Wednesday, January 25, 2012 5:15:58 PM
Another solid quarter for Danier Leather, DL.TO / DLTOF.PK
http://finance.yahoo.com/news/Danier-Leather-Reports-Fiscal-ccn-3255764475.html?x=0
TORONTO, ONTARIO--(Marketwire -01/25/12)- Danier Leather Inc. (TSX: DL.TO - News) 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 For the 26 Weeks Ended Ended---------------------------------------------------------------------------- Dec. 24, Dec. 25, Dec. 24, Dec. 25, 2011 2010 2011 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 For the 26 Weeks Ended Ended ---------------------------------------- Dec 24, Dec 25, Dec 24, Dec 25, 2011 2010 2011 2010 ------------------- ------------------- ($000) ($000) ($000) ($000)Net earnings $ 8,466 $ 8,170 $ 5,698 $ 5,298Add (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 todayat 4:00 PM Eastern Time to discuss the results. Please dial 416-340-2216 inthe Toronto area or 1-866-226-1792 (rest of Canada and the U.S.) and quotethe Danier Leather Inc. conference call with Chairperson Jeffrey Wortsman atleast 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 For the 26 Weeks Ended Ended --------------------------------------------- December December December December 24, 25, 24, 25, 2011 2010 2011 2010 --------------------- ---------------------Revenue $ 59,487 $ 61,442 $ 81,578 $ 84,869Cost 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 7,531Provision 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 $ 1.09Weighted 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 4,856,890Number of shares outstanding at period end 4,631,835 4,702,068 4,631,835 4,702,068DANIER LEATHER INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------------------------------------------- Dec 24, Dec 25, June 25, 2011 2010 2011 --------- --------- ---------ASSETSCurrent 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 58,948Non-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 --------- --------- --------- --------- --------- ---------LIABILITIESCurrent 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 12,838Non-current LiabilitiesDeferred 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 BoardJanuary 25, 2012See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.CONSOLIDATED STATEMENTS OF CASH FLOW(thousands of Canadian dollars) - unaudited------------------------------------------------------------------------------------------------------------------------------------------------------ For the 13 Weeks Ended For the 26 Weeks Ended ---------------------- ---------------------- December December December December 24, 2011 25, 2010 24, 2011 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) (2,008) (5,091) ---------------------- ----------------------Net cash generated from operating activities 21,219 16,353 6,176 124 ---------------------- ----------------------FINANCING ACTIVITIES Subordinate voting shares issued 12 607 12 649 Subordinate voting shares repurchased - - (530) - ---------------------- ----------------------Net cash (used in) generated from financing activities 12 607 (518) 649 ---------------------- ----------------------INVESTING ACTIVITIES Acquisition of property and equipment (1,502) (874) (2,537) (1,881) Acquisition of computer software (16) (10) (16) (49) ---------------------- ----------------------Net cash used in investing activities (1,518) (884) (2,553) (1,930) ---------------------- ----------------------Increase (decrease) in cash and cash equivalents 19,713 16,076 3,105 (1,157)Cash and cash equivalents, beginning of period 12,090 9,330 28,698 26,563 ---------------------- ----------------------Cash and cash equivalents, end of period $ 31,803 $ 25,406 $ 31,803 $ 25,406 ---------------------- ---------------------- ---------------------- ----------------------See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------- Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ------------------------------------------------------------Balance - June 25, 2011 $ 15,160 $ 934 $ - $ 45,834 $ 61,928 Net earnings - - - 5,698 5,698 Stock-based compensation related to stock options - 17 - - 17 Exercise of stock options 18 (6) - - 12 Share repurchases (219) - - (311) (530) ------------------------------------------------------------Balance - December 24, 2011 $ 14,959 $ 945 $ - $ 51,221 $ 67,125 ------------------------------------------------------------ Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ----------------------------------------------------------Balance - June 27, 2010 $ 14,176 $ 1,252 $ - $ 38,837 $ 54,265 Net earnings - - - 5,298 5,298 Stock-based compensation related to stock options - 60 - - 60 Exercise of stock options 825 (176) - - 649 Share repurchases - - - - - ----------------------------------------------------------Balance - December 25, 2010 $ 15,001 $ 1,136 $ - $ 44,135 $ 60,272 ----------------------------------------------------------See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the 13 week and 26 week periods ended December 24, 2011 and December 25,2010(unless otherwise stated, all amounts are in thousands of Canadian dollars)- unaudited1. General Information: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 are listed on the Toronto Stock Exchange (TSX: DL.TO - News). The address of its registered head office is 2650 St. Clair Avenue West, Toronto, Ontario, M6N 1M2, Canada.
