The results from Sears Canada’s 2013 Management Discussion and Analysis review show little promise in any turn around for the once leading department store chain.

When compared to the 2012 third quarter, 2013’s third quarter total revenue experienced a 6.4 per cent decrease.  The third quarter brings with it many more disheartening figures.  Sears Canada is suffering a net loss of $48.8 million, a decrease of 122.8 per cent since the 2012 third quarter.

With the company suffering consecutively grave net losses, they have begun selling assets in an attempt to balance the books.  According to its’ 2013 Management Discussion and Analysis review, Sears Canada received proceeds of $191 million in return for selling their leases at Yorkdale Shopping Centre in Toronto and Square One Shopping Centre in Mississauga.  These stores are expected to close this April.

Yet despite the gains in inventory and assets through selling lucrative property, total assets in the 2013 third quarter have decreased by 0.03 per cent.

Kenneth Wong, a Commerce Professor at Queen’s University is not surprised that selling leases has failed to further benefit the troubled company.

“Part of the problem is when you achieve a certain size as a company, the costs aren’t dramatically reduced when you close a store,” he says. “Instead you have a constant set of fixed costs but declining revenues.”

Recent store closures aren’t the only way Sears Canada is trying to cut costs.  The company has made headlines over the past month for employee layoffs.  They announced Wednesday that they were cutting 624 employees from their workforce.  This is in addition to the already 1,600-employee layoff announced two weeks ago and the nearly 800 more employees laid off in its head offices in November.

With rivals such as Walmart, Costco and Winners gaining market share, the company has been finding it hard to compete.   Their sales have fallen for the last seven fiscal years.

“It’s pretty dismal,” Wong says.  He explained that areas where Sears Canada had once been a leader have seen huge declines in the past decade.

“Sears used to be a leader in major appliances with brand names such as Kenmore and Craftsman.   But their product quality has slowly declined over the years.”

The numbers confirm Wong’s beliefs.  Revenue relating to Major Appliances decreased by $10.8 million dollars in 2013’s third quarter.

Before leaving Sears Canada in 2005, Barry Toner worked for the company for over 33 years. In those years, Toner saw the company decline dramatically.  He started at store level and worked his way up in the company to a head buying position.

He says that working from the bottom up made him understand the importance of customer service and customer loyalty.

He says that when Sears was strong it was largely due to ideas of customer loyalty, aggressive product marketing, and great inventory.  But over the years, Sears began outsourcing to third parties instead of doing their own customer service and delivery.

He says that this resulted in a lack of pride or ownership.

“They took their eyes off and started floundering,” Toner says.  “Their strengths became their weaknesses.”

He says that Sears is an example of a company that is struggling with a dwindling customer base.

“When you lose the confidence of the customer base, and you’re not willing to turn it around, you’re heading for trouble.”

Toner also says that the company morale has gone down significantly since its strong days.  “No one wants to work there anymore.”

Wong says that this attitude translates to their customer service and creates a vicious circle.  “Staff morale is down and consequently staff service isn’t good.”

The recent financial position of the company combined with selling off their assets and employee layoffs paint a grim picture for the future of Sears Canada.

“There’s a lack of confidence both within and outside of the company,” says Toner.

“They’re running a sinking ship.”

MD&A (Text)
Total Revenue and Net Losses (in millions)

A Calgary-based company is growing along with its network of oil pipelines in western Canada.

With TransCanada Corporation caught up in red tape as it tries to push through its nearly 2,000-kilometre cross-border Keystone Pipeline, Pembina Pipeline Corporation is expanding much closer to home and it’s paying off.

Pembina announced at the end of 2013 it had acquired enough support from potential customers to construct 540 kilometres of new pipeline from Taylor B.C., to Edmonton Alta. at a cost of $2 billion.

Since the end of November, the company’s stock has climbed more than $4 per share. It closed Friday at just over $38.

Finance expert William McNally, a professor at Wilfred Laurier University’s School of Business and Economics, said the timing of the two events doesn’t come as a surprise.

McNally said investors typically want to know what they’re buying into.

“People will be more optimistic if you say, ‘Hey look, we’re going to go increase this pipeline and that’s going to generate more business,’” he said.

“Clearly people thought it was worth a few dollars more after that announcement,” McNally said of Pembina.

