5
305
1.3 %
2.0 %
476.3
380
3.6
360
1.5 %
1.8 %
6.2 %
2.5 %
3.9 %
3.6 %
n/a
28.2 % $ 8,639.5 $ 7,418.0
11.0 %
NM12
n/a
13.6 %
n/a
17.6 %
NM12
(2.3) % $ 1,814.8 $ 2,036.3
n/a
4.5 %
3.8 %
(9.0) %
n/a
(8.5) %
NM12
12.0 % $ 1,213.2 $ 1,274.3
n/a
2.6 %
3.3 %
(7.2) %
n/a
(5.5) %
NM12
n/a
2.4 %
2.5 %
16.5 %
(10.9) %
(4.8) %
Revenue1
Revenue1
Gas bar locations
Gross margin dollars
Retail sales growth
Gasoline volume growth in litres
Comparable store gasoline volume growth in
litres2
$
196.1 $
176.0
11.4 % $
541.9 $
554.2
(2.2) %
$
354.9 $
468.4
(24.2) % $ 1,358.7 $ 1,894.5
(28.3) %
296
48.7 $
$
(18.8) %
(14.8) %
297
40.7
(1.1) %
(2.4) %
19.6 % $
170.1 $
168.2
1.1 %
(23.4) %
(19.1) %
(5.7) %
(0.6) %
(18.9) %
(2.7) %
(20.1) %
(0.5) %
1 Revenue reported for Canadian Tire, SportChek, Mark’s and Petroleum include inter-segment revenue. Helly Hansen revenue represents external revenue only
(the prior period figures for Helly Hansen have been restated to align with current year presentation). Therefore, in aggregate, revenue for Canadian Tire,
SportChek, Mark’s, Petroleum, and Helly Hansen will not equal total revenue for the Retail segment.
2 Comparable sales growth excludes Petroleum. Canadian Tire banner includes PartSource, PHL and Party City. Comparable sales growth and comparable
store gasoline volume growth in litres have been calculated by aligning the 2019 fiscal calendar to match the 2020 fiscal calendar (i.e., sales from the last week
in 2020 are not included in the calculation for comparable purposes), and, includes the impact of temporary store closures in the fourth quarter of 2020. Refer to
section 9.3.1 in this MD&A for additional information on comparable sales growth.
3 Retail Return on Invested Capital (“ROIC”) is calculated on a rolling 12-month basis based on normalized earnings. Refer to section 9.3.1 in this MD&A for
additional information.
4 Revenue includes revenue from Canadian Tire, PartSource, PHL, Party City and Franchise Trust.
5 Store count includes stores from Canadian Tire, and other banner stores of 163 (2019: 163 stores). Other banners include PartSource, PHL and Party City.
6 Sales per square foot figures are calculated on a rolling 12-month basis, for the current year, this calculation includes the period in which the stores were
temporarily closed in the Retail segment. Retail space does not include seasonal outdoor garden centres, auto service bays, or warehouse and administrative
space.
7 Retail sales growth includes sales from Canadian Tire, PartSource, PHL, Party City and the labour portion of Canadian Tire’s auto service sales.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 15 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
8 Sales per square foot figures are calculated on a rolling 12-month basis, include both corporate and franchise stores and warehouse and administrative space.
For the current year, this calculation includes the period in which the stores were temporarily closed in the Retail segment.
9 Retail sales growth includes sales from both corporate and franchise stores.
10 Revenue includes the sale of goods to Mark’s franchise stores, retail sales from Mark’s corporate stores, Mark’s wholesale revenue from its commercial
division, and includes ancillary revenue relating to embroidery and alteration services.
11 Retail sales growth includes retail sales from Mark’s corporate and franchise stores, but excludes ancillary revenue relating to alteration and embroidery
services.
12 Not meaningful.
The following chart shows the Retail Segment, excluding Petroleum, retail sales and revenue performance by
quarter for the last two years. The quarterly trend could be impacted by non-operational items, such as those
referenced in section 4.0 of this MD&A. The fourth quarter and full year 2020 results include one additional week
of retail operations compared to the fourth quarter and full year 2019.
16 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Year-over-year Retail Sales and Revenue Growth6.3%2.3%2.7%5.1%3.9%(2.5)%9.3%19.1%13.6%11.0%5.2%7.8%1.2%5.1%4.8%(1.8)%(8.4)%18.6%20.1%8.4%Retail Sales, excluding PetroleumRevenue, excluding PetroleumQ1 2019Q2 2019Q3 2019Q4 20192019Q1 2020Q2 2020Q3 2020Q4 20202020 MANAGEMENT'S DISCUSSION AND ANALYSIS
Retail Segment Commentary
Strong omni-channel performance in the fourth quarter of 2020 drove comparable sales growth of 9.5 percent, led
by strong performance at Canadian Tire. eCommerce sales also contributed to healthy top line growth, up 142
percent compared to the prior year, with penetration rate more than double 2019 levels. Retail segment
normalized income before taxes was up 70.1 percent, again, driven by strong performance at Canadian Tire.
Despite domestic and global store closures and other restrictions throughout the year, full year 2020 retail sales
(excluding Petroleum) grew 11 percent, primarily driven by Canadian Tire. eCommerce sales reached $1.6 billion,
up $1.0 billion, or 183 percent, with Canadian Tire delivering eCommerce sales growth of over 250 percent. For
2020, Retail segment normalized income before taxes grew 15.7 percent, driven by strong top line performance.
As a result of COVID-19, Retail segment earnings were impacted by a number of items in 2020. Refer to section
4.0 in this MD&A for further information regarding the events that impacted the Company in 2020. The fourth
quarter and full year 2020 results include one additional week of retail operations compared to the fourth quarter
and full year 2019 results except for comparable sales growth which is calculated on a comparable 13 week
period.
Retail
Sales
Q4 2020
p $479.0 million or 9.9%
p 9.5% in comparable sales growth
The fourth quarter results reflect exceptional
omni-channel growth in retail sales across all
Retail banners and growth in comparable sales
driven by Canadian Tire and Mark’s, partially
offset by a decline in SportChek. Retail sales
across all banners benefited from an additional
week of operations in the quarter compared to
prior year.
Retail sales, excluding Petroleum, grew 13.6
All banners
percent or $581.7 million.
experienced strong growth
the digital
in
channel, almost doubling their eCommerce
penetration rates compared to prior year.
Canadian Tire retail sales had strong
growth of 17.1 percent. The increase in retail
sales was across almost all lines of business,
with approximately two thirds of categories
generating double digit growth
led by
Seasonal, Kitchen, and Tools, which were
partially offset by declines
in automotive
repairs categories as Canadians continue to
commute less and tires partially driven by
warmer winter. The banner saw strong growth
in basket size compared to prior year.
retail sales were relatively flat for the
quarter, up by 0.5 percent. Strong sales in the
the quarter were offset by
first half of
temporary store closures and restrictions in
certain provinces in the second half of the
quarter. eCommerce sales continued to deliver
strong growth.
eCommerce sales continued
retail sales were higher by 11.9
percent.
to
contribute to retail sales growth as did the
Industrial Businesses, Accessories, and Ladies
Casualwear categories.
Petroleum retail sales decreased 18.8
percent due to lower gas volume and lower per
litre gas prices compared to the prior year,
partially offset by higher non-gas sales.
Full Year
p $985.4 million or 6.2%
Strong retail sales growth
the year was
attributable to strong sales growth at Canadian
Tire, which was partially offset by retail sales
decline across other retail banners that were
negatively impacted by temporary store closures
during the first half of the year.
for
Excluding Petroleum, retail sales grew by 11.0
percent, or $1,503.7 million. Strong eCommerce
penetration growth across all banners contributed
to growth in retail sales with all banners ending the
year with more than double the penetration rate
compared to prior year. Retail sales across all
banners also benefited from an additional week of
operations in the year.
Canadian Tire retail sales had strong growth of
17.6 percent despite the temporary closures during
the first half of the year. Retail sales growth was
driven by strength in product assortment with top
performing categories of Kitchen, Tools, Back Yard
Living, and, Gardening being
largest
contributors to growth, which was partially offset by
declines in the automotive related categories. The
inclusion of Party City and strong demand for
eCommerce also contributed to the increase in
retail sales.
the
retail sales decreased 8.5 percent
primarily attributable to temporary store closures in
the first half of the year. Growth in eCommerce
partially offset the temporary store closures with an
increase in penetration rates to more than double
of 2019.
retail sales decreased 5.5 percent
primarily attributable to temporary store closures
during the first half of the year. Growth in
eCommerce partially offset the temporary store
closures with an increase in penetration rates to
more than double of 2019.
Petroleum retail sales decreased by 23.4
percent mainly attributable to lower per litre gas
prices and lower gas volume, which were partially
offset by higher non-gas sales.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 17 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Retail Segment Commentary (continued)
Revenue
Q4 2020
p $593.0 million or 14.9%
p 20.1% excluding Petroleum
Full Year
p $410.2 million or 3.1%
p 8.4% excluding Petroleum
The exceptional growth in revenue was led by
performance at Canadian Tire driven primarily
by strong shipment growth and the impact of
the Company’s cost and margin-sharing
arrangement with its Dealers. Strong retail
sales growth at Mark’s and Helly Hansen also
contributed to the growth in revenue. Revenue
across all banners also benefited from an
additional week of operations in the quarter.
increases were partially offset by
These
revenue declines attributable to temporary
store closures in certain provinces during the
second half of the quarter.
Retail revenue increased during the year driven
by strong growth at Canadian Tire primarily
attributable to strong shipment growth, the impact
of
the Company’s cost and margin-sharing
arrangement with its Dealers, and the inclusion of
Party City. Revenue across all banners also
benefited from an additional week of operations in
the year.
These increases were partially offset by revenue
declines at other banners that were negatively
impacted by temporary store closures during the
first half of the year.
Gross
Margin
p $326.1 million or 25.0%
p 289 bps in gross margin rate
p 25.2% excluding Petroleum
p 153 bps in gross margin rate,
excluding Petroleum
p $282.9 million or 6.9%
p 115 bps in gross margin rate
p 7.2% excluding Petroleum
q 37 bps in gross margin rate, excluding
Petroleum
Excluding Petroleum, gross margin dollars
increased by $318.1 million, despite
the
inclusion of inventory write-downs related to
the Operational Efficiency program, primarily
driven by a strong
in revenue
attributable to the reasons described above.
increase
Excluding Petroleum, gross margin dollars
increased by $281.0 million, despite the inclusion
of inventory write-downs related to the Operational
Efficiency program recorded in the fourth quarter of
2020, primarily driven by a strong increase in
revenue attributable to the reasons as described
above.
attributable
rate was mainly
Normalized gross margin rate excluding Petroleum
decreased by 32 bps. The decrease in the gross
margin
to
unfavourable sales mix among banners and higher
eCommerce sales driven by the temporary store
closures, which typically have a lower margin at
SportChek and Mark’s. These decreases were
partially offset by a gross margin rate increase at
Canadian Tire mainly attributable to favourable
business mix and the impact of the Company’s
cost and margin-sharing arrangement with its
Dealers.
Normalized gross margin
increased by 168 bps.
rate excluding
Petroleum
The
increase in the normalized gross margin rate
was driven by Canadian Tire, attributable
mainly to favourable product mix and the
impact of the Company’s cost and margin-
sharing arrangement with its Dealers. Most
other Retail banners, including Helly Hansen,
also saw rate increases.
18 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Retail Segment Commentary (continued)
Q4 2020
q $18.2 million or 64.0%
Other
Income
Full Year
q $68.0 million or 49.0%
Selling,
General &
Administr-
ative
Expenses
Other income was lower by $18.2 million
primarily attributable to asset write-offs during
the quarter. Normalized other income was
relatively flat compared to prior year with a
decrease of $2.3 million.
Other income was lower by $68 million, including
asset write-offs recorded in the fourth quarter of
2020. Normalized other income decreased by
$52.1 million attributable to an impairment charge
of $27.9 million, a decline in real estate gains, and
non-operational foreign exchange losses at Helly
Hansen compared to the prior year.
p $88.9 million or 9.7%
p $144.4 million or 4.3%
Normalized SG&A expenses
to an
increase
increased by
$85.5 million, or 9.3 percent, primarily
in personnel,
attributable
marketing spend, and other expenses.
Personnel costs increased mainly attributable
to one additional week of operations in the
quarter as well as higher volume related
supply chain costs. Marketing costs increased
mainly due
timing of spend between
quarters, and other expenses increased in part
due to the donation to Jumpstart in the quarter.
These increases were partially offset by lower
variable
and
savings
Operational Efficiency
compared to the prior year.
compensation
expenses
program
to
This
Normalized SG&A expenses increased by $149.8
million, or 4.6 percent.
increase was
attributable to the inclusion of Party City, one
additional week of operations in the year, an
increase in personnel costs relating to supply
chain volume related increases, IT-related costs,
other expenses and the events that impacts the
Company during the year as outlined in Section 4
of this MD&A. These increases were partially
offset by a decrease in marketing spend and
Operational Efficiency program savings compared
to the prior year.
Earnings
Summary
p $226.3 million or 64.4%
p $90.5 million or 14.0%
Normalized
income
income before
taxes
increased $252.7 million. The increase in
income was attributable mainly to a strong
increase in gross margin partially offset by an
increase in the SG&A expenses attributable to
the reasons described above.
Normalized income before income taxes increased
by $108.1 million. The increase was primarily
driven by strong growth at Canadian Tire
attributable to strong shipment growth and the
Company’s margin sharing arrangement with its
Dealer’s. Strong growth in eCommerce sales
across all banners and an additional week of
operations in the quarter compared to prior year.
These increases were partially offset by the impact
of store closures across all banners, lower other
income and higher SG&A expenses attributable to
the reasons described above.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 19 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.2.3 Retail Segment Seasonal Trend Analysis
Quarterly operating net income and revenue are affected by seasonality. The fourth quarter typically generates
the greatest contribution to revenues and earnings, and the first quarter the least. The following table shows the
retail segment financial performance of the Company by quarter for the last two years. The quarterly trend could
be impacted by non-operational items, such as those items referenced in section 4.0 of this MD&A.
(C$ in millions, except per share
amounts)
Retail sales
Revenue
Q4 20201 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
$ 5,317.2 $ 4,414.4 $ 4,375.7 $ 2,757.1 $ 4,838.2 $ 3,904.3 $ 4,303.7 $ 2,832.8
4,582.2 3,684.8 2,849.8 2,503.2 3,989.2 3,296.3 3,360.3 2,564.0
Income (loss) before income taxes
Normalized2 (loss) income before
income taxes
577.9
326.2
(66.2)
(99.6)
351.6
170.6
139.1
(13.5)
613.2
333.8
(59.9)
(92.1)
360.5
192.7
147.2
(13.5)
1 The fourth quarter of 2020 results include one additional week of retail operations compared to the fourth quarter of 2019.
2 Refer to section 5.1.1 for a description of normalizing items.
5.3 Financial Services Segment Performance
5.3.1 Financial Services Segment Financial Results
(C$ in millions)
Revenue
Gross margin dollars
Gross margin as a % of revenue
Other (income) expense
Selling, general and administrative expenses
Net finance (income)
$
$
$
Q4 2020
Q4 2019
Change
2020
2019
Change
295.3 $
333.0
(11.3) % $ 1,248.4 $ 1,334.1
206.6 $
186.5
10.8 % $
645.7 $
737.2
(6.4) %
(12.4) %
69.9%
56.0% 1,395 bps
51.7%
55.3%
(354) bps
(0.2) $
91.6
(0.4)
0.5
76.8
(0.3)
(130.6) % $
0.6 $
1.9
(67.0) %
19.0 %
319.3
30.4 %
(1.5)
310.0
(1.0)
Income before income taxes
$
115.6 $
109.5
5.6 % $
327.3 $
426.3
3.0 %
50.9 %
(23.2) %
Financial Services Segment Commentary
Refer to section 4.0 in this MD&A for further information regarding the events that impacted the Company this
year.
During the fourth quarter, income before income taxes increased $6.1 million resulting primarily from an increase
in gross margin of $20.1 million. Gross margin increased due primarily to lower net impairment losses of $61.9
million driven by lower net write-offs and favourable changes in the allowance for loans receivable, partially offset
by a $37.7 million decline in revenue as a result of an 8.8 percent reduction in gross average accounts receivable
(“GAAR”), and an increase in borrowing costs. GAAR was lower compared to the prior year due to customer
payment trends and the reduction in new accounts acquired during the year. Allowance for loans receivable was
reduced by $27.3 million in the quarter due largely to a year over year decline in receivables. The credit card
receivables portfolio continues to be operationally strong, having ended the quarter with an 80 bps improvement
to the past due credit card receivables (“PD2+”) rate.
Full year, income before income taxes declined $99.0 million resulting primarily from a 6.4 percent, or $85.7
million, decrease in revenue relative to the prior year. The decline in revenue was primarily attributable to lower
credit card sales and continued strong customer payments which resulted in a year over year decline in
receivables. Within the year, Financial Services increased its allowances for loans receivable by $67.2 million
primarily due to the economic uncertainty as a result of COVID-19, which was entirely offset by lower than
expected insolvency volumes. Throughout the year, the portfolio remained operationally strong with historically
low delinquency trends and an 80 bps improvement to the PD2+ rate.
20 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Services Segment Commentary (continued)
Revenue
Q4 2020
q $37.7 million or 11.3%
Full Year
q $85.7 million or 6.4%
The decline in revenue was mainly attributable to
lower credit charges due to the decline in GAAR
and lower insurance revenue compared to prior
year.
The decline in revenue was primarily attributable
to lower credit card sales leading to lower credit
charges, transaction fee revenue and insurance
revenue.
Gross
Margin
p 10.8% in gross margin dollars
q 12.4% in gross margin dollars
The
increase
in gross margin dollars was
attributable to lower net impairment losses of
$61.9M driven by lower net write-offs and a
reduction in the ECL allowance, which were
partially offset by a decrease in revenue and
higher funding costs.
The decrease
in gross margin dollars was
primarily attributable to a decline in revenue and
higher funding costs which were partially offset by
lower net impairment.
SG&A
Expenses
p $14.8 million or 19.0%
p $9.3 million or 3.0%
The increase in SG&A expenses was primarily
due to an increase in marketing investments
related to the continued expansion of digital
acquisition and personnel related expenses.
to
increases
The increase in SG&A expenses was primarily
information
due
systems and personnel related expenses, which
were partially offset by
lower volume-driven
operational expenses.
in marketing,
Earnings
Summary
p $6.1 million or 5.6%
q $99.0 million or 23.2%
The increase in income before income taxes was
primarily due to a higher gross margin which was
partially offset by an increase in SG&A expenses
compared to the prior year.
Earnings were negatively impacted by a decline
in gross margin partially offset by savings in
volume-driven operational expenses.
5.3.2 Financial Services Segment Key Operating Performance Measures
Key operating performance measures do not have standard meanings under IFRS and, therefore, may not be
comparable to similar terms used by other companies. Refer to section 9.3.1 in this MD&A for definitions and
further information on performance measures.
3.3%
1.1 %
Change
20.78%
Q4 2019
Q4 2020
$ 5,833.9 $ 6,398.3
21.33%
(C$ in millions) except where noted
Credit card sales growth1
GAAR
Revenue2 (as a % of GAAR)
Average number of accounts with a
balance3 (thousands)
Average account balance3 (whole $)
Net credit card write-off rate2, 3
PD2+3, 4
Allowance rate5
Operating expenses2 (as a % of GAAR)
Return on receivables2
1 Credit card sales growth excludes balance transfers. Represents year-over-year percentage change.
2 Figures are calculated on a rolling 12-month basis.
3 Credit card portfolio only.
4 Credit card receivables more than 30 days past due as a percentage of total-ending credit card receivables.
5 The allowance rate was calculated based on the total-managed portfolio of loans receivable.
2,813 $
14.77%
12.18%
5.82%
2.77%
1.97%
4.96%
6.20%
5.31%
5.45%
6.82%
2,978
2,148
2,074
$
(3.5) %
(5.6) % $
2020
(3.9) %
2019
Change
5.4 %
(8.8) % $ 6,008.6 $ 6,253.5
n/a
n/a
(3.9) %
(2.5) %
(1.5) %
2,060
2,112
2,915 $
2,959
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 21 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Services Segment Scorecard
To evaluate the overall financial performance of the Financial Services segment, the following scorecard provides
a balanced view on how Financial Services is progressing towards achieving its strategic objectives.
Q4 2020 vs Q4 2019
Growth
q 8.8% in GAAR
p 1.1% in credit card sales growth
q 3.5% in average number of accounts with a balance
q 5.6% in average account balance
GAAR declined by 8.8 percent relative to last year due to a 5.6 percent decline in average
account balances and a 3.5 percent decline in average active accounts. The decrease in
average active accounts was primarily due to lower new credit card acquisitions as a result of
temporary store closures in the first half of the year and continued restrictions in the Company’s
store network, which impacted the ability to acquire new credit card customers throughout the
year.
Performance
q 137 bps in return on receivables
q 56 bps in revenue as a % of GAAR
p 36 bps in OPEX as a % of GAAR
Return on receivables declined by 137 bps compared to the prior year due to both a decrease
in earnings and a decline in GAAR. Lower earnings were mainly due to a decrease in revenue
and higher SG&A and funding expenses.
Operating expenses as a percentage of GAAR increased by 36 bps compared to the prior year
due to a lower GAAR and an increase in operating expenses resulting from increased
marketing costs associated with the continued development and expansion of digital acquisition
and personnel-related expenses.
Operational metrics q 80 bps in PD2+ rate
q 39 bps in net credit card write-off rate
p 14.77% allowance rate, up 259 bps
Significant improvement in the PD2+ rate, which was a result of improved risk across the
portfolio.
The decrease in the net write-off rate compared to the prior year is primarily driven by a decline
in insolvencies, consistent within the industry.
The allowance rate increased by 259 bps to 14.77 percent largely due to the year over year
decline in receivables and an increase in ECL allowance as a result of Management’s
expectations of increases in future losses associated with the ongoing impacts of COVID-19 on
the economy and the eventual end of government-backed financial stimulus programs.
5.3.3 Financial Services Segment Seasonal Trend Analysis
Quarterly operating net income and revenue are affected by seasonality. In the first quarter, the Financial
Services segment would typically contribute the majority of consolidated earnings. The following table shows the
financial performance of the segment by quarter for the last two years. The quarterly trend could be impacted by
non-operational items, such as those items referenced in section 4.0 of this MD&A.
(C$ in millions, except per share
amounts)
Revenue
Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
$ 295.3 $ 301.3 $ 309.9 $ 341.9 $ 333.0 $ 343.0 $ 329.3 $ 328.8
Income before income taxes
115.6
90.5
51.0
70.2
109.5
108.9
95.5
112.4
22 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4 CT REIT Segment Performance
5.4.1 CT REIT Segment Financial Results
(C$ in millions)
Property revenue
Property expense
Q4 2020
Q4 2019
Change
2020
$
126.8 $
123.7
2.5 % $
502.3 $
27.8
26.8
3.7 %
110.8
General and administrative expense
(“G&A”)
Net finance costs
Fair value loss (gain) adjustment
3.9
27.2
53.9
Income before income taxes
$
14.0 $
1 Not meaningful.
3.5
27.1
(10.6)
76.9
8.3 %
0.7 %
NM1
(81.8) % $
2019
489.0
106.1
14.2
108.8
(47.3)
12.9
107.9
87.4
183.3 $
307.2
Change
2.7%
4.4%
(8.9) %
(0.8) %
NM1
(40.3) %
The following shows the CT REIT year-over-year property revenue and AFFO performance by quarter for the last
two years. The quarterly trend could be impacted by non-operational items, such as those items referenced in
section 4.0 of this MD&A.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 23 of 134
Year-over-year Property Revenue and AFFO Growth4.2%2.6%3.5%3.7%3.5%4.3%2.9%1.2%2.5%2.7%8.3%6.8%11.5%10.7%9.3%7.7%6.3%3.7%4.2%5.4%Property RevenueAFFOQ1 2019Q2 2019Q3 2019Q4 20192019Q1 2020Q2 2020Q3 2020Q4 20202020
MANAGEMENT'S DISCUSSION AND ANALYSIS
CT REIT Segment Commentary
Property
Revenue
Q4 2020
p $3.1 million or 2.5%
Full Year
p $13.3 million or 2.7%
Property
Expense
G&A
Expenses
Net
Finance
Cost
Fair Value
Adjustment
on
Investment
Properties
Earnings
Summary
The $3.1 million increase was mainly due to
contractual rent escalation, additional base rent
relating
and
intensifications completed during 2020 and
2019.
properties
acquired
to
The $13.3 million increase was mainly due to
contractual rent escalation, additional base rent
relating
and
intensifications completed during 2020 and
2019.
properties
acquired
to
p $1.0 million or 3.7%
p $4.7 million or 4.4%
The
increase of $1.0 million
in property
expense was mainly attributable to property
acquisitions in the current year and higher
expected credit losses.
The
increase of $4.7 million
in property
expense was mainly attributable
to higher
expected credit losses, gross rent abatements
for some of REIT’s tenants and increased
to property
operating expenses
acquisitions completed during 2020 and 2019.
related
p $0.4 million or 8.3%
q $1.3 million or 8.9%
G&A is overall in line with prior year.
The decrease of $1.3 million in G&A was mainly
driven by lower operating costs, partially offset
by higher personnel compensation and higher
income tax expense.
p $0.1 million or 0.7%
q $0.9 million or 0.8%
Net finance cost is overall in line with prior year.
Decrease was mainly attributable to lower
interest on Class C LP Units, lower capitalized
interest on development projects in 2020 and
lower utilization of credit facilities, partially
offset by costs related to the redemption of the
Series C senior unsecured debentures and
increased interest expense on lease liabilities.
p $64.5 million
p $134.7 million
The
fair value adjustment on
investment
properties was a loss mainly attributable to the
updated
the
inputs and assumptions
property-appraisal models. This fair value
adjustment is eliminated upon consolidation
and, as such, has not been described in
section 4.0 of this MD&A.
in
The
fair value adjustment on
investment
properties was a loss mainly attributable to the
updated inputs and assumptions in the property
appraisal models. This fair value adjustment is
eliminated upon consolidation and, as such,
has not been described in section 4.0 of this
MD&A.
q $62.9 million or 81.8%
q $123.9 million or 40.3%
The decrease in earnings was primarily due to
the
investment
properties partially offset by an increase in
property revenue.
fair value adjustments on
fair value adjustments on
The decrease in earnings was primarily due to
the
investment
properties and higher property expense,
partially offset by an increase in property
revenue and a decrease in G&A and net
finance costs.
24 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4.2 CT REIT Segment Key Operating Performance Measures
Key operating performance measures do not have standard meanings under IFRS and, therefore, may not be
comparable to similar terms used by other companies. Refer to section 9.3.1 in this MD&A for definitions and
further information on performance measures.
(C$ in millions)
Net operating income1
Funds from operations1
Adjusted funds from operations1
1 Non-GAAP measures exclude all fair value adjustments, refer to section 9.3.2 in this MD&A for additional information.
Q4 2019
Q4 2020
3.7 % $
Change
96.8 $
4.2 %
2.0 %
59.8
68.1
66.6
57.3
93.4
$
2020
381.5 $
270.8
236.5
2019
368.8
261.9
224.3
Change
3.5 %
3.4 %
5.4 %
Net operating income (NOI)
NOI for the quarter and full year increased by 3.7 percent and 3.5 percent respectively compared to the prior year,
primarily due to the acquisition of income-producing properties and Properties Under Development completed in
2020 and 2019. NOI is a non-GAAP measure. Refer to section 9.3.2 for additional information.
Funds from operations (FFO)
FFO for the quarter and full year increased by 2.0 percent and 3.4 percent respectively compared to the prior
year, primarily due to the impact of NOI variances. FFO is a non-GAAP measure. Refer to section 9.3.2 for
additional information.
Adjusted funds from operations (AFFO)
AFFO for the quarter and full year increased by 4.2 percent and 5.4 percent respectively compared to the prior
year, primarily due to the impact of NOI variances. AFFO is a non-GAAP measure. Refer to section 9.3.2 for
additional information.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 25 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
6.0 Balance Sheet Analysis, Liquidity, and Capital Resources
6.1 Selected Balance Sheet Highlights
Selected line items from the Company’s assets and liabilities, as at January 2, 2021 and the year-over-year
change versus December 28, 2019, are noted below:
Total change
p $
858.8
Selected Asset
2020 Balance
Cash and cash equivalents
Short-term investments
Loans receivable
Merchandise inventories
Long-term receivables and other
assets
Goodwill and intangible assets
1,327.2
643.0
5,031.8
2,312.9
631.9
2,372.8
Total change
p $
528.8
Selected Liability
2020 Balance
Short-term borrowings
Loans
Long-term debt (current and long-
term portion)
Deposits (current and long term)
165.4
506.6
4,266.2
3,509.7
Assets
Cash and cash
equivalents
p $1,121.7 million Increase was primarily due to cash generated from operating activities, partially
offset by investing activities and financing activities. Refer to section 6.2 for
further details.
Short-term
investments
p $441.3 million
Short-term investments increased as the Company ended the year with an
improved liquidity position in both the Retail and Financial Services segments.
Loans receivable q $782.0 million
Decrease was mainly attributable to lower credit card sales, strong customer
payments and lower active accounts, resulting in fewer credit card loans and
lower Dealer loans.
Merchandise
inventories
p $100.0 million
Increase was mainly due to higher inventory at Canadian Tire, partially offset by a
decline at SportChek, Mark’s and Helly Hansen.
Long-term
receivables and
other assets
Goodwill and
intangible assets
q $175.9 million
Decrease was mainly attributable to timing of Dealer loans receivable.
q $41.5 million
Decrease during the year was mainly attributable to impairment charge in the
second quarter relating to Musto brand and higher amortization of software due to
reduced spending on IT-related activities in the current year.
26 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Year-over-year change inassets1,121.7441.3(782.0)100.0(175.9)(41.5)Year-over-year change inliabilities(284.6)(114.9)(252.2)1,065.5
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liabilities
Short-term
borrowings
Loans
Long-term debt
(current and long-
term portion)
Deposits (current
and long term)
q $284.6 million
The decrease in the short-term borrowings was mainly due to lower borrowings on
the bank credit facility and issuances of commercial paper in the Financial
Services segment ending the year with an improved liquidity position.
q $114.9 million
q $252.2 million
Decrease in loans was mainly attributable to lower Dealer loans receivable.
Decrease was mainly attributable to the repayment of the $250 million of medium-
term notes.
p $1,065.5 million Increase was mainly due to increases in High Interest Savings (“HIS”) deposits
and long-term guaranteed investment certificates (“GIC”) in the Financial Services
segment.
6.2 Summary Cash Flows
The Company’s cash and cash equivalents position, net of bank indebtedness, was $1,327.2 million as at
January 2, 2021. Selected line items from the Company’s Consolidated Statements of Cash Flows for the
quarters and years ended January 2, 2021 and December 28, 2019 are noted in the following tables:
(C$ in millions)
Cash generated from operating activities
Cash (used for) investing activities
Cash (used for) financing activities
Cash generated in the period
(C$ in millions)
Cash generated from operating activities
Cash (used for) investing activities
Cash (used for) financing activities
Cash generated (used) in the period
$
$
$
Q4 2020
Q4 2019
762.6 $
1,106.8 $
(332.5)
(398.9)
31.2 $
(354.0)
(744.3)
8.5 $
2020
2019
2,442.8 $
1,087.6 $
(848.0)
(462.7)
(758.7)
(604.2)
Change
(344.2)
21.5
345.4
22.7
Change
1,355.2
(89.3)
141.5
$
1,132.1 $
(275.3) $
1,407.4
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 27 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Q4 2020
q $344.2 million change
Operating
activities
Full Year
p $1,355.2 million change
Excluding the impact of the change in loans
receivable, operating activities used $515.8
million more in cash compared to change in the
prior year due to changes within Retail segment
working capital driven by higher inventory and the
timing of vendor payments. Conversely, loans
receivable improved the cash balance by $171.6
million as a result of lower cardholder activity.
Excluding the impact of the change in loans
from operating
receivable, cash generated
activities
increased $159.7 million primarily
attributable to the timing of taxes paid in the
current year. The change in loans receivable
further improved the cash balance by $1,195.5
million as less cash was used in the year. Loans
receivable balance declined as a result of lower
cardholder activity.
Investing
activities
q $21.5 million change
p $89.3 million change
to
The decrease in cash used for investing activities
lower spending on capital
was due
expenditures
the
acquisition of Party City in the prior year. The
decrease was partially offset by higher acquisition
of short-term investments due to the Company’s
improved liquidity position.
the current year and
in
The increase in cash used for investing activities
was primarily due to higher acquisition of short-
term investments due to the Company’s improved
liquidity position, partially offset by lower spending
on capital expenditures in the current year and
the impact of the acquisition of Party City in 2019.
Financing
activities
q $345.4 million change
q $141.5 million change
The decrease in cash used for financing activities
was primarily driven by an increase in long-term
deposits due to the greater issuance of HIS
deposits in the Financial Services segment.
The decrease in cash used for financing activities
was primarily driven by the increase in long-term
deposits due to increases in HIS deposits and
long-term GICs in the Financial Services segment
and the repayment of $250 million medium-term
notes.
Furthermore, in the prior year, additional cash
was generated from net proceeds from the sale
and issuance of CT REIT units amounting to
$228.9 million.
6.3 Capital Management
The definition of capital varies from company to company, from industry to industry, and for different purposes. In
the process of managing the Company’s capital, Management includes the following items in its definition of
capital and includes GCCT indebtedness but excludes Franchise Trust indebtedness:
2020 % of total
2019
% of total
$
1,228.0
9.3 % $
165.4
150.5
4,115.7
2,281.7
1.3 %
1.1 %
790.8
450.0
788.2
31.1 %
3,730.2
17.2 %
1,653.4
$
7,941.3
60.0 % $
7,412.6
567.0
597.0
2.9
4.3 %
4.5 %
— %
567.0
588.0
2.9
6.4 %
3.7 %
6.5 %
30.3 %
13.4 %
60.3 %
4.6 %
4.8 %
— %
4,136.9
31.2 %
3,729.6
30.3 %
$ 13,245.1
100.0 % $ 12,300.1
100.0 %
(C$ in millions)
Capital components
Deposits
Short-term borrowings
Current portion of long-term debt
Long-term debt
Long-term deposits
Total debt
Redeemable financial instrument
Share capital
Contributed surplus
Retained earnings
Total capital under management
28 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company’s objectives when managing capital are: ensuring sufficient liquidity to support its financial
obligations and execute its operating and strategic plans; maintaining healthy liquidity reserves and access to
capital; and minimizing the after-tax cost of capital while taking into consideration current and future industry,
market, and economic risks and conditions.
6.3.1 Canadian Tire Bank's Regulatory Environment
CTB manages its capital under guidelines established by the Office of the Superintendent of Financial Institutions
of Canada (“OSFI”). OSFI’s regulatory capital guidelines are based on the international Basel Committee on
Banking Supervision framework entitled Basel III: A Global Regulatory Framework for More Resilient Banks and
Banking Systems (“Basel III”), which came into effect in Canada on January 1, 2013, and measures capital in
relation to credit, market and operational risks. The Bank has various capital policies and procedures and
controls, including an Internal Capital Adequacy Assessment Process (“ICAAP”), which it utilizes to achieve its
goals and objectives.
The Bank’s objectives include:
• holding sufficient capital to maintain the confidence of investors and depositors; and
• being an appropriately capitalized institution, as measured internally, defined by regulatory authorities and
compared with the Bank’s peers.
As at Q4 2020 and 2019, CTB complied with all regulatory capital guidelines established by OSFI, its internal
targets as determined by its ICAAP and all financial covenants under its bank credit agreement.
6.4 Investing
6.4.1 Capital Expenditures
The Company’s capital expenditures for periods ended January 2, 2021 and December 28, 2019 were as follows:
(C$ in millions)
Real estate
Information technology
Other operating
Operational Efficiency program
Operating capital expenditures
CT REIT acquisitions and developments excluding vend-ins from CTC
2020
$
91.8 $
75.4
49.0
51.5
267.7
141.4
2019
232.0
124.1
88.1
—
444.2
93.1
Distribution capacity
Total capital expenditures1
1 Capital expenditures are presented on an accrual basis and include software additions, but exclude right-of-use asset additions, acquisitions relating to
452.4 $
43.3
537.3
—
$
business combinations, intellectual properties, and tenant allowances received.
Total
CAPEX
Full Year
q $84.9 million
During the year, the Company took measures to ensure a strong cash position and financial flexibility. As
a result of these measures, capital expenditures were reduced compared to the prior year.
Given the uncertainty regarding the future impact of COVID-19 on the economy, the Company believes it is not
appropriate at this time to disclose the expected 2021 capital expenditures range. The Company is, however,
committed to investing in the long-term health of the business and continues to allocate capital to strategic
initiatives, such as eCommerce.
Capital Commitments
The Company had commitments of approximately $263.9 million as at January 2, 2021 (2019 – $201.5 million) for
the acquisition of tangible and intangible assets.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 29 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
6.5 Liquidity and Financing
The Company is in a strong liquidity position with the ability to access capital from multiple sources. A number of
alternative financing sources are available to the Company, CT REIT, and CTB, to help ensure an appropriate
level of liquidity is available to meet the Company’s key initiatives.
The current economic, operating and capital market environment has led to increased emphasis on liquidity and
capital management. Management is focused on maintaining a strong balance sheet and ensuring continued
access to capital.
During the year ended January 2, 2021:
•
CTC secured additional credit by entering into a committed bank credit facility for $710.0 million with five
Canadian financial institutions. The new facility expires on June 30, 2022 and has not yet been used.
CTC repaid $250.0 million of Series E unsecured medium-term notes;
•
• GCCT issued and repaid $1.2 billion under Financial Services’ note purchase facility with Scotiabank;
• GCCT repaid $500.0 million of term notes, consisting of $465.0 million of senior notes and $35.0 million of
subordinated notes;
• GCCT issued $480.0 million of term notes that have an expected repayment date of September 22, 2025,
•
consisting of $448.8 million senior notes and $31.2 million of subordinated notes; and
CT REIT announced the issuance of $150.0 million Senior Unsecured Debentures, that closed on
January 6, 2021, with an expected repayment date of January 6, 2031. The net proceeds and cash on
hand were used to redeem the entire outstanding principal amount of $150.0 million Series C Debentures
on January 10, 2021.
As at January 2, 2021
(C$ in millions)
Committed Bank Lines of Credit
Less: Borrowings outstanding
Less: U.S. commercial paper outstanding
Less: Letters of credit outstanding
Available Committed Bank Lines of Credit
Cash and cash equivalents and short-term investments
Liquidity
Consolidated
Retail
Financial
Services
CT REIT
$
5,338.8 $
2,788.8 $
2,250.0 $
300.0
(50.9)
—
(5.6)
(50.9)
—
—
—
—
—
—
—
(5.6)
$
$
5,282.3 $
2,737.9 $
2,250.0 $
294.4
1,970.2
306.2
1,659.5
4.5
7,252.5 $
3,044.1 $
3,909.5 $
298.9
The Company ended 2020 with $2.0 billion cash and short-term investments and $3.0 billion, $3.9 billion and
$298.9 million in liquidity at its Retail, Financial Services, and REIT segments, respectively.