2. Significant Accounting Policies:(a) Statement of Compliance
These unaudited condensed interim consolidated financial statements ("interim consolidated financial statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34, Interim Financial Reporting and by IFRS 1, First-time Adoption of IFRS ("IFRS 1"), as issued by the International Accounting Standards Board ("IASB").
The policies applied in these interim consolidated financial statements are based on IFRS standards issued and outstanding as of January 25, 2012, the date the interim consolidated financial statements were approved and authorized for issuance by the Company's Board of Directors. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the financial year ending June 30, 2012 could result in restatement of these interim consolidated financial statements, including transition adjustments recognized on change-over to IFRS.
The interim consolidated financial statements should be read in conjunction with the Company's annual financial statements for the year ended June 25, 2011 prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). In addition, for supplemental annual disclosures, see note 21 and note 22 of the Company's 2012 first quarter unaudited condensed interim consolidated financial statements and notes ("Q1 2012 interim consolidated financial statements"). An explanation of how the transition from Canadian GAAP to IFRS as at June 27, 2010 ("transition date") has affected the reported financial position, financial performance and cash flows of the Company, including mandatory exceptions and optional exemptions under IFRS 1 is provided in the Q1 2012 interim consolidated financial statements.
(b) Basis of Presentation
These interim consolidated financial statements have been prepared on a historical cost basis except for the following items which are measured at fair value:
-- Financial instruments at fair value through profit and loss; and-- Liabilities for cash-settled share-based payment plans.The significant accounting policies as disclosed in note 3 of the Company's Q1 2012 interim consolidated financial statements have been applied consistently in the preparation of these interim consolidated financial statements.
(c) Functional and presentation currency
These interim consolidated financial statements are presented in Canadian dollars ("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) Use of Estimates and Judgments
The preparation of these interim consolidated financial statements in accordance with IFRS requires management to make certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the interim consolidated financial statements, and the reported amounts of revenues and expenses during the period.
Judgment is commonly used in determining whether a balance or transaction should be recognized in the interim consolidated financial statements, and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgments and estimates are often interrelated.
Management has applied its judgment in its assessment of the classification of leases and financial instruments, the recognition of tax provisions, determining the tax rates used for measuring deferred taxes, and identifying the indicators of impairment of property and equipment and computer software.
Estimates are used when estimating the useful lives of property and equipment and computer software for the purposes of depreciation and amortization, when accounting for or measuring items such as inventory provisions, gift card breakage, assumptions underlying income taxes, sales and use taxes and sales return provisions, certain fair value measures including those related to the valuation of share-based payments and financial instruments and when testing assets for impairment. These estimations depend upon subjective and complex judgments about matters that may be uncertain, and changes in those estimates could materially impact the interim consolidated 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 such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from such estimates and assumptions.
Estimates and underlying 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.
3. Future Accounting Standards:A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2012, and accordingly, have not been applied in preparing these interim consolidated financial statements:
(a) IFRS 7: Financial Instruments - Disclosures
The IASB has issued an amendment to IFRS 7, "Financial Instruments: Disclosures", requiring incremental disclosures regarding transfers of financial assets. This amendment is effective for annual periods beginning on or after July 1, 2011. The Company will apply the amendment for its fiscal year beginning July 1, 2012 and does not expect the implementation to have a significant impact on the Company's disclosures.
The IASB has issued two further amendments to IFRS 7 related to enhanced disclosure requirements for offsetting of financial assets and liabilities and additional disclosures on transition from IAS 39 to IFRS 9. The amendment related to offsetting of financial assets and liabilities is effective for annual periods beginning on or after January 1, 2013 and the amendment related to additional disclosures on transition from IAS 39 to IFRS 9 is effective for annual periods beginning on or after January 1, 2015. The Company has yet to assess the impact of these further amendments on its consolidated financial statements.
