Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F/A
Amendment No. 1
 
(Mark One)
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2018

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OR

¨
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 001-38027
 
CANADA GOOSE HOLDINGS INC.
(Exact name of Registrant as specified in its charter)
 

N/A
 
(Translation of Registrant’s name into English)
British Columbia
 
(Jurisdiction of incorporation or organization)
250 Bowie Ave
Toronto, Ontario, Canada M6E 4Y2
 

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(Address of principal executive offices)
David M. Forrest
Senior Vice President, General Counsel
250 Bowie Ave
Toronto, Ontario, Canada M6E 4Y2
Tel: (416) 780-9850
 
(Name, telephone, email and/or facsimile number and address of Company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Subordinate voting shares
 
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
 
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 
(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: At March 31, 2018, 37,497,549 subordinate voting shares and 70,894,076 multiple voting shares were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No

Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨ Emerging growth company ¨

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨
International Financial Reporting Standards as issued
by the International Accounting Standards Board x
Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ¨ Item 17 ¨ Item 18

If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ¨ Yes ¨ No
 

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EXPLANATORY NOTE

This Amendment No. 1 on Form 20-F/A (the “Amendment”) amends the Annual Report on Form 20-F of Canada Goose Holdings Inc. for the fiscal year ended March 31, 2018, as filed with the Securities and Exchange Commission on June 15, 2018 (the “Original Filing”).
This Amendment is being filed solely to include the conformed signature to the Report of Independent Registered Public Accounting Firm, dated June 14, 2018, which was inadvertently omitted from the Original Filing.
In accordance with Rule 12b-15 of the Securities Exchange Act of 1934, as amended, this Amendment includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, dated as of the filing date of this Amendment. In addition, the consent filed as Exhibit 23 to this Amendment is dated as of the filing date of this Amendment.
No other changes were made to the Original Filing. For ease of reference, the entire Form 20-F, including all exhibits filed therewith, is included in this Amendment.

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Canada Goose Holdings Inc.
Table of Contents
INTRODUCTION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
 
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
 
ITEM 3. KEY INFORMATION
 
ITEM 4. INFORMATION ON THE COMPANY
 
ITEM 4A. UNRESOLVED STAFF COMMENTS
 
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
ITEM 8. FINANCIAL INFORMATION
 
ITEM 9. THE OFFER AND LISTING
 
ITEM 10. ADDITIONAL INFORMATION
 
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
 
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
ITEM 15. CONTROLS AND PROCEDURES
 
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
 
ITEM 16B. CODE OF ETHICS
 
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
ITEM 16G. CORPORATE GOVERNANCE
 
ITEM 16H. MINE SAFETY DISCLOSURE
PART III
 
ITEM 17. FINANCIAL STATEMENTS
 
ITEM 18. FINANCIAL STATEMENTS
 
ITEM 19. EXHIBITS
 
EXHIBIT INDEX
SIGNATURES
FINANCIAL STATEMENTS
F-1

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INTRODUCTION
Unless otherwise indicated, all references in this Annual Report on Form 20-F 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 Annual Report, 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. References to the “Acquisition” refer to the sale of a 70% equity interest in our business in December 2013 to Bain Capital.
In connection with our initial public offering (“IPO”), we redesignated our Class A common shares into multiple voting shares. In addition, we eliminated all of our previously outstanding series of common and preferred shares and created our subordinate voting shares.
This Annual Report on Form 20-F contains our audited consolidated financial statements and related notes for the years ended March 31, 2018, 2017 and 2016 (“Annual Financial Statements”). Our Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
Trademarks and Service Marks
This Annual Report 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).
Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report 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.
CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Annual Report contains forward-looking statements. These 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 many of places throughout this Annual Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, business prospects, growth, strategies, expectations regarding industry trends and the size and growth rates of addressable markets, our business plan and growth strategies, including plans

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for expansion to new markets and new products, expectations for seasonal trends, and the industry in which we operate.
Certain assumptions made in preparing the forward-looking statements contained in this Annual Report include:
our ability to implement our growth strategies;
our ability to maintain strong business relationships with our customers, 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 Annual Report, which include, but are not limited to, the following risks:
we may not open retail stores or expand e-commerce access on our planned timelines;
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;
our indebtedness may adversely affect our financial condition;
we may be unable to remediate weaknesses in our internal controls over financial reporting;
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 expansion into China and other new store openings;
the success of our marketing programs;
our ability to forecast our inventory needs;
the risk our business is interrupted because of a disruption at our headquarters; and

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fluctuations in raw material costs, interest rates and currency exchange rates.
Although we base the forward-looking statements contained in this Annual Report 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 Annual Report. In addition, even if results and developments are consistent with the forward-looking statements contained in this Annual Report, those results and developments may not be indicative of results or developments in subsequent periods. As a result, any or all of our forward-looking statements in this Annual Report may prove to be inaccurate. We have included important factors in the cautionary statements included in this Annual Report on Form 20-F, particularly in Section 3.D of this Annual Report on Form 20-F titled “Risk Factors”, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. No forward-looking statement is a guarantee of future results. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
You should read this Annual Report and the documents that we reference herein and have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this Annual Report, and we do not assume any obligation to update any forward-looking statements except as required by applicable laws.

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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
Selected Financial Data
See the selected financial data disclosure included under Item 5. — “Operating and Financial Review and Prospects”.
Exchange Rate Information
We have published our financial statements in Canadian dollars. 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 customs 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 Annual Financial Statements or elsewhere in this Annual Report.
On June 8, 2018, the noon buying rate was US$1.00 = $1.2956.
Year Ended
Period Average Rate
March 31, 2014
$
1.0580

March 31, 2015
$
1.1471

March 31, 2016
$
1.3128

March 31, 2017
$
1.3149

March 31, 2018
$
1.2829

Last Six Months
High Rate
 
Low Rate
December 2017
$
1.2900

 
$
1.2517

January 2018
$
1.2534

 
$
1.2293

February 2018
$
1.2806

 
$
1.2280

March 2018
$
1.3096

 
$
1.2822

April 2018
$
1.2918

 
$
1.2548

May 2018
$
1.3027

 
$
1.2761


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B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
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 continues to expand 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 March 31, 2018, our brand is sold in 38 countries through approximately 2,200 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.

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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 2018, 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 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 over 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

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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 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.
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 Direct-to-Consumer (“DTC”) channel with the launch of our 12 e-commerce stores since August of 2014, and the opening of our first six retail stores in Boston, Calgary, Chicago, London, New York City and Toronto and a retail store operated by our distribution partner in Tokyo. Our revenue increased from $290.8 million for fiscal 2016 to $591.2 million for fiscal 2018, a Compound Annual Growth Rate (“CAGR”) of 42.6%.
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

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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.
The countries in which we operate online stores 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 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 March 31, 2018, we had repaid all borrowings outstanding under our Revolving Facility (as defined below), and had $97.8 million of unused commitments under our Revolving Facility, $146.6 million of term loans under our Term Loan Facility (as defined below), for total indebtedness of $146.6 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;

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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.
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 are growing 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

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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, wool, 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 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.

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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 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.

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Labour-related matters, including labour disputes, may adversely affect our operations.
As of March 31, 2018, less than 23% 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 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.
On November 22, 2017, the Ontario government passed the Fair Workplaces, Better Jobs Act, 2017, which includes broad ranging amendments to Ontario’s Employment Standards Act and Labour Relations Act. One such amendment is a raise of the statutory minimum wage from $11.60 per hour to $14 per hour on January 1, 2018, and to $15 per hour on January 1, 2019. Since we conduct a significant portion of our manufacturing in Ontario, this new legislation may materially increase our manufacturing costs. As the minimum wage increases, we may need to increase not only wages of our minimum wage employees, but also the wages paid to our other hourly or salaried employees. Further, if we fail to pay such higher wages, we could suffer increased employee turnover. We are currently evaluating the potential impact of this new legislation on our business, financial condition and results of operations.
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, sales and financial reporting. 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.

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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 in our wholesale segment 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.
Our sales depend, in part, on retailer partners effectively displaying our products, 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.
We also have key relationships with national retail partners. For fiscal 2018, our largest Canadian wholesale customer accounted for 21.9% of our wholesale revenue in Canada, and our largest U.S. wholesale customer accounted for 21.9% 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. The recent decline in the overall retail industry has been challenging for some of our retail partners and caused us to negotiate shortened payment terms and reduce credit limits with certain of our retail partners. If the overall retail environment continues to decline or if one or more of our retail partners is unable or unwilling to meet our payment terms, our business and results of operations could be harmed.
The majority of our sales are to retail partners, directly and through distributors.
The majority of our sales are made to retail partners, either directly or indirectly, through distributors, 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.

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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 and increasingly demanding international, U.S., Canadian, European and other laws and enforcement trends. For example, the European Union recently adopted a comprehensive General Data Privacy Regulation (the "GDPR"), which became fully effective in May 2018. The GDPR requires companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves. Failure to comply with GDPR requirements could result in significant penalties. 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 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.

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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 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 (“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 increase over time. We rely on independent service providers for payment processing, including credit and debit cards.

