Reitmans (Canada) Limited announces its results for the nine months ended
October 31, 2009
Sales for the third quarter ended
Sales for the month of November (four weeks ended
During the third quarter, the Company opened 12 new stores comprised of 3 Reitmans, 3 Smart Set, 3 RW & CO., 1 Cassis, 1 Penningtons and 1 Addition Elle; 2 stores were closed. Accordingly, at
At the Board of Directors meeting held on
As reported in the
Financial statements are attached.
Montreal, December 8, 2009
Jeremy H. Reitman, President
Tel: (514) 385-2630
Corporate Website: www.reitmans.ca
All of the statements contained herein, other than statements of fact that are independently verifiable at the date hereof, are forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the Company's control. Such risks include but are not limited to: the impact of general economic conditions, general conditions in the retail industry, seasonality, weather and other risks included in public filings of the Company. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the forward-looking statements included herein. These statements speak only as of the date made and the Company is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise, except to the extent required under applicable securities law.
(1) This release includes reference to certain Non-GAAP Financial
Measures such as operating earnings before depreciation and
amortization and EBITDA, which are defined as earnings before
interest, taxes, depreciation and amortization and investment income.
The Company believes such measures provide meaningful information on
the Company's performance and operating results. However, readers
should know that such Non-GAAP financial measures have no
standardized meaning as prescribed by GAAP and may not be comparable
to similar measures presented by other companies. Accordingly, these
should not be considered in isolation.
STATEMENTS OF EARNINGS (Unaudited)
(in thousands For the nine months ended For the three months ended
except per share October 31, November 1, October 31, November 1,
amounts) 2009 2008 2009 2008
Sales $ 788,407 $ 789,060 $ 270,684 $ 271,240
Cost of goods
sold and selling,
general and
administrative
expenses (note 4) 667,236 637,868 228,586 223,367
------------- ------------- ------------- -------------
121,171 151,192 42,098 47,873
Depreciation and
amortization 45,181 43,297 15,022 14,515
------------- ------------- ------------- -------------
Operating earnings
before the
undernoted 75,990 107,895 27,076 33,358
Investment income
(note 9) 2,020 5,879 613 1,622
Interest on long-
term debt 642 697 209 228
------------- ------------- ------------- -------------
Earnings before
income taxes 77,368 113,077 27,480 34,752
Income taxes:
Current 26,643 38,569 9,929 12,710
Future (2,423) (2,317) (1,370) (962)
------------- ------------- ------------- -------------
24,220 36,252 8,559 11,748
------------- ------------- ------------- -------------
Net earnings $ 53,148 $ 76,825 $ 18,921 $ 23,004
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings per
share (note 8):
Basic $ 0.77 $ 1.09 $ 0.28 $ 0.33
Diluted 0.77 1.08 0.28 0.32
The accompanying notes are an integral part of these financial
statements.
STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended For the three months ended
October 31, November 1, October 31, November 1,
(in thousands) 2009 2008 2009 2008
CASH FLOWS (USED
IN) FROM
OPERATING
ACTIVITIES
Net earnings $ 53,148 $ 76,825 $ 18,921 $ 23,004
Adjustments for:
Depreciation
and
amortization 45,181 43,297 15,022 14,515
Future income
taxes (2,423) (2,317) (1,370) (962)
Stock-based
compensation 810 519 511 150
Amortization
of deferred
lease credits (3,870) (3,930) (1,333) (1,368)
Deferred lease
credits 3,312 5,287 2,297 1,651
Pension
contribution (454) (1,280) (154) (1,101)
Pension expense 1,350 2,147 450 1,327
Loss on sale of
marketable
securities 61 - - -
Foreign
exchange
loss (gain) 722 (1,290) (135) (1,515)
Changes in non-
cash working
capital items
relating to
operations (16,035) (37,095) 8,201 3,371
------------- ------------- ------------- -------------
81,802 82,163 42,410 39,072
CASH FLOWS (USED
IN) FROM
INVESTING
ACTIVITIES
Purchases of
marketable
securities (1,843) - (70) -
Proceeds on sale
of marketable
securities 1,390 - - -
Additions to
capital assets (27,811) (45,507) (11,113) (18,624)
------------- ------------- ------------- -------------
(28,264) (45,507) (11,183) (18,624)
CASH FLOWS (USED
IN) FROM
FINANCING
ACTIVITIES
Dividends paid (37,101) (38,205) (12,244) (12,720)
Purchase of
Class A non-
voting shares
for cancellation (32,485) (4,073) (7,050) -
Repayment of long-
term debt (907) (852) (307) (288)
Proceeds from
issue of share
capital 1,904 178 1,052 -
------------- ------------- ------------- -------------
(68,589) (42,952) (18,549) (13,008)
FOREIGN EXCHANGE
(LOSS) GAIN ON
CASH HELD IN
FOREIGN CURRENCY (722) 1,290 135 1,515
------------- ------------- ------------- -------------
NET (DECREASE)
INCREASE IN CASH
AND CASH
EQUIVALENTS (15,773) (5,006) 12,813 8,955
CASH AND CASH
EQUIVALENTS,
BEGINNING OF THE
PERIOD 214,054 214,301 185,468 200,340
------------- ------------- ------------- -------------
CASH AND CASH
EQUIVALENTS, END
OF THE PERIOD $ 198,281 $ 209,295 $ 198,281 $ 209,295
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplemental disclosure of cash flow information (note 9)
Cash and cash equivalents consist of cash balances with banks and
investments in short-term deposits.