(b) IFRS 9: Financial Instruments
The IASB has 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. The Company has yet to assess the impact of the new standard on its statements of financial position, earnings and disclosures.
(c) IFRS 13: Fair Value Measurement
The IASB has issued a new standard, IFRS 13, "Fair Value Measurement" ("IFRS 13"), which is a comprehensive standard for 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 and, in many cases, does not reflect a clear measurement basis or consistent disclosures. The Company does not believe that this new standard will have a material impact on its consolidated financial statements.
(d) IAS 32: Financial Instruments - Presentation
The IASB has issued an amendment to standard IAS 32, "Financial Instruments - Presentation" ("IAS 32"). The amendment is effective for annual periods beginning on or after January 1, 2014 and clarifies the requirements for offsetting financial assets and financial liabilities. The Company has yet to assess the impact of this amendment on its consolidated financial statements.
(e) Other Standards
On May 12, 2011, the IASB issued a package of five new standards, all of which are effective for annual periods beginning on or after January 1, 2013. Early adoption is permitted but IFRS 10, IFRS 11 and IFRS 12 (all discussed below) must all be adopted at the same time. The Company has yet to fully assess the impact of the new standards and amendments on its consolidated financial statements. The following is a list of these new standards and amendments.
-- IFRS 10, "Consolidated Financial Statements" ("IFRS 10") - This standard replaces the portions of IAS 27, "Consolidated and Separate Financial Statements" that pertain to consolidated reporting and also SIC-12, "Consolidation - Special Purpose Entities". This new standard establishes standards for the presentation and preparation of consolidated financial statements when an entity controls one or more entities. IFRS 10 establishes a single control model that applies to all entities.-- IFRS 11, "Joint Arrangement" ("IFRS 11") - This standard replaces IAS 31, "Interests in Joint Ventures" and SIC-13, "Jointly-controlled Entities - Non-Monetary Contributions by Venturers", and requires that a party in a joint arrangement assess its rights and obligations to determine the type of joint arrangement and account for those rights and obligations accordingly. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method.-- IFRS 12, "Disclosure of Interests in Other Entities" ("IFRS 12") - This standard supplements existing disclosure requirements about interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. It focuses on the nature of, and risk associated with, such interests in other entities and the effects of such interests on its statements of financial position, earnings (loss) and cash flows.3. Future Accounting Standards (continued):-- IAS 27, "Separate Financial Statements" and IAS 28 "Investments in Associates and Joint Venturers" are both being amended as a direct consequence of the above new standards and deal with accounting in separate, or unconsolidated, financial statements, as well as the mechanics of equity accounting for joint ventures.4. Seasonality of retail 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 operations 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.
5. Cash and cash equivalents:The components of cash and cash equivalents are as follows:
December 24, 2011 December 25, 2010 June 25, 2011 ------------------- ------------------- ---------------Cash $ 3,333 $ 6,432 $ 4,625Bankers acceptances 28,470 18,974 24,073 ------------------- ------------------- ---------------Cash and cash equivalents $ 31,803 $ 25,406 $ 28,698 ------------------- ------------------- --------------- ------------------- ------------------- ---------------6. Inventories: ------------------------------------------------------- December 24, 2011 December 25, 2010 June 25, 2011 ------------------- ------------------- ---------------Raw materials $ 1,817 $ 3,188 $ 2,655Work-in-process 175 180 265Finished goods 34,797 37,795 26,044 ------------------- ------------------- --------------- $ 36,789 $ 41,163 $ 28,964 ------------------- ------------------- --------------- ------------------- ------------------- --------------- 13 Weeks Ended 26 Weeks Ended ----------------------- ----------------------- December December December December 24, 2011 25, 2010 24, 2011 25, 2010 ----------- ----------- ----------- -----------Cost of inventory recognized as an expense $ 26,070 $ 25,188 $ 36,352 $ 36,214Write-downs of inventory due to net realizable value being lower than cost $ 443 $ 330 $ 588 $ 439Write-downs recognized in previous periods that were reversed - - $ 3 $ 217. Property and Equipment: ------------------------------------------------- ------------------------------------------------- 26 Weeks Ended December 24, 