Danier Leather Reports Fiscal 2013 Second Quarter Results
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 01/30/13 -- Danier Leather Inc. (TSX: DL) today announced its unaudited interim consolidated financial results for the 13 week and 26 week periods ended December 29, 2012.
FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square footage and number of stores):
Sales during the second quarter of fiscal 2013 increased by 11% or $6.6 million to $66.1 million compared with $59.5 million during the second quarter last year. Comparable store sales(2) increased by 13%. Boxing Week sales were included in the second quarter this year whereas last year's Boxing Week sales were included in the third quarter.
Sales on a comparable week basis, which includes Boxing Week in both periods and compares the 13 weeks ended December 29, 2012 to the 13 weeks ended December 31, 2011, decreased by 1%. Comparable store sales, on a comparable week basis, were unchanged.
In line with our stated strategy, on a comparable week basis, accessory sales continued to perform well, increasing by 6% during the second quarter over the corresponding period last year. Accessories represented 32% of total merchandise revenue during the second quarter compared with 30% during the corresponding period last year.
Mainly due to unusual weather, including the relatively late arrival of winter in the major Toronto and Montreal markets, and a snowstorm that interrupted Boxing Day-related shopping in the eastern region of Canada, outerwear sales decreased by 5% during the 13 weeks ended December 29, 2012 compared with the 13 weeks ended December 31, 2011.
Year-to-date sales increased by 9% or $7.6 million to $89.2 million, while comparable store sales increased by 10% compared to the corresponding period last year. On a comparable week basis, with the 26 weeks ended December 29, 2012 compared to the 26 weeks ended December 31, 2011, sales decreased by 1% and comparable store sales were unchanged. Year-to-date accessory sales, on a comparable week basis, with the 26 weeks ended December 29, 2012 compared to the 26 weeks ended December 31, 2011, increased by 7% and represented 34% of total merchandise revenue compared with 31% of total merchandise revenue during the same period last year.
Gross profit as a percentage of revenue during the second quarter of fiscal 2013 decreased by 140 basis points to 54.3% compared with 55.7% during the second quarter last year. Gross profit margin during the first half of fiscal 2013 decreased by 170 basis points to 53.3% compared with 55.0% during the first six months of last year.
Selling, general and administrative expenses during the second quarter of fiscal 2013 increased by $3.0 million to $24.4 million, compared with $21.4 million during the second quarter last year. Year-to-date selling, general and administrative expenses increased by $3.8 million to $40.8 million compared with $37.0 million during the first half of last year.
Net earnings during the second quarter of fiscal 2013 decreased by $0.1 million to $8.4 million ($1.86 per diluted share) compared with $8.5 million ($1.77 per diluted share) during the second quarter last year. For the year-to-date period, net earnings decreased by $0.8 million to $4.9 million ($1.06 per diluted share) compared with $5.7 million ($1.19 per diluted share) during the first six months of last year.
During the second quarter of fiscal 2013, Danier repurchased 787,401 subordinate voting shares under a "modified Dutch Auction" substantial issuer bid at a purchase price of $12.70 per share. The subordinate voting shares repurchased under the substantial issuer bid represented approximately 23.01% of the total issued and outstanding subordinate voting shares as of November 28, 2012 and, immediately following the purchase and cancellation of those shares, approximately 2,635,172 subordinate voting shares remained outstanding. For further details, see Note 10(d) to the accompanying unaudited interim consolidated financial statements of the Company.
Danier continues to maintain a strong balance sheet with cash of $30.8 million, working capital of $42.2 million and no long-term debt.
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"). In order to provide additional insight into the business, the Company has also provided certain 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.
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", "estimate", "expect", "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 most recent annual information form, quarterly and annual reports and financial statements and notes thereto, and supplementary information, which are available on SEDAR at and in the Investor Relations section of the Company's website at . 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 laws.
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 90 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, visit .
1. Reporting Entity:
Danier Leather Inc. and its subsidiaries ("Danier" or the "Company") comprise a vertically integrated designer, manufacturer, distributor and retailer of leather apparel and accessories. Danier Leather Inc. is a corporation existing under the Business Corporations Act (Ontario) and is domiciled in Canada. The Company's subordinate voting shares (the "Subordinate Voting Shares") are listed on the Toronto Stock Exchange (the "TSX") under the symbol "DL". The address of its registered head office is 2650 St. Clair Avenue West, Toronto, Ontario, M6N 1M2, Canada.
