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We have audited the accompanying consolidated financial statements of Dollarama Inc., which comprise
the consolidated statements of financial position as at January 29, 2012, January 30, 2011 and February 1,
2010 and the consolidated statements of comprehensive income, changes in shareholders equity and cash
flows for the years ended January 29, 2012 and January 30, 2011, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Managements responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entitys preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
(2)
Dollarama Inc.
Consolidated Statements of Financial Position
Note
As of
January 29,
2012
$
As of
January 30,
2011
$
(note 20)
As of
February 1,
2010
$
(note 20)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Deposits and prepaid expenses
Merchandise inventories
Derivative financial instruments
16
70,271
1,844
4,436
315,873
3,951
53,129
1,821
4,658
258,905
838
93,057
1,453
4,924
234,684
3,479
396,375
319,351
337,597
173,053
110,531
727,782
152,081
111,917
727,782
5,342
138,214
113,302
727,782
1,407,741
1,311,131
1,322,237
101,301
6,635
20,635
248
13,967
103,858
12,830
5,630
14,292
78,519
23,445
55,194
1,925
142,786
136,610
159,083
258,385
73,765
37,859
347,763
61,906
33,644
468,591
56,879
29,988
512,795
579,923
714,541
525,024
15,659
352,287
1,976
523,295
16,066
198,712
(6,865)
518,430
17,472
81,885
(10,091)
894,946
731,208
607,696
1,407,741
1,311,131
1,322,237
Non-current assets
Derivative financial instruments
Property and equipment
Intangible assets
Goodwill
16
5
6
6
Total assets
7
16, 17
8
Non-current liabilities
Long-term debt
Deferred income tax
Other liabilities
8
12
Total liabilities
Shareholders equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
(signed)
John J. Swidler
__________________________________
John J. Swidler, Director
The accompanying notes are an integral part of the consolidated financial statements.
Dollarama Inc.
Consolidated Statements of Changes in Shareholders Equity
Note
20
Number of
common
shares
72,691,935
9
10
908,624
20
73,600,559
Share
capital
$
518,430
Contributed
surplus
$
17,472
3,226
3,226
2,377
1,082
-
1,082
2,377
2,488
(2,488)
4,865
(1,406)
3,459
523,295
16,066
10
538
784
-
198,712
173,474
(19,899)
-
(6,865)
-
8,841
-
731,208
173,474
8,841
(19,899)
784
538
(1,191)
1,729
(407)
(19,899)
(18,577)
15,659
352,287
1,976
894,946
The accompanying notes are an integral part of the consolidated financial statements.
116,827
1,191
525,024
607,696
116,827
(10,091)
73,807,542
81,885
Total
$
206,983
Retained
earnings
$
Accumulated
other
comprehensive
income (loss)
$
Dollarama Inc.
Consolidated Statements of Comprehensive Income
(expressed in thousands of Canadian dollars, except share and per share amounts)
Note
For the
year ended
January 29,
2012
$
Sales
Cost of sales
For the
year ended
January 30,
2011
$
(note 20)
1,602,827
1,002,487
1,419,914
906,982
Gross profit
600,340
512,932
305,121
33,336
278,952
28,508
Operating income
261,883
205,472
16,555
34,460
245,328
171,012
71,854
54,185
173,474
116,827
11,961
4,366
(3,120)
(1,140)
8,841
3,226
182,315
120,053
11
12
16
13
13
2.35
2.30
1.60
1.55
13
73,684
73,153
13
75,563
75,377
The accompanying notes are an integral part of the consolidated financial statements.
Dollarama Inc.
Consolidated Statements of Cash Flows
Note
For the
year ended
January 29,
2012
$
For the
year ended
January 30,
2011
$
(note 20)
Cash flows
Operating activities
Net earnings for the year
Adjustments for
Depreciation of property and equipment
Amortization of intangible assets
Amortization of deferred tenant allowances
Amortization of deferred leasing costs
Amortization of unfavourable lease rights
Amortization of debt issue cost and discounts
Excess of receipts over amount recognized
on derivative financial instruments
Foreign exchange gain on long-term debt
Deferred lease inducements
Deferred leasing costs
Deferred tenant allowances
Stock-based compensation
Repayment of capitalized interest on long-term debt
Repayment of finance lease
Deemed interest on repayment of long-term debt
Deferred income tax
Other
173,474
116,827
33,493
1,076
(2,444)
310
(1,233)
2,250
28,934
1,349
(2,014)
336
(1,775)
10,179
3,466
3,323
4,028
784
(653)
(1,419)
8,739
(9)
17,047
(15,850)
3,058
(300)
4,387
1,082
(28,074)
(20,207)
3,886
5
225,185
(52,123)
118,870
(9,599)
173,062
109,271
(52,957)
297
(54,262)
(42,981)
176
(52,660)
(97,067)
(90,459)
(13,264)
538
(75)
525,000
(571,401)
2,377
(8,108)
(103,260)
(52,132)
17,142
(39,928)
53,129
93,057
70,271
53,129
11,495
55,954
50,454
64,043
16
10
18
Investing activities
Settlement of derivative financial instruments
Purchase of property and equipment
Proceeds on disposal of property and equipment
16
Financing activities
Proceeds from long-term debt
Repayment of long-term debt
Dividends
Issuance of common shares
Debt issue costs
The accompanying notes are an integral part of the consolidated financial statements.
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Dollarama Corporation
Dollarama Group L.P. has a senior secured credit facility as further described in note 8.
Dollarama L.P. and Dollarama Corporation operate the chain of stores and perform related logistical and
administrative support activities.
(1)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
These consolidated financial statements have been prepared in compliance with IFRS. Subject to certain
transition elections and exceptions disclosed in note 20, the Corporation has consistently applied the
accounting policies used in the preparations of its opening IFRS consolidated statement of financial position as
of February 1, 2010 throughout all periods presented, as if these policies had always been in effect. Note 20
discloses the impact of the transition to IFRS on the Corporations reported shareholders equity as of
January 30, 2011 and comprehensive income and cash flows for the year ended January 30, 2011.
