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As confidentially submitted to the Securities and Exchange Commission on December 1, 2016

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CANADA GOOSE HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

 

British Columbia		2300		N/A
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

250 Bowie Avenue

Toronto, Ontario, Canada, M6E 4Y2

(416) 780-9850

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

 

 

David M. Forrest

Vice President, Legal

250 Bowie Ave

Toronto, Ontario, Canada M6E 4Y2

(416) 780-9850

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

 

 

Copies to:

 

Thomas Holden Ropes & Gray LLP 3 Embarcadero Center San Francisco, California 94111-4006 (415) 315-6300		Robert Carelli Stikeman Elliott LLP 1155 Blvd René-Lévesque West Montreal, Quebec, Canada H3B 3V2 (514) 397-3000		Marc D. Jaffe Ian D. Schuman John Chory Latham & Watkins LLP 885 Third Avenue New York, NY 10022-4834 (212) 906-1200		Desmond Lee Osler, Hoskin & Harcourt LLP 1 First Canadian Place Toronto, Ontario, Canada M5X 1B8 (416) 362-2111

 

 

Approximate date of commencement of proposed sale to public:

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

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

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

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

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

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registered		Proposed maximum aggregate offering price (1)(2)		Amount of registration fee (1)
Common Shares, no par value		US$		US$

(1)	Exchange rate calculated based on the noon buying rate of US$1.00 = C$         certified for customs purposes by the U.S. Federal Reserve Bank of New York on             .

(2)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

(3)	Includes common shares that may be sold upon exercise of the underwriters’ option to purchase additional common shares. See “Underwriting.”

 

 

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

 

 

 

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

 

Canada Goose Holdings Inc.

Common Shares

 

 

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

No public market currently exists for our common shares. We intend to apply for listing of our common shares on                 in the United States under the symbol “                 ,” and on the Toronto Stock Exchange under the symbol “             .”

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

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

 

 

Investing in our common shares involves risk. See “Risk Factors” beginning on page 14.

 

		Per share				Total
Initial public offering price		C$				C$
Underwriting discounts and commissions (1)		C$				C$
Proceeds to us, before expenses		C$				C$
Proceeds to the selling shareholders, before expenses		C$				C$

 

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

To the extent that the underwriters sell more than              common shares, the underwriters have the option to purchase up to an aggregate of              additional common shares from the selling shareholders at the initial public offering price, less the underwriting discounts and commissions, for 30 days after the date of this prospectus.

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

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

 

 

 

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

 

BofA Merrill Lynch		Morgan Stanley		Barclays		BMO		TD		Wells Fargo Securities

Prospectus dated                     , 2017

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HERITAGE
A global outerwear icon 60 years in the making.

 

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CRAFTSMANSHIP
Designed with purpose. Uncompromised quality.

 

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FUNCTION
Field-tested in the coldest places on Earth.

 

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TIMELESS
Superior function is always in style.

 

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ADVENTURE
Inspiring greatness in every season.

 

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To our Shareholders,

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

I believe Canada Goose is a brand like no other.

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

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

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

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

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

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

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

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

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

Dani Reiss, C.M.

President & CEO

 

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

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		Page
Prospectus Summary			1
The Offering			8
Summary Historical Consolidated Financial and Other Data			10
Risk Factors			14
Exchange Rate Information			35
Use of Proceeds			36
Dividend Policy			37
Recapitalization			38
Capitalization			39
Dilution			40
Selected Historical Consolidated Financial Data			42
Management’s Discussion and Analysis of Financial Condition and Results of Operations			44
Business			65
Management			78
Executive Compensation			88
Certain Relationships and Related Party Transactions			98
Principal and Selling Shareholders			100
Description of Indebtedness			102
Description of Share Capital			105
Comparison of Shareholder Rights			113
Shares Eligible for Future Sale			127
Material United States Federal Income Tax Considerations for U.S. Holders			129
Canadian Tax Implications For Non-Canadian Holders			134
Underwriting			136
Legal Matters			143
Experts			143
Enforcement of Civil Liabilities			143
Other Expenses of Issuance and Distribution			144
Where You Can Find More Information			144
Index to Consolidated Financial Statements and Financial Statement Schedules			F-1

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

Industry and Market Data

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

 

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

Trademarks and Service Marks

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

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

Basis of Presentation

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

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

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

 

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

 

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Risk Factors

This offering and investing in our common shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common shares. If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common shares could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Please also see “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to our Business

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

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

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

A key element of our growth strategy is expansion of our product offerings into new product categories. We may be unsuccessful in designing products that meet our customers’ expectations for our brand or that are attractive to new customers. If we are unable to anticipate customer preferences or industry changes, or if we are unable to modify our products on a timely basis or expand effectively into new product categories, we may lose customers. As of September 30, 2016, our brand is sold in 36 countries through nearly 2,500 wholesale doors. As we expand into new geographic markets, consumers in these new markets may be less compelled by our brand image and may not be willing to pay a higher price to purchase our premium functional products as compared to traditional outerwear. Our operating results would also suffer if our investments and innovations do not anticipate the needs of our customers, are not appropriately timed with market opportunities or are not effectively brought to market.

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

If our operations continue to grow, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development, manufacturing and distribution functions, to upgrade our management information systems and other processes, and to obtain more space for our expanding administrative support and other personnel. Our continued growth could increase the strain on our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of employees and manufacturing capacity to produce our products, and delays in production and shipments. These difficulties may result in the erosion of our brand image, divert the attention of management and key employees and impact financial and operational results.

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

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

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

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

Our business is seasonal and, historically, we have realized a higher portion 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. In addition, any factors that harm our second and third fiscal quarter operating results, including disruptions in our supply chain, unseasonably warm weather or unfavorable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscal year.

 

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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.

We have a material amount of indebtedness. As of September 30, 2016, we had $148.4 million of borrowings outstanding under our Revolving Facility, and $51.6 million of unused commitments under our Revolving Facility. Upon the completion of this offering, after giving effect to the Recapitalization and use of proceeds described in this prospectus, we expect to have total indebtedness of $             million. Our debt could have important consequences, including:

 

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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;

 

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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

 

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

The credit agreement governing our Revolving Facility contains 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. We expect that the agreements governing any new senior secured credit facilities will contain similar restrictive covenants and, with respect to any new revolving credit facility, require us to maintain specified financial ratios, subject to certain conditions.

Although the credit agreement governing our Revolving Facility contains 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 plan to grow our business by expanding our product offerings. The principal risks to our ability to successfully carry out our plans to expand our product offering include:

 

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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;

 

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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

 

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

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

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

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

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

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

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

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

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

As of September 30, 2016, less than 25% of our employees are members of labour unions, and additional members of our workforce may become represented by unions in the future. The exposure to unionized labour in our workforce nonetheless presents an increased risk of strikes and other labour disputes, and our ability to alter labour costs will be subject to collective bargaining, which could adversely affect our results of operations. In addition, potential labour disputes at independent factories where our goods are produced, shipping ports, or transportation carriers create risks for our business, particularly if a dispute results in work slowdowns, lockouts,

 

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strikes or other disruptions during our peak manufacturing, shipping and selling seasons. Any potential labour dispute, either in our own operations or in those of third parties, on whom we rely, could materially affect our costs, decrease our sales, harm our reputation or otherwise negatively affect our sales, profitability or financial condition.

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

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

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

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

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

We also have key relationships with national retail partners. For fiscal 2016, our largest Canadian wholesale customer accounted for 17% of our wholesale revenue in Canada, and our largest U.S. wholesale customer accounted for 18% of our wholesale revenue in the United States. If we lose any of our key retail partners, or if any key retail partner reduces their purchases of our existing or new products, or their number of stores or operations or promotes products of our competitors over ours, or suffers financial difficulty or insolvency, our sales would be harmed. Our sales depend, in part, on retailer partners effectively displaying our products, including providing attractive space in their stores, including shop-in-shops, and training their sales personnel to sell our products. If our retail partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower revenue and gross margins, which would harm our profitability and financial condition.

The majority of our sales are to retail partners.

The majority of our sales are made to retail partners who may decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our retail partners, and orders received from our retail partners are cancellable. 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

 

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customer acceptance of new products or product expansions; (c) unwillingness of our retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain shelf space from our retail partners; and (e) new, well-received product introductions by competitors.

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

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

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

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

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

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

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

 

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information that we process in connection with the purchase of our products, resulting in increased compliance costs.

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

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

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

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

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

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

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

For our DTC sales, as well as for sales to certain retail partners, we accept a variety of payment methods, including credit cards, debit cards and electronic funds transfers. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard, or PCI-DSS. These laws and obligations may require us to implement enhanced authentication and payment processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could significantly harm our brand, reputation, business, and results of operations.

 

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

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

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

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

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

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

 

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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 common shares.

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

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

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

Our future growth depends in part on our expansion efforts outside of North America. We have limited experience with regulatory environments and market practices outside of this region, and we may not be able to penetrate or successfully operate in any new market, as a result of unfamiliar regulation or other unexpected barriers to entry. In connection with our expansion efforts we may encounter obstacles, including cultural and linguistic differences, differences in regulatory environments, economic or governmental instability, labour practices and market practices, difficulties in keeping abreast of market, business and technical developments, and foreign customers’ tastes and preferences. We may also encounter difficulty expanding into new international markets because of limited brand recognition leading to delayed acceptance of our outerwear by customers in these new international markets. Our failure to develop our business in new international markets or experiencing disappointing growth outside of existing markets could harm our business and results of operations.

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

Our business requires compliance with many laws and regulations, including labour and employment, sales and other taxes, customs, and consumer protection laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse facilities. Failure to comply with these laws and regulations could subject us to lawsuits and other proceedings, and could also lead

 

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to damage awards, fines and penalties. We may become involved in a number of legal proceedings and audits, including government and agency investigations, and consumer, employment, tort and other litigation. The outcome of some of these legal proceedings, audits, and other contingencies could require us to take, or refrain from taking, actions that could harm our operations or require us to pay substantial amounts of money, harming our financial condition. Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, harming our financial condition. There can be no assurance that any pending or future legal or regulatory proceedings and audits will not harm our business, financial condition and results of operations.

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

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

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

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

We will incur significant legal, accounting, insurance and other expenses as a result of being a public company. The rules implemented by the Securities and Exchange Commission, or SEC, and the securities regulators in each of the provinces and territories of Canada and by the Toronto Stock Exchange, or TSX and             have required changes in corporate governance practices of public companies. We expect that compliance with these laws, rules and regulations will substantially increase our expenses, including our legal and accounting costs, and make some activities more time-consuming and costly, and these new obligations will require attention from our senior management and could divert their attention away from the day-to-day management of our business. We also expect these laws, rules and regulations to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as officers. As a result of the foregoing, we expect a substantial increase in legal, accounting, insurance and certain other expenses in the future, which will negatively impact our financial performance and could cause our results of operations and financial condition to suffer. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common shares, fines, sanctions and other regulatory action and potentially civil litigation.

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

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. As a private company, we have not historically prepared public company financial statements. In connection with the audit of our consolidated financial statements, we have identified material

 

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

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

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

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

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

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

 

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Delisting of our common shares on any exchange would reduce the liquidity of the market for our common shares, which would reduce the price of our common 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 effected, 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 common shares.

Risks Related to This Offering and Our Common Shares

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

We are currently controlled, and after this offering is completed will continue to be controlled, by Bain Capital. Upon completion of this offering, Bain Capital will beneficially own     % of our outstanding common shares (or     % if the underwriters exercise in full their option to purchase additional common shares). In addition, one or more entities indirectly controlled by our Chief Executive Officer will beneficially own     % of our outstanding common shares (or     % if the underwriters exercise in full their option to purchase additional common 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%, Bain Capital will continue to be able to strongly influence or effectively control our decisions.

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

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

 

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

Because Bain Capital will continue to control a majority of the voting power of our outstanding common

shares after completion of this offering, we will be a controlled company within the meaning of the corporate governance standards of the              . 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 common shares:

 

•

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

 

•

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

 

•

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

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

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

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

As a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual meetings will be governed by Canadian requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our common shares. Furthermore, as a foreign private issuer, we may take advantage of certain provisions in the              Listing Rules that allow us to follow Canadian law for certain governance matters.

 

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

The initial public offering price of our common shares is substantially higher than the net tangible book value per common share. Therefore, if you purchase our common shares in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering. Based on the initial public offering price of $        per share, the mid-point of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $        per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the initial public offering price. In addition, purchasers of common shares in this offering will have contributed     % of the aggregate price paid by all purchasers of our common shares but will own only approximately     % of our common shares outstanding after this offering.

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

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

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

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

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

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

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our common shares to fluctuate substantially. Fluctuations in our quarterly operating results could limit or prevent investors from readily selling their common shares and may otherwise negatively affect the market price and liquidity of our common shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

 

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

Sales of a substantial number of our common shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of common shares intend to sell common shares, could reduce the market price of our common shares. After this offering, we will have outstanding              common shares based on the number of common shares outstanding as of         . This includes              common shares that we are selling in this offering, which may be resold in the public market immediately, and assumes no exercises of outstanding options.

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

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

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

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

Certain provisions of our articles, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors may be willing to pay for our common shares. For instance, our articles, to be effective upon the completion of this offering, contain provisions that establish certain advance notice procedures for nomination of candidates for election as directors at shareholders’ meetings. A non-Canadian must file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business” within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in us. Otherwise, there are no limitations either under the laws of Canada or British Columbia, or in our articles on the rights of non-Canadians to hold or vote our common shares. Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to our shareholders. See “Description of Share Capital—Certain Important Provisions of Our Articles and the BCBCA.”

 

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Because we are a corporation incorporated in British Columbia and the 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.

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.

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

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

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

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

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

 

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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 common shares adversely, the price and trading volume of our common shares could decline.

The trading market for our common 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 common shares adversely, or provide more favorable relative recommendations about our competitors, the price of our common 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 common shares to decline.

 

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Cautionary Note Regarding Forward-Looking Statements

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

 

•

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

 

•

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

 

•

expectations for seasonal trends; and

 

•

the proposed use of proceeds from this offering.

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

 

•

our ability to implement our growth strategies;

 

•

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

 

•

our ability to keep pace with changing consumer preferences;

 

•

our ability to protect our intellectual property; and

 

•

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

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this prospectus beginning on page 14, which include, but are not limited to, the following risks:

 

•

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

 

•

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

 

•

we may not be able to satisfy changing consumer preferences;

 

•

an economic downturn may affect discretionary consumer spending;

 

•

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

 

•

we may not be able to manage our growth effectively;

 

•

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

 

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•

our indebtedness may adversely affect our financial condition;

 

•

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

 

•

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

 

•

the success of our marketing programs;

 

•

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

 

•

fluctuations in raw materials costs or currency exchange rates.

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

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

 

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Exchange Rate Information

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

On October 31, 2016, the noon buying rate was US$1.00 = $1.3403.

 

Year Ended		Period End				Period Average Rate				High Rate				Low Rate
March 31, 2014		$	1.1053			$	1.0580			$	1.1251			$	1.0023
March 31, 2015		$	1.2681			$	1.1471			$	1.2803			$	1.0633
March 31, 2016		$	1.2969			$	1.3128			$	1.4592			$	1.1950
Last Six Months
May 2016		$	1.3097			$	1.2945			$	1.3155			$	1.2544
June 2016		$	1.3010			$	1.2894			$	1.3089			$	1.2694
July 2016		$	1.3040			$	1.3052			$	1.3224			$	1.2897
August 2016		$	1.3122			$	1.2998			$	1.3179			$	1.2777
September 2016		$	1.3115			$	1.3108			$	1.3247			$	1.2843
October 2016		$	1.3403			$	1.3251			$	1.3403			$	1.3105

 

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Use of Proceeds

We estimate that the net proceeds to us from our issuance and sale of          common shares in this offering will be approximately $         million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. This estimate assumes an initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus.

