Condensed Consolidated Interim Statements of Income (Loss)
(unaudited)
(in millions of Canadian dollars, except per share amounts)
Second quarter ended
Two quarters ended
Notes
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Reclassified
Reclassified
$
$
$
$
Revenue
3
281.1
277.2
365.9
347.1
Cost of sales
6
101.6
111.4
131.2
138.6
Gross profit
179.5
165.8
234.7
208.5
Selling, general & administrative expenses
177.2
144.3
332.1
269.2
Operating income (loss)
2.3
21.5
(97.4)
(60.7)
Net interest, finance and other costs
10
13.6
23.6
28.1
29.5
Loss before income taxes
(11.3)
(2.1)
(125.5)
(90.2)
Income tax recovery
(15.4)
(7.1)
(44.6)
(31.6)
Net income (loss)
4.1
5.0
(80.9)
(58.6)
Attributable to:
Shareholders of the Company
3.9
3.3
(77.2)
(59.1)
Non-controlling interest
0.2
1.7
(3.7)
0.5
Net income (loss)
4.1
5.0
(80.9)
(58.6)
Earnings (loss) per share attributable to shareholders of the Company
Basic
4
$
0.04
$
0.03
$
(0.75)
$
(0.56)
Diluted
4
$
0.04
$
0.03
$
(0.75)
$
(0.56)
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
Canada Goose Holdings Inc.
Page 1 of 33
Condensed Consolidated Interim Statements of Comprehensive (Loss) Income
(unaudited)
(in millions of Canadian dollars, except per share amounts)
Second quarter ended
Two quarters ended
Notes
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
$
$
$
$
Net income (loss)
4.1
5.0
(80.9)
(58.6)
Other comprehensive (loss) income
Items that will not be reclassified to earnings, net of tax:
Actuarial (loss) gain on post-employment obligation
(0.2)
1.0
(0.2)
1.0
Items that may be reclassified to earnings, net of tax:
Cumulative translation adjustment loss
(4.1)
(3.7)
(6.5)
(11.8)
Net (loss) gain on derivatives designated as cash flow hedges
15
(3.8)
7.8
6.0
9.1
Reclassification of net (gain) loss on cash flow hedges to income
15
(0.5)
(0.1)
(1.0)
1.5
Other comprehensive (loss) income
(8.6)
5.0
(1.7)
(0.2)
Comprehensive (loss) income
(4.5)
10.0
(82.6)
(58.8)
Attributable to:
Shareholders of the Company
(4.3)
7.8
(78.1)
(59.7)
Non-controlling interest
(0.2)
2.2
(4.5)
0.9
Comprehensive (loss) income
(4.5)
10.0
(82.6)
(58.8)
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
Canada Goose Holdings Inc.
Page 2 of 33
Condensed Consolidated Interim Statements of Financial Position
(unaudited)
(in millions of Canadian dollars)
Notes
October 1, 2023
October 2, 2022
April 2, 2023
Assets
$
$
$
Current assets
Cash
37.5
97.1
286.5
Trade receivables
5
146.5
150.0
50.9
Inventories
6
519.7
511.5
472.6
Income taxes receivable
17.2
10.5
0.9
Other current assets
14
82.6
63.4
52.3
Total current assets
803.5
832.5
863.2
Deferred income taxes
119.2
90.0
67.5
Property, plant and equipment
179.3
122.4
156.0
Intangible assets
132.4
133.3
135.1
Right-of-use assets
7
280.0
274.3
291.8
Goodwill
62.7
64.1
63.9
Other long-term assets
14
12.2
26.9
12.5
Total assets
1,589.3
1,543.5
1,590.0
Liabilities
Current liabilities
Accounts payable and accrued liabilities
8, 14
210.2
218.4
195.6
Provisions
9
20.5
21.7
21.6
Income taxes payable
7.7
12.9
31.5
Short-term borrowings
10
80.7
57.3
27.6
Current portion of lease liabilities
7
77.1
65.4
76.1
Total current liabilities
396.2
375.7
352.4
Provisions
9
35.8
31.7
36.5
Deferred income taxes
15.5
23.2
16.4
Revolving Facility
10
85.0
55.1
—
Term Loan
10
391.4
402.7
391.6
Lease liabilities
7
253.2
250.1
258.7
Other long-term liabilities
14
56.5
38.5
56.9
Total liabilities
1,233.6
1,177.0
1,112.5
Equity
11
Equity attributable to shareholders of the Company
352.2
355.4
469.5
Non-controlling interests
3.5
11.1
8.0
Total equity
355.7
366.5
477.5
Total liabilities and equity
1,589.3
1,543.5
1,590.0
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
Canada Goose Holdings Inc.
Page 3 of 33
Condensed Consolidated Interim Statements of Changes in Equity
(unaudited)
(in millions of Canadian dollars)
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
Total attributable to shareholders
Non-controlling interest
Total
Notes
Multiple voting shares
Subordinate voting shares
Total
$
$
$
$
$
$
$
$
$
Balance at April 2, 2023
1.4
117.3
118.7
28.5
316.5
5.8
469.5
8.0
477.5
Normal course issuer bid purchase of subordinate voting shares
11
—
(5.7)
(5.7)
—
(50.5)
—
(56.2)
—
(56.2)
Liability to broker under automatic share purchase plan
11
—
—
—
10.0
—
—
10.0
—
10.0
Issuance of shares
11
—
3.9
3.9
(3.8)
—
—
0.1
—
0.1
Net loss
—
—
—
—
(77.2)
—
(77.2)
(3.7)
(80.9)
Other comprehensive loss
—
—
—
—
—
(0.9)
(0.9)
(0.8)
(1.7)
Share-based payment
12
—
—
—
6.9
—
—
6.9
—
6.9
Balance at October 1, 2023
1.4
115.5
116.9
41.6
188.8
4.9
352.2
3.5
355.7
Balance at April 3, 2022
1.4
117.1
118.5
36.2
290.4
(17.2)
427.9
—
427.9
Initial recognition of non-controlling interest on business combination
—
—
—
—
—
—
—
10.2
10.2
Put option for non-controlling interest
—
—
—
—
(19.8)
—
(19.8)
—
(19.8)
Issuance of shares
11
—
2.7
2.7
(2.7)
—
—
—
—
—
Net (loss) income
—
—
—
—
(59.1)
—
(59.1)
0.5
(58.6)
Other comprehensive (loss) income
—
—
—
—
—
(0.6)
(0.6)
0.4
(0.2)
Share-based payment
12
—
—
—
7.0
—
—
7.0
—
7.0
Balance at October 2, 2022
1.4
119.8
121.2
40.5
211.5
(17.8)
355.4
11.1
366.5
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
Canada Goose Holdings Inc.
Page 4 of 33
Condensed Consolidated Interim Statements of Cash Flows
(unaudited)
(in millions of Canadian dollars)
Second quarter ended
Two quarters ended
Notes
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Reclassified
Reclassified
$
$
$
$
Operating activities
Net income (loss)
4.1
5.0
(80.9)
(58.6)
Items not affecting cash:
Depreciation and amortization
30.6
26.4
59.8
52.2
Income tax recovery
(15.4)
(7.1)
(44.6)
(31.6)
Interest expense
10
12.9
9.2
20.3
16.2
Foreign exchange loss (gain)
4.2
17.1
(0.5)
19.2
Loss (gain) on disposal of assets
0.1
(0.1)
—
(0.1)
Share-based payment
12
4.7
4.3
7.2
7.0
Remeasurement of put option
14
2.7
1.7
10.8
1.7
Remeasurement of contingent consideration
14
(2.0)
(3.7)
(3.0)
(3.7)
41.9
52.8
(30.9)
2.3
Changes in non-cash operating items
16
(67.3)
(79.2)
(166.2)
(202.7)
Income taxes paid
(18.9)
(10.1)
(49.0)
(26.3)
Interest paid
(12.9)
(8.3)
(20.4)
(15.0)
Net cash used in operating activities
(57.2)
(44.8)
(266.5)
(241.7)
Investing activities
Purchase of property, plant and equipment
(26.0)
(7.8)
(31.2)
(10.3)
Investment in intangible assets
(0.3)
0.4
(0.5)
(0.7)
Initial direct costs of right-of-use assets
7
(0.1)
(0.3)
(0.4)
(0.4)
Net cash inflow from business combination
—
—
—
2.8
Net cash used in investing activities
(26.4)
(7.7)
(32.1)
(8.6)
Financing activities
Mainland China Facilities borrowings
10
25.1
19.5
37.7
24.1
Japan Facility borrowings
10
7.1
5.8
15.4
9.7
Term Loan repayments
10
(1.0)
(1.0)
(2.0)
(2.0)
Revolving Facility borrowings
10
86.3
55.4
86.3
55.4
Transaction costs on financing activities
10
(0.3)
—
(0.3)
—
Subordinate voting shares purchased and cancelled under NCIB
11
(29.9)
—
(57.4)
—
Principal payments on lease liabilities
7
(15.3)
(13.5)
(28.7)
(27.3)
Issuance of shares
12
0.1
—
0.1
—
Net cash from financing activities
72.1
66.2
51.1
59.9
Effects of foreign currency exchange rate changes on cash
1.0
1.6
(1.5)
(0.2)
(Decrease) increase in cash
(10.5)
15.3
(249.0)
(190.6)
Cash, beginning of period
48.0
81.8
286.5
287.7
Cash, end of period
37.5
97.1
37.5
97.1
The accompanying notes to the condensed consolidated interim financial statements are an integral part of these financial statements.
