La Senza Corporation
TSX : LSZ

La Senza Corporation

November 22, 2006 13:04 ET

La Senza Corporation Announces Record Earnings for the Third Quarter of Fiscal 2007

MONTREAL, QUEBEC--(CCNMatthews - Nov. 22, 2006) - (TSX:LSZ) La Senza Corporation today reported net earnings of $8.5 million or $0.62 per share for the quarter ended October 28, 2006 compared to $2.6 million or $0.19 per share for the quarter ended October 29, 2005. For the nine month period, the Company posted net earnings of $19.8 million or $1.43 per share compared to $6.4 million or $0.47 per share.

The prior year nine month results included a loss from discontinued operations of $1.9 million. Excluding the loss from discontinued operations in the prior year, the comparison of net earnings from continuing operations for nine months was $19.8 million or $1.43 per share versus $8.4 million or $0.62 per share.

Earnings before interest, income taxes, amortization, foreign exchange in investment activities, and discontinued operations (EBITDA) amounted to $18.1 million for the current quarter versus $9.3 million for the third quarter of the prior year. For the nine month period EBITDA amounted to $46.1 million versus $29.1 million for the prior year period.

Sales for the third quarter ended October 28, 2006 amounted to $117.9 million compared to $97.1 million for the third quarter ended October 29, 2005, an increase of 21.4%. For the nine month period of the current year sales amounted to $323.5 million versus $277.5 million for the nine months of the prior year, representing an increase of 16.6%. Comparable store sales (stores open more than a year) increased by 11.7% in the third quarter of the current year over the third quarter of the prior year, and for the nine months the increase was 6.7%.

Mr. Irving Teitelbaum, Chairman and Chief Executive Officer of the Corporation, said "We are pleased with our third quarter results. La Senza Corporation as a pure play has fulfilled its strategic plan to focus the Corporation's and its management's attention on its core business, and has done so rather successfully."

The Board declared a quarterly dividend of $0.20 per share payable on December 20, 2006 to shareholders of record on December 6, 2006.

On November 15, 2006, La Senza Corporation announced that it had executed a definitive support agreement with Limited Brands, Inc., under which Limited Brands had agreed to purchase all outstanding shares of La Senza for C$48.25 per share in cash via a takeover (or tender) offer. In conjunction with the execution of the definitive support agreement, it was also announced that Irv Teitelbaum, Stephen Gross and Laurence Lewin and their beneficial interests, together with all of the other holders of multiple voting shares, representing an aggregate of 48% of the outstanding shares and options of La Senza Corporation, had entered into a hard lock-up agreement.

La Senza Corporation, headquartered in Montreal, is a specialty retailer with 318 corporate owned stores as at October 28, 2006, offering fashionable lingerie and sleepwear sold in its 234 "La Senza" and "La Senza Express" stores, and fashionable apparel for girls sold in its 84 "La Senza Girl" stores. Stores are located in every province in Canada. In addition, 326 independently owned "La Senza" and "La Senza Girl" stores are operating in 34 other countries under license.

Forward-looking statement

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature relating to the Corporation and/or the environment in which it operates that are based on the Corporation's expectations, estimates and forecasts. These statements are subject to important risks, uncertainties and assumptions that are difficult to predict and/or are beyond the Corporation's control, as well as on management's reasonable evaluation of future events and are not meant as guarantees of future performance. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Corporation. Accordingly, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Corporation disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Corporation to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits; competitive conditions in the industries in which the Corporation participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Corporation's relationship with its suppliers and licensees; changes in the Corporation's key personnel; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Corporation.

For more information, please contact:

Anna Palestini, CA, Chief Financial Officer

For financial & investor relation information at (514) 421-8713





La Senza Corporation - Corporation La Senza
Consolidated Balance Sheets
(thousands of dollars)

As at As at As at
October 28, October 29, January 28,
2006 2005 2006
Unaudited Unaudited Audited
------------------------------------------------------------------------

ASSETS

Current
Cash $10,960 $7,539 $28,899
Short-term investments 23,823 19,740 32,793
Marketable securities 35,367 24,732 24,971
Accounts and sundry receivables 17,904 10,809 10,867
Inventory 58,760 56,975 48,990
Prepaid expenses 3,976 3,856 2,428
Future income taxes 131 6,069 1,488
------------------------------------------------------------------------
150,921 129,720 150,436

