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| Sears Canada Reports Fourth Quarter Earnings and Full-Year Results |
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| TORONTO, Feb. 25, 2009 (Canada NewsWire via COMTEX) -- Sears Canada Inc. (TSX: SCC) today announced its unaudited fourth quarter and full-year results. Total revenues for the 52-week period ended January 31, 2009 were $5.733 billion versus $5.845 billion for the comparable 52-week period ended February 2, 2008, a decrease of 1.9%. Same store sales decreased 1.6% compared to the same period last year. Operating EBITDA, before unusual items, was $517.0 million versus $521.6 million, a decrease of 0.9%. Net earnings, including unusual items, for the 52-week period ended January 31, 2009 decreased 5.1% to $288.6 million or $2.68 per share versus $304.2 million or $2.83 per share for the comparable period ended February 2, 2008.
Total revenues for the 13-week period ended January 31, 2009 were $1.616 billion versus $1.715 billion for the comparable 13-week period ended February 2, 2008, a decrease of 5.8%. Same store sales decreased by 6.2% compared to the comparable period last year. Operating EBITDA, before unusual items, was $179.9 million versus $218.7 million in the comparable period of last year, a decrease of 17.7%. Net earnings, including unusual items, for this period decreased 19.7% to $95.5 million or 89 cents per share versus $119.0 million or $1.11 per share for the comparable period last year. Cash, restricted cash and investments increased by $87.8 million in 2008 to a total of $964.6 million as at January 31, 2009. Cash flow generated from operations totalled $165.9 million in 2008. Commenting on the quarter and full year performance, Dene Rogers, President and Chief Executive Officer, Sears Canada Inc., said, "Operating EBITDA before unusual items at the end of the third quarter was up 11.3% versus the prior year. As consumer confidence began to slump in October, our sales were impacted. Nevertheless, we have had a solid year, with a minor decrease of Operating EBITDA of 0.9%. We are implementing new customer offers which are planned to meet the effect of the current economy and the lowest consumer confidence levels in almost three decades. These new offers include promotional offers to demonstrate to our customers the exceptional value Sears has to offer, such as our popular "Budget Relief Price Drop" program which we launched in the fall of 2008 and which has resonated favourably with customers coast to coast." Mr. Rogers continued, "Most importantly, I want to thank our 35,000 associates who have worked hard to adjust to the current economy, and who continue to improve our customers' lives by providing quality services, products and solutions that earn their trust and build lifetime relationships." The Company had previously announced a change in its fiscal year end from the Saturday closest to the end of December to the Saturday closest to the end of January. The 2008 fiscal year, which ended on January 31, 2009, was the first full year using the new fiscal calendar. The previous fiscal year (2007) which ended on February 2, 2008, was a 57-week year with an 18-week fourth quarter in order to adjust to the new calendar. The following chart provides financial indicators for 2008 versus the comparable number of weeks for the quarter and full year of 2007 (as reported above) as well as for the 18-week quarter and 57-week full year of 2007.
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13 Weeks 13 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
Jan. 31, Jan. 31, Jan. 31, Jan. 31,
2009 vs. 2009 vs. 2009 vs. 2009 vs.
13 Weeks 18 Weeks 52 Weeks 57 Weeks
Financial Ended Ended Ended Ended
Indicators Feb. 2, 2008 Feb. 2, 2008 Feb. 2, 2008 Feb. 2, 2008
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Revenues -5.8% -29.6% -1.9% -9.4%
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Same Store Sales -6.2% N/A -1.6% N/A
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Operating
EBITDA(1) -17.7% -33.3% -0.9% -4.0%
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Net Earnings
Incl. Unusual
Items -19.7% -34.3% -5.1% -5.7%
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(1) Non-GAAP measure. Please refer to Section 1.f.i. of Management's
Discussion and Analysis contained in the 2007 Annual Report.
Operating EBITDA is equal to Net Earnings Before Interest, Income
Taxes, Depreciation, Amortization and Unusual Items.
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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 impact of the sale of the Company's Credit and Financial Services operations and 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 198 corporate stores, 187 dealer stores, 44 home improvement showrooms, over 1,850 catalogue merchandise pick-up locations, 106 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.