Canada Goose Holdings Inc.
Page 5 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 1. The Company
Organization
Canada Goose Holdings Inc. and its subsidiaries (the “Company”) design, manufacture, and sell performance luxury apparel for men, women, youth, children, and babies. The Company’s product offerings include various styles of parkas, lightweight down jackets, rainwear, windwear, apparel, fleece, footwear, and accessories for the fall, winter, and spring seasons. The Company’s head office is located at 100 Queens Quay East, Toronto, Canada, M5E 1V3. The use of the terms “Canada Goose”, “we”, and “our” throughout these notes to the condensed consolidated interim financial statements ("Interim Financial Statements") refer to the Company.
Canada Goose is a public company listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol “GOOS”. The principal shareholders of the Company are investment funds advised by Bain Capital LP and its affiliates (“Bain Capital”), and DTR LLC ("DTR"), an entity indirectly controlled by the Chairman and Chief Executive Officer of the Company. The principal shareholders hold multiple voting shares representing 50.1% of the total shares outstanding as at October 1, 2023, or 90.9% of the combined voting power of the total voting shares outstanding. Subordinate voting shares that trade on public markets represent 49.9% of the total shares outstanding as at October 1, 2023, or 9.1% of the combined voting power of the total voting shares outstanding.
Statement of compliance
The Interim Financial Statements are prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Certain information, which is considered material to the understanding of the Interim Financial Statements and is normally included in the audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB, is not provided in these notes. These Interim Financial Statements should be read in conjunction with the Company's audited annual consolidated financial statements for the year ended April 2, 2023.
The Interim Financial Statements were authorized for issuance in accordance with a resolution of the Company’s Board of Directors on October 31, 2023.
Fiscal year
The Company's fiscal year is a 52 or 53-week reporting cycle with the fiscal year ending on the Sunday closest to March 31. Each fiscal quarter is 13 weeks for a 52-week fiscal year. Fiscal 2024 is a 52-week fiscal year.
Operating segments
The Company classifies its business in three operating and reportable segments: Direct-to-Consumer ("DTC"), Wholesale, and Other. The DTC segment comprises sales through country-specific e-Commerce platforms available across numerous markets, which includes the newly launched recommerce platform Canada Goose Generations, currently available in the United States and Canada, and our Company-owned retail stores located in luxury shopping locations.
The Wholesale segment comprises sales made to a mix of retailers and international distributors, who are partners that have exclusive rights to an entire market. The Wholesale segment includes the introduction of travel retail with the opening of a location in Frankfurt, Germany this quarter.
Canada Goose Holdings Inc.
Page 6 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Other segment comprises sales and costs that do not occur through the DTC or Wholesale segments, such as sales to employees, friends and family sales, and selling, general, and administrative (“SG&A”) expenses. The Other segment includes the cost of marketing expenditures to build brand awareness across all segments, management overhead costs in support of manufacturing operations, other corporate costs, and foreign exchange gains and losses not specifically associated with DTC or Wholesale segment operations.
Seasonality
Our business is seasonal, and we have historically realized a significant portion of our Wholesale revenue and operating income in the second and third quarters of the fiscal year and DTC revenue and operating income in the third and fourth quarters of the fiscal year. Thus, lower-than-expected revenue in these periods could have an adverse impact on our annual operating results.
Cash flows from operating activities are typically highest in the third and fourth quarters of the fiscal year due to revenue from the DTC segment and the collection of trade receivables from Wholesale revenue earlier in the year. Working capital requirements typically increase as inventory builds. Borrowings have historically increased in the first and second quarters and been repaid in the third quarter of the fiscal year.
Note 2. Material accounting policy information and critical accounting estimates and judgments
Basis of presentation
The accounting policies and critical accounting estimates and judgments as disclosed in the Company's audited annual financial statements for the year ended April 2, 2023 have been applied consistently in the preparation of these Interim Financial Statements except as noted below. The Interim Financial Statements are presented in Canadian dollars, the Company’s functional and presentation currency.
Certain comparative figures have been reclassified to conform with the current year presentation, where foreign exchange gains and losses related to the outstanding principal balance on the Term Loan, net of hedging, are reflected in the presentation of net interest, finance and other costs as outlined below (see "Note 10. Borrowings" for details and definitions); previously this was presented in SG&A expenses. This change was made to present all financing costs related to the Term Loan within the same financial statement caption in the consolidated interim statements of income (loss). For the second and two quarters ended October 2, 2022, we reclassified foreign exchange gains of $16.8m and $15.3m, respectively. This reclassification did not impact net loss, loss per share, or the consolidated interim statement of financial position in the comparative quarter.
In the prior year, management identified an immaterial reclassification in the interim statement of cash flows and related note disclosure for the second and two quarters ended October 2, 2022 decreasing cash outflows from investing activities and increasing cash outflows from operating activities of $7.0m due to translation of foreign currency. Certain comparative figures have been reclassified in the interim statement of cash flows and related note disclosure related to this reclassification. The reclassification has been appropriately reflected in the interim statement of cash flows and related note disclosure for the second and two quarters ended October 1, 2023.
Canada Goose Holdings Inc.
Page 7 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Principles of consolidation
The Interim Financial Statements include the accounts of the Company and its subsidiaries and those investments over which the Company has control. All intercompany transactions and balances have been eliminated.
Standards issued and not yet adopted
Certain new standards, amendments, and interpretations to existing IFRS standards have been published but are not yet effective and have not been adopted early by the Company. Management anticipates that pronouncements will be adopted in the Company’s accounting policy for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments, and interpretations is provided below.
In January 2020, the IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify its requirements for the presentation of liabilities in the statement of financial position. The limited scope amendment affected only the presentation of liabilities in the statement of financial position and not the amount or timing of its recognition. The amendment clarified that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specified that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduced a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants (Amendments to IAS 1). These amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. These amendments are effective for annual reporting periods beginning on or after January 1, 2024. Earlier application is permitted. The Company is assessing the potential impact of the amendment.
Standards issued and adopted
In February 2021, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements and IAS 8, Accounting Polices, Changes in Accounting Estimates and Errors. The amendments require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarified how to distinguish changes in accounting policies from changes in accounting estimates. Beginning April 3, 2023, the Company adopted the amendments. The adoption of the amendments did not have a material impact on the Interim Financial Statements.
In May 2023, the IASB issued International Tax Reform, Pillar Two Model Rules, Amendments to IAS 12, Income Taxes (the “Amendments”). The Amendments provide the Company with an exception from recognition and disclosure requirements for deferred tax assets and liabilities arising from the Organization for Economic Co-operation and Development (“OECD”) Pillar Two international tax reform. Upon issuance of the Amendments, the temporary exception has been adopted by the Company as at July 2, 2023. The disclosure requirements for current tax expense and the disclosures for enacted legislation but not yet effective are required for annual reporting periods beginning on or after January 1, 2023, but are not required for any interim period ending on or before December 31, 2023.
