La Senza Corporation
TSX : LSZ

La Senza Corporation

August 23, 2006 13:36 ET

La Senza Corporation Tripled its Net Earnings for the Second Quarter of Fiscal 2007 Over the Second Quarter of Fiscal 2006

MONTREAL, QUEBEC--(CCNMatthews - Aug. 23, 2006) - (TSX:LSZ) La Senza Corporation today reported net earnings of $7.2 million or $0.52 per share for the quarter ended July 29, 2006 compared to $2.1 million or $0.16 per share for the quarter ended July 30, 2005. For the six month period, the Company posted net earnings of $11.3 million or $0.82 per share compared to $3.8 million or $0.28 per share.

The prior year results included a loss from discontinued operations of $1.1 million for the second quarter and $1.9 million for the six month period. Excluding the loss from discontinued operations in the prior year, the comparison of net earnings from continuing operations was $7.2 million or $0.52 per share versus $3.2 million or $0.24 per share for the second quarter, and $11.3 million or $0.82 per share versus $5.8 million or $0.43 per share for the six month period.

Earnings before interest, income taxes, amortization, foreign exchange on investment activities, and discontinued operations (EBITDA) amounted to $15.5 million for the current quarter versus $10.0 million for the second quarter of the prior year. For the six month period, EBITDA amounted to $28.0 million versus $19.8 million for the prior year period.

Sales for the second quarter ended July 29, 2006 amounted to $108.9 million compared to $97.0 million for the second quarter ended July 30, 2005, an increase of 12.3%. For the first half of the current year, sales amounted to $205.6 million compared to $180.4 million for the six months of the prior year, representing an increase of 14.0%. Comparable store sales (stores open more than a year) increased by 2.6% in the second quarter of the current year over the second quarter of the prior year, and for the six months the increase was 4.1%.

Mr. Irving Teitelbaum, Chairman and Chief Executive Officer of the Corporation, said "We are pleased that the strong sales and net earnings growth in the first quarter of fiscal 2007 have continued in the second quarter. Our strong balance sheet and half-year results make our current ambitious new store expansion program in both power centres and mall locations even more compelling."

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

La Senza Corporation, headquartered in Montreal, is a specialty retailer with 310 corporate owned stores as at July 29, 2006, offering fashionable lingerie and sleepwear sold in its 227 "La Senza" and "La Senza Express" stores, and fashionable apparel for girls sold in its 83 "La Senza Girl" stores. Stores are located in every province in Canada. In addition, 306 independently owned "La Senza" and "La Senza Girl" stores are operating in 30 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:
La Senza Corporation
Anna Palestini, CA
Chief Financial Officer
(514) 421-8713


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

As at As at As at
July 29, July 30, January 28,
2006 2005 2006
Unaudited Unaudited Audited
--------------------------------------------------------------------
ASSETS

Current
Cash $31,384 $12,935 $28,899
Short-term
investments 24,740 19,999 32,793
Marketable
securities 33,755 24,208 24,971
Accounts and sundry
receivables 13,010 7,266 10,867
Income taxes
recoverable - 1,082 -
Inventory 36,453 43,071 48,990
Prepaid expenses 4,507 4,933 2,428
Future income taxes 473 6,950 1,488
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144,322 120,444 150,436

Property and
Equipment 85,817 81,721 79,971
Trademarks 1,263 1,221 1,217
Future Income Taxes 1,231 2,872 1,120
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232,633 206,258 232,744
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LIABILITIES

Current
Accounts payable and
accrued liabilities 33,539 28,692 41,656
Income taxes payable 1,787 - 1,284
Current maturity of
obligations under
capital leases 11,214 11,243 11,380
Current maturity of
long-term debt 130 122 127
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46,670 40,057 54,447

Obligations Under
Capital Leases 22,622 23,313 23,552
Long-Term Debt 2,516 2,648 2,582
Deferred Lease
Obligations 9,894 8,772 8,871
Future Income Taxes 110 70 110
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81,812 74,860 89,562
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Commitments and
Contingencies

SHAREHOLDERS' EQUITY

Capital Stock 37,500 34,169 36,328
Contributed Surplus 9,894 9,074 9,182
Retained Earnings 103,427 88,155 97,672
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150,821 131,398 143,182
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$232,633 $206,258 $232,744
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See accompanying notes