30 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financing Source
Committed Bank
Lines of Credit
Commercial Paper
Programs
Provided by a syndicate of seven Canadian and three international financial institutions, $1,975
million in a committed bank line is available to CTC for general corporate purposes, expiring in
August 2024. CTC had no borrowings under its bank lines as at January 2, 2021.
Provided by five Canadian financial institutions, CTC has a $710 million committed bank line of
credit. In Q4 2020, the expiry date was extended to June 30, 2022. There were no borrowings as
of January 2, 2021.
Provided by a syndicate of seven Canadian financial institutions, $300 million in a committed bank
line is available to CT REIT for general business purposes, expiring in December 2024. CT REIT
had no borrowings under its bank lines as at January 2, 2021.
Scotiabank has provided CTB with a $250 million unsecured revolving committed credit facility and
$2.0 billion in committed note purchase facilities for the purchase of senior and subordinated notes
issued by GCCT, each of which expire in October 2022. As at January 2, 2021, CTB had no
borrowings under its bank line and note purchase facilities, other than a nominal balance on a note
purchase facility to maintain GCCT’s ownership interest.
Helly Hansen has a 350 million Norwegian Krone (”NOK”) secured revolving committed credit facility
and a NOK 350 million factoring facility (both $51.9 million C$ equivalent) provided by a Norwegian
bank which expire in October 2022. Helly Hansen had a total of $50.9 million of C$ equivalent
borrowings (NOK 343 million) outstanding on its credit facilities as at January 2, 2021.
The Company has a commercial paper program that allows it to issue up to a maximum aggregate
principal amount of US$1.0 billion of short-term promissory notes in the United States. Terms to
maturity for the promissory note range from one to 270 days. Notes are issued at a discount and
rank equally in right of payment with all other present and future unsecured and unsubordinated
obligations to creditors of the Company.
As at January 2, 2021, the Company had no U.S. commercial paper outstanding.
Concurrent with the Company’s commercial paper issuances, the Company enters into foreign
exchange derivatives to hedge the foreign currency risk associated with the principal and interest
component of the borrowings under the program. The Company does not designate these debt
derivatives as hedges for accounting purposes.
As at January 2, 2021, GCCT had $114.3 million of asset-backed commercial paper notes
outstanding.
Medium-Term
Notes and Senior
Unsecured
Debentures
As at January 2, 2021, CTC had an aggregate principal amount of $951.2 million of medium-term
notes outstanding.
As at January 2, 2021, CT REIT had an aggregate principal amount of $1.075 billion of senior
unsecured debentures outstanding.
On July 6, 2020, CTC repaid $250 million of medium-term notes, which bore interest of 2.646
percent per annum.
Asset-backed
Senior and
Subordinated Term
Notes
As at January 2, 2021, GCCT had an aggregate principal amount of $2,184 million of asset-backed
term notes outstanding consisting of $2,042 million principal amount of senior term notes and $142
million principal amount of subordinated term notes.
On September 21, 2020, GCCT fully repaid $465 million of series 2015-1 senior term notes, which
bore an interest rate of 2.237 percent per annum as well as $35.0 million of series 2015-1
subordinated term notes, which bore an interest rate of 3.237 percent per annum.
On September 25, 2020, GCCT completed the issuance of $480.0 million of series 2020-1 term
notes that have an expected repayment date of September 22, 2025, consisting of $448.8 million
principal amount of senior term notes that bear an interest rate of 1.388 percent per annum and
$31.2 million principal amount of subordinated term notes that bear an interest rate of 2.438 percent
per annum.
Broker GIC
Deposits
Retail Deposits
Funds continue to be readily available to CTB through broker networks. As at January 2, 2021, CTB
held $2,497.3 million in broker GIC deposits.
Retail deposits consist of HIS and retail GIC deposits held by CTB, available both within and outside
a Tax-free savings account. As at January 2, 2021, CTB held $1,012.4 million in retail deposits.
Real Estate
The Company can undertake strategic real estate transactions involving properties not owned by CT
REIT. It also owns an investment in CT REIT in the form of publicly traded CT REIT Units.
Additional sources of funding are available to CT REIT, as appropriate, including the ability to access
equity and debt markets, subject to the terms and conditions of CT REIT’s Declaration of Trust and
all applicable regulatory requirements.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 31 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Credit Ratings
A credit rating generally provides an indication of the risk that the borrower will not fulfill its full obligations in a
timely manner with respect to both interest and principal commitments. Ratings for long-term debt instruments
range from highest credit quality (generally “AAA”) to default in payment (generally “D”). Ratings for short-term
debt instruments range from “R-1 (high)” (DBRS Morningstar), “A-1+” (S&P), “P-1” (Moody’s), or “F1+” (Fitch),
representing the highest credit quality to “D” (DBRS Morningstar), “C” (S&P and Fitch), and “not prime” (Moody’s)
for the lowest credit quality of securities rated. As a result of COVID-19, the Company’s credit ratings were
impacted as outlined in section 4.0 of this MD&A.
Credit Rating Summary
Rating
Trend
Rating Outlook
Rating Outlook
Rating Outlook
DBRS Morningstar
S&P
Moody’s
Fitch
Canadian Tire Corporation
Issuer rating
Medium-term notes
U.S. Commercial Paper
Glacier Credit Card Trust
Asset-backed senior term
notes1
Asset-backed subordinated
term notes1
Asset-backed commercial
paper
CT REIT
Issuer rating
Senior unsecured debentures
BBB
BBB
—
Stable
Stable
—
BBB
BBB
A-2
AAA (sf)
A (sf)
R-1 (high) (sf)
—
—
—
AAA (sf)
A (sf)
—
Negative
—
—
—
—
—
BBB
BBB
Stable
Stable
BBB
BBB
Negative
—
—
—
P-2
—
—
Stable
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
AAA (sf) Negative
A (sf)
Negative
F1+ (sf)
—
—
—
—
—
1 DBRS Morningstar rates all Series of term notes, S&P rates all Series of term notes except the Series 2018-1 term notes, and Fitch only rates the Series 2018-1
term notes.
32 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
6.5.1 Contractual Obligations, Guarantees, and Commitments
The Company funds capital expenditures, working capital needs, dividend payments, and other financing needs,
such as debt repayments and Class A Non-Voting Share purchases under a Normal Course Issuer Bid (“NCIB”)
program, from a combination of sources. The following table shows the Company’s contractual obligations
required to be paid over the next five years and beyond. The Company believes it has sufficient liquidity available
to meet its contractual obligations as at January 2, 2021.
Contractual Obligations Due by Period
(C$ in millions)
Current and long-term debt1, 3
Glacier Credit Card Trust debt2, 3
Lease obligations4
Purchase obligations
Financial Services’ deposits3
Other obligations
Total
2021
2022
2023
2024
2025
2026 &
beyond
$ 2,240.8 $
150.5 $
159.6 $
455.7 $
— $
200.0 $ 1,275.0
2,184.0
—
2,235.0
347.1
4,448.3
3,069.7
3,521.7
1,240.0
138.9
77.2
560.0
346.8
433.5
613.8
29.5
584.0
295.3
161.4
585.3
16.6
560.0
239.1
148.1
493.1
11.9
480.0
206.4
145.8
589.5
2.8
—
800.3
489.8
—
0.9
$ 14,768.7 $ 4,884.5 $ 2,143.2 $ 2,098.3 $ 1,452.2 $ 1,624.5 $ 2,566.0
1 Excludes senior and subordinated term notes at GCCT.
2 Represents senior and subordinated term notes.
3 Excludes interest obligations on debt or deposits.
4 Excludes reasonably certain options of $571.6 million and excludes $82.8 million (2019 – $269.4 million) commitment for lease agreements signed but not yet
commenced.
In the normal course of business, the Company enters into numerous agreements that may contain features that
meet the definition of a guarantee. For a discussion of the Company’s significant guarantees and commitments,
refer to Note 34 of the Company’s consolidated financial statements. The Company’s maximum exposure to
credit risk with respect to such guarantees and commitments is provided in Note 5 of the Company’s 2020
consolidated financial statements.
6.6 Funding Costs
The table below shows the funding costs relating to short-term and long-term debt, excludes deposits held by
CTB, Franchise Trust indebtedness, and Helly Hansen credit facilities:
(C$ in millions)
Interest expense1
Cost of debt2
1 Represents the interest expense relating to short-term and long-term debt. Short-term debt includes lines of credit. Long-term debt includes medium-term,
3.06 %
3.14 %
170.0
161.2
2020
2019
$
$
debentures, senior, and subordinated term notes.
2 Represents the weighted average cost of short-term and long-term debt during the period.
For a discussion of the liquidity and credit risks associated with the Company’s ability to generate sufficient
resources to meet its financial obligations, refer to section 10.1 in this MD&A.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 33 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.0 Equity
7.1 Shares Outstanding
(C$ in millions)
Authorized
3,423,366 Common Shares
100,000,000 Class A Non-Voting Shares
Issued
3,423,366 Common Shares (2019 – 3,423,366)
57,383,758 Class A Non-Voting Shares (2019 – 58,096,958)
2020
2019
$
$
0.2 $
596.8
597.0 $
0.2
587.8
588.0
Each year, the Company files a NCIB with the Toronto Stock Exchange (“TSX”) which allows it to purchase its
Class A Non-Voting Shares on the open market.
On February 19, 2019, the TSX accepted the Company’s notice of intention to make an NCIB to purchase up to
5.5 million Class A Non-Voting Shares during the period March 2, 2019 to March 1, 2020 and on February
14 ,2020, the TSX accepted the Company’s notice of intention to make an NCIB to purchase up to 5.5 million
Class A Non-Voting Shares during the period March 2, 2020 to March 1, 2021.
On November 7, 2019, the Company announced its intention to purchase $350 million of its Class A Non-Voting
Shares, in excess of the amount required for anti-dilutive purposes, by the end of fiscal 2020 (the “2020 Share
Purchase Intention”). As a result of the COVID-19 pandemic, purchases of Class A Non-Voting shares pursuant
to the 2020 Share Purchase Intention were paused on March 13, 2020 and no further purchases were made,
other than for anti-dilutive purposes.
The following table summarizes the Company’s purchases relating to the 2020 Share Purchase Intention:
(C$ in millions)
Shares purchased in 2019 under the November 7, 2019 announcement
Shares purchased in 2020 under the November 7, 2019 announcement
Total shares purchased under the November 7, 2019 announcement
$
$
11.4
96.4
107.8
The following represents forward-looking information and readers are cautioned that actual results may vary.
The Company intends to make a new NCIB to purchase up to 5.4 million Class A Non-Voting Shares during the
period March 2, 2021 to March 1, 2022. The renewal of the Company’s NCIB is subject to TSX approval. At this
time, the Company intends only to purchase shares for anti-dilutive purposes in 2021. All purchases are made by
means of open market transactions through the facilities of the TSX and/or alternative Canadian trading systems,
if eligible, at the market price of the Class A Non-Voting Shares at the time of purchase or as otherwise permitted
under the rules of the TSX and applicable securities laws. Class A Non-Voting Shares purchased by the
Company pursuant to the NCIB will be restored to the status of authorized but unissued shares. Security holders
may obtain a copy of the notice, without charge, by contacting the Corporate Secretary of the Company.
7.2 Dividends
The Company has a long-term payout ratio target of approximately 30 to 40 percent of the prior year normalized
earnings, after giving consideration to the period-end cash position, future cash flow requirements, capital market
conditions, and investment opportunities. The payout ratio may fluctuate in any particular year due to unusual or
non-recurring events, such as the impact of COVID-19 on the Company.
34 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company declared dividends payable to holders of Class A Non-Voting Shares and Common Shares at a rate
of $1.175 per share, payable on June 1, 2021 to shareholders of record as of April 30, 2021. The dividend is
considered an “eligible dividend” for tax purposes.
7.3 Equity Derivative Contracts
The Company enters into equity-derivative contracts to partially offset its exposure to fluctuations in stock-option,
performance share unit plan, and deferred share unit plan expenses. The Company currently uses floating-rate
equity forwards.
During the year, 1,110,000 equity forwards that hedged stock-options and performance share units settled and
resulted in a cash payment to the counterparties of approximately $25.4 million. Also during the year, the
Company entered into 2,005,000 floating-rate equity forwards at a weighted average purchase price of $119.62 to
offset its exposure to stock-options and performance share units.
8.0 Tax Matters
In the ordinary course of business, the Company is subject to ongoing audits by tax authorities. While the
Company has determined that its tax filing positions are appropriate and supportable, from time to time certain
matters are reviewed and challenged by the tax authorities.
With respect to temporary differences relating to and arising from the Company’s investment in its subsidiaries,
the Company is able to control and has no plans that would result in the realization of the respective temporary
differences. Accordingly, the Company has not provided for deferred taxes relating to these respective temporary
differences that might otherwise occur from transactions relating to the Company’s investment in its subsidiaries.
The Company regularly reviews the potential for adverse outcomes with respect to tax matters. The Company
believes that the ultimate disposition of these matters will not have a material adverse effect on its liquidity,
consolidated financial position, or net income, because the Company has determined that it has adequate
provision for these tax matters. Should the ultimate tax liability materially differ from the provision, the Company’s
effective tax rate and its earnings could be affected positively or negatively in the period in which the matters are
resolved.
Income taxes for the quarter ended January 2, 2021 were $196.8 million compared to $125.4 million in 2019. The
effective tax rate for the quarter ended January 2, 2021 increased to 27.4 percent from 25.5 percent in 2019
primarily due to higher non-deductibility of stock option expense in the period.
Income taxes for the full year ended January 2, 2021 were $309.5 million compared to $288.1 million in 2019.
The effective tax rate for the full year ended January 2, 2021 increased to 26.4 percent from 24.4 percent in 2019
primarily due to higher non-deductibility of stock option expense and lower favourable adjustments relating to prior
years’ tax settlements in the period.
Given the uncertainty regarding the future impact of COVID-19 on the economy, the Company believes it is not
appropriate at this time to disclose the annual effective tax rate for fiscal 2021.
9.0 Accounting Policies, Estimates, and Non-GAAP Measures
9.1 Critical Accounting Estimates
The Company estimates certain amounts, which are reflected in its consolidated financial statements using
detailed financial models based on historical experience, current trends, and other assumptions. Actual results
could differ from those estimates. In Management’s judgment, the accounting estimates and policies detailed in
Note 2 and Note 3 to the Company’s consolidated financial statements do not require Management to make
assumptions about matters that are highly uncertain and, accordingly, none of those estimates are considered a
“critical accounting estimate” as defined in Form 51-102F1 – Management Discussion and Analysis, published by
the Canadian Securities Administrators, except for the allowance for loan impairment in the Financial Services
segment.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 35 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Details of the accounting policies that are subject to judgments and estimates that the Company believes could
have the most significant impact on the amounts recognized in its consolidated financial statements, including the
extent to which the impacts of the COVID-19 pandemic affect the judgments and estimates, are described in Note
2 to the Company’s consolidated financial statements and notes.
9.2 Changes in Accounting Policies
Standards, Amendments and Interpretations Issued and Adopted
Interest Rate Benchmark Reform – Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7)
Effective in the first quarter 2020, the Company adopted “Interest Rate Benchmark Reform: Amendments to IFRS
9, IAS 39 and IFRS 7”, issued in September 2019. The amendments provide relief during the period of
uncertainty arising from the phase out of interest rate benchmarks (e.g. interbank offered rates (“IBORs”)).
The Company enters into interest rate swap contracts to hedge the exposure against interest rate risk on the
future interest payments of certain debt issuances and deposits. The Company also enters into “swaption”
derivative financial instruments that provide it with an option to enter into an interest rate swap as part of the
Company’s strategy to manage its interest rate exposure risk on the future interest payments of certain debt
issuances and deposits. Where hedge accounting can be applied, the Company accounts for these derivatives
as cash flow hedges.
The Company’s hedging relationships have significant exposure to the Canadian Dollar Offered Rate (“CDOR”).
Under IBOR reform, CDOR may be subject to discontinuance, changes in methodology, or become unavailable.
The Bank of Canada has established the Canadian Alternative Reference Rate Working Group (“CARR”) to
identify and seek to develop new Canadian dollar interest rate benchmarks. The Canadian Overnight Repo Rate
(“CORRA”) has been recommended as the alternative to CDOR. Already available in the market, CORRA is
currently being enhanced and reformed by its administrator, the Bank of Canada. As a result of these
developments, uncertainty exists relating to timing and methods of transition for financial instruments affected by
these changes, and also in determining whether hedging relationships that hedge the variability of cash flows due
to changes in IBORs continue to qualify for hedge accounting. These adopted amendments modify hedge
accounting requirements, allowing the Company to assume that the interest rate benchmark on which the cash
flows of the hedged item and the hedging instrument are based are not altered as a result of IBOR reform,
thereby allowing hedge accounting to continue.
Management is closely monitoring the impacted hedge relationship for possible changes to CDOR and its
possible replacement with a new Canadian dollar interest rate benchmark. If the new or revised rates differ from
the prior benchmark rates, new or revised hedging strategies may be required to better align derivative hedging
instruments with hedged items. However, given the market uncertainty, the assessment of the impact on the
Company's hedging strategies and its mitigation plans is in the early stages.
Mandatory application of the amendments ends at the earlier of when the uncertainty regarding the timing and
amount of interest rate benchmark-based cash flows is no longer present or when the hedging relationship is
discontinued.
For aspects of hedge accounting not covered by the amendments and hedges that are not directly impacted by
the IBOR reform, the accounting policies as described in Note 3 to the Company’s consolidated financial
statements and notes continue to apply.
Standards, Amendments and Interpretations Issued but not yet Adopted
The following new standards, amendments and interpretations have been issued but are not effective for the fiscal
year ending January 2, 2021 and, accordingly, have not been applied in preparing the consolidated financial
statements.
Insurance Contracts
In May 2017, the International Accounting Standards Board (“IASB”) issued IFRS 17 – Insurance Contracts
(“IFRS 17”), which replaces IFRS 4 – Insurance Contracts and establishes a new model for recognizing insurance
policy obligations, premium revenue, and claims-related expenses. IFRS 17 is effective for annual periods
36 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
beginning on or after January 1, 2021. In June 2020, the IASB issued ‘Amendments to IFRS 17’ to address
concerns and implementation challenges that were identified after IFRS 17 was published in 2017. The
amendment also deferred the effective date for two years to January 1, 2023. Early adoption is permitted. The
Company is assessing the potential impact of this standard.
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-current, which amends IAS 1 –
Presentation of Financial Statements. The narrow-scope amendments affect only the presentation of liabilities in
the statement of financial position and not the amount or timing of its recognition. It clarifies that the classification
of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and
specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the
transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective
for annual reporting periods beginning on or after January 1, 2022. Earlier application is permitted. In July 2020,
due to COVID-19, the IASB deferred the effective date by one year to provide companies with more time to
implement any classification changes resulting from the amendments. The implementation of these amendments
is not expected to have a significant impact on the Company.
Amendment to IFRS 16 Leases – COVID-19-Related Rent Concessions
In May 2020, the IASB issued an amendment to IFRS 16 – Leases (“IFRS 16”) to make it easier for lessees to
account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions. The
amendment exempts lessees from having to consider individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows
lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-
related rent concessions that reduce lease payments due on or before June 30, 2021. The amendment is
effective for annual reporting periods beginning on or after June 1, 2020. Earlier application is permitted. The
implementation of this amendment is not expected to have a significant impact on the Company.
Annual Improvements 2018-2020 and Package of Narrow-Scope Amendments
In May 2020, the IASB issued the package of narrow-scope amendments to three Standards (IFRS 3 – Business
Combinations, IAS 16 – Property, Plant and Equipment, and IAS 37 – Provisions, Contingent Liabilities and
Contingent Assets) as well as the IASB’s Annual Improvements 2018-2020, which are changes that clarify the
wording or correct minor consequences, oversights or conflicts between requirements in the Standards. These
amendments will be effective for annual periods beginning on or after January 1, 2022. The implementation of
these narrow-scope amendments is not expected to have a significant impact on the Company.
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16)
In August 2020, upon completion of the IFRS amendments to facilitate the IBOR reform, the IASB issued Interest
Rate Benchmark Reform – Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (“Phase 2
Amendments”). In relation to changes in financial instruments that are directly required by the IBOR reform,
Phase 2 Amendments mainly provide (i) a practical expedient to account for a change in the basis for determining
the contractual cash flows of a financial asset or financial liability that is required by the IBOR reform by updating
the effective interest rate of the financial asset or financial liability; (ii) exceptions to the hedge accounting
requirements providing relief from discontinuing hedge relationships because of changes to hedge documentation
required by the IBOR reform; and (iii) certain additional disclosures on additional information about the Company’s
exposure to risks arising from the IBOR reform and related risk management activities.
IFRS 16 has also been amended to provide a temporary exception addressing situations where lease agreements
specifically refer to an IBOR and will need to be amended as a result of the IBOR reform. Lessees are required to
remeasure their lease liabilities in a similar fashion to any other change in estimate, rather than as a lease
modification. The amount of the remeasurement is recognized as an adjustment to the right-of-use asset.
Phase 2 Amendments are effective for annual reporting periods beginning on or after January 1, 2021. Earlier
application is permitted. The Company is assessing the potential impact of these amendments.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 37 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
9.3 Key Operating Performance Measures and Non-GAAP Financial Measures
The Company uses certain key operating performance measures and non-GAAP financial measures and believes
that they provide useful information to both Management and investors in measuring the financial performance
and financial condition of the Company for the following reasons.
9.3.1 Key Operating Performance Measures
Retail Sales
Retail sales refers to the point-of-sale value of all goods and services sold to retail customers at stores operated
by Dealers, Mark’s and SportChek franchisees, and Petroleum retailers, at corporately-owned stores across all
retail banners, services provided as part of the Home Services offering, and of goods sold through the Company’s
online sales channels, and in aggregate do not form a part of the Company’s consolidated financial statements.
Sales descriptions for the retail banners can be found in the footnotes to the table contained within section 5.2.2
of this MD&A. Retail sales excludes Helly Hansen retail sales at its retail stores.
Management believes that retail sales and related year-over-year comparisons provide meaningful information to
investors and are expected and valued by them to help assess the size and financial health of the Company’s
retail network of stores. These measures also serve as an indicator of the strength of the Company’s brand,
which ultimately impacts its consolidated financial performance.
Comparable Sales
Comparable sales is a metric used by Management and is also commonly used in the retail industry to identify
sales growth generated by a Company’s existing store network and removes the effect of opening and closing
stores in the period. The calculation includes sales from all stores that have been open for a minimum of one
year and one week, as well as eCommerce sales. The Company also reviews consolidated comparable sales
which include comparable sales at Canadian Tire (including PartSource, PHL, and Party City), SportChek, and
Mark’s but excludes comparable sales at Petroleum and Helly Hansen. Additional information on comparable
sales and retail sales growth descriptions for Canadian Tire, Mark’s, and SportChek can be found in section 5.2.2
of this MD&A.
Sales per Square Foot
Management and investors use comparisons of sales per square foot metrics over several periods to help identify
whether existing assets are being made more productive by the Company’s introduction of new store layouts and
merchandising strategies. Sales per square foot descriptions for Canadian Tire, Mark’s, and SportChek can be
found in section 5.2.2 of this MD&A.
Retail Return on Invested Capital
The Company believes that Retail ROIC is useful in assessing the return on capital invested in its retail assets.
Retail ROIC is calculated as the rolling 12-month retail earnings divided by average invested retail capital. Retail
earnings are defined as Retail segment after-tax earnings excluding interest expense, lease-related depreciation
expense, inter-segment earnings, non-controlling interests, and any normalizing items. Average invested capital
is defined as Retail segment total assets (excluding IFRS 16-related ROU assets), including operating leases
capitalized at a factor of eight, less Retail segment current liabilities (excluding IFRS 16 lease liabilities) and inter-
segment balances for the current and the prior year.
Return on Receivables (“ROR”)
ROR is used by Management to assess the profitability of the Financial Services’ total portfolio of receivables.
ROR is calculated by dividing income before income tax and gains/losses on disposal of property and equipment
by the average total-managed portfolio over a rolling 12-month period.
38 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
9.3.2 Non-GAAP Financial Measures
Consolidated Normalized EBITDA Adjusted for Rent Expense, Normalized EBITDA and EBITDA
The following table reconciles the consolidated normalized income before income taxes, net finance costs,
depreciation and amortization and certain one-time normalizing items, or normalized EBITDA adjusted for rent
expense and normalized EBITDA respectively, to net income attributable to shareholders of Canadian Tire
Corporation, which is a GAAP measure reported in the consolidated financial statements for the periods ended
January 2, 2021 and December 28, 2019. Management uses normalizations to exclude one-time, non-
operational items and has adjusted EBITDA to include an estimate of rent expense, a significant operating
expense for its retail business. Normalized EBITDA adjusted for rent expense and normalized EBITDA, which
include normalized gross margin and normalized selling, general and administrative expenses with adjustments
for an estimate of rent expense, are used as a supplementary measure when assessing the performance of its
ongoing operations and its ability to generate cash flows to fund its cash requirements, including the Company’s
capital expenditures.
(C$ in millions)
Q4 2020
Q4 2019
2020
2019
Normalized EBITDA adjusted for rent expense
$
894.0 $
645.3 $ 1,805.6 $ 1,783.0
Add:
Depreciation of right-of-use assets
Net finance costs, related to leases
Normalized EBITDA
Less normalizing items:
Operating Efficiency program
Party City:
Acquisition-related costs
Fair value adjustment for inventories acquired1
EBITDA
Less:
Depreciation and amortization, other than right-of-use assets2
Depreciation of right-of-use assets
Net finance costs, other than those related to leases
Net finance costs, related to leases
Income before income taxes
Income taxes expense
Net income
71.9
22.2
69.8
24.8
282.6
92.4
262.3
101.0
$
988.1 $
739.9 $ 2,180.6 $ 2,146.3
35.3
—
—
6.5
—
2.4
56.7
34.4
—
—
2.3
2.4
$
952.8 $
731.0 $ 2,123.9 $ 2,107.2
103.5
103.9
71.9
36.6
22.2
69.8
41.2
24.8
412.7
282.6
164.1
92.4
395.2
262.3
165.8
101.0
$
718.6 $
491.3 $ 1,172.1 $ 1,182.9
196.8
125.4
309.5
$
521.8 $
365.9 $
862.6 $
288.1
894.8
116.4
778.4
Net income attributable to non-controlling interests
33.0
31.8
110.8
Net income attributable to shareholders of Canadian Tire Corporation $
488.8 $
334.1 $
751.8 $
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
2 Depreciation and amortization reported in cost of producing revenue for the 14 and 53 weeks ended January 2, 2021 was $3.2 million (2019 – $3.2 million) and
$12.9 million (2019 - $10.1 million).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 39 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Retail Segment Normalized EBITDA Adjusted for Rent Expense, Normalized EBITDA and
EBITDA
The following table reconciles the Retail segment normalized income before income taxes, net finance costs,
depreciation and amortization and certain one-time normalizing items, or normalized EBITDA adjusted for rent
expense and normalized EBITDA respectively, to income before income taxes, which is a supplementary GAAP
measure reported in the notes to the consolidated financial statements for the periods ended January 2, 2021 and
December 28, 2019. Management uses normalizations to exclude one-time, non-operational items and has
adjusted EBITDA to include an estimate of rent expense, a significant operating expense for its retail business.
Normalized EBITDA adjusted for rent expense and normalized EBITDA, which include normalized gross margin
and normalized SG&A expenses with adjustments for an estimate of rent expense, are used as a supplementary
measure when assessing the performance of its ongoing operations and its ability to generate cash flows to fund
its cash requirements, including the Company’s capital expenditures.
(C$ in millions)
Q4 2020
Q4 2019
2020
2019
Normalized EBITDA adjusted for rent expense
$
694.1 $
448.2 $
1,132.6 $
1,017.9
Add:
Depreciation of right-of-use assets
Net finance costs, related to leases
Normalized EBITDA
Less normalizing items:
Operating Efficiency program
Party City:
Acquisition-related costs
Fair value adjustment for inventories acquired1
EBITDA
Less:
132.1
53.9
128.7
58.3
520.0
220.9
495.5
236.8
$
880.1 $
635.2 $
1,873.5 $
1,750.2
35.3
6.5
56.7
34.4
—
—
—
2.4
—
—
2.3
2.4
$
844.8 $
626.3 $
1,816.8 $
1,711.1
Depreciation and amortization, other than right-of-use assets2
Depreciation of right-of-use assets
Net finance (income) costs, other than related to leases
Net finance costs, related to leases
Income before income taxes
84.2
132.1
(3.3)
53.9
88.1
128.7
(0.4)
58.3
338.3
520.0
(0.7)
220.9
$
577.9 $
351.6 $
738.3 $
327.6
495.5
3.4
236.8
647.8
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
2 Depreciation and amortization reported in cost of producing revenue for the 14 and 53 weeks ended January 2, 2021 was $3.2 million (2019 – $3.2 million) and
$12.9 million (2019 - $10.1 million).
40 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Normalized Gross Margin
The following table reconciles normalized gross margin to gross margin which is a supplementary GAAP measure
reported in the notes to the consolidated financial statements for the periods ended January 2, 2021 and
December 28, 2019.
(C$ in millions)
Normalized gross margin
Less normalizing items:
Q4 2020
Q4 2019
2020
2019
$
1,859.4 $
1,505.4 $
5,086.1 $
4,876.2
Operational Efficiency program
Party City – Inventory fair value adjustment1
Gross margin
9.5
—
—
2.4
9.5
—
—
2.4
$
1,849.9 $
1,503.0 $
5,076.6 $
4,873.8
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
Normalized Other Expense (Income)
The following table reconciles normalized other expense (income) to other expense (income) which is a
supplementary GAAP measure reported in the notes to the consolidated financial statements for the periods
ended January 2, 2021 and December 28, 2019.
(C$ in millions)
Normalized other expense (income)
Add normalizing items:
Operational Efficiency program
Other expense (income)
Q4 2020
Q4 2019
2020
2019
1.7 $
0.7 $
31.5 $
(14.7)
17.2
18.9 $
1.3
2.0 $
17.2
1.3
48.7 $
(13.4)
$
$
Normalized Selling, General and Administrative Expenses Adjusted for Rent Expense
The following table reconciles the normalized SG&A expenses, adjusted for rent expenses, and normalized SG&A
expenses to SG&A expenses, which is a supplementary GAAP measure reported in the notes to the consolidated
financial statements for the periods ended January 2, 2021 and December 28, 2019. Management uses
normalizations to exclude one-time, non-operational items and has adjusted SG&A expenses to include an
estimate of rent expense, a significant operating expense for our retail business. Normalized SG&A expenses
adjusted for rent expense and normalized SG&A expenses, are used as a supplementary measure when
assessing the performance of its ongoing operations.
(C$ in millions)
Q4 2020
Q4 2019
2020
2019
Normalized selling, general and administrative expenses adjusted for
rent expense
Add:
$
966.9 $
862.6 $
3,261.9 $
3,118.0
Depreciation and amortization, other than right-of-use assets
100.3
100.7
399.8
385.1
Less:
Net finance costs, related to leases
22.2
24.8
92.4
101.0
Normalized selling, general and administrative expenses
$
1,045.0 $
938.5 $
3,569.3 $
3,402.1
Add normalizing items:
Operational Efficiency program
Party City - Acquisition-related costs
8.6
—
5.2
—
30.0
—
33.1
2.3
Selling, general and administrative expenses
$
1,053.6 $
943.7 $
3,599.3 $
3,437.5
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 41 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Retail Normalized Gross Margin
The following table reconciles Retail normalized gross margin to Retail gross margin which is a supplementary
GAAP measure reported in the notes to the consolidated financial statements for the periods ended January 2,
2021 and December 28, 2019.
(C$ in millions)
Retail normalized gross margin
Less normalizing items:
Q4 2020
Q4 2019
2020
2019
$
1,639.8 $
1,306.6 $
4,368.2 $
4,078.2
Operational Efficiency program
Party City – Inventory fair value adjustment1
9.5
—
—
2.4
9.5
—
—
2.4
Retail gross margin
$
1,630.3 $
1,304.2 $
4,358.7 $
4,075.8
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
Retail Normalized Other (Income)
The following table reconciles Retail normalized other (income) to Retail other (income) which is a supplementary
GAAP measure reported in the notes to the consolidated financial statements for the periods ended January 2,
2021 and December 28, 2019.
(C$ in millions)
Retail Normalized other (income)
Add normalizing items:
Operational Efficiency program
Retail other (income)
Q4 2020
Q4 2019
2020
2019
$
(27.3) $
(29.6) $
(88.0) $
(140.1)
17.2
1.3
17.2
1.3
$
(10.1) $
(28.3) $
(70.8) $
(138.8)
Retail Normalized Selling, General and Administrative Expenses Adjusted for Rent Expense
The following table reconciles the Retail normalized SG&A expenses, adjusted for rent expenses, and, Retail
normalized SG&A expenses, to Retail SG&A expenses, which is a supplementary GAAP measure reported in the
notes to the consolidated financial statements for the periods ended January 2, 2021 and December 28, 2019.
Management uses normalizations to exclude one-time, non-operational items and has adjusted SG&A expenses
to include an estimate of rent expense, a significant operating expense for our retail business. Normalized SG&A
expenses adjusted for rent expense and normalized SG&A expenses, are used as a supplementary measure
when assessing the performance of its ongoing operations.
(C$ in millions)
Q4 2020
Q4 2019
2020
2019
Normalized selling, general and administrative expenses adjusted for
rent expense
Add:
$
976.2 $
891.2 $
3,336.5 $
3,210.5
Depreciation and amortization, other than right-of-use assets
81.0
84.9
325.4
317.5
Less:
Net finance costs, related to leases
53.9
58.3
220.9
236.8
Normalized selling, general and administrative expenses
$
1,003.3 $
917.8 $
3,441.0 $
3,291.2
Add normalizing items:
Operational Efficiency program
Party City - Acquisition-related costs
8.6
—
5.2
—
30.0
—
33.1
2.3
Selling, general and administrative expenses
$
1,011.9 $
923.0 $
3,471.0 $
3,326.6
42 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
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Normalized Net Income
The following table reconciles normalized net income to net income which is a GAAP measure reported in the
notes to the consolidated financial statements for the periods ended January 2, 2021 and December 28, 2019.
Management believes that normalizing GAAP net income provides a useful method for assessing the Company’s
underlying operating performance and assists in making decisions regarding the ongoing operations of its
business.
(C$ in millions)
Normalized net income
Less normalizing items:
Operating Efficiency program
Party City:
Q4 2020
Q4 2019
2020
2019
$
548.4 $
372.4 $
904.9 $
923.3
26.6
4.7
42.3
25.1
Acquisition-related costs
Fair value adjustment for inventories acquired1
Net income
—
—
—
1.8
—
—
1.6
1.8
$
521.8 $
365.9 $
862.6 $
894.8
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
Normalized Net Income Attributable to Shareholders and Earnings per Share
Management believes that normalizing GAAP net income attributable to shareholders of the Company and basic
EPS for non-operating items provides a useful method for assessing the Company’s underlying operating
performance and assists in making decisions regarding the ongoing operations of its business.
The following table is a reconciliation of normalized net income attributable to shareholders of the Company and
normalized basic and diluted EPS to the respective GAAP measures:
(C$ in millions, except per share amounts)
Q4 2020
EPS Q4 2019
EPS
2020
EPS
2019
EPS
Net income/basic EPS
$ 488.8 $ 8.04 $ 334.1 $ 5.42 $ 751.8 $ 12.35 $ 778.4 $ 12.60
Add the after-tax impact of the following,
attributable to shareholders of the Company:
Operational Efficiency program
26.6 0.43
4.7 0.08
42.3 0.69
25.1 0.40
Party City – acquisition-related costs and fair
value adjustment1
— —
1.8 0.03
— —
3.4 0.06
Normalized net income/normalized basic EPS
$ 515.4 $ 8.47 $ 340.6 $ 5.53 $ 794.1 $ 13.04 $ 806.9 $ 13.06
Normalized net income/normalized diluted EPS $ 515.4 $ 8.40 $ 340.6 $ 5.53 $ 794.1 $ 13.00 $ 806.9 $ 13.04
1 Relates to the fair value adjustment to Party City’s inventory recorded as part of the acquisition on October 1, 2019.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 43 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted Net Debt
The following tables reconcile adjusted net debt to GAAP measures. The Company believes that adjusted net
debt is relevant in assessing the amount of financial leverage employed.
As at January 2, 2021
(C$ in millions)
Consolidated net debt
Bank indebtedness
Short-term deposits
Long-term deposits
Short-term borrowings
Current portion of long-term debt
Long-term debt
Debt
Cash and cash equivalents and short-term investments1
Long-term investments1
Net debt
Inter-company debt
Adjusted net debt
1
Includes regulatory reserves.
As at December 28, 2019
(C$ in millions)
Consolidated net debt
Bank indebtedness
Short-term deposits
Long-term deposits
Short-term borrowings
Current portion of long-term debt
Long-term debt
Debt
Cash and cash equivalents and short-term investments1,2
Long-term investments1,2
Net debt
Inter-company debt2
Adjusted net debt
Includes regulatory reserves.
1
2 The prior period figures have been restated to align with current year presentation.
CT REIT Non-GAAP Financial Measures
Consolidated
Retail
Financial
Services
REIT
$
— $
1,228.0
2,281.7
165.4
150.5
— $
—
—
— $
1,228.0
2,281.7
51.1
114.3
—
—
4,115.7
950.9
2,177.6
—
—
—
—
150.5
987.2
7,941.3
1,002.0
5,801.6
1,137.7
(1,970.2)
(306.2)
(1,659.5)
(146.2)
—
(146.2)
(4.5)
—
5,824.9
695.8
3,995.9
1,133.2
—
(1,568.5)
53.7
1,514.8
$
5,824.9 $
(872.7) $
4,049.6 $
2,648.0
Consolidated
Retail
Financial
Services
$
10.4 $
2.0 $
8.4 $
790.8
1,653.4
450.0
788.2
—
—
790.8
1,653.4
67.0
250.5
383.0
500.0
REIT
—
—
—
—
37.7
3,730.2
950.8
1,698.0
1,081.4
7,423.0
1,270.3
5,033.6
1,119.1
(407.2)
(138.9)
(110.2)
—
(287.3)
(138.9)
(9.7)
—
6,876.9
1,160.1
4,607.4
1,109.4
—
(1,756.7)
303.1
1,453.6
$
6,876.9 $
(596.6) $
4,910.5 $
2,563.0
Net Operating Income
NOI is defined as cash rental revenue from investment properties less property operating costs. NOI is used as a
key indicator of performance as it represents a measure of property operations over which Management has
control.
CT REIT evaluates its performance by comparing the performance of the portfolio adjusted for the effects of non-
operational items and current-year acquisitions.
44 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table shows the relationship of NOI to GAAP property revenue and property expense in CT REIT’s
Consolidated Statements of Income and Comprehensive Income:
(C$ in millions)
Property revenue
Less:
Property expense
Property straight-line rent revenue
Net operating income
Q4 2020
Q4 2019
2020
$
126.8 $
123.7 $
502.3
2019
$489.0
27.8
2.2
26.8
3.5
110.8
10.0
106.1
14.1
$
96.8 $
93.4 $
381.5 $
368.8
Funds from Operations and Adjusted Funds from Operations
CT REIT calculates its FFO and AFFO in accordance with the Real Property Association of Canada’s White Paper
on FFO and AFFO for IFRS issued in February 2019. FFO and AFFO should not be considered as alternatives to
net income or cash flow provided by operating activities determined in accordance with IFRS.