“The idea behind stock prices is that they’re the present value of all future profits. So if we think that the company is going to be more profitable in the future, we’re willing to pay more for the stock,” he said.

Pembina more than doubled its revenue in 2012 from 2011. Pembina’s 2013 annual report is slated for release at the end of this month.

“If a company’s growing quickly, then we’ll probably think they’ll continue to grow quickly in the future,” McNally said.

But banking on something that hasn’t happened yet — like Pembina’s latest expansion, which isn’t expected to be completed until at least 2017 — is risky business.

“We’re talking about the future. No one knows for sure. Everybody’s guessing,” McNally said.

Pembina sold 10,000,000 shares last month for $250 million. It had originally only offered 6,000,000.

“The company knew that the market was receptive so they thought, ‘Okay, let’s raise some more money,’” McNally said.

He said the number shares a company makes available in an offering is flexible and ultimately depends on how high a price the company thinks they can sell the shares for.

“What we should see when all the dust settles is that they have a big pile of cash,” McNally said.

“Slowly, they’ll spend that as they start building this pipeline,” he said.

McNally said although there might not be much in the bank while the pipeline is being built, the investment is long-term as the new infrastructure will increase the company’s overall value.

Even if Pembina does put the $250 million toward the $2-billion expansion, McNally pointed out it will only cover a fraction of the cost.

He said he anticipates Pembina will likely have to do some borrowing to compensate and the company’s long-term debt will probably go up as well as the company funds the expansion.

But just how much likely won’t be clear until the company gets its 2014 first-quarter results later this spring.

Pembina’s 2012 Annual Report:

Sandvine Corp., a Waterloo based company that sells technology to Internet service providers, saw its annual revenue grow by 21 per cent this year, from US $88 million to $107 million.

Sandvine sells computer equipment and software which allows service providers to monitor or manage Internet traffic better.

Scott Penner, an analyst at TD Securities, said the big story on Sandvine this year is their revenue.

“They’ve been meeting expectations for a number of quarters in a row now,” he said.

“That’s a big difference versus a couple of years ago when it was kind of a white knuckle ride every quarter.”

Robert Young, an analyst from Canaccord Genuity, said Sandvine faced three major problems over recent years.

It was too complicated for clients to do software upgrades, a company they were working with caused some problems with a client and then two new competitors started beating them in wireless sales.

Young said Sandvine upgraded their software’s graphical interfaces and “spent a heck of a lot in R&D in 2011.”

Then through 2013 they stretched ahead of those competitors.

In the past, Sandvine has been criticized by investors for spending too much.

But now they’re out of their research and development cycle, and “they’re looking pretty good,” Young said.

“Operating expenses sort of went flat at the $17 or $18 million level,” he said.

That’s important because technology investors and analysts pay close attention to operating expenses and revenue.

In a news release the company said this year it picked up 25 new customers and made over $9 million in sales to large and well known service providers.

Net Neutrality ruling could change up the US DPI market

Because Sandvine sells equipment in different countries, sometimes its equipment can’t be used at its full extent because of different regulations on Internet traffic management.

But in the United States, an appeals court recently overturned the Federal Communication Commission’s net neutrality regulations.

So called “net neutrality” restrictions limit the extent ISPs can monitor, block or slow Internet traffic.

Scott Parsons, a postdoctoral fellow at University of Toronto’s Citizen Lab, a research group that focuses on Internet communications technology, says no one is realy certain about the effect of the appeals court ruling yet.

But he adds that vendor companies, like Sandvine, which sells to Comcast in the US, have a chance to boost sales.

“It makes their products potentially far more appealing to telecommunications providers int he United States,” he said.

“Various providers – Sandvine, Cisco, or other DPI based vendors have opportunity to target their market more aggressively.”

The FCC regulations made ISPs treat services like Youtube and Netflix the same way as a similar service their own companies or ones they have contracts with might provide.

What has changed, according to Parsons, is the possibility for ISPs to discriminate in regulating traffic flow depending on ownership.

“If you’re selling a product that’s capable of both identifying different kinds of traffic flows and treating it differently on the network, as a vendor, you have an increased opportunity to dive in that market.”