Under an accounting practice common in the retail industry, the Company follows a 52-week reporting cycle which periodically necessitates a fiscal year of 53 weeks. Fiscal 2013 is a 52-week fiscal year and fiscal 2012 was a 53-week fiscal year. The 52-week reporting cycle is divided into four quarters of 13 weeks each. The 53-week reporting cycle is divided into four quarters of 13 weeks each with the exception of the fourth quarter, which is 14 weeks in duration.
2. Significant Accounting Policies:
(a) Statement of Compliance
These unaudited interim condensed consolidated financial statements (the "unaudited interim financial statements") have been prepared on a going concern basis in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). The unaudited interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting and using accounting policies and methods consistent with those used for the Company's audited annual consolidated financial statements and notes thereto for the fiscal years ended June 30, 2012 and June 25, 2011 (the "2012 Financial Statements"), except for the following new accounting pronouncements which have been adopted. Certain information, in particular the accompanying notes, normally included in the audited annual consolidated financial statements prepared in accordance with IFRS, has been omitted or condensed. Accordingly, these unaudited interim financial statements do not include all the information required for annual consolidated financial statements and, therefore, should be read in conjunction with the 2012 Financial Statements.
The unaudited interim financial statements for the 13-week and 26-week periods ended December 29, 2012 (including comparatives) were approved by the Board of Directors on January 30, 2013.
(b) Basis of Measurement
The unaudited interim financial statements have been prepared on a going concern basis under the historical cost convention except for the following items which are measured at fair value:
(c) Functional and Presentation Currency
These unaudited interim financial statements are presented in Canadian dollars ("$" or "C$"), the Company's functional currency. All financial information is presented in thousands, except per share amounts, which are presented in whole dollars, and number of shares, which are presented as whole numbers.
(d) Seasonality of Interim Operations
Due to the seasonal nature of the retail business and the Company's product lines, the results of operation for any interim period are not necessarily indicative of the results of operation to be expected for the fiscal year. Generally, a significant portion of the Company's sales and earnings are typically generated during the second fiscal quarter, which includes the holiday selling season. Sales are usually lowest and losses are typically experienced during the period from April to September.
(e) Estimates, Judgments and Assumptions
The preparation of these unaudited interim financial statements in accordance with IFRS requires management to make certain estimates, judgments and assumptions in applying the Company's accounting policies which have an effect on the reported amounts and disclosures made in these unaudited interim financial statements and accompanying notes. These estimates, judgments and assumptions are based on historical experience, knowledge of current events and conditions, expectations of the future and other relevant factors that are believed to be reasonable under the circumstances. Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Significant estimates, judgments and assumptions applicable to the preparation of these unaudited interim financial statements are described in the Company's 2012 Financial Statements for the year ended June 30, 2012. Estimates made by management depend upon subjective or complex judgments about matters that may be uncertain, and changes in those estimates could materially impact these unaudited interim financial statements. Illiquid credit markets, volatile equity, foreign currency, and energy markets and declines in consumer spending have combined to increase the uncertainty inherent in estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from the estimates, judgments and assumptions made by management.
(f) Future Changes in Accounting Policies
A number of new standards, and amendments to standards and interpretations, are not yet effective for the 13-week and 26-week periods ended December 29, 2012 and have not been applied in preparing these unaudited interim financial statements. New standards and amendments to standards and interpretations that are currently under review include:
IFRS 7 - Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities ("IFRS 7")
The IASB has issued amendments to IFRS 7 relating to enhanced disclosure requirements for the offsetting of financial assets and liabilities and additional disclosures on transition from IAS 39 to IFRS 9 (as discussed below). The amendment relating to the offsetting of financial assets and liabilities is effective for annual periods beginning on or after January 1, 2013 and the amendment relating to additional disclosures on transition from IAS 39 to IFRS 9 is effective for annual periods beginning on or after January 1, 2015.