Property and Equipment 89,754 79,232 79,971
Trademarks 1,256 1,220 1,217
Future Income Taxes 1,120 2,872 1,120
------------------------------------------------------------------------
243,051 213,044 232,744
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES

Current
Accounts payable and accrued
liabilities 34,736 33,317 41,656
Income taxes payable 3,771 715 1,284
Current maturity of obligations under
capital leases 11,162 10,964 11,380
Current maturity of long-term debt 132 125 127
------------------------------------------------------------------------
49,801 45,121 54,447

Obligations Under Capital Leases 22,738 22,981 23,552
Long-Term Debt 2,483 2,615 2,582
Deferred Lease Obligations 10,602 8,860 8,871
Future Income Taxes 110 70 110
------------------------------------------------------------------------
85,734 79,647 89,562
------------------------------------------------------------------------

Commitments and Contingencies

SHAREHOLDERS' EQUITY

Capital Stock 38,103 35,657 36,328
Contributed Surplus 10,030 9,157 9,182
Retained Earnings 109,184 88,583 97,672
------------------------------------------------------------------------
157,317 133,397 143,182
------------------------------------------------------------------------
$243,051 $213,044 $232,744
------------------------------------------------------------------------
------------------------------------------------------------------------
See accompanying notes



La Senza Corporation - Corporation La Senza
Consolidated Statements of Retained Earnings
Unaudited (thousands of dollars)


Nine Months Ended
---------------------------------------------------------------------
October 28, 2006 October 29, 2005

Balance - Beginning of Period $97,672 $87,044
Net earnings 19,823 6,442
Dividends on subordinate voting shares (5,345) (3,106)
Dividends on multiple voting shares (2,966) (1,797)
---------------------------------------------------------------------
Balance - End of Period $109,184 $88,583
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes



La Senza Corporation - Corporation La Senza
Consolidated Statements of Earnings
Unaudited (thousands of dollars,
except per share amounts)

Third Quarter Ended Nine Months Ended
-------------------------------------------------------------------------
October 28, October 29, October 28, October 29,
2006 2005 2006 2005

Sales $117,932 $97,124 $323,527 $277,499
-------------------------------------------------------------------------
Cost, Expenses and
Other
Cost of sales and
store, warehouse,
general, administrative
and sales support
expenses 99,707 87,402 277,030 247,840
Amortization 5,512 5,191 16,535 15,556
Interest on
obligations under
capital leases 485 509 1,487 1,532
Interest on
long-term debt 35 41 105 156
Interest income (386) (53) (1,035) (90)
Foreign exchange loss 161 408 397 519
-------------------------------------------------------------------------
105,514 93,498 294,519 265,513
-------------------------------------------------------------------------

Operating Income 12,418 3,626 29,008 11,986
Interest income on
short-term investments 439 291 1,181 843
Other income 315 13 381 208
Foreign exchange
loss on investment
activities (75) (95) (180) (238)
-------------------------------------------------------------------------
Earnings from
Continuing Operations
Before Income Taxes 13,097 3,835 30,390 12,799
-------------------------------------------------------------------------

Income Taxes 4,562 1,211 10,567 4,410
-------------------------------------------------------------------------
Earnings from
Continuing Operations 8,535 2,624 19,823 8,389

Discontinued
operations, net of
income taxes - - - (1,947)
-------------------------------------------------------------------------

Net Earnings $8,535 $2,624 $19,823 $6,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic Earnings per
Share from
Continuing
Operations $0.62 $0.19 $1.43 $0.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted Earnings
per Share from
Continuing
Operations $0.61 $0.19 $1.42 $0.61
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic Earnings per
Share $0.62 $0.19 $1.43 $0.47
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted Earnings
per Share $0.61 $0.19 $1.42 $0.47
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted Average
Number of Shares
Outstanding -
Basic 13,877,646 13,710,960 13,841,382 13,577,195
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted Average
Number of Shares
Outstanding -
Diluted 14,043,735 13,803,830 14,004,167 13,656,274
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes


La Senza Corporation - Corporation La Senza
Consolidated Statements of Cash Flows
Unaudited (thousands of dollars)

Third Quarter Ended Nine Months Ended
-------------------------------------------------------------------------
October 28, October 29, October 28, October 29,
2006 2005 2006 2005

