Danier Leather Inc.
TSX : DL

Danier Leather Inc.

October 27, 2014 16:30 ET

Danier Leather Reports Fiscal 2015 First Quarter Results

TORONTO, ONTARIO--(Marketwired - Oct. 27, 2014) - Danier Leather Inc. (TSX:DL) ("Danier" or the "Company") today announced its unaudited interim consolidated financial results for the 13-week period ended September 27, 2014.

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

For the 13 Weeks Ended
Sept. 27, 2014 Sept. 28, 2013
Sales $ 20,572 $ 24,198
EBITDA(1) (6,652 ) (4,096 )
Adjusted EBITDA(1) (7,068 ) (3,518 )
Net Loss (5,917 ) (3,557 )
EPS - Basic $ (1.54 ) $ (0.93 )
EPS - Diluted $ (1.54 ) $ (0.93 )
Number of Stores 90 91
Retail Square Footage 283,224 287,657

Sales during the first quarter of fiscal 2015 decreased by 15% to $20.6 million compared with $24.2 million during the first quarter last year. Comparable store sales(2) decreased by 18% compared to the same period last year. Sales were affected by some of the same factors discussed in the Company's 2014 Annual Report, including increased promotional activity to reduce past season inventory, a competitive retail environment and a lack of "newness" in our product assortment, all of which resulted in a 13% decrease in customer traffic during the first quarter of fiscal 2015 as compared to the same period last year. New fall and winter merchandise is now being received in time for the upcoming holiday selling season, which is historically our busiest time of year.

In February 2014, Danier launched its eCommerce store for orders within Canada. While not currently a significant portion of Danier's overall sales, eCommerce revenue for the most recent quarter increased by 73% from our phone order channel in the same quarter last year.

Gross profit margin during the first quarter of fiscal 2015 was 46.7% compared with 50.0% during the same period last year. The decrease in gross profit margin was mainly due to increased promotional activity undertaken by the Company in order to reduce prior year inventory levels, increased inventory provisions and the effect of the weakened Canadian dollar relative to the U.S. dollar.

Selling, general and administrative expenses of $17.1 million incurred during the first quarter of fiscal 2015 were similar with the first quarter of last year.

The seasonal net loss of approximately $5.9 million during the first quarter of fiscal 2015 increased by approximately $2.3 million compared with the net loss of $3.6 million during the first quarter last year.

At the end of first quarter of fiscal 2015, Danier had working capital(3) of $24.0 million and a book value of $11.05 per outstanding share.

Non-IFRS Financial Measures

The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"). In order to provide additional insight into the business, the Company has also provided certain non-IFRS data, including EBITDA, Adjusted EBITDA and comparable store sales, each as defined below. Non-IFRS measures such as EBITDA, Adjusted 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 and Adjusted EBITDA - EBITDA is defined as net earnings (loss) before interest expense, interest income, income taxes and amortization. Adjusted EBITDA is defined as EBITDA (as defined above) before impairment loss on property and equipment, foreign exchange loss (gain) and termination benefits. 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 and amortization and its ability to incur and service debt. Adjusted EBITDA is a financial metric used by management to compare EBITDA (as defined above) before impairment loss on property and equipment, foreign exchange loss (gain) and termination benefits. EBITDA and Adjusted EBITDA is also used by management to measure performance against internal targets, prior period results and other retailers. EBITDA and Adjusted EBITDA are calculated as outlined in the following table:
For the 13 Weeks Ended
Sept 27, 2014 Sept 28, 2013
($000 ) ($000 )
Net loss $ (5,917 ) $ (3,557 )
Add (deduct) impact of the following:
Income tax (1,543 ) (1,455 )
Interest expense 21 19
Interest income (10 ) (40 )
Amortization 797 937
EBITDA $ (6,652 ) $ (4,096 )
Impairment loss on property and equipment 615 -
Foreign exchange loss (gain) (1,037 ) 573
Termination benefits 6 5
Adjusted EBITDA $ (7,068 ) $ (3,518 )
(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. Comparable store sales is calculated as outlined in the following table:
For the 13 Weeks Ended
Sept 27, 2014 Sept 28, 2013 % change
($000 ) ($000 )
Comparable stores $ 18,927 $ 22,995 (18 %)
Non-comparable stores & direct-to customer 1,567 1,091 44 %
Alterations revenue 129 157 (18 %)
Sales return provision (net change) (51 ) (45 ) n/m
Revenue $ 20,572 $ 24,198 (15 %)
(3) Working capital is defined as total current assets minus total current liabilities. Working capital is a key indicator and financial metric used by the Company to measure short-term liquidity for those assets that can easily be converted into cash to satisfy both short-term liabilities and upcoming operating expenses. Working capital is calculated as outlined in the following table:
Sept 27, 2014 Sept 28, 2013
($000 ) ($000 )
Total current assets $ 38,198 $ 45,227
Total current liabilities $ 14,234 $ 12,760
Working capital $ 23,964 $ 32,467

Forward-Looking Statements

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

Forward-looking statements and forward-looking information are based on information available at the time they are made, underlying estimates, opinions and assumptions made by management and management's good faith belief with respect to future events, performance and results and are subject to inherent risks and uncertainties surrounding future expectations generally. For additional information with respect to Danier's inherent risks and uncertainties, reference should be made to Danier's continuous disclosure materials filed from time to time with the Canadian Securities Regulatory Authorities, including the Company's most recent annual information form, quarterly and annual reports and financial statements and notes thereto, and supplementary information, which are available on SEDAR at 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 laws.

