Dollarama Group L.P. Announces Second Quarter Fiscal 2008 Results



    MONTREAL, Sept. 19 /CNW/ -- Dollarama Group L.P. (the "Company"), the
leading operator of dollar discount stores in Canada, today announced its
results for the second quarter of fiscal year 2008, which ended August 5,
2007.  [Note:  all dollar amounts in this press release are in Canadian
dollars unless otherwise indicated.]
    On February 1, 2007, the Company changed its fiscal year end from January
31 to February 4, 2007 for fiscal year 2007, and to a floating year ending on
the Sunday closest to January 31 for all subsequent fiscal years.  The Company
decided to change the year end date of its fiscal year 2007 to February 4,
2007 even though it is not the Sunday closest to January 31 because
traditionally, every 5 to 6 years, a week is added to the retail calendar. The
week ended February 4, 2007 is therefore equivalent to our 53rd week in the
retail calendar.  The rest of our fiscal year end dates fall on the Sunday
closest to January 31.  Our fiscal year 2008 began February 5, 2007 and will
end February 3, 2008.  There is one less day of transactions included in the
13-week period ended August 5, 2007 than in the three-month period ended July
31, 2006.
    Dollarama Group L.P. reported that sales increased $25.1 million, or
12.0%, to $233.2 million for the second quarter of fiscal year 2008, up from
$208.1 million for the three-month period ended July 31, 2006.  Sales growth
was driven primarily by the opening of 58 new stores during the 52 week period
ended August 5, 2007.  New store openings accounted for approximately $22.4
million or 89.3% of the sales increase and was offset by the temporary closure
of 4 stores during the same period.  Another factor was comparable store sales
growth of 0.7% for the 13-week period ended August 5, 2007, the latter of
which was offset by one less day of transactions during the period.
    Net earnings for the second quarter of fiscal year 2008 increased $5.9
million to $22.3 million from $16.4 million for the three-month period ended
July 31, 2006.  Adjusted EBITDA increased 18.2%, to $40.9 million for the 13-
week period ended August 5, 2007 from $34.6 million for the three-month period
ended July 31, 2006.
    "Dollarama continues to grow as a shopping destination for consumers who
look for value and opportunities to extend their purchasing power.  To meet
this continuing strong demand for our concept, we expanded our presence across
Canada by adding 9 stores this quarter," said Larry Rossy, Chief Executive
Officer of Dollarama.  "We continue to focus on merchandising and sourcing
initiatives that preserve our value proposition while maintaining the product
integrity."
    
    About Dollarama Group L.P.
    
    Dollarama is the leading operator of dollar discount stores in Canada.
Currently, the company operates more than 490 stores, each offering a broad
assortment of quality everyday merchandise sold in individual or multiple
units primarily at a fixed price of $1.00.  All stores are company-operated,
and nearly all are located in high traffic areas such as strip malls and
shopping centers in various locations, including metropolitan areas, mid-sized
cities, and small towns.  In 1910, the company was established as a single
variety store in Quebec.
    
    Safe Harbor for Forward-Looking and Cautionary Statements
    
    This release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended.  As such, final results could
differ from estimates or expectations due to risks and uncertainties,
including among others, changes in customer demand for products, changes in
raw material and equipment costs and availability, seasonal changes in
customer demand, pricing actions by competitors and general changes in
economic conditions; and other risks.  For any of these factors, the Company
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995, as amended.



