Danier Leather Reports Fiscal 2013 Second Quarter Results

Danier Leather Reports Fiscal 2013 Second Quarter Results 
TORONTO, ONTARIO -- (Marketwire) -- 01/30/13 -- Danier Leather Inc.
(TSX:DL) today announced its unaudited interim consolidated financial
results for the 13 week and 26 week periods ended December 29, 2012. 
FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square
footage and number of stores): 


 
                        ----------------------------------------------------
                            For the 13 Weeks Ended    For the 26 Weeks Ended
----------------------------------------------------------------------------
                             Dec. 29,     Dec. 24,     Dec. 29,     Dec. 24,
                                 2012         2011         2012         2011
----------------------------------------------------------------------------
Sales                    $     66,128 $     59,487 $     89,226 $     81,578
----------------------------------------------------------------------------
EBITDA(1)                      12,727       12,642        8,713        9,685
----------------------------------------------------------------------------
Net Earnings                    8,404        8,466        4,946        5,698
----------------------------------------------------------------------------
EPS - Basic              $       1.92 $       1.83 $       1.10 $       1.23
----------------------------------------------------------------------------
EPS - Diluted            $       1.86 $       1.77 $       1.06 $       1.19
----------------------------------------------------------------------------
Number of Stores                   90           91           90           91
----------------------------------------------------------------------------
Retail Square Footage         294,909      306,702      294,909      306,702
----------------------------------------------------------------------------

 
Sales during the second quarter of fiscal 2013 increased by 11% or
$6.6 million to $66.1 million compared with $59.5 million during the
second quarter last year. Comparable store sales(2) increased by 13%.
Boxing Week sales were included in the second quarter this year
whereas last year's Boxing Week sales were included in the third
quarter.  
Sales on a comparable week basis, which includes Boxing Week in both
periods and compares the 13 weeks ended December 29, 2012 to the 13
weeks ended December 31, 2011, decreased by 1%. Comparable store
sales, on a comparable week basis, were unchanged.  
In line with our stated strategy, on a comparable week basis,
accessory sales continued to perform well, increasing by 6% during
the second quarter over the corresponding period last year.
Accessories represented 32% of total merchandise revenue during the
second quarter compared with 30% during the corresponding period last
year. 
Mainly due to unusual weather, including the relatively late arrival
of winter in the major Toronto and Montreal markets, and a snowstorm
that interrupted Boxing Day-related shopping in the eastern region of
Canada, outerwear sales decreased by 5% during the 13 weeks ended
December 29, 2012 compared with the 13 weeks ended December 31, 2011. 
Year-to-date sales increased by 9% or $7.6 million to $89.2 million,
while comparable store sales increased by 10% compared to the
corresponding period last year. On a comparable week basis, with the
26 weeks ended December 29, 2012 compared to the 26 weeks ended
December 31, 2011, sales decreased by 1% and comparable store sales
were unchanged. Year-to-date accessory sales, on a comparable week
basis, with the 26 weeks ended December 29, 2012 compared to the 26
weeks ended December 31, 2011, increased by 7% and represented 34% of
total merchandise revenue compared with 31% of total merchandise
revenue during the same period last year. 
Gross profit as a percentage of revenue during the second quarter of
fiscal 2013 decreased by 140 basis points to 54.3% compared with
55.7% during the second quarter last year. Gross profit margin during
the first half of fiscal 2013 decreased by 170 basis points to 53.3%
compared with 55.0% during the first six months of last year. 
Selling, general and administrative expenses during the second
quarter of fiscal 2013 increased by $3.0 million to $24.4 million,
compared with $21.4 million during the second quarter last year.
Year-to-date selling, general and administrative expenses increased
by $3.8 million to $40.8 million compared with $37.0 million during
the first half of last year.  
Net earnings during the second quarter of fiscal 2013 decreased by
$0.1 million to $8.4 million ($1.86 per diluted share) compared with
$8.5 million ($1.77 per diluted share) during the second quarter last
year. For the year-to-date period, net earnings decreased by $0.8
million to $4.9 million ($1.06 per diluted share) compared with $5.7
million ($1.19 per diluted share) during the first six months of last
year.  
During the second quarter of fiscal 2013, Danier repurchased 787,401
subordinate voting shares under a "modified Dutch Auction"
substantial issuer bid at a purchase price of $12.70 per share. The
subordinate voting shares repurchased under the substantial issuer
bid represented approximately 23.01% of the total issued and
outstanding subordinate voting shares as of November 28, 2012 and,
immediately following the purchase and cancellation of those shares,
approximately 2,635,172 subordinate voting shares remained
outstanding. For further details, see Note 10(d) to the accompanying
unaudited interim consolidated financial statements of the Company. 
Danier continues to maintain a strong balance sheet with cash of
$30.8 million, working capital of $42.2 million and no long-term
debt.  
Non-IFRS Financial Measures  
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards ("IFRS").
In order to provide additional insight into the business, the Company
has also provided certain non-IFRS data, including "EBITDA" and
"comparable store sales", as defined below. Non-IFRS measures such as
EBITDA and comparable store sales are not recognized measures for
financial presentation under IFRS. These non-IFRS measures do not
have a standardized meaning prescribed by IFRS and, therefore, may
not be comparable to similarly titled measures presented by other
publicly traded companies, nor should they be construed as an
alternative to other financial measures determined in accordance with
IFRS.  


 
  (1)   EBITDA is defined as net earnings before interest expense, interest 
        income, income taxes, impairment loss on property and equipment and 
        amortization. EBITDA is a financial metric used by management and   
        some investors to compare companies on the basis of ongoing         
        operating results before taxes, interest expense, interest income,  
        impairment loss on property and equipment and amortization and its  
        ability to incur and service debt. EBITDA is also used by management
        to measure performance against internal targets and prior period    
        results. EBITDA is calculated as outlined in the following table:   
                                                                            
                         For the 13 Weeks Ended      For the 26 Weeks Ended 
                    --------------------------- --------------------------- 
                     Dec 29, 2012  Dec 24, 2011  Dec 29, 2012  Dec 24, 2011 
                    ------------------
--------- ----------------------------
                           ($000)        ($000)        ($000)        ($000) 
Net earnings         $      8,404  $      8,466  $      4,946  $      5,698 
Add (deduct) impact                                                         
 of the following:                                                          
  Income tax                3,153         3,299         1,833         2,206 
  Interest expense             13            11            31            33 
  Interest income             (37)          (19)         (103)          (57)
  Impairment loss on                                                        
   property and                                                             
   equipment                  327            21           327            21 
  Amortization                867           864         1,679         1,784 
                    --------------------------- ----------------------------
EBITDA               $     12,727  $     12,642  $      8,713  $      9,685 
                    --------------------------- ----------------------------
                    --------------------------- ----------------------------
                                                                            
(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", "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 power centre stores.
Corporations and other organizations can obtain Danier products for
use as incentives and premiums for employees, suppliers and customers
through Canada Sportswear Corp. For more information about the
Company and our products, visit www.danier.com. 


 
DANIER LEATHER INC.                                                         
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS              
(thousands of Canadian dollars, except per share amounts and number of      
 shares) - unaudited                                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                         For the 13 Weeks Ended      For the 26 Weeks Ended 
                    --------------------------- --------------------------- 
                     December 29,  December 24,  December 29,  December 24, 
                             2012          2011          2012          2011 
                    --------------------------------------------------------
Revenue              $     66,128  $     59,487  $     89,226  $     81,578 
Cost of sales (Note                                                         
 12)                       30,202        26,328        41,709        36,729 
                    --------------------------------------------------------
Gross profit               35,926        33,159        47,517        44,849 
  Selling, general                                                          
   and                                                                      
   administrative                                                           
   expenses (Note                                                           
   12)                     24,393        21,402        40,810        36,969 
  Interest income             (37)          (19)         (103)          (57)
  Interest expense             13            11            31            33 
                    --------------------------------------------------------
Earnings before                                                             
 income taxes              11,557        11,765         6,779         7,904 
Provision for income                                                        
 taxes (Note 13)            3,153         3,299         1,833         2,206 
                    --------------------------------------------------------
Net earnings and                                                            
 comprehensive                                                              
 earnings            $      8,404  $      8,466  $      4,946  $      5,698 
                    --------------------------------------------------------
                    --------------------------------------------------------
                                                                            
Net earnings per                                                            
 share:                                                                     
  Basic              $       1.92  $       1.83  $       1.10  $       1.23 
  Diluted            $       1.86  $       1.77  $       1.06  $       1.19 
                                                                            
