Net earnings for the third quarter ended
Nine-month Results
Net earnings for the nine-month period were
Sales decreased 6.0% to
During the first nine months of the year, the Company opened 10 stores, closed 2 and expanded 8 existing locations, resulting in the addition of 87,000 square feet or 8.3% to the Le Château network, bringing the total floor space at end of period to 1,135,000 square feet.
In
Dividend declaration
The Board of Directors has declared a quarterly dividend (constituting eligible dividends for income tax purposes) of
Online Shopping Launch
Le Château will be launching an online shopping initiative for Autumn-Winter 2010 targeted at further broadening its customer base to online shoppers in both
Profile
Le Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is synonymous with ageless fashion at accessible prices and is sold exclusively through the Company's 231 retail locations, of which 227 are located in
The Company's 50-year tradition of vertical integration, a design and manufacturing approach to retailing, makes it unique among Canadian fashion merchants.
Non-GAAP Measures
In addition to discussing earnings measures in accordance with Canadian generally accepted accounting principles ("GAAP"), this press release provides earnings before interest, income taxes, depreciation and amortization ("EBITDA") as a supplementary earnings measure. Depreciation and amortization include the write-off of fixed assets. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.
The Company also discloses comparable store sales which are defined as sales generated by stores that have been opened for at least one year.
The above measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.
Forward-Looking Statements
This news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.
Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------
(Unaudited) October 31, October 25,
(In units except where otherwise stated) 2009 2008
-------------------------------------------------------------------------
Working capital ($'000) $ 84,814 $ 78,411
Current ratio 3.07 2.63
Quick ratio 1.54 1.44
Long-term debt to equity* 0.24 0.23
Capital expenditures ($'000) $ 16,403 $ 19,856
Number of stores at end of quarter 229 220
Total number of square feet ('000) 1,135 1,037
Book value per share $ 6.10 $ 5.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
* Including capital lease obligations
-------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
As at As at As at
(Unaudited) October 31, October 25, January 31,
(In thousands of dollars) 2009 2008 2009
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 23,510 $ 2,405 $ 10,034
Short-term investments (note 3) 30,000 56,643 56,643
Accounts receivable and other
assets 2,638 3,506 4,791
Income taxes receivable 5,278 - -
Derivative financial instruments 254 5,060 1,530
Inventories (note 4) 62,750 57,233 54,012
Prepaid expenses 1,396 1,696 778
-------------------------------------------------------------------------
Total current assets 125,826 126,543 127,788
Long-term investments (note 3) 10,000 - -
Fixed assets 91,836 91,666 88,643
-------------------------------------------------------------------------
$ 227,662 $ 218,209 $ 216,431
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities $ 24,859 $ 30,681 $ 25,403
Dividend payable 4,269 4,278 4,239
Income taxes payable - 824 2,285
Current portion of capital lease
obligations - 1,443 1,008
Current portion of long-term
debt (note 5) 11,803 9,297 8,746
Future income taxes 81 1,609 487
-------------------------------------------------------------------------
Total current liabilities 41,012 48,132 42,168
Long-term debt (note 5) 24,060 20,863 18,982
Future income taxes 3,176 2,891 3,176
Deferred lease inducements 10,491 9,316 9,691
-------------------------------------------------------------------------
Total liabilities 78,739 81,202 74,017
-------------------------------------------------------------------------
Shareholders' equity
Capital stock (note 6) 32,683 31,266 30,997
Contributed surplus (note 6) 2,475 2,270 2,460
Retained earnings 113,592 100,020 107,914
Accumulated other comprehensive
income (note 7) 173 3,451 1,043
-------------------------------------------------------------------------
Total shareholders' equity 148,923 137,007 142,414
-------------------------------------------------------------------------
$ 227,662 $ 218,209 $ 216,431
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
-------------------------------------------------------------------------
For the three For the nine
(Unaudited) months ended months ended
(In thousands of October 31, October 25, October 31, October 25,
dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Balance, beginning
of period $ 112,263 $ 99,373 $ 107,914 $ 99,884
Excess of cost over
stated value of
Class A subordinate
voting shares
purchased and
cancelled - (5,063) - (7,955)
Net earnings 5,599 9,988 18,449 25,454
-------------------------------------------------------------------------
117,862 104,298 126,363 117,383
Dividends declared 4,270 4,278 12,771 17,363
-------------------------------------------------------------------------
Balance, end of
period $ 113,592 $ 100,020 $ 113,592 $ 100,020
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
