Sears Canada Posts Fourth Quarter Operating EBITDA Increase of 20%
Company Reports Fourth Quarter Earnings and Full-Year Results
TORONTO, Feb. 23 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its unaudited fourth quarter and full-year results. Total revenues for the 13-week period ended January 30, 2010 were $1.525 billion versus $1.616 billion for the comparable 13-week period ended January 31, 2009, a decrease of 5.6%. Same store sales decreased 1.7%. Operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the same 13-week period was $222.9 million versus $185.2 million last year, an increase of 20.4%. Operating EBITDA and operating net earnings are non-GAAP measures; please refer to the "Reconciliation of Net Earnings to Operating EBITDA" table attached. Net earnings, excluding non-operating activities, (Operating net earnings) increased 28.1% to $126.9 million or $1.18 per share in the fourth quarter of 2009 versus $99.1 million or 92 cents per share in the fourth quarter of 2008. Net earnings, including non-operating activities, for the same quarter increased 29.4% to $128.2 million or $1.19 per share versus $99.1 million or 92 cents per share last year.
Total revenues for the 52-week period ended January 30, 2010 were $5.201 billion versus $5.733 billion for the 52-week period ended January 31, 2009, a decrease of 9.3%. Same store sales decreased 6.8%. Operating EBITDA for the same 52-week period was $497.6 million versus $520.1 million, a decrease of 4.3%. Net earnings, excluding non-operating activities, (Operating net earnings) for the full year were $239.9 million or $2.23 per share for the year versus $261.3 million or $2.43 per share for the prior year. Last year's non-operating activities gain of $29.4 million, net of taxes, was primarily related to the sale of a property in Calgary, Alberta in the first quarter. Net earnings, including non-operating activities, for the full year were $234.7 million or $2.18 per share versus $290.7 million or $2.70 per share last year.
Cash, restricted cash and investments increased by $426 million in 2009 to a total of $1.398 billion as at January 30, 2010. Total debt is $350.7 million as at January 30, 2010 compared to $364.6 million at the end of the prior year.
Commenting on the quarter and full year performance, Dene Rogers, President and Chief Executive Officer, Sears Canada Inc., said, "With the economic recession and low consumer confidence prevalent throughout the year, 2009 was a challenging period for Canadian retailers. A cool, rainy summer and mild fall and winter in most parts of the country impacted sales, especially in highly seasonal categories. The Company managed both margins and expenses carefully. Most importantly, Sears continued to offer customers unprecedented value; the Sears "Boxing Day Prices" campaign was a competitive advantage, and we demonstrated exceptional value to customers in the important Holiday time frame."
"Once again, the credit for the progress we made in 2009 goes to our thousands of dedicated and hard working associates during a year which was particularly demanding," continued Mr. Rogers. "Their dedicated and energetic efforts in serving our customers, being responsive to the marketplace, and carefully managing margins and expenses are very much appreciated by all members of the senior management team and our Board of Directors. Sears is continuing to make progress in its quest to become Canada's No. 1 retailer."
This release contains information which is forward-looking and is subject to important risks and uncertainties. Forward-looking information concerns the Company's future financial performance, business strategy, plans, goals and objectives. Factors which could cause actual results to differ materially from current expectations include, but are not limited to: the ability of the Company to successfully implement its cost reduction, productivity improvement and strategic initiatives and whether such initiatives will yield the expected benefits; the results achieved pursuant to the Company's long-term marketing and servicing alliance with JPMorgan Chase Bank, N.A.; general economic conditions; competitive conditions in the businesses in which the Company participates; changes in consumer spending; seasonal weather patterns; customer preference toward product offerings; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in funding costs; fluctuations in foreign currency exchange rates; the possibility of negative investment returns in the Company's pension plan; the outcome of pending legal proceedings; and changes in laws, rules and regulations applicable to the Company. While the Company believes that its forecasts and assumptions are reasonable, results or events predicted in this forward-looking information may differ materially from actual results or events.