Management believes that FFO provides an operating performance measure that, when compared period over
period, reflects the impact on operations of trends in occupancy levels, rental rates, operating costs and property
taxes, acquisition activities and interest costs, and provides a perspective of the financial performance that is not
immediately apparent from net income determined in accordance with IFRS. FFO adds back items to net income
that do not arise from operating activities, such as fair-value adjustments. FFO, however, still includes non-cash
revenues relating to accounting for straight-line rent and makes no deduction for the recurring capital
expenditures necessary to sustain the existing earnings stream.
AFFO is a supplemental measure of recurring economic earnings used in the real estate industry to assess an
entity’s distribution capacity. CT REIT calculates AFFO by adjusting net income for all adjustments used to
calculate FFO as well as adjustments for non-cash income and expense items such as amortization of straight-
line rents. Net income is also adjusted by a reserve for maintaining productive capacity required to sustain
property infrastructure and revenue from real estate properties and direct leasing costs. Property capital
expenditures do not occur evenly during the fiscal year or from year to year. The capital expenditure reserve in
the AFFO calculation is intended to reflect an average annual spending level.
The following table reconciles income before income taxes, as reported in the notes to the consolidated financial
statements for the periods ended January 2, 2021 and December 28, 2019, to FFO and AFFO:
(C$ in millions)
Income before income taxes
Fair-value loss (gain) adjustment
Deferred taxes
Lease principal payments on right-of-use assets
Fair value of equity awards
Internal leasing expense
Funds from operations
Properties straight-line rent adjustment
Capital expenditure reserve
Adjusted funds from operations
Q4 2020
Q4 2019
2020
2019
$
14.0 $
76.9 $
183.3 $
307.2
53.9
(0.6)
(0.3)
0.8
0.3
68.1
(2.2)
(6.1)
(10.6)
(0.5)
(0.1)
0.7
0.2
66.6
(3.5)
(5.8)
87.4
—
(0.8)
0.1
0.8
(47.3)
(0.4)
(0.1)
2.0
0.5
270.8
261.9
(10.0)
(24.3)
(14.1)
(23.5)
$
59.8 $
57.3 $
236.5 $
224.3
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 45 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
10.0 Key Risks and Risk Management
Overview
In the normal course of its business activities, CTC is regularly faced with risks and opportunities. The effective
management of risk is a key priority for the Company to support CTC in achieving its strategies and business
objectives. Accordingly, CTC has adopted an Enterprise Risk Management Framework (“ERM Framework”) for
identifying, assessing, monitoring, mitigating and reporting risks and opportunities facing CTC. Refer to section
2.6 in the 2020 AIF for further details of CTC’s ERM Framework.
10.1 Key Risks
The Company regularly assesses its businesses to identify and assess key risks that alone, or in combination with
other interrelated risks, could have a significant adverse impact on the Company’s brand, financial performance,
and/or ability to achieve its strategic objectives. The following section provides a high-level view of CTC’s risks
that have the most potential to impact its businesses and CTC’s approaches to mitigate such risks.
The mitigation and management of risk is approached holistically with a view to ensuring all risk exposures are
considered. Although the Company believes the measures taken to mitigate risks described below are
reasonable, there can be no assurance that they will effectively mitigate risks that may have a negative impact on
the Company’s financial performance, brand, and/or ability to achieve its strategic objectives. In addition, there
are numerous other risk factors, such as macroeconomic, geopolitical, pandemics or new technologies that are
difficult to predict and could adversely impact financial performance, plans, and objectives.
The duration and severity of the COVID-19 pandemic remain uncertain as does its adverse, long-term impact on
CTC. The Company implemented a number of comprehensive and evolving operational and risk management
strategies to support its businesses and protect the health and well-being of its employees and customers through
the pandemic, as described below. For additional information on COVID-19 impacts to the Company’s
operations, customers and financial performance, please refer to Section 4.0 in this MD&A.
Strategy
CTC operates in a number of industries which are highly competitive and constantly evolving. The Company
selects strategies intended to address opportunities and risks, and positively differentiate its performance in the
marketplace. Should the Company be unable to appropriately respond to fluctuations in the external business
environment as a result of inaction, ineffective strategies, or poor implementation of strategies, there could be
adverse impacts on CTC’s financial performance, brand, and/or ability to achieve its strategic objectives. Factors
affecting these risks may include, but are not limited to:
•
•
•
•
•
•
•
changes in the competitive landscape in the retail, banking, or real estate sectors, impacting the
attractiveness of shopping at CTC’s businesses and the value of its real estate holdings;
economic recession, depression, or high inflation, impacting consumer spending;
changes in the domestic or international political environments, impacting the cost of products and/or
ability to do business;
shifts in the buying behaviour of consumers, demographics, or weather patterns, impacting the relevance
of the products and services offered by CTC;
transition and integration of significant acquisitions into the CTC business model and ability to achieve
expected performance and growth plans;
introduction of new technologies and trends impacting the relevance of the products, channels, or
services offered by CTC; and
health crises, such as the COVID-19 pandemic, impacting the Company’s operations, customer
behaviours and financial performance.
Risk management strategy:
The Company regularly assesses strategies to enable achievement of its financial aspirations. These strategies
take the form of a number of strategic objectives. On at least a quarterly basis, the Company identifies and
assesses the external and internal risks that may impede the achievement of its strategic objectives. This
includes the regular monitoring of economic, political, health, demographic, geographic and competitive
developments in Canada and other countries where CTC conducts business, as wells as the capabilities, strategic
fit, and other benefits of key initiatives and acquisitions. The goal of this approach is to provide early warning and
46 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
escalation within the Company regarding significant risks and engage in appropriate Management activities to
mitigate these risks. In addition to supporting strategy execution, this approach enables Management to assess
the effectiveness of its strategies considering external and internal conditions and propose changes to strategic
objectives as appropriate.
Key Business Relationships
CTC’s business model relies on certain significant business relationships. Such relationships include, but are not
limited to, relationships with its Dealers, agents, franchisees, suppliers and service providers.
The scope, complexity, materiality, and/or criticality of these key business relationships can affect customer
service, procurement, product and service delivery, information security and expense management. Failure to
effectively manage these relationships may have a negative impact on CTC’s financial performance, brand and/or
ability to achieve its strategic objectives.
Risk management strategy:
The Company regularly assesses the capabilities, strategic fit, and other realized benefits of key business
relationships in the context of supporting its strategies. Governance structures, including policies, processes,
contracts, service agreements, and other management activities, are in place to maintain and strengthen the
relationships that are critical to the success of the Company’s performance and aligned with its overall strategic
needs.
A key relationship for the Company is with its Dealers. Management of the Canadian Tire Dealer relationship is
led by Senior Management with oversight by the Chief Executive Officer (“CEO”) and Board of Directors.
In response to the COVID-19 pandemic, the Company has also worked closely with its Dealers, agents,
franchisees, suppliers and service providers to help maintain safe business operations and meet the needs of
Canadians and communities by continuing to provide the essential products and services they require.
Brand
The strength of CTC’s brand significantly contributes to the success of the Company and is sustained through its
culture and processes. Maintaining and enhancing brand equity enables the Company to innovate to better serve
its customers, as well as grow and achieve its financial goals and strategic aspirations. CTC’s reputation, and
consequently brand, may be negatively affected by various factors, some of which may be outside its control.
Should these factors materialize, stakeholders’ trust in the Company, the perception of what its brand stands for,
its connection with customers, and subsequently its brand equity, may significantly diminish. As a result, CTC’s
financial position, brand and/or ability to achieve its strategic objectives may be negatively affected.
that employees
identify and escalate matters
Risk management strategy:
The Company’s strategies include plans and investments to protect and enhance its significant brands. All
employees are expected to manage risks that can impact those brands. Most risks that could impact the
Company’s brand are managed through its risk frameworks. In addition, Senior Management is accountable to
ensure
that could create brand risk. The Company’s
communications department monitors a variety of sources to identify publicly-reported issues that could create
brand risk and supports Senior Management in managing its response to those issues. The Company’s Code of
Conduct provides all employees, contractors, suppliers, and Directors with guidance on ethical values and
expected behaviours that enable it to sustain its culture of integrity. To further protect its brands, CTC has
established requirements with respect to materials used, and the quality of its products, packaging and labelling,
that meet or exceed regulatory standards. Since the onset of the COVID-19 pandemic, the health and well-being
of its employees and customers have remained the Company’s top priority in serving to protect its brands and
reputation.
Financial
Macroeconomic conditions are highly cyclical, volatile and can have a material effect on the ability of the
Company to achieve strategic goals and aspirations. In response to the COVID-19 pandemic, the Company
implemented a plan to reduce operating costs, reduced discretionary capital expenditures and working capital
requirements, and paused share repurchases other than for anti-dilutive purposes. The Company also secured
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 47 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
additional credit with Canadian financial institutions. CTC manages a number of financial risks with respect to
financial instruments, liquidity, foreign currency exchange and interest rates, which are outlined in more detail
below.
Financial Instrument Risk
The Company’s primary financial instrument risk exposures relate to credit card loans receivable and allowances
for credit losses therein and the value of the Company’s financial instruments (including derivatives and
investments) employed to manage exposure to foreign currency risk, interest rate risk, and equity risk, all of which
are subject to financial market volatility. For further disclosure of the Company’s financial instruments, their
classification, their impact on financial statements, and determination of fair value refer to Note 33 of the
consolidated financial statements.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to
managing liquidity is to reasonably ensure that it will have sufficient liquidity to meet its liabilities when due, under
normal circumstance, with the ability to reach to some uncertainty. As a result of the COVID-19 pandemic, the
Company increased its focus on maintaining liquidity and a strong balance sheet and ensuring continued access
to capital.
For a comprehensive discussion of the Company’s liquidity risk, see Note 5 of the consolidated financial
statements.
Foreign Currency Risk
The Company sources its merchandise globally. Approximately 40%, 38%, and 10% of the value of the inventory
purchased for the Canadian Tire, Mark’s, and SportChek banners, respectively, is sourced directly from vendors
outside North America, primarily denominated in U.S. dollars. The majority of Helly Hansen’s purchases are
denominated in U.S. dollars and Euros. To mitigate the impact of fluctuating foreign exchange rates on the cost of
these purchases, the Company has an established foreign exchange risk management program that governs the
proportion of forecasted U.S. dollar purchases that are hedged through entering into foreign exchange derivative
contracts. The purpose of the program is to provide certainty with respect to a portion of the foreign exchange
component of future merchandise purchases.
As the Company has hedged a significant portion of the cost of its near-term U.S. dollar-denominated forecast
purchases, a change in foreign currency rates will not materially impact that portion of the cost of those
purchases. The Company operates its hedging program on a continual basis to ensure that any sustained
change in rates are reflected in the cost of the Company’s U.S. dollar purchases over the entirety of its hedging
horizon. This ensures that the cost off U.S. dollar purchases is smoothed relative to the foreign exchange market
allowing the Company to defer the impact of sudden exchange rate movements on margins and allow it time to
develop strategies to mitigate the impact of a sustained change in foreign exchange rates. Some vendors have
an underlying exposure to U.S. currency fluctuations which may affect the price they charge the Company for
merchandise; and the Company’s hedging program does not mitigate that risk. While the Company may be able
to pass on changes in foreign currency exchange rates through pricing, any decision to do so would be subject to
market conditions.
Interest Rate Risk
The Company may use interest rate derivatives to manage interest rate risk. The Company has a policy in place
whereby, on a consolidated basis, a minimum of 75 percent of its consolidated debt (short-term and long-term)
should be at fixed versus floating interest rates.
Failure to develop, implement, and execute effective strategies to manage these risks may result in insufficient
capital to absorb unexpected losses and/or decreases in margin and/or changes in asset value, negatively
affecting CTC’s financial position, brand, and/or ability to achieve its strategic objectives.
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Risk management strategy:
The Company has a Board-approved Financial Risk Management Policy in place that governs the management of
financial instruments, liquidity, foreign currency, interest rate and other financial risks. The Treasurer and Chief
Financial Officer (“CFO”) provide assurances with respect to policy compliance. Refer to section 6.3 for further
details.
In particular, the Company’s hedging activities, are governed by this policy. Hedge transactions are executed with
highly rated financial institutions and are monitored against policy limits.
Talent
To support its strategies, objectives and normal business operations, CTC needs to maintain a sufficient,
appropriately-skilled, focused and committed workforce. CTC’s financial position, brand, and/or ability to achieve
its strategic objectives may be negatively affected by its failure to manage its talent risk.
Risk management strategy:
The Company manages its talent risk through its organizational design, employee recruitment programs,
succession planning, compensation structures, ongoing training, professional development programs, code of
conduct, and performance management. The Company also continues to adopt strategies to attract and retain
talent, in particular to support key and emerging business areas such as cyber, digital, and consumer data
analytics.
Technology Innovation and Investment
CTC’s business is affected by the introduction of new technologies, which may positively or adversely impact
CTC’s products, channels, and services. CTC’s choices of investments in technology may support its ability to
achieve its strategic objectives, or may negatively affect its financial position, brand, and/or ability to achieve its
strategic objectives. The COVID-19 pandemic caused a rapid shift in consumer behaviour to online shopping,
and the majority of the Company’s corporate employees have shifted to a work-from-home model, increasing the
risk to Company’s digital platforms and IT systems.
Risk management strategy:
The Company manages its risks through its investments in people, processes, and technology to meet
operational and security requirements, and leverage technological advances in the marketplace.
The Company maintains policies, processes, and controls to address capabilities, performance, security, and
availability including resiliency and disaster recovery for systems, infrastructure, and data.
The Company regularly monitors and analyzes its technology needs and performance to determine the
effectiveness of its investments and its investment priorities. CTC implemented a series of enhancements to its
digital platforms to effectively meet the increased online customer demand resulting from the COVID-19 pandemic
and improve both the customer and Dealer eCommerce experiences. IT improvements pertaining to network
infrastructure, devices, security and incident management are effectively supporting the work from home model.
Cyber
CTC relies on IT systems in all areas of operations. The Company’s information systems are subject to an
increasing number of sophisticated cyber threats. The methods used to obtain unauthorized access, disable or
degrade service or sabotage systems are constantly evolving. A breach of sensitive information or its systems
may negatively impact CTC’s financial position, brand, and/or ability to achieve its strategic objectives. Around
the world, threat actors are taking an incrementally higher concerted effort to take advantage of disruptions
associated with the COVID-19 pandemic.
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Risk management strategy:
The Company maintains policies, processes, and controls to address capabilities, performance, security, and
availability including resiliency and disaster recovery for systems, infrastructure, and data. Security protocols,
along with information security policies, address compliance with information security standards, including those
relating to information belonging to the Company’s customers and employees. The Company actively monitors,
manages, and continues to enhance its ability to mitigate cyber risk through enterprise-wide programs. As a
result of related heightened risks CTC has implemented additional security measures with respect to employee
training, monitoring and testing, systems protection, and business continuity and contingency planning.
Data and Information
In the normal course of business, the Company collects and stores sensitive data, including the personal
information of its customers and employees, information of its business partners and internal information. The
integrity, reliability and security of information are critical to its business operations and strategy. The work-from-
home model has heightened the importance of data and information security and privacy.
The lack of integrity and reliability of information for decision-making, loss or inappropriate disclosure or
misappropriation of sensitive information could negatively affect CTC’s financial position, brand, and/or ability to
achieve its strategic objectives.
Risk management strategy:
The Company has policies, processes, and controls designed to manage and safeguard the information of its
customers, employees, and internal information throughout its lifecycle. The Company continues to enhance its
ability to mitigate information risk in conjunction with its cyber risk management programs. The Company
monitors and enforces its practices supporting the security, privacy and confidentiality of sensitive data and
information.
Operations
CTC has complex and diverse operations across its business units and functional areas. Sources of operational
risk include, but are not limited to, merchandising, supply chain, store networks, property management and
development, financial services, business disruptions, regulatory requirements, and reliance on technology.
Operations risk is the risk of potential for loss resulting from inadequate or failed internal processes or systems,
human interactions, or external events. Should this risk materialize, CTC’s financial position, brand, and/or ability
to achieve its strategic objectives could be negatively affected.
Government-issued guidelines and restrictions in response to the COVID-19 pandemic have resulted in the
implementation of several operational measures that impacted the Company’s offices, call centres, store and
distribution networks, including the temporary closures of facilities, reduced store hours and capacity, enhanced
cleaning protocols, and actions to promote physical distancing. Further government-response actions could have
additional adverse impacts on the Company’s operations and financial performance.
The COVID-19 pandemic has also increased the Company’s exposure to risks such as employee health and
safety, absenteeism due to illness or quarantine, and with a significant portion of employees working from home,
connectivity and the continuity of critical business functions. Furthermore, the Company, its Dealers, agents and
franchisees could experience a shortage of labour for front-line positions over concern for heightened exposure to
the virus.
Risk management strategy:
Management in charge of each banner and corporate function is accountable for providing assurances that
policies, processes, and procedures are adequately designed and operating effectively to support the strategic
and performance objectives, availability of business services, and regulatory compliance of the banner that they
operate or support. To ensure continuity of business activities and services, the Company has identified critical
processes and developed robust business continuity plans to mitigate and respond to significant disruptions.
Throughout the COVID-19 pandemic, the Company has been focused on maintaining safe and resilient business
operations to support Canadians and communities by providing essential products and services for the jobs and
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joys of life in Canada. CTC has continued to take the necessary measures and precautions to protect the health
and well-being of its employees and customers, including the implementation of physical distancing protocols,
enhanced cleaning activities and protective equipment, all reflecting best guidance from public health authorities.
The Company and its Dealers implemented a supplemental support payment for all active front-line employees in
recognition of their commitment to serve the Company and their communities. Understanding the importance of
timely and reliable information, CTC has also increased its communication to employees with frequent updates on
the state of business and the availability of tools and resources to help support health and wellness.
Further information regarding the Company’s exposure to this risk for each business segment is provided in
section 10.2.
Financial Reporting
Public companies such as CTC are subject to risks relating to the restatement and reissuance of financial
statements, which may be due to:
•
•
•
failure to adhere to financial accounting and presentation standards and securities regulations relevant to
financial reporting;
fraudulent activity and/or failure to maintain an effective system of internal controls; and/or
inadequate explanation of a Company’s operating performance, financial condition, and future prospects.
The realization of one or more of these risks may result in regulatory-related issues or may negatively impact
CTC’s financial position, brand and/or ability to achieve its strategic objectives.
Risk management strategy:
Internal controls, which include policies, processes and procedures, provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements and other disclosure documents. This
includes monitoring and responding to changing regulations and standards governing accounting and financial
presentation. Further details are set out in section 11.0.
Credit
CTC’s credit risk, which may result if a customer or counterparty fails to meet its contractual obligations, arises
principally from operations of the Bank’s credit card loan portfolio, CTC’s interaction with its Dealer and franchisee
networks, and financial instruments, which are discussed in more detail below.
Consumer Credit Risk
Through the granting of credit cards to the Bank’s customers, the Company assumes certain risks with respect to
the ability and willingness of the Bank’s customers to repay loans owing to it. In response to the COVID-19
pandemic, government authorities have implemented, and are continuing to implement, significant assistance
programs to provide economic support to individuals and businesses. While in the short term these measures
have mitigated some effects of the pandemic, over the long term they may not be sufficient to fully offset negative
impact or adverse recessionary conditions on the Company. Upon cessation of these measures, CTC expects to
see an increase in cardholder delinquencies or impairments, which could negatively impact its financial
performance and strategic objectives.
Dealer and Other Wholesale Customer Credit Risk
Accounts receivable credit risk is primarily from Dealers, franchisees, and wholesale customers. In addition, the
Company is required to provide credit enhancement to Franchise Trust for certain individual Dealer’s borrowings
in the form of standby letters of credit issued by highly-rated financial institutions and guaranteed by the Company
(the “LCs”) and may also provide guarantees of third-party bank debt agreements or inventory buy-back
agreements, with respect to the financing programs available to the Dealers and franchisees.
Financial Instrument Counterparty Risk
The Company's Financial Risk Management Policy is in place to manage the various risks including counterparty
credit risk relating to cash balances, investment activity, and the use of financial derivatives. The Company limits
its exposure to counterparty credit risk by transacting only with highly-rated financial institutions and other
counterparties and by managing within specific limits for credit exposure and term-to-maturity. The Company’s
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financial instrument portfolio is spread across financial institutions, provincial and federal governments, and, to a
lesser extent, corporate and asset-backed issuers that are at least dual rated and have a lowest (if dual rated) or
median (if three or more ratings) credit rating in the “A(low)” equivalent category or better.
Failure to effectively manage this risk may negatively impact CTC’s financial position, brand, and/or ability to
achieve its strategic objectives.
Risk management strategy:
Various Board-approved policies, processes and controls are employed to manage and mitigate the Company’s
credit risk exposure and are monitored for compliance with policy limits.
As the COVID-19 pandemic has evolved, the Company has seen a reduction in customer credit card spending.
Financial Services provided various relief programs to support its cardholders during this time of economic
uncertainty. Further information regarding the Company’s exposure to consumer lending risk is provided in
section 10.2.2.
For further disclosure of the Company’s maximum exposure to credit risk, over and above amounts recognized in
the Consolidated Balance Sheets, refer to Note 5.3.2 in the consolidated financial statements.
For further disclosure of the Company’s allowance for impairment on loans receivable, refer to Note 9 in the
consolidated financial statements.
Legal, Regulatory and Litigation
The Company is or may become subject to claims, disputes, legal proceedings, and regulatory compliance issues
arising in the ordinary course of business. The outcome of litigation cannot be predicted or guaranteed.
Unfavourable rulings may have a material adverse effect on CTC’s financial position, brand, and/or ability to
achieve its strategic objectives. As a response to the COVID-19 pandemic, additional legislation, regulations,
regulatory initiatives or proceedings may be adopted or instituted that impose additional constraints on CTC’s
operations, which may adversely impact its financial performance.
Regulatory risk may have a negative impact on business activities, earnings or capital, regulatory relationships,
Company’s brand or reputation as a result of failure to comply with or failure to adapt to current and changing
regulations or regulatory expectations.
Risk management strategy:
Various Board-approved policies, processes and controls address requirements for compliance with applicable
laws, regulations, and regulatory policies, including those related to the COVID-19 pandemic response. A team of
legal professionals assists employees with mitigating and managing risks relating to claims or potential claims,
disputes, and legal proceedings. The Company’s Legislative Compliance department provides compliance
oversight and guidance to the organization, including the development and maintenance of a regulatory
compliance management system. Specific activities that assist the Company in adhering to regulatory standards
include communication of regulatory requirements, advice, training, testing, monitoring, reporting, and escalation
of control deficiencies to Senior Management.
10.2 Business Segment Risks
10.2.1 Retail Segment Business Risks
The Retail segment is exposed to a number of risks in the normal course of its business that have the potential to
affect its operating performance. Certain risks have been further compounded by the COVID-19 pandemic. The
following are the business risks most relevant to the Retail segment’s operations. Refer to section 10.1 of this
MD&A for further details of the Company’s risk management strategies.
Seasonality Risk
Canadian Tire derives a significant amount of its revenue from the sale of seasonal merchandise and, accordingly,
derives a degree of sales volatility from abnormal weather patterns. Canadian Tire mitigates this risk, to the
extent possible, through the breadth of its product mix and proactive assortment management, effective
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procurement and inventory management practices, as well as the development of products and offers to stimulate
customer demand for ‘non-seasonal’ and year-round products not directly affected by weather patterns.
Mark’s business remains seasonal, with the fourth quarter typically producing the largest share of sales and
annual earnings. Detailed sales reporting and merchandise-planning modules assist Mark’s in mitigating the risks
and uncertainties associated with unseasonable weather and consumer behaviour during the important winter
selling season but cannot eliminate such risks completely because inventory orders, especially for a significant
portion of merchandise purchased offshore, must be placed well ahead of the season.
SportChek is affected by general seasonal trends that are characteristic of the apparel, footwear and hard goods
industries. SportChek strives to minimize the impact of the seasonality of the business by altering its
merchandise mix at certain times of the year to reflect consumer demand.
Evolving Consumer Behaviour and Shopping Habits
Prior to the COVID-19 pandemic, the retail business was rapidly evolving as consumers increasingly embraced
online shopping and mobile eCommerce applications. As a result of COVID-19 restrictions, the Company saw a
further shift in consumer behaviour with an unprecedented increase in online shopping demand. Failure to
provide attractive, user-friendly, and secure digital platforms that continually meet the changing expectations of
online shoppers could negatively impact the Company’s reputation, place the Company at a competitive
disadvantage and/or have a negative impact on business operations. In order to mitigate this risk, the Company
monitors the competitive landscape, digital evolutions and eCommerce trends to ensure its strategic initiatives are
designed to maintain competitive positioning and continue to be relevant. In response to COVID-19, the
Company enhanced its digital platforms and adopted a curbside pickup model to support eCommerce growth and
continue to serve customers in areas impacted by temporary store closures.
Supply Chain Risk
A substantial portion of the Company’s product assortment is sourced from foreign suppliers, lengthening the
supply chain and extending the time between order and delivery. Canadian Tire, Mark’s, and SportChek use
internal resources and third-party logistics providers to manage the movement of foreign-sourced goods from
suppliers to the Company’s Distribution Centres and to their retail stores. Accordingly, the Company is exposed to
potential supply chain disruptions due to foreign supplier failures, health crises such as the COVID-19 pandemic,
extreme weather events, geopolitical risk, labour disruption or insufficient capacity at ports, and risks of delays or
loss of inventory in transit. The Company mitigates these risks through the use of advanced tracking systems and
visibility tools, effective supplier selection and procurement practices and through strong relationships with
transportation companies and port and other shipping authorities, supplemented by marine insurance coverage.
The Company’s ongoing ability to satisfy its customer shopping habits has been significantly challenged by the
COVID-19 pandemic as a result of unprecedented demand for certain products. Key strategic relationships with
vendors as well as the capability to utilize inventory across retail banners have aided the Company’s ability to
address customer demand.
Conduct Risk
Products that are sourced from factories in less developed countries for which there is a high level of public
scrutiny pertaining to working conditions and labour regulations, introduces a heightened level of reputational and
brand risk to CTC. In order to mitigate these risks, CTC works with its suppliers to ensure that products are
sourced, manufactured, and transported according to the standards outlined in the Canadian Tire Supplier Code
of Conduct. The Company also works with the Business Social Compliance Initiative (BSCI) factory audit
methodology to assess the hiring and employment practices, as well as the health and safety standards of its
foreign suppliers.
Environmental Risk
Environmental risk within CTC is primarily associated with the storage, handling, and recycling of certain
materials. The Company has established and follows comprehensive environmental policies and practices to
avoid a negative impact on the environment, to comply with environmental laws, and protect its reputation. It
addresses applicable environmental stewardship requirements and takes the necessary steps to manage the end-
of-first life of product in accordance with these requirements. Petroleum is also subject to federal and provincial
regulations relating to combating climate change, such as carbon taxes, and cap and trade. Petroleum’s
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comprehensive regulatory compliance program includes environmental reviews and the remediation of
contaminated sites as required, supplemented by environmental insurance coverage.
Commodity Price and Disruption Risk
The operating performance of Petroleum can be affected by fluctuations in the commodity cost of oil. The
wholesale price of gasoline is subject to global oil supply and demand conditions, domestic and foreign political
policy, commodity speculation, global economic conditions, and potential supply chain disruptions from natural
and human-caused disasters or health crises such as pandemics. To mitigate this risk to profitability, Petroleum
maintains tight controls over its operational costs and enters into long-term gasoline purchase arrangements with
integrated gasoline wholesalers. Petroleum also enhances profitability through a comprehensive cross-marketing
strategy with other retail banners and higher-margin, ancillary businesses such as convenience store and car
wash sales.
Market Obsolescence Risk
Clothing and apparel retailers are exposed to ever-changing consumers’ fashion preferences. The risk has
increased due to the impact of the COVID-19 pandemic on consumer behaviour. SportChek and Mark’s mitigate
this risk through brand positioning, consumer preference monitoring, demand forecasting and merchandise
selection efforts; as well as the product development process at Mark’s. SportChek offers a comprehensive
assortment of brand-name products under its various banners and partners with strong, national-branded
suppliers that continually evolve their assortments to reflect customer preferences. In addition, SportChek
employs a number of inventory management practices, including certain agreements with vendors to manage
unsold product or offer markdown dollars to offset margin deterioration in liquidating aged inventory. Mark’s
specifically targets consumers of durable everyday casual wear and is less exposed to changing fashions than
apparel retailers offering high-fashion apparel and accessories. Mark’s industrial wear category is exposed to
fluctuations in the resource and construction industry.
Global Sourcing Risk
Similar to other retailers that source products internationally, CTC is exposed to risks associated with foreign
suppliers which can include, but are not limited to, currency fluctuations, the stability of manufacturing operations
in other countries, health crises such as pandemics, labour practices in other countries (see Conduct Risk), and
transportation and port disruptions (see Supply Chain Risk). The Company uses internal resources and third-
party quality assurance providers to proactively manage product quality with vendors in the foreign sourcing
regions. The Company believes that its business practices are appropriate to mitigate the risks. Further
information regarding the Company’s exposure to foreign currency risk is provided in section 10.1.
10.2.2 Financial Services Segment Business Risks
Financial Services is exposed to a number of risks in the normal course of its business that have the potential to
affect its operating performance. Certain risks have been further compounded by the COVID-19 pandemic. The
following are the business risks most relevant to Financial Services’ operations. Refer to section 10.1 for further
details of the Company’s risk management strategies.
Consumer Credit Risk
Financial Services grants credit to its customers on its credit cards, which may include various payment options.
With the granting of credit, Financial Services assumes certain risks with respect to the ability and willingness of
its customers to repay debt. Financial Services manages credit risk to optimize profitability, within the scope of
internal risk policy, by:
•
•
employing sophisticated credit-scoring models to constantly monitor the creditworthiness of customers;
using the latest technology to make informed credit decisions for each customer account to limit credit risk
exposure;
adopting technology to improve the effectiveness of the collection process; and
•
• monitoring the macroeconomic environment, especially with respect to consumer debt levels, interest
rates, employment levels, and income levels.
As a result of the COVID-19 pandemic, Financial Services expects to see an increase in cardholder delinquencies
or impairments once the various government assistance programs come to an end. Financial Services has seen
a reduction in consumer credit card spending due to the pandemic and has supported its cardholders with various
relief programs that cater to individual cardholders’ needs during this time of economic uncertainty.
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Liquidity and Funding Risk
Liquidity and funding risk is the risk that Financial Services will be unable to meet its funding obligations or obtain
funding at a reasonable cost. Financial Services mitigates its liquidity and funding risk by maintaining diversified
funding sources that include securitization of receivables, broker GIC deposits, retail deposits, and committed
bank lines of credit. The importance of maintaining diversified funding sources was demonstrated during the
disruptions in the capital markets during the early stages of the COVID-19 pandemic. Further mitigation is
provided by maintaining a pool of high-quality marketable securities that can be used as a source of liquidity
under a short-term stress scenario. Scotiabank has provided CTB with a $250.0 million unsecured revolving
committed credit facility and $2.0 billion in note purchase facilities for the purchase of senior and subordinated
notes issued by GCCT, both of which are committed to October 2022. A number of regulatory metrics are
monitored including the Liquidity Coverage Ratio and Net Cumulative Cash Flow. Further details on financing
sources for Financial Services are included in section 6.5.
Interest Rate Risk
The Financial Services segment is exposed to interest-rate risk to the extent that changes in interest rates impact
net interest income and net economic value. A significant portion of the funding liabilities for Financial Services
are fixed rate, which reduces interest-rate risk. A one percent change in interest rates does not materially affect
net interest income or net economic value.
Regulatory Risk
Regulatory risk is the risk of negative impact to business activities, earnings or capital, regulatory relationships, or
reputation as a result of failure to comply with or failure to adapt to current and changing regulations or regulatory
expectations. The Bank’s Compliance department is responsible for the development and maintenance of a
regulatory compliance management system. Specific activities that assist the Company in adhering to regulatory
standards include communication of regulatory requirements, advice, training, testing, monitoring, reporting,
escalation of control deficiencies, and regulatory risks.
10.2.3 CT REIT Segment Business Risks
CT REIT is exposed to a number of risks in the normal course of its business that have the potential to affect its
operating performance. Certain risks have been further compounded by the COVID-19 pandemic. The following
are the key business risks specific to the operations of CT REIT. Please refer to section 4 in CT REIT’s Annual
Information Form and Section 12.0 Enterprise Risk Management in CT REIT’s Management’s Discussion and
Analysis for the period ended December 31, 2020, which are not incorporated herein by reference, for a
discussion of risks that affect CT REIT’s operations and also to section 10.1 in this MD&A for further details of the
Company’s risk management strategies.
External Economic Environment
CT REIT is subject to risks resulting from fluctuations or fundamental changes in the external business
environment, which could include changes in the current and future economic environment, the economic stability
of local markets, geographic and industry concentrations, retail shopping behaviours and habits of consumers,
and increased competition amongst investors, developers, owners, and operators of similar properties.
In response to the COVID-19 pandemic, government authorities have implemented, and are continuing to
implement, significant assistance programs to provide economic support to individuals and businesses. While in
the short term these measures have mitigated some effects of the pandemic, over the long term they may not be
sufficient to fully offset its negative impact or advert recessionary conditions. Upon cessation of these measures,
CT REIT may see an increase in tenant rental payment delinquencies, which could negatively impact its financial
performance.
Key Business Relationship
CT REIT’s relationship with its majority unitholder, CTC, is integral to its business strategy. Key factors inherent in
this relationship include situations where the interests of CTC and CT REIT are in conflict, including dependence
of CT REIT’s revenues on the ability of CTC to meet its rent obligations and renew its tenancies, tenant
concentration, reliance on the services of key personnel including certain CTC personnel, and CTC lease
renewals, and rental increases.
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Financial
Risks associated with macroeconomic conditions which are highly cyclical and volatile could have a material
effect on CT REIT. Such risks include changes in interest rates, the availability of capital, unit price risks, and CT
REIT’s degree of leverage.
Legal and Regulatory Compliance
Failure to adhere to laws and regulations and changes to laws and regulations applicable to CT REIT’s operations
may have an adverse affect, including tax-related risks, regulatory risks, and environmental risks.
Operations
CT REIT is subject to the risk that a direct or indirect loss of operating capabilities may occur due to property,
development, redevelopment and renovation risks, disasters, health crises such as pandemics, cyber incidents,
climate change, ineffective business continuity and contingency planning, and talent shortages.
Government issued guidelines and restrictions in response to the COVID-19 pandemic have resulted in the
implementation of several operational measures that impacted CT REIT and its tenants, including the temporary
closures of retail stores and other businesses, reduced business hours and capacity, enhanced cleaning
protocols, and actions to promote physical distancing. Further government response actions could have
additional adverse impact on the REIT’s operations and financial performance.
The health and well-being of CT REIT’s employees, tenants, tenants’ employees and customers, has remained a
top priority throughout the pandemic and the REIT has continued to take necessary measures and precautions to
help protect and support them, reflecting best guidance by government and public health authorities.
11.0 Internal Controls and Procedures
11.1 Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of controls and procedures over the public
disclosure of financial and non-financial information regarding the Company. Such controls and procedures are
designed to provide reasonable assurance that all relevant information is gathered and reported, on a timely
basis, to Senior Management, including the CEO and the CFO, so that they can make appropriate decisions
regarding public disclosure.
The Company’s system of disclosure controls and procedures include, but is not limited to, its Disclosure
Corporate Operating Directive, its Code of Conduct, the effective functioning of its Disclosure Committee,
procedures in place to systematically identify matters warranting consideration of disclosure by the Disclosure
Committee, verification processes for individual financial and non-financial metrics, and information contained in
annual and interim filings, including the consolidated financial statements, MD&A, Annual Information Form, and
other documents and external communications.
As required by CSA National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings
(“NI 52-109”), an evaluation of the adequacy of the design (quarterly) and effective operation (annually) of the
Company’s disclosure controls and procedures was conducted under the supervision of Management, including
the CEO and the CFO, as at January 2, 2021. The evaluation included documentation review, enquiries and
other procedures considered by Management to be appropriate in the circumstances. Based on that evaluation,
the CEO and the CFO have concluded that the design and operation of the system of disclosure controls and
procedures were effective as at January 2, 2021.
11.2 Internal Control over Financial Reporting
Management is also responsible for establishing and maintaining appropriate internal control over financial
reporting. The Company’s internal control over financial reporting includes, but is not limited to, detailed policies
and procedures relating to financial accounting, reporting, and controls over systems that process and summarize
transactions. The Company’s procedures for financial reporting also include the active involvement of qualified
financial professionals, Senior Management, and its Audit Committee.
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All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
As also required by NI 52-109, Management, including the CEO and the CFO, evaluated the adequacy of the
design (quarterly) and the effective operation (annually) of the Company’s internal control over financial reporting
as defined in NI 52-109, as at January 2, 2021. In making this assessment, Management, including the CEO and
the CFO, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control – Integrated Framework (2013). This evaluation included review of the documentation of
controls, evaluation of the design and testing the operating effectiveness of controls, and a conclusion about this
evaluation. Based on that evaluation, the CEO and the CFO have concluded that the design and operation of the
internal control over financial reporting were effective as at January 2, 2021 in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external
purposes in accordance with IFRS.
11.3 Changes in Internal Control over Financial Reporting
During the quarter and year ended January 2, 2021, there were no changes in the Company’s internal control
over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
12.0 Environmental and Social Responsibility
12.1 Overview
As a proud Canadian company and responsible corporate citizen, CTC has made environmental sustainability a
priority. In line with global and Canadian efforts to combat climate change, the Company has set targets to reduce
its Greenhouse Gas (GHG) emissions and is making progress in executing sustainability initiatives that reduce
both energy consumption and waste, as well as using more sustainable materials in its products. For additional
detail on the Company’s sustainability strategy please refer to section 2.8 of the 2020 Annual Information Form. A
copy of the Environmental Sustainability Report is available at https://corp.canadiantire.ca/English/sustainability/
default.aspx.
CTC supports a variety of social causes, but the largest single beneficiary is Jumpstart Charities. For detail on
the Company’s commitment to various social causes aimed at improving social outcomes for Canadians, refer to
section 2.8 of the 2020 Annual Information Form. Additional information regarding Jumpstart is available on their
website at: http://jumpstart.canadiantire.ca.
12.1.2 Environmental Sustainability - Economic Benefits
The table below presents the economic and environmental benefits realized from sustainability initiatives that
contribute to the Company’s GHG reduction targets and additional initiatives that enhance productivity and reduce
its environmental footprint. For further detail on these initiatives and an explanation of how benefits are
calculated, please refer to the Sustainability Performance Report at https://corp.canadiantire.ca/English/
sustainability/performance-reports/default.aspx.