Weighted average                                                            
 number of shares                                                           
 outstanding:                                                               
  Basic                 4,370,014     4,629,878     4,508,458     4,643,017 
  Diluted               4,525,044     4,777,651     4,655,189     4,796,672 
Number of shares                                                            
 outstanding at                                                             
 period end             3,859,501     4,631,835     3,859,501     4,631,835 
                                                                            
See accompanying notes to the consolidated financial statements             
                                                                            
DANIER LEATHER INC.                                                         
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                               
(thousands of Canadian dollars) - unaudited                                 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                   Dec 29,          Dec 24,         June 30,
                                      2012             2011             2012
                         ---------------------------------------------------
ASSETS                                                                      
Current Assets                                                              
  Cash and cash                                                             
   equivalents (Note 3)   $         30,849 $         31,803 $         34,332
  Accounts receivable                1,351            1,686              517
  Income taxes                                                              
   recoverable                           -                -              426
  Inventories (Note 4)              32,061           36,789           24,891
  Prepaid expenses                     345              426              799
                         ---------------------------------------------------
                                    64,606           70,704           60,965
Non-current Assets                                                          
  Property and equipment                                                    
   (Note 5)                         16,661           15,315           15,012
  Computer software (Note                                                   
   6)                                  586              891              726
  Deferred income tax                                                       
   asset (Note 13)                   2,041            1,786            1,909
                         ---------------------------------------------------
                          $         83,894 $         88,696 $         78,612
                         ---------------------------------------------------
                         ---------------------------------------------------
LIABILITIES                                                                 
Current Liabilities                                                         
  Payables and accruals                                                     
   (Note 8)               $         18,684 $         16,010 $         10,161
  Deferred revenue                   1,867            2,135            1,463
  Sales return provision                                                    
   (Note 9)                          1,716            1,451              124
  Income taxes payable                 111              583                -
                         ---------------------------------------------------
                                    22,378           20,179           11,748
Non-current Liabilities                                                     
Deferred lease                                                              
 inducements and rent                                                       
 liability                           1,406            1,392            1,373
                         ---------------------------------------------------
                                    23,784           21,571           13,121
                         ---------------------------------------------------
SHAREHOLDERS' EQUITY                                                        
  Share capital (Note 10)           11,580           14,959           15,040
  Contributed surplus                  971              945              925
  Retained earnings                 47,559           51,221           49,526
                         ---------------------------------------------------
                                    60,110           67,125           65,491
                         ---------------------------------------------------
                          $         83,894 $         88,696 $         78,612
                         ---------------------------------------------------
                         ---------------------------------------------------
                                                                            
                                                                            
Contingencies, Guarantees and Commitments (Notes 15 and 16)                 
                                                                            
Approved by the Board of Directors                                          
January 30, 2013                                                            
                                                                            
See accompanying notes to the consolidated financial statements             
                                                                            
DANIER LEATHER INC.                                                         
CONSOLIDATED STATEMENTS OF CASH FLOW                                        
(thousands of Canadian dollars) - unaudited                                 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                         For the 13 Weeks Ended      For the 26 Weeks Ended 
                    --------------------------- ----------------------------
                     December 29,  December 24,  December 29,  December 24, 
                             2012          2011          2012    
      2011 
                    --------------------------------------------------------
Cash provided by                                                            
 (used in)                                                                  
OPERATING ACTIVITIES                                                        
  Net earnings       $      8,404  $      8,466  $      4,946  $      5,698 
  Adjustments for:                                                          
    Amortization of                                                         
     property and                                                           
     equipment                777           774         1,501         1,605 
    Amortization of                                                         
     computer                                                               
     software                  90            90           178           179 
    Impairment loss                                                         
     on property and                                                        
     equipment                327            21           327            21 
    Amortization of                                                         
     deferred lease                                                         
     inducements              (24)          (36)          (57)          (76)
    Proceeds from                                                           
     deferred lease                                                         
     inducement                 -           128             -           128 
    Straight line                                                           
     rent expense              46            17            90            22 
    Stock-based                                                             
     compensation              23             2            46            17 
    Interest income           (37)          (19)         (103)          (57)
    Interest expense           13            11            31            33 
    Provision for                                                           
     income taxes           3,153         3,299         1,833         2,206 
  Changes in working                                                        
   capital (Note 14)       13,993         9,388         2,920        (1,649)
  Interest paid                 -             -             -           (12)
  Interest received            40            12           121            69 
  Income taxes paid          (529)         (934)       (1,336)       (2,008)
                    --------------------------------------------------------
Net cash generated                                                          
 from operating                                                             
 activities                26,276        21,219        10,497         6,176 
                    --------------------------------------------------------
                                                                            
FINANCING ACTIVITIES                                                        
  Subordinate voting                                                        
   shares issued                -            12             -            12 
  Subordinate voting                                                        
   shares                                                                   
   repurchased            (10,465)            -       (10,465)         (530)
                    --------------------------------------------------------
Net cash (used in)                                                          
 generated from                                                             
 financing                                                                  
 activities               (10,465)           12       (10,465)         (518)
                    --------------------------------------------------------
                                                                            
INVESTING ACTIVITIES                                                        
  Acquisition of                                                            
   property and                                                             
   equipment               (1,521)       (1,502)       (3,477)       (2,537)
  Acquisition of                                                            
   computer software          (25)          (16)          (38)          (16)
                    --------------------------------------------------------
Net cash used in                                                            
 investing                                                                  
 activities                (1,546)       (1,518)       (3,515)       (2,553)
                    --------------------------------------------------------
                                                                            
Increase (decrease)                                                         
 in cash and cash                                                           
 equivalents               14,265        19,713        (3,483)        3,105 
Cash and cash                                                               
 equivalents,                                                               
 beginning of period       16,584        12,090        34,332        28,698 
                    --------------------------------------------------------
Cash and cash                                                               
 equivalents, end of                                                        
 period              $     30,849  $     31,803  $     30,849  $     31,803 
                    --------------------------------------------------------
                    --------------------------------------------------------
                                                                            
See accompanying notes to the consolidated financial statements             
                                                                            
DANIER 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                                                              
 30, 2012      $  15,040 $         925  $             - $   49,526 $ 65,491 
  Net earnings         -             -                -      4,946    4,946 
  Stock-based                                                               
   compensation                                                             
   related to                                                               
   stock                                                                    
   options             -            46                -          -       46 
  Share                                                                     
   repurchases                                                              
   (net of tax)   (3,460)            -                -     (6,913) (10,373)
               -------------------------------------------------------------
Balance -                                                                   
 December 29,                                                               
 2012          $  11,580 $         971  $             - $   47,559 $ 60,110 
               -------------------------------------------------------------
                                                                            
                                            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 
               -------------------------------------------------------------
                                                                            
See accompanying notes to the consolidated financial statements             
                                                                            
                                                                            
                            DANIER LEATHER INC.                             
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 
For the 13 week and 26 week periods ended December 29, 2012 and December 24,
                                    2011                                    
 (unless otherwise stated, all amounts are in thousands of Canadian dollars)
                                - unaudited                                 

 
1. Reporting Entity:  
Danier Leather Inc. and its subsidiaries ("Danier" or the "Company")
comprise a vertically integrated designer, manufacturer, distributor
and retailer of leather apparel and accessories. Danier Leather Inc.
is a corporation existing under the Business Corporations Act
(Ontario) and is domiciled in Canada. The Company's subordinate
voting shares (the "Subordinate Voting Shares") are listed on the
Toronto Stock Exchange (the "TSX") under the symbol "DL". The address
of its registered head office is 2650 St. Clair Avenue West, Toronto,
Ontario, M6N 1M2, Canada.  
Under an accounting practice common in the retail industry, the
Company follows a 52-week reporting cycle which periodically
necessitates a fiscal year of 53 weeks. Fiscal 2013 is a 52-week
fiscal year and fiscal 2012 was a 53-week fiscal year. The 52-week
reporting cycle is divided into four quarters of 13 weeks each. The
53-week reporting cycle is divided into four quarters of 13 weeks
each with the exception of the fourth quarter, which is 14 weeks in
duration. 
2. Significant Accounting Policies:  
(a) Statement of Compliance  
These unaudited interim condensed consolidated financial statements
(the "unaudited interim financial statements") have been prepared on
a going concern basis in accordance with International Financial
Reporting Standards ("IFRS"), as issued by the International
Accounting Standards Board ("IASB"). The unaudited interim financial
statements have been prepared in accordance with IAS 34, Interim
Financial Reporting and using accounting policies and methods
consistent with those used for the Company's audited annual
consolidated financial statements and notes thereto for the fiscal
years ended June 30, 2012 and June 25, 2011 (the "2012 Financial
Statements"), except for the following new accounting pronouncements
which have been adopted. Certain information, in particular the
accompanying notes, normally included in the audited annual
consolidated financial statements prepared in accordance with IFRS,
has been omitted or condensed. Accordingly, these unaudited interim
financial statements do not include all the information required for
annual consolidated financial statements and, therefore, should be
read in conjunction with the 2012 Financial Statements. 


