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Sears Canada Reports First Quarter Results

TORONTO, May 16, 2012 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its unaudited first quarter results.  Total revenue for the 13 week period ended April 28, 2012 was $915.1 million compared to $992.5 million for the 13 week period ended April 30, 2011, a decrease of 7.8%.  Same store sales decreased 6.3%.

EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Non-Operating Activities) for the quarter this year was a loss of $30.1 million compared to a loss of $22.3 million for the same period last year.   Net earnings for the quarter this year were $93.1 million or 91 cents per share compared to a net loss of $47.0 million or 45 cents per share for the same period last year.  Included in earnings for the quarter this year was a gain of $164.3 million this year representing the pre-tax gain on lease terminations of three stores as announced by the Company on March 2, 2012.

"Although not reflected in our top line sales, there are positive signs of progress in many areas of our business," commented Calvin McDonald, President and Chief Executive Officer, Sears Canada.  "We are making progress on our transformation, having executed two major initiatives during the quarter: the lowering of over 5,000 prices to provide increased value to customers more consistently every day and the launch of our Spring LOOK! Report to demonstrate quality, value and merchandising authority on the season's newest apparel and fashion trends.

"Balancing our value program has had a positive effect on our Monday to Friday sales, with weekday sales increasing and sales of our 'regular-priced' items in our full-line, Sears Home and hometown dealer stores up significantly compared to the first quarter of last year.   In addition, Major Appliances and Mattresses, two hero categories we have aggressively marketed, continue to perform better than last year, achieving sales growth in the quarter. These are all positive signs of some core business indicators getting better.

"In addition, the Company has prudently managed expenses during the quarter resulting in operating expense reductions of 5.9% compared to the first quarter of last year."

As expected, total-week net sales for the quarter were impacted negatively by the price rebalancing initiative, as the Company continues to instill more day-in and day-out value across the enterprise.  Factors adversely impacting revenue for the quarter were:

  • The reduction of merchandise offerings in non-strategic categories
  • Lower sales of clearance merchandise, the result of less clearance inventory and reduced promotional activity on clearance merchandise
  • The reduction in catalogue pages and distribution

"We will continue to roll out our transformation initiatives, focus on improved management of inventory levels in our apparel businesses and adjust our weekend promotional programs for improved customer response to our Saturday-Sunday offerings," added Mr. McDonald.

This release contains information which is forward-looking and is subject to important risks and uncertainties. Forward-looking information concerns the Company's future financial performance, business strategy, plans, goals and objectives.  Factors which could cause actual results to differ materially from current expectations include, but are not limited to: the ability of the Company to successfully implement its cost reduction, productivity improvement and strategic initiatives and whether such initiatives will yield the expected benefits; the results achieved pursuant to the Company's long-term marketing and servicing alliance with JPMorgan Chase Bank, N.A.;  general economic conditions; competitive conditions in the businesses in which the Company participates; changes in consumer spending; seasonal weather patterns; customer preference toward product offerings; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in funding costs; fluctuations in foreign currency exchange rates; the possibility of negative investment returns in the Company's pension plan;  the outcome of pending legal proceedings; and changes in laws, rules and regulations applicable to the Company.  While the Company believes that its forecasts and assumptions are reasonable, results or events predicted in this forward-looking information may differ materially from actual results or events.

Sears Canada is a multi-channel retailer with a network that includes 196 corporate stores, 278 hometown dealer stores, 29 home services showrooms, over 1,500 catalogue and online merchandise pick-up locations, 105 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The Company also publishes Canada's most extensive general merchandise catalogue and offers shopping online at www.sears.ca.





