SLEEP COUNTRY CANADA HOLDINGS INC. ANNUAL INFORMATION FORM - For the year ended December 31, 2020
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SLEEP COUNTRY CANADA HOLDINGS INC.
ANNUAL INFORMATION FORM
For the year ended December 31, 2020
March 2, 2021TABLE OF CONTENTS
INTRODUCTION............................................................................................................................................................ 1
CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION .............................................. 1
NON-IFRS MEASURES ................................................................................................................................................ 2
DEVELOPMENT OF THE BUSINESS .......................................................................................................................... 3
DESCRIPTION OF THE BUSINESS ............................................................................................................................. 6
RISK FACTORS .......................................................................................................................................................... 14
MATERIAL CONTRACTS ........................................................................................................................................... 26
DIRECTORS AND EXECUTIVE OFFICERS ............................................................................................................... 28
MARKET FOR SECURITIES ....................................................................................................................................... 32
TRANSFER AGENT AND REGISTRAR ..................................................................................................................... 32
INTERESTS OF EXPERTS ......................................................................................................................................... 32
ADDITIONAL INFORMATION ..................................................................................................................................... 32
AUDIT COMMITTEE.................................................................................................................................................... 33
APPENDIX A CHARTER OF THE AUDIT COMMITTEE ......................................................................................... A-1
-i-INTRODUCTION
Unless otherwise stated, the information contained in this Annual Information Form (“AIF”) is given as of
December 31, 2020 and all dollar amounts are expressed in Canadian dollars.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This AIF contains "forward looking information" within the meaning of applicable Canadian securities laws.
Forward-looking information may relate to the future outlook of Sleep Country Canada Holdings Inc. ("Sleep Country"
or the "Company") and anticipated events or results and may include information regarding the financial position,
business strategy, growth strategy, budgets, operations, financial results, taxes, dividends, plans and objectives of the
Company. Particularly, information regarding future results, performance, achievements, prospects or opportunities of
the Company or the Canadian market is forward-looking information. In some cases, but not necessarily in all cases,
forward-looking information can be identified by the use of forward looking terminology such as "plans", "targets",
"expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes",
"anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition,
any statements that refer to expectations, projections or other characterizations of future events or circumstances
contain forward-looking information. Statements containing forward-looking information are not historical facts but
instead represent management's expectations, estimates and projections regarding future events.
Discussions containing forward-looking information may be found, among other places, under "Description of
the Business", "Dividend Policy" and "Risk Factors". These forward-looking statements include, among other things,
statements relating to:
the impact of the novel coronavirus (“COVID-19”) pandemic;
the Company's expectations regarding its revenue, expenses and operations;
the Company's future growth plans, including new store openings, relocations, renovations and closures
in new and existing markets in addition to acquisitions;
the Company's expectations with respect to growth resulting from its marketing and advertising efforts;
the Company's expectations with respect to growth resulting from the continued implementation of the
enhanced store design;
the Company's expectations with respect to performance resulting from the implementation of the new
ERP;
the Company's expectations with respect to growth resulting from the continued implementation of its
sales associate training programs;
the Company's intention to declare dividends and the anticipated timing and quantum of any dividends;
the Company's expectations with respect to its relationships with its suppliers;
the Company's expectations with respect to its ability to leverage its scale to improve margins;
the Company’s expectations of realized benefits as a result of its acquisition of the Endy brand;
the Company’s expectation of trends and challenges that may occur in the market and/or industry in which
it operates; and
the market price of the Company’s common shares ("Common Shares").
These statements and other forward-looking information are based on opinions, assumptions and estimates
made by the Company in light of its experience and perception of historical trends, current conditions and expected
future developments, as well as other factors that the Company believes are appropriate and reasonable in the
circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. In addition,
if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments
are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements
contained in this AIF and the documents incorporated by reference herein. Accordingly, prospective purchasers are
cautioned not to place undue reliance on such statements.
Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that,
while considered reasonable by the Company as of the date such statements are made, are subject to known and
unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity,
performance or achievements to be materially different from those expressed or implied by such forward-looking-2-
information. Information about factors or assumptions that could cause actual results to differ materially from
expectations and that are applied in making forward-looking statements may be found in this AIF under "Risk Factors":
COVID-19 emerging risk; enterprise risks and risk management; industry risk and economic sensitivity; effectiveness
and efficiency of advertising expenditures; ability to maintain profitability and implement growth strategy; fluctuations in
same store sales; liquidity risk; damage to the Company's reputation; competition; seasonality and weather; business
continuity; real estate; remote work; workplace health and safety; dependence on key personnel; employee attraction,
development and succession planning; labour relations; relationship with suppliers; service providers; intellectual
property; dependence on distribution centres and timely delivery to customers; inventory management; dependence
on enterprise resource planning system; IT systems implementations and data management; internet, privacy,
confidentiality and cyber security; governance, change management, process and efficiency; insurance; comfort and
price guarantees; debt covenants in Credit Facility; dependence on operating subsidiary; risks relating to Endy
acquisition; fluctuations in product cost, inflation and foreign currency; legal proceedings; government regulation; third-
party consumer financing arrangements; price volatility of the Common Shares; forward-looking information; payment
of dividends; internal control over financial reporting; dilution; and securities analysts' research or reports could impact
price of Common Shares. These factors and assumptions are not intended to represent a complete list of the factors
and assumptions that could affect the Company or the forward-looking information provided herein. These factors and
assumptions, however, should be considered carefully.
