Danier Leather Reports Fiscal 2011 Fourth Quarter and Year End Results
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 08/11/11 -- Danier Leather Inc. (TSX: DL) today announced its consolidated financial results for the fourth quarter and fiscal year ended June 25, 2011.
FISCAL 2011 FULL YEAR HIGHLIGHTS
FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square footage and number of stores):
EBITDA during the fourth quarter of fiscal 2011 was $0.3 million and represented an increase of $0.7 million as compared with an EBITDA loss of $0.4 million during the fourth quarter of fiscal 2010. Net loss for the period improved to $0.3 million ($0.06 loss per share) compared with $0.7 million ($0.14 loss per share) during the fourth quarter last year. Fourth quarter sales decreased by less than 1% while comparable store sales decreased by 2%. Fourth quarter gross profit dollars increased by $0.6 million or 4% to $14.9 million compared with $14.3 million during the fourth quarter last year. Selling, general and administrative expenses ("SG&A") during the fourth quarter of fiscal 2011 increased by $0.1 million to $15.5 million compared with $15.4 million during the fourth quarter of fiscal 2010.
Year-to-date net earnings increased by 6% or $0.4 million to $7.6 million ($1.57 per diluted share) compared with net earnings of $7.2 million ($1.28 per diluted share) last year. Year-to-date EBITDA was $14.8 million compared with $15.2 million last year.
Year-to-date sales and comparable store sales decreased 4%. The decrease in sales was mainly due to customers shifting their purchases to lower price point items which resulted in a lower average transaction. Accessory sales continued to perform well during fiscal 2011. Accessory sales increased by 7% and represented approximately 27% of total sales compared with 25% of total sales during fiscal 2010.
Year-to-date gross profit as a percentage of revenue increased by 180 basis points and was 54.7% compared with 52.9% during fiscal 2010. The year-to-date gross margin rate increase was mainly due to a stronger Canadian dollar as compared with last year. Year-to-date SG&A decreased by approximately 1% or $0.4 million to $75.5 million compared with $75.9 million last year.
The retail environment continues to remain highly promotional and Danier's strategy is to focus on providing customers with exciting merchandise at remarkable value. Danier is also continuing to build the Danier brand by, among other things, creating more exciting presentation in our stores. To enhance the brand and create more excitement for our customers, Danier is introducing new merchandise collections including the luxurious Danier Black label, which is a higher-end label, and the fashion-forward Blink label geared towards trend setters of all ages. Danier's merchandise collection for this fall will also include collaborations with some leading fashion designers, such as key Canadian designer Greta Constantine, London-based internationally recognized Canadian designer Mark Fast, as well as one of Canada's top stylists George Antonpoulos. We are also putting more emphasis on store presentation and display and we expect to introduce a new prototype store design at our Square One location in Mississauga, Ontario during the first half of fiscal 2012, which has been developed in coordination with the renowned firm Chute Gerdman Retail of Columbus, Ohio.
Danier currently has a total of 4,678,135 shares outstanding comprised of 3,453,806 Subordinate Voting Shares and 1,224,329 Multiple Voting Shares. During fiscal 2011, Danier repurchased 75,000 Subordinate Voting Shares under its normal course issuer bid on the facilities of the Toronto Stock Exchange (the "TSX"). During fiscal 2010, Danier repurchased a total of 1,352,700 Subordinate Voting Shares, of which 1,120,000 Subordinate Voting Shares were repurchased during the third quarter of fiscal 2010 under a modified "Dutch Auction" substantial issuer bid and 232,700 Subordinate Voting Shares were repurchased under Danier's subsequent normal course issuer bid on the facilities of the TSX during the fourth quarter of fiscal 2010.
Danier maintained a strong financial position at the fiscal 2011 year-end with approximately $28.7 million in cash ($6.13 per outstanding share) compared with $26.6 million at the end of fiscal 2010. Danier has no long-term debt and working capital of $46.9 million. Book value per outstanding share at the end of the fourth quarter of fiscal 2011 was $13.40 per outstanding share.
(1) EBITDA is defined as net earnings (loss) before net interest expense (income), income taxes, amortization and restructuring costs. EBITDA is a financial metric used by management and some investors to compare companies on the basis of ongoing operating results before income taxes, net interest expense (income), amortization and restructuring costs and its ability to incur and service debt. EBITDA is not a recognized measure for financial presentation under Canadian generally accepted accounting principles ("GAAP"). Non-GAAP earnings measures such as EBITDA do not have any standardized meaning prescribed by Canadian GAAP 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 Canadian GAAP. EBITDA is calculated as outlined in the following table:
Note: 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 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 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 89 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 .
