F-1/A 1 d289883df1a.htm AMENDMENT NO. 2 TO FORM F-1 Amendment No. 2 to Form F-1
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As filed with the Securities and Exchange Commission on March 10, 2017

Registration No. 333-216078

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CANADA GOOSE HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

 

British Columbia   3152   N/A

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

250 Bowie Avenue

Toronto, Ontario, Canada, M6E 4Y2

(416) 780-9850

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

David M. Forrest

Vice President, Legal

250 Bowie Ave

Toronto, Ontario, Canada M6E 4Y2

(416) 780-9850

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Thomas Holden

Ropes & Gray LLP

3 Embarcadero Center

San Francisco, California

94111-4006

(415) 315-6300

 

Robert Carelli

Stikeman Elliott LLP

1155 Blvd René-Lévesque West

Montreal, Quebec, Canada

H3B 3V2

(514) 397-3000

 

Marc D. Jaffe

Ian D. Schuman

John Chory

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

(212) 906-1200

  

Desmond Lee

Osler, Hoskin & Harcourt LLP

1 First Canadian Place

Toronto, Ontario, Canada

M5X 1B8

(416) 362-2111

 

 

Approximate date of commencement of proposed sale to public:

As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated March 10, 2017

20,000,000 Shares

 

LOGO

Canada Goose Holdings Inc.

Subordinate Voting Shares

 

 

This is the initial public offering of our subordinate voting shares. We are offering 7,149,000 subordinate voting shares, and the selling shareholders named in this prospectus, including our principal shareholders, are offering, in the aggregate 12,851,000 subordinate voting shares. We will not receive any proceeds from the subordinate voting shares sold by the selling shareholders. We currently expect the initial public offering price to be between C$14.00 and C$16.00 per subordinate voting share.

No public market currently exists for our subordinate voting shares. Our subordinate voting shares have been approved for listing on the New York Stock Exchange in the United States and conditionally approved for listing on the Toronto Stock Exchange in Canada under the symbol “GOOS.”

Following this offering, we will have two classes of shares outstanding: multiple voting shares and subordinate voting shares. The rights of the holders of our multiple voting shares and subordinate voting shares are substantially identical, except with respect to voting and conversion. The subordinate voting shares will have one vote per share and the multiple voting shares will have 10 votes per share. The subordinate voting shares are not convertible into any other class of shares, while the multiple voting shares are convertible into subordinate voting shares on a one-for-one basis at the option of the holder and under certain other circumstances, including at the time our significant shareholders respectively cease to hold 15% of the total number of multiple voting shares and subordinate voting shares outstanding. See “Description of Share Capital.” After giving effect to the sale of the subordinate voting shares offered hereby, the subordinate voting shares will collectively represent approximately 19% of our total issued and outstanding shares and 2% of the voting power attached to all of our issued and outstanding shares (21% and 3%, respectively, if the underwriters’ over-allotment option is exercised in full) and the multiple voting shares will collectively represent approximately 81% of our total issued and outstanding shares and 98% of the voting power attached to all of our issued and outstanding shares (79% and 97%, respectively, if the underwriters’ over-allotment option is exercised in full). See “Description of Share Capital—Authorized Share Capital.”

We are eligible to be treated as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933 and, as a result, are subject to reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer.”

Following this offering, we will be a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange. See “Management—Director Independence.”

 

 

Investing in our subordinate voting shares involves risk. See “Risk Factors” beginning on page 17.

 

     Per
share
     Total  

Initial public offering price

   C$                   C$               

Underwriting commissions (1)

   C$      C$  

Proceeds to us, before expenses

   C$      C$  

Proceeds to the selling shareholders, before expenses

   C$      C$  

 

(1) We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See “Underwriting” for additional information regarding underwriting compensation.

To the extent that the underwriters sell more than 20,000,000 subordinate voting shares, the underwriters have the option to purchase up to an aggregate of 3,000,000 additional subordinate voting shares from the selling shareholders at the initial public offering price, less the underwriting commissions, for 30 days after the date of this prospectus solely to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the subordinate voting shares to investors on or about                     , 2017.

 

 

 

CIBC Capital Markets    Credit Suisse    Goldman, Sachs & Co.    RBC Capital Markets

 

BofA Merrill Lynch   Morgan Stanley   Barclays   BMO Capital Markets    TD   Wells Fargo Securities

Baird

 

Canaccord Genuity

  Nomura

Prospectus dated                     , 2017


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     Page  

Prospectus Summary

     1  

The Offering

     8  

Summary Historical Consolidated Financial and Other Data

     11  

Risk Factors

     17  

Exchange Rate Information

     40  

Use of Proceeds

     41  

Dividend Policy

     42  

Recapitalization

     43  

Capitalization

     44  

Dilution

     45  

Selected Historical Consolidated Financial Data

     47  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     50  

Letter from Dani Reiss

     76  

Business

     77  

Management

     92  

Executive Compensation

     103  

Certain Relationships and Related Party Transactions

     114  

Principal and Selling Shareholders

     117  

Description of Indebtedness

     119  

Description of Share Capital

     126  

Comparison of Shareholder Rights

     137  

Shares Eligible for Future Sale

     151  

Material United States Federal Income Tax Considerations for U.S. Holders

     153  

Canadian Tax Implications For Non-Canadian Holders

     159  

Underwriting

     161  

Legal Matters

     168  

Experts

     168  

Enforcement of Civil Liabilities

     168  

Other Expenses of Issuance and Distribution

     169  

Where You Can Find More Information

     169  

Index to Consolidated Financial Statements and Financial Statement Schedules

     F-1  

We are responsible for the information contained in this prospectus and in any free writing prospectus we prepare or authorize. Neither we, the selling shareholders nor the underwriters have authorized anyone to provide you with different information, and neither we, the selling shareholders nor the underwriters take responsibility for any other information others may give you. We are not, and the selling shareholders and underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is only accurate as of the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Industry and Market Data

This prospectus includes market data and forecasts with respect to the apparel industry including outerwear and luxury segments of the industry. Although we are responsible for all of the disclosure contained in this prospectus, in some cases we rely on and refer to market data and certain industry forecasts that were obtained from third party surveys, market research, consultant surveys, publicly available information and industry publications and surveys that we believe to be reliable. Unless otherwise indicated, all market and industry data and other statistical information and forecasts contained in this prospectus are based on independent industry publications, reports by market research firms or other published independent sources and other externally

 

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obtained data that we believe to be reliable. Information in this prospectus on the outerwear and luxury apparel markets is from Euromonitor Apparel and Footwear 2017 edition and Euromonitor Luxury Goods 2017 edition, which is independent market research carried out by Euromonitor International Limited. Research by Euromonitor International should not be considered as the opinion of Euromonitor International, as to the value of any security or the advisability of investing in the company. The Euromonitor data is reported in U.S. Dollars and includes sales taxes at current prices. Outerwear includes men’s and women’s clothing for outdoor/out-of-the-house wear including shorts and trousers, jeans, jackets and coats, suits, shirts and blouses, jumpers, tops, dresses, skirts and leggings. Luxury Apparel is equivalent to Designer Apparel (Ready-to-Wear) which is the aggregation of Men’s Designer Apparel, Women’s Designer Apparel, Designer Childrenswear, Designer Apparel Accessories and Designer Hosiery. However, designer haute couture is excluded from Euromonitor International’s coverage. Some market and industry data, and statistical information and forecasts, are also based on management’s estimates, which are derived from our review of customer surveys commissioned by us and conducted on our behalf as well as the independent sources referred to above. Any such market data, information or forecast may prove to be inaccurate because of the method by which we obtain it or because it cannot always be verified with complete certainty given the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties, including those discussed under the captions “Risk Factors.” As a result, although we believe that these sources are reliable, we have not independently verified the information.

Trademarks and Service Marks

This prospectus contains references to a number of trademarks which are our registered trademarks or trademarks for which we have pending applications or common law rights. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean). In addition to the registrations in Canada and the United States, our word mark and design are registered in other jurisdictions which cover approximately 37 jurisdictions. Furthermore, in certain jurisdictions we register as trademarks certain elements of our products, such as fabric, warmth categorization and style names such as our Snow Mantra parka.

Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ®, (sm) and (TM) symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

Basis of Presentation

Unless otherwise indicated, all references in this prospectus to “Canada Goose,” “we,” “our,” “us,” “the company” or similar terms refer to Canada Goose Holdings Inc. and its consolidated subsidiaries.

We publish our consolidated financial statements in Canadian dollars. In this prospectus, unless otherwise specified, all monetary amounts are in Canadian dollars, all references to “$,” “C$,” “CDN$,” “CAD$,” and “dollars” mean Canadian dollars and all references to “US$” and “USD” mean U.S. dollars.

On December 9, 2013, investment funds advised by Bain Capital L.P. and its affiliates, which we refer to as Bain Capital, acquired a majority equity interest in our business. We refer to this as the Acquisition. Accordingly, the financial statements presented elsewhere in this prospectus as of and for fiscal 2014 reflect the periods both prior and subsequent to the Acquisition. The consolidated financial statements as at and for fiscal 2014 are presented separately for (i) the predecessor period from April 1, 2013 through December 8, 2013, which we refer to as the Predecessor 2014 Period, and (ii) the successor period from December 9, 2013 through March 31, 2014, which we refer to as the Successor 2014 Period, with the periods prior to the Acquisition being labeled as predecessor and the periods subsequent to the Acquisition labeled as successor. For the purpose of performing a comparison to fiscal 2015, we have prepared Unaudited Pro Forma Combined Supplemental Financial

 

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Information for fiscal 2014, which gives effect to the Acquisition as if it had occurred on April 1, 2013, and which we refer to as the Unaudited Pro Forma Combined 2014 Period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation.”

In connection with this offering, we expect to redesignate our Class A common shares into multiple voting shares. In addition, we expect to eliminate all of our previously outstanding series of common and preferred shares and create our subordinate voting shares which will be issued in this offering. See “Description of Share Capital.” The subordinate voting shares to be sold by the selling shareholders as part of the offering will result from the conversion of multiple voting shares into subordinate voting shares prior to the closing of the offering.

We report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States. Our fiscal year ends on March 31 of each calendar year. Our most recent fiscal year, which we refer to as fiscal 2016, ended on March 31, 2016. We refer to the year ended March 31, 2015 and the Unaudited Pro Forma Combined 2014 Period as fiscal 2015 and fiscal 2014, respectively.

 

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Prospectus Summary

This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our subordinate voting shares. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision.

Canada Goose

Founded 60 years ago in a small Toronto warehouse, Canada Goose has grown into a highly coveted global outerwear brand. We are recognized for authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality. This reputation is decades in the making and is rooted in our commitment to creating premium products that deliver unrivaled functionality where and when it is needed most. Be it Canadian Arctic Rangers serving their country or an explorer trekking to the South Pole, people who live, work and play in the harshest environments on Earth have turned to Canada Goose. Throughout our history, we have found inspiration in these technical challenges and parlayed that expertise into creating exceptional products for any occasion. From research facilities in Antarctica and the Canadian High Arctic to the streets of Toronto, New York City, London, Paris, Tokyo and beyond, people have fallen in love with our brand and made it a part of their everyday lives.

We are deeply involved in every stage of our business as a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. This vertically integrated business model allows us to directly control the design and development of our products while capturing higher margins. As of December 31, 2016, our products are sold through select outdoor, luxury and online retailers and distributors in 36 countries, our e-commerce sites in Canada, the United States, the United Kingdom and France and two recently opened retail stores in Toronto and New York City.

The power of our business model and our ability to profitably scale our operations are reflected in our financial performance. In fiscal 2016, we had revenue of $290.8 million, gross profit of $145.6 million, which represented gross margin of 50.1%, net income of $26.5 million, Adjusted EBITDA of $54.3 million, Adjusted EBITDA Margin of 18.7% and Adjusted Net Income of $30.1 million. We grew our revenue at a 38.3% compound annual growth rate (“CAGR”), net income at a 196.0% CAGR and Adjusted EBITDA at an 85.0% CAGR from fiscal 2014 to fiscal 2016, while expanding our gross margin from 38.6% to 50.1% and our Adjusted EBITDA Margin from 10.4% to 18.7% over the same period. For additional information regarding Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, which are non-IFRS measures, including a reconciliation of these non-IFRS measures to net income, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures.”

Our Competitive Strengths

We believe that the following strengths are central to the power of our brand and business model:

Authentic brand. For decades, we have helped explorers, scientists, athletes and film crews embrace the elements in some of the harshest environments in the world. Our stories are real and are best told through the unfiltered lens of Goose People, our brand ambassadors. The journeys, achievements and attitudes of these incredible adventurers embody our core belief that greatness is out there and inspire our customers to chart their own course.

Uncompromised craftsmanship. Leveraging decades of experience, field testing and obsessive attention to detail, we develop superior functional products. Our expertise in matching our technical fabrics with optimal blends of down enables us to create warmer, lighter and more durable products across seasons and applications. The commitment to superior quality and lasting performance that initially made us renowned for warmth now extends into breathability and protection from wind and rain.

 



 

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Beloved and coveted globally. We offer outerwear with timeless style for anyone who wants to embrace the elements. From the most remote regions of the world to major metropolitan centres, we have successfully broadened our reach beyond our arctic heritage to outdoor enthusiasts, urban explorers and discerning consumers globally. Our deep connection with our customers is evidenced by their brand loyalty. Consumer surveys conducted on our behalf in 2016 show that 82% of customers say they love their Canada Goose jackets and 84% of customers indicate that, when making their next premium outerwear purchase, they would likely repurchase Canada Goose. These results are among the highest in our industry based on this survey.

Proudly made in Canada. Our Canadian heritage and commitment to local manufacturing are at the heart of our business and brand. While many companies in our industry outsource to offshore manufacturers, we are committed to aggressively investing in producing premium, high quality products in Canada, the country from which we draw our inspiration. We believe our Canadian production facilities and craftspeople have set us apart on the international stage and in the minds of our customers.

Flexible supply chain. We directly control the design, innovation, development, engineering and testing of our products, which we believe allows us to achieve greater operating efficiencies and deliver superior quality products. We manage our production through a combination of in-house manufacturing facilities and long-standing relationships with Canadian third party sub-contractors. Our flexible supply chain gives us distinct advantages including the ability to scale our operations, adapt to customer demand, shorten product development cycles and achieve higher margins.

Multi-channel distribution. Our global distribution strategy allows us to reach customers through two distinct, brand-enhancing channels. In our wholesale channel, which as of December 31, 2016 extends into 36 countries, we carefully select the best retail partners and distributors to represent our brand in a manner consistent with our heritage and growth strategy. As a result, our retail partnerships include best-in-class outdoor, luxury and online retailers. Through our fast growing direct to consumer (“DTC”) channel, which includes our e-commerce sites in four countries and two recently opened retail stores, we are able to more directly control the customer experience, driving deeper brand engagement and loyalty, while also realizing more favorable margins. We employ product supply discipline across both of our channels to manage scarcity, preserve brand strength and optimize profitable growth for us and our retail partners.

Passionate and committed management team. Through steady brand discipline and a focus on sustainable growth, our management team has transformed a small family business into a global brand. Dani Reiss, our CEO, has worked in almost every area of our company and successfully developed our international sales channels prior to assuming the role of CEO in 2001. Dani has assembled a team of seasoned executives from diverse and relevant backgrounds, who draw on an average of over 15 years’ experience working with a wide range of leading global companies including Marc Jacobs, New Balance, Nike, Patagonia, Ralph Lauren, McKinsey, UFC and Red Bull. Their leadership and passion have accelerated our evolution into a three season lifestyle brand and the rollout of our DTC channel.

Our Growth Strategies

We have built a strong foundation as Canada Goose has evolved into a highly coveted global outerwear brand. Over the past three fiscal years, we have grown our revenue at a 38.3% CAGR, net income at a 196.0% CAGR and Adjusted EBITDA at an 85.0% CAGR. We have also expanded our gross margin from 38.6% to 50.1% and our Adjusted EBITDA Margin from 10.4% to 18.7%, over the same period while concurrently making significant long-term investments in our human capital, production capacity, brand building and distribution channels. Leveraging these investments and our proven growth strategies, we will continue to aggressively pursue our substantial global market opportunity.

 



 

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Execute our proven market development strategy. As we have grown our business, we have developed a successful framework for entering and developing our markets by increasing awareness and broadening customer access. We intend to continue executing on the following tactics as we further penetrate our markets globally:

Introduce and strengthen our brand. Building brand awareness among potential new customers and strengthening our connections with those who already know us will be a key driver of our growth. While our brand has achieved substantial traction globally and those who have experienced our products demonstrate strong loyalty, our presence is relatively nascent in many of our markets. According to an August 2016 consumer survey conducted on our behalf, the vast majority of consumers outside of Canada are not aware of Canada Goose. Through a combination of the organic word-of-mouth brand building that has driven much of our success to date and a more proactive approach to reaching new audiences through traditional channels, we will continue to introduce the Canada Goose brand to the world.

Enhance our wholesale network. We intend to continue broadening customer access and strengthening our global foothold in new and existing markets by strategically expanding our wholesale network and deepening current relationships. In all of our markets, we have an opportunity to increase sales by adding new wholesale doors and increasing volume with existing retail partners. Additionally, we are focused on strengthening relationships with our retail partners through broader offerings, exclusive products and shop-in-shop formats. We believe our retail partners have a strong incentive to showcase our brand as our products drive customer traffic and consistent full-price sell-through in their stores.

Accelerate our e-commerce-led Direct to Consumer rollout. Our DTC channel serves as an unfiltered window into our brand, which creates meaningful relationships and direct engagement with our customers. This drives opportunities to generate incremental revenue growth and capture full retail margin. We have rapidly grown our online sales to $33.0 million in fiscal 2016, which represented 11.4% of our consolidated revenue. We have subsequently launched new online storefronts in the United Kingdom and France and plan to continue introducing online stores in new markets. Our e-commerce platform is complemented by our two recently opened retail stores in Toronto and New York City. We intend to open a select number of additional retail locations in major metropolitan centres and premium outdoor destinations where we believe they can operate profitably.

Strengthen and expand our geographic footprint. We believe there is an opportunity to grow penetration across our existing markets and selectively enter new regions. Although the Canada Goose brand is recognized globally, our recent investments have been focused on North America and have driven exceptional growth in Canada and the United States. Outside of Canada and the United States (“Rest of World”), we have identified an opportunity to accelerate our momentum utilizing our proven growth framework. The following table presents our revenue in each of our geographic segments over the past three fiscal years:

 

(in millions)    fiscal year ended March 31,      ‘14 – ‘16  
       2014          2015          2016          CAGR  

Canada

   $ 72.5      $ 75.7      $ 95.2        14.6

United States

   $ 33.6      $ 57.0      $ 103.4        75.5

Rest of World

   $ 46.0      $ 85.7      $ 92.2        41.6
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 152.1      $ 218.4      $ 290.8        38.3
  

 

 

    

 

 

    

 

 

    

 

 

 

Canada. While we have achieved high brand awareness in Canada, we continue to experience strong penetration and revenue growth driven primarily by expanding access and product offerings. After

developing a strong wholesale footprint, we successfully launched our Canadian e-commerce platform in August 2014 and opened our first retail store in Toronto in October 2016. We expect to further develop our presence through increased strategic marketing activities, deeper relationships with our retail partners and continued focus on our DTC channel. Additionally, we intend to continue broadening our product offering to make Canada Goose a bigger part of our customers’ lives.

 



 

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United States. As we continue to capture the significant market opportunity in the United States, our focus is on increasing brand awareness to a level that approaches what we have achieved in Canada. According to an August 2016 consumer survey conducted on our behalf, aided brand awareness in the United States is 16% as compared to 76% in Canada. Our market entry has been staged on a regional basis, with the bulk of our investments and wholesale penetration concentrated in the Northeast. This has been the primary driver of our historical growth and momentum in the U.S. and we continue to generate strong growth in the region. Building on this success, we launched our national e-commerce platform in September 2015 and opened our first retail store in New York City in November 2016. We believe there is a large white space opportunity in other regions such as the Mid-Atlantic, Midwest and West. As we sequentially introduce our brand to the rest of the country, we are focused on expanding our wholesale footprint, including executing our shop-in-shop strategy and continuing to deliver a broader three season product assortment to our partners.

Rest of World. We currently generate sales in every major Western European market and, while this is where the brand first achieved commercial success, we believe there are significant opportunities to accelerate these markets to their full potential. In the United Kingdom and France in particular, we have achieved strong traction through our retail partnerships, but have yet to fully extend our wholesale network and are only in the initial phase of executing on our shop-in-shop strategy. In both markets, we launched our e-commerce platforms in September 2016 and intend to establish our owned retail presence in the near future. While the United Kingdom and France are our most developed European markets, we have identified a number of markets with significant near-term development potential, such as Germany, Italy and Scandinavia.

Outside of Europe, our most established markets are Japan and Korea. Over the past decade, we have grown successfully in Japan, and in both Japan and Korea, we recently partnered with world-class distributors. These partners will help us continue to build awareness and access to the brand while ensuring its long term sustainability. Additionally, we currently have a minimal presence in China and other large markets which represent significant future opportunities.

Enhance and expand our product offering. Continuing to enhance and expand our product offering represents a meaningful growth driver for Canada Goose. Broadening our product line will allow us to strengthen brand loyalty with those customers who already love Canada Goose, drive higher penetration in our existing markets and expand our appeal across new geographies and climates. Drawing on our decades of experience and customer demand for inspiring new functional products, we intend to continue developing our offering through the following:

Elevate Winter. Recognizing that people want to bring the functionality of our jackets into their everyday lives, we have developed a wide range of exceptional winter products for any occasion. While staying true to our arctic heritage, we intend to continue refreshing and broadening our offering with new stylistic variations, refined fits and exclusive limited edition collaborations.

Expand Spring and Fall. We intend to continue building out our successful Spring and Fall collections in categories such as lightweight and ultra-lightweight down, rainwear, windwear and softshell jackets. While keeping our customers warm, comfortable and protected across three seasons, these extensions also increase our appeal in markets with more temperate climates.

Extend beyond outerwear. Our strategy is to selectively respond to customer demand for functional products in adjacent categories. Consumer surveys conducted on our behalf indicate that our customers are looking for additional Canada Goose products, particularly in key categories such as knitwear, fleece, footwear, travel gear and bedding. We believe offering inspiring new products that are consistent with our heritage, functionality and quality represents an opportunity to develop a closer relationship with our customers and expand our addressable market.

 



 

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Continue to drive operational excellence. As we scale our business, we plan to continue leveraging our brand and powerful business model to drive operational efficiencies and higher margins in the following ways:

Channel mix. We intend to expand our DTC channel in markets that can support the profitable rollout of e-commerce and select retail stores. As our distribution channel mix shifts toward our e-commerce-led DTC channel, we expect to capture incremental gross profit. A jacket sale in our DTC channel provides two-to-four times greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel.

Price optimization. We intend to continue optimizing our pricing to capture the full value of our products and the superior functionality they provide to our customers. Additionally, we actively balance customer demand with scarcity of supply to avoid the promotional activity that is common in the apparel industry. This allows us and our retail partners to sell our products at full price, avoid markdowns and realize full margin potential.

Manufacturing capabilities. Approximately one-third of Canada Goose products are currently manufactured in our own Canadian facilities. We intend to optimize our domestic manufacturing mix by opportunistically bringing additional manufacturing capacity in-house to capture incremental gross profit.

Operating leverage. We have invested ahead of our growth in all areas of the business including design and manufacturing, multi-channel distribution and corporate infrastructure. As we continue our growth trajectory, we have the opportunity to leverage these investments and realize economies of scale.

Corporate Information

Our company was founded in Toronto, Canada in 1957. In December 2013, we partnered with Bain Capital through a sale of a 70% equity interest in our business to accelerate our growth. In connection with such sale, Canada Goose Holdings Inc. was incorporated under the Business Corporations Act (British Columbia) on November 21, 2013.

Our principal office is located at 250 Bowie Avenue, Toronto, Ontario, Canada M6E 4Y2 and our telephone number is (416) 780-9850. Our registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. Our website address is www.canadagoose.com. Information contained on, or accessible through, our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference.

Sponsor Overview

Bain Capital L.P. is one of the world’s leading private, multi-asset alternative investment firms with over US$75 billion of assets under management. Bain Capital invests across asset classes including private equity, credit, public equity and venture capital, and leverages its shared platform to capture opportunities in its strategic areas of focus. Currently, Bain Capital has a team of nearly 400 investment professionals supporting its various asset classes. Headquartered in Boston, Bain Capital has offices in New York, Chicago, Palo Alto, San Francisco, London, Dublin, Munich, Hong Kong, Tokyo, Shanghai, Mumbai, Sydney and Melbourne.

Since 1984, Bain Capital Private Equity has made nearly 300 investments in a variety of industries around the world. The firm has a long and successful history of investing in consumer products and retail businesses and has a dedicated group of investment professionals focused on the sector. Bain Capital Private Equity has helped to build and scale many leading brands, including Burlington Stores, Samsonite, Staples, Sundial Brands and TOMS in the U.S. and Europe as well as Dollarama, BRP and Shoppers Drug Mart in Canada.

After giving effect to the sale of subordinate voting shares offered hereby, Bain Capital will control approximately 70% of our multiple voting shares, or approximately 68% of the combined voting power of our

 



 

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multiple voting shares and subordinate voting shares outstanding after this offering (68% if the underwriters’ over-allotment option is exercised in full). As a result, we expect to be a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange (the “NYSE ”) on which we have applied to list our subordinate voting shares. See “Risk Factors—Risks Related to This Offering and Our Subordinate Voting Shares.”

Risk Factors

Investing in our subordinate voting shares involves a high degree of risk. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our subordinate voting shares. If any of these risks actually occur, our business, financial condition and results of operations would likely be materially adversely affected. In such case, the trading price of our subordinate voting shares would likely decline and you may lose part or all of your investment. Below is a summary of some of the principal risks we face:

 

    we may be unable to maintain the strength of our brand;

 

    we may not be able to manage our growth effectively;

 

    our brand expansion plans may be unsuccessful;

 

    fluctuations in raw materials costs or currency exchange rates may impact our operating results; and

 

    our dual-class share structure concentrates voting control with our principal shareholders and as a result our principal shareholders will have the ability to control the outcome of matters submitted for shareholder approval and may have interests that differ from those of our other shareholders.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

We qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, as amended. An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:

 

    an exemption to include in an initial public offering registration statement less than five years of selected financial data;

 

    reduced executive compensation disclosure; and

 

    an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting.

The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We will not take advantage of this provision because IFRS standards make no distinction between public and private companies for purposes of compliance with new or revised accounting standards.

We will remain an emerging growth company until the earliest of:

 

    the last day of our fiscal year during which we have total annual gross revenue of at least US$1.0 billion;

 

    the last day of our fiscal year following the fifth anniversary of the completion of this offering;

 

    the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt securities; or

 



 

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    the date on which we are deemed to be a “large accelerated filer” under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter.

In addition, upon consummation of this offering, we will report under the Exchange Act, as a non-U.S. company with foreign private issuer status. As a foreign private issuer, we may take advantage of certain provisions in the NYSE Listing Rules that allow us to follow Canadian law for certain corporate governance matters. See “Management—Foreign Private Issuer Status.” Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

 

    the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

 

    Regulation Fair Disclosure, or Regulation FD, which regulates selective disclosures of material information by issuers.

 



 

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The Offering

 

Subordinate Voting Shares Offered by us

7,149,000 subordinate voting shares.

 

Subordinate Voting Shares Offered by the Selling Shareholders

12,851,000 subordinate voting shares (or 15,851,000 subordinate voting shares if the underwriters exercise their over-allotment option in full).

 

Subordinate Voting Shares to be Outstanding After This Offering

20,000,000 subordinate voting shares (or 23,000,000 subordinate voting shares if the underwriters exercise their over-allotment option in full).

 

Multiple Voting Shares to be Outstanding After This Offering

87,149,000 multiple voting shares (or 84,149,000 multiple voting shares if the underwriters exercise their over-allotment option in full).

 

Offering Price

$         per subordinate voting share.

 

Option to Purchase Additional Subordinate Voting Shares

The underwriters have an option for a period of 30 days from the date of this prospectus to purchase up to 3,000,000 additional subordinate voting shares from the selling shareholders identified in this prospectus to cover over-allotments.

 

Voting Rights

 Following the sale of subordinate voting shares offered hereby, we will have two classes of shares outstanding: multiple voting shares and subordinate voting shares. The rights of the holders of our multiple voting shares and subordinate voting shares are substantially identical, except with respect to voting and conversion.

 

 The subordinate voting shares will have one vote per share and the multiple voting shares will have 10 votes per share. See “Description of Share Capital—Authorized Share Capital.”

 

 After giving effect to this offering, the subordinate voting shares will collectively represent approximately 19% of our total issued and outstanding shares and approximately 2% of the voting power attached to all of our issued and outstanding shares (21% and 3%, respectively, if the underwriters’ over-allotment option is exercised in full) and the multiple voting shares will collectively represent approximately 81% of our total issued and outstanding shares and approximately 98% of the voting power attached to all of our issued and outstanding shares (79% and 97%, respectively, if the underwriters’ over-allotment option is exercised in full).

 

Conversion Rights

The subordinate voting shares are not convertible into any other class of shares. The multiple voting shares are convertible into subordinate voting shares on a one-for-one basis at the option of the holder or upon the sale of multiple voting shares to an unaffiliated third party.

 



 

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In addition, our articles will provide that multiple voting shares will automatically convert into subordinate voting shares in certain other circumstances. See “Description of Share Capital—Authorized Share Capital—Conversion.”

 

Take-Over Bid Protection

In accordance with applicable regulatory requirements designed to ensure that, in the event of a take-over bid, the holders of subordinate voting shares will be entitled to participate on an equal footing with holders of multiple voting shares, we will enter into a coattail agreement with holders of multiple voting shares. The coattail agreement will contain provisions customary for dual-class corporations listed on the Toronto Stock Exchange, or the TSX, designed to prevent transactions that otherwise would deprive the holders of subordinate voting shares of rights under applicable take-over bid legislation in Canada to which they would have been entitled if the multiple voting shares had been subordinate voting shares. See “Description of Share Capital—Certain Important Provisions of our Articles and the BCBCA—Take-Over Bid Protection.”

 

Use of Proceeds

We expect to receive net proceeds from this offering of approximately $100.0 million, after deducting underwriting commissions, based upon an assumed initial public offering price of $15.00 per subordinate voting share, which is the midpoint of the price range set forth on the cover page of this prospectus. We will not receive any proceeds from the sale of subordinate voting shares in this offering by the selling shareholders, including upon the sale of subordinate voting shares if the underwriters exercise their option to purchase additional subordinate voting shares from certain of the selling shareholders in this offering, to cover over-allotments.

 

  We intend to use the proceeds from this offering to repay a portion of our outstanding indebtedness, including $35.0 million under our Revolving Facility and $65.0 million under our Term Loan Facility incurred in connection with the Recapitalization. See “Use of Proceeds” and “Recapitalization.”

 

Directed Share Program

At our request, the underwriters have reserved for sale up to five percent of the subordinate voting shares to be sold by us and the selling shareholders, at the public offering price to certain individuals through a directed share program, including employees, directors and other persons associated with us who have expressed interest in purchasing shares in this offering. The number of subordinate voting shares available for sale to the general public will be reduced by the number of reserved shares sold to these individuals. Any reserved shares not purchased by these individuals will be offered by the underwriters to the general public on the same basis as the other subordinate voting shares offered under this prospectus. See “Underwriting.”

 

Dividend Policy

We do not expect to pay any dividends on our subordinate voting shares in the foreseeable future. See “Dividend Policy.”

 



 

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Principal Shareholder

Upon completion of this offering, Bain Capital will continue to own a controlling interest in us. Accordingly, we currently intend to avail ourselves of the “controlled company” exemption under the NYSE Listing Rules. See “Management—Director Independence” and “Principal and Selling Shareholders.”

 

Risk Factors

You should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding to invest in our subordinate voting shares.

 

Proposed NYSE and TSX Trading Symbol

“GOOS.”

The total number of subordinate voting shares and multiple voting shares to be outstanding after this offering is based on no subordinate voting shares and 100,000,000 multiple voting shares outstanding as of December 31, 2016 on a pro forma basis after giving effect to the transactions described below, and excludes:

 

    5,899,660 subordinate voting shares issuable upon exercise of options outstanding under our equity incentive plans as of March 1, 2017 at a weighted average exercise price of $1.63 per subordinate voting share; and

 

    5,100,340 additional subordinate voting shares reserved for future issuance under our equity incentive plans.