All of the forward-looking information in this AIF is qualified by these cautionary statements. Statements
containing forward-looking information contained or incorporated by reference herein are made only as of the date of
this AIF. The Company expressly disclaims any obligation to update or alter statements containing any forward-looking
information, or the factors or assumptions underlying them, whether as a result of new information, future events or
otherwise, except as required by law.
For additional information with respect to certain of these and other risks or uncertainties, reference should be
made to the section entitled "Risk Factors" on pages 14 to 26 of this AIF and to Sleep Country's continuous disclosure
materials filed from time to time with Canadian Securities Regulatory Authorities, which are available on the System for
Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com. Additional risks and uncertainties not
presently known to the Company or that Sleep Country currently believes to be less significant may also adversely
affect the Company.
NON-IFRS MEASURES
This AIF makes reference to certain non-International Financial Reporting Standards ("IFRS") measures such
as “Same Store Sales” (“SSS”), “EBITDA”, “Operating EBITDA”, “Operating EBITDA Margin”, “Adjusted Net Income”,
“Adjusted Basic EPS”, “Adjusted Diluted EPS“ and “Operating Days”. These measures are not recognized measures
under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable
to similar measures presented by other companies. Rather, these measures are provided as additional information to
complement IFRS measures by providing further understanding of the Company's results of operations from
management's perspective. Accordingly, they should not be considered in isolation or as a substitute for analysis of the
Company's financial information reported under IFRS. These non-IFRS measures are used to provide investors with
supplemental measures of the Company's operating performance and thus highlight trends in its core business that
may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that
securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of
issuers and to compare the Company's performance against others in the retail industry. The Company's management
also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare
annual operating budgets and to determine components of management compensation.
Prospective investors should review this information in conjunction with the Company's consolidated financial
statements, including the notes thereto, as well as the related management's discussion and analysis of financial
condition and results of operations.
For further details concerning how the Company calculates these non-IFRS measures, and for a reconciliation
to the most comparable IFRS measure, please refer to the management's discussion and analysis for the fiscal year
ended December 31, 2020 which is available on SEDAR at www.sedar.com.-3-
DEVELOPMENT OF THE BUSINESS
History
In 1994, Sleep Country, a mattress retailer, was founded by Christine Magee, Stephen K. Gunn and Gordon
Lownds with four stores in Vancouver. The Company continued to expand its operations and footprint by investing in
new stores and distribution centers across Canada.
In 2003, Sleep Country was listed on the Toronto Stock Exchange (the "TSX") as an income fund.
In January 2006, Sleep Country entered the Québec market through the acquisition of Dormez-vous? Sleep
Centres Inc.’s five stores and one distribution centre. After the acquisition, the Company continued to expand its
operations in Quebec under its banner “Dormez-vous?”TM.
In March 2006, the Company acquired Sleep America, LLC, a mattress retailer located in the State of Arizona
and began operating in the United States under the banner "Sleep America". In January 2015, the Company divested
its interest in Sleep America to a national U.S. mattress retailer and exited the U.S. market.
In 2008, the Sleep Country Canada Income Fund was acquired by a group of investors led by Birch Hill Equity
Partners Management Inc., together with members of management including co-founding partners Stephen Gunn and
Christine Magee, the Company's Chief Executive Officer - David Friesema, and Chief Business Development Officer
and President of Dormez-vous? - Stewart Schaefer.
On July 16, 2015, the Company completed its initial public offering (the "IPO") of 17,650,000 Common Shares
for aggregate gross proceeds of $300,050,000 and the Common Shares began trading on the TSX under the ticker
symbol "ZZZ". Immediately following completion of the IPO, the Company acquired (the "Acquisition") all of the issued
and outstanding shares of Sleep Country Canada Inc. ("SCCI"), Sleep Country US Holdco Canada Inc. ("SC US
Holdco") and SC Management Holding Inc. ("SC Management", and together with SCCI and SC US Holdco, the
"Acquired Entities") not already owned by it pursuant to the terms and conditions of the share purchase agreement
dated July 10, 2015 among the Company, SCCI, SC US Holdco, SC Management and the shareholders of SCCI, SC
US Holdco and SC Management (the "Purchase Agreement"). The Acquired Entities previously carried on, directly or
indirectly, the business of Sleep Country.
Pursuant to the Purchase Agreement, the purchase price payable by the Company to the existing
shareholders of the Acquired Entities for the purchased shares was $461,673,036 which was satisfied by (a) an
aggregate cash payment of $193,512,214, (b) the issuance to the existing shareholders of an aggregate of 13,126,666
Common Shares, and (c) the issuance to certain selling shareholders of an aggregate of $45,007,500 principal amount
of certain promissory notes, all of which were converted on August 31, 2015 into an aggregate of 2,647,500 Common
Shares. A business acquisition report was filed in respect of the Acquisition in compliance with National Instrument 51-
102 – Continuous Disclosure Obligations and is available online on SEDAR at www.sedar.com,
On December 6, 2018, the Company acquired the business of Overwater Limited, operating under the brand
name Endy, Canada’s leading online bed-in-a-box mattress company. This acquisition was made by Endy Canada Inc.
(“Endy”), a newly formed subsidiary of the Company, by purchasing a majority of the assets of Overwater Limited, net
of designated liabilities assumed.-4-
Three-Year History of the Business
The following table sets out selected IFRS and certain non-IFRS financial measures of the Company and
should be read in conjunction with the audited annual consolidated financial statements of SCC for fiscal years ended
December 31, 2020, December 31, 2019 and December 31, 2018.