These consolidated financial statements were approved by the Board of Directors for issue on April 10, 2012.
(2)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Segment information
The Corporation manages its business on the basis of one reportable segment. Operating segments are reported
in a manner consistent with the internal reporting provided to the chief operating decision-maker.
Financial assets
The Corporation classifies its financial assets in the following categories: financial assets at fair value through
profit or loss, and loans and receivables. The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of its financial assets at initial recognition.
a)
b)
Financial liabilities
Financial liabilities comprise accounts payable and accrued liabilities, dividend payable, derivative financial
instruments, long-term debt and other liabilities.
Long-term debt is recognized initially at fair value, net of transaction costs incurred, and is subsequently
carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption
value is recognized in the consolidated statement of comprehensive income over the period of the debt using
the effective interest method.
Fees paid on the establishment of revolving loan facilities are capitalized as a prepayment for liquidity services
and amortized over the period of the facility to which it relates.
Financial liabilities are classified as current liabilities unless the Corporation has an unconditional right to defer
settlement of the financial liabilities for at least 12 months after the statement of financial position date.
(3)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement
of financial position when there is a legally enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Derivative financial instruments
The Corporation uses derivative financial instruments in the management of its foreign currency risk. In prior
periods, the Corporation also used derivative financial instruments in the management of its interest rate
exposure. The Corporation designates certain derivatives as hedges of a particular risk associated with a highly
probable forecast transaction (cash flow hedge).
When hedge accounting is used, the Corporation documents at inception the relationships between the hedging
instruments and the hedged items, as well as its risk management objective and strategy for undertaking
various hedge transactions. This process includes linking derivatives to specific assets and liabilities on the
consolidated statement of financial position or to specific firm commitments or forecasted transactions. The
Corporation also assesses whether the derivatives that are used in hedging transactions are effective in
offsetting changes in cash flows of hedged items.
Movements on the hedging reserve in shareholders equity are shown in the consolidated statement of changes
in shareholders equity. The full fair value of a hedging derivative is classified as a non-current asset or liability
when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when
the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current
asset or liability.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is
recognized immediately in earnings. Amounts accumulated in shareholders equity are reclassified to earnings
in the periods when the hedged item affects earnings. The gain or loss relating to the effective portion of the
derivatives is recognized in the consolidated statement of comprehensive income in cost of sales.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when
the forecast transaction is ultimately recognized in earnings. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was reported in shareholders equity is immediately transferred to
earnings.
Most foreign exchange forward contracts are designated as cash flow hedges of specific anticipated
transactions.
(4)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Derivatives that do not qualify for hedge accounting
Derivative financial instruments which are not designated as hedges or have ceased to be effective prior to
maturity are recorded at their estimated fair values under assets or liabilities, with changes in their estimated
fair values recorded in earnings.
Foreign currency swap agreements
Prior to June 14, 2010, the Corporation had significant long-term debt denominated in US dollars. It used
foreign currency swap agreements to mitigate risks from fluctuations in the exchange rate. When not
designated as hedges or when foreign currency swap agreements have ceased to be effective prior to maturity,
changes in fair value were reported in earnings under net financing costs. Foreign currency swap agreements
were classified as non-current assets or non-current liabilities on the consolidated statement of financial
position.
Property and equipment
Property and equipment are carried at cost and depreciated under the straight-line method over the estimated
useful lives of the assets as follows:
Store and warehouse equipment
Computer equipment
Vehicles
Leasehold improvements
Computer software
8 to 10 years
5 years
5 years
Term of lease
5 years
The Corporation recognizes in the carrying amount of property and equipment the cost of replacing parts of an
item when that cost is incurred, if it is probable that the future economic benefits embodied within the item will
flow to the Corporation and the cost of the item can be measured reliably. The carrying amount of the replaced
part is derecognized.
Estimates of useful lives, residual values and methods of depreciation are reviewed annually. Any changes are
accounted for prospectively as a change in accounting estimate. If the expected residual value of an asset is
equal to or greater than its carrying value, depreciation on that asset is ceased. Depreciation is resumed when
the expected residual value falls below the assets carrying value. Gains and losses on disposal of an item of
property and equipment are determined by comparing the proceeds from disposal with the carrying amount of
the item and are recognized directly in the consolidated statement of comprehensive income.
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the
consideration transferred over IFRS interest in net fair value of the net identifiable assets, liabilities and
contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
(5)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested for impairment annually,
as of the financial position date, or more frequently if events or circumstances indicate that it may be impaired.
For the purposes of annual impairment testing, goodwill is allocated to one group of cash-generating units
(CGUs) that is expected to benefit from the business combination, and which represent the lowest level within
the Corporation at which goodwill is monitored for internal management purposes, according to operating
segment. Negative goodwill arising on an acquisition is recognized directly in the consolidated statement of
comprehensive income.
Trade name
The trade name is recorded at cost and is not subject to amortization, having an indefinite life. It is tested for
impairment annually, as of the financial position date, or more frequently if events or circumstances indicate
that it may be impaired. An impairment loss is recognized for the amount by which the assets carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell
and value in use. As the trade name does not generate cash flows that are independent from other assets or
individual CGUs, the Corporation estimates the recoverable amount of the CGU to which the asset belongs.
Impairment of other non-financial assets
Assets that are subject to amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an assets fair value less costs to sell and its value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (CGUs these are individual stores). Non-financial assets other than goodwill that
suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturities from the date of purchase
of three months or less.
Merchandise inventories
Merchandise inventories at the distribution centre, warehouses and stores are stated at the lower of cost and
net realizable value. Cost is determined on a weighted average cost basis and is assigned to store inventories
using the retail inventory method. Costs of inventories include amounts paid to suppliers, duties and freight
into the warehouses as well as costs directly associated with warehousing and distribution.
Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable
selling expenses. Costs of inventories include the transfer from accumulated other comprehensive income (loss)
of any gains (losses) on qualifying cash flow hedges related to the purchases of inventories.