(C$ in millions, except
where indicated)
2020
Economic
Benefit1
($M)
Energy Use
Avoidance2
(GJ)
Low-Carbon
Energy
Generation3
(GJ)
Greenhouse
Gas Emissions
Avoidance2
(tonnes CO2e)
Waste
Avoidance2 Waste Diversion4
(%)
(tonnes)
(tonnes)
Lifetime
Economic
Benefit5
($M)
59.1
137,089
1.5
21,913
—
—
3,847
17,716
— —
$ 396.9
928
106
— —
$
30.4
Product and Packaging6 $
Product Transport7
$
Business and Retail
Operations8
$
Total
$
67.3
212,587
39,236
6.7
53,585
39,236
3,350
8,125
4,862 26,472
77.3 % $ 114.7
22,684 26,472
77.3 % $ 542.0
1 Economic benefit refers to cost avoidance (e.g. energy costs) and income earned (e.g. from the sale of recyclable materials) associated with sustainability
initiatives.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 57 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
2 Avoidance refers to savings in comparison to the baseline scenario, where the baseline scenario is defined as “what would have most likely occurred in the
absence of the sustainability initiative”. Improvements are related to the specific initiatives reported and do not represent total improvements to the value-chain
segment.
3 Refers to energy generated from on-site solar installations. To be considered “low-carbon”, the GHG emissions associated with the energy generated must be
lower than traditional power generation. This energy is fed into the Ontario electrical grid for general consumption in the province.
4 Materials diverted from landfill through reuse, recycling, or composting.
5 Economic benefit to the Company, its Dealers and franchisees realized since our baseline year of 2011 for the entire useful life of the initiative (e.g. in-store
lighting upgrades completed in our baseline year of 2011 will continue to reap benefits every year for the expected lifetime of the asset). Each initiative has a
unique useful life ranging from one to 25 years.
6 Realized reductions in energy use resulting from the transportation of optimized product and packaging, realized reductions in customer energy use resulting
from the sale of energy efficient products, and waste reductions stemming from reduced packaging, damages, product waste at end-of-life, and as of 2019,
paper-saving initiatives such as flyer reductions which were previously classified under Business and Retail Operations.
7 Realized reductions in energy use from increased fuel efficiency in transportation modes and vehicles (e.g. use of long-combination vehicles).
8 Realized reductions in energy use in buildings and their operations through energy efficiency initiatives (e.g. new construction, retrofits), renewable energy
generated from rooftop solar installations, and percentage of waste diverted from landfill as a result of waste management initiatives at stores and DCs.
13.0 Forward-Looking Statements and Other Investor Communication
Caution Regarding Forward-looking Statements
This document contains forward-looking statements that reflect Management’s current expectations relating to
matters such as future financial performance and operating results of the Company. Specific forward-looking
statements included or incorporated by reference in this document include, but are not limited to, statements with
respect to:
•
•
the impacts of COVID-19, in section 4.0 and 10.0;
the Company’s Operational Efficiency program, including the target annualized savings in section 5.1.1;
and
the Company’s intention with respect to the purchase of its Class A Non-Voting Shares in section 7.1.
•
Forward-looking statements provide information about Management’s current expectations and plans, and allow
investors and others to better understand the Company’s anticipated financial position, results of operations and
operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Certain 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 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 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 material assumptions and Management’s beliefs, which may prove to be incorrect,
include, but are not limited to, the duration and impact of COVID-19, including measures adopted by
governmental or public authorities in response to the pandemic, the effectiveness of certain performance
measures, current and future competitive conditions and the Company’s position in the competitive environment,
the Company’s core capabilities, and expectations around the availability of sufficient liquidity to meet the
Company’s contractual obligations. Management’s expectations with respect to the Operational Efficiency
program are based on a number of assumptions relating to anticipated cost savings and operational efficiencies.
Although the Company believes that the forward-looking information in this document is based on information,
assumptions and beliefs that are current, reasonable, and complete, such 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 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
58 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Company to attract and retain high-quality executives and employees for all of its businesses, Dealers, Canadian
Tire Petroleum retailers, and Mark’s and SportChek 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 the Company’s owned brands or its financial products and services; (d)
the Company’s margins and sales and those of its competitors; (e) the changing consumer preferences and
expectations relating to eCommerce, online retailing and the introduction of new technologies; (f) the possible
effects on our business from international conflicts, political conditions, and other developments including changes
relating to or affecting economic or trade matters as well as the outbreak of contagions or pandemic diseases; (g)
risks and uncertainties relating to information management, technology, cyber threats, property management and
development, environmental liabilities, supply-chain management, product safety, competition, seasonality,
weather patterns, climate change, commodity prices and business continuity; (h) the Company’s relationships with
its Dealers, franchisees, suppliers, manufacturers, partners and other third parties; (i) changes in laws, rules,
regulations and policies applicable to the Company’s business; (j) the risk of damage to the Company’s reputation
and brand; (k) the cost of store network expansion and retrofits; (l) the Company’s capital structure, funding
strategy, cost management program, and share price; (m) the Company’s ability to obtain all necessary regulatory
approvals; (n) the Company’s ability to complete any proposed acquisition; and (o) the Company’s ability to
realize the anticipated benefits or synergies from its acquisitions. With respect to the statements concerning the
Company’s Operational Efficiency program, such factors also include: (a) the possibility that the Company does
not achieve the targeted annualized savings; (b) the possibility that the program results in unforeseen impacts to
overall performance; (c) the possibility that the one-time costs and capital investments associated with the
program are more significant than expected; and (d) the possibility that the Company does not achieve the
expected payback during the anticipated timeframe for the severance, store closure and other related expenses
recorded. 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, refer to section 10.0 (Key Risks and Risk Management) of this MD&A and all
subsections thereunder, as well as the Company’s other public filings, available on the SEDAR (System for
Electronic Document Analysis and Retrieval) website at www.sedar.com and at https://investors.canadiantire.ca.
The forward-looking information contained herein is based on certain factors and assumptions as of the date
hereof and does 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. The Company does not
undertake to update any 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, except as required by applicable
securities laws.
Information contained in or otherwise accessible through the websites referenced in this MD&A does not form part
of this MD&A and is not incorporated by reference into this MD&A. All references to such websites are inactive
textual references and are for information only.
This document contains trade names, trademarks and service marks of CTC and other organizations, all of which
are the property of their respective owners. Solely for convenience, the trade names, trademarks, and service
marks referred to herein appear without the ® or ™ symbol.
Commitment to Disclosure and Investor Communication
The Company strives to maintain a high standard of disclosure and investor communication and has been
recognized as a leader in financial reporting practices. Reflecting the Company’s commitment to full and
transparent disclosure,
the Company’s website at: https://
investors.canadiantire.ca, includes the following documents and information of interest to investors:
Investor Relations section of
the
•
•
•
•
Report to Shareholders;
the Annual Information Form;
the Management Information Circular;
quarterly reports;
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 59 of 134
MANAGEMENT'S DISCUSSION AND ANALYSIS
•
•
•
quarterly fact sheets and other supplementary information;
reference materials on the Company’s reporting changes; and
conference call webcasts (archived for one year).
The Company’s Report to Shareholders, Annual Information Form, Management Information Circular and
quarterly reports are also available at www.sedar.com.
If you would like to contact the Investor Relations department directly, email investor.relations@cantire.com.
14.0 Related Parties
The Company’s majority shareholder is Martha Billes, who beneficially owns, or controls or directs approximately
61.4 percent of the Common Shares of the Company through two privately held companies, Tire ‘N’ Me Pty. Ltd.
and Albikin Management Inc.
Transactions with members of the Company’s Board of Directors who were also Dealers represented less than
one percent of the Company’s total revenue and were in accordance with established Company policy applicable
to all Dealers. Other transactions with related parties, as defined by IFRS, were not significant during the year.
February 17, 2021
60 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Index to the Consolidated Financial Statements and Notes
MANAGEMENT’S RESPONSIBILITY FOR
Note 13. Property and Equipment
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
The Company and its Operations
Note 2.
Basis of Preparation
Note 3.
Significant Accounting Policies
Note 4. Capital Management
Note 5.
Financial Risk Management
Note 6. Operating Segments
Note 7. Cash and Cash Equivalents
Note 8.
Trade and Other Receivables
Note 9.
Loans Receivable
Note 10. Long-Term Receivables and Other Assets
Note 11. Goodwill and Intangible Assets
Note 12.
Investment Property
62
63
67
68
69
70
71
72
72
77
89
91
94
96
97
97
100
101
103
Note 14. Leases
Note 15. Subsidiaries
Note 16.
Income Taxes
Note 17. Deposits
Note 18. Trade and Other Payables
Note 19. Provisions
Note 20. Contingencies
Note 21. Short-Term Borrowings
Note 22. Loans
Note 23. Long-Term Debt
Note 24. Other Long-Term Liabilities
Note 25. Employment Benefits
Note 26. Share Capital
Note 27. Share-Based Payments
Note 28. Revenue
Note 29. Cost of Producing Revenue
104
105
107
109
111
111
112
112
113
113
114
116
116
118
120
122
122
Note 30. Selling, General and Administrative Expenses 123
Note 31. Net Finance Costs
Note 32. Notes to the Consolidated Statements of
Cash Flows
Note 33. Financial Instruments
Note 34. Guarantees and Commitments
Note 35. Related Parties
Note 36. Subsequent Events
Note 36. Subsequent Events
123
124
125
128
130
#Se
nPa
ctio
ge#
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 61 of 134
Management’s Responsibility for Financial Statements
The Management of Canadian Tire Corporation, Limited (the "Company") is responsible for the integrity and
reliability of the accompanying consolidated financial statements. These consolidated financial statements have
been prepared by Management in accordance with International Financial Reporting Standards and include
amounts based on judgments and estimates. All financial information in our Management's Discussion and
Analysis is consistent with these consolidated financial statements.
Management is responsible for establishing and maintaining adequate systems of internal control over financial
reporting. These systems are designed to provide reasonable assurance that the financial records are reliable
and form a proper basis for the timely and accurate preparation of financial statements. Management has
assessed the effectiveness of the Company’s internal controls over financial reporting based on the framework in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and concluded that the Company's internal controls over financial reporting were
effective as at the date of these consolidated statements.
The Board of Directors oversees Management’s responsibilities for the consolidated financial statements
primarily through the activities of its Audit Committee, which is comprised solely of directors who are neither
officers nor employees of the Company. This Committee meets with Management and the Company’s
independent auditors, Deloitte LLP, to review the consolidated financial statements and recommend approval by
the Board of Directors. The Audit Committee is responsible for making recommendations to the Board of
Directors with respect to the appointment of and, subject to the approval of the shareholders authorizing the
Board of Directors to do so, approving the remuneration and terms of engagement of the Company’s auditors.
The Audit Committee also meets with the auditors, without the presence of Management, to discuss the results
of their audit.
The consolidated financial statements have been audited by Deloitte LLP, in accordance with Canadian generally
accepted auditing standards. Their report is presented on the following page.
Greg Hicks
President and Executive Vice-President
Chief Executive Officer
and Chief Financial Officer
Gregory Craig
February 17, 2021
62 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Independent Auditor’s Report
To the Shareholders of Canadian Tire Corporation, Limited
Opinion
We have audited the consolidated financial statements of Canadian Tire Corporation, Limited (the “Company”)
and its subsidiaries, which comprise the consolidated balance sheets as at January 2, 2021 and December 28,
2019, and the consolidated statements of income, consolidated statements of comprehensive income,
consolidated statements of cash flows and consolidated statements of changes in equity for the years ended
January 2, 2021 and December 28, 2019, and notes to the consolidated financial statements, including a
summary of significant accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position
of the Company as at January 2, 2021 and December 28, 2019, and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”).
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements for the year ended January 2, 2021. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key Audit Matter description - Impairment of assets
The Company’s evaluation of goodwill for impairment involves the comparison of the recoverable amount of each
cash generating unit to its carrying value. The goodwill balance was $889.5 million as of January 2, 2021, of
which $398.4 million was related to the Helly Hansen cash generating unit (“CGU”). The recoverable amount of
the Helly Hansen CGU is estimated based on fair value less costs of disposal, estimated using discounted cash
flows based on an after-tax discount rate and supported using a market multiple approach. This requires
management to make significant estimates and assumptions related to the projected revenues and associated
earnings before income taxes, depreciation and amortization (“EBITDA”) margins, terminal growth rate, discount
rate and guideline public company (GPC) multiples. Changes in these assumptions could have a significant
impact on the fair value. The recoverable amount of the CGU exceeded its carrying value as of the measurement
date and, therefore, no impairment was recognized.
Given the significant judgments made by management to estimate the fair value of the Helly Hansen CGU,
performing audit procedures to evaluate the reasonableness of the estimates and assumptions related to the
projected cash flows, terminal growth rate, discount rate and GPC multiples required a high degree of auditor
judgment and an increased extent of effort, including the need to involve fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the projected revenues and associated EBITDA margins, terminal growth rate,
discount rate and GPC multiples used by management to estimate the fair value of goodwill for the Helly Hansen
CGU included the following, among others:
• Evaluated management’s ability to accurately forecast future revenues and EBITDA margins by comparing
actual results to management’s historical forecasts.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 63 of 134
Independent Auditor’s Report
• Evaluated the reasonableness of management’s forecasts of future revenues and EBITDA margins by
comparing forecasts to:
◦ Historical revenues and operating margins.
◦ Internal communications to management and the board of directors.
◦ Underlying analyses detailing business strategies and growth plans.
◦ Third-party economic research and projected and historical growth of Helly Hansen’s peer group.
• With the assistance of our fair value specialists;
◦ Compared the terminal growth rate to available industry data and expected long term inflation rates.
◦ Evaluated the reasonableness of the discount rate by testing the source information underlying the
determination of the discount rate and developing a range of independent estimates and compared those to
the discount rate used.
Evaluated the reasonableness of the GPC multiples by testing the source information underlying the estimate and
developing an independent estimate of the GPC multiples and compared that to those used by Management.
Key Audit Matter description - Allowance on credit card loans receivable
The Company’s estimate of allowance on credit card loans receivable is measured using an expected credit loss
(“ECL”) model. As disclosed in Note 2 and Note 9 to the consolidated financial statements, the Company recorded
$864 million in allowances on credit card receivables on its consolidated balance sheet as at January 2, 2021
using an ECL. The allowance on credit card loans receivable represents a complex accounting estimate based on
an assessment of the probability of default (“PD”), exposure at default (“EAD”) and loss given default (“LGD”) of
each cardholder. The Company’s ECL model employs an analysis of historical data, economic indicators and
experience of delinquency and default, to estimate the amount of credit card loans receivable that may default as
a result of past or future events, with certain adjustments for other relevant circumstances influencing the
recoverability of these credit card loans. ECL allowances are measured at amounts equal to either (i) 12-month
ECL; or (ii) lifetime ECL for those credit card loans that have experienced a significant increase in credit risk
(“SICR”) since initial recognition or when there is objective evidence of impairment.
The allowance on credit card loans receivable was identified as a key audit matter given the inherent complexity
of the models, assumptions, judgments and the interrelationship of these variables in measuring the ECL.
Although many estimates and assumptions are required, those with the highest degree of subjectivity and impact
on the allowance are related to the PD, EAD, LGD, SICR, lifetime credit losses, effective interest rate, forward
looking scenarios including the weighting of those scenarios and the application of expert credit judgment,
including the impact of COVID-19. These matters required a high degree of auditor judgment and increased audit
effort, including the involvement of financial modelling specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the models, assumptions and judgements used by management to
estimate the ECL included the following, among others:
• Evaluated the effectiveness of management’s internal controls related to the credit card portfolio data, the
governance and oversight over the modelled results and the use of expert credit judgement.
• Evaluated the completeness and accuracy of the data used in the estimate of ECL.
• With the assistance of financial modelling specialists:
◦ Evaluated the Company’s ECL methodology and key assumptions used for compliance with IFRS.
◦ Evaluated the appropriateness of the methodology and inputs used in the models to estimate PD, EAD,
LGD, SICR, lifetime credit losses, effective interest rate and the design of the forward-looking scenarios
including the weighting of those scenarios.
◦ Evaluated the quantitative assessments of the ECL by comparing management’s estimate of PD to actual
default rates and comparing management’s estimates of EAD and LGD to actual loss experience.
◦ On a sample basis, independently recalculated the ECL.
◦ Evaluated the qualitative assessments included in the ECL by comparing management’s expert credit
judgements against macroeconomic trends and evaluating those judgements to ensure they are reflective
of the credit quality of the credit card portfolio, including the impacts of COVID-19.
64 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Independent Auditor’s Report
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon. In connection with our audit of the financial statements, our
responsibility is to read the other information identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the
work we have performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements. As part of
an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 65 of 134
Independent Auditor’s Report
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the financial statements.We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Adam Charles Burke.
Chartered Professional Accountants
Licensed Public Accountants
February 17, 2021
Toronto, Ontario
66 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Consolidated Balance Sheets
As at
(C$ in millions)
ASSETS
Cash and cash equivalents (Note 7)
Short-term investments
Trade and other receivables (Note 8)
Loans receivable (Note 9)
Merchandise inventories
Income taxes recoverable
Prepaid expenses and deposits
Assets classified as held for sale
Total current assets
Long-term receivables and other assets (Note 10)
Long-term investments
Goodwill and intangible assets (Note 11)
Investment property (Note 12)
Property and equipment (Note 13)
Right-of-use assets (Note 14)
Deferred income taxes (Note 16)
Total assets
LIABILITIES
Bank indebtedness (Note 7)
Deposits (Note 17)
Trade and other payables (Note 18)
Provisions (Note 19)
Short-term borrowings (Note 21)
Loans (Note 22)
Current portion of lease liabilities
Income taxes payable
Current portion of long-term debt (Note 23)
Total current liabilities
Long-term provisions (Note 19)
Long-term debt (Note 23)
Long-term deposits (Note 17)
Long-term lease liabilities
Deferred income taxes (Note 16)
Other long-term liabilities (Note 24)
Total liabilities
EQUITY
Share capital (Note 26)
Contributed surplus
Accumulated other comprehensive (loss)
Retained earnings
Equity attributable to shareholders of Canadian Tire Corporation
Non-controlling interests (Note 15)
Total equity
Total liabilities and equity
January 2, 2021 December 28, 2019
1,327.2 $
643.0
973.6
5,031.8
2,312.9
21.9
193.8
42.6
10,546.8
631.9
146.2
2,372.8
385.8
4,298.2
1,696.7
298.7
20,377.1 $
— $
1,228.0
2,508.3
196.7
165.4
506.6
329.9
120.4
150.5
5,205.8
70.3
4,115.7
2,281.7
1,896.6
122.0
850.3
14,542.4
597.0
2.9
(237.7)
4,136.9
4,499.1
1,335.6
5,834.7
20,377.1 $
205.5
201.7
938.3
5,813.8
2,212.9
33.2
139.3
10.6
9,555.3
807.8
138.9
2,414.3
389.1
4,283.3
1,610.4
319.2
19,518.3
10.4
790.8
2,492.4
190.2
450.0
621.5
335.3
72.6
788.2
5,751.4
61.1
3,730.2
1,653.4
1,871.0
136.4
810.1
14,013.6
588.0
2.9
(129.9)
3,729.6
4,190.6
1,314.1
5,504.7
19,518.3
$
$
$
$
The related notes form an integral part of these consolidated financial statements.
Maureen J. Sabia
Director
Diana L. Chant
Director
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 67 of 134
Consolidated Statements of Income
For the years ended
(C$ in millions, except share and per share amounts)
January 2, 2021 December 28, 2019
Revenue (Note 28)
Cost of producing revenue (Note 29)
Gross margin
Other expense (income)
Selling, general and administrative expenses (Note 30)
Net finance costs (Note 31)
Income before income taxes
Income taxes (Note 16)
Net income
Net income attributable to:
Shareholders of Canadian Tire Corporation
Non-controlling interests (Note 15)
Basic earnings per share
Diluted earnings per share
$
14,871.0 $
9,794.4
5,076.6
48.7
3,599.3
256.5
1,172.1
309.5
862.6 $
751.8 $
110.8
862.6 $
12.35 $
12.31 $
$
$
$
$
$
14,534.4
9,660.6
4,873.8
(13.4)
3,437.5
266.8
1,182.9
288.1
894.8
778.4
116.4
894.8
12.60
12.58
Weighted average number of Common and Class A Non-Voting Shares
outstanding:
Basic
Diluted
60,896,809
61,090,111
61,794,565
61,861,486
The related notes form an integral part of these consolidated financial statements.
68 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Consolidated Statements of Comprehensive Income
For the years ended
(C$ in millions)
Net income
Other comprehensive (loss), net of taxes
Items that may be reclassified subsequently to net income:
Net fair value (losses) on hedging instruments entered into for cash flow
hedges not subject to basis adjustment
Deferred cost of hedging not subject to basis adjustment – Changes in fair
value of the time value of an option in relation to time-period related hedged
items
Reclassification of losses to income
Currency translation adjustment
Items that will not be reclassified subsequently to net income:
Actuarial losses
Net fair value (losses) on hedging instruments entered into for cash flow
hedges subject to basis adjustment
Other comprehensive (loss)
Other comprehensive (loss) attributable to:
Shareholders of Canadian Tire Corporation
Non-controlling interests
Comprehensive income
Comprehensive income attributable to:
Shareholders of Canadian Tire Corporation
Non-controlling interests
January 2, 2021 December 28, 2019
$
862.6 $
894.8
(34.7)
(4.5)
(12.0)
2.8
(13.0)
(10.7)
(29.9)
(97.5) $
(88.4) $
(9.1)
(97.5) $
765.1 $
663.4 $
101.7
765.1 $
(18.7)
0.6
(60.7)
(15.1)
(52.7)
(151.1)
(146.1)
(5.0)
(151.1)
743.7
632.3
111.4
743.7
$
$
$
$
$
$
The related notes form an integral part of these consolidated financial statements.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 69 of 134
Consolidated Statements of Cash Flows
For the years ended
(C$ in millions)
Cash (used for) generated from:
Operating activities
Net income
Adjustments for:
Depreciation of property and equipment, investment property and right-of-use assets
(Notes 29 and 30)
Impairment on property and equipment, intangible assets, investment property and right-
of-use assets
Income taxes (Note 16)
Net finance costs (Note 31)
Amortization of intangible assets (Note 30)
(Gain) on disposal of property and equipment, investment property, assets held for sale
and right-of-use assets
Total except as noted below
Interest paid
Interest received
Income taxes paid
Change in loans receivable
Change in operating working capital and other
Cash generated from operating activities
Investing activities
Additions to property and equipment and investment property
Additions to intangible assets
Total additions
Acquisition of short-term investments
Proceeds from maturity and disposition of short-term investments
Proceeds on disposition of property and equipment, investment property and assets
held for sale
Business combinations, net of cash acquired
Lease payments for finance subleases (principal portion)
Acquisition of long-term investments and other
Cash (used for) investing activities
Financing activities
Dividends paid
Distributions paid to non-controlling interests
Total dividends and distributions paid
Net (repayment) issuance of short-term borrowings
Issuance of loans
Repayment of loans
Issuance of long-term debt
Repayment of long-term debt
Payment of lease liabilities (principal portion)
Payment of transaction costs related to long-term debt
Purchase of Class A Non-Voting Shares
Proceeds on disposal of partial interest in CT REIT
Net proceeds from issue of trust units to non-controlling interests
Payments on financial instruments
Change in deposits
Cash (used for) financing activities
Cash generated (used) in the period
Cash and cash equivalents, net of bank indebtedness, beginning of period
Cash and cash equivalents, net of bank indebtedness, end of period (Note 7)
January 2, 2021
December 28, 2019
$
862.6 $
894.8
582.6
46.9
309.5
256.5
112.7
(12.1)
2,158.7
(272.6)
15.8
(200.5)
925.1
(183.7)
2,442.8
(307.2)
(129.3)
(436.5)
(710.0)
328.8
13.3
—
16.8
(60.4)
(848.0)
(262.9)
(96.2)
(359.1)
(284.6)
248.9
(363.6)
1,198.6
(1,450.8)
(367.9)
(2.8)
(111.5)
—
—
(30.9)
1,061.0
(462.7)
1,132.1
195.1
$
1,327.2 $
546.7
1.9
288.1
266.8
110.8
(25.8)
2,083.3
(297.3)
27.3
(347.9)
(270.4)
(107.4)
1,087.6
(435.2)
(178.6)
(613.8)
(297.3)
326.0
20.2
(177.3)
16.4
(32.9)
(758.7)
(242.5)
(84.1)
(326.6)
71.9
259.2
(292.3)
571.3
(500.3)
(313.3)
(2.6)
(218.0)
142.6
86.3
(51.6)
(30.8)
(604.2)
(275.3)
470.4
195.1
The related notes form an integral part of these consolidated financial statements.
70 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
Consolidated Statements of Changes in Equity
Total accumulated other comprehensive
income (loss)
(C$ in millions)
Share
capital
Contributed
surplus
Cash flow
hedges
Currency
translation
adjustment
Total
accumulated
other
comprehensive
income (loss)
Retained
earnings
Equity
attributable to
shareholders
of Canadian
Tire
Corporation
Equity
attributable
to non-
controlling
interests
Total
equity
Balance at December 28, 2019
$ 588.0 $
2.9 $
(28.3) $
(101.6) $
(129.9) $ 3,729.6 $
4,190.6 $
1,314.1 $ 5,504.7
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Transfers of cash flow hedge (gains) to non-financial
assets
Contributions and distributions to shareholders of
Canadian Tire Corporation
—
—
—
—
Issuance of Class A Non-Voting Shares (Note 26)
14.3
Purchase of Class A Non-Voting Shares (Note 26)
(110.7)
Reversal of accrued liability for automatic share
purchase plan commitment (Note 26)
3.0
Excess of purchase price over average cost (Note 26)
102.4
Dividends
Contributions and distributions to non-controlling
interests
Issuance of trust units to non-controlling interests, net
of transaction costs
Distributions and dividends to non-controlling interests
Total contributions and distributions
—
—
—
9.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
751.8
751.8
110.8
862.6
(65.1)
(13.0)
(78.1)
(10.3)
(88.4)
(9.1)
(97.5)
(65.1)
(13.0)
(78.1)
741.5
663.4
101.7
765.1
(29.7)
—
(29.7)
—
(29.7)
—
(29.7)
—
—
—
—
—
—
—
(29.7)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
46.1
(102.4)
(277.9)
14.3
(110.7)
49.1
—
(277.9)
—
—
—
—
—
14.3
(110.7)
49.1
—
(277.9)
—
—
—
—
16.2
16.2
(96.4)
(96.4)
(29.7)
(334.2)
(354.9)
(80.2)
(435.1)
Balance at January 2, 2021
$ 597.0 $
2.9 $
(123.1) $
(114.6) $
(237.7) $ 4,136.9 $
4,499.1 $
1,335.6 $ 5,834.7
Total accumulated other comprehensive
income (loss)
(C$ in millions)
Share
capital
Contributed
surplus
Cash flow
hedges
Currency
translation
adjustment
Total
accumulated
other
comprehensive
income (loss)
Retained
earnings
Equity
attributable to
shareholders
of Canadian
Tire
Corporation
Equity
attributable
to non-
controlling
interests
Total
equity
December 30, 2018, as previously reported
$ 591.5 $
2.9 $
92.0 $
(40.9) $
51.1 $ 3,720.7 $
4,366.2 $
1,048.8 $ 5,415.0
Transition adjustments – IFRS 16
—
Restated balance at December 30, 2018
591.5
Net income
Other comprehensive (loss)
Total comprehensive (loss) income
Transfers of cash flow hedge (gains) to non-financial
assets
Contributions and distributions to shareholders of
Canadian Tire Corporation
—
—
—
—
Issuance of Class A Non-Voting Shares (Note 26)
14.3
Purchase of Class A Non-Voting Shares (Note 26)
(215.2)
Reversal of accrued liability for automatic share
purchase plan commitment (Note 26)
(3.0)
Excess of purchase price over average cost (Note 26)
200.4
Dividends
Contributions and distributions to non-controlling
interests
Sale of ownership interests in the CT REIT business,
net of transaction costs
Issuance of trust units to non-controlling interests, net
of transaction costs
Distributions and dividends to non-controlling interests
—
—
—
—
Total contributions and distributions
(3.5)
—
2.9
—
—
—
—
—
—
—
—
—
—
—
—
—
92.0
—
—
—
(246.9)
(246.9)
(0.1)
(247.0)
(40.9)
51.1
3,473.8
4,119.3
1,048.7
5,168.0
—
—
778.4
778.4
116.4
894.8
(70.8)
(60.7)
(131.5)
(14.6)
(146.1)
(5.0)
(151.1)
(70.8)
(60.7)
(131.5)
763.8
632.3
111.4
743.7
(49.5)
—
(49.5)
—
(49.5)
—
(49.5)
—
—
—
—
—
—
—
(49.5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(46.1)
(200.4)
(261.5)
14.3
(215.2)
(49.1)
—
(261.5)
—
—
—
—
14.3
(215.2)
(49.1)
—
(261.5)
—
—
—
—
—
—
142.7
142.7
96.7
96.7
(85.4)
(85.4)
(49.5)
(508.0)
(561.0)
154.0
(407.0)
Balance at December 28, 2019
$ 588.0 $
2.9 $
(28.3) $
(101.6) $
(129.9) $ 3,729.6 $
4,190.6 $
1,314.1 $ 5,504.7
The related notes form an integral part of these consolidated financial statements.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 71 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and its Operations
Canadian Tire Corporation, Limited is a Canadian public company primarily domiciled in Canada. Its registered
office is located at 2180 Yonge Street, Toronto, Ontario, M4P 2V8, Canada. It is listed on the Toronto Stock
Exchange (TSX – CTC, CTC.A). Canadian Tire Corporation, Limited and entities it controls are together referred
to in these consolidated financial statements as the “Company”, “CTC” or “Canadian Tire Corporation”. Refer to
Note 15 for the Company’s major subsidiaries.
The Company is comprised of three main business operations, which offer a wide range of retail goods and
services, including general merchandise, apparel, sporting goods, petroleum, Financial Services including a bank,
and real estate operations. Details of the Company’s three reportable operating segments are provided in Note 6.
This document contains trade names, trademarks and service marks of CTC and other organizations, all of which
are the property of their respective owners. Solely for convenience, the trade names, trademarks and service
marks referred to herein appear without the ® or TM symbol.
2. Basis of Preparation
Fiscal Year
The fiscal year of the Company consists of a 52 or 53-week period ending on the Saturday closest to December
31. The fiscal years for the consolidated financial statements and notes presented for 2020 and 2019 are the 53-
week and 52-week periods ended January 2, 2021 and December 28, 2019, respectively.
Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) using the accounting policies described herein.
These consolidated financial statements were authorized for issuance by the Company’s Board of Directors on
February 17, 2021.
Basis of Presentation
These consolidated financial statements have been prepared on the historical cost basis, except for the following
items, which are measured at fair value:
• financial instruments at fair value through profit or loss (“FVTPL”);
• derivative financial instruments;
• liabilities for share-based payment plans; and
• initial recognition of assets acquired and liabilities assumed in a business combination.
In addition, the post-employment defined benefit obligation is recorded at its discounted present value.
Functional and Presentation Currency
These consolidated financial statements are presented in Canadian dollars (“$” or “C$”), the Company’s functional
currency.
Judgments and Estimates
The preparation of these consolidated financial statements in accordance with IFRS requires Management to
make judgments and estimates that affect:
• the application of accounting policies;
• the reported amounts of assets and liabilities;
• disclosures of contingent assets and liabilities; and
• the reported amounts of revenue and expenses during the reporting periods.
Actual results may differ from estimates made in these consolidated financial statements.
72 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Judgments are made in the selection and assessment of the Company’s accounting policies. Estimates are used
mainly in determining the measurement of recognized transactions and balances. Estimates are based on
historical experience and other factors, including expectations of future events believed to be reasonable under
the circumstances. Judgments and estimates are often interrelated. The Company’s judgments and estimates
are continually re-evaluated to ensure they remain appropriate. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in future periods affected.
On March 12, 2020, the World Health Organization declared the outbreak of Coronavirus (“COVID-19”) a
pandemic. There is significant uncertainty regarding the extent and duration of the impact that the COVID-19
pandemic will have on the Company’s operations. The extent to which the impacts of COVID-19 pandemic affects
the judgments and estimates described further in this note depend on future developments, which are highly
uncertain and cannot be predicted. Management will continue to monitor and assess the impact of the pandemic
on its judgments, estimates, accounting policies and amounts recognized in these consolidated financial
statements.
The following are the accounting policies that are subject to judgments and estimates that the Company believes
could have the most significant impact on the amounts recognized in these consolidated financial statements.
Impairment of Assets
Judgment – The Company uses judgment in determining the grouping of assets to identify its Cash Generating
Units (“CGUs”) for purposes of testing for impairment of property and equipment and goodwill and intangible
assets. The Company has determined that its Retail CGUs comprise individual stores or groups of stores. In
testing for impairment, goodwill acquired in a business combination is allocated to the CGUs that are expected to
benefit from the synergies of the business combination. In testing for impairment of intangibles with indefinite
lives, these assets are allocated to the CGUs to which they relate. Furthermore, on a quarterly basis, judgment is
used in determining whether there has been an indication of impairment, which would require the completion of a
quarterly impairment test, in addition to the annual requirement.
Estimation – The Company’s estimate of a CGU’s or group of CGUs’ recoverable amount is based on value in use
(“VIU”) and involves estimating future cash flows before taxes. Future cash flows are estimated based on multi-
year extrapolation of the most recent historical actual results or budgets and a terminal value calculated by
discounting the final year in perpetuity. The growth rate applied to the terminal value is based on the Bank of
Canada’s target inflation rate or Management’s estimate of the growth rate specific to the individual item being
tested. The future cash flow estimates are then discounted to their present value using an appropriate discount
rate that incorporates a risk premium specific to each business.
The Company’s determination of a CGU’s or group of CGUs’ recoverable amount based on fair value less cost to
sell (“FVLCS”) uses factors such as royalty rates or market rental rates for comparable assets or estimated using
discounted cash flows based on an after-tax discount rate, consistent with the assumptions that a market
participant would make. When using discounted cash flows based on an after-tax discount rate, the values
assigned to the key assumptions represent Management’s assessment of future trends in the relevant industry
and are based on historical data from both external and internal sources, including review of historical and
forecast growth rates, long-term inflationary and nominal Gross Domestic Product growth estimates for the
primary countries in which CGU or group of CGUs operates, consistent with the assumptions that a market
participant would make.
Fair Value Measurement of Redeemable Financial Instrument
Judgment – The Company uses judgment in determining the fair value measurement of the redeemable financial
instrument issued in conjunction with the sale of a 20 percent equity interest in the Company’s Financial Services
business. In calculating the fair value, judgment is used when determining the discount and growth rates applied
to the forecasted earnings in the discounted cash flow valuation. Refer to Note 33 for further information
regarding this financial instrument.
Estimation – The inputs to determine the fair value are taken from observable markets where possible, but where
they are unavailable, assumptions are required in establishing fair value. The fair value of the redeemable
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 73 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
financial instrument is determined based on the Company’s best estimate of forecasted earnings attributable to
the Financial Services business, adjusted for any undistributed earnings.
Merchandise Inventories
Estimation – Merchandise inventories are carried at the lower of cost and net realizable value. The estimation of
net realizable value is based on the most reliable evidence available of the amount the merchandise inventories
are expected to realize. Additionally, estimation is required for inventory provisions due to shrinkage.
Income and Other Taxes
Judgment – In calculating current and deferred income and other taxes, the Company uses judgment when
interpreting the tax rules in jurisdictions where the Company operates. The Company also uses judgment in
classifying transactions and assessing probable outcomes of claimed deductions, which considers expectations of
future operating results, the timing and reversal of temporary differences and possible audits of income tax and
other tax filings by tax authorities.
Consolidation
Judgment – The Company uses judgment in determining the entities that it controls and consolidates accordingly.
An entity is controlled when the Company has power over an entity, exposure or rights to variable returns from its
involvement with the entity, and is able to use its power over the entity to affect its return from the entity. The
Company has power over an entity when it has existing rights that give it the current ability to direct the relevant
activities, which are the activities that significantly affect the investee’s returns. Since power comes from rights,
power can result from contractual arrangements. However, certain contractual arrangements contain rights that
are designed to protect the Company’s interest, without giving it power over the entity.
Allowance on Loans Receivable
Estimation – The Company’s estimate of allowances on credit card loans receivable is based on an expected
credit loss (“ECL”) approach that employs an analysis of historical data, economic indicators and experience of
delinquency and default, to estimate the amount of loans that may default as a result of past or future events, with
certain adjustments for other relevant circumstances influencing the recoverability of these loans receivable.
Impairment of loans is assessed based on whether there has been a significant increase in credit risk since
origination and incorporation of forward-looking information in the measurement of expected credit losses.
Default rates, loss rates and the expected timing of future recoveries are periodically benchmarked against actual
outcomes to ensure that they remain appropriate. Future customer behaviour may be affected by a number of
factors, including changes in interest and unemployment rates and program design changes.
Post-Employment Benefits
Estimation – The accounting for the Company’s post-employment benefit plan requires the use of assumptions.
The accrued benefit liability is calculated using actuarial determined data and the Company’s best estimates of
future salary escalations, retirement ages of employees, employee turnover, mortality rates, market discount rates
and expected health and dental care costs.
Lease Liabilities
Estimation – For the measurement of lease liabilities, Management considers all factors that create an economic
incentive to exercise extension options, or not exercise termination options available in its leasing arrangements.
Extension options, or periods subject to termination options, are only included in the lease term if management
determines it is reasonably certain to be extended or not terminated. The assessment is reviewed if a significant
event or a significant change in circumstances occurs which affects this assessment and that is within the control
of the lessee.
Estimation – The Company generally uses the lessee’s incremental borrowing rate when initially recording
property leases. For property leases, the implicit rates are not readily available as information from the lessor
regarding the fair value of underlying assets and initial direct costs incurred by the lessor related to the leased
assets is not available. The Company determines the incremental borrowing rate as the rate of interest that the
lessee would pay to borrow over a similar term and with a similar security the funds necessary to obtain an asset
of a similar value to the right-of-use-asset in a similar economic environment.
74 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other
Other estimates include determining the useful lives and depreciation methods applied to investment property and
intangible assets for the purposes of depreciation and amortization; in accounting for and measuring items such
as deferred revenue, provisions and purchase price adjustments on business combinations; and in measuring
certain fair values, including those related to the valuation of business combinations, share-based payments and
financial instruments.
Standards, Amendments and Interpretations Issued and Adopted
Interest Rate Benchmark Reform – Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7)
Effective in the first quarter 2020, the Company adopted “Interest Rate Benchmark Reform: Amendments to IFRS
9, IAS 39 and IFRS 7”, issued in September 2019. The amendments provide relief during the period of
uncertainty arising from the phase out of interest rate benchmarks (e.g. interbank offered rates (“IBORs”)).
The Company enters into interest rate swap contracts to hedge the exposure against interest rate risk on the
future interest payments of certain debt issuances and deposits. The Company also enters into “swaption”
derivative financial instruments that provide it with an option to enter into an interest rate swap as part of the
Company’s strategy to manage its interest rate exposure risk on the future interest payments of certain debt
issuances and deposits. Where hedge accounting can be applied, the Company accounts for these derivatives
as cash flow hedges.