(C$ thousands unless otherwise stated) 2020 2019 2018
Consolidated Income Statement
Revenues $ 757,699 $ 712,372 $ 622,977
Cost of sales 513,203 489,082 442,615
Gross profit 244,496 223,290 180,362
General and administrative expenses 134,926 125,826 93,760
Income before finance related
expenses, interest income and other
expenses (income) and income taxes 109,570 97,464 86,602
Finance related expenses 25,363 21,149 4,475
Interest income and other expenses
(income) - net 200 (788) (89)
Net Income before provision for income
taxes 84,007 77,103 82,216
Provision for Income taxes 20,700 21,643 22,575
Net income $ 63,307 $ 55,460 $ 59,641
EBITDA(1) $ 166,443 $ 151,914 $ 101,422
Operating EBITDA(1) $ 171,469 $ 155,932 $ 105,775
Operating EBITDA Margin 22.6% 21.9% 17.0%
Adjusted Net Income(1) $ 72,148 $ 59,251 $ 63,861
Earnings per share - Basic $ 1.73 $ 1.50 $ 1.61
Earnings per share - Diluted $ 1.71 $ 1.49 $ 1.59
Adjusted earnings per share - Basic(1) $ 1.97 $ 1.60 $ 1.72
Adjusted earnings per share - Diluted(1) $ 1.95 $ 1.59 $ 1.71
Dividends declared per share $ 0.390 $ 0.770 $ 0.720
31-Dec-20 31-Dec-19 31-Dec-18
Total assets $ 902,351 $ 917,052 $ 602,106
Lease liabilities and long-term debt $ 345,575 $ 446,196 $ 170,036
Notes:
(1) See the section entitled “Non-IFRS Measures” for further details concerning how the Company calculates EBITDA, Operating EBITDA,
Adjusted Net Income and Basic and Diluted Adjusted EPS and for a reconciliation to the most comparable IFRS measure in the Company’s
management’s discussion and analysis as at December 31, 2020.
Impact of COVID-19 Pandemic on the Company
On January 30, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a global public
health emergency. Within a few weeks, the number of confirmed COVID-19 cases escalated exponentially in many
countries around the world. The Company actively monitored the progress of the virus and continuously assessed its
impact on the business and its environment while taking the necessary corrective actions, as required. On March 11,
2020, the WHO declared the outbreak as a global pandemic. During March 2020, Canada experienced a rapid increase
in the number of verified COVID-19 cases thereby confirming the pandemic onset in Canada.
To address the COVID-19 global outbreak, governments around the world enacted emergency measures to
contain the spread of the virus. These measures included the implementation of travel bans, self-imposed quarantine
periods, self-isolation, physical distancing, requirement of wearing masks in public areas and the temporary closure of
non-essential businesses. These measures materially disrupted businesses, both in Canada and worldwide, resulting
in an uncertain and challenging environment.
As a result, in March 2020, the Company enacted its business continuity measures to support ongoing
operations, liquidity and financial flexibility. The Company continued using these measure, throughout the remaining
fiscal year as required. The primary focus of these measures was to keep associates safe, to secure business continuity-5-
with suppliers and customers, to offer the government and the community support and to maintain the Company’s long-
term viability and shareholder value.
Some of the specific measures the Company undertook in response to the pandemic include:
1. Closing its retail stores on March 21, 2020 while its delivery and eCommerce services were permitted to
continue operations. Beginning May 11, 2020, as provincial and municipal restrictions eased, the Company
began to re-open its store network. All of the Company’s stores reopened and resumed operations by June
24, 2020.
2. In Fall 2020, as the number of verified COVID-19 cases grew significantly across Canada, closing its retail
stores in certain locations as required by municipal and provincial governments to contain the spread of the
virus. As a result, in November 2020, the Company was required to temporarily close 16% of its retail stores
which, as restrictions continued to increase across Canada, grew to 65% of its retail stores as at December
31, 2020.
The Company’s municipal and provincial mandated store closures are:
Regions Lockdown Start Date Stores Reopened Date # of Stores
Manitoba 12-Nov-20 23-Jan-21 7
Toronto and Peel 23-Nov-20 TBD 38
York 14-Dec-20 22-Feb-21 13
Windsor -Essex 14-Dec-20 10-Feb-21 2
Hamilton 21-Dec-20 16-Feb-21 6
Quebec 25-Dec-20 8-Feb-21 61
North Bay 26-Dec-20 TBD 1
Remaining Ontario 26-Dec-20 16-Feb-21 54
3. Implementing new safety protocols in its stores, offices and delivery services which include a contactless
delivery option;
4. Retaining its furloughed associates with reduced pay during the mandated temporary closure of its stores in
Winter, with the financial support provided by the Canada Emergency Wage Subsidy “CEWS” federal
government program;
5. In Fall 2020, during the mandated partial lockdown of its retail stores, putting the affected sales associates on
temporary leave without pay;
6. Continuing to have open dialogues with key suppliers, landlords and partners;
7. Actively managing liquidity to be prudent and ensure financial flexibility through various measures including
the following:
Securing an incremental $50 million accordion on its senior secured credit agreement;
Temporarily deferring 25% to 50% of the base salaries of Sleep Country’s Named Executive Officers,
as defined in the Company’s Management Information Circular available on SEDAR, which was
reinstated by the Company’s board of directors (the “Board”) on November 9, 2020;
Temporarily deferring the Board’s remaining 2020 cash compensation which was reinstated by the
Board on November 9, 2020;
Cancelled dividend payments in Q2 2020 and Q3 2020. Dividends payments were restored by the
Board on November 9, 2020.
Temporarily suspending the purchase of shares under the Company’s Normal Course Issuer Bid
(“NCIB”) program which was reinstated by the Board on November 9, 2020.