(6)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities are obligations to pay for goods or services that have been acquired in
the ordinary course of business from suppliers. Accounts payable and accrued liabilities are classified as current
liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method.
Provisions
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive
obligation that can be estimated reliably, and if it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are not recognized for future operating losses.
If the effect of time value of money is material, provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the obligation. The increase in the provision due to the passage
of time is recognized as interest expense.
Share capital
Common shares are classified as shareholders equity. Incremental costs directly attributable to the issue of
shares or options are shown in shareholders equity as a deduction, net of tax, from the proceeds.
Dividends declared
Dividend distributions to the Corporations shareholders are recognized as a liability in the Corporations
consolidated financial statements in the period in which the dividends are declared by the Board of Directors.
Employee future benefits
A defined contribution plan is a post-employment benefit plan under which the Corporation pays fixed
contributions into a separate legal entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution retirement plans are recognized as an expense
in earnings when they are due.
The Corporation offers a group defined contribution pension plan to eligible employees whereby it matches an
employees contributions of up to 3% of the employees salary to a maximum of three thousand dollars per year.
Short-term employee benefits
Liabilities for bonus plans are recognized based on a formula that takes into consideration individual
performance and contributions to the profitability of the Corporation.
(7)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Termination benefits
Termination benefits are generally payable when employment is terminated before the normal retirement date
or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Corporation
recognizes termination benefits when it is demonstrably committed to providing termination benefits as a
result of an offer made.
Income tax
The income tax expense for the year comprises current and deferred tax. Tax is recognized in earnings, except
to the extent that it relates to items recognized in other comprehensive income or directly in shareholders
equity. In this case, the tax is also recognized in other comprehensive income or directly in shareholders equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
statement of financial position date and any adjustment to tax payable in respect of previous years.
Deferred income tax is recognized using the liability method on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred income tax liability is not accounted for if it arises from initial recognition of goodwill or if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position
date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax
liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profits will be
available against which the temporary differences can be utilized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income tax
levied by the same taxation authority on either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
Revenue recognition
The Corporation recognizes revenue at the time the customer tenders payment for and takes possession of the
merchandise. All sales are final. Revenue is shown net of sales tax, rebates and discounts. Gift cards sold are
recorded as a liability and revenue is recognized when gift cards are redeemed.
Cost of sales
Cost of sales includes the cost of merchandise inventories, outbound transportation costs, warehousing and
distribution costs, as well as store, warehouse and distribution centre occupancy costs.
(8)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
General, administrative and store operating expenses
The Corporation includes store and head office salaries and benefits, repairs and maintenance, professional
fees, store supplies and other related expenses in general, administrative and store operating expenses.
Pre-opening costs
Costs associated with the opening of new stores are expensed as incurred, and included in general,
administrative and store operating expenses in the consolidated statement of comprehensive income.
Vendor rebates
The Corporation records vendor rebates, consisting of volume purchase rebates, when it is probable that they
will be received and the amounts are reasonably estimable. The rebates are recorded as a reduction of inventory
purchases and are reflected as a reduction of cost of sales in the consolidated statement of comprehensive
income.
Earnings per common share
Earnings per common share is determined using the weighted average number of common shares outstanding
during the year. Diluted earnings per common share is determined using the treasury stock method to evaluate
the dilutive effect of stock options. Under this method, instruments with a dilutive effect are considered to have
been exercised at the beginning of the year, or at the time of issuance, if later, and the proceeds received are
considered to have been used to redeem common shares at the average market price during the year.
Operating leases
The Corporation leases stores, warehouses, distribution centres and corporate headquarters. Leases in which a
significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. The Corporation recognizes rental expense incurred and inducements received from landlords on a
straight-line basis over the term of the lease. Any difference between the calculated expense and the amounts
actually paid is reflected as deferred lease inducements in the Corporations consolidated statement of financial
position. Contingent rental expense is recognized when the achievement of specified sales targets is considered
probable.
Favourable and unfavourable lease rights represent the fair value of lease rights as established on the date of
their acquisition or assumption and are amortized on a straight-line basis over the terms of the related leases.
Deferred leasing costs and deferred tenant allowances are recorded on the consolidated statement of financial
position and amortized using the straight-line method over the term of the respective lease.
(9)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Stock-based compensation
The Corporation recognizes a compensation expense for options granted based on the fair value of the options
at the grant date, using the Black-Scholes option pricing model. The options granted by the Corporation vest in
tranches (graded vesting) and, accordingly, the expense is recognized in award tranches.
The total amount to be expensed is determined by reference to the fair value of the options granted, including
any market performance conditions.
The impact of any service and non-market performance vesting conditions (for example, profitability, sales
growth targets and retaining an employee of the entity over a specified time period) are excluded from the fair
value calculation. Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. The total expense is recognized over the vesting period, which is the period over which all
of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Corporation
revises its estimates of the number of options that are expected to vest based on the non-marketing vesting
conditions. It recognizes the impact of the revision to original estimates, if any, in the consolidated statement of
comprehensive income, with a corresponding adjustment to shareholders equity.
The cash subscribed for the shares issued when the options are exercised is credited, together with the related
compensation costs, to share capital (nominal value), net of any directly attributable transaction costs.
Accounting standards and amendments issued but not yet adopted
The following standards and amendments to existing standards have been published and are mandatory for the
Corporations accounting periods beginning on or after February 1, 2013 unless otherwise noted. The
Corporation has not early adopted them.
x
IFRS 9, Financial Instruments, addresses classification and measurement of financial assets and replaces
the multiple category and measurement models in IAS 39, Financial Instruments: Recognition and
Measurement, with a new mixed measurement model having only two categories: amortized cost and fair
value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments. Such
instruments are recognized either at fair value through profit or loss or at fair value through other
comprehensive income. Where such equity instruments are measured at fair value through other
comprehensive income, dividends, to the extent that they do not clearly represent a return on investment,
are recognized in profit or loss; however, other gains and losses (including impairments) associated with
such instruments remain in accumulated comprehensive income indefinitely. IFRS 9 is effective for annual
periods beginning on or after January 1, 2015.