-------------------------------------------------------------------------
(Unaudited) For the three For the nine
(In thousands of months ended months ended
dollars, except per October 31, October 25, October 31, October 25,
share data) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $ 75,305 $ 83,763 $ 228,517 $ 243,059
-------------------------------------------------------------------------
Cost of sales and
expenses
Cost of sales and
selling, general
and administrative 62,509 64,187 187,457 192,471
Depreciation and
amortization 4,256 4,267 13,043 12,472
Write-off of fixed
assets 78 11 167 184
Interest on long-term
debt and capital lease
obligations 298 444 1,001 1,372
Interest income (170) (484) (605) (1,794)
-------------------------------------------------------------------------
66,971 68,425 201,063 204,705
-------------------------------------------------------------------------
Earnings before income
taxes 8,334 15,338 27,454 38,354
Provision for income
taxes 2,735 5,350 9,005 12,900
-------------------------------------------------------------------------
Net earnings $ 5,599 $ 9,988 $ 18,449 $ 25,454
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share
(note 8)
Basic $ 0.23 $ 0.40 $ 0.76 $ 1.02
Diluted 0.23 0.40 0.76 1.01
Weighted average
number of shares
outstanding ('000) 24,365 24,752 24,300 24,954
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-------------------------------------------------------------------------
For the three For the nine
(Unaudited) months ended months ended
(In thousands of October 31, October 25, October 31, October 25,
dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net earnings $ 5,599 $ 9,988 $ 18,449 $ 25,454
-------------------------------------------------------------------------
Other comprehensive
income
Change in fair value
of forward exchange
contracts 329 4,962 (1,374) 5,454
Realized forward
exchange contracts
reclassified to
net earnings 1,202 (242) 98 (644)
Income tax recovery
(expense) (487) (1,501) 406 (1,525)
-------------------------------------------------------------------------
1,044 3,219 (870) 3,285
-------------------------------------------------------------------------
Comprehensive income $ 6,643 $ 13,207 $ 17,579 $ 28,739
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
For the three For the nine
(Unaudited) months ended months ended
(In thousands of October 31, October 25, October 31, October 25,
dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $ 5,599 $ 9,988 $ 18,449 $ 25,454
Adjustments to
determine net cash
from operating
activities
Depreciation and
amortization 4,256 4,267 13,043 12,472
Write-off of
fixed assets 78 11 167 184
Amortization of
deferred lease
inducements (392) (372) (1,121) (1,056)
Stock-based
compensation (note 6) 160 193 323 646
Future income taxes - - - (927)
-------------------------------------------------------------------------
9,701 14,087 30,861 36,773
Net change in non-cash
working capital items
related to operations (610) (5,923) (15,310) (14,439)
Deferred lease
inducements 745 373 1,921 1,799
-------------------------------------------------------------------------
Cash flows related to
operating activities 9,836 8,537 17,472 24,133
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of capital
lease obligations (341) (321) (1,008) (949)
Proceeds of long-
term debt 15,000 - 15,000 18,000
Repayment of long-
term debt (2,231) (2,507) (6,865) (7,642)
Issue of capital stock
upon exercise of
options 368 212 1,378 614
Purchase of Class A
subordinate voting
shares for
cancellation - (6,239) - (9,234)
Dividends paid (4,263) (9,952) (12,741) (16,218)
-------------------------------------------------------------------------
Cash flows related to
financing activities 8,533 (18,807) (4,236) (15,429)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Decrease (increase)
in short-term
investments (10,000) (2,915) 26,643 9,711
Increase in long-
term investments - - (10,000) -
Additions to fixed
assets (4,485) (4,626) (16,403) (19,856)
-------------------------------------------------------------------------
Cash flows related
to investing
activities (14,485) (7,541) 240 (10,145)
-------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents 3,884 (17,811) 13,476 (1,441)
Cash and cash
equivalents,
beginning of period 19,626 20,216 10,034 3,846
-------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 23,510 $ 2,405 $ 23,510 $ 2,405
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information:
Interest paid during
the period $ 298 $ 444 $ 1,001 $ 1,372
Income taxes paid
during the period 4,675 4,652 16,019 17,803
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notes to the Interim Consolidated Financial Statements
------------------------------------------------------
(Unaudited - Tabular figures in thousands of dollars except share information)
1. Disclosure
The unaudited interim consolidated financial statements (the "financial statements") have been prepared in accordance with Canadian generally accepted accounting principles with the exception that they do not include all disclosure required for annual financial statements. The financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes contained in the Company's 2008 Annual Report.