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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

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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.
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 U.S. dollars, Euros, British pounds and Swiss Francs, if any of these currencies weakens against the Canadian dollar it would have a negative impact on our local operating results upon translation of those results into Canadian dollars for the purposes of financial statement consolidation. 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 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

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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.
Political uncertainty and an increase in trade protectionism could have a material adverse effect on our business, results of operation and financial condition.
Recent events, including the U.S. presidential election and “Brexit” in the U.K., have resulted in substantial regulatory uncertainty regarding international trade and trade policy. We sell a significant portion of our products to customers outside of Canada and changes, potential changes or uncertainties in regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we operate, could adversely affect our business and consolidated financial statements. For example, the current U.S. administration has called for substantial changes to trade agreements, such as the North American Free Trade Agreement (“NAFTA”), has increased tariffs on certain goods imported into the United States and has raised the possibility of imposing significant, additional tariff increases. The announcement of unilateral tariffs on imported products by the U.S has triggered retaliatory actions from certain foreign governments and may trigger retaliatory actions by other foreign governments, including Canada, potentially resulting in a “trade war”. A “trade war” of this nature or other governmental action related to tariffs or international trade agreements has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the Canadian, U.S. or world economy or certain sectors thereof and, thus, to adversely impact our business.
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 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.
Because of our international operations, which we are expanding as our DTC channel expands, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.
We source an increasingly significant portion of our products from outside Canada. The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other similar anti-bribery and anti-kickback laws and regulations generally prohibit companies and their intermediaries from making improper payments government officials for the purpose of obtaining or retaining business. While we take steps to ensure that our distributors, consultant and personnel comply with applicable law, we cannot assure you that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations,

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could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
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.
In connection with the audits of our consolidated financial statements for fiscal 2017 and 2018, we identified material weaknesses in our internal control over financial reporting. 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 our reputation.
In connection with the audit of our consolidated financial statements for fiscal 2017 and 2018, we 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.
As the Company experienced significant expansion of operations and revenue growth, we increased the number of personnel in our organization and specifically in our financial reporting team. Despite this progress, in fiscal 2018 we identified control deficiencies in aggregate that constitute a material

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weakness in four components of internal control as defined by COSO 2013 (Risk Assessment, Control Activities, Information and Communication, and Monitoring). Management determined it did not design and maintain effective controls over the following, each of which was deemed a material weakness in aggregate: (a) the occurrence and accuracy of revenue and the existence of the related accounts receivable, and access controls to customer master data; (b) the existence and valuation of inventory, including inventory costing and access controls to inventory master data; and (c) the accuracy and completeness of information used in the execution of internal controls primarily related to spreadsheets created from data extracted from our operating system.
While we have taken steps to address these material weaknesses, there are a number of additional steps that management plans to take in 2019 and beyond to strengthen the Company’s internal controls. In addition, as the Company continues to evaluate and work to improve its internal control over financial reporting, management may take additional measures to address control deficiencies. The material weaknesses cannot be considered remediated until the applicable relevant controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. No assurance can be provided at this time that the actions and remediation efforts will effectively remediate the material weaknesses identified or prevent the incidence of other material weaknesses in the Company’s internal control over financial reporting in the future. We do not know the specific time frame needed to fully remediate the material weaknesses identified, but do not expect they will be fully remediated in fiscal 2019. 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 are placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we may be unable to report our financial results accurately, which could increase operating costs, trigger an event of default under our Credit Agreement and harm our business, including our investors’ perception of our business, our share price and our ability to finance our operations.
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.”
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, as of March 31, 2018, we are 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. Since management was 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

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financial performance on a timely basis could also jeopardize our continued listing on the Toronto Stock Exchange (“TSX”), the New York Stock Exchange (“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.
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 and customer demand. 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. Our ability to forecast accurately will become increasingly important as we grow our DTC segment and as we expand our Spring and Fall product offerings. In our wholesale segment, a majority of orders are received prior to the end of the prior fiscal year, enabling us to manufacture inventory to wholesale demand. For DTC channel sales, we have to manufacture according to our forecasts. 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. The impact of an overestimation is expected to increase as a larger portion of our sales comes through our DTC channel, and as we expand our product offerings to include more new styles.
Risks Related to Our Subordinate Voting Shares
The dual-class structure contained in our articles has the effect of concentrating voting control and the ability to influence corporate matters with Bain Capital and our President and Chief Executive Officer, who held our shares prior to our initial public offering.
Our multiple voting shares have 10 votes per share and our subordinate voting shares have 1 vote per share. As of March 31, 2018, shareholders who hold multiple voting shares (Bain Capital and our President and Chief Executive Officer (including their respective affiliates)), together hold approximately 95% of the voting power of our outstanding voting shares and 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.

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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 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 outstanding shares. The concentrated voting control of holders of our multiple voting shares limits 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.
Bain Capital continues to have significant influence over us in the future, including control over decisions that require the approval of shareholders, which could limit shareholders’ ability to influence the outcome of matters submitted to shareholders for a vote.
We are currently controlled by Bain Capital. As of March 31, 2018, Bain Capital beneficially owns approximately 67.4% of our outstanding multiple voting shares, or approximately 64.0% of the combined voting power of our multiple voting and subordinate voting shares outstanding. In addition, our President and Chief Executive Officer beneficially owns approximately 32.6% of our outstanding multiple voting shares, or approximately 31.0% 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 voting 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.

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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.
We are a controlled company within the meaning of the NYSE listing rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. Our shareholders will not have the same protections afforded to shareholders of companies that are subject to such requirements.
We are 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.
As a foreign private issuer, we are exempt from 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 Securities Exchange Act of 1934, as amended (“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 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. 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.
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 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” within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, acquisitions of our subordinate voting shares and

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multiple voting shares may be reviewed pursuant to 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.
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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The legislation recently enacted in the United States commonly known as the Tax Cuts and Jobs Act comprehensively changes the U.S. federal income tax system. This law and related future legislation, regulations and rulings could adversely affect the U.S. federal income tax treatment of us and the U.S. Holders of our subordinate voting shares. The interpretation and application of many provisions of this law are unclear.
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 (“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.
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 (“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.
The legislation recently enacted in the United States commonly known as the Tax Cuts and Jobs Act comprehensively changes the U.S. federal income tax system. This law and related future legislation, regulations and rulings could adversely affect the U.S. federal income tax treatment of us and certain U.S. Holders of our subordinate voting shares. The interpretation and application of many provisions of this law are unclear. U.S. Holders should consult their own tax advisors in that regard.
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

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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.
Our constating documents permit us to issue an unlimited number of subordinate voting shares and multiple voting shares without additional shareholder approval.
Our articles 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.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Founded in a small warehouse in Toronto, Canada in 1957, Canada Goose has grown into one of the world’s leading makers of performance luxury apparel. Every Canada Goose product is informed by the rugged demands of the Arctic and inspired by relentless innovation and uncompromised craftsmanship. From Antarctic research facilities and the Canadian High Arctic, to the streets of New York, London, Milan, 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 outerwear, knitwear and accessories for men, women and children. This vertically integrated business model allows us to directly control the quality of our products while capturing higher margins. As of March 31, 2018, our products are sold through our DTC channel, which has

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e-commerce operations in 12 countries and 6 retail stores, and through our wholesale channel, which is comprised of select luxury and outdoor retailers and distributors in 38 countries and our partner-operated retail location in Tokyo, Japan.
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) (the “BCBCA”) on November 21, 2013. The initial public offering of our subordinate voting shares in the United States and Canada was completed on March 21, 2017.
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 Annual Report and the inclusion of our website address in this Annual Report is an inactive textual reference.
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 they 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 centered around protection from the elements and adaptability in a wide range of uses, climates and environments. Our expertise in matching our technical fabrics with the optimal blends of down enables us to create warmer, lighter and more durable products. Our commitment to superior quality and lasting performance also extends into freedom of movement, breathability and protection from wind and rain.
Beloved and coveted globally. From our utilitarian arctic heritage to urban explorers, outdoor enthusiasts and discerning consumers globally, we have built deep brand loyalty. Market research shows that we consistently rank amongst the highest in our industry for customer satisfaction and re-purchase intent. Consumer surveys conducted on our behalf in 2017 show that 87% of Canada Goose owners say that they have positive feelings about the brand and 84% would definitely or probably consider Canada Goose when making their next premium outerwear purchase.
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 primarily outsource to offshore manufacturers, we are deeply committed to producing our core down-filled jackets in Canada and aggressively investing in manufacturing capacity in 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.