We will not receive any proceeds from the sale of shares by the selling shareholders. After deducting underwriting discounts and commissions, the selling shareholders will receive approximately $         million of net proceeds from this offering (or approximately $         million if the underwriters exercise their option to purchase additional common shares in full).

We intend to use the net proceeds from this offering to repay a portion of our outstanding indebtedness, including indebtedness incurred as part of the Recapitalization, and to use any remaining net proceeds for working capital and for general corporate purposes. See “Description of Indebtedness” and “Recapitalization.”

A $1.00 increase (decrease) in the assumed initial public offering price of $         per common share, the midpoint of the price range set forth on the cover of this prospectus would increase (decrease) the net proceeds to us from this offering by $         million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

 

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Dividend Policy

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

 

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Recapitalization

Prior to the completion of this offering we expect to undertake a series of transactions, which we collectively refer to as the “Recapitalization.” These include amending our articles to create new classes of common shares and preferred shares and amending the provisions of certain of our existing classes of preferred shares to remove their voting rights. We also expect to enter into a credit agreement providing for senior secured term loans that are secured on a split collateral basis alongside our Revolving Facility, with an aggregate principal amount of up to $217.0 million. We expect to use these proceeds of the senior secured term loans to (i) repay our existing Subordinated Promissory Notes, (ii) repurchase certain of our outstanding shares, (iii) make certain distributions on our outstanding classes of common shares by way of return of capital and (iv) make a non-interest bearing loan to DTR LLC, an entity indirectly controlled by our Chief Executive Officer, as evidenced by the DTR Promissory Note, which note will be extinguished by its settlement against the redemption price for the redemption of the preferred shares to be issued to DTR LLC, prior to the completion of this offering. As part of the Recapitalization, we will also subdivide our existing classes of common shares on the basis of              shares for every share. See “Certain Relationships and Related Party Transactions.” Thereafter, we expect to amend further our articles to, among other things, eliminate all of our outstanding series of preferred shares, leaving us with a single class of common shares, as well as preferred shares issuable in series (none outstanding), as described under “Description of Share Capital.”

 

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Capitalization

The following table sets forth our cash and capitalization at September 30, 2016:

 

•

on an actual basis; and

 

•

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

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

 

		As of September 30, 2016
(in thousands except per share data)		Actual				As Adjusted
Cash (1)		$	10,931			$
Long-term debt, including current portions:
Revolving Facility			146,902
Subordinated Promissory Notes			85,306
Total debt			232,208
Shareholders’ equity:
Class A Common Shares, no par value; unlimited shares authorized, 7 shares issued and outstanding on an actual basis;			3,350
Class B Common Shares, no par value; unlimited shares authorized, 3 shares issued and outstanding on an actual basis;			–
Class A Senior Preferred Shares, no par value; unlimited shares authorized, 53,144,000 shares issued and outstanding on an actual basis;			53,144
Class B Senior Preferred Shares, no par value; unlimited shares authorized, 22,776,000 shares issued and outstanding on an actual basis;			–
Class A Junior Preferred Shares, no par value; unlimited shares authorized, 3,426,892 shares issued and outstanding on an actual basis;			3,727
Class B Junior Preferred Shares, no par value; unlimited shares authorized, 34,164,000 shares issued and outstanding on an actual basis;			–
Contributed surplus			59,239
Retained earnings			31,415
Accumulated other comprehensive loss			(1,099)
Total shareholder’s equity (1)			149,776
Total capitalization		$	392,915			$

 

(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the as adjusted amount of each of cash and total shareholders’ equity by approximately $         million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. A              share increase in the number of common shares offered by us would increase the as adjusted amount of each of cash and total shareholders’ equity by approximately $         million after deducting underwriting discounts and commissions and any estimated offering expenses payable by us. Conversely a          decrease in the number of common shares offered by us would decrease the as adjusted amount of each of cash and total shareholders’ equity by approximately $    million after deducting underwriting discounts and commissions and any estimated offering expenses payable by us.

 

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Dilution

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

As of September 30, 2016, we had a historical net tangible book value of $         million, or $         per common share, based on                  pro forma common shares outstanding as of such date. Dilution is calculated by subtracting net tangible book deficit per common share from the assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

Investors participating in this offering will incur immediate and substantial dilution. Without taking into account any other changes in such net tangible book deficit after September 30, 2016, after giving effect to the sale of common shares in this offering assuming an initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus), less the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of September 30, 2016 would have been approximately $         million, or $         per share. This amount represents an immediate decrease in net tangible book deficit of $         per share to the existing shareholders and immediate dilution of $         per share to investors purchasing our common shares in this offering. The following table illustrates this dilution on a per share basis:

 

$

US$

Assumed initial public offering price per share (1)

$

$

Net tangible book deficit per share as of September 30, 2016, before giving effect to this offering

$

$

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

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

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

 

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

Each $1.00 increase (decrease) in the assumed initial public offering price of $        per share would increase (decrease) the pro forma as adjusted net tangible book deficit per share after giving effect to this offering by approximately $        million, or by $        per share, assuming no change to the number of shares offered by us as set forth on the front cover page of this prospectus and after deducting the estimated underwriting discounts and expenses payable by us.

 

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The following table summarizes, as of September 30, 2016, on the pro forma basis described above, the total number of shares purchased from us, the total consideration paid to us, and the average price per common share paid by purchasers of such shares and by new investors purchasing shares in this offering.

 

Shares purchased

Total consideration

Average price per share

Number

Percent

Amount

Percent

Existing shareholders (1)

New investors

Total

100

%

100

%

 

(1)	Does not give effect to the sale of                  common shares by the selling shareholders in this offering.

If the underwriters were to fully exercise their option to purchase additional common shares from the selling shareholders, the percentage of our common shares held by existing shareholders would be     %, and the percentage of our common shares held by new investors would be     %.

The number of shares to be outstanding after this offering is based on                  common shares outstanding as of                 , 2017 and excludes                  common shares reserved for future issuance under our equity incentive plans as of                 , 2017, of which                  common shares were issuable upon exercise of stock options at a weighted average exercise price of $         per common share.

 

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Selected Historical Consolidated Financial Data

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

We have derived the selected historical consolidated information for the years ended March 31, 2016 and March 31, 2015 and the periods from December 9, 2013 to March 31, 2014 and April 1, 2013 to December 8, 2013 and the selected consolidated financial position information as of March 31, 2015 and 2016 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated statement of operations information for the six-months ended September 30, 2015 and 2016 and the selected consolidated financial position information as of September 30, 2016 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS and are presented in thousands of Canadian dollars except where otherwise indicated. Our historical results are not necessarily indicative of the results that should be expected in any future period.

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

 

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		Successor																								Predecessor
CAD$000s (except per share data)		Six months ended September 30, 2016				Six months ended September 30, 2015				Fiscal Year ended March 31, 2016				Fiscal Year ended March 31, 2015				Period from December 9, 2013 to March 31, 2014								Period from April 1, 2013 to December 8, 2013
Statement of Operations Data:
Revenue			143,630				133,405				290,830				218,414				17,263								134,822
Cost of sales			79,637				70,532				145,206				129,805				14,708								81,613
Gross profit			63,993				62,873				145,624				88,609				2,555								53,209
Selling, general & administrative expenses			48,265				40,918				100,103				59,317				20,494								30,119
Depreciation and amortization			2,936				2,481				4,567				2,623				804								447
Operating income (loss)			12,792				19,474				40,954				26,669				(18,743	)							22,643
Net interest and other finance costs			5,533				3,802				7,996				7,537				1,788								1,815
Income before income tax expense (recovery)			7,259				15,672				32,958				19,132				(20,531	)							20,828
Income tax expense (recovery)			1,277				1,431				6,473				4,707				(5,054	)							5,550
Net income (loss)			5,982				14,241				26,485				14,425				(15,477	)							15,278
Other comprehensive loss			(407	)							(692	)
Total comprehensive income (loss)			5,575				14,241				25,793				14,425				(15,477	)							15,278
Earnings (loss) per share—
Basic			598,191.00				1,424,060.10				2,648,500.00				1,442,500.00				(1,547,700.00	)							157,505.15
Diluted			2.82				7.56				12.08				13.23				(1,547,700.00	)							157,505.15
Weighted average number of shares outstanding—
Basic			10				10				10				10				10								97
Diluted			2,117,514				1,884,747				2,193,277				1,090,404				10								97
Other Data:
EBITDA(1)		$	16,724			$	22,667			$	46,870			$	30,064			$	(17,714	)						$	23,609
Adjusted EBITDA(1)			26,423				27,879				54,846				37,444				(8,165	)							23,727
Adjusted EBITDA Margin(2)			18.4	%			20.9	%			18.9	%			17.1	%			(47.3	)%							17.6	%
Adjusted Net Income(1)			17,248				22,268				35,455				25,459				(4,143	)							15,365

 

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

 

(2)	See note 2 in “Prospectus Summary—Summary Historical Consolidated Financial and Other Data.”

 

		As of September 30, 2016				As of March 31, 2016				As of March 31, 2015
Financial Position Information:
Cash			10,931				7,226				5,918
Total assets			454,991				353,018				274,825
Total liabilities			305,215				210,316				160,392
Shareholders’ equity			149,776				142,702				114,433

 

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

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

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

Overview

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

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

Factors Affecting our Performance

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

 

•

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

 

•

Growth in our DTC Channel. We introduced our DTC channel in fiscal 2014 with the launch of our Canadian e-commerce store and have since established e-commerce stores in the United States, the United Kingdom and France. In the fall of 2016, we opened our first two retail stores in Toronto and in New York City and anticipate opening a select number of additional retail locations where we believe they can operate profitably. In fiscal 2018 we are targeting opening between                  and

 

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e-commerce stores and between                  and                  retail stores in new geographies. As we work toward our long-term target of DTC sales comprising                  to                  of our revenue, we expect to continue recognizing a net positive impact on our gross margin from the increased sales through our DTC channel. Growth in our DTC channel is also expected to reduce the current seasonal concentration of our revenue by allowing us to recognize revenue when customers make purchases instead of when products are shipped to our retail partners. As a result, we expect a relatively higher percentage of our DTC sales to be recognized in our fiscal fourth quarter. Finally, as we expand our DTC channel, including opening additional retail stores, we expect our capital expenditures to continue to represent approximately             % of revenue.

 

•

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

 

•

Seasonality. We experience seasonal fluctuations in our revenue and operating results and we historically have realized a significant portion of our revenue and earnings for the fiscal year during our second and third fiscal quarters. We generated 79.0%, 91.4% and 78.3% of our revenues in the second and third fiscal quarters of fiscal 2016, fiscal 2015 and fiscal 2014, respectively. Working capital requirements typically increase throughout our first and second fiscal quarters as inventory builds to support our peak shipping and selling period which typically occurs from August to November. Cash provided by operating activities is typically highest in our third fiscal quarter due to the significant inflows associated with our peak selling season.

 

•

Foreign Exchange. We sell a significant portion of our products to customers outside of Canada, which exposes us to fluctuations in foreign currency exchange rates. In fiscal 2016, 2015 and 2014, we generated 56.5%, 35.9% and 32.5%, respectively, of our revenue in currencies other than Canadian dollars. Our sales outside of Canada also present an opportunity to strategically price our products to improve our profitability. In addition, the majority of our raw materials are sourced outside of Canada, primarily in U.S. dollars. As the majority of our wholesale revenue is derived from retailer orders made prior to the beginning of the fiscal year, we have a high degree of visibility into our anticipated future cash flows from operations. This extended visibility allows us to enter into hedging contracts with respect to our foreign currency exposure.

Segments

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

Our wholesale segment and DTC segment contributed 88.6% and 11.4% of our revenue, respectively, in fiscal 2016.

Components of Our Results of Operations and Trends Affecting Our Business

Revenue

Revenue in our wholesale channel is comprised of sales to retail partners and distributors of our products. Wholesale revenue from the sale of goods, net of an estimate for sales returns, discounts and allowances, is

 

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recognized when the significant risks and rewards of ownership of the goods have passed to the retail partner or distributor which, depending on the terms of the agreement with the reseller, is either at the time of shipment from our third-party warehouse or upon arrival at the reseller’s facilities.

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

Gross Profit

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

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

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

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

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

General and administrative expenses represent costs incurred in our corporate offices, primarily related to personnel costs, including salaries, bonuses, benefits, share-based compensation and other professional service costs. We have invested considerably in this area to support the growing volume and complexity of our business and anticipate continuing to do so in the future. In addition, in connection with this offering, we expect to incur transaction costs and stock compensation expenses and, following this offering, we anticipate a significant increase in accounting, legal and professional fees associated with being a public company.

Income Taxes

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

 

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Basis of Presentation

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

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

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

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

 

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

 

CAD$000s		Period from April 1, 2013 to December 8, 2013				Period from December 9, 2013 to March 31, 2014				Pro Forma Adjustments				Unaudited pro forma combined year ended March 31, 2014
Revenue			134,822				17,263				—				152,085
Cost of sales			81,613				14,708				(2,906	)(a)			93,415
Gross profit			53,209				2,555				2,906				58,670
Selling, general and administrative expenses			30,119				20,494				(5,529	)(b)(e)			45,086
Depreciation and amortization			447				804				1,151	(c)			2,402
Operating income (loss)			22,643				(18,743	)			7,285				11,183
Net interest and other finance costs			1,815				1,788				3,537	(d)(f)			7,136
Income (loss) before income taxes			20,828				(20,531	)			3,748				4,047
Income tax expense (recovery)			5,550				(5,054	)			528	(g)			1,024
Net income (loss)			15,278				(15,477	)			3,222				3,023

Notes to unaudited pro forma presentation:

 

(a)	Represents fair value step-up of inventory on-hand at the time of Acquisition. The amount sold through in the period from December 9, 2013 through March 31, 2014 has been removed from cost of sales.

(b)

These amounts reflects the transaction costs incurred by the Company as a result of the Acquisition. These include costs that were directly attributable to the transaction, such as legal, due diligence, tax, audit, consulting, and other professional services. These amounts would not have been incurred in the year had the transaction occurred on April 1, 2013 and therefore have been removed from SG&A on a pro forma basis.

(c)	At the time of the Acquisition, a customer list intangible asset in the amount of $8.7 million was recognized with a useful life of four years. Had the Acquisition occurred on April 1, 2013, a full year of amortization would have been recorded.

(d)

As a result of the Acquisition, the revolving debt that existed in the Predecessor entity was replaced. Had the Acquisition occurred on April 1, 2013, this interest would not have been incurred. In connection with the Acquisition, the Company extinguished the existing long-term debt and entered a credit facility for $19.5 million. A pro forma adjustment for a full year of interest on the credit facility has been recorded.

(e)	Bain management fee for the full year as if the transaction would have occurred on April 1, 2013.

(f)	Subordinated debt in the amount of $79.9 million was issued on the date of Acquisition. This adjustment reflects the interest cost associated with the subordinated debt had the transaction occurred on April 1, 2013.

(g)	Income tax expense calculated at the annual effective tax rate of 25.3% of pro forma income before taxes.