Sears Canada is a multi-channel retailer with a network of 197 corporate stores, 204 dealer stores, 35 home improvement showrooms, over 1,800 catalogue merchandise pick-up locations, 108 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The Company also publishes Canada's most extensive general merchandise catalogue and offers shopping online at www.sears.ca.
SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE (LOSS) INCOME
For the 13 and 52-week periods ended January 30, 2010 and January 31,
2009
Unaudited
Fourth Quarter Fiscal Year
---------------------- ----------------------
2008 2008
(in millions, except per (Restated (Restated
share amounts) 2009 (1)) 2009 (1))
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Total revenues $ 1,525.1 $ 1,616.3 $ 5,200.6 $ 5,733.2
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Cost of merchandise sold,
operating, administrative
and selling expenses 1,302.2 1,431.1 4,712.3 5,213.1
Depreciation and
amortization 30.3 31.4 117.4 126.9
Interest expense, net 7.2 4.5 25.2 10.0
Unusual items - (gain) (1.9) - (1.9) (38.8)
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Earnings before income
taxes 187.3 149.3 347.6 422.0
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Income taxes expense
(recovery)
Current 49.1 53.7 109.4 161.3
Future 10.0 (3.5) 3.5 (30.0)
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59.1 50.2 112.9 131.3
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Net earnings $ 128.2 $ 99.1 $ 234.7 $ 290.7
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Net earnings per share $ 1.19 $ 0.92 $ 2.18 $ 2.70
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Diluted net earnings per
share $ 1.19 $ 0.92 $ 2.18 $ 2.70
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Net earnings $ 128.2 $ 99.1 $ 234.7 $ 290.7
Other comprehensive income
(loss), net of taxes:
Mark-to-market adjustment
related to short-term
investments, net of
income taxes expense of
less than $0.1 and less
than $0.1 (2008: $0.1
and less than $0.1) 0.1 0.2 0.1 0.1
Gain (loss) on foreign
exchange derivatives
designated as cash flow
hedges, net of income
taxes expense of $0.2
and recovery of $14.6
(2008: expense of $3.7
and $35.4) 0.4 9.8 (31.7) 76.6
Reclassification to net
earnings of gain on
foreign exchange
derivatives designated
as cash flow hedges, net
of income taxes expense
of $1.8 and $13.3 (2008:
$3.5 and $3.8) (3.9) (7.6) (28.8) (8.3)
Loss on fuel derivatives
designated as cash flow
hedges, net of income
taxes recovery of less
than $0.1 and Nil (0.2) - - -
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Other comprehensive (loss)
income (3.6) 2.4 (60.4) 68.4
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Comprehensive income $ 124.6 $ 101.5 $ 174.3 $ 359.1
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(1) The fourth quarter and year-to-date 2008 have been restated as a
result of the retrospective application of the change in accounting
policy related to the adoption of Goodwill and Intangible Assets.
SEARS CANADA INC.
RECONCILIATION OF NET EARNINGS TO OPERATING EBITDA
Unaudited
Fourth Quarter(1) Year-to-Date(1)
(in millions, except per ----------------------------------------------
share amounts) 2009 2008 2009 2008
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Net earnings(2) $ 128.2 $ 99.1 $ 234.7 $ 290.7
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Non-operating activities,
net of taxes
Restructuring expense - - 6.5 -
Unusual items(3) (gain) (1.3) - (1.3) (29.4)
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Operating net
earnings(2),(4) $ 126.9 $ 99.1 $ 239.9 $ 261.3
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Depreciation and
amortization 30.3 31.4 117.4 126.9
Interest expense, net 7.2 4.5 25.2 10.0
Income taxes expense
excluding operating
adjustments(2) 58.5 50.2 115.1 121.9
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Operating EBITDA(4) $ 222.9 $ 185.2 $ 497.6 $ 520.1
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Net earnings per share $ 1.19 $ 0.92 $ 2.18 $ 2.70
Operating net earnings per
share $ 1.18 $ 0.92 $ 2.23 $ 2.43
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(1) The fourth quarter and year-to-date ("YTD") periods of 2009 and 2008
represent the 13 and 52-week periods ended January 30, 2010 and
January 31, 2009, respectively.