The Company's business is seasonal in nature. As the Company executes its strategy of broadening its customer base, the Company expects that its business will become less seasonal. However, retail sales are traditionally higher in the fourth quarter due to the holiday season. In addition, fourth quarter earnings results are usually reduced by post holiday sale promotions.
2. Accounting policies
These financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements for the 53-week period ended
3. Investments
Short-term investments amount to
4. Inventories
October 31, October 25,
2009 2008
-------------------------------------------------------------------------
Raw materials $ 6,047 $ 5,434
Work-in-process 1,199 1,493
Finished goods 53,115 44,674
Finished goods in transit 2,389 5,632
-------------------------------------------------------------------------
$ 62,750 $ 57,233
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The cost of inventory recognized as an expense and included in cost of sales and selling, general and administrative expenses for the three and nine-month periods ended
5. Long-Term Debt
On
6. Capital Stock
a) Issued and outstanding
October 31, 2009
----------------------------
Number
of shares $
-------------------------------------------------------------------------
Class A subordinate voting shares
Balance, beginning of period 19,663,464 30,595
Issuance of subordinate voting shares
upon exercise of options 171,200 1,378
Reclassification from contributed
surplus due to exercise of share options - 308
-------------------------------------------------------------------------
Balance, end of period 19,834,664 32,281
-------------------------------------------------------------------------
Class B multiple voting shares 4,560,000 402
-------------------------------------------------------------------------
24,394,664 32,683
-------------------------------------------------------------------------
-------------------------------------------------------------------------
b) Stock option plan
The status of the Company's stock option plan is summarized as follows:
October 31, 2009
----------------------------
Weighted
average
Number exercise
of options price $
-------------------------------------------------------------------------
Outstanding at beginning of period 1,172,800 12.64
Granted 215,500 9.40
Exercised (171,200) 8.05
Cancelled/Expired (4,000) 10.75
-------------------------------------------------------------------------
Outstanding at end of period 1,213,100 12.72
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Options exercisable at end of period 402,000 13.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the second quarter ended
c) Contributed surplus
The changes in contributed surplus are summarized as follows:
For the three For the nine
months ended months ended
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
-------------------------------------------------------------------------
Contributed surplus,
beginning of period $ 2,389 $ 2,116 $ 2,460 $ 1,761
Stock-based
compensation expense 160 193 323 646
Exercise of share
options (74) (39) (308) (137)
-------------------------------------------------------------------------
Contributed surplus,
end of period $ 2,475 $ 2,270 $ 2,475 $ 2,270
-------------------------------------------------------------------------
-------------------------------------------------------------------------
d) Normal course issuer bid
The Company announced on
7. Accumulated other comprehensive income (loss)
Changes in accumulated other comprehensive income was as follows:
For the three For the nine
months ended months ended
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
-------------------------------------------------------------------------
Balance, beginning of
period $ (871) $ 232 $ 1,043 $ 166
Other comprehensive
income (loss) for
the period 1,044 3,219 (870) 3,285
-------------------------------------------------------------------------
Balance, end of period $ 173 $ 3,451 $ 173 $ 3,451
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8. Earnings per share
The numbers of shares used in the earnings per share calculation is as follows:
For the three For the nine
months ended months ended
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
-------------------------------------------------------------------------
Weighted average
number of shares
outstanding
- basic 24,364,510 24,751,977 24,300,113 24,953,677
Dilutive effect of
stock options 92,473 124,619 59,594 147,234
-------------------------------------------------------------------------
Weighted average
number of shares
outstanding
- diluted 24,456,983 24,876,596 24,359,707 25,100,911