 

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Results of Operations

 

		Successor																				Predecessor
CAD$000s		Six months ended September 30, 2016				Six months ended September 30, 2015				Fiscal Year ended March 31, 2016				Fiscal Year ended March 31, 2015				Period from December 9, 2013 to March 31, 2014				Period from April 1, 2013 to December 8, 2013
Revenue			143,630				133,405				290,830				218,414				17,263				134,822
Cost of sales			79,637				70,532				145,206				129,805				14,708				81,613
Gross profit			63,993				63,873				145,624				88,609				2,555				53,209
Selling, general and administrative expenses			48,265				40,918				100,103				59,317				20,494				30,119
Depreciation and amortization			2,936				2,481				4,567				2,623				804				447
Operating income (loss)			12,792				19,474				40,954				26,669				(18,743	)			22,643
Net interest and other finance costs			5,533				3,802				7,996				7,537				1,788				1,815
Income (loss) before income tax (recovery)			7,259				15,672				32,958				19,132				(20,531	)			20,828
Income tax expense (recovery)			1,277				1,431				6,473				4,707				(5,054	)			5,550
Net income (loss)			5,982				14,241				26,485				14,425				(15,477	)			15,278
Other comprehensive loss			(407	)			—				(692	)			—				—				—
Comprehensive income (loss)			5,575				14,241				25,793				14,425				(15,477	)			15,278

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Revenue

Revenue for the three months ended September 30, 2016 increased by $18.2 million, or 16.6%, compared to the three months ended September 30, 2015, which was driven by an increase in revenue in both our wholesale and DTC channels.

Revenue in our wholesale channel increased $14.3 million, or 13.4%, compared to the three months ended September 30, 2015. The increase in revenue in our wholesale channel was driven primarily by sales of new products from our Spring and Fall collections to our retail partners and, to a lesser extent, by price increases of our products in certain geographies.

Revenue in the DTC channel was $6.5 million, an increase of $3.9 million, compared to the three months ended September 30, 2015, reflecting strong performance from both Canadian and U.S. e-commerce sites since launching in August 2014 and September 2015, respectively.

Cost of Sales and Gross Profit

Cost of sales for the three months ended September 30, 2016 increased by $13.2 million, or 23.9%, compared to the three months ended September 30, 2015, while gross profit was $59.3 million, representing a gross margin of 46.4%, compared with $54.3 million for the three months ended September 30, 2015, representing a gross margin of 49.5%. The increase in gross profit was attributable to higher revenue, particularly in the DTC channel, and

 

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lower product costs in Canadian dollars, partially offset by higher raw materials costs sourced in U.S. dollars. The decline in gross margin of 310 basis points was attributable primarily to the timing of inventory reserves taken in fiscal 2017.

Selling, General and Administrative Expenses

SG&A expenses for the three months ended September 30, 2016 increased by $0.3 million, or 1.1%, compared to the three months ended September 30, 2015, which represents 23.6% of revenue for the three months ended September 30, 2016 compared to 27.2% of revenue for the three months ended September 30, 2015. The increase in costs was attributable to an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores.

Net Interest and Other Finance Costs

Finance costs for the three months ended September 30, 2016 increased by $0.4 million, or 19.6%, compared to the three months ended September 30, 2015 primarily as a result of higher borrowings used to finance working capital, offset by a lower interest rate.

Income Taxes

Income tax expense was $5.2 million during the three months ended September 30, 2016, compared to $2.8 million in the three months ended September 30, 2015. The increase reflects a higher expected annual effective tax rate in fiscal 2017.

Net Income

Net income for the three months ended September 30, 2016 was $20.0 million compared with $18.5 million for the three months ended September 30, 2015. The increase of $1.5 million, or 8.4%, was driven by the factors described above.

Six Months Ended September 30, 2016 Compared to Six Months Ended September 30, 2015

Revenue

Revenue for the six months ended September 30, 2016 increased by $10.2 million, or 7.7%, compared to the six months ended September 30, 2015, which was driven by an increase in revenue in both our wholesale and DTC channels.

Revenue in our wholesale channel increased $5.2 million, or 4.0%, compared to the six months ended September 30, 2015. The increase in revenue in our wholesale channel was driven primarily by sales of new products from our Spring and Fall collections to our retail partners and, to a lesser extent, by price increases of our products in certain geographies.

Revenue in the DTC channel increased by $5.0 million, or 176.3%, compared to the six months ended September 30, 2015, reflecting strong performance from both Canadian and U.S. e-commerce since launching in August of 2014 and September of 2015, respectively, including a full six months of activity on our U.S. e-commerce site.

Cost of Sales and Gross Profit

Cost of sales for the six months ended September 30, 2016 increased by $9.1 million, or 12.9%, compared to the six months ended September 30, 2015, while gross profit was $64.0 million, representing a gross margin of

 

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44.6%, compared with $62.9 million for the six months ended September 30, 2015, representing a gross margin of 47.1%. The decrease in gross margin was attributable to the timing of inventory reserves taken in fiscal 2017 and, to a lesser extent, higher raw materials costs from products sourced in U.S. dollars. Combined, these increases more than offset lower Canadian dollar denominated production costs.

Selling, General and Administrative Expenses

SG&A expenses for the six months ended September 30, 2016 increased by $7.3 million over the same period in fiscal 2015, or 18.0%, representing 33.6% of revenue for the six months ended September 30, 2016 compared to 30.7% of revenue for the six months ended September 30, 2015. The increase in costs was attributable to an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores. The increase in SG&A was offset by the realization of gains on foreign exchange forward contracts.

Net Interest and Other Finance Costs

Finance costs for the six months ended September 30, 2016 increased by $1.7 million, or 45.5%, compared to the six months ended September 30, 2015 primarily as a result of higher borrowings used to finance working capital, partially offset by a lower interest rate.

Income Taxes

Income tax expense decreased as a result of lower earnings than were recorded during the period ending September 30, 2016, compared to the prior year period.

Net Income

Net income for the six months ended September 30, 2016 was $6.0 million compared with $14.2 million for the six months ended September 30, 2015. The decrease of $8.3 million, or 58.0%, was primarily the result of the factors described above.

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

Revenue

Revenue for fiscal 2016 increased by $72.4 million, or 33.2%, compared to fiscal 2015, driven by an increase in revenue in our wholesale channel and by growth in our DTC channel. On a constant currency basis, revenue increased 29.5% for fiscal 2016 compared to fiscal 2015.

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

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

Cost of Sales and Gross Profit

Cost of sales for fiscal 2016 increased by $15.4 million, or 11.9%, compared to fiscal 2015, while gross profit was $145.2 million, representing a gross margin of 50.1%, compared with $88.6 million in fiscal 2015,

 

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representing a gross margin of 40.6%. The increase in gross profit was attributable to the growth in e-commerce revenue in our DTC channel as well as overall higher revenue in fiscal 2016. Additionally, gross profit was positively impacted by lower production costs, partially offset by an increase in raw materials costs sourced in U.S. dollars.

Selling, General and Administrative Expenses

SG&A expenses for fiscal 2016 increased by $40.8 million over fiscal 2015, or 68.8%, representing 34.4% of revenue in fiscal 2016 compared to 27.2% of revenue in fiscal 2015. The increase in expenses was attributable to an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores. In addition, we incurred costs associated with terminating third party sales agents which resulted in indemnities and other termination payments. Also included was $6.8 million of expenses relating to consolidating our international operations in Zug, Switzerland, including closing several offices across Europe, relocating personnel and incurring temporary office costs.

Net Interest and Other Finance Costs

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

Income Taxes

Income tax expense increased by $1.8 million, or 37.5%, during fiscal 2016 primarily as a result of increased taxable income and a higher proportion of income in foreign jurisdictions, partially offset by the impact of non-deductible taxable items. The effective tax rate for fiscal 2016 was 19.6% compared with 24.6% in fiscal 2015 as a result of the benefit of a one-time derecognition of a deferred tax liability.

Net Income

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

Comparison of the fiscal year ended March 31, 2015 to the Unaudited Pro Forma Combined Period for the fiscal year ended March 31, 2014

We believe that a discussion of results of operations for the Predecessor 2014 Period and the Successor 2014 Period on a standalone basis is not meaningful as the Acquisition was accounted for as a business combination in accordance with IFRS 3 Business Combinations, and the resulting new basis of accounting is reflected in the Company’s consolidated financial statements for all periods beginning on or after December 9, 2013, and therefore, the two periods are not comparable. Except for the specific pro forma adjustments made to arrive at the Unaudited Pro Forma Combined 2014 Period, the underlying drivers for the change in 2015 as compared to 2014, both actual 2014 results and the Unaudited Pro Forma Combined 2014 Period results, are the same. We believe that the comparison of the fiscal year ended March 31, 2015 to the Unaudited Pro Forma Combined 2014 Period provides for a more meaningful discussion of the 2015 and 2014 results of operations for potential investors and users of the financial statements.

Revenue

Revenue was $218.4 million for fiscal 2015, as compared to $152.1 million for the Unaudited Pro Forma Combined 2014 Period. This represents a 43.6% increase as compared to the Unaudited Pro Forma Combined 2014 Period. The increase in revenue was driven primarily by an increase in product sales to our retail partners and to a lesser extent by price increases on our products in certain geographies. On a constant currency basis, revenue increased by 38.6%.

 

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Cost of Sales and Gross Profit

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

Selling, General and Administrative Expenses

SG&A expenses were $59.3 million for fiscal 2015, compared to $45.1 million for the Unaudited Pro Forma Combined 2014 Period. SG&A expenses increased $14.2 million, or 31.6%, as compared to the Unaudited Pro Forma Combined 2014 Period. As a percentage of revenue, SG&A expenses decreased from 29.6% in the Unaudited Pro Forma Combined 2014 Period to 27.2% in fiscal 2015. The decrease in costs were attributable to transaction-related expenses incurred during the Unaudited Pro Forma Combined 2014 Period, offset by an increase in headcount and brand investment to support new marketing initiatives and entry into new markets, as well as investment in our DTC channel associated with establishing our e-commerce sites and opening our retail stores.

Net Interest and Other Finance Costs

Finance costs increased by $0.4 million or 5.6% as compared to the Unaudited Pro Forma Combined 2014 Period primarily as a result of higher borrowings used to finance transaction expenses relating to the Acquisition.

Income Taxes

Income tax expense increased by $3.7 million in fiscal 2015 compared to the Unaudited Pro Forma Combined 2014 Period as a result of improved operating performance. The effective tax rate for fiscal 2015 was 24.6% compared with 25.3% in the Unaudited Pro Forma Combined 2014 Period as a result of increased taxable income in foreign jurisdictions.

Net Income

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

 

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Non-IFRS Measures

In addition to our results determined in accordance with IFRS, we believe the following non-IFRS measures provide useful information both to management and investors in measuring the financial performance and financial condition of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and they should not be construed as an alternative to other financial measures determined in accordance with IFRS.

 

CAD$000s		Six months ended September 30, 2016				Six months ended September 30, 2015				Year ended March 31, 2016				Year ended March 31, 2015				Period from April 1, 2013 to December 8, 2013				Period from December 9, 2013 to March 31, 2014				Unaudited Pro Forma period ended March 31, 2014
EBITDA			16,724				22,667				46,870				30,064				23,609				(17,714	)			14,329
Adjusted EBITDA			26,423				27,879				54,846				37,444				23,727				(8,165	)			15,562
Adjusted EBITDA Margin			18.4	%			20.9	%			18.9	%			17.1	%			17.6	%			(47.3	%)			10.2	%
Adjusted Net Income			17,248				22,268				35,455				25,459				15,365				(4,143	)			9,161
Constant Currency Revenue			N/A				N/A				282,795				210,791				—				—				—

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

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

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

 

•

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

 

•

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

 

•

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

 

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•

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

 

•

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

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

 

CAD$000s		Six months ended September 30, 2016				Six months ended September 30, 2015				Year ended March 31, 2016				Year ended March 31, 2015				Period from April 1, 2013 to December 8, 2013				Period from December 9, 2013 to March 31, 2014				Unaudited Pro Forma Period ended March 31, 2014
Net income (loss)		$	5,982			$	14,241			$	26,485			$	14,425			$	15,278			$	(15,477	)		$	3,023
Add the impact of:
Income tax expense (recovery)			1,277				1,431				6,473				4,707				5,550				(5,054	)			1,024
Interest expense			5,533				3,803				7,996				7,537				1,815				1,788				7,136
Depreciation and amortization			3,932				3,193				5,916				3,395				966				1,029				3,146
EBITDA			16,724				22,667				46,870				30,064				23,609				(17,714	)			14,329
Add the impact of:
Bain Capital management fees (1)			327				180				1,092				894				—				277				539
Transaction costs (2)			2,734				—				299				—				—				5,791
Purchase accounting adjustments (3)															2,861				—				2,906
Unrealized (gain)/loss on derivatives (4)			4,422				—				(4,422	)			(138	)			(257	)			377				120
International restructuring costs (5)			175				1,986				6,879				1,038				—				—				—
Share-based compensation (6)			1,499				250				500				300				—				—				—
Agent terminations and other (7)			(116	)			2,796				3,628				2,425				375				198				574
Non-cash rent expense (8)			657				—				—				—
Adjusted EBITDA		$	26,423			$	27,879			$	54,846			$	37,444			$	23,727			$	(8,165	)		$	15,562

 

CAD$000s		Six months ended September 30, 2016				Six months ended September 30, 2015				Year ended March 31, 2016				Year ended March 31, 2015				Period from April 1, 2013 to December 8, 2013				Period from December 9, 2013 to March 31, 2014				Unaudited Pro Forma Period ended March 31, 2014 (l)
Net income (loss)		$	5,982			$	14,241			$	26,485			$	14,425			$	15,278			$	(15,477	)		$	3,023
Add the impact of:
Bain Capital management fees (1)			327				180				1,092				894				—				277				539
Transaction costs (2)			2,734				—				299				—				—				5,791				—
Purchase accounting adjustments (3)			—				—				—				2,861				—				2,906				—
Unrealized (gain)/loss on derivatives (4)			4,422				—				(4,422	)			(138	)			(257	)			377				120
International restructuring costs (5)			175				1,986				6,879				1,038				—				—				—
Share-based compensation (6)			1,499				250				500				300				—				—				—
Agent terminations and other (7)			(116	)			2,796				3,628				2,425				375				198				574
Non-cash rent expense (8)			657				—				—				—				—				—				—
Amortization on intangible assets acquired by Bain Capital (9)			1,088				1,088				2,175				2,175				—				725				2,175
Non-cash interest on Bain Capital subordinated debt (10)			2,886				2,535				5,421				5,080				—				4,761				4,809
Total adjustments			13,672				8,834				15,572				14,635				118				15,035				8,217
Tax effect of adjustments			(2,406	)			(807	)			(3,058	)			(3,601	)			(31	)			(3,701	)			(2,079	)
Tax effect of one-time intercompany transaction (11)			—				—				(3,544	)			—				—				—				—
Adjusted Net Income		$	17,248			$	22,268			$	35,455			$	24,459			$	15,365			$	(4,143	)		$	9,161

 

(1)	Represents the amount paid pursuant to the management agreement with Bain Capital for ongoing consulting and other services, which we expect will be terminated upon consummation of this offering. See “Certain Relationships and Related Party Transactions—Management Agreement.”

 

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(2)

In connection with the Acquisition and the filing of this prospectus, the Company incurred expenses related to professional fees, consulting, legal, and accounting that would otherwise not have been incurred and were directly related to these two matters. These fees are not indicative of the Company’s ongoing costs and we expect they will discontinue following the completion of this offering.

(3)

In connection with the Acquisition, we recognized acquired inventory at fair value, which included a mark-up for profit. Recording inventory at fair value in purchase accounting had the effect of increasing inventory and thereby increasing the cost of sales in subsequent periods as compared to the amounts we would have recognized if the inventory was sold through at cost. The write-up of acquired inventory sold represents the incremental cost of sales that was recognized as a result of purchase accounting. This inventory was sold in fiscal 2014 and fiscal 2015 and has impacted net income in both periods.

