Reitmans (Canada) Limited results for the nine months ended November 3, 2007Dec 4, 2007
MONTREAL, Dec. 4 /CNW Telbec/ - Sales for the nine months ended
November 3, 2007 increased 3.6% to $788,102,000 as compared with $760,399,000
for the nine months ended October 28, 2006. The increase in sales is
attributed to the net addition of 33 stores year over year. Same store sales
for the comparable 39 weeks decreased 1.9%. Operating earnings before
depreciation and amortization (EBITDA(1)) increased 1.5% to $147,051,000 as
compared with $144,891,000 last year. Net earnings and diluted EPS increased
to $77,855,000 or $1.08 per share as compared with $59,512,000 or $0.83 per
share last year. Excluding the impact of the retroactive Québec income tax
assessments and interest of $1,392,000 for the current year and $19,578,000
for last year, net earnings and diluted EPS for the nine months ended
November 3, 2007 would have amounted to $79,247,000 or $1.11 per share as
compared to $79,090,000 or $1.11 per share last year. The Company had
952 stores in operation at the end of this period compared to 919 stores at
the same time last year.
Sales for the third quarter ended November 3, 2007 increased 2.7% to
$265,465,000 as compared with $258,602,000 for the third quarter ended
October 28, 2006. Same store sales for the comparable 13 weeks decreased 3.2%.
Operating earnings before depreciation and amortization (EBITDA(1)) for the
period increased 18.4% to $52,360,000 as compared with $44,219,000 last year.
Net earnings and diluted EPS increased to $27,394,000 or $0.38 per share as
compared to $23,390,000 or $0.33 per share for the period last year. Excluding
the impact of the retroactive Québec income tax assessments and interest of
$475,000 for the current year and $433,000 for last year, net earnings and
diluted EPS for the three months ended November 3, 2007 would have amounted to
$27,869,000 or $0.39 per share as compared to $23,823,000 or $0.33 per share
last year.
During the third quarter, the Company opened 20 new stores and closed
3 stores. Accordingly, at November 3, 2007, there were 952 stores in
operation, consisting of 366 Reitmans, 160 Smart Set, 53 RW & CO., 73 Thyme
Maternity, 14 Cassis, 162 Penningtons and 124 Addition Elle. An additional
14 stores are scheduled to open this year and 6 stores will be closed.
Sales for the month of November (4 weeks ended December 1, 2007)
increased 4.2%; same store sales increased 1.3%.
The Company continues to be in a strong financial position with cash,
cash equivalents and marketable securities of $212,366,000 reported at fair
value (cost of $213,280,000). The Company's short-term cash is conservatively
invested in bank bearer deposit notes and bank term deposits with major
Canadian chartered banks. The Company does not hold any asset backed
commercial paper.
At the Board of Directors meeting held on December 4, 2007, a quarterly
cash dividend (designated eligible dividends) of $0.18 per share was declared
on all Class A non-voting and Common shares outstanding, payable January 30,
2008 to shareholders of record on January 11, 2008. This is an increase of
12.5% over the previous quarterly rate of $0.16 per share resulting in an
annual dividend rate of $0.72 per share.
As reported in the November 22, 2007 press release, the Company received
approval from the Toronto Stock Exchange to proceed with a normal course
issuer bid. Under the bid, the Corporation may purchase up to
2,870,615 Class A non-voting shares, representing 5% of the issued and
outstanding Class A non-voting shares as at November 9, 2007. The bid
commenced on November 28, 2007 and may continue to November 27, 2008.
Financial statements are attached.
Montreal, December 4, 2007
Jeremy H. Reitman, President
Telephone: (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, they should not be
considered in isolation.