SEARS CANADA INC.      
RECONCILIATION OF NET EARNINGS (LOSS) TO OPERATING EBITDA      
For the 13-week periods ended April 28, 2012 and April 30, 2011      
         
Unaudited      
         
(in CAD millions, except per share amounts)   2012 2011
Net earnings (loss)    $ 93.1  $ (47.0)
             
  Gain on lease terminations     (164.3)   -
  Depreciation and amortization expense     28.7   28.6
  Finance costs     4.0   6.8
  Interest income     (0.5)   (0.6)
  Share of income from joint ventures     (3.5)   (1.9)
  Income tax (expense) recovery     12.4   (8.2)
             
Operating EBITDA    $ (30.1)  $ (22.3)
             
             
Basic net earnings (loss) per share    $ 0.91  $ (0.45)
         
   
Operating EBITDA is a measure used by management, the retail industry and investors as an indicator of the Company's performance, ability to incur and service debt, and as a valuation metric.  Operating EBITDA is a non-IFRS measure.

 

TABLE OF CONTENTS
 
Unaudited Condensed Consolidated Financial Statements
      Condensed Consolidated Statements of Financial Position
  Condensed Consolidated Statements of Net Earnings (Loss) and Comprehensive Income (Loss)
  Condensed Consolidated Statements of Changes in Shareholders' Equity
  Condensed Consolidated Statements of Cash Flows
Notes to the Unaudited Condensed Consolidated Financial Statements
  Note 1:    General information
  Note 2:    Significant accounting policies
  Note 3:    Issued standards not yet adopted
  Note 4:    Critical accounting judgments and key sources of estimation uncertainty
  Note 5:    Cash and cash equivalents and interest income
  Note 6:    Inventories
  Note 7:    Long-term obligations and finance costs
  Note 8:    Capital stock
  Note 9:    Revenue
  Note 10:  Retirement benefit plans
  Note 11:  Depreciation and amortization expense
  Note 12:  Gain on lease terminations
  Note 13:  Assets and liabilities held for sale
  Note 14:  Financial instruments
  Note 15:  Contingent liabilities
  Note 16:  Net earnings (loss) per share
  Note 17:  Income taxes
  Note 18:  Events after the reporting period
  Note 19:  Approval of unaudited condensed consolidated financial statements
   

SEARS CANADA INC.          
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION        
           
Unaudited          
           
      As at As at As at
    As at January 28, 2012 April 30, 2011 January 29, 2011
(in CAD millions) Notes April 28, 2012 (Restated - Note 2.4.1) (Restated - Note 2.4.1) (Restated - Note 2.4.1)
           
ASSETS          
Current assets          
Cash and cash equivalents  5,14,15  $ 361.6  $ 397.4  $ 198.4  $ 432.3
Accounts receivable, net  14   96.2   116.2   131.1   144.0
Income taxes recoverable      1.5   4.1   1.2   4.5
Inventories 6   883.7   823.9   981.7   953.2
Prepaid expenses      33.3   27.9   39.4   31.8
                   
Assets classified as held for sale 13   31.9   -   -   -
                   
Total current assets     1,408.2   1,369.5   1,351.8   1,565.8
                   
Non-current assets                  
Property, plant and equipment     853.7   872.0   887.0   900.7
Investment property     21.7   21.7   21.7   21.7
Intangible assets     22.5   23.6   23.6   23.5
Goodwill      8.7   8.7   11.2   11.2
Investment in joint ventures      298.8   301.4   309.9   313.3
Deferred tax assets  2.4.1   75.4   84.6   66.8   33.2
Other long-term assets  7,14,17   55.6   49.2   55.5   38.1
                   
Total assets    $ 2,744.6  $ 2,730.7  $ 2,727.5  $ 2,907.5
                   
LIABILITIES                  
Current liabilities                  
Accounts payable and accrued liabilities 14  $ 577.7  $ 576.8  $ 644.8  $ 665.6
Deferred revenue     213.7   208.0   230.2   224.0
Provisions      54.4   64.8   61.1   65.3
Income taxes payable     10.9   1.0   3.1   1.0
Other taxes payable     31.5   42.8   29.5   65.3
Derivative financial liabilities 14   -   -   17.1   3.0
Principal payments on long-term obligations due within one year  7,14   4.9   5.1   5.7   4.7
                   