Investors and analysts are invited to participate in a conference call today at 9:00 AM Eastern Time to discuss the results. Please dial 416-340-2218 in the Toronto area or 1-866-226-1793 (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 or at .
Danier Leather Inc. ("Danier" or the "Company") is a corporation existing under the Business Corporations Act (Ontario) and is a vertically integrated designer, manufacturer, distributor and retailer of leather apparel and accessories.
(1) Summary of Significant Accounting Policies:
The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").
(a) Basis of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary companies. On consolidation, all intercompany transactions and balances have been eliminated.
(b) Year-end:
The fiscal year end of the Company consists of a 52 or 53 week period ending on the last Saturday in June each year. The fiscal year for the consolidated financial statements presented is the 52-week period ended June 25, 2011, and comparably, the 52-week period ended June 26, 2010.
(c) Revenue recognition:
Revenue includes sales of merchandise, alteration services and gift cards to customers through stores operated by the Company and sales of incentive and promotional product merchandise to a third party distributor. Revenue is measured at the fair value of consideration received, net of estimated returns and discounts. The Company bases its estimates on historical results and the type of transaction.
Sales of merchandise to customers through stores operated by the Company is recorded net of returns and discounts and is recognized when the significant risks and rewards of ownership have been transferred to the buyer, which is the time the transaction is entered into the point-of-sale register.
Alteration revenue is recorded based on the percentage of completion method. Due to alteration revenue representing less than one percent of merchandise revenue, the short time required to complete an alteration and the fact that at any point in time there is an immaterial amount of partially processed alterations, alteration revenue is recorded at the same time the sale of merchandise transaction is entered into the point-of-sale register.
Sales to a third party distributor are recorded when the significant risks and rewards of ownership have been transferred to the buyer which is at the time of shipment.
Revenue from gift cards is recognized at the time of redemption. When a customer purchases a gift card, a liability is recorded based on the dollar value of the gift card purchased. Unredeemed balances on gift cards that are more than three years old from the date of issuance (or "breakage") are recorded in the consolidated statement of earnings. Historically, breakage has not been material.
(d) Cash:
Cash consists of cash on hand, bank balances and money market investments with maturities of three months or less.
(e) Inventories:
Merchandise inventories are valued at the lower of cost, using the weighted average cost method, and net realizable value. For inventories manufactured by the Company, cost includes direct labour, raw materials, manufacturing and distribution centre costs related to inventories and transportation costs that are directly incurred to bring inventories to their present location and condition. For inventories purchased from third party vendors, cost includes the cost of purchase, duty and brokerage, quality assurance costs, distribution centre costs related to inventories and transportation costs that are directly incurred to bring inventories to their present location and condition. The Company estimates the net realizable value as the amount at which inventories are expected to be sold, taking into account fluctuations in retail prices due to seasonality, less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is not estimated to be recoverable due to obsolescence, damage or declining selling prices. When circumstances that previously caused inventories to be written down below cost no longer exist, the amount of the write-down previously recorded is reversed. Storage costs, administrative overheads and selling costs related to the inventories are expensed in the period the costs are incurred.
(f) Property and equipment:
Property and equipment are recorded at cost and annual amortization is provided at the following rates:
Leasehold improvements are amortized on a straight line basis over the term of the lease, unless the Company has decided to terminate the lease, at which time the unamortized balance is written off.
Property and equipment are reviewed for recoverability whenever events indicate an impairment may exist. An impairment loss is measured as the amount by which the carrying value of an asset or a group of assets exceeds its fair value. If such assets or group of assets are considered impaired, an impairment loss is recognized and the carrying value of the asset is adjusted.
(g) Intangible assets:
Intangible assets consist of computer software and annual amortization is provided at a rate of 30% declining balance.
(h) Deferred lease inducements and rent liability:
Deferred lease inducements represent cash benefits received from landlords pursuant to store lease agreements. These lease inducements are amortized against rent expense over the term of the lease, not exceeding 10.5 years.
Rent liability represents the difference between minimum rent as specified in the lease and rent calculated on a straight line basis.