But Parsons also said it’s not clear if carriers actually would do that because it they would risk customers jumping ship to ISPs that preach neutrality.

On the other hand, because US telecom markets are concentrated, they could all start engaging in it.

“It’s not a brand new market that just opened up,” Parsons said. But it could potentially be a new revenue model.

“Sandvine, Cisco, Huawei — all of them are going to be able to make a much stronger case pitching to businesses they can find more value in what you’re providing because you can start changing customers at a more granular level, or turn around and start charging providers for the content.”

Canadian pharmacy chain Shoppers Drug Mart is enjoying steady profits in anticipation of the Competition Bureau approving its merger with the Loblaw grocery chain.

In the third quarter of 2013, Shoppers reported a two per cent increase in gross profit, compared to the same time period in 2012. The merger was proposed in July 2013, near the end of the second quarter, and was approved by shareholders in September.

Alan Middleton, a marketing professor at York University’s Schulich School of Business, says the company’s slightly inflated profits can be attributed to a combination of riding out the wave of positive anticipation of the merger with it simply being a good time to be in the pharmacy business.

Shoppers Drug Mart MD&A 3Q (Text)
“It’s probably accelerated in order to make them look more attractive, but one of the great things about drug stores is the demographics of the population are working for them,” Middleton said, speaking about the company’s better than expected returns.

Shoppers’ one notable loss during the third quarter was a one per cent decrease in their net earnings compared to the same quarter in 2012. The company’s 2013 third quarter Management’s Discussion and Analysis attributes the loss to restructuring costs. Middleton says ‘restructuring costs’ could be anything, including preparations for the merger.

The planned combination of Shoppers and Loblaw, which Middleton says was in part born out of fear of the entry of American chains like Target into Canada, will result in a retail product that is formidable, particularly for small, community convenience stores. Middleton says he suspects that efforts to stock Shoppers’ shelves with President’s Choice (Loblaw’s popular food brand) snacks, beverages and other basic groceries will be regionally focussed. For example, Shoppers Drug Marts in areas where there aren’t large Loblaw stores will carry more Loblaw stock in order to compete with nearby convenience stores.

“The retail sector is moving more and more to analyse local trading areas, rather than just deciding what everyone offers on a national basis,” Middleton said.

Shoppers Drug Mart has already waded into diversifying its retail side—and has been rewarded for it. The Management’s Discussion and Analysis notes that the store is making more money from front-of-store sales than from the pharmacy.

Middleton says the acquisition of a drug store by a grocery chain is reflective of a change in Canada’s population demographic shift. Canada’s aging population means visits to the drug store have become a more regular occurrence.

“With an older population where they have to refill prescriptions more frequently, it can become more of a regular place to visit, with the advantage that as you walk to the back of the store to get prescriptions, you walk past all this other stuff that you might normally have to go to a local convenience store for or to buy them at the grocery store,” Middleton said.

Middleton says the model is indicative of what could become a trend. He predicts the Rexall drug store chain will be snapped up in a similar deal sometime within the next year.

Though major changes and effects on structure and finance will not really be evident until after the merger has gone through, Middleton says that there is probably a lot of collaboration already happening between Shoppers and Loblaw in anticipation of the merger.

“Usually what happens when you get takeovers like this, you get a lot of rethinking about what are the back-offers and capabilities they need, what kind of staffing, and all that will be going on right now, but all that will be behind the scenes until such time as it’s formally approved,” Middleton said.

Whether or not the Competition Bureau approves the merger should be announced soon, as it was anticipated to happen around the same time as the release of Shoppers Drug Mart’s annual report, which is slated for early February.

Net income for Bombardier Inc., Canada’s biggest manufacturer of planes and trains decreased by 290 million dollars in 2012. According to their annual financial statement, this represents a 29 per cent loss.

Noted in Bombardier’s annual financial statement, slow economic recovery has weakened sale results. And cash flow is down 741 million. Although the company is not generating expected revenues, their financial reports show a significant growth in investment.

Pierre Beaudoin, President and CEO of Bombardier acknowledged the losses and says the low order intake and overall market conditions were a disappointment.

But the Montreal manufactuer is trying to make a comeback with their newly designed CSeries aircraft. The aircraft has been designed to burn 20 per cent less fuel than its competitors like the Boeing and Airbus. However, its release has been delayed and the plane won’t be ready until the second half of 2015.