Canada Goose Holdings Inc.
Page 8 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 3. Segment information
The Company has three reportable operating segments: DTC, Wholesale, and Other. The Company measures each reportable operating segment’s performance based on revenue and segment operating income (loss), which is the profit metric utilized by the Company's chief operating decision maker, the Chairman and Chief Executive Officer, for assessing the performance of operating segments. Our operating segments are not reliant on any single external customer.
The Company does not report total assets or total liabilities based on its reportable operating segments.
Second quarter ended October 1, 2023
(in millions of Canadian dollars)
DTC
Wholesale
Other
Total
$
$
$
$
Revenue
109.4
162.0
9.7
281.1
Cost of sales
25.8
69.3
6.5
101.6
Gross profit
83.6
92.7
3.2
179.5
SG&A expenses
63.3
19.3
94.6
177.2
Operating income (loss)
20.3
73.4
(91.4)
2.3
Net interest, finance and other costs
13.6
Loss before income taxes
(11.3)
Second quarter ended October 2, 2022
(in millions of Canadian dollars)
DTC
Wholesale
Other
Total
$
$
$
$
Revenue
94.8
180.7
1.7
277.2
Cost of sales
21.8
88.6
1.0
111.4
Gross profit
73.0
92.1
0.7
165.8
SG&A expenses (reclassified)1
49.7
18.0
76.6
144.3
Operating income (loss) (reclassified)
23.3
74.1
(75.9)
21.5
Net interest, finance and other costs (reclassified)
23.6
Loss before income taxes
(2.1)
1See "Note 2. Material accounting policy information and critical accounting estimates and judgments" for more details on the reclassification of SG&A.
Canada Goose Holdings Inc.
Page 9 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Two quarters ended October 1, 2023
(in millions of Canadian dollars)
DTC
Wholesale
Other
Total
$
$
$
$
Revenue
165.2
189.1
11.6
365.9
Cost of sales
40.8
82.6
7.8
131.2
Gross profit
124.4
106.5
3.8
234.7
SG&A expenses
118.1
33.4
180.6
332.1
Operating income (loss)
6.3
73.1
(176.8)
(97.4)
Net interest, finance and other costs
28.1
Loss before income taxes
(125.5)
Two quarters ended October 2, 2022
(in millions of Canadian dollars)
DTC
Wholesale
Other
Total
$
$
$
$
Revenue
129.6
213.9
3.6
347.1
Cost of sales
31.3
105.0
2.3
138.6
Gross profit
98.3
108.9
1.3
208.5
SG&A expenses (reclassified)1
91.7
29.2
148.3
269.2
Operating income (loss) (reclassified)
6.6
79.7
(147.0)
(60.7)
Net interest, finance and other costs (reclassified)
29.5
Loss before income taxes
(90.2)
1See "Note 2. Material accounting policy information and critical accounting estimates and judgments" for more details on the reclassification of SG&A.
Geographic information
The Company determines the geographic location of revenue based on the location of its customers.
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
$
$
$
$
Canada
57.9
58.7
81.4
76.6
United States
66.2
74.2
84.3
89.9
North America
124.1
132.9
165.7
166.5
Asia Pacific
63.8
56.4
88.3
72.5
EMEA1
93.2
87.9
111.9
108.1
Revenue
281.1
277.2
365.9
347.1
1EMEA comprises Europe, the Middle East, Africa, and Latin America.
Canada Goose Holdings Inc.
Page 10 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 4. Earnings per share
The following table presents details for the calculation of basic and diluted earnings (losses) per share:
Second quarter ended
Two quarters ended
(in millions of Canadian dollars, except share and per share amounts)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net income (loss) attributable to shareholders of the Company
$
3.9
$
3.3
$
(77.2)
$
(59.1)
Weighted average number of multiple and subordinate voting shares outstanding
102,468,461
105,334,265
103,089,612
105,284,370
Weighted average number of shares on exercise of stock options, RSUs and PSUs1
1,118,081
530,704
—
—
Diluted weighted average number of multiple and subordinate voting shares outstanding
103,586,542
105,864,969
103,089,612
105,284,370
Earnings (loss) per share attributable to shareholders of the Company
Basic
$
0.04
$
0.03
$
(0.75)
$
(0.56)
Diluted
$
0.04
$
0.03
$
(0.75)
$
(0.56)
1 Applicable to dilutive shares and when the weighted average daily closing share price for the year was greater than the exercise price for stock options. For the two quarters ended October 1, 2023, there were 958,806 shares (two quarters ended October 2, 2022 - 562,845 shares) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.
Note 5. Trade receivables
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
April 2, 2023
$
$
$
Trade accounts receivable
126.3
124.6
30.4
Credit card receivables
5.3
6.4
2.5
Other receivables
16.0
20.0
19.5
147.6
151.0
52.4
Less: expected credit loss and sales allowances
(1.1)
(1.0)
(1.5)
Trade receivables
146.5
150.0
50.9
Canada Goose Holdings Inc.
Page 11 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 6. Inventories
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
April 2, 2023
$
$
$
Raw materials
46.8
70.3
60.3
Work in progress
20.8
20.4
17.5
Finished goods
452.1
420.8
394.8
Total inventories at the lower of cost and net realizable value
519.7
511.5
472.6
Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining rate of sale.
The breakdown of the provision for obsolescence is presented as follows:
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
April 2, 2023
$
$
$
Raw material shrink reserves
0.2
—
0.2
Finished goods shrink reserves
0.9
0.7
0.4
Raw material obsolete inventory reserves
20.2
10.2
20.5
Finished goods obsolete inventory reserves
22.6
19.3
22.1
Provision for obsolescence
43.9
30.2
43.2
Amounts charged to cost of sales comprise the following:
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
$
$
$
$
Cost of goods manufactured
98.7
109.1
125.7
133.9
Depreciation and amortization
2.9
2.3
5.5
4.7
101.6
111.4
131.2
138.6
Canada Goose Holdings Inc.
Page 12 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 7. Leases
Right-of-use assets
The following table presents changes in the cost and the accumulated depreciation of the Company’s right-of-use assets:
(in millions of Canadian dollars)
Retail stores
Manufacturing facilities
Other
Total
Cost
$
$
$
$
April 2, 2023
396.7
44.9
58.4
500.0
Additions
20.4
—
0.5
20.9
Lease modifications
6.9
—
—
6.9
Derecognition on termination
(4.0)
—
(1.8)
(5.8)
Impact of foreign currency translation
(5.1)
—
(0.4)
(5.5)
October 1, 2023
414.9
44.9
56.7
516.5
April 3, 2022
296.3
36.7
17.4
350.4
Additions
45.3
—
34.6
79.9
Additions from business combinations
1.5
—
1.8
3.3
Lease modifications
2.6
—
—
2.6
Derecognition on termination
(1.8)
—
—
(1.8)
Impact of foreign currency translation
9.0
—
0.6
9.6
October 2, 2022
352.9
36.7
54.4
444.0
Canada Goose Holdings Inc.
Page 13 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
(in millions of Canadian dollars)
Retail stores
Manufacturing facilities
Other
Total
Accumulated depreciation
$
$
$
$
April 2, 2023
171.1
20.6
16.5
208.2
Depreciation
30.4
2.8
3.3
36.5
Derecognition on termination
(4.0)
—
(1.8)
(5.8)
Impact of foreign currency translation
(2.3)
—
(0.1)
(2.4)
October 1, 2023
195.2
23.4
17.9
236.5
April 3, 2022
110.1
15.2
9.9
135.2
Depreciation
26.4
2.6
3.3
32.3
Derecognition on termination
(1.2)
—
—
(1.2)
Impact of foreign currency translation
3.0
—
0.4
3.4
October 2, 2022
138.3
17.8
13.6
169.7
Net book value
October 1, 2023
219.7
21.5
38.8
280.0
October 2, 2022
214.6
18.9
40.8
274.3
April 2, 2023
225.6
24.3
41.9
291.8
Lease liabilities
The following table presents the changes in the Company's lease liabilities:
(in millions of Canadian dollars)
Retail stores
Manufacturing facilities
Other
Total
$
$
$
$
April 2, 2023
259.2
27.7
47.9
334.8
Additions
20.3
—
0.2
20.5
Lease modifications
6.9
—
—
6.9
Principal payments
(28.1)
(2.7)
2.1
(28.7)
Impact of foreign currency translation
(3.1)
—
(0.1)
(3.2)
October 1, 2023
255.2
25.0
50.1
330.3
April 3, 2022
217.2
24.8
8.7
250.7
Additions
44.9
—
34.6
79.5
Additions from business combinations
1.5
—
1.7
3.2
Lease modifications
1.8
—
—
1.8
Principal payments
(23.4)
(2.7)
(1.2)
(27.3)
Impact of foreign currency translation
7.3
—
0.3
7.6
October 2, 2022
249.3
22.1
44.1
315.5
Canada Goose Holdings Inc.