2011 ------------------------------------------------- ------------------------------------------------- Land Building Roof HVAC -------------------------------------------------CostAt June 25, 2011 $ 1,000 $ 6,063 $ 308 $ 753Additions - - - 40Disposals - - - - -------------------------------------------------At December 24, 2011 $ 1,000 $ 6,063 $ 308 $ 793 ------------------------------------------------- -------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 - $ 2,198 $ 184 $ 531Amortization for the period - 77 9 23Impairment losses - - - -Disposals - - - - -------------------------------------------------At December 24, 2011 - $ 2,275 $ 193 $ 554 ------------------------------------------------- -------------------------------------------------Net carrying valueAt December 24, 2011 $ 1,000 $ 3,788 $ 115 $ 239At June 25, 2011 $ 1,000 $ 3,865 $ 124 $ 222Capital work in progress included aboveAt December 24, 2011 - - - - -------------------------------------------------- -------------------------------------------------- 26 Weeks Ended December 24, 2011 -------------------------------------------------- -------------------------------------------------- Leasehold Furniture & Computer Improvements Equipment Hardware Total --------------------------------------------------CostAt June 25, 2011 $ 23,453 $ 8,985 $ 3,180 $ 43,742Additions 1,762 638 97 2,537Disposals (1,470) (346) - (1,816) --------------------------------------------------At December 24, 2011 $ 23,745 $ 9,277 $ 3,277 $ 44,463 -------------------------------------------------- --------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 $ 17,968 $ 6,232 $ 2,225 $ 29,338Amortization for the period 845 483 168 1,605Impairment losses 21 - - 21Disposals (1,470) (346) - (1,816) --------------------------------------------------At December 24, 2011 $ 17,364 $ 6,369 $ 2,393 $ 29,148 -------------------------------------------------- --------------------------------------------------Net carrying valueAt December 24, 2011 $ 6,381 $ 2,908 $ 884 $ 15,315At June 25, 2011 $ 5,485 $ 2,753 $ 955 $ 14,404Capital work in progress included aboveAt December 24, 2011 $ 270 $ 59 - $ 329 ------------------------------------------------- ------------------------------------------------- 26 Weeks Ended Dec
http://finance.yahoo.com/news/Danier-Leather-Reports-Fiscal-ccn-3255764475.html?x=0
TORONTO, ONTARIO--(Marketwire -01/25/12)- Danier Leather Inc. (TSX: DL.TO - News) 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 For the 26 Weeks Ended Ended---------------------------------------------------------------------------- Dec. 24, Dec. 25, Dec. 24, Dec. 25, 2011 2010 2011 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 For the 26 Weeks Ended Ended ---------------------------------------- Dec 24, Dec 25, Dec 24, Dec 25, 2011 2010 2011 2010 ------------------- ------------------- ($000) ($000) ($000) ($000)Net earnings $ 8,466 $ 8,170 $ 5,698 $ 5,298Add (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 todayat 4:00 PM Eastern Time to discuss the results. Please dial 416-340-2216 inthe Toronto area or 1-866-226-1792 (rest of Canada and the U.S.) and quotethe Danier Leather Inc. conference call with Chairperson Jeffrey Wortsman atleast 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 For the 26 Weeks Ended Ended --------------------------------------------- December December December December 24, 25, 24, 25, 2011 2010 2011 2010 --------------------- ---------------------Revenue $ 59,487 $ 61,442 $ 81,578 $ 84,869Cost 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 7,531Provision 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 $ 1.09Weighted 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 4,856,890Number of shares outstanding at period end 4,631,835 4,702,068 4,631,835 4,702,068DANIER LEATHER INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------------------------------------------- Dec 24, Dec 25, June 25, 2011 2010 2011 --------- --------- ---------ASSETSCurrent 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 58,948Non-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 --------- --------- --------- --------- --------- ---------LIABILITIESCurrent 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 12,838Non-current LiabilitiesDeferred 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 BoardJanuary 25, 2012See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.CONSOLIDATED STATEMENTS OF CASH FLOW(thousands of Canadian dollars) - unaudited------------------------------------------------------------------------------------------------------------------------------------------------------ For the 13 Weeks Ended For the 26 Weeks Ended ---------------------- ---------------------- December December December December 24, 2011 25, 2010 24, 2011 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) (2,008) (5,091) ---------------------- ----------------------Net