The accompanying notes are an integral part of these financial
statements.
BALANCE SHEETS (Unaudited)
Audited
October 31, November 1, January 31,
(in thousands) 2009 2008 2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents
(note 9) $ 198,281 $ 209,295 $ 214,054
Marketable securities (note 9) 37,254 26,455 32,818
Accounts receivable 3,311 4,389 2,689
Income taxes recoverable 5,429 1,233 3,826
Merchandise inventories 91,791 96,839 64,061
Prepaid expenses 11,083 25,410 11,402
Future income taxes 2,735 1,239 3,598
------------- ------------- -------------
Total Current Assets 349,884 364,860 332,448
CAPITAL ASSETS 230,102 251,752 249,891
GOODWILL 42,426 42,426 42,426
FUTURE INCOME TAXES 11,129 7,930 8,474
------------- ------------- -------------
$ 633,541 $ 666,968 $ 633,239
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
items $ 81,814 $ 92,531 $ 70,632
Current portion of long-term
debt (note 7) 1,279 1,201 1,220
------------- ------------- -------------
Total Current Liabilities 83,093 93,732 71,852
DEFERRED LEASE CREDITS 21,567 22,823 22,125
LONG-TERM DEBT (note 7) 11,765 13,044 12,731
FUTURE INCOME TAXES - - 74
ACCRUED PENSION LIABILITY 4,814 3,388 3,918
SHAREHOLDERS' EQUITY
Share capital 25,370 23,892 23,830
Contributed surplus 4,715 4,476 4,538
Retained earnings 486,920 509,753 502,361
Accumulated other
comprehensive loss (4,703) (4,140) (8,190)
------------- ------------- -------------
482,217 505,613 494,171
------------- ------------- -------------
Total Shareholders' Equity 512,302 533,981 522,539
------------- ------------- -------------
$ 633,541 $ 666,968 $ 633,239
------------- ------------- -------------
------------- ------------- -------------
The accompanying notes are an integral part of these financial
statements.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the nine months ended For the three months ended
October 31, November 1, October 31, November 1,
(in thousands) 2009 2008 2009 2008
SHARE CAPITAL
Balance, beginning
of the period $ 23,830 $ 23,777 $ 24,430 $ 23,892
Cash considera-
tion on
exercise of
stock options 1,904 178 1,052 -
Ascribed value
credited to
share capital
from exercise
of stock
options 633 44 71 -
Cancellation of
shares pursuant
to stock
repurchase
program
(note 5) (997) (107) (183) -
------------- ------------- ------------- -------------
Balance, end of
the period 25,370 23,892 25,370 23,892
------------- ------------- ------------- -------------
CONTRIBUTED SURPLUS
Balance, beginning
of the period 4,538 4,001 4,275 4,326
Stock-based
compensation 810 519 511 150
Ascribed value
credited to
share capital
from exercise
of stock
options (633) (44) (71) -
------------- ------------- ------------- -------------
Balance, end of
the period 4,715 4,476 4,715 4,476
------------- ------------- ------------- -------------
RETAINED EARNINGS
Balance, beginning
of the period 502,361 468,374 487,110 499,469
Adjustment to
opening retained
earnings due to
adoption of new
accounting
standard (net of
tax of $3,121) - 6,725 - -
Net earnings 53,148 76,825 18,921 23,004
Dividends (37,101) (38,205) (12,244) (12,720)
Premium on
repurchase of
Class A non-
voting (note 5) (31,488) (3,966) (6,867) -
------------- ------------- ------------- -------------
Balance, end of
the period 486,920 509,753 486,920 509,753
------------- ------------- ------------- -------------
ACCUMULATED OTHER
COMPREHENSIVE
INCOME (LOSS)
Balance, beginning
of the period (8,190) (1,033) (3,815) (609)
Net unrealized
gain (loss) on
available-for-
sale financial
assets arising
during the
period (net of
tax of $549 for
the nine months
and $424 for
the three
months ended
October 31,
2009; $491 for
the nine months
and $425 for
the three
months ended
November 1,
2008) 3,434 (3,107) (888) (3,531)
Reclassification
of losses on
available-for-
sale financial
assets to net
earnings (net
of tax of $8
for the nine
months ended
October 31,
2009) 53 - - -
------------- ------------- ------------- -------------
Balance, end of
the period(1) (4,703) (4,140) (4,703) (4,140)
------------- ------------- ------------- -------------
Total Share-
holders' Equity $ 512,302 $ 533,981 $ 512,302 $ 533,981
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(1) Available-for-sale financial investments constitute the sole item in
accumulated other comprehensive income (loss).