Page 14 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Lease liabilities are classified as current and non-current liabilities as follows:
(in millions of Canadian dollars)
Retail stores
Manufacturing facilities
Other
Total
$
$
$
$
Current lease liabilities
64.5
6.1
6.5
77.1
Non-current lease liabilities
190.7
18.9
43.6
253.2
October 1, 2023
255.2
25.0
50.1
330.3
Current lease liabilities
56.3
5.5
3.6
65.4
Non-current lease liabilities
193.0
16.6
40.5
250.1
October 2, 2022
249.3
22.1
44.1
315.5
Current lease liabilities
64.7
6.1
5.3
76.1
Non-current lease liabilities
194.5
21.6
42.6
258.7
April 2, 2023
259.2
27.7
47.9
334.8
For the second and two quarters ended October 1, 2023, $3.3m and $6.1m of lease payments, respectively, were not included in the measurement of lease liabilities (second and two quarters ended October 2, 2022 - $2.1m and $2.7m, respectively). The majority of these balances related to short-term leases and variable rent payments, net of rent concessions, which are expensed as incurred.
Note 8. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
April 2, 2023
$
$
$
Trade payables
64.5
66.0
60.1
Accrued liabilities
86.1
95.4
82.4
Employee benefits
32.9
27.1
21.9
Derivative financial instruments
9.8
17.6
3.3
ASPP liability (note 11)
10.0
—
20.0
Other payables
6.9
12.3
7.9
Accounts payable and accrued liabilities
210.2
218.4
195.6
Canada Goose Holdings Inc.
Page 15 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 9. Provisions
Provisions are classified as current and non-current liabilities based on management's expectations of the timing of settlement, as follows:
(in millions of Canadian dollars)
Warranty
Sales returns
Asset retirement obligations
Total
$
$
$
$
Current provisions
7.3
13.2
—
20.5
Non-current provisions
22.2
—
13.6
35.8
October 1, 2023
29.5
13.2
13.6
56.3
Current provisions
5.9
15.8
—
21.7
Non-current provisions
22.6
—
9.1
31.7
October 2, 2022
28.5
15.8
9.1
53.4
Current provisions
6.0
15.6
—
21.6
Non-current provisions
24.4
—
12.1
36.5
April 2, 2023
30.4
15.6
12.1
58.1
Note 10. Borrowings
Amendments to borrowings
Effective June 30, 2023, LIBOR rates are no longer published for U.S Dollars. As a result, in the first quarter ended July 2, 2023, the Company transitioned facilities and contracts denominated in U.S dollars applying LIBOR to the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (“SOFR”). At this time, the Company entered into further amendments to its Revolving Facility (as defined below), Term Loan (as defined below) and the interest rate swaps to transition to SOFR. In connection with the amendments, during the first quarter ended July 2, 2023, the Company also extended the maturity of the Revolving Facility to May 15, 2028 and incurred transaction costs of $0.7m, on the extension of the Revolving Facility, which are being amortized using the effective interest rate method over the new term to maturity. There were no amendments to borrowings in the second quarter ended October 1, 2023.
See "Note 15. Financial risk management objectives and policies" for more details on the amendments to the interest rate swaps.
Canada Goose Holdings Inc.
Page 16 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Revolving Facility
The Company has an agreement with a syndicate of lenders for a senior secured asset-based revolving credit facility ("Revolving Facility") in the amount of $467.5m, with an increase in commitments to $517.5m during the peak season (June 1 - November 30). The Revolving Facility matures on May 15, 2028. Amounts owing under the Revolving Facility may be borrowed, repaid and re-borrowed for general corporate purposes. The Company has pledged substantially all of its assets as collateral for the Revolving Facility. The Revolving Facility contains financial and non-financial covenants which could impact the Company’s ability to draw funds.
The Revolving Facility has multiple interest rate charge options that are based on the Canadian prime rate, Banker's Acceptance rate, the lenders' Alternate Base Rate, European Base Rate, SOFR rate, or EURIBOR rate plus an applicable margin, with interest payable the earlier of quarterly or at the end of the then current interest period (whichever is earlier).
As at October 1, 2023, the Company had $86.3m owing on the Revolving Facility (October 2, 2022 - $55.9m, April 2, 2023 - $nil). Included in this balance is $1.6m of interest and administrative fees which remain outstanding as at October 1, 2023 (October 2, 2022 - $0.9m, April 2, 2023 - $nil). There were deferred financing charges in the amounts of $1.3m as at October 1, 2023 (October 2, 2022 - $0.8m). As at April 2, 2023, the Company had repaid all amounts owing on the Revolving Facility and related deferred financing charges in the amounts of $0.5m were included in other long-term liabilities. As at and during the two quarters ended October 1, 2023, the Company was in compliance with all covenants.
The Company had unused borrowing capacity available under the Revolving Facility of $335.2m as at October 1, 2023 (October 2, 2022 - $361.7m, April 2, 2023 - $238.4m).
The revolving credit commitment also includes a letter of credit commitment in the amount of $25.0m, with a $5.0m sub-commitment for letters of credit issued in a currency other than Canadian dollars, U.S. dollars, euros or British pounds sterling, and a swingline commitment for $25.0m. As at October 1, 2023, the Company had letters of credit outstanding under the Revolving Facility of $1.5m (October 2, 2022 - $1.7m, April 2, 2023 - $1.8m).
Term Loan
The Company has a senior secured loan agreement with a syndicate of lenders that is secured on a split collateral basis ("Term Loan") alongside the Revolving Facility. The Term Loan has an aggregate principal amount of USD300.0m, with quarterly repayments of USD0.75m on the principal amount and a maturity date of October 7, 2027. Moreover, the Term Loan has an interest rate of SOFR plus a term SOFR adjustment of 0.11448% with an applicable margin of 3.50% payable monthly in arrears. SOFR plus the term SOFR adjustment may not be less than 0.75%.
Canada Goose Holdings Inc.
Page 17 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Voluntary prepayments of amounts owing under the Term Loan may be made at any time without premium or penalty, once repaid may not be reborrowed. As at October 1, 2023, the Company had USD291.8m (October 2, 2022 - USD294.8m, April 2, 2023 - USD293.3m) aggregate principal amount outstanding under the Term Loan. The Company has pledged substantially all of its assets as collateral for the Term Loan. The Term Loan contains financial and non-financial covenants which could impact the Company’s ability to draw funds. As at and during the two quarters ended October 1, 2023, the Company was in compliance with all covenants.
As the Term Loan is denominated in U.S. dollars, the Company remeasures the outstanding balance plus accrued interest at each balance sheet date.
The amount outstanding with respect to the Term Loan is as follows:
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
April 2, 2023
$
$
$
Term Loan
396.2
407.5
396.3
Unamortized portion of deferred transaction costs
(0.7)
(0.7)
(0.6)
395.5
406.8
395.7
Mainland China Facilities
A subsidiary of the Company in Mainland China has three uncommitted loan facilities in the aggregate amount of RMB360.0m ($67.1m) ("Mainland China Facilities"). The term of each draw on the loans is one, three or six months or such other period as agreed upon and shall not exceed twelve months (including any extension or rollover). The interest rate on each facility is equal to the loan prime rate of 1 year, minus a marginal rate between 0.35% and 0.55%, and payable at one, three or six months, depending on the term of each draw. Proceeds drawn on the Mainland China Facilities are being used to support working capital requirements and build up of inventory for peak season sales. As at October 1, 2023, the Company had $47.5m (RMB254.8m) owing on the Mainland China Facilities (October 2, 2022 - $24.1m (RMB124.0m), April 2, 2023 - $9.8m (RMB50.0m)).