The flight-testing phase is taking longer than expected. “We are taking the required time to ensure a flawless entry-into-service. We are very pleased that no major design changes have been identified, this gives us confidence that we will meet our performance targets,” said Mike Arcamone, President of Bombardier Commercial Aircraft.

Zafar Khan, an analyst at Societe Generale SA says Bombardier faces fierce competition in the transportation industry because the economy is still recovering and business and private buyers are spending less.

“Bombardier had a major decline in sales in the transport business and although the aerospace revenue was broadly flat, even in that division, they suffered quite a big fall in profitability.”

Khan says the decrease in income also have to do with a series of bad contracts. Contracts implemented through 2012 cost Bombardier more money than expected. Additionally, the cost of higher exchange rates for the Canadian dollar affected revenues. However, Khan says it’s nothing to worry about as the company is developing new aircrafts and money will be rolling in when they reach the market. The company still has 6.3 billion dollars in liquidity.

In January, Bombardier announced in an internal email it will cut 1,700 employees from its aerospace division to deal with its financial setbacks. Around 1,100 jobs will be cut in Canada and 600 in the United States.

According to Business professor Amr Addassays from Concordia University, Bombardier is trying to reduce current operational costs by cutting employees. But once the Cseries is ready, higher profitability and job creation is expected.

In addition to the CSeries, Bombardier is developing several other aircraft, including the Challenger 350, the Learjet 70 and the global executive jets to gain competitive advantage.

Bombardier’s 2013 fiscal year ended Dec. 31, and the results will be available mid February. Analyst Khan predicts, the results won’t be that different from 2012.

You may find statistics and findings below by searching. Or  click the publications then notes to be brought to the relevant pages.

By Micki Cowan

After posting a net loss of $48.8 million in their third quarter earnings, Sears Canada is at risk of becoming the next Eaton’s, according to marketing expert Alan Middleton.

The loss is 123 per cent more than what the company lost in the same period in 2012, when it was down $21.9 million in earnings.

“They’re at a pivotal point in their existence,” said Middleton, an assistant marketing professor at York University. “They’re having to sell off major assets in order to continue business.”

Middleton noticed the company was “troubled” back in 2012, but said it’s not yet clear from the financial statements if they are doing anything substantive about it.

He blames the financial struggle on a failure to keep up with online ordering and digital marketing, out-of-date stores and offering too many products and services instead of specializing.

“If we go back 20 years, Sears had one of the best databases and direct marketing operations of any department store. And they’ve just let it slide, where the others have come on strong,” Middleton said.

But he also said their current financial situation is a simple case of bad management.

“All these things look very sensible in the short term – reducing revenue, reducing cost,” he said.

“But you don’t recognize that often a lot of companies, they reduce costs so much that it’s causing an acceleration in the reduction of revenue.” –  Middleton

Sears Canada media representatives said they are unable to comment on their finances until next week due to staff being away.

But in a recent press release, the company said they are “transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices.”

The transition involves increasing access to a wide assortment of products for members, enhancing member benefits, and making use of data and analytics for targeted sales offers, according to the Jan. 9 release.

Middleton pointed to Hudson’s Bay as an example of a department store that has kept up with the times and been able to handle increased competition from incoming American retailers such as Target and Nordstrom.

He said Sears went wrong by continuing to offer a large amount of products and services, especially specialty goods like appliances.

“Whereas the Bay has gone out of a lot of those products, is focusing on fashion and related products, Sears is still much more an old style department store but with costs higher than specialists like the Brick and Leons can offer,” Middleton said.

In October, Sears announced the future closure of five major stores at the Toronto Eaton Centre, Sherway Gardens, Markville, London-Masonville and at Richmond Centre in B.C.

The third quarter financial statement does not include the $400 million the company received for the termination of the those leases, nor mention what the company plans to do with the money.

The statement did hint more sales may be coming, and mentioned the future closure of its logistics centre in Regina and that the land is now for sale.

“We continue to reduce unprofitable stores as leases expire and in some cases accelerate closings when circumstances dictate,” it said in the release.

Middleton wasn’t convinced the company will try to make a comeback.

