La Senza Corporation
TSX : LSZ.SV

La Senza Corporation

August 24, 2005 11:37 ET

La Senza's Sales and Net Earnings Continue to Surge in Second Quarter

MONTREAL, QUEBEC--(CCNMatthews - Aug. 24, 2005) - La Senza Corporation (TSX:LSZ.SV) today reported net earnings of $2.1 million or $0.16 per share for the quarter ended July 30, 2005 compared to a net loss of $1.6 million or $0.12 per share for the quarter ended July 31, 2004. For the six month period, the Company posted net earnings of $3.8 million or $0.28 per share compared to a net loss of $5.8 million or $0.44 per share for the corresponding prior year period.

The financial results include a loss from discontinued operations relating to the closure of the Company's U.S. operation. The results of the U.S. operations for the corresponding period of the previous year have been reclassified as discontinued operations. Excluding losses from discontinued operations, earnings from continuing operations amounted to $3.2 million or $0.24 per share for the second quarter ended July 30, 2005 compared to a loss of $814,000 or $0.06 per share for the corresponding quarter of the prior year. For the six month period, earnings from continuing operations amounted to $5.8 million or $0.43 per share compared to a loss of $3.8 million or $0.28 per share for the corresponding prior year period.

Earnings before interest, income taxes, amortization, results in a significantly influenced company, foreign exchange on investment activities and discontinued operations (EBITDA) amounted to $10.0 million for the current second quarter versus $8.2 million for the second quarter of the prior year. For the six month period, EBITDA amounted to $19.8 million versus $12.0 million for the prior year period.

Sales for the second quarter ended July 30, 2005 amounted to $97.0 million compared to $86.4 million for the second quarter ended July 31, 2004, an increase of 12.2%. For the first half of the current year, sales amounted to $180.4 million compared to $157.4 million for the six months of the prior year, representing an increase of 14.6%. Comparable store sales (stores open more than a year) increased by 8.2% in the second quarter of the current year over the second quarter of the prior year, and for the six months the increase was 9.1%.

Mr. Irving Teitelbaum, Chairman and Chief Executive Officer of the Corporation, said "We are pleased to note that our second quarter sales performance maintained the strong momentum shown in the first quarter of the current year. These encouraging results are an excellent lead-in to the last half of the year where traditionally we achieve the major portion of our sales volume."

The Board declared a quarterly dividend of $0.16 per share, which is payable on September 21, 2005 to shareholders of record as of September 7, 2005.

La Senza Corporation, headquartered in Montreal, is a specialty retailer with 299 corporate owned stores as at July 30, 2005, offering fashionable lingerie and sleepwear sold in its 223 "La Senza" and "Silk & Satin" stores, and fashionable apparel for girls sold in its 76 "La Senza Girl" stores. Stores are located in every province in Canada. In addition, 248 independently owned "La Senza" and "La Senza Girl" stores are operating in 22 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 concerning the future performance of the Company. These statements are based on suppositions and uncertainties, as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.



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

As at As at As at
July 30, 2005 July 31, 2004 January 29, 2005
Unaudited Unaudited Audited
---------------------------------------------------------------------
ASSETS

Current
Cash $12,935 $- $18,347
Short-term investments 19,999 23,237 23,216
Marketable securities 24,208 22,885 25,782
Accounts and sundry
receivables 7,266 6,478 7,063
Income taxes
recoverable 1,082 4,146 1,428
Inventory 43,071 33,693 39,753
Prepaid expenses 4,933 6,679 2,190
Assets of discontinued
operations - - 2,286
Future income taxes 6,950 8,161 8,387
---------------------------------------------------------------------
120,444 105,279 128,452

Fixed Assets 81,721 87,359 82,844
Trademarks 1,221 1,199 1,199
Assets of Discontinued
Operations - - 359
Future Income Taxes 2,872 797 2,872
---------------------------------------------------------------------
206,258 194,634 215,726
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES

Current
Bank indebtedness - 2,420 -
Accounts payable and
accrued liabilities 28,692 22,696 35,169
Current maturity of
obligations under
capital leases 11,243 10,113 11,588
Current maturity of
long-term debt 122 1,020 104
Liabilities of
discontinued
operations - - 4,317
---------------------------------------------------------------------
40,057 36,249 51,178

