Danier Leather Inc. Reports Fiscal 2006 First Quarter Results.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Danier Leather Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :DL.SV) today announced its consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: financial results for the 13 weeks ended September September: see month. 24, 2005. HIGHLIGHTS ($000s, except earnings per share):
---------------------------------
For the 13 Weeks Ended
---------------------------------
Sept. 24, 2005 Sept. 25, 2004
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Sales $20,831 $24,277
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EBITDA (Loss) (7,074) (3,704)
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Net Loss (5,291) (3,413)
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EPS - Basic and Diluted (0.81) (0.49)
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Number of Stores 97 96
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Retail Square Footage 378,321 374,559
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"The first quarter is traditionally our slowest and results were affected by hot weather and fewer price oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. promotions," said Jeffrey Wortsman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Danier Leather. "We are moving away from our practice of discounting and toward a strategy of communicating value and fashion to build the Danier brand. The benefits of this strategy may take some time to be realized." Sales for the first quarter decreased 14% to $20.8 million, from $24.3 million in the first quarter of fiscal 2005. Comparable store sales decreased 16%. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (1) loss increased to $7.1 million, compared with $3.7 million in the same quarter last year. Net loss was $5.3 million, or $0.81 per share, compared to a loss of $3.4 million, or $0.49 per share, in the first quarter of fiscal 2005. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. decreased to 43.4% from 46.9% during the same period last year as the hot weather shifted customers purchases toward lower margin Spring clearance CLEARANCE, com. law. The name of a certificate given by the collector of a port, in which is stated the master or commander (naming him) of a ship or vessel named and described, bound for a port, named, and having on board goods described, has entered and cleared his ship or vessel merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain rather than higher margin Fall garments. Danier maintains a strong financial position with working capital of $36.4 million and no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . During the first quarter, Danier opened one new shopping mall shopping mall or shopping centre Collection of independent retail stores, services, and parking areas constructed and maintained by a management firm as a unit. It is a 20th-century adaptation of the historical marketplace. In the U.S. store at the Niagara Niagara, river, United States and Canada Niagara (nīăg`rə), river, 34 mi (55 km) long, issuing from Lake Erie between Buffalo, N.Y., and Fort Erie, Ont., Canada. Fallsview Casino casino or cassino (both: kəsē`nō). 1 Card game played with a full deck by two to four players. Its origins are obscure though it probably traces back to the Italian game of Scopa. and one power centre location at Sunridge Mall Sunridge Mall is a major enclosed shopping mall in Calgary, Alberta containing 758,626 square feet / 70,478.7 m² of retail space [1]. It is the leading shopping centre in the city's northeast quadrant, located at the corner of 36th Street NE and 26th Avenue NE. in Calgary Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. . "The marketing plan we recently launched is intended to position us well for the important holiday shopping season," added Mr. Wortsman. "Throughout fiscal 2006, we will continue to implement our strategy to elevate el·e·vate tr.v. ele·vat·ed, ele·vat·ing, ele·vates 1. To move (something) to a higher place or position from a lower one; lift. 2. To increase the amplitude, intensity, or volume of. 3. the Danier brand, redefine Verb 1. redefine - give a new or different definition to; "She redefined his duties" define, delimit, delimitate, delineate, specify - determine the essential quality of 2. value, improve the store experience, strengthen relationships with customers, and build new traffic and sales." Danier is holding its Annual General Meeting today, Wednesday Wednesday: see week. , October October: see month. 19 at 4:00 p.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time at Danier's corporate headquarters in Toronto. Shareholders are encouraged to attend. The annual meeting will also be webcast live at www.danier.com. About Danier Danier Leather Inc. is a leading integrated designer, manufacturer, and retailer of high-quality leather and suede clothing Noun 1. suede cloth - a fabric made to resemble suede leather suede cloth, fabric, textile, material - artifact made by weaving or felting or knitting or crocheting natural or synthetic fibers; "the fabric in the curtains was light and semitransparent"; and accessories. The Company's merchandise is marketed exclusively under the well-known well-known adj. 1. Widely known; familiar or famous: a well-known performer. 2. Fully known: well-known facts. Danier brand name and is available only at its 97 shopping mall, street-front, and power centre stores, or through its corporate sales division and online through its website, www.danier.com. (1)EBITDA refers to earnings before interest expense, income tax, depreciation and amortization, and is a measure used by management to assess operating performance. EBITDA is a non-GAAP earnings measure and does not have a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning. It is therefore unlikely to be comparable to similar measures presented by other issuers. Note: This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks, estimates, and uncertainties. Therefore, actual results may differ materially. Examples of such risks and uncertainties include those associated with product sales, demand for Danier's products, availability of raw materials, foreign sourcing and manufacturing, estimates of damages, costs and interest associated with the class action lawsuit class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax , continued growth of the leather apparel industry, and competition and other associated risks with Danier's business. For an expanded discussion of risks and uncertainties, please see the documents filed by Danier Leather Inc. with the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. . Danier disclaims any responsibility to update or revise such forward-looking statements whether as a result of new information, future events or otherwise.
DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF LOSS AND RETAINED EARNINGS
(thousands of dollars, except per share amounts)
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For the 13 Weeks Ended
------------------------
September September
24, 2005 25, 2004
------------------------
(unaudited) (unaudited)
Revenue $ 20,831 $ 24,277
Cost of sales (Note 7) 11,785 12,893
------------------------
Gross profit 9,046 11,384
Selling general and administrative
expenses (Note 7) 17,660 16,718
Interest (income) (81) (59)
------------------------
Loss before discontinued operations and
income taxes (8,533) (5,275)
Recovery of income taxes (3,242) (2,323)
------------------------
Net loss before discontinued operations $ (5,291) $ (2,952)
Loss from discontinued operations (Note 3) - (461)
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Net loss $ (5,291) $ (3,413)
------------------------
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Retained earnings, beginning of period $ 32,214 $ 36,902
Share purchases (Note 6(c)) - (537)
Dividends (393) (417)
------------------------
Retained earnings, end of period $ 26,530 $ 32,535
------------------------
------------------------
Net loss per share before discontinued
operations:
Basic and diluted ($0.81) ($0.43)
Net loss per share:
Basic and diluted ($0.81) ($0.49)
Weighted average number of shares
outstanding:
Basic 6,546,154 6,933,657
Diluted 6,593,762 6,980,974
Number of shares outstanding at period end 6,546,154 6,867,154
DANIER LEATHER INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
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September September June
24, 2005 25, 2004 25, 2005
--------------------------------
(unaudited) (unaudited)
ASSETS
Current Assets
Cash $ 3,325 $ 184 $ 21,193
Accounts receivable 1,002 1,159 594
Income taxes recoverable 3,525 2,696 939
Inventories (Note 4) 37,824 43,770 29,031
Prepaid expenses 660 705 516
Assets of discontinued operations
(Note 3) - 935 23
Future income tax asset 210 103 159
--------------------------------
46,546 49,552 52,455
Other Assets
Capital assets (Note 5) 26,955 28,498 25,314
Goodwill 342 342 342
Assets of discontinued operations
(Note 3) - 1,245 -
Future income tax asset 5,498 4,681 5,254
--------------------------------
$ 79,341 $ 84,318 $ 83,365
--------------------------------
--------------------------------
LIABILITIES
Current Liabilities
Accounts payable and accrued
liabilities $ 10,196 $ 9,599 $ 8,170
Liabilities of discontinued
operations (Note 3) - 92 -
--------------------------------
10,196 9,691 8,170
Accrued litigation provision and
related expenses (Note 9) 18,000 15,373 18,000
Deferred lease inducements and
rent liability 1,821 2,185 1,838
Future income tax liability 60 470 420
--------------------------------
30,077 27,719 28,428
--------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 6) 22,493 23,845 22,493
Contributed surplus 241 219 230
Retained earnings 26,577 32,535 32,214
--------------------------------
49,311 56,599 54,937
--------------------------------
$ 79,341 $ 84,318 $ 83,365
--------------------------------
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DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(thousands of dollars)
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For the 13 Weeks Ended
-----------------------
September September
24, 2005 25, 2004
-----------------------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $ (5,291) $ (3,413)
Items not affecting cash:
Amortization - continuing operations
(Note 7) 1,540 1,630
Amortization - discontinued operations
(Note 7) - 85
Amortization of deferred lease inducements (92) (98)
Straight line rent expense 75 -
Stock based compensation 11 -
Future income taxes (655) 57
Net change in non-cash working capital items
(Note 10) (9,905) (18,103)
Discontinued operations (Note 3) 23 (29)
-----------------------
Cash flows from operating activities (14,294) (19,871)
-----------------------
FINANCING ACTIVITIES
Subordinate voting shares issued - 14
Subordinate voting shares repurchased - (872)
Dividends (393) (417)
-----------------------
Cash flows from financing activities (393) (1,275)
-----------------------
INVESTING ACTIVITIES
Acquisition of capital assets (3,181) (1,246)
-----------------------
Cash flows from investing activities (3,181) (1,246)
-----------------------
Decrease in cash (17,868) (22,392)
Cash, beginning of period 21,193 22,576
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Cash, end of period $ 3,325 $ 184
-----------------------
-----------------------
Supplementary cash flow information:
Interest paid - -
Income taxes paid - 1,467