Liabilities classified as held for sale 13,14   28.4   -   -   -
                   
Total current liabilities     921.5   898.5   991.5   1,028.9
                   
Non-current liabilities                  
Long-term obligations  7,14   23.3   117.6   27.7   124.4
Deferred revenue      88.5   89.2   77.0   77.4
Retirement benefit liability  2.4.1,10   450.0   452.3   333.1   326.2
Deferred tax liabilities 2.4.1   5.4   5.3   5.5   5.5
Other long-term liabilities      73.6   75.8   91.4   84.7
                   
Total liabilities     1,562.3   1,638.7   1,526.2   1,647.1
                   
SHAREHOLDERS' EQUITY                  
Capital stock  8   15.0   15.0   15.4   15.4
Retained earnings 2.4.1,8   1,246.2   1,155.9   1,199.9   1,247.8
Accumulated other comprehensive loss 2.4.1,10   (78.9)   (78.9)   (14.0)   (2.8)
Total shareholders' equity     1,182.3   1,092.0   1,201.3   1,260.4
Total liabilities and shareholders' equity    $ 2,744.6  $ 2,730.7  $ 2,727.5  $ 2,907.5
           
           
The accompanying notes are an integral part of these consolidated financial statements.          
 
 
 
SEARS CANADA INC.      
CONDENSED CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS)    
  AND COMPREHENSIVE INCOME (LOSS)      
For the 13-week periods ended April 28, 2012 and April 30, 2011      
         
Unaudited      
         
        2011
(in CAD millions, except per share amounts) Notes 2012 (Restated - Note 2.4.1)
         
Revenue 9  $             915.1  $ 992.5
Cost of goods and services sold 6    580.4   625.4
Selling, administrative and other expenses 2.4.1,10,11,14   393.5   418.0
Operating loss     (58.8)   (50.9)
             
Gain on lease terminations 12   164.3   -
Finance costs  7,17   4.0   6.8
Interest income  5   0.5   0.6
Share of income from joint ventures     3.5   1.9
Earnings (loss) before income taxes     105.5   (55.2)
             
Income tax (expense) recovery          
  Current 17   (3.1)   (21.2)
  Deferred 2.4.1,17   (9.3)   29.4
        (12.4)   8.2
Net earnings (loss)      $ 93.1  $ (47.0)
             
Basic net earnings (loss) per share 16  $ 0.91  $ (0.45)
Diluted net earnings (loss) per share 16  $ 0.91  $ (0.45)
             
Net earnings (loss)    $ 93.1  $ (47.0)
             
Other comprehensive income (loss), net of taxes:          
  Mark-to-market adjustment on cash equivalents     0.1   -
  Loss on foreign exchange derivatives     -   (12.2)
  Reclassification to net earnings (loss) of (gain) loss on foreign exchange derivatives     (0.1)   1.0
Other comprehensive loss     -   (11.2)
Comprehensive income (loss)    $ 93.1  $ (58.2)
             
             
The accompanying notes are an integral part of these consolidated financial statements.      
 
 
                         
SEARS CANADA INC.                                    
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN                            
  SHAREHOLDERS' EQUITY                                
For the 13-week periods ended April 28, 2012 and April 30, 2011                            
                                 
Unaudited                              
                                 
(in CAD millions) Notes   Capital stock   Retained
earnings
  Mark-to-market on
short-term
investments within
cash and cash
equivalents
  Foreign exchange
derivatives
designated as cash
flow hedges
  Remeasurement
gains (losses)
  Accumulated other
comprehensive
loss
  Shareholders'
equity
Balance as at January 28, 2012   $ 15.0 $ 1,155.9 $ - $ 0.2 $ (79.1) $ (78.9) $ 1,092.0
                                 
Comprehensive income (loss)                              
  Net earnings         93.1               -   93.1
                                 
Other comprehensive income (loss)                              
  Mark-to-market gain             0.1           0.1   0.1
  Reclassification of gain on foreign exchange derivatives                 (0.1)       (0.1)   (0.1)
Total other comprehensive income (loss)     -   -   0.1   (0.1)   -   -   -
Total comprehensive income (loss)     -   93.1   0.1   (0.1)   -   -   93.1
                                 
  Repurchases of common shares 8   -   (2.8)               -   (2.8)
                                 