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
For the For the
nine months ended three months ended
(in thousands except November 3, October 28, November 3, October 28,
per share amounts) 2007 2006 2007 2006
Sales $ 788,102 $ 760,399 $ 265,465 $ 258,602
Cost of goods sold and
selling, general and
administrative expenses 641,051 615,508 213,105 214,383
---------- ---------- ---------- ----------
147,051 144,891 52,360 44,219
Depreciation and
amortization 36,500 32,498 12,662 10,438
---------- ---------- ---------- ----------
Operating earnings before
the undernoted 110,551 112,393 39,698 33,781
Investment income (note 8) 9,677 9,378 2,628 2,479
Interest on long-term debt 749 798 245 262
---------- ---------- ---------- ----------
Earnings before income
taxes 119,479 120,973 42,081 35,998
Income taxes:
Current 43,332 43,782 13,495 12,764
Future (3,100) (1,899) 717 (589)
---------- ---------- ---------- ----------
40,232 41,883 14,212 12,175
Québec tax assessments
- current (note 7) 1,392 19,578 475 433
---------- ---------- ---------- ----------
41,624 61,461 14,687 12,608
---------- ---------- ---------- ----------
Net earnings $ 77,855 $ 59,512 $ 27,394 $ 23,390
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share
(note 6):
Basic $ 1.09 $ 0.85 $ 0.39 $ 0.33
Diluted 1.08 0.83 0.38 0.33
The accompanying notes are an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the For the
nine months ended three months ended
(in thousands) November 3, October 28, November 3, October 28,
2007 2006 2007 2006
CASH FLOWS (USED IN) FROM
OPERATING ACTIVITIES
Net earnings $ 77,855 $ 59,512 $ 27,394 $ 23,390
Adjustments for:
Depreciation and
amortization 36,500 32,498 12,662 10,438
Future income taxes (3,100) (1,899) 717 (589)
Stock-based
compensation 771 984 247 308
Amortization of
deferred lease
credits (3,416) (2,971) (1,186) (1,037)
Deferred lease credits 4,255 4,237 1,165 2,107
Pension expense 1,200 1,008 400 336
Gain on sale of
marketable securities (1,991) (2,280) 15 3
Changes in non-cash
working capital items
relating to operations (41,374) 9,170 (3,681) 7,419
---------- ---------- ---------- ----------
70,700 100,259 37,733 42,375
CASH FLOWS (USED IN) FROM
INVESTING ACTIVITIES
Purchases of marketable
securities - (3,982) - -
Proceeds on sale of
marketable securities 12,846 13,770 1,250 811
Additions to capital
assets (56,118) (46,952) (16,975) (23,040)
---------- ---------- ---------- ----------
(43,272) (37,164) (15,725) (22,229)
CASH FLOWS (USED IN) FROM
FINANCING ACTIVITIES
Dividends paid (34,169) (29,552) (11,337) (9,854)
Purchase of Class A
non-voting shares for
cancellation (11,021) (735) (11,021) (735)
Repayment of long-term
debt (800) (752) (270) (255)
Proceeds from issue of
share capital 1,532 999 210 208
---------- ---------- ---------- ----------
(44,458) (30,040) (22,418) (10,636)
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (17,030) 33,055 (410) 9,510
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 188,491 135,399 171,871 158,944
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $ 171,461 $ 168,454 $ 171,461 $ 168,454
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Supplemental disclosure of cash flow information (note 8)
The accompanying notes are an integral part of these consolidated
financial statements.
CONSOLIDATED BALANCE SHEETS (Unaudited)
Audited
November 3, October 28, February 3,
(in thousands) 2007 2006 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents (note 8) $ 171,461 $ 168,454 $ 188,491
Marketable securities (note 8) 40,905 52,624 52,675
Accounts receivable 4,628 3,585 3,439
Merchandise inventories 86,736 89,836 61,834
Prepaid expenses 24,585 10,027 21,405
Future income taxes 344 - -
---------- ---------- ----------
Total Current Assets 328,659 324,526 327,844
CAPITAL ASSETS 245,860 221,261 226,734
GOODWILL 42,426 42,426 42,426
FUTURE INCOME TAXES 5,949 3,214 3,407
---------- ---------- ----------
$ 622,894 $ 591,427 $ 600,411
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued items $ 86,012 $ 89,733 $ 85,317
Income taxes payable 26,999 42,886 40,289
Future income taxes - - 248
Current portion of long-term debt
(note 5) 1,127 1,059 1,076
---------- ---------- ----------
Total Current Liabilities 114,138 133,678 126,930
DEFERRED LEASE CREDITS 21,697 20,291 20,858
LONG-TERM DEBT (note 5) 14,246 15,372 15,097
FUTURE INCOME TAXES - 118 112
ACCRUED PENSION LIABILITY 2,495 503 1,295
SHAREHOLDERS' EQUITY
Share capital 23,135 18,361 21,323
Contributed surplus 3,864 3,507 3,583
Retained earnings 444,088 399,597 411,213
Accumulated other comprehensive loss (769) - -
