Danier Leather Reports Fiscal 2012 Second Quarter Results




Jan 25, 2012 - 14:58

TORONTO, ONTARIO--(Marketwire - Jan. 25, 2012) - Danier Leather Inc. (TSX:DL) today announced its unaudited interim consolidated financial results for the 13 week and 26 week periods ended December 24, 2011.

FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square footage and number of stores):

For the 13 Weeks Ended For the 26 Weeks Ended
Dec. 24, 2011 Dec. 25, 2010 Dec. 24, 2011 Dec. 25, 2010
Sales $ 59,487 $ 61,442 $ 81,578 $ 84,869
EBITDA(1) 12,642 12,708 9,685 9,609
Net Earnings 8,466 8,170 5,698 5,298
EPS - Basic $ 1.83 $ 1.75 $ 1.23 $ 1.15
EPS - Diluted $ 1.77 $ 1.67 $ 1.19 $ 1.09
Number of Stores 91 91 91 91
Retail Square Footage 306,702 315,623 306,702 315,623

Net earnings during the second quarter of fiscal 2012 increased by 4% to $8.5 million ($1.77 per diluted share) compared with $8.2 million ($1.67 per diluted share) during the second quarter last year. For the year-to-date period, net earnings increased by 8% to $5.7 million ($1.19 per diluted share) compared with net earnings of $5.3 million ($1.09 per diluted share) for the same period last year.

During fiscal 2012, Danier has placed more emphasis on increasing sales generated from accessories. Although unseasonably warm weather contributed to a reduction in outerwear sales, accessory sales continued to perform well, increasing by 8% during the second quarter of fiscal 2012 and increasing by 9% for the year-to-date period, compared to the respective periods last year. The higher margin accessory category represented 30% of total sales during the second quarter of fiscal 2012 compared with 27% during the second quarter last year. For the 26 weeks ended December 24, 2011, accessories represented 32% of total sales compared with 29% during the corresponding period last year.

Mainly due to unseasonably warm weather, total company sales during the second quarter of fiscal 2012 decreased by 3% to $59.5 million compared with $61.4 million during the second quarter last year. Year-to-date sales decreased by 4% to $81.6 million compared with $84.9 million for the corresponding period last year. Comparable store sales(2) decreased by 3% during the second quarter of fiscal 2012 and decreased by 4% for the first half of fiscal 2012, compared to the respective periods last year.

Gross profit as a percentage of revenue during the second quarter of fiscal 2012 decreased by 280 basis points to 55.7% compared with 58.5% during the second quarter last year. Gross profit margin during the first half of fiscal 2012 decreased by 180 basis points to 55.0% compared with 56.8% during the first six months of last year.

Selling, general and administrative expenses during the second quarter of fiscal 2012 decreased by 12% to $21.4 million compared with $24.3 million during the second quarter last year. Year-to-date, selling, general and administrative expenses decreased by 9% to $37.0 million compared with $40.6 million during the corresponding period last year.

Danier continues to maintain a strong balance sheet with cash of $31.8 million compared with $25.4 million at the end of the second quarter last year. In addition, at the end of the second quarter of fiscal 2012, Danier had working capital of $50.5 million, no long-term debt and a book value of $14.49 per outstanding share.

For the 2012 fiscal year, Danier began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"), including comparative information. Previously reported financial results prepared in accordance with Canadian generally accepted accounting principles have been restated to conform to the new standards adopted. See Note 21 accompanying Danier's second quarter 2012 unaudited interim condensed consolidated financial statements for further information on the transition to IFRS and its impact on Danier's financial position, financial performance and cash flows.

Non-IFRS Financial Measures

The Company prepares its consolidated financial statements in accordance with IFRS. In order to provide additional insight into the business, the Company has also provided non-IFRS data, including EBITDA and comparable store sales as defined below. Non-IFRS measures such as EBITDA and comparable store sales are not recognized measures for financial presentation under IFRS. These non-IFRS measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.

