UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
(Amendment No. 1)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 30 , 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 001-32635
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None.
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report was:
Class A Voting Shares, without nominal or par value | ||
Class B Multiple Voting Shares, without nominal or par value | ||
Series A Preferred Shares, without nominal or par value, issuable in series |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
☒ | ||||||
Emerging Growth Company |
||||||||||
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒ |
International Financial Reporting Standards as issued |
Other ☐ | ||||||
by the International Accounting Standards Board |
☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐
If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes☒ No
☐ Yes
Auditor Firm ID: |
Auditor Name : |
Auditor Location: |
Explanatory Note
Birks Group Inc. (the “Company”) is filing this Amendment No. 1 to its annual report on Form
20-F
for the fiscal year ended March 30, 2024 (the “Amendment No. 1”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on July 16, 2024 (the “Original Filing”). The purpose of this Amendment No. 1 is solely to include the auditor’s signature on the “Report of Independent Registered Public Accounting Firm” issued by our auditor KPMG LLP for the fiscal year ended March 30, 2024, which was inadvertently excluded from the Original Filing. In order to comply with certain requirements of the SEC’s rules in connection with this filing, this Amendment No. 1 includes Item 18. Financial Statements. For the avoidance of doubt, there have been no changes to the Company’s financial statements set forth in the Original Filing. Consistent with the rules of the SEC, the certifications of the Company’s principal executive officer and principal financial officer as of the date of this Amendment No. 1 are attached as exhibits to this Amendment No. 1.
Except as described above, no other changes have been made to the Original Filing. This Amendment No. 1 speaks as of the filing date of the Original Filing. Other than as stated otherwise, this Amendment No. 1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the Original Filing, or reflect any events that have occurred since the date thereof. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and the Company’s filings with the SEC subsequent to the filing of the Original Filing.
1
Item 18. |
Financial Statements |
The financial statements required by this item are found at the end of this Annual Report beginning on page
F-1.
PART III
Item 19. |
Exhibits |
The following exhibits are part of this Annual Report on Form
20-F.
2
3
4
| * | Filed with this Amendment No. 1. |
| ** | Furnished with this Amendment No. 1. |
| *** | Previously Filed with the Original Filing. |
| + | Certain identified information has been excluded from this exhibit because the Company does not believe it is material and is the type that the Company customarily treats as private and confidential. Redacted information is indicated by [***]. |
| ++ | Schedules and other similar attachments to this exhibit have been omitted pursuant to the Instructions As To Exhibits of Form 20-F. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request. |
5
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amendment No. 1 to Annual Report on its behalf.
| BIRKS GROUP INC. | ||||||
| Date: July 18, 2024 | /s/ Katia Fontana | |||||
| Katia Fontana, | ||||||
| Vice President and Chief Financial Officer | ||||||
6
INDEX TO FINANCIAL STATEMENTS
Page |
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| F-2 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 | ||||
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Birks Group Inc.:
Opinion on the
Consolidated
Financial Statements
We have audited the accompanying consolidated balance sheets of Birks Group Inc. (the “Company”) as of March 30, 2024 and March 25, 2023, the related consolidated statements of operations, other comprehensive income (loss), changes in stockholders’ equity (deficiency), and cash flows for each of the years ended March 30, 2024, March 25, 2023 and March 26, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 30, 2024 and March 25, 2023, and the results of its operations and its cash flows for each of the years ended March 30, 2024, March 25, 2023 and March 26, 2022, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Assessment of the Company’s ability to continue as a going concern
As discussed in Note 1 to the consolidated financial statements, the Company prepares its consolidated financial statements on a going concern basis. The Company believes that it will be able to adequately fund its operations and meet its cash flow requirements for at least twelve months from the date of issuance of these financial statements. The Company funds its operations primarily through committed financing under its senior secured credit facility and its senior secured term loan. The Company’s ability to meet its cash flow requirements in order to fund its operations is dependent upon its ability to attain profitable operations, adhere to the terms of its committed financings, obtain favorable payment terms from suppliers, as well as to maintain specified excess availability levels under its senior secured credit facility and its senior secured term loan. In addition to the covenant to adhere to a daily minimum excess availability of $8.5 million under both its senior secured credit facility and its senior secured term loan, other loans have a covenant to adhere to a working capital ratio of 1.01 at the end of each year. The working capital ratio of 1.01 may be lower in any given year if a tolerance letter accepting a lower working capital ratio is received. Management estimated and forecasted cash flows and excess availability levels under various scenarios for at least the next twelve months from the date the financial statements were authorized for issuance.
We identified the assessment of the Company’s ability to continue as a going concern and related disclosures as a critical audit matter. There was uncertainty associated with the future outcome of events and circumstances underlying significant assumptions. In addition, there was significant auditor judgment involved in assessing management’s cash flow forecast under various scenarios, specifically forecasted sales and gross margins, operating costs, favorable payment terms from suppliers, excess availability levels and working capital ratio.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of the internal control related to management’s going concern assessment. We assessed management’s ability to forecast by comparing prior year forecasts to actual results and excess availability achieved. We assessed management’s estimated forecasted sales, gross margins and operating costs used in management’s forecasted cash flows, excess availability levels and working capital ratio and adherence to the terms of its committed financings under various scenarios. We assessed waivers received by management for the breach of the working capital ratio. We assessed the tolerance letter received by management related to the working capital ratio for the upcoming year end. We assessed the shareholder support letter received by management. We evaluated the assumptions in the forecasted cash flows and the various scenarios, related to cost reductions and obtaining favorable payment terms from suppliers by understanding the nature of management’s plans and whether they were probable. We examined the results of operations and excess availability levels after year-end, up to the date of our auditor’s report, and compared them to management’s forecasted excess availability levels. We assessed the adequacy of the disclosures related to the application of the going concern assessment.
Evaluation of the reserve for slow-moving finished goods inventories
As discussed in Note 4 to the consolidated financial statements, the inventories reserve balance as of March 30, 2024 is $2,196 thousands, which includes the reserve for slow-moving finished goods inventories. As discussed in Note 2(e), inventories are stated at the lower of average cost and net realizable value, which is the estimated selling price in the ordinary course of business. The reserve for slow-moving finished goods inventories is equal to the difference between the cost of inventories and the estimated selling prices, resulting in the expected gross margin. There is estimation uncertainty in relation to the identification of slow-moving finished goods inventories which are based on certain criteria established by the Company’s management. The criteria includes consideration of operational decisions by Management to discontinue ordering the inventory based on sales trends, market conditions, and the aging of the inventories. Estimation uncertainty also exists in determining the expected selling prices and associated gross margins through normal sales channels, which are based on assumptions about future demand and market conditions for those slow-moving inventories.
We identified the evaluation of the reserve for slow-moving finished goods inventories as a critical audit matter. A higher degree of auditor judgement and increased audit effort was required to evaluate the identification of the slow-moving finished goods inventories based on the Company’s established criteria, and the expected selling prices for those slow-moving finished goods inventories.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the slow-moving inventory reserve, including the control related to the identification of the slow-moving finished goods inventories based on the Company’s established criteria and the estimated reserve percentage. We evaluated the criteria used by the Company to identify slow-moving finished goods inventories by considering the aging of finished goods inventories on-hand, historic inventory turnover, historic sales trends and historic gross margin analysis. We evaluated the Company’s criteria and assumptions used in the reserve for slow-moving finished goods inventories by analyzing the reserve trends, movements of the specific inventory status year-over-year and business plans, and the impact of changes on the reserve. We compared the estimated selling price and the associated gross margins utilized in the prior year to the actual gross margins in the current year to evaluate the Company’s ability to accurately estimate the reserve. We developed an expectation of the slow-moving reserve using historic inventory activity and gross margin rates and compared our expectation to the amount recorded by the Company. We assessed the sufficiency of the reserves at year-end by analyzing sales and gross margins subsequent to year-end.
/s/ KPMG LLP
We have served as the Company’s auditor since 2000.
Montreal, Canada
July 16, 2024
F-3
BIRKS GROUP INC.
Consolidated Balance Sheets
As of |
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March 30, 2024 |
March 25, 2023 |
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(In thousands) |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | $ | ||||||
| Accounts receivable and other receivables |
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| Inventories |
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| Prepaids and other current assets |
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| |
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| Total current assets |
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| Long-term receivables |
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| Equity investment in joint venture |
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| Property and equipment |
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| Operating lease right-of-use |
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| Intangible assets and other assets |
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| Total non-current assets |
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| |
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| Total assets |
$ | $ | ||||||
| |
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|
| Liabilities and Stockholders’ Equity (Deficiency) |
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| Current liabilities: |
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| Bank indebtedness |
$ | $ | ||||||
| Accounts payable |
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| Accrued liabilities |
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| Current portion of long-term debt |
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| Current portion of operating lease liabilities |
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| |
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| Total current liabilities |
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| Long-term debt |
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| Long-term portion of operating lease liabilities |
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| Other long-term liabilities |
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| |
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| Total long-term liabilities |
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| Stockholders’ equity (deficiency): |
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| Class A common stock – |
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| Class B common stock – |
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| Preferred stock – unlimited shares authorized, |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Accumulated other comprehensive income (loss) |
( |
) | ||||||
| |
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|
|||||
| Total stockholders’ equity (deficiency) |
( |
) |
( |
) | ||||
| |
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|
|||||
| Total liabilities and stockholders’ equity (deficiency) |
$ | $ | ||||||
| |
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|
|
See accompanying notes to consolidated financial statements
| On behalf of the Board of Directors: | ||
| /s/ Jean-Christophe Bédos | /s/ Emilio B. Imbriglio | |
| Jean-Christophe Bédos, Director | Emilio B. Imbriglio | |
F-
4
BIRKS GROUP INC.
Consolidated Statements of Operations
Fiscal Year Ended |
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March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
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Net sales |
$ | $ | $ | |||||||||
Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Depreciation and amortization |
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Total operating expenses |
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Operating income (loss) |
( |
) | ||||||||||
Interest and other financial costs |
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(Loss) income before taxes and equity in earnings of joint venture |
( |
) | ( |
) | ||||||||
Income taxes (benefits) |
||||||||||||
Equity in earnings of joint venture, net of taxes of $ ($ |
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Net (loss) income, net of tax |
$ | ( |
) | $ | ( |
) |
$ | |||||
Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Net (loss) income per common share: |
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Basic |
$ | ( |
) | $ | ( |
) | $ | |||||
Diluted |
( |
) | ( |
) | ||||||||
See accompanying notes to consolidated financial statements
F-
5
BIRKS GROUP INC.