Obligations Under
Capital Leases 23,313 22,020 25,326
Long-Term Debt 2,648 6,028 2,711
Deferred Lease
Inducements 8,772 7,413 8,193
Future Income Taxes 70 - 70
---------------------------------------------------------------------
74,860 71,710 87,478
---------------------------------------------------------------------

Commitments and
Contingencies

SHAREHOLDERS' EQUITY

Capital Stock 34,169 31,700 31,781
Contributed Surplus 9,074 9,030 9,423
Retained Earnings 88,155 82,194 87,044
---------------------------------------------------------------------
131,398 122,924 128,248
---------------------------------------------------------------------
$206,258 $194,634 $215,726
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes



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

Six Months Ended
---------------------------------------------------------------------
July 30, 2005 July 31, 2004
(restated)
Balance - Beginning of Period $87,044 $89,779
Retroactive effect of adopting fair
value-based method for share options - (667)
Net earnings (loss) 3,818 (5,844)
Dividends on subordinate voting shares (1,708) (874)
Dividends on multiple voting shares (999) (200)
---------------------------------------------------------------------

Balance - End of Period $88,155 $82,194
---------------------------------------------------------------------
---------------------------------------------------------------------

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 30, 2005 July 31, 2004 July 30, 2005 July 31, 2004
(restated) (restated)

Sales $96,976 $86,398 $180,376 $157,417
---------------------------------------------------------------------

Cost, Expenses
and Other
Cost of sales
and store,
warehouse,
general,
administrative
and sales
support
expenses 86,831 78,046 160,438 145,419
Amortization 4,826 4,572 10,366 8,834
Interest on
obligations
under
capital leases 507 497 1,023 1,007
Interest on
long-term debt 57 73 115 132
Other interest 24 179 16 269
Interest income (53) - (53) -
Foreign
exchange
(gain) loss 185 165 111 (1)
---------------------------------------------------------------------
92,377 83,532 172,016 155,660
---------------------------------------------------------------------

Operating Income 4,599 2,866 8,360 1,757
Interest income
on short-term
investments 287 169 551 269
Other income
(loss) 127 (206) 196 (75)
Foreign
exchange
gain (loss)
on investment
activities (26) (24) (143) 221
Loss in a
significantly
influenced
company - (3,915) - (6,480)
---------------------------------------------------------------------
Earnings (Loss)
from Continuing
Operations
Before
Income Taxes 4,987 (1,110) 8,964 (4,308)
---------------------------------------------------------------------

Income Taxes 1,788 (296) 3,199 (502)
---------------------------------------------------------------------

Earnings (Loss)
from
Continuing
Operations 3,199 (814) 5,765 (3,806)

Discontinued
operations, net
of income taxes (1,067) (784) (1,947) (2,038)
---------------------------------------------------------------------

Net Earnings
(Loss) $2,132 $(1,598) $3,818 $(5,844)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic Earnings
(Loss) per
Share
from
Continuing
Operations $0.24 $(0.06) $0.43 $(0.28)
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted Earnings
(Loss) per
Share from
Continuing
Operations $0.23 $(0.06) $0.42 $(0.28)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and
Diluted
Earnings (Loss)
per Share $0.16 $(0.12) $0.28 $(0.44)
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted Average
Number of
Shares
Outstanding
- Basic 13,562,502 13,426,335 13,510,712 13,421,525
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted
Average Number
of Shares
Outstanding
- Diluted 13,688,746 13,426,335 13,591,506 13,421,525
---------------------------------------------------------------------
---------------------------------------------------------------------

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 30, July 31, July 30, July 31,
2005 2004 2005 2004
(restated) (restated)
Funds Provided
(Used)
Operating
Activities
Earnings (loss)
from continuing
operations $3,199 $(814) $5,765 $(3,806)
Amortization 4,826 4,572 10,366 8,834
Amortization of
deferred lease
inducements (197) (387) (618) (758)
Stock-based
compensation
expense 176 412 356 511
Loss in a
significantly
influenced
company - 3,915 - 6,480
Future income
taxes 800 (1,163) 1,438 (660)
Foreign exchange
gain (loss) on
investment
activities 26 124 143 (121)
Deferred lease
inducements 391 926 1,196 1,149
---------------------------------------------------------------------
9,221 7,585 18,646 11,629
Changes in
non-cash
operating
elements of
working capital 10,116 16,585 (13,608) (3,590)
---------------------------------------------------------------------
19,337 24,170 5,038 8,039
---------------------------------------------------------------------

