Reitmans (Canada) Limited announces its results for the three months ended May 5, 2007



    MONTREAL, June 6 /CNW Telbec/ - Sales for the first quarter ended May 5,
2007 increased 3.5% to $230,695,000 as compared with $222,969,000 for the
first quarter ended April 29, 2006. The increase in sales is attributable to
the net addition of 42 stores year over year. Comparable store sales, compared
to the 13 weeks ended May 6, 2006, decreased 6.5% due to unseasonable weather
conditions that were prevalent throughout the first quarter ended May 5, 2007
in virtually all significant markets, resulting in reduced customer traffic
which impacted the demand for apparel.
    Operating earnings before depreciation and amortization (EBITDA(1)) for
the period decreased 10.4% to $34,750,000 as compared with $38,771,000 last
year. Net earnings and diluted EPS, after recording an additional interest
charge for retroactive Québec income tax assessments of $454,000 or $0.01 per
share, decreased to $18,384,000 or $0.26 per share as compared to $21,674,000
or $0.30 per share for the period last year. Excluding the effect of the
retroactive Québec income tax assessments, net earnings and diluted EPS for
the period would have decreased 13.1% to $18,838,000 or $0.27 per share.
    Sales for the month of May (4 weeks ended June 2, 2007) increased 9.4%
with comparable store sales increasing 4.7%.
    During the first quarter, the Company opened 15 new stores comprised of
3 Reitmans, 1 Smart Set, 1 RW & CO., 3 Thyme Maternity, 2 Cassis,
2 Penningtons and 3 Addition Elle; 6 stores were closed. Accordingly, at
May 5, 2007, there were 929 stores in operation, consisting of 357 Reitmans,
158 Smart Set, 46 RW & CO., 72 Thyme Maternity, 12 Cassis, 158 Penningtons and
126 Addition Elle, as compared with a total of 887 stores last year. An
additional 60 stores are scheduled to open this year, 38 stores will be
remodeled and 25 stores will be closed.
    At the Board of Directors meeting held on June 6, 2007, quarterly cash
dividends (designated eligible dividends) of $0.16 per share on all
outstanding Class A non-voting and Common shares of the Company was declared,
payable July 26, 2007 to shareholders of record on July 12, 2007.

    Financial statements are attached.

    Montreal, June 6, 2007

    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, they should not be
considered in isolation.

    
    CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

                                                  For the three months ended
                                                           May 5,   April 29,
    (in thousands except per share amounts)                 2007        2006

    Sales                                             $  230,695  $  222,969
    Cost of goods sold and selling, general
     and administrative expenses                         195,945     184,198
                                                      ----------- -----------
                                                          34,750      38,771
    Depreciation and amortization                         11,698      11,207
                                                      ----------- -----------
    Operating earnings before the undernoted              23,052      27,564

    Investment income (note 8)                             4,320       4,180
    Interest on long-term debt                               254         270
                                                      ----------- -----------
    Earnings before income taxes                          27,118      31,474

    Income taxes:
      Current                                              9,647       9,675
      Future                                              (1,367)        125
                                                      ----------- -----------
                                                           8,280       9,800
    Québec tax assessments - current (note 7)                454           -
                                                      ----------- -----------
                                                           8,734       9,800
                                                      ----------- -----------

    Net earnings                                      $   18,384  $   21,674
                                                      ----------- -----------
                                                      ----------- -----------

    Earnings per share:
      Basic                                           $     0.26  $     0.31
      Diluted                                               0.26        0.30

    The accompanying notes are an integral part of these consolidated
    financial statements.


    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                                  For the three months ended
                                                           May 5,   April 29,
    (in thousands)                                          2007        2006

    CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
      Net earnings                                    $   18,384  $   21,674
      Adjustments for:
        Depreciation and amortization                     11,698      11,207
        Future income taxes                               (1,367)        125
        Stock-based compensation                             256         277
        Amortization of deferred lease credits            (1,084)       (958)
        Deferred lease credits                             1,352       1,170
        Pension expense                                      400         336
        Gain on sale of marketable securities             (1,996)     (2,007)
      Changes in non-cash working capital items
       relating to operations                            (55,668)    (24,389)
                                                      ----------- -----------
                                                         (28,025)      7,435

    CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES
      Purchases of marketable securities                       -      (1,194)
      Proceeds on sale of marketable securities           11,062       4,950
      Additions to capital assets                        (18,224)    (11,965)
                                                      ----------- -----------
                                                          (7,162)     (8,209)

    CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES
      Dividends paid                                     (11,412)     (9,847)
      Repayment of long-term debt                           (263)       (247)
      Proceeds from issue of share capital                 1,250         620
                                                      ----------- -----------
                                                         (10,425)     (9,474)

    NET DECREASE IN CASH AND CASH EQUIVALENTS            (45,612)    (10,248)

    CASH AND CASH EQUIVALENTS, BEGINNING OF THE
     PERIOD                                              188,491     135,399
                                                      ----------- -----------

    CASH AND CASH EQUIVALENTS, END OF THE PERIOD      $  142,879  $  125,151
                                                      ----------- -----------
                                                      ----------- -----------

    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
                                               May 5,   April 29, February 3,
    (in thousands)                              2007        2006        2007

    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents           $  142,879  $  125,151  $  188,491
      Marketable securities (note 8)          43,500      58,383      52,675
      Accounts receivable                      4,795       4,221       3,439
      Merchandise inventories                 92,044      86,823      61,834
      Prepaid expenses                        23,061       8,392      21,405
                                          ----------- ----------- -----------
        Total Current Assets                 306,279     282,970     327,844

    CAPITAL ASSETS                           231,502     207,912     226,734

    GOODWILL                                  42,426      42,426      42,426

    FUTURE INCOME TAXES                        5,127       1,303       3,407

    ACCRUED PENSION ASSET                          -         169           -
                                          ----------- ----------- -----------

                                          $  585,334  $  534,780  $  600,411
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Accounts payable and accrued items  $   83,071  $   92,783  $   85,317
      Income taxes payable                    18,331       2,612      40,289
      Future income taxes                        685           -         248
      Current portion of long-term debt        1,093       1,026       1,076
                                          ----------- ----------- -----------
        Total Current Liabilities            103,180      96,421     126,930

    DEFERRED LEASE CREDITS                    21,126      19,237      20,858

    LONG-TERM DEBT                            14,817      15,910      15,097

    FUTURE INCOME TAXES                            -         231         112

    ACCRUED PENSION LIABILITY                  1,695           -       1,295

    SHAREHOLDERS' EQUITY
      Share capital                           22,866      17,994      21,323
      Contributed surplus                      3,546       2,800       3,583

      Retained earnings                      418,185     382,187     411,213
      Accumulated other comprehensive loss       (81)          -           -
                                          ----------- ----------- -----------
                                             418,104     382,187     411,213
                                          ----------- ----------- -----------
        Total Shareholders' Equity           444,516     402,981     436,119
                                          ----------- ----------- -----------

                                          $  585,334  $  534,780  $  600,411
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    The accompanying notes are an integral part of these consolidated
    financial statements.


    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

                                                  For the three months ended
                                                           May 5,   April 29,
    (in thousands)                                          2007        2006

    SHARE CAPITAL
    Balance, beginning of period                      $   21,323  $   17,374
      Cash consideration on exercise of stock options      1,250         620
      Ascribed value credited to share capital from
       exercise of stock options                             293           -
                                                      ----------- -----------
    Balance, end of period                            $   22,866  $   17,994
                                                      ----------- -----------
                                                      ----------- -----------

    CONTRIBUTED SURPLUS
    Balance, beginning of period                      $    3,583  $    2,523
      Stock option compensation costs                        256         277
      Ascribed value credited to share capital from
       exercise of stock options                            (293)          -
                                                      ----------- -----------
    Balance, end of period                            $    3,546  $    2,800
                                                      ----------- -----------
                                                      ----------- -----------

    RETAINED EARNINGS
    Balance, beginning of period                      $  411,213  $  370,360
      Net earnings                                        18,384      21,674
      Dividends                                          (11,412)     (9,847)
                                                      ----------- -----------
    Balance, end of period                            $  418,185  $  382,187
                                                      ----------- -----------
                                                      ----------- -----------

    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    Balance, beginning of period                      $        -  $        -
      Adjustment to opening balance due to the new
       accounting policies adopted regarding
       financial instruments (net of income taxes
       of $523)                                            2,883           -
      Net unrealized loss on available-for-sale
       financial assets arising during the period         (1,245)          -
      Reclassification adjustment for net gains and
       losses included in net earnings                    (1,719)          -
                                                      ----------- -----------
    Balance, end of period(1)                         $      (81) $        -
                                                      ----------- -----------
                                                      ----------- -----------

    Total Shareholders' Equity                        $  444,516  $  402,981
                                                      ----------- -----------
                                                      ----------- -----------

    (1)Available-for-sale financial investments constitute the sole item in
       accumulated other comprehensive income.