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SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
For the 13 and 52-week periods ended January 31, 2009 and
the 18 and 57-week periods ended February 2, 2008
Unaudited
Fourth Quarter Fiscal Year
(in millions, except ----------------------- -----------------------
per share amounts) 2008 2007 2008 2007
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Total revenues $ 1,616.3 $ 2,295.8 $ 5,733.2 $ 6,326.4
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Cost of merchandise sold,
operating, administrative
and selling expenses 1,436.4 2,025.9 5,216.2 5,787.6
Depreciation and
amortization 31.4 43.0 126.9 150.1
Interest expense
(recovery), net 4.5 (1.7) 10.0 12.7
Unusual items - (gain)
expense - 4.2 (38.8) (82.2)
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Earnings before income
taxes 144.0 224.4 418.9 458.2
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Income taxes expense
(recovery)
Current 53.7 37.7 161.3 74.4
Future (5.2) 41.3 (31.0) 77.8
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48.5 79.0 130.3 152.2
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Net earnings $ 95.5 $ 145.4 $ 288.6 $ 306.0
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Net earnings per share $ 0.89 $ 1.35 $ 2.68 $ 2.84
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Diluted net earnings per
share $ 0.89 $ 1.35 $ 2.68 $ 2.84
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Net earnings $ 95.5 $ 145.4 $ 288.6 $ 306.0
Other comprehensive income
(loss), net of taxes:
Mark-to-market adjustment
related to short-term
investments, net of
income taxes expense of
$0.1 and of less than
$0.1 (2007: $0.1 and
Nil), respectively. 0.2 0.2 0.1 -
Gain on derivatives
designated as cash flow
hedges, net of income
taxes expense of $3.7
and $35.4 9.8 - 76.6 -
Reclassification to net
earnings of loss on
derivatives designated
as cash flow hedges,
net of income taxes
recovery of $3.5 and
$3.8 (7.6) - (8.3) -
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Other comprehensive income 2.4 0.2 68.4 -
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Comprehensive income $ 97.9 $ 145.6 $ 357.0 $ 306.0
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SEARS CANADA INC.
RECONCILIATION OF NET EARNINGS TO OPERATING EBITDA
Unaudited
Fourth Quarter Year-to-Date
(in millions, except -----------------------------------------------
per share amounts) 2008 2007 2008 2007
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Net earnings(1) $ 95.5 $ 145.4 $ 288.6 $ 306.0
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Unusual items, net of
taxes:
Restructuring activities - (0.2) (1.1) (0.2)
Sale of real estate/
joint venture - - (28.3) (67.3)
Sale of airplane - - - (2.3)
Settlement of lawsuit - - - 2.4
Environmental
remediation - 2.9 - 2.9
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Net earnings excluding
unusual items(1) $ 95.5 $ 148.1 $ 259.2 $ 241.5
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Depreciation and
amortization 31.4 43.0 126.9 150.1
Interest expense, net 4.5 (1.7) 10.0 12.7
Income taxes expense
excluding taxes on
unusual items(1) 48.5 80.5 120.9 134.5
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Operating EBITDA(2) $ 179.9 $ 269.9 $ 517.0 $ 538.8
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Adjustments to arrive at
comparable period
operating EBITDA(3) for
2007:
Change in fiscal year end (47.0) (26.9)
New inventory standard 6.5 5.9
Retrospective change in
financial instruments
accounting policy (10.7) 3.8
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Comparable period
operating EBITDA(3) $ 179.9 $ 218.7 $ 517.0 $ 521.6
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Net earnings per share $ 0.89 $ 1.35 $ 2.68 $ 2.84
Net earnings per share
excluding unusual items $ 0.89 $ 1.38 $ 2.41 $ 2.25
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(1) Net earnings and income taxes expense for the fourth quarter and
year-to-date ("YTD") 2007 have been restated as a result of the
retrospective application of the change to the Company's financial
instruments accounting policy choice regarding recognition.
(2) The fourth quarter and YTD periods of 2008 and 2007 represent the
13 and 52-week periods ended January 31, 2009 and 18 and 57-week
periods ended February 2, 2008, respectively.
(3) For the fourth quarter and YTD 2008 and the comparable fourth quarter
and YTD 2007, comparable period operating EBITDA represents the
13 and 52-week periods ended January 31, 2009 and 13 and 52-week
periods ended February 2, 2008, respectively.
SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
As at As at
January 31, February 2,
(in millions) 2009 2008
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ASSETS
Current Assets
Cash and short-term investments $ 819.8 $ 871.6
Restricted cash and investments(1) 144.8 5.2
Accounts receivable 138.7 118.4
Income taxes recoverable 16.6 0.4
Inventories(2) 968.3 879.7
Prepaid expenses and other assets(3) 182.5 91.1
Current portion of future income tax assets 0.3 29.2
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2,271.0 1,995.6
Capital assets 712.8 742.0
Deferred charges 198.1 205.0
Future income tax assets 27.9 24.9
Other long-term assets(1) 54.9 34.2
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$ 3,264.7 $ 3,001.7
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LIABILITIES
Current Liabilities
Accounts payable $ 640.9 $ 683.6
Accrued liabilities 383.6 438.6
Income and other taxes payable 39.4 80.2
Principal payments on long-term obligations due
within one year 14.2 16.1
Future income tax liabilities 2.5 -
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1,080.6 1,218.5
Long-term obligations(4) 350.4 356.0
Accrued benefit liability 158.5 164.1
Other long-term liabilities 167.1 169.7
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1,756.6 1,908.3
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SHAREHOLDERS' EQUITY
Capital stock 15.7 15.7
Retained earnings 1,424.0 1,077.7
Accumulated other comprehensive income 68.4 -
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1,508.1 1,093.4
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$ 3,264.7 $ 3,001.7
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(1) As at January 31, 2009, the Company had $144.8 million (2007:
$5.2 million) of restricted cash and investments recorded as current
assets and $6.9 million of restricted cash deposits recorded in other
long-term assets. These balances represent cash and investments
pledged as collateral for letters of credit obligations issued under
the Company's offshore merchandise purchasing program (Footnote 4) of
$110.4 million (2007: Nil), current and long-term cash deposits
pledged as collateral with counterparties related to outstanding
derivative contracts of $28.8 million (2007: Nil) and $6.9 million
(2007: Nil) respectively, and funds held in trust in accordance with
regulatory requirements governing advance ticket sales related to
Sears Travel of $5.6 million (2007: $5.2 million).