The accompanying notes are an integral part of these financial
statements.
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the nine months ended For the three months ended
October 31, November 1, October 31, November 1,
(in thousands) 2009 2008 2009 2008
Net earnings $ 53,148 $ 76,825 $ 18,921 $ 23,004
Other comprehen-
sive income:
Net unrealized
gain (loss) on
available-for-
sale financial
assets arising
during the
period (net of
tax of $549 for
the nine months
and $424 for
the three
months ended
October 31,
2009; $491 for
the nine months
and $425 for
the three
months ended
November 1,
2008) 3,434 (3,107) (888) (3,531)
Reclassification
of losses on
available-for-
sale financial
assets to net
earnings (net
of tax of $8
for the nine
months ended
October 31,
2009) 53 - - -
------------- ------------- ------------- -------------
3,487 (3,107) (888) (3,531)
------------- ------------- ------------- -------------
Comprehensive
income $ 56,635 $ 73,718 $ 18,033 $ 19,473
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The accompanying notes are an integral part of these financial
statements.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited)
(all amounts in thousands except per share amounts)
1. BASIS OF PRESENTATION
These unaudited interim financial statements (the "financial statements") have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information and include all normal and recurring entries that are necessary for a fair presentation of the statements. Accordingly, they do not include all of the information and footnotes required by Canadian generally accepted accounting principles for annual financial statements. These financial statements should be read in conjunction with the most recently prepared annual financial statements for the 52 week period ended
The Company has wound up its wholly-owned subsidiaries effectively eliminating the preparation of consolidated financial statements. There was no impact in the comparative financial statements as at and for the periods ended
The Company's business is seasonal and due to the geographical spread of the Company's stores and range of products it offers, the Company has experienced quarterly fluctuations in operating results. The business seasonality results in performance for the 39 weeks ended
All amounts in the attached footnotes are unaudited unless specifically identified.
2. ADOPTION OF NEW ACCOUNTING STANDARD
In
3. RECENT ACCOUNTING PRONOUNCEMENTS
The Canadian Accounting Standards Board has confirmed that the use of International Financial Reporting Standards ("IFRS") will be required for publicly accountable profit-oriented enterprises. IFRS will replace Canada's current GAAP for those enterprises. These new standards are applicable to fiscal years beginning on or after
4. INVENTORY
The cost of inventory recognized as an expense and included in cost of goods sold and selling, general and administrative expenses for the nine months ended
5. SHARE CAPITAL
The Company has authorized an unlimited number of Class A non-voting shares.