---------- ---------- ----------
Total Shareholders' Equity 470,318 421,465 436,119
---------- ---------- ----------
$ 622,894 $ 591,427 $ 600,411
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the For the
nine months ended three months ended
(in thousands) November 3, October 28, November 3, October 28,
2007 2006 2007 2006
SHARE CAPITAL
Balance, beginning of
period $ 21,323 $ 17,374 $ 22,981 $ 18,165
Cash consideration on
exercise of stock
options 1,532 999 210 208
Ascribed value credited
to share capital from
exercise of stock
options 490 - 154 -
Cancellation of shares
pursuant to stock
repurchase program (210) (12) (210) (12)
---------- ---------- ---------- ----------
Balance, end of period 23,135 18,361 23,135 18,361
---------- ---------- ---------- ----------
CONTRIBUTED SURPLUS
Balance, beginning of
period 3,583 2,523 3,771 3,199
Stock option
compensation costs 771 984 247 308
Ascribed value credited
to share capital from
exercise of stock
options (490) - (154) -
---------- ---------- ---------- ----------
Balance, end of period 3,864 3,507 3,864 3,507
---------- ---------- ---------- ----------
RETAINED EARNINGS
Balance, beginning of
period 411,213 370,360 438,842 386,784
Net earnings 77,855 59,512 27,394 23,390
Dividends (34,169) (29,552) (11,337) (9,854)
Premium on repurchase
of Class A non-voting
shares (10,811) (723) (10,811) (723)
---------- ---------- ---------- ----------
Balance, end of period 444,088 399,597 444,088 399,597
---------- ---------- ---------- ----------
ACCUMULATED OTHER
COMPREHENSIVE
INCOME (LOSS)
Balance, beginning of
period - - (305) -
Adjustment to opening
balance due to the new
accounting policies
adopted regarding
financial instruments
(net of tax of $523) 2,883 - - -
Net unrealized loss on
available-for-sale
financial assets
arising during the
period, net of tax (1,906) - (455) -
Reclassification
adjustment for net
gains included in net
earnings, net of tax (1,746) - (9) -
---------- ---------- ---------- ----------
Balance, end of period(1) (769) - (769) -
---------- ---------- ---------- ----------
Total Shareholders' Equity $ 470,318 $ 421,465 $ 470,318 $ 421,465
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(1) Available-for-sale financial investments constitute the sole item in
accumulated other comprehensive income (loss).
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the For the
nine months ended three months ended
(in thousands) November 3, October 28, November 3, October 28,
2007 2006 2007 2006
Net earnings $ 77,855 $ 59,512 $ 27,394 $ 23,390
Other comprehensive income
(loss):
Net unrealized loss on
available-for-sale
financial assets
arising during the
period, net of tax
of $337 ($86 for the
three months ended
November 3, 2007) (1,906) - (455) -
Reclassification
adjustment for net
gains included in net
earnings, net of tax
of $332 ($1 for the
three months ended
November 3, 2007) (1,746) - (9) -
---------- ---------- ---------- ----------
Other comprehensive income
(loss) (3,652) - (464) -
---------- ---------- ---------- ----------
Comprehensive Income $ 74,203 $ 59,512 $ 26,930 $ 23,390
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated
financial statements.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(all amounts in thousands except per share amounts)
1. BASIS OF PRESENTATION
These unaudited interim consolidated 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 53 week period ended February 3, 2007. The Company applied the same
accounting policies in the preparation of the financial statements as
disclosed in note 1 of its annual consolidated financial statements in the
Company's fiscal 2007 Annual Report except as described below in note 2 -
changes in accounting policies.
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 13 weeks ended November 3, 2007,
which is not necessarily indicative of performance for the balance of the
year.
All amounts in the attached footnotes are unaudited unless specifically
identified.
2. CHANGES IN ACCOUNTING POLICIES
On February 4, 2007, the Company adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA").
As provided under the standards, the adoption of these recommendations was
done without restatement of prior period consolidated financial statements.
The transitional adjustments resulting from these standards are recognized in
the opening balance of accumulated other comprehensive income.
CICA Section 1530 - Comprehensive Income
This CICA Handbook section introduced a statement of comprehensive income
which is included in the full set of interim and annual financial statements.