 
  i)    On July 1, 2012, the Company adopted IFRS 7, Financial Instruments: 
        Disclosures, Amendment regarding Disclosures on Transfers of        
        Financial Assets. This amendment requires increased disclosure for  
        transactions involving transfers of financial assets to help users  
        of the financial statements evaluate the risk exposures related to  
        such transfers and the effect of those risks on an entity's         
        financial position. There was no impact on the unaudited interim    
        financial statements as a result of adopting this standard.         
                                                                            
  ii)   On July 1, 2012, the Company adopted IAS 12, Income Taxes, Amendment
        regarding Deferred Tax: Recovery of Underlying Assets. This         
        amendment requires an entity to recognize a deferred tax asset or   
        liability depending on the expected manner of recovery or settlement
        of the asset or liability and for which the tax base is not         
        immediately apparent. There was no impact on the unaudited interim  
        financial statements as a result of adopting this standard.         

 
The unaudited interim financial statements for the 13-week and
26-week periods ended December 29, 2012 (including comparatives) were
approved by the Board of Directors on January 30, 2013. 
(b) Basis of Measurement  
The unaudited interim financial statements have been prepared on a
going concern basis under the historical cost convention except for
the following items which are measured at fair value: 


 
--  Financial instruments at fair value through profit and loss; and 
--  Liabilities for cash-settled share-based payment plans. 

 
(c) Functional and Presentation Currency  
These unaudited interim financial statements are presented in
Canadian dollars ("$" or "C$"), the Company's functional currency.
All financial information is presented in thousands, except per share
amounts, which are presented in whole dollars, and number of shares,
which are presented as whole numbers. 
(d) Seasonality of Interim Operations  
Due to the seasonal nature of the retail business and the Company's
product lines, the results of operation for any interim period are
not necessarily indicative of the results of operation to be expected
for the fiscal year. Generally, a significant portion of the
Company's sales and earnings are typically generated during the
second fiscal quarter, which includes the holiday selling season.
Sales are usually lowest and losses are typically experienced during
the period from April to September. 
(e) Estimates, Judgments and Assumptions  
The preparation of these unaudited interim financial statements in
accordance with IFRS requires management to make certain estimates,
judgments and assumptions in applying the Company's accounting
policies which have an effect on the 
reported amounts and disclosures
made in these unaudited interim financial statements and accompanying
notes. These estimates, judgments and assumptions are based on
historical experience, knowledge of current events and conditions,
expectations of the future and other relevant factors that are
believed to be reasonable under the circumstances. Estimates and
assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are
revised and in any future periods affected. 
Significant estimates, judgments and assumptions applicable to the
preparation of these unaudited interim financial statements are
described in the Company's 2012 Financial Statements for the year
ended June 30, 2012. Estimates made by management depend upon
subjective or complex judgments about matters that may be uncertain,
and changes in those estimates could materially impact these
unaudited interim financial statements. Illiquid credit markets,
volatile equity, foreign currency, and energy markets and declines in
consumer spending have combined to increase the uncertainty inherent
in estimates and assumptions. As future events and their effects
cannot be determined with precision, actual results could differ
significantly from the estimates, judgments and assumptions made by
management. 
(f) Future Changes in Accounting Policies  
A number of new standards, and amendments to standards and
interpretations, are not yet effective for the 13-week and 26-week
periods ended December 29, 2012 and have not been applied in
preparing these unaudited interim financial statements. New standards
and amendments to standards and interpretations that are currently
under review include: 
IFRS 7 - Financial Instruments: Disclosures - Offsetting Financial
Assets and Financial Liabilities ("IFRS 7") 
The IASB has issued amendments to IFRS 7 relating to enhanced
disclosure requirements for the offsetting of financial assets and
liabilities and additional disclosures on transition from IAS 39 to
IFRS 9 (as discussed below). The amendment relating to the offsetting
of financial assets and liabilities is effective for annual periods
beginning on or after January 1, 2013 and the amendment relating to
additional disclosures on transition from IAS 39 to IFRS 9 is
effective for annual periods beginning on or after January 1, 2015.  
IFRS 9 - Financial Instruments 
On November 12, 2009, the IASB issued a new standard, IFRS 9,
Financial Instruments ("IFRS 9"), which will ultimately replace IAS
39, Financial Instruments: Recognition and Measurement ("IAS 39").
The replacement of IAS 39 is a multi-phase project with the objective
of improving and simplifying the reporting for financial instruments
and the issuance of IFRS 9 is a part of the first phase. This
standard originally was to become effective on January 1, 2013 but
the mandatory effective date has been amended to January 1, 2015 and
must be applied retrospectively. 
IFRS 13 - Fair Value Measurement  
The IASB has issued a new standard, IFRS 13, Fair Value Measurement,
which is a comprehensive standard for the fair value measurement and
disclosure requirements for use across all IFRS standards. The new
standard is effective for annual periods beginning on or after
January 1, 2013 and clarifies that fair value is the price that would
be received to sell an asset, or paid to transfer a liability, in an
orderly transaction between market participants at the measurement
date. It also establishes disclosures about fair value measurement.
Under existing IFRS, guidance on measuring and disclosing fair value
is dispersed among the specific standards requiring fair value
measurements.  
The extent of the impact of adoption of the above noted standards and
interpretations on the unaudited interim financial statements of the
Company have not yet been determined. 
A number of other standards have been adopted by the IASB but
currently have no impact on the Company. 
3. Cash and cash equivalents:  
The components of cash and cash equivalents are as follows: 


 
                              December 29,     December 24,         June 30,
                                      2012             2011             2012
                         ---------------------------------------------------
Cash                      $         30,849 $          3,333 $         34,332
Bankers acceptances                      -           28,470                -
                         ---------------------------------------------------
Cash and cash equivalents $         30,849 $         31,803 $         34,332
                         ---------------------------------------------------
                         ---------------------------------------------------

 
4. Inventories:  


 
                              December 29,     December 24,         June 30,
                                      2012             2011             2012
                         ---------------------------------------------------
Raw materials             $          2,887 $          1,817 $          2,644
Work-in-process                        233              175              183
Finished goods                      28,941           34,797           22,064
                         ---------------------------------------------------
                          $         32,061 $         36,789 $         24,891
                         ---------------------------------------------------
                         ---------------------------------------------------
                                                                            
                                                                            
                                                                            
                               13 Weeks Ended            26 Weeks Ended     
                          --------------------------------------------------
                             December     December     December     December
                             29, 2012     24, 2011     29, 2012     24, 2011
                        ----------------------------------------------------
Cost of inventory                                                           
 recognized as an                                                           
 expense                 $     29,935 $     26,070 $     41,347 $     36,352
Write-downs of inventory                                                    
 due to net realizable                                                      
 value being lower than                                                     
 cost                    $        290 $        443 $        430 $        588
Write-downs recognized                                                      
 in previous periods                                                        
 that were reversed                 -            - $         27 $          3

 
5. Property and Equipment:  


 
               ------------------------------------------------------------
               ------------------------------------------------------------
                             26 Weeks Ended December 29, 2012              
               ------------------------------------------------------------
               ------------------------------------------------------------
                          Land       Building           Roof           HVAC
               ------------------------------------------------------------
Cost                                                                       
At June 30,                                                                
 2012           $        1,000 $        6,063 $          308 $          793
Additions                    -              -              -              -
Disposals                    -              -              -              -
               ------------------------------------------------------------
At December 29,                                       
                     
 2012           $        1,000 $        6,063 $          308 $          793
               ------------------------------------------------------------
               ------------------------------------------------------------
                                                                           