The following table summarizes Class A non-voting shares issued for each of the quarters listed:
For the For the
nine months ended three months ended Audited
October November October November January
31, 2009 1, 2008 31, 2009 1, 2008 31, 2009
Balance at
beginning of the
period 56,864 57,473 54,934 57,228 57,473
Shares issued
pursuant to
exercise of stock
options 197 30 89 - 46
Shares purchased
under issuer bid (2,481) (275) (443) - (655)
---------- ---------- ---------- ---------- ----------
Balance at end of
the period 54,580 57,228 54,580 57,228 56,864
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
The Company has authorized an unlimited number of Common shares. At
The Company received, in
6. STOCK-BASED COMPENSATION
The Company has a share option plan as described in note 10 c) to the financial statements contained in the 2009 Annual Report. Following approval by the shareholders and the
7. LONG-TERM DEBT
Audited
October 31, November 1, January 31,
2009 2008 2009
Mortgage bearing interest at
6.40%, payable in monthly
instalments of principal and
interest of $172, due November
2017 and secured by the
Company's distribution centre $ 13,044 $ 14,245 $ 13,951
Less current portion 1,279 1,201 1,220
------------- ------------- -------------
$ 11,765 $ 13,044 $ 12,731
------------- ------------- -------------
------------- ------------- -------------
8. EARNINGS PER SHARE
The number of shares used in the earnings per share calculation is as
follows:
For the nine months ended For the three months ended
October 31, November 1, October 31, November 1,
2009 2008 2009 2008
Weighted average
number of shares
per basic
earnings per
share calculations 69,061 70,803 68,200 70,668
Effect of dilutive
options out-
standing 148 356 265 314
------------- ------------- ------------- -------------
Weighted average
number of shares
per diluted
earnings per
share calcula-
tions 69,209 71,159 68,465 70,982
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
As at October 31, 2009, a total of 2,193 stock options were excluded from
the calculation of diluted earnings per share as these were deemed to be
anti-dilutive, because the exercise prices were greater than the average
market price of the shares during the quarter.
9. OTHER INFORMATION
a) Included in the determination of the Company's net earnings for the
three months and nine months ended October 31, 2009 are foreign
exchange gains and losses of $1,073 and $293 respectively (gains of
$1,323 and $1,736 for the three months and nine months ended November
1, 2008 respectively).
b) Supplementary cash flow information:
Audited
October November January
31, 2009 1, 2008 31, 2009
Balance with
banks $ 3,909 $ 4,923 $ 1,069
Short-term
deposits, bearing
interest at 0.3%
(November 1, 2008
- 3.2%; January
31, 2009 - 1.0%) 194,372 204,372 212,985
---------- ---------- ----------
Cash and cash
equivalents $ 198,281 $ 209,295 $ 214,054
---------- ---------- ----------
---------- ---------- ----------
Marketable
securities:
Fair value $ 37,254 $ 26,455 $ 32,818
Cost 42,052 31,249 41,660
Non-cash
transactions:
Capital asset
additions
included
in accounts
payable and
accrued items $ 870 $ 2,908 $ 3,289
Ascribed value
credited to
share capital
from exercise
of stock
options 633 44 63
For the For the
nine months ended three months ended Audited
October November October November January
31, 2009 1, 2008 31, 2009 1, 2008 31, 2009
Cash paid during
the period for:
Income taxes $ 28,663 $ 59,504 $ 7,737 $ 13,920 $ 70,886
Interest 642 705 209 230 975
Investment income:
Available-for-
sale financial
assets:
Interest
income $ - $ 36 $ - $ 14 $ 42
Dividends 1,562 1,224 490 401 1,719
Realized loss
on disposal (61) - - - (2,350)
Held-for-trading
financial assets:
Interest income 519 4,619 123 1,207 5,940
---------- ---------- ---------- ---------- ----------
$ 2,020 $ 5,879 $ 613 $ 1,622 $ 5,351
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
10. FINANCIAL INSTRUMENTS
a) Fair Value Disclosure
Fair value estimates are made at a specific point in time, using available information about the financial instrument. These estimates are subjective in nature and often cannot be determined with precision.
The Company has determined that the carrying value of its short-term financial assets and liabilities approximates fair value at the period-end dates due to the short-term maturity of these instruments. The fair values of the marketable securities are based on published market prices at period-end.
The fair value of long-term debt is
The fair value of the Company's long-term debt bearing interest at a fixed rate was calculated using the present value of future payments of principal and interest discounted at the current market rates of interest available to the Company for the same or similar debt instruments with the same remaining maturities.
b) Risk Management
Disclosures relating to exposure to risks, in particular credit risk, liquidity risk, foreign currency risk, interest rate risk and equity price risk were provided at
Foreign Currency Risk
The Company purchases a significant amount of its merchandise with US dollars. The Company uses a combination of foreign exchange option contracts and spot purchases to manage its foreign exchange exposure on cash flows related to these purchases. These option contracts generally do not exceed three months. A foreign exchange option contract represents an option to buy a foreign currency from a counterparty to meet its obligations. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. The Company reduces this risk by dealing only with highly-rated counterparties, normally major Canadian financial institutions.