The Company’s hedging relationships have significant exposure to the Canadian Dollar Offered Rate (“CDOR”).
Under IBOR reform, CDOR may be subject to discontinuance, changes in methodology, or become unavailable.
The Bank of Canada has established the Canadian Alternative Reference Rate Working Group (“CARR”) to
identify and seek to develop new Canadian dollar interest rate benchmarks. The Canadian Overnight Repo Rate
(“CORRA”) has been recommended as the alternative to CDOR. Already available in the market, CORRA is
currently being enhanced and reformed by its administrator, the Bank of Canada. As a result of these
developments, uncertainty exists relating to timing and methods of transition for financial instruments affected by
these changes, and also in determining whether hedging relationships that hedge the variability of cash flows due
to changes in IBORs continue to qualify for hedge accounting. These adopted amendments modify hedge
accounting requirements, allowing the Company to assume that the interest rate benchmark on which the cash
flows of the hedged item and the hedging instrument are based are not altered as a result of IBOR reform,
thereby allowing hedge accounting to continue.
Management is closely monitoring the impacted hedge relationship for possible changes to CDOR and its
possible replacement with a new Canadian dollar interest rate benchmark. If the new or revised rates differ from
the prior benchmark rates, new or revised hedging strategies may be required to better align derivative hedging
instruments with hedged items. However, given the market uncertainty, the assessment of the impact on the
Company's hedging strategies and its mitigation plans is in the early stages.
Mandatory application of the amendments ends at the earlier of when the uncertainty regarding the timing and
amount of interest rate benchmark-based cash flows is no longer present or when the hedging relationship is
discontinued.
For aspects of hedge accounting not covered by the amendments and hedges that are not directly impacted by
the IBOR reform, the accounting policies as described in Note 3 continue to apply.
Standards, Amendments and Interpretations Issued but not yet Adopted
The following new standards, amendments and interpretations have been issued but are not effective for the fiscal
year ending January 2, 2021 and, accordingly, have not been applied in preparing these consolidated financial
statements.
Insurance Contracts
In May 2017, the International Accounting Standards Board (“IASB”) issued IFRS 17 – Insurance Contracts
(“IFRS 17”), which replaces IFRS 4 – Insurance Contracts and establishes a new model for recognizing insurance
policy obligations, premium revenue, and claims-related expenses. IFRS 17 is effective for annual periods
beginning on or after January 1, 2021. In June 2020, the IASB issued ‘Amendments to IFRS 17’ to address
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 75 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
concerns and implementation challenges that were identified after IFRS 17 was published in 2017. The
amendment also deferred the effective date for two years to January 1, 2023. Early adoption is permitted. The
Company is assessing the potential impact of this standard.
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-current, which amends IAS 1 –
Presentation of Financial Statements. The narrow-scope amendments affect only the presentation of liabilities in
the statement of financial position and not the amount or timing of its recognition. It clarifies that the classification
of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and
specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the
transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective
for annual reporting periods beginning on or after January 1, 2022. Earlier application is permitted. In July 2020,
due to COVID-19, the IASB deferred the effective date by one year to provide companies with more time to
implement any classification changes resulting from the amendments. The implementation of these amendments
is not expected to have a significant impact on the Company.
Amendment to IFRS 16 Leases – COVID-19-Related Rent Concessions
In May 2020, the IASB issued an amendment to IFRS 16 – Leases (“IFRS 16”) to make it easier for lessees to
account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions. The
amendment exempts lessees from having to consider individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows
lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-
related rent concessions that reduce lease payments due on or before June 30, 2021. The amendment is
effective for annual reporting periods beginning on or after June 1, 2020. Earlier application is permitted. The
implementation of this amendment is not expected to have a significant impact on the Company.
Annual Improvements 2018-2020 and Package of Narrow-Scope Amendments
In May 2020, the IASB issued the package of narrow-scope amendments to three Standards (IFRS 3 – Business
Combinations, IAS 16 – Property, Plant and Equipment, and IAS 37 – Provisions, Contingent Liabilities and
Contingent Assets) as well as the IASB’s Annual Improvements 2018-2020, which are changes that clarify the
wording or correct minor consequences, oversights or conflicts between requirements in the Standards. These
amendments will be effective for annual periods beginning on or after January 1, 2022. The implementation of
these narrow-scope amendments is not expected to have a significant impact on the Company.
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16)
In August 2020, upon completion of the IFRS amendments to facilitate the IBOR reform, the IASB issued Interest
Rate Benchmark Reform – Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (“Phase 2
Amendments”). In relation to changes in financial instruments that are directly required by the IBOR reform,
Phase 2 Amendments mainly provide (i) a practical expedient to account for a change in the basis for determining
the contractual cash flows of a financial asset or financial liability that is required by the IBOR reform by updating
the effective interest rate of the financial asset or financial liability; (ii) exceptions to the hedge accounting
requirements providing relief from discontinuing hedge relationships because of changes to hedge documentation
required by the IBOR reform; and (iii) certain additional disclosures on additional information about the Company’s
exposure to risks arising from the IBOR reform and related risk management activities.
IFRS 16 has also been amended to provide a temporary exception addressing situations where lease agreements
specifically refer to an IBOR and will need to be amended as a result of the IBOR reform. Lessees are required to
remeasure their lease liabilities in a similar fashion to any other change in estimate, rather than as a lease
modification. The amount of the remeasurement is recognized as an adjustment to the right-of-use asset.
Phase 2 Amendments are effective for annual reporting periods beginning on or after January 1, 2021. Earlier
application is permitted. The Company is assessing the potential impact of these amendments.
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The Company’s hedging relationships have significant exposure to the CDOR benchmark. Management is
closely monitoring the impacted hedging relationship for possible changes to CDOR and its possible replacement
with a new interest rate benchmark. In November 2020, Refinitiv Benchmark Services (UK) Limited, the
administrator of CDOR, announced that the 6 and 12 month tenors of CDOR will cease to be published effective
May 17, 2021. The 1, 2 and 3 month tenors of CDOR will continue to be published. As of the date of these
financial statements, the Company’s hedging instruments do not specify 6 and 12 month tenors of CDOR.
The practical expedients available under these amendments will be applied for the 2021 annual fiscal period and
beyond once the IBOR reform starts impacting the basis for determining the contractual cash flows of a financial
asset or financial liability and hedge accounting requirements.
3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, except as noted below and have been applied consistently throughout the
Company.
Basis of Consolidation
These consolidated financial statements include the accounts of Canadian Tire Corporation and entities it
controls. An entity is controlled when the Company has the ability to direct the relevant activities of the entity, has
exposure or rights to variable returns from its involvement with the entity, and is able to use its power over the
entity to affect its returns from the entity. Refer to Note 15.1 for details of the Company’s significant entities.
The results of certain subsidiaries that have different year ends have been included in these consolidated financial
statements for the 53-week periods ended January 2, 2021 and 52-week periods ended December 28, 2019. The
year end of CT Real Estate Investment Trust (“CT REIT”), Helly Hansen, Franchise Trust and CTFS Holdings
Limited and its subsidiaries is December 31.
Income or loss and each component of OCI are attributed to the shareholders of the Company and to the non-
controlling interests. Total comprehensive income is attributed to the shareholders of the Company and to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance on
consolidation.
Business Combinations
The Company applies the acquisition method in accounting for business combinations.
The Company measures goodwill as the difference between the fair value of the consideration transferred,
including the recognized amount of any non-controlling interests in the acquiree and the net recognized amount
(fair value) of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date.
Consideration transferred includes the fair value of the assets transferred (including cash), liabilities incurred by
the Company on behalf of the acquiree, the fair value of any contingent consideration and equity interests issued
by the Company.
Where a business combination is achieved in stages, previously held interests in the acquired entity are
remeasured to fair value at the acquisition date, which is the date control is obtained and the resulting gain or
loss, if any, is recognized in net income. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognized in OCI are reclassified to net income.
The fair values of property and equipment recognized as a result of a business combination is based on either the
cost approach or market approach, as applicable. The market value of property is the estimated amount for which
a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s
length transaction after proper marketing wherein the parties each act knowledgeably and willingly. For the cost
approach, the current replacement cost or reproduction cost for each major asset is calculated.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 77 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair values of banners and trademarks acquired in a business combination are determined using an income
approach. The “relief from royalty” method has been applied to forecast revenue using an appropriate royalty
rate. This results in an estimate of the value of the intangible assets acquired by the Company.
The fair values of franchise agreements and other intangibles, such as customer relationships, are determined
using an income approach or multi-period excess earnings approach. This method is based on the discounted
cash flows expected to be derived from ownership of the assets. The present value of the cash flows represents
the value of the intangible asset. The fair value of off-market leases acquired in a business combination is
determined based on the present value of the difference between market rates and rates in the existing leases.
The fair values of inventories acquired in a business combination is determined based on the estimated selling
price in the ordinary course of business less the estimated costs of sale and a reasonable profit margin based on
the effort required to complete and sell the inventories.
Transaction costs that the Company incurs in connection with a business combination are expensed immediately.
Lease liabilities and corresponding right-of-use assets are recognized for leases in which the acquiree is a lessee.
The lease liability is measured at the present value of the remaining lease payments as if the acquired lease were
a new lease at the acquisition date. The right-of-use asset is equal to the lease liability, adjusted to reflect
favourable or unfavourable market terms.
Joint Arrangement
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the
contractually agreed sharing of control whereby decisions about relevant activities require unanimous consent of
the parties sharing control. A joint arrangement is classified as a joint operation when the parties that have joint
control have rights to the assets and obligations for the liabilities related to the arrangement. The Company
records its share of a joint operation’s assets, liabilities, revenues, and expenses.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the arrangement. The Company records its interest in a joint venture as an investment and
accounts for it using the equity method.
Functional and Presentation Currency
Each of the Company’s foreign subsidiaries determines its own functional currency and items included in the
consolidated financial statements of each foreign subsidiary are measured using that functional currency. Assets
and liabilities of foreign operations having a functional currency other than the Canadian dollar are translated at
the rate of exchange prevailing at the reporting date and revenues and expenses at average rates during the
period. Gains or losses on translation are accumulated as a component of equity. On the disposal of a foreign
operation, or the loss of control, the component of accumulated other comprehensive income (“AOCI”) relating to
that foreign operation is reclassified to net income.
Foreign Currency Transactions and Balances
Transactions in foreign currencies are translated into the entity’s functional currency at rates in effect at the date
of the transaction. Monetary assets and liabilities in foreign currencies are translated into the entity’s functional
currency at the closing exchange rate at the balance sheet date. Non-monetary items that are measured in terms
of historical cost are translated into the entity’s functional currency at the exchange rate at the date of the original
transaction. Exchange gains or losses arising from translation are recorded in other (income) expense of
producing revenue as applicable in the Consolidated Statements of Income.
Financial Instruments
Recognition and Initial Measurement
Financial assets and financial liabilities, including derivatives, are recognized in the Consolidated Balance Sheets
when the Company becomes a party to the contractual provisions of a financial instrument or non-financial
derivative contract. All financial instruments are measured at fair value on initial recognition.
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Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial
liabilities, other than financial assets and financial liabilities classified as FVTPL, are added to or deducted from
the fair value on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities classified as FVTPL are recognized immediately in net income.
Classification and Subsequent Measurement
The Company classifies financial assets, at the time of initial recognition, according to the Company’s business
model for managing the financial assets and the contractual terms of the cash flows. Financial assets are
classified in the following measurement categories: a) amortized cost and b) fair value through profit or loss.
Financial Instruments at Amortized Cost
Financial assets are subsequently measured at amortized cost if both the following conditions are met and they
are not designated as FVTPL:
• the financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
These assets are subsequently measured at amortized cost using the effective interest method and are subject to
impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or
impaired.
Financial liabilities are subsequently measured at amortized cost using the effective interest rate method with
gains and losses recognized in net income in the period that the liability is derecognized, except for financial
liabilities classified as FVTPL. These financial liabilities, including derivative liabilities and the redeemable
financial instrument, are subsequently measured at fair value with changes in fair value recorded in net income in
the period in which they arise to the extent they are not part of a designated hedging relationship. Subsequent to
initial recognition, other financial liabilities are measured at amortized cost using the effective interest method,
with gains and losses recognized in net income in the period that the liability is derecognized.
Financial Instruments at Fair Value Through Profit or Loss
Financial instruments are classified as FVTPL when the financial instrument is either held for trading or
designated as such upon initial recognition. Financial instruments are classified as held for trading if acquired
principally for the purpose of selling in the near future or if part of an identified portfolio of financial instruments
that the Company manages together and has a recent actual pattern of short-term profit-making. All financial
assets not classified as amortized cost are measured at FVTPL. This includes derivative financial assets that are
not part of a designated hedging relationship.
Financial instruments classified as FVTPL are measured at fair value, with changes in fair value recorded in net
income in the period in which they arise.
Impairment of Financial Instruments
The Company recognizes a loss allowance on a forward-looking basis at an amount equal to the lifetime ECL on
its financial assets measured at amortized cost, except for the following, which are measured at 12-month ECL:
• debt investments that are determined to have low credit risk at the reporting date with a credit risk rating
equivalent to investment grade; and
• other financial assets, such as loans receivable, for which credit risk has not increased significantly since
initial recognition.
Lifetime ECL represents the expected credit losses that will result from all probable default events over the
expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is
expected to result from default events that are possible within 12 months after the reporting date.
Losses for impaired credit card loans are recognized when credit is granted. Twelve-month ECL is recognized on
loans except when credit risk has increased significantly since initial recognition, in which case lifetime ECL is
applied. A significant increase in credit risk is assessed based on changes in the probability of default since initial
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
recognition along with borrower specific qualitative information, or when the loan is more than 30 days past due.
Credit card loans are considered impaired and in default when they are 90 days past due or there is sufficient
doubt regarding the ultimate collectability of principal and/or interest. The estimate of credit card loans receivable
for accounts wherein the customer has initiated the consumer proposal insolvency process is based on the
present value of expected future cash flows based on the terms of consumer proposal agreements received
during the year. Credit card loans that are over 180 days past due are written down to the present value of the
expected future cash flows.
ECL is calculated as the product of the probability of default, exposure at default and loss given default over the
remaining expected life of the loans and discounted to the reporting date. The ECL model also incorporates
forward-looking information, which increases the degree of judgment required as to how changes in macro-
economic factors will affect ECLs. Macro-economic factors taken into consideration include, but are not limited to,
unemployment rate and require an evaluation of both the current and forecast direction of the macro-economic
cycle. The methodologies and assumptions, including any forecasts of future economic conditions, are reviewed
regularly.
All loans receivable are assessed for impairment. All loans receivable found not to be specifically impaired are
then collectively assessed for impairment. Loans receivables are collectively assessed for impairment by
grouping together loans receivable with similar risk characteristics.
Derecognition of Financial Instruments
A financial asset is derecognized when the contractual rights to the cash flows from the asset expire or when the
Company transfers the financial asset to another party without retaining control or substantially all the risks and
rewards of ownership of the asset. Any interest in transferred financial assets created or retained by the
Company is recognized as a separate asset or liability.
A financial liability is derecognized when its contractual obligations are discharged, cancelled, or expire.
Derivative Financial Instruments
The Company enters into various derivative financial instruments as part of the Company’s strategy to manage its
foreign currency and interest rate exposures. The Company also enters into equity derivative contracts to hedge
certain future share-based payment expenses. The Company does not hold or issue derivative financial
instruments for trading purposes.
All derivative financial instruments, including derivatives embedded in financial or non-financial contracts not
closely related to the host contracts, are measured at fair value. The gain or loss that results from
remeasurement at each reporting period is recognized in net income immediately unless the derivative is
designated and effective as a hedging instrument, in which case the timing of the recognition in net income
depends on the nature of the hedge relationship.
Hedge Accounting
Where hedge accounting can be applied, certain criteria are documented at the inception of the hedge and
updated at each reporting date.
Cash Flow Hedges
For cash flow hedges, the effective portion of the changes in the fair value of the hedging derivative, net of taxes,
is recognized in OCI, while the ineffective and unhedged portions are recognized immediately in net income.
Amounts recorded in AOCI are reclassified to net income in the periods when the hedged item affects net income.
However, when a forecasted transaction that is hedged results in the recognition of a non-financial asset or
liability, the gains and losses previously recognized in AOCI are directly transferred from AOCI and included in the
initial measurement of the cost of the non-financial asset or liability without affecting other comprehensive income.
When hedge accounting is discontinued, the amounts previously recognized in AOCI are reclassified to net
income during the periods when the variability in the cash flows of the hedged item affects net income. If hedge
accounting is discontinued due to the hedged item no longer being expected to occur, the amount previously
recognized in AOCI is reclassified immediately to net income.
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The Company enters into foreign currency derivative contracts to hedge the exposure against foreign currency
risk on the future payment of certain foreign-currency-denominated inventory purchases and certain expenses.
The Company’s policy is for the critical terms of the foreign currency derivative contracts to align with the hedged
item and applies a hedge ratio of 1:1. The changes in fair value of these derivative contracts are included in OCI
to the extent the hedges continue to be effective. Hedge ineffectiveness may arise if the timing of the hedged
transactions changes from what was originally estimated. Once the inventory is received, the Company transfers
the related AOCI amount to merchandise inventories and subsequent changes in the fair value of the foreign
currency derivative contracts are recorded in net income as they occur. When the expenses are incurred, the
Company reclassifies the related AOCI amount to the expense.
The Company enters into interest rate swap contracts to hedge the exposure against interest rate risk on the
future interest payments of certain debt issuances and deposits. The Company also enters into “swaption”
derivative financial instruments that provide it with an option to enter into an interest rate swap as part of the
Company’s strategy to manage its interest rate exposure risk on the future interest payments of certain debt
issuances and deposits.
The Company’s policy is for the critical terms of the interest rate swap and swaptions contracts to align with the
hedged item and applies a hedge ratio of 1:1. The changes in fair value of these derivative contracts are included
in OCI to the extent that the hedges continue to be effective. The Company designates only the change in fair
value of the intrinsic value of the instrument as the hedging instrument. The time value of the option relates to a
time-period related to the hedged item. The change in time value is recognized in OCI and is subsequently
amortized on a systematic and rational basis over the period during which the hedge adjustment for the option’s
intrinsic value could affect profit or loss. Hedge ineffectiveness may arise if the timing of the hedged transactions
changes from what was originally estimated. When the interest expense is incurred, the Company reclassifies the
related AOCI amount to finance costs.
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash plus highly liquid and rated certificates of deposit or commercial
paper with an original term to maturity of three months or less.
Short-Term Investments
Short-term investments are investments in highly liquid and rated certificates of deposit, commercial paper or
other securities, primarily Canadian and United States (“U.S.”) government securities and notes of other
creditworthy parties, with an original term to maturity of more than three months and remaining term to maturity of
less than one year.
Trade and Other Receivables
The lifetime ECL allowance for impairment is recognized for trade and other receivables. It is estimated based on
the Company’s historical loss experience, adjusted for factors that are specific to the debtors and an assessment
of both the current as well as forecast direction of conditions at the reporting date. The carrying amount of the
asset is reduced through the use of an allowance account and the amount of the loss is recognized in Selling,
general and administrative expenses in the Consolidated Statements of Income. When a trade receivable is
deemed uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are recognized as a recovery in Selling, general and administrative expenses in the
Consolidated Statements of Income.
Loans Receivable
Loans receivable consists of credit card and line of credit loans, as well as loans to certain Dealers, who are
independent third-party operators of Canadian Tire stores. Loans receivable are recognized when cash is
advanced to the borrower. They are derecognized when the borrower repays its obligations, the loans are sold or
written off, or substantially all of the risks and rewards of ownership are transferred.
Losses for impaired loans are recognized when the loan is originated. Impairment allowances are calculated on
individual loans and on groups of loans assessed collectively. Impairment losses are recorded in Cost of
producing revenue in the Consolidated Statements of Income. The carrying amount of loans receivable in the
Consolidated Balance Sheets is reduced through the use of impairment allowance accounts.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 81 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Merchandise Inventories
Merchandise inventories are carried at the lower of cost and net realizable value.
Cash consideration received from vendors is recognized as a reduction to the cost of related inventory, unless the
cash consideration received is either a reimbursement of incremental costs incurred by the Company or a
payment for assets or services delivered to the vendor.
The cost of merchandise inventories is determined based on weighted average cost and includes costs incurred
in bringing the merchandise inventories to their present location and condition. All inventories are finished goods.
Net realizable value is the estimated selling price of inventory during the normal course of business less estimated
selling expenses.
Long-Term Investments
Investments in highly liquid and rated securities with a remaining term to maturity of greater than one year are
classified as long-term investments. The Company’s exposure to credit, currency and interest rate risks related to
other investments is disclosed in Note 5.
Intangible Assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the
identifiable assets acquired and liabilities assumed in a business combination. Goodwill is measured at cost less
any accumulated impairment and is not amortized.
Finite Life and Indefinite Life Intangible Assets
Intangible assets with finite useful lives are measured at cost and are amortized on a straight-line basis over their
estimated useful lives, generally for a period of two to ten years. The estimated useful lives and amortization
methods are reviewed annually with the effect of any changes in estimate being accounted for on a prospective
basis.
Intangible assets with indefinite useful lives are measured at cost, less any accumulated impairment and are not
amortized.
Expenditures on research activities are expensed as incurred.
Investment Property
Investment property is property held to earn rental income or for appreciation of capital or both. The Company
has determined that properties it provides to its Dealers, franchisees and agents are not investment property as
these relate to the Company’s operating activities. This was determined based on certain criteria such as whether
the Company provides significant ancillary services to the lessees of the property. The Company includes
property that it leases to third parties (other than Dealers, franchisees, or agents) in investment property.
Investment property is measured and depreciated in the same manner as property and equipment.
Property and Equipment
Property and equipment is measured at cost less accumulated depreciation and any accumulated impairment.
Land is measured at cost less any accumulated impairment. Properties in the course of construction are
measured at cost less any accumulated impairment. The cost of an item of property or equipment comprises
costs that are directly attributed to its acquisition and initial estimates of the cost of dismantling and removing the
item and restoring the site on which it is located.
Buildings, fixtures and equipment are depreciated on a straight-line basis over their estimated useful lives. The
estimated useful lives, depreciation method and residual values are reviewed annually with the effect of any
changes in estimate being accounted for on a prospective basis.
Leasehold improvements are amortized on a straight-line basis over the terms of the respective leases or useful
life, if shorter.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Estimated useful lives are as follows:
Asset Category
Buildings
Fixtures and equipment (including software intangible assets)
Estimated Useful Lives
10 – 45 years
3 – 25 years
Leasehold improvements
Shorter of term of lease or estimated useful life
Leased Assets
Lessee
The Company assesses whether a contract is or contains a lease, at inception of a contract. Leases are
recognized as a right-of-use asset and corresponding liability at the commencement date. Each lease payment
included in the lease liability is apportioned between the repayment of the liability and a finance cost. The finance
cost is recognized in net finance costs in the Consolidated Statements of Income over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period. Lease
liabilities include the net present value of fixed payments (including in-substance fixed payments), variable lease
payments that are based on an index or a rate or subject to a fair market value renewal, amounts expected to be
payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option. The Company allocates the consideration in the contract to each lease
component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone
price of the non-lease components. The lease liability is net of lease incentives receivable. The lease payments
are discounted using the interest rate implicit in the lease or, if that rate cannot be determined, the lessee’s
incremental borrowing rate. The period over which the lease payments are discounted is the reasonably certain
lease term, including renewal options that the Company is reasonably certain to exercise. Renewal options are
included in a number of leases across the Company.
Payments associated with short-term leases and leases of low-value assets are recognized as an expense on a
straight-line basis in Selling, general and administrative expenses in the Consolidated Statements of Income.
Short-term leases are leases with a lease term of 12 months or less. Variable lease payments that do not depend
on an index or a rate or subject to a fair market value renewal are expensed as incurred and recognized in
Selling, general and administrative expenses in the Consolidated Statements of Income.
Right-of-use assets are measured at cost which is calculated as the amount of the initial measurement of lease
liability plus any lease payments made at or before the commencement date, any initial direct costs and related
restoration costs. The right-of-use assets are depreciated on a straight-line basis over the shorter of the lease
term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost
of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use
asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement
date of the lease.
Lessor
When the Company is the lessor in an operating lease, rental income is recognized in net income on a straight-
line basis over the term of the lease.
Subleases
When the Company enters into sublease arrangements as an intermediate lessor, it determines whether the
sublease is a finance sublease or operating sublease by reference to the right-of-use asset arising from the head
lease. A sublease is a finance sublease if substantially all the risks and rewards of the related head lease right-of-
use asset have been transferred to the sub-lessee. When the Company is an intermediate lessor, it accounts for
the head lease and the sublease as two separate contracts.
For finance subleases, the Company derecognizes the corresponding right-of-use asset and records a net
investment in the finance sublease and corresponding interest income is recognized in net finance costs. The net
investment in the sublease is recognized in trade and other receivables and long-term receivables and other
assets.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 83 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Sale and Leaseback
The accounting treatment of a sale and leaseback transaction is assessed based upon the substance of the
transaction and whether the transfer of an asset is considered as a sale when the control of the asset has been
transferred to the purchaser.
If the transfer of the asset by the Company as seller-lessee is considered a sale, the Company measures the
right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that
relates to the right of use retained by it. Accordingly, the amount of any gain or loss that relates to the rights
transferred to the buyer-lessor are recognized in other income in the Consolidated Statements of Income.
If the transfer of an asset is not considered a sale, the asset continues to be recognized and a financial liability
equal to the transfer proceeds is recorded.
Impairment of Assets
The carrying amounts of property and equipment, investment property, right-of-use assets and intangible assets
with finite useful lives are reviewed at the end of each reporting period to determine whether there are any
indicators of impairment. Indicators of impairment may include a significant decline in asset market value,
material adverse changes in the external operating environment which affect the manner in which the asset is
used or is expected to be used, obsolescence, physical damage of the asset, or expected permanent closing of
the store related to a property lease. If any such indicators exist, then the recoverable amount of the asset is
estimated. Goodwill and intangible assets with indefinite useful lives and intangible assets not yet available for
use are not amortized but are tested for impairment at least annually or whenever there is an indicator that the
asset may be impaired.
Cash Generating Units
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the CGU to which the asset belongs. The CGUs correspond to the smallest identifiable
group of assets whose continuing use generates cash inflows that are largely independent of the cash inflows
from other assets or groups of assets.
Goodwill acquired in a business combination is allocated to each of the CGUs (or groups of CGUs) expected to
benefit from the synergies of the combination. Intangible assets with indefinite useful lives are allocated to the
CGU to which they relate.
Determining the Recoverable Amount
An impairment loss is recognized when the carrying amount of an asset, or of the CGU to which it belongs,
exceeds the recoverable amount. The recoverable amount of an asset or CGU is defined as the higher of its
FVLCS and its VIU.
In assessing VIU, the estimated future cash flows are discounted to their present value. Cash flows are
discounted using a discount rate that includes a risk premium specific to each line of business. The Company
estimates cash flows before taxes based on the most recent actual results or budgets. Cash flows are then
extrapolated over a period of up to five years, taking into account a terminal value calculated by discounting the
final year in perpetuity. The growth rate applied to the terminal values is based on the Bank of Canada’s target
inflation rate or a growth rate specific to the individual item being tested based on Management’s estimate.
Recording Impairments and Reversals of Impairments
Impairments and reversals of impairments are recognized in other expense (income) in the Consolidated
Statements of Income. Any impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the CGU and then to the other assets of the CGU. Impairments of goodwill cannot be reversed.
Impairments of other assets recognized in prior periods are assessed at the end of each reporting period to
determine if the indicators of impairment have reversed or no longer exist. An impairment loss is reversed if the
estimated recoverable amount exceeds the carrying amount. The increased carrying amount of an asset
attributable to a reversal of impairment may not exceed the carrying amount that would have been determined
had no impairment been recognized in prior periods.
84 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Assets Classified as Held for Sale
Non-current assets and disposal groups are classified as assets held for sale when their carrying amount is to be
recovered principally through a sale transaction rather than through continuing use. This condition is regarded as
met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its
present condition. Management must be committed to the sale and it should be expected to qualify for
recognition as a completed sale within one year from the date of classification. Assets (and disposal groups)
classified as held for sale are measured at the lower of the carrying amount or FVLCS and are not depreciated.
The fair value measurement of assets held for sale is categorized within Level 2 of fair value hierarchy (refer to
Note 33.2 for definition of fair value hierarchy levels).
Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalized.
Qualifying assets are those that require a minimum of three months to prepare for their intended use. All other
borrowing costs are recognized in Cost of producing revenue or in Net finance costs in the Consolidated
Statements of Income in the period in which they are incurred.
Employee Benefits
Short-Term Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.
The Company recognizes a liability and an expense for short-term benefits such as bonuses, profit-sharing and
employee stock purchases if the Company has a present legal obligation or constructive obligation to pay this
amount as a result of past service provided by the employees and the obligation can be reasonably estimated.
Post-Employment Benefits
The Company provides certain health care, dental care, life insurance and other benefits, but not pensions, for
certain retired employees pursuant to Company policy. The Company accrues the cost of these employee
benefits over the periods in which the employees earn the benefits. The cost of employee benefits earned by
employees is actuarially determined using the projected benefit method pro-rated on length of service and
Management’s best estimate of salary escalation, retirement ages of employees, employee turnover, life
expectancy and expected health and dental care costs. The costs are discounted at a rate that is based on
market rates as at the measurement date. Actuarial gains and losses are immediately recorded in OCI.
The Company also provides post-employment benefits with respect to contributions to a Deferred Profit Sharing
Plan (“DPSP”).
Termination Benefits
Termination benefits are payable when employment is terminated by the Company before the normal retirement
date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company
recognizes a provision for termination benefits when it is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan, without possibility of withdrawal, or
providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Share-Based Payments
Stock options with tandem stock appreciation rights (“stock options”) are granted which enable the employee to
exercise the stock option or receive a cash payment equal to the difference between the market price of the
Company’s Class A Non-Voting Shares as at the exercise date and the exercise price of the stock option. These
stock options are considered to be compound instruments. The fair value of compound instruments is measured
at each reporting date, taking into account the terms and conditions on which the rights to cash or equity
instruments are granted. As the fair value of the settlement in cash is the same as the fair value of the settlement
as a traditional stock option, the fair value of the stock option is the same as the fair value of the debt component.
The corresponding expense and liability are recognized over the respective vesting period.
The fair value of the amount payable to employees with respect to share unit plans and trust unit plans, which are
settled in cash, is recorded as the services are provided over the vesting period. The fair value of the liability is
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 85 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
remeasured at each reporting date with the change in the liability being recognized in Selling, general and
administrative expenses in the Consolidated Statements of Income.
Insurance Reserve
Included in Trade and other payables is an insurance reserve that consists of an amount determined from loss
reports and individual cases and an amount, based on past experience, for losses incurred but not reported.
These estimates are continually reviewed and are subject to the impact of future changes in such factors as claim
severity and frequency. While Management believes that the amount is adequate, the ultimate liability may be in
excess of or less than the amounts provided and any adjustment will be reflected in net income during the periods
in which they become known.
The Company uses actuarial valuations in determining its reserve for outstanding losses and loss-related
expenses using an appropriate reserving methodology for each line of business. The Company does not discount
its liabilities for unpaid claims.
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation
that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the
obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account risks and uncertainty of cash flows.
Where the effect of discounting is material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability.
Sales and Warranty Returns
The provision for sales and warranty returns relates to the Company’s obligation for defective goods in current
store inventories and defective goods sold to customers that have yet to be returned, after-sales service for
replacement parts and future corporate store sales returns. Accruals for sales and warranty returns are estimated
on the basis of historical returns and are recorded as a reduction to revenue. These accruals are reviewed
regularly and updated to reflect Management’s best estimate that is based on a most likely amount at each
reporting date.
Site Restoration and Decommissioning
Legal or constructive obligations associated with the removal of underground fuel storage tanks and site
remediation costs on the retirement of certain property and equipment and with the termination of certain lease
agreements are recognized in the period in which they are incurred, when it is probable that an outflow of
resources embodying economic benefits will be required and a reasonable estimate of the amount of the
obligation can be made. The obligations are initially measured at the Company’s best estimate, using an
expected value approach and are discounted to present value.
Onerous Contracts
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a
contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision is
measured at the present value of the lower of the expected cost of terminating the contract or the expected net
cost of continuing with the contract.
Debt
Debt is classified as current when the Company expects to settle the liability in its normal operating cycle, it holds
the liability primarily for the purpose of trading, the liability is due to be settled within 12 months after the date of
the Consolidated Balance Sheets, or it does not have an unconditional right to defer settlement of the liability for
at least 12 months after the date of the Consolidated Balance Sheets.
Share Capital
Shares issued by the Company are recorded at the value of proceeds received. Repurchased shares are
removed from equity. No gain or loss is recognized in net income on the purchase, sale, issue, or cancellation of
the Company’s shares.
86 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share purchases are charged to Share capital at the average cost per share outstanding and the excess between
the purchase price and the average cost is first allocated to the related contributed surplus, with any remainder
allocated to retained earnings.
Dividends
Dividends declared and payable to the Company’s shareholders are recognized as a liability in the Consolidated
Balance Sheets in the period in which the dividends are approved by the Company’s Board of Directors.
Distributions
Distributions to non-controlling interests are recognized as a liability in the Consolidated Balance Sheets in the
period in which the distributions are declared.
Revenue
Sale of Goods
Revenue from the sale of goods includes merchandise sold to Dealers, Mark’s and SportChek franchisees, the
sale of gasoline through agents, the sale of goods to the general public by Mark’s, PartSource, SportChek1, Helly
Hansen and Party City2 corporately-owned stores as well as the sale of goods through Helly Hansen’s wholesale
channels. This revenue is recognized when the goods are delivered, less an estimate for sales and warranty
returns. Revenue from the sale of goods is measured at the fair value of the consideration received less an
appropriate deduction for actual and expected returns, discounts, rebates and warranty and customer loyalty
program costs, net of sales taxes.
Customer Loyalty Programs
Loyalty reward credits issued as part of a sales transaction results in revenue being deferred until the loyalty
reward is redeemed by the customer. In addition, an obligation arises from the loyalty program when the
Company sells merchandise to the Dealers, for which reward credits may be issued as part of the subsequent
sales transaction with the customer. The obligation is measured at fair value by reference to the fair value of the
rewards for which they could be redeemed and based on the estimated probability of their redemption. The
loyalty program costs are recorded as a reduction to revenue in the Consolidated Statements of Income.
Interest Income on Loans Receivable
Interest income includes interest charged on loans receivable and fees that are an integral part of the effective
interest rate on financial instruments. Interest income on financial assets is determined using the effective interest
method.
Services Rendered
Service revenue includes Roadside Assistance Club membership revenue; merchant, interchange and processing
fees; cash advance fees; home services fees; foreign exchange fees; and service charges on the loans receivable
of the Financial Services operating segment. Service revenue is recognized according to the contractual
provisions of the arrangement, which is generally when the service is provided or over the contractual period.
Merchant, interchange and processing fees, cash advance fees and foreign exchange fees on credit card
transactions are recognized as revenue at the time transactions are completed.
Reinsurance Revenue
Reinsurance premiums are recorded on an accrual basis and are included in net income on a pro rata basis over
the life of the insurance contract, with the unearned portion deferred in the Consolidated Balance Sheets.
Premiums that are subject to adjustment are estimated based on available information. Any variances from the
estimates are recorded in the periods in which they become known.
1 “SportChek” refers to the retail business carried on by FGL Sports Ltd., including stores operated under the SportChek, Sports Experts, Atmosphere, National
Sports, Sports Rousseau and Hockey Experts names and trademarks.
2 “Party City” refers to the party supply business that operate under the Party City name and trademarks in Canada.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 87 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Royalties and Licence Fees
Royalties and licence fees include licence fees from Petroleum agents and Dealers and royalties from Mark’s and
SportChek franchisees. Royalties and licence fee revenues are recognized as they are earned in accordance
with the substance of the relevant agreement, which is generally based on percentage of occurred sales.
Rental Income
Rental income from operating leases where the Company is the lessor is recognized on a straight-line basis over
the terms of the respective leases.
Vendor Rebates
The Company records cash consideration received from vendors as a reduction in the price of vendors’ products
and recognizes it as a reduction to the cost of related inventory or, if the related inventory has been sold, to the
cost of producing revenue. Certain exceptions apply where the cash consideration received is either a
reimbursement of incremental selling costs incurred by the Company or a payment for assets or services
delivered to the vendor, in which case the cost is reflected as a reduction in selling, general and administrative
expenses.
The Company recognizes rebates that are at the vendor’s discretion when the vendor either pays the rebates or
agrees to pay them and payment is considered probable and can be reasonably estimated.
Net Finance Costs
Finance income comprises interest income on funds invested and interest income on lease receivables for finance
subleases. Interest income is recognized as it accrues using the effective interest method.
Finance costs comprises interest expense on borrowings (including borrowings relating to the Dealer Loan
Program), unwinding of the discount on provisions, as well as finance cost on lease liabilities and is net of
borrowing costs that have been capitalized. Interest on deposits is recorded in cost of producing revenue in the
Consolidated Statements of Income.
Income Taxes
The income tax expense for the year comprises of current and deferred income tax. Income tax expense is
recognized in net income except to the extent that it relates to items recognized either in OCI or directly in equity.
In this case, the income tax expense is recognized in OCI or in equity, respectively.
The income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the date of
the Consolidated Balance Sheets in the countries where the Company operates and generates taxable income.
Deferred income tax is recognized using the liability method for unused tax losses, unused tax benefits and
temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in these
Consolidated Financial Statements. However, deferred income tax is not accounted for if it arises from the initial
recognition of goodwill or the initial recognition of an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects neither accounting nor taxable income. Deferred income
tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the date of the
Consolidated Balance Sheets and are expected to apply when the related deferred income tax asset is realized or
the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable income will be
available against which the temporary differences can be utilized. Deferred income tax liabilities are provided on
temporary differences arising on investments in subsidiaries and associates, except where the timing of the
reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference
will not reverse in the foreseeable future.
88 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Earnings per Share
Basic earnings per share (“Basic EPS”) is calculated by dividing the net income attributable to the shareholders of
the Company by the weighted average number of Common and Class A Non-Voting shares outstanding during
the reporting period. Diluted earnings per share (“Diluted EPS”) is calculated by adjusting the net income
attributable to the shareholders of the Company and the weighted average number of shares outstanding for the
effects of all potentially dilutive equity instruments, which comprise employee stock options. Net income
attributable to the shareholders of the Company is the same for both the Basic EPS and Diluted EPS calculations.
Non-controlling Interests
When the proportion of the equity held by non-controlling interests changes, the Company adjusts the carrying
amounts of the controlling and non-controlling interests to reflect the changes in their relative interest in the
subsidiary. The Company recognizes directly in equity any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the consideration paid or received and attribute it to the
shareholders of the Company.
4. Capital Management
The Company’s objectives when managing capital are:
• ensuring sufficient liquidity to support its financial obligations and execute its operating and strategic plans;
• maintaining healthy liquidity reserves and access to capital; and
• minimizing the after-tax cost of capital while taking into consideration current and future industry, market and
economic risks and conditions.