Balance as at April 28, 2012   $ 15.0 $ 1,246.2 $ 0.1 $ 0.1 $ (79.1) $ (78.9) $ 1,182.3
                                 
(Restated - Note 2.4.1)                              
Balance as at January 29, 2011   $ 15.4 $ 1,247.8 $ - $ (2.8) $ - $ (2.8) $ 1,260.4
                                 
Comprehensive loss                              
  Net loss         (47.0)               -   (47.0)
                                 
Other comprehensive (loss) income                              
  Loss on foreign exchange derivatives                 (12.2)       (12.2)   (12.2)
  Reclassification of loss on foreign exchange derivatives                 1.0       1.0   1.0
Total other comprehensive loss     -   -   -   (11.2)   -   (11.2)   (11.2)
Total comprehensive loss     -   (47.0)   -   (11.2)   -   (11.2)   (58.2)
                                 
  Repurchases of common shares 8   -   (0.9)               -   (0.9)
                                 
Balance as at April 30, 2011   $ 15.4 $ 1,199.9 $ - $ (14.0) $ - $ (14.0) $ 1,201.3
                                 
                                 
The accompanying notes are an integral part of these consolidated financial statements.                            
                     
                     
 
SEARS CANADA INC.      
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS      
For the 13-week periods ended April 28, 2012 and April 30, 2011      
         
Unaudited      
         
        2011
(in CAD millions) Notes 2012 (Restated - Note 2.4.1)
Cash flow used for operating activities      
  Net earnings (loss)    $                  93.1  $ (47.0)
  Adjustments for:          
    Depreciation and amortization expense 11   28.7   28.6
    Gain on disposal of property, plant and equipment     (0.3)   (0.2)
    Gain on lease terminations 12   (164.3)   -
    Finance costs 7   4.0   6.8
    Interest income 5   (0.5)   (0.6)
    Share of income from joint ventures     (3.5)   (1.9)
    Retirement benefit plans expense 10   7.8   7.7
    Short-term disability expense 10   2.5   2.4
    Income tax (expense) recovery 17   12.4   (8.2)
  Interest received 5   0.5   0.7
  Interest paid 7   (1.5)   -
  Retirement benefit plans contributions 10   (12.4)   (2.7)
  Income tax refunds (payments), net 17   7.8   (19.7)
  Changes in non-cash working capital     (65.6)   (71.1)
  Changes in long-term assets and liabilities     (2.0)   (7.7)
        (93.3)   (112.9)
Cash flow generated from (used for) investing activities        
  Purchases of property, plant and equipment and intangible assets     (13.2)   (16.3)
  Proceeds from sale of property, plant and equipment     0.5   0.3
  Proceeds from lease terminations 12   170.0   -
  Dividends received from joint ventures      6.3   6.7
        163.6   (9.3)
Cash flow used for financing activities          
  Interest paid on finance lease obligations 7   (0.5)   (0.6)
  Repayment of long-term obligations     (134.2)   (110.8)
  Proceeds from long-term obligations     31.7   1.9
  Repurchases of common shares 8   (2.9)   (0.9)
        (105.9)   (110.4)
             
Decrease in cash and cash equivalents    $ (35.6)  $ (232.6)
             
Effect of exchange rate on cash and cash equivalents at end of period     (0.2)   (1.3)
             
Cash and cash equivalents at beginning of period    $ 397.4  $ 432.3
Cash and cash equivalents at end of period    $ 361.6  $ 198.4
         
         
The accompanying notes are an integral part of these consolidated financial statements.      
 
 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General information

Sears Canada Inc. is incorporated in Canada. The address of its registered office and principal place of business is 290 Yonge Street, Suite 700, Toronto, Ontario, Canada M5B 2C3.  The principal activities of Sears Canada Inc. and its subsidiaries (the "Company") are disclosed in Management's Discussion and Analysis. The immediate parent of the Company is Sears Holdings Corporation ("Sears Holdings"), incorporated in the U.S. in the state of Delaware. The ultimate controlling party of the Company is ESL Investments, Inc. through Sears Holdings, also incorporated in the U.S. in the state of Delaware.