Comprehensive income represents the change in equity during a period from
transactions and other events and circumstances from non-owner sources and
will include all changes in equity other than those resulting from investments
by owners and distributions to owners.
CICA Section 3251 - Equity
This CICA Handbook section, which replaced Section 3250 - Surplus,
establishes standards for the presentation of equity and changes in equity
during the reporting period and requires the Company to present separately
equity components and changes in equity arising from (i) net earnings;
(ii) other comprehensive income; (iii) other changes in retained earnings;
(iv) changes in contributed surplus; (v) changes in share capital; and
(vi) changes in reserves. New consolidated statements of changes in
shareholders' equity are included in these financial statements.
CICA Section 3855 - Financial Instruments - Recognition and Measurement
This CICA Handbook section establishes standards for recognition and
measurement of financial assets, financial liabilities and non-financial
derivatives. All financial instruments must be classified into a defined
category, namely, held-to-maturity investments, held-for-trading financial
assets and financial liabilities, available-for-sale financial assets, loans
and receivables or other financial liabilities. The standard requires that
financial instruments within scope, including derivatives, be included on the
Company's balance sheet and measured at fair value, except for loans and
receivables, held-to-maturity investments and other financial liabilities
which are measured at cost or amortized cost. Gains and losses on
held-for-trading financial assets and financial liabilities are recognized in
net earnings in the period in which they arise. Unrealized gains and losses,
including changes in foreign exchange rates on available-for-sale financial
assets are recognized in other comprehensive income until the financial assets
are derecognized or impaired, at which time any unrealized gains or losses are
recorded in net earnings. Transaction costs are added to the financial asset
on initial recognition and are recognized in net earnings when the asset is
derecognized or impaired.
Fair values of available-for-sale financial assets are based on published
market prices at month end.
CICA Section 3861 - Financial Instruments - Disclosure and Presentation
This CICA Handbook section, which replaced Section 3860 of the same name,
establishes standards for presentation of financial instruments and
non-financial derivatives, and identifies the information that should be
disclosed about them.
The adoption of these new standards resulted in the following changes in
the classification and measurement of the Company's financial instruments,
previously recorded at cost:
Cash and cash equivalents are classified as "financial assets
held-for-trading" and are measured at fair value. These financial assets are
marked-to-market through net earnings and recorded as investment income at
each period end. This change had no impact on the Company's consolidated
financial statements.
Accounts receivable are classified as "loans and receivables" and are
recorded at cost which at initial measurement corresponds to fair value. After
their initial fair value measurement, they are measured at amortized cost
using the effective interest rate method. This change had no impact on the
Company's consolidated financial statements.
Marketable securities, which consist primarily of preferred shares of
Canadian public companies, are classified as "available-for-sale securities".
These financial assets are marked-to-market through other comprehensive income
at each period end. The initial impact of measuring the available-for-sale
securities at fair value was a net unrealized gain of $2,883, net of tax of
$523, which was recorded in opening accumulated other comprehensive income.
Accounts payable and accrued items and long-term debt are classified as
"other financial liabilities". They are initially measured at fair value and
subsequent revaluations are recorded at amortized cost using the effective
interest rate method. This change had no impact on the Company's consolidated
financial statements.
The Company uses a variety of strategies, such as foreign exchange option
contracts, with maturities not exceeding three months, to manage its exposure
to fluctuations in the US dollar. These derivative financial instruments are
not used for speculative purposes. These financial assets are marked-to-market
through net earnings at each period end. This change had no impact on the
Company's consolidated financial statements.
Embedded derivatives (elements of contracts whose cash flows move
independently from the host contract) are required to be separated and
measured at fair values if certain criteria are met. Under an election
permitted by the new standard, management reviewed contracts entered into or
modified subsequent to February 2, 2003 and determined that the Company does
not currently have any significant embedded derivatives in these contracts
that require separate accounting and disclosure.
3. SHARE CAPITAL
The Company has authorized an unlimited number of Class A non-voting
shares.
During the quarter, the Company purchased 561 Class A non-voting shares
having a book value of $210 under its stock repurchase program for a total
cash consideration of $11,021. The excess of the purchase price over book
value of the shares in the amount of $10,811 was charged to retained earnings.