The definition of capital varies from company to company, industry to industry and for different purposes. In the
process of managing the Company’s capital, Management includes the following items in its definition of capital,
which includes Glacier Credit Card Trust (“GCCT”) indebtedness but excludes Franchise Trust indebtedness:
(C$ in millions)
Capital components
Deposits
Short-term borrowings
Current portion of long-term debt
Long-term debt
Long-term deposits
Total debt
Redeemable financial instrument (Note 24)
Share capital
Contributed surplus
Retained earnings
2020
% of total
2019
% of total
$
1,228.0
9.3 % $
165.4
150.5
4,115.7
2,281.7
7,941.3
567.0
597.0
2.9
$
1.3 %
1.1 %
31.1 %
17.2 %
60.0 % $
4.3 %
4.5 %
— %
790.8
450.0
788.2
3,730.2
1,653.4
7,412.6
567.0
588.0
2.9
4,136.9
31.2 %
3,729.6
6.4 %
3.7 %
6.5 %
30.3 %
13.4 %
60.3 %
4.6 %
4.8 %
— %
30.3 %
100.0 %
Total capital under management
$
13,245.1
100.0 % $
12,300.1
The Company monitors its capital structure by measuring debt-to-earnings ratios and manages its debt service
and other fixed obligations by tracking its interest and other coverage ratios and forecasting corporate liquidity.
The Company manages its capital structure over the long term to optimize the balance among capital efficiency,
financial flexibility and risk mitigation. Management calculates its ratios to approximate the methodologies of
credit-rating agencies and other market participants on a current and prospective basis. Many of these ratios
include lease liabilities. To assess its effectiveness in managing capital, Management monitors these ratios
against targeted ranges.
The Company has a policy in place to manage capital. As part of the overall management of capital,
Management and the Audit Committee of the Board of Directors review the Company’s compliance with and
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 89 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
performance against, the policy. In addition, periodic review of the policy is performed to ensure consistency with
risk tolerances.
In order to maintain or adjust the capital structure, the Company has the flexibility to adjust discretionary capital
spending, adjust the amount of shares purchased under its normal course issuer bid (“NCIB”) program, adjust the
amount of dividends paid to shareholders, repay debt, issue new debt and equity, monetize various assets,
engage in additional sale and leaseback transactions of real estate properties and increase or decrease the
amount of sales of co-ownership interests in credit card loans receivable to GCCT.
As a result of the economic impacts of the COVID-19 pandemic, the Company took actions to enhance its cash
position and financial flexibility, including implementing a plan to reduce operating costs at the head office and
corporate stores, reducing discretionary capital expenditure and working capital requirements across the
Company, and pausing its share purchases other than for anti-dilutive purposes.
Financial covenants of the existing debt agreements are reviewed by Management on an ongoing basis to
monitor compliance with the agreements. The key financial covenant for Canadian Tire Corporation is a
requirement for the Retail segment to maintain, at all times, a ratio of total indebtedness to total capitalization
equal to or lower than a specified maximum ratio (as defined in the Company’s bank credit agreements, but which
excludes consideration of CTFS Holdings Limited, CT REIT, Franchise Trust and their respective subsidiaries).
Helly Hansen is required to comply with covenants established under its bank credit agreements, and was in
compliance with all financial covenants thereunder as at December 31, 2020 and 2019.
CT REIT is required to comply with covenants established under its Declaration of Trust, the Trust Indenture and
bank credit agreement and was in compliance with all financial covenants thereunder as at December 31, 2020
and 2019.
The Company was in compliance with all financial covenants under its existing credit agreements as at January 2,
2021 and December 28, 2019. Under these covenants, the Company has sufficient flexibility to support business
growth.
Canadian Tire Bank (“CTB” or “the Bank”), a federally chartered Schedule I bank, is required to comply with
regulatory requirements for capital, other regulatory requirements that have an impact on its business operations
and certain financial covenants established under its bank credit agreement.
CTB manages its capital under guidelines established by the Office of the Superintendent of Financial Institutions
of Canada (“OSFI”). OSFI’s regulatory capital guidelines are based on the international Basel Committee on
Banking Supervision framework entitled Basel III: A Global Regulatory Framework for More Resilient Banks and
Banking Systems (“Basel III”), which came into effect in Canada on January 1, 2013, and measures capital in
relation to credit, market and operational risks. The Bank has various capital policies and procedures and
controls, including an Internal Capital Adequacy Assessment Process (“ICAAP”), which it utilizes to achieve its
goals and objectives.
The Bank’s objectives include:
• holding sufficient capital to maintain the confidence of investors and depositors; and
• being an appropriately capitalized institution, as measured internally, defined by regulatory authorities and
compared with the Bank’s peers.
OSFI’s regulatory capital guidelines under Basel III allow for two tiers of capital. Common Equity Tier 1 (“CET1”)
capital includes common shares, retained earnings and AOCI, less regulatory adjustments which are deducted
from capital. The Bank currently does not hold any additional Tier 1 capital instruments; therefore, the Bank’s
CET1 is equal to its Tier 1 regulatory capital. Tier 2 capital consists of the eligible portion of general allowances.
Risk-weighted assets (“RWAs”) include a credit risk component for all on-balance-sheet assets weighted for the
risk inherent in each type of asset, off-balance sheet financial instruments, an operational risk component based
on a percentage of average risk-weighted revenues and a market-risk component for assets held for trade. For
the purposes of calculating RWAs, securitization transactions are considered off-balance-sheet transactions and,
90 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
therefore, securitized assets are not included in the RWAs calculation. Assets are classified as held for trade
when they are held with trading intent.
The leverage ratio prescribed by OSFI’s Leverage Requirements Guideline provides an overall measure of the
adequacy of an institution’s capital and is defined as the all-in Tier 1 capital divided by the leverage ratio
exposure. The leverage ratio exposure is the sum of on-balance sheet exposures, derivative exposures,
securities financing transaction exposures and off-balance sheet items.
As at December 31, 2020 and 2019, CTB complied with all regulatory capital guidelines established by OSFI, its
internal targets as determined by its ICAAP and all financial covenants under its bank credit agreement.
5. Financial Risk Management
5.1 Overview
The Company has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk (including foreign currency and interest rate risk).
This note presents information about the Company’s exposure to each of the foregoing risks and the Company’s
objectives, policy and processes for measuring and managing risk. Further quantitative disclosures are included
throughout these consolidated financial statements and notes thereto.
5.2 Risk Management Framework
The Company’s Board-approved Financial Risk Management Policy serves to identify and analyze the risks faced
by the Company, to set acceptable risk tolerance limits and controls and to monitor risks and adherence to limits.
The financial risk management strategies and systems are reviewed regularly to ensure they remain consistent
with the objectives and risk tolerance acceptable to the Company and current market trends and conditions. The
Company, through its training and management standards and procedures, aims to uphold a disciplined and
constructive control environment in which all employees understand their roles and obligations.
5.3 Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual
obligations, arises principally from operations of the Bank’s credit card loan portfolio, CTC’s interaction with its
Dealer and franchisee networks, and financial instruments, which are discussed in more detail below.
5.3.1 Financial Instrument Counterparty Credit Risk
The Company's Financial Risk Management Policy is in place to manage the various risks including counterparty
credit risk relating to cash balances, investment activity, and the use of financial derivatives. The Company limits
its exposure to counterparty credit risk by transacting only with highly-rated financial institutions and other
counterparties and by managing within specific limits for credit exposure and term-to-maturity. The Company’s
financial instrument portfolio is spread across financial institutions, provincial and federal governments, and, to a
lesser extent, corporate and asset-backed issuers that are at least dual rated and have a lowest (if dual rated) or
median (if three or more ratings) credit rating in the “A(low)” equivalent category or better.
5.3.2 Consumer and Dealer/Franchisee Credit Risk
Through the granting of credit cards to the Bank’s customers, the Company assumes certain risks with respect to
the ability and willingness of the Bank’s customers to repay loans owing to it. In addition, the Company is
required to provide credit enhancement to Franchise Trust for certain individual Dealer’s borrowings in the form of
standby letters of credit issued by highly-rated financial institutions and guaranteed by the Company (the “LCs”)
and may also provide guarantees of third-party bank debt agreements or inventory buy-back agreements, with
respect to the financing programs available to the Dealers and franchisees (Note 34).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 91 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s maximum exposure to credit risk, over and above amounts recognized in the Consolidated
Balance Sheets, include the following:
(C$ in millions)
Undrawn loan commitments
Guarantees
Total
$
$
2020
9,993.9 $
377.0
10,370.9 $
2019
10,695.9
414.9
11,110.8
Refer to Note 9 for information on the credit quality and performance of loans receivable.
5.4 Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to
managing liquidity is to reasonably ensure that it will have sufficient liquidity to meet its liabilities when due, under
normal circumstance, with the ability to reach to some uncertainty. As a result of the COVID-19 pandemic, the
Company increased its focus on maintaining liquidity and a strong balance sheet and ensuring continued access
to capital. The Company’s Financial Risk Management Policy serves to manage its exposure to liquidity risk. The
Company uses a detailed consolidated cash flow forecast model to regularly monitor its near-term and longer-
term cash flow requirements, which assists in optimizing its short-term cash and indebtedness position while
evaluating longer-term funding and capital allocation strategies.
In addition, CTB has in place an Asset Liability Management Policy. It is CTB’s objective to ensure the availability
of adequate funds by maintaining a strong liquidity management framework and to satisfy all applicable regulatory
and statutory requirements.
Provided by a syndicate of seven Canadian and three international financial institutions, $1.975 billion in an
unsecured revolving committed bank credit facility is available to CTC for general corporate purposes, expiring in
August 2024.
During the second quarter of 2020, in response to COVID-19, the Company entered into a new unsecured
revolving committed bank credit facility for $710 million with five Canadian financial institutions. This facility
expires in June, 2022.
Provided by a syndicate of seven Canadian financial institutions, $300.0 million in an unsecured revolving
committed bank credit facility is available to CT REIT for general business purposes, expiring in December 2024.
The Bank of Nova Scotia (“Scotiabank”) has provided CTB with a $250.0 million unsecured revolving committed
credit facility and $2.0 billion in committed note purchase facilities for the purchase of senior and subordinated
notes issued by GCCT, each of which expire in October 2022.
Provided by a syndicate of five Canadian financial institutions, $300.0 million in a committed liquidity facility
provides backstop protection to GCCT’s Series 1997-1 asset-backed commercial paper (“ABCP”) program,
expiring in August 2022.
In addition to the key committed bank credit facilities outlined above, the Company has access to additional
facilities and funding sources including internal cash generation, access to public and private financial markets,
monetization of various assets, and strategic real estate transactions. Assets of CTB are funded through the
securitization of credit card loans receivable using GCCT, broker guaranteed investment certificate (“GIC”)
deposits, retail GIC deposits and high-interest savings (“HIS”) account deposits. CTB also holds high quality
liquid assets, as required by regulators, which are available to address funding disruptions.
The Company has a U.S. dollar-denominated commercial paper (“U.S. CP”) program that allows it to issue up to a
maximum aggregate principal amount of U.S. $1.0 billion of short-term promissory notes in the United States.
Funds can be borrowed under this program with terms to maturity ranging from one to 270 days. Any issuances
made under the program are issued at a discount and the notes rank equally in right of payment with all other
present and future unsecured and unsubordinated obligations to creditors of the Company.
92 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Due to the diversification of its funding sources, the Company is not overly exposed to any concentration risk.
The following table summarizes the Company’s contractual maturity for its financial liabilities, including both
principal and interest payments:
(C$ in millions)
2021
2022
2023
2024
2025 Thereafter
Total
Non-derivative financial liabilities
Deposits1,2
Trade and other payables (Note 18)
Short-term borrowings
Loans
Long-term debt
Mortgages
Interest payments3
Total
$ 1,240.0 $
613.8 $
585.3 $
493.1 $
589.5 $
— $ 3,521.7
1,962.4
165.4
506.6
150.0
0.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,962.4
165.4
506.6
710.0
984.0
560.0
680.0
1,125.0
4,209.0
9.6
55.7
—
—
—
65.8
187.5
167.6
126.8
93.1
70.3
272.9
918.2
$ 4,212.4 $ 1,501.0 $ 1,751.8 $ 1,146.2 $ 1,339.8 $ 1,397.9 $ 11,349.1
1 Deposits exclude the GIC broker fee discount of $12.0 million.
2 The average remaining term of the GIC deposits is 32 months as at January 2, 2021.
3
Includes interest payments on deposits, short-term borrowings, loans, and long-term debt.
It is not expected that the cash flows included in the maturity analysis would occur significantly earlier or at
significantly different amounts.
5.5 Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices, will affect the Company’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage market risk exposures within acceptable parameters while optimizing the
return. The Company’s Financial Risk Management Policy establishes guidelines on how the Company is to
manage the market risk inherent to the business and provides mechanisms to ensure business transactions are
executed in accordance with established limits, processes and procedures.
All such transactions are carried out within the established guidelines and, generally, the Company seeks to apply
hedge accounting in order to manage volatility in its net income.
5.5.1 Foreign Currency Risk
The Company sources its merchandise globally. Approximately 40%, 38%, and 10% of the value of the inventory
purchased for the Canadian Tire, Mark’s, and SportChek banners, respectively, is sourced directly from vendors
outside North America, primarily denominated in U.S. dollars. The majority of Helly Hansen’s purchases are
denominated in U.S. dollars and Euros. To mitigate the impact of fluctuating foreign exchange rates on the cost of
these purchases, the Company has an established foreign exchange risk management program that governs the
proportion of forecasted U.S. dollar purchases that are hedged through entering into foreign exchange derivative
contracts. The purpose of the program is to provide certainty with respect to a portion of the foreign exchange
component of future merchandise purchases.
As the Company has hedged a significant portion of the cost of its near-term U.S. dollar-denominated forecast
purchases, a change in foreign currency rates will not materially impact that portion of the cost of those
purchases. The Company operates its hedging program on a continual basis to ensure that any sustained
change in rates are reflected in the cost of the Company’s U.S. dollar purchases over the entirety of its hedging
horizon. This ensures that the cost off U.S. dollar purchases is smoothed relative to the foreign exchange market
allowing the Company to defer the impact of sudden exchange rate movements on margins and allow it time to
develop strategies to mitigate the impact of a sustained change in foreign exchange rates. Some vendors have
an underlying exposure to U.S. currency fluctuations which may affect the price they charge the Company for
merchandise; and the Company’s hedging program does not mitigate that risk. While the Company may be able
to pass on changes in foreign currency exchange rates through pricing, any decision to do so would be subject to
market conditions.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 93 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.5.2 Interest Rate Risk
The Company may use interest rate derivatives to manage interest rate risk. The Company has a policy in place
whereby, on a consolidated basis, a minimum of 75 percent of its consolidated debt (short-term and long-term)
should be at fixed versus floating interest rates.
A one percent change in interest rates would therefore not materially affect the Company’s net income or equity
as the Company has minimal floating interest rate exposure given the indebtedness of the Company is
predominantly at fixed rates.
The Company’s exposure to interest rate changes is predominantly driven by short-term Retail borrowings (on the
bank lines or in the commercial paper markets) and the Financial Services business to the extent that the interest
rates on future issuances of GIC deposits, HIS account deposits, tax-free savings account (“TFSA”) deposits and
securitization transactions are market-dependent. Partially offsetting this will be interest rates charged on credit
cards and a significant portion of the funding liabilities for Financial Services are fixed rate, which reduces interest
rate risk. In addition, CTB has entered into interest rate derivatives to hedge a portion of its planned issuances of
GCCT term debt and GIC deposits in 2021 to 2025. Furthermore, CTB holds short-term interest-bearing
investments held in reserve in support of its liquidity and regulatory requirements.
6. Operating Segments
The Company has three reportable operating segments: Retail, Financial Services, and CT REIT. The reportable
operating segments are strategic business units offering different products and services. They are separately
managed due to their distinct nature. The following summary describes the operations of each of the Company’s
reportable segments:
• The retail business is conducted under a number of banners including Canadian Tire, Canadian Tire Gas
(“Petroleum”), Mark’s, PartSource, Helly Hansen, Party City and various SportChek banners. Retail also
includes the Dealer Loan Program (the portion [silo] of Franchise Trust that issues loans to certain Dealers).
Non-CT REIT real estate is included in Retail.
• Financial Services issues Canadian Tire's Triangle branded credit cards, including Triangle Mastercard,
Triangle World Mastercard and Triangle World Elite Mastercard. Financial Services also offers Cash
Advantage Mastercard and Gas Advantage Mastercard products, markets insurance and warranty products,
and provides settlement services to the Company’s affiliates. Financial Services includes CTB, a federally-
regulated Schedule I bank that manages and finances the Company’s consumer Mastercard and retail credit
card portfolios, as well as an existing block of Canadian Tire branded line of credit loans. CTB also offers HIS
account deposits, TFSA and GIC deposits, both directly and through third-party brokers. Financial Services
includes GCCT, a structured entity established to purchase co-ownership interests in the Company’s credit
card loans receivable. GCCT issues debt to third-party investors to fund its purchases.
• CT REIT is an unincorporated, closed-end real estate investment trust. CT REIT holds a geographically-
diversified portfolio of properties mainly comprising Canadian Tire banner stores, Canadian Tire anchored
retail developments, mixed-use commercial property, and distribution centres.
94 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Performance is measured based on segment income before income taxes, as included in the internal
management reports. Management has determined that this measure is the most relevant in evaluating segment
results and allocating resources. Information regarding the results of each reportable operating segment is as
follows:
(C$ in millions)
External revenue
Retail
Financial
Services CT REIT
Eliminations
and
adjustments
Total
Retail
Financial
Services CT REIT
Eliminations
and
adjustments
2020
2019
Total
$ 13,617.2 $ 1,208.7 $
53.7 $
(8.6) $ 14,871.0 $ 13,205.1 $ 1,291.4 $
51.6 $
(13.7) $ 14,534.4
Intercompany revenue
2.8
39.7
448.6
(491.1)
—
4.7
42.7
437.4
(484.8)
—
Total revenue
13,620.0 1,248.4
502.3
(499.7) 14,871.0 13,209.8 1,334.1
489.0
(498.5) 14,534.4
Cost of producing revenue
9,261.3
602.7
—
(69.6) 9,794.4 9,134.0
596.9
—
(70.3) 9,660.6
Gross margin
4,358.7
645.7
502.3
(430.1) 5,076.6 4,075.8
737.2
489.0
(428.2) 4,873.8
Other (income) expense
(70.8)
0.6
—
118.9
48.7
(138.8)
1.9
—
123.5
(13.4)
Selling, general and
administrative expenses
3,471.0
319.3
123.7
(314.7) 3,599.3 3,326.6
310.0
120.3
(319.4) 3,437.5
Net finance costs (income)
220.2
(1.5)
107.9
(70.1)
256.5
240.2
(1.0)
108.8
(81.2)
266.8
Fair value loss (gain) on
investment properties
—
—
87.4
(87.4)
—
—
—
(47.3)
47.3
—
Income before income taxes $ 738.3 $ 327.3 $ 183.3 $
(76.8) $ 1,172.1 $ 647.8 $ 426.3 $ 307.2 $
(198.4) $ 1,182.9
Items included in the above:
Depreciation and
amortization
Interest income
Interest expense
$ 858.3 $
13.3 $
— $
(176.3) $ 695.3 $ 823.1 $
13.2 $
— $
(178.8) $ 657.5
87.9 1,059.0
0.1
(66.9) 1,080.1
105.3 1,115.1
0.3
(69.7) 1,151.0
295.3
147.2
108.0
(201.6)
348.9
325.0
137.5
109.1
(210.6)
361.0
The eliminations and adjustments include the following items:
• reclassifications of certain revenues and costs in the Financial Services segment to net finance (income)
costs;
• conversion from CT REIT’s fair value investment property valuation policy to the Company’s cost model,
including the recording of depreciation; and
• intersegment eliminations and adjustments including intercompany rent, property management fees, credit
card processing fees and the change in fair value of the redeemable financial instrument.
While the Company primarily operates in Canada, it also operates in foreign jurisdictions primarily through Helly
Hansen. Foreign revenue earned by Helly Hansen amounted to $493.6 million for the year ended January 2,
2021 (2019 – $513.3 million). Property and equipment and intangible assets (brand and goodwill) and right-of-
use assets located outside of Canada was $963.3 million as at January 2, 2021 (2019 – $984.7 million).
Capital expenditures by reportable operating segment are as follows:
2020
2019
Financial
Services CT REIT
Financial
Services CT REIT
(C$ in millions)
Capital expenditures1
1 Capital expenditures are presented on an accrual basis and include software additions, but exclude right-of-use asset additions, acquisitions relating to
432.2 $
452.4 $
141.4 $
304.9 $
12.0 $
93.1 $
6.1 $
Retail
537.3
Retail
Total
Total
$
business combinations, intellectual property additions and tenant allowances received.
Right-of-use asset additions by reportable operating segment are as follows:
(C$ in millions)
Retail
Financial
Services CT REIT
Total
Retail
Financial
Services
CT REIT
Total
Right-of-use asset additions
$
410.3 $
1.8 $
3.0 $
415.1 $
129.0 $
— $
— $
129.0
2020
2019
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 95 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Total assets by reportable operating segment are as follows:
(C$ in millions)
Retail
Financial Services
CT REIT
2020
$
15,937.2 $
7,134.2
6,176.1
2019
15,995.4
6,606.4
6,024.5
Eliminations and adjustments
Total assets1
1 The Company employs a shared-services model for several of its back-office functions, including finance, information technology, human resources and legal.
As a result, expenses relating to these functions are allocated on a systematic and rational basis to the reportable operating segments. The associated assets
and liabilities are not allocated among segments in the presented measures of segmented assets and liabilities.
20,377.1 $
(8,870.4)
(9,108.0)
19,518.3
$
Total liabilities by reportable operating segment are as follows:
(C$ in millions)
Retail
Financial Services
CT REIT
$
2020
9,534.6 $
6,120.5
2,800.3
2019
9,870.2
5,589.9
2,690.4
Eliminations and adjustments
Total liabilities1
1 The Company employs a shared-services model for several of its back-office functions, including finance, information technology, human resources and legal.
As a result, expenses relating to these functions are allocated on a systematic and rational basis to the reportable operating segments. The associated assets
and liabilities are not allocated among segments in the presented measures of segmented assets and liabilities.
14,542.4 $
(3,913.0)
(4,136.9)
14,013.6
$
The eliminations and adjustments include the following items:
• conversion from CT REIT’s fair value investment property valuation policy to the Company’s cost model,
including the recording of depreciation; and
• intersegment eliminations.
7. Cash and Cash Equivalents
Cash and cash equivalents comprise the following:
(C$ in millions)
Cash
Cash equivalents
Restricted cash and cash equivalents1
Total cash and cash equivalents2
Bank indebtedness
Cash and cash equivalents, net of bank indebtedness
$
$
$
2020
750.7 $
540.3
36.2
1,327.2 $
—
1,327.2 $
2019
117.9
69.4
18.2
205.5
(10.4)
195.1
1 Restricted cash and cash equivalents relates to GCCT and is restricted for the purpose of paying principal and interest to note holders and additional funding
costs of $29.7 million (2019 – $12.8 million) and Helly Hansen’s other operational items $6.6 million (2019 – $5.4 million).
2 Included in cash and cash equivalents are amounts held in reserve in support of CTB’s liquidity and regulatory requirements (refer to Note 32.1).
96 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. Trade and Other Receivables
Trade and other receivables include the following:
(C$ in millions)
Trade receivables
Other receivables
Net investment in subleases
Derivatives (Note 33.2)
$
$
2020
697.4 $
190.3
15.9
70.0
973.6 $
2019
747.9
151.7
17.5
21.2
938.3
Trade receivables are primarily from Dealers, franchisees and Helly Hansen’s wholesale customers. This is a
large and geographically-dispersed group whose receivables, individually, generally comprise less than one
percent of the total balance outstanding. Other receivables are primarily receivables from vendors and tenants
and insurance receivables.
Receivables from Dealers are in the normal course of business and include cost and margin-sharing
arrangements. The credit range period on sale of goods is between 1 and 120 days.
9. Loans Receivable
Quantitative information about the Company’s loans receivable portfolio is as follows:
(C$ in millions)
Credit card loans2
Dealer loans3
Total loans receivable
Less: long-term portion4
Current portion of loans receivable
Total principal amount of receivables1
2019
2020
$
$
4,983.8 $
507.7
5,491.5
459.7
5,031.8 $
5,794.1
622.5
6,416.6
602.8
5,813.8
Includes line of credit loans and are expected to be recovered within one year of the reporting date.
1 Amounts shown are net of allowance for loans receivable.
2
3 Loans issued to certain Dealers by Franchise Trust (refer to Note 22).
4 The long-term portion of loans receivable is included in long-term receivables and other assets and includes Dealer loans of $458.7 million (2019 – $601.6
million).
For the year ended January 2, 2021, cash received from interest earned on credit cards and loans was $1,014.6
million (2019 – $1,043.9 million).
The carrying amount of loans includes loans to certain Dealers that are secured by the Canadian Tire store assets
of the respective Dealers’ corporations. The Company’s exposure to loans receivable credit risk resides at
Franchise Trust and at the Bank. Credit risk at the Bank is influenced mainly by the individual characteristics of
each credit card customer. The Bank uses sophisticated credit scoring models, monitoring technology and
collection modelling techniques to implement and manage strategies, policies and limits that are designed to
control risk. Loans receivable are generated by a large and geographically-dispersed group of customers.
Current credit exposure is limited to the loss that would be incurred if all of the Bank’s counterparties were to
default at the same time.
The Company’s allowances for loans receivable increased by $67.2 million from December 28, 2019 primarily due
to the economic uncertainty as a result of COVID-19. This increase in allowance was driven by changes in
Management’s assumptions on forward-looking economic indicators and from increased probability of cardholder
delinquency and default.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 97 of 134
85.5
13.6
—
—
—
409.2
864.0
2019
Total
764.6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A continuity of the Company’s allowances for loans receivable is as follows:
(C$ in millions)
12-month ECL
(Stage 1)
Lifetime ECL –
not credit-impaired
(Stage 2)
Lifetime ECL –
credit-impaired
(Stage 3)
Balance at December 28, 2019
$
300.5 $
192.1 $
304.2 $
Increase (decrease) during the period
2020
Total
796.8
(32.3)
(397.5)
(441.1)
Write-offs
Recoveries
New loans originated
Transfers
to Stage 1
to Stage 2
to Stage 3
Net remeasurements
(11.3)
—
13.6
121.0
(14.9)
(30.6)
30.8
—
—
(68.4)
21.2
(40.5)
89.2
85.5
—
(52.6)
(6.3)
71.1
289.2
293.6 $
Balance at January 2, 2021
$
409.1 $
161.3 $
(C$ in millions)
12-month ECL
(Stage 1)
Lifetime ECL –
not credit-impaired
(Stage 2)
Lifetime ECL –
credit-impaired
(Stage 3)
Balance at December 29, 2018
$
253.0 $
186.1 $
325.5 $
Increase (decrease) during the period
Write-offs
Recoveries
New loans originated
Transfers
to Stage 1
to Stage 2
to Stage 3
Net remeasurements
(14.1)
—
25.3
147.1
(26.8)
(26.8)
(57.2)
Balance at December 28, 2019
$
300.5 $
(28.9)
(436.8)
(479.8)
—
—
(92.5)
37.1
(27.6)
117.9
192.1 $
82.8
—
(54.6)
(10.3)
54.4
343.2
304.2 $
82.8
25.3
—
—
—
403.9
796.8
Credit card loans are considered impaired when a payment is 90 days past due or there is sufficient doubt
regarding the collectability of the outstanding balance. No collateral is held against loans receivable, except for
loans to Dealers, as discussed above. The Bank continues to seek recovery on amounts that were written-off
during the period, unless the Bank no longer has the right to collect, the receivable has been sold to a third party,
or all reasonable efforts to collect have been exhausted.
98 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table sets out information about the credit risk exposure of loans receivable:
(C$ in millions)
Low risk
Moderate risk
High risk
Total gross carrying amount
ECL allowance
Net carrying amount
(C$ in millions)
Low risk
Moderate risk
High risk
Total gross carrying amount
ECL allowance
Net carrying amount
Stage 1
Stage 2
Stage 3
$
2,364.6 $
58.9 $
1,799.3
698.1
4,862.0
409.1
108.4
168.8
336.1
161.3
— $
—
649.7
649.7
293.6
2020
Total
2,423.5
1,907.7
1,516.6
5,847.8
864.0
$
4,452.9 $
174.8 $
356.1 $
4,983.8
Stage 1
2,536.5 $
1,982.5
923.9
5,442.9
300.5
5,142.4 $
$
$
Stage 2
Stage 3
67.0 $
137.0
325.7
529.7
192.1
337.6 $
— $
—
618.3
618.3
304.2
314.1 $
2019
Total
2,603.5
2,119.5
1,867.9
6,590.9
796.8
5,794.1
Transfers of Financial Assets
Glacier Credit Card Trust
GCCT is a structured entity that was created to securitize the Bank’s credit card loans receivable. The Bank has
transferred co-ownership interest in credit card loans receivable to GCCT and has determined, for the purposes of
accounting, consolidation of GCCT is appropriate. The associated liabilities, as at January 2, 2021 and
December 28, 2019, secured by these assets, include the commercial paper notes and term notes on the
Consolidated Balance Sheets and are carried at amortized cost. The table below sets out the carrying amounts
and the fair values of the Bank’s transferred credit card loans receivable and the associated liabilities.
(C$ in millions)
Credit card loans receivable transferred1
Associated liabilities
Net position
2020
2019
Carrying amount
Fair value Carrying amount
Fair value
$
$
2,280.0 $
2,280.0 $
2,291.9
2,379.0
2,370.8 $
2,364.9
2,370.8
2,380.0
(11.9) $
(99.0) $
5.9 $
(9.2)
1 The fair value measurement of credit card loans receivable is categorized within Level 2 of the fair value hierarchy. For definitions of the levels refer to Note
33.2.
For legal purposes, the co-ownership interests in the Bank’s credit card loans receivable owned by GCCT have
been sold at law to GCCT and are not available to the creditors of the Bank. Furthermore, GCCT’s liabilities are
not legal liabilities of the Company.
The Bank has not identified any factors arising from current market circumstances that could lead to a need for
the Bank to extend liquidity and/or credit support to GCCT over and above the existing arrangements or that could
otherwise change the substance of the Bank’s relationship with GCCT. There have been no relevant changes in
the capital structure of GCCT since the Bank’s assessment for consolidation.
Franchise Trust
The consolidated financial statements include a portion (silo) of Franchise Trust, a legal entity sponsored by a
third-party bank that originates and services loans to certain Dealers for their purchases of inventory and fixed
assets (the “Dealer loans”). The Company has arranged for several major Canadian banks to provide standby
LCs to Franchise Trust as credit support for the Dealer loans. Franchise Trust has sold all of its rights in the LCs
and outstanding Dealer loans to other independent trusts set up by major Canadian banks (the “Co-owner Trusts”)
that raise funds in the capital markets to finance their purchase of these undivided co-ownership interests. Due to
the retention of substantially all of the risks and rewards relating to these Dealer loans, the transfers are
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 99 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
accounted for as secured financing transactions. Accordingly, the Company continues to recognize the current
portion of these assets in loans receivable and the long-term portion in long-term receivables and other assets
and records the associated liability secured by these assets as loans, being the loans that Franchise Trust has
incurred to fund the Dealer loans. The Dealer loans and Loans are initially recorded at fair value and
subsequently carried at amortized cost.
(C$ in millions)
Dealer loans1
Associated liabilities
Net position
2020
2019
Carrying amount
Fair value Carrying amount
Fair value
$
$
506.6 $
506.6
— $
506.6 $
506.6
— $
621.5 $
621.5
— $
621.5
621.5
—
1 The fair value measurement of Dealer loans is categorized within Level 2 of the fair value hierarchy. For definitions of the levels refer to Note 33.2
The Dealer loans have been sold at law and are not available to the creditors of the Company. Loans are not
legal liabilities of the Company.
In the event that a Dealer defaults on a loan, the Company has the right to purchase such loan from the Co-owner
Trusts, at which time the Co-owner Trusts will assign such Dealer’s debt instrument and related security
documentation to the Company. The assignment of this documentation provides the Company with first-priority
security rights over all of such Dealer’s assets, subject to certain prior ranking statutory claims.
In most cases, the Company would expect to recover any payments made to purchase a defaulted loan, including
any associated expenses. In the event the Company does not choose to purchase a defaulted Dealer loan, the
Co-owner Trusts may draw against the LCs.
The Co-owner Trusts may also draw against the LCs to cover any shortfalls in certain related fees owing to them.
In any case, where a draw is made against the LCs, the Company has agreed to reimburse the bank issuing the
LCs for the amount so drawn. Refer to Note 34 for further information.
10. Long-Term Receivables and Other Assets
Long-term receivables and other assets include the following:
(C$ in millions)
Loans receivable (Note 9)
Net investment in subleases
Derivatives (Note 33.2)
Mortgages receivable
Other receivables
Total long-term receivables
Other
$
$
2020
459.7 $
103.9
42.6
10.0
8.5
624.7
7.2
631.9 $
2019
602.8
112.5
42.9
32.1
7.0
797.3
10.5
807.8
100 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Goodwill and Intangible Assets
The following table presents the changes in cost and accumulated amortization and impairment of the Company’s
goodwill and intangible assets:
Indefinite-life intangible assets and
goodwill
Finite-life intangible assets
Goodwill
Banners and
trademarks
Franchise
agreements
and other
intangibles
Software
Other
intangibles
Total
2020
(C$ in millions)
Cost
Balance, beginning of year
$
893.0 $
932.9 $
167.7 $
1,167.1 $
11.7 $
3,172.4
Additions
Disposals/retirements
Reclassifications and transfers
Currency translation adjustment
Balance, end of year
Accumulated amortization and impairment
Balance, beginning of year
Amortization for the year
Impairment
Disposals/retirements
Balance, end of year
Net carrying amount, end of year
$
$
$
$
—
—
—
0.5
1.4
—
—
(0.2)
—
—
—
—
101.7
(5.9)
(10.6)
—
—
—
—
—
103.1
(5.9)
(10.6)
0.3
893.5 $
934.1 $
167.7 $
1,252.3 $
11.7 $
3,259.3
(1.9) $
—
(2.1)
—
(4.0) $
889.5 $
(0.6) $
—
(16.0)
—
(16.6) $
917.5 $
— $
(743.9) $
(11.7) $
—
—
—
(112.7)
—
2.4
—
—
—
(758.1)
(112.7)
(18.1)
2.4
— $
(854.2) $
(11.7) $
(886.5)
167.7 $
398.1 $
— $
2,372.8
Indefinite-life intangible assets and goodwill
Finite-life intangible assets
Goodwill
Banners and
trademarks
Franchise
agreements
and other
intangibles
Software
Other
intangibles
Total
2019
$
863.5 $
832.7 $
165.5 $
1,048.1 $
23.1 $
2,932.9
—
—
—
—
863.5
832.7
165.5
1,048.1
(11.4)
11.7
(11.4)
2,921.5
—
48.4
—
(18.9)
68.5
57.0
—
(25.3)
2.2
—
—
—
121.9
—
(2.9)
—
—
—
—
—
192.6
105.4
(2.9)
(44.2)
893.0 $
932.9 $
167.7 $
1,167.1 $
11.7 $
3,172.4
(1.9) $
—
(1.9)
—
—
(0.6) $
—
(0.6)
—
—
— $
(636.0) $
(22.4) $
(660.9)
—
—
—
—
—
(636.0)
(110.8)
2.9
10.7 $
(11.7) $
—
—
10.7
(650.2)
(110.8)
2.9
(1.9) $
(0.6) $
— $
(743.9) $
(11.7) $
(758.1)
891.1 $
932.3 $
167.7 $
423.2 $
— $
2,414.3
$
$
$
$
(C$ in millions)
Cost
Balance, as previously reported
IFRS 16 transition adjustment1
Balance, beginning of year
Additions
Additions related to business combinations
Disposals/retirements
Currency translation adjustment
Balance, end of year
Accumulated amortization and impairment
Balance, as previously reported
IFRS 16 transition adjustment1
Balance, beginning of year
Amortization for the year
Disposals/retirements
Balance, end of year
Net carrying amount, end of year
1 Relates to SportChek off-market leases.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 101 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the details of the Company’s goodwill:
(C$ in millions)
Helly Hansen
SportChek
Mark’s
Canadian Tire
Total
$
$
2020
398.4 $
362.5
56.7
71.9
889.5 $
2019
397.9
364.6
56.7
71.9
891.1
The Company’s banners and trademarks, which include SportChek, Mark’s, Helly Hansen and Party City store
banners and trademarks and acquired private-label brands, represent legal trademarks of the Company with
expiry dates ranging from 2021 to 2038 with further renewals at the Company’s election and discretion dependent
on use. As the Company currently has no approved plans to change its store banners and intends to continue to
use and renew its trademarks and private-label brands at each expiry date for the foreseeable future, there is no
foreseeable limit to the period over which the assets are expected to generate net cash inflows. Therefore, these
intangible assets are considered to have indefinite useful lives.
Franchise agreements have expiry dates with options to renew, or have indefinite lives. As the Company intends
to renew these agreements at each renewal date for the foreseeable future, there is no foreseeable limit to the
period over which the franchise agreements and franchise locations will generate net cash inflows. Therefore,
these assets are considered to have indefinite useful lives.
Finite-life intangible assets are amortized over a term of two to 10 years.
The amount of borrowing costs capitalized in 2020 was $4.8 million (2019 – $5.9 million). The capitalization rate
used to determine the amount of borrowing costs capitalized during the year was 4.9 percent (2019 – 4.4
percent).
Amortization expense of software and other finite-life intangible assets is included in Selling, general and
administrative expenses in the Consolidated Statements of Income.
Impairment of Intangible Assets and Subsequent Reversal
The Company performed its annual impairment test on goodwill and indefinite-life intangible assets for all CGUs
based on VIU except as noted. The cash flow projections included specific estimates for up to five years and
terminal growth rates ranging to extrapolate cash flow projections beyond the period covered by the most recent
forecasts, except as noted below.
For all goodwill and intangible assets except as noted, the estimated recoverable amount is based on VIU
exceeding the carrying amount. A material change in any of the assumptions used in testing goodwill and
intangible assets could cause the carrying amount to exceed the estimated recoverable amount.
The Company recognized an impairment charge of $16.0 million under its banners and trademarks reflecting the
broader economic challenges COVID-19 is having on the timing of certain growth strategies, future cash flows
and the discount rate related to the Company’s Musto sailing brand.
In 2020, primarily as a result of Management’s decision to close National Sports and to a lesser extent the impact
of broader economic challenges COVID-19 is having on the future cash flows and the discount rate related to
select SportChek stores, the Company recognized an impairment loss of $30.9 million across goodwill,
investment property, assets classified as held for sale, property and equipment and right-of-use assets.
Impairment charges were recorded under Retail segment in Other expense (income) in the Consolidated
Statements of Income.
During 2020, the recoverable amount of goodwill and intangibles assets of Helly Hansen was based on fair value
less costs of disposal, estimated using discounted cash flows based on an after-tax discount rate and supported
using the market multiple approach, under the Guideline Public Company (GPC) multiples. The fair value
102 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
measurement was categorized as a Level 3 fair value based on the inputs in the valuation technique used. The
cash flow projections included specific estimates for 8 years, taking into account a terminal value calculated by
discounting the final year in perpetuity. A material change in any of the assumptions used in testing Helly Hansen
goodwill and intangible assets could cause the carrying amount to exceed the estimated recoverable amount.
