CANADIAN TIRE ANNUAL REPORT 2005 ANNUAL TIRE CANADIAN CANADIAN TIRE ANNUAL REPORT 2005 BM35408_CTC_Cover 3/27/06 11:45 PM Page 1 BM35408_CTC_Cover 3/27/06 11:45 PM Page 2 Financial Highlights ($ in millions except for per share amounts) 2005 2004 % Change Consolidated Gross operating revenue $ 7,774.6 $ 7,153.6 8.7% Earnings before income taxes and minority interest 527.7 460.9 14.5% Income taxes 190.0 162.5 16.9% Net earnings 330.1 291.5 13.3% Cash generated from operations 721.2 630.4 14.4% Cash generated from operating activities 438.1 413.1 6.1% Dividends 45.7 38.5 19.0% Per share Basic earnings $ 4.04 $ 3.60 12.2% Diluted earnings 3.98 3.53 12.7% Cash generated from operations 8.82 7.78 13.3% Cash generated from operating activities 5.36 5.10 5.1% Dividends declared 0.58 0.50 16.0% Shareholders’ equity 30.83 27.75 11.1% Number of shares outstanding – weighted average 81,764,082 80,983,467 Ratios1 Current ratio 1.6 1.6 Canadian Tire stores MMark’s Work Wearhouse stores Canadian Tire Retail inventory turnover 9.6 9.7 Car washes Long-term debt to total capitalization 31.7% 28.9% WWork World stores Interest coverage 7.3 6.9 Gas bars Q stores Return on equity 13.9% 13.7% PartSourceP stores Strategic Plan key metrics1 2001–2005 Performance2 2005 Performance 2005–2009 Aspirational Targets Canadian Tire Retail comparable store sales3 2.6% 3.0% 3%–4% per annum Canadian Tire Network at a Glance Gross operating revenue4 8.3% 8.7% 7%–9% compound annual growth EBITDA5 and minority interest4 11.7% 12.2% 10%–15% compound annual growth As at December 31, 2005 Basic earnings per share4 16.9% 12.2% 12% to 15% compound annual growth Canadian Tire Car Gas PartSource Mark’s Work World After-tax return on invested capital3 8.7% 9.7% 10% after tax Province Stores Washes Bars Stores stores Stores Q Stores Total Alberta 43 3 20 12 57 5 – 140 1 Formulae for certain ratios and metrics can be found in the glossary of this Annual Report on page 113. British Columbia 52 1 8 – 53 4 – 118 2 Performance from the beginning of fiscal 2001 to the end of fiscal 2005. Manitoba 15 16413––39 3 For 2001 to 2005 Performance, results are an average of 2005, 2004, 2003, 2002 and 2001 percentages. New Brunswick 17 1 13 – 11 – – 42 4 Plan goals and performance for these metrics are expressed in terms of a compound annual growth rate (CAGR). 5 Earnings before interest, income taxes, depreciation and amortization. See section 12 on non-GAAP measures in Management’s Discussion and Analysis section of this Annual Report. Newfoundland 12 2 10 – 6 – – 30 Northwest Territories 1 – – – 1 – – 2 M O Nova Scotia 20 – 6 – 14 – – 40 C . S Ontario 195 46 132 35* 118 1 2 529 L L Table of Contents I Prince Edward Island 2 – – –2––4 M N A Quebec 92 11 59 – 37 – – 199 Y 2 Corporate Profile 20 What makes us unique 104 Ten-Year Financial Review R B . Saskatchewan 12 2 5 6 11 – – 36 4 2005 Performance Scorecard 32 Message from the 106 Corporate Reporting and W W Yukon 1–––1––2 8 Message from the Chief Financial Officer Governance Information at a Glance W P Chairman of the Board 33 CEO/CFO Certification 107 Corporate Responsibility U Total 462 67 259 57* 324 10 2 1,181 O R 10 Executive Team 34 Management’s Discussion 110 Directors G S and Analysis L * Includes three acquired stores that will be re-branded to the PartSource banner in 2006. 11 Message from the 111 Officers L I Chief Executive Officer 81 Consolidated Financial Statements and Notes M 112 Shareholder and N A 13 2001–2005 Report Card 102 2005 Quarterly Information Corporate Information Y R B 14 2005–2009 Strategic Plan Information 103 2004 Quarterly Information 113 Glossary of Terms : N G I S E D CANADIAN TIRE 2005 ANNUAL REPORT 1 AL REPORT ANNU 2005 anking r TIRE CANADIAN Index y ered cumulative TRS of 286%, ered cumulative us in the top quartile of retailers in Canada and the United States. Since December 29, 2000,Tire Canadian has deliv 400 ) 350 1 274% 300 250 % 2005) 200 TRS – consists of share price appreciation plus dividends. 