As at
The Company has performed a sensitivity analysis on its US dollar denominated financial instruments, which consist principally of cash and cash equivalents of
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE PERIODS ENDED OCTOBER 31, 2009
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of Reitmans (
All financial information contained in this MD&A and Reitmans' financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), except for certain information referred to as Non-GAAP financial measures discussed below. All amounts in this report are in Canadian dollars, unless otherwise noted. The financial statements and this MD&A were reviewed by Reitmans' Audit Committee and were approved by its Board of Directors on
The Company has wound up its wholly-owned subsidiaries, eliminating the preparation of consolidated financial statements. There was no impact on the comparative financial statements as at and for the periods ended
Additional information about Reitmans, including the Company's 2009 Annual Information Form, is available on the Company's website at www.reitmans.ca or on the SEDAR website at www.sedar.com.
FORWARD-LOOKING STATEMENTS
All of the statements contained herein, other than statements of fact that are independently verifiable at the date hereof, are forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the Company's control. Such risks include but are not limited to: the impact of general economic conditions, general conditions in the retail industry, seasonality, weather and other risks included in public filings of the Company. Consequently, actual future results may differ materially from the anticipated results expressed in forward-looking statements. The reader should not place undue reliance on the forward-looking statements included herein. These statements speak only as of the date made and the Company is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise, except to the extent required under applicable securities law.
NON-GAAP FINANCIAL MEASURES
This MD&A includes references to certain Non-GAAP financial measures such as operating earnings before depreciation and amortization ("EBITDA"), which is defined as earnings before interest, taxes, depreciation and amortization and investment income and adjusted net earnings and adjusted earnings per share, which are defined in the section entitled 'Summary of Quarterly Results'. The Company believes such measures provide meaningful information on the Company's performance and operating results. However, readers should know that such Non-GAAP financial measures have no standardized meaning as prescribed by GAAP and may not be comparable to similar measures presented by other companies. Accordingly, these should not be considered in isolation.
CORPORATE OVERVIEW
Reitmans is a Canadian ladies' wear specialty apparel retailer. The Company has seven banners: Reitmans, Smart Set, RW & CO., Thyme Maternity, Cassis, Penningtons and Addition Elle. Each banner is focused on a particular niche in the retail marketplace. Each banner has a distinct marketing program as well as a specific website thereby allowing the Company to continue to enhance its brands and strengthen customer loyalty. The Company has several competitors in each niche, including local, regional and national chains of specialty stores and department stores as well as foreign-based competitors. The Company's stores are located in malls, strip plazas, retail power centres and on major shopping streets across
The Company offers e-commerce website shopping in its plus-size banners (Penningtons and Addition Elle). This online channel offers customers convenience, selection and ease of purchase, while enhancing customer loyalty and continuing to build the brands.
OPERATING RESULTS FOR THE NINE MONTHS ENDED OCTOBER 31, 2009 ("year to
date") AND COMPARISON TO OPERATING RESULTS FOR NINE MONTHS ENDED NOVEMBER
1, 2008 ("year to date fiscal 2009")
Sales for the year to date remained virtually unchanged at
For the year to date, EBITDA decreased by
Depreciation and amortization expense for the year to date was
Investment income for the year to date decreased 65.6% to
Interest expense on long-term debt decreased to
Income tax expense for the year to date amounted to
Net earnings for the year to date decreased 30.8% to
The Company in its normal course of business makes long lead time commitments for a significant portion of its merchandise purchases, in some cases as long as eight months. In the year to date, these merchandise purchases, which are payable in US dollars, exceeded
During the year to date, the Company opened 21 stores comprised of 5 Reitmans, 3 Smart Set, 6 RW & CO., 1 Thyme Maternity, 2 Cassis, 3 Penningtons and 1 Addition Elle; 13 stores were closed. Accordingly, at
Store closings take place for a variety of reasons as the viability of each store and its location is constantly monitored and assessed for continuing profitability. In most cases when a store is closed, merchandise at that location is sold off in the normal course of business and any unsold merchandise remaining at the closing date is generally transferred to other stores operating under the same banner for sale in the normal course of business.