Financing
Activities
Issuance of
subordinate
voting shares 1,543 84 1,683 94
Repayments of
obligations
under capital
leases (2,994) (2,490) (5,856) (4,817)
Repayment of
long-term debt (22) (21) (45) (42)
Obligations
under capital
leases 3,498 3,135 3,498 3,135
Dividends paid (2,169) (1,074) (2,707) (1,074)
---------------------------------------------------------------------
(144) (366) (3,427) (2,704)
---------------------------------------------------------------------

Investing
Activities
Short-term
investments and
marketable
securities 4,852 2,165 4,647 2,046
Additions to
fixed assets (5,207) (4,376) (9,158) (10,541)
Additions to
trademarks (24) (66) (106) (166)
Net proceeds on
sale of a
significantly
influenced company - 20,446 - 20,446
---------------------------------------------------------------------
(379) 18,169 (4,617) 11,785
---------------------------------------------------------------------

Cash provided by
(used) in
continuing
operations 18,814 41,973 (3,006) 17,120
Cash used in
discontinued
operations (2,507) (811) (2,406) (6,764)
---------------------------------------------------------------------

Net Increase
(Decrease) in
Cash and Cash
Equivalents 16,307 41,162 (5,412) 10,356

Cash and Cash
Equivalents

Beginning of
Period (3,372) (20,846) 18,347 9,960
---------------------------------------------------------------------
End of Period $12,935 $20,316 $12,935 $20,316
---------------------------------------------------------------------
---------------------------------------------------------------------

Represented by:
Cash (bank
indebtedness) $12,935 $(2,420)
Short-term investments 19,999 23,237
Short-term investments with maturity
over 3 months (19,999) (501)
---------------------------------------------------------------------
$12,935 $20,316
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes


Notes to the Consolidated Financial Statements
July 30, 2005
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 29, 2005. 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 29, 2005.

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 - Change in Accounting Policies

Vendor Discounts

In January 2004, the Emerging Issues Committee of the CICA released Abstract 144 (EIC - 144) "Accounting By a Customer (Including a Reseller) for Certain Consideration Received From a Vendor". EIC - 144 specifies the accounting method to be applied to considerations received from a vendor. EIC - 144 requires the Company to record cash considerations received from a vendor as a reduction in the price of the vendor's products and reflect them as a reduction of cost of sales and related inventory when they are recognized in the income statement and balance sheet.

The Company applied this new recommendation in the fourth quarter of fiscal 2005. As a result of the retroactive application of this new standard, the financial statements for the three and six months ended July 31, 2004 have been restated. The impact on previously reported balances is as follows:



Three Months Six Months
Ended Ended
--------------------------------------------------------------------
July 31, July 31,
2004 2004
--------------------------------------------------------------------
$ $
Cost of sales and store,
warehouse, general,
administration and sales
support expenses (48) (111)
Earnings from continuing
operations before income taxes 48 111
Income tax expense 17 40
Earnings from continuing operations 31 71
Net earnings 31 71
Retained earnings - end of period 71
Inventory 111
Income taxes recoverable 463
Future income tax asset (503)
--------------------------------------------------------------------

Reporting Segment

The Company assessed the long-term economic characteristics for the
La Senza and La Senza Girl segments and has determined that it meets
the criteria for aggregating the operating segments and, accordingly,
considers that it currently has a single reporting segment.

As a result, segmented results for La Senza and La Senza Girl will no
longer be presented.

4 - 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 current and prior periods have been
presented as discontinued operations. The net assets of these
operations are presented as assets/liabilities of discontinued
operations in the periods in which they qualify as held for sale. In
the second quarter of 2005, all of the U.S. stores were closed.