(10)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
x
In May 2011, the IASB issued the following standards which have not yet been adopted by the Corporation:
IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; IFRS 12, Disclosure of
Interests in Other Entities; IFRS 13, Fair Value Measurement; IAS 27, Consolidated and Separate
Financial Statements; and IAS 28, Investments in Associates and Joint Ventures (as amended in 2011).
Each of the new standards is effective for annual periods beginning on or after January 1, 2013, with early
adoption permitted. The Corporation has not yet begun the process of assessing the impact that the new
and amended standards will have on its consolidated financial statements nor whether to early adopt any
of the new requirements. The following is a brief summary of the new standards:
o
(11)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
o
(12)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Impairment of goodwill and trade name
Goodwill and trade name are not subject to amortization and are tested for impairment annually or more
frequently if events or circumstances indicate that the assets might be impaired. Impairment is identified by
comparing the recoverable amount of the CGU to its carrying value. To the extent the CGU carrying amount
exceeds its recoverable amount, an impairment loss is recognized in the consolidated statement of
comprehensive income.
The recoverable amount of the CGU is based on the fair value less cost to sell. The fair value less cost to sell is
the amount for which the CGU could be exchanged between knowledgeable willing parties in an arms length
transaction, less cost to sell. Management undertakes an assessment of relevant market data, which is the
market capitalization of the Corporation.
As of January 29, 2012, January 30, 2011 and February 1, 2010, impairment reviews were performed by
comparing the carrying value of goodwill and the trade name with the recoverable amount of the CGU to which
goodwill and the trade name have been allocated. Management determined that there has been no impairment.
Fair value of financial instruments and hedging
The fair value of financial instruments is based on current interest rates, foreign exchange rates, credit risk,
market value and current pricing of financial instruments with similar terms. Unless otherwise disclosed, the
carrying value of the financial instruments, especially those with current maturities such as cash and cash
equivalents, accounts receivable, deposits and prepaid expenses, accounts payable and accrued liabilities, and
dividend payable approximates their fair value.
When hedge accounting is used, formal documentation is set up about relationships between hedging
instruments and hedged items, as well as a risk management objective and strategy for undertaking various
hedge transactions. This process includes linking derivatives to specific firm commitments or forecast
transactions. As part of the Corporations hedge accounting, an assessment is made to determine whether the
derivatives that arose as hedging instruments are effective in offsetting changes in cash flows of hedged items.
Income tax
Significant judgment is required in determining the provision for income tax. There are transactions and
calculations for which the ultimate tax determination is uncertain. The Corporation recognizes liabilities for
anticipated tax audit issues based on estimates of whether additional tax will be due. Where the final tax
outcome of these matters differs from the amounts that were initially recorded, such differences will impact the
current and deferred income tax assets and liabilities in the period in which such determination is made.
(13)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Computer
equipment
$
Vehicles
$
Leasehold
improvements
$
Computer
software
$
Total
$
123,475
(46,567)
3,142
(1,365)
2,681
(1,341)
79,993
(28,061)
14,712
(8,455)
224,003
(85,789)
76,908
1,777
1,340
51,932
6,257
138,214
76,908
20,790
(5)
1,777
453
-
1,340
992
(625)
51,932
18,770
(37)
6,257
1,976
-
138,214
42,981
(667)
449
(494)
38
(8,627)
(3,247)
487
(28,934)
(16,073)
(493)
81,620
1,737
1,662
62,076
4,986
152,081
144,260
(62,640)
3,595
(1,858)
3,048
(1,386)
98,726
(36,650)
16,688
(11,702)
266,317
(114,236)
81,620
1,737
1,662
62,076
4,986
152,081
81,620
27,429
(49)
1,737
1,890
-
1,662
1,426
(1,095)
62,076
19,525
(15)
4,986
4,483
-
152,081
54,753
(1,159)
15
(18,699)
(1,143)
4
(10,452)
(2,593)
871
(33,493)
90,316
2,484
2,239
71,138
6,876
173,053
171,640
(81,324)
5,485
(3,001)
3,379
(1,140)
118,236
(47,098)
21,171
(14,295)
319,911
(146,858)
90,316
2,484
2,239
71,138
6,876
173,053
852
(606)
(14)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Covenants
not to
compete
$
Deferred
leasing
costs
$
Favourable
lease
rights
$
Total
$
Goodwill
$
As of February 1, 2010
Cost
Accumulated amortization
108,200
-
400
(298)
2,550
(891)
20,862
(17,521)
132,012
(18,710)
727,782
-
108,200
102
1,659
3,341
113,302
727,782
108,200
-
102
(57)
1,659
300
(336)
3,341
(1,292)
113,302
300
(1,685)
727,782
-
108,200
45
1,623
2,049
111,917
727,782
108,200
-
400
(355)
2,850
(1,227)
20,862
(18,813)
132,312
(20,395)
727,782
-
108,200
45
1,623
2,049
111,917
727,782
108,200
-
45
(45)
1,623
(310)
2,049
(1,031)
111,917
(1,386)
727,782
-
108,200
1,313
1,018
110,531
727,782
108,200
-
2,850
(1,537)
20,862
(19,844)
132,312
(21,781)
727,782
-
108,200
1,313
1,018
110,531
727,782
400
(400)
-
(15)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
As of
January 30,
2011
As of
February 1,
2010
30,751
39,577
31,694
27,913
5,730
5,736
17,859
13,312
21,612
6,026
4,850
19,381
12,412
19,597
5,321
4,607
5,366
11,934
101,301
103,858
78,519
Long-term debt
Long-term debt outstanding consists of the following:
Carrying value
Note
Senior secured credit facility
Senior subordinated deferred interest notes
Term bank loan
Less: Current portion (net of financing cost of
$135; 2011 $190; 2010 $678)
Less: Unamortized financing costs
8(a)
8(b)
8(c)
As of
January 29,
2012
$
As of
January 30,
2011
$
As of
February 1,
2010
$
274,997
-
366,875
-
226,872
250,564
274,997
366,875
477,436
13,967
14,292
1,925
261,030
2,645
352,583
4,820
475,511
6,920
258,385
347,763
468,591
(16)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
a)
b)
(17)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
c)
d)
Principal repayments on long-term debt due 12 months from the statement of financial position date in
each of the next three fiscal years are approximately as follows:
$
2013
2014
2015
14,102
14,102
246,793
(18)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
(10,091)
1,618
(16,432)
19,180
(1,140)
3,226
(6,865)
8,577
(8,767)
12,151
(3,120)
8,841
1,976
(19)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
10 Stock-based compensation
The Corporation has a management option plan whereby its directors, managers and employees may be granted
stock options to acquire its shares. Under the plan, the number and characteristics of stock options granted are
determined by the Board of Directors of the Corporation, and the options will have a life not exceeding 10 years.