About Danier

Danier Leather Inc. is a leading integrated designer, manufacturer, distributor and retailer of high-quality fashion-oriented leather apparel and accessories. The Company's merchandise is marketed exclusively under the well-known Danier brand name and is available at its 90 shopping mall, street-front and outlet stores as well as the online store at danier.com. For more information about the Company and our products, visit www.danier.com.

DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(thousands of Canadian dollars, except per share amounts and number of shares) - unaudited
For the 13 Weeks Ended
Sept 27, 2014 Sept 28, 2013
Revenue $ 20,572 $ 24,198
Cost of sales 10,969 12,091
Gross profit 9,603 12,107
Selling, general and administrative expenses 17,052 17,140
Interest income (10 ) (40 )
Interest expense 21 19
Loss before income taxes (7,460 ) (5,012 )
Recovery of income taxes (1,543 ) (1,455 )
Net loss and comprehensive loss $ (5,917 ) $ (3,557 )
Net loss per share:
Basic $ (1.54 ) $ (0.93 )
Diluted $ (1.54 ) $ (0.93 )
Weighted average number of shares outstanding:
Basic 3,854,168 3,832,168
Diluted 3,927,334 3,953,035
Number of shares outstanding at period end 3,854,168 3,832,168
DANIER LEATHER INC.
CONSOLIDATED BALANCE SHEETS
(thousands of Canadian dollars) - unaudited
Sept 27, 2014 Sept 28, 2013 June 28, 2014
ASSETS
Current Assets
Cash $ 787 $ 8,050 $ 13,507
Accounts receivable 1,241 999 638
Income taxes recoverable 5,102 2,388 3,461
Inventories 30,326 33,037 21,721
Prepaid expenses 742 753 643
38,198 45,227 39,970
Non-current Assets
Property and equipment 16,469 17,775 16,826
Computer software 1,447 1,504 1,459
Deferred income tax asset 2,276 2,032 2,374
$ 58,390 $ 66,538 $ 60,629
LIABILITIES
Current Liabilities
Bank indebtedness $ 2,991 $ - $ -
Payables and accruals 9,607 11,054 9,185
Deferred revenue 1,491 1,562 1,511
Sales return provision 145 144 94
14,234 12,760 10,790
Non-current Liabilities
Deferred lease inducements and rent liability 1,581 1,389 1,432
15,815 14,149 12,222
SHAREHOLDERS' EQUITY
Share capital 11,772 11,533 11,772
Contributed surplus 1,125 991 1,040
Retained earnings 29,678 39,865 35,595
42,575 52,389 48,407
$ 58,390 $ 66,538 $ 60,629

Approved by the Board of Directors

October 27, 2014

DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(thousands of Canadian dollars) - unaudited
For the 13 Weeks Ended
Sept 27, 2014 Sept 28, 2013
Cash provided by (used in)
OPERATING ACTIVITIES
Net loss $ (5,917 ) $ (3,557 )
Adjustments for:
Amortization of property and equipment 697 850
Amortization of computer software 100 87
Impairment loss on property and equipment 615 -
Amortization of deferred lease inducements (21 ) (20 )
Proceeds from deferred lease inducements 125 -
Straight line rent expense 45 17
Stock-based compensation 85 37
Interest income (10 ) (40 )
Interest expense 21 19
Recovery of income taxes (1,543 ) (1,455 )
Changes in working capital (8,881 ) (9,001 )
Interest received 16 55
Income taxes paid - (444 )
Net cash used in operating activities (14,668 ) (13,452 )
FINANCING ACTIVITIES
Increase in bank indebtedness 2,991 -
Net cash generated from financing activities 2,991 -
INVESTING ACTIVITIES
Acquisition of property and equipment (955 ) (2,591 )
Acquisition of computer software (88 ) (448 )
Net cash used in investing activities (1,043 ) (3,039 )
Decrease in cash (12,720 ) (16,491 )
Cash, beginning of period 13,507 24,541
Cash, end of period $ 787 $ 8,050
DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(thousands of Canadian dollars) - unaudited
Share Capital Contributed Surplus Accumulated Other Comprehensive Income Retained Earnings Total
Balance - June 28, 2014 $ 11,772 $ 1,040 $ - $ 35,595 $ 48,407
Net loss - - - (5,917 ) (5,917 )
Stock-based compensation related to stock options - 85 - - 85
Balance - September 27, 2014 $ 11,772 $ 1,125 $ - $ 29,678 $ 42,575
Share Capital Contributed Surplus Accumulated Other Comprehensive Income Retained Earnings Total
Balance - June 29, 2013 $ 11,533 $ 954 $ - $ 43,422 $ 55,909
Net loss - - - (3,557 ) (3,557 )
Stock-based compensation related to stock options - 37 - - 37
Balance - September 28, 2013 $ 11,533 $ 991 $ - $ 39,865 $ 52,389

Contact Information

  • Investor Relations Contact
    Danier Leather Inc.
    Jeffrey Wortsman
    President and Chief Executive Officer
    (416) 762-8175 ext. 302
    jeffreyw@danier.com

    Danier Leather Inc.
    Bryan Tatoff
    Executive Vice-President and Chief Financial Officer
    (416) 762-8175 ext. 328
    bryan@danier.com
    www.danier.com