Except as otherwise indicated, the information in this prospectus reflects or assumes:

 

    the filing of amended articles, which will occur immediately prior to the consummation of this offering, to, among other things, amend and redesignate our Class A Common Shares as multiple voting shares, eliminate our remaining series of common and preferred shares and create our subordinate voting shares;

 

    no exercise by the underwriters of their option to purchase additional subordinate voting shares from the selling shareholders identified in this prospectus to cover over-allotments; and

 

    no exercise of stock options outstanding.

 



 

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Summary Historical Consolidated Financial and Other Data

The following tables set forth our summary historical consolidated financial data. You should read the following summary historical consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

We have derived the summary historical consolidated information for the years ended March 31, 2016 and March 31, 2015 and the periods from December 9, 2013 to March 31, 2014 and April 1, 2013 to December 8, 2013 and the summary consolidated financial position information as of March 31, 2015 and 2016 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations information for the nine months ended December 31, 2015 and 2016 and the summary consolidated financial position information as of December 31, 2016 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS and are presented in thousands of Canadian dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.

On December 9, 2013, Bain Capital acquired a majority equity interest in our business as part of the Acquisition. Accordingly, the financial statements presented elsewhere in this prospectus as of and for fiscal 2014 reflect the periods both prior and subsequent to the Acquisition. The consolidated financial statements for March 31, 2014 are presented separately for the predecessor period from April 1, 2013 through December 8, 2013, which we refer to as the Predecessor 2014 Period, and the successor period from December 9, 2013 through March 31, 2014, which we refer to as the Successor 2014 Period, with the periods prior to the Acquisition being labeled as predecessor and the periods subsequent to the Acquisition labeled as successor. For the purpose of performing a comparison to fiscal 2015, we have prepared Unaudited Pro Forma Combined Supplemental Financial Information for fiscal 2014, which gives effect to the Acquisition as if it had occurred on April 1, 2013, and which we refer to as the Unaudited Pro Forma Combined 2014 Period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation.”

 

     Successor           Predecessor  

CAD$000s

(except per share data)

   Nine months
ended
December 31,
2016
     Nine months
ended
December 31,

2015
    Fiscal Year
ended March
31, 2016
    Fiscal Year
ended March
31, 2015
    Period from
December 9,
2013 to
March 31,
2014
          Period from
April 1, 2013
to December 8,
2013
 

Statement of Operations Data:

                 

Revenue

   $ 352,681      $ 248,909     $  290,830     $  218,414     $  17,263         $  134,822  

Cost of sales

     168,403        122,107       145,206       129,805       14,708           81,613  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Gross profit

     184,278        126,802       145,624       88,609       2,555           53,209  

Selling, general and administrative expenses

     110,270        72,851       100,103       59,317       20,494           30,119  

Depreciation and amortization

     4,901        3,585       4,567       2,623       804           447  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Operating income (loss)

     69,107        50,366       40,954       26,669       (18,743         22,643  

Net interest and other finance costs (1)

     8,620        6,017       7,996       7,537       1,788           1,815  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Income (loss) before income tax expense

     60,487        44,349       32,958       19,132       (20,531         20,828  

Income tax expense (recovery)

     15,416        8,662       6,473       4,707       (5,054         5,550  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Net income (loss)

     45,071        35,687       26,485       14,425       (15,477         15,278  

 



 

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    Successor           Predecessor  

CAD$000s

(except per share data)

  Nine months
ended
December 31,
2016
    Nine months
ended
December 31,

2015
    Fiscal Year
ended
March 31,
2016
    Fiscal Year
ended
March 31,
2015
    Period from
December 9,
2013 to
March 31,
2014
          Period from
April 1, 2013
to December 8,
2013
 

Earnings (loss) per share

               

basic

    0.45       0.36       0.26       0.14       (0.15         157,505.15  

diluted

    0.44       0.35       0.26       0.14       (0.15         157,505.15  

Weighted average number of shares outstanding

               

basic

    100,000,000       100,000,000       100,000,000       100,000,000       100,000,000           97  

diluted

    101,751,470       101,622,219       101,680,207       101,211,134       100,000,000           97  
 

Pro forma statement of operations data (2):

               

Pro forma net income

    46,334         25,775            

Pro forma earnings per share—

               

Basic

    0.43         0.24            

Diluted

    0.43         0.24            

Pro forma weighted average number of shares outstanding—

               

Basic

    107,149,000         107,149,000            

Diluted

    108,900,470         108,829,207            
 

Other Data:

               

EBITDA (3)

  $ 75,578     $ 55,009     $ 46,870   $ 30,063   $ (17,714       $ 23,609

Adjusted EBITDA (3)

    92,443       61,913       54,307     37,191       (8,113         23,984  

Adjusted EBITDA Margin (4)

    26.2     24.9     18.7     17.0     (47.0 )%          17.8

Adjusted Net Income (loss) (3)

    58,851       38,520       30,122       21,374       (7,691         15,554  

Gross Margin

    52.3     50.9     50.1     40.6     14.8         39.5

 

     As of
December 31,
2016
     As of
March 31,
2016
     As of
March 31,
2015
           

Financial Position Information:

              

Cash

   $ 30,180      $ 7,226      $ 5,918        

Total assets

     442,062        353,018        274,825        

Total liabilities

     373,963        210,316        160,392        

Shareholders’ equity

     68,099        142,702        114,433        

 

(1) Net interest and other finance costs consist of interest expense relating to our subordinated debt, which was refinanced in connection with the Recapitalization, as well as our Revolving Facility and prior credit facility. Interest expense associated with the subordinated debt represented $3,822 in the nine months ended December 31, 2016, $5,598 in fiscal 2016, $5,398 in fiscal 2015 and $4,809 in the Unaudited Pro Forma Period ended March 31, 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a presentation of the Unaudited Pro Forma Combined 2014 Period.
(2)

The pro forma statement of comprehensive income data for the fiscal year ended March 31, 2016 and the nine months ended December 31, 2016 give effect to (a) the Recapitalization, including the incurrence of indebtedness under the Term Loan Facility and the repayment of the Bain Capital subordinated debt, (b) the issuance of 7,149,000 subordinate voting shares in the offering at an initial public offering price of $15.00 per

 



 

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  subordinate voting share, the midpoint of the range set forth on the cover of this prospectus and the application of the net proceeds therefrom as described in “Use of Proceeds,” and (c) the termination of our management agreement with Bain Capital in connection with the completion of this offering, as if each had occurred on the first day of the respective period presented. See “Related Party Transactions—Management Agreement” and “Recapitalization.”

 

     The following is a reconciliation of historical net income to pro forma net income for the fiscal year ended March 31, 2016 and the nine months ended December 31, 2016:
     Nine months ended
December 31, 2016
     Fiscal year ended
March 31, 2016
 

Net income as reported

   $ 45,071      $ 26,485  

Decrease in management fees (a)

     1,560        1,092  

Net (increase) decrease in interest expense (b)

     135        (2,042

(Increase) in income tax expense (c)

     (432      240  
  

 

 

    

 

 

 

Pro forma net income

   $ 46,334      $ 25,775  
  

 

 

    

 

 

 

Pro forma weighted average shares outstanding (d)

     

Basic

     107,149,000        107,149,000  

Diluted

     108,900,470        108,829,207  

Pro forma basic net income per share

   $ 0.43      $ 0.24  

Pro forma diluted net income per share

   $ 0.43      $ 0.24  

 

  (a) Reflects the termination, in connection with the offering, of the management fees paid to Bain Capital pursuant to the management agreement for the periods presented. See “Related Party Transactions—Management Agreement.”

 

  (b) Reflects the net adjustment to interest expense resulting from the incurrence of indebtedness under the new Term Loan Facility, the repayment of the subordinated debt and the repayment, with the net proceeds of this offering, of $65 million aggregate principal amount of outstanding loans under our Term Loan Facility and the repayment of $35 million under our Revolving Facility. See “Description of Indebtedness,” and “Use of Proceeds.” Pro forma presentation does not give effect to the refinancing of our prior credit facility completed on June 3, 2016. See Notes 16 and 22 to the audited consolidated financial statements included in this prospectus.

 

  (c) Reflects adjustments to historical income tax expense to reflect the net increases in income tax expense due to higher income before income taxes resulting from the decrease in management fees as a result of the termination of the management agreement with Bain Capital described in (a) above and a net (increase) decrease in interest expense as a result of our new Term Loan Facility and Revolving Facility as described in (b) above, assuming a tax rate of 25.5% and 25.3% for each respective period presented.

 

  (d) Reflects 7,149,000 additional subordinate voting shares to be issued by us in this offering.

 

     The following is a reconciliation of historical interest expense to pro forma interest expense for the fiscal year ended March 31, 2016 and the nine months ended December 31, 2016:
     Nine months ended
December 31, 2016
     Fiscal year ended
March 31, 2016
 

Interest expense as reported

     7,541        7,834  

Increase resulting from Recapitalization Transactions (e)

     3,507        6,898  

Decrease resulting from application of net proceeds (f)

     (3,642      (4,856
  

 

 

    

 

 

 

Pro forma interest expense

     7,406        9,876  
  

 

 

    

 

 

 

 



 

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  (e) Reflects the interest expense resulting from the increase in our outstanding borrowings pursuant to the Term Loan offset by the repayment of subordinated debt described in footnote (b) above as if these transactions had occurred on April 1, 2015 and were in effect during the entire periods presented. The interest expense for the Term Loan Facility is calculated by assuming the base LIBOR rate of 1% plus the applicable margin of 5.00% and is not calculated using the effective interest method and therefore excludes the impact of approximately CAD$6.5 million of original issue discount and transaction costs of CAD$3.4 million incurred in connection with the issuance of the Term Loan Facility.

 

  (f) Reflects the application of $65.0 million of net proceeds to the repayment of indebtedness under our Term Loan Facility and $35.0 million of net proceeds to the repayment of indebtedness under our Revolving Facility, at the assumed interest rate of 2.73%. This decrease excludes the items described under note (e).

 

(3) EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income are financial measures that are not defined under IFRS. We use these non-IFRS financial measures, and believe they enhance an investor’s understanding of our financial and operating performance from period to period, because they exclude certain material non-cash items and certain other adjustments we believe are not reflective of our ongoing operations and our performance. In particular, following the Acquisition, we have made changes to our legal and operating structure to better position our organization to achieve our strategic growth objectives, which have resulted in outflows of economic resources. Accordingly, we use these metrics to measure our core financial and operating performance for business planning purposes and as a component in the determination of incentive compensation for management employees. In addition, we believe EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income are measures commonly used by investors to evaluate companies in the apparel industry. However, they are not presentations made in accordance with IFRS and the use of the terms EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income vary from others in our industry. These financial measures are not intended to represent and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as measures of liquidity.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under IFRS. For example, these financial measures:

 

    exclude certain tax payments that may reduce cash available to us;

 

    do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

 

    do not reflect changes in, or cash requirements for, our working capital needs;

 

    do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and

 

    other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

 



 

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The tables below illustrate a reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted Net Income for the periods presented:

 

CAD$000s   Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
    Year ended
March 31, 2016
    Year ended
March 31,
2015
    Period from
April 1,
2013 to
December 8,
2013
    Period from
December 9,
2013 to
March 31,
2014
    Unaudited Pro
Forma Period
ended March 31,
2014 (l)
 

Net income (loss)

  $ 45,071     $ 35,687     $ 26,485     $ 14,425     $ 15,278     $   (15,477   $ 3,023  

Add the impact of:

             

Income tax expense (recovery)

    15,416       8,662       6,473       4,707       5,550       (5,054     1,024  

Interest expense

    8,620       6,017       7,996       7,537       1,815       1,788       7,136  

Depreciation and amortization

    6,471       4,643       5,916       3,394       966       1,029       3,146  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    75,578       55,009       46,870       30,063       23,609       (17,714     14,329  

Add the impact of:

             

Bain Capital management fees (a)

    1,560       647       1,092       894       —         277       539  

Transaction costs (b)

    5,624       8       299       —         —         5,791    

Purchase accounting adjustments (c)

    —         —           2,861       —         2,906    

Unrealized (gain)/loss on derivatives (d)

    4,422       —         (4,422     (138     —         —         —    

Unrealized foreign exchange loss on term loan (e)

    1,561       —         —         —         —         —         —    

International restructuring costs (f)

    175       2,877       6,879       1,038       —         —         —    

Share-based compensation (g)

    2,536       375       500       300       —         —         —    

Agent terminations and other (h)

    —         2,997       3,089       2,173       375       627       1,002  

Non-cash rent expense (i)

    987       —         —         —          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 92,443     $ 61,913     $   54,307     $   37,191     $   23,984     $ (8,113   $   15,870  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

CAD$000s   Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
    Year ended
March 31, 2016
    Year ended
March 31, 2015
    Period from
April 1,
2013 to
December 8,
2013
    Period from
December 9,
2013 to
March 31,
2014
    Unaudited Pro
Forma Period
ended March 31,
2014 (l)
 

Net income (loss)

  $ 45,071     $ 35,687     $ 26,485     $ 14,425     $ 15,278     $   (15,477   $ 3,023  

Add the impact of:

             

Bain Capital management fees (a)

    1,560       647       1,092       894       —         277       539  

Transaction costs (b)

    5,624       8       299       —         —         5,791       —    

Purchase accounting adjustments (c)

    —         —         —         2,861       —         2,906       —    

Unrealized (gain)/loss on derivatives (d)

    4,422       —         (4,422     (138     —         —         —    

Unrealized foreign exchange loss on term loan (e)

    1,561       —         —         —         —         —         —    

International restructuring costs (f)

    175       2,877       6,879       1,038       —         —         —    

Share-based compensation (g)

    2,536       375       500       300       —         —         —    

Agent terminations and other (h)

    —         2,997       3,089       2,173       375       627       1,002  

Non-cash rent expense (i)

    987       —         —         —         —         —         —    

Amortization on intangible assets acquired by Bain Capital (j)

    1,632       1,632       2,175       2,175       —         725       2,175  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

    18,497       8,536       9,612       9,303       375       10,326       3,716  

Tax effect of adjustments

    (4,717     (2,159     (2,431     (2,354     (99     (2,540     (940

Tax effect of one-time intercompany transaction (k)

    —         (3,544     (3,544     —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net income (loss)

  $ 58,851     $ 38,520     $ 30,122     $ 21,374     $ 15,554     $ (7,691   $ 5,799  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a) Represents the amount paid pursuant to the management agreement with Bain Capital for ongoing consulting and other services. In connection with this offering, the management agreement will be terminated, and Bain Capital will no longer receive management fees from us. See “Certain Relationships and Related Party Transactions—Management Agreement.”
  (b) In connection with the Acquisition and the filing of this prospectus, we incurred expenses related to professional fees, consulting, legal, and accounting that would otherwise not have been incurred and were directly related to these two matters. These fees are not indicative of the company’s ongoing costs and we expect they will discontinue following the completion of this offering.
  (c)

In connection with the Acquisition, we recognized acquired inventory at fair value, which included a mark-up for profit. Recording inventory at fair value in purchase accounting had the effect of increasing inventory

 



 

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  and thereby increasing the cost of sales in subsequent periods as compared to the amounts we would have recognized if the inventory was sold through at cost. The write-up of acquired inventory sold represents the incremental cost of sales that was recognized as a result of purchase accounting. This inventory was sold in fiscal 2014 and fiscal 2015 and has impacted net income in both periods.
  (d) Represents unrealized gains on foreign exchange forward contracts recorded in fiscal 2016 that relate to fiscal 2017. We manage our exposure to foreign currency risk by entering into foreign exchange forward contracts. Management forecasts its net cash flows in foreign currency using expected revenue from orders it receives for future periods. The unrealized gains and losses on these contracts are recognized in net income from the date of inception of the contract, while the cash flows to which the derivatives related are not realized until the contract settles. Management believes that reflecting these adjustments in the period in which the net cash flows will occur is more appropriate.
  (e) Represents a non-cash charge for unrealized losses on the translation of the Term Loan Facility from USD to CAD$.
  (f) Represents expenses incurred to establish our European headquarters in Zug, Switzerland, including closing several smaller offices across Europe, relocating personnel and incurring temporary office costs.
  (g) Represents non-cash share-based compensation expense. Adjustments in fiscal 2017 reflect management’s estimates that certain tranches of outstanding option awards will vest.
  (h) Represents accrued expenses in respect of termination payments to be made to our third party sales agents. As part of a strategy to transition certain sales functions in-house, we terminated the majority of our third party sales agents and certain distributors, primarily during fiscal 2015 and 2016, which resulted in indemnities and other termination payments. As sales agents have now largely been eliminated from the sales structure, management does not expect these charges to recur in future fiscal periods.
  (i) Represents non-cash amortization charges during pre-opening periods for new store leases.
  (j) As a result of the Acquisition, we recognized an intangible asset for customer lists in the amount of $8.7 million, which has a useful life of four years.
  (k) During fiscal 2016, we entered into a series of transactions whereby our wholly-owned subsidiary, Canada Goose International AG, acquired the global distribution rights to our products. As a result, there was a one-time tax benefit of $3.5 million recorded during the year.
  (l) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a presentation of our Unaudited Pro Forma Combined Supplemental Financial Information for the year ended March 31, 2014.
(4) Adjusted EBITDA Margin is equal to Adjusted EBITDA for the period presented as a percentage of revenue for the same period.

 



 

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Risk Factors

This offering and investing in our subordinate voting shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our subordinate voting shares. If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our subordinate voting shares could decline and you could lose all or part of your investment. Please also see “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to our Business

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand we may be unable to sell our products, which would adversely affect our business.

The Canada Goose name and premium brand image are integral to the growth of our business, and to the implementation of our strategies for expanding our business. We believe that the brand image we have developed has significantly contributed to the success of our business and is critical to maintaining and expanding our customer base. Maintaining and enhancing our brand may require us to make substantial investments in areas such as product design, store openings and operations, marketing, e-commerce, community relations and employee training, and these investments may not be successful.

We anticipate that, as our business expands into new markets and new product categories and as the market becomes increasingly competitive, maintaining and enhancing our brand may become difficult and expensive. Conversely, as we penetrate these new markets and our brand becomes more widely available, it could potentially detract from the appeal stemming from the scarcity of our brand. Our brand may also be adversely affected if our public image or reputation is tarnished by negative publicity. In addition, ineffective marketing, product diversion to unauthorized distribution channels, product defects, counterfeit products, unfair labour practices, and failure to protect the intellectual property rights in our brand are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish consumer confidence in us. Maintaining and enhancing our brand will depend largely on our ability to be a leader in the premium outerwear industry and to continue to offer a range of high quality products to our customers, which we may not execute successfully. Any of these factors could harm our sales, profitability or financial condition.

A key element of our growth strategy is expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’ expectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes, or if we are unable to modify our products on a timely basis or expand effectively into new product categories, we may lose customers. As of December 31, 2016, our brand is sold in 36 countries through nearly 2,500 points of distribution. As we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing to pay a higher price to purchase our premium functional products as compared to traditional outerwear. Our operating results would also suffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities or are not effectively brought to market.

Because our business is highly concentrated on a single, discretionary product category, premium outerwear, we are vulnerable to changes in consumer preferences that could harm our sales, profitability and financial condition.

Our business is not currently diversified and consists primarily of designing, manufacturing and distributing premium outerwear and accessories. In fiscal 2016, our main product category across all seasons, our jackets, was made up of over 100 styles and comprised the majority of our sales. Consumer preferences often change

 

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rapidly. Therefore, our business is substantially dependent on our ability to attract customers who are willing to pay a premium for our products. Any future shifts in consumer preferences away from retail spending for premium outerwear and accessories would also have a material adverse effect on our results of operations.

In addition, we believe that continued increases in sales of premium outerwear will largely depend on customers continuing to demand technical superiority from their luxury products. If the number of customers demanding premium outerwear does not continue to increase, or if our customers are not convinced that our premium outerwear is more functional or stylish than other outerwear alternatives, we may not achieve the level of sales necessary to support new growth platforms and our ability to grow our business will be severely impaired.

A downturn in the economy may affect customer purchases of discretionary items, which could materially harm our sales, profitability and financial condition.

Many factors affect the level of consumer spending for discretionary items such as our premium outerwear and related products. These factors include general economic conditions, interest and tax rates, the availability of consumer credit, disposable consumer income, unemployment and consumer confidence in future economic conditions. Consumer purchases of discretionary items, such as our premium outerwear, tend to decline during recessionary periods when disposable income is lower. During our 60-year history, we have experienced recessionary periods, but we cannot predict the effect on our sales and profitability. A downturn in the economy in markets in which we sell our products may materially harm our sales, profitability and financial condition.

We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our revenue and profitability.

The market for outerwear is highly fragmented. We compete directly against other wholesalers and direct retailers of premium functional outerwear and luxury apparel. Because of the fragmented nature of the marketplace, we also compete with other apparel sellers, including those who do not specialize in outerwear. Many of our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, store development, marketing, distribution, and other resources than we do.

Our competitors may be able to achieve and maintain brand awareness and market share more quickly and effectively than we can. Many of our competitors have more established and diversified marketing programs, including with respect to promotion of their brands through traditional forms of advertising, such as print media and television commercials, and through celebrity endorsements, and have substantial resources to devote to such efforts. Our competitors may also create and maintain brand awareness using traditional forms of advertising more quickly than we can. Our competitors may also be able to increase sales in their new and existing markets faster than we can by emphasizing different distribution channels than we can, such as catalog sales or an extensive retail network, and many of our competitors have substantial resources to devote toward increasing sales in such ways.

If we fail to attract new customers, we may not be able to increase sales.

Our success depends, in part, on our ability to attract new customers. In order to expand our customer base, we must appeal to and attract consumers who identify with our products. We have made significant investments in enhancing our brand and attracting new customers. We expect to continue to make significant investments to promote our current products to new customers and new products to current and new customers, including through our DTC e-commerce platforms and retail store presence. Such campaigns can be expensive and may not result in increased sales. Further, as our brand becomes more widely known, we may not attract new customers as we have in the past. If we are unable to attract new customers, we may not be able to increase our sales.

 

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We have grown rapidly in recent years. If we are unable to manage our operations at our current size or to manage any future growth effectively, the pace of our growth may slow.

We have expanded our operations rapidly since 2013 and have been developing a DTC channel with the launch of our four e-commerce stores in Canada and the United States as well as the United Kingdom and France in August 2014, September 2015 and September 2016, respectively, and the opening of our first two retail stores in October and November of 2016 in Toronto and New York City, respectively. Our revenue increased from $152.1 million for fiscal 2014 to $290.8 million for fiscal 2016, a CAGR of approximately 38.3%, including $33.0 million of revenue generated from our DTC channel in fiscal 2016.

If our operations continue to grow, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution functions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative support and other personnel. Our continued growth could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products, and delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact financial and operational results. In addition, in order to continue to expand our DTC channel, we expect to continue to add selling, general & administrative expenses to our operating profile. These costs, which include lease commitments, headcount and capital assets, could result in decreased margins if we are unable to drive commensurate growth.

Our growth strategy involves expansion of our DTC channel, including retail stores and on-line, which may present risks and challenges that we have not yet experienced.

Our business has only recently evolved from one in which we only distributed products on a wholesale basis for resale by others to one that also includes a multi-channel experience, which includes retail physical and online stores operated by us. Growing our e-commerce platforms and number of physical stores is essential to our growth strategy, as is expanding our product offerings available through these channels. However, we have limited operating experience executing this strategy, which we launched with our first e-commerce store in August 2014 and our first retail store in October 2016. This strategy has and will continue to require significant investment in cross-functional operations and management focus, along with investment in supporting technologies and retail store spaces. If we are unable to provide a convenient and consistent experience for our customers, our ability to compete and our results of operations could be adversely affected. In addition, if our e-commerce store design does not appeal to our customers, reliably function as designed, or maintain the privacy of customer data, or if we are unable to consistently meet our brand promise to our customers, we may experience a loss of customer confidence or lost sales, or be exposed to fraudulent purchases, which could adversely affect our reputation and results of operations.

We currently operate our online stores in Canada, the United States, the United Kingdom and France, and are planning to expand our e-commerce platform to other geographies. These countries may impose different and evolving laws governing the operation and marketing of e-commerce websites, as well as the collection, storage and use of information on consumers interacting with those websites. We may incur additional costs and operational challenges in complying with these laws, and differences in these laws may cause us to operate our businesses differently in different territories. If so, we may incur additional costs and may not fully realize the investment in our international expansion.

Our operating results are subject to seasonal and quarterly variations in our revenue and operating income, which could cause the price of our subordinate voting shares to decline.

Our business is seasonal and, historically, we have realized approximately three quarters of our revenue and earnings for the fiscal year in the second and third fiscal quarters, due to the impact of wholesale orders in

 

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anticipation of the Winter and holiday selling season. Many of these orders are not subject to contracts and, if cancelled for any reason, could result in harm to our sales and financial results. Any factors that harm our second and third fiscal quarter operating results, including disruptions in our supply chain, unseasonably warm weather or unfavourable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscal year. In addition, we typically experience net losses in our first and fourth fiscal quarters as we invest ahead of our most active season. Disrupted sales in our second and third fiscal quarters could upset our seasonal balance leading to an adverse effect on our financial and operating results.

In order to prepare for our peak shopping season, we must maintain higher quantities of finished goods. As a result, our working capital requirements also fluctuate during the year, increasing in the first and second fiscal quarters and declining significantly in the fourth fiscal quarter.

Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the sales contributed by our DTC channel. As a result, historical period-to-period comparisons of our sales and operating results are not necessarily indicative of future period-to-period results. You should not rely on the results of a single fiscal quarter as an indication of our annual results or our future performance.

Our indebtedness could adversely affect our financial condition.

As of December 31, 2016, we had $59.8 million of borrowings outstanding under our Revolving Facility, and $82.1 million of unused commitments under our Revolving Facility $218.3 million of term loans under our Term Loan Facility, and total indebtedness of $278.1 million as of such date. See “Description of Indebtedness” and “Recapitalization”. Upon the completion of this offering, after giving effect to the use of proceeds described in this prospectus, we expect to have total indebtedness of $178.1 million. Our debt could have important consequences, including:

 

    limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing;

 

    requiring a portion of our cash flow to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

    requiring the net cash proceeds of certain equity offerings to be used to prepay our debt as opposed to other purposes;

 

    exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, are at variable rates of interest; and

 

    limiting our flexibility in planning for and reacting to changes in the industry in which we compete.

The credit agreements governing our senior secured credit facilities contain a number of restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to incur certain liens, make investments and acquisitions, incur or guarantee additional indebtedness, pay dividends or make other distributions in respect of, or repurchase or redeem our common or preferred shares, or enter into certain other types of contractual arrangements affecting our subsidiaries or indebtedness. In addition, the restrictive covenants in the credit agreement governing our Revolving Facility require us to maintain a minimum fixed charge coverage ratio if excess availability under our Revolving Facility falls below a specified threshold.

Although the credit agreements governing our senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, those restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with those restrictions could be substantial. We may also seek to amend or refinance one or more of our debt instruments to permit us to finance our growth strategy or improve the terms of our indebtedness.

 

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Our plans to improve and expand our product offerings may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could harm our competitive position and reduce our revenue and profitability.

In addition to our DTC strategy and the expansion of our geographic footprint, we plan to grow our business by expanding our product offerings. The principal risks to our ability to successfully carry out our plans to expand our product offering include:

 

    if our expanded product offerings fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and our sales may decrease;

 

    implementation of these plans may divert management’s attention from other aspects of our business and place a strain on our management, operational and financial resources, as well as our information systems; and

 

    incorporation of novel materials or features into our products may not be accepted by our customers or may be considered inferior to similar products offered by our competitors.

In addition, our ability to successfully carry out our plans to expand our product offerings may be affected by economic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and styles. These plans could be abandoned, could cost more than anticipated and could divert resources from other areas of our business, any of which could negatively impact our competitive position and reduce our revenue and profitability.

We rely on a limited number of third-party suppliers to provide high quality raw materials.

Our products require high quality raw materials, including cotton, polyester, down and coyote fur. The price of raw materials depends on a wide variety of factors largely beyond the control of Canada Goose. A shortage, delay or interruption of supply for any reason could negatively impact our ability to fulfill orders and have an adverse impact on our financial results.

In addition, we rely on a very small number of direct suppliers for our raw materials. As a result, any disruption to these relationships could have a material adverse effect on our business. Events that adversely affect our suppliers could impair our ability to obtain inventory in the quantities and at the quality that we desire. Such events include difficulties or problems with our suppliers’ businesses, finances, labour relations, ability to import raw materials, costs, production, insurance and reputation, as well as natural disasters or other catastrophic occurrences. Furthermore, there can be no assurance that our suppliers will continue to provide fabrics and raw materials or provide products that are consistent with our standards.

More generally, if we need to replace an existing supplier, additional supplies or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, and any new supplier may not meet our strict quality requirements. In the event we are required to find new sources of supply, we may encounter delays in production, inconsistencies in quality and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of our raw materials could have an adverse effect on our ability to meet customer demand for our products and result in lower sales and profitability both in the short and long-term.

We could experience significant disruptions in supply from our current sources.

We generally do not enter into long-term formal written agreements with our suppliers, and typically transact business with our suppliers on an order-by-order basis. There can be no assurance that there will not be a disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, that we would be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality

 

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control, responsiveness and service, financial stability and labour and other ethical practices. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower revenue and operating income both in the short and long-term.

Our business or our results of operations could be harmed if we are unable to accurately forecast demand for our products.

To ensure adequate inventory supply, we and our retail partners forecast inventory needs, which are subject to seasonal and quarterly variations. If we fail to accurately forecast retailer demand, we may experience excess inventory levels or a shortage of product to deliver to our retail partners and through our DTC channel.

If we underestimate the demand for our products, we may not be able to produce products to meet our retail partner requirements, and this could result in delays in the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and retail partner relationships. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm our gross margins and our brand management efforts. In addition, failures to accurately predict the level of demand for our products could cause a decline in revenue and harm our profitability and financial condition.

If we are unable to establish and protect our trademarks and other intellectual property rights, counterfeiters may produce copies of our products and such counterfeit products could damage our brand image.

Given the increased popularity of our brand, we believe there is a high likelihood that counterfeit products or other products infringing on our intellectual property rights will continue to emerge, seeking to benefit from the consumer demand for Canada Goose outerwear. These counterfeit products do not provide the functionality of our products and we believe they are of substantially lower quality, and if customers are not able to differentiate between our products and counterfeit products, this could damage our brand image. In order to protect our brand, we devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We actively pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures. In spite of our efforts, counterfeiting still occurs and, if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright or other intellectual property rights, this could adversely affect our future sales, financial condition and results of operations. We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future or that we will be able to identify and pursue all counterfeiters who may seek to benefit from our brand.

Competitors have and will likely continue to attempt to imitate our products and technology and divert sales. If we are unable to protect or preserve our intellectual property rights, brand image and proprietary rights, our business may be harmed.

As our business has expanded, our competitors have imitated, and will likely continue to imitate, our product designs and branding, which could harm our business and results of operations. Competitors who flood the market with products seeking to imitate our products could divert sales and dilute the value of our brand. We believe our trademarks, copyrights and other intellectual property rights are extremely important to our success and our competitive position.

However, enforcing rights to our intellectual property may be difficult and costly, and we may not be successful in stopping infringement of our intellectual property rights, particularly in some foreign countries, which could make it easier for competitors to capture market share. Intellectual property rights necessary to protect our products and brand may also be unavailable or limited in certain countries. Furthermore, our efforts to enforce our trademarks, copyrights and other intellectual property rights may be met with defenses, counterclaims and

 

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countersuits attacking the validity and enforceability of our trademark and other intellectual property rights. Continued sales of competing products by our competitors could harm our brand and adversely impact our business, financial condition and results of operations.

Labour-related matters, including labour disputes, may adversely affect our operations.

As of March 1, 2017, less than 25% of our employees are members of labour unions, and additional members of our workforce may become represented by unions in the future. The exposure to unionized labour in our workforce nonetheless presents an increased risk of strikes and other labour disputes, and our ability to alter labour costs will be subject to collective bargaining, which could adversely affect our results of operations. In addition, potential labour disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts, strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Any potential labour dispute, either in our own operations or in those of third parties, on whom we rely, could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our sales, profitability or financial condition.