Japan Facility
A subsidiary of the Company in Japan has a loan facility in the aggregate amount of JPY4,000.0m ($36.4m) ("Japan Facility") with a floating interest rate of JBA TIBOR plus an applicable margin of 0.3%. The term of the facility is twelve months and each draw on the facility is payable within the term. Proceeds drawn on the Japan Facility are being used to support build up of inventory for peak season sales. As at October 1, 2023, the Company had $29.1m (JPY3,200.0m) owing on the Japan Facility (October 2, 2022 - $29.1m (JPY3,050.0m), April 2, 2023 - $13.7m (JPY1,350.0m)).
Short-term Borrowings
As at October 1, 2023, the Company has short-term borrowings in the amount of $80.7m. Short-term borrowings include $47.5m (October 2, 2022 - $24.1m, April 2, 2023 - $9.8m) owing on the Mainland China Facilities, $29.1m (October 2, 2022 - $29.1m, April 2, 2023 - $13.7m) owing on the Japan Facility, and $4.1m (October 2, 2022 - $4.1m, April 2, 2023- $4.1m) for the current portion of the quarterly principal repayments on the Term Loan. Short-term borrowings are all due within the next 12 months.
Canada Goose Holdings Inc.
Page 18 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Net interest, finance and other costs consist of the following:
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Reclassified
Reclassified
$
$
$
$
Interest expense
Mainland China Facilities
0.3
0.2
0.4
0.2
Japan Facility1
—
—
—
—
Revolving Facility
1.4
0.7
1.5
0.8
Term Loan
5.0
4.6
10.0
8.9
Lease liabilities
4.0
2.8
8.6
5.4
Standby fees
0.3
0.5
0.6
0.9
Foreign exchange losses (gains) on Term Loan net of hedges
1.7
16.8
(0.5)
15.3
Fair value remeasurement on the put option liability (note 14)
2.7
1.7
10.8
1.7
Fair value remeasurement on the contingent consideration (note 14)
(2.0)
(3.7)
(3.0)
(3.7)
Interest income
(0.1)
(0.1)
(0.8)
(0.2)
Other costs
0.3
0.1
0.5
0.2
Net interest, finance and other costs
13.6
23.6
28.1
29.5
1The net interest expense for the Japan Facility is less than $0.1m for the second and two quarters ended October 1, 2023 (second and two quarters ended October 2, 2022 - less than $0.1m).
Note 11. Shareholders' equity
Share capital transactions for the two quarters ended October 1, 2023
Normal course issuer bid
The Board of Directors has authorized the Company to initiate a normal course issuer bid ("NCIB"), in accordance with the requirements of the Toronto Stock Exchange, to purchase up to 5,421,685 subordinate voting shares over the 12-month period from November 22, 2022 to November 21, 2023. Purchased subordinate voting shares will be cancelled.
In connection with the NCIB, the Company also entered an automatic share purchase plan (“ASPP”) under which a designated broker may purchase subordinate voting shares under the NCIB during the regularly scheduled quarterly trading blackout periods of the Company. The repurchases made under the ASPP will be made in accordance with certain purchasing parameters and will continue until the earlier of the date in which the Company has acquired the maximum limit of subordinate voting shares pursuant to the ASPP or upon the date of expiry of the NCIB.
Canada Goose Holdings Inc.
Page 19 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
During the two quarters ended October 1, 2023, the Company purchased 2,521,501 subordinate voting shares for cancellation for total cash consideration of $56.2m. The amount to purchase the subordinate voting shares was charged to share capital, with the remaining $50.5m charged to retained earnings. Of the 2,521,501 subordinate voting shares purchased, 672,644 were purchased under the ASPP for total cash consideration of $16.2m. Since the commencement of the NCIB in fiscal 2023, the Company purchased 3,674,303 subordinate voting shares for cancellation for total cash consideration of $84.1m.
A liability representing the maximum amount that the Company could be required to pay the designated broker under the ASPP was $10.0m as at October 1, 2023. The amount was charged to contributed surplus. Subsequent to the two quarters ended October 1, 2023, the Company purchased an additional 570,057 subordinate voting shares for cancellation for total cash consideration of $10.0m under the ASPP. As at the filing date of this report, the remaining liability to the designated broker is $nil.
The transactions affecting the issued and outstanding share capital of the Company are described below:
(in millions of Canadian dollars, except share amounts)
Multiple voting shares
Subordinate voting shares
Total
Number
$
Number
$
Number
$
April 2, 2023
51,004,076
1.4
53,184,912
117.3
104,188,988
118.7
Purchase of subordinate voting shares
—
—
(2,521,501)
(5.7)
(2,521,501)
(5.7)
Total share purchases
—
—
(2,521,501)
(5.7)
(2,521,501)
(5.7)
Exercise of stock options
—
—
13,110
0.1
13,110
0.1
Settlement of RSUs
—
—
134,020
3.8
134,020
3.8
Total share issuances
—
—
147,130
3.9
147,130
3.9
October 1, 2023
51,004,076
1.4
50,810,541
115.5
101,814,617
116.9
Share capital transactions for the two quarters ended October 2, 2022
The transactions affecting the issued and outstanding share capital of the Company are described below:
(in millions of Canadian dollars, except share amounts)
Multiple voting shares
Subordinate voting shares
Total
Number
$
Number
$
Number
$
April 3, 2022
51,004,076
1.4
54,190,432
117.1
105,194,508
118.5
Exercise of stock options
—
—
55,248
—
55,248
—
Settlement of RSUs
—
—
85,866
2.7
85,866
2.7
Total share issuances
—
—
141,114
2.7
141,114
2.7
October 2, 2022
51,004,076
1.4
54,331,546
119.8
105,335,622
121.2
Canada Goose Holdings Inc.
Page 20 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 12. Share-based payments
Stock options
The Company issued stock options to purchase subordinate voting shares under its incentive plans, prior to the public share offering on March 21, 2017, the Legacy Plan, and subsequently, the Omnibus Plan. All options are issued at an exercise price that is not less than market value at the time of grant and expire ten years after the grant date.
Stock option transactions are as follows:
Two quarters ended
October 1, 2023
October 2, 2022
(in millions of Canadian dollars, except share and per share amounts)
Weighted average exercise price
Number of shares
Weighted average exercise price
Number of shares
Options outstanding, beginning of period
$
36.58
4,055,199
$
42.99
2,722,690
Granted to purchase shares
$
22.24
755,762
$
24.64
1,568,221
Exercised
$
3.91
(13,110)
$
0.25
(55,248)
Cancelled
$
29.61
(292,448)
$
43.26
(121,356)
Options outstanding, end of period
$
34.72
4,505,403
$
36.56
4,114,307
Restricted share units
Under the Omnibus Plan, the Company has granted RSUs to employees of the Company. The RSUs are treated as equity instruments for accounting purposes. We expect that vested RSUs will be paid at settlement through the issuance of one subordinate voting share per RSU. The RSUs vest over a period of three years, a third on each anniversary of the date of grant.
RSUs transactions are as follows:
Two quarters ended
October 1, 2023
October 2, 2022
Number of shares
Number of shares
RSUs outstanding, beginning of period
318,082
215,590
Granted
375,668
207,820
Settled
(134,020)
(85,866)
Cancelled
(36,421)
(11,135)
RSUs outstanding, end of period
523,309
326,409
Canada Goose Holdings Inc.
Page 21 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Performance share units
In May 2023, the Company implemented a Performance Share Unit (“PSU”) program under the Omnibus Plan. A PSU represents the right to receive a subordinate voting share settled by the issuance of shares at the vesting date. PSUs vest on the third anniversary of the award date and are earned only if certain performance targets are achieved. Shares issued per PSU at the vesting date can decrease or increase if minimum or maximum performance targets are achieved ranging from 0% to 200% of the PSU award granted. The Company expects that vested PSUs will be paid at settlement through the issuance of one subordinate voting share per PSU. PSUs are treated as equity instruments for accounting purposes.