    SUMMARY CONSOLIDATED FINANCIAL DATA

    
                              13-Week     Three Month  26-Week    Six-Month
                              Period        Period     Period      Period
                               Ended         Ended      Ended       Ended
                              August 5,     July 31,   August 5,   July 31,
    (dollars in thousands)      2007         2006        2007        2006
    

    
    Statement of Operations
     Data:
    Sales                     $233,205     $208,142    $449,080    $393,083
    Cost of sales              152,117      138,594     297,413     265,701
    

    Gross profit                81,088       69,548     151,667     127,382

    
    Expenses:
    General administrative
     and store operating
     expenses                   41,526       36,791      84,843      69,977
    Amortization(1)              4,239        3,024       8,338       5,834
    

    Total expenses              45,765       39,815      93,181      75,811

    Operating income/(loss)     35,323       29,733      58,486      51,571

    
    Other (income)/expense:
    Amortization of deferred
     financing costs             1,078        1,015       2,146       2,035
    Interest expense            10,836       12,018      21,863      23,336
    Foreign exchange loss
     (gain) on derivative
     financial instruments
     and long-term debt            976         (167)      1,842          14
    

    
    Earnings before
     income taxes               22,433       16,867      32,635      26,186
    

    Income taxes                   158          421         200         843

    Net earnings               $22,275      $16,446     $32,435     $25,343


    
    Statement of Cash Flows Data:
    Cash flows provided
     by (used in):
      Operating activities     $(6,586)     $19,833      $5,678     $57,472
    

    
      Investing activities      (9,328)     (11,063)    (19,909)    (19,888)
      Financing activities     (19,131)      (5,293)    (20,838)    (10,258)
    

    
    Other Financial Data:
    Adjusted EBITDA(2)         $40,902      $34,620     $70,450     $60,813
    Capital expenditures        $9,383      $11,091     $20,002     $19,991
    Rent expenses(3)           $13,749      $12,202     $27,545     $23,502
    Gross margin(4)               34.8%        33.4%       33.8%       32.4%
    Number of stores (at
     end of period)                486          432         486         432
    Comparable store
     sales growth(5)               0.7%         3.6%       (0.6%)       4.4%
    



    
                                                      As of          As of
                                                     August 5,      July 31,
    (dollars in thousands)                             2007           2006
    

    
    Balance Sheet Data:
    Cash and cash equivalents                        $12,626        $58,209
    Merchandise inventories                          194,394        144,515
    Property and equipment                            96,493         69,184
    Total assets                                   1,167,291      1,132,269
    Long-term debt                                   511,801        570,051
    Partners' capital                                475,913        424,322
    

    
    (1) Amortization represents amortization of tangible and amortizable
        intangible assets, including amortization of favourable and
        unfavourable lease rights.
    

    
    (2) EBITDA represents net income (loss) before net interest expense,
        income taxes, and depreciation and amortization expense. Adjusted
        EBITDA represents EBITDA as further adjusted to reflect items set
        forth in the table below, all of which are required in determining our
        compliance with financial covenants under our senior secured credit
        facility. We have included EBITDA and Adjusted EBITDA to provide
        investors with a supplemental measure of our operating performance and
        information about the calculation of some of the financial covenants
        that are contained in the senior secured credit facility. We believe
        EBITDA is an important supplemental measure of operating performance
        because it eliminates items that have less bearing on our operating
        performance and thus highlights trends in our core business that may
        not otherwise be apparent when relying solely on Canadian GAAP
        financial measures. We also believe that securities analysts,
        investors and other interested parties frequently use EBITDA in the
        evaluation of issuers, many of which present EBITDA when reporting
        their results. Adjusted EBITDA is a material component of the
        covenants imposed on us by the senior secured credit facility. Under
        the senior secured credit facility, we are subject to financial
        covenant ratios that are calculated by reference to Adjusted EBITDA.
        Non-compliance with the financial covenants contained in our senior
        secured credit facility could result in a default, an acceleration in
        the repayment of amounts outstanding under the senior secured credit
        facility, and a termination of the lending commitments under the
        senior secured credit facility. Generally, any default under the
        senior secured credit facility that results in the acceleration in the
        repayment of amounts outstanding under the senior secured credit
        facility would result in a default under the indenture governing the
        8.875% senior subordinated notes. While an event of default under the
        senior secured credit facility or the indenture is continuing, we
        would be precluded from, among other things, paying dividends on our
        capital stock or borrowing under the revolving credit facility. Our
        management also uses EBITDA and Adjusted EBITDA in order to facilitate
        operating performance comparisons from period to period, prepare
        annual operating budgets and assess our ability to meet our future
        debt service, capital expenditure and working capital requirements and
        our ability to pay dividends on our capital stock.
        EBITDA and Adjusted EBITDA are not presentations made in accordance
        with Canadian GAAP. As discussed above, we believe that the
        presentation of EBITDA and Adjusted EBITDA in this summary
        consolidated financial data section is appropriate. However, EBITDA
        and Adjusted EBITDA have important limitations as analytical tools,
        and you should not consider them in isolation, or as substitutes for
        analysis of our results as reported under Canadian GAAP. For example,
        neither EBITDA nor Adjusted EBITDA reflect (a) our cash expenditures,
        or future requirements for capital expenditures or contractual
        commitments; (b) changes in, or cash requirements for, our working
        capital needs; (c) the significant interest expense, or the cash
        requirements necessary to service interest or principal payments, on
        our debt; and (d) tax payments or distributions to our parent to make
        payments with respect to taxes attributable to us that represent a
        reduction in cash available to us. Because of these limitations, we
        primarily rely on our results as reported in accordance with Canadian
        GAAP and use EBITDA and Adjusted EBITDA only supplementally. In
        addition, because other companies may calculate EBITDA and Adjusted
        EBITDA differently than we do, EBITDA may not be, and Adjusted EBITDA
        as presented in this summary consolidated financial data section is
        not, comparable to similarly titled measures reported by other
        companies.
    