We rely significantly on information technology systems for our distribution systems and other critical business functions, and are increasing our reliance on these functions as our DTC channel expands. Any failure, inadequacy, or interruption of those systems could harm our ability to operate our business effectively.

We rely on information systems to effectively manage all aspects of our business, including merchandise planning, manufacturing, allocation, distribution and sales. Our reliance on these systems, and their importance to our business, will increase as we expand our DTC channel and global operations. We rely on a number of third parties to help us effectively manage these systems. If information systems we rely on fail to perform as expected, our business could be disrupted. The failure of us or our vendors to manage and operate our information technology systems as expected could disrupt our business, result in our not providing adequate product, losing sales or market share, and reputational harm, causing our business to suffer. Any such failure or disruption could have a material adverse effect on our business.

Our information technology systems and vendors also may be vulnerable to damage or interruption from circumstances beyond our or their control, including fire, flood, natural disasters, systems failures, network or communications failures, power outages, viruses, security breaches, cyber-attacks and terrorism. We maintain disaster recovery procedures intended to mitigate the risks associated with such events, but there is no guarantee that these procedures will be adequate in any particular circumstance. As a result, such an event could materially disrupt, and have a material adverse effect on, our business.

We depend on our retail partners to display and present our products to customers, and our failure to maintain and further develop our relationships with our retail partners could harm our business.

We sell our products through knowledgeable local, regional, and national retail partners. Our retail partners service customers by stocking and displaying our products, and explaining our product attributes. Our relationships with these retail partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our retail partners or financial difficulties experienced by these retail partners could harm our business.

We also have key relationships with national retail partners. For fiscal 2016, our largest Canadian wholesale customer accounted for 17% of our wholesale revenue in Canada, and our largest U.S. wholesale customer accounted for 18% of our wholesale revenue in the United States. If we lose any of our key retail partners, or if any key retail partner reduces their purchases of our existing or new products, or their number of stores or operations or promotes products of our competitors over ours, or suffers financial difficulty or insolvency, our sales would be harmed. Our sales depend, in part, on retailer partners effectively displaying our products,

 

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including providing attractive space in their stores, including shop-in-shops, and training their sales personnel to sell our products. If our retail partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower revenue and gross margins, which would harm our profitability and financial condition.

The majority of our sales are to retail partners.

The majority of our sales are made to retail partners who may decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our retail partners, and confirmed orders received from our retail partners may be difficult to enforce. Factors that could affect our ability to maintain or expand our sales to these retail partners include: (a) failure to accurately identify the needs of our customers; (b) lack of customer acceptance of new products or product expansions; (c) unwillingness of our retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; and (e) new, well-received product introductions by competitors.

We cannot assure you that our retail partners will continue to carry our products in accordance with current practices or carry any new products that we develop. If these risks occur, they could harm our brand as well as our results of operations and financial condition.

Our marketing programs, e-commerce initiatives and use of customer information are governed by an evolving set of laws and enforcement trends and unfavorable changes in those laws or trends, or our failure to comply with existing or future laws, could substantially harm our business and results of operations.

We collect, process, maintain and use data, including sensitive information on individuals, available to us through online activities and other customer interactions in our business. Our current and future marketing programs may depend on our ability to collect, maintain and use this information, and our ability to do so is subject to evolving international, U.S., Canadian, European and other laws and enforcement trends. We strive to comply with all applicable laws and other legal obligations relating to privacy, data protection and customer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, may conflict with our practices or fail to be observed by our employees or business partners. If so, we may suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management or otherwise have an adverse effect on our business.

Certain of our marketing practices rely upon e-mail to communicate with consumers on our behalf. We may face risk if our use of e-mail is found to violate the applicable law. We post our privacy policy and practices concerning the use and disclosure of user data on our websites. Any failure by us to comply with our posted privacy policy or other privacy-related laws and regulations could result in proceedings which could potentially harm our business. In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance. If applicable data privacy and marketing laws become more restrictive at the international, federal, provincial or state levels, our compliance costs may increase, our ability to effectively engage customers via personalized marketing may decrease, our investment in our e-commerce platform may not be fully realized, our opportunities for growth may be curtailed by our compliance burden and our potential reputational harm or liability for security breaches may increase.

Data security breaches and other cyber security events could negatively affect our reputation, credibility and business.

We collect, process, maintain and use sensitive personal information relating to our customers and employees, including their personally identifiable information, and rely on third parties for the operation of our e-commerce

 

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site and for the various social media tools and websites we use as part of our marketing strategy. Any perceived, attempted or actual unauthorized disclosure of personally identifiable information regarding our employees, customers or website visitors could harm our reputation and credibility, reduce our e-commerce sales, impair our ability to attract website visitors, reduce our ability to attract and retain customers and could result in litigation against us or the imposition of significant fines or penalties.

Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject to more extensive requirements to protect the customer information that we process in connection with the purchase of our products, resulting in increased compliance costs.

Our on-line activities, including our e-commerce websites, also may be subject to denial of service or other forms of cyber attacks. While we have taken measures we believe reasonable to protect against those types of attacks, those measures may not adequately protect our on-line activities from such attacks. If a denial of service attack or other cyber event were to affect our e-commerce sites or other information technology systems, our business could be disrupted, we may lose sales or valuable data, and our reputation may be adversely affected.

A significant portion of our business functions operate out of our headquarters in Toronto. As a result, our business is vulnerable to disruptions due to local weather, economics and other factors.

All of our significant business functions reside at our headquarters in Toronto, Canada. Events such as extreme local weather, natural disasters, transportation strikes, acts of terrorism, significant economic disruptions or unexpected damage to the facility could result in an unexpected disruption to our business as a whole. Although we carry business interruption insurance, if a disruption of this type should occur, our ability to conduct our business could be adversely affected or interrupted entirely and adversely affect our financial and operating results.

Our success is substantially dependent on the continued service of our senior management.

Our success is substantially dependent on the continued service of our senior management, including Dani Reiss, who is our third-generation President and Chief Executive Officer. The loss of the services of our senior management could make it more difficult to successfully operate our business and achieve our business goals. We also may be unable to retain existing management, technical, sales and client support personnel that are critical to our success, which could result in harm to our customer and employee relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs.

We have not obtained key man life insurance policies on any members of our senior management team. As a result, we would not be protected against the associated financial loss if we were to lose the services of members of our senior management team.

We rely on payment cards to receive payments, and are subject to payment-related risks.

For our DTC sales, as well as for sales to certain retail partners, we accept a variety of payment methods, including credit cards, debit cards and electronic funds transfers. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard, or PCI-DSS. These laws and obligations may require us to implement enhanced authentication and payment processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may

 

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increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.

If our independent manufacturers or our suppliers fail to use ethical business practices and fail to comply with changing laws and regulations or our applicable guidelines, our brand image could be harmed due to negative publicity.

Our core values, which include developing the highest quality products while operating with integrity, are an important component of our brand image, which makes our reputation sensitive to allegations of unethical or improper business practices, whether real or perceived. We do not control our suppliers and manufacturers or their business practices. Accordingly, we cannot guarantee their compliance with our guidelines or the law. A lack of compliance could lead to reduced sales or recalls or damage to our brand or cause us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations.

In addition, many of our products include materials that are heavily regulated in many jurisdictions. Certain jurisdictions in which we sell have various regulations related to manufacturing processes and the chemical content of our products, including their component parts. Monitoring compliance by our manufacturers and suppliers is complicated, and we are reliant on their compliance reporting in order to comply with regulations applicable to our products. This is further complicated by the fact that expectations of ethical business practices continually evolve and may be substantially more demanding than applicable legal requirements. Ethical business practices are also driven in part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical shortcomings. Accordingly, we cannot predict how such regulations or expectations might develop in the future and cannot be certain that our guidelines or current practices would satisfy all parties who are active in monitoring our products or other business practices worldwide.

Our current and future products may experience quality problems from time to time that can result in negative publicity, litigation, product recalls and warranty claims, which could result in decreased revenue and operating margin, and harm to our brand.

There can be no assurance we will be able to detect, prevent, or fix all defects that may affect our products. Failure to detect, prevent, or fix defects, or the occurrence of real or perceived quality, health or safety problems or material defects in our current and future products, could result in a variety of consequences, including a greater number of product returns than expected from customers and our retail partners, litigation, product recalls, and credit, warranty or other claims, among others, which could harm our brand, sales, profitability and financial condition. We stand behind every Canada Goose product with a full lifetime warranty against defects. Because of this comprehensive warranty, quality problems could lead to increased warranty costs, and divert the attention of our manufacturing facilities. Such problems could hurt our premium brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.

 

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Our business could be adversely affected by protestors or activists.

We have been the target of activists in the past, and may continue to be in the future. Our products include certain animal products, including goose and duck feathers in all of our down-filled parkas and coyote fur on the hoods of some of our parkas, which has drawn the attention of animal welfare activists. In addition, protestors can disrupt sales at our stores, or use social media or other campaigns to sway public opinion against our products. If any such activists are successful at either of these our sales and results of operations may be adversely affected.

The cost of raw materials could increase our cost of goods sold and cause our results of operations and financial condition to suffer.

The fabrics used by our suppliers and manufacturers include synthetic fabrics and natural products, including cotton, polyester, down and coyote fur. Significant price fluctuations or shortages in the cost of these raw materials may increase our cost of goods sold and cause our results of operations and financial condition to suffer. In particular, in our experience, pricing for fur products tends to be unpredictable. If we are unable to secure coyote fur for our jackets at a reasonable price, we may have to alter or discontinue selling some of our designs, or attempt to pass along the cost to our customers, any of which could adversely affect our results of operations and financial condition.

Additionally, increasing costs of labour, freight and energy could increase our and our suppliers’ cost of goods. If our suppliers are affected by increases in their costs of labour, freight and energy, they may attempt to pass these cost increases on to us. If we pay such increases, we may not be able to offset them through increases in our pricing, which could adversely affect our results of operation and financial condition.

Fluctuations in foreign currency exchange rates could harm our results of operations as well as the price of our subordinate voting shares.

The presentation currency for our consolidated financial statements is the Canadian dollar. Because we recognize sales in the United States in U.S. dollars, if the U.S. dollar weakens against the Canadian dollar it would have a negative impact on our U.S. operating results upon translation of those results into Canadian dollars for the purposes of financial statement consolidation. We may face similar risks in other foreign jurisdictions where sales are recognized in foreign currencies. Although we engage in short-term hedging transactions for a large portion of our foreign currency denominated cash flows to mitigate foreign exchange risks, depending upon changes in future currency rates, such gains or losses could have a significant, and potentially adverse, effect on our results of operations. Foreign exchange variations (including the value of the Canadian dollar relative to the U.S. dollar) have been significant in the past and current foreign exchange rates may not be indicative of future exchange rates.

Our earnings per share are reported in Canadian dollars, and accordingly may be translated into U.S. dollars by analysts or our investors. As a result, the value of an investment in our subordinate voting shares to a U.S. shareholder will fluctuate as the U.S. dollar rises and falls against the Canadian dollar. Our decision to declare a dividend depends on results of operations reported in Canadian dollars. As a result, U.S. and other shareholders seeking U.S. dollar total returns, including increases in the share price and dividends paid, are subject to foreign exchange risk as the U.S. dollar rises and falls against the Canadian dollar.

Unexpected obstacles in new markets may limit our expansion opportunities and cause our business and growth to suffer.

Our future growth depends in part on our expansion efforts outside of North America. We have limited experience with regulatory environments and market practices outside of this region, and we may not be able to penetrate or successfully operate in any new market, as a result of unfamiliar regulation or other unexpected

 

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barriers to entry. In connection with our expansion efforts we may encounter obstacles, including cultural and linguistic differences, differences in regulatory environments, economic or governmental instability, labour practices and market practices, difficulties in keeping abreast of market, business and technical developments, and foreign customers’ tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our outerwear by customers in these new international markets. Our failure to develop our business in new international markets or experiencing disappointing growth outside of existing markets could harm our business and results of operations.

We may become involved in legal or regulatory proceedings and audits.

Our business requires compliance with many laws and regulations, including labour and employment, sales and other taxes, customs, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead to damage awards, fines and penalties. We may become involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort and other litigation. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, harming our financial condition. There can be no assurance that any pending or future legal or regulatory proceedings and audits will not harm our business, financial condition and results of operations.

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Our operations are subject to many hazards and operational risks inherent to our business, including: general business risks, product liability, product recall and damage to third parties, our infrastructure or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, human errors and similar events.

Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim, or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations and financial condition.

We will incur significant expenses and devote other significant resources and management time as a result of being a public company, which may negatively impact our financial performance and could cause our results of operations and financial condition to suffer.

We will incur significant legal, accounting, insurance and other expenses as a result of being a public company. The rules implemented by the Securities and Exchange Commission, or SEC, and by the NYSE, and the securities regulators in each of the provinces and territories of Canada and by the TSX have required changes in corporate governance practices of public companies. We expect that compliance with these laws, rules and regulations will substantially increase our expenses, including our legal and accounting costs, and make some activities more time-consuming and costly, and these new obligations will require attention from our senior management and could divert their attention away from the day-to-day management of our business. We also expect these laws, rules and regulations to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as officers. As a result of the foregoing, we expect a

 

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substantial increase in legal, accounting, insurance and certain other expenses in the future, which will negatively impact our financial performance and could cause our results of operations and financial condition to suffer. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our subordinate voting shares, fines, sanctions and other regulatory action and potentially civil litigation.

We have identified material weaknesses in our internal control over financial reporting and if we fail to remediate these weaknesses and maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. As a private company, we have not historically prepared public company financial statements. In connection with the audit of our consolidated financial statements, we have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

We did not have in place an effective control environment with formal processes and procedures or an adequate number of accounting personnel with the appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner, including inventory costing and business combinations. We did not design or maintain effective controls over the financial statement close and reporting process in order to ensure the accurate and timely preparation of financial statements in accordance with IFRS. In addition, information technology controls, including end user and privileged access rights and appropriate segregation of duties, including for certain users the ability to create and post journal entries, were not designed or operating effectively.

We have taken steps to address these material weaknesses and continue to implement our remediation plan, which we believe will address their underlying causes. We have hired personnel with requisite skills in both technical accounting and internal control over financial reporting. In addition, we have engaged external advisors to provide financial accounting assistance in the short term and to evaluate and document the design and operating effectiveness of our internal controls and assist with the remediation and implementation of our internal controls as required. We are evaluating the longer term resource needs of our various financial functions.

Implementing any appropriate changes to our internal controls and continuing to update and maintain our internal controls may distract our officers and employees, entail substantial costs to implement new processes and modify our existing processes and take significant time to complete. If we fail to enhance our internal control over financial reporting to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act, we may be unable to report our financial results accurately, which could increase operating costs and harm our business, including our investors’ perception of our business and our share price. The actions we plan to take are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. While we expect to fully remediate these material weaknesses, we cannot assure you that we will be able to do so in a timely manner, which could impair our ability to report our financial position. For a more detailed discussion of our material weaknesses, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting.”

 

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Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting, which could harm our business and cause a decline in our share price.

Reporting obligations as a public company and our anticipated growth have placed and are likely to continue to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. In addition, following our first year as a public company we will be required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify the effectiveness of our internal controls. As a result, we will be required to continue to improve our financial and managerial controls, reporting systems and procedures, to incur substantial expenses to test our systems and to make such improvements and to hire additional personnel. If our management is unable to certify the effectiveness of our internal controls or if additional material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in our share price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our share price and harm our ability to raise capital. Failure to accurately report our financial performance on a timely basis could also jeopardize our continued listing on the TSX, the NYSE or any other exchange on which our subordinate voting shares may be listed. Delisting of our subordinate voting shares from any exchange would reduce the liquidity of the market for our subordinate voting shares, which would reduce the price of our subordinate voting shares and increase the volatility of our share price.

We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely affected, which could also cause investors to lose confidence in our reported financial information, which in turn could result in a reduction in the trading price of the subordinate voting shares.

Risks Related to This Offering and Our Subordinate Voting Shares

The dual-class structure that will be contained in our articles has the effect of concentrating voting control and the ability to influence corporate matters with Bain Capital and DTR LLC, who held our shares prior to our initial public offering.

Our multiple voting shares have 10 votes per share and our subordinate voting shares, which are the shares we and the selling shareholders are selling in this offering, have 1 vote per share. Shareholders who hold multiple voting shares (Bain Capital and DTR LLC, an entity indirectly controlled by our President and Chief Executive Officer), will together hold approximately 98% of the voting power of our outstanding voting shares following this offering (or, if the underwriters’ over-allotment option is exercised in full, 97% of the voting power of our outstanding voting shares following this offering) and will therefore have significant influence over our management and affairs and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions. In addition, in connection with this offering, the principal shareholders expect to enter into an investor rights agreement providing for certain director nomination rights and registration rights. See “Certain Relationships and Related Party Transactions—Investor Rights Agreement.”

In addition, because of the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares, the holders of our multiple voting shares will continue to control a majority of the combined voting power of our voting shares even where the multiple voting shares represent a substantially reduced percentage of our total

 

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outstanding shares. The concentrated voting control of holders of our multiple voting shares will limit the ability of our subordinate voting shareholders to influence corporate matters for the foreseeable future, including the election of directors as well as with respect to decisions regarding amending of our share capital, creating and issuing additional classes of shares, making significant acquisitions, selling significant assets or parts of our business, merging with other companies and undertaking other significant transactions. As a result, holders of multiple voting shares will have the ability to influence or control many matters affecting us and actions may be taken that our subordinate voting shareholders may not view as beneficial. The market price of our subordinate voting shares could be adversely affected due to the significant influence and voting power of the holders of multiple voting shares. Additionally, the significant voting interest of holders of multiple voting shares may discourage transactions involving a change of control, including transactions in which an investor, as a holder of the subordinate voting shares, might otherwise receive a premium for the subordinate voting shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed by one or more holders of multiple voting shares.

Future transfers by holders of multiple voting shares, other than permitted transfers to such holders’ respective affiliates or direct family members or to other permitted holders, will result in those shares automatically converting to subordinate voting shares, which will have the effect, over time, of increasing the relative voting power of those holders of multiple voting shares who retain their multiple voting shares. See “Description of Share Capital—Authorized Share Capital—Conversion.”

Bain Capital will continue to have significant influence over us after this offering, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.

We are currently controlled, and after this offering is completed will continue to be controlled, by Bain Capital. Upon completion of this offering, Bain Capital will beneficially own approximately 70% of our outstanding multiple voting shares, or approximately 68% of the combined voting power of our multiple voting and subordinate voting shares outstanding after this offering. If the underwriters’ over-allotment option is exercised in full, Bain Capital will beneficially own approximately 68% of the combined voting power of our multiple voting shares and subordinate voting shares outstanding after this offering. In addition, DTR LLC, an entity indirectly controlled by our President and Chief Executive Officer, will beneficially own approximately 30% of our outstanding multiple voting shares or approximately 29% of the combined voting power of our outstanding voting shares. As long as Bain Capital owns or controls at least a majority of our outstanding voting power, it will have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election and removal of directors and the size of our board of directors, any amendment of our certificate of incorporation, notice of articles and articles, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Even if its ownership falls below 50% of the voting power of our outstanding voting shares, Bain Capital will continue to be able to strongly influence or effectively control our decisions. Bain Capital’s multiple voting shares convert automatically to subordinate voting shares at the time that Bain Capital and its affiliates no longer beneficially own at least 15% of the outstanding subordinate shares and multiple voting shares on a non-diluted basis. Even once Bain Capital’s multiple voting shares convert into subordinate voting shares we may continue to be a controlled company so long as an entity controlled by our President and Chief Executive Officer continues to hold multiple voting shares. See “Description of Share Capital.”

Additionally, Bain Capital’s interests may not align with the interests of our other shareholders. Bain Capital is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Bain Capital may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Following this offering, our audit committee will be responsible for reviewing all related party transactions for potential conflict of interest situations and approving all such transactions. See “Certain Relationships and

 

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Related Party Transactions—Review, Approval or Ratification of Transactions with Related Parties.” Our audit committee will consist of directors who are independent as required by SEC and the NYSE Listing Rules, subject to the permitted phase-in period afforded by such rules. In addition, our code of ethics, following this offering, will contain provisions designed to address conflicts of interest. However, such provisions may not be effective in limiting Bain Capital’s significant influence over us.

Upon the listing of our subordinate voting shares, we will be a controlled company within the meaning of the rules of the NYSE and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements; you will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Because Bain Capital will continue to control a majority of the combined voting power of our outstanding multiple voting shares and subordinate voting shares after completion of this offering, we will be a controlled company within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our subordinate voting shares:

 

    we have a board of directors that is composed of a majority of independent directors, as defined under the NYSE Listing Rules;

 

    we have a compensation committee that is composed entirely of independent directors; and

 

    we have a nominating and governance committee that is composed entirely of independent directors.

We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our subordinate voting shares less attractive to investors.

We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding shareholder advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenues exceed US$1.0 billion, if we issue more than US$1.0 billion in non-convertible debt securities during any three-year period, or if we are a large accelerated filer and the market value of our shares held by non-affiliates exceeds US$700 million as of the end of any second quarter before that time. We cannot predict if investors will find our subordinate voting shares less attractive because we may rely on these exemptions. If some investors find our subordinate voting shares less attractive as a result, there may be a less active trading market for our subordinate voting shares and our share price may be more volatile.

As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.

As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual meetings will be governed by Canadian requirements. In addition, our

 

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officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our subordinate voting shares. Furthermore, as a foreign private issuer, we may take advantage of certain provisions in the NYSE Listing Rules that allow us to follow Canadian law for certain governance matters.

If you purchase subordinate voting shares in this offering, you will suffer immediate and substantial dilution of your investment.

The initial public offering price of our subordinate voting shares is substantially higher than the net tangible book deficit per subordinate voting share. Therefore, if you purchase our subordinate voting shares in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book deficit per share after this offering. Based on the initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $15.19 per subordinate voting share, representing the difference between our pro forma net tangible book deficit per subordinate voting share after giving effect to this offering and the initial public offering price.

We also have a number of outstanding options to purchase subordinate voting shares with exercise prices that are below the estimated initial public offering price of our subordinate voting shares. To the extent that these options are exercised, you will experience further dilution. See “Dilution” for more detail.

We cannot assure you that a market will develop for our subordinate voting shares or what the price of our subordinate voting shares will be. Investors may not be able to resell their subordinate voting shares at or above the initial public offering price.

Before this offering, there was no public trading market for our subordinate voting shares, and we cannot assure you that one will develop or be sustained after this offering. If a market does not develop or is not sustained, it may be difficult for you to sell your subordinate voting shares. This may affect the pricing of the subordinate voting shares in the secondary market, the transparency and availability of trading prices, the liquidity of the subordinate voting shares and the extent of regulation applicable to us. We cannot predict the prices at which our subordinate voting shares will trade. The initial public offering price for our subordinate voting shares will be determined through our negotiations with the underwriters and may not bear any relationship to the market price at which our subordinate voting shares will trade after this offering or to any other established criteria of the value of our business. It is possible that, in future quarters, our operating results may be below the expectations of securities analysts and investors. As a result of these and other factors, the price of our subordinate voting shares may decline, possibly materially.

Our operating results and share price may be volatile, and the market price of our subordinate voting shares after this offering may drop below the price you pay.

Our quarterly operating results are likely to fluctuate in the future in response to numerous factors, many of which are beyond our control, including each of the factors set forth above.

In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our subordinate voting shares to wide price fluctuations regardless of our operating performance. Our operating results and the trading price of our subordinate voting shares may fluctuate in response to various factors, including the risks described above.

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our subordinate voting shares to fluctuate substantially. Fluctuations in our quarterly

 

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operating results could limit or prevent investors from readily selling their subordinate voting shares and may otherwise negatively affect the market price and liquidity of subordinate voting shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our subordinate voting shares to drop significantly, even if our business is doing well.

Sales of a substantial number of our subordinate voting shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of subordinate voting shares or securities convertible into subordinate voting shares intend to sell subordinate voting shares, could reduce the market price of our subordinate voting shares. After giving effect to this offering, we will have outstanding 20,000,000 subordinate voting shares (23,000,000 if the underwriters exercise their over-allotment option), which may be resold in the public market immediately, and assumes no exercises of outstanding options.

Following the consummation of this offering, shares that are not being sold in this offering will be subject to a 180 day lock-up period provided under lock-up agreements executed in connection with this offering described in “Underwriting” and restricted from immediate resale under U.S. federal securities laws and, in certain cases, Canadian securities laws as described in “Shares Eligible for Future Sale.” All of these shares will, however, be able to be resold after the expiration of the lock-up period, as well as pursuant to customary exceptions thereto or upon the waiver of the lock-up agreement by certain of the underwriters. We also intend to register 11,000,000 subordinate voting shares that we may issue under our equity compensation plans. Once we register these subordinate voting shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements. As restrictions on resale end, the market price of our subordinate voting shares could decline if the holders of currently restricted subordinate voting shares sell them or are perceived by the market as intending to sell them.

Because we have no current plans to pay regular cash dividends on our subordinate voting shares following this offering, you may not receive any return on investment unless you sell your subordinate voting shares for a price greater than that which you paid for it.

We do not anticipate paying any regular cash dividends on our subordinate voting shares following this offering. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur. Therefore, any return on investment in our subordinate voting shares is solely dependent upon the appreciation of the price of our subordinate voting shares on the open market, which may not occur. See “Dividend Policy” for more detail.

Our articles, and certain Canadian legislation contain provisions that may have the effect of delaying or preventing a change in control.

Certain provisions of our articles, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors may be willing to pay for our subordinate voting shares. For instance, our articles, to be effective upon the completion of this offering, contain provisions that establish certain advance notice procedures for nomination of candidates for election as directors at shareholders’ meetings. A non-Canadian must file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business”

 

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within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, limitations on the ability to acquire and hold our subordinate voting shares and multiple voting shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in us. Otherwise, there are no limitations either under the laws of Canada or British Columbia, or in our articles on the rights of non-Canadians to hold or vote our subordinate voting shares and multiple voting shares. Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders. See “Description of Share Capital—Certain Important Provisions of Our Articles and the BCBCA.”

Because we are a corporation incorporated in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.

We are a corporation incorporated under the laws of British Columbia with our principal place of business in Toronto, Canada. Some of our directors and officers and the auditors or other experts named herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers or such auditors who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue sky laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.

Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian securities laws.

Changes in U.S. tax laws and regulations or trade rules may impact our effective tax rate and may adversely affect our business, financial condition and operating results.

Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could result in an unfavorable change in our effective tax rate, which could adversely affect our business, financial condition and operating results. Additionally, results of the November 2016 U.S. elections have introduced greater uncertainty with respect to tax and trade policies, tariffs and government regulations affecting trade between the United States and other countries. Major developments in tax policy or trade relations, such as the renegotiation of the North American Free Trade Agreement or the imposition of unilateral tariffs on imported products, could have a material adverse effect on our growth opportunities, business and results of operations.

 

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There could be adverse tax consequence for our shareholders in the United States if we are a passive foreign investment company.

Under United States federal income tax laws, if a company is, or for any past period was, a passive foreign investment company, or PFIC, it could have adverse United States federal income tax consequences to U.S. shareholders even if the company is no longer a PFIC. The determination of whether we are a PFIC is a factual determination made annually based on all the facts and circumstances and thus is subject to change, and the principles and methodology used in determining whether a company is a PFIC are subject to interpretation. We do not believe that we currently are or have been a PFIC, and we do not expect to be a PFIC in the future, but we cannot assure you that we will not be a PFIC in the future. United States purchasers of our subordinate voting shares are urged to consult their tax advisors concerning United States federal income tax consequences of holding our subordinate voting shares if we are considered to be a PFIC. See the discussion under “Material United States Federal Income Tax Considerations for U.S. Holders.”

If we are a PFIC, U.S. holders would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws or regulations. Whether or not U.S. holders make a timely qualified electing fund, or QEF, election or mark-to-market election may affect the U.S. federal income tax consequences to U.S. holders with respect to the acquisition, ownership and disposition of our subordinate voting shares and any distributions such U.S. holders may receive. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our subordinate voting shares.

Canada Goose Holdings Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiary for cash to fund its operations and expenses, including future dividend payments, if any.

As a holding company, our principal source of cash flow will be distributions from our operating subsidiary, Canada Goose, Inc. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in the future will depend on the ability of our subsidiary to generate sufficient cash flow to make upstream cash distributions to us. Our subsidiary is a separate legal entity, and although it is wholly-owned and controlled by us, it has no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. The ability of our subsidiary to distribute cash to us will also be subject to, among other things, restrictions that may be contained in our subsidiary agreements (as entered into from time to time), availability of sufficient funds in such subsidiary and applicable laws and regulatory restrictions. Claims of any creditors of our subsidiary generally will have priority as to the assets of such subsidiary over our claims and claims of our creditors and shareholders. To the extent the ability of our subsidiary to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt and pay dividends, if any, could be harmed.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our subordinate voting shares adversely, the price and trading volume of our subordinate voting shares could decline.

The trading market for our subordinate voting shares is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation regarding our subordinate voting shares adversely, or provide more favorable relative recommendations about our competitors, the price of our subordinate voting shares would likely decline. If any analyst who covers us or may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our subordinate voting shares to decline.

 

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Our constating documents will permit us to issue an unlimited number of subordinate voting shares and multiple voting shares without additional shareholder approval.

Our articles will permit us to issue an unlimited number of subordinate voting shares and multiple voting shares. We anticipate that we will, from time to time, issue additional subordinate voting shares in the future. Subject to the requirements of the NYSE and the TSX, we will not be required to obtain the approval of shareholders for the issuance of additional subordinate voting shares. Although the rules of the TSX generally prohibit us from issuing additional multiple voting shares, there may be certain circumstances where additional multiple voting shares may be issued, including upon receiving shareholder approval. Any further issuances of subordinate voting shares or multiple voting shares will result in immediate dilution to existing shareholders and may have an adverse effect on the value of their shareholdings. Additionally, any further issuances of multiple voting shares may significantly lessen the combined voting power of our subordinate voting shares due to the 10-to-1 voting ratio between our multiple voting shares and subordinate voting shares.

 

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Cautionary Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectation concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. Forward-looking statements contained in this prospectus include, among other things, statements relating to:

 

    expectations regarding industry trends and the size and growth rates of addressable markets;

 

    our business plan and our growth strategies, including plans for expansion to new markets and new products;

 

    expectations for seasonal trends; and

 

    the proposed use of proceeds from this offering.

Although we base the forward-looking statements contained in this prospectus on assumptions that we believe are reasonable, we caution you that actual results and developments (including our results of operations, financial condition and liquidity, and the development of the industry in which we operate) may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if results and developments are consistent with the forward-looking statements contained in this prospectus, those results and developments may not be indicative of results or developments in subsequent periods. Certain assumptions made in preparing the forward-looking statements contained in this prospectus include:

 

    our ability to implement our growth strategies;

 

    our ability to maintain good business relationships with our suppliers, wholesalers and distributors;

 

    our ability to keep pace with changing consumer preferences;

 

    our ability to protect our intellectual property; and

 

    the absence of material adverse changes in our industry or the global economy.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this prospectus beginning on page 15, which include, but are not limited to, the following risks:

 

    we may be unable to maintain the strength of our brand or to expand our brand to new products and geographies;

 

    we may be unable to protect or preserve our brand image and proprietary rights;

 

    we may not be able to satisfy changing consumer preferences;

 

    an economic downturn may affect discretionary consumer spending;

 

    we may not be able to compete in our markets effectively;

 

    we may not be able to manage our growth effectively;

 

    poor performance during our peak season may affect our operating results for the full year;

 

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    our indebtedness may adversely affect our financial condition;

 

    our ability to maintain relationships with our select number of suppliers;

 

    our ability to manage our product distribution through our retail partners and international distributors;

 

    the success of our marketing programs;

 

    the risk our business is interrupted because of a disruption at our headquarters; and

 

    fluctuations in raw materials costs or currency exchange rates.

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this prospectus. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. If any of the these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus.

Given these risks and uncertainties, you are cautioned not to place substantial weight or undue reliance on these forward-looking statements when making an investment decision. Any forward-looking statement that we make in this prospectus speaks only as of the date of this prospectus, and, except as required by law, we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

Any references to forward-looking statements in this prospectus include forward-looking information within the meaning of applicable Canadian securities laws.