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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 third party sub-contractors. Our flexible supply chain gives us distinct advantages including the ability to scale our operations, adapt to customer demand and achieve higher margins.
Multi-channel distribution. Our global distribution strategy allows us to reach customers how and where they want to shop, through two distinct and complementary channels. Our wholesale channel, which represented approximately 2,200 points of distribution as of March 31, 2018, is the tip of the spear for how we drive brand awareness and develop markets. Our global network of best-in-class retail partners and distributors give us a level of reach and depth that we do not intend to replicate on our own. Through our DTC channel, we provide an unfiltered window into our brand, driving closer customer relationships and deeper engagement, while also realizing more favourable margins. In a world that is increasingly going digital, our e-commerce platform is strong and dynamic, offering the full breadth of our product offering, available anytime. The response to our retail stores, which we began opening in the fall of 2016, has also demonstrated that our customers value physical, personalized and immersive shopping experiences.
Passionate and committed management team. Through steady discipline and a focus on sustainable growth, our management team has transformed a small private label manufacturing business into a global brand. Dani Reiss, our President and Chief Executive Officer, 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. Mr. Reiss 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 brands. Their leadership and passion have played central roles in the growth and stewardship of the brand.
B.
Business Overview
Our Growth Strategies
Over the past three fiscal years, we have grown our revenue at a 42.6% CAGR. Leveraging the power of our brand and these investments, we intend to continue pursuing our global market opportunity. Key elements of our strategy include:
Execute our proven approach to market development. As we have grown our business, we have developed a successful framework for entering and developing our markets by increasing awareness, consideration and conversion, while building customer access in both our wholesale and DTC channels.
Introduce and strengthen our brand. Driving interest among new customers and strengthening our connections with those who already know us is central to how we develop markets. 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 global markets in which we believe we have the opportunity to grow. Through organic, word-of-mouth brand building, with amplification

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by our integrated digital-first marketing approach, we intend to continue introducing Canada Goose to the world, activating local markets, and encouraging our fans to explore the full breadth of our product offering.
Enhance our wholesale network. With a focus on providing a compelling and consistent brand experience, we plan to drive continued growth with our best-in-class retail partners and distributors, while selectively adding new points of distribution. Through a wide range of collaborations in areas such as assortment planning, merchandising, creative content, events and campaigns, we are working closely with our wholesale network to build awareness and affinity for the long term, while driving traffic and full price sell through.
Continue our DTC rollout. Since opening our first e-commerce store in Canada in August of 2014, we have grown our annual DTC revenue to $255.0 million in fiscal 2018, which represents 43.1% of total revenue. We intend to continue growing revenue from existing e-commerce operations and retails stores, while further expanding our footprint in our most important markets. In January 2018, we began a pilot project establishing online sales in China, and in fiscal 2019 we intend to open five new retail stores around the world.
Pursue continued global growth. While the Canada Goose brand is recognized and distributed globally, we believe there is a significant opportunity to increase penetration in our existing markets and selectively enter new regions through our proven approach to strategic market development. The following table presents our revenue in each of our geographic segments over the past three fiscal years:
(in CAD $millions)
Fiscal year ended March 31,
 
'16 - '18
 
2016
 
2017
 
2018
 
CAGR
Canada
95.2

 
155.1

 
228.8

 
55.0
%
United States
103.4

 
131.9

 
184.2

 
33.5
%
Rest of World
92.2

 
116.8

 
178.2

 
39.0
%
Total
290.8
 
403.8
 
591.2
 
42.6
%
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. We successfully launched our Canadian e-commerce platform in August 2014 and opened our first two retail stores in Toronto and Calgary in October 2016 and November 2017, respectively. We expect to continue developing deeper relationships with our retail partners and continue expanding our DTC channel.
United States. Our market entry has been staged on a regional basis, with the bulk of our investments and wholesale penetration concentrated in the Northeast and Midwest. This has been the primary driver of our historical growth and momentum in the U.S. 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, followed by retail stores in Chicago and Boston in October 2017 and November 2017, respectively. We believe there is a large white space opportunity in other regions

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such as the Pacific Northwest. We continue to be focused on deepening and expanding our wholesale footprint and continuing to develop our DTC channel.
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 both channels. In the past two years, we have opened e-commerce sites in nine Western European markets. In November 2017, we opened a store in London, U.K. We have seen strong traction in these markets by expanding our three season product offering with lightweight jackets.
Outside of Europe, our most developed markets are Japan and Korea. We have world-class distributors that we are working with to build access and awareness to the brand while ensuring its long-term sustainability. In November 2017, we opened our partner-operated retail location in Tokyo, Japan. We have had a small wholesale presence in China for a number of years. To lead market development efforts, we are establishing a regional head office in Shanghai with local expertise and capabilities in marketing and commercial operations. We also plan to open two retail stores in Hong Kong and Beijing in fiscal 2019 and we are transitioning online Chinese distribution to Alibaba’s Tmall platform in the fall of 2019.
Comparing current penetration levels in our largest geographic markets illustrates the magnitude of our long-term opportunity. In Canada, which is our most developed market, we sold approximately 52 jackets in fiscal 2018 per 1,000 addressable customers, as defined as people living above the 37th Parallel with annual household income of greater than $100,000. In larger addressable markets such as the United States, Western Europe, Japan, South Korea and China, our corresponding penetration levels range from one to 10 units per 1,000 addressable customers. As we continue strengthening our brand and building out customer access globally, achieving 35% of our current penetration in Canada would more than triple annual unit volume. Beyond this, other earlier stage markets and products represent significant incremental opportunities.
Enhance and expand our product offering. As a three-season lifestyle brand we will continue to evolve and expand our product offering across styles, uses and climates. Giving people new ways to experience Canada Goose builds deeper brand loyalty, drives higher penetration and expands our geographic appeal.
Fall / Winter. While our long-standing styles continue to grow, we are also broadening our jacket offering through innovation and new styles. In fiscal 2018 we successfully introduced over 30 new styles and six colours in our Fall / Winter line. With outerwear becoming a more prominent part of wardrobes, we intend to continue responding to demand for more choice and variety with new jackets that address a wider range of silhouettes, colors, fits, uses and weather conditions.
Spring. We plan to continue building out our Spring collections in categories such as lightweight down, rainwear, windwear and softshell jackets. While keeping our customers warm, comfortable and protected across three seasons, these extensions also increase our relevance in markets with more temperate climates.

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Beyond outerwear. Our strategy is to selectively and carefully respond to customer demand for complementary functional products in adjacent categories. As a product-led, function-first brand, we are focused on going places which stay true to our heritage and where we have the right capabilities to create exceptional products that are undeniably authentic Canada Goose. Outside of outerwear, we currently offer collections of knitwear and accessories, which we intend to thoughtfully expand in offering and distribution going forward.
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. As our mix continues to shift towards the DTC channel, we expect to continue to capture incremental gross margin. A jacket sale in our DTC channel provides significantly greater contribution to segment operating income per jacket as compared to a sale of the same product in our wholesale channel.
Price optimization. We believe that we have a significant degree of pricing power with our long-standing styles and we plan to continue optimizing our pricing to capture their full functional value. In addition, we intend to continue offering new styles at higher price points, which is incrementally beneficial to gross margin over the longer term as their volumes and production efficiencies scale.
Manufacturing. We intend to continue expanding in-house domestic jacket production to optimize our manufacturing mix, realize efficiencies and capture incremental gross margin. In fiscal 2018, 35% of total unit production was in-house, as compared to 30% in fiscal 2017. In fiscal 2018, we opened a new cutting and distribution centre in Scarborough, Ontario and expanded our Boisbriand, Québec production facility.
Our Products
Outerwear
From raincoats and lightweight jackets to insulated parkas, Canada Goose designs and manufactures functional outerwear for every adventure. Since 1957, we have been making purpose-driven products known for unparalleled warmth and timeless style with the functionality to thrive in some of the most extreme conditions in the world.
Over time, our product offering has evolved significantly. We leverage our tactical industrial heritage to inspire, develop and refine functional outerwear 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 across the globe. True to our heritage, we partnered with Goose People as a source of inspiration and real-world testing. While developing our award-winning HyBridge Lite product, Ray Zahab put the performance piece to the test while running the Sahara. The Skreslet Parka, co-designed by Laurie Skreslet, the first Canadian to summit Everest, inspired our Altitude line of mountaineering products.

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Knitwear
Canada Goose introduced its first Knitwear Collection in 2017, pairing the natural moisture wicking and temperature regulating properties of premium ultra-fine Merino wool with the function-first focus at the core of all of our products. Our knitwear uses technology for maximum comfort by increasing breathability where your body needs it most. This technique combines loose and tight stitches to increase airflow to the parts of the body that generate the most heat or require more insulation.
Accessories
Canada Goose’s accessories are designed to transition seamlessly from weekday commutes to weekend retreats. Our collection of scarves and beanies are made in Italy from premium ultra-fine Merino wool and our gloves are available in reinforced leather that resists abrasion or in heavy duty fleece and down-filled styles for ultimate warmth in colder climates.
Thermal Experience Index
From hiking trails to embarking on an urban adventure, or exploring the coldest places on Earth, Canada Goose has developed the Thermal Experience Index (TEI) to help customers select the right product for them no matter the adventure. The five-point system breaks down each piece into a category, activity and suggested temperature. TEI categorizes warmth from lightweight pieces to parkas made for extreme weather systems; ranging from five degrees Celsius (40 degrees Fahrenheit) to negative 30 degrees Celsius (negative 25 degrees Fahrenheit) and below.
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 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 came into 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 31, 2018, we operate five production facilities in Toronto, Winnipeg and Montreal. We also work with 27 Canadian and 7 international highly qualified subcontractors who offer specialized expertise, which provides us with flexibility to scale our production and effectively offer a broader range of product categories. We employed 2,043 Canadian manufacturing employees as of March 31, 2018, and have been recognized by the Government of Canada for supporting the apparel manufacturing industry in Canada.