(i) Income taxes:
Income taxes are determined using the asset and liability method of accounting. This method recognizes future tax assets and liabilities that arise from differences between the accounting basis of the Company's assets and liabilities and their corresponding tax basis. Future taxes are measured at the balance sheet date using the enacted or substantially enacted income tax rates and laws that are expected to apply when the asset is realized or the liability settled. The Company provides a valuation allowance for future tax assets when it is more likely than not that some or all of the future tax assets will not be realized.
(j) Earnings per share:
Basic earnings per share is calculated by dividing the net earnings available to shareholders by the weighted average number of shares outstanding during the year (see Note 6). Diluted earnings per share is calculated using the treasury stock method, which assumes that all outstanding stock options with an exercise price below the average monthly market price of the Subordinate Voting Shares on the Toronto Stock Exchange (the "TSX") are exercised and the assumed proceeds are used to purchase the Company's Subordinate Voting Shares at the average monthly market price on the TSX during the fiscal year.
(k) Translation of foreign currencies:
Accounts in foreign currencies are translated into Canadian dollars. Monetary balance sheet items are translated at the rates of exchange in effect at year-end and non-monetary items are translated at historical exchange rates. Revenues and expenses are translated at the rates in effect on the transaction dates or at the average rates of exchange for the reporting period. The resulting net gain or loss is included in the consolidated statement of earnings (loss).
(l) Financial instruments:
Financial instruments are recognized depending on their classification with changes in subsequent measurements being recognized in net earnings or other comprehensive income. The Company's financial assets and liabilities are classified as follows:
Cash is classified as "held-for-trading" and is measured at fair value. This financial asset is marked-to-market through net earnings and recorded as interest income at each period end.
Accounts receivable are classified as "loans and receivables" and are recorded at cost, which at initial measurement corresponds to fair value. After their initial fair value measurement, they are measured at amortized cost using the effective interest method.
Accounts payable and accrued liabilities and bank indebtedness are classified as "other liabilities". They are initially measured at fair value and subsequent revaluations are recorded at amortized cost using the effective interest method.
Transaction costs other than those related to financial instruments classified as held-for-trading, which are expensed as incurred, are amortized using the effective interest method.
Foreign currency option contracts, which are included in either accounts receivable or accounts payable and accrued liabilities, have been classified as held-for-trading and are measured at fair value. Fair value estimates are made at a specific point in time, using published price quotations or other available information where published price quotations are not available. These estimates are subjective in nature and involve uncertainties and the exercise of significant judgment.
Embedded derivatives (elements of contracts whose cash flows move independently from the host contract) are required to be separated and measured at fair values if certain criteria are met.
(m) Stock option plan:
The Company has a Stock Option Plan which is described in Note 6 where options to purchase Subordinate Voting Shares are issued to directors, officers, employees and service providers. Effective with the commencement of its 2004 fiscal year, the Company accounts for stock-based compensation using the fair-value method. The fair value of options granted are estimated at the date of grant using the Black-Scholes Option Pricing Model and is recognized as an expense over the vesting period of the stock option with an offsetting credit to contributed surplus. When stock options are subsequently exercised, share capital is increased by the sum of the consideration paid together with the related portion previously added to contributed surplus when compensation costs were charged against income. The Company continues to use settlement accounting to account for stock options granted prior to June 29, 2003.
(n) Restricted Share Units and Deferred Share Units:
The Company has Restricted Share Unit ("RSU") and Deferred Share Unit ("DSU") Plans, which are described in Note 6. RSUs and DSUs are settled in cash and are recorded as liabilities. The measurement of the compensation expense and corresponding liability for these awards is based on the fair value of the award, and is recorded as a charge to selling, general and administrative ("SG&A") expenses over the vesting period of the award. At the end of each financial period, changes in the Company's payment obligation due to changes in the market value of the Subordinate Voting Shares on the TSX are recorded as a charge to SG&A expenses. Dividend equivalent grants, if any, are recorded as a charge to SG&A expenses in the period the dividend is paid.
(o) Use of estimates:
The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities in the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are based on management's historical experience, best knowledge of current events and actions that the Company may undertake in the future. Illiquid credit markets, volatile equity and foreign currency markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination of inventory valuation, realizable value of property and equipment and intangible assets, stock based compensation, future tax assets, harmonized sales tax, goods and services tax, provincial sales tax, gift card breakage and income tax provisions. By their nature, these estimates are subject to measurement uncertainty and the impact on the consolidated financial statements of future periods could differ materially from those estimated.