cash generated from operating activities 21,219 16,353 6,176 124 ---------------------- ----------------------FINANCING ACTIVITIES Subordinate voting shares issued 12 607 12 649 Subordinate voting shares repurchased - - (530) - ---------------------- ----------------------Net cash (used in) generated from financing activities 12 607 (518) 649 ---------------------- ----------------------INVESTING ACTIVITIES Acquisition of property and equipment (1,502) (874) (2,537) (1,881) Acquisition of computer software (16) (10) (16) (49) ---------------------- ----------------------Net cash used in investing activities (1,518) (884) (2,553) (1,930) ---------------------- ----------------------Increase (decrease) in cash and cash equivalents 19,713 16,076 3,105 (1,157)Cash and cash equivalents, beginning of period 12,090 9,330 28,698 26,563 ---------------------- ----------------------Cash and cash equivalents, end of period $ 31,803 $ 25,406 $ 31,803 $ 25,406 ---------------------- ---------------------- ---------------------- ----------------------See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------- Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ------------------------------------------------------------Balance - June 25, 2011 $ 15,160 $ 934 $ - $ 45,834 $ 61,928 Net earnings - - - 5,698 5,698 Stock-based compensation related to stock options - 17 - - 17 Exercise of stock options 18 (6) - - 12 Share repurchases (219) - - (311) (530) ------------------------------------------------------------Balance - December 24, 2011 $ 14,959 $ 945 $ - $ 51,221 $ 67,125 ------------------------------------------------------------ Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ----------------------------------------------------------Balance - June 27, 2010 $ 14,176 $ 1,252 $ - $ 38,837 $ 54,265 Net earnings - - - 5,298 5,298 Stock-based compensation related to stock options - 60 - - 60 Exercise of stock options 825 (176) - - 649 Share repurchases - - - - - ----------------------------------------------------------Balance - December 25, 2010 $ 15,001 $ 1,136 $ - $ 44,135 $ 60,272 ----------------------------------------------------------See accompanying notes to the consolidated financial statementsDANIER LEATHER INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the 13 week and 26 week periods ended December 24, 2011 and December 25,2010(unless otherwise stated, all amounts are in thousands of Canadian dollars)- unaudited1. General Information: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 are listed on the Toronto Stock Exchange (TSX: DL.TO - News). The address of its registered head office is 2650 St. Clair Avenue West, Toronto, Ontario, M6N 1M2, Canada.
2. Significant Accounting Policies:(a) Statement of Compliance
These unaudited condensed interim consolidated financial statements ("interim consolidated financial statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34, Interim Financial Reporting and by IFRS 1, First-time Adoption of IFRS ("IFRS 1"), as issued by the International Accounting Standards Board ("IASB").
The policies applied in these interim consolidated financial statements are based on IFRS standards issued and outstanding as of January 25, 2012, the date the interim consolidated financial statements were approved and authorized for issuance by the Company's Board of Directors. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the financial year ending June 30, 2012 could result in restatement of these interim consolidated financial statements, including transition adjustments recognized on change-over to IFRS.
The interim consolidated financial statements should be read in conjunction with the Company's annual financial statements for the year ended June 25, 2011 prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). In addition, for supplemental annual disclosures, see note 21 and note 22 of the Company's 2012 first quarter unaudited condensed interim consolidated financial statements and notes ("Q1 2012 interim consolidated financial statements"). An explanation of how the transition from Canadian GAAP to IFRS as at June 27, 2010 ("transition date") has affected the reported financial position, financial performance and cash flows of the Company, including mandatory exceptions and optional exemptions under IFRS 1 is provided in the Q1 2012 interim consolidated financial statements.
(b) Basis of Presentation
These interim consolidated financial statements have been prepared on a historical cost basis except for the following items which are measured at fair value:
-- Financial instruments at fair value through profit and loss; and-- Liabilities for cash-settled share-based payment plans.The significant accounting policies as disclosed in note 3 of the Company's Q1 2012 interim consolidated financial statements have been applied consistently in the preparation of these interim consolidated financial statements.