150 26% 100 ersus the S&P/TSX Composite Index and Canadian Consumer Discretionar to shareholders – n 14% 50 otal retur J J A J J O A M M J A O F D F J J M A S F N D J F A N D N D M S M A J J O N J S S A N D M O J J J A S O M A M J F M A M T u u u u u u u a u a a a u u a 2000 to December 31, 2005 total return to shareholders (TRS e e e e e u u u u u p p p p p e e e e e c c e e o o e o e c o c o e c 24.7 a a a a a a a a a a n l n l l n l n n n n n n l n b b b b b g g g g g p p p p p t y y t r y y r t r t r y t r v v v v v c c c c c y y y y y r r r r r e e e e e 1 t t t t t 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 5 3 3 4 5 2 2 1 1 2 4 5 3 1 4 5 3 2 1 4 5 3 2 1 4 3 1 5 2 1 5 3 4 2 3 1 4 5 2 4 1 5 3 2 4 5 3 2 1 4 5 3 2 1 2 1 4 5 3 CTR.NV S&P/TSX Composite Index Stock price appreciation v Five Year Class A Non-Voting Shares (CTR.NV) A Non-Voting Class Year Five Canadian Tire’s unique business platform,Tire’s Canadian position and deep-rooted customer relationships provide market the basis for sustainable long-term most recognized and trusted earnings growth. one of Canada’s have We brands. meet customers’ We needs through three retail banners, a vibrant financial services business and retailer. independent gasoline largest through Canada’s in of significant opportunities for growth taking advantage our customer relationships by are leveraging We of businesses. synergies within our inter-related network leveraging each of our businesses and by (December 29, S&P/TSX Canadian Consumer Discretionary Index BM35408_CTC_1to32sedar 3/27/06 11:51 PM Page 1 BM35408_CTC_1to32sedar 3/27/06 11:51 PM Page 2 Canadian Tire Corporation, Limited is an inter-related network of businesses engaged in retail, petroleum and financial services, with more than 1,100 stores, gas bars and car washes. Uniquely Positioned for Growth Canadian Tire Retail: Positioned for growth Canadian Tire Retail (CTR), Canada’s most-shopped general merchandise retailer with 462 stores, offers a large selection of national and private label brands through three product divisions: Automotive Parts, Accessories and Service; Sports and Leisure Products; and Home Products. As of March 2006, we have approximately 15,500 products posted on www.canadiantire.ca, our online web store. CTR’s store renewal program gives customers an inspiring place to shop for innovative products sourced worldwide. Canadian Tire Retail also operates 57 PartSource stores, including three recently acquired stores that will be re- branded to the PartSource brand in 2006, offering automotive parts and professional advice to commercial installers, serious “do-it-yourselfers” and automotive enthusiasts. Mark’s Work Wearhouse: Creating a Superbrand Mark’s Work Wearhouse (Mark’s) is one of the largest specialty retailers in Canada, offering men’s and women’s clothing, footwear and accessories for business casual and industrial work environments, as well as for recreational use or leisure. Mark’s Work Wearhouse now operates 334 stores across Canada, including 37 under the L’Équipeur brand in Quebec. Mark’s “Clothes That Work” marketing philosophy reinforces the quality and depth of their product offering and provides an exceptional opportunity to increase our market penetration. Canadian Tire Retail 2005 Mark’s Work Wearhouse 2005 % change versus 2004 % change versus 2004 Retail sales 5.1% Retail sales 20.3% Same store sales 3.4% Same store sales 17.4% Comparable store sales 3.0% Gross operating revenue 21.7% Net shipments 4.2% Earnings before income taxes 75.2% Gross operating revenue 4.3% Earnings before income taxes and minority interest 6.8% 2 CANADIAN TIRE 2005 ANNUAL REPORT BM35408_CTC_1to32sedar 3/27/06 11:51 PM Page 3 Our customer offering is unparalleled in terms of locations, products and services. Our unique businesses reach customers daily through innovative product and service offerings, and we build customer loyalty through Canada’s most successful loyalty program, Canadian Tire ‘Money’.