(1) EBITDA is defined as net earnings before interest expense, interest income, income taxes, impairment loss on property and equipment and amortization. EBITDA is a financial metric used by management and some investors to compare companies on the basis of ongoing operating results before taxes, interest expense, interest income, impairment loss on property and equipment and amortization and its ability to incur and service debt. EBITDA is also used by management to measure performance against internal targets and prior period results. EBITDA is calculated as outlined in the following table:
For the 13 Weeks Ended For the 26 Weeks Ended
Dec 24, 2011 Dec 25, 2010 Dec 24, 2011 Dec 25, 2010
($000) ($000) ($000) ($000)
Net earnings $ 8,466 $ 8,170 $ 5,698 $ 5,298
Add (deduct) impact of the following:
Income tax 3,299 3,472 2,206 2,233
Interest expense 11 23 33 69
Interest income (19 ) (8 ) (57 ) (26 )
Impairment loss on property and equipment 21 35 21 35
Amortization 864 1,016 1,784 2,000
EBITDA $ 12,642 $ 12,708 $ 9,685 $ 9,609
(2) Comparable store sales are defined as sales generated by stores that have been open during the full current fiscal year as well as the full prior fiscal year. Comparable store sales is a key indicator used by the Company to measure performance against internal targets and prior period results and excludes sales fluctuations due to new stores, store closings and certain permanent store relocations. This measure is also commonly used by financial analysts and investors to compare Danier to other retailers.

Forward-Looking Statements

This press release may contain forward-looking information and forward-looking statements which reflect the current view of Danier with respect to the Company's objectives, plans, goals, strategies, future growth, results of operations, financial and operating performance and business prospects and opportunities. Wherever used, the words "may", "will", "anticipate", "intend", "expect", "estimate", "plan", "believe" and similar expressions identify forward-looking statements and forward-looking information. Forward-looking statements and forward-looking information should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the statements in this press release containing forward-looking statements or forward-looking information, if any, are qualified by these cautionary statements.

Forward-looking statements and forward-looking information are based on information available at the time they are made, underlying estimates, opinions and assumptions made by management and management's good faith belief with respect to future events, performance and results and are subject to inherent risks and uncertainties surrounding future expectations generally. For additional information with respect to Danier's inherent risks and uncertainties, reference should be made to Danier's continuous disclosure materials filed from time to time with the Canadian Securities Regulatory Authorities, including the Company's annual information form, quarterly and annual reports and financial statements and notes thereto, and supplementary information, which are available on SEDAR at www.sedar.com and in the Investor Relations section of the Company's website at www.danier.com. Additional risks and uncertainties not presently known to the Company or that Danier currently believes to be less significant may also adversely affect the Company.

Danier cautions readers that such factors and uncertainties are not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual events, performance and results may vary significantly from those expected. There can be no assurance that the actual results, performance, events or activities anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. Potential investors and other readers are urged to consider these factors carefully in evaluating forward-looking information and forward-looking statements and are cautioned not to place undue reliance on any forward-looking information or forward-looking statements. Danier disclaims any intention or obligation to update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Danier

Danier Leather Inc. is a leading integrated designer, manufacturer, distributor and retailer of high-quality fashion-oriented leather apparel and accessories. The Company's merchandise is marketed exclusively under the well-known Danier brand name and is available at its 91 shopping mall, street-front and power centre stores. Corporations and other organizations can obtain Danier products for use as incentives and premiums for employees, suppliers and customers through Canada Sportswear Corp. For more information about the Company and our products, see www.danier.com.