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at
9. Segmented information
For the three For the nine
months ended months ended
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
-------------------------------------------------------------------------
Sales by country
Canada $ 74,425 $ 82,396 $ 224,943 $ 238,678
United States 880 1,367 3,574 4,381
-------------------------------------------------------------------------
$ 75,305 $ 83,763 $ 228,517 $ 243,059
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales by division
Ladies' Clothing $ 42,118 $ 46,535 $ 128,690 $ 137,127
Men's Clothing 12,088 13,576 37,507 39,385
Footwear 9,055 10,033 25,767 27,843
Accessories 12,044 13,619 36,553 38,704
-------------------------------------------------------------------------
$ 75,305 $ 83,763 $ 228,517 $ 243,059
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings (loss)
Canada $ 6,158 $ 10,165 $ 19,585 $ 25,736
United States (559) (177) (1,136) (282)
-------------------------------------------------------------------------
$ 5,599 $ 9,988 $ 18,449 $ 25,454
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fixed assets
Canada $ 91,037 $ 90,628 $ 91,037 $ 90,628
United States 799 1,038 799 1,038
-------------------------------------------------------------------------
$ 91,836 $ 91,666 $ 91,836 $ 91,666
-------------------------------------------------------------------------
-------------------------------------------------------------------------
10. Financial instruments
Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The disclosures in the "Financial Instruments - Recognition and Measurement" section of note 1 to the Company's 2008 consolidated financial statements describe how the categories of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognized. As at
Other
Avail- Held Loans finan- Total
able- for and cial car-
for- tra- recei- liabi- Deriva- rying Fair
sale ding vables lities tives value value
$ $ $ $ $ $ $
-------------------------------------------------------------------------
October 31, 2009
Financial assets
Cash and cash
equivalents - 23,510 - - - 23,510 23,510
Short-term
investments 30,000 - - - - 30,000 30,000
Accounts
receivable and
other assets - - 2,638 - - 2,638 2,638
Derivative
financial
instruments - - - - 254 254 254
Long-term
investments 10,000 - - - - 10,000 10,000
-------------------------------------------------------------------------
Total 40,000 23,510 2,638 - 254 66,402 66,402
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial
liabilities
Accounts payable
and accrued
liabilities(1) - - - 20,310 - 20,310 20,310
Dividend payable - - - 4,269 - 4,269 4,269
Long-term debt - - - 35,863 - 35,863 35,661
-------------------------------------------------------------------------
Total - - - 60,442 - 60,442 60,240
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
October 25, 2008
Financial assets
Cash and cash
equivalents - 2,405 - - - 2,405 2,405
Short-term
investments 56,643 - - - - 56,643 56,643
Accounts
receivable and
other assets - - 3,506 - - 3,506 3,506
Derivative
financial
instruments - - - - 5,060 5,060 5,060
-------------------------------------------------------------------------
Total 56,643 2,405 3,506 - 5,060 67,614 67,614
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial
liabilities
Accounts payable
and accrued
liabilities(1) - - - 25,204 - 25,204 25,204
Dividend payable - - - 4,278 - 4,278 4,278
Long-term debt - - - 30,160 - 30,160 29,704
Capital lease
obligations - - - 1,443 - 1,443 1,443
-------------------------------------------------------------------------
Total - - - 61,085 - 61,085 60,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Excludes commodity taxes and other provisions
Fair values
The Company has determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. Accordingly, the estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. The estimated fair value amounts can be materially affected by the use of different assumptions or methodologies. The methods and assumptions used to estimate the fair value of financial instruments are described below:
- The fair values of the short and long-term investments have been
determined by reference to published price quotation.
- Given their short-term maturity, the fair value of cash and cash
equivalents, accounts receivable and other assets, accounts payable
and accrued liabilities and dividend payable approximates their
carrying value.
- The estimated fair value of long-term debt was determined by
discounting expected cash flows at rates currently offered to the
Company for similar debt, and is approximately $202,000 lower than
the carrying value as noted in the table above.