Funds Provided (Used)
Operating Activities
Earnings from
continuing operations $8,535 $2,624 $19,823 $8,389
Amortization 5,512 5,191 16,535 15,556
Amortization of
deferred lease
obligations (434) (563) (1,228) (1,181)
Stock-based compensation 335 452 1,405 808
Future income taxes 453 882 1,358 2,320
Foreign exchange
loss on investment
activities 75 95 180 238
Deferred lease
obligations 1,140 650 2,958 1,847
-------------------------------------------------------------------------
15,616 9,331 41,031 27,977

Changes in
non-cash operating
elements of
working capital (23,489) (9,444) (22,789) (23,053)
-------------------------------------------------------------------------
(7,873) (113) 18,242 4,924
-------------------------------------------------------------------------

Financing Activities
Issuance of subordinate
voting shares 405 1,119 1,218 2,802
Repayment of
obligations under
capital leases (2,906) (3,204) (8,719) (9,060)
Repayment of
long-term debt (32) (30) (94) (75)
Obligations under
capital leases 2,969 2,593 7,687 6,092
Dividends paid (2,776) (2,196) (8,311) (4,903)
-------------------------------------------------------------------------
(2,340) (1,718) (8,219) (5,144)
-------------------------------------------------------------------------

Investing Activities
Short-term
investments and
marketable securities (2,984) 7,468 4,255 12,116
Additions to
property and
equipment (9,396) (2,646) (26,164) (11,805)
Additions to trademarks (46) (55) (192) (161)
-------------------------------------------------------------------------
(12,426) 4,767 (22,101) 150
-------------------------------------------------------------------------

Cash provided by
(used) in
continuing operations (22,639) 2,936 (12,078) (70)
Cash used in
discontinued
operations - (504) - (2,910)
-------------------------------------------------------------------------

Net Increase
(Decrease) in Cash
and Cash Equivalents (22,639) 2,432 (12,078) (2,980)
Cash and Cash
Equivalents

Beginning of Period 51,066 12,935 40,505 18,347
-------------------------------------------------------------------------
End of Period $28,427 $15,367 $28,427 $15,367
-------------------------------------------------------------------------
Represented by:
Cash $10,960 $7,539
Short-term investments 23,823 19,740
Short-term investments
with maturity over
3 months (6,356) (11,912)
-------------------------------------------------------------------------
$28,427 $15,367
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes




La Senza Corporation - Corporation La Senza
Notes to Consolidated Financial Statements
October 28, 2006
Unaudited
(tabular amounts are expressed in thousands of dollars,
except per share amounts)

1 - Financial Statement Presentation

The interim consolidated statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") using the same accounting policies and methods of computation as were used for the consolidated financial statements for the year ended January 28, 2006. They do not include all the disclosures required by GAAP in annual financial statements and, accordingly, should be read in conjunction with the consolidated financial statements for the year ended January 28, 2006.

2 - Seasonal Variations

Results of operations are subject to significant seasonal variations and, accordingly, the operating income for any given interim period is not necessarily indicative of the results of operations for a full year.

3 - Discontinued Operations

In January 2005, the Company approved a plan to discontinue the U.S. operations of La Senza and, accordingly, the results and cash flows of the U.S. operations for the prior periods have been presented as discontinued operations. In the second quarter of fiscal 2006, all of the U.S. stores were closed.



Information regarding the discontinued operations is as follows:

-------------------------------------------------------------------
Third Quarter Ended Nine Months Ended
-------------------------------------------------------------------
October October October October
28, 29, 28, 29,
2006 2005 2006 2005
-------------------------------------------------------------------
$ $ $ $
Sales - - - 3,507
-------------------------------------------------------------------
Operating losses - - - (3,198)
-------------------------------------------------------------------
Income taxes - - - (1,251)
-------------------------------------------------------------------
Loss from Discontinued
Operations, Net of Income
Taxes - - - (1,947)
-------------------------------------------------------------------

-------------------------------------------------------------------
Basic and Diluted Loss Per
Share from Discontinued
Operations - - - (0.15)

-------------------------------------------------------------------
-------------------------------------------------------------------
Cash flows used in operating
activities - (504) - (2,910)
-------------------------------------------------------------------
-------------------------------------------------------------------


4 - Earnings Per Share

Basic and diluted per share amounts are based on the following
weighted average number of shares outstanding:


-----------------------------------------------------------------------
Third Quarter Ended Nine Months Ended
-----------------------------------------------------------------------
October October October October
28, 29, 28, 29,
2006 2005 2006 2005