IFRS 9 - Financial Instruments
On November 12, 2009, the IASB issued a new standard, IFRS 9, Financial Instruments ("IFRS 9"), which will ultimately replace IAS 39, Financial Instruments: Recognition and Measurement ("IAS 39"). The replacement of IAS 39 is a multi-phase project with the objective of improving and simplifying the reporting for financial instruments and the issuance of IFRS 9 is a part of the first phase. This standard originally was to become effective on January 1, 2013 but the mandatory effective date has been amended to January 1, 2015 and must be applied retrospectively.
IFRS 13 - Fair Value Measurement
The IASB has issued a new standard, IFRS 13, Fair Value Measurement, which is a comprehensive standard for the fair value measurement and disclosure requirements for use across all IFRS standards. The new standard is effective for annual periods beginning on or after January 1, 2013 and clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements.
The extent of the impact of adoption of the above noted standards and interpretations on the unaudited interim financial statements of the Company have not yet been determined.
A number of other standards have been adopted by the IASB but currently have no impact on the Company.
3. Cash and cash equivalents:
The components of cash and cash equivalents are as follows:
4. Inventories:
5. Property and Equipment:
The Company conducted an impairment test for its property and equipment and determined that there was an impairment at one of its stores, which was under-performing, in the amount of $327 for the 13 week and 26 week periods ended December 29, 2012 ($21 for the 13 week and 26 week periods ended December 24, 2011). The recoverable amount of the cash generating unit ("CGU") was estimated based on value-in-use calculations as this was determined to be higher than fair value less costs to sell. These calculations use cash flow projections based on actual performance during the past 12 months which are then extrapolated over each CGU's remaining lease term and then discounted using an estimated discount rate. The key assumptions for the value-in-use calculations include discount rates, growth rates and expected cash flows. Management estimates discount rates using pre-tax rates that reflect current market assessment of the time value of money and the risks specific to the CGUs. Changes in revenues and direct costs are based on past experience and expectations of future changes in the market.
The pre-tax discount rate used to calculate the value-in-use range is 11% and is dependent on the specific risks in relation to the CGU. The discount rate is derived from retail industry comparable post-tax weighted average cost of capital.
If management's cash flow estimate were to decrease by 10% or if the discount rate were to increase by 100 basis points, the impairment for the 13 week and 26 week periods ended December 29, 2012 would remain unchanged.
6. Computer Software:
7. Bank Facilities:
The Company has an operating credit facility for working capital and for general corporate purposes to a maximum amount of $25 million that is committed until June 27, 2014 and bears interest at prime plus 0.75%. Standby fees of 0.50% are paid on a quarterly basis for any unused portion of the operating credit facility. The operating credit facility is subject to certain covenants and other limitations that, if breached, could cause a default and may result in a requirement for immediate repayment of amounts outstanding. Security provided includes a security interest over all personal property of the Company's business and a mortgage over the land and building comprising the Company's head office/distribution facility.
The Company also has an uncommitted letter of credit facility (the "LC Facility") to a maximum amount of $10 million and an uncommitted demand overdraft facility in the amount of $0.5 million to be used exclusively for issuance of letters of credit for the purchase of inventory. Any amounts outstanding under the overdraft facility will bear interest at the bank's prime rate. The LC Facility is secured by the Company's personal property from time to time financed with the proceeds drawn thereunder.
8. Payables and Accruals:
9. Sales Return Provision:
The provision for sales returns primarily relates to customer returns of unworn and undamaged purchases for a full refund within the time period provided by Danier's return policy, which is generally 14 days after the purchase date. Since the time period of the provision is of relatively short duration, all of the provision is classified as current. The following transactions occurred during the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011 with respect to the sales return provision:
10. Share Capital:
(a) Authorized
(b) Issued
The Multiple Voting Shares and Subordinate Voting Shares have identical attributes except that the Multiple Voting Shares entitle the holder to ten votes per share and the Subordinate Voting Shares entitle the holder to one vote per share. Each Multiple Voting Share is convertible at any time, at the holder's option, into one fully paid and non-assessable Subordinate Voting Share. The Multiple Voting Shares are subject to provisions whereby, if a triggering event occurs, then each Multiple Voting Share is converted into one fully paid and non-assessable Subordinate Voting Share. A triggering event may occur if, among other things, Mr. Jeffrey Wortsman, President and Chief Executive Officer: (i) dies; (ii) ceases to be a Senior Officer of the Company; (iii) ceases to own 5% or more of the aggregate number of Multiple Voting Shares and Subordinate Voting Shares outstanding; or (iv) owns less than 918,247 Multiple Voting Shares and Subordinate Voting Shares combined.