Financial instrument risk management
There has been no change with respect to the Company's overall risk exposure during the three and nine-month periods ended
Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company's financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents, short and long-term investments and foreign exchange contracts. The Company limits its exposure to credit risk with respect to cash, cash equivalents, short and long-term investments by investing available cash in guaranteed investment certificates with major Canadian chartered banks. The Company enters into foreign exchange contracts only with Canadian chartered banks to minimize credit risk.
The Company's cash is not subject to any external restrictions. The Company has an investment policy that monitors the safety and preservation of principal and investments, which limits the amount invested by issuer.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet liabilities when due. The Company has a high level of liquidity, more than sufficient to cover its operating requirements, as well as a strong financial position. The Company's liquidity follows a seasonal pattern based on the timing of inventory purchases and capital expenditures. As at
Market risk - foreign exchange risk
The Company's foreign exchange risk is primarily limited to currency fluctuations between the Canadian and U.S. dollar. In order to protect itself from the risk of losses should the value of the Canadian dollar decline compared to the foreign currency, the Company uses forward contracts to fix the exchange rate of a substantial portion of its expected U.S. dollar requirements. The contracts are matched with anticipated foreign currency purchases.
Their nominal values and contract values as at
Average Nominal
contractual foreign
exchange currency Contract
rate value value
$ $
-------------------------------------------------------------------------
(000's) (000's)
Purchase contracts
U.S. dollars 1.0660 16,000 17,056
-------------------------------------------------------------------------
The range of maturity of these contracts is from
Market risk - interest rate risk
Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company's short and long-term investments are the only financial assets bearing fixed interest rate, and the long-term debt and capital lease obligations are the only financial liabilities bearing a fixed interest rate. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to fixed interest rates on the short and long-term investments, owing to their relative short-term nature. The long-term debt and capital lease obligations are other financial liabilities and are recorded at amortized cost.
To manage the interest rate risk, the Company's investments are made to achieve the highest rate of return while complying with the two primary objectives for its investment portfolio: liquidity and capital preservation.
11. Comparative figures
Certain comparative figures have been reclassified to conform to the presentation adopted in the current period.
Management's Discussion and Analysis
Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited interim consolidated financial statements for the nine months ended
Results of Operations
Sales for the third quarter ended
Net earnings for the third quarter were
Earnings before interest, income taxes, depreciation and amortization ("EBITDA") (see supplementary measures below) for the third quarter amounted to
Year-to-date, the Company opened 10 stores, closed 2 and expanded 8 existing locations, resulting in the addition of 87,000 square feet or 8.3% to the Le Château network, bringing the total floor space at end of period to 1,135,000 square feet. As at
Le Château will be launching an online shopping initiative for Autumn-Winter 2010 targeted at further broadening its customer base to online shoppers in both
Liquidity and Capital Resources
Cash flow from operating activities amounted to
The Company continues to be in a strong financial position with cash, cash equivalents, short and long-term investments of
Capital expenditures for the third quarter amounted to
Financial Position
Working capital stood at
Inventories increased 9.8% to
Long-term debt and capital lease obligations, including the current portions, amounted to
Dividends
On
On
The Company designated the above dividends to be eligible dividends pursuant to the Income Tax Act (
Share Capital
As at
The Company announced on
The directors of the Company have concluded that purchases of up to 987,173 of the issued and outstanding Class A subordinate voting shares are an appropriate and desirable use of the Company's available funds and, therefore, would be in the best interests of the Company. As a result of such purchases, the number of issued shares will be decreased and, consequently, the proportionate share interest of all remaining shareholders will be increased on a pro rata basis.
Accounting Policies
Critical Accounting Estimates:
The Company's critical accounting estimates are substantially the same as those disclosed in the Management's Discussion and Analysis section of its 2008 Annual Report.
Accounting Standards Implemented in 2009:
There were no new accounting standards implemented during the first nine months of 2009.
International Financial Reporting Standards
In
A project team has been formed and a detailed conversion plan has been created outlining the major phases of the transition to IFRS.
The Company has completed the initial scoping and diagnostic phase which included the review and identification of major differences between current Canadian generally accepted accounting principles ("GAAP") and IFRS as well as an initial evaluation of IFRS 1 transition exemptions. Activities in this phase also included the training of key employees.