DANIER LEATHER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge For the 13 week periods ended September 24, 2005 and September 25, 2004 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES: (a) Basis of Presentation: The interim financial statements presented herein follow the same accounting policies and their methods of application as the 2005 annual financial statements. Generally accepted accounting policies ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") for interim financial statements do not conform in all respects to the disclosures required for annual financial statements, and accordingly, these interim financial statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the audited consolidated financial statements of Danier Leather Inc. ("the "Company") and the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes contained in the Company's 2005 Annual Report. The preparation of financial statements in conformity with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company. Notes: An example might be a settlement from a lawsuit. See also: Asset, Balance Sheet, Contingent Liability, Liability and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management's best knowledge of current events and actions that the Company may undertake in the future. Significant areas requiring the use of management estimates relate to the determination of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. award reserves, inventory valuation, realizable value of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) , future income tax assets, and income tax provisions. By their nature, these estimates are subject to measurement uncertainty and the impact on the consolidated financial statements of future periods could differ materially from those estimated. (b) Comparative Figures: Certain of the prior period's figures were reclassified to conform with the current year's financial statement presentation. 2. SEASONALITY OF RETAIL OPERATIONS: Due to the seasonal nature of the retail business and the Company's product lines, the results of operations for any interim period are not necessarily indicative indicative: see mood. of the results of operations to be expected for the fiscal year. Generally, a significant portion of the Company's sales and earnings are generated during the fiscal second quarter, which includes the holiday selling season. Sales are generally lowest and losses are experienced during the period from April to September. 3. DISCONTINUED OPERATIONS Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. (thousands of dollars): In March 2005, the Company announced that it would discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: its U.S. operations which consisted of 3 shopping mall stores. On March 31, 2005, two of the U.S. shopping mall locations located on Long Island, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of were closed. The third store located in Paramus, New Jersey Paramus (IPA: /pəˈræməs/) is a borough in Bergen County, New Jersey, United States. As of the United States 2000 Census, the borough population was 25,737. was closed in April 2005. Financial results for the periods presented were restated to reflect the discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of the U.S. operations. The results of discontinued operations were as follows:
Sept 24, 2005 Sept 25, 2004
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Revenue $ - $365
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Loss from discontinued operations $ - ($461)
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The net assets of discontinued operations are summarized as follows:
Sept 24, 2005 Sept 25, 2004
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Current assets $ - $ 935
Capital assets - 1,245
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- 2,180
Current liabilities - 92
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Net assets from discontinued operations $ - $ 2,088
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Changes in current assets and current liabilities of discontinued
operations are summarized as follows:
Sept 24, 2005 Sept 25, 2004
-----------------------------
Current assets $ 23 $ (51)
Current liabilities - 22
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$ 23 $ (29)
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4. INVENTORIES (thousands of dollars):
September September June
24, 2005 25, 2004 25, 2005
-----------------------------
Raw materials $ 3,804 $ 4,002 $ 3,456
Work-in-process 1,219 1,502 634
Finished goods 32,801 38,266 24,941
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$ 37,824 $ 43,770 $ 29,031
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5. CAPITAL ASSETS (thousands of dollars):
September 24, 2005 September 25, 2004
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Cost Accumulated Net Book Cost Accumulated Net Book
Amortization Value Amortization Value
-----------------------------------------------------------
Land $ 1,000 $ - $ 1,000 $ 1,000 $ - $ 1,000
Building 7,064 1,384 5,680 7,064 1,162 5,902
Leasehold
improve
-ments 26,901 14,582 12,319 26,096 12,619 13,477
Furniture
and
equipment 10,826 6,099 4,727 12,163 7,317 4,846
Computer
hardware
and
software 9,970 6,741 3,229 9,107 5,834 3,273
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$ 55,762 $ 28,806 $ 26,955 $ 55,430 $ 26,932 $ 28,498
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June 25, 2005
---------------------------------
Cost Accumulated Net Book
Amortization Value
---------------------------------