8. Continually evaluating and using available eligible government programs that are beneficial to the Company.
The Company qualified for wage subsidies under the CEWS government program from March 15, 2020 to
July 4, 2020, which provided the Company with a 75% wage subsidy, on eligible remuneration for eligible
associates to a weekly maximum of $847.-6-
9. Deferring certain capital expenditures and implementing certain cost-saving measures across the business.
The duration and continued impact of the COVID-19 pandemic is unknown at this time. Any estimate of the
length and severity of these developments is therefore subject to significant uncertainty, and accordingly estimates of
the extent to which the COVID-19 pandemic may materially and adversely affect the Company’s operations, financial
results and condition in future periods are also subject to significant uncertainty. Refer to the section entitled “Risk
Factors” for certain specific risks and uncertainties related to COVID-19.
DESCRIPTION OF THE BUSINESS
Business Overview
Sleep Country is Canada’s leading omnichannel specialty sleep retailer with a national brick-and-mortar
footprint and robust eCommerce platforms dedicated to supporting the health and wellbeing of Canadians by matching
each customer to their best night’s sleep. Sleep Country operates under three retail banners (the “Banners”):
“Sleep Country Canada™”, with omnichannel operations in Canada excluding Québec;
“Dormez-vous?™”, with omnichannel operations in Québec; and
“Endy™”, Canada’s leading online mattress-in-a-box retailer.
Sleep Country continues to grow its customer base and take greater market share across the country with new
and renovated stores, expanding eCommerce platforms, strategic partnerships, a growing product assortment and
targeted marketing. On December 31, 2020, Sleep Country had 281 stores and 17 distribution centres across Canada.
Sleep Country’s stores are, on average, approximately 5,000 square feet and offer customers Canada’s largest
selection of mattresses, both made in Canada and imported from countries around the world, along with bases, metal
frames and lifestyle bases. Sleep Country also sells a wide assortment of complementary sleep related products
(“Accessories”) which include pillows, pillowcases, sheets, blankets, throws, duvets, duvet covers, mattress toppers,
mattress protectors, pet beds, sleep essentials, weighted blankets, headboards, footboards and platforms. Each store
is staffed by the Company’s Sleep Experts who are dedicated to supporting the health and wellbeing of Canadians by
matching each customer to their best night’s sleep. All the Company’s stores are corporate-owned thereby enabling it
to develop and maintain a strong culture resulting in a consistent and superior in-store and home delivery customer
experience.
The Company continues to grow and optimize its eCommerce platforms through continued investment in the
Company’s Sleep Country, Dormez-vous? and Endy websites. In addition, the Company retails through the Walmart.ca
marketplace as the exclusive vendor of traditional mattresses. The Company continues to invest in omnichannel
capabilities to seamlessly link the physical and digital shopping experiences. These investments enable the Company
to evolve alongside the Canadian consumer and holistically serve the sleep needs of Canadians across channels and
brands.
Sleep Country Canada
Sleep Country Canada launched its concept in the Vancouver market with four stores in 1994 and has since
expanded across Canada. As at December 31, 2020, the banner has 220 corporately owned stores and 14 distribution
centres in British Columbia, Alberta, Manitoba, Saskatchewan, Ontario, Nova Scotia, New Brunswick and Prince
Edward Island. The Company’s regional footprint includes the following distribution centres: Victoria, BC; Richmond,
BC; Kelowna, BC; Calgary, AB; Edmonton, AB; Winnipeg, MB; Regina, SK; Brampton, ON; London, ON; Ancaster,
ON; Cobourg, ON; Ottawa, ON; Moncton, NB and Halifax, NS.
The banner also has a robust eCommerce platform that retails its entire assortment of sleep products.
Dormez-vous?
In Quebec, Sleep Country operates under the “Dormez-vous?” banner. Dormez-vous? launched its first store
in April 1994 and has continued to expand over the last 26 years. As of December 31, 2020, the Dormez-vous? banner
has 61 stores with three distribution centres in Montréal and Québec City.
The banner also has a robust eCommerce platform that retails its entire assortment of sleep products.-7-
Endy
Launched in 2015, Endy is Canada’s leading mattress-in-a-box eCommerce retailer. The brand’s award-
winning Endy mattress-in-a-box is engineered to offer the perfect balance of comfort and support. Endy’s product
assortment includes The Endy Pillow, The Endy Sheets, The Endy Mattress Protector, The Endy Duvet, The Endy
Duvet Cover, The Endy Bed Frame and The Endy Weighted Blanket.
In December 2018, the Company acquired substantially all the operating assets of Endy, further strengthening
its position as Canada’s leading omnichannel specialty sleep retailer. The acquisition diversified the Company’s brand
portfolio and channel structure, added best-in-class eCommerce and digital marketing capabilities and positioned the
Company to expand its customer reach and meet the evolving sleep needs of Canadians.
Corporate Structure
The Company was incorporated under the Canada Business Corporations Act (the "CBCA") on May 27, 2015.
As December 31, 2020, SCCI and Endy are the two subsidiaries of the Company. The Company beneficially
owns, controls or directs, directly or indirectly, 100% of the votes attaching to all voting securities of SCCI and Endy.
The Company manages its business on the basis of two operating segments, which is consistent with the
internal reporting provided to the chief operating decision-maker, the Chief Executive Officer. The Company has only
one reportable segment as the operating segments meet the aggregation criteria of IFRS 8. The Company operates in
Canada, which is its country of domicile.
The registered and head office of the Company is located at 7920 Airport Road, Brampton, ON, L6T 4N8.
