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



    MONTREAL, Dec. 19 /CNW/ -- Dollarama Group L.P. ("Dollarama"), the
leading operator of dollar discount stores in Canada, today announced its
financial results for the third quarter ended November 4, 2007. Note: All
dollar amounts in this press release are in Canadian dollars unless otherwise
indicated.
    On February 1, 2007, Dollarama 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 its 53rd week in the
retail calendar. The rest of the Company's fiscal year end dates fall on the
Sunday closest to January 31. Dollarama's fiscal year 2008 began on February
5, 2007 and will end February 3, 2008. There is one day less of transactions
included in the 13-week period ended November 4, 2007 than in the three-month
period ended October 31, 2006.
    Dollarama reported that sales increased $23.4 million, or 10.7%, to
$241.9 million for the third quarter of fiscal year 2008, up from $218.5
million for the three-month period ended October 31, 2006. Sales growth was
driven primarily by the opening of 57 new stores during the 52 week period
ended November 4, 2007 and by the incremental full 13-week effect of the
stores opened during the third quarter last year. Offsetting the sales
increase was a 0.3% decline in comparable store sales and one day less of
transactions.
    Net earnings for the third quarter of fiscal year 2008 decreased $0.8
million, to $16.6 million from $17.4 million for the 13-week period ended
November 4, 2007. Adjusted EBITDA increased 4.7%, to $36.8 million for the
13-week period ended November 4, 2007 from $35.2 million for the three-month
period ended October 31, 2006.
    Dollarama reported that sales increased $79.4 million, or 13%, to $691.0
million for the 39-week period ended November 4, 2007, up from $611.6 for the
nine-month period ended October 31, 2006. Sales growth was driven primarily by
the opening of 57 new stores during the 52 week period ended November 4, 2007
and the incremental full 39-week effect of the stores opened during the nine-
month period last year. Offsetting the sales increase was a 0.7% decline in
comparable store sales, partially attributable to inventory issues associated
with the implementation of a new Enterprise Resource Planning system earlier
this year.
    Net earnings for the 39-week period ended November 4, 2007, increased
$6.3 million, to $49.1 million from $42.8 million for the nine-month period
ended October 31, 2006. Adjusted EBITDA increased 11.8%, to $107.3 million for
the 39-week period ended November 4, 2007 from $96.0 million for the
nine-month period ended October 31, 2006.
    "This year we made significant progress including the implementation of a
new IT system, deployment of debit card technology and additions to our
management team, however, we have also been impacted by many challenges. We
are operating in a more challenging retail environment due to a number of
factors including rising fuel and labor costs in Canada and increasing costs
for imported goods. In this context, we are pleased to report another quarter
of growth in sales and adjusted EBITDA," said Larry Rossy, Chief Executive
Officer of Dollarama. "Our focus continues to be on finding ways to attract
customers by refreshing our merchandise offering and improving the overall
customer experience, while managing our costs and achieving purchasing
efficiencies."
    
    About Dollarama Group L.P.
    
    Dollarama is the leading operator of dollar discount stores in Canada.
Currently, the company operates more than 505 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     39-Week      Nine-Month
                        Period Ended  Period Ended  Period Ended  Period Ended
                         November 4,   October 31,   November 4,   October 31,
    (dollars in thousands)  2007         2006           2007          2006
    

    
    Statement of
     Operations Data:
    

    Sales                 $241,905     $218,477       $690,985     $611,560

    Cost of sales          160,700      147,501        458,113      413,202

    Gross profit            81,205       70,976        232,872      198,358

    Expenses:

    
    General administrative
     and store operating
     expenses               46,163       37,405        131,006      107,382
    

    Amortization(1)          4,588        3,415         12,926        9,249

    Total expenses          50,751       40,820        143,932      116,631

    Operating income        30,454       30,156         88,940       81,727

    Other (income)/expense:

    
    Amortization of deferred
     financing costs         1,089        1,015          3,235        3,050
    

    Interest expense        10,876       12,001         32,739       35,337

    
    Foreign exchange loss
     (gain) on derivative
     financial instruments
     and long-term debt      1,773         (693)         3,615         (679)
    

    
    Earnings before income
     taxes                  16,716       17,833         49,351       44,019
    

    Income taxes                67          421            267        1,264

    Net earnings           $16,649      $17,412        $49,084      $42,755


    
    Statement of Cash
     Flows Data:
    

    
    Cash flows provided
     by (used in):
    

    Operating activities $15,694       $3,222        $21,372      $60,695

    Investing activities (14,184)     (12,545)       (34,093)     (32,434)

    Financing activities (12,307)     (22,019)       (33,145)     (32,277)

    Other Financial Data:

    Adjusted EBITDA(2)     $36,828      $35,182       $107,278      $95,997

    Capital expenditures   $14,321      $12,596        $34,323      $32,588

    Rent expenses(3)       $15,543      $12,571        $43,088      $36,073

    Gross margin(4)          33.6%        32.5%          33.7%        32.4%

    
    Number of stores (at
     end of period)            505          451            505          451
    

    
    Comparable store sales
     growth(5)                (0.3%)        1.6%          (0.7%)        3.3%
    



    
    (dollars in thousands)                            As at          As at
                                                   November 4,    October 31,
                                                      2007           2006
    

    Balance Sheet Data:

    Cash and cash equivalents                         $1,829        $26,867

    Merchandise inventories                          204,322        164,552

    Property and equipment                           106,171         78,687

    Total assets                                   1,173,198      1,131,416

    Long-term debt                                   478,738        564,372

    Partners' capital                                467,751        442,929


    
    (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 indentures governing the 8.875% senior
         subordinated notes and the senior floating rate deferred interest
         notes. While an event of default under the senior secured credit
         facility or the indentures 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 to EBITDA and to Adjusted EBITDA is
included below



    
                          13-Week     Three Month     39-Week      Nine-Month
                        Period Ended  Period Ended  Period Ended  Period Ended
                         November 4,   October 31,   November 4,   October 31,
    (dollars in thousands)  2007         2006           2007          2006
    


    Net earnings          $16,649       $17,412        $49,084       $42,755

    Income taxes               67           421            267         1,264

    Interest expense       10,876        12,001         32,739        35,337

    
    Amortization of
     deferred financing
     costs                  1,089         1,015          3,235         3,050
    

    
    Amortization of fixed
     tangible and intangible
     assets                 4,588         3,415         12,926         9,249
    

    EBITDA                 33,269        34,264         98,251        91,655

    
    Foreign exchange loss
     (gain) on derivative
     financial instruments
     and long-term debt     1,773          (693)         3,615          (679)
    

    Management fees(a)        751           792          2,375         2,337

    
    Deferred lease
     inducements(b)           824           664          1,958         2,221
    

    
    Stock-based compen-
     sation expense(c)        211           155          1,079           463
    

    Adjusted EBITDA       $36,828       $35,182       $107,278       $95,997



    
        (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, Dollarama Group L.P., +1-514-737-7080 ext. 238, 
robert.coallier@dollarama.com; 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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