Under the plan, the following types of options are available:
a)
b)
Weighted
average
purchase
price
$
3,278,640
5.02
Granted
Exercised
Forfeited
108,000
(961,009)
(2,000)
24.67
4.02
24.51
2,423,631
6.23
Granted
Exercised
250,000
(260,632)
41.47
9.36
2,412,999
9.58
1,919,491
4.68
During the year ended January 29, 2012, the Corporation recognized stock-based compensation expense of
$784 (January 30, 2011 $1,082).
(20)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Information relating to share options outstanding as of January 29, 2012:
Price
$
2.30
9.20
9.38
11.99
17.50
22.42
24.51
26.55
28.84
29.10
29.65
37.77
43.50
44.43
Options outstanding
Options exercisable
Weighted
average
remaining
life (months)
Weighted
average
remaining
life (months)
Number
of options
Number
of options
1,333,344
84,202
553,356
72,936
11,161
2,000
100,000
4,000
2,000
2,000
33,000
4,000
209,000
2,000
34
37
67
75
93
95
98
105
107
110
111
116
120
120
1,333,344
84,202
442,685
35,659
1,601
800
20,000
800
400
-
34
37
67
74
92
95
98
105
107
-
2,412,999
55
1,919,491
43
The weighted average fair value of the share options granted was estimated at the grant date based on the
Black-Scholes option pricing model using the following assumptions:
Dividend yield
Risk-free interest rate
Expected life
Expected volatility
Weighted average fair value of share options
granted at the grant date
As of
January 29,
2012
As of
January 30,
2011
0.83%
1.65%
6 years
20%
Nil
1.65%
6 years
48%
$10.31
$12.22
As part of the Corporations management option plan, the expected life of the options has to be determined. The
expected life is estimated using the average of the vesting period and the contractual life of the options. The
volatility is estimated based on the Corporations public trading history.
(21)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
For the
year ended
January 30,
2011
$
3,556
15
4,354
632
3,355
15
3,836
903
8,557
8,109
Cost of sales
General, administrative and store operating expenses
28,883
4,453
24,391
4,117
33,336
28,508
222,746
784
1,234
201,032
1,082
1,312
224,764
203,426
14,305
2,250
24,281
10,179
16,555
34,460
Financing costs:
(22)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
12 Income tax
a)
As of
January 30,
2011
$
As of
February 1,
2010
$
13,270
540
14,750
1,450
14,510
1,922
(86,581)
(994)
(78,106)
-
(73,311)
-
(73,765)
(61,906)
(56,879)
56,879
3,887
1,140
61,906
8,739
3,120
73,765
(23)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
The movement in deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Property
and
equipment
$
As of February 1, 2010
Charged (credited) to
consolidated
statement of
comprehensive
income
As of January 30, 2011
Charged (credited) to
consolidated
statement of
comprehensive
income
Credited to component of
other comprehensive
income
As of January 29, 2012
Goodwill
and other
intangible
assets
$
Foreign
exchange
gain (loss) on
long-term
debt
$
Other
$
(7,084)
(63,851)
(2,353)
49
(7,220)
2,353
(7,035)
(71,071)
(174)
(8,301)
(7,209)
(79,372)
Derivative
financial
instruments
$
Total
$
(23)
(73,311)
23
(4,795)
(78,106)
2,126
(6,349)
(3,120)
(3,120)
(994)
(87,575)
Tax benefit
arising from
financing
expenses
$
Other
liabilities
$
Total
$
1,373
4,917
10,142
16,432
920
1,229
(1,241)
908
(1,140)
(1,140)
1,153
6,146
8,901
16,200
(1,153)
(2,623)
1,386
(2,390)
3,523
10,287
13,810
(24)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
b)
For the
year ended
January 30,
2011
$
62,976
139
48,448
1,851
63,115
50,299
7,708
1,501
(470)
4,807
(921)
8,739
3,886
71,854
54,185
Tax on the Corporations earnings before income tax differs from the theoretical amount that would arise
using the weighted average tax rate applicable to earnings of the consolidated entities as follows:
For the
year ended
January 29,
2012
$
Earnings before income tax
Provision for income tax based on combined statutory
Canadian federal and provincial income tax rate
Adjustments for income tax arising from the following
Non-deductible taxable portion of capital losses
Decrease in deferred income tax resulting from a substantively
enacted change in tax rates
Non-deductible expense related to the initial public offering
or secondary offerings
Non-deductible stock-based compensation expense
Other permanent differences
Other
Adjustment to deferred tax in respect of prior year adjustment
For the
year ended
January 30,
2011
$
245,328
171,012
69,158
51,617
573
(470)
(921)
221
364
1,080
1,501
316
327
358
1,915
-
71,854
54,185
(25)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
The applicable statutory tax rate is 28.19% in 2012 and 30.18% in 2011. The Corporations applicable tax
rate is the Canadian combined rate applicable in the provinces in which the Corporation operates. The
decrease is mainly due to the reduction of the federal income tax rate in 2011 from 18.0% to 16.5%.