Accumulated amortization and impairment losses                             
At June 30,                                                                
 2012                        - $        2,354 $          201 $          578
Amortization                                                               
 for the period              -             77              7             23
Impairment                                                                 
 losses                      -              -              -              -
Disposals                    -              -              -              -
               ------------------------------------------------------------
At December 29,                                                            
 2012                        - $        2,431 $          208 $          601
               ------------------------------------------------------------
               ------------------------------------------------------------
                                                                           
Net carrying                                                               
 value                                                                     
At December 29,                                                            
 2012           $        1,000 $        3,632 $          100 $          192
At June 30,                                                                
 2012           $        1,000 $        3,709 $          107 $          215
                                                                           
Capital work in progress included above                                    
At December 29,                                                            
 2012                        -              -              -              -
 
               -------------------------------------------------------------
               -------------------------------------------------------------
                             26 Weeks Ended December 29, 2012               
               ------------------------------------------------------------ 
               ------------------------------------------------------------ 
                     Leasehold     Furniture &       Computer               
                  Improvements       Equipment       Hardware         Total 
               -------------------------------------------------------------
Cost                                                                        
At June 30,                                                                 
 2012           $       22,208  $        9,088  $       3,386 $      42,846 
Additions                2,265           1,163             49         3,477 
Disposals               (1,292)           (127)             -        (1,419)
               -------------------------------------------------------------
At December 29,                                                             
 2012           $       23,181  $       10,124  $       3,435 $      44,904 
               -------------------------------------------------------------
               -------------------------------------------------------------
                                                                            
Accumulated amortization and impairment losses                              
At June 30,                                                                 
 2012           $       15,875  $        6,321  $       2,505 $      27,834 
Amortization                                                                
 for the period            813             388            193         1,501 
Impairment                                                                  
 losses                    277              50              -           327 
Disposals               (1,292)           (127)             -        (1,419)
               -------------------------------------------------------------
At December 29,                                                             
 2012           $       15,673  $        6,632  $       2,698 $      28,243 
               -------------------------------------------------------------
               -------------------------------------------------------------
                                                                            
Net carrying                                                                
 value                                                                      
At December 29,                                                             
 2012           $        7,508  $        3,492  $         737 $      16,661 
At June 30,                                                                 
 2012           $        6,333  $        2,767  $         881 $      15,012 
                                                                            
Capital work in progress included above                                     
At December 29,                                                             
 2012                        -               -              -             - 
                                                                           
                                                                           
               ------------------------------------------------------------
               ------------------------------------------------------------
                             26 Weeks Ended December 24, 2011              
               ------------------------------------------------------------
               ------------------------------------------------------------
                          Land       Building           Roof           HVAC
               ------------------------------------------------------------
Cost                                                                       
At June 25,                                                                
 2011           $        1,000 $        6,063 $          308 $          753
Additions                    -              -              -             40
Disposals                    -              -              -              -
               ------------------------------------------------------------
At December 24,                                                            
 2011           $        1,000 $        6,063 $          308 $          793
               ------------------------------------------------------------
               ------------------------------------------------------------
                                                                           
Accumulated amortization and impairment losses                             
At June 25,                                                                
 2011                        - $        2,198 $          184 $          531
Amortization                                                               
 for the period              -             77              9             23
Impairment                                                                 
 losses                      -              -              -              -
Disposals                    -              -              -              -
               ------------------------------------------------------------
At December 24,                                                            
 2011                        - $        2,275 $          193 $          554
               ------------------------------------------------------------
               ------------------------------------------------------------
                                                                           
Net carrying                                                               
 value                                                                     
At December 24,                                                            
 2011           $        1,000 $        3,788 $          115 $          239
At June 25,                                                                
 2011           $        1,000 $        3,865 $          124 $          222
                                                                           
Capital work in progress included above                                    
At December 24,                                                            
 2011                        -              -              -              -
 
                                                                            
                                                                            
               -------------------------------------------------------------
               -------------------------------------------------------------
                             26 Weeks Ended December 24, 2011               
               -------------------------------------------------------------
               -------------------------------------------------------------
                     Leasehold     Furniture &       Computer               
                  Improvements       Equipment       Hardware         Total 
               -------------------------------------------------------------
Cost                                                                        
At June 25,                                                                 
 2011           $       23,453  $        8,985  $       3,180 $      43,742 
Additions                1,762             638             97         2,537 
Disposals               (1,470)           (346)             -        (1,816)
               -------------------------------------------------------------
At December 24,                                                             
 2011           $       23,745  $        9,277  $       3,277 $      44,463 
               -------------------------------------------------------------
               -------------------------------------------------------------
                                                                            
Accumulated amortization and impairment losses                              
At June 25,                                                                 
 2011           $       17,968  $        6,232  $       2,225 $      29,338 
Amortization                                                                
 for the period            845             483            168         1,605 
Impairment                                                                  
 losses                     21               -              -            21 
Disposals               (1,470)           (346)             -        (1,816)
               -------------------------------------------------------------
At December 24,                                                             
 2011           $       17,364  $        6,369  $       2,393 $      29,148 
               -------------------------------------------------------------
               -------------------------------------------------------------
                                                                            
Net carrying                                                                
 value                                                                      
At December 24,                                                             
 2011           $        6,381  $        2,908  $         884 $      15,315 
At June 25,                                                                 
 2011           $        5,485  $        2,753  $         955 $      14,404 
                                                                            
Capital work in progress included above                                     
At December 24,                                                             
 2011           $          270  $           59              - $         329 

 
The Company conducted an impairment test for its property and
equipment and determined that there was an impairment at one of its
stores, which was under-performing, in the amount of $327 for the 13
week and 26 week periods ended December 29, 2012 ($21 for the 13 week
and 26 week periods ended December 24, 2011). The recoverable amount
of the cash generating unit ("CGU") was estimated based on
value-in-use calculations as this was determined to be higher than
fair value less costs to sell. These calculations use cash flow
projections based on actual performance during the past 12 months
which are then extrapolated over each CGU's remaining lease term and
then discounted using an estimated discount rate. The key assumptions
for the value-in-use calculations include discount rates, growth
rates and expected cash flows. Management estimates discount rates
using pre-tax rates that reflect current market assessment of the
time value of money and the risks specific to the CGUs. Changes in
revenues and direct costs are based on past experience and
expectations of future changes in the market.  
The pre-tax discount rate used to calculate the value-in-use range is
11% and is dependent on the specific risks in relation to the CGU.
The discount rate is derived from retail industry comparable post-tax
weighted average cost of capital. 
If management's cash flow estimate were to decrease by 10% or if the
discount rate were to increase by 100 basis points, the impairment
for the 13 week and 26 week periods ended December 29, 2012 would
remain unchanged.  
6. Computer Software:  


 
                                              26 Weeks Ended                
                              ----------------------------------------------
                                    December 29, 2012      December 24, 2011
                              ----------------------------------------------
Cost                                                                        
Beginning of period            $                3,994 $                4,041
Additions                                          38                     16
Disposals                                           -                      -
                              ----------------------------------------------
End of period                  $                4,032 $                4,057
                              ----------------------------------------------
                              ----------------------------------------------
                                                                            
Accumulated amortization                                                    
Beginning of period            $                3,268 $                2,987
Amortization for the period                       178                    179
Impairment losses                                   -                      -
                              ----------------------------------------------
End of period                  $                3,446 $                3,166
                              ----------------------------------------------
                              ----------------------------------------------
                                                                            
Net carrying value                                                          
End of period                  $                  586 $                  891
Beginning of period            $                  726 $                1,054

 
7. Bank Facilities:  
The Company has an operating credit facility for working capital and
for general corporate purposes to a maximum amount of $25 million
that is committed until June 27, 2014 and bears interest at prime
plus 0.75%. Standby fees of 0.50% are paid on a quarterly basis for
any unused portion of the operating credit facility. The 
operating
credit facility is subject to certain covenants and other limitations
that, if breached, could cause a default and may result in a
requirement for immediate repayment of amounts outstanding. Security
provided includes a security interest over all personal property of
the Company's business and a mortgage over the land and building
comprising the Company's head office/distribution facility.  
The Company also has an uncommitted letter of credit facility (the
"LC Facility") to a maximum amount of $10 million and an uncommitted
demand overdraft facility in the amount of $0.5 million to be used
exclusively for issuance of letters of credit for the purchase of
inventory. Any amounts outstanding under the overdraft facility will
bear interest at the bank's prime rate. The LC Facility is secured by
the Company's personal property from time to time financed with the
proceeds drawn thereunder. 
8. Payables and Accruals:  