(p) Comparative figures:
Certain amounts included in the June 26, 2010 comparative figures were reclassified to conform with the current year's financial statement presentation. Reclassification of these amounts had no effect on previously reported shareholders' equity or net earnings.
5. 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 ($14 million between September 1, 2011 and December 15, 2011) 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.
6. Share Capital:
(a). Authorized
1,224,329 Multiple Voting Shares
Unlimited Subordinate Voting Shares
Unlimited Class A and B Preference Shares
(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
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 period. The number of options excluded was 58,000 as at June 25, 2011 and 115,000 as at June 26, 2010.
(d) Substantial Issuer Bid and Normal Course Issuer Bids
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 Company's previous normal course issuer bid expired on May 6, 2011 (the "2010 NCIB"). The 2011 NCIB permits 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 during the period from May 9, 2011 to May 8, 2012, or such earlier date as the Company may complete its purchases under the 2011 NCIB. During the fourth quarter of fiscal 2011, the Company repurchased 75,000 Subordinate Voting Shares for cancellation at a weighted average price of $12.00 under the 2011 NCIB. During the fourth quarter of fiscal 2010, the Company repurchased 232,700 Subordinate Voting Shares for cancellation at a weighted average price of $8.49 under the 2010 NCIB.
On January 29, 2010, the Company commenced a substantial issuer bid ("SIB" or the "Offer") by filing and mailing a formal offer to purchase and accompanying circular dated January 26, 2010, pursuant to which the Company offered to purchase for cancellation up to $7 million in value of its Subordinate Voting Shares from shareholders by way of a modified "Dutch Auction" at a range of Offer prices between $6.10 and $6.45 per share. The minimum and maximum Offer prices corresponded with the fair market range of values per Subordinate Voting Share determined, as of January 20, 2010, by Deloitte and Touche LLP, the independent valuator engaged by the Special Committee of independent directors of the Board of Directors to prepare a formal valuation of the Subordinate Voting Shares. The Offer expired on March 8, 2010 and a total of 1,845,592 Subordinate Voting Shares were validly deposited and not withdrawn under the Offer. As the aggregate value of Subordinate Voting Shares deposited under the Offer exceeded the $7 million maximum value of consideration payable by the Company pursuant to the Offer, a pro-ration factor of 0.6088 was applied to deposited Subordinate Voting Shares (except for odd lot deposits, which were not subject to pro-ration), and the Company purchased for cancellation 1,120,000 Subordinate Voting Shares at a price of $6.25 per share.
The following Subordinate Voting Shares were repurchased for cancellation under the SIB and NCIBs then in effect during the fourth quarters and years ended June 25, 2011 and June 26, 2010, respectively:
(e) 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 June 25, 2011, the Company has reserved 638,934 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 under the Stock Option Plan vest over a period of one year from the grant date for options issued to directors and between two years and four years from the grant date for options issued to officers, employees and service providers, 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 June 25, 2011 and June 26, 2010 and changes during the fiscal years ended on those dates is presented below:
The following table summarizes the distribution of these options and the remaining contractual life as at June 25, 2011:
During the years ended June 25, 2011 and June 26, 2010, there were no stock options granted.
The compensation expense recorded for the year ended June 25, 2011 in respect of stock options was $203 (June 26, 2010 - $302). The counterpart is recorded as contributed surplus. Any consideration paid by optionees upon the exercise of stock options is credited to share capital.
(f) Deferred Share Unit Plan
The DSU Plan, as amended, was established by the Company for non-management directors. Under this Plan, non-management directors of the Company may receive an annual grant of DSUs 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 trading price of the Company's Subordinate Voting Shares on the TSX immediately prior to the date on which the value of the DSU is determined.
After retirement from the Board of Directors, a participant in the DSU Plan receives a cash payment equal to the market value of the accumulated DSUs in their account. The value of the DSU liability is adjusted to reflect changes in the market value of the Company's Subordinate Voting Shares on the TSX.