Land $ 1,000 $ - $1,000
Building 7,064 1,319 5,745
Leasehold improvements 25,566 13,710 11,856
Furniture and equipment 9,966 5,880 4,086
Computer hardware and software 8,985 6,358 2,627
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$ 52,581 $ 27,267 $ 25,314
---------------------------------
---------------------------------
6. SHARE CAPITAL (thousands of dollars, except per share amounts):
(a) Authorized
1,224,329 Multiple Voting Shares
Unlimited Subordinate Voting Shares
Unlimited Class A and B Preference Shares
(b) Issued
Sept 24, Sept 25, June 25,
2005 2004 2005
--------------------------
1,224,329 Multiple Voting Shares
(September 25, 2004 and
June 25, 2005 - 1,224,329) (i) (i) (i)
5,321,825 Subordinate Voting Shares
(September 25, 2004 - 5,642,825 and
June 25, 2005 - 5,321,825) 22,493 23,845 22,493
--------------------------
$ 22,493 $ 23,845 $ 22,493
--------------------------
--------------------------
(i) Nominal
The following transactions occurred during the first 13 weeks of the
fiscal year with respect to the Subordinate Voting shares:
13 Weeks Ended 13 Weeks Ended
September 24, 2005 September 25, 2004
----------------------------------------
Number $ Number $
----------------------------------------
Shares outstanding at
beginning of the period 5,321,825 $ 22,493 5,720,225 $ 24,166
Issued - - 2,000 14
Repurchased - - (79,400) (335)
----------------------------------------
Shares outstanding at end
of the period 5,321,825 $ 22,493 5,695,225 $ 23,845
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----------------------------------------
(c) Normal Course Issuer Bid On February February: see month. 2, 2005, the Company received approval from the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. to renew its Normal Course Issuer Bid. The bid permits the Company to acquire up to 421,061 Subordinate Voting Shares Voting Shares Shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors. Notes: Different classes of shares, such as preferred stock, sometimes don't allow for voting rights. , representing approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10% of the public float of the Subordinate Voting Shares, during the period from February 7, 2005 to February 6, 2006. During the 13 week period ended September 24, 2005, no shares were repurchased under the Normal Course Issuer Bid (13 week period ended September 25, 2004 - 79,400 Subordinate Voting Shares were repurchased). (d) Stock Option Plan The Company maintains a Stock Option Plan for the benefit of directors, officers and employees. As at September 24, 2005, the Company has reserved 911,275 Subordinate Voting Shares for issuance under its Stock Option Plan. As at September 24, 2005, there were 645,400 options outstanding with exercise prices ranging from $6.02 to $17.94. Of these outstanding options, 593,650 are exercisable. During the 13 week period ended September 24, 2005, no stock options were granted. Further details of the Stock Option Plan are contained in Note 7(d) of the consolidated financial statements contained in the Company's 2005 Annual Report. Prior to fiscal 2004, the Company used settlement accounting to account for its Stock Option Plan. No compensation cost was recorded when stock options were granted. When options were exercised, consideration paid by employees and directors was recorded in the financial statements as an increase of share capital based on the exercise price of the options. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the transitional provisions of CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) Handbook
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tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). below. Had compensation cost been determined using the fair value-based method at the grant date of the stock options awarded to employees and directors during fiscal 2003, the net earnings and earnings per share for the 13 weeks ended September 24, 2005 and September 25, 2004 would have been reduced to the pro-forma amounts indicated in the following table:
13 Weeks Ended 13 Weeks Ended
September 24, 2005 September 25, 2004
-----------------------------------------------
As Reported Pro-forma As Reported Pro-forma
-----------------------------------------------
Net loss ($5,291) ($5,351) ($3,413) ($3,473)
Basic loss per share ($0.81) ($0.82) ($0.49) ($0.50)
Diluted loss per share n/a n/a n/a n/a