OPERATING RESULTS FOR THE THREE MONTHS ENDED OCTOBER 31, 2009 ("third
quarter") AND COMPARISON TO OPERATING RESULTS FOR THREE MONTHS ENDED
NOVEMBER 1, 2008 ("third quarter of fiscal 2009")
Sales for the third quarter decreased 0.2% to
For the third quarter, EBITDA decreased by
Depreciation and amortization expense for the third quarter was
Investment income for the third quarter decreased 62.2% to
Interest expense on long-term debt decreased to
Income tax expense for the third quarter amounted to
Net earnings for the third quarter decreased 17.7% to
The Company in its normal course of business makes long lead time commitments for a significant portion of its merchandise purchases, in some cases as long as eight months. In the third quarter, these merchandise purchases, which are payable in US dollars, exceeded
During the third quarter, the Company opened 12 stores comprised of 3 Reitmans, 3 Smart Set, 3 RW & CO., 1 Cassis, 1 Penningtons and 1 Addition Elle; 2 stores were closed.
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.
To measure the Company's performance from one period to the next without the variations caused by the impact of retroactive Québec income tax reassessments for the fiscal year ended
-------------------------------------------------------------------------
(in thousands, Adjusted
except per Earnings per Earnings per
share Share ("EPS") Share ("EPS")
amounts) Adjusted
Net Net
Sales Earnings Basic Diluted Earnings Basic Diluted
---------------------------------------------------------------
October 31,
2009 $ 270,684 $ 18,921 $ 0.28 $ 0.28 $ 18,921 $ 0.28 $ 0.28
August 1,
2009 286,071 26,426 0.38 0.38 26,426 0.38 0.38
May 2,
2009 231,652 7,801 0.11 0.11 7,801 0.11 0.11
January 31,
2009 261,801 8,981 0.13 0.13 8,981 0.13 0.13
November 1,
2008 271,240 23,004 0.33 0.32 23,004 0.33 0.32
August 2,
2008 289,502 35,385 0.50 0.50 35,385 0.50 0.50
May 3,
2008 228,318 18,436 0.26 0.26 18,436 0.26 0.26
February 2,
2008 269,618 37,047 0.52 0.52 28,506 0.40 0.40
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The retail business is seasonal and results of operations for any interim period are not necessarily indicative of the results of operations for the full fiscal year.
BALANCE SHEET
Cash and cash equivalents amounted to
Accounts receivable are
The Company invested
Accounts payable and accrued items are
The Company maintains a defined benefit pension plan ("PLAN"). An actuarial valuation was performed as at
COMPARISON OF FINANCIAL POSITION AS AT
Cash and cash equivalents amounted to
Accounts payable and accrued items are
OPERATING RISK MANAGEMENT
Economic Environment
The prolonged economic recession continues to negatively impact the retail environment. Rising unemployment levels and consumer concern over erosion of their wealth due to declines in equity markets and house prices have impacted consumer discretionary spending, most notably apparel. Reduced access to credit, interest rates, personal debt levels and unemployment rates impact consumer spending and ultimately have a financial impact on the Company. The Company closely monitors economic conditions in order to react to consumer spending habits and constraints in developing both its short-term and long-term operating decisions. Additionally, despite the impact of reduced access to credit for many businesses, the Company is in a strong financial position with significant liquidity available and ample financial credit resources to draw upon as deemed necessary.
Competitive Environment
The apparel business in
Seasonality
The Company is principally engaged in the sale of women's apparel through 981 leased retail outlets operating under seven banners located across
Distribution and Supply Chain
The Company depends on the efficient operation of its sole distribution centre, such that any significant disruption in the operation thereof (e.g. natural disaster, system failures, destruction or major damage by fire), could materially delay or impair its ability to replenish its stores on a timely basis causing a loss of future sales, which could have a significant effect on the Company's results of operations.
Information Technology
The Company depends on information systems to manage its operations, including a full range of retail, financial, merchandising and inventory control, planning, forecasting, reporting and distribution systems. The Company regularly invests to upgrade, enhance, maintain and replace these systems. Any significant disruptions in the performance of these systems could have a material adverse impact on the Company's operations and financial results.
Government Regulation
The Company is structured in a manner that management considers to be most effective to conduct its business in every Canadian province and territory. The Company is therefore subject to all manner of material and adverse changes that can take place in any one or more of these jurisdictions as they might impact income and sales, taxation, duties, quota impositions or re-impositions and other legislated or government regulated matters.
Merchandise Sourcing
Virtually all of the Company's merchandise is private label. In the first nine months of fiscal 2010, no supplier represented more than 10% of the Company's purchases (in dollars and/or units) and there are a variety of alternative sources (both domestic and offshore) for virtually all of the Company's merchandise. The Company has good relationships with its suppliers and has no reason to believe that it is exposed to any material risk that would operate to prevent the Company from acquiring, distributing and/or selling merchandise on an ongoing basis.