The following transactions occurred with respect to the DSU Plan during the fourth quarter quarters and years ended June 25, 2011 and June 26, 2010, respectively:
(g) Restricted Share Unit Plan
The Company has established a RSU Plan, as amended, as part of its overall compensation plan. The RSU Plan is administered by the Board of Directors, with the advice of the Committee. Under the RSU plan, certain participating 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. An RSU is a notional unit equivalent in value to one Subordinate Voting Share of the Company based on the average of the daily closing price of the Subordinate Voting Shares on the TSX for the last five consecutive trading days immediately preceding the payment date. 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 value of the vested RSU liability is adjusted to reflect changes in the market value of the Company's Subordinate Voting Shares.
The following transactions occurred with respect to the RSU Plan during the fourth quarters and years ended June 25, 2011 and June 26, 2010, respectively:
7. Amortization:
8. Restructuring Costs:
Restructuring costs of approximately $1,466 were originally recorded during fiscal 2009 and represented severance costs in connection with the Toronto manufacturing facility workforce reduction of approximately 56 employees and head office staff reduction of more than 20 employees. Approximately $1,313 of the restructuring costs were paid during fiscal 2009 and $153 of restructuring costs were reversed during fiscal 2010 as these costs are not expected to be incurred as all severances have been paid.
9. Income Taxes:
10. Changes in non-cash operating working capital items:
11. Contingencies & 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:
12. Commitments:
(a) Operating leases:
Minimum rentals for the next five fiscal years and thereafter, excluding rentals based upon revenue are as follows:
(b) Letters of credit:
The Company had outstanding letters of credit in the amount of $11,827 (June 26, 2010 - $11,118) for the importation of finished goods inventories to be received.
13. 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 assumption used in estimating the fair value of the Company's financial instruments are as follows:
13. 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 option contracts and spot purchases to manage its foreign exchange exposure on cash flows related to these purchases. A foreign exchange option 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 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.
Outstanding foreign exchange option contracts as at June 25, 2011 included contracts with notional amounts of US$18,500 expiring between July 15, 2011 and December 16, 2011. As at June 26, 2010, there were outstanding foreign exchange option contracts with notional amounts of US$15,000 that expired between July 2, 2010 and December 6, 2010.
As at June 25, 2011, a sensitivity analysis was performed on the Company's U.S. dollar denominated financial instruments which principally consist of US$0.5 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 $19 decrease or increase, respectively, in the Company's net earnings for the year ended June 25, 2011.
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 June 25, 2011, to determine how a change in interest rates would have impacted net earnings. As at June 25, 2011, the Company's cash balance available for investment was approximately $28.7 million and an increase or decrease of 100 basis points in interest rates would have increased or decreased net earnings by approximately $0.2 million. 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 accounts payable and accrued liabilities. 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 June 25, 2011 to determine how a change in the price of the Company's Subordinate Voting Shares would have impacted net earnings. As at June 25, 2011, a total of 122,300 RSUs and 103,920 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 $0.2 million. 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 June 25, 2011, the Company had $28.7 million of cash; an operating credit facility of $25 million that is committed until June 27, 2014; and a $10 million ($14 million between September 1, 2011 and December 15, 2011) 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 accounts payable and accrued liabilities 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 (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 and Government of Canada treasury bills. 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.
As at June 25, 2011, the Company's exposure to credit risk for these financial instruments was cash of $28.7 million and accounts receivable of $0.4 million. Cash included $24.1 million of short-term deposits.
14. 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 ($14 million between September 1, 2011 and December 15, 2011) 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. 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 June 25, 2011 and June 26, 2010. There has been no change with respect to the overall capital risk management strategy during the year ended June 25, 2011.
15. 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:
Danier Leather Inc.: Investor Relations Contact
Jeffrey Wortsman
President and Chief Executive Officer
(416) 762-8175 ext. 302
Danier Leather Inc.
Bryan Tatoff
Senior Vice-President, Chief Financial Officer & Secretary
(416) 762-8175 ext. 328
Themen in dieser Pressemitteilung:
Unternehmensinformation / Kurzprofil:
Datum: 11.08.2011 - 10:00 Uhr
Sprache: Deutsch
News-ID 45015
Anzahl Zeichen: 0
contact information:
Town:
TORONTO, ONTARIO
Kategorie:
Fashion
Diese Pressemitteilung wurde bisher 302 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Danier Leather Reports Fiscal 2011 Fourth Quarter and Year End Results"
steht unter der journalistisch-redaktionellen Verantwortung von
Danier Leather Inc. (Nachricht senden)
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