Consolidated Statements of Other Comprehensive Income (loss)
Fiscal Year Ended |
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March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
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(In thousands) |
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| Net (loss) income |
$ | ( |
) | $ | ( |
) | $ | |||||
| Other comprehensive (loss) income: |
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| Foreign currency translation adjustments (1) |
( |
) | ||||||||||
| |
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| Total other comprehensive (loss) income |
$ | ( |
) | $ | ( |
) | $ | |||||
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| (1) | Item that may be reclassified to the Statement of Operations in future periods |
See accompanying notes to consolidated financial statements.
F-
6
BIRKS GROUP INC.
Consolidated Statements of Changes in Stockholders’ Equity (deficiency)
(In thousands of dollars except shares amounts)
| Voting common stock outstanding |
Voting common stock |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive loss |
Total |
|||||||||||||||||||
| Balance at March 27, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||
| Net income |
— | — | — | — | ||||||||||||||||||||
| Cumulative translation adjustment (1) |
— | — | — | — | ||||||||||||||||||||
| |
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| Total comprehensive income |
— | — | — | — | — | |||||||||||||||||||
| Modification of certain awards from cash settled to equity settled |
— | — | — | — | ||||||||||||||||||||
| Compensation expense resulting from equity settled deferred stock units granted to Management |
— | — | — | |||||||||||||||||||||
| Exercise of stock options and warrants |
( |
) | — | — | ||||||||||||||||||||
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| Balance at March 26, |
( |
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| Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Cumulative translation adjustment (1) |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
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| Total comprehensive loss |
— | — | — | — | — | ( |
) | |||||||||||||||||
| Compensation expense resulting from equity settled restricted stock units granted to Management |
— | — | — | — | ||||||||||||||||||||
| Exercise of stock options and warrants |
( |
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| Balance at March 25, |
( |
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) | ( |
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| Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Cumulative translation adjustment (1) |
— | — | — | — | ||||||||||||||||||||
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| Total comprehensive loss |
— | — | — | — | — | ( |
) | |||||||||||||||||
| Compensation expense resulting from equity settled restricted stock units granted to Management |
— | — | — | — | ||||||||||||||||||||
| Settlement of stock units |
( |
) | — | — | — | |||||||||||||||||||
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| Balance at March 3 , 20240 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||
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| (1) | The change in cumulative translation adjustments is not due to reclassifications out of accumulated other comprehensive income (loss). |
See accompanying notes to consolidated financial statements.
F-
7
BIRKS GROUP INC.
Consolidated Statements of Cash Flows
Fiscal Year Ended |
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March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
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In thousands |
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| Cash flows from (used in) operating activities: |
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| Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
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| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
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| Depreciation and amortization |
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| Net change of operating lease right-of-use assets and liabilities |
( |
) | ( |
) | ( |
) | ||||||
| Leasehold inducements received |
( |
) | ||||||||||
| Early lease termination |
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| Amortization of debt costs |
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| Compensation expenses resulting from equity settled restricted stock units |
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| Equity in earnings of joint venture |
( |
) | ( |
) | — | |||||||
| Other operating activities, net |
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| (Increase) decrease in: |
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| Accounts receivable, other receivables and long-term receivables |
( |
) | ||||||||||
| Inventories |
( |
) | ( |
) | ||||||||
| Prepaids and other current assets |
( |
) | ( |
) | ||||||||
| Increase (decrease) in: |
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| Accounts payable |
( |
) | ||||||||||
| Accrued liabilities and other long-term liabilities |
( |
) | ||||||||||
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| Net cash (used in) provided by operating activities |
( |
) | ( |
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| Cash flows (used in) provided by investing activities: |
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| Additions to property and equipment |
( |
) | ( |
) | ( |
) | ||||||
| Additions to intangible assets and other assets |
( |
) | ( |
) | ( |
) | ||||||
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| Net cash used in investing activities |
( |
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) | ( |
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| Cash flows provided by (used in) financing activities: |
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| Increase (decrease) in bank indebtedness |
( |
) | ||||||||||
| Drawdown on capital lease funding |
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| Increase in long-term debt |
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| Repayment of long-term debt |
( |
) | ( |
) | ( |
) | ||||||
| Repayment of obligations under finance lease |
( |
) | ( |
) | ||||||||
| Payment of loan origination fees and costs |
( |
) | ( |
) | ( |
) | ||||||
| Exercise of stock options and warrants |
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| Net cash provided by (used in) financing activities |
( |
) | ||||||||||
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| Net (decrease) increase in cash and cash equivalents |
( |
) | ||||||||||
| Cash and cash equivalents, beginning of year |
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| Cash and cash equivalents, end of year |
$ | $ | $ | |||||||||
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| Supplemental disclosure of cash flow information: |
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| Interest paid |
$ | $ | $ | |||||||||
| Non-cash transactions: |
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| Property and equipment and intangible assets additions included in accounts payable and accrued liabilities |
$ | $ | $ | |||||||||
| Conversion of cash-settled RSUs and DSUs to equity-settled awards |
$ | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
F-
8
BIRKS GROUP INC.
Notes to Consolidated Financial Statements
Years ended March 30, 2024, March 25, 2023 and March 26, 2022
Birks Group Inc. (“Birks Group” or “Birks” or “the Company”) is incorporated under the Canada Business Corporations Act. The principal business activities of the Company and its subsidiaries are the design of fine jewelry and the operation of retail sale of luxury jewelry, timepieces and gifts. The Company’s consolidated financial statements are prepared using a fiscal year which consists of 52 or 53 weeks and ends on the last Saturday in March of each year. The fiscal year ended March 30, 2024 consists of fifty-three week periods whereas March 25, 2023 and March 26, 2022 each consist of fifty-two week periods.
1. |
Basis of presentation: |
Throughout these consolidated financial statements, the Company refers to the fiscal year ending March 30, 2024, as fiscal 2024, and the fiscal years ended March 25, 2023, and March 26, 2022, as fiscal 2023 and 2022, respectively. Our fiscal year ends on the last Saturday in March of each year.
These consolidated financial statements, which include the accounts of Birks Group for all periods presented for the fiscal years ended March 30, 2024, March 25, 2023, and March 26, 2022, are reported in accordance with accounting principles generally accepted in the U.S. These principles require management to make certain estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes.
The most significant estimates and judgments include the assessment of the going concern assumption, the valuation of inventories and, accounts receivable, deferred tax assets, and the recoverability of long-lived assets and right of use assets. Actual results could differ from these estimates. Periodically, the Company reviews all significant estimates and assumptions affecting the financial statements relative to current conditions and records the effect of any necessary adjustments. All significant intercompany accounts and transactions have been eliminated upon consolidation.
The consolidated financial statements are presented in Canadian dollars, the Company’s functional and reporting currency.
Future operations
These financial statements have been prepared on a going concern basis in accordance with generally accepted accounting principles in the U.S. The going concern basis of presentation assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company funds its operations primarily through committed financing under its senior secured credit facility and its senior secured term loan described in Note 6. The senior secured credit facility along with the senior secured term loan are used to finance working capital, finance capital expenditures, provide liquidity to fund the Company’s day-to-day operations and for other general corporate purposes.
The Company believes recent general economic conditions and business and retail climates, which includes rising inflation and interest rates as well as stock market volatility, could lead to a slow-down in certain segments of the global economy and affect customer behaviour and the amount of discretionary income spent by potential customers to purchase the Company’s products. If global economic and financial market conditions persist or worsen, the Company’s sales may decrease, and the Company’s financial condition and results of operations may be adversely affected.
The Company continues to and expects to continue to operate through its senior secured credit facility and senior secured term loan.
For
a
net loss of $in
fiscal 2022. The Company used net cash flows from operations of $.
On
December 24, 2021, the Company entered into an amended and restated senior secured revolving credit facility (“Amended Credit Facility”) with Wells Fargo Capital Finance Corporation Canada and an amended and restated senior secured term loan (“Amended Term Loan”) with Crystal Financial LLC (dba SLR Credit Solutions
) (“SLR”).
The Amended Credit Facility and Amended Term Loan extended the maturity date of the Company’s
pre-existing
loans from
to
.
On
August 24, 2021, the Company entered into a 10
-
year loan agreement with Investissement Québec, the sovereign fund of the province of Québec, for an amount of up to $
million to be used specifically to finance the digital transformation of the Company through the implementation of an omni-channel e-commerce platform and enterprise resource planning system. As of March 30, 2024, the Company has $
million
outstanding on the loan. The term loan with Investissement Québec requires the Company on an annual basis to have a working capital ratio (defined as current assets divided by current liabilities excluding the current portion of operating lease liabilities) of at least 1.01 at the end of the Company’s fiscal year. The working capital ratio of 1.01 may be lower in any given year if a tolerance letter accepting a lower working capital ratio is received from Investissement Québec. During fiscal 2024, the Company received a tolerance letter from Investissement Québec that allowed the Company, as at March 30, 2024 to tolerate a working capital ratio
of
.
As at March 30, 2024, the working capital ratio was 0.96 . On Ju
ly
3
, 2024, the Company obtained a waiver from Investissement Québec with respect to the requirement to meet the working capital ratio at March 30, 2024. Furthermore, on July 0.90
12
, 2024, the Company received a tolerance letter from Investissement Québec that allows the Company, as at March 29, 2025, to tolerate a working capital ratio of .
9
On
. 0.97 .
As at March 30, 2024, the working capital ratio (defined as current assets divided by current liabilities excluding the current portion of operating lease liabilities) was The working capital ratio of 1.01 may be lower in any given year if a tolerance letter accepting a lower working capital ratio is received from Investissement Québec.
During fiscal 2024, the Company received a tolerance letter from Investissement Québec that allowed the Company, as at March 30, 2024 to tolerate a working capital ratio of . On Ju
ly
3
, 2024Furthermore, on July 0.90 .
12
, 2024, the Company received a tolerance letter from Investissement Québec that allows the Company, as at March 29, 2025, to tolerate a working capital ratio of There is no assurance the Company will meet its covenant at March 29, 2025 or for future years, or that if not met, waivers would be available. If a waiver is not obtained, cross defaults with our Amended Credit Facility and our Amended Term Loan would arise.