    A reconciliation of net earnings (loss) to EBITDA and to Adjusted EBITDA
is included below


    
                              13-Week    Three Month   26-Week      Six-Month
                              Period       Period      Period        Period
                               Ended        Ended       Ended         Ended
                              August 5,    July 31,    August 5,     July 31,
    (dollars in thousands)      2007        2006         2007          2006
    

    
    Net earnings              $22,275      $16,446      $32,435      $25,343
    Income taxes                  158          421          200          843
    Interest expense           10,836       12,018       21,863       23,336
    Amortization of deferred
     financing costs            1,078        1,015        2,146        2,035
    Amortization of fixed
     tangible and
     intangible assets          4,239        3,024        8,338        5,834
    

    
    EBITDA                     38,586       32,924       64,982       57,391
    Foreign exchange loss
     (gain) on derivative
     financial instruments
     and long-term debt           976         (167)       1,842           14
    Management fees(a)            790          764        1,624        1,543
    Deferred lease
     inducements(b)               425          945        1,134        1,557
    Stock-based compensation
     expense(c)                   125          154          868          308
    

    Adjusted EBITDA           $40,902      $34,620      $70,450      $60,813

    
    (a) Reflects the management fees incurred and paid or payable to the
        company's majority owners.
    (b) Represents the elimination of non-cash straight-line rent expense.
    (c) Represents the elimination of non-cash stock-based compensation
        expense.
    


    
    (3) Rent expense represents (i) basic rent expense on a straight-line
        basis and (ii) contingent rent expense, net of amortization of
        inducements received from landlords.
    

    (4) Gross margin represents gross profit as a percentage of sales.

    
    (5) Comparable store sales is a measure of the percentage increase or
        decrease of the sales of stores open for at least 13 complete months
        and that remain open at the end of the reporting period relative to
        the same period in the prior year.  We include sales from stores
        expanded or relocated in the calculation of comparable store sales.
        To provide more meaningful results, the company measures comparable
        store sales over periods containing an integral number of weeks
        beginning on a Monday and ending on a Sunday that best approximate the
        fiscal period to be analyzed.
    




For further information:

For further information: Investors, Robert Coallier, Chief Financial 
Officer, +1-514-737-7080 ext. 238, robert.coallier@dollarama.com; or Media, 
Alex Stanton, Stanton Crenshaw Communications, +1-212-780-1900, 
alex@stantoncrenshaw.com

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DOLLARAMA GROUP L.P.

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