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


Six Months Ended
----------------------------------------------------
July 29, 2006 July 30, 2005
Balance - Beginning
of Period $97,672 $87,044
Net earnings 11,289 3,818
Dividends on
subordinate voting
shares (3,557) (1,708)
Dividends on
multiple voting
shares (1,977) (999)
----------------------------------------------------
Balance - End of
Period $103,427 $88,155
----------------------------------------------------
----------------------------------------------------

See accompanying notes



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


Second Quarter Ended Six Months Ended
------------------------------------------------------------------
July 29, July 30, July 29, July 30,
2006 2005 2006 2005

Sales $108,932 $96,976 $205,596 $180,376
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Cost, Expenses
and Other
Cost of sales
and store,
warehouse,
general,
administrative
and sales
support
expenses 93,476 86,831 177,323 160,438
Amortization 4,894 4,826 11,023 10,366
Interest on
obligations
under capital
leases 516 507 1,001 1,023
Interest on
long-term debt 35 57 70 115
Other interest - 24 - 16
Interest income (491) (53) (648) (53)
Foreign exchange
(gain) loss (71) 185 236 111
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98,359 92,377 189,005 172,016
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Operating Income 10,573 4,599 16,591 8,360
Interest income
on short-term
investments 388 287 741 551
Other income 85 127 66 196
Foreign exchange
gain (loss) on
investment
activities 17 (26) (104) (143)
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Earnings from
Continuing
Operations
Before
Income Taxes 11,063 4,987 17,294 8,964
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Income Taxes 3,865 1,788 6,005 3,199
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Earnings from
Continuing
Operations 7,198 3,199 11,289 5,765

Discontinued
operations, net
of income
taxes - (1,067) - (1,947)
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Net Earnings $7,198 $2,132 $11,289 $3,818
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Basic Earnings
per Share from
Continuing
Operations $0.52 $0.24 $0.82 $0.43
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Diluted Earnings
per Share from
Continuing
Operations $0.51 $0.23 $0.81 $0.42
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Basic Earnings
per Share $0.52 $0.16 $0.82 $0.28
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Diluted Earnings
per Share $0.51 $0.16 $0.81 $0.28
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Weighted Average
Number of
Shares
Outstanding -
Basic 13,847,295 13,562,502 13,823,249 13,510,712
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Weighted Average
Number of
Shares
Outstanding -
Diluted 14,006,223 13,688,746 13,956,222 13,591,506
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See accompanying notes




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

Second Quarter Ended Six Months Ended
------------------------------------------------------------------
July 29, July 30, July 29, July 30,
2006 2005 2006 2005

Funds Provided (Used)
Operating
Activities
Earnings from
continuing
operations $7,198 $3,199 $11,289 $5,765
Amortization 4,894 4,826 11,023 10,366
Amortization of
deferred lease
obligations (415) (197) (795) (618)
Stock-based
compensation
expense 834 176 1,071 356
Future income
taxes 453 800 904 1,438
Foreign exchange
(gain) loss on
investment
activities (17) 26 104 143
Deferred lease
obligations 1,077 391 1,818 1,196
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14,024 9,221 25,414 18,646
Changes in
non-cash
operating
elements of
working capital 13,041 10,116 701 (13,608)
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27,065 19,337 26,115 5,038
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Financing
Activities
Issuance of
subordinate
voting shares 147 1,543 813 1,683
Repayment of
obligations
under capital
leases (2,985) (2,994) (5,813) (5,856)
Repayment of
long-term debt (32) (22) (63) (45)
Obligations
under capital
leases 4,718 3,498 4,718 3,498
Dividends paid (2,769) (2,169) (5,534) (2,707)
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(921) (144) (5,879) (3,427)
--------------------------------------------------------------------

Investing
Activities
Short-term
investments and
marketable
securities 12,606 4,852 7,239 4,647
Additions to
property and
equipment (10,096) (5,207) (16,768) (9,158)
Additions to
trademarks (58) (24) (146) (106)
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2,452 (379) (9,675) (4,617)
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Cash provided by
(used) in
continuing
operations 28,596 18,814 10,561 (3,006)
Cash used in
discontinued
operations - (2,507) - (2,406)
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Net Increase
(Decrease) in
Cash and Cash
Equivalents 28,596 16,307 10,561 (5,412)