PSUs transactions are as follows:
Two quarters ended
October 1, 2023
October 2, 2022
Number of shares
Number of shares
PSUs outstanding, beginning of period
—
—
Granted
397,600
—
Cancelled
(7,468)
—
PSUs outstanding, end of period
390,132
—
Shares reserved for issuance
As at October 1, 2023, subordinate voting shares, to a maximum of 5,426,114 shares, have been reserved for issuance under equity incentive plans to select employees of the Company, with vesting contingent upon meeting the service, performance goals and other conditions of the Omnibus Plan.
Accounting for share-based awards
For the second and two quarters ended October 1, 2023, the Company recorded $4.7m and $7.2m, respectively, as compensation expense for the vesting of stock options, RSUs and PSUs (second and two quarters ended October 2, 2022 - $4.3m and $7.0m, respectively). Share-based compensation expense is included in SG&A expenses.
The assumptions used to measure the fair value of options granted under the Black-Scholes option pricing model at the grant date were as follows:
Two quarters ended
(in millions of Canadian dollars, except share and per share amounts)
October 1, 2023
October 2, 2022
Weighted average stock price valuation
$
22.24
$
24.64
Weighted average exercise price
$
22.24
$
24.64
Risk-free interest rate
4.11
%
2.51
%
Expected life in years
5
5
Expected dividend yield
—
%
—
%
Volatility
40
%
40
%
Weighted average fair value of options issued
$
7.51
$
7.86
Canada Goose Holdings Inc.
Page 22 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
RSU and PSU fair values are determined based on the market value of the subordinate voting shares at the time of grant. As at October 1, 2023, the weighted average fair value of RSUs was $22.24 (October 2, 2022 - $24.64). As at October 1, 2023, the weighted average fair value of PSUs was $22.24.
Note 13. Related party transactions
The Company enters into transactions from time to time with its principal shareholders and organizations affiliated with members of the Board of Directors by incurring expenses for business services. During the second and two quarters ended October 1, 2023, the Company incurred expenses with related parties of $0.1m and $0.4m, respectively (second and two quarters ended October 2, 2022 - $0.2m and $0.5m, respectively) from companies related to certain shareholders. Balances owing to related parties as at October 1, 2023 were $0.1m (October 2, 2022 - $0.2m, April 2, 2023 - $0.4m).
A lease liability due to the controlling shareholder of the acquired Baffin Inc. business (the "Baffin Vendor") for leased premises was $2.7m as at October 1, 2023 (October 2, 2022 - $3.5m, April 2, 2023 - $3.1m). During the second and two quarters ended October 1, 2023, the Company paid principal and interest on the lease liability, net of rent concessions, and other operating costs to entities affiliated with the Baffin Vendor totalling $0.3m and $0.7m, respectively (second and two quarters ended October 2, 2022 - $0.3m and $0.7m, respectively). No amounts were owing to Baffin entities as at October 1, 2023, October 2, 2022, and April 2, 2023.
The joint venture between the Company and Sazaby League ("Japan Joint Venture"), has lease liabilities due to the non-controlling shareholder, Sazaby League for leased premises. Lease liabilities were $2.2m as at October 1, 2023 (October 2, 2022 - $2.7m, April 2, 2023 - $2.7m). During the second and two quarters ended October 1, 2023, the Company incurred principal and interest on lease liabilities, royalty fees, and other operating costs to Sazaby League totalling $0.8m and $1.9m, respectively (second and two quarters ended October 2, 2022 - $1.1m and $2.5m, respectively). Balances owing to Sazaby League as at October 1, 2023 were $0.2m (October 2, 2022 - $0.3m, April 2, 2023 - $0.2m).
During the second and two quarters ended October 1, 2023, the Japan Joint Venture sold inventory of $0.1m and $0.1m, respectively to companies wholly owned by Sazaby League (second and two quarters ended October 2, 2022 - $0.1m and $0.1m, respectively). As at October 1, 2023, the Japan Joint Venture recognized a trade receivable of $0.1m from these companies (October 2, 2022 - $0.1m, April 2, 2023 - $0.1m).
Pursuant to the agreement entered between the Company and Sazaby League to form the Japan Joint Venture ("Joint Venture Agreement"), during the second and two quarters ended October 2, 2022 the Company sold inventory of $4.5m and $11.2m, respectively, to Sazaby League for repurchase by the Japan Joint Venture for inventory fulfillment. The Company recognized a receivable from Sazaby League as at October 2, 2022 of $1.6m in trade receivables. During the second and two quarters ended October 2, 2022, the Japan Joint Venture repurchased $5.0m and $11.2m, respectively, of inventory from Sazaby League and the Japan Joint Venture recognized a payable to Sazaby League of $1.7m as at October 2, 2022 in accounts payable and accrued liabilities. These transactions were measured based on pricing established through the Joint Venture Agreement at market terms and were not recognized as sales transactions. The repurchase of inventory pursuant to this Joint Venture Agreement was completed during the fourth quarter ended April 2, 2023.
Canada Goose Holdings Inc.
Page 23 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Note 14. Financial instruments and fair value
The following table presents the fair values and fair value hierarchy of the Company’s financial instruments and excludes financial instruments carried at amortized cost that are short-term in nature:
October 1, 2023
(in millions of Canadian dollars)
Level 1
Level 2
Level 3
Carrying value
Fair value
$
$
$
$
$
Financial assets
Derivatives included in other current assets
—
26.5
—
26.5
26.5
Derivatives included in other long-term assets
—
12.1
—
12.1
12.1
Financial liabilities
Derivatives included in accounts payable and accrued liabilities
—
9.8
—
9.8
9.8
Mainland China Facilities
—
47.5
—
47.5
47.5
Japan Facility
—
29.1
—
29.1
29.1
Revolving Facility
—
85.0
—
85.0
86.3
Term Loan
—
395.5
—
395.5
432.4
Derivatives included in other long-term liabilities
—
1.9
—
1.9
1.9
Put option liability included in other long-term liabilities
—
—
39.5
39.5
39.5
Contingent consideration included in other long-term liabilities
—
—
12.0
12.0
12.0
October 2, 2022
(in millions of Canadian dollars)
Level 1
Level 2
Level 3
Carrying value
Fair value
$
$
$
$
$
Financial assets
Derivatives included in other current assets
—
20.4
—
20.4
20.4
Derivatives included in other long-term assets
—
26.8
—
26.8
26.8
Financial liabilities
Derivatives included in accounts payable and accrued liabilities
—
17.6
—
17.6
17.6
Mainland China Facilities
—
—
24.1
24.1
24.1
Japan Facility
—
29.1
—
29.1
29.1
Revolving Facility
—
55.1
—
55.1
55.9
Term Loan
—
406.8
—
406.8
438.8
Put option liability included in other long-term liabilities
—
—
21.5
21.5
21.5
Contingent consideration included in other long-term liabilities
—
—
15.0
15.0
15.0
Canada Goose Holdings Inc.
Page 24 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
April 2, 2023
(in millions of Canadian dollars)
Level 1
Level 2
Level 3
Carrying value
Fair value
$
$
$
$
$
Financial assets
Derivatives included in other current assets
—
12.4
—
12.4
12.4
Derivatives included in other long-term assets
—
12.4
—
12.4
12.4
Financial liabilities
Derivatives included in accounts payable and accrued liabilities
—
3.3
—
3.3
3.3
Mainland China Facilities
—
—
9.8
9.8
9.8
Japan Facility
—
13.7
—
13.7
13.7
Term Loan
—
395.7
—
395.7
433.1
Derivatives included in other long-term liabilities
—
6.0
—
6.0
6.0
Put option liability included in other long-term liabilities
—
—
32.1
32.1
32.1
Contingent consideration included in other long-term liabilities
—
—
16.8
16.8
16.8
In connection with the Japan Joint Venture, for the second and two quarters ended October 1, 2023, the Company recorded a decrease of JPY222.6m ($2.2m, excluding translation losses of $0.2m) and a decrease of JPY332.8m ($4.8m, excluding translation losses of $1.8m), respectively, on the remeasurement of the contingent consideration. The Company recorded an increase of JPY303.6m ($2.4m, excluding translation losses of $0.3m) and an increase of JPY1,189.1m ($7.4m, excluding translation losses of $3.4m) on the remeasurement of the put option liability during the second and two quarters ended October 1, 2023, respectively. The change in fair values of the contingent consideration and put option liability were driven by progression through the 4-year and 10-year terms, respectively, and improvements in the Company’s credit rating.