The results of discontinued operations were as follows:


Second Quarter Ended Six Months Ended
--------------------------------------------------------------------
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
--------------------------------------------------------------------
$ $ $ $

Sales 1,039 2,880 3,507 5,665
--------------------------------------------------------------------
Operating losses (1,874) (1,180) (3,198) (2,413)
Income taxes (807) (396) (1,251) (375)
--------------------------------------------------------------------
Loss from Discontinued
Operations, Net of
Income Taxes (1,067) (784) (1,947) (2,038)
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and Diluted Loss
Per Share from
Discontinued Operations (0.08) (0.06) (0.15) (0.16)
--------------------------------------------------------------------
--------------------------------------------------------------------


The net assets of discontinued operations are summarized as follows:


As at As at As at
July 30, July 31, January 29,
2005 2004 2005
--------------------------------------------------------------------
$ $ $
Current assets - - 2,286
Fixed assets - - 359
--------------------------------------------------------------------
- - 2,645
Current liabilities - - 4,317
--------------------------------------------------------------------
Net assets from
discontinued operations - - (1,672)
--------------------------------------------------------------------
--------------------------------------------------------------------


The cash flows from discontinued operations are summarized as
follows:


Second Quarter Ended Six Months Ended
--------------------------------------------------------------------
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
--------------------------------------------------------------------
$ $ $ $
Cash flows used in
operating activities (2,507) (811) (2,406) (8,464)
Cash flows from
investing activities - - - 1,700
--------------------------------------------------------------------
(2,507) (811) (2,406) (6,764)
--------------------------------------------------------------------
--------------------------------------------------------------------


5 - Earnings (Loss) 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 30, July 31, July 30, July 31,
2005 2004 2005 2004

Weighted Average
Number of Shares
Outstanding
- Basic 13,562,502 13,426,335 13,510,712 13,421,525
Assumed exercise
of share options 126,244 - 80,794 -
--------------------------------------------------------------------
Weighted Average
Number of Shares
Outstanding
- Diluted 13,688,746 13,426,335 13,591,506 13,421,525
--------------------------------------------------------------------
--------------------------------------------------------------------


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 or six months ended July 30, 2005. As a result of the loss from continuing operations for the three and six months ended July 31, 2004, diluted loss per share was calculated using the basic weighted average shares outstanding because to do so otherwise would have been anti-dilutive.

6 - 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"). The Company and its officers have filed a motion to dismiss the suit, which is scheduled to be heard by the Court on September 12, 2005. 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. On April 22, 2005, the two officers of the Company each received a subpoena for documents only from the SEC pursuant to a formal order of investigation dated April 19, 2005. The subpoenas seek documents relating to the sale of Wet Seal shares by the Corporation in 2004 and by the two officers and their holding companies during 2005, and related topics. The Company and its officers have provided documents to the SEC in response to the subpoenas. At this early stage, it is not possible to give any opinion as to the likely outcome of the SEC investigation. No provision has been made with respect to this matter.



7 - Contributed Surplus

Six Months Ended
--------------------------------------------------------------------
July 30, July 31,
2005 2004
--------------------------------------------------------------------
$ $
Balance - beginning of period 9,423 7,852
Stock-based compensation
expense - prior periods - 667
Stock-based compensation expense
- current period 356 511
Exercise of share options (705) -
--------------------------------------------------------------------
Balance - end of period 9,074 9,030
--------------------------------------------------------------------
--------------------------------------------------------------------


8 - Capital Stock


Quantity $
--------------------------------------------------------------------
Subordinate Voting Shares
Balance - January 30, 2005 8,460,266 30,387
Issuance of subordinate
voting shares upon
exercise of options 193,700 2,388
--------------------------------------------------------------------
Balance - July 30, 2005 8,653,966 32,775

Multiple Voting Shares 4,992,569 1,394
--------------------------------------------------------------------
13,646,535 34,169
--------------------------------------------------------------------
--------------------------------------------------------------------


Share Option Plan

On June 16, 2005, the Company amended the share option plan so that
the number of Subordinate Voting Shares that may be issued pursuant
to the share option plan is limited to 11% of the Subordinate Voting
Shares and Multiple Voting Shares outstanding.

Share option transactions during the six-month period ending July 30,
2005 were as follows:


Weighted
Average
Exercise
Options Price
--------------------------------------------------------------------
$
Outstanding as at
January 30, 2005 774,300 10.51
Granted - -
Exercised (193,700) 9.03
Forfeited (10,800) 10.62
--------------------------------------------------------------------
Outstanding as at July 30, 2005 569,800 11.01
--------------------------------------------------------------------
--------------------------------------------------------------------


9 - Comparative figures

Certain comparative figures have been reclassified to conform to the
current period's presentation.




Contact Information

  • La Senza Corporation
    Anna Palestini, CA,
    Chief Financial Officer
    (514) 421-8713