 
                     December 29, 2012   December 24 2011      June 30, 2012
                   ---------------------------------------------------------
Trade payables      $            2,176 $            3,199 $            1,482
Accruals                         9,090              6,344              5,787
RSU/DSU liability                2,471              1,950              2,374
Commodity and                                                               
 capital taxes                   4,800              4,517                489
Derivative                                                                  
 financial                                                                  
 instruments                       147                  -                  -
Other current                                                               
 liabilities                         -                  -                 29
                   ---------------------------------------------------------
                    $           18,684 $           16,010 $           10,161
                   ---------------------------------------------------------
                   ---------------------------------------------------------

 
9. Sales Return Provision:  
The provision for sales returns primarily relates to customer returns
of unworn and undamaged purchases for a full refund within the time
period provided by Danier's return policy, which is generally 14 days
after the purchase date. Since the time period of the provision is of
relatively short duration, all of the provision is classified as
current. The following transactions occurred during the 13 week and
26 week periods ended December 29, 2012 and December 24, 2011 with
respect to the sales return provision: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                     December 29,  December 24,  December 29,  December 24, 
                             2012          2011          2012          2011 
                    --------------------------------------------------------
Beginning of period  $        129  $        126  $        124  $         47 
Amount provided                                                             
 during the period          1,716         1,451         1,845         1,577 
Released during the                                                         
 period                      (129)         (126)         (253)         (173)
                    --------------------------------------------------------
End of period        $      1,716  $      1,451  $      1,716  $      1,451 
                    --------------------------------------------------------
                    --------------------------------------------------------

 
10. Share Capital:  
(a) Authorized  


 
1,224,329 Multiple Voting Shares                                            
Unlimited Subordinate Voting Shares                                         
Unlimited Class A and B Preference Shares                                   

 
(b) Issued  


 
Multiple Voting Shares                                                      
------------------------------                                              
                                               Number          Consideration
                              ----------------------------------------------
Balance June 25, 2011                       1,224,329                Nominal
Balance December 24, 2011                   1,224,329                Nominal
Balance June 30, 2012                       1,224,329                Nominal
Balance December 29, 2012                   1,224,329                Nominal
                                                                            
Subordinate Voting Shares                                                   
------------------------------                                              
                                              Number          Consideration 
                              ----------------------------------------------
Balance June 30, 2012                      3,422,573  $              15,040 
  Shares repurchased                        (787,401)                (3,460)
  Shares issued upon                                                        
   exercising of stock options                     -                      - 
                              ----------------------------------------------
Balance December 29, 2012                  2,635,172  $              11,580 
                              ----------------------------------------------
                              ----------------------------------------------
                                                                            
Balance June 25, 2011                      3,453,806  $              15,160 
  Shares repurchased                         (50,000)                  (219)
  Shares issued upon                                                        
   exercising of stock options                 3,700                     18 
                              ----------------------------------------------
Balance December 24, 2011                  3,407,506  $              14,959 
                              ----------------------------------------------
                              ----------------------------------------------

 
The Multiple Voting Shares and Subordinate Voting Shares have
identical attributes except that the Multiple Voting Shares entitle
the holder to ten votes per share and the Subordinate Voting Shares
entitle the holder to one vote per share. Each Multiple Voting Share
is convertible at any time, at the holder's option, into one fully
paid and non-assessable Subordinate Voting Share. The Multiple Voting
Shares are subject to provisions whereby, if a triggering event
occurs, then each Multiple Voting Share is converted into one fully
paid and non-assessable Subordinate Voting Share. A triggering event
may occur if, among other things, Mr. Jeffrey Wortsman, President and
Chief Executive Officer: (i) dies; (ii) ceases to be a Senior Officer
of the Company; (iii) ceases to own 5% or more of the aggregate
number of Multiple Voting Shares and Subordinate Voting Shares
outstanding; or (iv) owns less than 918,247 Multiple Voting Shares
and Subordinate Voting Shares combined.  
(c) Earnings per share  
Basic and diluted per share amounts are based on the following
weighted average number of shares outstanding: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29,  December 24,  December 29,  December 24,
                              2012          2011          2012          2011
                    --------------------------------------------------------
Weighted average                                                            
 number of shares                      
                                     
 for basic earnings                                                         
 per share                                                                  
 calculations            4,370,014     4,629,878     4,508,458     4,643,017
Effect of dilutive                                                          
 options outstanding       155,030       147,773       146,731       153,655
                    --------------------------------------------------------
Weighted average                                                            
 number of shares                                                           
 for diluted                                                                
 earnings per share                                                         
 calculations            4,525,044     4,777,651     4,655,189     4,796,672
                    --------------------------------------------------------
                    --------------------------------------------------------

 
The computation of dilutive options outstanding only includes those
options having exercise prices below the average market price of
Subordinate Voting Shares on the TSX during the relevant period. No
options were excluded as at December 29, 2012 and 62,000 options were
excluded as at December 24, 2011. 
(d) Substantial Issuer Bid and Normal Course Issuer Bid  
On October 24, 2012, the Company commenced a substantial issuer bid
("SIB" or the "Offer") by filing and mailing a formal offer to
purchase and accompanying circular dated October 23, 2012, pursuant
to which the Company offered to purchase for cancellation up to $10
million in value of its Subordinate Voting Shares from shareholders
by way of a "modified Dutch Auction" at a range of Offer prices
between $12.55 and $13.30 per share. The minimum and maximum Offer
prices corresponded with the fair market range of values per
Subordinate Voting Share determined, as of October 23, 2012, by
Deloitte and Touche LLP, the independent valuator engaged by a
Special Committee of independent directors of the Board of Directors
to prepare a formal valuation of the Subordinate Voting Shares. The
Offer expired on November 28, 2012 and a total of 1,748,470
Subordinate Voting Shares were validly deposited and not withdrawn
under the Offer. Pursuant to the terms of the Offer, the Company
determined the purchase price to be $12.70 per share. As the
aggregate value of Subordinate Voting Shares deposited under the
Offer at or below the purchase price of $12.70 per share exceeded the
$10 million maximum value of consideration payable by the Company
pursuant to the Offer, a pro-ration factor of 0.9852 was applied to
deposited Subordinate Voting Shares (except for odd lot deposits,
which were not subject to pro-ration), and the Company repurchased
for cancellation 787,401 Subordinate Voting Shares at a price of
$12.70 per share. 
During the past several years, the Company has received approval from
the TSX to commence various normal course issuer bids ("NCIBs"). On
May 5, 2011, the Company received approval from the TSX to commence
its fifth normal course issuer bid (the "2011 NCIB"). The 2011 NCIB
permitted the Company to acquire up to 176,440 Subordinate Voting
Shares, representing approximately 5% of the Company's issued and
outstanding Subordinate Voting Shares at the date of acceptance of
the notice of intention in respect of the 2011 NCIB filed with the
TSX. The 2011 NCIB expired on May 8, 2012 without being renewed.  
During the 13 week and 26 week periods ended December 29, 2012 and
December 24, 2011, repurchases of Subordinate Voting Shares under the
Company's SIB and 2011 NCIB outstanding during the applicable period
are presented below.  


 
                           13 weeks ended              26 weeks ended       
                    --------------------------------------------------------
                      December 29,  December 24,  December 29,  December 24,
                              2012          2011          2012          2011
                    --------------------------------------------------------
Number of shares                                                            
 repurchased under                                                          
 SIB                       787,401             -       787,401             -
Number of shares                                                            
 repurchased under                                                          
 2011 NCIB                       -             -             -        50,000
Amount charged to                                                           
 share capital       $       3,460             - $       3,460 $         219
Amount charged to                                                           
 retained earnings                                                          
 representing the                                                           
 excess over the                                                            
 average paid-in                                                            
 value               $       6,913             - $       6,913 $         311
                    --------------------------------------------------------
Total cash                                                                  
 consideration (net                                                         
 of tax)             $      10,373             - $      10,373 $         530
                    --------------------------------------------------------
                    --------------------------------------------------------

 
The amount of income tax recorded directly to Shareholders' Equity
that was related to the SIB during the 13 week and 26 week periods
ended December 29, 2012 was $92. 
11. Share-based Compensation:  
The Company's net share-based compensation expense recognized in
selling, general and administrative expenses ("SG&A") related to its
stock option, restricted share unit ("RSU") and deferred share unit
("DSU") plans is presented below: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29, December 24,   December 29, December 24, 
                              2012         2011           2012         2011 
                    --------------------------------------------------------
Stock option plan                                                           
 expense             $          23 $          2  $          46 $         17 
RSU plan expense               251          156            557          314 
DSU plan expense                95          (36)           165          (88)
                    --------------------------------------------------------
                     $         369 $        122  $         768 $        243 
                    --------------------------------------------------------
                    --------------------------------------------------------