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

                                                  For the three months ended
                                                           May 5,   April 29,
    (in thousands)                                          2007        2006

    Net earnings                                      $   18,384  $   21,674
    Other comprehensive income:
      Net unrealized loss on available-for-sale
       financial assets arising during the period,
       net of tax of $239                                 (1,245)          -
      Reclassification adjustment for net gains and
       losses included in net earnings, net of tax
       of $312                                            (1,719)          -
                                                      ----------- -----------
      Other comprehensive income                          (2,964)          -
                                                      ----------- -----------

    Comprehensive Income                              $   15,420  $   21,674
                                                      ----------- -----------
                                                      ----------- -----------

    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 May 5, 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 replaces 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 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 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 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 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.
    The following table summarizes Class A non-voting shares issued for each
of the quarters listed:
                                                           May 5,   April 29,
                                                            2007        2006

    Balance at beginning of period                        57,817      56,747
    Shares issued pursuant to exercise of stock
     options                                                 108         148
                                                      ----------- -----------
    Balance at end of period                              57,925      56,895
                                                      ----------- -----------
                                                      ----------- -----------

    The Company has authorized an unlimited number of Common shares. At May 5,
2007, there were 13,440 common shares issued (April 29, 2006 - 13,440;
February 3, 2007 - 13,440) with a value of $482 (April 29, 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 month period ended May 5, 2007, no options were granted, while
8 stock options were cancelled.

    5. LONG-TERM DEBT

                                                                     Audited
                                               May 5,   April 29, 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        $   15,910  $   16,936  $   16,173
    Less current portion                       1,093       1,026       1,076
                                          ----------- ----------- -----------
                                          $   14,817  $   15,910  $   15,097
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    6. EARNINGS PER SHARE

                                                           May 5,   April 29,
                                                            2007        2006

    Weighted average number of shares for basic
     earnings per share calculations                      71,284      70,237
    Effect of dilutive options outstanding                   757       1,497
                                                      ----------- -----------
    Weighted average number of shares for diluted
     earnings per share calculations                      72,041      71,734
                                                      ----------- -----------
                                                      ----------- -----------

    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. An additional amount
of $454 was expensed in the quarter ended May 5, 2007 (April 29, 2006 - nil)
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
                                               May 5,   April 29, February 3,
                                                2007        2006        2007

    Balance with banks (overdraft)        $    8,845  $   (6,790) $    6,239
    Short-term deposits, bearing interest
     at 4.3% (April 29, 2006 - 4.0%;
     February 3, 2007 - 4.3%)                134,034     131,941     182,252
                                          ----------- ----------- -----------
                                          $  142,879  $  125,151  $  188,491
                                          ----------- ----------- -----------
                                          ----------- ----------- -----------

    Non-cash transactions:
      Capital asset additions included in
       accounts payable                   $    1,646  $    2,030  $    3,404

    Cash paid during the period for:
      Income taxes                        $   32,113  $   21,707
      Interest                                   300         310

    Investment income:
      Available-for-sale financial assets:
        Interest income                   $       19  $       19
        Dividends                                685         965
        Realized gain on disposal              1,996       2,007
      Held-for-trading financial assets:
        Interest income                        1,620       1,189
                                          ----------- -----------
                                          $    4,320  $    4,180
                                          ----------- -----------
                                          ----------- -----------

    At May 5, 2007, marketable securities amounted to $43,500 reported at fair
value (cost of $43,609) as compared with $58,383 last year reported at cost
(with a market value of $61,743). 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 was adopted by the
Company in the first quarter of fiscal 2008 marketable securities have been
measured and reported at their fair value at May 5, 2007 while the comparative
year is reported at cost.

    9. FINANCIAL INSTRUMENTS

    As at May 5, 2007, the Company had entered into a series of European call
options which limit the Company's exposure on future purchases during the
second quarter of fiscal 2008 of $30,000 US at a rate of $1.11 Canadian. The
impact of measuring these derivatives at fair value was an unrealized gain of
$202, which was recorded in net earnings.

    10. COMPARATIVE FIGURES

    Certain comparative figures have been reclassified to conform with the
presentation adopted in the current year. In particular, investment income,
which had been previously classified as part of cash flows from investing
activities, is now included in cash flows from operating activities and
marketable securities have been reclassified as current assets based on the
liquidity of the investments.
    
    %SEDAR: 00002316EF




For further information:

For further information: Jeremy H. Reitman, President, (514) 385-2630;
www.reitmans.ca


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