Investors and analysts are invited to participate in a conference call today at 4:00 PM Eastern Time to discuss the results. Please dial 416-340-2216 in the Toronto area or 1-866-226-1792 (rest of Canada and the U.S.) and quote the Danier Leather Inc. conference call with Chairperson Jeffrey Wortsman at least five minutes prior to the call. The call will also be webcast at http://www.danier.com/ or at http://www.marketwire.com/.
DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
(thousands of Canadian dollars, except per share amounts and number of shares) - unaudited
For the 13 Weeks Ended For the 26 Weeks Ended
December 24,
2011
December 25,
2010
December 24,
2011
December 25,
2010
Revenue $ 59,487 $ 61,442 $ 81,578 $ 84,869
Cost of sales (Note 13) 26,328 25,500 36,729 36,666
Gross profit 33,159 35,942 44,849 48,203
Selling, general and administrative expenses (Note 13) 21,402 24,285 36,969 40,629
Interest income (19 ) (8 ) (57 ) (26 )
Interest expense 11 23 33 69
Earnings before income taxes 11,765 11,642 7,904 7,531
Provision for income taxes 3,299 3,472 2,206 2,233
Net earnings and comprehensive earnings $ 8,466 $ 8,170 $ 5,698 $ 5,298
Net earnings per share:
Basic $ 1.83 $ 1.75 $ 1.23 $ 1.15
Diluted $ 1.77 $ 1.67 $ 1.19 $ 1.09
Weighted average number of shares outstanding:
Basic 4,629,878 4,656,321 4,643,017 4,614,433
Diluted 4,777,651 4,894,548 4,796,672 4,856,890
Number of shares outstanding at period end 4,631,835 4,702,068 4,631,835 4,702,068
DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(thousands of Canadian dollars) - unaudited
Dec 24,
2011
Dec 25,
2010
June 25, 2011
ASSETS
Current Assets
Cash and cash equivalents (Note 5) $ 31,803 $ 25,406 $ 28,698
Accounts receivable 1,686 391 385
Inventories (Note 6) 36,789 41,163 28,964
Prepaid expenses 426 381 901
70,704 67,341 58,948
Non-current Assets
Property and equipment (Note 7) 15,315 15,808 14,404
Computer software (Note 8) 891 1,166 1,054
Deferred income tax asset (Note 14) 1,786 1,777 1,678
$ 88,696 $ 86,092 $ 76,084
LIABILITIES
Current Liabilities
Payables and accruals (Note 10) $ 16,010 $ 19,650 $ 11,024
Deferred revenue 2,135 2,353 1,489
Sales return provision (Note 11) 1,451 1,306 47
Income taxes payable 583 1,097 278
20,179 24,406 12,838
Non-current Liabilities
Deferred lease inducements and rent liability 1,392 1,414 1,318
21,571 25,820 14,156
SHAREHOLDERS' EQUITY
Share capital (Note 12) 14,959 15,001 15,160
Contributed surplus 945 1,136 934
Retained earnings 51,221 44,135 45,834
67,125 60,272 61,928
$ 88,696 $ 86,092 $ 76,084
Commitments and Contingencies (Notes 16 and 17)
Approved by the Board
January 25, 2012
See accompanying notes to the consolidated financial statements
DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(thousands of Canadian dollars) - unaudited
For the 13 Weeks Ended For the 26 Weeks Ended
December 24, 2011 December 25, 2010 December 24, 2011 December 25, 2010
Cash provided by (used in)
OPERATING ACTIVITIES
Net earnings $ 8,466 $ 8,170 $ 5,698 $ 5,298
Adjustments for:
Amortization of property and equipment 774 840 1,605 1,700
Amortization of computer software 90 176 179 300
Impairment loss on property and equipment 21 35 21 35
Amortization of deferred lease inducements (36 ) (46 ) (76 ) (99 )
Proceeds from deferred lease inducement 128 155 128 155
Straight line rent expense 17 6 22 13
Stock-based compensation 2 20 17 60
Interest income (19 ) (8 ) (57 ) (26 )
Interest expense 11 23 33 69
Provision for income taxes 3,299 3,472 2,206 2,233
Changes in working capital (Note 15) 9,388 4,548 (1,649 ) (4,444 )
Interest paid - - (12 ) (100 )
Interest received 12 3 69 21
Income taxes paid (934 ) (1,041 )