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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 60 countries. 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.
Seasonality
Our business is seasonal in nature. See Item 5.A — “Operating and Financial Review and Prospects” — “Management’s Discussion and Analysis of Financial Results” — “Factors Affecting our Performance” — “Seasonality” for a discussion.
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.

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C.    Organizational Structure
The following chart reflects our organizational structure (including the jurisdiction of formation or incorporation of the various entities).
https://cdn.kscope.io/e9bded09f7ce09a32cfd305677846358-orgchart.jpg


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D.    Property, Plants and Equipment
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
Canada
 
 
 
 
 
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
Winnipeg, Manitoba
Manufacturing
 
72,619 square feet
 
March 31, 2028
Boisbriand, Québec
Manufacturing
 
94,547 square feet
 
July 31, 2023
Calgary, Alberta
Retail Store
 
3,984 square feet
 
January 31, 2028
Vancouver, British Columbia
Inactive
 
3,945 square feet
 
January 31, 2028
United States
 
 
 
 
 
New York, NY
Office and Showroom
 
8,604 square feet
 
December 31, 2024
New York, NY
Retail Store
 
6,970 square feet
 
March 31, 2027
Chicago, IL
Retail Store
 
10,188 square feet
 
July 31, 2027
Boston, MA
Retail Store
 
4,966 square feet
 
March 31, 2028
Rest of World
 
 
 
 
 
Hong Kong, China
Office
 
1,492 square feet
 
July 22, 2018
Paris, France
Office and Showroom
 
4,090 square feet
 
March 15, 2018
London, U.K.
Retail Store
 
6,000 square feet
 
September 28, 2027
Zug, Switzerland
Office and Showroom
 
7,545 square feet
 
January 31, 2021

ITEM 4A. UNRESOLVED STAFF COMMENTS
None
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following tables set forth our selected consolidated financial data. The selected historical consolidated financial data below should be read in conjunction with our Annual Financial Statements (Item 18), as well as Item 4. - “Information on the Company” and Item 5. - “Operating and Financial Condition and Results of Operations” of this Annual Report.

-40-




We have derived the statements of operations data for the years ended March 31, 2018, March 31, 2017 and March 31, 2016 and the consolidated financial position information as at March 31, 2017 and March 31, 2018 from our Annual Financial Statements included elsewhere in this Annual Report. The statements of operations data for the years ended March 31, 2015 and March 31, 2014 and for the periods from December 9, 2013 to March 31, 2014 and April 1, 2013 to December 8, 2013 have been derived from our audited consolidated financial statements, which are not included in this Annual Report. Our Annual 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 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 (the “Predecessor 2014 Period”), and the successor period from December 9, 2013 through March 31, 2014 (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.

-41-




 
Successor
 
 
Predecessor
CAD $000s (except per share data)
Fiscal Year ended March 31, 2018
 
Fiscal Year ended March 31, 2017
 
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
591,181

 
403,777

 
290,830

 
218,414

 
17,263

 
 
134,822

Cost of sales
243,569

 
191,709

 
145,206

 
129,805

 
14,708

 
 
81,613

Gross profit
347,612

 
212,068

 
145,624

 
88,609

 
2,555

 
 
53,209

Selling, general and administrative expenses
200,110

 
164,965

 
100,103

 
59,317

 
20,494

 
 
30,119

Depreciation and amortization
9,374

 
6,601

 
4,567

 
2,623

 
804

 
 
447

Operating income (loss)
138,128

 
40,502

 
40,954

 
26,669

 
(18,743
)
 
 
22,643

Net interest and other finance costs
12,888

 
9,962

 
7,996

 
7,537

 
1,788

 
 
1,815

Income (loss) before income taxes
125,240

 
30,540

 
32,958

 
19,132

 
(20,531
)
 
 
20,828

Income tax expense (recovery)
29,185

 
8,900

 
6,473

 
4,707

 
(5,054
)
 
 
5,550

Net income (loss)
96,055

 
21,640

 
26,485

 
14,425

 
(15,477
)
 
 
15,278

Other comprehensive loss
(1,822
)
 
(610
)
 
(692
)
 

 

 
 

Total comprehensive income (loss)
94,233

 
21,030

 
25,793

 
14,425

 
(15,477
)
 
 
15,278

Earnings (loss) per share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.90

 
$
0.22

 
$
0.26

 
$
0.14

 
$
(0.15
)
 
 
$
157,505.15

Diluted
$
0.86

 
$
0.21

 
$
0.26

 
$
0.14

 
$
(0.15
)
 
 
$
157,505.15

Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
Basic
107,250,039
 
100,262,026
 
100,000,000
 
100,000,000

 
100,000,000
 
 
97
Diluted
111,519,238
 
102,023,196
 
101,692,301
 
101,211,134

 
100,000,000
 
 
97
CAD $000s
March 31, 2018
 
March 31, 2017
 
March 31, 2016
Financial Position Information:
 
 
 
 
 
Cash
95,290

 
9,678

 
7,226

Working capital (1)
167,373

 
98,954

 
104,751

Total assets
548,438

 
380,869

 
353,018

Total non-current liabilities
171,232

 
170,432

 
160,335

Shareholders' equity
243,610

 
146,168

 
142,702

(1) Working capital is a non-IFRS financial measure. See “Non-IFRS Financial Measures” for a description of these measures.

-42-





CANADA GOOSE HOLDINGS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three and twelve months ended March 31, 2018
The following Management’s Discussion and Analysis (“MD&A”) for Canada Goose Holdings Inc. (“us,” “we,” “our,” “Canada Goose” or the “Company”) is dated June 13, 2018 and provides information concerning our financial condition and results of operations for the three months and the fiscal year ended March 31, 2018 (“fiscal 2018”). You should read this MD&A together with our audited consolidated financial statements and the related notes for the fiscal year ended March 31, 2018 (“Annual Financial Statements”), and other financial information. Additional information about Canada Goose is available on our website at www.canadagoose.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission (the “SEC”) website at www.sec.gov, including this Annual Report on Form 20-F.
CAUTIONARY NOTE REGARDING FORWARDLOOKING STATEMENTS
This MD&A contains forward-looking statements. These 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 many places throughout this MD&A and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, business prospects, growth, strategies, expectations regarding industry trends and the size and growth rates of addressable markets, our business plan and growth strategies, including plans for expansion to new markets and new products, expectations for seasonal trends, and the industry in which we operate.
Certain assumptions made in preparing the forward-looking statements contained in this MD&A include:
our ability to implement our growth strategies;
our ability to maintain strong business relationships with our customers, 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.

-43-




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 Annual Report, which include, but are not limited to, the following risks:
we may not open retail stores or expand e-commerce access on our planned timelines;
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;
our indebtedness may adversely affect our financial condition;
we may be unable to remediate weaknesses in our internal controls over financial reporting;
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 expansion into China and other new store openings;
the success of our marketing programs;
our ability to forecast our inventory needs;
the risk our business is interrupted because of a disruption at our headquarters; and
fluctuations in raw material costs, interest rates and currency exchange rates.
Although we base the forward-looking statements contained in this MD&A 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 MD&A. In addition, even if results and developments are consistent with the forward-looking statements contained in this MD&A, those results and developments may not be indicative of results or developments in subsequent periods. As a result, any or all of our forward-looking statements in this MD&A may prove to be inaccurate. No forward-looking statement is a guarantee of future results. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
You should read this MD&A and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made as of the date of this MD&A, and we do not assume any obligation to update any forward-looking statements except as required by applicable laws.

-44-




BASIS OF PRESENTATION
The Annual Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and are presented in thousands of Canadian dollars, except where otherwise indicated. Certain financial measures contained in this MD&A are non-IFRS financial measures and are discussed further under “Non-IFRS Financial Measures” below.
All references to “$”, “CAD” and “dollars” refer to Canadian dollars, “USD” and “US$” refer to U.S. dollars, “GBP” refers to British pounds sterling, “EUR” refers to Euros, and “CHF” refers to Swiss Francs, unless otherwise indicated. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding.
All references to “fiscal 2015” are to the Company’s fiscal year ended March 31, 2015; to “fiscal 2016” are to the Company’s fiscal year ended March 31, 2016; to “fiscal 2017” are to the Company’s fiscal year ended March 31, 2017; to “fiscal 2018” are to the Company’s fiscal year ended March 31, 2018; to “fiscal 2019” are to the Company’s fiscal year ended March 31, 2019; and to “fiscal 2020” are to the Company’s fiscal year ended March 31, 2020.

-45-




SUMMARY OF FINANCIAL PERFORMANCE
The following table summarizes results of operations for the three months ended March 31, 2018 and 2017, and the fiscal years ended March 31, 2018, 2017 and 2016. The table also expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the table below and the discussion that follows have been calculated using rounded numbers. See “Results of Operations” for additional details.
 