The key assumptions used in the estimation of the recoverable amount for all CGUs are set out below.
Discount rate
Terminal growth rate
There was no reversal of impairment of intangible assets in 2020 or 2019.
12. Investment Property
2020
6.0 to 9.0 %
2.0 to 3.0 %
2019
6.5 to 7.5 %
2.0 to 2.5 %
The following table presents changes in the cost and the accumulated depreciation and impairment on the
Company’s investment property:
(C$ in millions)
Cost
Balance, as previously reported
IFRS 16 transition adjustment
Balance, beginning of year
Additions
Other1
Balance, end of year
Accumulated depreciation and impairment
Balance, beginning of year
Depreciation for the year
Other1
Balance, end of year
Net carrying amount, end of year2
1 Other includes disposals, retirements, impairment, reclassifications and transfers.
2
2020
2019
$
445.4 $
—
445.4
15.6
(14.0)
447.0 $
(56.3) $
(7.0)
2.1
(61.2) $
385.8 $
$
$
$
$
416.4
4.6
421.0
45.6
(21.2)
445.4
(51.7)
(6.2)
1.6
(56.3)
389.1
Investment property includes $6.8 million (2019 – 4.6 million) right-of-use assets related to operating subleases where the Company is an intermediate lessor.
The investment properties generated rental income of $56.7 million (2019 – $54.9 million). Direct operating
expenses (including repairs and maintenance) arising from investment property recognized in net income were
$22.8 million (2019 – $24.3 million).
The estimated fair value of investment property was $542.7 million (2019 – $541.0 million). This recurring fair
value measurement is categorized within Level 3 of the fair value hierarchy (refer to Note 33.2 for definition of
levels). The Company determines the fair value of investment property by applying a pre-tax capitalization rate to
the annual rental income for the current leases. The capitalization rate ranged from 4.82 percent to 8.00 percent
(2019 – 4.75 percent to 7.75 percent). The cash flows are for a term of five years, including a terminal value. The
Company has real estate management expertise that is used to perform the valuation of investment property and
has also completed independent appraisals on certain investment property owned by CT REIT.
Impairment of Investment Property and Subsequent Reversal
Any impairment or reversals of impairment are reported in Other expense (income) in the Consolidated
Statements of Income.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 103 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Property and Equipment
The following table presents changes in the cost and the accumulated depreciation and impairment on the
Company’s property and equipment:
(C$ in millions)
Cost
Land
Buildings
Fixtures and
equipment
Leasehold
improvements
Construction
in progress
2020
Total
Balance, beginning of year
$
1,054.3 $
3,543.6 $
1,680.4 $
1,238.6 $
118.0 $
7,634.9
Additions
Disposals/retirements1
Currency translation adjustment
Reclassifications and transfers
18.2
—
—
0.1
148.0
(8.7)
—
(38.6)
80.4
(46.3)
(0.2)
(6.5)
56.6
(5.3)
0.2
1.0
31.9
—
0.2
(0.4)
335.1
(60.3)
0.2
(44.4)
Balance, end of year
$
1,072.6 $
3,644.3 $
1,707.8 $
1,291.1 $
149.7 $
7,865.5
Accumulated depreciation and
impairment
Balance, beginning of year
$
(7.0) $
(1,726.0) $
(999.0) $
(619.6) $
— $
(3,351.6)
Depreciation for the year
Impairment
Disposals/retirements1
Reclassifications and transfers
—
—
—
—
(85.5)
(0.4)
7.3
11.0
(136.5)
(71.0)
(2.3)
44.7
8.3
(5.0)
5.2
8.5
—
—
—
—
(293.0)
(7.7)
57.2
27.8
Balance, end of year
$
(7.0) $
(1,793.6) $
(1,084.8) $
Net carrying amount, end of year $
1,065.6 $
1,850.7 $
623.0 $
(681.9) $
609.2 $
— $
(3,567.3)
149.7 $
4,298.2
1 Current year disposals includes $40.1 million of zero net book value assets no longer in use.
(C$ in millions)
Cost
Land
Buildings
Fixtures and
equipment
Leasehold
improvements
Assets under
finance lease
Construction
in progress
2019
Total
Balance, as previously reported
$
971.8 $
3,390.1 $
1,535.1 $
1,319.4 $
199.6 $
165.6 $ 7,581.6
IFRS 16 transition adjustments
—
—
(6.8)
(63.1)
(199.6)
—
(269.5)
Balance, beginning of year
971.8
3,390.1
1,528.3
1,256.3
Additions
113.6
109.8
152.8
66.4
Additions related to business
combinations
Disposals/retirements1
Currency translation adjustment
Reclassifications and transfers
—
(0.4)
—
(30.7)
—
(4.0)
—
47.7
9.3
(40.0)
—
30.0
11.1
(22.1)
(0.3)
(72.8)
—
—
—
—
—
—
165.6 7,312.1
(75.0)
367.6
—
—
—
27.4
20.4
(66.5)
(0.3)
1.6
Balance, end of year
$ 1,054.3 $
3,543.6 $
1,680.4 $
1,238.6 $
— $
118.0 $ 7,634.9
Accumulated depreciation and
impairment
Balance, as previously reported
$
(7.0) $
(1,652.5) $
(911.8) $
(583.3) $
(143.8) $
— $ (3,298.4)
IFRS 16 transition adjustments
Balance, beginning of year
Depreciation for the year
Impairment
Reversal of impairment losses
Disposals/retirements1
Reclassifications and transfers
—
—
(7.0)
(1,652.5)
—
—
—
—
—
(84.8)
—
—
3.2
8.1
3.1
(908.7)
(127.5)
(1.6)
0.2
39.0
(0.4)
Balance, end of year
$
(7.0) $
(1,726.0) $
(999.0) $
Net carrying amount, end of year
$ 1,047.3 $
1,817.6 $
681.4 $
1 Disposals includes $33.8 million of zero net book value assets no longer in use.
—
143.8
(583.3)
(65.2)
—
—
22.1
6.8
(619.6) $
619.0 $
—
—
—
—
—
— $
— $
146.9
— (3,151.5)
(277.5)
(1.6)
0.2
64.3
14.5
—
—
—
—
— $ (3,351.6)
118.0 $ 4,283.3
104 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company capitalized borrowing costs of $4.8 million (2019 – $5.0 million) on indebtedness relating to
property and equipment under construction. The rate used to determine the amount of borrowing costs
capitalized during the year was 4.7 percent (2019 – 4.3 percent).
Impairment of Property and Equipment and Subsequent Reversal
The amount of impairment of property and equipment in 2020 was $7.7 million (2019 – $1.6 million). There was
no reversal of impairment in 2020 (2019 – $0.2 million). Any impairment or reversal of impairment is reported in
Other income in the Consolidated Statements of Income.
14. Leases
14.1 As a Lessee
Extension and termination options are included in a number of leases across the Company particularly for
property related leases. These terms are used to maximize the operational flexibility in terms of managing
contracts. The majority of the extension and termination options held are exercisable only by the Company and
not by the respective Lessor.
14.1.1 Right-of-use Assets
The following table presents changes to the carrying amount of the Company’s right-of-use assets at the end of
the reporting period:
(C$ in millions)
Balance, beginning of year
Additions
Depreciation for the year
Impairment
Disposals/retirements and other
Balance, end of year
Property
Non-property1
2020
Total
$
1,581.4 $
29.0 $
1,610.4
393.3
(269.5)
(19.9)
(26.1)
21.8
(13.1)
—
(0.2)
415.1
(282.6)
(19.9)
(26.3)
$
1,659.2 $
37.5 $
1,696.7
1 Non-property leases consist of leased IT equipment, supply chain and transportation related assets.
(C$ in millions)
Balance, beginning of year
Transition adjustment
Additions
Additions related to business combinations
Depreciation for the year
Disposals/retirements and other
Balance, end of year
Property
Non-property1
$
— $
— $
1,672.6
121.3
76.1
(253.1)
(35.5)
31.7
7.7
—
(9.2)
(1.2)
2019
Total
—
1,704.3
129.0
76.1
(262.3)
(36.7)
$
1,581.4 $
29.0 $
1,610.4
1 Non-property leases consist of leased IT equipment, supply chain and transportation related assets.
14.1.2 Undiscounted Cash Flows
The annual lease payments for property and non-property leases are as follows:
(C$ in millions)
Less than one year
One to five years
$
More than five years
Total undiscounted lease obligation1
1 Excludes $82.8 million (2019 – $269.4 million) commitment for lease agreements signed but not yet commenced.
$
2020
386.7 $
1,427.6
992.3
2,806.6 $
2019
437.1
1,446.5
894.7
2,778.3
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 105 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.2 As a Lessor
The Company leases out a number of its investment properties (refer to Note 12), and has certain sublease
arrangements with the majority having an option to renew after the expiry date. The lessee does not have an
option to purchase the property at the expiry of the lease period.
14.2.1 Net Investment in Subleases
The table below summarizes the Company’s contractual cash flows from its net investment in subleases.
(C$ in millions)
Less than one year
One to two years
Two to three years
Three to four years
More than five years
Total undiscounted lease payments receivable
Unearned finance income
Net investment in subleases
$
$
2020
21.9 $
21.2
18.8
19.5
57.2
138.6
(18.8)
119.8 $
2019
23.2
23.2
22.5
20.6
66.2
155.7
(25.7)
130.0
14.2.2 Operating Leases
The table below summarizes the Company’s future undiscounted annual minimum lease payments receivable
from lessees under non-cancellable operating leases.
(C$ in millions)
Less than one year
One to two years
Two to three years
Three to four years
More than five years
Total
$
2020
31.6 $
28.9
24.8
22.2
99.9
$
207.4 $
2019
31.0
28.2
26.0
22.3
101.2
208.7
106 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Subsidiaries
15.1 Control of Subsidiaries and Composition of the Company
These consolidated financial statements include entities controlled by Canadian Tire Corporation. Control exists
when Canadian Tire Corporation has the ability to direct the relevant activities and the returns of an entity. The
financial statements of these entities are included in these consolidated financial statements from the date that
control commences until the date that control ceases. Details of the Company’s significant entities are as follows:
Name of subsidiary
CTFS Holdings Limited1
Principal activity
Marketing of insurance products, processing credit
card transactions at Canadian Tire stores, banking
and reinsurance
Canadian Tire Real Estate Limited
Real estate
CT Real Estate Investment Trust
Real estate
FGL Sports Ltd. (“SportChek”)2
Franchise Trust3
Glacier Credit Card Trust4
Retailer of sporting equipment, apparel and
footwear
Canadian Tire Dealer Loan Program
Financing program to purchase co-ownership
interests in the Bank’s credit card loans
Mark’s Work Wearhouse Ltd.
Retailer of clothing and footwear
Helly Hansen Group AS
Holding company for “Helly Hansen” branded
global wholesaler of sportswear and workwear
Country of
incorporation
and operation
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Norway
Ownership Interest
2020
80.0 %
2019
80.0 %
100.0 %
100.0 %
69.2 %
69.4 %
100.0 %
100.0 %
0.0 %
0.0 %
0.0 %
0.0 %
100.0 %
100.0 %
100.0 %
100.0 %
1 Legal entity CTFS Holdings Limited, incorporated in 2014, is the parent company of CTB and CTFS Bermuda Ltd. CTB's principal activity is banking, marketing
2
of insurance products and processing credit card transactions at the Company’s stores. CTFS Bermuda Ltd.’s principal activity is reinsurance.
“SportChek” refers to the retail business carried on by FGL Sports Ltd., including stores operated under the SportChek, Sports Experts, Atmosphere, National
Sports, Sports Rousseau and Hockey Experts names and trademarks.
3 Franchise Trust is a legal entity sponsored by a third-party bank that originates loans to certain Dealers under the Dealer Loan program. The Company does
not have any share ownership in Franchise Trust; however, the Company has determined that it has the ability to direct the relevant activities and returns on the
silo of assets and liabilities of Franchise Trust that relate to the Canadian Tire Dealer Loan Program. As the Company has control over this silo of assets and
liabilities, it is consolidated in these financial statements.
4 GCCT was formed to meet specific business needs of the Company, namely to buy co-ownership interests in the Company’s credit card loans receivable.
GCCT issues debt to third-party investors to fund such purchases. The Company does not have any share ownership in GCCT; however, the Company has
determined that it has the ability to direct the relevant activities and returns of GCCT. As the Company has control over GCCT, it is consolidated in these
financial statements.
15.2 Details of Non-wholly Owned Subsidiaries that have Non-Controlling Interests
The portion of net assets and income attributable to third parties is reported as non-controlling interests and net
income attributable to non-controlling interests in the Consolidated Balance Sheets and Consolidated Statements
of Income, respectively. The non-controlling interests of CT REIT and CTFS Holdings Limited were initially
measured at fair value on the date of acquisition.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 107 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the information relating to non-controlling interests:
(C$ in millions)
Non-controlling interests
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
Net income attributable to non-controlling interests
Equity attributable to non-controlling interests
Distributions to non-controlling interests
CTFS
Holdings
Limited1
20.0 %
CT REIT2
30.8 %
Other3
50.0 %
$
6,773.3
$
13.0
$
7.8
$
360.9
1,614.1
4,506.4
1,013.7
1,345.2
47.2
500.6
(38.9)
$
$
6,163.1
290.6
2,509.7
3,375.8
$
$
$
$
502.3
62.4
827.2
(56.0)
51.8
1.6
42.3
15.7
137.4
1.2
7.8
(1.5)
$
$
2020
Total
6,794.1
6,575.8
1,906.3
7,058.4
4,405.2
1,984.9
110.8
1,335.6
(96.4)
1 Net income attributable to non-controlling interests is based on the net income of CTFS Holdings Limited adjusted for contractual requirements as stipulated in
the Universal Shareholder Agreement.
2 Net income attributable interests is based on net income of CT REIT adjusted to convert to the Company’s cost method, including recording of depreciation.
3 Net income attributable to non-controlling interests is based on net income of the subsidiary adjusted for contractual requirements as stipulated in the ownership
agreement.
(C$ in millions)
Non-controlling interests
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
Net income attributable to non-controlling interests
Equity attributable to non-controlling interests
Distributions to non-controlling interests
CTFS
Holdings
Limited1
20.0 %
CT REIT2
30.6 %
Other3
50.0 %
$
6,157.4
$
15.8
$
398.0
2,140.9
3,398.1
1,016.4
1,425.0
61.7
501.5
(40.8)
$
$
6,008.7
343.0
2,347.4
3,334.1
$
$
$
$
489.0
51.3
804.5
(42.1)
$
$
$
12.8
53.3
3.8
43.8
18.5
211.7
3.4
8.1
(2.5)
2019
Total
6,186.0
6,460.0
2,487.7
5,789.3
4,369.0
2,125.7
116.4
1,314.1
(85.4)
1 Net income attributable to non-controlling interests is based on the net income of CTFS Holdings Limited adjusted for contractual requirements as stipulated in
the Universal Shareholder agreement.
2 Net income attributable to non-controlling interests is based on net income of CT REIT adjusted to convert to the Company’s cost method, including recording of
depreciation.
3 Net income attributable to non-controlling interests is based on net income of the subsidiary adjusted for contractual requirements as stipulated in the ownership
agreement.
108 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Income Taxes
16.1 Deferred Income Tax Assets and Liabilities
The amount of deferred tax assets or liabilities recognized in the Consolidated Balance Sheets and the
corresponding movement recognized in the Consolidated Statements of Income, Consolidated Statements of
Changes in Equity, or resulting from a business combination is as follows:
Balance,
beginning of
year
Recognized
in profit or
loss
Recognized in
other
comprehensive
income
Recognized
in equity
Other
adjustments
Balance,
end of year
2020
(C$ in millions)
Provisions, deferred revenue and
reserves
Property and equipment
Intangible assets
Employee benefits
Cash flow hedges
Right-of-use asset and lease liabilities
Non-capital losses carryforward
Other
Net deferred tax asset (liability)1
$
247.8 $
(47.9) $
(52.7)
(267.3)
46.5
11.9
155.9
34.6
6.1
(1.4)
(7.7)
0.5
—
(2.2)
9.6
1.8
— $
—
—
3.9
26.4
—
—
—
(0.1) $
— $
—
(0.1)
—
10.7
—
0.3
0.1
—
—
—
—
—
—
—
$
182.8 $
(47.3) $
30.3 $
10.9 $
— $
1
Includes the net amount of deferred tax assets of $298.7 million and deferred tax liabilities of $122.0 million.
199.8
(54.1)
(275.1)
50.9
49.0
153.7
44.5
8.0
176.7
2019
(C$ in millions)
Provisions, deferred revenue and
reserves
Property and equipment
Intangible assets
Employee benefits
Cash flow hedges
Right-of-use asset and lease liabilities
Finance leases
Non-capital losses carryforward
Other
Net deferred tax asset (liability)1
Balance,
beginning of
year
Recognized in
profit or loss
Recognized in
other
comprehensive
income
Recognized in
equity
Other
adjustments
Balance,
end of year
$
311.4 $
(60.4)
(277.5)
40.4
(33.6)
—
13.6
33.7
3.7
$
31.3 $
25.6 $
(16.8)
1.5
0.8
—
(14.8)
—
2.3
1.4
— $
— $
—
—
5.3
27.4
—
—
—
—
(89.2) $
26.1
6.0
—
18.1
171.2
(13.6)
(1.4)
1.6
32.7 $
118.8 $
— $
(1.6)
2.7
—
—
(0.5)
—
—
(0.6)
— $
247.8
(52.7)
(267.3)
46.5
11.9
155.9
—
34.6
6.1
182.8
1
Includes the net amount of deferred tax assets of $319.2 million and deferred tax liabilities of $136.4 million.
No deferred tax is recognized on the amount of temporary differences arising from the difference between the
carrying amount of the investment in subsidiaries, branches and associates and interests in joint arrangements
accounted for in these consolidated financial statements and the cost amount for tax purposes of the investment.
The Company is able to control the timing of the reversal of these temporary differences and believes it is
probable that they will not reverse in the foreseeable future. The amount of these taxable temporary differences
was approximately $2.5 billion at January 2, 2021 (2019 – $2.4 billion).
No deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent
that it is not probable that future taxable profit will be available against which they can be utilized. The amount of
these deductible temporary differences was approximately $156.5 million at January 2, 2021 (2019 – 153.4
million).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 109 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16.2 Income Tax Expense
The following are the major components of income tax expense:
(C$ in millions)
Current tax expense
Current period
Adjustments with respect to prior years
Deferred tax expense (benefit)
$
$
Deferred income tax expense relating to the origination and reversal of temporary
differences
$
Deferred income tax expense (benefit) adjustments with respect to prior years
Deferred income tax expense resulting from change in tax rate
2020
303.3 $
(41.1)
262.2 $
10.7 $
35.7
0.9
47.3
Total income tax expense
$
309.5 $
Income tax benefit recognized in other comprehensive income was as follows:
(C$ in millions)
Net fair value (losses) on hedging instruments entered into for cash flow hedges
not subject to basis adjustment
$
Deferred cost of hedging not subject to basis adjustment – Changes in fair value
of the time value of an option in relation to time-period related hedged items
Reclassification of losses to income
Net fair value (losses) on hedging instruments entered into for cash flow hedges
subject to basis adjustment
Actuarial losses
Total income tax (benefit)
$
2020
(12.5) $
(4.3)
1.0
(10.6)
(3.9)
(30.3) $
2019
282.2
5.9
288.1
13.0
(13.5)
0.5
—
288.1
2019
(1.6)
(6.7)
0.2
(19.3)
(5.3)
(32.7)
Reconciliation of Income Tax Expense
Income taxes in the Consolidated Statements of Income vary from amounts that would be computed by applying
the statutory income tax rate for the following reasons:
(C$ in millions)
Income before income taxes
Income taxes based on the applicable statutory tax rate of 26.49% (2019 –
26.65%)
Adjustment to income taxes resulting from:
Income attributable to non-controlling interest in flow-through entities
Prior years’ tax settlement
Non-taxable portion of capital gains
Non-deductible (non-taxable) stock option expense (recovery)
Other
Income tax expense
$
$
2020
1,172.1 $
2019
1,182.9
310.5 $
315.3
(16.8)
(0.2)
(0.2)
14.8
1.4
$
309.5 $
(14.7)
(5.3)
(3.0)
—
(4.2)
288.1
The applicable statutory tax rate is the aggregate of the Canadian federal income tax rate of 15.0 percent (2019 –
15.0 percent) and the Canadian provincial income tax rate of 11.49 percent (2019 – 11.65 percent).
In the ordinary course of business, the Company is subject to ongoing audits by tax authorities. While the
Company has determined that its tax filing positions are appropriate and supportable, from time to time certain
matters are reviewed and challenged by the tax authorities.
110 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company regularly reviews the potential for adverse outcomes with respect to tax matters. The Company
believes that the ultimate disposition of these will not have a material adverse effect on its liquidity, Consolidated
Balance Sheets, or net income because the Company has determined that it has adequate provision for these tax
matters. Should the ultimate tax liability materially differ from the provision, the Company’s effective tax rate and
its earnings could be affected positively or negatively in the period in which the matters are resolved.
17. Deposits
Deposits consist of broker deposits and retail deposits.
Cash from broker deposits is raised through sales of GICs through brokers rather than directly to the retail
customer. Broker deposits are offered for varying terms ranging from 30 days to five years and issued broker
GICs are non-redeemable prior to maturity (except in certain rare circumstances). Total short-term and long-term
broker deposits outstanding at January 2, 2021, were $2,497.3 million (2019 – $1,916.6 million).
Retail deposits consist of HIS deposits, retail GICs and TFSA deposits. Total retail deposits outstanding at
January 2, 2021, were $1,012.4 million (2019 – $527.6 million).
For repayment requirements of deposits refer to Note 5.4. The following are the effective rates of interest:
GIC deposits
HIS account deposits
18. Trade and Other Payables
Trade and other payables include the following:
(C$ in millions)
Trade payables and accrued liabilities
Derivatives (Note 33.2)
Total financial liabilities
Deferred revenue
Insurance reserve
Other
2020
2.81 %
1.82 %
2019
2.87 %
1.78 %
$
2020
1,962.4 $
119.3
2,081.7
246.8
8.1
171.7
2019
2,087.0
28.3
2,115.3
222.8
8.6
145.7
$
2,508.3 $
2,492.4
Deferred revenue consists mainly of unearned revenue relating to gift cards and customer loyalty program
rewards. Deferred revenue will be recognized as revenue as the customer utilizes gift cards and loyalty rewards
are redeemed. The majority of deferred revenue is expected to be redeemed within one year from issuance.
$199.9 million included in deferred revenue at the beginning of the period was recognized as revenue in 2020
(2019 – $198.3 million).
Other consists primarily of the short-term portion of share based payment transactions and sales taxes payable.
The credit range period on trade payables is one to 150 days (2019 – one to 180 days).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 111 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Provisions
The following table presents the changes to the Company’s provisions:
(C$ in millions)
Balance, beginning of year
Charges, net of reversals
Utilizations
Discount adjustments
Balance, end of year
Current provisions
Long-term provisions
20. Contingencies
Sales and
warranty
returns
Site restoration
and
decommissioning
Other
$
183.7 $
50.6 $
17.0 $
585.5
(571.9)
1.0
$
198.3 $
187.1
11.2
7.3
(9.5)
4.1
52.5 $
3.6
48.9
5.3
(6.1)
—
16.2 $
6.0
10.2
2020
Total
251.3
598.1
(587.5)
5.1
267.0
196.7
70.3
Legal Matters
The Company is party to a number of legal and regulatory proceedings and has determined that each such
proceeding constitutes a routine matter incidental to the business it conducts and that the ultimate disposition of
the proceedings will not have a material effect on its consolidated net income, cash flows, or financial position.
The Bank’s commodity tax assessments for the years 2011 through 2015 have been appealed to the Tax Court of
Canada. In addition, the 2016 and 2017 tax years have also been reassessed. Management has objected to the
reassessments and is awaiting a response from the Canada Revenue Agency. Upon receipt of the response,
Management will take the necessary steps to add them to the appeal. The Bank is of the view that certain
services provided by Credit Card Networks are exempt financial services under the Excise Tax Act (Canada).
Although the Tax Court has recently ruled in a proceeding unrelated to the Bank, that similar services are subject
to Federal and Quebec sales taxes, that decision has been recently overturned by a decision from the Federal
Court of Appeal. Accordingly, the Bank’s view continues to be that it is more likely than not that the services will be
viewed by the Court as exempt financial services. Accordingly, no provision has been made for amounts that
would be payable in the event of an adverse outcome. If the Court rules against the Bank, the total aggregate
exposure as of 2020 would not be significant.
112 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. Short-Term Borrowings
Short-term borrowings include commercial paper notes issued by the Company and GCCT, note purchase facility
borrowings issued by GCCT, bank credit and factoring facility borrowings. Short-term borrowings may bear
interest payable at maturity or be sold at a discount and mature at face value.
The commercial paper notes are short-term notes issued with varying original maturities of one year or less for
GCCT’s ABCP and 270 days or less for the Company’s US CP at interest rates fixed at the time of each renewal
and are recorded at amortized cost. As at January 2, 2021, GCCT had $114.3 million (2019 – $166.9 million) of
ABCP outstanding and no borrowings were outstanding on CTB’s committed note purchase facilities, other than a
nominal balance on one of them to maintain GCCT’s co-ownership interest. CTB had no borrowings outstanding
under its unsecured committed bank credit facility (2019 – $216.0 million).
As at January 2, 2021, the Company (excluding Helly Hansen) had no borrowings on its unsecured committed
bank credit facilities and no US CP outstanding. Helly Hansen had a total of $50.9 million (2019 – $67.0 million)
of C$ equivalent borrowings outstanding on its committed bank credit facility (180 million Norwegian Krone
[“NOK”]) and its factoring facility (NOK 163.1 million). CT REIT had no borrowings under its committed bank
credit facility (2019 – nil).
22. Loans
Franchise Trust, a special purpose entity, is a legal entity sponsored by a third-party bank that originates loans to
certain Dealers. Loans are what Franchise Trust incurs to fund loans to Dealers, which are secured by such
Dealers’ store assets. These loans are not direct legal liabilities of the Company but have been consolidated in
the accounts of the Company as the Company effectively controls the silo of Franchise Trust containing the
Dealer Loan Program.
Loans, which are initially recognized at fair value and are subsequently measured at amortized cost, are due
within one year.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 113 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Long-Term Debt
Long-term debt includes the following:
(C$ in millions)
Senior term notes (GCCT)
Series 2015-1, 2.237%, September 21, 2020
Series 2017-1, 2.048%, September 20, 2022
Series 2018-1, 3.138%, September 20, 2023
Series 2019-1, 2.280%, June 6, 2024
Series 2020-1, 1.388%, September 22, 2025
Subordinated term notes (GCCT)
Series 2015-1, 3.237%, September 21, 2020
Series 2017-1, 3.298%, September 20, 2022
Series 2018-1, 4.138%, September 20, 2023
Series 2019-1, 3.430%, June 6, 2024
Series 2020-1, 2.438%, September 22, 2025
Debentures (CT REIT)
Series C, 2.159% due June 1, 2021
Series A, 2.852% due June 9, 2022
Series B, 3.527% due June 9, 2025
Series D, 3.289% due June 1, 2026
Series E, 3.469% due June 16, 2027
Series F, 3.865% due December 7, 2027
Medium-term notes (CTC)
2.646% due July 6, 2020
3.167% due July 6, 2023
6.375% due April 13, 2028
6.445% due February 24, 2034
5.61% due September 4, 2035
Mortgages
Promissory note and other
Total debt
Current
Non-current
Face value
2020
Carrying
amount
Face value
2019
Carrying
amount
—
523.6
546.0
523.6
448.8
—
36.4
38.0
36.4
31.2
150.0
150.0
200.0
200.0
175.0
200.0
—
400.0
150.0
200.0
200.0
65.8
—
—
522.8
544.5
521.7
446.6
—
36.4
37.9
36.4
31.2
150.0
149.8
199.2
199.2
174.2
199.1
—
399.2
150.8
201.5
199.7
66.0
—
465.0
523.6
546.0
523.6
—
35.0
36.4
38.0
36.4
—
150.0
150.0
200.0
200.0
175.0
200.0
250.0
400.0
150.0
200.0
200.0
47.7
1.3
464.8
522.2
544.0
521.3
—
35.0
36.4
38.0
36.4
—
149.8
149.6
199.1
199.1
174.1
198.9
249.8
398.9
150.6
201.4
199.7
48.0
1.3
$
4,274.8 $
4,266.2 $
4,528.0 $
4,518.4
150.5
150.5
788.2
788.2
4,124.3
4,115.7
3,739.8
3,730.2
The carrying amount of long-term debt is net of debt issuance costs of $13.8 million (2019 – $14.6 million).
Senior and Subordinated Term Notes
Asset-backed senior and subordinated term notes issued by GCCT are recorded at amortized cost using the
effective interest method.
Subject to the payment of certain priority amounts, the senior asset-backed term notes of a series have recourse
on a priority basis to the allocable collections from such series’ co-ownership interest in a securitized pool of credit
card loans receivable originated by CTB. The subordinated asset-backed term notes of such series have
recourse to such series’ allocable collections on a subordinated basis to the senior asset-backed term notes of
such series in terms of the priority of payment of principal and, in some circumstances, interest. The entitlement
of note holders and other parties to such assets is governed by the priority and payment provisions set forth in
114 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GCCT’s Trust Indenture dated as of November 29, 1995, as amended, and the related series supplements under
which the outstanding series of notes were issued as well as the series purchase agreements which set forth the
Bank’s over collateralization.
Repayment of the principal of the series 2017-1, 2018-1, 2019-1 and 2020-1 term notes is scheduled for the
expected repayment dates indicated in the preceding table. Subsequent to the expected repayment date,
collections distributed to GCCT with respect to the related co-ownership interest will be applied to pay any
remaining amount owing.
Principal repayments may commence earlier than the expected repayment dates (an amortization period) if
certain events occur including:
• the Bank failing to make required payments to GCCT or failing to meet covenant or other contractual terms;
• the performance of the securitized credit card loans receivable failing to achieve set criteria; and
• insufficient credit card loans receivable in the securitized pool.
None of these events occurred in the Bank’s year ended December 31, 2020.
During the second quarter of 2020, due to COVID-19, CTB pre-emptively raised funding through draws under its
note purchase facilities provided by Scotiabank. $500 million of funding was raised through GCCT’s existing
Series 2016-A variable funding notes which had been established to draw with same day notice. This funding
was repaid during the second quarter of 2020 shortly after GCCT issued $700 million of Series 2020-A two-year
pre-payable term notes pursuant to the note purchase facility with 35-day notice. These Series 2020-A notes
were repaid early, in full, during the third quarter of 2020.
On September 21, 2020, GCCT repaid at maturity $500 million of Series 2015-1 term notes consisting of $465
million of senior term notes, which bore an interest rate of 2.237 percent per annum as well as $35 million of
subordinated term notes, which bore an interest rate of 3.237 percent per annum.
On September 25, 2020, GCCT issued $480 million of Series 2020-1 term notes that have an expected
repayment date of September 22, 2025, consisting of $448.8 million of senior term notes bearing an interest rate
of 1.388 percent per annum and $31.2 million of subordinated term notes bearing an interest rate of 2.438 percent
per annum.
Medium-Term Notes and Debentures
Medium-term notes and debentures are unsecured and those issued by the Company and CT REIT with terms
greater than two years are redeemable by the Company or CT REIT, as applicable, in whole or in part, at any
time, at the greater of par or a formula price based upon interest rates at the time of redemption.
On July 6, 2020, the Company repaid at maturity $250 million of medium-term notes, which bore interest of 2.646
percent per annum.
On December 10, 2020 CT REIT announced that it has provided holders of its Series C debentures a notice of
redemption to redeem the entire $150.0 million outstanding principal amount of Series C debentures early on
January 10, 2021 at a redemption price per $1,000 principal amount equal to $1,004.95 plus accrued and unpaid
interest to but excluding the redemption date, of $2.37. The Series C debentures were redeemed with the
proceeds of a new $150 million Series G debenture issuance that closed on January 6, 2021.
Mortgages
Mortgages payable as at January 2, 2021 had a weighted average interest rate of 2.27% percent and maturity
dates of July 1, 2022 and March 10, 2023.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 115 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Other Long-Term Liabilities
Other long-term liabilities include the following:
(C$ in millions)
Redeemable financial instrument1
Employee benefits (Note 25)
Derivatives (Note 33.2)
Other
$
$
2020
567.0 $
194.7
10.4
78.2
850.3 $
2019
567.0
176.4
5.6
61.1
810.1
1 A financial liability; refer to Note 33 for further information on the redeemable financial instrument.
Other primarily includes the long-term portion of share-based payment transactions.
25. Employment Benefits
Profit-Sharing Program
The Company has a profit-sharing program for certain employees. The amount awarded to employees is
contingent on the Company’s profitability but shall be equal to at least one percent of the Company’s previous
year’s net profits after income tax. A portion of the award (“Base Award”) is contributed to a DPSP for the benefit
of the employees. The maximum amount of the Company’s Base Award contribution to the DPSP per employee
per year is subject to limits set by the Income Tax Act. Each participating employee is required to invest and
maintain 10 percent of the Base Award in a Company share fund of the DPSP. The share fund holds both
Common Shares and Class A Non-Voting Shares. The Company’s contributions to the DPSP, with respect to
each employee, vest 20 percent after one year of continuous service and 100 percent after two years of
continuous service.
In 2020, the Company contributed $25.4 million (2019 – $25.3 million) under the terms of the DPSP.
Defined Benefit Plan
The Company provides certain health care, dental care, life insurance and other benefits for certain retired
employees pursuant to Company policy. The Company does not have a pension plan. Information about the
Company’s defined benefit plan is as follows:
(C$ in millions)
Change in the present value of defined benefit obligation
2020
2019
Defined benefit obligation, beginning of year
$
176.4 $
151.9
Current service cost
Interest cost
Actuarial loss arising from changes in financial assumptions
Actuarial gain arising from changes in experience assumptions
Benefits paid
2.1
5.4
15.6
(1.0)
(3.8)
Defined benefit obligation, end of year1
1 The accrued benefit obligation is not funded because funding is provided when benefits are paid. Accordingly, there are no plan assets.
194.7 $
$
1.7
5.8
21.4
(1.0)
(3.4)
176.4
116 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Significant actuarial assumptions used:
Defined benefit obligation, end of year:
Discount rate
Net benefit plan expense for the year:
Discount rate
2020
2019
2.60 %
3.10 %
3.10 %
3.90 %
For measurement purposes, a 3.85 percent weighted average health care cost trend rate is assumed for 2020
(2019 – 3.96 percent). The rate is assumed to decrease gradually to 2.11 percent for 2040 and remain at that
level thereafter.
The most recent actuarial valuation of the obligation was performed as of December 28, 2019.
The cumulative amount of actuarial losses before tax recognized in equity at January 2, 2021, was $76.9 million
(2019 – $62.3 million).
Sensitivity Analysis:
The Company’s defined benefit plan is exposed to actuarial risks such as the health care cost trend rate, the
discount rate and the life expectancy assumptions. The following table provides the sensitivity of the defined
benefit obligation to these assumptions. For each sensitivity test, the impact of a reasonably possible change in a
single factor is shown with other assumptions left unchanged.
(C$ in millions)
Sensitivity analysis
A fifty basis point change in assumed discount rates
$
A one-percentage-point change in assumed health care cost trend rates
A one-year change in assumed life expectancy
2020
Accrued benefit obligation
Increase
Decrease
(15.7) $
20.5
5.5
17.8
(17.5)
(5.5)
The weighted-average duration of the defined benefit plan obligation at January 2, 2021 is 17.2 years (2019 –
16.9 years).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 117 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Share Capital
Share capital consists of the following:
(C$ in millions)
Authorized
3,423,366 Common Shares
100,000,000 Class A Non-Voting Shares
Issued
2020
2019
3,423,366 Common Shares (2019 – 3,423,366)
57,383,758 Class A Non-Voting Shares (2019 – 58,096,958)
$
$
0.2 $
596.8
597.0 $
0.2
587.8
588.0
All issued shares are fully paid. The Company does not hold any of its Common or Class A Non-Voting Shares.
Neither the Common nor the Class A Non-Voting Shares have a par value.
During 2020 and 2019, the Company issued and purchased Class A Non-Voting Shares. The Company’s share
purchases were made pursuant to its NCIB program, in connection with its anti-dilutive policy and announced
share purchase intentions.
During the fourth quarter of 2019, the Company provided notice to its broker under its Automatic Securities
Purchase Plan (“ASPP”) to purchase Class A Non-Voting Shares for cancellation under the NCIB during the
Company’s blackout period starting December 28, 2019. As at December 28, 2019, an obligation to purchase
shares of $49.1 million was recognized under the ASPP in trade and other payables. In the first quarter of 2020,
upon completion of the purchases made pursuant to the notice issued in the fourth quarter of 2019 under the
ASPP, the Company reversed the accrual previously recorded. During 2020, the Company did not provide notice
to its broker under its ASPP to purchase Class A Non-Voting Shares for cancellation under the NCIB during the
Company’s blackout period starting January 2, 2021.
The following transactions occurred with respect to Class A Non-Voting Shares during 2020 and 2019:
(C$ in millions)
Number
2020
$
Number
Shares outstanding at beginning of the year
58,096,958 $
587.8
59,478,460 $
Issued under the dividend reinvestment plan
Purchased1
Accrued liability for ASPP commitment
Excess of purchase price over average cost
105,102
(818,302)
14.3
99,863
(110.7)
(1,481,365)
—
—
3.0
102.4
—
—
Shares outstanding at end of the period
57,383,758 $
596.8
58,096,958 $
2019
$
591.3
14.3
(215.2)
(3.0)
200.4
587.8
1 Purchased shares, pursuant to the Company’s NCIB program, have been restored to the status of authorized but unissued shares. The Company records
shares purchased on a transaction date basis.
Conditions of Class A Non-Voting Shares and Common Shares
The holders of Class A Non-Voting Shares are entitled to receive a fixed cumulative preferential dividend at the
rate of $0.01 per share per annum. After payment of fixed cumulative preferential dividends at the rate of $0.01
per share per annum on each of the Class A Non-Voting Shares with respect to the current year and each
preceding year and payment of a non-cumulative dividend on each of the Common Shares with respect to the
current year at the same rate, the holders of the Class A Non-Voting Shares and the Common Shares are entitled
to further dividends declared and paid in equal amounts per share without preference or distinction or priority of
one share over another.
In the event of the liquidation, dissolution, or winding up of the Company, all of the property of the Company
available for distribution to the holders of the Class A Non-Voting Shares and the Common Shares shall be paid or
118 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
distributed equally, share for share, to the holders of the Class A Non-Voting Shares and to the holders of the
Common Shares without preference or distinction or priority of one share over another.
The holders of Class A Non-Voting Shares are entitled to receive notice of and to attend all meetings of the
shareholders; however, except as provided by the Business Corporations Act (Ontario) and as hereinafter noted,
they are not entitled to vote at those meetings. Holders of Class A Non-Voting Shares, voting separately as a
class, are entitled to elect the greater of (i) three Directors or (ii) one-fifth of the total number of the Company’s
Directors.