(2) Net earnings and income taxes expense for the fourth quarter and YTD
2008 have been restated as a result of the retrospective application
of the change in accounting policy related to the adoption of
Goodwill and Intangible Assets.
(3) Unusual items in 2009 represent the sale of a joint venture. Unusual
items in 2008 is primarily due to the sale of a real estate/joint
venture.
(4) Operating net earnings and Operating EBITDA are non-GAAP measures
which exclude non-operating gains and losses and are used by
management to better assess the Company's underlying performance.
SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
As at
As at January 31,
January 30, 2009
(in millions) 2010 (Restated(1))
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ASSETS
Current Assets
Cash and short-term investments $ 1,381.8 $ 819.8
Restricted cash and investments(2) 15.8 144.8
Accounts receivable 131.1 138.7
Income taxes recoverable 6.0 16.6
Inventories 852.3 968.3
Prepaid expenses and other assets(3) 74.7 147.9
Current portion of future income tax assets 29.7 8.7
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2,491.4 2,244.8
Capital assets 620.2 696.0
Deferred charges 179.2 185.2
Intangible assets 22.6 16.8
Goodwill 11.2 11.2
Future income tax assets 32.0 28.4
Other long-term assets(2) 48.2 54.9
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$ 3,404.8 $ 3,237.3
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LIABILITIES
Current Liabilities
Accounts payable $ 647.7 $ 640.9
Accrued liabilities 342.1 383.6
Income and other taxes payable 72.7 39.4
Principal payments on long-term obligations
due within one year 314.2 32.1
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1,376.7 1,096.0
Long-term obligations 36.5 332.5
Accrued benefit liabilities 167.7 158.5
Future income tax liabilities 4.3 4.1
Other long-term liabilities 162.1 163.0
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1,747.3 1,754.1
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SHAREHOLDERS' EQUITY
Capital stock 15.7 15.7
Retained earnings 1,633.8 1,399.1
Accumulated other comprehensive income 8.0 68.4
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1,657.5 1,483.2
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$ 3,404.8 $ 3,237.3
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(1) In fiscal 2009, Sears Canada Inc. ("The Company") adopted the
Canadian Institute of Chartered Accountants issued Handbook Section
3064, "Goodwill and Intangible Assets". The new standard is effective
for interim and annual financial statements issued for fiscal years
beginning on or after October 1, 2008 and provides further guidance
on the recognition and treatment of internally developed intangibles
and requires elimination of the practice of deferring costs that do
not meet the definition and recognition criteria of assets. The
fourth quarter and fiscal year of 2008 have been restated as a result
of the retrospective application of the change in accounting policy
related to the adoption of this section. The following table
summarizes the increase (decrease) to the 2008 comparative figures.
2008
------------------------
Fourth Fiscal
(increase (decrease) in millions) Quarter Year
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Prepaid expenses and other assets $ (34.6) $ (34.6)
Current portion of future income tax assets 8.4 8.4
Deferred charges (1.7) (1.7)
Future income tax assets 0.5 0.5
Future income tax liabilities (2.5) (2.5)
Net earnings 3.6 2.1
Opening retained earnings (28.5) (27.0)
Closing retained earnings (24.9) (24.9)
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(2) Cash and investments are considered to be restricted when it is
subject to contingent rights of a third party customer, vendor, or
government agency. As at January 30, 2010, the Company recorded
$15.8 million (2008: $144.8 million) of restricted cash and
investments recorded as current assets and Nil (2008: $6.9 million)
of restricted cash deposits recorded in other long-term assets. These
balances represent cash and investments pledged as collateral for
letter of credit obligations issued under the Company's offshore
merchandise purchasing program of $5.2 million (2008: $110.4 million)
the Canadian equivalent of U.S. $4.8 million (2008: U.S. $90.0
million), current and long-term cash deposits pledged as collateral
with counterparties related to outstanding derivative contracts of
$6.4 million (2008: $28.3 million) and Nil (2008: $6.9 million),
respectively, and funds held in trust in accordance with regulatory
requirements governing advance ticket sales related to Sears Travel
of $4.2 million (2008: $6.1 million).