Three months ended
 
Year ended
CAD $000s
(except per share data)
March 31, 2018
March 31, 2017
 
March 31, 2018
March 31, 2017
March 31, 2016
Statement of Operations Data:
 
 
 
 
 
Revenue
124,821

51,096

 
591,181

403,777

290,830

Gross profit
78,257

27,790

 
347,612

212,068

145,624

Gross margin
62.7
%
54.4
 %
 
58.8
%
52.5
%
50.1
%
Operating income (loss)
14,827

(28,605
)
 
138,128

40,502

40,954

Net income (loss)
8,092

(23,431
)
 
96,055

21,640

26,485

Earnings (loss) per share
 
 
 
 
 
Basic
$
0.08

$
(0.23
)
 
$
0.90

$
0.22

$
0.26

Diluted
$
0.07

$
(0.23
)
 
$
0.86

$
0.21

$
0.26

Other data: (1)
 
 
 
 
 
 
EBITDA
19,775

(26,664
)
 
152,347

48,914

46,870

Adjusted EBITDA
21,659

(11,433
)
 
149,173

81,010

54,307

Adjusted EBITDA margin
17.4
%
(22.4
)%
 
25.2
%
20.1
%
18.7
%
Adjusted net income (loss)
9,883

(14,704
)
 
94,107

44,147

30,122

Adjusted net income (loss) per share
$
0.09

$
(0.15
)
 
$
0.88

$
0.44

$
0.30

Adjusted net income (loss) per diluted share
$
0.09

$
(0.15
)
 
$
0.84

$
0.43

$
0.30

CAD $000s
March 31, 2018
 
March 31, 2017
 
March 31, 2016
Financial Position:
 
 
 
 
 
Cash
95,290

 
9,678

 
7,226

Working capital (1)
167,373

 
98,954

 
104,751

Total assets
548,438

 
380,869

 
353,018

Total non-current liabilities
171,232

 
170,432

 
160,335

Shareholders' equity
243,610

 
146,168

 
142,702

(1) EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per share and per diluted share, and working capital are non-IFRS financial measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

-46-




Segments
We report our results in two segments which are aligned with our sales channels: Wholesale and Direct-to-Consumer (“DTC”). We measure each reportable operating segment’s performance based on revenue and segment operating income. As of March 31, 2018, we sell through our wholesale segment to retail partners and distributors in 38 countries. Our DTC segment includes online sales through our e-commerce sites to customers in Austria, Belgium, Canada, China, France, Germany, Ireland, Luxembourg, the Netherlands, Sweden, the U.K. and the U.S. and sales to customers from our Company-owned retail stores in Boston, Calgary, Chicago, London, New York City and Toronto.
Our wholesale segment and DTC segment represented 56.9% and 43.1%, respectively, of our total revenue, in fiscal 2018. For fiscal 2017, our wholesale segment and DTC segment represented 71.5% and 28.5%, respectively, of our revenue, and for fiscal 2016, our wholesale segment and DTC segment represented 88.6% and 11.4%, respectively. We expect to experience an increasing proportion of revenue from our DTC segment as we open more retail stores and expand e-commerce access in future years.
Factors Affecting our Performance
We believe that our performance and future success depend on many factors that present significant opportunities for us and may pose risks and challenges, including those discussed below.
Market Development. Our market development strategy has been a key driver of our recent revenue growth and we plan to continue to execute our expansion strategy. Across our various markets, we intend to continue increasing brand awareness, and activating local markets while building out customer access in our wholesale and DTC channels. We expect that marketing 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 site and have since established e-commerce sites in the U.S. during the second quarter of fiscal 2016, in the U.K. and France in the second quarter of fiscal 2017, in Ireland in the first quarter of fiscal 2018, and in Belgium, Luxembourg, the Netherlands, Sweden, Germany and Austria in the second quarter of fiscal 2018. In the fourth quarter of fiscal 2018, we launched a small cross-border pilot e-commerce site in China. We plan to continue to expand e-commerce access in future years.
In the third quarter of fiscal 2017, we opened our first two retail stores in Toronto and in New York City. In the third quarter of fiscal 2018, we opened four retail stores in Chicago, London, Calgary and Boston and our distribution partner in Japan opened a retail store in Tokyo. We intend to open a select number of additional retail locations in major metropolitan centres and premium outdoor and lifestyle destinations where we believe they can operate profitably.
A jacket sale in our DTC channel generally 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. As we continue to increase the percentage of sales from our DTC channel, we expect to continue maintaining 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 products are delivered to customers instead of when products are transferred to our retail partners. As a result, we expect a relatively higher percentage of our DTC sales to be recognized in our third and fourth fiscal quarters.

-47-




New Products. We intend to continue to expand our Fall/Winter and Spring collections of outerwear, knitwear and accessories across styles, uses and climates. Product design and innovation are a core part of our strategy and we intend to continue investing in the development and introduction of new products. We launched our new knitwear collection in the second quarter of fiscal 2018, which we will continue to roll out gradually in fiscal 2019. As we introduce additional products, we expect that they will supplement the seasonal nature of our business and expand our addressable geographic market. We expect these products to be accretive to revenue, but carry a lower gross margin per unit relative to our long-standing styles which are produced in significantly higher volumes.
Seasonality. We experience seasonal fluctuations in our revenue and operating results and historically have realized a significant portion of our annual wholesale revenue during our second and third fiscal quarters and DTC revenue in the third and fourth fiscal quarters. We generated 74.2%, 83.5%, and 77.4% of our revenues in the second and third fiscal quarters of fiscal 2018, fiscal 2017 and fiscal 2016, respectively. In our wholesale channel, we have visibility into expected future revenues, with a majority of orders received prior to the end of the prior fiscal year, enabling us to manufacture inventory to wholesale demand. That said, seasonal fluctuations in wholesale customer demand have shifted the delivery timing of customer orders between quarters in prior years, and can be expected to affect the quarterly pattern of wholesale revenue in future. Because of seasonal fluctuations in revenue and fixed costs associated with our business, particularly the headcount growth and premises costs associated with our expanding DTC channel, we typically experience reduced or negative net income and adjusted EBITDA(1) in the first and fourth quarters. Working capital requirements typically increase throughout our first and second fiscal quarters as inventory builds to support our peak shipping and selling period from August to the end of the calendar year. Cash flows from operating activities are typically highest in the third and fourth quarters of the fiscal year due to the peak period for DTC and collection of receivables from revenue earlier in the year. As a result of our seasonality, changes that impact gross margin and adjusted EBITDA can have a disproportionate impact on the quarterly results when they are recorded in our off-peak periods.
(1) 
Adjusted EBITDA is a non-IFRS measure. See “Non-IFRS Financial Measures” for a description of these measures.
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 years 2018, 2017 and 2016, we generated 53.7%, 52.2% and 54.6%, 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. As most of our wholesale revenue is derived from retailer orders made prior to the beginning of the fiscal year, we have significant visibility within the wholesale channel. In addition, most of our raw materials are sourced outside of Canada, primarily in U.S. dollars, and selling, general and administrative (“SG&A”) expenses are typically denominated in the currency of the country in which they are incurred. As part of our risk management program, this extended visibility allows us to enter into foreign exchange forward contracts to lock in the exchange rates for future foreign currency transactions, which is intended to reduce the variability of our operating costs and future cash flows denominated in local currencies.
We are exposed to translation and transaction risks associated with foreign currency exchange fluctuations on the principal and interest payable on our U.S. dollar denominated senior secured asset-based revolving credit facility (the “Revolving Facility”) and senior secured term loan

-48-




facility (“Term Loan Facility”). On October 18, 2017, we entered into foreign exchange forward and cross-currency swap contracts to hedge a portion of the exposure to foreign currency exchange and interest rate risk on the principal amount of the Term Loan Facility. See “Quantitative and Qualitative Disclosures about Market Risk - Foreign Exchange Risk” below.
The main foreign currency exchange rates that impact our business and operations as at and for the three months and fiscal year ended March 31, 2018 and 2017 are summarized below:
 
Foreign currency exchange rate to $1.00 CAD
Currency
March 31, 2018
Average Q4
Average Q3
Average Q2
Average Q1
Average Fiscal 2018
USD/CAD
1.2894

1.2647

1.2713

1.2528

1.3449

1.2837

EUR/CAD
1.5867

1.5544

1.4971

1.4721

1.4810

1.5011

GBP/CAD
1.8106

1.7601

1.6875

1.6396

1.7211

1.7022

CHF/CAD
1.3482

1.3337

1.2881

1.3012

1.3663

1.3226

 
Foreign currency exchange rate to $1.00 CAD
Currency
March 31, 2017
Average Q4
Average Q3
Average Q2
Average Q1
Average Fiscal 2017
USD/CAD
1.3299

1.3238

1.3344

1.3046

1.2882

1.3125

EUR/CAD
1.4189

1.4109

1.4386

1.4564

1.4546

1.4402

GBP/CAD
1.6662

1.6405

1.6569

1.7123

1.8478

1.7154

CHF/CAD
1.3279

1.3190

1.3300

1.3372

1.3271

1.3290

Source: Bank of Canada
Components of Our Results of Operations
Revenue
Wholesale revenue is comprised of sales to third party resellers (which includes distributors and retailers) 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 reseller which, depending on the terms of the agreement with the reseller, occurs when the products have been shipped to the reseller, are picked up from our third-party warehouse or arrive at the reseller’s facilities, and there is no continuing management involvement or obligation affecting the acceptance of the goods.
DTC revenue consists of sales through our e-commerce operations and, beginning in the third quarter of fiscal 2017, in our Company-owned retail stores. Revenue through e-commerce operations and retail stores is recognized upon delivery of the goods to the customer and when collection is reasonably assured, net of an estimated provision for sales returns.