“They’re trying to recover now. But as you know they’re selling off stores. The question is how much will they remain active in Canada.” – Middleton

Information on the fourth quarter will be available in February, following the year-end on Feb. 1.

Email: mickicowan@gmail.com
Twitter: @mickicowan

Click on the notes below to see highlighted aspects of the interim report.

A gold mine slated to be Canada’s biggest is watching its  costs closely until it reaches full capacity.

Detour Gold’s interim-CEO, Paul Martin, told Reuters on Jan. 28 that the company’s board of directors has given him the green-light to hedge up to 50-percent of the mine’s output to ensure there is stable cash flow for the rest of the mine’s start-up.

Kelly Smith, an analyst for Haywood Capital Inc., explained that by hedging, or selling the mine’s output ahead of time at a fixed price, Detour guarantees its income.

Smith says this is a good strategy for a mine that is just starting operations and has lots of overhead, but it’s potentially bad for investors.

“If gold prices go lower, it was a smart thing to do,” said Smith, “but if gold goes higher, it wasn’t such a smart thing to do.

“An investor doesn’t want a mine to speculate on the price of gold. But in this case, they’re doing it as a measure to protect their revenues, and ensure that they can cover their costs while they go through the ramp up.”

Smith said the mine has been plagued by the usual troubles of an operation of its size that is in the “ramp-up” phase.

Part of Detour’s problem is that they began building the mine as gold prices started to fall from their 2011 peak of almost $1,900, as the chart below shows.

(gold data from: http://www.investing.com/commodities/gold-historical-data)

Detour has an average cost per ounce of gold produced of $1,214 USD, so if gold price drop below $1,200 like they did in late 2013, the mine is losing money. Which is why shareholders are tentative, says Smith.

DETOUR GOLD (Text)
“It’s marginally undervalued, however they (Detour) need potentially more capital to complete the ramp up,” said Smith.

The northern Ontario mine’s full year-end statements are due early February, but the company announced in a press release last week that it missed its minimum target of 240,000 ounces of gold produced by about 8,000 ounces.

And that potential need for more capital isn’t helping share prices either. If Detour needs to raise capital by issuing more stock, they’ll dilute existing share prices. So despite Smith’s valuation of Detour at $8.50 a share, the share price remains at around $6.30, and probably won’t move much until its year-end reports are released.

“When they start the plant up there are always things that you have to fix,” said Smith. “So you’re constantly stopping and starting the plant, you’re making repairs, you’re fine tuning, and all of that costs money.”

The gold mine began operations in June of last year and according to it’s own definition only began commercial scale operations on Sept. 1.

But shareholders began to grumble when the company’s third quarter results showed disappointingly narrow margins. Then the company’s founder and CEO Gerald Panneton resigned in November after a meeting with the board of directors and stock prices took another dip.

But on Jan. 27 interim CEO Paul Martin, Detour’s former CFO, said in a press release, that the second year of operation will “serve as a stepping stone towards further production increases and cost reductions.

Detour 2014 Guidance (Text)
“The significant shutdown in December impacted our progress but I am please to report that we are mow back on track with milling rates having returned to pre-shutdown numbers,” Martin said.

The challenge for Detour in the next year, said Smith, is making sure they have the cash to cover their expenses until they mine is fully operational.

Until then they’re in a vulnerable position.

“They’re just right at that critical point in their start-up,” Smith said.  “They say they’ll have it (operating) at design capacity in Q4, and we’re seven, eight months away from that.”

By Philippe de Montigny

TransCanada Corp., an energy infrastructure company, saw a 14 per cent dip in profits in 2012 while its top leader got a lofty raise.

The company’s net income dropped by $238 million during the last fiscal year. While TransCanada stocks lost value for shareholders, president and chief executive officer Russ Girling took home an annual paycheque of $8.7 million, a 26 per cent increase over his 2011 compensation.

Carleton University professor André Plourde, an expert in energy economics, said the decline is largely due to delays in restarting Bruce A, a nuclear power plant in Ontario in which TransCanada invested.

“They lost $149 million on Bruce A alone in 2012,” Plourde said. “I would expect that this was an unusual situation.”

Also unusual is the CEO’s salary hike during that lower-income year.