(c) Earnings per share
Basic and diluted per share amounts are based on the following weighted average number of shares outstanding:
The computation of dilutive options outstanding only includes those options having exercise prices below the average market price of Subordinate Voting Shares on the TSX during the relevant period. No options were excluded as at December 29, 2012 and 62,000 options were excluded as at December 24, 2011.
(d) Substantial Issuer Bid and Normal Course Issuer Bid
On October 24, 2012, the Company commenced a substantial issuer bid ("SIB" or the "Offer") by filing and mailing a formal offer to purchase and accompanying circular dated October 23, 2012, pursuant to which the Company offered to purchase for cancellation up to $10 million in value of its Subordinate Voting Shares from shareholders by way of a "modified Dutch Auction" at a range of Offer prices between $12.55 and $13.30 per share. The minimum and maximum Offer prices corresponded with the fair market range of values per Subordinate Voting Share determined, as of October 23, 2012, by Deloitte and Touche LLP, the independent valuator engaged by a Special Committee of independent directors of the Board of Directors to prepare a formal valuation of the Subordinate Voting Shares. The Offer expired on November 28, 2012 and a total of 1,748,470 Subordinate Voting Shares were validly deposited and not withdrawn under the Offer. Pursuant to the terms of the Offer, the Company determined the purchase price to be $12.70 per share. As the aggregate value of Subordinate Voting Shares deposited under the Offer at or below the purchase price of $12.70 per share exceeded the $10 million maximum value of consideration payable by the Company pursuant to the Offer, a pro-ration factor of 0.9852 was applied to deposited Subordinate Voting Shares (except for odd lot deposits, which were not subject to pro-ration), and the Company repurchased for cancellation 787,401 Subordinate Voting Shares at a price of $12.70 per share.
During the past several years, the Company has received approval from the TSX to commence various normal course issuer bids ("NCIBs"). On May 5, 2011, the Company received approval from the TSX to commence its fifth normal course issuer bid (the "2011 NCIB"). The 2011 NCIB permitted the Company to acquire up to 176,440 Subordinate Voting Shares, representing approximately 5% of the Company's issued and outstanding Subordinate Voting Shares at the date of acceptance of the notice of intention in respect of the 2011 NCIB filed with the TSX. The 2011 NCIB expired on May 8, 2012 without being renewed.
During the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011, repurchases of Subordinate Voting Shares under the Company's SIB and 2011 NCIB outstanding during the applicable period are presented below.
The amount of income tax recorded directly to Shareholders' Equity that was related to the SIB during the 13 week and 26 week periods ended December 29, 2012 was $92.
11. Share-based Compensation:
The Company's net share-based compensation expense recognized in selling, general and administrative expenses ("SG&A") related to its stock option, restricted share unit ("RSU") and deferred share unit ("DSU") plans is presented below:
The carrying amount of the Company's share-based compensation arrangements including stock option, RSU and DSU plans are recorded on the consolidated statements of financial position as follows:
(a) Stock option plan
The Company maintains a Stock Option Plan, as amended, for the benefit of directors, officers, employees and service providers, pursuant to which granted options are exercisable for Subordinate Voting Shares. As at December 29, 2012, the Company has reserved 620,167 Subordinate Voting Shares for issuance under its Stock Option Plan. The granting of options and the related vesting periods are at the discretion of the Board of Directors, on the advice of the Governance, Compensation, Human Resources and Nominating Committee of the Board (the "Committee"), at exercise prices determined as the weighted average of the trading prices of the Company's Subordinate Voting Shares on the TSX for the five trading days preceding the effective date of the grant. In general, options granted to officers, employees and service providers under the Stock Option Plan typically vest over a period of between three years and four years from the grant date and expire no later than the tenth anniversary of the date of grant (subject to extension in accordance with the Stock Option Plan if the options would otherwise expire during a black-out period).