-49-




Cost of Sales and Gross Profit
Gross profit is our revenue less cost of sales. Cost of sales is comprised of the cost of manufacturing our products, including raw materials, direct labour and overhead, plus freight, duties and non-refundable taxes incurred in delivering the goods to distribution centres managed by third parties. It also includes costs incurred in our production, design and merchandise departments, as well as inventory provisions and allowances related to obsolescence and shrinkage. 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), manufacturing labour rates in the provinces of Canada and the allocation of overhead. Gross margin measures our gross profit as a percentage of revenue.
Selling, General and Administrative Expenses (“SG&A”)
SG&A expenses consist of selling costs to support our customer relationships and to deliver our products 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 operations. Foreign exchange gains and losses are recorded in SG&A and comprise the translation of assets and liabilities denominated in currencies other than the functional currency of the Company, including cash balances, the Term Loan Facility, and a portion of our Revolving Facility, mark-to-market adjustments on derivative contracts, gains or losses associated with our term loan hedges, and realized gains on settlement of foreign currency denominated assets and liabilities.
Selling costs, other than headcount-related costs, generally correlate to revenue timing and therefore experience similar seasonal trends. As a percentage of sales, we expect these selling costs to change as our business evolves. This change 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. Retail store costs are mostly fixed and will be incurred throughout the year. The growth of our DTC channel is expected to be accretive to net income given the higher gross margin for sales made through our DTC channel where we are better able 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 our initial public offering completed on March 21, 2017 (“IPO”), we incurred transaction costs and share-based compensation expenses, and we have experienced a significant increase in accounting, legal and professional fees associated with being a public company in fiscal 2018.
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 U.S., Switzerland and the U.K.

-50-




RECENT DEVELOPMENTS
Expansion into Greater China
Canada Goose is expanding its operations into Greater China, including establishing a regional head office in Shanghai and appointing Scott Cameron as President, Greater China. As part of it Greater China initiative, the Company plans to launch its DTC business by opening two retail stores - in Beijing and Hong Kong - with operating partner ImagineX Group, and e-Commerce operations through Alibaba Group’s Tmall, China’s largest consumer platform for brands and retailers, in fall 2018.
Retail stores to open in 2018
The company has plans to launch five new retail stores ahead of the 2018 holiday shopping season, in Short Hills, New Jersey, Montreal, Quebec, and Vancouver, British Columbia, as well as the stores in Beijing and Hong Kong.
Manufacturing facility in Winnipeg
In June, 2018 Company expects to open its sixth manufacturing facility, and its third in the city of Winnipeg.

-51-




RESULTS OF OPERATIONS
Three months ended March 31, 2018 compared to three months ended March 31, 2017
The following table summarizes results of operations and expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the table below and the discussion that follows have been calculated using rounded numbers.
CAD $000s
(except share and per share data)
Three months ended
Statement of Operations Data:
March 31, 2018
 
March 31, 2017
 
$ Change
Revenue
124,821

 
51,096

 
73,725

Cost of sales
46,564

 
23,306

 
23,258

Gross profit
78,257

 
27,790

 
50,467

Gross margin
62.7
%
 
54.4
 %
 
 
Selling, general and administrative expenses
60,942

 
54,695

 
6,247

SG&A expenses as % of revenue
48.8
%
 
107.0
 %
 
 
Depreciation and amortization
2,488

 
1,700

 
788

Operating income (loss)
14,827

 
(28,605
)
 
43,432

Operating income (loss) as % of revenue
11.9
%
 
(56.0
)%
 
 
Net interest and other finance costs
2,811

 
1,342

 
1,469

Income (loss) before income tax
12,016

 
(29,947
)
 
41,963

Income tax expense (recovery)
3,924

 
(6,516
)
 
10,440

Effective tax rate
32.7
%
 
21.8
 %
 
 
Net income (loss)
8,092

 
(23,431
)
 
31,523

Other comprehensive income (loss)
(1,460
)
 
119

 
(1,579
)
Total comprehensive income (loss)
6,632

 
(23,312
)
 
29,944

Earnings (loss) per share
 
 
 
 
 
Basic
$
0.08

 
$
(0.23
)
 
$
0.31

Diluted
$
0.07

 
$
(0.23
)
 
$
0.30

Weighted average number of shares outstanding
 
 
 
 
 
Basic
108,074,609

 
101,062,660

 
 
Diluted
111,629,427

 
103,155,814

 
 
Other data: (1)
 
 
 
 
 
EBITDA
19,775

 
(26,664
)
 
46,439

Adjusted EBITDA
21,659

 
(11,433
)
 
33,092

Adjusted EBITDA margin
17.4
%
 
(22.4
)%
 
39.8
%
Adjusted net income (loss)
9,883

 
(14,704
)
 
24,587

Adjusted net income (loss) per share
$
0.09

 
$
(0.15
)
 
$
0.24

Adjusted net income (loss)
 per diluted share
$
0.09

 
$
(0.15
)
 
$
0.24

(1) EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), and adjusted net income (loss) per share and per diluted share are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

-52-




Revenue
Revenue for the three months ended March 31, 2018 increased by $73.7 million, or 144.3%, compared to the three months ended March 31, 2017. The increase was driven by growth in both our wholesale and DTC channels and across all geographic regions, partially offset by an unfavourable foreign exchange impact of approximately $0.6 million. On a constant currency basis(1), revenue increased by 145.5% for the three months ended March 31, 2018 compared to three months ended March 31, 2017. Revenue generated from our DTC channel represented 76.0% of total revenue for the three months ended March 31, 2018 compared to 71.4% for the three months ended March 31, 2017.
 
Three months ended
 
$ Change
 
Foreign Exchange Impact
 
$ Change
 
% Change
CAD $000s
March 31, 2018
 
March 31, 2017
 
As reported
 
 
Constant Currency
 
As reported
 
Constant Currency
Wholesale
29,990

 
14,631

 
15,359

 
(152
)
 
15,511

 
105.0
%
 
106.0
%
DTC
94,831

 
36,465

 
58,366

 
(453
)
 
58,819

 
160.1
%
 
161.3
%
Total revenue
124,821

 
51,096

 
73,725

 
(605
)
 
74,330

 
144.3
%
 
145.5
%
(1) 
Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures” for a description of these measures.
Wholesale
Revenue in our wholesale channel was $30.0 million for the three months ended March 31, 2018 compared to $14.6 million for the three months ended March 31, 2017. The fourth quarter of fiscal 2018 contributed 21.1% of annual revenue compared to 12.7% in the prior year. The increase reflects growth in customer orders from existing accounts year-over-year, and higher inventory levels which permitted us to respond to customer re-orders. To a lesser extent, fourth quarter fiscal 2017 wholesale revenue was negatively impacted by the removal of a small quantity of products from our sales channels that did not meet our quality standards, the settlement of certain trade discounts and sales allowances that occur in the normal course following our peak selling season and a year-over-year decline in the Pound Sterling foreign exchange rate versus the Canadian dollar.
DTC
Revenue in our DTC channel was $94.8 million for the three months ended March 31, 2018 compared to $36.5 million for the three months ended March 31, 2017. The revenue increase of $58.4 million from our DTC channel includes incremental revenue generated from our four new Company-owned retail stores and eight new e-commerce sites which opened in fiscal 2018. We also experienced continued strong performances of our existing e-commerce sites and retail stores.
Revenue by geography
CAD $000s
Three months ended
Revenue by geography:
March 31, 2018
 
% of total revenue
 
March 31, 2017
 
% of total revenue
 
$ Change
 
% Change
Canada
49,397

 
39.6
%
 
22,428

 
43.9
%
 
26,969

 
120.2
%
United States
44,694

 
35.8
%
 
19,972

 
39.1
%
 
24,722

 
123.8
%
Rest of World
30,730

 
24.6
%
 
8,696

 
17.0
%
 
22,034

 
253.4
%
 
124,821

 
100.0
%
 
51,096

 
100.0
%
 
73,725

 
144.3
%

-53-




Revenue growth was strong across all our geographic regions for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. Increased DTC revenue was a primary factor in all geographic regions, and Rest of World in particular, with the addition of four new Company-owned retail stores (including one in London) and seven new e-commerce sites (all in Europe and Asia) which opened in fiscal 2018.
Cost of Sales and Gross Profit
Cost of sales for the three months ended March 31, 2018 increased by $23.3 million or 99.8%, compared to the three months ended March 31, 2017. This was primarily driven by higher sales volume. Gross profit and gross margin were $78.3 million and 62.7%, respectively, compared to $27.8 million and 54.4%, respectively, for the three months ended March 31, 2017. The increase in gross profit and gross margin was primarily attributable to revenue growth and favourable changes in channel mix with an increased proportion of revenue from our DTC channel. This was partially offset by increased inventory provisions following the end of our peak selling season, a provision for a quality issue limited to select products, and higher product development costs than in fiscal 2017. In fiscal 2017, we experienced inventory adjustments and a limited number of products that did not meet our quality standards that were removed from sellable inventory that impacted the margin considerably.
 