The Industry
The Company believes that the Canadian mattress industry is characterized by steady, stable long-term
growth. The Company believes the industry is well-positioned to continue its growth trajectory given favourable
fundamentals and long-term trends driven by the following key factors:
Necessity item: Mattresses are a necessity rather than a fashion purchase. During an economic downturn,
purchases are typically deferred and not lost.
Replacement cycle: Customers typically replace their mattresses every 8 to 12 years, generating a steady
flow of recurring demand.
Demographic trends: Unit demand is further driven by steady long-term demographic trends, including
general population increases, the formation of new households, the growth in recreational properties and
the trend towards a larger number of rooms in homes.
Consumer preferences for high-quality sleep: In recent years, the mattress industry has experienced an
increase in the demand for larger size mattresses and for premium quality products, due in some measure
to the aging North American population, its relative affluence and its growing health awareness. The
Company believes that this increase in demand for larger and better quality products has resulted in a
shift to higher-priced mattress sets.
Shift toward specialty retailers: There has been a shift in consumer preference toward specialty retailers
given the unique consumer needs, the big-ticket purchase and lack of consumer familiarity with
developments in product offerings.
Inflation: There is less price sensitivity, manufacturer price increases - mainly due to inflation, are typically
passed through to customers.
Health and Wellbeing: Canadians are increasingly prioritizing and investing in their health and sleep is
increasingly recognized as a pillar of health and wellbeing.-8-
Online research: Consumers often conduct online research to gain product knowledge and perform
general price comparison. Although many consumers want to test and purchase the product in-store,
there is an increasing percentage of consumers who are choosing to purchase mattresses online.
o In fiscal 2020, the Company experienced a significant acceleration in its eCommerce sales fueled by
its temporary store closures in response to the COVID-19 pandemic. As of the date of this AIF, the
Company‘s eCommerce platforms continue to experience significant growth in comparison to the prior
year, though no assurance can be provided regarding the sustainability of this demand. Investors
should also refer to the Company's description of certain impacts of the ongoing pandemic described
under “Impact of COVID-19 Pandemic on the Company”. For risks and uncertainties related to COVID-
19, refer to the section “Risk Factors – COVID-19 emerging risk” in this AIF.
Competitors
The retail mattress and sleep accessories industry is highly competitive and includes national and regional
full-line furniture retailers, departmental retailers, mass merchants, small regional specialty bedding retailers, online
mattress-in-a-box retailers and online marketplaces. The eight leading retailers in the industry include Sleep Country /
Dormez-vous?, Leon's Furniture Limited ("Leon's") / The Brick Ltd. ("The Brick"), The Hudson's Bay Company
("Hudson's Bay”), BMTC Group Inc. ("BMTC"), IKEA, Amazon.com, Inc ("Amazon"), Casper Sleep Inc. ("Casper") and
Costco Wholesale Canada Ltd. ("Costco"). Of these eight retailers, Sleep Country is the leading omnichannel sleep
retailer in Canada. The remaining industry sales are highly fragmented amongst a number of smaller specialty mattress
stores, other furniture stores, discounters and warehouse clubs and small independent retailers. See "Risk Factors —
Competition".
Omnichannel Leader in the Sleep Industry
Sleep Country is Canada’s leading omnichannel specialty sleep retailer with a national brick-and-mortar
footprint and robust eCommerce platforms dedicated to supporting the health and wellbeing of Canadians by matching
each customer to their best night’s sleep. The Company believes it can maintain a leading position through its key
success factors which include a highly differentiated service and operating model that has been unrivalled in execution
over the last 26 years in Canada and continues to serve as competitive advantage. Management continues to add
strategic layers to this successful model across infrastructure, channel, partnership and experience, in order to predict
and serve Canadians’ sleep needs.
Strong Brand Recognition
The Company’s Banners are Sleep Country, Dormez-vous? and Endy. These brands have strong recognition
in the Canadian marketplace. The Company continues to invest in marketing and brand development to create "top-
of-mind" unaided brand awareness which has provided it with a significant competitive advantage in the sleep industry.
Strategic Store Locations and Distribution Centers
As at December 31, 2020, the Company had 281 stores and 17 distribution centers across Canada. The
Company continues to expand its store network reaching new customers, both in existing and new markets. Stores
are, on average, approximately 5,000 square feet providing the Company with the optimal space to maximize its product
displays and its return per square foot rented. These stores are located in prominent and convenient locations making
it easy for customers to visit a store when they are shopping for their sleep needs.
Stores are strategically located in each regional market close to residential areas, in high-traffic, highly visible
locations with prominent signage and convenient access. Even with growing sales from the Company’s eCommerce
platforms, the majority of sales are repeatedly generated at the Company’s store locations. While customers may
research mattresses online, majority of customers continue to visit the Company’s retail stores to make a purchase.
The Company’s established store and distribution network across Canada provides the Company with the
ability and the flexibility in introducing new products efficiently and effectively either nationally or regionally. The
Company’s network, which continues to expand, provides the Company with key access points to engage customers
in the market.-9-
All retail store and distribution centre premises are leased and typically have a term from five to 15 years
including renewal options or permit continuation of the lease on a month-to-month basis. The Company believes that it
has a good relationship with each of its landlords and that the business carried on at these leased locations is
relocatable and that no individual lease or location is material.
Robust eCommerce Platforms
The Company continues to grow and optimize its eCommerce platforms through continued investment in the
Company’s Sleep Country, Dormez-vous? and Endy websites. In addition, the Company retails through the Walmart.ca
marketplace as the exclusive vendor of traditional mattresses. The Company continues to invest in omnichannel
capabilities to seamlessly link the physical and digital shopping experiences. These investments enable the Company
to evolve alongside the Canadian consumer and holistically serve the sleep needs of Canadians across channels and
brands.