Basic
Basic earnings per common share is calculated by dividing the profit attributable to shareholders of the
Corporation by the weighted average number of common shares issued during the year.
For the
year ended
January 29,
2012
Net earnings attributable to shareholders of the Corporation
b)
For the
year ended
January 30,
2011
$173,474
$116,827
73,684
73,153
$2.35
$1.60
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all dilutive potential common shares. The Corporation has one
category of dilutive potential common shares that are share options. For the share options, a calculation is
performed to determine the number of shares that could have been acquired at fair value (determined as
the average annual market share price of the Corporations shares) based on the monetary value of the
subscription rights attached to outstanding share options. The number of shares calculated as above is
compared with the number of shares that would have been issued assuming the exercise of the share
options, plus any unrecognized compensation costs.
For the
year ended
January 29,
2012
Net earnings attributable to shareholders of the Corporation
Net earnings used to determine diluted earnings per share
For the
year ended
January 30,
2011
$173,474
$173,474
$116,827
$116,827
75,563
75,377
$2.30
$1.55
(26)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
As at
January 30,
2011
$
As at
February 1,
2010
$
94,115
308,162
239,302
84,217
284,984
241,141
75,514
253,501
238,584
Total
641,579
610,342
567,599
The basic rent and contingent rent expense of operating leases for stores, warehouses, distribution centre and
corporate headquarters included in the consolidated statement of comprehensive income is as follows:
For the
year ended
January 29,
2012
$
Basic rent
Contingent rent
For the
year ended
January 30,
2011
$
91,694
3,687
81,795
3,169
95,381
84,964
The Corporation entered into a finance lease totalling $1,797 as of January 1, 2011. The amount due under the
finance lease has an implied interest rate of 8.4% and a maturity extending until December 1, 2013. During the
year, the Corporation recorded interest expense of $117 (January 30, 2011 nil).
(27)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
235,000
10,000
30,000
275,000
Contractual
nominal
value
Statement
of financial
position
location
Fair value
Asset
(liability)
$
Nature of
hedging
relationship
Current assets
Current liabilities
3,600
(82)
Not applicable
3,703
As of January 30, 2011
Contractual
nominal
value
US$
Hedging instruments
Foreign exchange
forward contracts
Foreign currency swap
agreements
Contractual
nominal
value
Statement
of financial
position
location
90,324
992
Current assets
261,517
450
Current liabilities
351,841
1,442
Fair value
Asset
(liability)
$
Nature of
hedging
relationship
838
(28)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
As of February 1, 2010
Contractual
nominal
value
US$
Hedging instruments
Foreign exchange forward contracts
Foreign exchange forward contracts
Non-hedging instruments
Foreign currency and interest rate swaps
Foreign currency swap agreements
Foreign currency swap agreements
125,000
130,000
Statement
of financial
position
location
Current assets
Current liabilities
Nature of
hedging
relationship
(32,759)
Not applicable
5,342
(12,546)
Not applicable
Not applicable
702,300
(46,373)
As of
January 30,
2011
$
As of
February 1,
2010
$
3,951
(248)
838
(5,630)
3,479
5,342
(55,194)
3,703
(4,792)
(46,373)
As of
January 29,
2012
$
Derivative financial instruments
Current assets
Non-current assets
Current liabilities
Fair value
Asset
(liability)
$
The Corporation is exposed to certain risks relating to its ongoing business operations. The primary risk
managed by using derivative financial instruments is currency risk. Foreign exchange forward contracts and
cumulative foreign exchange forward contracts are entered into to manage the currency fluctuation risk
associated with forecasted US dollar and euro merchandise purchases sold in stores.
For foreign exchange forward contracts, the Corporation formally documents the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge
transactions.
Foreign exchange forward contracts are designated as hedging instruments and are recorded at fair value,
determined using market prices. The Corporation designates its foreign exchange forward contracts as hedges
of the variability in highly probable future cash flows attributable to a recognized asset or liability or a
forecasted transaction (cash flow hedges). All gains and losses from changes in fair value of foreign exchange
forward contracts designated as cash flow hedges are recorded in accumulated other comprehensive income
(loss) and reclassified to comprehensive income when the associated gains (losses) on related hedged items are
recognized in comprehensive income.
The cumulative foreign exchange forward contract does not qualify for hedge accounting treatment; as such,
changes in its fair value are recognized in comprehensive income.
(29)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Up to June 14, 2010, the Corporation used foreign currency interest rate swap agreements to manage currency
fluctuation risk and interest rate risk associated with US dollar borrowings. Those derivative financial
instruments were classified as held for trading. All gains and losses from changes in fair value of derivative
financial instruments not designated as hedges were recognized in earnings.