The Company is currently working on the second phase of its conversion plan which entails a detailed analysis of the significant areas, as identified in the initial scoping and diagnostic phase, which will be impacted by the conversion to IFRS. This phase includes the identification, evaluation and selection of accounting policies required for the transition to IFRS. During this phase, the Company will also evaluate the implication of these changes on business processes, information systems and internal control over financial reporting. To date the Company has completed the majority of the detailed analysis of the significant areas and expects to compete the balance by year-end.
The final phase of the Company's IFRS changeover plan will entail the implementation of the changes identified in the second phase as well as the preparation of draft financial statements and related note disclosure.
As the conversion plan progresses, the Company will be able to provide a more detailed assessment of the financial impact of the transition to IFRS.
Supplementary Measures
In addition to discussing earnings measures in accordance with GAAP, this MD&A provides EBITDA as a supplementary earnings measure. Depreciation and amortization include the write-off of fixed assets. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.
The following table reconciles EBITDA to GAAP measures disclosed in the unaudited interim consolidated statements of earnings for the three and nine-month periods ended
For the three For the nine
months ended months ended
(in thousands of October 31, October 25, October 31, October 25,
dollars) 2009 2008 2009 2008
-------------------------------------------------------------------------
Earnings before
income taxes $ 8,334 $ 15,338 $ 27,454 $ 38,354
Depreciation and
amortization 4,256 4,267 13,043 12,472
Write-off of fixed
assets 78 11 167 184
Interest on long-
term debt and capital
lease obligations 298 444 1,001 1,372
Interest income (170) (484) (605) (1,794)
-------------------------------------------------------------------------
EBITDA $ 12,796 $ 19,576 $ 41,060 $ 50,588
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company also discloses comparable store sales which are defined as sales generated by stores that have been opened for at least one year.
The above measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.
Summary of Quarterly Results
The table below sets forth selected financial data for the eight most recently completed quarters. This unaudited quarterly information has been prepared on the same basis as the annual financial statements. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.
Earnings
(in thousands of dollars before
of dollars, except Income Net Earnings per Share
per share amounts) Sales Taxes Earnings Basic Diluted
-------------------------------------------------------------------------
Third quarter
ended October 31,
2009 $ 75,305 $ 8,334 $ 5,599 $ 0.23 $ 0.23
Second quarter
ended August 1,
2009 81,437 11,550 7,780 0.32 0.32
First quarter
ended May 2,
2009 71,775 7,570 5,070 0.21 0.21
Fourth quarter
ended January 31,
2009 102,555 19,352 13,167 0.54 0.54
Third quarter
ended October 25,
2008 83,763 15,338 9,988 0.40 0.40
Second quarter
ended July 26,
2008 88,680 14,536 9,821 0.39 0.39
First quarter
ended April 26,
2008 70,616 8,480 5,645 0.23 0.22
Fourth quarter
ended January 26,
2008(*) 99,973 19,026 12,359 0.49 0.49
(*) Restated to reflect the change in the accounting policy affecting
inventories as described in note 1 to the audited consolidated
financial statements for 2008.
The Company's business is seasonal in nature. As the Company executes its strategy of broadening its customer base, the Company expects that its business will become less seasonal. However, retail sales are traditionally higher in the fourth quarter due to the holiday season. In addition, fourth quarter earnings results are usually reduced by post holiday sale promotions.
Controls and Procedures
Disclosure controls and procedures
The Chief Executive Officer ("CEO") and the Chief Financial officer ("CFO") have designed disclosure controls and procedures ("DC&P"), or have caused them to be designed under their supervision, to provide reasonable assurance that material information relating to the Company has been made known to them and has been properly disclosed in the annual and quarterly regulatory filings.
Internal controls over financial reporting
The CEO and CFO have designed internal controls over financial reporting ("ICFR"), or have caused them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with Canadian GAAP. The CEO and CFO have evaluated whether there were changes to its ICFR during the three and nine-month periods ended
Forward-looking Statements
This "Management's Discussion and Analysis" may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.
Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.
%SEDAR: 00002941EF
For further information: Emilia Di Raddo, CA, President, (514) 738-7000; Johnny Del Ciancio, CA, Vice-President, Finance, (514) 738-7000; MaisonBrison: Rick Leckner, (514) 731-0000; Source: Le Château Inc.
Share this article