(c) Functional and presentation currency
These interim consolidated financial statements are presented in Canadian dollars ("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) Use of Estimates and Judgments
The preparation of these interim consolidated financial statements in accordance with IFRS requires management to make certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the interim consolidated financial statements, and the reported amounts of revenues and expenses during the period.
Judgment is commonly used in determining whether a balance or transaction should be recognized in the interim consolidated financial statements, and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgments and estimates are often interrelated.
Management has applied its judgment in its assessment of the classification of leases and financial instruments, the recognition of tax provisions, determining the tax rates used for measuring deferred taxes, and identifying the indicators of impairment of property and equipment and computer software.
Estimates are used when estimating the useful lives of property and equipment and computer software for the purposes of depreciation and amortization, when accounting for or measuring items such as inventory provisions, gift card breakage, assumptions underlying income taxes, sales and use taxes and sales return provisions, certain fair value measures including those related to the valuation of share-based payments and financial instruments and when testing assets for impairment. These estimations depend upon subjective and complex judgments about matters that may be uncertain, and changes in those estimates could materially impact the interim consolidated 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 such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from such estimates and assumptions.
Estimates and underlying 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.
3. Future Accounting Standards:A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2012, and accordingly, have not been applied in preparing these interim consolidated financial statements:
(a) IFRS 7: Financial Instruments - Disclosures
The IASB has issued an amendment to IFRS 7, "Financial Instruments: Disclosures", requiring incremental disclosures regarding transfers of financial assets. This amendment is effective for annual periods beginning on or after July 1, 2011. The Company will apply the amendment for its fiscal year beginning July 1, 2012 and does not expect the implementation to have a significant impact on the Company's disclosures.
The IASB has issued two further amendments to IFRS 7 related to enhanced disclosure requirements for offsetting of financial assets and liabilities and additional disclosures on transition from IAS 39 to IFRS 9. The amendment related to offsetting of financial assets and liabilities is effective for annual periods beginning on or after January 1, 2013 and the amendment related to additional disclosures on transition from IAS 39 to IFRS 9 is effective for annual periods beginning on or after January 1, 2015. The Company has yet to assess the impact of these further amendments on its consolidated financial statements.
(b) IFRS 9: Financial Instruments
The IASB has 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. The Company has yet to assess the impact of the new standard on its statements of financial position, earnings and disclosures.
(c) IFRS 13: Fair Value Measurement
The IASB has issued a new standard, IFRS 13, "Fair Value Measurement" ("IFRS 13"), which is a comprehensive standard for 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 and, in many cases, does not reflect a clear measurement basis or consistent disclosures. The Company does not believe that this new standard will have a material impact on its consolidated financial statements.
(d) IAS 32: Financial Instruments - Presentation
The IASB has issued an amendment to standard IAS 32, "Financial Instruments - Presentation" ("IAS 32"). The amendment is effective for annual periods beginning on or after January 1, 2014 and clarifies the requirements for offsetting financial assets and financial liabilities. The Company has yet to assess the impact of this amendment on its consolidated financial statements.
(e) Other Standards
On May 12, 2011, the IASB issued a package of five new standards, all of which are effective for annual periods beginning on or after January 1, 2013. Early adoption is permitted but IFRS 10, IFRS 11 and IFRS 12 (all discussed below) must all be adopted at the same time. The Company has yet to fully assess the impact of the new standards and amendments on its consolidated financial statements. The following is a list of these new standards and amendments.
-- IFRS 10, "Consolidated Financial Statements" ("IFRS 10") - This standard replaces the portions of IAS 27, "Consolidated and Separate Financial Statements" that pertain to consolidated reporting and also SIC-12, "Consolidation - Special Purpose Entities". This new standard establishes standards for the presentation and preparation of consolidated financial statements when an entity controls one or more entities. IFRS 10 establishes a single control model that applies to all entities.-- IFRS 11, "Joint Arrangement" ("IFRS 11") - This standard replaces IAS 31, "Interests in Joint Ventures" and SIC-13, "Jointly-controlled Entities - Non-Monetary Contributions by Venturers", and requires that a party in a joint arrangement assess its rights and obligations to determine the type of joint arrangement and account for those rights and obligations accordingly. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method.-- IFRS 12, "Disclosure of Interests in Other Entities" ("IFRS 12") - This standard supplements existing disclosure requirements about interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. It focuses on the nature of, and risk associated with, such interests in other entities and the effects of such interests on its statements of financial position, earnings (loss) and cash flows.3. Future Accounting Standards (continued):-- IAS 27, "Separate Financial Statements" and IAS 28 "Investments in Associates and Joint Venturers" are both being amended as a direct consequence of the above new standards and deal with accounting in separate, or unconsolidated, financial statements, as well as the mechanics of equity accounting for joint ventures.4. Seasonality of retail 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 operations 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.