2012
Note
Derivative financial instruments
Non-hedging:
Net change in unrealized loss on cumulative
foreign exchange forward contract
Hedging:
Net change in unrealized gain on foreign
exchange forward contracts
Realized losses on foreign exchange
forward contracts
Transfer to earnings
Total
16(d)
Impact on
statement
of financial
position
Pre-tax
impact on other
comprehensive
income
Change in fair
value during
the year of
derivative
financial
instruments
$
Unrealized
gain (loss) on
derivative
financial
instruments,
net of
reclassification
adjustment
$
(82)
8,577
8,577
Impact on
earnings
Impact on
cash flows
Cost
of sales
$
Excess of
receipts
(disbursements)
over amount
recognized on
derivative
financial
instruments
$
(82)
-
82
-
(8,767)
12,151
(12,151)
(8,767)
12,151
11,961
(12,233)
3,466
(30)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
2011
Note
Long-term debt
Senior subordinated deferred
interest notes
Term bank loan
Other foreign exchange loss
Derivative financial
instruments
Hedging:
Net change in
unrealized gain on
foreign exchange
forward contracts
Realized losses on
foreign exchange
forward contracts
Transfer to earnings
Non-hedging:
Foreign currency and
interest rate swap
agreements
Settlement of foreign
currency and
interest rate swap
agreements
Foreign currency swap
agreements
Settlement of foreign
currency swap
agreements
Materialized loss on
early settlement
of derivatives
Realized gain on
foreign currency
and interest rate
swap interest
payments
Realized loss on
foreign currency
swap agreement
interest payments
Total
8(b)
8(c)
Impact on
statement
of financial
position
Pre-tax
impact on other
comprehensive
income
Change in fair
value during
the year of
long-term
debt and
derivative
financial
instruments
$
Unrealized
gain (loss) on
derivative
financial
instruments,
net of
reclassification
adjustment
$
7,464
8,198
-
16(b)
1,618
16(b)
Impact on earnings
Net
financing
costs
$
Cost
of sales
$
Excess of
receipts
over amount
recognized on
derivative
financial
instruments
$
Foreign
exchange
gain on
long-term
debt
$
Settlement of
derivative
financial
instruments
$
7,464
8,198
(235)
(7,464)
(8,198)
(188)
15,427
(15,850)
1,618
(16,432)
19,180
(19,180)
2,748
-
4,366
(19,180)
2,748
7,540
6,759
16(a)
(7,540)
(7,540)
16(a)
40,299
16(c)
(6,759)
16(c)
10,963
(10,963)
16(c)
3,000
(3,000)
59
(853)
(15,093)
4,366
334
(6,759)
(19,180)
14,299
17,047
(15,850)
(40,299)
-
(54,262)
(54,262)
(31)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
a)
b)
c)
(32)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
d)
(33)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
a)
Market risk
i)
Currency risk
The Corporation is exposed to foreign exchange risks arising from the purchase of imported
merchandise using US dollars and euros, which are partially covered by foreign exchange forward
contracts. The Corporation is also exposed to the fluctuation of the Chinese renminbi against the US
dollar.
The Corporations risk management policy is to hedge up to 100% of anticipated cash flows required
for purchases of merchandise in US dollars and euros over the next rolling six months. The
Corporation does not hedge its exposure to fluctuations in the value of the Chinese renminbi against
the US dollar.
The Corporation uses foreign exchange forward contracts to manage risks from fluctuations in the
US dollar and euro relative to the Canadian dollar. The forward contracts are used only for risk
management purposes and are designated as hedges of specific anticipated purchases of merchandise.
Upon redesignation or amendment of a foreign exchange forward contract, the ineffective portion of
such contracts is recognized immediately in earnings. The Corporation periodically examines the
derivative financial instruments it uses to hedge exposure to foreign currency fluctuations to ensure
that these instruments are highly effective at reducing foreign exchange risk associated with the
hedged item.
As of January 29, 2012, the Corporation held net financial liabilities of approximately US$6,563 and
net financial assets of approximately 311. A 1% variance in the US dollar and euro foreign exchange
rates would result in an approximate variance of $62 in the net liabilities of the Corporation and in
earnings. This analysis assumes that all other variables remain constant. The analysis was performed
on the same basis for the year ended January 30, 2011.
ii)
(34)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
b)
Credit risk
The Corporation is exposed to credit risk to the extent of non-payment by counterparties of its financial
instruments. The Corporation has credit policies covering financial exposures. The maximum exposure
to credit risk at the statement of financial position date is represented by the carrying value of each
financial asset, including derivative financial instruments. The Corporation mitigates this credit risk by
dealing with counterparties which are major financial institutions that the Corporation anticipates will
satisfy their contractual obligations.
The Corporation is exposed to credit risk on accounts receivable from its landlords for tenant allowances.
In order to reduce this risk, the Corporation retains rent payments until accounts receivable are fully
satisfied.
c)
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they fall due. As
of January 29, 2012, the Corporation had available credit facilities of $74,083 (January 30, 2011
$74,239), taking into consideration outstanding letters of credit of $917 (January 30, 2011 $761).
The contractual maturities, including interest, of the Corporations financial liabilities as of January 29, 2012
are summarized in the following table:
Carrying
amount
$
Non-derivative financial liabilities
Accounts payable
Accrued liabilities and other
Term bank loan
Contractual
cash flows
$
Under
1 year
$
From 1 to
2 years
$
From 2 to
5 years
$
30,751
70,550
274,997
30,751
70,550
274,997
30,751
70,550
14,102
14,102
246,793
376,298
376,298
115,403
14,102
246,793
166
166
166
82
82
82
248
248
248
(35)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated at the financial position date
using year-end exchange rates, while non-monetary assets and liabilities are translated at historical rates.
Expenses are translated at prevailing market rates in the recognition period. The resulting exchange gains or
losses are recorded in the consolidated statement of comprehensive income.
For the
year ended
January 30,
2011
$
For the
year ended
January 29,
2012
$
Net financing costs
Foreign exchange loss included in cost of sales
12,084
(334)
18,957
12,084
18,623
Quoted
prices
in active
markets for
identical
assets
(Level 1)
$
Significant
observable
inputs
(Level 2)
$
Unobservable
inputs
(Level 3)
$
Assets
Derivative financial instruments Current
3,951
Liabilities
Derivative financial instruments Current
248
(36)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
January 30, 2011
Quoted
prices
in active
markets for
identical
assets
(Level 1)
$
Significant
observable
inputs
(Level 2)
$
Unobservable
inputs
(Level 3)
$
Assets
Derivative financial instruments Current
838
Liabilities
Derivative financial instruments Current
5,630
February 1, 2010
Quoted
prices
in active
markets for
identical
assets
(Level 1)
$
Significant
observable
inputs
(Level 2)
$
Unobservable
inputs
(Level 3)
$
Assets
Derivative financial instruments Current
Derivative financial instruments Non-current
3,479
5,342
Liabilities
Derivative financial instruments Current
55,194
Derivative financial instruments include foreign currency and interest rate swap agreements, foreign currency
swap agreements, foreign exchange forward contracts and cumulative foreign exchange forward contract. Fair
value measurements of the Corporations derivative financial instruments are classified under Level 2 because
such measurements are determined using published market prices or estimates based on observable inputs
such as interest rates, yield curves, and spot and future exchange rates.
