TORONTO, ONTARIO--(Marketwired - Nov. 6, 2015) - Danier Leather Inc. (TSX:DL) ("Danier" or the "Company") today announced its unaudited interim consolidated financial results for the 13-week period ended September 26, 2015.
FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square footage and number of stores):
| |
|
For the 13 Weeks Ended |
|
| |
|
Sept. 26, 2015 |
|
|
Sept. 27, 2014 |
|
| Sales |
|
$ |
18,197 |
|
|
$ |
20,572 |
|
| EBITDA(1) |
|
|
(5,272 |
) |
|
|
(6,652 |
) |
| Adjusted EBITDA(1) |
|
|
(6,512 |
) |
|
|
(7,068 |
) |
| Net Loss |
|
|
(6,017 |
) |
|
|
(5,917 |
) |
| EPS - Basic |
|
$ |
(1.56 |
) |
|
$ |
(1.54 |
) |
| EPS - Diluted |
|
$ |
(1.56 |
) |
|
$ |
(1.54 |
) |
| Number of Stores |
|
|
86 |
|
|
|
90 |
|
| Retail Square Footage |
|
|
272,124 |
|
|
|
283,224 |
|
On August 27, 2015, the Company converted its existing operating and revolving credit facilities of $29 million into an asset based loan facility of $35 million with its existing lender. The asset based loan facility has a term of three years with an initial commitment of $35 million that will reduce to $28.5 million upon the sale of the Company's head office building and property on October 1, 2015. The head office location was sold for net proceeds of $11.4 million with an expected gain on sale of $6.9 million. The Company is leasing back the building from the purchaser for the next seven years at fixed rental rates.
Sales during the first quarter of fiscal 2016 decreased by 12% to $18.2 million compared with $20.6 million during the first quarter last year. Comparable store sales(2) decreased by 10% compared to the same period last year. Sales were affected by some of the same factors discussed in the Company's 2015 Annual Report, including increased promotional activity to reduce past- season built-up inventory, a competitive retail environment and a lack of "newness" in product assortment.
Gross profit margin during the first quarter of fiscal 2016 was 44.1% compared with 46.7% during the same period last year. The decrease in gross profit margin was mainly due to increased promotional activity undertaken by the Company in order to reduce past-season built-up inventory, increased inventory provisions and the effect of the weakened Canadian dollar relative to the U.S. dollar.
Selling, general and administrative expenses of $14.9 million incurred during the first quarter of fiscal 2016 decreased by approximately $2.6 million compared with the same period last year due to cost reduction initiatives including lowered salary expense of $1.2 million and reduced advertising spend of $0.9 million.
Foreign exchange gains of $1.9 million were recorded on derivative financial instruments during the first quarter of 2016 ($1.0 million in the same period last year) due to the decline in the Canadian dollar in relation to the U.S. dollar.
The net loss of approximately $6.0 million during the first quarter of fiscal 2016 increased by approximately $0.1 million compared with the net loss of $5.9 million during the first quarter last year.
At the end of first quarter of fiscal 2016, Danier had working capital(3) of $15.0 million ($24.0 million as at September 27, 2014). On-going operating losses are being financed by increased bank indebtedness. The Company's net bank indebtedness increased from $2.2 million as at September 27, 2014 to net bank indebtedness of $17.5 million as at September 26, 2015. Total inventory of $33.5 million as at September 26, 2015 was approximately $3.2 million higher than inventory of $30.3 million at the end of the first quarter last year.
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"). In order to provide additional insight into the business, the Company has also provided certain non-IFRS data, including EBITDA, Adjusted EBITDA and comparable store sales, each as defined below. Non-IFRS measures such as EBITDA, Adjusted EBITDA and comparable store sales are not recognized measures for financial presentation under IFRS. These non-IFRS measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.