(3) As at January 30, 2010, there were derivative contracts outstanding
with a notional value of U.S. $303.6 million (2008: U.S. $547.4
million) and a combined fair value of $9.9 million (2008: $91.0
million), included in prepaid expenses and other assets. These
derivative contracts have settlement dates extending to December
2010. These contracts are intended to reduce the foreign exchange
risk with respect to anticipated purchases of U.S. dollar denominated
goods and services, including goods purchased for resale ("hedged
item"). While the notional principal amounts of these outstanding
financial instruments are not recorded on the consolidated statements
of financial position, the fair value of the contracts is included on
the consolidated statements of financial position in one of the
following categories, depending on the derivative's maturity and
value: prepaid expenses and other assets, other long-term assets,
accrued liabilities or other long-term liabilities. Changes in fair
value of those contracts designated as hedges are included in other
comprehensive income for cash flow hedges to the extent the hedges
continue to be effective. Amounts previously included in other
comprehensive income are reclassified to net earnings in the same
period in which the hedged item impacts net earnings.
SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 13 and 52-week period ended January 30, 2010 and January 31, 2009
Unaudited
Fourth Quarter Fiscal Year
---------------------- ----------------------
2008 2008
(Restated (Restated
(in millions) 2009 (1)) 2009 (1))
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Cash flow generated from
(used for) operating
activities
Net earnings $ 128.2 $ 99.1 $ 234.7 $ 290.7
Non-cash items included
in net earnings,
principally depreciation,
pension expense, future
income taxes and gain on
sale of real estate and
real estate joint
ventures 40.5 40.2 135.4 90.9
Changes in non-cash
working capital balances
related to operations 139.4 57.3 135.7 (197.9)
Other, principally
pension contributions
and changes to long-term
assets and liabilities (2.6) (1.0) (9.7) (17.8)
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305.5 195.6 496.1 165.9
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Cash flow generated from
(used for) investing
activities
Purchases of capital and
intangible assets (20.6) (29.9) (65.7) (97.1)
Proceeds from sale of
capital assets and joint
venture 5.0 0.2 6.0 40.4
Changes in restricted cash
and investments (Current
and Long-term) 52.7 (145.8) 135.9 (146.5)
Acquisition, net of cash
acquired - - - (7.0)
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37.1 (175.5) 76.2 (210.2)
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Cash flow used for financing
activities
Repayment of long-term
obligations (6.0) (3.8) (10.3) (7.5)
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Increase (decrease) in cash
and short-term investments 336.6 16.3 562.0 (51.8)
Cash and short-term
investments at beginning
of period 1,045.2 803.5 819.8 871.6
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Cash and short-term
investments at end of
period $ 1,381.8 $ 819.8 $ 1,381.8 $ 819.8
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Cash at end of period $ 56.5 $ 66.4 $ 56.5 $ 66.4
Short-term investments at
end of period 1,325.3 753.4 1,325.3 753.4
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Total cash and short-term
investments at end of
period $ 1,381.8 $ 819.8 $ 1,381.8 $ 819.8
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(1) The fourth quarter and year-to-date 2008 have been restated as a
result of the retrospective application of the change in accounting
policy related to the adoption of Goodwill and Intangible Assets.
For further information: Media Relations Contact: Vincent Power, Sears Canada Inc., (416) 941-4422, [email protected]
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