On July 15, 2024, the Company obtained a support letter from one if its shareholders, Mangrove Holding S.A., providing financial support in an amount of up to $3.75 million, of which
$1.0
million would be available after January 1, 2025. These amounts can be borrowed, if needed, when deemed necessary by the Company, upon approval by the Company’s Board of Directors, until at least
,
to
assist the Company in satisfying its obligations and debt service requirements as they come due in the normal course of operations, or in meeting its financial covenant requirements of maintaining minimum excess availability levels
of $8.5 million
at all times as required by its Amended Credit Facility and Amended Term Loan. Amounts drawn under this support letter will bear interest at an annual rate of 15 %. However, there will be no interest or principal repayments prior to July 31, 2025.
0
The Company’s ability to meet its cash flow requirements in order to fund its operations is dependent upon its ability to attain profitable operations, adhere to the terms of its committed financings, obtain favorable payment terms from suppliers as well as to maintain specified excess availability levels under its Amended Credit Facility and its Amended Term Loan. In addition to the covenant 8.5 1.01 at the end of each fiscal year. In the event that excess availability falls below the minimum requirement, this would be considered an event of default under the Amended Credit Facility and under the Amended Term Loan, that would result in the outstanding balances borrowed under the Company’s Amended Credit facility and its Amended Term Loan becoming due immediately, which would also result in cross defaults on the Company’s other borrowings. Similarly, both the Company’s Amended Credit Facility and its Amended Term Loan are subject to cross default provisions with all other loans pursuant to which the Company is in default of any other loan, the Company will immediately be in default of both the Amended Credit Facility and the Amended Term Loan. The Company met its excess availability requirements as of and throughout the fiscal year ended March 30, 2024 and as of the date these financial statements were authorized for issuance. In addition, the Company expects to have excess availability of at least $8.5 million for at least the next twelve months from the date of issuance of these financial statements.
under both its Amended Credit Facility and its Amended Term Loan
to adhere to a daily minimum excess availability of not less than
$million at all times, except that the Company will not be in breach of this covenant if excess availability falls below $8.5
million for not more than two consecutive business days once during any fiscal month, other loans have a covenant to adhere to a working capital ratio of The Company’s ability to make scheduled payments of principal, or to pay the interest, or to fund planned capital expenditures and store operations will also depend on its ability to maintain adequate levels of available borrowing, obtain favorable payment terms from suppliers and its future performance, which to a certain extent, is subject to general economic, financial, competitive, legislative and regulatory factors, as well as other events that are beyond the Company’s control.
The Company continues to be actively engaged in identifying alternative sources of financing that may include raising additional funds through public or private equity, the disposal of assets, and debt financing, including funding from government sources. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that could restrict the Company’s operations. Financing may be unavailable in amounts or on terms acceptable to the Company if at all, which may have a material adverse impact on its business, including its ability to continue as a going concern.
The Company’s lenders under its Amended Credit Facility and its Amended Term Loan may impose, at any time, discretionary reserves, which would lower the level of borrowing availability under the Company’s credit facilities (customary for asset-based loans), at their reasonable discretion, to: (i) ensure that the Company maintains adequate liquidity for the operation of its business, (ii) cover any deterioration in the amount of value of the collateral, and (iii) reflect impediments to the lenders to realize upon the collateral. There is no limit to the amount of discretionary reserves that the Company’s lenders may impose at their reasonable discretion. No discretionary reserves were imposed during fiscal 2024, fiscal 2023 and fiscal 2022 by the Company’s lenders.
Certain adverse conditions and events outlined above require consideration of management’s plans, which management believes mitigate the effect of such conditions and events. Management plans include continuing to manage liquidity actively which allows for adherence to excess availability requirements, and cost reductions, which include reducing future purchases,
reducing
marketing and general operating expenses, postponement of certain capital expenditures and obtaining favorable payment terms from suppliers. Notwithstanding, the Company believes that it will be able to adequately fund its operations and meet its cash flow requirements for at least the next twelve months from the date of issuance of these financial statements. 2. |
Significant accounting policies: |
| (a) | Revenue recognition: |
Sales are recognized at the point of sale when merchandise is picked up by the customer or delivered to a customer. Sales to our wholesale customers are recognized when the Company has agreed to terms with its customers, the contractual rights and payment terms have been identified, the contract has commercial substance, it is probable that consideration will be collected by the Company and when control of the goods has been transferred to the customer. Shipping and handling fees billed to customers are included in net sales.
Revenues for gift certificate sales and store credits are recognized upon redemption. Prior to recognition as a sale, gift certificates are recorded as accounts payable on the balance sheet. Based on historical redemption rates, the Company estimates the portion of outstanding gift certificates (not subject to unclaimed property laws) that will ultimately not be redeemed and records this amount as breakage income. The Company recognizes such breakage income in proportion to redemption rates of the overall population of gift certificates and store credits. Gift certificates and store credits outstanding are subject to unclaimed property laws and are maintained as accounts payable until remitted in accordance with local ordinances.
1
Sales of consignment merchandise are recognized at such time as the merchandise is sold, and are recorded on a gross basis because the Company is the primary obligor of the transaction, has general latitude on setting the price, has discretion as to the suppliers, is involved in the selection of the product and has inventory loss risk.
Sales are reported net of returns and sales taxes. The Company generally gives its customers the right to return merchandise purchased by them within 10 to 90 days, depending on the product sold and records a provision at the time of sale for the effect of the estimated returns which is determined based on historical experience.
Revenues for repair services are recognized when the service is delivered to and accepted by the customer.
| (b) | Cost of sales: |
Cost of sales includes direct inbound freight and duties, direct labor related to repair services, design and creative costs (labor and overhead) inventory shrink, inventory thefts, and boxes (jewelry, watch and giftware). Indirect freight including inter-store transfers, purchasing and receiving costs, distribution costs and warehousing costs are included in selling, general and administrative expenses. Mark down dollars received from vendors are recorded as a reduction of inventory costs to the specific items to which they apply and are recognized in cost of sales once the items are sold.
| (c) | Cash and cash equivalents: |
The Company utilizes a cash management system under which a book cash overdraft may exist in its primary disbursement account. These overdrafts, when applicable, represent uncleared checks in excess of cash balances in the bank account at the end of a reporting period and have been reclassified to accounts payable on the consolidated balance sheets.
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Amounts receivable from credit card issuers are included in cash and cash equivalents and are typically converted to cash within 2 to 4 days of the original sales transaction. These amounts totaled $0.9 million at March 30, 2024 and $0.5 million at March 25, 2023.
| (d) | Accounts receivable: |
Accounts receivable arise primarily from customers’ use of our private label and proprietary credit cards and wholesale sales and are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less expected credit losses. Several installment sales plans are offered to our private label credit card holders and proprietary credit card holders which vary as to repayment terms and finance charges. Finance charges on the Company’s consumer credit receivables, when applicable, accrue at rates ranging from 0 % to 9.99 % per annum for financing plans. The Company maintains allowances for expected credit losses associated with the accounts receivable recorded on the balance sheet for estimated losses resulting from the inability of its customers to make required payments. The allowance for credit losses is an estimate of expected credit losses, measured on a collective basis over the estimated life of the Company’s customer
in-house
receivables and wholesale receivables. In determining expected credit losses, the Company considers historical level of credit losses, current economic trends and reasonable and supportable forecasts that affect the collectability of future cash flows. The Company also incorporates qualitative adjustments for certain factors such as Company specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the allowance for credit losses reflects the Company’s best estimate of current expected credit losses. Other relevant factors include, but are not limited to, the length of time that the receivables are past due, the Company’s knowledge of the customer, and historical write-off
experiences. Management considered and applied qualitative factors such as the unfavorable macroeconomic conditions caused by the current uncertainty resulting from rising inflation and interest rates, and its potential effects. 2
The Company classifies a receivable account as past due if a required payment amount has not been received within the allotted time frame (generally 30 days), after which internal collection efforts commence. Once all internal collection efforts have been exhausted and management has reviewed the account, the account is sent for external collection or legal action. Upon the suspension of the accrual of interest, interest income is recognized to the extent cash payments received exceed the balance of the principal amount owed on the account. After all collection efforts have been exhausted, including internal and external collection efforts, an account is written off.
The Company guarantees a portion of its private label credit card sales to its credit card vendor. The Company maintains a liability associated with these outstanding amounts. Similar to the allowance for expected credit losses, the liability related to these guaranteed sales amounts are based on a combination of factors including the length of time the receivables are past due to the Company’s credit card vendor, the Company’s knowledge of the customer, economic and market conditions and historical write-off experiences of similar credits. If the financial conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
The allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest. Accrued interest is included within the same line item as the respective principal amount of the customer
in-house
receivables in the condensed consolidated balance sheets. The accrual of interest is discontinued at the time the receivable is determined to be uncollectible and written-off.
Accrued interest during the fiscal years-ending March 30, 2024 and March 25, 2023 were immaterial. | (e) | Inventories: |
Finished goods inventories and inventories of raw materials are
stated
at the lower of average cost (which includes material, labor and overhead costs) and net realizable value, which is the estimated selling price in the ordinary course of business. The Company records inventory reserves for lower of cost or net realizable value, which includes slow-moving finished goods inventory, damaged goods, and shrink. The cost of inbound freight and duties are included in the carrying value of the inventories. The reserve for slow-moving finished goods inventories is equal to the difference between the cost of inventories and the estimated selling prices, resulting in the expected gross margin. There is estimation uncertainty in relation to the identification of slow-moving finished goods inventories which are based on certain criteria established by management. The criteria includes consideration of operational decisions by management to discontinue ordering the inventories based on sales trends, market conditions, and the aging of the inventories. Estimation uncertainty also exists in determining the expected selling prices and associated gross margins through normal sales channels, which are based on assumptions about future demand and market conditions for those slow-moving inventories. If actual market conditions are less favorable than those projected by management, additional inventory reserves may be required.