To support the growth of its eCommerce sales, as well as provide customers with a truly omnichannel
experience, in 2020, the Company created an exclusive online Sleep Experts team to service its valued customers.
Customers are able to get live support with the Company’s Sleep Experts through a dedicated phone line or live chat
available on the Company’s eCommerce platforms.
In 2020, the Company experienced a significant acceleration of eCommerce sales fueled by its temporary
store closures in response to the COVID-19 pandemic. As of the date of this Annual Information Form, the Company‘s
eCommerce platforms continue to experience significant growth in comparison to the prior year, though no assurance
can be provided regarding the sustainability of this demand.
Superior Assortment of the World’s Leading Sleep Products
The Company offers customers a superior and extensive assortment of mattresses and accessories, including
a wide range of brands, comfort choices, styles, sizes and price points in order to meet its customers’ sleep needs.
One of the Company’s goals is to build market share of its Banners and to grow its revenue by strategically
continuing to expand its product assortment in the sleep ecosystem, including mattresses and Accessories categories.
Over the last few years, the Company has continued to drive significant growth in Accessories through
launching exciting new products, brands and categories such as cushions, throws, duvets, pillows, headboards, sheets,
silk pillowcases, baby mattresses and pet beds. The Company will continue to expand its product assortment through
in-house innovations and exclusive strategic partnerships with the world’s most innovative sleep brands such as Purple
Innovation, Malouf and Simba. These partnerships allow Sleep Country to serve as the exclusive Canadian retailer of
premier international sleep brands.
Highly Trained and Dedicated Workforce with a Strong Culture of Customer Service
The Company has a comprehensive approach to human resource management, whether it’s the Company’s
stores, distribution centers or offices. The Company is built on a foundation of family values, commitment to training
and development and competitive compensation and benefits. This has resulted in a workforce dedicated to delivering
superior customer service throughout the organization, underpinned by excellent relations between management and
associates and reinforced by high retention rates.
Unrivalled Customer Experience
The Company distinguishes itself through a superior customer experience both, in-store and its eCommerce
platforms, that results in high sales conversion and repeat customers.
A mattress is a big-ticket infrequent purchase and it is difficult to compare between models and brands.
Customers require a knowledgeable and effective sales associate, the Company’s Sleep Experts, to aid them in their
mattress purchases. The Sleep Experts also help customers in selecting the right accessories to help meet the
customers’ sleep needs and optimize their wellbeing. As a result, Sleep Country invests heavily in initial and ongoing
training to ensure it delivers a highly informative, friendly and helpful customer experience. This experience is further
enhanced by the cumulative knowledge and abilities of a long tenured full-time sales team with low turnover.
In 2020 the Company launched the Sleep Expert Chat capability to offer customers access to its Sleep Experts
on its eCommerce sites.- 10 -
As part of the customers’ experience, the Company provides a 100-day price or product return guarantee on
its mattresses.
The “white-glove” home delivery experience is a critical part of the customer’s journey. It plays an important
role in customer satisfaction, repeat sales and word-of-mouth advertising. The Company offers delivery seven days a
week within a specified three-hour time frame. Delivery personnel are uniformed, wear shoe covers to protect the
customer's home and are trained to be courteous. New mattresses are set-up, packaging materials are removed and
the replaced mattress set is either donated to charity or recycled. The entire customer experience is complemented by
a well-trained, in-house customer service department and a complete enterprise-wide information technology system
to support delivery logistics and provide a seamless customer experience.
Experienced and Committed Management Team
The Company is led by a highly experienced management team with a proven track record. On average, the
Company's executives have over 15 years of experience with Sleep Country and over 20 years of relevant industry
experience. The Company’s Chief Executive Officer, David Friesema, joined the Company in 1995 and, along with
Stewart Schaefer, President of Dormez-vous? and Chief Business Development Officer, and other members of senior
management, have been instrumental in driving the Company’s growth strategy. In addition, the Company's co-founder,
Christine Magee, serves as Chair of the Board.
Suppliers
The Company's overall size, regional market leadership and its approach to supplier relations result in strong
partnerships with its leading suppliers, Tempur-Sealy Canada, Serta Simmons Bedding Canada, Kingsdown Canada,
Primo International, Purple Innovation, Simba Sleep Incorporated, Dormeo North America and Springwall Sleep
Products, which yield many advantages. These advantages include better product cost, the ability to obtain unique
products, product features and high supplier service levels.
Trademarks
The Company's trademarks, such as Sleep Country CanadaTM, Dormez-vous?TM, EndyTM, Why buy a mattress
anywhere else?TM, All for SleepTM, Sleep Well. Stay Well.TM, BloomTM, PloomTM, Tout le monde devrait bien dormirTM,
and Tous pour le sommeilTM are protected under applicable intellectual property laws and are the property of the
Company. The Company believes that its brands and trademarks are important to its competitive position and marketing
of its merchandise. The Company takes a proactive approach to protecting its brand and trademarks.
Environment and Social Responsibility
Reducing Environmental Impacts
The Company is committed to environmental sustainability. The Company has formed a Sustainability Team
consisting of cross-functional leaders from across the organization. The team’s objective is to provide updates and
escalate opportunities for the Company’s environmental responsibility and social accountability initiatives. The team
has prioritized the areas below to mitigate the environmental impacts that are most material to the business.
(i) Products: (a) Adoption of more sustainable materials across key raw materials and packaging and
(b) promoting and improving environment stewardship in suppliers.