The pro-forma effect on net earnings of the period is not representative of the pro-forma effect on net earnings of future periods because it does not take into consideration the pro-forma compensation cost related to options awarded prior to June 29, 2002. (e) Deferred Share Unit Plan Effective October 19, 2004, the Company established a Deferred Share Unit ("DSU 1. (communications) DSU - Data Service Unit. 2. DSU - Disk Subsystem Unit (Artecon). 3. (humour) DSU - Dwarf Storage Unit. ") Plan for non-management directors. The DSU Plan is administered by the Board of Directors, with the advice of the Human Resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. and Governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. Committee. Under this plan, non-management directors of the Company receive an annual grant of DSUs and can also elect to receive their annual retainers and meeting fees in DSUs. A DSU is a unit equivalent in value to one Subordinate Voting Share of the Company based on the five-day average trading price Trading price The price at which a security is currently selling. of the Company's Subordinate Voting Shares on The Toronto Stock Exchange immediately prior to the date on which the value of the DSU is determined. When dividends are paid by the Company, an equivalent number of DSUs are added to the DSU account of the non-management director based on the number of DSUs in their account and the market value of the Subordinate Voting Shares on the date the dividend is paid. After retirement from the board, a participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. in the DSU Plan receives a cash payment equal to the market value of the accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. DSUs in their account. The following transactions occurred during the first 13 weeks of the fiscal year with respect to the Deferred Share Unit Plan:
13 Weeks Ended 13 Weeks Ended
September 24, 2005 September 25, 2004
--------------------------------------
Number Number
--------------------------------------
Outstanding at beginning
of the period 7,317 -
Granted 7,200 -
Issued as dividend equivalents 85 -
--------------------------------------
Outstanding at end of the period 14,602 -
--------------------------------------
--------------------------------------
(f) Restricted Share Unit Plan Effective April 20, 2005, the Company established a Restricted Share Unit ("RSU RSU Restricted Stock Unit RSU Rogers State University (Claremore, Oklahoma) RSU Rifiuti Solidi Urbani (Italiano) RSU Rappresentanza Sindacale Unitaria (Italian Group of Unions) ") Plan as part of its overall executive compensation plan. The RSU Plan is administered by the Board of Directors, with the advice of the Human Resources and Governance Committee. Under this plan, Senior Officers of the Company are eligible to receive a grant of RSUs that vest on each anniversary of the grant in equal one-third instalments over a vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period of three years. A RSU is a unit equivalent in value to one Subordinate Voting Share of the Company. When dividends are paid by the Company, an equivalent number of RSUs are added to the RSU account of the Senior Officer based on the number of RSUs in their account, the dividend paid per Subordinate Voting Share and the market value of the Subordinate Voting Shares on the date the dividend is paid. Upon the exercise of the vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) RSUs, a cash payment equal to the market value of the exercised vested RSUs will be paid to the senior officer. The following transactions occurred during the first 13 weeks of the fiscal year with respect to the Restricted Share Unit Plan:
13 Weeks Ended
September 24, 2005
-------------------
Outstanding Vested
-------------------
Outstanding at beginning of the period 5,030 -
Granted - -
Issued as dividend equivalents 30 -
-------------------
Outstanding at end of the period 5,060 -
-------------------
-------------------
7. AMORTIZATION (thousands of dollars):
Amortization included in cost of sales and selling, general and
administrative expenses ("SG&A") is summarized as follows:
13 Weeks Ended
----------------------------
Sept 24, 2005 Sept 25, 2004
----------------------------
Cost of sales $ 146 $ 195
SG&A of continuing operations 1,394 1,435
----------------------------
Continuing operations 1,540 1,630
SG&A of discontinued operations - 85
----------------------------
$ 1,540 $ 1,715
----------------------------
----------------------------
8. INCOME TAXES (thousands of dollars):
The Company's effective income tax rate consists of the following:
Sept 24, 2005 Sept 25, 2004
-----------------------------
Combined basic federal and provincial
average statutory rate 35.4% 36.1%
Effect of foreign operating losses - 2.8%
Other 2.6% 1.6%
-----------------------------
38.0% 40.5%
-----------------------------
-----------------------------
9. LITIGATION PROVISION AND RELATED EXPENSES:
Sept 24, Sept 25, June 25,
2005 2004 2005
-----------------------------
Provision for damages, costs and
interest $ 18,000 $ 15,000 $ 18,000
Legal and professional fees - 373 -
-----------------------------
Accrued litigation provision and
related expenses $ 18,000 $ 15,373 $ 18,000