FINANCIAL RISK MANAGEMENT
Disclosures relating to exposure to risks, in particular credit risk, liquidity risk, foreign currency risk, interest rate risk and equity price risk were provided at
Foreign Currency Risk
The Company purchases a significant amount of its merchandise with US dollars. The Company uses a combination of foreign exchange option contracts and spot purchases to manage its foreign exchange exposure on cash flows related to these purchases. These option contracts generally do not exceed three months. A foreign exchange option contract represents an option to buy a foreign currency from a counterparty. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. The Company reduces this risk by dealing only with highly-rated counterparties, normally major Canadian financial institutions. For the third quarter of fiscal 2010, the Company satisfied its US dollar requirements through spot rate purchases.
As at
The Company has performed a sensitivity analysis on its US dollar denominated financial instruments, which consist principally of cash and cash equivalents of
LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES
During the year to date, a total of 2,481,000 Class A non-voting shares were purchased in the market under a normal course issuer bid for
The Company has granted standby letters of credit, issued by highly-rated financial institutions, to third parties to indemnify them in the event the Company does not perform its contractual obligations. As at
The Company is self-insured on a limited basis with respect to certain property risks and also purchases excess insurance coverage from financially stable third-party insurance companies. The Company maintains comprehensive internal security and loss prevention programs aimed at mitigating the financial impact of operational risks.
The Company continued repayment on its long-term debt, relating to the mortgage on the distribution centre, paying down
In the year to date, the Company invested
FINANCIAL COMMITMENTS
The following table sets forth the Company's financial commitments as at October 31, 2009:
Payments Due by Period
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Contractual Within 2 to 4 5 years
Obligations Total 1 year years and over
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Operating
leases(1) $447,153,000 $ 97,634,000 $206,763,000 $142,756,000
Long-term debt 13,044,000 1,279,000 4,359,000 7,406,000
Interest on
long-term debt 3,640,000 787,000 1,840,000 1,013,000
Other 17,106,000 3,794,000 8,913,000 4,399,000
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Total contractual
obligations $480,943,000 $103,494,000 $221,875,000 $155,574,000
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(1) Represents the minimum lease payments under long-term leases for
store locations and office space as at October 31, 2009.
OFF-BALANCE SHEET ARRANGEMENTS
Derivative Financial Instruments
The Company in its normal course of business must make long lead time commitments for a significant portion of its merchandise purchases, in some cases as long as eight months. Most of these purchases must be paid for in US dollars. The Company uses a variety of strategies, such as foreign exchange option contracts, designed to fix the cost of its continuing US dollar commitments. For the year to date, the Company satisfied its US dollar requirements through spot rate purchases.
A foreign exchange option contract represents an option to buy a foreign currency from a counterparty at a predetermined date and amount. Credit risks exist in the event of failure by a counterparty to fulfill its obligations. The Company reduces this risk by dealing only with highly-rated counterparties, normally Canadian chartered banks.
The Company does not use derivative financial instruments for speculative purposes. Foreign exchange option contracts are entered into with maturities not exceeding three months. As at
Included in the determination of the Company's net earnings for the three months and nine months ended
RELATED PARTY TRANSACTIONS
The Company leases two retail locations which are owned by a related party. The leases for such premises were entered into on commercial terms similar to those for leases entered into with third parties for similar premises. In the year to date, the rent expense under these leases was, in the aggregate, approximately
The Company incurred
These transactions are recorded at the amount of consideration paid, as established and agreed to by the related parties.
FINANCIAL INSTRUMENTS
The Company's significant financial instruments consist of cash and cash equivalents along with marketable securities. The Company uses its cash resources to fund ongoing store construction and renovations along with working capital needs. Financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company reduces its credit risks by investing available cash in bank bearer deposit notes and bank term deposits with major Canadian chartered banks. The Company closely monitors its risk with respect to short-term cash investments. Marketable securities consist primarily of preferred shares of Canadian public companies. The Company's investment portfolio is subject to stock market volatility and widespread declines in the stock market due to the economic recession resulted in a reduction in the market value of these securities. However, due to market improvement since
The volatility of the Canadian dollar impacts earnings and while the Company considers a variety of strategies, such as foreign exchange option contracts, designed to fix the cost of its continuing US dollar commitments, this unpredictability can result in exposure to risk.
