Danier Leather Reports Fiscal 2013 Second Quarter Results

TORONTO, ONTARIO--(Marketwire - Jan. 30, 2013) - 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, 2012		Dec. 24, 2011		Dec. 29, 2012		Dec. 24, 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, 2012			December 24, 2011			December 29, 2012			December 24, 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, 2012		Dec 24, 2011		June 30, 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, 2012			December 24, 2011			December 29, 2012			December 24, 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

		Share Capital			Contributed Surplus			Accumulated Other Comprehensive Income		Retained 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

		Share Capital			Contributed Surplus			Accumulated Other Comprehensive Income		Retained 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, 2012		December 24, 2011		June 30, 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, 2012		December 24, 2011		June 30, 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 29, 2012		December 24, 2011		December 29, 2012		December 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		Leasehold Improvements			Furniture & Equipment			Computer Hardware		Total
Cost
At June 30, 2012	$	1,000	$	6,063	$	308	$	793	$	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	$	1,000	$	6,063	$	308	$	793	$	23,181		$	10,124		$	3,435	$	44,904
Accumulated amortization and impairment losses
At June 30, 2012		-	$	2,354	$	201	$	578	$	15,875		$	6,321		$	2,505	$	27,834
Amortization for the period		-		77		7		23		813			388			193		1,501
Impairment losses		-		-		-		-		277			50			-		327
Disposals		-		-		-		-		(1,292	)		(127	)		-		(1,419	)
At December 29, 2012		-	$	2,431	$	208	$	601	$	15,673		$	6,632		$	2,698	$	28,243
Net carrying value
At December 29, 2012	$	1,000	$	3,632	$	100	$	192	$	7,508		$	3,492		$	737	$	16,661
At June 30, 2012	$	1,000	$	3,709	$	107	$	215	$	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		Leasehold Improvements			Furniture & Equipment			Computer Hardware		Total
Cost
At June 25, 2011	$	1,000	$	6,063	$	308	$	753	$	23,453		$	8,985		$	3,180	$	43,742
Additions		-		-		-		40		1,762			638			97		2,537
Disposals		-		-		-		-		(1,470	)		(346	)		-		(1,816	)
At December 24, 2011	$	1,000	$	6,063	$	308	$	793	$	23,745		$	9,277		$	3,277	$	44,463
Accumulated amortization and impairment losses
At June 25, 2011		-	$	2,198	$	184	$	531	$	17,968		$	6,232		$	2,225	$	29,338
Amortization for the period		-		77		9		23		845			483			168		1,605
Impairment losses		-		-		-		-		21			-			-		21
Disposals		-		-		-		-		(1,470	)		(346	)		-		(1,816	)
At December 24, 2011		-	$	2,275	$	193	$	554	$	17,364		$	6,369		$	2,393	$	29,148
Net carrying value
At December 24, 2011	$	1,000	$	3,788	$	115	$	239	$	6,381		$	2,908		$	884	$	15,315
At June 25, 2011	$	1,000	$	3,865	$	124	$	222	$	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, 2012			December 24, 2011			December 29, 2012			December 24, 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, 2012	December 24, 2011	December 29, 2012	December 24, 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, 2012		December 24, 2011	December 29, 2012		December 24, 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, 2012		December 24, 2011			December 29, 2012		December 24, 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 amended, for the benefit of directors, officers, employees and service providers, pursuant to which granted options are exercisable for Subordinate Voting Shares. As at December 29, 2012, the Company has reserved 620,167 Subordinate Voting Shares for issuance under its Stock Option Plan. The granting of options and the related vesting periods are at the discretion of the Board of Directors, on the advice of the Governance, Compensation, Human Resources and Nominating Committee of the Board (the "Committee"), at exercise prices determined as the weighted average of the trading prices of the Company's Subordinate Voting Shares on the TSX for the five trading days preceding the effective date of the grant. In general, options granted to officers, employees and service providers under the Stock Option Plan typically vest over a period of between three years and four years from the grant date and expire no later than the tenth anniversary of the date of grant (subject to extension in accordance with the Stock Option Plan if the options would otherwise expire during a black-out period).

A summary of the status of the Company's Stock Option Plan as of December 29, 2012 and December 24, 2011 and changes during the respective 26 week periods ended on those dates is presented below:

		December 29, 2012				December 24, 2011
Stock Options		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise 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
Exercise Prices	# Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		# of Shares Exercisable	Weighted Average Exercise 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, 2012			December 24, 2011		December 29, 2012			December 24, 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 respect to the DSU Plan:

		13 Weeks Ended				26 Weeks Ended
		December 29, 2012		December 24, 2011		December 29, 2012			December 24, 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, 2012		December 24, 2011		December 29, 2012		December 24, 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, 2012			December 24, 2011			December 29, 2012			December 24, 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 years, with options to renew (if any) that do not exceed 5 years. The majority of leases are net leases, which require additional payments for the cost of insurance, taxes, common area maintenance and utilities. Certain rental agreements include contingent rent, which is based on revenue exceeding a minimum amount. Minimum rentals, excluding rentals based upon revenue, are as follows:

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, 2012		December 24, 2011		December 29, 2012		December 24, 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
	Classification	Maturity	Carrying value			Fair value			Carrying value		Fair value
Cash and cash equivalents	Loans and receivables	Short-term	$	30,849		$	30,849		$	31,803	$	31,803
Accounts receivable	Loans and receivables	Short-term	$	1,351		$	1,351		$	1,682	$	1,682
Payables and accruals	Financial liabilities	Short-term	$	18,537		$	18,537		$	16,010	$	16,010
Sales return provision	Financial liabilities	Short-term	$	1,716		$	1,716		$	1,451	$	1,451
Derivative financial instruments(1)	Fair value through profit and loss	Short-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, 2012		December 24, 2011		December 29, 2012		December 24, 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:

Management has determined that the Company operates in one dominant industry which involves the design, manufacture, distribution and retail of fashion leather clothing and accessories.