A summary of the status of the Company's Stock Option Plan as of December 29, 2012 and December 24, 2011 and changes during the respective 26 week periods ended on those dates is presented below:
The following table summarizes the distribution of these options and the remaining contractual life as at December 29, 2012:
There were no stock options granted during the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011.
(b) Restricted Share Unit Plan
The Company has established a cash-settled RSU Plan, as amended, as part of its overall compensation plan. An RSU is a notional unit equivalent in value to one Subordinate Voting Share of the Company. The RSU Plan is administered by the Board of Directors, with the advice of the Committee. Under the RSU Plan, certain eligible officers, employees and directors of the Company are eligible to receive a grant of RSUs that generally vest over periods not exceeding three years, as determined by the Committee. Upon the exercise of the vested RSUs, a cash payment equal to the market value of the exercised vested RSUs will be paid to the participant. The market value is based on the five-day average daily closing prices of the Subordinate Voting Shares on the TSX immediately prior to the applicable payment date. RSU expense is recognized on a graded vesting schedule and is determined based on the fair value of the liability incurred at each financial position date until the award is settled. The fair value of the liability is measured by applying the Black-Scholes Option Pricing Model, taking into account the extent to which participants have rendered services to date.
The following transactions occurred during each of the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011, respectively, with respect to the RSU Plan:
(c) Deferred Share Unit Plan
The cash-settled DSU Plan, as amended, was established for non-management directors. Under the DSU Plan, non-management directors of the Company may receive an annual grant of DSUs at the discretion of the Board of Directors on the advice of the Committee, and can also elect to receive their annual retainers and meeting fees in DSUs. A DSU is a notional unit equivalent in value to one Subordinate Voting Share of the Company based on the five-day average daily closing prices of the Subordinate Voting Shares on the TSX immediately prior to the date on which the value of the DSU is determined. The fair value of the liability is measured at each financial position date by applying the Black-Scholes Option Pricing Model until the award is settled.
The following transactions occurred during each of the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011, respectively, with respect to the DSU Plan:
12. Amortization and Impairment Loss on Property and Equipment:
Amortization and impairment loss on property and equipment included in cost of sales and SG&A is summarized as follows:
13. Income Taxes:
The Company's income tax expense is comprised as follows:
The estimated average annual effective rate was 27.0% during the 26 weeks ended December 29, 2012 compared with the 27.9% estimated rate for the 26 weeks ended December 24, 2011 and 27.6% for the fiscal year ended June 30, 2012. The difference between the rate for the 26 weeks ended December 29, 2012 and the rate for the 26 weeks ended December 24, 2011 and the fiscal year ended June 30, 2012 is mainly due to a reduction in the statutory tax rates as well as the effect of certain non-deductible expenses on estimated earnings.
The Company's effective income tax rate consists of the following:
14. Change in Working Capital Items:
15. Contingencies and Guarantees:
(a) Legal proceedings
In the course of its business, the Company from time to time becomes involved in various claims and legal proceedings. In the opinion of management, all such claims and suits are adequately covered by insurance, or if not so covered, the results are not expected to materially affect the Company's financial position.
(b) Guarantees
The Company has provided the following guarantees to third parties and no amounts have been accrued in the consolidated financial statements for these guarantees:
16. Commitments:
(a) Operating leases:
The Company leases various store locations, a distribution warehouse and certain equipment under non-cancellable operating lease agreements. The leases are classified as operating leases since there is no transfer of risks and rewards inherent to ownership.
The leases have varying terms, escalation clauses and renewal rights. Minimum lease payments are recognized on a straight-line basis. Leases run for varying terms that generally do not exceed 10 years, with options to renew (if any) that do not exceed 5 years. The majority of leases are net leases, which require additional payments for the cost of insurance, taxes, common area maintenance and utilities. Certain rental agreements include contingent rent, which is based on revenue exceeding a minimum amount. Minimum rentals, excluding rentals based upon revenue, are as follows:
Minimum lease payments, contingent rentals and sublease payments recognized as an expense are summarized as follows:
(b) Letters of credit:
As at December 29, 2012, the Company had outstanding letters of credit in the amount of $8,971 (December 24, 2011 - $6,342) for the importation of finished goods inventories to be received.