 
The carrying amount of the Company's share-based compensation
arrangements including stock option, RSU and DSU plans are recorded
on the consolidated statements of financial position as follows: 


 
                       December 29, 2012 December 24, 2011     June 30, 2012
                      ------------------------------------------------------
Payables and accruals  $           2,471 $           1,950 $           2,374
Contributed surplus                  971               945               925
                      ------------------------------------------------------
                       $           3,442 $           2,895 $           3,299
                      ------------------------------------------------------
                      ------------------------------------------------------

 
(a) Stock option plan  
The Company maintains a Stock Option Plan, as ame
nded, for the
benefit of directors, officers, employees and service providers,
pursuant to which granted options are exercisable for Subordinate
Voting Shares. As at December 29, 2012, the Company has reserved
620,167 Subordinate Voting Shares for issuance under its Stock Option
Plan. The granting of options and the related vesting periods are at
the discretion of the Board of Directors, on the advice of the
Governance, Compensation, Human Resources and Nominating Committee of
the Board (the "Committee"), at exercise prices determined as the
weighted average of the trading prices of the Company's Subordinate
Voting Shares on the TSX for the five trading days preceding the
effective date of the grant. In general, options granted to officers,
employees and service providers under the Stock Option Plan typically
vest over a period of between three years and four years from the
grant date and expire no later than the tenth anniversary of the date
of grant (subject to extension in accordance with the Stock Option
Plan if the options would otherwise expire during a black-out
period). 
A summary of the status of the Company's Stock Option Plan as of
December 29, 2012 and December 24, 2011 and changes during the
respective 26 week periods ended on those dates is presented below: 


 
                          December 29, 2012           December 24, 2011     
                    --------------------------------------------------------
                                        Weighted                    Weighted
                                         Average                     Average
                                        Exercise                    Exercise
Stock Options              Shares          Price       Shares          Price
----------------------------------------------------------------------------
Outstanding at                                                              
 beginning of period      357,767  $        7.14      348,434  $        6.65
  Granted                       -              -            -              -
  Exercised                     -              -       (3,700) $        3.15
  Forfeited               (58,000) $       15.85            -              -
                    --------------------------------------------------------
Outstanding at end                                                          
 of period                299,767  $        5.45      344,734  $        6.69
                    --------------------------------------------------------
Options exercisable                                                         
 at end of period         271,667  $        4.91      338,067  $        6.74
                    --------------------------------------------------------

 
The following table summarizes the distribution of these options and
the remaining contractual life as at December 29, 2012: 


 
                      Options Outstanding             Options Exercisable   
            ----------------------------------------------------------------
                            Weighted                                        
                             Average      Weighted                  Weighted
                           Remaining       Average        # of       Average
Exercise               # Contractual      Exercise      Shares      Exercise
 Prices      Outstanding        Life         Price Exercisable         Price
----------------------------------------------------------------------------
$3.15            157,667   5.8 years $        3.15     157,667 $        3.15
$6.25             50,000   5.5 years $        6.25      50,000 $        6.25
$7.80             45,000   4.1 years $        7.80      45,000 $        7.80
$8.68             15,000   4.3 years $        8.68      15,000 $        8.68
$10.68            28,100   9.5 years $       10.68           - $       10.68
$10.96             4,000   0.6 years $       10.96       4,000 $       10.96
            ----------------------------------------------------------------
                 299,767   5.7 years $        5.45     271,667 $        4.91
            ----------------------------------------------------------------
            ----------------------------------------------------------------

 
There were no stock options granted during the 13 week and 26 week
periods ended December 29, 2012 and December 24, 2011.  
(b) Restricted Share Unit Plan  
The Company has established a cash-settled RSU Plan, as amended, as
part of its overall compensation plan. An RSU is a notional unit
equivalent in value to one Subordinate Voting Share of the Company.
The RSU Plan is administered by the Board of Directors, with the
advice of the Committee. Under the RSU Plan, certain eligible
officers, employees and directors of the Company are eligible to
receive a grant of RSUs that generally vest over periods not
exceeding three years, as determined by the Committee. Upon the
exercise of the vested RSUs, a cash payment equal to the market value
of the exercised vested RSUs will be paid to the participant. The
market value is based on the five-day average daily closing prices of
the Subordinate Voting Shares on the TSX immediately prior to the
applicable payment date. RSU expense is recognized on a graded
vesting schedule and is determined based on the fair value of the
liability incurred at each financial position date until the award is
settled. The fair value of the liability is measured by applying the
Black-Scholes Option Pricing Model, taking into account the extent to
which participants have rendered services to date. 
The following transactions occurred during each of the 13 week and 26
week periods ended December 29, 2012 and December 24, 2011,
respectively, with respect to the RSU Plan: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                     December 29,   December 24, December 29,  December 24, 
                             2012           2011         2012          2011 
                    --------------------------------------------------------
Outstanding at                                                              
 beginning of period      156,639        166,770      167,536       122,300 
  Granted                       -              -       25,000        61,100 
  Redeemed                   (166)             -      (36,063)      (16,130)
  Forfeited                  (334)             -         (334)         (500)
                    --------------------------------------------------------
Outstanding at end                                                          
 of period                156,139        166,770      156,139       166,770 
RSU vested at end of                                                        
 period                    37,765         16,300       37,765        16,300 
Liability at end of                                                         
 period              $      1,440  $         895 $      1,440  $        895 

 
(c) Deferred Share Unit Plan  
The cash-settled DSU Plan, as amended, was established for
non-management directors. Under the DSU Plan, non-management
directors of the Company may receive an annual grant of DSUs at the
discretion of the Board of Directors on the advice of the Committee,
and can also elect to receive their annual retainers and meeting fees
in DSUs. A DSU is a notional unit equivalent in value to one
Subordinate Voting Share of the Company based on the five-day average
daily closing prices of the Subordinate Voting Shares on the TSX
immediately prior to the date on which the value of the DSU is
determined. The fair value of the liability is measured at each
financial position date by applying the Black-Scholes Option Pricing
Model until the award is settled. 
The following transactions occurred during each of the 13 week and 26
week periods ended December 29, 2012 and December 24, 2011,
respectively, with re
spect to the DSU Plan: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29,  December 24, December 29,   December 24,
                              2012          2011         2012           2011
                    --------------------------------------------------------
Outstanding at                                                              
 beginning of period        83,136       103,920      103,920        103,920
  Granted                        -             -            -              -
  Redeemed                       -             -      (20,784)             -
                    --------------------------------------------------------
Outstanding at end                                                          
 of period                  83,136       103,920       83,136        103,920
Danier stock price                                                          
 at end of period    $       12.40 $       10.15 $      12.40  $       10.15
Liability at end of                                                         
 period              $       1,031 $       1,055 $      1,031  $       1,055

 
12. Amortization and Impairment Loss on Property and Equipment:  
Amortization and impairment loss on property and equipment included
in cost of sales and SG&A is summarized as follows: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29,  December 24,  December 29,  December 24,
                              2012          2011          2012          2011
                    --------------------------------------------------------
Cost of sales        $          42 $          50 $          83 $          96
SG&A                         1,152           835         1,923         1,709
                    --------------------------------------------------------
                     $       1,194 $         885 $       2,006 $       1,805
                    --------------------------------------------------------
                    --------------------------------------------------------

 
13. Income Taxes:  
The Company's income tax expense is comprised as follows: 


 
                                December 29, 2012         December 24, 2011 
                        ----------------------------------------------------
Current period income                                                       
 tax expense             $                  1,862  $                  2,265 
Adjustment for prior                                                        
 years taxes                                   11                        48 
                        ----------------------------------------------------
Current income tax                                                          
 expense                 $                  1,873  $                  2,313 
                                                                            
Deferred tax expense                          (40)                     (107)
                        ----------------------------------------------------
Income tax expense       $                  1,833  $                  2,206 
                        ----------------------------------------------------
                        ----------------------------------------------------

 
The estimated average annual effective rate was 27.0% during the 26
weeks ended December 29, 2012 compared with the 27.9% estimated rate
for the 26 weeks ended December 24, 2011 and 27.6% for the fiscal
year ended June 30, 2012. The difference between the rate for the 26
weeks ended December 29, 2012 and the rate for the 26 weeks ended
December 24, 2011 and the fiscal year ended June 30, 2012 is mainly
due to a reduction in the statutory tax rates as well as the effect
of certain non-deductible expenses on estimated earnings. 
The Company's effective income tax rate consists of the following:  