“It may be a complete happenstance,” Plourde said. “There’s no doubt that performance will matter in terms of what the salary of the CEO is.”

While the year’s financial targets were not met, a TransCanada circular reports that Girling “secured significant projects that support future growth.” Executives’ compensation breaks into a base salary as well as short-term and long-term monetary incentives. These incentives usually consist of company stocks and options.

The increase in long-term compensation for these growth-generating projects outweighed the decline in short-term compensation for the poor performance in 2012. 

Revamping Bruce A, for instance, was an investment for long-term growth that cut into the year’s profitability.

Parts of the power plant were offline for maintenance throughout the fiscal year, so less power could be generated for revenue and the company paid out to fix its facility, according to the 2012 annual report.

Plourde said the company expected the nuclear power plant to resume its operations in late November 2012, but another shutdown had to be sustained.

The planned outage of another power plant—the coal-fired Sundance A west of Edmonton—also pulled down the company’s income, he explained.

Natural gas a finicky business

Low energy prices also slashed TransCanada’s revenues from its natural gas pipelines in 2012.

The company is responsible for nearly 11,800 megawatts of electricity, which is enough to power close to 12 million of homes. More than a third of this energy is from natural gas, the fuel source also responsible for powering massive oil sands operations.

Market conditions however have made it more difficult for TransCanada and other companies producing and distributing natural gas to get the biggest bang for their buck.

“The $1.89 per share we earned in 2012 was impacted by cyclically low gas and power prices,” CEO Russ Girling wrote in the annual report. He also outlined the decreases in the volumes of gas pushed through the pipelines.

Expert André Plourde questions TransCanada’s future in the natural gas business.

“Natural gas production in Western Canada is falling,” he said. “You fix infrastructure to keep it safe and now you’re not filling it at capacity.”

He said that TransCanada kept a good track record in terms of safety, but maintaining age-old pipelines is costly. With more frequent spills and occasional explosions, increasing regulatory pressures are bound to choke profitability, he predicts.

Though it lies outside the 2012 fiscal year, incidents like the recent explosion in southern Manitoba are drawing attention to the “old pipes,” as Plourde puts it.

“It’s coming at a bad time in the sense that TransCanada has to reevaluate its business model,” he said.

The natural gas challenges faced in 2012 could resurface in future fiscal years, he said, but TransCanada hopes that expanding oil infrastructure—namely with the Keystone XL project on the line—will generate long-term income growth.

More public scrutiny on gas pipelines usually means tighter regulation, Plourde said. And tighter regulation increases costs, eating into the company’s profits.

“They’re going to have trouble with natural gas.”

By Beatrice Britneff

A Canadian seniors’ housing company is looking at a 138 per cent increase in profits for 2013, according to its third-quarter report.

After ending 2012 deep in the red, this is good news for Chartwell Retirement Residences. Chartwell suffered a $140 million loss in profits in 2012 — a 126.6 per cent drop in profits from 2011.

This debt came primarily from extensive property acquisition. In 2012, Chartwell bought two groups of properties in Collingwood, Ont. and Kamloops, B.C. The company also partnered up with Health Care REIT Inc. — an American real estate investment trust — to a buy a larger portfolio with properties located in B.C., Alberta, Ontario, and Quebec.

While these acquisitions cost the company a lot of money, Chartwell’s chief financial officer Vlad Volodarski said that it was an opportunity not to be missed.

“This was just a unique opportunity where a large portfolio came to market,” Volodarski said.“These opportunities don’t come around very often in Canada or actually, almost never, where you can make an acquisition of 8,000 units or almost a billion dollars … and these properties that were for sale were in the markets that we operate.”

Investments paying off in 2013

The company’s third quarter report shows that new property acquisition and operation in 2012 caused total expenses to increase by nearly six per cent in 2013. However, revenues and savings in other areas helped offset this increase.

By the end of the 2013 third quarter, revenues from Chartwell residences increased by nearly seven per cent due to occupancy improvements, increases in regular annual rental rates, and “higher ancillary services revenues.”

Chartwell is also experiencing increased revenues in 2013 thanks to the sale of company assets. Chartwell sold a portfolio of five seniors living communities located in New York State in February 2013 — referred to as the “Bristal Portfolio” in the company’s financial reports. The sale brought in $49.1 million.