The reserve for inventory shrink is estimated for the period from the last physical inventory date to the end of the reporting period on a store by store basis and at our distribution centers. The shrink rate from the most recent physical inventory, in combination with historical experience, is the basis for providing a shrink reserve.
| (f) | Property and equipment: |
Property and equipment are recorded at cost less any impairment charges. Maintenance and repair costs are charged to selling, general and administrative expenses as incurred, while expenditures for major renewals and improvements are capitalized. Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the assets as follows:
| Asset |
Period | |||
| Leasehold improvements |
||||
| Software and electronic equipment |
||||
| Furniture and fixtures |
||||
| Equipment |
3
| (g) | Intangible assets and other assets: |
Eligible costs incurred during the development stage of information systems projects are capitalized and amortized over the estimated useful life of the related project and presented as part of intangible assets and other assets on the Company’s balance sheet. Eligible costs include those related to the purchase, development, and installation of the related software. The costs related to the implementation of the ERP system and the 5 years.
e-commerce
platform are amortized over a period of Intangible assets and other assets also consist of trademarks and tradenames, which are amortized using the straight-line method over a period of 15 to 20 years. The Company had $7.9 million and $7.0 million of intangible assets at March 30, 2024 and March 25, 2023, respectively. The Company had $1.2 million and $1.0 million of accumulated amortization of intangibles at March 30, 2024 and March 25, 2023, respectively.
net book value related to
and other assets
| (h) | Leases: |
The Company accounts for leases in accordance with Topic 842 and recognizes a asset and a corresponding lease liability on the balance sheet for long-term lease agreements. We determine if an arrangement is a lease at inception. The amounts of the Company’s operating lease (“ROU”) assets and current and long-term portion of operating lease liabilities are presented separately on the balance sheet. Finance leases are included in property and equipment and long-term debt on the balance sheet.
right-of-use
right-of-use
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments in order to measure its lease liabilities at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives.
The Company leases office, distribution, and retail facilities. Certain retail store leases may require the payment of minimum rentals and contingent rent based on a percentage of sales exceeding a stipulated amount. The Company’s lease agreements expire at various dates through 2034, are subject, in many cases, to renewal options and provide for the payment of taxes, insurance and maintenance. Certain leases contain escalation clauses resulting from the pass
-
through of increases in operating costs, property taxes and the effect on costs from changes in consumer price indices, which are considered as variable costs. 4
The Company determines its lease payments based on predetermined rent escalations,
rent-free
periods and other incentives. The Company recognizes lease expense on a straight-line basis over the related terms of such leases, including any rent-free period and beginning from when the Company takes possession of the leased facility. Variable operating lease expenses, including contingent rent based on a percentage of sales, CAM charges, rent related taxes, mall advertising and adjustments to consumer price indices, are recorded in the period such amounts and adjustments are determined. Lease expense is recorded within selling, general and administrative expenses in the statement of operations. Lease arrangements occasionally include renewal options. The Company uses judgment when assessing the renewal options in the leases and assesses whether or not it is reasonably certain to exercise these renewal options if they are within the control of the Company. Any renewal options not reasonably certain to be exercised are excluded from the lease term.
The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. ROU assets, as part of the group of assets, are periodically reviewed for impairment. The Company uses the long-lived assets impairment guidance in ASC Subtopic
360-10,
Property, Plant and Equipment, overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. | (i) | Deferred financing costs: |
The Company amortizes deferred financing costs incurred in connection with its financing agreements using the effective interest method over the term of the related financing. Such deferred costs are presented as a reduction to bank indebtedness and long-term debt in the accompanying consolidated balance sheets.
| (j) | Warranty accrual: |
The Company provides warranties on its Birks branded jewelry for periods extending up to five years
.
The Company accrues a liability based on its historical repair costs for such warranties. | (k) | Income taxes: |
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial statement reporting purposes and the bases for income tax purposes, and (b) operating losses and tax credit carryforwards. Deferred income tax assets are evaluated and, if realization is not considered to be a valuation allowance is provided (see Note 11(a)).
more-likely-than-not,
| (l) | Foreign exchange: |
Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange in effect at the balance sheet date. 0.2 ) million, ($1.4 ) million, and ($0.2 ) million were recorded in cost of goods sold for the years ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively and $0.2 million, ($0.5 ) million, 0.1 million of gains (losses) on foreign exchange were recorded in interest and other financial costs related to U.S. dollar denominated debts for the years ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively.
Non-monetary
assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the respective transaction dates. Revenue and expenses denominated in foreign currencies are translated at average rates prevailing during the year. Foreign exchange gains (losses) of ($a
nd
$| (m) | Impairment of long-lived assets: |
The Company periodically reviews the estimated useful lives of its depreciable assets and changes in useful lives are made on a prospective basis unless factors indicate the carrying amounts of the assets may not be recoverable and an impairment write-down is necessary. However, the Company will review its long-lived assets for impairment once events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition is less than its carrying value. Measurement of an impairment loss for such long-lived assets would be based on the difference between the carrying value and the fair value of the asset, with fair value being determined based upon discounted cash flows or appraised values, depending on the nature of the asset. no
Long-lived
assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. The Company did non-cash
impairment charges of long-lived assets during fiscal 2024, fiscal 2023 and fiscal 2022. | (n) | Advertising and marketing costs: |
Advertising and marketing costs are generally charged to expense as incurred and are included in selling, general and administrative expenses in the consolidated statements of operations. The Company and its vendors participate in cooperative advertising programs in which the vendors reimburse the Company for a portion of certain specific advertising costs which are netted against advertising expense in selling, general and administrative expenses, and amounted to $0.6 million, $1.1 million, and $1.0 million for each of the years ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively. Advertising and marketing expense, net of vendor cooperative advertising allowances, amounted to $6.8 million, $8.1 million, and $8.8 million, in the years ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively.
| (o) | Government grants: |
The Company recognizes a government grant when there is reasonable assurance that it will comply with the conditions required to qualify for the grant, and that the grant will be received. The Company recognizes government grants as a reduction to the expense that the grant is intended to offset.
5
| (p) | Principles of consolidation and equity method of accounting: |
The consolidated financial statements include the accounts of Birks Group and its subsidiaries. All intercompany transactions and balances have been eliminated.
The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (VIE) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity.
The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting.
On April 16, 2021, the Company entered into a joint venture with FWI LLC (“FWI”) to form RMBG Retail Vancouver ULC (“RMBG”) to operate a retail location in Vancouver, British Columbia. The Company originally contributed nominal cash amounts as well as $1.6 million of certain assets in the form of a shareholder advance for 49 % equity interest in RMBG, the legal entity comprising the joint venture. Likewise, FWI contributed certain assets in exchange for its 51 % equity interest in RMBG, and controls the joint venture from the date of its inception. The Company has significant influence but not control over RMBG and therefore has applied the equity method of accounting to account for its investment in RMBG. The Company has recorded an equity method investment on the consolidated balance sheet and an equity 1.8 million 1.5
pick-up
on the consolidated statement of operations. In addition, as of March 30, 2023 and March 26, 2022, the Company had a non-interest bearing shareholder advance in the amount of
$and
$mi
llion
,
respectively, which is presented in Accounts receivable and other receivables on the consolidated balance sheet. This receivable was fully reimbursed in fiscal 2024. Please refer to note 16 for additional details. The receivable is reimbursed from the actual profits of the business. Dividends are only paid to the shareholders after the repayment of the shareholder’s loans. The Company expects profits will be distributed annually or as approved by the directors at their annual meetings in accordance with their respective shareholdings.
| (q) | Earnings per common share: |
Basic earnings per share (“EPS”) is computed as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the dilutive effect of the assumed exercise of stock options and warrants except in years where the Company has a net loss.
6
The following table sets forth the computation of basic and diluted earnings (loss) per common share for the years ended March 30, 2024, March 25, 2023, and March 26, 2022:
Fiscal Year Ended |
||||||||||||
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
(In thousands, except per share data) |
||||||||||||
| Basic income (loss) per common share computation: |
||||||||||||
| Numerator: |
||||||||||||
| Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
| Denominator: |
||||||||||||
| Weighted-average common shares outstanding |
||||||||||||
| Income (loss) per common share |
$ | ( |
) | $ | ( |
) | $ | |||||
| Diluted (loss) income per common share computation: |
||||||||||||
| Numerator: |
||||||||||||
| Net income (loss) |
$ | ( |
) | $ | ( |
) | $ | |||||
| Denominator: |
||||||||||||
| Weighted-average common shares outstanding |
||||||||||||
| |
|
|
|
|
|
|||||||
| Dilutive effect of stock options and warrants |
— | — | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding – diluted |
||||||||||||
| Diluted income (loss) per common share |
$ | ( |
) | $ | ( |
) | $ | |||||
7
| (r) | For the year ended March 30, 2024, all Class A voting shares underlying outstanding option awards were excluded from the computation of diluted earnings per share due to the Company reporting a net loss. For the year ended March 25, 2023, all Class A voting shares underlying outstanding option awards were excluded from the computation of diluted earnings per share due to the Company reporting a net loss. For the year ended March 26, 2022, the effect from the assumed exercise of voting shares underlying outstanding option awards and |
| (s) | Recent Accounting Pronouncements adopted during the year |
There were no new accounting pronouncements adopted during the fiscal year that have a material impact on the Company’s financial position or results of operations.
Recent Accounting Pronouncements not yet adopted:
On March 12, 2020. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as The ASU was effective starting on March 12, 2020, and is available to be adopted on a prospective basis no later than December 31, 2024, following the amendments of ASU
from ,
the FASB issued ASU 2020-04
Reference rate reform (Topic 848). On December 21, 2022, the FASB issued an amendment to this reform, ASU 2022-06
Reference rate reform (Topic 848): Facilitation of the effects of reference rate reform on financial reporting and related amendments
held-to-maturity.
2022-06.
The Canadian Dollar Offered Rate (CDOR) is a benchmark interest rate referenced in a variety of agreements. The publication of certain CDOR rates were discontinued in May 2021, and the remaining rates are expected to be discontinued on June 30, 2024. The Amended Credit Facility bears interest at a rate of CDOR plus a spread ranging depending on the Company’s excess availability levels. The
Amended Term Loan
bears interest at a rate of CDOR plus Amended Term Loan also allows for periodic revisions of the annual interest rate to CDOR
on the Company complying with certain financial covenants. On June
26
2024, the Amended Credit Facility and the Amended Term Loan
were amended to replace CDOR by the Canadian Overnight Repo Rate Average (“
CORRA”)
and these amendments are not expected to materially impact the Company’s results. Refer to note 19 - Subsequent events. On November 27, 2023, the FASB issued ASU , which enhances segment disclosures and requires additional disclosures of segment expenses. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods thereafter. Early adoption is permitted. Management continues to evaluate the impact of this ASU on the consolidated financial statements.