(37)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
For the
year ended
January 30,
2011
$
(23)
222
(56,968)
(3,159)
7,805
(368)
266
(24,221)
25,339
(10,615)
(52,123)
(9,599)
19 Capital disclosures
Capital is defined as long-term debt and shareholders equity excluding accumulated other comprehensive
income (loss).
As of
January 29,
2012
$
Long-term debt, including current portion
Shareholders equity*
Total capital
As of
January 30,
2011
$
274,997
892,970
366,875
738,073
1,167,967
1,104,948
provide a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business;
maintain a flexible capital structure that optimizes the cost of capital at acceptable risk and preserves
the ability to meet financial obligations; and
(38)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
In managing its capital structure, the Corporation monitors performance throughout the year to ensure working
capital requirements and maintenance capital expenditures are funded from operations, available cash on
deposit and, where applicable, bank borrowings. The Corporation manages its capital structure and may make
adjustments to it in order to support the broader corporate strategy or in response to changes in economic
conditions and risk. In order to maintain or adjust its capital structure, the Corporation may issue shares or
new debt, issue new debt to replace existing debt (with different characteristics), or reduce the amount of
existing debt.
The Corporation monitors debt using a number of financial metrics, including but not limited to:
x
the leverage ratio, defined as debt adjusted for value of lease obligations to consolidated EBITDAR
which is defined as the sum of (i) adjusted earnings before interest, taxes, depreciation and
amortization, adjusted for annualized earnings for new stores (defined as consolidated adjusted
EBITDA), and (ii) lease expense; and
the interest coverage ratio, defined as adjusted EBITDA to net interest expense (interest expense
incurred net of interest income earned).
The Corporation uses EBITDA and EBITDAR as measurements to monitor performance. Both measures, as
presented, are not recognized for financial statement presentation purposes under IFRS and do not have a
standardized meaning. Therefore, they are not likely to be comparable to similar measures presented by other
entities.
The Corporation is subject to financial covenants pursuant to the credit facility agreements and indentures,
which are measured on a quarterly basis. These covenants include the leverage and debt service ratios
presented above. The Corporation is in compliance with all such covenants.
(39)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
20 Transition to IFRS
Reconciliation between IFRS and previous Canadian GAAP
The following reconciliations provide a quantification of the effect of the transition from Canadian GAAP to
IFRS for equity, comprehensive income and cash flows as described in note 2.
1)
Reconciliation of shareholders equity between previous reporting under Canadian GAAP and IFRS
As of
January 30,
2011
$
Total shareholders equity under Canadian GAAP
Deferred tax adjustment on measurement
Total shareholders equity under IFRS
As of
February 1,
2010
$
738,208
614,696
7,000
7,000
731,208
607,696
Under Canadian GAAP, future income taxes were calculated from temporary differences between the tax
basis of an asset or liability and its carrying amount in the consolidated statement of financial position.
Under the current Income Tax Act (Canada) and equivalent provincial legislation, eligible capital
expenditures are deductible for tax purposes to a maximum of 75% of the cost incurred. CICA Handbook
Section 3465, Income Taxes, addresses this specific situation and specifies that for these assets, at any
point in time, the tax basis represents the balance in the cumulative eligible capital pool plus 25% of the
carrying amount.
The definition of temporary differences under IFRS is generally consistent with that under Canadian
GAAP. However, IFRS does not provide specific guidance in relation to the determination of the tax basis
of eligible capital expenditures such the one described above. As such, the tax bases of these assets, without
taking into consideration the 25% adjustment of the carrying amount as allowed under Canadian GAAP,
should be compared with the carrying amounts in the consolidated statement of financial position to
determine the temporary difference relating to these assets.
The adjustment increased the deferred income tax liabilities in the consolidated statement of financial
position by $7,000 as of February 1, 2010 and January 30, 2011, and decreased retained earnings by the
same amount. The change had no impact on comprehensive income for the presented periods.
2)
Reconciliation of comprehensive income between previous reporting under Canadian GAAP and IFRS
The transition from Canadian GAAP to IFRS had no significant impact on comprehensive income.
(40)
Dollarama Inc.
Notes to Consolidated Financial Statements
January 29, 2012 and January 30, 2011
(expressed in thousands of Canadian dollars, unless otherwise noted)
3)
Reconciliation of consolidated statement of cash flows between previous reporting under Canadian
GAAP and IFRS
The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the
Corporation.
Exemptions and exceptions from full retrospective application elected by the Corporation
The Corporation has elected to apply the following exemptions and exceptions from full retrospective
application.
Business combinations exemption
The Corporation has applied the business combinations exemption as per IFRS 1, First-time Adoption of IFRS.
It has not restated business combinations that took place prior to the February 1, 2010 transition date.
Hedge accounting
Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the
hedge accounting criteria in IAS 39, Financial Instruments: Recognition and Measurement, at that date.
Hedging relationships cannot be designated retrospectively, and supporting documentation cannot be created
retrospectively. All hedging relationships satisfied the hedge accounting criteria as of the transition date, and,
consequently, they are still reflected as hedges in the Corporations results under IFRS.
Estimates
In accordance with IFRS 1, an entitys estimates under IFRS as of the transition date to IFRS must be consistent
with estimates made for the same date under Canadian GAAP, unless there is objective evidence that those
estimates were in error. The estimates previously made by the Corporation under Canadian GAAP were not
revised accordingly, except where necessary to reflect any difference in accounting policies.
21 Subsequent event
On April 11, 2012, the Corporation announced that its Board of Directors had approved a 22% increase of the
quarterly dividend for holders of its common shares, from $0.09 per common share to $0.11 per common
share. The increased dividend will be paid on May 4, 2012 to shareholders of record at the close of business on
April 25, 2012. The dividend is designated as an eligible dividend for Canadian tax purposes.
(41)