17. Financial Instruments:
(a) Fair value disclosure
The following table presents the carrying amount and the fair value of the Company's financial instruments:
The fair value of a financial instrument is the estimated amount that the Company would receive or pay to settle the financial assets and financial liabilities as at the reporting date. These estimates are subjective in nature, often involve uncertainties and the exercise of significant judgment and are made at a specific point in time, using available information about the financial instrument and may not reflect fair value in the future. The estimated fair value amounts can be materially affected by the use of different assumptions or methodologies.
The methods and assumptions used in estimating the fair value of the Company's financial instruments are as follows:
(b) Financial instrument risk management
Exposure to foreign currency risk, interest rate risk, equity price risk, liquidity risk and credit risk arise in the normal course of the Company's business and are discussed further below:
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. The Company purchases a significant portion of its leather and finished goods inventory from foreign vendors with payment terms in U.S. dollars. The Company uses a combination of foreign exchange contracts and spot purchases to manage its foreign exchange exposure on cash flows related to these purchases. A foreign exchange contract represents an option with a counterparty to buy or sell a foreign currency to meet its obligations. Credit risk exists in the event of a failure by a counterparty to fulfill its obligations. The Company reduces this risk by mainly dealing with highly-rated counterparties such as major Canadian financial institutions.
During the 13 week and 26 week periods ended December 29, 2012 and December 24, 2011, the Company entered into foreign exchange contracts with Canadian financial institutions as counterparties with U.S. dollar notional amounts as listed below. Foreign exchange contracts outstanding as at December 29, 2012 expire at various times between January 4, 2013 and December 16, 2013 and the foreign exchange contracts that were outstanding as at December 24, 2011 expired between January 3, 2012 and March 16, 2012.
As at December 29, 2012, a sensitivity analysis was performed on the Company's U.S. dollar denominated financial instruments, which principally consist of US$0.6 million of cash, to determine how a change in the U.S. dollar exchange rate would impact net earnings. A 500 basis point rise or fall in the Canadian dollar against the U.S. dollar, assuming that all other variables, in particular interest rates, remained the same, would have resulted in a $6 and $11 decrease or increase, respectively, in the Company's net earnings for the 13 week and 26 week periods ended December 29, 2012, respectively.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to interest rate fluctuations is primarily related to cash borrowings under its existing credit facility, which bears interest at floating rates, and interest earned on its cash balances. The Company has performed a sensitivity analysis on interest rate risk as at December 29, 2012 to determine how a change in interest rates would have impacted net earnings. As at December 29, 2012, the Company's cash balance available for investment was approximately $30.8 million. A 100 basis point change in interest rates would have increased or decreased net earnings by approximately $54 and $108 for the 13 week and 26 week periods ended December 29, 2012, respectively. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Equity Price Risk
Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market equity prices. The Company's exposure to equity price fluctuations is primarily related to the RSU and DSU liability included in payables and accruals. The value of the vested DSU and RSU liability is adjusted to reflect changes in the market value of the Company's Subordinate Voting Shares on the TSX. The Company has performed a sensitivity analysis on equity price risk as at December 29, 2012 to determine how a change in the price of the Subordinate Voting Shares would have impacted net earnings. As at December 29, 2012, a total of 156,139 RSUs and 83,136 DSUs have been granted and are outstanding. An increase or decrease of $1.00 in the market price of the Company's Subordinate Voting Shares would have increased or decreased net earnings by approximately $167 for the 13 week and 26 week periods ended December 29, 2012. This analysis assumes that all RSUs and DSUs were fully vested and other variables remain constant.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company's approach to managing liquidity risk is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due. As at December 29, 2012, the Company had $30.8 million of cash; an operating credit facility of $25 million that is committed until June 27, 2014; and a $10 million uncommitted letter of credit facility which includes an uncommitted demand overdraft facility in the amount of $0.5 million related thereto. The credit facilities are used to finance seasonal working capital requirements for merchandise purchases and other corporate purposes. The Company expects that the majority of its payables and accruals and deferred revenue will be discharged within 90 days.