(4)

Represents unrealized gains on foreign exchange forward contracts recorded in fiscal 2016 that relate to fiscal 2017. We manage our exposure to foreign currency risk by entering into foreign exchange forward contracts. Management forecasts its net cash flows in foreign currency using expected revenue from orders it receives for future periods. The unrealized gains and losses on these contracts are recognized in net income from the date of inception of the contract, while the cash flows to which the derivatives related are not realized until the contract settles. Management believes that reflecting these adjustments in the period in which the net cash flows will occur is more appropriate.

(5)	Represents expenses incurred to establish our European headquarters in Zug, Switzerland, including closing several smaller offices across Europe, relocating personnel, and incurring temporary office costs.

(6)	Represents non-cash share-based compensation expense. Adjustments in fiscal 2017 reflect management’s estimate that certain tranches of outstanding option awards will vest.

(7)

Represents accrued expenses related to termination payments to be made to our third party sales agents. As part of a strategy to transition certain sales functions in-house, we terminated the majority of our third party sales agents and certain distributors, primarily during fiscal 2015 and 2016, which resulted in indemnities and other termination payments. As sales agents have now largely been eliminated from the sales structure, management does not expect these charges to recur in future fiscal periods.

(8)	Represents non-cash amortization charges during pre-opening periods for new store leases.

(9)	As a result of the Acquisition, the Company recognized an intangible asset for customer lists in the amount of $8.7 million, which has a useful life of four years.

(10)

As part of the financing of the Acquisition, we issued subordinated debt to investment funds advised by Bain Capital, which bears interest at 6.7%. In connection with the Recapitalization, we expect the entire amount of the notes, including accumulated interest thereon, to be repaid. See “Certain Relationships and Related Party Transactions—Promissory Notes and Continuing Subscription Agreement.”

(11)	During fiscal 2016, we entered into a series of transactions whereby our wholly-owned subsidiary, Canada Goose International AG, acquired the global distribution rights to our products. As a result, there was a one-time tax benefit of $3.5 million recorded during the year.

 

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

 

CAD$000s		Actual												In Constant Currency
		FY16				FY15				% Change				FY16				% Change
Revenue			290,830				218,414				33.2	%			281,097				28.7	%
		FY15				FY14*								FY15
Revenue			218,414				152,085				43.6	%			210,791				38.6	%

 

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

Financial Condition, Liquidity and Capital Resources

Overview

 

		Successor																				Predecessor
CAD$000s		Six months ended September 30, 2016				Six months ended September 30, 2015				Year ended March 31, 2016				Year ended March 31, 2015				Period from December 9, 2013 to March 31, 2014				Period from April 1, 2013 to December 8, 2013
Total cash provided by (used in):
Operating activities			(72,411	)			(42,481	)			(6,442	)			4,960				(11,593	)			15,202
Investing activities			(15,471	)			(13,104	)			(21,842	)			(7,263	)			(149,431	)			(6,361	)
Financing activities			91,587				60,101				29,592				4,952				164,294				(5,715	)
Increase (decrease) in cash			3,705				4,516				1,308				2,648				3,270				(3,126	)
Cash, end of period			10,931				10,435				7,226				5,918				3,270				4,477

Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures, debt service and for general corporate purposes. Our primary source of liquidity is funds generated by operating activities. We also use our asset based Revolving Facility as a source of liquidity for short-term working capital needs and general corporate purposes. Our ability to fund our operations, to make planned capital expenditures, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. Cash generated from operations are significantly impacted by the seasonality of our business, with a disproportionate amount of our operating cash generally coming in the second and third fiscal quarters of each year. As a result, historically, we have had higher balances under our revolving credit facilities in the first and fourth quarters and lower balances in the second and third quarters.

As of September 30, 2016, we had $10.9 million of cash and $194.8 million of working capital, which is current assets minus current liabilities, compared with $7.2 million of cash and $104.8 million of working capital as of March 31, 2016. The $90.2 million increase in our working capital was primarily due to a $58.3 million increase in accounts receivable and a $23.5 million increase in inventory, offset by accounts payable and accrued liabilities of $8.6 million.

 

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

Cash Flows

Cash flows from operating activities

The year-over-year increase in cash used in operating activities for the six months ended September 30, 2016 of $29.9 million was primarily due to increases in trade receivables and inventory and a decrease in net income, partially offset by increases in accounts payable, accrued liabilities, and decreases in provisions.

Cash used in operating activities was $6.4 million in fiscal 2016 compared to cash flows provided by operating activities of $5.0 million in fiscal 2015. The year-over-year decrease in cash inflows was primarily due to an increase in inventory, partially offset by an increase in net income, as well as increases in accounts payable and accrued liabilities.

Cash provided by operating activities was $5.0 million in fiscal 2015 compared to cash flows used in operating activities of $11.6 million during the period from December 9, 2014 to March 31, 2014. The year-over-year increase in cash inflows was primarily due to decreases in trade receivables partially offset by accounts payable, accrued liabilities and increases in inventory.

Cash flows from investing

The year-over-year increase in cash outflows during the six months ended September 30, 2016 of $2.4 million was primarily due to increased activity in the DTC channel as the Company prepared for retail store openings in Toronto and New York City and opened e-commerce sites in the United Kingdom and France. Investments in the comparable period in fiscal 2016 consisted of expenditures related to operating capacity at our manufacturing facilities. We anticipate that these investments will remain consistent as a percentage of revenue as we expand our DTC channel.

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

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

Cash flows from financing

The year-over-year increase in cash inflows during the six months ended September 30, 2016 of $31.5 million was primarily driven by cash proceeds from long-term debt used to finance working capital.

The year-over-year increase in cash inflows of $24.6 million in fiscal 2016 compared to fiscal 2015 was primarily driven by cash proceeds from long-term debt used to finance working capital.

The year-over-year decrease in cash inflows of $159.4 million in fiscal 2015 compared to the period from December 9, 2013 to March 31, 2014 was primarily due to the proceeds from Bain Capital’s initial investment in the Company in exchange for subordinated debt and Class A Senior Preferred Shares for the purpose of the Acquisition.

Indebtedness

Revolving Facility

On June 3, 2016, Canada Goose Holdings Inc. and its wholly-owned subsidiaries, Canada Goose Inc. and Canada Goose International AG, entered into a senior secured asset-based revolving credit facility, which we refer to as

 

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the Revolving Facility, with Canadian Imperial Bank of Commerce, as administrative agent, and certain financial institutions as lenders, which matures in 2021. The Revolving Facility has commitments of $150.0 million with a seasonal increase of up to $200.0 million during peak season (June 1 through November 30). In addition, the Revolving Facility includes a letter of credit sub-facility of $25.0 million. All obligations under the Revolving Facility are unconditionally guaranteed by us and our U.S., Swiss, U.K. and Canadian subsidiaries. The Revolving Facility provides for customary events of default.

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

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

As of September 30, 2016 we had $146,762 outstanding under the Revolving Facility. Amounts under the Revolving Facility may be borrowed, repaid and re-borrowed to fund our general corporate purposes and are available in Canadian dollars, U.S. dollars, and Euros and, subject to an aggregate cap of $40.0 million, such other currencies as are approved in accordance with the credit agreement governing the Revolving Facility.

Contractual Obligations

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

 

CAD$000s		2017				2018				2019				2020				2021				Thereafter				Total
Credit facility (1)			1,250				1,250				52,702				—				—				—				55,202
Subordinated debt			—				—				—				—				—				85,306				85,306
Accounts payable and accrued liabilities			38,451				—				—				—				—				—				38,451
Foreign exchange forward contracts (2)			48,254																								48,254
Operating leases			5,407				7,008				7,061				7,027				6,881				30,753				64,137
Other long-term liability			—				—				—				—				—				762				762
Total contractual obligations			93,362				8,258				59,763				7,027				6,881				116,821				292,112

 

(1)	Represents obligations pursuant to our revolving credit facility in effect on March 31, 2016. On June 3, 2016, we entered into a new asset-based revolving facility. See “Description of Indebtedness.”

(2)

During fiscal 2016, the Company entered into forward contracts to sell foreign currencies at future dates occurring between October 2016 and March 2017. Several contracts were outstanding as at September 30, 2016 and March 31, 2016. Unrealized losses on those contracts were $4.6 million at September 30, 2016 (gain of $5.4 million as at March 31, 2016). As at September 30, 2016, the Company has a liability of

 

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$0.1 million (March 31, 2016–$4.4 million) reflected in other assets. In the first quarter of fiscal 2017, the Company settled all of its outstanding contracts in place at the end of fiscal 2016 for a realized gain of $4.3 million, and re-entered new contracts with a notional amount of USD$30,500,000 to buy Canadian dollars and sell U.S. dollars, €9,000,000 to buy Canadian dollars and sell Euros, £7,500,000 to buy Canadian dollars and sell Pounds Sterling, and CHF2,500,000 to sell Canadian dollars and buy Swiss Francs that expire between October 2016 and March 2017.

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

Quantitative and Qualitative Disclosures about Market Risk

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

Foreign currency exchange risk

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

We are also exposed to fluctuations in the prices of U.S. dollar denominated purchases as a result of changes in U.S. dollar exchange rates. A depreciating Canadian dollar relative to the U.S. dollar will negatively impact operating income and net earnings by increasing our costs of raw materials, while an appreciating Canadian dollar relative to the U.S. dollar will have the opposite impact. During the six months ended September 30, 2016 and fiscal 2016, 2015, and 2014 we entered into derivative instruments in the form of forward contracts to manage the majority of our current and anticipated exposure to fluctuations in U.S. dollar, GBP, Euro, and CHF exchange rates.

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

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

 

($000s)		Contract Amount		Primary Currencies
Forward exchange contract to purchase currency		CHF2,500		Swiss Francs
Forward exchange contract to sell currency		USD $30,500 €9,000 £7,500		US dollars Euros Pounds Sterling

 

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Interest rate risk

We are exposed to interest rate risk primarily to the effect of interest rate changes on borrowings outstanding under our Revolving Facility. As of September 30, 2016, we had $146,902 outstanding under our Revolving Facility subject to a weighted average interest rate of 2.9%. Based on the outstanding borrowings under the Revolving Facility during Fiscal 2016, we estimate that a 1% increase in the average interest rate on our borrowings would have increased interest expense by $0.6 million in the six months ended September 30, 2016. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.

Critical Accounting Policies and Estimates

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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inability to make payments, a larger allowance might be required. In the event we determine that a smaller or larger allowance is appropriate, we would record a credit or a charge to selling, general and administrative expense in the period in which such a determination is made.

Internal Control Over Financial Reporting

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

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

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

Standards issued but not yet effective

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

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

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

 

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

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

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

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

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

JOBS Act

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

 

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Business

Canada Goose

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

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

The power of our business model and our ability to profitably scale our operations are reflected in our financial performance. In fiscal 2016, we had revenue of $290.8 million, net income of $26.5 million, Adjusted EBITDA of $54.8 million, an Adjusted EBITDA Margin of 18.9% and an Adjusted Net Income of $35.5 million. We grew our revenue at a 38.3% CAGR and Adjusted EBITDA at an 87.7% CAGR from fiscal 2014 to fiscal 2016, while expanding our Adjusted EBITDA Margin from 10.2% to 18.9% over the same period. For additional information regarding Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, which are non-IFRS measures, including a reconciliation of these non-IFRS measures to net income, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures.”

Our Competitive Strengths

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

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

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

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

 

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

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

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

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

Our Growth Strategies

We have built a strong foundation as Canada Goose has evolved into one of the world’s most desired outerwear brands. Over the past three fiscal years, we have grown our revenue at a 38.3% CAGR and Adjusted EBITDA at an 87.7% CAGR. We have also expanded our Adjusted EBITDA Margin from 10.2% to 18.9% over the same period while concurrently making significant long-term investments in our human capital, production capacity, brand building and distribution channels. Leveraging these investments and our proven growth strategies, we will continue to aggressively pursue our substantial global market opportunity.

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

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

 

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

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

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

 

(in millions)		Fiscal year ended March 31,												‘14 – ‘16
		2014				2015				2016				CAGR
Canada		$	72.5			$	75.7			$	95.2				14.6	%
United States			33.6				57.0				103.4				75.5	%
Rest of World			46.0				85.7				92.2				41.6	%
Total		$	152.1			$	218.4			$	290.8				38.3	%

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

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

Rest of World. We currently generate sales in every major Western European market and, while this is where the brand first achieved commercial success, we believe there are significant opportunities to accelerate these

 

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markets to their full potential. In the United Kingdom and France in particular, we have achieved strong traction through our retail partnerships, but have yet to fully extend our wholesale network and are only in the initial phase of executing on our shop-in-shop strategy. In both markets, we launched our e-commerce platforms in September 2016 and intend to establish our owned retail presence in the near future. While the United Kingdom and France are our most developed European markets, we have identified a number of markets with significant near-term development potential, such as Germany, Italy and Scandinavia.

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

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

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

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

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

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

Channel mix. We intend to expand our DTC channel in markets that can support the profitable rollout of e-commerce and select retail stores. As our distribution channel mix shifts toward our e-commerce-led DTC channel, we expect to capture incremental gross margin.

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

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

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

 

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History

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

 

Our Products

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

 

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

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

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

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

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

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

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

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

Beyond outerwear. Canada Goose has launched a refined line of accessories in response to customer demand for products to complement their outerwear. Our accessories focus on hand-, head- and neck-wear, and offer

 

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

 

 

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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 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. 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.

We operate five production facilities in Toronto, Winnipeg and Montreal, manufacturing approximately one-third of our products in-house. We also work with 31 highly qualified Canadian subcontractors who offer specialized expertise, which provides us with flexibility to scale our production. We employ 1,060 manufacturing employees and have been recognized by the Government of Canada for supporting the apparel manufacturing industry in Canada. We have invested ahead of our growth and more than doubled our in-house unit production capacity in the past five years.

Multi-Channel Distribution Network

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

Wholesale. The wholesale channel allows us to enter and develop new markets, maintain a leading position within our geographies and make informed investments in our DTC infrastructure. Within our wholesale channel, we develop strategic relationships directly with retailers and distributors. We work with a select set of partners who respect our heritage, share our values and strengthen our market presence. As of September 30, 2016, through our global network of nearly 2,500 wholesale doors with retailers such as Sporting Life, Harry Rosen, Gorsuch, Saks Fifth Avenue, Nordstrom, Selfridges and Lane Crawford we reach customers across 36 countries. Our wholesale distribution includes a mix of outdoor, luxury and online retailers. We drive traffic for our retail partners and leverage our mutually beneficial relationships to receive prime placement within their stores, showcase a broader product offering and establish Canada Goose shops-in-shops. Careful planning with our wholesale network allows us to manage scarcity and maintain high levels of full-price sell-through.

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

Our e-commerce rollout is complemented by our retail stores in premium high traffic locations. We opened our first two retail stores in Toronto and New York City in the fall of 2016. Going forward, we plan to open a limited number of additional retail stores in other major metropolitan centres as well as premium outdoor destinations where we believe they can operate profitably. This unfiltered window into our brand will allow us to develop a closer relationship with our customers through unique experiences, feature our full product offering and drive revenue growth across both channels.

 

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Marketing

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

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

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

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

 

Film and entertainment. For more than three decades, our jackets have been a staple on film sets around the world and are known as the unofficial jacket of film crews anywhere it is cold. Our jackets offer crew and talent the warmth and functionality they need to survive long shoots in the most demanding environments. Due to this long-standing and organic relationship, we have not paid for product placement, but our products have naturally transitioned from behind the scenes to on-camera as a way to authenticate cold weather scenes. We also support the industry as an official sponsor of a number of international film festivals, including the Sundance Film Festival and Toronto International Film Festival.