(ii) Transportation: (a) Driving efficiencies across the Company’s entire network; (b) finding new ways of
transporting more goods while consuming less energy and (v) establishing emissions reduction
targets.
(iii) Buildings: Continuously improving the Company’s energy efficiency in its real estate portfolio and
incorporating innovative new technologies into the Company’s store prototypes.
(iv) Waste: (a) Increasing the Company’s diversion rate and reducing waste generated to lessen its
impact on the environment and (b) paying fees to applicable provincial stewardship programs to help
fund the costs of collecting, transporting, recycling and safely disposing of consumer waste that
results from the Company’s selling activities. These fee contributions vary across provinces.- 11 -
Bed Donation & Recycling Program
The Company is proud to be the only national sleep retailer offering a comprehensive Mattress Recycling
Program. For every new mattress delivered, the Company’s team picks up the old mattress for a nominal green fee.
When collected, mattresses are examined and are either donated or recycled based on their condition. Donation
beneficiaries include Canadian Mental Health Association, Covenant House, Welcome Collective, Dans la Rue,
Women’s Centre of Calgary, Children’s Services – Edmonton, Furniture Bank, Women in Need Society (WINS) and
Matthew House. In 2020, over 155,000 mattress and foundation units were diverted from landfills through donation or
recycling.
Sleep Country Cares
From the very beginning, it has always been a privilege to give back to the communities where the Company
operates. Through the Sleep Country Cares Program, the Company is committed to supporting local charities that focus
on helping children and families in need. As a company that embraces the diversity and inclusiveness that makes
Canada great, Sleep Country works with charitable partners who support people of all ethnic backgrounds, sexual
orientation and gender identity.
Caring through the COVID-19 Pandemic
During the COVID-19 pandemic, the Company provided $1.5 million worth of essential sleep products. The
Company donated mattresses, beds, frames, sheets and pillows to create healthy sleeping arrangements for vulnerable
and at-risk communities, as well as, frontline medical workers. More than 70 organizations and hospitals have received
help from Sleep Country, including organizations like the Journey Home in Vancouver, YWCA in Regina, Toronto
Community Housing and Yellowhead Youth Centre in Edmonton. The Company worked closely with these
organizations and many others in cities, big and small, across this country to provide support to its most vulnerable
communities.
Associates
As at December 31, 2020, the Company and its subsidiaries had 1,462 associates. Of this group, 1,434 were
full-time associates and the remainder were part-time associates. As at December 31, 2020, 90 associates were
unionized, comprising approximately 6.0% of the total workforce. All of the unionized associates are employed at the
Company's Greater Vancouver, Victoria and Brampton distribution centres. The current agreement with Retail
Wholesale Union Local 580 covering the Greater Vancouver and Victoria sites was renewed on January 1, 2018 for a- 12 -
four-year term expiring on December 31, 2021. The current agreement with the Workers United Canada Council, on
its own behalf and on behalf of its Local 2757, in respect of the Brampton site was ratified January 28, 2019 retroactive
to January 14, 2019 for a three-year term expiring on January 13, 2022. The Company believes its relations with its
associates are excellent and experiences turnover rates well below industry norms. The Company has never
experienced a work stoppage and has been successful in renegotiating its collective agreements.
In 2020, Sleep Country/Dormez-vous? and Endy were certified as a Great Place to Work (in Canada).
Additionally, in 2020, Sleep Country/Dormez-vous? won recognition for Best Workplaces in Ontario.
Legal Proceedings
The Company is not party to any legal proceedings other than ordinary course, routine litigation which is not
material to its business, results of operations or financial condition.
Dividend Policy
Subject to financial results, capital requirements, available cash flow and any other factors that the Board may
consider relevant, the Company intends to continue to declare a quarterly dividend on an ongoing basis. All dividends
to be paid by the Company, unless otherwise indicated, are designated as eligible dividends in accordance with
subsection 89(14) of the Income Tax Act (Canada) and any applicable corresponding provincial or territorial provisions.
See "Risk Factors — Payment of dividends".
In response to the risks and uncertainties caused by the COVID-19 pandemic since its onset in Q1 2020, the
Company temporarily suspended dividends with an intent to reinstate payments at a time and payment level considered
prudent by the Company's Board. The Company intended to reinstate the dividends at a future date with the resumption
of normal operating conditions and when the Board considered the risks and uncertainties associated with COVID-19
to be unlikely to have a material ongoing impact. As at November 9, 2020, the Board approved and restored the
Company’s dividend. As the COVID-19 pandemic continues, the Company may consider it advisable to reduce or
suspend dividends in the future.
The Company declared and paid the following dividends on its Common Shares:
Date of declaration Record date Payment date Dividend declared per
share
January 29, 2016 February 16, 2016 February 26, 2016 $ 0.130
May 10, 2016 May 20, 2016 May 30, 2016 $ 0.130
July 28, 2016 August 16, 2016 August 26, 2016 $ 0.150
November 1, 2016 November 18, 2016 November 28, 2016 $ 0.150
January 26, 2017 February 17, 2017 February 27, 2017 $ 0.150
May 9, 2017 May 19, 2017 May 29, 2017 $ 0.165
August 2, 2017 August 18, 2017 August 28, 2017 $ 0.165
November 1, 2017 November 17, 2017 November 27, 2017 $ 0.165
January 26, 2018 February 16, 2018 February 26, 2018 $ 0.165
May 7, 2018 May 22, 2018 May 31, 2018 $ 0.185
August 2, 2018 August 20, 2018 August 30, 2018 $ 0.185
November 1, 2018 November 19, 2018 November, 29, 2018 $ 0.185
February 5, 2019 February 15, 2019 February 26, 2019 $ 0.185
May 6, 2019 May 21, 2019 May 31, 2019 $ 0.195
August 8, 2019 August 20, 2019 August 29, 2019 $ 0.195
October 31, 2019 November 19, 2019 November 29, 2019 $ 0.195
February 4, 2020 February 14. 2020 February 25, 2020 $0.195
November 9, 2020 November 20, 2020 November 30, 2020 $0.195- 13 -
Subsequent to December 31, 2020, on February 9, 2021, the Board declared a dividend on the Common
Shares in the amount of $0.195 per share, payable on February 26, 2021 to shareholders of record at the close of
business on February 18, 2021.