 
                                          26 Weeks Ended                    
                        ----------------------------------------------------
                               December 29, 2012         December 24, 2011  
                        ----------------------------------------------------
Combined basic federal                                                      
 and provincial average                                                     
 statutory rate                             26.4%                     27.2% 
Non-deductible expenses                      1.8%                      0.6% 
Future federal and                                                          
 provincial rate changes                       -                       0.4% 
Other                                       (1.2%)                    (0.3%)
                        ----------------------------------------------------
                                            27.0%                     27.9% 
                        ----------------------------------------------------
                        ----------------------------------------------------

 
14. Change in Working Capital Items:  


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                     December 29,  December 24,  December 29,  December 24, 
                             2012          2011          2012          2011 
                    --------------------------------------------------------
Decrease (increase)                                                         
 in:                                                                        
  Accounts                                                                  
   receivable        $       (496) $       (593) $       (834) $     (1,301)
  Inventories               3,088         2,986        (7,170)       (7,825)
  Prepaid expenses            320           341           405           441 
Increase (decrease)                                                         
 in:                                                                        
  Payables and                                                              
   accruals                 9,046         4,650         8,523         4,986 
  Deferred revenue            448           679           404           646 
  Sales return                                                              
   provision                1,587         1,325         1,592         1,404 
                    --------------------------------------------------------
                     $     13,993  $      9,388  $      2,920  $     (1,649)
                    --------------------------------------------------------
                    --------------------------------------------------------

 
15. Contingencies and Guarantees:  
(a) Legal proceedings  
In the course of its business, the Company from time to time becomes
involved in various claims and legal proceedings. In the opinion of
management, all such claims and suits are adequately covered by
insurance, or if not so covered, the results are not expected to
materially affect the Company's financial position. 
(b) Guarantees  
The Company has provided the following guarantees to third parties
and no amounts have been accrued in the consolidated financial
statements for these guarantees: 


 
  (i)   In the ordinary course of business, the Company has agreed to       
        indemnify its lenders under its credit facilities against certain   
        costs or losses resulting from changes in laws and regulations or   
        from a default in repaying a borrowing. These indemnifications      
        extend for the term of the credit facilities and do not provide any 
        limit on the maximum potential liability. Historically, the Company 
        has not made any indemnification payments under such agreements.    
                                                                            
  (ii)  In the ordinary course of business, the Company has provided        
        indemnification commitments to certain counterparties in matters    
        such as real estate leasing transactions, director and officer      
        indemnification agreements and certain purchases of non-inventory   
        assets and services. These indemnification agreements generally     
        require the Company to compensate the counterparties for costs or   
        losses resulting from legal action brought against the              
        counterparties related to the actions of the Company. The terms of  
        these indemnification agreements will vary based on the contract and
        generally do not provide any limit on the maximum potential         
        liability.                                                          
                                                                            
  (iii) The Company sublet one location during the first quarter of fiscal  
        2011 and provided the landlord with a guarantee in the event the    
        sub-tenant defaults on its obligations under the lease. The         
        guarantee terminates at the time of lease expiry, which is March 31,
        2013, and the Company's maximum exposure is approximately $35.      

 
16. Commitments:  
(a) Operating leases:  
The Company leases various store locations, a distribution warehouse
and certain equipment under non-cancellable operating lease
agreements. The leases are classified as operating leases since there
is no transfer of risks and rewards inherent to ownership.  
The leases have varying terms, escalation clauses and renewal rights.
Minimum lease payments are recognized on a straight-line basis.
Leases run for varying terms that generally do not exceed 10 year
s,
with options to renew (if any) that do not exceed 5 years. The
majority of leases are net leases, which require additional payments
for the cost of insurance, taxes, common area maintenance and
utilities. Certain rental agreements include contingent rent, which
is based on revenue exceeding a minimum amount. Minimum rentals,
excluding rentals based upon revenue, are as follows: 


 
Not later than one year                                     $         11,001
Later than one year and not later than five years           $         29,589
Later than 5 years                                          $         14,531
                                                            ----------------
Total                                                       $         55,121

 
Minimum lease payments, contingent rentals and sublease payments
recognized as an expense are summarized as follows: 


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29,  December 24,  December 29,  December 24,
                              2012          2011          2012          2011
                    --------------------------------------------------------
Minimum lease                                                               
 payments recognized                                                        
 as an expense       $       2,924 $       2,763 $       5,729 $       5,570
Contingent rentals                                                          
 recognized as an                                                           
 expense             $         341 $         241 $         359 $         242
Sublease payments                                                           
 recognized as an                                                           
 expense                         -             -             -             -

 
(b) Letters of credit:  
As at December 29, 2012, the Company had outstanding letters of
credit in the amount of $8,971 (December 24, 2011 - $6,342) for the
importation of finished goods inventories to be received. 
17. Financial Instruments:  
(a) Fair value disclosure  
The following table presents the carrying amount and the fair value
of the Company's financial instruments:  


 
                                        December 29, 2012  December 24, 2011
                                       -------------------------------------
                                        Carrying     Fair   Carrying    Fair
               Classification  Maturity    value    value      value   value
----------------------------------------------------------------------------
Cash and cash  Loans and       Short-                                       
 equivalents    receivables     term    $ 30,849  $30,849  $  31,803 $31,803
Accounts       Loans and       Short-                                       
 receivable     receivables     term    $  1,351  $ 1,351  $   1,682 $ 1,682
Payables and   Financial       Short-                                       
 accruals       liabilities     term    $ 18,537  $18,537  $  16,010 $16,010
Sales return   Financial       Short-                                       
 provision      liabilities     term    $  1,716  $ 1,716  $   1,451 $ 1,451
Derivative     Fair value                                                   
 financial      through profit Short-                                       
 instruments(1) and loss        term    $   (147) $  (147) $       4 $     4
----------------------------------------------------------------------------
(1)   Included in payables and accruals for the 26 week period ended        
      December 29, 2012 and included in accounts receivable for the 26 week 
      period ended December 24, 2011.                                       

 
The fair value of a financial instrument is the estimated amount that
the Company would receive or pay to settle the financial assets and
financial liabilities as at the reporting date. These estimates are
subjective in nature, often involve uncertainties and the exercise of
significant judgment and are made at a specific point in time, using
available information about the financial instrument and may not
reflect fair value in the future. The estimated fair value amounts
can be materially affected by the use of different assumptions or
methodologies. 
The methods and assumptions used in estimating the fair value of the
Company's financial instruments are as follows: 


 
-     The derivative financial instruments, which consist of foreign        
      exchange contracts, have been marked-to-market and are categorized as 
      Level 2 in the fair value hierarchy. Factors included in the          
      determination of fair value include the spot rate, forward rates,     
      estimates of volatility, present value factor, strike prices, credit  
      risk of the Company and credit risk of counterparties. As at December 
      29, 2012, a $147 unrealized loss (December 24, 2011 - $4 unrealized   
      gain) was recorded in SG&A for the foreign exchange contracts         
      outstanding.                                                          
-     The fair value of cash is determined using Level 2 inputs in the fair 
      value hierarchy which include interest rates for similar instruments  
      which are obtained from independent publications and market exchanges.
-     Given their short-term maturity, the fair value of cash, accounts     
      receivable, payables and accruals and sales return provision          
      approximates their carrying values.                                   

 
(b) Financial instrument risk management  
Exposure to foreign currency risk, interest rate risk, equity price
risk, liquidity risk and credit risk arise in the normal course of
the Company's business and are discussed further below: 
Foreign Currency Risk  
Foreign currency risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in
foreign currency exchange rates. The Company purchases a significant
portion of its leather and finished goods inventory from foreign
vendors with payment terms in U.S. dollars. The Company uses a
combination of foreign exchange contracts and spot purchases to
manage its foreign exchange exposure on cash flows related to these
purchases. A foreign exchange contract represents an option with a
counterparty to buy or sell a foreign currency to meet its
obligations. Credit risk exists in the event of a failure by a
counterparty to fulfill its obligations. The Company reduces this
risk by mainly dealing with highly-rated counterparties such as major
Canadian financial institutions.  
During the 13 week and 26 week periods ended December 29, 2012 and
December 24, 2011, the Company entered into foreign exchange
contracts with Canadian financial institutions as counterparties with
U.S. dollar notional amounts as listed below. Foreign exchange
contracts outstanding as at December 29, 2012 expire at various times
between January 4, 2013 and December 16, 2013 and the foreign
exchange contracts that were outstanding as at December 24, 2011
expired between January 3, 2012 and March 16, 2012.  