For the second and two quarters ended October 2, 2022, the Company recorded a decrease of JPY388.2m ($5.0m, excluding translation losses of $1.3m) on the remeasurement of the contingent consideration, resulting in the fair value of the contingent consideration of JPY1,570.7m ($15.0m). The Company recorded an increase of JPY174.9m ($0.3m, excluding translation losses of $1.4m) on the remeasurement of the put option liability during the second and two quarters ended October 2, 2022, resulting in a balance of JPY2,251.3m ($21.5m).
Note 15. Financial risk management objectives and policies
The Company’s primary risk management objective is to protect the Company’s assets and cash flow, in order to increase the Company’s enterprise value.
The Company is exposed to capital management risk, liquidity risk, credit risk, market risk, foreign exchange risk, and interest rate risk. The Company’s senior management and Board of Directors oversee the management of these risks. The Board of Directors reviews and agrees upon policies for managing each of these risks which are summarized below.
Canada Goose Holdings Inc.
Page 25 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Capital management
The Company manages its capital and capital structure with the objectives of safeguarding sufficient net working capital over the annual operating cycle and providing sufficient financial resources to grow operations to meet long-term consumer demand. The Board of Directors of the Company monitors the Company’s capital management on a regular basis. The Company will continually assess the adequacy of the Company’s capital structure and capacity and make adjustments within the context of the Company’s strategy, economic conditions, and risk characteristics of the business.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to satisfy the requirements for business operations, capital expenditures, debt service and general corporate purposes, under normal and stressed conditions. The primary source of liquidity is funds generated by operating activities; the Company also relies on the Mainland China Facilities, the Japan Facility and Revolving Facility as sources of funds for short term working capital needs. The Company continuously reviews both actual and forecasted cash flows to ensure that the Company has appropriate capital capacity.
The following table summarizes the amount of contractual undiscounted future cash flow requirements as at October 1, 2023:
Contractual obligations by fiscal year
Q3 to Q4 2024
2025
2026
2027
2028
2029
Thereafter
Total
(in millions of Canadian dollars)
$
$
$
$
$
$
$
$
Accounts payable and accrued liabilities
210.2
—
—
—
—
—
—
210.2
Mainland China Facilities
47.5
—
—
—
—
—
—
47.5
Japan Facility
29.1
—
—
—
—
—
—
29.1
Revolving Facility
—
—
—
—
—
86.3
—
86.3
Term Loan
2.0
4.1
4.1
4.1
381.9
—
—
396.2
Interest commitments relating to borrowings1
21.0
36.2
35.4
35.4
17.7
—
—
145.7
Lease obligations
48.7
85.5
64.7
54.0
39.3
29.4
72.7
394.3
Pension obligation
—
—
—
—
—
—
2.0
2.0
Total contractual obligations
358.5
125.8
104.2
93.5
438.9
115.7
74.7
1,311.3
1 Interest commitments are calculated based on the loan balance and the interest rate payable on the Mainland China Facilities, the Japan Facility, the Revolving Facility, and the Term Loan of 3.07%, 0.35%, 5.89%, and 8.93% respectively, as at October 1, 2023.
As at October 1, 2023, we had additional liabilities which included provisions for warranty, sales returns, asset retirement obligations, deferred income tax liabilities, as well as the put option liability and the contingent consideration on the Japan Joint Venture. These liabilities have not been included in the table above as the timing and amount of future payments are uncertain.
Canada Goose Holdings Inc.
Page 26 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Letter of guarantee facility
On April 14, 2020, Canada Goose Inc. entered into a letter of guarantee facility in the amount of $10.0m. Letters of guarantee are available for terms of up to twelve months and will be charged a fee equal to 1.0% per annum calculated against the face amount and over the term of the guarantee. Amounts issued on the facility will be used to finance working capital requirements of Canada Goose Inc. through letters of guarantee, standby letters of credit, performance bonds, counter guarantees, counter standby letters of credit, or similar credits. The Company immediately reimburses the issuing bank for amounts drawn on issued letters of guarantees. At October 1, 2023, the Company had $6.8m outstanding.
In addition, a subsidiary of the Company in Mainland China entered into letters of guarantee and as at October 1, 2023 the amount outstanding was $8.9m. Amounts will be used to support retail operations of such subsidiaries through letters of guarantee, standby letters of credit, performance bonds, counter guarantees, counter standby letters of credit, or similar credits.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
Credit risk arises from the possibility that certain parties will be unable to discharge their obligations. The Company manages its credit risk through a combination of third party credit insurance and internal house risk. Credit insurance is provided by a third party for customers and is subject to continuous monitoring of the credit worthiness of the Company's customers. Insurance covers a specific amount of revenue, which may be less than the Company's total revenue with a specific customer. The Company has an agreement with a third party who has insured the risk of loss for up to 90% of trade accounts receivable from certain designated customers subject to a total deductible of $0.1m, to a maximum of $30.0m per year. As at October 1, 2023, trade accounts receivable totalling approximately $77.5m (October 2, 2022 - $93.3m, April 2, 2023 - $10.3m) were insured subject to the policy cap. Complementary to the third party insurance, the Company establishes payment terms with customers to mitigate credit risk and continues to closely monitor its trade accounts receivable credit risk exposure.
Within CG Japan, the Company has an agreement with a third party who has insured the risk of loss for up to 45% of trade accounts receivable for certain designated customers for a maximum of JPY450.0m per annum subject to a deductible of 10% and applicable only to accounts with receivables over JPY100k. As at October 1, 2023, trade accounts receivable totalling approximately $4.1m (JPY450.0m) were insured subject to the policy cap (October 2, 2022 - $4.3m (JPY450.0m), April 2, 2023 - $0.7m (JPY72.8m)).
Trade accounts receivable factoring program
A subsidiary of the Company in Europe has an agreement to factor, on a limited recourse basis, certain of its trade accounts receivable up to a limit of EUR20.0m in exchange for advanced funding equal to 100% of the principal value of the invoice.
Canada Goose Holdings Inc.
Page 27 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
For the two quarters ended October 1, 2023, the Company received cash proceeds from the sale of trade accounts receivable with carrying values of $25.9m which were derecognized from the Company's statement of financial position (two quarters ended October 2, 2022 - $20.0m). Fees of $0.2m were incurred during the two quarters ended October 1, 2023 (two quarters ended October 2, 2022 - $0.1m) and included in net interest, finance and other costs in the interim statements of income (loss). As at October 1, 2023, the outstanding amount of trade accounts receivable derecognized from the Company’s statement of financial position, but which the Company continued to service, was $12.2m (October 2, 2022 - $13.5m, April 2, 2023 - $1.1m).
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise foreign exchange risk and interest rate risk.
Foreign exchange risk
Foreign exchange risk in operating cash flows
The Company’s Interim Financial Statements are expressed in Canadian dollars, but a substantial portion of the Company’s revenues, purchases, and expenses are denominated in other currencies, principally U.S. dollars, euros, British pounds sterling, Swiss francs, Chinese yuan, Hong Kong dollars and Japanese yen. The Company has entered into forward foreign exchange contracts to reduce the foreign exchange risk associated with revenues, purchases, and expenses denominated in these currencies. Certain forward foreign exchange contracts were designated at inception and accounted for as cash flow hedges. During the fourth quarter of fiscal 2023, the Company executed the operating cash flow hedge program for the fiscal year ending March 31, 2024.
Revenues and expenses of all foreign operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates in effect at the dates when such items are recognized. As a result, we are exposed to foreign currency translation gains and losses. Appreciating foreign currencies relative to the Canadian dollar, to the extent they are not hedged, will positively impact operating income and net income by increasing our revenue, while depreciating foreign currencies relative to the Canadian dollar will have the opposite impact.
The Company recognized the following unrealized losses and gains in the fair value of derivatives designated as cash flow hedges in other comprehensive income:
Second quarter ended
Two quarters ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(in millions of Canadian dollars)
Net loss
Tax recovery
Net loss
Tax recovery
Net gain
Tax expense
Net loss
Tax recovery
$
$
$
$
$
$
$
$
Forward foreign exchange contracts designated as cash flow hedges
(4.2)
1.1
(0.9)
0.5
3.0
(0.7)
(0.2)
0.1
Canada Goose Holdings Inc.