5. Cash and cash equivalents:The components of cash and cash equivalents are as follows:
December 24, 2011 December 25, 2010 June 25, 2011 ------------------- ------------------- ---------------Cash $ 3,333 $ 6,432 $ 4,625Bankers acceptances 28,470 18,974 24,073 ------------------- ------------------- ---------------Cash and cash equivalents $ 31,803 $ 25,406 $ 28,698 ------------------- ------------------- --------------- ------------------- ------------------- ---------------6. Inventories: ------------------------------------------------------- December 24, 2011 December 25, 2010 June 25, 2011 ------------------- ------------------- ---------------Raw materials $ 1,817 $ 3,188 $ 2,655Work-in-process 175 180 265Finished goods 34,797 37,795 26,044 ------------------- ------------------- --------------- $ 36,789 $ 41,163 $ 28,964 ------------------- ------------------- --------------- ------------------- ------------------- --------------- 13 Weeks Ended 26 Weeks Ended ----------------------- ----------------------- December December December December 24, 2011 25, 2010 24, 2011 25, 2010 ----------- ----------- ----------- -----------Cost of inventory recognized as an expense $ 26,070 $ 25,188 $ 36,352 $ 36,214Write-downs of inventory due to net realizable value being lower than cost $ 443 $ 330 $ 588 $ 439Write-downs recognized in previous periods that were reversed - - $ 3 $ 217. Property and Equipment: ------------------------------------------------- ------------------------------------------------- 26 Weeks Ended December 24, 2011 ------------------------------------------------- ------------------------------------------------- Land Building Roof HVAC -------------------------------------------------CostAt June 25, 2011 $ 1,000 $ 6,063 $ 308 $ 753Additions - - - 40Disposals - - - - -------------------------------------------------At December 24, 2011 $ 1,000 $ 6,063 $ 308 $ 793 ------------------------------------------------- -------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 - $ 2,198 $ 184 $ 531Amortization for the period - 77 9 23Impairment losses - - - -Disposals - - - - -------------------------------------------------At December 24, 2011 - $ 2,275 $ 193 $ 554 ------------------------------------------------- -------------------------------------------------Net carrying valueAt December 24, 2011 $ 1,000 $ 3,788 $ 115 $ 239At June 25, 2011 $ 1,000 $ 3,865 $ 124 $ 222Capital work in progress included aboveAt December 24, 2011 - - - - -------------------------------------------------- -------------------------------------------------- 26 Weeks Ended December 24, 2011 -------------------------------------------------- -------------------------------------------------- Leasehold Furniture & Computer Improvements Equipment Hardware Total --------------------------------------------------CostAt June 25, 2011 $ 23,453 $ 8,985 $ 3,180 $ 43,742Additions 1,762 638 97 2,537Disposals (1,470) (346) - (1,816) --------------------------------------------------At December 24, 2011 $ 23,745 $ 9,277 $ 3,277 $ 44,463 -------------------------------------------------- --------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 $ 17,968 $ 6,232 $ 2,225 $ 29,338Amortization for the period 845 483 168 1,605Impairment losses 21 - - 21Disposals (1,470) (346) - (1,816) --------------------------------------------------At December 24, 2011 $ 17,364 $ 6,369 $ 2,393 $ 29,148 -------------------------------------------------- --------------------------------------------------Net carrying valueAt December 24, 2011 $ 6,381 $ 2,908 $ 884 $ 15,315At June 25, 2011 $ 5,485 $ 2,753 $ 955 $ 14,404Capital work in progress included aboveAt December 24, 2011 $ 270 $ 59 - $ 329 ------------------------------------------------- ------------------------------------------------- 26 Weeks Ended Dec
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