Three months ended
 
March 31, 2018
 
March 31, 2017
 
 
CAD $000s
By segment
 
% of segment revenue
 
By segment
 
% of segment revenue
 
$
Change
Wholesale
 
 
 
 
 
 
 
 
 
Revenue
29,990

 
100.0
%
 
14,631

 
100.0
%
 
15,359

Cost of sales
19,784

 
66.0
%
 
14,487

 
99.0
%
 
5,297

Gross profit
10,206

 
34.0
%
 
144

 
1.0
%
 
10,062

 
 
 
 
 
 
 
 
 
 
DTC
 
 
 
 
 
 
 
 
 
Revenue
94,831

 
100.0
%
 
36,465

 
100.0
%
 
58,366

Cost of sales
26,780

 
28.2
%
 
8,819

 
24.2
%
 
17,961

Gross profit
68,051

 
71.8
%
 
27,646

 
75.8
%
 
40,405

 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Revenue
124,821

 
100.0
%
 
51,096

 
100.0
%
 
73,725

Cost of sales
46,564

 
37.3
%
 
23,306

 
45.6
%
 
23,258

Gross profit
78,257

 
62.7
%
 
27,790

 
54.4
%
 
50,467

Wholesale
Cost of sales in our wholesale channel was $19.8 million for the three months ended March 31, 2018 compared to $14.5 million for the three months ended March 31, 2017. Gross profit was $10.2 million (34.0% of segment revenue) for the three months ended March 31, 2018 compared to $0.1 million (1.0% of segment revenue) for the three months ended March 31, 2017. Gross margin in the fourth quarter is generally impacted negatively by a seasonal shift in product mix to lower margin products. It was further impacted by higher inventory provisions and the product quality issue

-54-




described above. The gross margin in fiscal 2017 was also reduced by an increase in cost of sales attributable to the segment’s share of raw material cost adjustments, described above, of $3.2 million.
DTC
Cost of sales in our DTC channel for the three months ended March 31, 2018 was $26.8 million compared to $8.8 million for the three months ended March 31, 2017. Gross profit was $68.1 million (71.8% of segment revenue) for the three months ended March 31, 2018 compared to $27.6 million (75.8% of segment revenue) for the three months ended March 31, 2017. The increase in DTC channel gross profit of $40.4 million includes incremental gross profit generated from our four new Company-owned retail stores and additional eight e-commerce sites which opened in fiscal 2018. We experienced continued strong performances of our existing e-commerce sites and retail stores. Segment gross margin was reduced in fiscal 2018 by the increase in cost of sales attributable to the segment’s share of inventory adjustments and a seasonal shift to lower margin products.
SG&A Expenses
SG&A expenses for the three months ended March 31, 2018 were $60.9 million compared to $54.7 million for the three months ended March 31, 2017. SG&A expenses in fiscal 2017 included expenses that did not recur in fiscal 2018, including an $9.6 million fee related to the termination of the Management Agreement with Bain Capital (as defined below - see “Related Party Transactions”), $4.4 million of transaction costs related to the IPO, and $3.4 million of share-based compensation expense. SG&A expenses in fiscal 2017 before these items amounted to $37.3 million; the increase in SG&A expenses, excluding these amounts in 2017, was $23.6 million, or 63.3%. The increase is the result of higher retail store operating costs, headcount and compensation costs, professional fees, primarily related to public company compliance and marketing and administration costs.
 
Three months ended
 
March 31, 2018
 
March 31, 2017
 
 
CAD $000s
By segment
 
% of segment revenue
 
By segment
 
% of segment revenue
 
$
Change
Segment:
 
 
 
 
 
 
 
 
 
Wholesale
8,125

 
27.1
%
 
6,749

 
46.1
%
 
1,376

DTC
18,670

 
19.7
%
 
9,656

 
26.5
%
 
9,014

Unallocated corporate expenses
34,147

 
 
 
38,290

 
 
 
(4,143
)
Total SG&A expenses
60,942

 
48.8
%
 
54,695

 
107.0
%
 
6,247

Wholesale
SG&A expenses in our wholesale channel for the three months ended March 31, 2018 were $8.1 million (27.1% of segment revenue), compared to $6.7 million (or 46.1% of segment revenue) for the three months ended March 31, 2017. Wholesale sales for the fourth quarter increased by 105.0% year-over-year, with the result that SG&A expenses represent a lower percentage of sales in fiscal 2018. While some SG&A expenses vary with revenue, certain costs in our wholesale business are fixed and represent a higher proportion of wholesale revenue in our off-peak fourth quarter.

-55-




DTC
SG&A expenses in our DTC channel for the three months ended March 31, 2018 were $18.7 million (19.7% of segment revenue), compared to $9.7 million (26.5% of segment revenue) for the three months ended March 31, 2017. The $9.0 million increase in SG&A expenses is primarily attributable to higher operating costs of the expansion of our DTC channel and specific operating costs, primarily for premises costs and staff associated with the four new retail stores, offset by store pre-opening costs in fiscal 2017 for 2018 stores. We did not incur any pre-opening costs in the fourth quarter for stores opening in fiscal 2019.
Unallocated Corporate Expense
Unallocated corporate expenses for the three months ended March 31, 2018 were $34.1 million compared to $38.3 million for the three months ended March 31, 2017. The decrease in unallocated corporate expenses of $4.1 million is primarily a result of the $17.4 million of costs incurred in the fourth quarter of fiscal 2017 which did not recur in fiscal 2018, as described above, offset by increases, in headcount and related compensation costs, professional fees, primarily related to public company compliance costs, and marketing costs.
Operating Income (Loss) and Margin
Total operating income for the three months ended March 31, 2018 was $14.8 million compared to an operating loss of $28.6 million for the three months ended March 31, 2017, an increase of $43.4 million. The increase is driven by increased revenue, favourable channel mix with the increasing proportion of DTC revenue, and certain SG&A expenses in fiscal 2017 that did not recur in the current year, as described above.
 
Three months ended
 
 
 
March 31, 2018
 
March 31, 2017
 
 
CAD $000s
Operating income (loss)
Operating Margin
 
Operating income (loss)
Operating Margin
 
$
Change
Segment:
 
 
 
 
 
 
 
Wholesale
2,081

6.9
%
 
(6,605
)
(45.1
)%
 
8,686

DTC
49,381

52.1
%
 
17,990

49.3
 %
 
31,391

 
51,462

 
 
11,385

 
 
40,077

Unallocated corporate expenses
34,147

 
 
38,290

 
 
(4,143
)
Unallocated depreciation and amortization expense
2,488

 
 
1,700

 
 
788

Total operating income (loss)
14,827

11.9
%
 
(28,605
)
(56.0
)%
 
43,432

Wholesale
Wholesale segment operating income for the three months ended March 31, 2018 was $2.1 million (6.9% of segment revenue) compared to a loss of $6.6 million (45.1% of segment revenue) for the three months ended March 31, 2017. The $8.7 million increase in segment operating income and increase in operating margin are primarily attributable to higher revenue and gross profit for the reasons described above.

-56-




DTC
DTC segment operating income for the three months ended March 31, 2018 was $49.4 million (52.1% of segment revenue) compared to $18.0 million (49.3% of segment revenue) for the three months ended March 31, 2017. The $31.4 million increase is primarily attributable to incremental revenue and gross profit contribution from four new retail stores and eight new e-commerce sites which opened in fiscal 2018, as well as continued strong performance from existing e-commerce sites and retail stores.
Net Interest and Other Finance Costs
Net interest and finance costs for the three months ended March 31, 2018 was $2.8 million, compared with $1.3 million for the three months ended March 31, 2017, an increase of $1.5 million in the fourth quarter of fiscal 2018. Interest expense on long-term debt was lower by $1.3 million owing to lower average balances on the Revolving Facility and the Term Loan Facility, and the reduced interest rate margin on the Term Loan Facility from 5% to 4% as a result of the repayment of $65.0 million of the outstanding balance on the Term Loan Facility in fiscal 2017, using proceeds from the IPO. As a result of the partial repayment of the Term Loan Facility in the fourth quarter of 2017, $3.0 million of unamortized costs were written off, offset by a gain of $5.9 million to recognize the change in fair value of the loan balance from the 1% reduction in the effective interest rate for the remaining term of the loan.
Income Taxes
Income tax expense for the three months ended March 31, 2018 was $3.9 million compared to a $6.5 million recovery for the three months ended March 31, 2017. For the three months ended March 31, 2018, the effective tax rate and statutory tax rate were 32.7% and 25.4%, respectively, compared to 21.8% and 25.3%, respectively, for the three months ended March 31, 2017. The increase in the effective tax rate for the three months ended March 31, 2018 relates primarily to the decrease in non-taxable unrealized gains on foreign exchange translation.
Net Income (Loss)
Net income for the three months ended March 31, 2018 was $8.1 million compared to a $23.4 million net loss for the three months ended March 31, 2017. The increase in net income of $31.5 million was driven primarily by the increase in revenue and the other factors described above.