Credit Risk
Credit risk is the risk that a customer or counterparty to a financial instrument will cause a financial loss to the Company by failing to meet its obligations. The Company's financial instruments that are exposed to concentrations of credit risk are primarily cash and cash equivalents (which includes cash and money market investments with maturities of three months or less), accounts receivable and foreign exchange option contracts. The Company limits its exposure to credit risk with respect to cash and money market investments by investing in short-term deposits and bankers' acceptances with major Canadian financial institutions. The Company's accounts receivable consist primarily of credit card receivables from the last few days of the fiscal period end, which are settled within the first few days of the new fiscal period. Accounts receivable also consist of accounts receivable from distributors and corporate customers. Accounts receivable are net of applicable allowance for doubtful accounts, which is established based on the specific credit risks associated with the distributor, each corporate customer and other relevant information. The allowance for doubtful accounts is assessed on a quarterly basis. Concentration of credit risk with respect to accounts receivable from distributors and corporate customers is limited due to the relatively insignificant balances outstanding and the number of different customers comprising the Company's customer base. Credit risk for foreign exchange contracts exists in the event of failure by a counterparty to fulfill its obligations. The Company reduces this risk by dealing only with highly-rated counterparties such as major Canadian financial institutions.
As at December 29, 2012, the Company's exposure to credit risk for these financial instruments was cash of $30.8 million, accounts receivable of $1.4 million and foreign exchange option contracts that had a notional amount of US$17.5 million.
18. Capital Disclosure:
The Company defines its capital as shareholders' equity. The Company's objectives in managing capital are to:
The Company's primary uses of capital are to finance non-cash working capital along with capital expenditures for new store additions, existing store renovation or relocation projects, information technology software and hardware purchases and production machinery and equipment purchases. The Company maintains a $25 million operating credit facility and a $10 million uncommitted letter of credit facility that it uses to finance seasonal working capital requirements for merchandise purchases and other corporate purposes. The Company does not have any long-term debt and therefore net earnings generated from operations are available for reinvestment in the Company. The Board of Directors does not establish quantitative return on capital criteria for management, but rather promotes year-over-year sustainable profitable growth. On a quarterly basis, the Board of Directors monitors share repurchase program activities. Decisions on whether to repurchase shares are made on a specific transaction basis and depend on the Company's cash position, estimates of future cash requirements, market prices and regulatory restrictions, among other factors. The Company does not currently pay dividends.
Externally imposed capital requirements include a debt-to-equity ratio covenant as part of the operating credit facility. The Company was in compliance with this covenant as at December 29, 2012 and December 24, 2011. There has been no change with respect to the overall capital risk management strategy during the 26 week period ended December 29, 2012.
19. Expenses by Nature:
Selling and retail operating expenses comprise costs incurred to operate the Company's stores including wages and benefits for store personnel, rent and occupancy, marketing and advertising, credit card fees, amortization of property and equipment and computer software and other store operating expenses.
General and administrative expenses include the cost of designing, merchandising, sourcing, merchandise planning, marketing, store administrative support, finance, loss prevention, information technology, human resources and executive functions.
20. Segmented Information:
Management has determined that the Company operates in one dominant industry which involves the design, manufacture, distribution and retail of fashion leather clothing and accessories.
Contacts:
Investor Relations Contact:
Danier Leather Inc.
Bryan Tatoff
Senior Vice-President, Chief Financial Officer & Secretary
(416) 762-8175 ext. 328
Danier Leather Inc.
Jeffrey Wortsman
President and Chief Executive Officer
(416) 762-8175 ext. 302
Themen in dieser Pressemitteilung:
Unternehmensinformation / Kurzprofil:
Datum: 30.01.2013 - 14:13 Uhr
Sprache: Deutsch
News-ID 1192153
Anzahl Zeichen: 0
contact information:
Contact person:
Town:
TORONTO, ONTARIO
Phone:
Kategorie:
Fashion
Anmerkungen:
Diese Pressemitteilung wurde bisher 136 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Danier Leather Reports Fiscal 2013 Second Quarter Results
"
steht unter der journalistisch-redaktionellen Verantwortung von
Danier Leather Inc. (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