Weighted Average Number
of Shares Outstanding
- Basic 13,877,646 13,710,960 13,841,382 13,577,195
Assumed exercise of
share options 166,089 92,870 162,786 79,079
-----------------------------------------------------------------------
Weighted Average Number
of Shares Outstanding
- Diluted 14,043,735 13,803,830 14,004,167 13,656,274
-----------------------------------------------------------------------
-----------------------------------------------------------------------


Earnings from continuing operations have been used as a control number in determining if the inclusion of share options in the diluted per share calculation is dilutive. In addition, in periods where the inclusion of share options is dilutive, only those having an exercise price below the average market price of subordinate voting shares during the period are included in the computation. The number of excluded share options was nil for the three months and 183,773 for the nine months ended October 28, 2006 and 45,714 for the three months and 21,282 for the nine months ended October 29, 2005.

5 - Contingent Liabilities

Class Action Suit

On August 19, 2004, a class action suit was filed against the Company and certain of its officers in the United States District Court, Central District of California, alleging that the Company and two of its officers violated section 20A of the US Securities Exchange Act of 1934 relating to contemporaneous insider trading in relation to the sale by the Company of its investment in The Wet Seal, Inc. ("Wet Seal"). On September 12, 2005, the Court granted a motion to dismiss, which was filed by the Company and its officers. An amended complaint was filed with the Court on November 23, 2005. Defendants have filed motions to dismiss plaintiffs' amended consolidated complaint, which were heard by the Court on October 23, 2006 and the matter was taken under submission. The Company and its officers deny all allegations of wrongdoing made in this suit, consider the allegations groundless and without merit, and intend to vigorously defend against this action. No provision has been made with respect to this matter.

United States Securities and Exchange Commission Inquiry

On February 4, 2005, the United States Securities and Exchange Commission ("SEC") announced an informal inquiry relating to Wet Seal and requesting Wet Seal to voluntarily provide the SEC with a detailed chronology of events and certain documents pertaining to Wet Seal's public announcements on August 5, 9 and 19, 2004. The SEC inquiry also requested all information relating to the sale of Wet Seal shares by the Corporation during 2004 and by two of its officers and their holding companies during 2005. In July 2006, the Corporation was informed that the SEC advised Wet Seal by written notice that it terminated its formal investigation with no enforcement action recommended against Wet Seal.



6 - Contributed Surplus

Nine Months Ended
---------------------------------------------------------
October 28, October 29,
2006 2005
---------------------------------------------------------
$ $
Balance - beginning of period 9,182 9,423
Stock-based compensation expense 1,405 808
Exercise of share options (557) (1,074)
---------------------------------------------------------
Balance - end of period 10,030 9,157
---------------------------------------------------------
---------------------------------------------------------

7 - Capital Stock

Quantity $
--------------------------------------------------------------
Subordinate voting shares
Balance - January 28, 2006 8,792,566 34,934
Issuance of subordinate voting shares
upon exercise of options 106,750 1,218
Reclassification from contributed
surplus due to exercise of
stock options 557
Conversion of multiple voting shares 50,000 14

--------------------------------------------------------------
Balance - October 28, 2006 8,949,316 36,723

Multiple voting shares
Balance - January 28, 2006 4,992,569 1,394
Conversion to subordinate
voting shares (50,000) (14)
--------------------------------------------------------------
Balance - October 28, 2006 4,942,569 1,380
--------------------------------------------------------------
13,891,885 38,103
--------------------------------------------------------------
--------------------------------------------------------------


Share option transactions during the nine month period ending October
28, 2006 were as follows:

Weighted
Average
Exercise
Options Price
---------------------------------------------------------
$

Outstanding as at January 28, 2006 571,200 13.04
Granted 356,000 25.06
Exercised (106,750) 11.44
Forfeited (2,300) 10.80
---------------------------------------------------------
Outstanding as at October 28, 2006 818,150 18.49
---------------------------------------------------------
---------------------------------------------------------


Weighted average assumptions used in the Black Scholes options
pricing model for the options granted during the nine month period
ending October 28, 2006 were as follows:

---------------------------------------------
Expected dividend yield 3.79 %
Expected volatility 38.00 %
Risk-free interest rate 4.19 %
Expected life (years) 5

Weighted average fair value of
options at grant date $6.96


Contact Information

  • La Senza Corporation
    Anna Palestini, CA
    Chief Financial Officer
    For financial & investor relation information
    514-421-8713