Cash and Cash
Equivalents

Beginning of
Period 22,470 (3,372) 40,505 18,347
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End of Period $51,066 $12,935 $51,066 $12,935
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Represented by:
Cash $31,384 $12,935
Short-term
investments 24,740 19,999
Short-term
investments with
maturity over 3
months (5,058) (19,999)
--------------------------------------------------------------------
$51,066 $12,935
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See accompanying notes


La Senza Corporation - Corporation La Senza
Notes to Consolidated Financial Statements
July 29, 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:


Second Quarter Ended Six Months Ended
--------------------------------------------------------------------
July 29, July 30, July 29, July 30,
2006 2005 2006 2005
--------------------------------------------------------------------
$ $ $ $
--------------------------------------------------------------------

Sales - 1,039 - 3,507
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Operating losses - (1,874) - (3,198)
Income taxes - (807) - (1,251)
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Loss from Discontinued
Operations, Net of
Income Taxes - (1,067) - (1,947)
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Basic and Diluted
Loss Per Share
from Discontinued
Operations - (0.08) - (0.15)
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Cash flows used in
operating activities - (2,507) - (2,406)
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4 - Earnings Per Share

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

--------------------------------------------------------------------
Second Quarter Ended Six Months Ended
--------------------------------------------------------------------
July 29, July 30, July 29, July 30,
2006 2005 2006 2005

Weighted Average
Number of
Shares
Outstanding -
Basic 13,847,295 13,562,502 13,823,249 13,510,712
Assumed exercise
of share options 158,928 126,244 132,973 80,794
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Weighted Average
Number of Shares
Outstanding -
Diluted 14,006,223 13,688,746 13,956,222 13,591,506
--------------------------------------------------------------------
--------------------------------------------------------------------


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. There were no excluded share options for the three and six months ended July 29, 2006 and for the three and six months ended July 30, 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 are awaiting a hearing by the Court. 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.

Legal Proceeding

A legal proceeding was filed on February 28, 2006 against the Company's subsidiary, La Senza Inc. by Victoria's Secret Stores Brand Management, Inc., Victoria's Secret Direct, LLC and Victoria's Secret Stores, LLC (the "Plaintiffs") in the Superior Court of Justice of Ontario. The Plaintiffs allege that La Senza Inc. has passed off its "La Senza ITEC" bra and related products as and for those of the Plaintiffs sold under the Plaintiffs trademark IPEX and has directed public attention to its products or business in a way that causes or is likely to cause confusion with the Plaintiffs business. The Plaintiffs requested both an interim and an interlocutory injunction, both of which were denied by the court. The Plaintiffs are claiming damages, including exemplary or punitive damages in the amount of $1,000,000; interests and costs of this proceeding. Neither the outcome nor the extent of potential damages, if any, which may be awarded is known. La Senza is disputing the claim and is vigorously defending against it. No provision has been made with respect to this matter.



6 - Contributed Surplus

Six Months Ended
--------------------------------------------------------------------
July 29, July 30,
2006 2005
--------------------------------------------------------------------
$ $
Balance - beginning of period 9,182 9,423
Stock-based compensation expense 1,071 356
Exercise of share options (359) (705)
--------------------------------------------------------------------
Balance - end of period 9,894 9,074
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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 69,100 1,172
Conversion of multiple voting shares 50,000 14
--------------------------------------------------------------------
Balance - July 29, 2006 8,911,666 36,120

Multiple voting shares
Balance - January 28, 2006 4,992,569 1,394
Conversion to subordinate voting shares (50,000) (14)
--------------------------------------------------------------------
Balance - July 29, 2006 4,942,569 1,380

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13,854,235 37,500
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Share option transactions during the six month period ending July 29,
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 (69,100) 11.82
Forfeited (1,500) 10.74
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Outstanding as at July 29, 2006 586,600 18.14
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Weighted average assumptions used in the Black Scholes options
pricing model for the options granted during the six month period
ending July 29, 2006 were as follows:

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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
    (514) 421-8713