The Credit Facility restricts the Company's ability to declare dividends in certain circumstances. The amount
and timing of the payment of any dividends are not guaranteed and are subject to the discretion of the Board. See
"Material Contracts" and "Risk Factors".
Normal Course Issuer Bid
In the first quarter of 2020, the Company received approval from the TSX to commence, effective March 9,
2020, a NCIB and purchase through the facilities of the TSX up to 1,368,363 of the Company’s common shares,
representing approximately 4.8% of the public float as of February 29, 2020. Purchases were permitted to commence
through the TSX on March 9, 2020 and will conclude on the earlier of the date on which purchases under the bid have
been completed and March 8, 2021. In accordance with the rules and by-laws of the TSX, the Company has been
permitted to purchase up to a daily maximum of 28,010 Shares (representing 25% of the average daily trading volume
of the Shares on the TSX for the six months prior to commencement of the NCIB), except where such purchases are
made in accordance with the "block purchase" exception under the applicable TSX rules and policies.
In Q2 2020, in response to the risks and uncertainties caused by the onset of the COVID-19 pandemic onset,
the Board suspended the purchase of any shares under the Company’s NCIB to preserve liquidity and financial
resources. As at November 9, 2020, the Board reinstated the option for the Company to purchase common shares for
cancellation under the NCIB. As at December 31, 2020, the Company had not purchased any shares under the NCIB
program for cancellation.
Subsequent to year end, the Company submitted a Notice of Intention to the TSX to pursue a NCIB. Pursuant
to the NCIB, the Company proposes to purchase through the facilities of the TSX, from time to time over the next 12
months, if considered advisable, up to a maximum of 928,933 common shares of the Company, being approximately
3.0% of its public float as of February 28, 2021. Purchases may commence through the TSX on March 9, 2021 and will
conclude on the earlier of the date on which purchases under the bid have been completed and March 8, 2022. The
Company may purchase up to a daily maximum of 30,661 shares (representing 25% of the average daily trading volume
of the Shares on the TSX for the six months prior to commencement of the NCIB), except where such purchases are
made in accordance with the "block purchase" exception under applicable TSX rules and policies.- 14 -
Description of Share Capital
The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited
number of Class A Common Shares. The summary below of the rights, privileges, restrictions and conditions attaching
to the Common Shares and to the Class A Common Shares, respectively, is subject to, and qualified in its entirety by
reference to, the Company's articles which are available on SEDAR at www.sedar.com.
Common Shares
Holders of Common Shares are entitled to receive notice of any meetings of shareholders, to attend and to
cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting
rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to
vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to
receive on a pro rata basis such dividends, if any, as and when declared by the Board at its discretion from funds legally
available therefore and upon the liquidation, dissolution or winding-up of the Company are entitled to receive on a pro
rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights,
privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on
a pro rata basis with the Common Shares with respect to dividends or liquidation. The Common Shares do not carry
any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund
provisions.
Class A Common Shares
Holders of Class A Common Shares are entitled to the same rights and privileges as holders of the Common
Shares described above under "— Common Shares" and rank equally with the holders of Common Shares upon the
liquidation, dissolution or winding-up of the Company. The Class A Common Shares do not carry any pre-emptive or
subscription rights, nor do they contain any sinking or purchase fund provisions.
Certain Class A Common Shares were issued as part of the pre-closing transactions undertaken by the
Company prior to the completion of the IPO and all such Class A Common Shares were redeemed immediately
following completion of the IPO on July 16, 2015. Accordingly, as at December 31, 2020, there are no Class A Common
Shares issued and outstanding, nor does the Company intend to issue any Class A Common Shares in the future.
RISK FACTORS
In addition to the risks described elsewhere in this AIF, this section describes the principal risks that could
have a material and adverse effect on the Company’s financial condition, results of operations or business, cash flows
or the trading price of its common shares, as well as cause actual results to differ materially from the Company’s
expectations expressed in or implied by forward-looking statements. The Company cautions that the following
discussion of risk factors that may affect future results is not exhaustive, including those related to the impact of COVID-
19 on the Company’s business, operations and performance. The risks listed below are not the only risks that could
affect the Company. Additional risks and uncertainties not currently known to the Company or that the Company
currently deem to be immaterial may also materially adversely affect the Company’s financial condition, results of
operations, cash flows, or business.
COVID-19 emerging risk
The COVID-19 pandemic creates a number of risks and uncertainties for the Company's business, which
could significantly impact the Company’s results of operations going forward and the forward-looking statements made
herein.
As an emerging risk, the duration and impact of the COVID-19 pandemic is unknown at this time, as is the
efficacy of any current or future government and central bank interventions. Any estimate of the length and severity of
these developments is therefore subject to significant uncertainty, and accordingly estimates of the extent to which the
COVID-19 pandemic may, directly or indirectly, materially and adversely affect the Company’s operations, financial
results and condition in future periods are also subject to significant uncertainty.You can also read