According to Volodarski, the sale of the Bristal Portfolio was part of a recently implemented company strategy to concentrate its American properties in three core states — Colorado, Florida and Texas.

“We used to have properties in 15 different states,” Volodarski said. “We made the strategic decision a few years ago … to make sure that we can manage and provide proper oversight of the [core] properties.”

Volodarski said Chartwell will continue looking at what properties it can sell on an annual basis.

“We have over 200 properties in our portfolio, and some of these properties become old,” he said. “If they were not built necessarily with a kind of futuristic view to begin with, at some point in time they’ll become obsolete.”

As of September, 76 per cent of Chartwell’s retirement residences were located in Canada. The remaining 24 per cent are all located in the United States.

According to the company’s third-quarter report, 22 per cent of its residences are dedicated to assisted living, 16 per cent are for long-term care, and 62 per cent are independent supportive living.

Chartwell also saved money in 2013 through decreased spending on interest. The third-quarter report shows that the company’s interest expenses on same property portfolios decreased due to “regular mortgage principal repayments and lower interest rates achieved on renewals.” Interest expenses on the company’s acquisitions also saw a decrease with the sale of the Bristal Portfolio.

If all goes well in the 2013 fourth-quarter report, Chartwell will return to making a profit for the first time in at least three years.

Chartwell AnnualReport 2012 (Text)

Chartwell Q3 2013 (Text)

Chartwell Q3 Report: Mgmt Discussion & Analysis (Text)

A Montreal-based transportation company has managed to keep investors optimistic about its future even though it has suffered significant financial losses and production delays.

Bombardier Inc. posted a loss of more than $230 million US for their 2012 fiscal year.

The company decided to “restructure” in “an effort to improve competitiveness and cost structure” in 2012, which involved more than 1,200 jobs cut and the closure of a plant in Germany. This restructuring cost the company $119 million.

Below is an annotated Bombardier’s Annual Report for 2012. Click “Notes” at the top to scroll through the annotations.

As it turns out, 2012’s financial setbacks were only the beginning for the multinational company.

According to a report by JP Morgan analyst Joseph Nadol, the layoffs aren’t directly related to the delay of the C-Series, but “the cash requirements for that program are causing management to seek to preserve cash elsewhere.”

Bombardier also saw the the loss of another senior vice-president back in early December. The company did not comment on whether the former employee left on his own accord or whether his departure was linked to diminishing orders for the C-Series.

The additional job losses and product delays don’t bode well for the company’s future considering how much they lost last year. However, Bombardier’s stock has been doing well recently.

In fact, according an online report by Nasdaq, Bombardier was the most active share on the Toronto Stock Exchange this past week, with its stock climbing nearly 3 per cent. 

Eric Kirzner, a professor of finance at the University of Toronto, said that for a low-priced stock like Bombardier’s, the move in price was “not insignificant.”

He says the company, by maintaining this price level in such a weak market, is “bucking the trend.”

However, Kirzner also said this could likely have more to do with the optimism of Bombardier’s analysts.

“Stocks don’t normally react to news unless the news is totally unexpected,” he said. “Stocks tend to anticipate events long in advance.”

“The events that have taken place at Bombardier in the last year have either been not that important or the events themselves were pretty well-anticipated.”

Kirzner said he looked into Bombardier a short while ago and found that there is either no news that is surprising or things turned out to be not quite as bad as expected for investors.

“It’s the anticipation, not the event itself that’s the key to share prices.”

Kirzner’s assessment appears to be correct.

Noah Poponak, an analyst with Goldman Sachs, follows Bombardier closely.  He identified a decline in the demand for regional and business jets as well as the large amount of cash usage coming from the development of the C-Series as key risks for investing in the company.

He also noted Bombardier received 81 orders in 2013 compared to 138 the previous year, a 40 per cent drop.

In spite of this, Poponak confirmed there was “no change” to his estimates for the company in the coming years.

His own report predicts an eight per cent growth in the company’s net income for 2014 and additional 13 per cent rise for 2015.

The company was just this week declared the 24th most sustainable companies in the world by investment advisory company Corporate Knights Inc.

It looks like regardless of their financial difficulties in the present, investors and analysts believe things are still looking up for the company’s future.