CRITICAL ACCOUNTING ESTIMATES
Inventory Valuation
The Company uses the retail inventory method in arriving at cost. Merchandise inventories are valued at the lower of cost and net realizable value. Excess or slow moving items are identified and a provision is taken using management's best estimate. In addition, a provision for shrinkage and sales returns are also recorded using historical rates experienced. Given that inventory and cost of sales are significant components of the financial statements, any changes in assumptions and estimates could have a material impact on the Company's financial position and results of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation and other stock-based payments using the fair value method. Stock options granted result in an expense over their vesting period based on their estimated fair values on the date of grant, determined using the Black-Scholes option pricing model. In computing the compensation cost related to stock option awards granted during the year under the fair value approach, various assumptions are used to determine the expected option life, risk-free interest rate, expected stock price volatility and average dividend yield. The use of different assumptions could result in a stock compensation expense that differs from that which the Company has recorded.
Pension
The Company maintains a contributory, defined benefit pension plan and sponsors a SERP. The costs of the defined benefit pension plan and SERP are determined periodically by independent actuaries. Pension expense is included in operations. Assumptions used in developing the net pension expense and projected benefit obligation include a discount rate, rate of increase in salary levels and expected long-term rate of return on plan assets. Effective the beginning of the fiscal year ending 2010, due to the recent performance in the equity markets in
Goodwill
Goodwill is not amortized but rather is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the Company determines in the future that impairment has occurred, the Company would be required to write off the impaired portion of goodwill.
Gift Cards
Gift cards sold are recorded as a liability and revenue is recognized when the gift card is redeemed. The Company, for each reporting period, reviews the gift card liability and assesses its adequacy. In its review, the Company estimates expected usages and evaluates specific trends and patterns, which can result in an adjustment to the liability for unredeemed gift cards.
ADOPTION OF NEW ACCOUNTING STANDARD
In
CONVERGENCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
In
The Company began planning the transition from current Canadian GAAP to IFRS in 2008 by establishing a project plan and a project team. The project team is led by senior finance executives that provide overall project governance, management and support. Members also include representatives from various areas of the organization as necessary and external advisors that have been engaged to assist in the IFRS conversion project. The project team reports quarterly to the Audit Committee of the Company.
The project plan consists of three phases: the initial assessment, detailed assessment and design, and implementation. The Company has completed the initial assessment phase, which included the completion of a high level review of the major differences between current Canadian GAAP and IFRS, and an initial evaluation of IFRS 1 transition exemptions. The initial assessment also included training sessions for project team members and discussions with the Company's external auditors and advisors.
The Company is now engaged in the detailed assessment and design phase. The detailed assessment and design phase involves completing a comprehensive analysis of the impact of the IFRS differences identified in the initial assessment phase. The design of solutions to resolve these IFRS differences is progressing according to plan and set out below are the main areas where changes to accounting policies are expected at this time:
- Presentation of Financial Statements (IAS 1)
- Income Taxes (IAS 12)
- Property, Plant and Equipment (IAS 16)
- Impairment of Assets (IAS 36)
During the implementation phase, the Company will implement the identified changes to business processes, financial systems, accounting policies, disclosure controls and internal controls over financial reporting.
The Company continues to assess the financial reporting impacts of converting to IFRS and, at this time, the impact on future financial position and results of operations is not reasonably determinable or estimable.
OUTSTANDING SHARE DATA
At
In
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Company has designed disclosure controls and procedures to provide reasonable assurance that material information related to the Company is included in the annual and quarterly filings. In addition, the Company evaluated the effectiveness of the disclosure controls and procedures as of
The Company, under the supervision of the Chief Executive Officer and Chief Financial Officer, has designed internal controls over financial reporting, as defined by National Instrument 52-109, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company evaluated the effectiveness of the internal controls over financial reporting as of
There have been no changes in the Company's internal controls over financial reporting during the nine months ended
OUTLOOK
The prolonged economic recession continues to negatively impact the retail environment despite some evidence of a slow recovery. High unemployment levels and consumer concern over erosion of their wealth due to declines in equity markets and house prices have impacted consumer discretionary spending. The Bank of
The Company's
We believe that, in general, our merchandise offerings will continue to remain attractive values to the consumer, even in these difficult times. The Company has a strong balance sheet, with excellent liquidity and borrowing capacity. Its systems, including merchandise procurement, inventory control, planning, allocation and distribution, distribution centre management, point-of-sale, financial management and information technology are fully integrated. The Company is committed to continue to invest in training for all levels of its employees.
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For further information: Jeremy H. Reitman, President, (514) 385-2630, Corporate Website: www.reitmans.ca
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