2. Significant accounting policies

2.1 Statement of compliance

The unaudited condensed consolidated financial statements of the Company for the 13-week period ended April 28, 2012 (the "Financial Statements") have been prepared in accordance with IAS 34, Interim Financial Reporting ("IAS 34"), and therefore, do not contain all disclosures required by International Financial Report Standards ("IFRS") for annual financial statements.  Accordingly, these Financial Statements should be read in conjunction with the Company's most recently prepared audited annual consolidated financial statements for the 52-week period ended January 28, 2012 (the "2011 Annual Financial Statements"), prepared in accordance with the standards and interpretations issued by the International Accounting Standards Board ("IASB").  These include IFRS, International Accounting Standards ("IAS") and the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") and the Standing Interpretations Committee ("SIC"), which were effective and applicable to the Company as at the end of fiscal 2011.

2.2 Basis of preparation and presentation

The principal accounting policies of the Company have been applied consistently in the preparation of these Financial Statements for all periods presented.  These Financial Statements follow the same accounting policies and methods of application as those used in the preparation of the 2011 Annual Financial Statements except for the employee benefits accounting policies and financial instrument disclosures, as discussed in Note 2.4.  The Company's significant accounting policies are described in Note 2 of the 2011 Annual Report.

The Company's Financial Statements incorporate the financial statements of the Company as well as all of its subsidiaries.  Real estate joint venture investments are accounted for using the equity method of accounting (described in Note 2.13 of the 2011 Annual Report).  Subsidiaries include all entities where the Company has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.  All intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in the preparation of these Financial Statements.

The fiscal year of the Company consists of a 52 or 53-week period ending on the Saturday closest to January 31. The 13-week periods presented in these Financial Statements reflect the first quarter of fiscal 2012 ending April 28, 2012 and the first quarter of fiscal 2011 ending April 30, 2011.

The Company's Financial Statements are presented in Canadian dollars, which is the Company's functional currency.

2.3 Seasonality

The Company's operations are seasonal in nature. Accordingly, merchandise and service revenues, as well as performance payments received from JPMorgan Chase & Co, N.A. (Toronto Branch) ("JP Morgan Chase") under the long-term credit card marketing and servicing alliance, will vary by quarter based on consumer spending behaviour. Historically, the Company's revenues and earnings are highest in the fourth quarter due to the holiday season. The Company is able to adjust certain variable costs in response to seasonal revenue patterns; however, costs such as occupancy are fixed, causing the Company to report a disproportionate level of earnings in the fourth quarter. This business seasonality results in quarterly performance that is not necessarily indicative of the year's performance.

2.4 Changes in accounting policies

2.4.1 IAS 19 (Revised), Employee Benefits ("IAS 19")

The Company has elected to early adopt IAS 19 (Revised).  On June 16, 2011, the IASB issued amendments to IAS 19 which included the elimination of the "corridor approach," which is the option to defer and amortize the recognition of actuarial gains and losses.  The significant amendments to IAS 19 are as follows:

  • The "corridor approach" is to be replaced with full and immediate recognition of actuarial gain and loss remeasurements in "Other comprehensive (loss) income" ("OCI");
  • Retirement benefit costs are to consist of service costs, net interest and remeasurements, with remeasurements being recorded in OCI;
  • Past service costs are to be recognized immediately in the Consolidated Statements of Net Earnings (Loss);
  • Expected returns on plan assets will no longer be recognized in profit or loss. Instead, interest income on plan assets, calculated using the discount rate used to measure the pension obligation, will be recognized in the Consolidated Statements of Net Earnings (Loss),
  • Plan administration costs are to be expensed as incurred; and
  • Disclosures relating to retirement benefit plans will be enhanced and will include discussions on risk associated with each plan, an explanation of items recognized in the consolidated financial statements and descriptions of the amount, timing and uncertainty on the Company's future cash flows.