Page 28 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
The Company reclassified the following losses and gains from other comprehensive income on derivatives designated as cash flow hedges to locations in the Interim Financial Statements described below:
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Loss (gain) from other comprehensive income
Reclassified
Reclassified
Forward foreign exchange contracts designated as cash flow hedges
$
$
$
$
Revenue
0.1
(0.4)
0.2
0.3
SG&A expenses
(0.4)
(0.3)
(0.5)
0.7
Inventory
0.1
—
—
(0.1)
For the second and two quarters ended October 1, 2023, an unrealized loss of $0.4m and an unrealized gain of $1.8m, respectively (second and two quarters ended October 2, 2022 - unrealized losses of $1.3m and $1.9m, respectively) on forward exchange contracts that were not treated as hedges were recognized in SG&A expenses in the interim statements of income (loss).
Foreign currency forward exchange contracts outstanding as at October 1, 2023 related to operating cash flows were:
(in millions)
Aggregate Amounts
Currency
Forward contract to purchase Canadian dollars
USD
148.5
U.S. dollars
€
188.4
euros
¥
792.9
Japanese yen
Forward contract to sell Canadian dollars
USD
60.7
U.S. dollars
€
114.0
euros
£
5.0
British pounds sterling
Forward contract to purchase euros
CHF
1.6
Swiss francs
CNY
1,282.7
Chinese yuan
£
56.4
British pounds sterling
HKD
67.8
Hong Kong dollars
Forward contract to sell euros
CHF
5.3
Swiss francs
CNY
308.7
Chinese yuan
£
14.1
British pounds sterling
HKD
53.2
Hong Kong dollars
Canada Goose Holdings Inc.
Page 29 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Foreign exchange risk on borrowings
The Company enters into derivative transactions to hedge a portion of its exposure to interest rate risk and foreign currency exchange risk related to principal and interest payments on the Term Loan denominated in U.S. dollars (see "Note 10. Borrowings"). The Company also entered into a five-year forward exchange contract by selling $368.5m and receiving USD270.0m as measured on the trade date, to fix the foreign exchange risk on a portion of the Term Loan borrowings.
The Company recognized the following unrealized gains in the fair value of derivatives designated as hedging instruments in other comprehensive income:
Second quarter ended
Two quarters ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(in millions of Canadian dollars)
Net gain
Tax expense
Net gain
Tax expense
Net gain
Tax expense
Net gain
Tax expense
$
$
$
$
$
$
$
$
Swaps designated as cash flow hedges
0.4
(0.1)
8.7
(3.0)
3.0
(1.3)
9.3
(3.2)
The Company reclassified the following gains and losses from other comprehensive income on derivatives designated as hedging instruments to net interest, finance and other costs:
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
(Gain) loss from other comprehensive income
$
$
$
$
Swaps designated as cash flow hedges
(0.4)
0.2
(0.9)
0.4
For the second and two quarters ended October 1, 2023, unrealized gains of $8.0m and $2.4m, respectively (second and two quarters ended October 2, 2022 - unrealized gains of $11.0m and $23.4m, respectively) in the fair value of the long-dated forward exchange contract related to a portion of the Term Loan balance were recognized in net interest, finance and other costs in the interim statements of income (loss).
Interest rate risk
The Company is exposed to interest rate risk related to the effect of interest rate changes on the borrowings outstanding under the Mainland China Facilities, Japan Facility, the Revolving Facility, and the Term Loan, which currently bear interest rates at 3.07%, 0.35%, 5.89%, and 8.93%, respectively.
Interest rate risk on the Term Loan is partially mitigated by interest rate swap hedges. The Company has entered into five-year interest rate swap agreements terminating December 31, 2025 to pay fixed interest rates and receive floating interest rates on notional debt of USD270.0m. Effective June 30, 2023, the floating interest benchmark reference rate contained within the swap agreements were amended from LIBOR to SOFR and the average fixed rates were reduced from 1.97% to 1.76%. These swap agreements fix the interest rate on the USD300.0m Term Loan. Following the amendment, the interest rate swaps continue to be designated and accounted for as cash flow hedges.
Canada Goose Holdings Inc.
Page 30 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Based on the weighted average amount of outstanding borrowings, a 1.00% increase in the average interest rate during the two quarters ended October 1, 2023 would have increased interest expense on the Mainland China Facilities, Japan Facility, the Revolving Facility, and the Term Loan before hedging, by $0.1m, $0.1m, $0.2m, and $2.0m, respectively (two quarters ended October 2, 2022 - less than $0.1m, $0.1m, $0.1m, and $1.9m, respectively).
Note 16. Selected cash flow information
Changes in non-cash operating items
Second quarter ended
Two quarters ended
(in millions of Canadian dollars)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Reclassified
Reclassified
$
$
$
$
Trade receivables
(97.3)
(106.5)
(97.8)
(111.0)
Inventories
1.1
(9.4)
(51.2)
(95.3)
Other current assets
(11.6)
(7.9)
(16.6)
(12.7)
Accounts payable and accrued liabilities
37.9
38.6
2.6
24.3
Provisions
5.7
6.6
(1.9)
3.4
Other
(3.1)
(0.6)
(1.3)
(11.4)
Change in non-cash operating items
(67.3)
(79.2)
(166.2)
(202.7)
Canada Goose Holdings Inc.
Page 31 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Changes in liabilities and equity arising from financing activities
Mainland China Facilities
Japan Facility
Revolving Facility
Term Loan
Lease liabilities
Share capital
$
$
$
$
$
$
April 2, 2023
9.8
13.7
(0.5)
395.7
334.8
118.7
Cash flows:
Mainland China Facilities borrowings
37.7
—
—
—
—
—
Japan Facility borrowings
—
15.4
—
—
—
—
Revolving Facility borrowings
—
—
86.3
—
—
—
Term Loan repayments
—
—
—
(2.0)
—
—
Transactions costs on financing activities
—
—
(0.2)
(0.1)
—
—
Subordinate voting shares purchased and cancelled under NCIB
—
—
—
—
—
(56.2)
Principal payments on lease liabilities
—
—
—
—
(28.7)
—
Issuance of shares
—
—
—
—
—
0.1
Non-cash items:
Accrued transaction costs
—
—
(0.7)
—
—
—
Amortization of deferred transaction costs
—
—
0.1
—
—
—
Unrealized foreign exchange loss (gain)
—
—
—
1.9
(3.2)
—
Additions and amendments to lease liabilities (note 7)
—
—
—
—
27.4
—
Share purchase charge to retained earnings (note 11)
—
—
—
—
—
50.5
Contributed surplus on share issuances (note 11)
—
—
—
—
—
3.8
October 1, 2023
47.5
29.1
85.0
395.5
330.3
116.9
Canada Goose Holdings Inc.
Page 32 of 33
Notes to the Condensed Consolidated Interim Financial Statements
(unaudited)
Mainland China Facilities
Japan Facility
Revolving Facility
Term Loan
Lease liabilities
Share capital
$
$
$
$
$
$
April 3, 2022
—
—
(0.4)
370.0
250.7
118.5
Cash flows:
Cash inflow from business combination
—
19.4
—
—
3.2
—
Mainland China Facilities borrowings
24.1
—
—
—
—
—
Japan Facility borrowings
—
9.7
—
—
—
—
Revolving Facility borrowings
—
—
55.4
—
—
—
Term Loan repayments
—
—
—
(2.0)
—
—
Transactions costs on financing activities
—
—
—
—
—
—
Principal payments on lease liabilities
—
—
—
—
(27.3)
—
Non-cash items:
Amortization of deferred transaction costs
—
—
—
0.1
—
—
Unrealized foreign exchange loss
—
—
—
38.7
7.6
—
Additions and amendments to lease liabilities (note 7)
—
—
—
—
81.3
—
Contributed surplus on share issuances (note 11)
—
—
—
—
—
2.7
October 2, 2022
24.1
29.1
55.0
406.8
315.5
121.2
Note 17. Subsequent Events
Prior to the end of the second quarter, the Company entered into a framework agreement to acquire a manufacturing facility. The acquisition has not been completed as at the issuance date of these Interim Financial Statements, but is expected imminently.