 

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Exchange Rate Information

The following table sets forth, for each period indicated, the high and low exchange rate for U.S. dollars expressed in Canadian dollars, and the average exchange rate for the periods indicated. Averages for year-end periods are calculated by using the exchange rates on the last day of each full month during the relevant period and the last available exchange rate in March during the relevant fiscal year. These rates are based on the noon buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our consolidated financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.

On March 3, 2017, the noon buying rate was US$1.00 = $1.3419.

 

Year Ended    Period End      Period Average Rate      High Rate      Low Rate  

March 31, 2014

   $ 1.1053      $ 1.0580      $ 1.1251      $ 1.0023  

March 31, 2015

   $ 1.2681      $ 1.1471      $ 1.2803      $ 1.0633  

March 31, 2016

   $ 1.2969      $ 1.3128      $ 1.4592      $ 1.1950  

Last Six Months

           

September 2016

   $ 1.3115      $ 1.3108      $ 1.3247      $ 1.2843  

October 2016

   $ 1.3403      $ 1.3251      $ 1.3403      $ 1.3105  

November 2016

   $ 1.3425      $ 1.3434      $ 1.3581      $ 1.3335  

December 2016

   $ 1.3426      $ 1.3339      $ 1.3555      $ 1.3119  

January 2017

   $ 1.3030      $ 1.3183      $ 1.3437      $ 1.3030  

February 2017

   $ 1.3247      $ 1.3109      $ 1.3247      $ 1.3003  

 

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Use of Proceeds

We estimate that the net proceeds to us from our issuance and sale of 7,149,000 subordinate voting shares in this offering will be approximately $100 million, after deducting underwriting commissions. This estimate assumes an initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus.

We will not receive any proceeds from the sale of subordinate voting shares by the selling shareholders. After deducting underwriting commissions, the selling shareholders will receive approximately $179.7 million of net proceeds from this offering (or approximately $221.7 million if the underwriters exercise their over-allotment option in full).

We intend to use the proceeds from this offering to repay $65.0 million of our outstanding indebtedness under our Term Loan Facility and $35.0 million of outstanding indebtedness under our Revolving Facility. The loans currently outstanding under the Revolving Facility, which matures in June 2021, are LIBOR Loans, bearing interest at 2.73%. The Revolving Facility was initially used to repay and extinguish our prior secured credit facility. We use our Revolving Facility in the normal course as a source of liquidity for short-term working capital needs and general corporate purposes. The term loans under the Term Loan Facility, which mature in December 2021, currently bear interest at the LIBOR Rate (subject to a minimum rate of 1.00% per annum) plus an Applicable Margin of 5.00%. The proceeds of the term loans borrowed under the Term Loan Facility were used to effect the steps described in this prospectus under “Recapitalization,” to pay transaction expenses in connection with the closing of the Term Loan Facility and for other general corporate purposes. See “Description of Indebtedness,” “Recapitalization” and “Certain Relationships and Related Party Transactions.”

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per subordinate voting share, the midpoint of the price range set forth on the cover of this prospectus, would decrease (increase) the shares offered by us in this offering by approximately 500,000 shares in order to continue to receive net proceeds of approximately $100 million.

 

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Dividend Policy

Prior to the completion of this offering, in connection with the Recapitalization, we made certain distributions on our then outstanding classes of common shares. See “Recapitalization.” Following completion of the offering, our board of directors does not currently intend to pay dividends on our subordinate voting shares or multiple voting shares. We currently intend to retain any future earnings to fund business development and growth, and we do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. Currently, the provisions of our senior secured credit facilities place certain limitations on the amount of cash dividends that our operating subsidiary can pay. See “Description of Indebtedness.”

 

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Recapitalization

On December 2, 2016 we completed a series of transactions, which we collectively refer to as the “Recapitalization,” including the following sequential steps in which we:

 

    entered into term loans under the Term Loan Facility of approximately $216.7 million, the terms of which are described under “Description of Indebtedness—Term Loan Facility”;

 

    repaid all amounts outstanding , including all accrued interest, under our Senior Convertible Subordinated Note and our Junior Convertible Subordinated Note, each dated December 9, 2013, totaling approximately $91.0 million;

 

    redeemed all of our issued and outstanding Class A Senior Preferred Shares in exchange for a payment of approximately $53.1 million;

 

    redeemed all of our issued and outstanding Class A Junior Preferred Shares in exchange for a payment of approximately $4.1 million;

 

    effected a 1-for-10,000,000 split of our Class A Common Shares, and a 1-for-10,000,000 split of our Class B Common Shares;

 

    effected a return of capital to the holders of our Class A Common Shares in the amount of approximately $0.7 million;

 

    exchanged all of the issued and outstanding Class B Senior Preferred Shares, Class B Junior Preferred Shares and Class B Common Shares into Class D Preferred Shares with a fixed redemption value of approximately $63.6 million and 30,000,000 Class A Common Shares;

 

    issued a secured, non-interest bearing loan of approximately $63.6 million to DTR LLC, an entity indirectly controlled by our President and Chief Executive Officer, as evidenced by the DTR Promissory Note, for which DTR LLC pledged all of the Class D Preferred Shares held by DTR LLC in favor of CGHI; and

 

    made adjustments in accordance with the Canada Goose Holdings Inc. Stock Option Plan, which was established in 2013, to (i) convert all outstanding options to purchase Class B Common Shares and Class A Junior Preferred Shares into options to purchase Class A Common Shares, and (ii) reduce the exercise price of certain options and/or issue new options to certain option holders.

On January 31, 2017, all of our Class D Preferred Shares were redeemed by the company for cancellation and the DTR Promissory Note was extinguished in exchange for the redemption of the Class D Preferred Shares. See “Certain Relationships and Related Party Transactions.”

In connection with this offering we will amend our articles in order to, among other things:

 

    amend and redesignate our Class A Common Shares as multiple voting shares;

 

    eliminate our Class B Common Shares, Class A Senior Preferred Shares, Class B Senior Preferred Shares, Class A Junior Preferred Shares, Class B Junior Preferred Shares, Class C Junior Preferred Shares and the Class D Preferred Shares from our share capital; and

 

    create our subordinate voting shares. See “Description of Share Capital.”

 

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Capitalization

The following table sets forth our cash and capitalization at December 31, 2016:

 

    on an actual basis; and

 

    on a pro forma as adjusted basis to give effect to (1) the redesignation of our Class A Common Shares as multiple voting shares and creation of our subordinate voting shares, (2) the issuance of subordinate voting shares by us in this offering based upon an assumed initial public offering price of $15.00 per subordinate voting share, which is the midpoint of the price range set forth on the cover page of this prospectus and the application of the estimated net proceeds from the offering as described in “Use of Proceeds” and (3) the payment of approximately $9.6 million out of available cash in fees under our management agreement in connection with the offering and termination of the management agreement, as described under “Certain Relationships and Related Party Transactions—Management Agreement.”

You should read this table in conjunction with the information contained in “Use of Proceeds,” “Selected Historical Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

     As of December 31, 2016   

CAD$000s

   Actual      Pro Forma
As Adjusted
 
 

Cash

   $ 30,180      $ 15,380 (1) 
  

 

 

    

 

 

 

Long-term debt, including current portions:

     

Revolving Facility

     59,825        24,825

Term Loan

     218,298        153,298
  

 

 

    

 

 

 

Total debt

     278,123        178,123

Shareholders’ equity:

     

Class A Common Shares, no par value; unlimited shares authorized, 100,000,000 shares issued and outstanding on an actual basis; nil shares issued and outstanding on a pro forma as adjusted basis

     2,652        —    

Multiple voting shares, no par value; nil shares authorized, issued and outstanding on an actual basis; unlimited shares authorized and 87,149,000 shares issued and outstanding on a pro forma as adjusted basis

     —          2,310  

Subordinate voting shares, no par value; nil shares authorized, issued and outstanding on an actual basis; unlimited shares authorized and 20,000,000 shares issued and outstanding on a pro forma as adjusted basis

     —          100,342  

Contributed surplus

     3,336        3,336

Retained earnings

     63,532        48,932  

Accumulated other comprehensive loss

     (1,421)        (1,421 )
  

 

 

    

 

 

 

Total shareholder’s equity (1)

     68,099        153,499  
  

 

 

    

 

 

 

Total capitalization

   $ 346,222      $ 331,622  
  

 

 

    

 

 

 

 

(1) Gives effect to the payment of approximately $5.2 million in transaction expenses incurred since December 31, 2016 in connection with this offering.

 

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Dilution

If you invest in our subordinate voting shares in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per subordinate voting share in this offering and the pro forma as adjusted net tangible book value per subordinate voting share after this offering. Dilution results from the fact that the initial public offering price per subordinate voting share is substantially in excess of the net tangible book deficit per share attributable to the existing shareholders for our presently outstanding shares. Our net tangible book deficit per share represents the amount of our total tangible assets (total assets less intangible assets) less total liabilities, divided by the number of shares issued and outstanding.

As of December 31, 2016, we had a historical net tangible book deficit of $105.2 million, or $(1.05) per share, based on 100,000,000 pro forma multiple voting shares and subordinate voting shares outstanding as of such date. Dilution is calculated by subtracting net tangible book deficit per share from the assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

Investors participating in this offering will incur immediate and substantial dilution. Without taking into account any other changes in such net tangible book deficit after December 31, 2016, after giving effect to the sale of subordinate voting shares in this offering assuming an initial public offering price of $15.00 per subordinate voting share (the midpoint of the price range set forth on the cover page of this prospectus), less the underwriting commissions and estimated offering expenses payable by us, our pro forma net tangible book value deficit as of December 31, 2016 would have been approximately $(20.0) million, or $(0.19) per share. This amount represents an immediate decrease in net tangible book deficit of $0.86 per share to the existing shareholders and immediate dilution of $15.19 per share to investors purchasing our subordinate voting shares in this offering. The following table illustrates this dilution on a per share basis:

 

     $      US$  

Assumed initial public offering price per subordinate voting share (1)

     $ 15.00        $ 11.45  

Net tangible book deficit per subordinate voting share as of December 31, 2016, before giving effect to this offering

   $ (1.05      $ (0.80  

Decrease in net tangible book deficit per subordinate voting share attributable to investors purchasing shares in this offering

     0.86          0.66    
  

 

 

      

 

 

   

Pro forma net tangible book value per subordinate voting share, after giving effect to this offering

     (0.19        (0.14  

Dilution in as adjusted net tangible book deficit per subordinate voting share to investors in this offering

       15.19          11.49  
    

 

 

      

 

 

 

 

(1) Translated for convenience only using the noon buying rate for Canadian dollars in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on February 24, 2017 of $1.00=US$0.76.

A $1.00 increase in the assumed initial public offering price of $15.00 per subordinate voting share, the midpoint of the price range set forth on the cover of this prospectus, would decrease the shares offered by us in this offering by approximately 500,000 shares. This would result in a decrease in the pro forma net tangible book deficit by approximately $6.0 million or a decrease of $0.87 per share. A $1.00 decrease in the assumed initial public offering price of $15.00 per subordinate voting share, the midpoint of the price range set forth on the cover of this prospectus, would increase the shares offered by us in this offering by approximately 500,000 shares. This would result in a decrease in the pro forma net tangible book deficit by approximately $5.4 million or $1.14 per share.

 

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The following table summarizes, as of December 31, 2016, on the pro forma basis described above, the aggregate number of shares purchased from us, the total consideration paid to us, and the average price per share paid by purchasers of such shares and by new investors purchasing subordinate voting shares in this offering.

 

     Shares purchased     Total consideration     Average price
per share
 
     Number      Percent     Amount      Percent    

Existing shareholders (1)

     100,000,000        93   $ 3,350,408        3   $ 0.03  

New investors

     7,149,000        7     107,235,000        97   $ 15.00  
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

     107,149,000        100     110,585,408        100  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

(1) Does not give effect to the sale of 12,851,000 subordinate voting shares by the selling shareholders in this offering.

After giving effect to the sale of 12,851,000 subordinate voting shares by the selling shareholders in this offering, the percentage of our shares held by existing shareholders would be 81% and the percentage of our shares held by new investors would be 19%. If the underwriters were to fully exercise their over-allotment option to purchase additional subordinate voting shares from the selling shareholders, the percentage of our shares held by existing shareholders would be 79%, and the percentage of our shares held by new investors would be 21%.

The number of shares to be outstanding after this offering is based on no subordinate voting shares and 100,000,000 multiple voting shares outstanding on a pro forma basis as of December 31, 2016 and excludes 11,000,000 subordinate voting shares reserved for future issuance under our equity incentive plans as of March 1, 2017, of which 5,899,660 subordinate voting shares were issuable upon exercise of stock options at a weighted average exercise price of $1.63 per share.

 

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Selected Historical Consolidated Financial Data

The following tables set forth our selected historical consolidated financial data. You should read the following selected historical consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

We have derived the selected historical consolidated information for the years ended March 31, 2016 and March 31, 2015 and the periods from December 9, 2013 to March 31, 2014 and April 1, 2013 to December 8, 2013 and the selected consolidated financial position information as of March 31, 2015 and 2016 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated statement of operations information for the nine months ended December 31, 2015 and 2016 and the selected consolidated financial position information as of December 31, 2016 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS and are presented in thousands of Canadian dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.

On December 9, 2013, Bain Capital acquired a majority equity interest in our business as part of the Acquisition. Accordingly, the financial statements presented elsewhere in this prospectus as of and for fiscal 2014 reflect the periods both prior and subsequent to the Acquisition. The consolidated financial statements for March 31, 2014 are presented separately for the predecessor period from April 1, 2013 through December 8, 2013, which we refer to as the Predecessor 2014 Period, and the successor period from December 9, 2013 through March 31, 2014, which we refer to as the Successor 2014 Period, with the periods prior to the Acquisition being labeled as predecessor and the periods subsequent to the Acquisition labeled as successor. For the purpose of performing a comparison to fiscal 2015, we have prepared Unaudited Pro Forma Combined Supplemental Financial Information for fiscal 2014, which gives effect to the Acquisition as if it had occurred on April 1, 2013, and which we refer to as the Unaudited Pro Forma Combined 2014 Period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation.”

 

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    Successor           Predecessor  

CAD$000s

(except per share data)

  Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
    Fiscal Year
ended
March 31,

2016
    Fiscal Year
ended
March 31,

2015
    Period from
December 9,
2013 to
March 31,

2014
          Period from
April 1, 2013
to December 8,

2013
 

Statement of Operations Data:

               

Revenue

    352,681       248,909       290,830       218,414       17,263           134,822  

Cost of sales

    168,403       122,107       145,206       129,805       14,708           81,613  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Gross profit

    184,278       126,802       145,624       88,609       2,555           53,209  

Selling, general & administrative expenses

 

 

110,270

 

 

 

72,851

 

    100,103       59,317       20,494           30,119  

Depreciation and amortization

    4,901       3,585       4,567       2,623       804           447  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Operating income (loss)

    69,107       50,366       40,954       26,669       (18,743         22,643  

Net interest and other finance costs(1)

    8,620       6,017       7,996       7,537       1,788           1,815  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Income before income tax expense (recovery)

 

 

60,487

 

 

 

44,349

 

    32,958       19,132       (20,531         20,828  

Income tax expense (recovery)

    15,416       8,662       6,473       4,707       (5,054         5,550  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Net income (loss)

    45,071       35,687       26,485       14,425       (15,477         15,278  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Other comprehensive loss

    (729     —         (692          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Total comprehensive income (loss)

    44,342       35,687       25,793       14,425       (15,477         15,278  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

 

Earnings (loss) per share—

               

Basic

    0.45       0.36       0.26       0.14       (0.15         157,505.15  

Diluted

    0.44       0.35       0.26       0.14       (0.15         157,505.15  

Weighted average number of shares outstanding—

               

Basic

    100,000,000       100,000,000       100,000,000       100,000,000       100,000,000           97  

Diluted

    101,751,470       101,622,219       101,680,207       101,211,134       100,000,000           97  
 

Other Data:

               

EBITDA(2)

  $ 75,578     $ 55,009     $ 46,870     $ 30,063     $ (17,714       $ 23,609  

Adjusted EBITDA(2)

    92,443       61,913       54,307       37,191       (8,113         23,984  

Adjusted EBITDA Margin(3)

    26.2     24.9     18.7     17.0     (47.0 )%          17.8

Adjusted Net Income (loss)(2)

    58,851       38,520       30,122       21,374       (7,691         15,554  

Gross Margin

    52.3     50.9     50.1     40.6     14.8         39.5

 

(1) Net interest and other finance costs consist of interest expense relating to our subordinated debt, which was refinanced in connection with the Recapitalization, as well as our Revolving Facility and prior credit facility. Interest expense associated with the subordinated debt represented $3,822 in the nine months ended December 31, 2016, $5,598 in fiscal 2016, $5,398 in fiscal 2015 and $4,809 in the Unaudited Pro Forma Period ended March 31, 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” for a presentation of the Unaudited Pro Forma Combined 2014 Period.

 

(2) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures” for a reconciliation to the nearest IFRS measure.

 

(3) See note 4 in “Prospectus Summary—Summary Historical Consolidated Financial and Other Data.”

 

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    As of
December 31,
2016
    As of
March 31,

2016
    As of
March 31,

2015
         

Financial Position Information:

         

Cash

    30,180       7,226       5,918      

Total assets

    442,062       353,018       274,825      

Total liabilities

    373,963       210,316       160,392      

Shareholders’ equity

    68,099       142,702       114,433      

 

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results, performance and achievements could differ materially from those implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under “Risk Factors.” See “Cautionary Note Regarding Forward-Looking Statements.”

Our consolidated financial statements have been prepared in accordance with IFRS. All amounts are in Canadian dollars except where otherwise indicated. See “Basis of Presentation.” All references to “fiscal 2014” refer to our Unaudited Pro Forma Combined Supplemental Financial Information for the year ended March 31, 2014.

Overview

Founded 60 years ago in a small Toronto warehouse, Canada Goose has grown into a highly coveted global outerwear brand. We are recognized for authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality. This reputation is decades in the making and is rooted in our commitment to creating premium products that deliver unrivaled functionality where and when it is needed most. Be it Canadian Arctic Rangers serving their country or an explorer trekking to the South Pole, people who live, work and play in the harshest environments on Earth have turned to Canada Goose. Throughout our history, we have found inspiration in these technical challenges and parlayed that expertise into creating exceptional products for any occasion. From research facilities in Antarctica and the Canadian High Arctic to the streets of Toronto, New York City, London, Paris, Tokyo and beyond, people have fallen in love with our brand and made it a part of their everyday lives.

We are deeply involved in every stage of our business as a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. This vertically integrated business model allows us to directly control the design and development of our products while capturing higher margins. As of December 31, 2016, our products are sold through select outdoor, luxury and online retailers and distributors in 36 countries, our e-commerce sites in Canada, the United States, the United Kingdom and France and two recently opened retail stores in Toronto and New York City.

Factors Affecting our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us and may pose risks and challenges, including those discussed below and in the “Risk Factors” section of this prospectus.

 

    Market Expansion. Our market expansion strategy has been a key driver of our recent revenue growth and we have identified a number of additional high potential markets where we plan to continue to execute our expansion strategy. Across all of our markets, we plan to focus on increasing brand awareness, deepening our wholesale presence and rolling out our DTC channel as market conditions permit. We expect that marketing and selling expenses to support these initiatives will continue to grow in proportion to anticipated revenue growth.

 

   

Growth in our DTC Channel. We introduced our DTC channel in fiscal 2015 with the launch of our Canadian e-commerce store and have since established e-commerce stores in the United States, the United Kingdom and France. A jacket sale in our DTC channel provides two-to-four times greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel. In the fall of 2016, we opened our first two retail stores in Toronto and in New York City and anticipate opening a select number of additional retail locations where we believe

 

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they can operate profitably. In fiscal 2018 we are targeting opening between 4 and 6 e-commerce stores, with a long-term target of 15 to 20 e-commerce stores. In addition, in fiscal 2018 we are targeting opening 3 retail stores in new geographies with a long term target of 15 to 20 retail stores. As we continue to increase the percentage of sales from our DTC channel, we expect to maintain a balanced multi-channel distribution model. Growth in our DTC channel is also expected to reduce the current seasonal concentration of our revenue by allowing us to recognize revenue when customers make purchases instead of when products are shipped to our retail partners. As a result, we expect a relatively higher percentage of our DTC sales to be recognized in our fiscal fourth quarter. Finally, as we expand our DTC channel, including opening additional retail stores, we expect our capital expenditures to continue to represent 6.0 to 8.0% of revenue.

 

    New Products. The evolution of our heritage line of winter products and expansion of our product assortment across Spring, Fall and new product categories has contributed meaningfully to our performance and we intend to continue investing in the development and introduction of new products. We expect to introduce a new Spring collection in stores in early calendar 2017 and we expect our new knitwear collection to be rolled out gradually over fiscal 2018 and 2019. As we introduce additional products, we expect that they will help mitigate the seasonal nature of our business and expand our addressable geographic market.

 

    Seasonality. We experience seasonal fluctuations in our revenue and operating results and we historically have realized a significant portion of our revenue and earnings for the fiscal year during our second and third fiscal quarters. We generated 77.4%, 78.1% and 78.3% of our revenues in the second and third fiscal quarters of fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Our business model also provides meaningful visibility into expected future revenues, with a significant majority of wholesale orders secured during the third and fourth quarters of the prior fiscal year. In addition, we typically experience net losses in the first and fourth quarters as we invest ahead of our most active season. Working capital requirements typically increase throughout our first and second fiscal quarters as inventory builds to support our peak shipping and selling period which typically occurs from August to November. Cash provided by operating activities is typically highest in our third fiscal quarter due to the significant inflows associated with our peak selling season.

 

    Foreign Exchange. We sell a significant portion of our products to customers outside of Canada, which exposes us to fluctuations in foreign currency exchange rates. In fiscal 2016, 2015 and 2014, we generated 54.6%, 49.3% and 32.5%, respectively, of our revenue in currencies other than Canadian dollars. Our sales outside of Canada also present an opportunity to strategically price our products to improve our profitability. In addition, the majority of our raw materials are sourced outside of Canada, primarily in U.S. dollars. As the majority of our wholesale revenue is derived from retailer orders made prior to the beginning of the fiscal year, we have a high degree of visibility into our anticipated future cash flows from operations. SG&A costs are typically denominated in the currency of the country in which they are incurred. This extended visibility allows us to enter into hedging contracts with respect to our foreign currency exposure.

Segments

We report our results in two segments which are aligned with our sales channels: Wholesale and DTC. We measure each reportable operating segment’s performance based on revenue and segment operating income. Through our wholesale segment we sell to retail partners and distributors in 36 countries, as of December 31, 2016. Our DTC segment is comprised of sales through our e-commerce sites and retail stores. Through our DTC segment, we sell online to customers in Canada, the United States, the United Kingdom and France and in retail stores as of the third quarter of fiscal 2017 to customers in Toronto and New York City.

Our wholesale segment and DTC segment contributed 88.6% and 11.4% of our revenue, respectively, in fiscal 2016. For the nine months ended December 31, 2016, the wholesale segment and DTC segment contributed 77.7% and 22.3%, respectively.

 

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Components of Our Results of Operations and Trends Affecting Our Business

Revenue

Revenue in our wholesale channel is comprised of sales to retail partners and distributors of our products. Wholesale revenue from the sale of goods, net of an estimate for sales returns, discounts and allowances, is recognized when the significant risks and rewards of ownership of the goods have passed to the retail partner or distributor which, depending on the terms of the agreement with the reseller, is either at the time of shipment from our third-party warehouse or upon arrival at the reseller’s facilities.

Revenue in our DTC channel consists of sales through our e-commerce operations and, beginning in the third quarter of fiscal 2017, in our retail stores. Revenue through e-commerce operations and retail stores are recognized upon delivery of the goods to the customer and when collection is reasonably assured, net of an estimated allowance for sales returns.

Gross Profit

Gross profit is our revenue less cost of sales. Cost of sales includes the cost of manufacturing our products, including raw materials, direct labour and overhead, plus in-bound freight, duty and non-refundable taxes incurred in delivering the goods to distribution centres managed by third parties. It also includes all costs incurred in the production, design, distribution and merchandise departments, as well as inventory provision expense. The primary drivers of our cost of sales are the costs of raw materials, which are sourced both in Canadian dollars and U.S. dollars, labour in Canada and the allocation of overhead. Gross margin measures our gross profit as a percentage of revenue.

Over the past two fiscal years, our gross margin has improved as a result of an increase in sales attributable to our DTC channel, execution on our geographic expansion strategy, an increase in the average effective price of our products and favourable foreign exchange impacts. We expect to continue to improve gross margin in future periods as a result of expanding DTC sales and strategically increasing the pricing of our products at a rate that exceeds the expected increases in production costs.

Selling, General and Administrative Expenses (“SG&A”)

SG&A expenses consist of selling costs to support our customer relationships and to deliver our product to our retail partners, e-commerce customers and retail stores. It also includes our marketing and brand investment activities and the corporate infrastructure required to support our ongoing business.

Selling costs generally correlate to revenue timing and therefore experience similar seasonal trends. As a percentage of sales, we expect these selling costs to increase as our business evolves. This increase is expected to be driven primarily by the growth of our DTC channel, including the investment required to support additional e-commerce sites and retail stores. The growth of our DTC channel is expected to be accretive to net income given the higher gross profit margin of our DTC channel which results from the opportunity to capture the full retail value of our products.

General and administrative expenses represent costs incurred in our corporate offices, primarily related to personnel costs, including salaries, variable incentive compensation, benefits, share-based compensation and other professional service costs. We have invested considerably in this area to support the growing volume and complexity of our business and anticipate continuing to do so in the future. In addition, in connection with this offering, we expect to incur transaction costs and stock compensation expenses and, following this offering, we anticipate a significant increase in accounting, legal and professional fees associated with being a public company. Foreign exchange gains and losses are recorded in SG&A and comprise translation of assets and liabilities denominated in currencies other than the functional currency of the entity, including the term loan, mark-to-market adjustments on derivatives, foreign exchange forward contracts, and realized gains on settlement of assets and liabilities.

 

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Income Taxes

We are subject to income taxes in the jurisdictions in which we operate and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. The primary regions that determine the effective tax rate are Canada, the United States, Switzerland and the United Kingdom. Over the long-term, we target our annual effective income tax rate to be approximately 25%.

Basis of Presentation

On November 21, 2013, Bain Capital incorporated Canada Goose Holdings Inc. under the laws of British Columbia. Pursuant to the purchase and sale agreement dated December 9, 2013, a wholly-owned subsidiary of the Successor acquired all the operating assets of the former Canada Goose Inc. and sales and distribution companies owned by the former Canada Goose Inc. which consisted of Canada Goose Europe AB, Canada Goose US, Inc. and Canada Goose Trading Inc.

The Acquisition was accounted for as a business combination using the acquisition method of accounting and the Successor financial statements reflect a new basis of accounting that is based on the fair value of assets acquired and liabilities assumed as of the effective time of the agreement. Periods presented prior to December 9, 2013 represent the operations of the Predecessor and the period presented as of December 9, 2013 represents the operations of the Successor.

The fiscal year ended March 31, 2014 includes the 252 day Predecessor 2014 Period from April 1, 2013 through December 8, 2013 and the 113 day Successor 2014 Period from December 9, 2013 through March 31, 2014. Accordingly, the company’s accumulated deficit as of March 31, 2014, and the company’s retained earnings as at March 31, 2015 and March 31, 2016 represent only the results of operations subsequent to and including December 9, 2013, the date of the Acquisition. The Predecessor and Successor periods have been separated by a black line on the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting. All intercompany transactions have been eliminated.

For the purpose of performing a comparison to the fiscal year ended March 31, 2015, we have prepared Unaudited Pro Forma Combined Supplemental Financial Information for the year ended March 31, 2014, which gives effect to the Acquisition as if it had occurred on April 1, 2013, and which we refer to as the Unaudited Pro Forma Combined 2014 Period. The Unaudited Pro Forma Combined 2014 Period discussed herein has been prepared in accordance with Article 11 of Regulation S-X promulgated under the United States Securities Act of 1933, as amended, and does not purport to represent what our actual consolidated results of operations would have been had the Acquisition actually occurred on April 1, 2013, nor is it necessarily indicative of future consolidated results of operations. The Unaudited Pro Forma Combined 2014 Period is being discussed herein for informational purposes only and does not reflect any operating efficiencies or potential cost savings that may result from the consolidation of operations.

 

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The pro forma adjustments made to give effect to the Acquisition, as if it had occurred on April 1, 2013, are summarized in the table below:

 

CAD$000s    Period from
April 1,
2013 to
December 8,
2013
     Period from
December 9,
2013 to
March 31,
2014
    Pro Forma
Adjustments
     Unaudited
pro forma
combined
year ended
March 31,
2014
 

Revenue

     134,822        17,263       —          152,085  

Cost of sales

     81,613        14,708       (2,906 )(a)       93,415  
          

Gross profit

     53,209        2,555       2,906        58,670  

Selling, general and administrative expenses

     30,119        20,494       (5,528 )(b)(e)       45,085  

Depreciation and amortization

     447        804       1,151 (c)       2,402  
          

Operating income (loss)

     22,643        (18,743     7,283        11,183  

Net interest and other finance costs

     1,815        1,788       3,533 (d)(f)       7,136  
          

Income (loss) before income taxes

     20,828        (20,531     3,750        4,047  

Income tax expense (recovery)

     5,550        (5,054     528 (g)       1,024  
          

Net income (loss)

     15,278        (15,477     3,222        3,023  
  

 

 

    

 

 

   

 

 

    

 

 

 

Notes to unaudited pro forma presentation:

 

(a) Represents fair value step-up of inventory on-hand at the time of Acquisition. The amount sold through in the period from December 9, 2013 through March 31, 2014 has been removed from cost of sales.
(b) These amounts reflect the transaction costs incurred by the company as a result of the Acquisition. These include costs that were directly attributable to the transaction, such as legal, due diligence, tax, audit, consulting, and other professional services. These amounts would not have been incurred in the year had the transaction occurred on April 1, 2013 and therefore have been removed from SG&A on a pro forma basis.
(c) At the time of the Acquisition, a customer list intangible asset in the amount of $8.7 million was recognized with a useful life of four years. Had the Acquisition occurred on April 1, 2013, a full year of amortization would have been recorded.
(d) As a result of the Acquisition, the revolving debt that existed in the Predecessor entity was replaced. Had the Acquisition occurred on April 1, 2013, this interest would not have been incurred. In connection with the Acquisition, the company extinguished the existing long-term debt and entered a credit facility for $19.5 million. A pro forma adjustment for a full year of interest on the credit facility has been recorded.
(e) Bain management fee for the full year as if the transaction would have occurred on April 1, 2013.
(f) Subordinated debt in the amount of $79.7 million was issued on the date of Acquisition. This adjustment reflects the interest cost associated with the subordinated debt had the transaction occurred on April 1, 2013.
(g) Income tax expense calculated at the annual effective tax rate of 25.3% of pro forma income before taxes.

 

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Results of Operations

 

     Successor      Predecessor  
CAD$000s    Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
     Fiscal Year
ended
March 31,
2016
    Fiscal Year
ended
March 31,
2015
     Period from
December 9,
2013 to
March 31,
2014
     Period from
April 1,
2013 to
December
8, 2013
 

Revenue

   $ 352,681     $ 248,909        290,830       218,414        17,263        134,822  

Cost of sales

     168,403       122,107        145,206       129,805        14,708        81,613  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Gross profit

     184,278       126,802        145,624       88,609        2,555        53,209  

Selling, general and administrative expenses

     110,270       72,851        100,103       59,317        20,494        30,119  

Depreciation and amortization

     4,901       3,585        4,567       2,623        804        447  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Operating income (loss)

     69,107       50,366        40,954       26,669        (18,743      22,643  

Net interest and other finance costs

     8,620       6,017        7,996       7,537        1,788        1,815  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Income (loss) before income tax (recovery)

     60,487       44,349        32,958       19,132        (20,531      20,828  

Income tax expense (recovery)

     15,416       8,662        6,473       4,707        (5,054      5,550  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss)

     45,071       35,687        26,485       14,425        (15,477      15,278  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Other comprehensive loss

     (729     —          (692     —          —          —    
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

     44,342       35,687        25,793       14,425        (15,477      15,278  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Three Months Ended December 31, 2016 Compared to Three Months Ended December 31, 2015

Revenue

Revenue for the three months ended December 31, 2016 increased by $93.5 million, or 81.0%, compared to the three months ended December 31, 2015, which was driven by an increase in revenue in both our wholesale and DTC channels. On a constant currency basis, revenue increased by 85.8% for the three months ended December 31, 2016 compared to three months ended December 31, 2015.