2023-07:
Segment Reporting (Topic 280): Improvements to reportable segment disclosures
On December 14, 2023, the FASB issued ASU , which primarily enhances the annual income tax disclosures for the effective tax rate reconciliation and income taxes paid. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The ASU should be applied prospectively however, retrospective application in all prior periods is permitted. Management continues to evaluate the impact of this ASU on the consolidated financial statements.
2023-09:
Income Taxes (Topic 740): Improvements to income tax disclosures
F-
18
3. |
Accounts receivable and other receivabl es: |
Accounts receivable, net of allowance for credit losses, at March 30, 2024 and March 25, 2023 consist of the following:
As of |
||||||||
| March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
| Customer trade receivables |
$ | $ | ||||||
| Other receivables |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|
|
|
|
|
Continuity of the allowance for doubtful accounts is as follows (in thousands):
| Balance March 27, 2021 |
$ |
|||
| Provision for credit losses |
||||
| Net write offs |
( |
) | ||
| |
|
|||
| Balance March 26, 2022 |
$ | |||
| Provision for credit losses |
||||
| Net write offs |
( |
) | ||
| |
|
|||
| Balance March 25, 2023 |
$ | |||
| |
|
|||
| Provision for credit losses |
||||
| Net write offs |
( |
) | ||
| |
|
|||
| Balance March 30, 2024 |
$ |
|||
| |
|
Other receivables mainly relate to receivables from wholesale revenue, tenant allowances receivable from certain landlords, and the receivable from the joint venture (see Note 16).
Certain
sheet.
The
Current |
1 - 30 days past due |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total |
|||||||||||||||||||
| Customer in-house receivables |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
| Other receivables |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The following table disaggregates the Company’s accounts receivables and other receivables and long-term receivables as at March 25, 2023:
Current |
1 - 30 days past due |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total |
|||||||||||||||||||
| Customer in-house receivables |
$ | $ | |
$ | $ | $ | $ | |||||||||||||||||
| Other receivables |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
F-
19
4. |
Inventories: |
Inventories, net of reserves, are summarized as follows:
As of |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
| Raw materials and work in progress |
$ | $ | (1) | |||||
| Finished goods |
(1) | |||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
(1) |
The amount presented has been corrected in these financial statements from amounts previously disclosed to increase raw materials and work in progress and decrease finished goods by an amount of $ unchanged as previously disclosed. |
Continuity of the inventory reserves are as follows (in thousands):
| Balance March 27, 2021 |
$ | |||
| Additional charges |
||||
| Deductions |
( |
) | ||
| |
|
|
|
|
| Balance March 26, 2022 |
||||
| Additional charges |
||||
| Deductions |
( |
) | ||
| |
|
|
|
|
| Balance March 25, 2023 |
||||
| Additional charges |
||||
| Deductions |
( |
) | ||
| |
|
|
|
|
| Balance March 30, 2024 |
$ | |||
| |
|
|
|
|
F-2
0
5. |
Property and equipment: |
The components of property and equipment are as follows:
As of |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
Leasehold improvements |
||||||||
Furniture, fixtures and equipment |
||||||||
Software and electronic equipment |
||||||||
Accumulated depreciation and impairment charges |
( |
) | ( |
) | ||||
| $ | $ | |||||||
The Company wrote off $2.8 million of gross fixed assets that were fully 1.7 million), mostly related to leasehold improvements. Property and equipment, having a cost of $4.5 million and net book value of $3.8 million at March 30, 2024, and a cost of $0.3 million and a net book value of $0.3 million at March 25, 2023, are under finance leasing arrangements.
depreciated
during the year ended March 30, 2024 (March 25, 2023 - $6. |
Bank indebtedness: |
As of March 30, 2024 and March 25, 2023, bank indebtedness consisted solely of amounts owing under the Company’s Amended Credit Facility (defined below), which had an outstanding balance of $63.4 million ($63.7 million net of $0.3 million of deferred financing costs) 57.9 58.3 0.4 13.4 12.9
and $
million ($
million net of $
million of deferred financing costs), respectively. The Company’s Amended Credit Facility is collateralized by substantially all of the Company’s assets. The Company’s excess borrowing capacity was $
million as of March 30, 2024 and $
million as of March 25, 2023. The Company met its excess availability requirements throughout fiscal 2024, and as of the date of these financial statements.
The Company’s ability to fund its operations and meet its cash flow requirements is dependent upon its ability to maintain positive excess availability under its $85.0 million Amended Credit Facility with Wells Fargo Canada Corporation. On October 23, 2017, the Company entered into a credit facility with Wells Fargo Capital Finance Corporation Canada for a maximum amount of $85.0 million and maturing in . On December 24, 2021, the Company entered into an amended and restated senior secured revolving credit facility (“Amended Credit Facility”) with Wells Fargo Capital Finance Corporation Canada. The Amended Credit Facility extended the maturity date of the Company’s 5.0 million. The Company will only have the ability to exercise this accordion option if it has the required borrowing capacity at such time. The Amended Credit Facility bears interest at a rate of 1.5 2.0 % depending on the Company’s excess availability levels. Under the Amended Credit Facility, the sole financial covenant 8.5 million8.5 million for not more than two consecutive business days
pre-existing
loan from October 2022 to . The Amended Credit Facility also provides the Company with an option to increase the total commitments thereunder by up to $CDOR
plus a spread ranging from % -
that
the Company is required to adhere to is to maintain minimum excess availability of not less than $ at all times
, except that the Company shall not be in breach of this covenant if excess availability falls below $once
during any fiscal month throughout 2024
. The Company’s excess availability was above $8.5 million throughout fiscal 2024. On June 29, 2018, the Company secured a $12.5 million 7.75 %. The Amended Term Loan also allows for periodic revisions of the annual interest rate to 7.00 % or 6.75 % depending on the Company complying with certain financial covenants. Under the Amended Term Loan, the Company is required to adhere to the same financial covenant as under the Amended Credit Facility (maintain minimum excess availability of not less than $8.5 million , except that the Company shall not be in breach of this covenant if excess availability falls below $8.5 million for not more than two consecutive business days once during any fiscal month). In addition, the Amended Term Loan includes 5.0 million and from January 21st to January 31st of each year of $2.0 million. The Term Loan is required to be repaid upon maturity.
t
erm l
oan maturing in October 2022 with SLR. On December 24, 2021, the Company entered into an amended and restated senior secured term loan (“Amended Term Loan”) with SLR. The Amended Term Loan extended the maturity date of the Company’s pre-existing
loan from October 2022 to . The Amended Term Loan is subordinated in lien priority to the Amended Credit Facility and bears interest at a rate of CDOR
plus CDOR
plus CDOR
plus at all times
availability blocks at all times of not less than the greater of $8.5 million and 10 % of the borrowing base, including additional
seasonal availability blocks imposed from December 20th to January 20th of each year of $The Company’s borrowing capacity under both its Amended Credit Facility and its Amended Term Loan is based upon the value of the Company’s inventory and accounts receivable, which is periodically assessed by its lenders and based upon these reviews the Company’s borrowing capacity could be significantly increased or decreased.
1
The
Company’s Amended Credit Facility and its Amended Term Loan are subject to cross default provisions with all other loans pursuant to which if the Company is in default of any other loan, the Company will immediately be in default of both its Amended Credit Facility and its Amended Term Loan. The Company’s Amended Credit Facility and its Amended Term Loan also contain limitations on the Company’s ability to pay dividends, more specifically, among other limitations; the Company can pay dividends only at certain excess borrowing capacity thresholds. The Company is required to either i) maintain excess availability of at least 40 % of the borrowing base in the month preceding payment or ii) maintain excess availably of at least 25 % of the line cap and maintain a fixed charge coverage ratio of at least 1.10 to 1.00 . Other than these financial covenants related to paying dividends, the terms of the Company’s Amended Credit Facility and its Amended Term Loan provide that no financial covenants are required to be met other than already described.
The Company’s lenders under its Amended Credit Facility and its Amended Term Loan may impose, at any time, discretionary reserves, which would lower the level of borrowing availability under its credit facilities (customary for asset-based loans), at their reasonable discretion, to: i) ensure that the Company maintains adequate liquidity for the operations of its business, ii) cover any deterioration in the value of the collateral, and iii) reflect impediments to the lenders to realize upon the collateral. There is no limit to the amount of discretionary reserves that the Company’s lenders may impose at their reasonable discretion. No discretionary reserves were imposed during fiscal year 2024 by the Company’s lenders.