 

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

Our Market

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

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

 

(US$ in billions)		Outerwear								Luxury Apparel
		2016				‘16 – ‘20 CAGR				2016				‘16 – ‘20 CAGR
Canada		$	18				3.8	%		$	2				3.2	%
United States		$	192				3.2	%		$	17				3.0	%
Europe		$	250				2.6	%		$	40				3.7	%
Asia Pacific		$	313				4.5	%		$	22				4.0	%

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

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

For example, as we continue to capture the significant market opportunity in the United States, we are pursuing a staged regional expansion. Our initial entry into the U.S. market was concentrated in the Northeast where we grew our wholesale network to 125 doors as of November 15, 2016 and, according to a survey conducted on our behalf in August 2016 of consumers that have purchased premium outerwear, achieved aided brand awareness of 46% in Boston and New York City. Building on this, we have begun to focus on expanding customer access via our e-commerce site and retail store in New York City. Our successful execution in this region has been the primary driver of our 75.5% revenue CAGR in the United States from fiscal 2014 to fiscal 2016.

 

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

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

Competition

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

Intellectual Property

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

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

Government Regulation

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

Our Employees

As of November 15, 2016, we employed 1,549 people, including both full-time and part-time employees. Of these employees, 1,060 were employed in Canadian manufacturing positions, 63 were employed in North

 

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American selling and retail administrative positions, 67 were employed globally in corporate support and administrative functions. The remaining employees were engaged in other aspects of our business. As of November 15, 2016, 356 of our employees are represented by unions. We believe that relations with our employees are satisfactory and we have never encountered a strike or significant work stoppage.

Corporate Information and Structure

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

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

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

 

 

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Leased Properties

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

 

Location		Principal Activity		Square Feet		Lease Expiration Date
Toronto, Ontario		Corporate Headquarters, showroom and manufacturing		190,978 square feet		June 30, 2023
Scarborough, Ontario		Manufacturing		84,800 square feet		May 31, 2020
Yorkdale Shopping Centre,     Toronto, Ontario		Retail Store		4,503 square feet		October 31, 2026
Winnipeg, Manitoba		Manufacturing		82,920 square feet		November 12, 2022
Winnipeg, Manitoba		Manufacturing		94,541 square feet		September 30, 2025
Boisbriand, Québec		Manufacturing		23,637 square feet		July 31, 2023
New York, NY		Office and showroom		4,040 square feet		December 31, 2024
New York, NY		Retail Store		6,970 square feet		March 31, 2027
Paris, France		Office and showroom		4,090 square feet		March 15, 2018
Munich, Germany		Inactive		1,938 square feet		November 14, 2017
Zug, Switzerland		Office and showroom		7,545 square feet		January 31, 2021

Seasonality

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

Legal Proceedings and Regulatory Matters

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

 

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Management

Executive Officers and Directors

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

 

Name and Province or State and Country of Residence		Age				Position
Dani Reiss Ontario, Canada			43			Chief Executive Officer and Director
John Black Ontario, Canada			58			Chief Financial Officer
Paul Riddlestone Ontario, Canada			39			Chief Operating Officer
Pat Sherlock Ontario, Canada			43			Senior Vice President, Global Wholesale
Ana Mihaljevic Ontario, Canada			36			Vice President, Planning and Sales Operations
Jacqueline Poriadjian Ontario, Canada			39			Chief Marketing Officer
Jacob Pat Ontario, Canada			37			Vice President, Information Technology
Lee Turlington California, United States			62			Chief Product Officer
Kara MacKillop Ontario, Canada			41			Senior Vice President, Human Resources
Scott Cameron Ontario, Canada			38			Executive Vice President e-Commerce, Stores and Strategy
Carrie Baker Ontario, Canada			40			Chief of Staff, Senior Vice President
Ryan Cotton Massachusetts, United States			38			Director
Joshua Bekenstein Massachusetts, United States			58			Director

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

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

John Black, Chief Financial Officer

Mr. Black joined the company in August 2013 as Chief Financial Officer. Prior to joining the Company, Mr. Black served as the Chief Financial Officer of Protenergy Natural Foods Corp., from May 2011 to August 2013, and at the Ontario Lottery and Gaming Corporation from April 2005 to April 2010. From March 2001 to April 2005 Mr. Black served as Chief Financial Officer of Trimark Sportswear Group. Mr. Black received a Bachelor of Commerce (Honours) degree and Bachelor of Administration degree from The University of Ottawa, and is a CPA-CA.

 

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Paul Riddlestone, Chief Operating Officer

Mr. Riddlestone joined the company in October 2010 and was named Chief Operating Officer in September 2014. Mr. Riddlestone previously served as the company’s Vice President of Supply Chain and Manufacturing from October 2010 to March 2013, and Senior Vice President of Operations from March 2013 to September 2014. Prior to joining the company, Mr. Riddlestone served as Director of Global Product Development, Asia at Avery Dennison from August 2008 to September 2010, and as the Global/Group Operations Manager at Advanced Manufacturing Group from January 2002 to August 2008. Mr. Riddlestone received his Higher National Diploma in Business and Manufacturing from York University.

Pat Sherlock, Senior Vice President, Global Wholesale

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

Ana Mihaljevic, Vice President, Planning and Sales Operations

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

Jacqueline Poriadjian, Chief Marketing Officer

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

Jacob Pat, Vice President, Information Technology

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

Lee Turlington, Chief Product Officer

Mr. Turlington began working with Canada Goose in October 2015 as an independent consultant, and formally joined the company as Chief Product Officer in March 2016. Prior to joining the company Mr. Turlington spent seven years as independent consultant with TURLINGTON, Inc., advising Companies such as International Marketing Partners Ltd., Mission Athlete Care, Ape & Partners S.P.A/Parajumpers, Quiksilver Inc., Ironclad Performance Wear Corporation, Haglofs, and LK International AG/KJUS. He spent five years at with Patagonia Inc. from 2008-2013, most recently serving as Vice President, Global Product. From March 1999 to April 2007, Mr. Turlington served as a Global Director and General Manager for Nike Inc. Prior to that, he served at Fila Sport sPa from March 1994 to February 1999, as Senior Vice President, Fila Apparel. From June 1977 to April 1992, he served as Vice President, Sales, Marketing, Global Product and various other executive roles at The North Face. Mr. Turlington received a Bachelor of Economics from Lenoir-Rhyne University.

 

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Kara MacKillop, Senior Vice President, Human Resources

Ms. MacKillop joined the company in September 2014 as the Vice President of Human Resources. She was promoted to Senior Vice President of Human Resources in 2015. Prior to joining our team, Ms. MacKillop served as the Director of Human Resources for Red Bull Canada, a company that produces and sells energy drinks, from September 2010 to September 2014, and as Director of Human Resources for Indigo Books and Music from August 2003 until September 2010. Ms. MacKillop received a Bachelor of Science from Western University.

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

Mr. Cameron, joined the company in January 2016 as Chief Strategy and Business Development Officer. Prior to joining our team, Mr. Cameron spent eight years at McKinsey & Co. Toronto, a management consulting firm, most recently as a principal. Mr. Cameron received a Bachelor in Commerce (Honours) degree from Queen’s University and a Master of Business Administration from Harvard Business School, where he was a Baker Scholar.

Carrie Baker, Chief of Staff, Senior Vice President

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

Ryan Cotton, Director

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

Joshua Bekenstein, Director

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

Foreign Private Issuer Status

The listing rules of the                 , which we also refer to as the          Listing Rules, include certain accommodations in the corporate governance requirements that allow foreign private issuers, such as us, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of the          . The application of such exceptions requires that we disclose any significant ways that our

 

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corporate governance practices differ from the          Listing Rules that we do not follow. When our common shares are listed on the                 , we intend to continue to follow Canadian corporate governance practices in lieu of the corporate governance requirements of the          in respect of the following:

 

•

the majority independent director requirement under Section          of the          Listing Rules;

 

•

the requirement under Section          of the          Listing Rules that a compensation committee be comprised solely of independent directors; and

 

•

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

Corporate Governance

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

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

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

Composition of our Board of Directors

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

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recommended to our board of directors by our nominating and governance committee in accordance with the provisions of applicable corporate law and the charter of our nominating and governance committee. See “Board Committees—Nominating and Governance Committee.”

Majority Voting Policy

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

Director Term Limits and Other Mechanisms of Board Renewal

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

Director Independence

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

Under the          Listing Rules, an independent director means a person who, in the opinion of our board of directors, has no material relationship with our company. Under NI 58-101, a director is considered to be independent if he or she is independent within the meaning of Section 1.4 of National Instrument 52-110—Audit Committees, or NI 52-110. Pursuant to NI 52-110, an independent director is a director who is free from any

 

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direct or indirect material relationship with us which could, in the view of our board of directors, be reasonably expected to interfere with the exercise of a director’s independent judgment.

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

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

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

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

Mandate of the Board of Directors

Our board of directors is responsible for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. Our board of directors will hold regularly scheduled meetings as well as ad hoc meetings from time to time. Our board will adopt a formal mandate for the board of directors. The responsibilities of our board of directors upon completion of this offering will include:

 

•

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

 

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appointing the Chief Executive Officer of the company and developing the corporate goals and objectives that the Chief Executive Officer is responsible for meeting, and reviewing the performance of the Chief Executive Officer against such goals and objectives;

 

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overseeing communications with shareholders, other stakeholders, analysts and the public, including the adoption of measures for receiving feedback from stakeholders; and

 

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monitoring the implementation of procedures, policies and initiatives relating to corporate governance, risk management, corporate social responsibility, health and safety, ethics and integrity.

Our board of directors has not developed at this time written position descriptions for the chairman of the board of directors or the chairperson of the board committees. Their primary roles are managing the affairs of the board of directors or of such relevant committee, including ensuring the board of directors or such committee is organized properly, functions effectively and meets its obligations and responsibilities. Each committee chairperson will conduct the affairs of the applicable committee in accordance with the charter of such committee.

 

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Our board of directors and our Chief Executive Officer have not developed at this time a written position description for the Chief Executive Officer or for other executive officers. The role of the Chief Executive Officer is delineated on the basis of customary practice. The board of directors considers that the role and responsibilities of the Chief Executive Officer are to develop the company’s strategic plans and policies and recommending such plans and policies to the board of directors; provide executive leadership, oversee a comprehensive operational planning and budgeting process, supervise day-to-day management, report relevant matters to the board of directors, facilitate communications between the board of directors and the senior management team, and identify business risks and opportunities and manage them accordingly, and has communicated the same to the Chief Executive Officer.

Orientation and Continuing Education

Following the completion of this offering, we will implement an orientation program for new directors under which each new director will meet separately with the chairman of our board of directors, individual directors and members of the senior management team. New directors will be provided with comprehensive orientation and education as to our business, operations and corporate governance (including the role and responsibilities of the board of directors, each committee, and directors individually).

The chairman of our board of directors will be responsible for overseeing director continuing education designed to maintain or enhance the skills and abilities of our directors and to ensure that their knowledge and understanding of our business remains current. The chairperson of each committee will be responsible for coordinating orientation and continuing director development programs relating to the committee’s mandate.

Business Conduct and Ethics

Prior to the completion of this offering, we expect to adopt a Code of Business Conduct and Ethics, or Code of Conduct, applicable to all of our directors, officers and employees.

The Code of Conduct will set out our fundamental values and standards of behavior that are expected from our directors, officers and employees with respect to all aspects of our business. The objective of the Code of Conduct will be to provide guidelines for maintaining our integrity, reputation and honesty with a goal of honoring others’ trust in us at all times. The Code of Conduct will set out guidance with respect to conflicts of interest, protection and proper use of corporate assets and opportunities, confidentiality of corporate information, fair dealing with third parties, compliance with laws and reporting of any illegal or unethical behaviour.

We also expect to adopt a code of ethics for senior managers and financial officers, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions.

Upon the completion of this offering, the full text of the Code of Conduct will be available on our website at www.canadagoose.com and our SEDAR profile at www.sedar.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein.

Monitoring Compliance with the Code of Business Conduct and Ethics

Our audit committee is responsible for reviewing and evaluating the Code of Conduct periodically and will recommend any necessary or appropriate changes thereto to our board of directors for consideration. The audit committee will also assist our board of directors with the monitoring of compliance with the Code of Conduct, and will be responsible for considering any waivers of the Code of Conduct (other than waivers applicable to our directors or executive officers, which shall be subject to review by our board of directors as a whole).

 

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Interests of Directors

A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to excuse himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the BCBCA regarding conflicts of interest. See “Description of Share Capital—Certain Important Provisions of Our Articles and the BCBCA—Directors.”

Complaint Reporting and Whistleblower Policy

In order to foster a climate of openness and honesty in which any concern or complaint pertaining to a suspected violation of the law, our Code of Conduct or any of our policies, or any unethical or questionable act or behavior, the board of directors will adopt a whistleblower policy that requires that our employees promptly report such violation or suspected violation. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, our whistleblower policy will contain procedures that are aimed to facilitate confidential, anonymous submissions by our employees.

Diversity

We believe that having a diverse board of directors can offer a breadth and depth of perspectives that enhance our performance. The nominating and governance committee values diversity of abilities, experience, perspective, education, gender, background, race and national origin. Recommendations concerning director nominees are based on merit and past performance as well as expected contribution to the board’s performance and, accordingly, diversity is taken into consideration. At closing of this offering,          out of          members of our board of directors will be women.

We similarly believe that having a diverse and inclusive organization overall is beneficial to our success, and we are committed to diversity and inclusion at all levels of our organization to ensure that we attract, retain and promote the brightest and most talented individuals. We have recruited and selected senior management candidates that represent a diversity of business understanding, personal attributes, abilities and experience. Currently,          out of          members of our senior management team are women.

We do not currently have a formal policy for the representation of women on our board of directors or senior management. The nominating and governance committee and our senior management team already takes gender and other diversity representation into consideration as part of their overall recruitment and selection process. We have not adopted targets for gender or other diversity representation in part due to the need to consider a balance of criteria for each individual appointment.

We anticipate that the composition of the board of directors will in the future be shaped by the selection criteria to be developed by our board of directors and nominating and compensation committee, ensuring that diversity considerations are taken into account in senior management, monitoring the level of women representation on the board and in senior management positions, continuing to broaden recruiting efforts to attract and interview qualified female candidates, and committing to retention and training to ensure that our most talented employees are promoted from within our organization, all as part of our overall recruitment and selection process to fill board or senior management positions as the need arises and subject to the rights of our principal shareholders under agreements with the company.

Board Committees

Upon the completion of this offering, our board of directors will have three standing committees: the audit committee; the compensation committee; and the nominating and governance committee. Each of the committees

 

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operates under its own written charter adopted by our board of directors, each of which will be available on our website upon closing of this offering.

Audit Committee

Following this offering, our audit committee will be composed of                 ,                 and                 with          serving as chairperson of the committee. Our board of directors has determined that                  and                  meet the independence requirements under the rules of the                 , the BCBCA and under Rule 10A-3 of the Exchange Act. Within one year following the effective date of the registration statement relating to this offering, our audit committee will consist exclusively of independent directors. Our board of directors has determined that          is an “audit committee financial expert” within the meaning of the SEC’s regulations and applicable Listing Rules of          . The audit committee’s responsibilities upon completion of this offering will include:

 

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appointing, compensating, retaining and overseeing the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and reviewing and appraising the audit efforts of our independent accountants;

 

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pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

 

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establishing procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (ii) confidential and anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters;

 

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engaging independent counsel and other advisers, as necessary and determining funding of various services provided by accountants or advisers retained by the committee;

 

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reviewing our financial reporting processes and internal controls;

 

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establishing, overseeing and dealing with issues related to the company’s code of ethics for managers and financial officers;

 

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reviewing and approving related-party transactions or recommending related-party transactions for review by independent members of our board of directors; and

 

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providing an open avenue of communication among the independent accountants, financial and senior management and the board.