Revenue in our wholesale channel was $137.0 million, an increase of $38.4 million, compared to the three months ended December 31, 2015. The increase in revenue in our wholesale channel was driven primarily by sales of new products from our Spring and Fall collections to our retail partners, strong growth outside North America and, to a lesser extent, by price increases of our products in certain geographies.

Revenue in our DTC channel was $72.0 million, an increase of $55.1 million, compared to the three months ended December 31, 2015, reflecting strong performance from our Canadian, U.S., France and U.K. e-commerce sites since launching in August of 2014, September of 2015 and September of 2016, respectively and incremental revenue generated from retail stores opened in Toronto and New York in the third quarter of fiscal 2017.

Cost of Sales and Gross Profit

Cost of sales for the three months ended December 31, 2016 increased by $37.2 million, or 72.1%, compared to the three months ended December 31, 2015. Gross profit was $120.3 million, representing a gross margin of

 

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57.5%, compared with $63.9 million for the three months ended December 31, 2015, representing a gross margin of 55.3%. The increase in gross profit and 220 basis point increase in gross margin was attributable to higher revenue, particularly in our DTC channel.

Cost of sales in our wholesale channel for the three months ended December 31, 2016 was $71.5 million, an increase of $23.8 million, compared to the three months ended December 31, 2015. Gross profit was $65.5 million, representing a gross margin of 47.8%, compared with $50.9 million for the three months ended December 31, 2015, representing a gross margin of 51.6%. The decline in gross margin of 380 basis points was attributable primarily to the shift of sales to lower margin geographies, foreign exchange headwinds on proportionately higher European sales and, to a lesser extent, higher raw materials costs sourced in U.S. dollars. The increase in gross profit was attributable to higher sales and lower product costs in Canadian dollars.

Cost of sales in our DTC channel for the three months ended December 31, 2016 was $17.2 million, an increase of $13.4 million, compared to the three months ended December 31, 2015. Gross profit was $54.8 million, representing a gross margin of 76.1%, compared with $13.0 million of gross profit for the three months ended December 31, 2015, representing a gross margin of 77.2%. The increase in gross profit was attributable to higher revenue as a result of incremental retail store revenue generated during the three month period, growth in e-commerce business and lower product costs in Canadian dollars, partially offset by higher raw materials costs in U.S. dollars.

Selling, General and Administrative Expenses

SG&A expenses for the three months ended December 31, 2016 increased by $30.1 million, or 94.2%, compared to the three months ended December 31, 2015, which represents 29.7% of revenue for the three months ended December 31, 2016 compared to 27.6% of revenue for the three months ended December 31, 2015. The increase in costs was attributable to an increase in headcount and brand investment to support new marketing initiatives, transaction costs related to this public offering, entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores in the United States and Canada.

SG&A expenses in our wholesale channel for the three months ended December 31, 2016 was $10.5 million, a decrease of $0.3 million, compared to the three months ended December 31, 2015, which represents 7.7% of segment revenue for the three months ended December 31, 2016 compared to 11.0% of segment revenue for the three months ended December 31, 2015. The decrease in costs was attributable to expenses incurred in the comparable prior year period restructuring our international operations to Zug, Switzerland which encompassed closing several offices across Europe, relocating personnel and incurring temporary office costs and termination of third party sales agents. These aforementioned prior period costs more than offset an increase in headcount and operational and selling expenditures to support new marketing initiatives and entry into new markets.

SG&A expenses in our DTC channel for the three months ended December 31, 2016 was $13.1 million, an increase of $7.9 million, compared to the three months ended December 31, 2015, which represents 18.2% of segment revenue for the three months ended December 31, 2016 compared to 30.6% of segment revenue for the three months ended December 31, 2015. The increase in segment costs was attributable to establishing our new e-commerce sites in France and the United Kingdom, maintaining our existing e-commerce sites and opening our two retail stores in the United States and Canada.

Net Interest and Other Finance Costs

Finance costs for the three months ended December 31, 2016 increased by $0.9 million, or 39.4%, compared to the three months ended December 31, 2015 primarily as a result of higher average borrowings of $236.0 million compared to $169.3 million in the same period in fiscal 2016 used to finance working capital, partially offset by a lower effective interest rate.

 

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Income Taxes

Income tax expense for the three months ended December 31, 2016 was $14.1 million compared to $7.2 million for the three months ended December 31, 2015. For the three months ended December 31, 2016, the effective tax rate was 26.6% and varied from the statutory tax rate of 25.3%. For the three months ended December 31, 2015, the effective tax rate was 25.2% and varied immaterially from the statutory tax rate of 25.3%.

Net Income

Net income for the three months ended December 31, 2016 was $39.1 million compared with $21.4 million for the three months ended December 31, 2015. The increase of $17.6 million, or 82.3%, was driven by the factors described above.

Nine Months Ended December 31, 2016 Compared to Nine Months Ended December 31, 2015

Revenue

Revenue for the nine months ended December 31, 2016 increased by $103.8 million, or 41.7%, compared to the nine months ended December 31, 2015, which was driven by an increase in revenue in both our wholesale and DTC channels. On a constant currency basis, revenue increased by 43.9% for the nine months ended December 31, 2016 compared to the nine months ended December 31, 2015.

Revenue in our wholesale channel was $273.9 million, an increase of $44.8 million, compared to the nine months ended December 31, 2015. The increase in revenue in our wholesale channel was driven primarily by sales of new products from our Spring and Fall collections to our retail partners, strong growth outside of North America and, to a lesser extent, by price increases of our products in certain geographies.

Revenue in our DTC channel was $78.8 million, an increase of $59.0 million, compared to the nine months ended December 31, 2015, reflecting strong performance from the Canadian, U.K., and France e-commerce sites since launching in August of 2014, and September of 2016, respectively, a full nine months of activity on our U.S. e-commerce site which launched in September of 2015 and incremental revenue generated from retail stores opened in Toronto and New York in the third quarter of fiscal 2017.

Cost of Sales and Gross Profit

Cost of sales for the nine months ended December 31, 2016 increased by $46.3 million, or 37.9%, compared to the nine months ended December 31, 2015. Gross profit was $184.3 million, representing a gross margin of 52.3%, compared with $126.8 million for the nine months ended December 31, 2015, representing a gross margin of 50.9%. The increase in gross margin was attributable to a significant increase in DTC channel revenues partially offset by higher inventory provisions on raw materials taken in fiscal 2017, write-offs related to damaged products and, to a lesser extent, higher raw material costs from products sourced in U.S. dollars and a shift of sales mix to lower margin geographies.

Cost of sales in our wholesale channel for the nine months ended December 31, 2016 was $149.0 million, an increase of $31.6 million, compared to the nine months ended December 31, 2015. Segment gross profit was $124.9 million, representing a segment gross margin of 45.6%, compared with $111.8 million for the nine months ended December 31, 2015, representing a segment gross margin of 48.8%. The decline in segment gross margin of 320 basis points was attributable primarily to foreign exchange impact resulting from geographical sales mix, a higher proportion of sales in lower margin geographies, the timing of inventory provisions taken in first quarter of fiscal 2017 and, to a lesser extent, higher raw materials costs from products sourced in U.S. dollars. Combined, these increases more than offset lower Canadian dollar denominated production costs.

Cost of sales in our DTC channel for the nine months ended December 31, 2016 was $19.4 million, an increase of $14.7 million, compared to the nine months ended December 31, 2015. Segment gross profit was

 

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$59.3 million, representing a segment gross margin of 75.3%, compared with $15.0 million for the nine months ended December 31, 2015, representing a segment gross margin of 76.2%. The increase in segment gross profit was attributable to higher segment revenue driven by incremental retail store revenue, a full nine month period of e-commerce stores in the United States, the launch of e-commerce websites in France and the U.K. in September 2016, lower product costs in Canadian dollars, partially offset by higher raw materials costs sourced in U.S. dollars.

Selling, General and Administrative Expenses

SG&A expenses for the nine months ended December 31, 2016 increased by $37.4 million over the same period in fiscal 2015, or 51.4%, representing 31.3% of revenue for the nine months ended December 31, 2016 compared to 29.3% of revenue for the nine months ended December 31, 2015. The increase in costs was attributable to an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, $8.6 million of transaction costs related to this offering, $2.5 million of share-based compensation costs, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores.

SG&A expenses in our wholesale channel for the nine months ended December 31, 2016 was $24.0 million, an increase of $1.7 million, compared to the nine months ended December 31, 2015, which represents 8.8% of segment revenue for the nine months ended December 31, 2016 compared to 9.7% of segment revenue for the nine months ended December 31, 2015. The increase in segment costs was attributable to an increase in headcount, selling and operational expenditures to support growth initiatives and entry into new markets. The increase was partially offset by $5.9 million of expenses incurred in the comparable prior year period; comprising of $2.9 million for restructuring our international operations to Zug, Switzerland which encompassed closing several offices across Europe, relocating personnel and incurring temporary office costs as well as $3.0 million incurred for termination of third party sales agents.

SG&A expenses in our DTC channel for the nine months ended December 31, 2016 was $17.8 million, an increase of $10.8 million compared to the nine months ended December 31, 2015, which represents 22.6% of segment revenue for the nine months ended December 31, 2016 compared to 35.6% of segment revenue for the nine months ended December 31, 2015. The increase in segment costs was attributable to establishing our new sites in France and the U.K., maintaining our existing e-commerce sites and opening our two retail stores in the United States and Canada.

Net Interest and Other Finance Costs

Finance costs for the nine months ended December 31, 2016 increased by $2.6 million, or 43.3%, compared to the nine months ended December 31, 2015, primarily as a result of higher average borrowings of $206.2 million, compared to $146.7 million in the comparable prior year period and a $0.9 million write off of deferred financing costs resulting from refinancing of the previous credit facility partially offset by a lower interest rate.

Income Taxes

Income tax expense for the nine months ended December 31, 2016 was $15.4 million compared to $8.7 million for the nine months ended December 31, 2015. For the nine months ended December 31, 2016, the effective tax rate was 25.5% and varied marginally from the statutory tax rate of 25.3%. For the nine months ended December 31, 2015, the effective tax rate was 19.5% versus the statutory tax rate of 25.3%.

The difference between the effective tax rate and the statutory tax rate for the nine months ended December 31, 2015 relates primarily to the benefit of a one-time reversal of a deferred tax liability of $3.5 million relating to intercompany transactions during the nine months ended December 31, 2015.

 

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Net Income

Net income for the nine months ended December 31, 2016 was $45.1 million compared with $35.7 million for the nine months ended December 31, 2015. The increase of $9.4 million, or 26.3%, was primarily the result of the factors described above.

Fiscal Year Ended March 31, 2016 Compared to Fiscal Year Ended March 31, 2015

Revenue

Revenue for fiscal 2016 increased by $72.4 million, or 33.2%, compared to fiscal 2015, driven by an increase in revenue in our wholesale channel and by growth in our DTC channel. On a constant currency basis, revenue increased 25.2% for fiscal 2016 compared to fiscal 2015.

Revenue in our wholesale channel increased $47.4 million, or 22.5%, compared to fiscal 2015. The increase in revenue in our wholesale channel was primarily driven by additional product sales, sales of new products from our Spring and Fall collections to our retail partners and, to a lesser extent, by price increases on our products in certain geographies.

This increase in revenue was also due in part to the inclusion of a full year of performance from our Canadian e-commerce site and the launch of our U.S. e-commerce site in our DTC segment, representing a $25.0 million increase over fiscal 2015.

Cost of Sales and Gross Profit

Cost of sales for fiscal 2016 increased by $15.4 million, or 11.9%, compared to fiscal 2015, while gross profit was $145.6 million, representing a gross margin of 50.1%, compared with $88.6 million in fiscal 2015, representing a gross margin of 40.6%. The increase in gross profit was attributable to the growth in e-commerce revenue in our DTC channel as well as overall higher revenue in fiscal 2016. Additionally, gross profit was positively impacted by lower production costs, partially offset by an increase in raw materials costs sourced in U.S. dollars.

Cost of sales in our wholesale channel for fiscal 2016 increased by $8.7 million, or 6.8%, compared to fiscal 2015, while segment gross profit was $121.4 million, representing a segment gross margin of 47.1%, compared with $82.7 million in fiscal 2015, representing a segment gross margin of 39.3%. The increase in segment gross profit was attributable to the overall higher revenue in fiscal 2016. Additionally, segment gross profit was positively impacted by lower production costs, partially offset by an increase in raw materials costs sourced in U.S. dollars.

Cost of sales in our DTC channel for fiscal 2016 increased by $6.7 million, or 313.6%, compared to fiscal 2015, while segment gross profit was $24.2 million, representing a segment gross margin of 73.3%, compared with $5.9 million in fiscal 2015, representing a segment gross margin of 73.4%. The increase in segment gross profit was attributable to the growth in e-commerce revenue in our DTC channel, including the impact of having the U.S. e-commerce store open beginning in September of 2015, as well as overall higher revenue in fiscal 2016.

Selling, General and Administrative Expenses

SG&A expenses for fiscal 2016 increased by $40.8 million over fiscal 2015, or 68.8%, representing 34.4% of revenue in fiscal 2016, compared to 27.2% of revenue in fiscal 2015. The increase in expenses was attributable to an increase in headcount in both segments and our corporate office, and an increase in marketing expenses that were not allocated to a segment and were designed to support an overall investment in our brand and entry into new markets. The increase was also partially attributable to investments in our DTC channel associated with establishing our e-commerce sites and opening our retail stores. In addition, we incurred costs of $3.1 million in

 

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our wholesale segment associated with terminating third party sales agents which resulted in indemnities and other termination payments. Also included was $6.9 million of expenses relating to restructuring our international operations to Zug, Switzerland, including closing several offices across Europe, relocating personnel and incurring temporary office costs.

SG&A expenses in our wholesale channel for fiscal 2016 decreased by $10.1 million over fiscal 2015, or 27.2%, representing 10.5% of segment revenue in fiscal 2016 compared to 17.7% of segment revenue in fiscal 2015. The decrease was attributable to the increase in centralized marketing initiatives described above, offset by indemnities and termination payments for third party sales agents.

SG&A expenses in our DTC channel for fiscal 2016 increased by $12.7 million over fiscal 2015, or 920.4%, representing 42.8% of segment revenue in fiscal 2016 compared to 17.3% of segment revenue in fiscal 2015. The increase in expenses was attributable to an increase in headcount and brand investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores.

Net Interest and Other Finance Costs

Finance costs increased by $0.5 million, or 6.1%, during fiscal 2016 primarily as a result of higher borrowings of $25.9 million used to finance working capital, partially offset by a lower interest rate.

Income Taxes

Income tax expense increased by $1.8 million during fiscal year 2016 while the net income before taxes increased as compared to fiscal 2015. This is primarily as a result of a decrease in the effective tax rate from 24.6% for fiscal year 2015 to 19.6% for fiscal year 2016, together with the benefit of a one-time reversal of a deferred tax liability of $3.5 million relating to intercompany transactions during the three months ended September 30, 2015.

Net Income

Net income for fiscal 2016 was $26.5 million compared with $14.4 million in fiscal 2015. The increase of $12.1 million, or 83.6%, was the result of the factors described above.

Comparison of the fiscal year ended March 31, 2015 to the Predecessor 2014 Period and the Successor 2014 Period, as well as a comparison of the fiscal year ended March 31, 2015 to the Unaudited Pro Forma Combined Period for the fiscal year ended March 31, 2014

The Acquisition was accounted for as a business combination in accordance with IFRS 3 Business Combinations and the resulting new basis of accounting is reflected in the Company’s consolidated financial statements for all periods beginning on or after December 9, 2013. As a result and in order to provide a more meaningful comparison, we are also supplementally presenting a comparison of fiscal 2015 with the Unaudited Pro Forma Combined Period for the fiscal year ended March 31, 2014. Except for the specific pro forma adjustments made to arrive at the Unaudited Pro Forma Combined 2014 Period, the underlying drivers for the change in fiscal 2015 as compared to fiscal 2014, both actual 2014 results and the Unaudited Pro Forma Combined 2014 Period results, are the same.

Revenue

Revenue was $218.4 million for fiscal 2015, as compared to $134.8 million for the Predecessor 2014 Period and $17.3 million for the Successor 2014 Period, or $152.1 million for the Unaudited Pro Forma Combined 2014 Period. This represents a 43.6% increase in fiscal 2015, as compared to the Unaudited Pro Forma Combined 2014 Period. The increase in revenue was driven primarily by an increase in product sales to our retail partners and to a lesser extent by price increases on our products in certain geographies. On a constant currency basis, revenue increased by 39.0% for fiscal 2015 compared to the Unaudited Pro Forma Combined 2014 Period.

 

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Cost of Sales and Gross Profit

Cost of sales was $129.8 million for fiscal 2015, as compared to $81.6 million for the Predecessor 2014 Period and $14.7 million for the Successor 2014 Period, or $93.4 million for the Unaudited Pro Forma Combined 2014 Period. Gross profit was $88.6 million for fiscal 2015, as compared to $53.2 million for the Predecessor 2014 Period and $2.6 million for the Successor 2014 Period, or $58.7 million for the Unaudited Pro Forma Combined 2014 Period. As compared to the Unaudited Pro Forma Combined 2014 Period, gross profit increased $29.9 million, or 51.0%, to $88.6 million for fiscal 2015. The increase in gross profit was primarily attributable to higher revenue as a result of increased sales in the U.S. market during the winter season.

Selling, General and Administrative Expenses

SG&A expenses were $59.3 million for fiscal 2015, as compared to $30.1 million for the Predecessor 2014 Period and $20.5 million for the Successor 2014 Period, or $45.1 million for the Unaudited Pro Forma Combined 2014 Period. SG&A expenses increased by 31.6% in fiscal 2015, as compared to the Unaudited Pro Forma Combined 2014 Period. As a percentage of revenue, SG&A expenses were 22.3% in the Predecessor 2014 Period and 118.7% in the Successor 2014 Period, and decreased from 29.6% in the Unaudited Pro Forma Combined 2014 Period to 27.2% in fiscal 2015. The increase in costs were attributable to an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores.

Net Interest and Other Finance Costs

Finance costs were $7.5 million for fiscal 2015, as compared to $1.8 million for the Predecessor 2014 Period, and $1.8 million for the Successor 2014 Period, or $7.1 million for the Unaudited Pro Forma Combined 2014 Period. Finance costs increased by $0.4 million in fiscal 2015 or 5.6% as compared to the Unaudited Pro Forma Combined 2014 Period primarily as a result of higher borrowings used to finance working capital to support the growth in the business between the comparable periods and on subordinated debt held by Bain Capital in accordance with the terms of interest payments.

Income Taxes

Income tax expense was $4.7 million for fiscal 2015, as compared to $5.6 million for the Predecessor 2014 Period, representing an effective tax rate of 26.6% and was a recovery of $5.1 million for Successor 2014 Period, representing an effective tax rate of 24.6%, and $1.0 million for the Unaudited Pro Forma Combined 2014 Period, representing an effective tax rate of 25.3%. Income tax expense increased by $3.7 million in fiscal 2015 compared to the Unaudited Pro Forma Combined 2014 Period as a result of higher taxable income from improved operating performance in fiscal 2015 and higher non-deductible expenses in the comparable period.

Net Income

Net income was $14.4 million for fiscal 2015, as compared to $15.3 million for the Predecessor 2014 Period, and a loss of $15.5 million for Successor 2014 Period, or $3.0 million for the Unaudited Pro Forma Combined 2014 Period. Net income in fiscal 2015 represents a 377.2% increase as compared to the Unaudited Pro Forma Combined 2014 Period. The increase in net income in fiscal 2015 was driven primarily by the underlying performance of the business, and the impact of transaction costs as well as by the impact of $2.6 million of amortization expense in fiscal 2015 relating to a step-up of intangible assets, both relating to the Acquisition on December 9, 2013.

 

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Quarterly Financial Information

 

CAD$000s (except per share data)

   Q3 2017      Q2 2017      Q1 2017     Q4 2016     Q3 2016      Q2 2016      Q1 2016     Q4 2015  

Revenue

     209,051        127,935        15,695       41,921       115,504        109,694        23,711       18,778  

Net Income (Loss)

     39,088        20,019        (14,036     (9,202     21,446        18,475        (4,234     (7,390

Basic Earnings (Loss) per Share

     0.39        0.20        (0.14     (0.09     0.21        0.18        (0.04     (0.08

Diluted Earnings (Loss) per Share

     0.38        0.20        (0.14     (0.09     0.21        0.18        (0.04     (0.08

Eight Quarter Commentary on Trends

Net revenue is highest in the second and third quarters as we fulfill customer orders in time for the fall and winter retail seasons. In addition, our net income is typically reduced or negative in the first and fourth quarters as we invest ahead of our peak selling season.

Revenue

Over the last eight quarters, revenue has been impacted by the following:

 

    rollout of e-commerce in Canada in the second quarter of fiscal 2015, United States in the second quarter of fiscal 2016 and in the United Kingdom and France in the third quarter of fiscal 2017;

 

    opening of retail stores in Toronto and New York City in the third quarter of fiscal 2017;

 

    successful execution of pricing strategy across all segments;

 

    shift in mix of revenue from wholesale to DTC;

 

    shift in geographic mix of sales to increase sales outside of Canada;

 

    fluctuation of foreign exchange rates between the USD, GBP and Euro versus CAD; and

 

    timing of shipments to wholesale customers.

Net Income (loss)

Net income has been affected by the following factors over the last eight quarters:

 

    impact of the items noted in revenue above;

 

    increase and timing of our investment in brand, marketing, and administrative support to support our wholesale expansion and DTC channel as well as increased investment in property, plant, and equipment and intangible assets to support growth initiatives;

 

    impact of foreign exchange on production costs;

 

    higher average borrowings to address the growing magnitude of inventory needs and higher seasonal borrowings in the first and fourth quarters of each fiscal year to address seasonal nature of revenue.

 

    transaction costs in relation to this offering; and

 

    consolidation of our international operations to Zug, Switzerland which included closing offices across Europe and terminating third party sales agents.

Non-IFRS Measures

In addition to our results determined in accordance with IFRS, we believe the following non-IFRS measures provide useful information both to management and investors in measuring the financial performance and

 

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financial condition of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with IFRS.

 

CAD$000s    Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
    Year
ended
March 31,
2016
    Year
ended
March 31,
2015
    Period from
April 1,
2013 to
December 8,
2013
    Period from
December 9,
2013 to
March 31,
2014
    Unaudited
Pro Forma
period
ended
March 31,
2014
 

EBITDA

     75,578       55,009       46,870       30,063       23,609       (17,714     14,329  

Adjusted EBITDA

     92,443       61,913       54,307       37,191       23,984       (8,113     15,870  

Adjusted EBITDA Margin

     26.2     24.9     18.7     17.0     17.8     (47.0 )%      10.4

Adjusted Net Income

     58,851       38,520       30,122       21,374       15,554       (7,691     5,799  

Constant Currency Revenue

     358,147       233,325       273,410       211,361       —         —         —    

Management uses these non-IFRS financial measures (other than Constant Currency Revenue) to exclude the impact of certain expenses and income that management does not believe are reflective of the company’s underlying operating performance and make comparisons of underlying financial performance between periods difficult. From time to time, the company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income are financial measures that are not defined under IFRS. We use these non-IFRS financial measures, and believe they enhance an investor’s understanding of our financial and operating performance from period to period, because they exclude certain material non-cash items and certain other adjustments we believe are not reflective of our ongoing operations and our performance. In particular, following the Acquisition, we have made changes to our legal and operating structure to better position our organization to achieve our strategic growth objectives which have resulted in outflows of economic resources. Accordingly, we use these metrics to measure our core financial and operating performance for business planning purposes and as a component in the determination of incentive compensation for salaried employees. In addition, we believe EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income are measures commonly used by investors to evaluate companies in the apparel industry. However, they are not presentations made in accordance with IFRS and the use of the terms EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income vary from others in our industry. These financial measures are not intended to represent and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as measures of liquidity.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under IFRS. For example, these financial measures:

 

    exclude certain tax payments that may reduce cash available to us;

 

    do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

 

    do not reflect changes in, or cash requirements for, our working capital needs;

 

    do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and

 

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    other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

The tables below illustrate a reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted Net Income for the periods presented:

 

CAD$000s   Nine
months ended
December 31,
2016
    Nine
months ended
December 31,
2015
    Year ended
March 31, 2016
    Year ended
March 31,
2015
    Period from
April 1,
2013 to
December 8,
2013
    Period from
December 9,
2013 to
March 31,
2014
    Unaudited Pro
Forma Period
ended March 31,
2014 (l)
 

Net income (loss)

  $ 45,071     $ 35,687     $ 26,485     $ 14,425     $ 15,278     $ (15,477   $ 3,023  

Add the impact of:

             

Income tax expense (recovery)

    15,416       8,662       6,473       4,707       5,550       (5,054     1,024  

Interest expense

    8,620       6,017       7,996       7,537       1,815       1,788       7,136  

Depreciation and amortization

    6,471       4,643       5,916       3,394       966       1,029       3,146  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    75,578       55,009       46,870       30,063       23,609       (17,714     14,329  

Add the impact of:

             

Bain Capital management fees (a)

    1,560       647       1,092       894       —         277       539  

Transaction costs (b)

    5,624       8       299       —         —         5,791    

Purchase accounting adjustments (c)

    —         —           2,861       —         2,906    

Unrealized (gain)/loss on derivatives (d)

    4,422       —         (4,422     (138     —         —         —    

Unrealized foreign exchange loss on term loan (e)

    1,561       —         —         —         —         —         —    

International restructuring costs (f)

    175       2,877       6,879       1,038       —         —         —    

Share-based compensation (g)

    2,536       375       500       300       —         —         —    

Agent terminations and other (h)

    —         2,997       3,089       2,173       375       627       1,002  

Non-cash rent expense (i)

    987       —         —         —          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 92,443     $ 61,913     $ 54,307     $ 37,191     $ 23,984     $ (8,113   $ 15,870  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

CAD$000s   Nine
months ended
December 31,
2016
    Nine
months ended
December 31,
2015
    Year ended
March 31, 2016
    Year ended
March 31,
2015
    Period from
April 1,
2013 to
December 8,
2013
    Period from
December 9,
2013 to
March 31,
2014
    Unaudited Pro
Forma Period
ended March 31,
2014 (l)
 

Net income (loss)

  $ 45,071     $ 35,687     $ 26,485     $ 14,425     $ 15,278     $ (15,477   $ 3,023  

Add the impact of:

             

Bain Capital management fees (a)

    1,560       647       1,092       894       —         277       539  

Transaction costs (b)

    5,624       8       299       —         —         5,791       —    

Purchase accounting adjustments (c)

    —         —         —         2,861       —         2,906       —    

Unrealized (gain)/loss on derivatives (d)

    4,422       —         (4,422     (138     —         —         —    

Unrealized foreign exchange loss on term loan (e)

    1,561       —         —         —         —         —         —    

International restructuring costs (f)

    175       2,877       6,879       1,038       —         —         —    

Share-based compensation (g)

    2,536       375       500       300       —         —         —    

Agent terminations and other (h)

    —         2,997       3,089       2,173       375       627       1,002  

Non-cash rent expense(i)

    987       —         —         —         —         —         —    

Amortization on intangible assets acquired by Bain Capital (j)

    1,632       1,632       2,175       2,175       —         725       2,175  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

    18,497       8,536       9,612       9,303       375       10,326       3,716  

Tax effect of adjustments

    (4,717     (2,159     (2,431     (2,354     (99     (2,540     (940

Tax effect of one-time intercompany transaction (k)

    —         (3,544     (3,544     —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net income (loss)

  $ 58,851     $ 38,520     $ 30,122     $ 21,374     $ 15,554     $ (7,691   $ 5,799  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(a) Represents the amount paid pursuant to the management agreement with Bain Capital for ongoing consulting and other services. In connection with this offering, the management agreement will be terminated, and Bain Capital will no longer receive management fees from us. See “Certain Relationships and Related Party Transactions—Management Agreement.”
(b) In connection with the Acquisition and the filing of this prospectus, the company incurred expenses related to professional fees, consulting, legal, and accounting that would otherwise not have been incurred and were directly related to these two matters. These fees are not indicative of the company’s ongoing costs and we expect they will discontinue following the completion of this offering.
(c) In connection with the Acquisition, we recognized acquired inventory at fair value, which included a mark-up for profit. Recording inventory at fair value in purchase accounting had the effect of increasing inventory and thereby increasing the cost of sales in subsequent periods as compared to the amounts we would have recognized if the inventory was sold through at cost. The write-up of acquired inventory sold represents the incremental cost of sales that was recognized as a result of purchase accounting. This inventory was sold in fiscal 2014 and fiscal 2015 and has impacted net income in both periods.
(d) Represents unrealized gains on foreign exchange forward contracts recorded in fiscal 2016 that relate to fiscal 2017. We manage our exposure to foreign currency risk by entering into foreign exchange forward contracts. Management forecasts its net cash flows in foreign currency using expected revenue from orders it receives for future periods. The unrealized gains and losses on these contracts are recognized in net income from the date of inception of the contract, while the cash flows to which the derivatives related are not realized until the contract settles. Management believes that reflecting these adjustments in the period in which the net cash flows will occur is more appropriate.
(e) Represents non-cash charge for unrealized losses on the translation of the Term Loan Facility from USD to CAD$.
(f) Represents expenses incurred to establish our European headquarters in Zug, Switzerland, including closing several smaller offices across Europe, relocating personnel, and incurring temporary office costs.
(g) Represents non-cash share-based compensation expense. Adjustments in fiscal 2017 reflect management’s estimate that certain tranches of outstanding option awards will vest.
(h) Represents accrued expenses related to termination payments to be made to our third party sales agents. As part of a strategy to transition certain sales functions in-house, we terminated the majority of our third party sales agents and certain distributors, primarily during fiscal 2015 and 2016, which resulted in indemnities and other termination payments. As sales agents have now largely been eliminated from the sales structure, management does not expect these charges to recur in future fiscal periods.
(i) Represents non-cash amortization charges during pre-opening periods for new store leases.
(j) As a result of the Acquisition, the company recognized an intangible asset for customer lists in the amount of $8.7 million, which has a useful life of four years.
(k) During fiscal 2016, we entered into a series of transactions whereby our wholly-owned subsidiary, Canada Goose International AG, acquired the global distribution rights to our products. As a result, there was a one-time tax benefit of $3.5 million recorded during the year.
(l) See “—Basis of Presentation” for a presentation of our Unaudited Pro Forma Combined Supplemental Financial Information for the year ended March 31, 2014.

 

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Constant Currency Revenue. Because we are a global company, the comparability of our revenue reported in Canadian Dollars is also affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the Canadian Dollar. These rate fluctuations can have a significant effect on our reported results. As such, in addition to financial measures prepared in accordance with IFRS, our revenue discussions often contain references to constant currency measures, which are calculated by translating the current year and prior year reported amounts into comparable amounts using a single foreign exchange rate for each currency calculated based on the average exchange rate over the period as measured by the Bank of Canada. We present constant currency financial information, which is a non-IFRS financial measure, as a supplement to our reported operating results. We use constant currency information to provide a framework to assess how our business segments performed excluding the effects of foreign currency exchange rate fluctuations. We believe this information is useful to investors to facilitate comparisons of operating results and better identify trends in our businesses.

 

CAD$000s    Actual     In Constant Currency  

Revenue

                % Change            % Change  

For the fiscal years ended March 31:

     2016        2015         2016     
  

 

 

    

 

 

     

 

 

    
     290,830        218,414       33.2     273,410        25.2
     2015        2014*         2015     
  

 

 

    

 

 

     

 

 

    
     218,414        152,085       43.6     211,361        39.0

For the nine months ended December 31:

     2016        2015         2016     
  

 

 

    

 

 

     

 

 

    
     352,681        248,909       41.7     358,147        43.9
     2015        2014         2015     
  

 

 

    

 

 

     

 

 

    
     248,909        199,636       24.7     233,325        16.9

For the three months ended December 31:

     2016        2015         2016     
  

 

 

    

 

 

     

 

 

    
     209,051        115,504       81.0     214,621        85.8
     2015        2014         2015     
  

 

 

    

 

 

     

 

 

    
     115,504        82,258       40.4     108,238        31.6

 

* Unaudited pro forma combined year ended March 31, 2014.