 
                                              26 Weeks Ended                
                              ----------------------------------------------
                                   December 29, 2012      December 24, 2011 
                              ----------------------------------------------
Notional amount outstanding at                                              
 beginning of period (US$000)  $              21,000  $              18,500 
  Notional amount of foreign                                                
   exchange contracts entered                                               
   into during the period                                        
           
   (US$000)                                   15,500                  4,000 
  Notional amount of foreign                                                
   exchange contracts expired                                               
   during the period (US$000)                (19,000)               (18,500)
                              ----------------------------------------------
Notional amount outstanding at                                              
 end of period (US$000)        $              17,500  $               4,000 
Fair value of foreign exchange                                              
 contracts outstanding at end                                               
 of period - gain/(loss)                                                    
 (C$000)                       $                (147) $                   4 

 
As at December 29, 2012, a sensitivity analysis was performed on the
Company's U.S. dollar denominated financial instruments, which
principally consist of US$0.6 million of cash, to determine how a
change in the U.S. dollar exchange rate would impact net earnings. A
500 basis point rise or fall in the Canadian dollar against the U.S.
dollar, assuming that all other variables, in particular interest
rates, remained the same, would have resulted in a $6 and $11
decrease or increase, respectively, in the Company's net earnings for
the 13 week and 26 week periods ended December 29, 2012,
respectively. 
Interest Rate Risk 
Interest rate risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in
market interest rates. The Company's exposure to interest rate
fluctuations is primarily related to cash borrowings under its
existing credit facility, which bears interest at floating rates, and
interest earned on its cash balances. The Company has performed a
sensitivity analysis on interest rate risk as at December 29, 2012 to
determine how a change in interest rates would have impacted net
earnings. As at December 29, 2012, the Company's cash balance
available for investment was approximately $30.8 million. A 100 basis
point change in interest rates would have increased or decreased net
earnings by approximately $54 and $108 for the 13 week and 26 week
periods ended December 29, 2012, respectively. This analysis assumes
that all other variables, in particular foreign currency rates,
remain constant. 
Equity Price Risk  
Equity price risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in
market equity prices. The Company's exposure to equity price
fluctuations is primarily related to the RSU and DSU liability
included in payables and accruals. The value of the vested DSU and
RSU liability is adjusted to reflect changes in the market value of
the Company's Subordinate Voting Shares on the TSX. The Company has
performed a sensitivity analysis on equity price risk as at December
29, 2012 to determine how a change in the price of the Subordinate
Voting Shares would have impacted net earnings. As at December 29,
2012, a total of 156,139 RSUs and 83,136 DSUs have been granted and
are outstanding. An increase or decrease of $1.00 in the market price
of the Company's Subordinate Voting Shares would have increased or
decreased net earnings by approximately $167 for the 13 week and 26
week periods ended December 29, 2012. This analysis assumes that all
RSUs and DSUs were fully vested and other variables remain constant. 
Liquidity Risk  
Liquidity risk is the risk that the Company will not be able to meet
its financial obligations as they become due. The Company's approach
to managing liquidity risk is to ensure, to the extent possible, that
it will have sufficient liquidity to meet its liabilities when due.
As at December 29, 2012, the Company had $30.8 million of cash; an
operating credit facility of $25 million that is committed until June
27, 2014; and a $10 million uncommitted letter of credit facility
which includes an uncommitted demand overdraft facility in the amount
of $0.5 million related thereto. The credit facilities are used to
finance seasonal working capital requirements for merchandise
purchases and other corporate purposes. The Company expects that the
majority of its payables and accruals and deferred revenue will be
discharged within 90 days.  
Credit Risk  
Credit risk is the risk that a customer or counterparty to a
financial instrument will cause a financial loss to the Company by
failing to meet its obligations. The Company's financial instruments
that are exposed to concentrations of credit risk are primarily cash
and cash equivalents (which includes cash and money market
investments with maturities of three months or less), accounts
receivable and foreign exchange option contracts. The Company limits
its exposure to credit risk with respect to cash and money market
investments by investing in short-term deposits and bankers'
acceptances with major Canadian financial institutions. The Company's
accounts receivable consist primarily of credit card receivables from
the last few days of the fiscal period end, which are settled within
the first few days of the new fiscal period. Accounts receivable also
consist of accounts receivable from distributors and corporate
customers. Accounts receivable are net of applicable allowance for
doubtful accounts, which is established based on the specific credit
risks associated with the distributor, each corporate customer and
other relevant information. The allowance for doubtful accounts is
assessed on a quarterly basis. Concentration of credit risk with
respect to accounts receivable from distributors and corporate
customers is limited due to the relatively insignificant balances
outstanding and the number of different customers comprising the
Company's customer base. Credit risk for foreign exchange contracts
exists in the event of failure by a counterparty to fulfill its
obligations. The Company reduces this risk by dealing only with
highly-rated counterparties such as major Canadian financial
institutions. 
As at December 29, 2012, the Company's exposure to credit risk for
these financial instruments was cash of $30.8 million, accounts
receivable of $1.4 million and foreign exchange option contracts that
had a notional amount of US$17.5 million.  
18. Capital Disclosure:  
The Company defines its capital as shareholders' equity. The
Company's objectives in managing capital are to: 


 
--  Ensure sufficient liquidity to support its current operations and
    execute its business plans; 
--  Enable the internal financing of capital projects; and 
--  Maintain a strong capital base so as to maintain investor, creditor and
    market confidence. 

 
The Company's primary uses of capital are to finance non-cash working
capital along with capital expenditures for new store additions,
existing store renovation or relocation projects, information
technology software and hardware purchases and production machinery
and equipment purchases. The Company maintains a $25 million
operating credit facility and a $10 million uncommitted letter of
credit facility that it uses to finance seasonal working capital
requirements for merchandise purchases and other corporate purposes.
The Company does not have any long-term debt and therefore net
earnings generated from operations are available for reinvestment in
the Company. The Board of Directors does not establish quantitative
return on capital criteria for management, but rather promotes
year-over-year sustainable profitable growth. On a quarterly basis,
the Board of Directors monitors share repurchase program activities.
Decisions on whether to repurchase shares are made on a specific
transaction basis and depend on the Company's cash position,
estimates of future cash requirements, market prices and regulatory
restrictions, among other factors. The Company does not currently pay
dividends.  
Externally imposed capital requirements include a debt-to-equity
ratio covenant as part of the operating credit facility. The Company
was in compliance with this covenant as at December 29, 2012 and
December 24, 2011. There has been no change with respect to the
overall capital risk management strategy during the 26 week period
ended December 29, 2012.  
19. Expenses by Nature:  


 
                           13 Weeks Ended              26 Weeks Ended       
                    --------------------------------------------------------
                      December 29,  December 24,  December 29,  December 24,
                              2012          2011          2012          2011
                    --------------------------------------------------------
Selling and retail                                                          
 operating expenses  $      19,945 $      17,014 $      31,649 $      29,401
General and                                                                 
 administrative                                                             
 expenses                    4,448         4,388         9,161         7,568
                    --------------------------------------------------------
                     $      24,393 $      21,402 $      40,810 $      36,969
                    --------------------------------------------------------
                    --------------------------------------------------------

 
Selling and retail operating expenses comprise costs incurred to
operate the Company's stores including wages and benefits for store
personnel, rent and occupancy, marketing and advertising, credit card
fees, amortization of property and equipment and computer software
and other store operating expenses. 
General and administrative expenses include the cost of designing,
merchandising, sourcing, merchandise planning, marketing, store
administrative support, finance, loss prevention, information
technology, human resources and executive functions. 
20. Segmented Information:  
Ma
nagement has determined that the Company operates in one dominant
industry which involves the design, manufacture, distribution and
retail of fashion leather clothing and accessories. 
Contacts:
Investor Relations Contact:
Danier Leather Inc.
Bryan Tatoff
Senior Vice-President, Chief Financial Officer & Secretary
(416) 762-8175 ext. 328
bryan@danier.com 
Danier Leather Inc.
Jeffrey Wortsman
President and Chief Executive Officer
(416) 762-8175 ext. 302
jeffreyw@danier.com
www.danier.com