- EBITDA and Adjusted EBITDA - EBITDA is defined as net earnings (loss) before interest expense, interest income, income taxes and amortization. Adjusted EBITDA is defined as EBITDA (as defined above) before impairment loss on property and equipment, foreign exchange loss (gain) and termination benefits. EBITDA is a financial metric used by management and some investors to compare companies on the basis of ongoing operating results before taxes, interest expense, interest income and amortization and its ability to incur and service debt. Adjusted EBITDA is a financial metric used by management to compare EBITDA (as defined above) before impairment loss on property and equipment, foreign exchange loss (gain) and termination benefits. EBITDA and Adjusted EBITDA is also used by management to measure performance against internal targets, prior period results and other retailers. EBITDA and Adjusted EBITDA are calculated as outlined in the following table:
| |
|
For the 13 Weeks Ended |
|
| |
|
Sept 25, 2015 |
|
|
Sept 27, 2014 |
|
| |
|
($000) |
|
|
($000) |
|
| Net loss |
|
$ |
(6,017 |
) |
|
$ |
(5,917 |
) |
| Add (deduct) impact of the following: |
|
|
|
|
|
|
|
|
| |
Income tax |
|
|
- |
|
|
|
(1,543 |
) |
| |
Interest expense |
|
|
177 |
|
|
|
21 |
|
| |
Interest income |
|
|
- |
|
|
|
(10 |
) |
| |
Amortization |
|
|
568 |
|
|
|
797 |
|
| EBITDA |
|
$ |
(5,272 |
) |
|
$ |
(6,652 |
) |
| |
Impairment loss on property and equipment |
|
|
621 |
|
|
|
615 |
|
| |
Foreign exchange gain |
|
|
(1,900 |
) |
|
|
(1,037 |
) |
| |
Severances |
|
|
39 |
|
|
|
6 |
|
| Adjusted EBITDA |
|
$ |
(6,512 |
) |
|
$ |
(7,068 |
) |
- Comparable store sales are defined as sales generated by stores that have been open during the full current fiscal year as well as the full prior fiscal year. Comparable store sales is a key indicator used by the Company to measure performance against internal targets and prior period results and excludes sales fluctuations due to new stores, store closings and certain permanent store relocations. This measure is also commonly used by financial analysts and investors to compare Danier to other retailers. Comparable store sales is calculated as outlined in the following table:
| |
|
For the 13 Weeks Ended |
|
| |
|
Sept 26, 2015 |
|
Sept 27, 2014 |
|
|
% change |
|
| |
|
($000) |
|
($000) |
|
|
|
|
| Comparable stores |
|
$ |
17,298 |
|
$ |
19,250 |
|
|
(10 |
%) |
| Non-comparable stores & direct-to customer |
|
|
768 |
|
|
1,244 |
|
|
(38 |
%) |
| Alterations revenue |
|
|
69 |
|
|
129 |
|
|
(47 |
%) |
| Sales return provision (net change) |
|
|
62 |
|
|
(51 |
) |
|
222 |
|
| Revenue |
|
$ |
18,197 |
|
$ |
20,572 |
|
|
(12 |
%) |
- Working capital is defined as total current assets minus total current liabilities. Working capital is a key indicator and financial metric used by the Company to measure short-term liquidity for those assets that can easily be converted into cash to satisfy both short-term liabilities and upcoming operating expenses. Working capital is calculated as outlined in the following table:
| |
|
Sept 26, 2015 |
|
Sept 27, 2014 |
| |
|
($000) |
|
($000) |
| Total current assets |
|
$ |
47,801 |
|
$ |
38,198 |
| Total current liabilities |
|
|
32,835 |
|
|
14,234 |
| Working capital |
|
$ |
14,966 |
|
$ |
23,964 |
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 86 shopping mall, street-front and outlet stores as well as the online store at danier.com. For more information about the Company and our products, visit www.danier.com.