Financial Condition, Liquidity and Capital Resources

Overview

 

     Successor      Predecessor  
CAD$000s    Nine months
ended
December 31,
2016
    Nine months
ended
December 31,
2015
    Year
ended
March 31,
2016
    Year
ended
March 31,
2015
    Period from
December 9,
2013 to
March 31,
2014
     Period from
April 1,
2013 to
December 8,
2013
 

Total cash provided by (used in):

             

Operating activities

     36,704       (9,946     (6,442     4,960       (11,593      15,202  

Investing activities

     (21,762     (20,017     (21,842     (7,263     (149,431      (6,361

Financing activities

     8,012       47,638       29,592       4,951       164,294        (5,715

Increase (decrease) in cash

     22,954       17,675       1,308       2,648       3,270        3,126  

Cash, end of period

     30,180       23,593       7,226       5,918       3,270        4,477  

Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes. Our primary source of liquidity is funds generated by operating activities. We also use our asset based Revolving Facility as a source of liquidity for short-term working capital needs and general corporate purposes. Our ability to fund our operations, to make planned capital expenditures,

 

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to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. Cash generated from operations are significantly impacted by the seasonality of our business, with a disproportionate amount of our operating cash generally coming in the second and third fiscal quarters of each year. As a result, historically, we have had higher balances under our revolving credit facilities in the first and fourth quarters and lower balances in the second and third quarters.

As of December 31, 2016, we had $30.2 million of cash and $144.5 million of working capital, which is current assets minus current liabilities, compared with $7.2 million of cash and $104.8 million of working capital as of March 31, 2016. The $39.7 million increase in our working capital was primarily due to a $23.0 million increase in cash, a $71.5 million increase in accounts receivable, primarily offset by a $22.8 million decrease in inventory, a $25.8 million increase in accounts payable and accrued liabilities and a $9.3 million increase in provisions. Working capital is significantly impacted by the seasonal trends of our business and has been further impacted in the current quarters by the opening of our retail stores.

We expect that our cash on hand and cash flows from operations, along with our Revolving Facility, will be adequate to meet our capital requirements and operational needs for the next 12 months.

Cash Flows

Cash flows from operating activities

Cash flows generated in operating activities increased from $9.9 million used in the nine months ended December 31, 2015 to $36.7 million generated from the nine months ended December 31, 2016. This period-over-period increase in cash generated from operating activities of $46.7 million was primarily due to an increase in net income of $9.4 million and a $38.0 million lower use of cash in working capital items, including differences in timing of payments on accounts payable and accrued liabilities in the comparable periods and seasonal decrease in inventory partially offset by lower payments of provisions and other current assets in the current period and higher income tax installments of $13.7 million due to higher taxable income.

Cash used in operating activities was $6.4 million in fiscal 2016 compared to cash flows provided by operating activities of $5.0 million in fiscal 2015. The year-over-year decrease of $11.4 million in cash inflows was primarily due to an increase in inventory of $49.7 million as a result of preparation for the launch of our e-commerce store in the United States, partially offset by an increase in net income of $12.1 million, as well as increases in accounts payable and accrued liabilities.

Cash provided by operating activities was $5.0 million in fiscal 2015 compared to cash flows used in operating activities of $11.6 million during the period from December 9, 2013 to March 31, 2014 and cash provided by operating activities of $15.2 million during the period from April 1, 2013 to December 8, 2013. The period-over-period increase in cash inflows was primarily due to an increase in net income, partially offset by increases in accounts receivable of $9.2 million and increases in inventory of $10.6 million due to higher sales volumes.

Cash flows from investing activities

The year-over-year increase in cash outflows from investing activities during the nine months ended December 31, 2016 of $1.7 million was primarily due to increased activity in the DTC channel as the company prepared for retail store openings in Toronto and New York City and opened e-commerce sites in the United Kingdom and France. Investments in the comparable period in fiscal 2016 consisted of expenditures related to operating capacity at our manufacturing facilities. We anticipate that these investments will remain consistent as a percentage of revenue as we expand our DTC channel.

The year-over-year increase in cash outflows of $14.6 million in fiscal 2016 compared to fiscal 2015 was primarily due to increased investments in property and equipment to increase production capacity and in retail store and e-commerce assets, as well as investments in intangible assets related to ERP software.

 

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The year-over-year decrease in cash outflows of $142.2 million in fiscal 2015 compared to the Unaudited Pro Forma Combined 2014 Period was primarily due to outflows related to the Acquisition.

Cash flows from financing activities

Cash inflows from financing activities decreased by $39.6 million year-over-year in the nine months ended December 31, 2016. The higher level of cash flows from financing activities in the period ended December 31, 2015 results from the seasonal increase in the revolving credit facility, net of contractual quarterly repayments. In the nine month period ended December 31, 2016, the $212.5 million net proceeds from the Term Loan were used to repay subordinated debt and redeem shareholders’ equity, for a net increase in cash of $8.0 million.

The $24.6 million increase in fiscal 2016 compared to fiscal 2015 was primarily driven by an increase in borrowings under our credit facility used to finance working capital.

The year-over-year decrease in cash inflows of $159.3 million in fiscal 2015 compared to the period from December 9, 2013 to March 31, 2014 was primarily due to the proceeds from Bain Capital’s initial investment in the company in exchange for subordinated debt and Class A Senior Preferred Shares for the purpose of the Acquisition.

Indebtedness

Revolving Facility

On June 3, 2016, Canada Goose Holdings Inc. and its wholly-owned subsidiaries, Canada Goose Inc. and Canada Goose International AG, entered into a senior secured asset-based revolving credit facility, which we refer to as the Revolving Facility, with Canadian Imperial Bank of Commerce, as administrative agent, and certain financial institutions as lenders, which matures in 2021. The Revolving Facility has commitments of $150.0 million with a seasonal increase of up to $200.0 million during peak season (June 1 through November 30). In addition, the Revolving Facility includes a letter of credit sub-facility of $25.0 million. All obligations under the Revolving Facility are unconditionally guaranteed by Canada Goose Holdings Inc. and, subject to certain exceptions, our U.S., Swiss, U.K. and Canadian subsidiaries. The Revolving Facility provides for customary events of default.

Loans under the Revolving Facility, at our option may be maintained from time to time as (a) Prime Rate Loans, which bear interest at a rate per annum equal to the Applicable Margin for Prime Rate Loans plus the Prime Rate, (b) Banker’s Acceptances funded on a discounted proceeds basis given the published discount rate plus a rate per annum equal to the Applicable Margin for stamping fees, (c) ABR Loans, which bear interest at a rate per annum equal to the Applicable Margin for ABR Loans plus the ABR, (d) European Base Rate Loans, which bear interest at a rate per annum equal to the Applicable Margin for European Base Rate Loans plus the European Base Rate, (e) LIBOR Loans, which bear interest at a rate per annum equal to the Applicable Margin for LIBOR Loans plus the LIBO Rate or (f) EURIBOR Loans, which bear interest at a rate per annum equal to the Applicable Margin for EURIBOR Loans plus the applicable EURIBOR.

A commitment fee will be charged on the average daily unused portion of the Revolving Facility of 0.25% per annum if average utilization under the Revolving Facility is greater than 50% or 0.375% if average utilization under the Revolving Facility is less than 50%. A letter of credit fee, with respect to standby letters of credit will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility equal to the Applicable Margin for LIBOR Loans, and, with respect to trade or commercial letters of credit, 50% of the then applicable Applicable Margin on LIBOR Loans. A fronting fee will be charged on the aggregate face amount of outstanding letters of credit equal to 0.125% per annum. In addition, we pay the administrative agent under the Revolving Facility a monitoring fee of $1,000 per month.

As of December 31, 2016 we had $59.8 million outstanding under the Revolving Facility. Amounts under the Revolving Facility may be borrowed, repaid and re-borrowed to fund our general corporate purposes and are

 

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available in Canadian dollars, U.S. dollars, and Euros and, subject to an aggregate cap of $40.0 million, such other currencies as are approved in accordance with the credit agreement governing the Revolving Facility.

Term Loan Facility

General

On December 2, 2016, which is referred to as the Term Loan Closing Date, in connection with the Recapitalization, Canada Goose Holdings Inc. and Canada Goose Inc. (the “Borrower”) entered into a senior secured term loan facility which we refer to as the Term Loan Facility, with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and certain financial institutions as lenders, which matures in 2021. All obligations under the Term Loan Facility are unconditionally guaranteed by Canada Goose Holdings Inc. and, subject to certain exceptions, our U.S., U.K. and Canadian subsidiaries. The Term Loan Facility provides for customary events of default.

The initial interest rate on the term loans outstanding under the Term Loan Facility is the LIBOR Rate (subject to a minimum rate of 1.00% per annum) plus an Applicable Margin of 5.00%. The term loans can also be maintained as ABR Loans which bear interest at ABR plus an Applicable Margin which is 1.00% less than that for LIBOR loans. Effective on the first day immediately following the 180-day anniversary of the Term Loan Closing Date and, the last day of each three-month period thereafter, the Applicable Margin shall increase by 0.50%, if, upon the completion of this offering and after giving effect to the prepayment of term loans under the Term Loan Facility with the net cash proceeds from this offering, the Borrower’s consolidated total net leverage ratio is not equal to or less than 2.50 to 1.00; provided, however, that the Applicable Margin shall not, at any time, exceed for term loans that are LIBOR Loans, 7.00%, and for Initial Term Loans that are ABR Loans, 6.00%. If upon the completion of this offering (or any other underwritten primary public offering of common equity by the Borrower or any direct or indirect parent thereof) and after giving effect to the prepayment of term loans under the Term Loan Facility with the net cash proceeds from this offering, the Borrower has a consolidated total net leverage ratio of less than or equal to 2.50 to 1.00, the Applicable Margin then in effect shall be permanently reduced by 1.00%. We have not yet determined what the consolidated total net leverage ratio of the Borrower will be following the completion of this offering.

The proceeds of the term loans borrowed under the Term Loan Facility were used to effect the steps described in this prospectus under “The Recapitalization,” to pay transaction expenses in connection with the closing of the Term Loan Facility and for other general corporate purposes.

As of December 31, 2016 we had approximately $218.3 million aggregate principal amount of term loans outstanding under the Term Loan Facility. Amounts prepaid or repaid under the Term Loan Facility may not be re-borrowed.

 

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Contractual Obligations

The following table summarizes certain of our significant contractual obligations and other obligations as at December 31, 2016:

 

CAD $000s    Q4 2017      FY2018      FY2019      FY2020      FY2021      Thereafter      Total  

Revolving facility

     —          —          —          —          59,825        —          59,825  

Term loan

     —          2,183        2,183        2,183        2,183        209,566        218,298  

Interest commitments relating to long-term debt

     4,907        14,687        14,556        14,425        13,069        8,383        70,027  

Accounts payable and accrued liabilities

     64,242        —          —          —          —          —          64,242  

Foreign exchange forward contracts

     31,009        —          —          —          —          —          31,009  

Operating leases

     2,414        10,154        10,448        10,386        10,646        52,259        96,307  

Other long-term liability

     —          —          —          —          —          1,059        1,059  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations

     102,572        27,024        27,187        26,994        85,723        271,267        540,767  

As at December 31, 2016, the company had additional long term liabilities which included provisions, including warranty, agent termination fees, sales returns, and asset retirement obligation, and deferred income tax liabilities. These long term liabilities have not been included in the table above as the timing and amount of future payments are uncertain.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks arising from transactions in the normal course of our business. Such risk is principally associated with foreign exchange.

Foreign currency exchange risk

Our consolidated financial statements are expressed in Canadian dollars, however a portion of the company’s net assets are denominated in U.S. dollars, Euro, GBP, SEK, and CHF, through its foreign operations in the U.S. and Switzerland. The net monetary assets are translated into Canadian dollars at the foreign currency exchange rate in effect at the balance sheet date. As a result, we are exposed to foreign currency translation gains and losses. Revenues and expenses of all foreign operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates in effect at the dates when such items are recognized. Appreciating foreign currencies relative to the Canadian dollar will positively impact operating income and net earnings by increasing our revenue, while depreciating foreign currencies relative to the Canadian dollar will have the opposite impact.

We are also exposed to fluctuations in the prices of U.S. dollar denominated purchases as a result of changes in U.S. dollar exchange rates. A depreciating Canadian dollar relative to the U.S. dollar will negatively impact operating income and net earnings by increasing our costs of raw materials, while an appreciating Canadian dollar relative to the U.S. dollar will have the opposite impact. During the nine months ended December 31, 2016 and fiscal 2016, 2015, and 2014 we entered into derivative instruments in the form of forward contracts to manage the majority of our current and anticipated exposure to fluctuations in U.S. dollar, GBP, Euro, and CHF exchange rates.

Amounts borrowed under the Term Loan Facility are denominated in U.S. dollars. Based on our outstanding balance of $218.3 million under the Term Loan Facility as of December 31, 2016, a 10% depreciation in the value of the Canadian dollar compared to the U.S. dollar would result in a decrease in our net income (loss) of $21.8 million solely as a result of that exchange rate fluctuation’s effect on such debt. We intend to use the proceeds from this offering to repay a portion of the Term Loan Facility. In addition we intend to use foreign currency hedging contracts to reduce the foreign currency exchange risk due to such debt.

 

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We may enter into foreign currency forward exchange contracts and options to reduce fluctuations in our long or short currency positions relating primarily to purchase commitments, raw materials and finished goods denominated in foreign currencies.

A summary of foreign currency forward exchange contracts and the corresponding amounts as at December 31, 2016 contracted forward rates is as follows:

 

($000s)

  

Contract Amount

  

Primary Currencies

Forward exchange contract to purchase currency

   CHF 1,000    Swiss Francs

Forward exchange contract to sell currency

  

US$11,500

€5,000

£4,500

  

US dollars

Euros

Pounds Sterling

Interest rate risk

We are exposed to interest rate risk primarily related to the effect of interest rate changes on borrowings outstanding under our Revolving Facility and Term Loan. As of December 31, 2016, we had $59.8 million outstanding under our Revolving Facility with a weighted average interest rate of 2.73% and Term Loan debt of $218.3 million which was advanced on December 2, 2016, and currently bears interest at 6.00%. Based on the outstanding borrowings under the Revolving Facility during Fiscal 2016, we estimate that a 1.00% increase in the average interest rate on our borrowings would have increased interest expense by $0.9 million in the nine months ended December 31, 2016. Correspondingly, a 1.00% increase in the Term Loan rate would have increased interest expense by an additional $0.2 million. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.

Critical Accounting Policies and Estimates

Our consolidated financial statements included elsewhere in this prospectus have been prepared in accordance with IFRS. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are more fully described in the notes to our consolidated financial statements included elsewhere in this prospectus, we believe that the following accounting policies and estimates are critical to our business operations and understanding our financial results.

The following are the accounting policies subject to judgments and key sources of estimation uncertainty that the company believes could have the most significant impact on the amounts recognized in the consolidated financial statements.

Revenue recognition. Wholesale revenue from the sale of goods to third party resellers, net of an estimated allowance for sales returns, is recognized when the significant risks and rewards of ownership of the goods have passed to the reseller, which is as soon as the products have been shipped to the reseller and there is no continuing management involvement or obligation affecting the acceptance of the goods. Revenue through e-commerce operations and retail stores are recognized upon delivery of the goods to the customer and when collection is reasonably assured, net of an estimated allowance for sales returns. Management bases its estimates on historical results, taking into consideration the type of customer, transaction, and specifics of each arrangement.

Inventories. Inventories are carried at the lower of cost and net realizable value which requires the company to utilize estimates related to fluctuations in obsolescence, shrinkage, future retail prices, seasonality and costs necessary to sell the inventory.

 

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We periodically review our inventories and make provisions as necessary to appropriately value obsolete or damaged goods. In addition, as part of inventory valuations, we accrue for inventory shrinkage for lost or stolen items based on historical trends from actual physical inventory counts.

Impairment of non-financial assets (goodwill, intangible assets, and property and equipment). Management is required to use judgment in determining the grouping of assets to identify their cash generating units (“CGU”) for the purposes of testing fixed assets for impairment. Judgment is further required to determine appropriate groupings of CGUs for the level at which goodwill and intangible assets are tested for impairment. For the purpose of goodwill and intangible assets impairment testing, CGUs are grouped at the lowest level at which goodwill and intangible assets are monitored for internal management purposes. In addition, judgment is used to determine whether a triggering event has occurred requiring an impairment test to be completed.

In determining the recoverable amount of a CGU or a group of CGUs, various estimates are employed. The company determines value in use by using estimates including projected future revenues, earnings and capital investment consistent with strategic plans presented to the Board. Discount rates are consistent with external industry information reflecting the risk associated with the specific cash flows.

Income and other taxes. Current and deferred income taxes are recognized in the consolidated statements income (loss) and comprehensive income (loss), except when it relates to a business combination, or items recognized in equity or in other comprehensive income. Application of judgment is required regarding the classification of transactions and in assessing probable outcomes of claimed deductions including expectations about future operating results, the timing and reversal of temporary differences and possible audits of income tax and other tax filings by the tax authorities in the various jurisdictions in which the company operates.

Functional currency. Items included in the consolidated financial statements of the company’s subsidiaries are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The consolidated financial statements are presented in Canadian dollars, which is the company’s functional currency and the presentation currency.

Financial instruments. Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the financial instrument. Financial assets and financial liabilities are initially measured at fair value. The critical assumptions and estimates used in determining the fair value of financial instruments are: equity prices; future interest rates; the relative creditworthiness of the Company to its counterparties; estimated future cash flows; discount rates; and volatility utilized in option valuations.

The company enters into financial instruments with highly-rated creditworthy institutions and instruments with liquid markets and readily-available pricing information.

Share-based payments are valued based on the grant date fair value of these awards and the company records compensation expense over the corresponding service period. The fair value of the share-based payments is determined using the Monte Carlo model, which incorporates the Board’s best estimate of the fair value of our common equity, which incorporate management’s discounted cash flow estimates and other market assumptions. Following the Acquisition, we adopted our Stock Option Plan, which allows stock options to be granted to selected executives with vesting contingent upon meeting the service, performance goals and exit event conditions of the Plan. There are three types of stock options: Tranche A options are time based which generally vest over 5 years of service, with 40% on the second anniversary, and 20% on each of the third, fourth, and fifth anniversary. Tranche B and Tranche C options are performance based awards that vest upon attainment of performance conditions and the occurrence of an exit event. The expense related to the Tranche B and Tranche C options is recognized rateably over the requisite service period, provided it is probable that the vesting conditions will be achieved and the occurrence of such exit event, such as our initial public offering, is probable. Following our initial public offering, we expect that the grant date fair value of these awards to be based upon the closing price of our subordinate voting shares on the grant date.

 

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Warranty. The critical assumptions and estimates used in determining the warranty provision at the balance sheet date are: number of jackets expected to require repair or replacement; proportion to be repaired versus replaced; period in which the warranty claim is expected to occur; cost of repair; cost of jacket replacement; risk-free rate used to discount the provision to present value. We update our inputs to this estimate on a quarterly basis to ensure the provision reflects the most current information regarding our products.

Trade receivables. The company does not have any customers which account for more than 10% of sales or accounts receivable. We make ongoing estimates relating to the ability to collect our accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. In determining the amount of the allowance, we consider our historical level of credit losses and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Credit risk arises from the possibility that certain parties will be unable to discharge their obligations. To mitigate this risk, management has entered into an agreement with a third party who has insured the risk of loss for up to 90% of accounts receivable from certain designated customers based on a total deductible of $50,000. Since we cannot predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, a larger allowance might be required. In the event we determine that a smaller or larger allowance is appropriate, we would record a credit or a charge to selling, general and administrative expense in the period in which such a determination is made.

Internal Control Over Financial Reporting

We have identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

We did not have in place an effective control environment with formal processes and procedures or an adequate number of accounting personnel with the appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner, including inventory costing and business combinations. We did not design or maintain effective controls over the financial statement close and reporting process in order to ensure the accurate and timely preparation of financial statements in accordance with IFRS. In addition, information technology controls, including end user and privileged access rights and appropriate segregation of duties, including for certain users the ability to create and post journal entries, were not designed or operating effectively.

We have taken steps to address these material weaknesses and continue to implement our remediation plan, which we believe will address their underlying causes. We have engaged external advisors to provide assistance in the areas of information technology, internal controls over financial reporting, and financial accounting in the short term and to evaluate and document the design and operating effectiveness of our internal controls and assist with the remediation and implementation of our internal controls as required. We are evaluating the longer term resource needs of our various financial functions. These remediation measures may be time consuming, costly, and might place significant demands on our financial and operational resources. Although we have made enhancements to our control procedures in this area, the material weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively. We do not know the specific time frame needed to fully remediate the material weaknesses identified. See “Risk Factors.”

Standards issued but not yet effective

Certain new standards, amendments, and interpretations to existing IFRS standards have been published but are not yet effective and have not been adopted early by the company. Management anticipates that all of the pronouncements will be adopted in the company’s accounting policy for the first period beginning after the

 

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effective date of the pronouncement. Information on new standards, amendments, and interpretations are provided below.

In 2016, the IASB issued IFRS 16, “Leases” (“IFRS 16”), replacing IAS 17, “Leases” and related interpretations. The standard introduces a single on-statement of financial position recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. Lessors continue to classify leases as finance and operating leases. IFRS 16 becomes effective for annual periods beginning on or after January 1, 2019, and is to be applied retrospectively. Early adoption is permitted if IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”) has been adopted. The company is currently assessing the impact of the new standard on its consolidated financial statements.

In 2014, the IASB issued IFRS 15, replacing IAS 18, “Revenue”, IAS 11, “Construction Contracts”, and related interpretations. The new standard provides a comprehensive framework for the recognition, measurement and disclosure of revenue from contracts with customers, excluding contracts within the scope of the accounting standards on leases, insurance contracts and financial instruments. IFRS 15 becomes effective for annual periods beginning on or after January 1, 2018, and is to be applied retrospectively. Early adoption is permitted. The company is currently assessing the impact of the new standard on its consolidated financial statements.

In July 2014, the IASB issued the final version of IFRS 9, which reflects all phases of the financial instruments project and replaces IAS 39, “Financial Instruments: Recognition and Measurement,” and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is mandatorily effective for annual periods beginning on or after January 1, 2018. Early adoption is permitted. The company is currently assessing the impact of the new standard on its consolidated financial statements.

Amendments to IAS 7, Statement of Cash Flows (“IAS 7”) were issued by the IASB in January 2016. The amendment clarifies that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment to IAS 7 is effective for annual periods beginning on or after January 1, 2017. The company is currently assessing the impact of the new standard on its consolidated financial statements.

In January 2016, the International Accounting Standards Board (IASB) issued amendments to clarify the requirements for recognizing deferred tax assets on unrealized losses. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. They also clarify certain other aspects of accounting for deferred tax assets. The amendments are effective for the year beginning on or after January 1, 2017. The company is currently assessing the impact of these amendments on its financial statements.

In June 2016, the IASB issued an amendment to IFRS 2, Share-based Payment, clarifying the accounting for certain types of share-based payment transactions. The amendments provide requirements on accounting for the effects of vesting and non-vesting conditions of cash-settled share-based payments, withholding tax obligations for share-based payments with a net settlement feature, and when a modification to the terms of a share-based payment changes the classification of the transaction from cash-settled to equity-settled. The amendments are effective for the year beginning on or after January 1, 2018. The company is currently assessing the impact of this amendment on its financial statements.

Amendments to IAS 1, Presentation of Financial Statements (“IAS 1”) were issued by the IASB in December 2014. The amendments clarify principles for the presentation and materiality considerations for the financial statements and notes to improve understandability and comparability. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2016. The company is evaluating the impact of this standard on its consolidated financial statements.

 

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JOBS Act

We will not take advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Because IFRS standards make no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

 

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LOGO

To our Shareholders,

When my grandfather started this company 60 years ago, I don’t know if he ever dreamed that this is where we would be today, but I am sure he would be proud. That pride has been a cornerstone throughout three generations of Canada Goose and, today, I am both humbled and excited to be writing this letter.

I believe Canada Goose is a brand like no other.

Since 1957, we have gone against the grain, stayed true to who we are and surpassed our expectations at almost every turn. We have turned business challenges into leadership opportunities and intuition into insight, invested heavily when others only chased margins and we have demonstrated that ‘doing good’ is good for business. In a world of fabricated stories, we have given people something real to experience.

For three generations, Canada Goose has helped people from all corners of the globe embrace the elements and make their adventures possible. We outfitted Laurie Skreslet, the first Canadian to summit Mount Everest in 1982, and helped a former two-packs-a-day smoker, Ray Zahab, break the world speed record for an unsupported expedition by a team to the South Pole. We helped a nurse who was plunged into the icy waters of Hudson Bay keep her core temperature warm enough to keep her heart beating. We helped Lance Mackey, champion dog-musher and cancer survivor, stay warm as he won the Iditarod and Yukon Quest, two years in a row. We help protect First Air crews from the elements when they’re flying north of 60-degrees and we help researchers in Antarctica and Polar Bears International scientists work outside for hours in freezing temperatures. And along the way we have found a home in urban centres too. We’ve brought the same function, quality and craftsmanship into great cities around the world including Toronto, New York, London, Paris, Tokyo and many others in between.

In doing so, we have played a leading role in the creation of a new category, premium outerwear, and established Canada Goose as an iconic brand. We have also invented new technologies, challenged traditional thinking, sold into leading retailers around the world and opened experiential stores of our own. We have made award-winning products and award-winning marketing campaigns, been embraced by world-renowned artists, athletes and adventurers, helped reinvigorate the declining apparel industry in Canada by creating thousands of jobs and played the role of ambassador for our country internationally. In the process, we’ve become a brand to watch and one that other companies try to emulate — an authentic leader on a global stage.

Authenticity is everything to us. It is woven into every aspect of our business from how we design and build our products to how we engage with our customers. That commitment does not come without its challenges, but we believe it is the only way for us to build an enduring brand that will continue for generations.

Far from this company’s humble beginnings, we now proudly sell in 36 countries. Today, Canada Goose is a brand that is known around the world. We are proud to be a champion of Made-in-Canada manufacturing and export the brand of Canada around the world. We believe that Canada Goose is good for Canada and for the world.

Fueled by strong performance, a bold vision that’s underpinned by world-class talent who have experience garnered from some of the world’s best brands, a relentless focus on execution and an inspiring culture, I believe we have an extraordinary opportunity ahead. We have all the right pieces in place to build this company to be the enduring legacy I know it can be.

But we will be careful. We are not interested in trading short term revenue opportunities for bad long term business decisions. We are focused on building an enduring brand, a legacy for our employees and our country and long-term value for our shareholders. We have been careful stewards of this brand for 60 years and we will do the same as a publicly-traded company in the years ahead.

That may mean we won’t always choose the obvious path or do what traditional thinking would dictate. We would not be where we are today if we had done what everyone else was doing or what was easy. We have taken risks that we believed in and we have succeeded in doing so. We intend to continue on our path of swimming upstream. It’s certainly more challenging, but more fun — and more rewarding.

We are on a remarkable journey, one that I feel incredibly privileged to lead and one that I hope you will be proud to be a part of. This is your invitation.

LOGO

Dani Reiss, C.M.

President & CEO

 

250 BOWIE AVENUE  •  TORONTO, ONTARIO  •  M6E 4Y2  •  CANADA

 

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Business

Canada Goose

Founded 60 years ago in a small Toronto warehouse, Canada Goose has grown into a highly coveted global outerwear brand. We are recognized for authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality. This reputation is decades in the making and is rooted in our commitment to creating premium products that deliver unrivaled functionality where and when it is needed most. Be it Canadian Arctic Rangers serving their country or an explorer trekking to the South Pole, people who live, work and play in the harshest environments on Earth have turned to Canada Goose. Throughout our history, we have found inspiration in these technical challenges and parlayed that expertise into creating exceptional products for any occasion. From research facilities in Antarctica and the Canadian High Arctic to the streets of Toronto, New York City, London, Paris, Tokyo and beyond, people have fallen in love with our brand and made it a part of their everyday lives.

We are deeply involved in every stage of our business as a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. This vertically integrated business model allows us to directly control the design and development of our products while capturing higher margins. As of December 31, 2016, our products are sold through select outdoor, luxury and online retailers and distributors in 36 countries, our e-commerce sites in Canada, the United States, the United Kingdom and France, and two recently opened retail stores in Toronto and New York City.

The power of our business model and our ability to profitably scale our operations are reflected in our financial performance. In fiscal 2016, we had revenue of $290.8 million, gross profit of $145.6 million, which represented gross margin of 50.1%, net income of $26.5 million, Adjusted EBITDA of $54.3 million, Adjusted EBITDA Margin of 18.7% and Adjusted Net Income of $30.1 million. We grew our revenue at a 38.3% CAGR, net income at a 196.0% CAGR and Adjusted EBITDA at an 85.0% CAGR from fiscal 2014 to fiscal 2016, while expanding our gross margin from 38.6% to 50.1% and our Adjusted EBITDA Margin from 10.4% to 18.7% over the same period. For additional information regarding Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, which are non-IFRS measures, including a reconciliation of these non-IFRS measures to net income, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures.”

Our Competitive Strengths

We believe that the following strengths are central to the power of our brand and business model.

Authentic brand. For decades, we have helped explorers, scientists, athletes and film crews embrace the elements in some of the harshest environments in the world. Our stories are real and are best told through the unfiltered lens of Goose People, our brand ambassadors. The journeys, achievements and attitudes of these incredible adventurers embody our core belief that greatness is out there and inspire our customers to chart their own course.

Uncompromised craftsmanship. Leveraging decades of experience, field testing and obsessive attention to detail, we develop superior functional products. Our expertise in matching our technical fabrics with the optimal blends of down enables us to create warmer, lighter and more durable products across seasons and applications. The commitment to superior quality and lasting performance that initially made us renowned for warmth now extends into breathability and protection from wind and rain.

Beloved and coveted globally. We offer outerwear with timeless style for anyone who wants to embrace the elements. From the most remote regions of the world to major metropolitan centres, we have successfully broadened our reach beyond our arctic heritage to outdoor enthusiasts, urban explorers and discerning consumers globally. Our deep connection with our customers is evidenced by their brand loyalty. Consumer surveys conducted on our behalf in 2016 show that 82% of customers say they love their Canada

 

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Goose jackets and 84% of customers indicate that, when making their next premium outerwear purchase, they would likely repurchase Canada Goose. These results are among the highest in our industry based on this survey.

Proudly made in Canada. Our Canadian heritage and commitment to local manufacturing are at the heart of our business and brand. While many companies in our industry outsource to offshore manufacturers, we are committed to aggressively investing in producing premium, high quality products in Canada, the country from which we draw our inspiration. We believe our Canadian production facilities and craftspeople have set us apart on the international stage and in the minds of our customers.

Flexible supply chain. We directly control the design, innovation, development, engineering and testing of our products, which we believe allows us to achieve greater operating efficiencies and deliver superior quality products. We manage our production through a combination of in-house manufacturing facilities and long-standing relationships with Canadian third party sub-contractors. Our flexible supply chain gives us distinct advantages including the ability to scale our operations, adapt to customer demand, shorten product development cycles and achieve higher margins.

Multi-channel distribution. Our global distribution strategy allows us to reach customers through two distinct, brand-enhancing channels. In our wholesale channel, which as of December 31, 2016 extends into 36 countries, we carefully select the best retail partners and distributors to represent our brand in a manner consistent with our heritage and growth strategy. As a result, our retail partnerships include best-in-class outdoor, luxury and online retailers. Through our fast growing DTC channel, which includes our e-commerce sites in four countries and two recently opened retail stores, we are able to more directly control the customer experience, driving deeper brand engagement and loyalty, while also realizing more favorable margins. We employ product supply discipline across both of our channels to manage scarcity, preserve brand strength and optimize profitable growth for us and our retail partners.

Passionate and committed management team. Through steady brand discipline and a focus on sustainable growth, our management team has transformed a small family business into a global brand. Dani Reiss, our CEO, has worked in almost every area of our company and successfully developed our international sales channels prior to assuming the role of CEO in 2001. Dani has assembled a team of seasoned executives from diverse and relevant backgrounds who draw on an average of over 15 years’ experience working with a wide range of leading global companies including Marc Jacobs, New Balance, Nike, Patagonia, Ralph Lauren, McKinsey, UFC and Red Bull. Their leadership and passion have accelerated our evolution into a three season lifestyle brand and the rollout of our DTC channel.