-57-




Fiscal Year Ended March 31, 2018 Compared to Fiscal Year Ended March 31, 2017
The following table summarizes results of operations and expresses the percentage relationship to revenues of certain financial statement captions. All percentages shown in the table below and the discussion that follows have been calculated using rounded numbers.
CAD $000s
(except per share data)
Year ended
Statement of Operations Data:
March 31, 2018
 
March 31, 2017
 
$ Change
Revenue
591,181

 
403,777

 
187,404

Cost of sales
243,569

 
191,709

 
51,860

Gross profit
347,612

 
212,068

 
135,544

Gross margin
58.8
%
 
52.5
%
 
 
Selling, general and administrative expenses
200,110

 
164,965

 
35,145

SG&A expenses as % of revenue
33.8
%
 
40.9
%
 
 
Depreciation and amortization
9,374

 
6,601

 
2,773

Operating income
138,128

 
40,502

 
97,626

Operating income as % of revenue
23.4
%
 
10.0
%
 
 
Net interest and other finance costs
12,888

 
9,962

 
2,926

Income before income tax
125,240

 
30,540

 
94,700

Income tax expense
29,185

 
8,900

 
20,285

Effective tax rate
23.3
%
 
29.1
%
 
 
Net income
96,055

 
21,640

 
74,415

Other comprehensive loss
(1,822
)
 
(610
)
 
(1,212
)
Total comprehensive income
94,233

 
21,030

 
73,203

Earnings per share
 
 
 
 
 
Basic
$
0.90

 
$
0.22

 
$
0.68

Diluted
$
0.86

 
$
0.21

 
$
0.65

Weighted average number of shares outstanding
 
 
 
 
 
Basic
107,250,039

 
100,262,026

 
 
Diluted
111,519,238

 
102,023,196

 
 
Other data: (1)
 
 
 
 
 
EBITDA
152,347

 
48,914

 
103,433

Adjusted EBITDA
149,173

 
81,010

 
68,163

Adjusted EBITDA margin
25.2
%
 
20.1
%
 
5.1
%
Adjusted net income
94,107

 
44,147

 
49,960

Adjusted net income per share
$
0.88

 
$
0.44

 
$
0.44

Adjusted net income per diluted share
$
0.84

 
$
0.43

 
$
0.41

(1) 
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted net income per share and per diluted share are non-IFRS measures. See “Non-IFRS Financial Measures” for a description of these measures and a reconciliation to the nearest IFRS measure.

-58-




Revenue
Revenue for the fiscal year ended March 31, 2018 was $591.2 million compared to $403.8 million for the fiscal year ended March 31, 2017. The increase of $187.4 million, or 46.4%, was driven by growth in all our sales channels and across all geographic regions, despite an unfavourable foreign exchange impact of approximately $5.2 million. On a constant currency(1) basis, revenue increased by 47.7% for the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017. Revenue generated from our DTC channel represented 43.1% of total revenue for the fiscal year ended March 31, 2018 compared to 28.5% for the fiscal year ended March 31, 2017.
 
Year ended
 
$ Change
 
Foreign Exchange Impact
 
$ Change
 
% Change
CAD $000s
March 31, 2018
 
March 31, 2017
 
As reported
 
 
Constant Currency
 
As reported
 
Constant Currency
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
336,179

 
288,540

 
47,639

 
(2,887
)
 
50,526

 
16.5
%
 
17.5
%
DTC
255,002

 
115,237

 
139,765

 
(2,272
)
 
142,037

 
121.3
%
 
123.3
%
Total revenue
591,181

 
403,777

 
187,404

 
(5,159
)
 
192,563

 
46.4
%
 
47.7
%
(1) 
Constant currency revenue is a non-IFRS financial measure. See “Non-IFRS Financial Measures” for a description of these measures.
Wholesale
Revenue from our wholesale channel was $336.2 million for the fiscal year ended March 31, 2018 compared to $288.5 million for the fiscal year ended March 31, 2017. The increase of $47.6 million in revenue from our wholesale channel reflects growth in customer orders from existing accounts year-over-year, supported by higher inventory availability through production execution, which permitted us to respond to customer re-orders.
DTC
Revenue from our DTC channel was $255.0 million for the fiscal year ended March 31, 2018 compared to $115.2 million for the fiscal year ended March 31, 2017. The increase of $139.8 million in revenue from our DTC channel was driven by the continued strong performances of our existing retail and e-commerce sites, as well as a full year of operations for our Toronto and New York City retail stores, and the incremental revenue from our four new Company-owned retail stores and eight e-commerce sites which opened in fiscal 2018.
Revenue by geography
CAD $000s
Year ended
Revenue by geography:
March 31, 2018
 
% of total revenue
 
March 31, 2017
 
% of total revenue
 
$ Change
 
% Change
Canada
228,752

 
38.7
%
 
155,103

 
38.4
%
 
73,649

 
47.5
%
United States
184,245

 
31.2
%
 
131,891

 
32.7
%
 
52,354

 
39.7
%
Rest of World
178,184

 
30.1
%
 
116,783

 
28.9
%
 
61,401

 
52.6
%
 
591,181

 
100.0
%
 
403,777

 
100.0
%
 
187,404

 
46.4
%

-59-




Revenue growth was strong across all our geographic regions for the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017, with growth in both our wholesale and DTC channels as discussed above.
Cost of Sales and Gross Profit
Cost of sales for the fiscal year ended March 31, 2018 increased by $51.9 million, or 27.1%, compared to the fiscal year ended March 31, 2017. This was driven primarily by higher sales volume. Gross profit and gross margin for the fiscal year ended March 31, 2018 were $347.6 million and 58.8%, respectively, compared to $212.1 million and 52.5%, respectively, for the fiscal year ended March 31, 2017. The increase in gross profit and expanded gross margin in fiscal 2018 were primarily attributable to favourable changes in channel mix, with a higher proportion of revenue from our DTC channel as compared to fiscal 2017, partially offset by higher inventory adjustments.
 
Year ended
 
March 31, 2018
 
March 31, 2017
 
 
CAD $000s
Reported
 
% of segment revenue
 
Reported
 
% of segment revenue
 
$
Change
Wholesale
 
 
 
 
 
 
 
 
 
Revenue
336,179

 
100.0
%
 
288,540

 
100.0
%
 
47,639

Cost of sales
178,367

 
53.1
%
 
163,459

 
56.7
%
 
14,908

Gross profit
157,812

 
46.9
%
 
125,081

 
43.3
%
 
32,731

 
 
 
 
 
 
 
 
 
 
DTC
 
 
 
 
 
 
 
 
 
Revenue
255,002

 
100.0
%
 
115,237

 
100.0
%
 
139,765

Cost of sales
65,202

 
25.6
%
 
28,250

 
24.5
%
 
36,952

Gross profit
189,800

 
74.4
%
 
86,987

 
75.5
%
 
102,813

 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Revenue
591,181

 
100.0
%
 
403,777

 
100.0
%
 
187,404

Cost of sales
243,569

 
41.2
%
 
191,709

 
47.5
%
 
51,860

Gross profit
347,612

 
58.8
%
 
212,068

 
52.5
%
 
135,544

Wholesale
Cost of sales in our wholesale channel was $178.4 million for the fiscal year ended March 31, 2018 compared to $163.5 million for the fiscal year ended March 31, 2017, an increase of $14.9 million. Gross profit from our wholesale channel was $157.8 million (46.9% of segment revenue) for the fiscal year ended March 31, 2018 compared to $125.1 million (43.3% of segment revenue) for the fiscal year ended March 31, 2017. The $32.7 million increase in gross profit was primarily attributable to demand growth in customer orders, including re-orders. In addition, both gross profit and gross margin increased due to a greater proportion of wholesale revenue from higher margin jackets within our Fall/Winter collection and lower material costs, partially offset by higher inventory provisions in fiscal 2018.

-60-




DTC
Cost of sales in our DTC channel was $65.2 million for the fiscal year ended March 31, 2018 compared to $28.3 million for the fiscal year ended March 31, 2017, an increase of $37.0 million. Gross profit was $189.8 million (74.4% of segment revenue) for the fiscal year ended March 31, 2018 compared with $87.0 million (75.5% of segment revenue) for the fiscal year ended March 31, 2017. The increase in DTC channel gross profit was attributable to the continued strong performances of our existing retail stores and e-commerce sites, as well as the incremental gross profit generated from our four new Company-owned retail stores and additional eight e-commerce sites which opened in fiscal 2018. Gross margin decreased because of a higher proportion of sales in the non-peak season of lower margin products.
SG&A Expenses
SG&A expenses for the fiscal year ended March 31, 2018 were $200.1 million compared to $165.0 million for the fiscal year ended March 31, 2017. SG&A expenses in fiscal 2017 included expenses that did not recur in fiscal 2018, including a $9.6 million fee related to the termination of the Management Agreement, and $10.0 million of transaction costs related to the IPO. SG&A expenses in fiscal 2017 before these items amounted to $145.4 million; the increase in SG&A expenses, excluding these amounts in 2017, was $54.8 million, or 37.7%. The increase is the result of higher retail stores operating costs, headcount and compensation costs, professional fees, primarily related to public company compliance and marketing costs, partially offset by higher foreign exchange gains of $9.3 million in fiscal 2018, as well as lower share-based compensation expense.
 
Year ended
 
March 31, 2018
 
March 31, 2017