| DANIER LEATHER INC. |
|
| CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS |
|
| (thousands of Canadian dollars, except per share amounts and number of shares) - unaudited |
|
| |
|
|
| |
For the 13 Weeks Ended |
|
| |
Sept 26, 2015 |
|
Sept 27, 2014 |
|
| |
|
|
|
|
|
|
| Revenue |
$ |
18,197 |
|
$ |
20,572 |
|
| Cost of sales (Note 11) |
|
10,175 |
|
|
10,969 |
|
| Gross profit |
|
8,022 |
|
|
9,603 |
|
| |
Selling, general and administrative expenses (Notes 11 and 18) |
|
14,893 |
|
|
17,474 |
|
| |
Asset impairment losses |
|
621 |
|
|
615 |
|
| |
Foreign exchange gains |
|
(1,900 |
) |
|
(1,037 |
) |
| |
Strategic review fees |
|
248 |
|
|
- |
|
| |
Interest income |
|
- |
|
|
(10 |
) |
| |
Interest expense |
|
177 |
|
|
21 |
|
| Loss before income taxes |
|
(6,017 |
) |
|
(7,460 |
) |
| Recovery of income taxes (Note 12) |
|
- |
|
|
(1,543 |
) |
| Net loss and comprehensive loss |
$ |
(6,017 |
) |
$ |
(5,917 |
) |
| |
|
|
|
|
|
|
| Net loss per share: |
|
|
|
|
|
|
| |
Basic |
$ |
(1.56 |
) |
$ |
(1.54 |
) |
| |
Diluted |
$ |
(1.56 |
) |
$ |
(1.54 |
) |
| |
|
|
|
|
|
|
| Weighted average number of shares outstanding: |
|
|
|
|
|
|
| |
Basic |
|
3,854,168 |
|
|
3,854,168 |
|
| |
Diluted |
|
3,856,983 |
|
|
3,927,334 |
|
| Number of shares outstanding at period end |
|
3,854,168 |
|
|
3,854,168 |
|
| |
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements
| DANIER LEATHER INC. |
| CONSOLIDATED BALANCE SHEETS |
| (thousands of Canadian dollars) - unaudited |
| |
|
|
|
|
| |
|
Sept 26,
2015 |
|
Sept 27, 2014 |
|
June 27, 2015 |
| ASSETS |
|
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
|
| |
Cash |
|
$ |
5,523 |
|
$ |
787 |
|
$ |
928 |
| |
Accounts receivable |
|
|
898 |
|
|
752 |
|
|
519 |
| |
Income taxes recoverable |
|
|
2,074 |
|
|
5,102 |
|
|
2,074 |
| |
Inventories (Note 3) |
|
|
33,481 |
|
|
30,326 |
|
|
21,519 |
| |
Prepaid expenses |
|
|
195 |
|
|
742 |
|
|
413 |
| |
Assets held for sale (Notes 4 and 20) |
|
|
4,420 |
|
|
- |
|
|
- |
| |
Derivative financial instruments (Note 16) |
|
|
1,210 |
|
|
489 |
|
|
782 |
| |
|
|
47,801 |
|
|
38,198 |
|
|
26,235 |
| Non-current Assets |
|
|
|
|
|
|
|
|
|
| |
Property and equipment (Note 4) |
|
|
8,100 |
|
|
16,469 |
|
|
13,556 |
| |
Computer software (Note 5) |
|
|
1,400 |
|
|
1,447 |
|
|
1,504 |
| |
Deferred income tax asset |
|
|
- |
|
|
2,276 |
|
|
- |
| |
|
$ |
57,301 |
|
$ |
58,390 |
|
$ |
41,295 |
| LIABILITIES |
|
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
|
| |
Bank indebtedness (Note 6) |
|
$ |
23,015 |
|
$ |
2,991 |
|
$ |
2,293 |
| |
Payables and accruals (Note 7) |
|
|
7,948 |
|
|
9,205 |
|
|
6,239 |
| |
Deferred revenue |
|
|
1,301 |
|
|
1,491 |
|
|
1,336 |
| |
Provisions (Note 8) |
|
|
571 |
|
|
547 |
|
|
869 |
| |
Derivative financial instruments (Note 16) |
|
|
- |
|
|
- |
|
|
54 |
| |
|
|
32,835 |
|
|
14,234 |
|
|
10,791 |
| Non-current Liabilities |
|
|
|
|
|
|
|
|
|
| |
Provisions (Note 8) |
|
|
57 |
|
|
- |
|
|
106 |
| |
Deferred lease inducements and rent liability |
|
|
1,651 |
|
|
1,581 |
|
|
1,624 |
| |
|
|
34,543 |
|
|
15,815 |
|
|
12,521 |
| SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
| |
Share capital (Note 9) |
|
|
11,772 |
|