Our Growth Strategies

We have built a strong foundation as Canada Goose has evolved into a highly coveted global outerwear brand. Over the past three fiscal years, we have grown our revenue at a 38.3% CAGR, net income at a 196.0% CAGR and Adjusted EBITDA at an 85.0% CAGR. We have also expanded our gross margin from 38.6% to 50.1% and our Adjusted EBITDA Margin from 10.4% to 18.7% over the same period while concurrently making significant long-term investments in our human capital, production capacity, brand building and distribution channels. Leveraging these investments and our proven growth strategies, we will continue to aggressively pursue our substantial global market opportunity.

Execute our proven market development strategy. As we have grown our business, we have developed a successful framework for entering and developing our markets by increasing awareness and broadening customer access. We intend to continue executing on the following tactics as we further penetrate our markets globally:

Introduce and strengthen our brand. Building brand awareness among potential new customers and strengthening our connections with those who already know us will be a key driver of our growth. While our brand has achieved substantial traction globally and those who have experienced our products demonstrate strong loyalty, our presence is relatively nascent in many of our markets. According to an August 2016 consumer survey conducted on our behalf, the vast majority of consumers outside of Canada are not aware

 

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of Canada Goose. Through a combination of the organic, word-of-mouth brand building that has driven much of our success to date and a more proactive approach to reaching new audiences through traditional channels, we will continue to introduce the Canada Goose brand to the world.

Enhance our wholesale network. We intend to continue broadening customer access and strengthening our global foothold in new and existing markets by strategically expanding our wholesale network and deepening current relationships. In all of our markets, we have an opportunity to increase sales by adding new wholesale doors and increasing volume in existing retailers. Additionally, we are focused on strengthening relationships with our retail partners through broader offerings, exclusive products and shop-in-shop formats. We believe our retail partners have a strong incentive to showcase our brand as our products drive customer traffic and consistent full-price sell-through in their stores.

Accelerate our e-commerce-led Direct to Consumer rollout. Our DTC channel serves as an unfiltered window into our brand which creates meaningful relationships and direct engagement with our customers. This drives opportunities to generate incremental revenue growth and capture full retail margin. We have rapidly grown our online sales to $33.0 million in fiscal 2016, which represented 11.4% of our consolidated revenue. We have subsequently launched new online storefronts in the United Kingdom and France and plan to continue introducing online stores in new markets. Our e-commerce platform is complemented by our two recently opened retail stores in Toronto and New York City. We intend to open a select number of additional retail locations in major metropolitan centres and premium outdoor destinations where we believe they can operate profitably.

Strengthen and expand our geographic footprint. We believe there is an opportunity to increase penetration across our existing markets and selectively enter new regions. Although the Canada Goose brand is recognized globally, our recent investments have been focused on North America and have driven exceptional growth in Canada and the United States. Outside of Canada and the United States (“Rest of World”), we have identified an opportunity to accelerate our momentum utilizing our proven growth framework. The following table presents our revenue in each of our geographic segments over the past three fiscal years:

 

(in millions)    Fiscal year ended March 31,      ‘14 – ‘16  
       2014          2015          2016        CAGR  

Canada

   $ 72.5      $ 75.7      $ 95.2        14.6

United States

     33.6        57.0        103.4        75.5

Rest of World

     46.0        85.7        92.2        41.6
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 152.1      $ 218.4      $ 290.8        38.3
  

 

 

    

 

 

    

 

 

    

 

 

 

Canada. While we have achieved high brand awareness in Canada, we continue to experience strong penetration and revenue growth driven primarily by expanding access and product offerings. After developing a strong wholesale footprint, we successfully launched our Canadian e-commerce platform in August 2014 and opened our first retail store in Toronto in October 2016. We expect to further develop our presence through increased strategic marketing activities, deeper relationships with our retail partners and continued focus on our DTC channel. Additionally, we intend to continue broadening our product offering, to make Canada Goose a bigger part of our customers’ lives.

United States. As we continue to capture the significant market opportunity in the United States, our focus is on increasing brand awareness to a level that approaches what we have achieved in Canada. According to an August 2016 consumer survey conducted on our behalf, aided brand awareness in the United States is 16% as compared to 76% in Canada. Our market entry has been staged on a regional basis, with the bulk of our investments and wholesale penetration concentrated in the Northeast, where our aided brand awareness is 25% and as high as 46% in Boston and New York City. This has been the primary driver of our historical growth and momentum in the U.S. and we continue to generate strong growth in the region. Building on this success, we launched our national e-commerce platform in September 2015 and opened our first retail store in New York City in November 2016. We believe there is a large white space opportunity in other regions such as the

 

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Mid-Atlantic as well as the Midwest, where our aided brand awareness is currently 18%, and West, where our aided brand awareness is 14% and as high as 26% in metropolitan markets such as Denver and San Francisco. As we sequentially introduce our brand to the rest of the country, we are focused on expanding our wholesale footprint, including executing our shop-in-shop strategy and continuing to deliver a broader three season product assortment to our partners.

Rest of World. We currently generate sales in every major Western European market and, while this is where the brand first achieved commercial success, we believe there are significant opportunities to accelerate these markets to their full potential. In the United Kingdom and France in particular, we have achieved strong traction through our retail partnerships, but have yet to fully extend our wholesale network and are only in the initial phase of executing on our shop-in-shop strategy. In both markets, we launched our e-commerce platforms in September 2016 and intend to establish our owned retail presence in the near future. While the United Kingdom and France are our most developed European markets, we have identified a number of markets with significant near-term development potential, such as Germany, Italy and Scandinavia.

Outside of Europe, our most established markets are Japan and Korea. Over the past decade, we have grown successfully in Japan and, in both Japan and Korea, recently partnered with world-class distributors. These partners will help us continue to build awareness and access to the brand while ensuring its long term sustainability. Additionally, we currently have a minimal presence in China and other large markets which represent significant future opportunities.

Over the past three fiscal years, we have nearly doubled our market penetration in Canada to reach approximately 35 unit sales per 1,000 addressable customers (people living above the 37th Parallel and with annual household income of greater than $100,000). We have been similarly successful in the United States, Western Europe, Scandinavia and Asia with units sales per 1,000 addressable customers reaching between 3.5 and 10 units, but we still have room to grow in our current markets. Even without expanding our geographic footprint or our product lines, we believe we have significant opportunity to further increase penetration in the United States, Western Europe (Sweden, Denmark, Norway, Finland, France, United Kingdom, the Netherlands, Spain, Germany, Austria, Belgium and Italy), Scandinavia and Asia (Japan and South Korea); if we were to achieve 50% of current penetration in Canada in these other geographies, this would result in tripled unit demand within our Fall and Winter product categories.

Enhance and expand our product offering. Continuing to enhance and expand our product offering represents a meaningful growth driver for Canada Goose. Broadening our product line will allow us to strengthen brand loyalty with those customers who already love Canada Goose, drive higher penetration in our existing markets and expand our appeal across new geographies and climates. Drawing on our decades of experience and customer demand for inspiring new functional products, we intend to continue developing our offering through the following:

Elevate Winter. Recognizing that people want to bring the functionality of our jackets into their everyday lives, we have developed a wide range of exceptional winter products for any occasion. While staying true to our tactical industrial heritage, we intend to continue refreshing and broadening our offering with new stylistic variations, refined fits and exclusive limited edition collaborations.

Expand Spring and Fall. We intend to continue building out our successful Spring and Fall collections in categories such as lightweight and ultra-lightweight down, rainwear, windwear and softshell jackets. While keeping our customers warm, comfortable and protected across three seasons, these extensions also increase our appeal in markets with more temperate climates.

Extend beyond outerwear. Our strategy is to selectively respond to customer demand for functional products in adjacent categories. Consumer surveys conducted on our behalf indicate that our customers are looking for additional Canada Goose products, particularly in key categories such as knitwear, fleece, footwear, travel gear and bedding. We believe offering inspiring new products that are consistent with our heritage, functionality and quality represents an opportunity to develop a closer relationship with our customers and expand our addressable market.

 

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Continue to drive operational excellence. As we scale our business, we plan to continue leveraging our brand and powerful business model to drive operational efficiencies and higher margins in the following ways:

Channel mix. We intend to expand our DTC channel in markets that can support the profitable rollout of e-commerce and select retail stores. As our distribution channel mix shifts toward our e-commerce-led DTC channel, we expect to capture incremental gross margin. A jacket sale in our DTC channel provides two-to-four times greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel.

Price optimization. We intend to continue optimizing our pricing to capture the full value of our products and the superior functionality they provide to our customers. Additionally, we actively balance customer demand with scarcity of supply to avoid the promotional activity that is common in the apparel industry. This allows us and our retail partners to sell our products at full price, avoid markdowns and realize full margin potential.

Manufacturing capabilities. Approximately one-third of Canada Goose products are currently manufactured in our own facilities in Canada. We intend to optimize our domestic manufacturing mix by opportunistically bringing additional manufacturing capacity in-house to capture incremental gross margin.

Operating leverage. We have invested ahead of our growth in all areas of the business including design and manufacturing, multi-channel distribution and corporate infrastructure. For example, our current manufacturing footprint is sufficient to allow us to double our current headcount. As we continue our growth trajectory, we have the opportunity to leverage these investments and realize economies of scale.

 

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History

Over the last 60 years, we have grown from a manufacturer of private label parkas into one of the world’s most desired outerwear brands. Fueled by our core belief that greatness is out there and building on our strength of creating premium functional jackets, we have extended our brand into three seasons and new categories beyond the parka. With the same discipline, we have expanded our sales channels beyond distributors to include a select group of outdoor, luxury and online retailers as well as, more recently, our own DTC channel. At every step, we have stayed true to our heritage, which we believe has set us apart.

 

LOGO

Our Products

Our arctic heritage. Authenticity is everything to Canada Goose. We began as an outerwear manufacturer focused primarily on providing parkas to people working in the harshest environment on Earth—the Arctic. From

 

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the crew of a northern Canadian airline, First Air, to Canadian Arctic Rangers, we have been trusted to help keep people warm. For decades, this utilitarian, functional history has been core to our heritage. To ensure we deliver a product that performs when and where it is needed most, we strive to make the best products of their kind by using the highest quality raw materials and craftsmanship.

The precision of every cut, fold and stitch in our products is guided by decades of experience. From zipper to button and stitch to stitch, every element is carefully chosen and meticulously put into place by hand. Every Canada Goose jacket passes through the hands of multiple craftspeople, all united by our commitment to uncompromising quality. Our quality assurance team inspects every jacket to ensure no detail is overlooked. We believe our best-in-class Canadian manufacturing capabilities and partnerships afford us increased quality control and direct involvement in all stages of the process, enabling us to stand behind our outerwear with a lifetime warranty against defects in materials and workmanship.

Our evolution. As a global three-season outerwear brand, our product offering has evolved significantly since the days of solely making specialty jackets such as the Snow Mantra and Expedition parkas for the severe Arctic environment. We leveraged our tactical industrial heritage, including our long relationship with the Canadian military and law enforcement, to inspire, develop and refine functionally superior in-line collections for extreme conditions and beyond.

Recognizing our customers want to bring the functionality of our jackets into their everyday lives, we expanded our offering to include products for outdoor enthusiasts, urban explorers and discerning consumers everywhere. True to our heritage, we partnered with extraordinary Goose People as a source of inspiration and real-world testing. Whether developing novel HyBridge products for Ray Zahab to run the Sahara or custom-designing Laurie Skreslet’s coat to summit Everest, which inspired our Altitude line, Canada Goose has found inspiration in every technical challenge and parlayed that expertise into creating exceptional products for any occasion.

The uncompromised craftsmanship and quality of the Canada Goose brand is preserved in new products and high performance materials to keep our customers warm and comfortable no matter how low the temperature drops. According to our customers who responded to our consumer survey our jackets are the warmest as compared to other outerwear brands. As we evolved and expanded our winter assortment to suit new uses, climates and geographies, we also refreshed our core offerings with the introduction of our Black Label collection, enhancing our classic products with a focus on elevated style, luxurious fabrics and refined fits.

Our broad set of manufacturing capabilities and access to innovative materials ranging from ArcticTech and Tri-Durance fabrics to luxury Loro Piana wool enable us to meet customers’ needs in the Arctic, on designer runways and nearly everywhere in between. At the same time as our coats keep Canadian law enforcement warm and equip Goose People on epic adventures, our collaborations with Marc Jacobs, Levi’s, musician Drake’s October’s Very Own (OVO) fashion brand, professional baseball player José Bautista and others have been met with strong acclaim. These collaborations help extend our brand to new audiences and introduce inspiring new styles to those who already love Canada Goose.

Expansion into three seasons. As our heritage line has expanded significantly, Canada Goose has also developed a reputation for superior quality and exceptional functionality across Spring and Fall. No matter the season, people trust Canada Goose to keep them warm, comfortable and protected. Our Spring and Fall products enable consumers to embrace the elements in every season, with a wide selection of lightweight and ultra-lightweight down, rainwear, windwear and other down hybrid and softshell jackets.

Our Spring and Fall collections have demonstrated meaningful traction with consumers, achieving a 60% increase in sales between fiscal 2015 and fiscal 2016. They have also been met with great critical acclaim: HyBridge Lite won the Gear of The Year Award from Outside Magazine in 2011 and our Spring 2017 collection was named Editor’s Pick by World’s Global Style Network (WGSN), a leading trend forecaster.

 

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Beyond outerwear. Canada Goose has launched a refined line of accessories in response to customer demand for products to complement their outerwear. Our accessories focus on handwear, headwear and neckwear, and offer unparalleled warmth, function and timeless style to our customers, consistent with the heritage of our core products. Beyond accessories, we continue to selectively respond to customer demand for new product categories. Our customers have shown meaningful interest in key new product categories including knitwear and fleece, which we are developing, as well as footwear, travel gear and bedding, which we may pursue in the future. As we expand the Canada Goose brand to serve new uses, wearing occasions, geographies and consumers, we will always stay true to who we are and what the Canada Goose brand stands for: authentic heritage, uncompromised craftsmanship and quality, exceptional warmth and superior functionality.

 

LOGO

Sourcing and Manufacturing

Uncompromised craftsmanship begins with sourcing the right raw materials. We use premium fabrics and finishings that are built to last. Our blends of down and fabrics enable us to create warmer, lighter and more

 

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durable products across seasons and applications. Our products are made with down because it is recognized as the world’s best natural insulator, providing approximately three times the warmth per ounce as synthetic alternatives and, when necessary, trimmed with real fur to protect the skin from frostbite in harsh conditions.

We are committed to the sustainable and ethical sourcing of our raw materials. We have introduced comprehensive traceability programs for fur and down throughout our supply chain which we expect will be fully in effect during the spring of 2017. We only use down that is a byproduct of the poultry industry and we only purchase down and fur from suppliers who adhere to our stringent standards regarding fair practices and humane treatment of animals.

As of March 1, 2017, we operate five production facilities in Toronto, Winnipeg and Montreal, manufacturing approximately one-third of our products in-house. We also work with 32 Canadian and 6 international highly qualified subcontractors who offer specialized expertise, which provides us with flexibility to scale our production of parkas and non-core products, respectively. We employ 1,275 manufacturing employees as of March 1, 2017, and have been recognized by the Government of Canada for supporting the apparel manufacturing industry in Canada. We have invested ahead of our growth and more than doubled our in-house and contract manufacturing unit production capacity, respectively, in the past five years.

Multi-Channel Distribution Network

We sell our products through our wholesale and DTC channels. In fiscal 2016, our wholesale channel accounted for 88.6% of our revenue and our DTC channel contributed 11.4% to revenue. Across both channels we are very selective with the distribution and supply of our products.

Wholesale. The wholesale channel allows us to enter and develop new markets, maintain a leading position within our geographies and make informed investments in our DTC infrastructure. As we have grown, we have evolved what was originally a generalist approach to account management through specialist capabilities that are better aligned with the needs of specific markets and retail formats. These capabilities allow us to develop strategic relationships directly with retailers and distributors. We work with a select set of partners who respect our heritage, share our values and strengthen our market presence. As of December 31, 2016, through our global network of nearly 2,500 points of distribution with retailers such as Sporting Life, Harry Rosen, Gorsuch, Saks Fifth Avenue, Nordstrom, Selfridges and Lane Crawford we reach customers across 36 countries. Our wholesale distribution includes a mix of outdoor, luxury and online retailers. We drive traffic for our retail partners and leverage our mutually beneficial relationships to receive prime placement within their stores, showcase a broader product offering and establish Canada Goose shops-in-shops. Careful planning with our wholesale network allows us to manage scarcity and maintain high levels of full-price sell-through. Over the past three years, we have been in the process of enhancing our wholesale network to bring all of our accounts in-house with enhanced management. This allows us to deepen the relationships with our retailers by strategizing on product assortment, shop-in-shop presentation and rollout, and creates opportunities to increase our three season penetration and to offer new products through our retail partners.

Direct to Consumer. We operate an e-commerce-led DTC channel, which has grown rapidly since its launch in fiscal 2015. Our online store features our full product offering and grants us the ability to build valuable intelligence through a direct conversation with our customers. We rolled out our e-commerce platforms in Canada and the United States as well as the United Kingdom and France in August 2014, September 2015 and September 2016, respectively. Our e-commerce platform is rapidly gaining penetration, with Canada and the U.S. online stores contributing 11.4% of our total revenue in fiscal 2016, approximately two years after the launch of our first online store. We intend to continue building out our e-commerce infrastructure in new markets where we have an established wholesale presence.

Our e-commerce rollout is complemented by our retail stores in premium high traffic locations. We opened our first two retail stores in Toronto and New York City in the fall of 2016. Going forward, we plan to open a limited

 

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number of additional retail stores in other major metropolitan centres as well as premium outdoor destinations where we believe they can operate profitably. This unfiltered window into our brand will allow us to develop a closer relationship with our customers through unique experiences, feature our full product offering and drive revenue growth across both channels.

 

LOGO   LOGO   LOGO

Marketing

We have never taken a traditional marketing approach to driving consumer awareness. We have told real stories in authentic ways, fueling brand awareness and affinity through creative marketing initiatives and developing strategic relationships in relevant industries. Our success has been driven organically by word-of-mouth marketing. We have found that the experience people have with Canada Goose products is something they eagerly and passionately share with others, which we believe generates exceptional demand for our products.

Powerful and creative storytelling. To us, marketing is about telling stories—interesting stories with genuine impact. As a result of the love for our products and the deep relationships we have developed, our brand has been featured extensively in a wide range of media around the world including documentaries, feature films, commercials and magazines.

We also create original content to drive awareness and understanding of Canada Goose. In celebration of our 50th anniversary, we published Goose People, a coffee table book highlighting 50 people from around the world who embody our values. This cemented one of our key marketing initiatives as Goose People continue to be an important way for us to authentically tell our stories. In 2015, we brought some of these stories to life on the big screen through our collaboration with Oscar-winning director, Paul Haggis, and our production of the film, Out There, which was awarded two Cannes Gold Lions.

Goose People. Goose People are a diverse group of global brand ambassadors—adventurers, athletes, scientists and artists—who embody our values and lifestyle, stand for something bigger than themselves and inspire others through epic adventures and accomplishments. We consider them the epitome of our core belief that greatness is out there. They have become a platform to showcase our brand’s heritage, authentic story and uncompromised craftsmanship.

 

LOGO   LOGO   LOGO   LOGO

Film and entertainment. For more than three decades, our jackets have been a staple on film sets around the world and are known as the unofficial jacket of film crews anywhere it is cold. Our jackets offer crew and talent

 

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the warmth and functionality they need to survive long shoots in the most demanding environments. Due to this long-standing and organic seeding relationship, we have not paid for product placement, but our products have naturally transitioned from behind the scenes to on-camera as a way to authenticate cold weather scenes. We also support the industry as an official sponsor of a number of international film festivals, including the Sundance Film Festival and Toronto International Film Festival.

Investing for the future. Moving forward, our marketing focus is on continuing to tell our stories in unique, creative and authentic ways that engage and inspire customers. As our distribution model has shifted from pure wholesale to multi-channel, our business needs have evolved. We have supported this shift through digital first marketing that scales quickly and globally while maintaining a consistent and authentic brand experience for our customers. We have also taken a more proactive and sophisticated approach to understanding our customers and utilizing insights to inform how we deliver new products. This allows us to be present in their preferred digital platforms and to engage our fans and maintain their loyalty for years to come. We will continue to strategically invest in reaching new audiences in developing markets and boosting affinity around the world. Our marketing efforts, like our products, will always be subject to the brand discipline and stewardship that have guided us throughout our history.

Our Market

Strongly positioned in large and growing apparel market segment. Our focus on functionality and quality broadens our reach beyond people working in the coldest places on earth to outdoor enthusiasts, urban explorers and discerning consumers globally. Our uncompromised craftsmanship positions our products as premium technical garments and coveted luxury items in the eyes of our customer. We believe the staying power of our brand strongly positions us to compete in the growing outerwear and luxury apparel markets.

We intend to execute on our proven growth strategies to further develop all of our markets along the maturity curve. The following table summarizes Euromonitor International 2016 retail value market size data and anticipated 2016—2020 compound annual growth rates for key global geographies.

 

(US$ in billions)    Outerwear     Luxury Apparel  
     2016      ‘16 – ‘20
CAGR
    2016      ‘16 – ‘20
CAGR
 

Canada

   $ 18        3.8   $ 2        3.2

United States

   $ 192        3.2   $ 17        3.0

Europe

   $ 250        2.6   $ 40        3.7

Asia Pacific

   $ 313        4.5   $ 22        4.0

Source: Euromonitor Apparel and Footwear 2017 edition, Euromonitor Luxury Goods 2017 edition, Retail Value RSP including Sales Tax, Current Prices. Outerwear covers men’s and women’s clothing for outdoor/out-of-the-house wear including shorts and trousers, jeans, jackets and coats, suits, shirts and blouses, jumpers, tops, dresses, skirts, leggings. Luxury Apparel is equivalent to Designer Apparel (Ready-to-Wear) which is the aggregation of Men’s Designer Apparel, Women’s Designer Apparel, Designer Childrenswear, Designer Apparel Accessories, and Designer Hosiery. However, designer haute couture is excluded from Euromonitor International’s coverage.

 

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Current Global Market Penetration

 

LOGO

Proven growth framework to further penetrate geographic markets. While we have a global distribution network in place, we recognize the potential for significant penetration upside across all of our markets. Our tailored approach to market development is informed by prevailing awareness and distribution. We cost-effectively develop initial awareness in new markets by building strong relationships with carefully selected partners within our wholesale channel. Wholesale momentum informs our incremental brand building investments in each region. As our market presence grows, we evaluate the opportunity to roll out our DTC channel. The first step in this process is the introduction of our e-commerce platform which is followed by the evaluation of select retail store opportunities. With increased customer awareness and access, we begin to introduce a broader product offering.

For example, as we continue to capture the significant market opportunity in the United States, we are pursuing a staged regional expansion. Our initial entry into the U.S. market was concentrated in the Northeast where we grew our wholesale network to 125 doors as of December 31, 2016 and, according to a survey conducted on our behalf in August 2016 of consumers that have purchased premium outerwear, achieved aided brand awareness of 46% in Boston and New York City. Building on this, we have begun to focus on expanding customer access via our e-commerce site and retail store in New York City. Our successful execution in this region has been the primary driver of our 75.5% revenue CAGR in the United States from fiscal 2014 to fiscal 2016.

Moving beyond our success in the Northeast, we recognize a significant whitespace opportunity across the United States. We continue to focus on introducing and strengthening the Canada Goose brand given relatively low aided brand awareness levels of 26% in key metropolitan markets such as Denver and San Francisco. In these rapidly developing markets, we remain focused on expanding our wholesale footprint, including executing our shop-in-shop strategy and continuing to drive a broader product assortment to our partners. Our national e-commerce presence offers us a direct connection to our customers and informs our efforts in high potential regions such as the Mid-Atlantic, Midwest and Pacific Northwest. As we continue to expand to regions with diverse and temperate climates, our product offering will include a stronger emphasis on our expanding Spring and Fall collections.

The success we have achieved in North America has allowed us to refine and strengthen our framework for market development. We will continue to aggressively pursue our substantial global market opportunity using our proven growth strategies.

 

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Competition

The market for outerwear is highly fragmented. We principally operate in the market for premium outerwear, which is part of the broader apparel industry. We compete directly against other manufacturers, wholesalers and direct retailers of outerwear, premium functional outerwear and luxury outerwear. We compete both with global brands and with regional brands operating only in select markets. Because of the fragmented nature of our marketplace, we also compete with other apparel sellers, including those who do not specialize in outerwear. While we operate in a highly competitive market, we believe there are many factors that differentiate us from other manufacturers, wholesalers and retailers of outerwear, including our brand, our heritage and history, our focus on functionality and craftsmanship and the fact that our core products are made in Canada.

Intellectual Property

We own the trademarks used in connection with the marketing, distribution and sale of all of our products in the United States, Canada and in the other countries in which our products are sold. Our major trademarks include the CANADA GOOSE word mark and the ARCTIC PROGRAM & DESIGN trademark (our disc logo consisting of the colour-inverse design of the North Pole and Arctic Ocean). In addition to the registrations in Canada and the United States, our word mark and design are registered in other jurisdictions which cover approximately 37 jurisdictions. Furthermore, in certain jurisdictions we register as trademarks certain elements of our products, such as fabric, warmth categorization and style names such as our Snow Mantra parka.

We enforce our trademarks and we have taken several measures to protect our customers from counterfeiting activities. Since 2011 we have sewn a unique hologram, designed exclusively for us, into every jacket and accessory as proof of authenticity. Additionally, our website has a tool for potential online customers to verify the integrity of third party retailers that purport to sell our products. We are also active in enforcing rights on a global basis to our trademarks and taking action against counterfeiters, online and in physical stores.

Government Regulation

In Canada and in the other jurisdictions in which we operate, we are subject to labour and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer protection regulations that apply to retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse facilities. Our products sold outside of Canada are subject to tariffs, treaties and various trade agreements as well as laws affecting the importation of consumer goods. We monitor changes in these laws, regulations, treaties and agreements, and believe that we are in material compliance with applicable laws.

Our Employees

As of March 1, 2017, we employed 1,688 people, including both full-time and part-time employees. Of these employees, 1,275 were employed in Canadian manufacturing positions and 125 were employed in North American selling and retail positions. The remaining employees were engaged in other aspects of our business. As of March 1, 2017, 377 of our employees are represented by unions. We believe that relations with our employees are satisfactory and we have never encountered a strike or significant work stoppage.

Corporate Information and Structure

Our company was founded in Toronto, Canada in 1957. In December 2013, we partnered with Bain Capital through a sale of a 70% equity interest in our business, to accelerate our growth and international expansion. In connection with such sale, Canada Goose Holdings Inc. was incorporated under the Business Corporations Act (British Columbia) on November 21, 2013.

 

 

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Our principal office is located at 250 Bowie Avenue, Toronto, Ontario, Canada M6E 4Y2 and our telephone number is (416) 780-9850. Our registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8.

The following chart reflects our organizational structure (including the jurisdiction of formation or incorporation of the various entities), after giving effect to the Recapitalization and the completion of this offering and assuming no exercise of the underwriters’ over-allotment option:

 

LOGO

In connection with this offering we will amend our articles in order to, among other things, amend and redesignate our Class A Common Shares as multiple voting shares; eliminate our Class B Common Shares, Class A Senior Preferred Shares, Class B Senior Preferred Shares, Class A Junior Preferred Shares, Class B Junior Preferred Shares, Class C Junior Preferred Shares and the Class D Preferred Shares from our share capital; and create our subordinate voting shares. Upon completion of this offering, our share capital will consist of an unlimited number of multiple voting shares and subordinate voting shares and an unlimited number of preferred shares, issuable in series (none outstanding). See “Description of Share Capital.”

 

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Leased Properties

We maintain the following leased facilities for our corporate headquarters and to conduct our principal manufacturing and retail activities, which we believe are in good condition and working order:

 

Location

 

Principal Activity

 

Square Feet

 

Lease Expiration Date

Toronto, Ontario   Corporate Headquarters, showroom and manufacturing   190,978 square feet   June 30, 2023
Scarborough, Ontario   Manufacturing   84,800 square feet   May 31, 2020
Scarborough, Ontario   Logistics   117,179 square feet   August 31, 2027

Yorkdale Shopping Centre,

    Toronto, Ontario

  Retail Store   4,503 square feet   October 31, 2026
Winnipeg, Manitoba   Manufacturing   82,920 square feet   November 12, 2022
Winnipeg, Manitoba   Manufacturing   94,541 square feet   September 30, 2025
Boisbriand, Québec   Manufacturing   23,637 square feet   July 31, 2023
New York, NY   Office and showroom   4,040 square feet   December 31, 2024
New York, NY   Retail Store   6,970 square feet   March 31, 2027
Chicago, IL  

Inactive

  10,188 square feet   June 24, 2027
Paris, France   Office and showroom   4,090 square feet   March 15, 2018
Zug, Switzerland   Office and showroom   7,545 square feet   January 31, 2021

Seasonality

Our business is seasonal in nature. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Performance—Seasonality.”

Legal Proceedings and Regulatory Matters

From time to time, we may be subject to legal or regulatory proceedings and claims in the ordinary course of business, including proceedings to protect our intellectual property rights. As part of our monitoring program for our intellectual property rights, from time to time we file lawsuits for acts of trademark counterfeiting, trademark infringement, trademark dilution, patent infringement or breach of other state or foreign laws. These actions often result in seizure of counterfeit merchandise and negotiated settlements with defendants. Defendants sometime raise the invalidity or unenforceability of our proprietary rights as affirmative defenses or counterclaims. We currently have no material legal or regulatory proceedings pending.

 

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Management

Executive Officers and Directors

The following table sets forth certain information relating to our directors and executive officers as of the date of this prospectus. Unless otherwise stated, the business address for our directors and officers is c/o Canada Goose Holdings Inc., 250 Bowie Ave, Toronto, Ontario, Canada M6E 4Y2.

 

Name and Province or State and

Country of Residence

   Age     

Position

Dani Reiss

Ontario, Canada

     43      President and Chief Executive Officer and Director

John Black

Ontario, Canada

     58      Chief Financial Officer

Pat Sherlock

Ontario, Canada

     43      Senior Vice President, Global Wholesale

Ana Mihaljevic

Ontario, Canada

     36      Vice President, Planning and Sales Operations

Jacqueline Poriadjian

Ontario, Canada

     39      Chief Marketing Officer

Jacob Pat

Ontario, Canada

     37      Vice President, Information Technology

Lee Turlington

California, United States

     62      Chief Product Officer

Kara MacKillop

Ontario, Canada

     41      Senior Vice President, Human Resources

Scott Cameron

Ontario, Canada

     39      Executive Vice President e-Commerce, Stores and Strategy

Carrie Baker

Ontario, Canada

     41      Chief of Staff, Senior Vice President

John Moran

Ontario, Canada

     54      Senior Vice President, Manufacturing and Supply Chain

Spencer Orr

Ontario, Canada

     39      Vice President, Merchandising and Product Strategy

Kevin Spreekmeester

Ontario, Canada

     56      Chief Brand Officer

Ryan Cotton

Massachusetts, United States

     38      Director

Joshua Bekenstein

Massachusetts, United States

     58      Director

Stephen Gunn

Ontario, Canada

     62      Director

Jean-Marc Huët

Guildford, England

     47      Director

Dani Reiss C. M. (Member of the Order of Canada), President and Chief Executive Officer and Director

The grandson of our founder, Mr. Reiss, joined the company in 1997 and was named President and Chief Executive Officer of the company in 2001. Mr. Reiss has worked in almost every area of the company and successfully developed our international sales channels prior to assuming the role of President and Chief Executive Officer. Mr. Reiss received a Bachelor of Arts from University of Toronto. Mr. Reiss is the chairman of our board of directors and brings leadership and operational experience to our board of directors as our President and Chief Executive Officer.

 

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John Black, Chief Financial Officer

Mr. Black joined the company in August 2013 as Chief Financial Officer. Prior to joining the Company, Mr. Black served as the Chief Financial Officer of Protenergy Natural Foods Corp., from May 2011 to August 2013, and at the Ontario Lottery and Gaming Corporation from April 2005 to April 2010. From March 2001 to April 2005 Mr. Black served as Chief Financial Officer of Trimark Sportswear Group. Mr. Black brings to our team a results-focused approach and strong negotiation skills as well as a track record of improving performance at companies. Mr. Black received a Bachelor of Commerce (Honours) degree and Bachelor of Administration degree from The University of Ottawa, and is a CPA-CA.