The amendments to IAS 19 are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The amendments are required to be applied retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. As discussed above, the Company has elected to early adopt the amendments to IAS 19, and as such, the Company has restated the assets and liabilities, and income and expenses, for the 52-week period ended January 28, 2012, including the opening balance of "Retained earnings" and the opening assets and liabilities disclosed in the Consolidated Statement of Financial Position as at January 29, 2011, as though these amendments had always applied.

Restatement of prior year comparatives

A summary of the impact arising from the application of the change in accounting policy is as follows:

   
Consolidated Statements of Financial Position  
(Increase (decrease) in CAD millions) As at
January 28, 2012
As at
April 30, 2011
As at
January 29, 2011
       
  Retirement benefit asset  $ (187.7)  $ (193.1)  $ (197.4)
  Retirement benefit liability   308.2   206.2   205.3
Net change to retirement benefit asset and liability   (495.9)   (399.3)   (402.7)
             
  Deferred tax assets   84.0   66.1   32.7
  Deferred tax liabilities   (43.6)   (36.7)   (71.0)
Net change to deferred tax assets and liabilities   127.6   102.8   103.7
             
Accumulated other comprehensive loss   (79.1)   -   -
Retained earnings   (289.2)   (296.5)   (299.0)
             
             
Consolidated Statements of Net Earnings (Loss) and Comprehensive Income (Loss)    
       
(Increase (decrease) in CAD millions, except per share amounts) 13-Week
Period Ended
April 28, 2012
13-Week
Period Ended
April 30, 2011
52-Week
Period Ended
January 28, 2012
       
Selling, administrative and other expenses  $ (6.1)  $ (3.3)  $ (13.2)
Earnings before income taxes   6.1   3.3   13.2
Deferred income tax expense   1.6   0.8   3.4
             
Net earnings   4.5   2.5   9.8
             
Basic net earnings per share  $ 0.04  $ 0.02  $ 0.09
Diluted net earnings per share  $ 0.04  $ 0.02  $ 0.09
             
Other comprehensive loss   -   -   (79.1)
Comprehensive income (loss)   4.5   2.5   (69.3)
           
           
Consolidated Statemens of Cash Flows          
(Increase (decrease) in CAD millions) 13-Week
Period Ended
April 28, 2012
13-Week
Period Ended
April 30, 2011
52-Week
Period Ended
January 28, 2012
       
Net earnings  $ 4.5  $ 2.5  $ 9.8
Retirement benefit plans expense   (6.1)   (3.3)   (13.2)
Income tax expense   1.6   0.8   3.4
       
       

Please refer to Note 10 for fully restated prior year comparative figures.

2.4.2 IFRS 7, Financial Instruments: Disclosures ("IFRS 7")

The IASB first amended IFRS 7 on October 7, 2010, to require additional disclosures regarding transfers of financial assets.  These amendments are effective for annual periods beginning on or after July 1, 2011.  The Company has adopted these amendments beginning January 29, 2012.  These amendments do not impact the Company's disclosures for the 13-week period ended April 28, 2012.

3. Issued standards not yet adopted

The Company monitors the standard setting process for new standards issued by the IASB that the Company may be required to adopt in the future. Since the impact of a proposed standard may change during the review period, the Company does not comment publicly until the standard has been finalized and the effects have been determined.

On December 16, 2011, the IASB issued amendments to three previously released standards.  They are as follows:

    IAS 32, Financial Instruments: Presentation ("IAS 32")
    The IASB amended IAS 32 to address inconsistencies in current practice in the application of offsetting criteria.  The amendments provide clarification with respect to the meaning of 'currently has a legally enforceable right of set-off' and that some gross settlement systems may be considered equivalent to net settlement.  These amendments are effective for annual periods beginning on or after January 1, 2014.  The Company is currently assessing the impact of these amendments on the Company's consolidated financial statements and related note disclosures.
     
    IFRS 7, Financial Instruments: Disclosures
    On December 16, 2011, the IASB approved additional amendments to IFRS 7, which establishes disclosure requirements to help users better assess the effect or potential effect of offsetting arrangements on a company's financial position.  These amendments are effective for annual periods beginning on or after January 1, 2013.  The Company will apply these amendments beginning the first quarter of its 2013 fiscal year and is currently assessing the impact on the Company's disclosures.
     