The holders of Common Shares are entitled to receive notice of, to attend and to have one vote for each Common
Share held at all meetings of holders of Common Shares, subject only to the restriction on the right to elect those
directors who are elected by the holders of Class A Non-Voting Shares as set out above.
Common Shares can be converted, at any time and at the option of each holder of Common Shares, into Class A
Non-Voting Shares on a share-for-share basis. The authorized number of shares of either class cannot be
increased without the approval of the holders of at least two-thirds of the shares of each class represented and
voted at a meeting of the shareholders called for the purpose of considering such an increase. Neither the Class
A Non-Voting Shares nor the Common Shares can be changed in any manner whatsoever, whether by way of
subdivision, consolidation, reclassification, exchange, or otherwise, unless at the same time the other class of
shares is also changed in the same manner and in the same proportion.
Should an offer to purchase Common Shares be made to all, or substantially all of the holders of Common
Shares, or be required by applicable securities legislation or by the Toronto Stock Exchange to be made to all
holders of Common Shares in Ontario and should a majority of the Common Shares then issued and outstanding
be tendered and taken up pursuant to such offer, the Class A Non-Voting Shares shall thereupon and thereafter
be entitled to one vote per share at all meetings of the shareholders and thereafter the Class A Non-Voting Shares
shall be designated as Class A Shares. The foregoing voting entitlement applicable to Class A Non-Voting Shares
would not apply in the case where an offer is made to purchase both Class A Non-Voting Shares and Common
Shares at the same price per share and on the same terms and conditions.
The foregoing is a summary of certain conditions attached to the Class A Non-Voting Shares of the Company and
reference should be made to the Company’s articles of amendment dated December 15, 1983 for a full statement
of such conditions, which are available on SEDAR at www.sedar.com.
As of January 2, 2021, the Company had dividends declared and payable to holders of Class A Non-Voting
Shares and Common Shares of $70.5 million (2019 – $70.0 million) at a rate of $1.1750 per share (2019 –
$1.1375 per share).
On February 17, 2021 the Company’s Board of Directors declared a dividend of $1.1750 per share payable on
June 1, 2021 to shareholders of record as of April 30, 2021.
Dividends per share declared were $4.5875 in 2020 (2019 – $4.2500).
The dilutive effect of employee stock options is 193,302 (2019 – 66,921).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 119 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. Share-Based Payments
The Company’s share-based payment plans are described below.
Stock Options
The Company has granted stock options to certain employees that enable such employees to exercise their stock
options and subscribe for Class A Non-Voting Shares or surrender their options and receive a cash payment.
Such cash payment is calculated as the difference between the fair market value of Class A Non-Voting Shares as
at the surrender date and the exercise price of the option. Stock options vest over a three-year period. All
outstanding stock options have a term of seven years. At January 2, 2021, and December 28, 2019, the
aggregate number of Class A Non-Voting Shares that were authorized for issuance under the stock option plan
was 3.4 million.
Stock option transactions during 2020 and 2019 were as follows:
Outstanding at beginning of year
Granted
Exercised and surrendered1
Forfeited
Outstanding at end of year
2020
2019
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
1,286,007 $
146.71
1,026,545 $
1,021,688
80.49
446,227
(134,521)
(227,846)
121.08
(134,928)
129.88
(51,837)
1,945,328 $
115.67
1,286,007 $
144.91
144.08
121.07
155.13
146.71
Stock options exercisable at end of year
620,716
362,552
1 The weighted average market price of the Company's shares when the options were exercised in 2020 was $158.78 (2019 – $146.73).
The following table summarizes information about stock options outstanding and exercisable at January 2, 2021:
Options outstanding
Options exercisable
Range of exercise prices
$ 177.09
156.29
144.35
129.14 to 129.92
80.49 to 99.72
$ 80.49 to 177.09
Number of
outstanding
options
212,402
199,160
362,716
189,899
981,151
Weighted
average
remaining
contractual
life1
5.17 $
4.17
6.16
2.81
7.08
Weighted
average
exercise
price
Number of
exercisable
options
Weighted
average
exercise
price
177.09
156.29
144.35
129.63
80.98
— $
199,160
138,280
189,899
93,377
—
156.29
144.35
129.63
85.67
134.85
1,945,328
5.99 $
115.67
620,716 $
1 Weighted average remaining contractual life is expressed in years.
Performance Share Units and Performance Units
The Company grants Performance Share Units (“PSUs”) to certain of its employees that generally vest after three
years. Each PSU entitles the participant to receive a cash payment equal to the fair market value of the
Company’s Class A Non-Voting Shares on the date set out in the Performance Share Unit plan, multiplied by a
factor determined by specific performance-based criteria and a relative total shareholder return modifier.
CT REIT grants Performance Units (“PUs”) to certain of its employees that generally vest after three years. Each
PU entitles the participant to receive a cash payment equal to the fair market value of Units of CT REIT on the
date set out in the Performance Unit plan, multiplied by a factor determined by specific performance-based
criteria.
120 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of stock options and PSUs at the end of the year was determined using the Black-Scholes option
pricing model with the following inputs:
Share price at end of year (C$)
Weighted average exercise price1(C$)
Expected remaining life (years)
Expected dividends
Expected volatility2
Risk-free interest rate
Stock options
PSUs Stock options
2020
2019
PSUs
$
$
167.33
$
167.33
117.99
4.1
3.0 %
29.5 %
0.7 %
N/A
1.6
3.3 %
35.6 %
0.5 %
$
$
140.63
$
140.63
146.80
3.6
4.0 %
19.8 %
2.0 %
N/A
1.3
4.5 %
18.3 %
2.1 %
1 Reflects expected forfeitures.
2 Reflects historical volatility over a period of time similar to the remaining life of the stock options, which may not necessarily be the actual outcome.
Service and non-market performance conditions attached to the transactions are not taken into account in
determining fair value.
Deferred Share Units and Deferred Units
The Company offers Deferred Share Unit (“DSU”) plans to certain of its Executives and to members of its Board
of Directors. Under the Executives’ DSU plan, eligible Executives may elect to receive all or a portion of their
annual bonus in DSUs. The Executives’ DSU plan also provides for the granting of discretionary DSUs. Under
the Directors’ DSU plan, eligible Directors may defer all or a portion of their annual director fees into DSUs. DSUs
received under both the Executives’ and Directors’ DSU plans are settled in cash following termination of service
with the Company and/or the Board based on the fair market value of the Company’s Class A Non-Voting Shares
on the settlement date.
CT REIT also offers a Deferred Unit (“DU”) plan for members of its Board of Trustees. Under this plan, eligible
trustees may elect to receive all or a portion of their annual trustee fees in DUs. DUs are settled through the
issuance of an equivalent number of Units of CT REIT or, at the election of the trustee, cash, following termination
of service with the Board.
Restricted Unit Plan
CT REIT offers a Restricted Unit (“RU”) plan for its Executives. RUs may be issued as discretionary grants or,
Executives may elect to receive all or a portion of their annual bonus in RUs. At the end of the vesting period,
which is generally three years from the date of grant (in the case of discretionary grants) and five years from the
annual bonus payment date (in the case of deferred bonus), an Executive receives an equivalent number of Units
issued by CT REIT or, at the Executive’s election, the cash equivalent thereof.
The Company enters into equity derivative transactions to hedge share-based payments and does not apply
hedge accounting. The expense recognized for share-based compensation is summarized as follows:
(C$ in millions)
Expense arising from share-based payment transactions
Effect of hedging arrangements
Total expense included in net income
$
$
2020
115.5 $
(82.1)
33.4 $
2019
31.6
4.9
36.5
The total carrying amount of liabilities for share-based payment transactions at January 2, 2021, was $172.9
million (2019 – $86.7 million).
The intrinsic value of the liability for vested benefits at January 2, 2021, was $55.6 million (2019 – $33.6 million).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 121 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. Revenue
Revenue by reportable operating segment is as follows:
(C$ in millions)
Sale of goods
Retail
Financial
Services CT REIT
Adjust-
ments
Total
Retail
Financial
Services CT REIT
Adjust-
ments
2020
2019
Total
$ 13,062.1 $
— $
— $
— $ 13,062.1 $ 12,708.3 $
— $
— $
— $ 12,708.3
Interest income on loans
receivable
12.9 1,056.6
Royalties and licence fees
50.0
—
21.1
152.1
Services rendered
Rental income
—
—
—
(4.9) 1,064.6
20.5 1,113.4
—
50.0
55.4
—
(3.7)
169.5
19.4
178.0
—
—
—
(10.5) 1,123.4
—
55.4
(2.4)
195.0
471.1
—
53.7
—
524.8
401.5
—
51.6
(0.8)
452.3
$ 13,617.2 $ 1,208.7 $
53.7 $
(8.6) $ 14,871.0 $ 13,205.1 $ 1,291.4 $
51.6 $
(13.7) $ 14,534.4
Retail revenue breakdown is as follows:
(C$ in millions)
Canadian Tire
SportChek
Mark’s
Helly Hansen1
Petroleum
Other and intersegment eliminations
2020
$
8,639.5 $
1,814.8
1,213.2
541.9
1,358.7
49.1
2019
7,418.0
2,036.3
1,274.3
554.2
1,894.5
27.8
$
13,617.2 $
13,205.1
1 Helly Hansen revenue represents external revenue only. The prior period figures have been restated to align with current year presentation
Major Customers
The Company does not rely on any one customer.
29. Cost of Producing Revenue
Cost of producing revenue consists of the following:
(C$ in millions)
Inventory cost of sales1
Net impairment loss on loans receivable
Finance costs on deposits
Other
$
$
2020
9,260.4 $
405.9
76.8
51.3
2019
9,116.8
409.5
66.6
67.7
9,794.4 $
9,660.6
1 Inventory cost of sales includes depreciation for the year ended January 2, 2021 of $12.9 million (2019 – $10.1 million).
Inventory writedowns, as a result of net realizable value being lower than cost, recognized in the year ended
January 2, 2021 were $91.5 million (2019 – $50.7 million).
Inventory writedowns recognized in prior periods and reversed in the year ended January 2, 2021 were $8.3
million (2019 – $7.8 million). The reversal of writedowns was the result of actual losses being lower than
previously estimated.
The writedowns and reversals are included in inventory cost of sales.
122 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of the following:
(C$ in millions)
Personnel expenses
Occupancy
Marketing and advertising
Depreciation of property and equipment and investment property 1
Depreciation of right-of-use assets
Amortization of intangible assets
Information systems
Other
1 Refer to Note 29 for depreciation included in cost of producing revenue.
2020
$
1,429.8 $
433.5
301.9
287.1
282.6
112.7
212.6
539.1
2019
1,375.0
417.6
312.8
274.3
262.3
110.8
187.0
497.7
$
3,599.3 $
3,437.5
31. Net Finance Costs
Net finance costs consists of the following:
(C$ in millions)
Finance (income)
Finance (income) on lease receivables
Finance costs
Finance costs on lease liabilities
$
$
2020
(9.8) $
(5.8)
173.9
98.2
256.5 $
2019
(21.5)
(6.1)
187.3
107.1
266.8
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 123 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. Notes to the Consolidated Statements of Cash Flows
Changes in liabilities arising from financing activities comprise the following:
(C$ in millions)
Balance, beginning of year
Cash changes:
Lease liabilities
Deposits
Long-term debt
$
2,206.3 $
2,444.2 $
4,518.4
2020
Payment of lease liabilities (principal portion)
(367.9)
Change in deposits
Long-term debt issuance
Long-term debt repayment
Mortgage issuance
Mortgage repayment
Payment of transaction costs related to long-term debt
—
—
—
—
—
—
—
1,061.0
—
—
—
—
—
—
—
1,180.0
(1,450.4)
18.6
(0.4)
(2.8)
Total changes from financing cash flows
(367.9)
1,061.0
(255.0)
Non-cash changes:
New leases, interest accretion, currency translation
adjustment and other
Amortization of broker commission
Amortization of debt issuance costs
Balance, end of year
(C$ in millions)
Balance, beginning of year
Cash changes:
388.1
—
—
—
4.5
—
(1.0)
—
3.8
2,226.5 $
3,509.7 $
4,266.2
Lease liabilities
Deposits
Long-term debt
— $
2,471.2 $
4,553.9
2019
$
$
Payment of lease liabilities (principal portion)
(313.3)
Change in deposits
Long-term debt issuance
Long-term debt repayment
Mortgage issuance
Mortgage repayment
Payment of transaction costs related to long-term debt
—
—
—
—
—
—
—
(30.8)
—
—
—
—
—
Total changes from financing cash flows
(313.3)
(30.8)
Non-cash changes:
IFRS 16 transition adjustment
New leases, interest accretion and other
Acquisition through business combinations
Currency translation adjustment
Amortization of broker commission
Amortization of debt issuance costs
Balance, end of year
2,346.3
101.3
74.1
(2.1)
—
—
—
—
—
—
3.8
—
$
2,206.3 $
2,444.2 $
4,518.4
32.1 Cash and Marketable Investments Held in Reserve
Cash and marketable investments includes reserves held by the Financial Services segment in support of its
liquidity and regulatory requirements. As at January 2, 2021, reserves held by Financial Services totaled $398.3
million (2019 – $347.4 million) and includes restricted cash disclosed in Note 7 as well as short-term investments.
124 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
—
—
560.4
(500.0)
10.9
(0.3)
(2.6)
68.4
(108.0)
—
—
—
—
4.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. Financial Instruments
33.1 Fair Value of Financial Instruments
Fair values have been determined for measurement and/or disclosure purposes based on the following:
The carrying amount of the Company’s cash and cash equivalents, trade and other receivables, loans receivable,
bank indebtedness, trade and other payables, short-term borrowings and loans approximate their fair value either
due to their short-term nature or because they are derivatives, which are carried at fair value.
The carrying amount of the Company’s long-term receivables and other assets approximate their fair value either
because the interest rates applied to measure their carrying amount approximate current market interest or
because they are derivatives, which are carried at fair value.
Fair values of financial instruments reflect the credit risk of the Company and counterparties when appropriate.
Investments in Debt Securities
The fair values of financial assets traded in active markets are determined by reference to their quoted closing bid
price or dealer price quotations at the reporting date. For investments that are not traded in active markets, the
Company determines fair values using a combination of discounted cash flow models, comparison to similar
instruments for which market-observable prices exist and other valuation models.
Derivatives
The fair value of a foreign exchange forward contract is estimated by discounting the difference between the
contractual forward price and the current forward price for the residual maturity of the contract using a risk-free
interest rate (based on government bonds).
The fair value of interest rate swaps and swaptions reflect the estimated amounts the Company would receive or
pay if it were to settle the contracts at the measurement date and is determined by an external valuator using
valuation techniques based on observable market input data.
The fair value of equity derivatives is determined by reference to share price movement adjusted for interest using
market interest rates specific to the terms of the underlying derivative contracts.
Redeemable Financial Instrument
On October 1, 2014, the Scotiabank acquired a 20.0 percent interest in the Financial Services business from the
Company for proceeds of $476.8 million, net of $23.2 million in transaction costs. In conjunction with the
transaction, Scotiabank was provided an option to sell and require the Company to purchase all of the interest
owned by Scotiabank at any time during the six-month period following the tenth anniversary of the transaction.
This obligation gives rise to a liability for the Company (the “redeemable financial instrument”) and is recorded on
the Company’s Consolidated Balance Sheets in Other long-term liabilities. The purchase price will be based on
the fair value of the Financial Services business and Scotiabank’s proportionate interest in the Financial Services
business, at that time.
The redeemable financial instrument was initially recorded at $500.0 million and is subsequently measured at fair
value with changes in fair value recorded in net income for the period in which they arise. The subsequent fair
value measurements of the redeemable financial instrument are calculated based on a discounted cash flow
analysis using earnings attributable to the Financial Services business, adjusted for any undistributed earnings
and Scotiabank’s proportionate interest in the business. The Company estimates future annual earnings over the
forecast time period, taking into account a terminal value calculated by discounting the final year in perpetuity.
The growth rate applied to the terminal value is based on an industry-based estimate of the Financial Services
business. The discount rate reflects the cost of equity of the Financial Services business and is based on
expected market rates adjusted to reflect the risk profile of the business. The fair value measurement is
performed quarterly using internal estimates and judgment supplemented by input from a third party, as required.
This recurring fair value measurement is categorized within Level 3 of the fair value hierarchy (refer to Note 33.2).
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 125 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33.2 Fair Value of Financial Assets and Financial Liabilities Classified Using the Fair Value
Hierarchy
The Company uses a fair value hierarchy to categorize the inputs used to measure the fair value of financial
assets and financial liabilities, the levels of which are:
Level 1 – Inputs are unadjusted quoted prices of identical instruments in active markets;
Level 2 – Inputs are other than quoted prices included in Level 1 but are observable for the asset or liability, either
directly or indirectly; and
Level 3 – Inputs are not based on observable market data.
The following table presents the financial instruments measured at fair value classified by the fair value hierarchy:
(C$ in millions)
Trade and other receivables
Trade and other receivables
Long-term receivables and other assets
Long-term receivables and other assets
Trade and other payables
Trade and other payables
Redeemable financial instrument
Other long-term liabilities
Other long-term liabilities
Category
FVTPL1
Effective hedging instruments
FVTPL1
Effective hedging instruments
FVTPL1
Effective hedging instruments
FVTPL
FVTPL1
Effective hedging instruments
1 Relates to derivatives not designated as hedging instruments.
2020
Level
Level
2
2
2
2
2
2
3
2
2
$
69.8
0.2
28.2
14.4
25.6
93.7
567.0
2.2
8.2
2
2
2
2
2
2
3
2
2
2019
12.1
9.1
—
42.9
9.2
19.1
567.0
0.4
5.2
There were no transfers in either direction between categories in 2020 or 2019.
Changes in Fair Value Measurement for Instruments Categorized in Level 3
Level 3 financial instruments include a redeemable financial instrument.
As of January 2, 2021, the fair value of the redeemable financial instrument was estimated to be $567.0 million
(2019 – $567.0 million). The determination of the fair value of the redeemable financial instrument requires
significant judgment on the part of Management. Refer to Note 2 of these consolidated financial statements for
further information.
33.3 Fair Value Measurement of Investments, Debt and Deposits
The fair value measurement of investments, debt and deposits is categorized within Level 2 of the fair value
hierarchy (refer to Note 33.2). The fair values of the Company’s investments, debt and deposits compared to the
carrying amounts are as follows:
As at
(C$ in millions)
Short-term investments
Long-term investments
Long-term debt
Deposits
$
January 2, 2021
December 28, 2019
Carrying
amount
643.0 $
146.2
4,266.2
3,509.7
Fair value
642.3 $
146.1
4,593.3
3,613.3
Carrying
amount
201.7 $
138.9
4,518.4
2,444.2
Fair value
201.7
139.5
4,711.7
2,459.0
The difference between the fair values and the carrying amounts (excluding transaction costs, which are included
in the carrying amount of debt) is due to changes in market interest rates for similar instruments. The fair values
are determined by discounting the associated future cash flows using current market interest rates for items of
similar risk.
126 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33.4 Items of Income, Expense, Gains or Losses
The following table presents certain amounts of income, expense, gains, or losses, arising from financial
instruments that were recognized in net income or equity:
(C$ in millions)
Net (loss) gain on:
2020
2019
Financial instruments designated and/or classified as FVTPL1
$
71.0 $
(20.5)
Interest income (expense):
Total interest income calculated using effective interest method for financial
instruments that are not at FVTPL
Total interest expense calculated using effective interest method for financial
instruments that are not at FVTPL
Fee expense arising from financial instruments that are not at FVTPL:
Other fee expense
1,074.4
1,144.8
(247.7)
(261.7)
(16.5)
(9.8)
1 Excludes gains (losses) on cash flow hedges, which are effective hedging relationships and are reflected on the Consolidated Statements of Comprehensive
Income.
33.5 Derivatives Designated as Hedging Instruments
The following table details the effectiveness of the hedging relationships and the amounts reclassified from
hedging reserve to profit or loss:
(C$ in millions)
Foreign currency risk
Interest rate risk
(C$ in millions)
Foreign currency risk
Interest rate risk
Current period
hedging gains
(losses)
recognized in OCI
$
$
(41.4) $
(62.6) $
Amounts reclassified to profit or loss
2020
Due to hedged
item affecting
profit or loss
Line item in profit or
loss affected by the
reclassification
(1.5)
5.3
Other expense
(income)
Net finance costs
Amounts reclassified to profit or loss
2019
Current period
hedging gains
(losses) recognized
in OCI
Due to hedged item
affecting profit or
loss
Line item in profit or
loss affected by the
reclassification
$
$
(73.7) $
(29.8) $
(1.8)
2.6
Other (income)
Net finance costs
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 127 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table shows a reconciliation of cash flow hedges, net of tax, in relation to hedge accounting:
(C$ in millions)
Balance, beginning of year
Changes in fair value:
Foreign currency risk
Hedging instruments entered into for cash flow hedges subject to basis
adjustment
Hedging instruments entered into for cash flow hedges not subject to basis
adjustment
Interest rate risk
Hedging instruments entered into for cash flow hedges not subject to basis
adjustment
Deferred cost of hedging not subject to basis adjustment – time value of an
option in relation to time-period related hedged items
Amount reclassified to profit or loss:
Foreign currency risk
Interest rate risk
Amount reclassified to non-financial assets:
Foreign currency risk
Tax on movements on reserves during the year
Attributable to non-controlling interests
Balance, end of year
34. Guarantees and Commitments
$
2020
(28.3) $
2019
92.0
(40.5)
(0.9)
(46.3)
(16.3)
(1.5)
5.3
(40.4)
37.1
8.7
$
(123.1) $
(72.0)
(1.7)
(4.4)
(25.4)
(1.8)
2.6
(67.6)
45.5
4.5
(28.3)
Guarantees
In the normal course of business, the Company enters into numerous agreements that may contain features that
meet the definition of a guarantee. A guarantee is defined to be a contract (including an indemnity) that
contingently requires the Company to make payments to the guaranteed party based on (i) changes in an
underlying interest rate, foreign exchange rate, equity or commodity instrument, index or other variable that is
related to an asset, a liability or an equity security of the counterparty; (ii) failure of another party to perform under
an obligating agreement; or (iii) failure of a third party to pay its indebtedness when due.
The Company has provided the following significant guarantees and other commitments to third parties:
Standby Letters of Credit
Franchise Trust, a legal entity sponsored by a third-party bank, originates loans to certain Dealers for their
purchase of Canadian Tire store inventory and fixed assets. While Franchise Trust is consolidated as part of
these financial statements, the Company has arranged for several major Canadian banks to provide standby LCs
to Franchise Trust to support the credit quality of the Dealer loan portfolio. Franchise Trust may also draw against
the LCs to cover any shortfalls in certain related fees owing to it. In any case where a draw is made against an
LC, the Company has agreed to reimburse the bank issuing such standby LC for the amount so drawn. The
Company has not recorded any liability for these amounts due to the credit quality of the Dealer loans and to the
nature of the underlying collateral represented by the inventory and fixed assets of the borrowing Dealers. In the
unlikely event that all of the LCs have been fully drawn simultaneously, the maximum payment by the Company
under this reimbursement obligation would have been $71.9 million at January 2, 2021 (2019 – $115.4 million).
The Company has obtained documentary and standby letters of credit aggregating $28.7 million (2019 – $42.2
million) relating to the importation of merchandise inventories and to facilitate various real estate activities.
128 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Business and Property Dispositions
In connection with agreements for the sale of all or part of a business or property and in addition to
indemnifications relating to failure to perform covenants and breach of representations and warranties, the
Company has agreed to indemnify the purchasers against claims from its past conduct, including environmental
remediation. Typically, the term and amount of such indemnification will be determined by the parties in the
agreements. The nature of these indemnification agreements prevents the Company from estimating the
maximum potential liability it would be required to pay to counterparties. Historically, the Company has not made
any significant indemnification payments under such agreements and no amount has been accrued in the
consolidated financial statements with respect to these indemnification agreements.
Lease Agreements Guarantees
The Company has guaranteed leases on certain franchise stores in the event the franchisees are unable to meet
their remaining lease commitments. These lease agreements have expiration dates through November 2023.
The maximum amount that the Company may be required to pay under these agreements was $1.8 million (2019
– $2.5 million). In addition, the Company could be required to make payments for percentage rents, realty taxes
and common area costs. No amount has been accrued in the consolidated financial statements with respect to
these lease agreements.
Third-Party Financial Guarantees
The Company has guaranteed the debts of certain Dealers. These third-party financial guarantees require the
Company to make payments if the Dealer fails to make scheduled debt payments. The majority of these third-
party financial guarantees have expiration dates extending up to and including January 2023. Under these
financial guarantees, $11.0 million (2019 – $11.5 million) was issued as at January 2, 2021.
The Company has entered into agreements to buy back franchise-owned merchandise inventory should the
banks foreclose on any of the applicable franchisees. The terms of the guarantees range from less than a year to
the lifetime of the particular underlying franchise agreement. The Company’s maximum exposure as at
January 2, 2021, was $30.7 million (2019 – $52.4 million).
No amount has been accrued in the consolidated financial statements with respect to these guarantees and buy-
back agreements.
Indemnification of Lenders and Agents Under Credit Facilities
In the ordinary course of business, the Company has agreed to indemnify its lenders under various credit facilities
against costs or losses resulting from changes in laws and regulations that would increase the lenders’ costs and
from any legal action brought against the lenders related to the use of the loan proceeds. These indemnifications
generally extend for the term of the credit facilities and do not provide any limit on the maximum potential liability.
Historically, the Company has not made any significant indemnification payments under such agreements and no
amount has been accrued in the consolidated financial statements with respect to these indemnification
agreements.
Other Indemnification Agreements
In the ordinary course of business, the Company provides other additional indemnification agreements to
counterparties in transactions such as leasing transactions, service arrangements, investment banking
agreements, securitization agreements, indemnification of trustees under indentures for outstanding public debt,
director and officer indemnification agreements, escrow agreements, price escalation clauses, sales of assets
(other than dispositions of businesses discussed above) and the arrangements with Franchise Trust discussed
above. These additional indemnification agreements require the Company to compensate the counterparties for
certain amounts and costs incurred, including costs resulting from changes in laws and regulations (including tax
legislation) or as a result of litigation claims or statutory sanctions that may be suffered by a counterparty as a
consequence of the transaction.
The terms of these additional indemnification agreements vary based on the contract and do not provide any limit
on the maximum potential liability. Historically, the Company has not made any significant payments under such
additional indemnifications and no amount has been accrued in the consolidated financial statements with respect
to these additional indemnification commitments.
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 129 of 134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s exposure to credit risks related to the above-noted guarantees are disclosed in Note 5.
Capital Commitments
As at January 2, 2021, the Company had capital commitments for the acquisition of property and equipment,
investment property and intangible assets for an aggregate cost of approximately $263.9 million (2019 – $201.5
million).
35. Related Parties
The Company’s majority shareholder is Martha Billes, who beneficially owns, or controls or directs approximately
61.4 percent of the Common Shares of the Company through two privately held companies, Tire ‘N’ Me Pty. Ltd.
and Albikin Management Inc.
Transactions with members of the Company’s Board of Directors who were also Dealers represented less than
one percent of the Company’s total revenue and were in accordance with established Company policy applicable
to all Dealers. Other transactions with related parties, as defined by IFRS, were not significant during the year.
The following outlines the compensation of the Company’s Board of Directors and key Management personnel
(the Company’s Chief Executive Officer, Chief Financial Officer and certain other Senior Officers):
(C$ in millions)
Salaries and short-term employee benefits
Share-based payments and other
$
$
2020
14.4 $
31.0
45.4 $
2019
16.1
13.3
29.4
130 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
2020 Quarterly Information
(C$ in millions, except where noted)
(Store numbers are cumulative at end of
period)
Retail segment1
Revenue
First Quarter Second Quarter
Third Quarter Fourth Quarter
(December 29,
2019 to March
28, 2020)
(March 29,
2020 to June
27, 2020)
(June 28, 2020
to September
26, 2020)
(September 27,
2020 to January
2, 2021)
Total
$
2,503.2
$
2,849.8
$
3,684.8
$
4,582.2
$
13,620.0
(Loss) Income before income taxes
(99.6)
(66.2)
326.2
577.9
738.3
CT REIT segment
Revenue
Income before income taxes
Financial Services segment
Revenue
Income before income taxes
Total
Revenue
Cost of producing revenue
Other (income) expense
Selling, general and administrative expenses
Net finance costs
Income tax (recovery) expenses
Net income
Net (loss) income attributable to shareholders
of Canadian Tire Corporation
Net income attributable to non-controlling
interests
Basic EPS2
Diluted EPS2
Canadian Tire
Retail sales growth 1, 3
Comparable sales growth4
Number of Canadian Tire stores
Number of Other Canadian Tire stores5
SportChek
Retail sales growth 1, 6
Comparable sales growth4
Number of SportChek stores
Canadian Tire Petroleum
Number of gas bars
Mark’s
Retail sales growth 1, 7
Comparable sales growth4
Number of Mark’s stores
126.8
43.2
341.9
70.2
125.5
62.0
309.9
51.0
123.2
64.1
301.3
90.5
126.8
14.0
295.3
115.6
502.3
183.3
1,248.4
327.3
$
2,848.3
$
3,161.8
$
3,986.4
$
4,874.5
$
14,871.0
1,909.1
2,221.1
2,639.6
(8.6)
876.7
68.2
(9.3)
12.2
(13.3)
25.5
(0.22)
(0.22)
2.2 %
0.7 %
503
163
(13.1) %
(1.8) %
400
32.8
830.2
69.4
6.0
2.3
(20.0)
22.3
(0.33)
(0.33)
20.3 %
NM10
504
163
(24.9) %
NM10
398
5.6
838.8
60.1
116.0
326.3
296.3
30.0
4.87
4.84
25.7 %
25.1 %
504
163
(1.7) %
(1.4) %
397
3,024.6
18.9
1,053.6
58.8
196.8
521.8
488.8
33.0
8.04
7.97
17.1 %
12.8 %
504
163
0.5 %
(3.0) %
397
297
297
297
296
(15.3) %
(4.5) %
380
(36.4) %
NM10
380
4.9 %
5.7 %
381
11.9 %
7.6 %
381
9,794.4
48.7
3,599.3
256.5
309.5
862.6
751.8
110.8
12.35
12.31
17.6 %
NM10
(8.5) %
NM10
(5.5) %
NM10
Financial Services segment
Average number of accounts with a balance8
(thousands)
Average account balance8 ($)
Gross average accounts receivable (millions)9
2,110
3,015
6,363.3
2,013
2,961
5,962.3
2,045
2,871
5,874.6
2,074
2,813
5,833.9
2,060
2,915
6,008.6
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 131 of 134
2020 Quarterly Information
(C$ in millions, except where noted)
Class A Non-Voting Shares
High
Low
Close
Volume (thousands of shares)
Common Shares
High
Low
Close
Volume (thousands of shares)
First Quarter Second Quarter
Third Quarter Fourth Quarter
(December 29,
2019 to March
28, 2020)
(March 29,
2020 to June
27, 2020)
(June 28, 2020
to September
26, 2020)
(September 27,
2020 to January
2, 2021)
$
153.90 $
128.57 $
139.69 $
170.39 $
67.15
86.11
27,329
80.30
116.39
35,652
114.67
134.34
19,845
132.50
167.33
18,235
$
199.25 $
239.99 $
225.00 $
217.99 $
140.00
185.00
36
180.00
224.97
60
200.01
216.66
23
195.26
208.00
32
Total
170.39
67.15
167.33
101,061
239.99
140.00
208.00
151
1 The fourth quarter and full year 2020 results of retail operations include 14 weeks and 53 weeks ended Jan 2, 2021 respectively. Unless otherwise indicated, all
comparisons of results for Q4 2020 (14 weeks ended January 2, 2021) are compared against Q4 2019 (13 weeks ended December 28, 2019) and all
comparisons of results for the full year 2020 (53 weeks ended January 2, 2021) are compared against results for full year 2019 (52 weeks ended December 28,
2019).
2 Basic EPS is calculated by dividing the net income attributable to shareholders of Canadian Tire Corporation by the weighted average number of Common and
Class A Non-Voting shares outstanding during the reporting period. Diluted EPS is calculated by dividing the net income attributable to shareholders of
Canadian Tire Corporation by the weighted average number of shares outstanding adjusted for the effects of all dilutive potential equity instruments, which
comprise employee stock options.
3 Retail sales growth includes sales from Canadian Tire, PartSource, PHL, Party City and the labour portion of Canadian Tire’s auto service sales.
4 Comparable sales growth excludes Petroleum. Canadian Tire banner includes PartSource, PHL and Party City. Comparable sales growth has been calculated
by aligning the 2019 fiscal calendar to match the 2020 fiscal calendar (i.e., sales from the last week in 2020 are not included in the calculation for comparable
purposes), and, includes the impact of temporary store closures in the fourth quarter of 2020. Refer to section 9.3.1 in the MD&A for additional information on
comparable sales growth.
5 Other Canadian Tire banners include PartSource, PHL and Party City.
6 Retail sales include sales from both corporate and franchise stores.
7 Retail sales growth includes retail sales from Mark’s corporate and franchise stores, but excludes ancillary revenue relating to alteration and embroidery
services.
8 Credit card portfolio only.
9 Total portfolio of loans receivable.
10 Not meaningful.
132 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
2019 Quarterly Information
(C$ in millions, except where noted)
(Store numbers are cumulative at end of
period)
Retail segment
Revenue
First Quarter Second Quarter
Third Quarter
Fourth Quarter
(December 30,
2018 to March
30, 2019)
(March 31,
2019 to June
29, 2019)
(June 30, 2019
to September
28, 2019)
(September 29,
2019 to December
28, 2019)
Total
$
2,564.0
$
3,360.3
$
3,296.3
$
3,989.2
$
13,209.8
(Loss) Income before income taxes
(13.5)
139.1
170.6
351.6
647.8
CT REIT segment
Revenue
Income before income taxes
Financial Services segment
Revenue
Income before income taxes
Total
Revenue
Cost of producing revenue
Other (income) expense
Selling, general and administrative expenses
Net finance costs
Income taxes
Net income
Net income attributable to shareholders of
Canadian Tire Corporation
Net income attributable to non-controlling
interests
Basic EPS1
Diluted EPS1
Canadian Tire
Retail sales growth2
Comparable sales growth3
Number of Canadian Tire stores
Number of Other Canadian Tire stores4
SportChek
Retail sales growth5
Comparable sales growth3
Number of SportChek stores
Canadian Tire Petroleum
Number of gas bars
Mark’s
Retail sales growth6
Comparable sales growth3
Number of Mark’s stores
Financial Services segment
Average number of accounts with a balance7
(thousands)
Average account balance7 ($)
Gross average accounts receivable
(millions)8
121.6
71.4
328.8
112.4
122.0
78.8
329.3
95.5
121.7
80.1
343.0
108.9
123.7
76.9
333.0
109.5
489.0
307.2
1,334.1
426.3
$
2,894.4
$
3,686.6
$
3,636.7
$
4,316.7
$
14,534.4
1,896.1
2,542.7
2,408.1
2,813.7
(5.0)
812.9
67.0
26.0
97.4
69.7
27.7
1.12
1.12
7.4 %
7.1 %
503
104
2.8 %
3.4 %
404
(28.3)
848.6
62.3
57.5
203.8
177.4
26.4
2.87
2.87
2.1 %
1.9 %
504
102
3.0 %
3.7 %
402
17.9
832.3
71.5
79.2
227.7
197.2
30.5
3.20
3.20
2.7 %
2.4 %
504
101
3.8 %
4.6 %
403
297
295
296
5.5 %
4.9 %
385
2.7 %
2.6 %
380
0.9 %
1.2 %
381
2.0
943.7
66.0
125.4
365.9
334.1
31.8
5.42
5.42
6.6 %
4.8 %
504
163
1.3 %
2.0 %
402
297
1.5 %
1.8 %
380
9,660.6
(13.4)
3,437.5
266.8
288.1
894.8
778.4
116.4
12.60
12.58
4.5 %
3.8 %
2.6 %
3.3 %
2.4 %
2.5 %
2,082
2,930
2,093
2,955
2,126
2,973
2,148
2,978
2,112
2,959
6,104.6
6,187.3
6,324.0
6,398.3
6,253.5
CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS 133 of 134
2019 Quarterly Information
(C$ in millions, except where noted)
Class A Non-Voting Shares
High
Low
Close
Volume (thousands of shares)
Common Shares
High
Low
Close
Volume (thousands of shares)
First Quarter Second Quarter
Third Quarter
Fourth Quarter
(December 30,
2018 to March
30, 2019)
(March 31,
2019 to June
29, 2019)
(June 30, 2019
to September
28, 2019)
(September 29,
2019 to December
28, 2019)
$
153.63 $
154.69 $
149.64 $
157.36 $
137.00
143.99
16,527
133.56
142.68
14,114
131.31
148.03
13,159
$
243.89 $
233.32 $
231.83 $
211.10
233.32
17
215.00
228.00
17
205.65
209.00
13
139.73
140.63
16,774
214.00 $
175.20
175.30
37
Total
157.36
131.31
140.63
60,574
243.89
175.20
175.30
84
1 Basic EPS is calculated by dividing the net income attributable to shareholders of Canadian Tire Corporation by the weighted average number of Common and
Class A Non-Voting shares outstanding during the reporting period. Diluted EPS is calculated by dividing the net income attributable to shareholders of
Canadian Tire Corporation by the weighted average number of shares outstanding adjusted for the effects of all dilutive potential equity instruments, which
comprise employee stock options.
2 Retail sales growth includes sales from Canadian Tire, PartSource, PHL, Party City and the labour portion of Canadian Tire’s auto service sales.
3 Comparable sales growth excludes Petroleum. Refer to section 9.3.1 in the MD&A for additional information on comparable sales growth.
4 Other Canadian Tire banners include PartSource, PHL and Party City.
5 Retail sales growth includes sales from both corporate and franchise stores.
6 Retail sales growth includes retail sales from Mark’s corporate and franchise stores, but excludes ancillary revenue relating to alteration and embroidery
services.
7 Credit card portfolio only.
8 Total portfolio of loans receivable.
134 of 134 CANADIAN TIRE CORPORATION 2020 REPORT TO SHAREHOLDERS
CONTACT
HEAD OFFICE
Canadian Tire Corporation, Limited
2180 Yonge Street
P.O. Box 770, Station K
Toronto, Ontario M4P 2V8
Canada
Telephone: 416-480-3000
Fax: 416-544-7715
Website: http://corp.canadiantire.ca
SHAREHOLD ER CONTACT
Lisa Greatrix
Senior Vice-President,
Finance & Investor Relations
lisa.greatrix@cantire.com
Investor Relations:
investor.relations@cantire.com
MEDIA CONTACT
Jane Shaw
Vice-President, Communications
jane.shaw@cantire.com
Media Inquiries:
mediainquiries@cantire.com
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Canada
Toll-free (Canada and U.S.): 1-877-982-8768
Telephone (Global): 514-982-7122
Fax (Canada and U.S.): 1-866-249-7775
Fax (Global): 416-263-9524
Email: service@computershare.com
i