Compensation Committee

Following this offering, our compensation committee will be composed of                 ,                  and                 . Our board of directors has determined that                  and                 are independent within the meaning of NI 58-101, with          serving as chairperson of the committee. Its primary purpose, with respect to compensation, will be to assist our board of directors in fulfilling its oversight responsibilities and to make recommendations to our board of directors with respect to the compensation of our directors and executive officers. The principal responsibilities and duties of the compensation committee include:

 

•

evaluating our Chief Executive Officer’s and other executive officer’s performance in light of the goals and objectives established by our board of directors and, based on such evaluation, with appropriate input from other independent members of our board of directors, determining the Chief Executive Officer’s and other executive officer’s compensation;

 

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administering our equity-based plans and management incentive compensation plans and making recommendations to our board of directors about amendments to such plans and the adoption of any new employee incentive compensation plans; and

 

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engaging independent counsel and other advisers, as necessary and determining funding of various services provided by accountants or advisers retained by the committee.

 

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Nominating and Governance Committee

Following this offering, our nominating and governance committee will be composed of                 ,                  and                 . Our board of directors has determined that and                  and                  are independent within the meaning of NI 58-101, with          serving as chairperson of the committee. The nominating and governance committee’s responsibilities upon completion of this offering will include:

 

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developing and recommending to the board of directors criteria for board and committee membership;

 

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recommending to the board of directors the persons to be nominated for election as directors and to each of the committees of the board of directors;

 

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assessing the independence of directors within the meaning of securities laws and stock exchange rules as applicable;

 

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considering resignations by directors submitted pursuant to our majority voting policy, and making recommendations to our board of directors as to whether or not to accept such resignations;

 

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reviewing and making recommendations to the board of directors in respect of our corporate governance principles;

 

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providing for new director orientation and continuing education for existing directors on a periodic basis;

 

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performing an evaluation of the performance of the committee; and

 

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overseeing the evaluation of the board of directors and its committees.

 

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Executive Compensation

Overview

The following tables and discussion relate to the compensation paid to or earned by our Chief Executive Officer, Dani Reiss, and our two most highly compensated executive officers (other than Mr. Reiss) who were serving as executive officers on the last day of fiscal 2016. They are Scott Cameron, who serves as our Executive Vice President, E-commerce, Stores and Strategy, and Paul Riddlestone, who serves as our Chief Operating Officer. Messrs. Reiss, Cameron, and Riddlestone are referred to collectively in this prospectus as our named executive officers.

Summary Compensation Table

The following table sets forth information about certain compensation awarded to, earned by, or paid to our named executive officers during fiscal 2016:

 

Name and principal position		Year				Salary ($) (1)				Bonus ($)				Option awards ($) (2)				Nonequity incentive plan compensation ($)				All other compensation ($) (3)				Total ($)
Dani Reiss, C.M.,			2016				1,000,000				150,000	(4)			—				600,000	(5)			421				1,750,421
President & Chief Executive Officer
Scott Cameron,			2016				79,327				137,500	(6)			396,165				—				2,902				615,894
EVP, E-commerce, Stores & Strategy
Paul Riddlestone,			2016				273,946				87,696	(7)			—				—				421				362,063
Chief Operating Officer

 

(1)	Amount shown for Mr. Cameron includes contributions by him to the Group Retirement Savings Plan for the Employees of Canada Goose Inc. (referred to as the RSP and described below). Messrs. Reiss and Riddlestone did not contribute to the RSP in fiscal 2016.

(2)	Amount shown reflects the grant date fair value of options to purchase Class B Common Shares and Class A Junior Preferred Shares, granted to Mr. Cameron in fiscal 2016. The value was determined in accordance with IFRS 2.

(3)

Amounts shown in this column include Company-paid life insurance premiums of $421, $90 and $421 paid on behalf of Messrs. Reiss, Cameron and Riddlestone, respectively, and, for Mr. Cameron, Company contributions of $2,812 under our Deferred Profit Sharing Plan for the Employees of Canada Goose Inc. (referred to as the DPSP and described below).

(4)	Amount shown reflects the portion of Mr. Reiss’s annual bonus earned with respect to fiscal 2016 that was based on the achievement of individual performance goals.

(5)	Amount shown in the Nonequity Incentive Plan Compensation column reflects the portion of Mr. Reiss’s annual bonus earned with respect to fiscal 2016 that was based on the achievement of EBITDA goals.

(6)	Amount shown represents a cash sign-on bonus of $100,000 paid to Mr. Cameron in connection with his commencement of employment with us and Mr. Cameron’s annual bonus of $37,500 earned with respect to fiscal 2016.

(7)	Amount shown represents Mr. Riddlestone’s annual bonus earned with respect to fiscal 2016.

2016 Base Salaries

Base salaries provide our named executive officers with a fixed amount of compensation each year. Base salary levels reflect the executive’s title, experience, level of responsibility, and performance. Initial base salaries for our named executive officers were set forth in their employment agreements, as described below under “Agreements with our Named Executive Officers.” Base salaries for Messrs. Reiss and Cameron have remained the same in fiscal 2017, while Mr. Riddlestone’s base salary increased to $280,000 as of April 1, 2016.

 

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2016 Bonuses

Each named executive officer is eligible to receive an annual bonus pursuant to his employment agreement, as described below under “Agreements with our Named Executive Officers.” The annual bonus amounts earned by our named executive officers for fiscal 2016 are shown in the Summary Compensation Table above.

For fiscal 2016, Mr. Reiss was eligible to earn a target annual bonus equal to $750,000, based on the achievement of pre-established fiscal 2016 EBITDA targets, weighted at 80% of his bonus, and individual performance criteria, weighted at 20% of his bonus. Target EBITDA was approved by our board of directors at the beginning of fiscal 2016 in connection with the annual budgeting process, with target EBITDA set at $55.59 million and payout of the EBITDA component of Mr. Reiss’s bonus being earned at 100% upon achievement of EBITDA within a range of 95% to 105% of target. No portion of the EBITDA component of Mr. Reiss’s bonus would be earned if EBITDA were achieved at 80% or less below target. Achievement of EBITDA between 80% of target and less than 95% of target would result in the EBITDA component of Mr. Reiss’s bonus being earned on a straight-line basis between 0% and 100%. Achievement of EBITDA above 105% of target would result in the EBITDA component of Mr. Reiss’s bonus being earned on a straight-line basis between 100% and 200%, with 135% of target as the upper bound. The individual performance criteria for Mr. Reiss for fiscal 2016 included leadership and effectiveness goals determined by our board of directors.

Mr. Reiss earned a fiscal 2016 bonus equal to 100% of his target annual bonus, based on the determination by our board of directors that EBITDA, as adjusted, was deemed achieved at 100% of target and that Mr. Reiss also achieved his leadership and effectiveness goals at 100% of target.

Messrs. Cameron and Riddlestone were eligible to earn annual bonuses for fiscal 2016 under a broad-based annual bonus plan for salaried employees targeted at 40% of their base salaries, respectively, with Mr. Cameron’s bonus pro-rated to reflect one quarter of service. Bonuses could be earned under the plan based on the achievement of pre-established EBITDA targets and a participant’s individual performance review for fiscal 2016. Target EBITDA for purposes of our fiscal 2016 annual bonus plan was defined the same as above for Mr. Reiss, with target EBITDA also set at $55.59 million. No bonuses were payable under the plan for achievement of EBITDA at less than 80% of target or an individual performance rating of “needs immediate improvement.” Upon achievement of EBITDA of at least 80% of target, a participant could receive an annual bonus of between 0% and 160% of his or her targeted bonus, depending on an individual performance rating of “exceptional,” “tracking,” “leading,” or “inconsistent,” with ranges of bonuses as a percentage of target eligible to be earned at each performance rating. Messrs. Cameron and Riddlestone earned fiscal 2016 bonuses equal to 100% and 80% of their targeted annual bonuses, respectively. Fiscal 2016 bonuses were paid to Messrs. Reiss, Cameron and Riddlestone on June 24, 2016.

Equity-Based Compensation

Mr. Cameron was our only named executive officer granted an equity award in fiscal 2016. In connection with his commencement of employment with us in January 2016, Mr. Cameron was granted options to purchase Class B Common Shares and Class A Junior Preferred Shares. In fiscal 2015, Mr. Riddlestone was granted options to purchase Class B Common Shares and Class A Junior Preferred Shares. One-third of each of Messrs. Cameron’s and Riddlestone’s awards is subject to time-based vesting, and two-thirds is subject to time-based and performance-based vesting, with the performance-based component tied to the achievement by Bain Capital of certain returns on its investment in Canada Goose. The time-based vesting options and the time-vesting component of the options subject to time-based and performance-based vesting held by Messrs. Cameron and Riddlestone will accelerate in full upon a change of control, subject to their continued employment through such date.

Employee Benefits

Our full-time employees, including our named executive officers, are eligible to participate in our health and welfare benefit plans, which include medical, dental, vision, basic and dependent life, supplemental life,

 

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accidental death, dismemberment and specific loss, long-term disability, and optional critical illness insurance. Employees are also eligible to receive continuing education support and to participate in our employee purchase program, which allows employees to purchase a specified number of jackets and accessories at 50% of the manufacturer’s suggested retail price. Our named executive officers participate in these plans on a slightly better basis than other salaried employees, including in some instances with slightly lower deductibles, better cost-sharing rates and the ability to purchase Medcan health coverage. Our named executive officers are also entitled to three complimentary jackets each calendar year.

Retirement Plans

In fiscal 2016, Messrs. Cameron and Riddlestone were eligible to participate in the RSP, a broad-based registered defined contribution plan offered to all of our full-time Canada-based employees other than Mr. Reiss. Salaried employees in Toronto (including Messrs. Cameron and Riddlestone, but not Mr. Reiss) may defer up to 3% of their annual earnings into the RSP and may make additional voluntary contributions. We will match any such employee contributions by making a contribution to the DPSP, a broad-based defined contribution plan offered to all of our full-time, salaried employees. The match is equal to 100% of the required participant contributions made into the plan up to 3% of the participant’s annual base salary. We do not sponsor or maintain any qualified or non-qualified defined benefit plans or supplemental executive retirement plans.

Agreements with our Named Executive Officers

We have entered into an employment agreement with each of our named executive officers, the terms of which are as follows:

Base Salaries and Bonus Opportunities

Under his employment agreement, effective December 9, 2013, Mr. Reiss is entitled to an annual base salary of $1,000,000, subject to annual review and increase by our board of directors. Mr. Reiss is also eligible for an annual incentive bonus targeted at $750,000, plus any amount by which his salary has increased since December 9, 2013.

Under his employment agreement, effective January 4, 2016, Mr. Cameron is entitled to an annual base salary of $375,000, subject to annual review. Mr. Cameron is also eligible to participate in our annual bonus plan, with an annual incentive bonus targeted at 40% of his annual base salary and potential payouts ranging from 0% to 160% of his annual base salary. Mr. Cameron received a cash sign-on bonus of $100,000 in connection with his hire that he must repay if he resigns from Canada Goose prior to January 4, 2017.

Under his employment agreement, effective October 21, 2010, Mr. Riddlestone is entitled to an annual base salary of $190,000, subject to bi-annual review. Pursuant to his employment agreement, Mr. Riddlestone is also eligible to participate in our annual bonus plan, with an annual incentive bonus targeted at 15% of his annual base salary and an additional 5% of annual base salary based on achievement of our gross margin goals.

Messrs. Reiss and Cameron continue to have an annual base salary and target annual incentive bonus at the same level as specified in their employment agreements, while Mr. Riddlestone’s annual base salary has since increased to $280,000 and his target annual incentive bonus has since increased to 40% of his annual base salary.

Severance

If Mr. Reiss’s employment were terminated by us without cause or he resigned for good reason, he would be entitled to (i) salary continuation for 12 months at a per annum rate equal to $750,000 plus any amount by which his salary has increased since December 9, 2013, (ii) a pro rata bonus amount for the year in which the termination occurs, based on the actual bonus amount paid in the prior year and (iii) continued participation in our benefit plans for the minimum period required by applicable employment standards legislation.

 

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If Mr. Cameron’s employment were terminated by us without cause, he would be entitled to notice or pay in lieu of notice and benefits continuance equal to two weeks’ notice plus an additional four weeks per year of completed service, up to a maximum of 52 weeks.

Mr. Riddlestone’s employment agreement provides that we may terminate his employment without cause by providing notice or pay in lieu of notice and benefits continuance in accordance with the provisions of applicable employment standards legislation.

Restrictive Covenants

Under his employment agreement, Mr. Reiss is subject to non-competition obligations during and for one year following his termination of employment, restrictions on soliciting our customers, prospective customers, employees or consultants during and for two years following his termination of employment, as well as intellectual property assignment and confidentiality obligations.

Under their employment agreements, Messrs. Cameron and Riddlestone are subject to non-competition obligations during and for one year following their termination of employment, restrictions on soliciting our customers or employees for one year following their termination of employment, intellectual property assignment obligations during and for one year following their termination of employment, and confidentiality obligations.

In addition, as a condition to receiving their Canada Goose Holdings Inc. option awards, Messrs. Cameron and Riddlestone entered into restrictive covenant agreements binding them to non-competition obligations with respect to our business beginning on the first date on which any options granted pursuant to the award vest and continuing for 12 months following their termination of employment, restrictions on soliciting customers, prospective customers, employees and independent contractors beginning on the first date on which any options granted pursuant to the award vest and continuing for 24 months following their termination of employment, as well as confidentiality obligations during and after their employment with us.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding equity awards held by our named executive officers as of March 31, 2016.

 

		OPTION AWARDS
Name		Number of securities underlying unexercised options (#) exercisable				Number of securities underlying unexercised options (#) unexercisable				Equity incentive plan awards: Number  of securities underlying unexercised unearned options (#)				Option exercise price ($)				Option expiration date
Dani Reiss			—				—				—				—				—
Scott Cameron (1)			—				280,968				561,939				3.55				1/4/2026
Paul Riddlestone (2)			182,770				274,155				913,853				1.00				4/17/2024

 

(1)

Mr. Cameron was granted 337,162 options to purchase Class B Common Shares and 505,745 options to purchase Class A Junior Preferred Shares on January 4, 2016. One third of his options are subject to time-based vesting of 40% on the second anniversary of the grant date and 20% on each anniversary of the grant date thereafter (Cameron Time-Based Options). The remaining two-thirds of his options are subject to both time-based and performance-based vesting with the performance metrics reflecting a multiple of our Bain Capital’s return on its investment in us (Cameron Performance-Based Options). The Cameron Performance-Based Options are subject to the same time-based vesting schedule as the Cameron Time-Based Options. The Cameron Time-Based Options and the time-vesting component of the Cameron Performance-Based Options will accelerate in full upon a change of control.

 

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(2)

Mr. Riddlestone was granted 548,311 options to purchase Class B Common Shares and 822,467 options to purchase Class A Junior Preferred Shares on April 17, 2014. One third of his options are subject to time-based vesting of 40% on December 9, 2015 and 20% on each December 9th thereafter (Riddlestone Time-Based Options). The remaining two-thirds of his options are subject to both time-based and performance-based vesting with the performance metrics reflecting a multiple of Bain Capital’s return on its investment in us (Riddlestone Performance-Based Options). The Riddlestone Performance-Based Options are subject to the same time-based vesting schedule as the Riddlestone Time-Based Options. The Riddlestone Time-Based Options and the time-vesting component of the Riddlestone Performance-Based Options will accelerate in full upon a change of control.

Director Compensation

Other than Mr. Reiss, whose compensation is included with that of our other named executive officers, none of our directors received any compensation for their services during fiscal 2016.