Th
e
information concerning the Company’s bank indebtedness is as follows: Fiscal Year Ended |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
Maximum borrowing outstanding during the year |
$ | $ | ||||||
Average outstanding balance during the year |
$ | $ | ||||||
Weighted average interest rate for the year |
% |
% | ||||||
Effective interest rate at year- end |
% |
% | ||||||
As security for the bank indebtedness, the Company has provided some of its lenders the following: (i) general assignment of all accounts receivable, other receivables and trademarks; (ii) general security agreements on all of the Company’s assets; (iii) insurance on physical assets in a minimum amount equivalent to the indebtedness, assigned to the lenders; (iv) a mortgage on moveable property (general) under the Civil Code (Québec) of $200.0 million; (v) lien on machinery,
equipment
and molds and dies; and (vi) a pledge of trademarks and stock of the Company’s subsidiaries.7. |
Accrued Liabilities |
The components of accrued liabilities are as follows:
As of |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
Compensation related accruals |
$ |
$ |
||||||
Interest and bank fees |
||||||||
Accrued property and equipment additions |
||||||||
Sales return provision |
||||||||
Professional and other service fees |
||||||||
Other |
||||||||
Total accrued liabilities |
$ |
$ |
||||||
F-2
2
8. |
Long-term debt: |
(a) |
Long-term debt consists of the following: |
As of |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
Term loan from SLR Credit Solutions, bearing interest at an annual rate of C DOR plus , respectively). Refer to Note 6 for additional information. |
$ | $ | ||||||
$ , |
||||||||
$ payments beginning |
||||||||
U . S. $6 (c)) |
||||||||
and |
||||||||
Eligible borrowing amount of up to $ |
||||||||
Current portion of long-term debt |
||||||||
| $ | $ | |||||||
| (b) | On July 8, 2020, the Company secured a On January 4, 2023, the Company received a loan forgiveness in the amount of $ During fiscal 2024, the Company received a tolerance letter from Investissement Québec that allowed the Company, as at March 30, 2024 , to tolerate a working capital ratio of As at March 30, 2024, the working capital ratio (defined as current assets divided by current liabilities excluding the current portion of operating lease liabilities) was , 2024Furthermore, on July 12 , 2024, the Company received a tolerance letter from Investissement Québec that allows the Company, as at March 29, 2025, to tolerate a working capital ratio of |
( c) |
On March 26, 2020 , the Company secured a Business Development Bank of Canada ( BDC), as amended, for an amount of $ from . June 26, 2021, the date of the drawdown |
( d) |
On July 14, 2023, the Company entered into a financing agreement for a capital lease facility financing with Varilease Finance Inc. relating to certain equipment consisting of leasehold improvements, furniture, security equipment and related equipment for store construction and renovation. The maximum borrowing amount under this facility is U.S $ |
2
3
On February 1, 2024, the Company entered into a financing agreement for a capital lease facility financing with Varilease Finance Inc. relating to certain equipment consisting of leasehold improvements, furniture, security equipment and related equipment for the construction of a new store. The maximum borrowing amount under this facility is U.S. $2.5 million (Cdn $3.4 million). During fiscal 2024, the Company has drawn U.S. $0.6 million (Cdn. $0.8 million). Payments will commence upon project completion, which is expected to occur during fiscal 2025. The amounts drawn are interest bearing
at approximately 16 %
annually
.
On February 1, 2024, the Company entered into a financing agreement for a capital lease facility financing with Varilease Finance. Inc relating to
certain equipment consisting of leasehold improvements, furniture, security equipment and related equipment for
the partial renovation of a
store. The maximum borrowing amount under this facility is U.S.
$ million
(Cdn $0.7 million)
and the balance as of March 30, 2024 is .
The payments are interest bearing at approximately 10 %
annually
and commence upon project completion.
( e) |
On August 24, 2021, the Company entered into a - year loan agreement with Investissement Québec for an amount of up to $e-commerce platform and enterprise resource planning system. In order to obtain the financing, the Company has agreed to maintain a certain number of employees in Quebec. As of March 30, 2024, the Company has fully drawn on the loan ($ $in July 2022.(defined as current assets divided by current liabilities excluding the current portion of operating lease liabilities) of at least During fiscal 2024, the Company received a tolerance letter from Investissement Québec that allowed the Company, as at March 30, 2024, to tolerate a working capital ratio of As at March 30, 2024, the working capital ratio was 0.97 .On July 3, 2024, the Company obtained a waiver from Investissement Québec with respect to the requirement to meet the working capital ratio at March 30, 2024 and therefore the debt has been presented as long-term at year end. Furthermore, on July 12 , 2024, the Company received a tolerance letter from Investissement Québec that allows the Company, as at March 29, 2025, to tolerate a working capital ratio of 0.90 . |
4
( f ) |
Future minimum lease payments for finance leases required in the following five years are as follows (in thousands): |
| Year ending March: | ||||
2025 |
$ | |||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
Less imputed interest |
( |
) | ||
| $ | ||||
( g ) |
Principal payments on long-term debt required in the following five years and thereafter, including obligations under finance leases, are as follows (in thousands): |
Year ending March: |
||||
2025 |
$ | |||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
Thereafter |
||||
| $ | ||||
| ( h ) |
As of March 30, 2024 and March 25, 2023, the Company had $ , respectively, of outstanding letters of credit. |
9. |
Other long-term liabilities: |
On
August 31, 2023, the Company entered into an inventory supplier agreement relating to 20 % payment within 30 days upon receipt of inventory and the balance is repayable over 34 monthly payments bearing interest at 6 %. As of March 30, 2024, the Company has
inventory
purchases. The agreement requires a U.S. $
(Cdn $2.8 million
outstanding on the loan of which )
U.S.
$Cdn
$1.5 million) is presented in
other
long-term liabilities and the balance as accounts payable
. On
February 14, 2024, the Company entered into 25 % payment within 30 days upon receipt of inventory and the balance is repayable over 26 monthly payments and is interest-free. As of March 30, 2024, the Company has
an
inventory supplier agreement relating to inventory
purchases. The agreement requires a U.S.
$1.3 million
(Cdn $1.7 million
) outstanding on the loan of which U.S.
$0.5 million
(Cdn $0.7 million
) is presented in
other
long-term liabilities and the balance as accounts payable
. The cash flows related to inventory supplier agreements are presented in operating cash flows.
10. |
Benefit plans and stock-based compensation: |
(a) |
Stock option plans and arrangements: |
(i) |
The Company can issue stock options, stock appreciation rights, deferred share units and restricted stock units to executive management, key employees and directors under the stock-based compensation plans discussed below. The Company’s stock trades on the NYSE American and is valued in USD, as such all prices in Note 10 are denominated in USD. |
The
Long-Term
Incentive Plan under which awards may be made in order to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and to promote the success of the Company. Any employee or consultant selected by the administrator is eligible for any type of award provided for under the Long-Term Incentive Plan, except that incentive stock options may not be granted to consultants. The Long-Term Incentive Plan provided for the grant of units and performance units or share awards. As of March 30, 2024, there were as of March 30, 2024.
The Company has As
of
Long-Tern Incentive Plan
expired in February 2016 and no further awards will be granted under this plan. However, the Long-Term Incentive Plan will remain in effect until the outstanding awards issued under the plan terminate or expire by their terms. 5
On August 15, 2016, the Board of Directors adopted the Company’s Omnibus Long-Term Incentive Plan (the “Omnibus LTIP”), and same was approved by the Company’s shareholders on September 21, 2016. Further to the Omnibus LTIP, the Company’s directors, officers, senior executives and other employees of the Company or one of its subsidiaries, consultants and service providers providing ongoing services to the Company and its affiliates may from 1,000,000 shares of the Company’s Class A voting shares reserved for issuance under the Omnibus LTIP. On January 11, 2022, the Omnibus LTIP was amended to increase the number of the Company’s Class A voting shares reserved for issuance under the Omnibus LTIP from 1,000,000 to 1,500,000 . This increase was ratified by a majority of shareholders in September 2022. In no event shall the Company issue Class A voting shares, or awards requiring the Company to issue Class A voting shares, pursuant to the Omnibus LTIP if such issuance, when combined with the Class A voting shares issuable upon the exercise of awards granted under the Company’s former plan or any other equity awards plan of the Company, would exceed 1,796,088 Class A voting shares, unless such issuance of Class A voting shares or awards is approved by the shareholders of the Company. This limit shall not restrict however, the Company’s ability to issue awards under the Omnibus LTIP that are payable other than in shares. As of March 30, 2024, there were stock options to purchase 12,000 Class A voting shares outstanding under the Omnibus LTIP, all of which were granted during fiscal 2017, with a three1.43 and an expiration date of 10 years after the grant date. No additional stock options were granted under this plan since then. As of March 30, 2024, 100% of the outstanding stock options were fully vested. Total compensation cost for options recognized in expenses was nil
time-to-time
be granted various types of compensation awards, as same are further described below. The Omnibus LTIP is meant to replace the Company’s former equity awards plans. As of March 26, 2021, there were a total of -
year vesting period, an average exercise price of $The following is a summary of the activity of Birks’ stock option plans and arrangements.
Options |
Weighted average exercise price |
|||||||
Outstanding March 27, 2021 |
$ | |||||||
Exercised |
( |
) | ||||||
Forfeited |
||||||||
Outstanding March 26, 2022 |
||||||||
Exercised |
( |
) | ||||||
Forfeited |
||||||||
Outstanding March 25, 2023 |
||||||||
Exercised |
||||||||
Forfeited |
||||||||
Outstanding March 30, 2024 |
$ | |||||||
A summary of the status of Birks’ stock options at March 30, 2024 is presented below:
Options outstanding |
Options exercisable |
|||||||||||||||||||
Exercise price |
Number outstanding |
Weighted average remaining life (years) |
Weighted average exercise price |
Number exercisable |
Weighted average exercise price |
|||||||||||||||
$ |
$ | $ | ||||||||||||||||||
$ |
||||||||||||||||||||
| $ | $ | |||||||||||||||||||
| (b) | As of March 30, 2024, the Company U.S. $U.S. $Cdn $Cdn $ |
| (c) | Restricted stock units and deferred share unit plans: |
On September 17, 2020375,000 cash325,000 of the outstanding cash-settled RSUs to equity0.9 million was reclassified to additional paidnil outstanding cash-settled RSUs (50,000 nil outstanding equity-settled RSUs
,
the Company issued -
settled restricted stock units (“RSUs”) to members of senior management under the Omnibus LTIP. These units vest after three years and expire within two months following the vesting date. Compensation expense is based on the fair value of the RSU and the liability is re-measured
at each reporting period. On December 20, 2021, the Company converted -
settled awards and as a result, the liability outstanding at that date of $-
in capital. At March 30, 2024, there were as
all remaining cash-
settled RSUs were exercised in fiscal 2024and
March 26, 2022) and as all remaining equity-settled RSUs were exercised in fiscal 2024 (325,000
March 25, 2023 and
March 26, 2022)
. 2
6
The Company issued cash70,000 and September 21, 2022 (35,584 ). In the prior years, the Company issued cash-settled DSU’s on September 16, 2021 (61,470 units), September 17, 2020 (223,878 units), October 7, 2019 (157,890 units) and June 20, 2019 (86,954 units). On December 20, 2021, the Company converted all of the 750,482 outstanding cash-settled DSUs to equity4.6 million was reclassified to additional paid 8,896 cash-settled and 10,000 DSUs were exercised (nil 96,688 cash-settled DSUs were outstanding (March 25, 2023 – 35,584 – nil ) and 740,482 equity-settled DSUs were outstanding (March 25, 2023 – 750,482 750,482 ). These units are exercisable immediately upon the date the member ceases being a director and expire on December 31 of the following year.