Cash and investments are considered to be restricted when it is
subject to contingent rights of a third party customer, vendor, or
government agency.
(2) On February 3, 2008, the Company adopted CICA Handbook Section 3031
"Inventories". The new standard applies to interim and annual
financial statements relating to fiscal years beginning on or after
January 1, 2008 and provides guidance on the determination of cost
and requires inventories to be measured at the lower of cost and net
realizable value. The Company has adopted the new standard
retrospectively, without restatement of prior period amounts. The
initial impact of measuring inventories under the new standard is an
increase to the carrying amount of opening inventories as at
February 3, 2008 of $85.4 million. Opening retained earnings has been
adjusted by $57.7 million, equal to the change in opening inventories
net of taxes of $27.7 million.
(3) When advantageous to do so, the Company enters into foreign exchange
contracts to reduce the foreign exchange risk with respect to U.S.
dollar denominated assets, liabilities, goods or services. As at
January 31, 2009, there were foreign exchange contracts outstanding
with a notional value of U.S. $547.4 million and a combined carrying
value of $91.0 million (2007: $4.2 million), included in prepaid
expenses and other assets. These contracts have settlement dates
extending to August 2010. 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 noted above are included in prepaid expenses and other
assets. 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.
(4) The secured three year revolving $200.0 million credit facility
expired in December 2008. As a result, the assets of the Company
which had been pledged as security for the facility were released and
the outstanding medium term notes are unsecured. The Company is no
longer subject to any financial covenants. The revolving facility had
been solely used to support the Company's offshore merchandise
purchasing program and was replaced by a U.S. $120.0 million letter
of credit facility.
SEARS CANADA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 13 and 52-week periods ended January 31, 2009 and
the 18 and 57-week periods ended February 2, 2008
Unaudited
Fourth Quarter Fiscal Year
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(in millions) 2008 2007 2008 2007
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Cash flow generated from
(used for) operating
activities
Net earnings $ 95.5 $ 145.4 $ 288.6 $ 306.0
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 38.5 78.0 89.9 172.7
Changes in non-cash
working capital balances
related to operations 62.6 52.2 (194.8) (236.2)
Other, principally pension
contributions and changes
to long-term assets and
liabilities (1.0) (3.6) (17.8) (17.2)
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195.6 272.0 165.9 225.3
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Cash flow generated from
(used for) investing
activities
Purchases of capital
assets (29.9) (5.7) (96.6) (54.6)
Proceeds from sale of
capital assets 0.2 0.7 40.4 104.4
Deferred charges - (0.6) (0.5) (0.7)
Changes in restricted
cash and investments
(Current and Long-term) (145.8) (0.1) (146.5) 4.9
Acquisition, net of cash
acquired - - (7.0) -
Purchases of investments - - - (3.0)
Proceeds on sale of real
estate joint ventures,
net of cash sold - - - 5.2
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(175.5) (5.7) (210.2) 56.2
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Cash flow used for
financing activities
Repayment of long-term
obligations (3.8) (130.7) (7.5) (132.8)
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Increase (decrease) in
cash and short-term
investments 16.3 135.6 (51.8) 148.7
Cash and short-term
investments at beginning
of period 803.5 736.0 871.6 722.9
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Cash and short-term
investments at end of
period $ 819.8 $ 871.6 $ 819.8 $ 871.6
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Cash at end of period $ 66.4 $ 64.7 $ 66.4 $ 64.7
Short-term investments at
end of period 753.4 806.9 753.4 806.9
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Total cash and short-term
investments at end of
period $ 819.8 $ 871.6 $ 819.8 $ 871.6
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SOURCE: Sears Canada Inc. Media Relations Contact: Vincent Power, Sears Canada Inc., (416) 941-4422, vpower@sears.ca |
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