Equity Incentive Plans

In December 2013, we established the Canada Goose Holdings Inc. Stock Option Plan (referred to as the Legacy Option Plan). In this prospectus, we refer to this plan as the Legacy Option Plan. Upon completion of this offering, each such outstanding option granted under the Legacy Option Plan will be exercisable for one common share of Canada Goose Holdings Inc., and no further awards will be made under the Legacy Option Plan. Prior to the completion of this offering, we will adopt an omnibus incentive plan (referred to as the Omnibus Incentive Plan), which will be effective upon the completion of this offering, and which will allow our board of directors, to grant long-term equity-based awards to eligible participants. We refer herein to our Legacy Option Plan and our Omnibus Incentive Plan collectively as the equity incentive plans.

Omnibus Incentive Plan

The Omnibus Incentive Plan will allow for a variety of equity-based awards that provide different types of incentives to be granted to our directors, executive officers, employees and consultants, including options, share appreciation rights, restricted shares, restricted share units, deferred share units and performance awards, collectively referred to as awards. Our board of directors will be responsible for administering the Omnibus Incentive Plan, and the compensation committee will make recommendations to our board of directors in respect of matters relating to the Omnibus Incentive Plan. The following discussion is qualified in its entirety by the full text of the Omnibus Incentive Plan.

Our board of directors, in its sole discretion, shall from time to time designate the directors, executive officers, employees or consultants to whom awards shall be granted and determine, if applicable, the number of common shares to be covered by such awards and the terms and conditions of such awards. The number of common shares of Canada Goose Holdings Inc. that may be issuable pursuant to the Omnibus Incentive Plan will initially be     % of the aggregate number of common shares issued and outstanding from time to time, which will represent, in the aggregate,          common shares upon completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares). If an outstanding award expires or is terminated or cancelled for any reason without having been exercised or settled in full, or if common shares acquired pursuant to an award subject to forfeiture are forfeited, the common shares covered by such award, if any, will again be available for issuance under the Omnibus Incentive Plan. Common shares will not be deemed to have been issued pursuant to the Omnibus Incentive Plan with respect to any portion of an award that is settled in cash.

Individual Limits. The maximum number of shares for which options may be granted and the maximum number of shares subject to share appreciation rights which may be granted to any person in any calendar year is, in each case,              shares. The maximum number of shares subject to other awards which may be granted to any person in any calendar year is              shares. The maximum amount that may be paid to any person in any calendar year with respect to cash awards is $        .

 

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Non-Employee Director Limits. The maximum aggregate grant date fair value, as determined in accordance with IFRS 2, of awards granted to any non-employee director for service as a director pursuant to the Omnibus Incentive Plan during any fiscal year, together with any other fees or compensation paid to such director outside of the Omnibus Incentive Plan for services as a director may not exceed $         (or, in the fiscal year of any director’s initial service, $         ).

Options. All options granted under the Omnibus Incentive Plan will have an exercise price determined and approved by our board of directors at the time of grant, which shall not be less than the market price of the common shares on the date of the grant. For purposes of the Omnibus Incentive Plan, the market price of the common shares as at a given date shall be the closing price on the last trading day before such date.

An option shall be exercisable during a period established by our board of directors which shall commence on the date of the grant and shall terminate not later than ten years after such grant date of the option. The Omnibus Incentive Plan will provide that the exercise period shall automatically be extended if the date on which it is scheduled to terminate shall fall during a blackout period. In such cases, the extended exercise period shall terminate ten business days after the last day of the blackout period.

In order to facilitate the payment of the exercise price of the options, the Omnibus Incentive Plan allows for broker-assisted “cashless exercise” or “net exercise”, subject to the procedures set out in the Omnibus Incentive Plan, including the consent of the board of directors, when required.

Share Appreciation Rights. For share appreciation rights granted under the Omnibus Incentive Plan, the participant, upon exercise of the share appreciation right, will have the right to receive, as determined by our board of directors, cash or a number of common shares equal to the excess of: (a) the market price of a common share on the date of exercise and (b) the grant price of the share appreciation right as determined by the board of directors, which grant price cannot be less than the market price of a common share on the date of grant. Subject to any vesting conditions imposed by our board of directors, a share appreciation right shall be exercisable during a period established by our board of directors which shall commence on the date of the grant and shall terminate not later than ten years after the date of the granting of the share appreciation right. The Omnibus Incentive Plan will provide that the exercise period shall automatically be extended if the date on which it is scheduled to terminate shall fall during a blackout period. In such cases, the extended exercise period shall terminate ten business days after the last day of the blackout period.

Restricted Shares. Our board of directors is authorized to grant awards of restricted shares to eligible persons under the Omnibus Incentive Plan. The common shares awarded as restricted shares will be subject to such restrictions as our board of directors may impose (including, without limitation, a restriction on or prohibition against the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the board of directors determines. Participants in Canada are not eligible to receive a grant of restricted shares under the Omnibus Incentive Plan.

Restricted Share Units. Our board of directors is authorized to grant restricted share units evidencing the right to receive common shares, cash based on the value of a common share or a combination thereof at some future time to eligible persons under the Omnibus Incentive Plan. The delivery of the common shares or cash may be subject to the satisfaction of performance conditions or other vesting conditions.

Deferred Share Units. Our board of directors is authorized to grant deferred share units to eligible persons under the Omnibus Incentive Plan. A deferred share unit represents an unfunded notional investment in our common shares and may be settled, at the board of directors’ discretion, in common shares, cash based on the value of a common share or a combination thereof. The delivery of the common shares or cash may be subject to the satisfaction of performance conditions or other vesting conditions.

Performance Awards. Our board of directors is authorized to grant performance awards to eligible persons under the Omnibus Incentive Plan. A performance award (i) may be denominated or payable in cash, common shares

 

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(including, without limitation, restricted shares, restricted share units and deferred share units), other securities, other awards or other property, and (ii) will confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the board of directors establishes. Subject to the terms of the Omnibus Incentive Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award granted, the amount of any payment or transfer to be made pursuant to any performance award and any other terms and conditions of any performance award will be determined by the board of directors.

Performance Criteria. The Omnibus Incentive Plan provides that grants of performance awards may be made based upon, and subject to achieving, “performance objectives” over a specified performance period. Performance objectives with respect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) are limited to an objectively determinable measure or objectively determinable measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; net sales; sales by location or store type; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, and/or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; operating efficiencies; operating income; net income; share price; shareholder return; sales of particular products or services; customer acquisition or retention; buyer contribution; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings.

To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), our compensation committee may provide in the case of any award intended to qualify for such exception that one or more of the performance objectives applicable to an award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by generally accepted accounting principles) occurring during the performance period of such award that affect the applicable performance objectives.

Adjustments. The Omnibus Incentive Plan will also provide that appropriate adjustments, if any, will be made by our board of directors in its sole discretion in connection with a change in the issued and outstanding common shares by reason of any stock dividend or split, recapitalization, amalgamation, consolidation, combination or exchange of shares, or other corporate change, and subject where required to the prior approval of the applicable stock exchange, appropriate substitution or adjustment in the number or kind of securities reserved for issuance pursuant to the Omnibus Incentive Plan and the number and kind of securities subject to unexercised awards granted prior to such change, if applicable, and in the exercise price therefor. If we are reorganized, amalgamated with another corporation or consolidated, our board of directors will make such provisions under the Omnibus Incentive Plan as the board of directors in its sole discretion deems appropriate.

Trigger Events; Change of Control. The Omnibus Incentive Plan will provide that certain events, including termination for cause, resignation, termination other than for cause, retirement, death or disability, may trigger forfeiture or reduce the vesting period, where applicable, of the award, subject to the terms of the participant’s agreement. A participant’s grant agreement or any other written agreement between a participant and us may provide, where applicable, that unvested awards be subject to acceleration of vesting and exercisability in certain circumstances, including in the event of certain change of control transactions. For example, our board of directors may at its discretion, acting in good faith, accelerate the vesting, where applicable, of any outstanding awards notwithstanding the previously established vesting schedule, regardless of any adverse or potentially

 

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adverse tax consequences resulting from such acceleration or, subject to applicable regulatory provisions and shareholder approval, extend the expiration date of any award, provided that the period during which an option is exercisable does not exceed ten years from the date such option is granted. Similarly, our board of directors may at its discretion, acting in good faith, provide in the event of certain change of control transactions that any award be substituted, converted or replaced by new awards of similar value (including awards of the acquiring or surviving entity), be assumed by the acquiring or surviving entity, or be commuted for or into any other security or any other property or cash.

Amendments and Termination. Our board of directors may suspend or terminate the Omnibus Incentive Plan at any time, or from time to time amend or revise the terms of the Omnibus Incentive Plan or of any granted award, provided that no such suspension, termination, amendment or revision will be made, (i) except in compliance with applicable law and with the prior approval, if required, of the shareholders,             , the TSX or any other regulatory body having authority over our company, and (ii) in the case of an amendment or revision, if it would materially adversely affect the rights of any participant, without the consent of the participant except as permitted by the terms of the Omnibus Incentive Plan, provided however, subject to any applicable rules of              and the TSX, the board of directors may from time to time, in its absolute discretion and without the approval of shareholders, make the following amendments to the Omnibus Incentive Plan or any outstanding award:

 

•

any amendment to the vesting provisions, if applicable, or assignability provisions of awards;

 

•

any amendment to the expiration date of an award that does not extend the terms of the award past the original date of expiration for such award;

 

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any amendment regarding the effect of termination of a participant’s employment or engagement;

 

•

any amendment which accelerates the date on which any option may be exercised under the Omnibus Incentive Plan;

 

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any amendment to the definition of an eligible person under the Omnibus Incentive Plan;

 

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any amendment necessary to comply with applicable law or the requirements of             , the TSX or any other regulatory body;

 

•

any amendment of a “housekeeping” nature, including, without limitation, to clarify the meaning of an existing provision of Omnibus Incentive Plan, correct or supplement any provision of the Omnibus Incentive Plan that is inconsistent with any other provision of the Omnibus Incentive Plan, correct any grammatical or typographical errors or amend the definitions in the Omnibus Incentive Plan;

 

•

any amendment regarding the administration of the Omnibus Incentive Plan;

 

•

any amendment to add an insider participation limit to the Omnibus Incentive Plan; and

 

•

any other amendment that does not require the approval of the holders of common shares pursuant to the amendment provisions of the Omnibus Incentive Plan.

For greater certainty, our board of directors shall be required to obtain shareholder approval to make the following amendments:

 

•

any increase in the maximum number of common shares that may be issuable pursuant to the Omnibus Incentive Plan;

 

•

any reduction in the exercise price of an option or share appreciation right or any cancellation of an option or share appreciation right and replacement of such option or share appreciation right with an option or share appreciation right with a lower exercise price, to the extent such reduction or replacement benefits an insider;

 

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any extension of the term of an award beyond its original expiry time to the extent such amendment benefits an insider; and

 

•

any amendment to the amendment provisions of the Omnibus Incentive Plan.

 

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Except as specifically provided in an award agreement approved by our board of directors, awards granted under the Omnibus Incentive Plan are generally not transferable other than by will or the laws of descent and distribution.

We currently do not provide any financial assistance to participants under the Omnibus Incentive Plan.

Legacy Option Plan

We have previously granted options to acquire Class B Common Shares and Class A Junior Preferred Shares to certain directors, officers and employees under the Legacy Option Plan. The following discussion is qualified in its entirety by the full text of the Legacy Option Plan.

The Legacy Option Plan allows for the grant of options to our directors, officers and full-time and part-time employees. Our board of directors is responsible for administering the Legacy Option Plan and has the sole and complete authority, in its sole discretion, to determine the individuals to whom options may be granted and to grant options in such amounts and, subject to the provisions of the plan, on such terms and conditions as it determines including: (i) the time or times at which options may be granted, (ii) the exercise price, (iii) the time or times when each option vests and becomes exercisable and the duration of the exercise period (provided however that the exercise period may not exceed 10 years), (iv) whether restrictions or limitations are to be imposed on the Class B Common Shares and Class A Junior Preferred Shares underlying options and the nature of such restrictions or limitations and (v) any acceleration of exercisability or waiver of termination regarding any option.

Pursuant to the Legacy Option Plan, the aggregate number of Class B Common Shares and Class A Junior Preferred Shares that may be issued pursuant to the exercise of options cannot represents more than 10% of the common shares of our company (on an as-converted to or as-exercised basis for or exchangeable into common shares of our company) and to the extent options terminate for any reason prior to exercise in full or are cancelled (with the consent of the optionee), the Class B Common Shares and Class A Junior Preferred Shares are added back to the applicable number of shares reserved for issuance and become available for grant under the plan.

Options. All options granted under the Legacy Option Plan have an exercise price that is not less than the fair market value of the Class B Common Shares and Class A Junior Preferred Shares at the time of grant, as determined in good faith by our board of directors.

An option granted under the Legacy Option Plan is exercisable no later than ten years after the date of grant. In order to facilitate the payment of the exercise price of the options, the Legacy Option Plan allows for the participant to surrender options in order to “net exercise”, subject to the procedures set out in the Legacy Option Plan, including the consent of our board of directors.

Trigger Events; Change of Control. The Legacy Option Plan provides that certain events, including termination for cause, termination without cause, retirement, disability or death, may trigger forfeiture or reduce the vesting period, where applicable, of the option, subject to the terms of the participant’s agreement. Our board of directors may, in its discretion, at any time prior to or following such events, permit the exercise of any or all options held by the optionee in the manner and on the terms authorized by the board of directors, provided that the board of director cannot, in any case, authorize the exercise of an option beyond the expiration of the exercise period of the particular option. Otherwise, options granted may generally only be exercised during the lifetime of the optionee by such optionee personally. The Legacy Option Plan also provides that, in connection with a subdivision or consolidation of Class B Common Shares, Class A Junior Preferred Shares or any other capital reorganization or a payment of a stock dividend (other than a stock dividend that is in lieu of a cash dividend), our board of directors may make certain adjustments to outstanding options and authorize such steps to be taken as may be equitable and appropriate to that end. In the event of an amalgamation, combination, plan of arrangement, merger or other reorganization, including by sale or lease of assets or otherwise, or of the payment

 

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of an extraordinary dividend, our board of directors may also make certain adjustments to outstanding options and authorize such steps to be taken as may be equitable and appropriate to that end. In the event of certain change of control transactions or an initial public offering, our board of directors may (i) provide for substitute or replacement options of similar value from, or the assumption of outstanding options by, the acquiring or surviving entity; (ii) provide that all options shall terminate, provided that any outstanding vested options shall remain exercisable until consummation of such change of control transaction or initial public offering or (iii) accelerate the vesting of any or all outstanding options.

Amendments and Termination. Our board of directors may, without notice, at any time from time to time, amend, suspend or terminate the Legacy Option Plan or any provisions hereof in such respects as it, in its sole discretion, determines appropriate, except that it may not without the consent of the optionee (or the representatives of his or her estate) materially alter or impair any rights or obligations arising from any option previously granted to such optionee under the Legacy Option Plan that remains outstanding.

Recapitalization. As part of the Recapitalization, all of the outstanding options under the Legacy Option Plan will become options to acquire common shares thereunder. Options to acquire a total of              common shares will be outstanding under the Legacy Option Plan following the Recapitalization, and, following completion of this offering, the common shares issuable upon exercise of such options will represent, in the aggregate,     % of the common shares issued and outstanding upon completion of this offering (assuming no exercise of the underwriter’s option to purchase additional shares). Following the closing of this offering, no additional options will be granted under the Legacy Option Plan. For additional information relating to options outstanding under the Legacy Option Plan, see “Description of Share Capital—Options to Purchase Common Shares.”