-
settled deferred share units (“DSUs”) to members of the board of directors on October 1, 2023 (DSUs
)
un
its
-
settled awards and as a result, the liability outstanding at that date of $-
in capital. During fiscal 2024,equity
-
settledand
March 26, 2022and
March 26, 2022 – 7
A summary of the status of the Company’s cash-settled RSUs and cash
-
settled DSUs at March 30, 2024 is presented below: DSU |
||||
Outstanding March 27, 2021 |
||||
Grants of new units |
||||
Converted to equity-settled awards |
( |
) | ||
Outstanding March 26, 2022 |
||||
Grants of new units |
||||
Outstanding March 25, 2023 |
||||
Grants of new units |
||||
Exercised |
( |
) | ||
Outstanding March 30, 2024 |
||||
The fair value of cash0.4 million (March 25, 2023 – $0.4 million nil ). The closing stock price used to determine the liability for fiscal 2024 was $3.34 Total compensation cost (gain) for DSUs recognized in expense was ($0.3 ) million, $0.4 million, and $1.5 million in fiscal 2024, 2023, and 2022
-
settled DSUs is measured based on the Company’s share price at each period end. As at March 30, 2024, the liability for all cash-
settled DSU’s was $and
March 26, 2022 – ($8.18 as at March 26, 2023).
, respectively
. RSU |
||||
Outstanding March 27, 2021 |
||||
Converted to equity-settled awards |
( |
) | ||
Outstanding March 26, 2022 |
||||
Exercised |
||||
Outstanding March 25, 2023 |
||||
Exercised |
( |
) | ||
Outstanding March 30, 2024 |
||||
The fair value of cashnil (March 25, 2023 - $0.5 million 0.2 million). The closing stock price used to determine the liability was $8.18 for fiscal 2023 and $5.12 for fiscal 2022. Total compensation cost (gain) for cash-settled RSU’s recognized in expense was $(0.2 ) million, $0.3 million, and $0.8 million in fiscal 2024, 2023, and 2022 Total compensation cost for equity-settled RSU’s recognized in expense was $0.03 million, $0.5 million, and $0.2 million in fiscal 2024, 2023, and 2022
-
settled RSUs is measured based on the Company’s share price at each period end. As at March 30, 2024, the liability for all vested cash-
settled RSUs was and
March 26, 2022 - $, respectively.
, respectively
. A summary of the status of the Company’s equity-settled
DSUs
at March 30, 2024 is presented below: DSU |
||||
Outstanding March 25, 2023 and March 26, 2022 |
||||
Exercised |
( |
) | ||
Outstanding March 30, 2024 |
||||
A summary of the status of the Company’s equity-settled at March 30, 2024 is presented below:
RSUs
RSU |
||||
Outstanding March 26, 2022 and March 25, 2023 |
||||
Exercised |
( |
) | ||
Outstanding March 30, 2024 |
||||
The equity
-
settled RSUs and DSUs are recorded at fair value at grant or modification date and not subsequently re-measured.
11 . |
Income taxes: |
| (a) | The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 30, 2024, the Company did not have any accrued interest or penalties related to uncertain tax positions due to available tax loss carry forwards. The tax years |
8
The Company evaluates its deferred tax assets to determine if any adjustments to its valuation allowances are required. As part of this analysis, the Company could not reach the required conclusion that it would be able to more likely than not realize the value of net deferred tax assets in the future. As a result, the Company has a 26.1 million against the majority of the Company’s net deferred tax assets.
non-cash
valuation allowance of $(March 25, 2023 - $24.8 million)
The significant items comprising the Company’s net deferred tax assets at March 30, 2024 and March 25, 2023 are as follows:
Fiscal Year Ended |
||||||||
March 30, 2024 |
March 25, 2023 |
|||||||
(In thousands) |
||||||||
Deferred tax assets: |
||||||||
Loss and tax credit carry forwards |
$ | $ | ||||||
Difference between book and tax basis of property and equipment and intangible assets |
||||||||
Operating lease right-of-use |
||||||||
Other reserves not currently deductible |
||||||||
Other |
( |
) | ( |
) | ||||
Net deferred tax asset before valuation allowance |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Net deferred tax asset |
$ | $ | ||||||
The Company’s income tax expense (benefit) consists of the following components:
Fiscal Year Ended |
||||||||||||
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
(In thousands) |
||||||||||||
Income tax expense (benefit): |
||||||||||||
Current |
$ | $ | $ | |||||||||
Deferred |
( |
) | ( |
) | ||||||||
Valuation allowance |
( |
) | ||||||||||
Income tax expense |
$ | $ | $ | |||||||||
The Company’s current tax payable was at March 30, 2024, March 25, 2023 and March 26, 2022.
nil
The Company’s provision for income taxes varies from the amount computed by applying the statutory income tax rates for the reasons summarized below:
Fiscal Year Ended |
||||||||||||
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
Canadian statutory rate |
% |
% |
% | |||||||||
Utilization of unrecognized losses and other tax attributes |
( |
%) |
( |
%) |
( |
%) | ||||||
Permanent differences and other |
% |
( |
%) |
% | ||||||||
Total |
% |
% |
% | |||||||||
| (b) | At March 30, 2024, the Company had federal non-capital losses of $ |
29
The following table outlines the maturity of the federal non-capital losses by fiscal year-ends.
Non Capital losses as |
||||
of March 30, 2024 (in thousands) |
||||
| Year ending March: |
Operating |
|||
| Expiring in 2025 |
||||
| Expiring in 2026 |
||||
| Expiring in 2027 |
||||
| Expiring in 2028 |
||||
| Expiring in 2029 |
||||
| Expiring in 2030 |
||||
| Expiring in 2031 |
||||
| Expiring in 2032 |
||||
| Expiring after 2032 |
||||
| Total non-capital losses as of March 30, 2024 |
||||
| |
|
|
|
|
F-3
0
12. |
Capital stock: |
Authorized capital
Class A common stock |
Class B common stock |
Total common stock |
||||||||||||||||||||||
Number of Shares |
Amount |
Number of Shares |
Amount |
Number of Shares |
Amount |
|||||||||||||||||||
| Balance as of March 26, 2022 |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Exercise of stock options and warrants |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of March 25, 2023 |
$ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Settlement of stock units |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of March 30, 2024 |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
F-3
1
13. |
Leases: |
Amounts recognized in the consolidated statement of operations were as follows:
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
(In thousands) |
||||||||||||
| Fixed operating lease expense |
$ | $ | $ | |||||||||
| Variable operating lease expense (1) |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total lease expense |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| (1) | In May 2020, the FASB issued guidance to Topic 842, Leases, exempting lessees from determining whether COVID-19 related rent concessions are lease modifications when certain conditions are met. In accordance with the guidance issued, the Company adopted the amendment effective March 29, 2020 and elected not to treat COVID-19 related rent concessions as lease modifications. As such, for the period ended March 30, 2024, and March 26, 2022 of $ |
Variable operating lease expense includes percentage rent, taxes, mall advertising and common area maintenance charges.
The
The following table provides supplemental cash flow information related to the Company’s operating leases:
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
(In thousands) |
||||||||||||
| Cash outflows from operating activities attributable to operating leases (1) |
$ | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for Operating lease liabilities (2) |
$ | $ | $ | |||||||||
| (1) | There were rent concessions associated to base rent for the period ended March 30, 2024. Net of $ |
| (2) | Right-of-use and other receivables. For the period ending March 25, 2023, leasehold inducements totaled $and other receivables . |
The following table reconciles the undiscounted cash flows expected to be paid in each of the next five fiscal years and thereafter to the operating lease liability recorded on the Consolidated Balance Sheet for operating leases and finance leases which is included in long-term debt as of March 30, 2024.
Minimum Lease Payments as of March 30, 2024 |
||||
(in thousands) |
||||
| Year ending March: |
Operating |
|||
| 2025 |
||||
| 2026 |
||||
| 2027 |
||||
| 2028 |
||||
| 2029 |
||||
| Thereafter |
||||
| |
|
|||
| Total minimum lease payments |
||||
| Less: amount of total minimum lease payments representing interest |
( |
) | ||
| |
|
|||
| Present value of future total minimum lease payments |
||||
| Less: current portion of lease liabilities |
( |
) | ||
| |
|
|
|
|
| Long-term lease liabilities |
$ | |||
| |
|
|
|
|
F-3
2
14. |
Contingencies: |
The Company and its subsidiaries, in the normal course of business, become involved from time to time in litigation and are subject to claims. While the final outcome with respect to claims and legal proceedings pending at March 30, 2024 cannot be predicted with certainty, management believes that adequate provisions have been recorded in the accounts where required and that the financial impact, if any, from claims related to normal business activities will not be material.