    IFRS 9, Financial Instruments ("IFRS 9")
    The IASB issued IFRS 9 on November 12, 2009, which will ultimately replace IAS 39, Financial Instruments: Recognition and Measurement ("IAS 39").  The replacement of IAS 39 is a three-phase project with the objective of improving and simplifying the reporting for financial instruments.
     
    The first phase of the project provides guidance on the classification and measurement of financial assets.  IFRS 9 was subsequently reissued on October 28, 2010, incorporating new requirements on accounting for financial liabilities.  On December 16, 2011, the IASB amended the mandatory effective date of IFRS 9 to fiscal years beginning on or after January 1, 2015.  The amendment also provides relief from the requirement to restate comparative financial statements for the effect of applying IFRS 9.  The Company is monitoring the impact of amendments to this standard and initial application of this IFRS is expected to impact the classification of a number of financial assets which will require disclosure in the financial statement notes.
     

On June 16, 2011, the IASB amended IAS 1 to require additional disclosures for items presented in OCI on a before-tax basis and requires items to be grouped and presented in OCI based on whether they are potentially reclassifiable to earnings or loss subsequently (i.e. items that may be reclassified and those that will not be reclassified to earnings or loss).  These amendments are effective for annual periods beginning on or after July 1, 2012 and require full retrospective application.  The Company will apply these amendments beginning the first quarter of its 2013 fiscal year and is currently assessing the impact to its consolidated financial statements.

On May 12, 2011, the IASB issued four new standards, all of which are applicable to Annual Reporting periods beginning on or after January 1, 2013.  The Company is currently assessing the impact of these standards on its consolidated financial statements and related note disclosures. The following is a list and description of these standards:

    IFRS 10, Consolidated Financial Statements ("IFRS 10")
    IFRS 10 establishes the standards for the presentation and preparation of consolidated financial statements when an entity controls one or more entities;
     
    IFRS 11, Joint Arrangements ("IFRS 11")
    IFRS 11 replaces IAS 31, Interests in Joint Ventures ("IAS 31") and requires that a party in a joint arrangement assess its rights and obligations to determine the type of joint arrangement and account for those rights and obligations accordingly;
     
    IFRS 12, Disclosure of Involvement with Other Entities ("IFRS 12")
    IFRS 12, along with IFRS 11 described above, replaces IAS 31. IFRS 12 requires the disclosure of information that enables users of financial statements to evaluate the nature of and the risks associated with, the entity's interests in joint ventures and the impact of those interests on its financial position, financial performance and cash flows; and
     
    IFRS 13, Fair Value Measurement ("IFRS 13")
    IFRS 13 provides guidance to improve consistency and comparability in fair value measurements and related disclosures through a 'fair value hierarchy'. This standard applies when another IFRS requires or permits fair value measurements or disclosures. IFRS 13 does not apply for share-based payment transactions, leasing transactions and measurements that are similar to, but are not fair value.
   

4. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Critical judgments that management has made in the process of applying the Company's accounting policies, key assumptions concerning the future and other key sources of estimation uncertainty that have the potential to materially impact the carrying amounts of assets and liabilities within the next financial year are described in Note 4 of the 2011 Annual Report. The critical accounting judgments and key sources of estimation uncertainty used in the preparation of these Financial Statements are consistent with those as described in Note 4 of the 2011 Annual Report.

5. Cash and cash equivalents and interest income

Cash and cash equivalents

The components of cash and cash equivalents were as follows:

                         
(in CAD millions)     As at
April 28, 2012
    As at
January 28, 2012
    As at
April 30, 2011
    As at
January 29, 2011
Cash   $ 70.0   $ 49.0   $ 64.8   $ 46.3
Cash equivalents                        
  Government treasury bills     239.9     199.9     60.0     323.8
  Bank term deposits     25.0     121.0     27.6     26.9
  Investment accounts     20.3     20.3     20.0     20.0
Restricted cash and cash equivalents     6.4     7.2     26.0