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
November 3, October 28, November 3, October 28,
2007 2006 2007 2006
Balance at beginning
of period 57,817 56,747 57,935 56,928
Shares issued pursuant to
exercise of stock options 156 239 38 58
Class A non-voting shares
for cancellation (561) (41) (561) (41)
---------- ---------- ---------- ----------
Balance at end of period 57,412 56,945 57,412 56,945
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The Company has authorized an unlimited number of Common shares. At
November 3, 2007, there were 13,440 common shares issued (October 28, 2006 -
13,440; February 3, 2007 - 13,440) with a value of $482 (October 28, 2006 -
$482; February 3, 2007 - $482).
4. STOCK-BASED COMPENSATION
The Company has a share option plan as described in note 7 c) to the
consolidated financial statements contained in the 2007 Annual Report. During
the three and nine month periods ended November 3, 2007, no options were
granted. For the nine months ended November 3, 2007, eight thousand options
were cancelled.
5. LONG-TERM DEBT
Audited
November 3, October 28, February 3,
2007 2006 2007
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 $ 15,373 $ 16,431 $ 16,173
Less current portion 1,127 1,059 1,076
---------- ---------- ----------
$ 14,246 $ 15,372 $ 15,097
---------- ---------- ----------
---------- ---------- ----------
6. EARNINGS PER SHARE
For the For the
nine months ended three months ended
November 3, October 28, November 3, October 28,
2007 2006 2007 2006
Weighted average number of
shares per basic earnings
per share calculations 71,244 70,321 71,079 70,379
Effect of dilutive options
outstanding 688 1,436 619 1,360
---------- ---------- ---------- ----------
Weighted average number of
shares per diluted
earnings per share
calculations 71,932 71,757 71,698 71,739
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
7. INCOME TAXES
During the second quarter of the fiscal year ended February 3, 2007, the
Québec National Assembly enacted legislation (Bill 15) that retroactively
changed certain tax laws that subject the Company to additional taxes and
interest for the 2003, 2004 and 2005 years. In accordance with Canadian
generally accepted accounting principles, as a result of Québec income tax
assessments received, an amount of $20,054 for retroactive taxes and interest
was expensed in the fiscal year ended February 3, 2007 ($433 and $19,578 for
the three and nine months period ended October 28, 2006). An additional amount
of $475 and $1,392 were expensed in the three and nine months ended
November 3, 2007, respectively, representing additional accrued interest.
The Company has filed formal objection notices for these unpaid
assessments and is pursuing all avenues to mitigate the tax liability.
However, the Company is unable to judge the likelihood of success.
8. SUPPLEMENTARY INFORMATION
Audited
November 3, October 28, February 3,
2007 2006 2007
Balance with banks (overdraft) $ 4,234 $ (6,696) $ 6,239
Short-term deposits, bearing interest
at 4.7% (October 28, 2006 - 4.3%;
February 3, 2007 - 4.3%) 167,227 175,150 182,252
---------- ---------- ----------
$ 171,461 $ 168,454 $ 188,491
---------- ---------- ----------
---------- ---------- ----------
Non-cash transactions:
Capital asset additions included
in accounts payable $ 2,912 $ 1,683 $ 3,404
For the For the
nine months ended three months ended
November 3, October 28, November 3, October 28,
2007 2006 2007 2006
Cash paid during the
period for:
Income taxes $ 61,196 $ 36,746 $ 14,917 $ 6,075
Interest 802 957 250 349
Investment income:
Available-for-sale
financial assets:
Interest income $ 51 $ 58 $ 11 $ 19
Dividends 1,833 2,417 586 688
Realized gain (loss)
on disposal 1,991 2,280 (15) (3)
Held-for-trading
financial assets:
Interest income 5,802 4,623 2,046 1,775
---------- ---------- ---------- ----------
$ 9,677 $ 9,378 $ 2,628 $ 2,479
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
At November 3, 2007, marketable securities amounted to $40,905 reported
at fair value (cost of $41,819) as compared with $52,624 last year reported at
cost (with a market value of $56,396). At February 3, 2007, marketable
securities amounted to $52,675 (with a market value of $56,081). Due to new
accounting standards with respect to financial instruments that were adopted
by the Company in the first quarter of fiscal 2008, marketable securities have
been measured and reported at their fair value at November 3, 2007 while the
comparative year is reported at cost.
9. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
presentation adopted in the current year.
%SEDAR: 00002316EF
For further information: Jeremy H. Reitman, President, (514) 385-2630, www.reitmans.ca |