1 5 . |
Segmented information: |
The Compa
,
Retail and Other. As of March 30, 2024, Retail operated and
three stores in fiscal 2022)
e-commerce
business, wholesale business and gold exchange program. The two reportable segments are managed and evaluated separately based on unadjusted gross profit. The accounting policies used for each of the segments are the same as those used for the consolidated financial statements. Inter-segment sales are made at amounts of consideration agreed upon between the Certain information relating to the Company’s segments for the years ended March 30, 2024, March 25, 2023, and March 26, 2022, respectively, is set forth below:
Retail |
Other |
Total |
||||||||||||||||||||||||||||||||||
2024 |
2023 |
2022 |
2024 |
2023 |
2022 |
2024 |
2023 |
2022 |
||||||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||||||
| Sales to external customers |
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Inter-segment sales |
— | — | — | |||||||||||||||||||||||||||||||||
| Unadjusted Gross profit |
$ | $ | $ | $ | $ | (1) |
$ | $ | $ | $ | ||||||||||||||||||||||||||
(1) |
The amount presented has been corrected by $ the amount previously disclosed to reflect the accurate unadjusted gross profit. The total unadjusted gross profit for the year ended March 25, 2023 remains unchanged as previously disclosed. |
The following sets forth reconciliations of the segment’s gross profits and certain unallocated costs to the Company’s consolidated gross profits for the years ended March 30, 2024, March 25, 2023, and March 26, 2022:
Fiscal Year Ended |
||||||||||||
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
(In thousands) |
||||||||||||
| Unadjusted gross profit |
$ | $ | $ | |||||||||
| Inventory provisions |
( |
) | ( |
) | ( |
) | ||||||
| Other unallocated costs |
( |
) | ( |
) | ( |
) | ||||||
| Adjustment of intercompany profit |
||||||||||||
| |
|
|
|
|
|
|||||||
| Gross profit |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
3
Sales by classes of similar products and by channel were as follows:
Retail |
Other |
Total |
||||||||||||||||||||||||||||||||||
2024 |
2023 |
2022 |
2024 |
2023 |
2022 |
2024 |
2023 |
2022 |
||||||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||||||
| Jewelry and other |
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Timepieces |
||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
F-3
4
16. |
Related party transactions: |
(a) |
The Company is party to certain related party transactions. Balances related to these related parties are disclosed in the consolidated financial statements except the following: |
Fiscal Year Ended |
||||||||||||
March 30, 2024 |
March 25, 2023 |
March 26, 2022 |
||||||||||
| (In thousands) |
||||||||||||
| Expenses incurred: |
||||||||||||
| Management fees to related parties (b) |
||||||||||||
| Consultant fees to a related party (f) |
||||||||||||
| Expense reimbursement to a related party (d) |
||||||||||||
| Interest expense on cash advance received from controlling shareholder (c) |
||||||||||||
| Compensation paid to a related party (e) |
||||||||||||
| Fees charged to RMBG in exchange for retail support and administrative services (g) |
( |
) | ||||||||||
| Balances: |
||||||||||||
| Accounts payable to related parties |
||||||||||||
| Interest payable on cash advance received from controlling shareholder (c) |
||||||||||||
| Receivable from joint venture (g) |
||||||||||||
| (b) | Effective January 1, 2016, the Company entered into a management consulting services agreement with Gestofi S.A. (“Gestofi”) out-of-pocket was renewed in November 2023 until December 31, 2024. In fiscal 2024, 2023, and 2022, the Company incurred expenses of €$ |
| (c) | The Company has a cash advance outstanding from its controlling shareholder, Montel S.à.r.l. (“Montel”, formerly Montrovest), of U.S. $Amended Credit Facility and Amended Term Loan. This cash advance bears an annual interest rate of Amended Credit Facility permit such a payment. At March 30, 2024 and March 25, 2023 advances payable to the Company’s controlling shareholder amounted to U.S. $$ $million in Canadian dollars), respectively. |
On July 28, 2017, the Company received a U.S. $2.5 million (approximately $3.3 million in Canadian dollars) loan from Montel, to finance its working capital needs. The loan bears interest at an annual rate of 11 %, net of withholding taxes, representing an effective interest rate of approximately 12 %. During fiscal year 2019, U.S. $1.25 million (approximately $1.55 million in Canadian dollars) was repaid. During fiscal 2022, the remaining principal balance on the loan of approximately U.S. $1.25 million ($1.6 million in Canadian dollars) was fully repaid.
5
| (d) | In accordance with the Company’s Code of Conduct related to related party transactions, in April 2011, the Company’s corporate governance and nominating committee and Board of Directors approved the reimbursement to Regaluxe Srl of certain expenses, such as rent, communication, administrative support and analytical service costs, incurred in supporting the office of Dr. Lorenzo Rossi di Montelera, the Company’s then Chairman, and of Mr. Niccolò Rossi di Montelera, the Company’s Chairman of the Executive Committee and the Company’s current Executive Chairman of the Board, for the work performed on behalf of the Company, up to a yearly maximum of U.S. $U.S. $, respectively to Regaluxe Srl under this agreement. |
| (e) | Effective January 1, 2017, the Company agreed to total annual compensation of € |
| (f) | On March 28, 2018, the Company’s Board of Directors approved the Company’s entry into a consulting services agreement with Carlo Coda Nunziante effective April 1, 2018. Under the agreement, Carlo Coda-Nunziante, the Company’s former Vice President, Strategy, and brother-law to the Executive Chairman of the Board, is providing advice and assistance on the Company’s strategic planning and business strategies for a total annual fee, including reimbursement of out-of-pocket ( a was extended for an additional 6-month period ending on September 30th , 2024 upon the same terms and conditions. |
| (g) |
On April 16, 2021, the Company entered into a joint venture with FWI LLC (FWI) to form RMBG Retail Vancouver ULC (RMBG). The Company originally contributed nominal cash amounts as well as $ |
The Company provides RMBG with retail support and administrative services, and charges RMBG for these related services. During fiscal 2024, the Company charged $612,500 to RMBG (nil 0.2 million (nil
| (h) | In April 2011, the Company entered into a Wholesale and Distribution Agreement with Regaluxe Srl. Under the agreement, Regaluxe Srl is to provide services to the Company to support the distribution of the Company’s products in Italy through authorized dealers. The initial one-year term of the agreement began on April 1, 2011. Under this agreement, the Company pays Regaluxe Srl a net price for the Company’s products equivalent to the price, net of taxes, for the products paid by retailers to Regaluxe Srl less a discount factor of |
| (i) | On July 15 , 2024, the Company obtained a support letter from one if its shareholders, Mangrove Holding S.A., providing financial support in an amount of up to $million, of which $ assist the Company in satisfying its obligations and debt service requirements as they come due in the normal course of operations, or in meeting its financial covenant requirements of maintaining minimum excess availability levels of $at all times as required by its Amended Credit Facility and Amended Term Loan. Amounts drawn under this support letter will bear interest at an annual rate of |
F-36
17. |
Financial instruments: |
Fair value of financial instruments:
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP prescribes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 inputs are considered to carry the most weight within the fair value hierarchy due to the low levels of judgment required in determining fair values.
7
Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 – Unobservable inputs reflecting the reporting entity’s own assumptions. Level 3 inputs are considered to carry the least weight within the fair value hierarchy due to substantial levels of judgment required in determining fair values.
The Company has determined that the carrying value of its cash and cash equivalents, accounts receivable, long-term receivables, accounts payable and accrued liabilities approximates fair values as at the balance sheet date. As of March 30, 2024 and March 25, 2023, for the $63.4 million and $57.9 million, respectively, of bank indebtedness and the $12.3 million and $12.3 million, respectively of
long-term
debt bearing interest at variable rates, the fair value is considered to approximate the carrying value. As of March 30, 2024 and March 25, 2023, the fair value of the remaining $14.6 million and $12.1 million, respectively of fixed-rate long-term debt is estimated to be approximately $14.6 million and $12.0 million, respectively. The fair value was determined by discounting the future cash flows of each instrument at the current market interest rates for the same or similar debt instruments with the same remaining maturities adjusted for all necessary risks, including its own credit risk. In determining an appropriate spread to reflect its credit standing, the Company considered interest rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s lenders. As a result, the Company has determined that the inputs used to value these long-term debts fall within Level 3 of the fair value hierarchy.
1 8 . |
Government grants |
In response to the COVID-19 pandemic, various government programs were announced to provide financial relief for affected businesses such as the Canada Emergency Wage Subsidy (“CEWS”) program in April 2020 and the Canada Emergency Rent Subsidy (“CERS”) program in October 2020.
CEWS provideno
d
a wage subsidy on eligible paid compensation, subject to limits per employee, to eligible employers based on certain criteria, including demonstration of certain revenue declines as a result of COVID-19. During fiscal 2024 and 2023, the Company did funding. In fiscal 2022
$,
million
, was
recorded as a reduction to the eligible employee compensation expense incurred by the Company during such
period (within selling, general, and administrative expenses). As at March 30, 2024 and March 25, 2023 is included within Account Receivable
and other receivables
on the consolidated balance sheet. CERS provide
d
a rent subsidy for eligible property expenses, such as occupancy costs, based on certain criteria and is proportional to revenue declines as a result of COVID-19. For the fiscal year ended March 30, 2024, the Company didfunding. In
fiscal 2023 and fiscal 2022
$, nil and
,
respectively was
recorded as a reduction to the eligible occupancy expense incurred by the Company during s
period (within selling, general and administrative expenses). As at March 30, 2024 and March 25, 2023, uch
and other receivables
on the consolidated balance sheet.19. |
Subsequent events |
On June 2% depending on the Company’s excess availability levels for the interest rate of CORRA plus a CORRA adjustment ranging from 0.30 % to 0.32 % and a spread ranging from 1.5 % 2 % depending on the Company’s excess availability levels. The adjustment is effective on June
26
, 2024, the Company entered into an amendment to the Amended Credit Facility with Wells Fargo Capital Finance Corporation Canada. The amendment replaces the interest rate of CDOR plus a spread ranging from 1.5%-
-
26
, 2024. On June 0.32 % and 7.75 % (or CORRA plus a CORRA adjustment of 0.32 % plus 7.00 % or CORRA plus a CORRA adjustment of 0.32 % plus 6.75 % depending on the Company complying with certain financial covenants). The adjustment is effective on June
26
, 2024, the Company entered into an amendment to the Amended Term Loan with SLR.
The amendment replaces the interest rate of CDOR plus 7.75% (or CDOR plus 7.00% or CDOR plus 6.75% depending on the Company complying with certain financial covenants) for the interest rate of CORRA plus a CORRA adjustment of 26
, 2024. On June 3, 2024, the Company entered into a financing agreement 0.6 million 0.8 million
for a capital lease facility
with Varilease Finance. Incfinancing
.
relating to certain equipment consisting of leasehold improvements, furniture, security equipment and related equipment for
the partial
renovation of a store. The maximum borrowing amount under this facility is U.S
$.
(Cdn $
) and the balance as of March 30, 2024 is nil . The payments are interest bearing at approximately 10 %
annually
and commence upon project completion
.
On June 20, 2024, the Company entered into an early termination lease agreement for one of its retail stores, that modifies the lease term to
The lease termination results in a termination payment that is to be
On July
15
, 2024, the Company obtained a support letter from one if its shareholders, Mangrove Holding S.A., providing financial support in an amount of up to
$
million, of which $1.0 million would be available after January 1, 2025. These amounts can be borrowed, if needed, when deemed necessary by the Company, upon approval by the Company’s Board of Directors, until at least
assist the Company in satisfying its obligations and debt service requirements as they come due in the normal course of operations, or in meeting its financial covenant requirements of maintaining minimum excess availability levels of
$8.5
million at all times as required by its Amended Credit Facility and Amended Term Loan. Amounts drawn under this support letter will bear interest at an annual rate of 15 %. However, there will be
s
prior to July 31, 2025. F-3
8