Canadian Tire Corporation Annual Report 2013 Canadian Tire CANADIAN TIRE CORPORATION ANNUAL REPORT 2013 REV_CTC_AR_2013_V4.indd 3 14-03-20 10:18 PM Canadian Tire Corporation, Limited is a family of companies that includes a retail segment, a financial services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal categories. PartSource and Gas+ are key parts of the Canadian Tire network. The retail segment also includes Mark’s, a leading source for casual and industrial wear, and FGL Sports (Sport Chek, Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere), which offers the best active wear brands. For more information, including video messages from Canadian Tire Corporation’s executive management team, please visit our Year in Review website at 2013.CanadianTireCorporation.ca Table of Contents Message from the Chairman 2 Message from the CEO 3 Message from the President 4 Board of Directors 4 Executive Leadership Team 4 Message from the CFO 5 Management’s Discussion and Analysis 6 Consolidated Financial Statements 60 REV_CTC_AR_2013_V4.indd 4 14-03-21 5:00 PM 2013 Highlights at a Glance We are one of the most trusted companies in Canada because we have always delivered what our customers need for the jobs and joys of life in Canada, thanks to the loyalty and dedication of the 85,000 employees of our growing family of businesses. Strong performance across our retail banners including Canadian Tire, FGL Sports and Mark’s along with our Financial Services division led to record financial results and an all-time high Class A share price which surpassed $100. Our innovative brand and marketing initiatives including our partnership with the Canadian Olympic Committee sparked unprecedented business momentum and engagement with our customers and employees. Signed a landmark, 11-year contract with our Canadian Tire Dealers. A testament to the dedication of our local store owners and the strength of our relationship, the new agreement ensures that we are focused on serving our customers, giving back to our communities and growing our Company. Surfaced significant value for our shareholders through the creation of CT Real Estate Investment Trust (CT REIT), one of the most successful initial public offerings for a Canadian REIT in recent years. This important development also allowed our Company to retain control over our valuable real estate portfolio, one of our heritage assets. Strengthened executive leadership to better position the Company for long-term growth. Canadian Tire Jumpstart Charities helped 155,000 children across Canada participate in sport and recreational programs in 2013, bringing the total number of children supported to nearly 700,000 since 2005. 2013.CANADIANTIRECORPORATION.CA CANADIAN TIRE CORPORATION ANNUAL REPORT 2013 1 REV_CTC_AR_2013_V4.indd 5 14-03-20 10:18 PM Message from the Chairman Maureen J. Sabia The Canadian Tire brand is our greatest asset. We believe the strength of our brand is inextricably linked to our future strength as a company. During the past year we have been more in the rewards of so doing more equitably. We many fronts and that our shareholders have focused than ever before on our brand, made significant investments in technology been well served. I also want to express my enhancing it, protecting it, evolving it. And leadership and witnessed the very positive gratitude to my colleagues on the Board of with that has come a heightened awareness results thereof. The level of innovation in Directors for their hard work and wise counsel of the need to follow in the footsteps of our our brand and marketing initiatives reached during the year. The dynamic that we have founders and become even more innovative. new heights, and we received numerous established together is a source of great And to reap the rewards of innovation and industry awards including Marketer of the satisfaction to me. Moreover, I believe that, sustain our high performance, increased Year and Retailer of the Year. In addition, as a Board, we have established an excellent productivity had to become a priority. But, our long-term sponsorship of the Olympics working relationship with management, based very importantly, a different emphasis on became a reality, with superb and innovative on open and candid communication and shareholder value was needed in order implementation. constructive challenge. to permit us to pursue the growth of the Innovation, productivity, growth and high Frank Potter will not stand for re-election Company, thereby ensuring a growing, performance – these are some of the to the Board at our AGM. He has given dynamic enterprise, capable of high components of our brand. We will pursue the Company and the Board 15 years of performance and sustainable rewards for these relentlessly in 2014. And we will hard work and has contributed much. With our loyal shareholders. continue in our efforts to return value to our the approval of the shareholders, we will So focused are we on brand, that we have shareholders. welcome Dr. Ronald Goldsberry to our Board. formed a Committee of the Board dedicated Dr. Goldsberry is an experienced director, For some years now, we have been putting to overseeing the growth and the strength who has had a distinguished domestic and in place the building blocks for future growth of our brand. While social responsibility international career at Ford Motor Company. and sustainable performance. is a significant component of brand, the Dr. Goldsberry brings to us his experience in reconstitution of the Social Responsibility Those building blocks are made up of a the automotive sector, his strategic skills and Committee into the Brand and Values number of different initiatives. The investment a creative approach to the transformation Committee allows broader oversight of all we have made in leading-edge technology taking place in automotive service. brand attributes. It also permits a Committee initiatives includes our innovation centre I believe that our accomplishments during of the Board to do the detailed work in Waterloo, our cloud computing centre in the year, unlocking shareholder value and necessary to keep the Board informed on Winnipeg, our mobile wallet project and our returning it to you, together with our high issues related to brand. initial success in digital retailing. We have performance and our initiatives in innovation, also made significant investments (and will In many ways, we are proving the wisdom of have resulted in a year of accomplishment continue to do so) in productivity initiatives, having a brand focus. The past year has been of which you and we should be proud. No streamlined the organizational structure and an exceptional one, even in the face of one one who has seen us in the media and made a number of bold strategic marketing of the most competitive years in Canadian in our communities during the past year moves across each of our brands. We have retailing history, and I want to express the can doubt the power of the Canadian Tire also focused on unlocking value for our pride that my colleagues on the Board brand. At Canadian Tire, all of us, the Board, shareholders with the successful creation of of Directors and I take in the remarkable management, our Associate Dealers and CT REIT, our share buyback program and our accomplishments of the past year. our thousands of employees proudly play dividend policy. All of the above, along with for Canada. I will mention but a few of them. During the our emphasis on enhancing the power of the year we experienced stellar performance triangle, suggests a vital, dynamic company Sincerely, across all our businesses. We negotiated a building for the future. new Dealer contract, building on the strength I would be remiss if I did not use this of the relationship the Corporation has with opportunity to thank our Executives for the its Associate Dealers, enabling both parties very high performance standards they set Maureen J. Sabia to more quickly and more efficiently serve our and met in 2013. I think you will agree that Chairman of the Board customers better and enabling both to share the past year has been a rewarding one on 2 CANADIAN TIRE CORPORATION ANNUAL REpoRT 2013 Message from the CEO Stephen G. Wetmore Canadian Tire Corporation (CTC) has become a very different organization. We have made great progress on our FGL Sports completed its acquisition of Pro ensures that we are focused on serving our journey to become a brand-led organization. Hockey Life and grew its core banner, Sport customers, giving back to our communities We are putting our brand at the heart of Chek, which delivered exceptional results and growing the Company. everything we do and this is contributing to and, in early 2014, opened its West Edmonton We are proud of our Company and our significant momentum and record results for Mall flagship store – likely the most digitally accomplishments and we thank our our Company. advanced, interactive and personalized retail customers for continuing to count on us for experience in the world. Along with our continued focus on the CTC the products and services they need for brand, 2013 was characterized by our Mark’s also had a very successful year with everyday life in Canada. performance in key heritage categories such a focus on a younger, more urban customer. Over the past several years we put in place an as Sports and Automotive, the creation of CT The rebranding of the banner to “Mark’s” excellent management team that will continue Real Estate Investment Trust, a new long-term and its focus on menswear essentials are to drive strong results into 2014 and beyond.