|
11,772 |
|
|
11,772 |
| |
Contributed surplus |
|
|
1,277 |
|
|
1,125 |
|
|
1,276 |
| |
Retained earnings |
|
|
9,709 |
|
|
29,678 |
|
|
15,726 |
| |
|
|
22,758 |
|
|
42,575 |
|
|
28,774 |
| |
|
$ |
57,301 |
|
$ |
58,390 |
|
$ |
41,295 |
| |
| Contingencies, Guarantees and Commitments (Notes 14 and 15) |
| Approved by the Board of Directors on November 6, 2015 |
| 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 |
|
| |
Sept 26, 2015 |
|
|
Sept 27, 2014 |
|
| Cash provided by (used in) |
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
| |
Net loss |
$ |
(6,017 |
) |
|
$ |
(5,917 |
) |
| |
Adjustments for: |
|
|
|
|
|
|
|
| |
|
Amortization of property and equipment |
|
465 |
|
|
|
697 |
|
| |
|
Amortization of computer software |
|
103 |
|
|
|
100 |
|
| |
|
Asset impairment losses (Note 4) |
|
621 |
|
|
|
615 |
|
| |
|
Amortization of deferred lease inducements |
|
(15 |
) |
|
|
(21 |
) |
| |
|
Proceeds from deferred lease inducements |
|
- |
|
|
|
125 |
|
| |
|
Straight line rent expense |
|
42 |
|
|
|
45 |
|
| |
|
Non-current provision expense |
|
(49 |
) |
|
|
- |
|
| |
|
Fair value of derivative financial instruments |
|
(482 |
) |
|
|
- |
|
| |
|
Stock-based compensation |
|
1 |
|
|
|
85 |
|
| |
|
Interest income |
|
- |
|
|
|
(10 |
) |
| |
|
Interest expense |
|
177 |
|
|
|
21 |
|
| |
|
Recovery of income taxes |
|
- |
|
|
|
(1,543 |
) |
| |
Changes in working capital (Note 13) |
|
(10,856 |
) |
|
|
(8,881 |
) |
| |
Interest (paid) received |
|
(68 |
) |
|
|
16 |
|
| Net cash used in operating activities |
|
(16,078 |
) |
|
|
(14,668 |
) |
| |
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
| |
Increase in bank indebtedness |
|
20,722 |
|
|
|
2,991 |
|
| Net cash generated from financing activities |
|
20,722 |
|
|
|
2,991 |
|
| |
|
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
| |
Acquisition of property and equipment |
|
(50 |
) |
|
|
(955 |
) |
| |
Disposal (acquisition) of computer software |
|
1 |
|
|
|
(88 |
) |
| Net cash used in investing activities |
|
(49 |
) |
|
|
(1,043 |
) |
| Increase (decrease) in cash |
|
4,595 |
|
|
|
(12,720 |
) |
| Cash, beginning of period |
|
928 |
|
|
|
13,507 |
|
| Cash, end of period |
$ |
5,523 |
|
|
$ |
787 |
|
| |
|
|
|
|
|
|
|
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 27, 2015 |
|
$ |
11,772 |
$ |
1,276 |
$ |
- |
$ |
15,726 |
|
$ |
28,774 |
|
| |
Net loss |
|
|
- |
|
- |
|
- |
|
(6,017 |
) |
|
(6,017 |
) |
| |
Stock-based compensation related to stock options |
|
|
- |
|
1 |
|
- |
|
- |
|
|
1 |
|
| Balance - September 26, 2015 |
|
$ |
11,772 |
$ |
1,277 |
$ |
- |
$ |
9,709 |
|
$ |
22,758 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Share Capital |
|
Contributed Surplus |
|
Accumulated Other Comprehensive Income |
|
Retained Earnings |
|
|
Total |
|
| Balance - June 28, 2014 |
|
$ |
11,772 |
$ |
1,040 |
$ |
- |
$ |
35,595 |
|
$ |
48,407 |
|
| |
Net loss |
|
|
- |
|
- |
|
- |
|
(5, 917 |
) |
|
(5,917 |
) |
| |
Stock-based compensation related to stock options |
|
|
- |
|
85 |
|
- |
|
- |
|
|
85 |
|
| Balance - September 27, 2014 |
|
$ |
11,772 |
$ |
1,125 |
$ |
- |
$ |
29,678 |
|
$ |
42,575 |
|
See accompanying notes to the consolidated financial statements