In connection with this offering, the Legacy Option Plan will be amended and restated to, among other things, include terms and conditions required by the TSX for a stock option plan and to mirror the terms of the Omnibus Incentive Plan summarized above under “—Omnibus Incentive Plan” to the extent applicable to a “legacy” stock option plan under similar circumstances.

 

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Certain Relationships and Related Party Transactions

Review, Approval or Ratification of Transactions with Related Parties

Prior to the completion of this offering, we expect to implement formal policies and procedures for the review, approval or ratification of related-party transactions that may be required to be reported under the disclosure rules applicable to us. As of the date of this prospectus, such transactions, if and when they are proposed or have occurred, are reviewed by one or more of the board of directors, audit committee or the compensation committee (other than the directors or committee members involved, if any) on a case-by-case basis, depending on whether the nature of the transaction would otherwise be under the purview of the audit committee, the compensation committee or the board of directors.

Management Agreement

In connection with the Acquisition, on December 9, 2013 we entered into a Management Agreement with certain affiliates of Bain Capital, L.P., which we refer to as the Manager for a term of five years, pursuant to which the Manager provides us with certain business consulting services. In exchange for these services, we pay the Manager a quarterly fee equal to four-tenths of one percent (0.4%) of our total revenue generated during the calendar quarter beginning six months prior to such payment date, not to exceed $2 million per year. The fees paid for these services, including fees related to the Acquisition were $1.1 million, $0.9 million and $0.3 million, respectively for fiscal 2016, fiscal 2015 and fiscal 2014. We also reimburse the Manager for out-of-pocket expenses incurred in connection with the provision of the services. In addition, the Manager is entitled to a transaction fee in connection with any financing, acquisition, disposition or change of control transaction. The Management Agreement includes customary exculpation and indemnification provisions in favor of the Manager and its affiliates. The Management Agreement will terminate pursuant to its terms upon the consummation of this offering, at which time we will pay the Manager a lump sum amount of $        . The indemnification and exculpation provisions in favor of the Manager will survive such termination.

Promissory Notes and Continuing Subscription Agreement

In connection with the Acquisition, on December 9, 2013, we (i) issued a Senior Convertible Subordinated Note and a Junior Convertible Subordinated Note to Bain Capital, which we refer to as the Subordinated Promissory Notes, and (ii) entered into a Continuing Subscription Agreement with Bain Capital. The Senior Convertible Subordinated Note was issued in the amount of $79.716 million and bears interest at a rate of 6.7% per year. Any accrued and unpaid interest on the principal amount of each Subordinated Promissory Note is payable in cash annually on the last business day of November each year. Pursuant to the Continuing Subscription Agreement, a substantial portion of the interest paid to Bain Capital on the Subordinated Promissory Notes each year is reinvested in the form of (i) a subscription for Class A Junior Preferred Shares and (ii) an additional loan under the Junior Convertible Subordinated Note. As a result, since December 9, 2013, we have issued an aggregate of 3,426,892 Class A Junior Preferred Shares, for an aggregate subscription price of $3,726,904, and borrowed the aggregate amount of $5,590,354 under the Junior Convertible Subordinated Note, which also bears interest at a rate of 6.7% per year. In connection with the Recapitalization, we expect that the entire unpaid principal and accrued interest amounts will be repaid and that the Continuing Subscription Agreement will be terminated.

Promissory Note from DTR LLC

As part of the Recapitalization, we will receive a non-interest bearing promissory note from DTR LLC, an entity indirectly controlled by our Chief Executive Officer, which we refer to as the DTR Promissory Note. Prior to the completion of this offering, the DTR Promissory Note will be extinguished by its settlement against the redemption of preferred shares to be issued to DTR LLC as part of the Recapitalization.

 

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Interest of Management and Others in Material Transactions

Except as set out above or described elsewhere in this prospectus, there are no material interests, direct or indirect, of any of our directors or executive officers, any shareholder that beneficially owns, or controls or directs (directly or indirectly), more than 10% of any class or series of our outstanding voting securities, or any associate or affiliate of any of the foregoing persons, in any transaction within the three years before the date in this prospectus that has materially affected or is reasonably expected to materially affect us or any of our subsidiaries.

Indebtedness of Directors, Executive Officers and Employees

Except as set out above or described elsewhere in this prospectus, as of the date of this prospectus, none of our directors, executive officers, employees, former directors, former executive officers or former employees or any of our subsidiaries, and none of their respective associates, is indebted to us or any of our subsidiaries or another entity whose indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar agreement or understanding provided by us or any of our subsidiaries, except, as the case may be, for routine indebtedness as defined under applicable securities legislations.

 

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Principal and Selling Shareholders

The following table sets forth information relating to the beneficial ownership of our common shares as of September 30, 2016, by:

 

•

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding common shares, which includes each of the selling shareholders;

 

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each of our directors;

 

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each of our named executive officers; and

 

•

all directors and executive officers as a group.

Beneficial ownership is determined in accordance with SEC rules. The information is not necessarily indicative of beneficial ownership for any other purpose. In general, under these rules a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power or investment power with respect to such security. A person is also deemed to be a beneficial owner of a security if that person has the right to acquire beneficial ownership of such security within 60 days. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all common shares held by that person.

The percentage of common shares beneficially owned is computed on the basis of              of our common shares outstanding as of                     , 2016. Common shares that a person has the right to acquire within 60 days of                     , 2016 are deemed outstanding for purposes of computing the percentage ownership of such person’s holdings, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o Canada Goose Holdings Inc., 250 Bowie Avenue, Toronto, Ontario, Canada, M6E 4Y2.

 

(Name and address of beneficial owner)

Shares beneficially owned prior to this offering

Number of shares being offered

Shares beneficially owned after this offering (no exercise of option to purchase additional shares)

Shares beneficially owned after this offering (full exercise of option to purchase additional shares)

Number

Percentage

Number

Percentage

Number

Percentage

5% shareholders:

Bain Capital Entities (1)(2)

Dani Reiss (3)(4)

Directors and named executive officers:

Ryan Cotton (5)

Joshua Bekenstein (5)

Paul Riddlestone

Scott Cameron

All executive officers and directors as a group (13 persons)

 

*	Less than 1%.

(1)

Includes 3,426,892 Class A Junior Preferred Shares registered in the name of Brent (BC) Finco S.à r.l (“Brent Finco”) and 7 Class A Common Shares and 53,144,000 Class A Senior Preferred Shares registered in the name of Brent (BC) Participation S.à r.l (“Brent Part” and with Brent Finco, the “Bain Capital Entities”), each of which is owned by Bent (BC) S.à r.l, which is owned by Bain Capital Integral Investors 2008, L.P. Bain Capital investors, LLC (“BCI”) is the general partner of Bain Capital Integral Investors 2008, L.P. As a result of the relationships described above, BCI may be deemed to share beneficial

 

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ownership of the shares held by each of the Bain Capital Entities. The governance, investment strategy and decision-making process with respect to investments held by the Bain Capital Entities is directed by BCI’s Global Private Equity Board (“GPEB”). By virtue of the relationships described in this footnote, GPEB may be deemed to exercise voting and dispositive power with respect to the shares held by the Bain Capital Entities. Each of the members of GPEB disclaims beneficial ownership of such shares to the extent attributed to such member solely by virtue of serving on GPEB. Each of the Bain Capital Entities has an address c/o Bain Capital Partners, LLC, John Hancock Tower, 200 Clarendon Street, Boston, MA 02116. Of the 3,426,892 Class A Junior Preferred Shares registered in the name of Brent Finco, 1,767,315 were purchased on November 30, 2015 pursuant to the Continuing Subscription Agreement. As part of the Recapitalization, the Class A Junior Preferred Shares and Class A Senior Preferred Shares will be repurchased for cancellation.

(2)

On a fully-diluted basis,              common shares, representing     % of the outstanding common shares upon completion of this offering (         common shares, representing     % of the outstanding common shares assuming the exercise in full of the underwriter’s option to purchase additional shares).

(3)

Includes 3 Class B Common Shares, 22,776,000 Class B Senior Preferred Shares and 34,164,000 Class B Junior Preferred Shares registered in the name of DTR LLC, an entity indirectly controlled by Dani Reiss. As part of the Recapitalization, the Class B Common Shares, Class B Senior Preferred Shares and Class B Junior Preferred Shares will be exchanged for other common shares and preferred shares, which preferred shares will be redeemed in settlement of the non-interest bearing promissory note issued by DTR LLC prior to the closing of this offering.

(4)

On a fully-diluted basis,              common shares, representing     % of the outstanding common shares upon completion of this offering (         common shares, representing     % of the outstanding common shares assuming the exercise in full of the underwriter’s option to purchase additional shares).

(5)

Mr. Cotton and Mr. Bekenstein are managing directors of Bain Capital. Mr. Cotton and Mr. Bekenstein each disclaim beneficial ownership of the securities held or controlled by the Bain Capital Entities. Their addresses are c/o Bain Capital Partners, LLC, John Hancock Tower, 200 Clarendon Street, Boston, MA 02116.

 

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Description of Indebtedness

We summarize below certain terms and provisions of the agreements that govern our asset-based Revolving Facility. We refer you to the exhibit to the registration statement relating to this offering for a copy of the agreement governing the Revolving Facility described below as this summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the agreements. Unless noted otherwise, dollar amounts herein are Canadian dollars.

Revolving Facility

General

On June 3, 2016, Canada Goose Holding Inc. and its wholly-owned subsidiaries, Canada Goose Inc. (“CGI Borrower”) and Canada Goose International AG (“Swiss Borrower”), entered into a senior secured asset-based revolving facility (the “Revolving Facility”), with Canadian Imperial Bank of Commerce, as administrative agent, and certain financial institutions as lenders. The Revolving Facility has commitments of $150.0 million with a seasonal increase of up to $200.0 million during peak season (June 1 through November 30, the “Peak Season”). In addition, the Revolving Facility includes a letter of credit sub-facility of $25.0 million. In respect of letters of credit issued in a currency other than Canadian dollars, U.S. dollars or Euros, the letter of credit sub-facility is capped at $5.0 million in such alternative currency.

The borrowing base under the Revolving Facility, subject to certain exceptions and customary reserves, equals (i) with respect to CGI Borrower, the sum of (a) 90% of eligible credit card receivables, (b) 90% of credit enhanced eligible trade receivables (or 85% of non-credit enhanced eligible trade receivables) and (c) 90% (or 92.5% during Peak Season) of the appraised net orderly liquidation value of eligible inventory (including eligible in-transit inventory and eligible letter of credit inventory), in each case, of CGI Borrower and other CGI borrowing base parties (the “CGI Borrowing Base”) and (ii) with respect to Swiss Borrower, the sum of (a) 90% of eligible credit card receivables, (b) 90% of credit enhanced eligible trade receivables (or 85% of non-credit enhanced eligible trade receivables) and (c) 90% (or 92.5% during Peak Season) of the appraised net orderly liquidation value of eligible inventory, in each case, of Swiss Borrower and any other Swiss borrowing base parties (the “Swiss Borrowing Base”).

As of September 30, 2016 we had $148.4 million outstanding under the Revolving Facility. Amounts under the Revolving Facility may be borrowed, repaid and re-borrowed to fund our general corporate purposes.

Interest Rates and Fees

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

A commitment fee will be charged on the average daily unused portion of the Revolving Facility of 0.25% per annum if average utilization under the Revolving Facility is greater than 50% or 0.375% if average utilization under the Revolving Facility is less than 50%. A letter of credit fee, with respect to standby letters of credit will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility equal to the relevant Applicable Margin for LIBOR Loans, and, with respect to trade or commercial letters of credit, 50% of the then applicable Applicable Margin on LIBOR Loans. A fronting fee will be charged on the aggregate face

 

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amount of outstanding letters of credit equal to 0.125% per annum. In addition, we pay the administrative agent under the Revolving Facility a monitoring fee of $1,000 per month.

Currencies

Borrowing will be available under the Revolving Facility in U.S. dollars, Canadian dollars, Euros and, subject to an aggregate cap of $40.0 million, such other currencies as are approved in accordance with the credit agreement governing the Revolving Facility, subject to any other items and conditions required by the administrative agent and the lenders.

Collateral; Guarantees

All obligations under the Revolving Facility are unconditionally guaranteed by Canada Goose Holdings Inc. and our U.S., Swiss, U.K. and Canadian subsidiaries. All obligations under the Revolving Facility, and the guarantees of those obligations, are secured, subject to certain exemptions, by substantially all of our assets and the assets of CGI Borrower, Swiss Borrower and the guarantors.

Maturity; Prepayments

The maturity date of the Revolving Facility is June 3, 2021.

Except with respect to protective advances under the Revolving Facility, if at any time (a) the aggregate amount outstanding under the Revolving Facility exceeds the lesser of (i) the total revolving commitment amount at such time and (ii) the aggregate borrowing base at such time (such lesser amount, the “Line Cap”), (b) the aggregate amount outstanding to the Swiss Borrower exceeds the line cap under the Swiss Borrowing Base or (c) the aggregate amount outstanding to the CGI Borrower exceeds the line cap under the CGI Borrowing Base, then we are required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.

Voluntary prepayments of the Revolving Facility and voluntary reductions of the unutilized portion of the commitment amount may be made at any time (subject to minimum repayment amounts and customary notice periods) without premium or penalty, other than customary “breakage” costs, if applicable.

Uncommitted Incremental Facility

We are able, at our option and subject to certain other conditions described in the credit agreement governing our Revolving Facility, to request that the Revolving Facility be increased in an aggregate amount not to exceed $100.0 million.

Amortization

There is no scheduled amortization under our Revolving Facility.

Covenants

The Revolving Facility contains a number of customary affirmative covenants and customary negative covenants that, among other things, will limit or restrict the ability of CGI Borrower and its restricted subsidiaries, and, in the case of the passive activity covenant described below, Canada Goose Holdings Inc.’s ability to (in each case, subject to certain exceptions):

 

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incur additional indebtedness (including guarantee obligations);

 

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incur liens;

 

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•

engage in certain fundamental changes, including changes in the nature of business, mergers, amalgamations, liquidations and dissolutions;

 

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sell assets;

 

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pay dividends or make distributions, and make share repurchases and redemptions;

 

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make acquisitions, investments, loans and advances;

 

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prepay or modify the terms of certain subordinated indebtedness;

 

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modify organizational documents;

 

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engage in certain transactions with affiliates;

 

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in the case of Canada Goose Holdings Inc., engage in activities other than as a passive holding company;

 

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change our fiscal year; and

 

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enter into negative pledge clauses and clauses restricting subsidiary distributions.

Financial Covenant

The Revolving Facility contains a springing consolidated fixed charge coverage ratio financial covenant that requires us to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 when Excess Availability falls below the greater of (i) $7.5 million and (ii) 10% of the Line Cap, which financial covenant will be tested on a trailing four quarter basis immediately upon trigger based on the most recently completed fiscal quarter for which financial statements were required to be delivered and on the last day of each subsequently completed fiscal quarter of CGI Borrower until Excess Availability exceeds the threshold specified above for 30 consecutive calendar days. Excess Availability under the Revolving Facility equals the remainder of (i) the sum of (x) the Line Cap plus (y) the amount of unrestricted cash and cash equivalents of CGI Borrower and the guarantors that are held in accounts for which the administrative agent under the Revolving Facility has account control agreements in place, plus (z) the amount, if any, by which the aggregate borrowing base under the Revolving Facility exceeds the aggregate commitments under the Revolving Facility, over (ii) the sum of (x) the aggregate principal amount of all outstanding loans (including swingline loans) under the Revolving Facility and (y) all outstanding letters of credit under the Revolving Facility (plus, without duplication, all unreimbursed disbursements with respect to any letters of credit under the Revolving Facility).

Events of Default