Pat Sherlock, Senior Vice President, Global Wholesale

Mr. Sherlock joined the company in November 2012 as the Director of Canadian Sales and was named Senior Director of Sales in May 2014, Vice President of Sales Canada in May 2015 and Senior Vice President of Global Wholesale in April 2016. Prior to joining the company, Mr. Sherlock served as the National Sales Manager of New Balance Canada Inc., from January 2008 to November 2012 and Managing Director, Central Eastern Canada for Lothar Heinrich Agencies Ltd. (Warsteiner) from December 2006 to January 2008. He spent 10 years at InBev (Labatt), from 1997 to 2007 most recently as National Field Sales Manager. Mr. Sherlock received a Bachelor of Business Administration and Management from University of Winnipeg.

Ana Mihaljevic, Vice President, Planning and Sales Operations

Ms. Mihaljevic joined the company in April 2015 as Vice President of Planning and became Vice President of Planning and Sales Operations in April 2016. Prior to joining the company, Ms. Mihaljevic served as the Director of Business Planning at Marc Jacobs International, a designer apparel company, from March 2013 to March 2015, the Director of Sales and Planning at Jones Apparel Group, a women’s apparel company, from May 2011 to March 2013, and as an Account Executive at Ralph Lauren from April 2008 to May 2011. Ms. Mihaljevic received a Bachelor in Commerce from Queen’s University.

Jacqueline Poriadjian, Chief Marketing Officer

Ms. Poriadjian joined the company in April 2016 as Chief Marketing Officer. Prior to joining the company, Ms. Poriadjian spent nine years at Ultimate Fighting Championship (UFC) from February 2007 to November 2015 and served as the Senior Vice President of Global Brand Marketing from July 2012 to November 2015. Prior to that she spent six years at iN DEMAND, LLC from January 2001 to February 2007. Ms. Poriadjian received a Bachelor of Arts in History from Queens College (NY) and a Juris Doctorate from New York Law School.

Jacob Pat, Vice President, Information Technology

Mr. Pat joined the company as Director of Information Technology in March 2013, and was named Vice President of Information Technology in March 2014. Prior to joining our team, Mr. Pat served as the Director of Enablement at Momentum Advanced Solutions Inc., a division of OnX, from April 2012 to March 2013, and Manager of QA/Information Technology at Trimble Navigation from August 2008 to April 2012.

Lee Turlington, Chief Product Officer

Mr. Turlington began working with Canada Goose in October 2015 as an independent consultant, and formally joined the company as Chief Product Officer in March 2016. Prior to joining the company Mr. Turlington spent seven years as independent consultant with TURLINGTON, Inc., advising companies such as International Marketing Partners Ltd., Mission Athlete Care, Ape & Partners S.P.A/Parajumpers, Quiksilver Inc., Ironclad Performance Wear Corporation, Haglofs, and LK International AG/KJUS. He spent five years at Patagonia Inc. from 2008-2013, most recently serving as Vice President, Global Product. From March 1999 to April 2007, Mr. Turlington served as a Global Director and General Manager for Nike Inc. Prior to that, he served at Fila Sport

 

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sPa from March 1994 to February 1999, as Senior Vice President, Fila Apparel. From June 1977 to April 1992, he served as Vice President, Sales, Marketing, Global Product and various other executive roles at The North Face. Mr. Turlington received a Bachelor of Economics from Lenoir-Rhyne University.

Kara MacKillop, Senior Vice President, Human Resources

Ms. MacKillop joined the company in September 2014 as the Vice President of Human Resources. She was promoted to Senior Vice President of Human Resources in 2016. Prior to joining our team, Ms. MacKillop served as the Director of Human Resources for Red Bull Canada, a company that produces and sells energy drinks, from September 2010 to September 2014, and as Director of Human Resources for Indigo Books and Music from August 2003 until September 2010. Ms. MacKillop received a Bachelor of Science from the University of Western Ontario.

Scott Cameron, Executive Vice President e-Commerce, Stores and Strategy

Mr. Cameron joined the company in December 2015 as Chief Strategy and Business Development Officer and has served as Executive Vice President e-Commerce, Stores and Strategy since July 2016. Prior to joining our team, Mr. Cameron spent eight years focused on luxury and apparel retail brands at McKinsey & Co. Toronto, a management consulting firm, most recently as a principal. Mr. Cameron received a Bachelor in Commerce (Honours) degree from Queen’s University and a Master of Business Administration from Harvard Business School, where he was a Baker Scholar.

Carrie Baker, Chief of Staff, Senior Vice President

Ms. Baker joined the company in May 2012 as the Vice President of Communications and now serves as Chief of Staff and Senior Vice President. Prior to joining the company Ms. Baker spent 12 years at High Road Communications, a North American communications agency, from May 2000 to April 2012, serving most recently as Senior Vice President. Ms. Baker received a Bachelor of Arts from the University of Western Ontario.

John Moran, Senior Vice President Manufacturing & Supply Chain

Mr. Moran joined the company in November 2014 as Vice President of Manufacturing and was promoted in January 2017 to Senior Vice President, Manufacturing and Supply Chain. Prior to joining the company, Mr. Moran served as Chief Operating Officer at Smith & Vandiver Corp. in 2014 and as Vice President, Operations from October 2003 to March 2011 and later Chief Operating Officer from April 2011 to April 2013 at Robert Talbott Inc. in Monterey, California, a renowned producer of men’s and women’s luxury apparel. Throughout his time with Robert Talbott Inc., Mr. Moran’s responsibilities ranged from strategic planning and business development to sales, sourcing, manufacturing, distribution and finance. Prior to his time with Robert Talbott Inc., Mr. Moran was employed full-time with Gitman Brothers Shirt Company, based in Ashland, Pennsylvania, from 1984 to October 2003 holding positions of varying levels of responsibility in manufacturing, distribution and finance. At the time of his departure in October 2003 he held the position of Chief Operating Officer.

Spencer Orr, Vice President, Merchandising and Product Strategy

Mr. Orr joined the company in January 2009 as Product Manager. He was promoted to Vice President of Design and Merchandising in 2012 and to Vice President of Merchandising and Product Strategy in June 2016. Prior to joining the company, Mr. Orr served as the Manager of Product Design and Development at Sierra Designs, an industry leading outerwear and outdoor equipment brand. Mr. Orr received an honours Bachelors in Outdoor Recreation from Lakehead University and a Masters in Business Administration from Ivey Business School at University of Western Ontario.

 

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Kevin Spreekmeester, Chief Brand Officer

Mr. Spreekmeester joined the company in January 2008 as the Vice President of Marketing. He was promoted to Chief Marketing Officer in 2014 and again to Chief Brand Officer in July 2016. Mr. Spreekmeester has over 30 years of experience in brand building, including at Young & Rubicam. He was named to Advertising Age magazine’s 2015 Creativity 50 list. Mr. Spreekmeester received a Bachelors of Arts in Communication Studies from Concordia University.

Ryan Cotton, Director

Mr. Cotton has served as a member of our board of directors since December 2013. He joined Bain Capital in 2003, and is currently a Managing Director. Prior to joining Bain Capital, Mr. Cotton was a consultant at Bain & Company from 2001 to 2003. He is a director at Apple Leisure Group, TOMS Shoes Holdings, LLC, and International Market Centers, Inc. Mr. Cotton received a bachelor’s degree from Princeton University and a Master of Business Administration from the Stanford Graduate School of Business. Mr. Cotton provides strong executive and business operations skills to our board of directors and valuable experience gained from previous and current board service.

Joshua Bekenstein, Director

Mr. Bekenstein has served as a member of our board of directors since December 2013. He is a Managing Director at Bain Capital. Prior to joining Bain Capital, in 1984, Mr. Bekenstein spent several years at Bain & Company, Inc., where he was involved with companies in a variety of industries. Mr. Bekenstein serves as a director of The Michaels Companies, Inc., BRP Inc., Dollarama Inc., Burlington Stores, Inc., Bright Horizons Family Solutions Inc., The Gymboree Corporation and Waters Corporation. Mr. Bekenstein received a Bachelor of Arts from Yale University and a Master of Business Administration from Harvard Business School. Mr. Bekenstein provides strong executive and business operations skills to our board of directors and valuable experience gained from previous and current board service.

Stephen Gunn, Director

Mr. Gunn has served as a member of our board of directors since February 2017. He serves as a Co-Chair of Sleep Country Canada Inc. (“Sleep Country”). He co-founded Sleep Country in 1994 and served as its Chair and Chief Executive Officer from 1997 to 2014. Prior to founding Sleep Country Mr. Gunn was a management consultant with McKinsey & Company from 1981 to 1987 and then co-founded and was President of Kenrick Capital, a private equity firm. Mr. Gunn also serves as the lead director of Dollarama Inc. and is the Chair of the audit committee of Cara Operations Limited, and served as a director of Golf Town Canada Inc. from 2008 to 2016. He received a Bachelor of Electrical Engineering from Queens University and a Master of Business Administration from the University of Western Ontario. Mr. Gunn provides strong executive and business operations skills to our board of directors and valuable experience gained from previous and current board service.

Jean-Marc Huët, Director

Mr. Huët has served as a member of our board of directors since February 2017. He serves as a supervisory board member of Heineken N.V. and of SHV Holdings N.V. Mr. Huët served as a director of Formula One from 2012 to January 2017, and was an Executive Director and Chief Financial Officer of Unilever N.V. from 2010 to 2015. Mr. Huët was also Executive Vice President and Chief Financial Officer of Bristol-Myers Squibb Company from 2008 to 2009 and as a member of the Executive Board and Chief Financial Officer of Royal Numico N.V. from 2003 to 2007. Prior to that, he worked at Goldman Sachs International. He received a Bachelor of Arts from Dartmouth College and a Master of Business Administration from INSEAD. Mr. Huët provides strong executive, consumer and financial expertise to our board of directors and valuable experience gained from previous and current board service.

 

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Bankruptcies

None of our directors or executive officers is, as at the date of this prospectus, or has been, within the 10 years prior to the date of this prospectus, a director or executive officer of any company (including Canada Goose companies), that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or comprise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, except for Stephen Gunn who was a director of Golf Town Canada Inc. which filed for protection under the Companies Creditors Arrangement Act on September 14, 2016.

Foreign Private Issuer Status

The listing rules of the NYSE, which we also refer to as the NYSE Listing Rules, include certain accommodations in the corporate governance requirements that allow foreign private issuers, such as us, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of the NYSE. The application of such exceptions requires that we disclose any significant ways that our corporate governance practices differ from the NYSE Listing Rules that we do not follow. When our subordinate voting shares are listed on the NYSE, and upon ceasing to be a “controlled company” under the NYSE Listing Rules, we intend to continue to follow Canadian corporate governance practices in lieu of the corporate governance requirements of the NYSE in respect of the following:

 

    the majority independent director requirement under Section 303A.01 of the NYSE Listing Rules;

 

    the requirement under Section 303A.05 of the NYSE Listing Rules that a compensation committee be comprised solely of independent directors; and

 

    the requirement under Section 303A.04 of the NYSE Listing Rules that director nominees be selected or recommended for selection by a nominations committee comprised solely of independent directors.

Corporate Governance

Section 310.00 of the NYSE Listing Rules generally requires that a listed company’s by-laws provide for a quorum for any meeting of the holders of the company’s voting shares that is sufficiently high to ensure a representative vote. Pursuant to the NYSE Listing Rules we, as a foreign private issuer, have elected to comply with practices that are permitted under Canadian law in lieu of the provisions of Section 310.00. Our articles, as they will be amended in connection with this offering, will provide that a quorum of shareholders shall be the holders who, in the aggregate hold at least 25% of the issued shares plus at least a majority of multiple voting shares entitled to be voted at the meeting, irrespective of the number of persons actually present at the meeting.

Except as stated above, we intend to comply with the rules generally applicable to U.S. domestic companies listed on the NYSE. We may in the future decide to use other foreign private issuer exemptions with respect to some of the other NYSE listing requirements. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on the NYSE, may provide less protection than is accorded to investors under the NYSE listing requirements applicable to U.S. domestic issuers.

The Canadian Securities Administrators have issued corporate governance guidelines pursuant to National Policy 58-201 Corporate Governance Guidelines, or the Corporate Governance Guidelines, together with certain related disclosure requirements pursuant to National Instrument 58-101 Disclosure of Corporate Governance Practices, or NI 58-101. The Corporate Governance Guidelines are recommended as “best practices” for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we have adopted, or will be adopting in connection with the completion of this offering, certain corporate governance policies and practices which reflect our consideration of the recommended Corporate Governance Guidelines. The disclosure set out below includes disclosure required by NI 58-101 describing our approach to corporate governance in relation to the Corporate Governance Guidelines.

 

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Composition of our Board of Directors

Under our articles, as they will be amended and restated in connection with this offering, our board of directors will consist of a number of directors as determined from time to time by the directors. Upon completion of this offering, our board of directors will be comprised of five directors. Our articles will provide that a director may be removed with or without cause by a resolution passed by a special majority comprised of 66 23% of the votes cast by shareholders present in person or by proxy at a meeting and who are entitled to vote. The directors will be elected by the shareholders at each annual general meeting of shareholders, and all directors will hold office for a term expiring at the close of the next annual shareholders meeting or until their respective successors are elected or appointed. Under the BCBCA and our articles, between annual general meetings of our shareholders, the directors may appoint one or more additional directors, but the number of additional directors may not at any time exceed one-third of the number of current directors who were elected or appointed other than as additional directors.

Certain aspects of the composition and functioning of our board of directors may be subject to the rights of our principal shareholders under agreements with the company. For example, in connection with this offering, the principal shareholders expect to enter into an investor rights agreement providing for certain director nomination rights. See “Certain Relationships and Related Party Transactions—Investor Rights Agreement.” Subject to such agreements, nominees for election as directors will be recommended to our board of directors by our nominating and governance committee in accordance with the provisions of applicable corporate law and the charter of our nominating and governance committee. See “Board Committees—Nominating and Governance Committee.”

Majority Voting Policy

In accordance with the requirements of the TSX, our board of directors will adopt a majority voting policy to the effect that a nominee for election as a director of our company who does not receive a greater number of votes “for” than votes “withheld” with respect to the election of directors by shareholders will be expected to offer to tender his or her resignation to the chairman of our board of directors promptly following the meeting of shareholders at which the director was elected. The nominating and governance committee will consider such offer and make a recommendation to our board of directors whether to accept it or not. Our board of directors will promptly accept the resignation unless it determines, in consultation with the nominating and governance committee, that there are exceptional circumstances that should delay the acceptance of the offer to resign or justify rejecting it. Our board of directors will make its decision and announce it in a press release within 90 days following the applicable meeting of shareholders. A director who tenders a resignation pursuant to our majority voting policy will not participate in any meeting of our board of directors or the nominating and governance committee at which the resignation is considered. Our majority voting policy will apply for uncontested director elections, being elections where (a) the number of nominees for election as director is the same as the number of directors to be elected, as determined by the board of directors, and (b) no proxy materials are circulated in support of one or more nominees who are not part of the director nominees supported by the board of directors.

Director Term Limits and Other Mechanisms of Board Renewal

Our board of directors has not adopted director term limits, a retirement policy for its directors or other automatic mechanisms of board renewal. Rather than adopting formal term limits, mandatory age-related retirement policies and other mechanisms of board renewal, the nominating and governance committee of our board of directors will develop appropriate qualifications and criteria for our board as a whole and for individual directors. The nominating and governance committee will also conduct a process for the assessment of our board of directors, each committee and individual director regarding his, her or its effectiveness and contribution, and will also report evaluation results to our board of directors on a regular basis. The nominating and governance committee will develop a succession plan for the board of directors, including maintaining a list of qualified candidates for director positions.

 

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Director Independence

Following the completion of this offering, we will be a “controlled company” under the rules of the NYSE because more than 50% of the voting power of our shares will be held by Bain Capital. See “Principal and Selling Shareholders.” We intend to rely upon the “controlled company” exception relating to the board of directors and committee independence requirements under the NYSE Listing Rules. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our board of directors consist of a majority of independent directors and that our compensation committee and nominating and governance committee be composed entirely of independent directors. The “controlled company” exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Exchange Act and the rules of the NYSE and the BCBCA, which require that our audit committee have a majority of independent directors upon consummation of this offering, and exclusively independent directors within one year following the effective date of the registration statement relating to this offering.

Under the NYSE Listing Rules, an independent director means a person who, in the opinion of our board of directors, has no material relationship with our company. Under NI 58-101, a director is considered to be independent if he or she is independent within the meaning of Section 1.4 of National Instrument 52-110—Audit Committees, or NI 52-110. Pursuant to NI 52-110, an independent director is a director who is free from any direct or indirect material relationship with us which could, in the view of our board of directors, be reasonably expected to interfere with the exercise of a director’s independent judgment.

Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Mr. Gunn and Mr. Huët, representing two of the five members of our board of directors, are “independent” as that term is defined under the NYSE Listing Rules and NI 58-101. In making this determination, our board of directors considered the current and prior relationships that each such non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence. Mr. Reiss is considered not independent by reason of the fact that he is our President and Chief Executive Officer. Mr. Bekenstein and Mr. Cotton are considered not independent under

NI 52-110, NI 58-101 and the BCBCA, by reason of their relationships with Bain Capital. Four of the five members of our board of directors are not members of our company’s management.

Our company will take steps to ensure that adequate structures and processes will be in place following the completion of this offering to permit our board of directors to function independently of management, including for purposes of encouraging an objective process for nominating directors and determining executive compensation. It is contemplated that the independent members of our board of directors will consider, on the occasion of each meeting, whether an in camera meeting without the non-independent directors and members of management would be appropriate and that they will hold an in camera meeting without the non-independent directors and members of management where appropriate.

Members of our board of directors are also members of the boards of other public companies. See “Management—Executive Officers and Directors.” Our board of directors has not adopted a formal director interlock policy, but is keeping informed of other directorships held by its members.

The chairman of our board directors is not considered an independent director by reason of the fact that he is our President and Chief Executive Officer. However, following completion of the offering, our board of directors will take steps for facilitating the exercise of independent judgment by the board of directors, providing leadership for independent directors and ensuring that the directors who are independent of management have opportunities to meet without management present, as appropriate.

Mandate of the Board of Directors

Our board of directors is responsible for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. Our board of directors will hold regularly scheduled

 

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meetings as well as ad hoc meetings from time to time. Our board will adopt a formal mandate for the board of directors. The responsibilities of our board of directors upon completion of this offering will include:

 

    adopting a strategic planning process, approving the principal business objectives for the company and approving major business decisions and strategic initiatives;

 

    appointing the President and Chief Executive Officer of the company and developing the corporate goals and objectives that the President and Chief Executive Officer is responsible for meeting, and reviewing the performance of the President and Chief Executive Officer against such goals and objectives;

 

    overseeing communications with shareholders, other stakeholders, analysts and the public, including the adoption of measures for receiving feedback from stakeholders; and

 

    monitoring the implementation of procedures, policies and initiatives relating to corporate governance, risk management, corporate social responsibility, health and safety, ethics and integrity.

Our board of directors has not developed at this time written position descriptions for the chairman of the board of directors or the chairperson of the board committees. Their primary roles are managing the affairs of the board of directors or of such relevant committee, including ensuring the board of directors or such committee is organized properly, functions effectively and meets its obligations and responsibilities. Each committee chairperson will conduct the affairs of the applicable committee in accordance with the charter of such committee.

Our board of directors and our Chief Executive Officer have not developed at this time a written position description for the Chief Executive Officer or for other executive officers. The role of the Chief Executive Officer is delineated on the basis of customary practice. The board of directors considers that the role and responsibilities of the Chief Executive Officer are to develop the company’s strategic plans and policies and recommending such plans and policies to the board of directors; provide executive leadership, oversee a comprehensive operational planning and budgeting process, supervise day-to-day management, report relevant matters to the board of directors, facilitate communications between the board of directors and the senior management team, and identify business risks and opportunities and manage them accordingly, and has communicated the same to the Chief Executive Officer.

Orientation and Continuing Education

Following the completion of this offering, we will implement an orientation program for new directors under which each new director will meet separately with the chairman of our board of directors, individual directors and members of the senior management team. New directors will be provided with comprehensive orientation and education as to our business, operations and corporate governance (including the role and responsibilities of the board of directors, each committee, and directors individually).

The chairman of our board of directors will be responsible for overseeing director continuing education designed to maintain or enhance the skills and abilities of our directors and to ensure that their knowledge and understanding of our business remains current. The chairperson of each committee will be responsible for coordinating orientation and continuing director development programs relating to the committee’s mandate.

Business Conduct and Ethics

Prior to the completion of this offering, we expect to adopt a Code of Business Conduct and Ethics, or Code of Conduct, applicable to all of our directors, officers and employees.

The Code of Conduct will set out our fundamental values and standards of behavior that are expected from our directors, officers and employees with respect to all aspects of our business. The objective of the Code of

 

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Conduct will be to provide guidelines for maintaining our integrity, reputation and honesty with a goal of honoring others’ trust in us at all times. The Code of Conduct will set out guidance with respect to conflicts of interest, protection and proper use of corporate assets and opportunities, confidentiality of corporate information, fair dealing with third parties, compliance with laws and reporting of any illegal or unethical behaviour.

We also expect to adopt a code of ethics for senior managers and financial officers, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions.

Upon the completion of this offering, the full text of the Code of Conduct will be available on our website at www.canadagoose.com and our SEDAR profile at www.sedar.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein.

Monitoring Compliance with the Code of Business Conduct and Ethics

Our audit committee is responsible for reviewing and evaluating the Code of Conduct periodically and will recommend any necessary or appropriate changes thereto to our board of directors for consideration. The audit committee will also assist our board of directors with the monitoring of compliance with the Code of Conduct, and will be responsible for considering any waivers of the Code of Conduct (other than waivers applicable to our directors or executive officers, which shall be subject to review by our board of directors as a whole).

Interests of Directors

A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to excuse himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the BCBCA regarding conflicts of interest. See “Description of Share Capital—Certain Important Provisions of Our Articles and the BCBCA—Directors.”

Complaint Reporting and Whistleblower Policy

In order to foster a climate of openness and honesty in which any concern or complaint pertaining to a suspected violation of the law, our Code of Conduct or any of our policies, or any unethical or questionable act or behavior, the board of directors will adopt a whistleblower policy that requires that our employees promptly report such violation or suspected violation. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, our whistleblower policy will contain procedures that are aimed to facilitate confidential, anonymous submissions by our employees.

Diversity

We believe that having a diverse board of directors can offer a breadth and depth of perspectives that enhance our performance. The nominating and governance committee values diversity of abilities, experience, perspective, education, gender, background, race and national origin. Recommendations concerning director nominees are based on merit and past performance as well as expected contribution to the board’s performance and, accordingly, diversity is taken into consideration. At closing of this offering, none of the members of our board of directors will be women.

We similarly believe that having a diverse and inclusive organization overall is beneficial to our success, and we are committed to diversity and inclusion at all levels of our organization to ensure that we attract, retain and

 

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promote the brightest and most talented individuals. We have recruited and selected senior management candidates that represent a diversity of business understanding, personal attributes, abilities and experience. Currently, 4 out of 13 members of our senior management team are women.

We do not currently have a formal policy for the representation of women on our board of directors or senior management. The nominating and governance committee and our senior management team already takes gender and other diversity representation into consideration as part of their overall recruitment and selection process. We have not adopted targets for gender or other diversity representation in part due to the need to consider a balance of criteria for each individual appointment.

We anticipate that the composition of the board of directors will in the future be shaped by the selection criteria to be developed by our board of directors and nominating and governance committee, ensuring that diversity considerations are taken into account in senior management, monitoring the level of women representation on the board and in senior management positions, continuing to broaden recruiting efforts to attract and interview qualified female candidates, and committing to retention and training to ensure that our most talented employees are promoted from within our organization, all as part of our overall recruitment and selection process to fill board or senior management positions as the need arises and subject to the rights of our principal shareholders under agreements with the company.

Board Committees

Upon the completion of this offering, our board of directors will have three standing committees: the audit committee; the compensation committee; and the nominating and governance committee. Each of the committees operates under its own written charter adopted by our board of directors, each of which will be available on our website upon closing of this offering.

Audit Committee

Following this offering, our audit committee will be composed of Mr. Cotton, Mr. Gunn and Mr. Huët with Mr. Gunn serving as chairperson of the committee. Our board of directors has determined that Mr. Gunn and Mr. Huët meet the independence requirements under the rules of the NYSE, the BCBCA and under Rule 10A-3 of the Exchange Act. Within one year following the effective date of the registration statement relating to this offering, our audit committee will consist exclusively of independent directors. Our board of directors has determined that Mr. Gunn is an “audit committee financial expert” within the meaning of the SEC’s regulations and applicable Listing Rules of the NYSE. We will comply with NI 52-110 and intend to rely on the exemptions for U.S. listed issuers thereunder. The audit committee’s responsibilities upon completion of this offering will include:

 

    appointing, compensating, retaining and overseeing the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and reviewing and appraising the audit efforts of our independent accountants;

 

    pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

 

    establishing procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (ii) confidential and anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters;

 

    engaging independent counsel and other advisers, as necessary and determining funding of various services provided by accountants or advisers retained by the committee;

 

    reviewing our financial reporting processes and internal controls;

 

    establishing, overseeing and dealing with issues related to the company’s code of ethics for managers and financial officers;

 

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    reviewing and approving related-party transactions or recommending related-party transactions for review by independent members of our board of directors; and

 

    providing an open avenue of communication among the independent accountants, financial and senior management and the board.

Compensation Committee

Following this offering, our compensation committee will be composed of Mr. Bekenstein and Mr. Cotton, with Mr. Bekenstein serving as chairperson of the committee. Its primary purpose, with respect to compensation, will be to assist our board of directors in fulfilling its oversight responsibilities and to make recommendations to our board of directors with respect to the compensation of our directors and executive officers. The principal responsibilities and duties of the compensation committee include:

 

    evaluating our President and Chief Executive Officer’s and other executive officer’s performance in light of the goals and objectives established by our board of directors and, based on such evaluation, with appropriate input from other independent members of our board of directors, determining the President and Chief Executive Officer’s and other executive officer’s compensation;

 

    administering our equity-based plans and management incentive compensation plans and making recommendations to our board of directors about amendments to such plans and the adoption of any new employee incentive compensation plans; and

 

    engaging independent counsel and other advisers, as necessary and determining funding of various services provided by accountants or advisers retained by the committee.

Nominating and Governance Committee

Following this offering, our nominating and governance committee will be composed of Mr. Bekenstein, Mr. Cotton and Mr. Reiss, with Mr. Cotton serving as chairperson of the committee. The nominating and governance committee’s responsibilities upon completion of this offering will include:

 

    developing and recommending to the board of directors criteria for board and committee membership;

 

    recommending to the board of directors the persons to be nominated for election as directors and to each of the committees of the board of directors;

 

    assessing the independence of directors within the meaning of securities laws and stock exchange rules as applicable;

 

    considering resignations by directors submitted pursuant to our majority voting policy, and making recommendations to our board of directors as to whether or not to accept such resignations;

 

    reviewing and making recommendations to the board of directors in respect of our corporate governance principles;

 

    providing for new director orientation and continuing education for existing directors on a periodic basis;

 

    performing an evaluation of the performance of the committee; and

 

    overseeing the evaluation of the board of directors and its committees.

 

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Executive Compensation

Overview

The following tables and discussion relate to the compensation paid to or earned by our President and Chief Executive Officer, Dani Reiss, and our two most highly compensated executive officers (other than Mr. Reiss) who were serving as executive officers on the last day of fiscal 2016. They are Scott Cameron, who serves as our Executive Vice President, E-commerce, Stores and Strategy, and Paul Riddlestone, our former Chief Operating Officer. Messrs. Reiss, Cameron, and Riddlestone are referred to collectively in this prospectus as our named executive officers.

Summary Compensation Table

The following table sets forth information about certain compensation awarded to, earned by, or paid to our named executive officers during fiscal 2016:

 

Name and principal position

  Year     Salary
($) (1)
    Bonus
($)
    Option
awards
($) (2)
    Non-equity
incentive plan
compensation
($)
    All other
compensation
($) (3)
    Total
($)
 

Dani Reiss, C.M.

    2016       1,020,150       150,000  (4)      —         600,000  (5)      421       1,770,571  

President & Chief Executive Officer

             

Scott Cameron

    2016       79,327       137,500  (6)     396,165       —         2,902       615,894  

EVP, E-commerce, Stores & Strategy

             

Paul Riddlestone(7)

    2016       273,946       87,696  (8)      —         —         421       362,063  

Former Chief Operating Officer

             

 

(1) Amount shown for Mr. Reiss includes salary paid to him as our President and Chief Executive Officer ($1,000,000) and fees paid in connection with his service on the board of Canada Goose International AG, a wholly-owned subsidiary of the Company (aggregate of $20,150). Amount shown for board fees is in Canadian dollars, but was paid to Mr. Reiss in three equal payments in Swiss Francs (CHF) and the exchange rate was calculated based on the daily noon exchange rate on each of February 25, 2016, July 25, 2016 and December 23, 2016; of C$1.00 = CHF 0.73, C$1.00 = CHF 0.75 and C$1.00 = CHF 0.76, respectively, as published by the Bank of Canada. Amount shown for Mr. Cameron includes contributions by him to the Group Retirement Savings Plan for the Employees of Canada Goose Inc. (referred to as the RSP and described below). Messrs. Reiss and Riddlestone did not contribute to the RSP in fiscal 2016.
(2) Amount shown reflects the grant date fair value of options to purchase Class B Common Shares and Class A Junior Preferred Shares, granted to Mr. Cameron in fiscal 2016. The value was determined in accordance with IFRS 2.
(3) Amounts shown in this column include Company-paid life insurance premiums of $421, $90 and $421 paid on behalf of Messrs. Reiss, Cameron and Riddlestone, respectively, and, for Mr. Cameron, Company contributions of $2,812 under our Deferred Profit Sharing Plan for the Employees of Canada Goose Inc. (referred to as the DPSP and described below).
(4) Amount shown reflects the portion of Mr. Reiss’s annual bonus earned with respect to fiscal 2016 that was based on the achievement of individual performance goals.
(5) Amount shown reflects the portion of Mr. Reiss’s annual bonus earned with respect to fiscal 2016 that was based on the achievement of EBITDA goals.
(6) Amount shown represents a cash sign-on bonus of $100,000 paid to Mr. Cameron in connection with his commencement of employment with us and Mr. Cameron’s annual bonus of $37,500 earned with respect to fiscal 2016.
(7) Mr. Riddlestone’s employment with the company terminated on January 10, 2017.
(8) Amount shown represents Mr. Riddlestone’s annual bonus earned with respect to fiscal 2016.

 

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2016 Base Salaries

Base salaries provide our named executive officers with a fixed amount of compensation each year. Base salary levels reflect the executive’s title, experience, level of responsibility, and performance. Initial base salaries for our named executive officers were set forth in their employment agreements, as described below under “Agreements with our Named Executive Officers.” Base salaries for Messrs. Reiss and Cameron have remained the same in fiscal 2017, while Mr. Riddlestone’s base salary increased to $280,000 as of April 1, 2016.

2016 Bonuses

Each named executive officer is (or was, in Mr. Riddlestone’s case) eligible to receive an annual bonus pursuant to his employment agreement, as described below under “Agreements with our Named Executive Officers.” The annual bonus amounts earned by our named executive officers for fiscal 2016 are shown in the Summary Compensation Table above.

For fiscal 2016, Mr. Reiss was eligible to earn a target annual bonus equal to $750,000, based on the achievement of pre-established fiscal 2016 EBITDA targets, weighted at 80% of his bonus, and individual performance criteria, weighted at 20% of his bonus. Target EBITDA was approved by our board of directors at the beginning of fiscal 2016 in connection with the annual budgeting process, with target EBITDA set at $55.59 million and payout of the EBITDA component of Mr. Reiss’s bonus being earned at 100% upon achievement of EBITDA within a range of 95% to 105% of target. No portion of the EBITDA component of Mr. Reiss’s bonus would be earned if EBITDA were achieved at 80% or less below target. Achievement of EBITDA between 80% of target and less than 95% of target would result in the EBITDA component of Mr. Reiss’s bonus being earned on a straight-line basis between 0% and 100%. Achievement of EBITDA above 105% of target would result in the EBITDA component of Mr. Reiss’s bonus being earned on a straight-line basis between 100% and 200%, with 135% of target as the u