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In fiscal 1999, the Company and certain of its directors and officers were served with a Statement of Claim under the Class Proceedings Act (Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. ) concerning the accuracy and disclosure of certain information contained in a financial forecast issued by the Company during its initial public offering ("IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ") in 1998. The suit sought damages be paid equal to the alleged diminution in value diminution in value n. in the event of a breach of contract, the decrease in value of property due to the failure to construct something exactly as specified in the contract. of the shares. In October 2001, a motion to certify cer·ti·fy v. cer·ti·fied, cer·ti·fy·ing, cer·ti·fies v.tr. 1. a. To confirm formally as true, accurate, or genuine. b. the action as a class action was granted. The trial commenced in the Superior Court of Justice (Ontario) during May 2003 and was completed in January January: see month. 2004. On May 7, 2004, the Judge issued a judgment in favour Favor or favour (see spelling differences) may be
For those shareholders who sold their shares between June 4 and 9, 1998, the Court awarded them the difference between the IPO price and the price at which they sold their shares. For those shareholders who sold or still hold those shares after June 9, 1998, the Court awarded $2.35 per share. A hearing to determine the awarding of costs was held in April 2005. In May 2005, the Court awarded a portion of the costs claimed by the plaintiffs but referred the matter for assessment to determine the amount of costs to be paid. The quantum quantum In physics, a discrete natural unit, or packet, of energy, charge, angular momentum, or other physical property. Light, for example, which appears in some respects as a continuous electromagnetic wave, on the submicroscopic level is emitted and absorbed in discrete of the costs award will not be known until the final assessment ordered by the Court has been conducted. Based solely on the information currently available, the Company estimates that this award, if unchanged on appeal, would amount to approximately $3 million to $4 million. Based solely on the information currently available, if the damages award, costs and interest had been paid at the fiscal 2005 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , the Company estimates this amount to be about $18 million. During the fourth quarter of 2004, the Company recorded an expense and set up a provision of $15 million pursuant to this judgment. This provision was subsequently increased by $3 million to $18 million during the fourth quarter of 2005. The judgment is a joint and several responsibility of the Company and two of its Senior Officers. The Company carries directors and officers insurance and it expects that the insurance will cover the two Senior Officers' portion of the total award but the amount of insurance is not reasonably determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. at this time. The provision for recovery of income taxes related to the award is based on the entire $18 million provision and does not take account of the potential results of the appeal discussed in the next paragraph, any possible insurance recoveries or future tax adjustments. The damages award and income tax recovery is based on management's best estimate and is subject to adjustment when all facts are known and all issues are resolved. The possible adjustment could be significant. In June 2004, a Notice of Appeal was filed by the Company and two of its Senior Officers. The appeal was heard by the Ontario Court of Appeal The Court of Appeal for Ontario (frequently referred to as Ontario Court of Appeal) is headquartered in downtown Toronto, in historic Osgoode Hall. The Court is composed of 22 judges who hear over 1 500 appeals each year, on issues of private law, constitutional during June 2005. The Court reserved its decision and it is not anticipated that the Court's determination will be made before the end of 2005. The payment of any damages and costs awarded by the trial judge is stayed pending the determination of the appeal. 10. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS (thousands of dollars):
13 weeks ended
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Sept 24, 2005 Sept 25, 2004
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(unaudited) (unaudited)
Accounts receivable ($408) ($533)
Inventories (8,793) (14,287)
Prepaid expenses (144) 198
Accounts payable and accrued
liabilities 2,026 167
Income taxes recoverable/payable (2,586) (3,648)
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($9,905) ($18,103)
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11. CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. & GUARANTEES - (thousands of dollars): (a) Legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. In addition to the class action matter discussed in Note 9, 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 ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. in the financial statements for these guarantees: (i) In the ordinary course of business, the Company has agreed to indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which its lenders under its credit facility 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 facility and do not provide any limit on the maximum potential liability. Historically, the Company has not made any indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from payments under such agreements. (ii) In the ordinary course of business, the Company has provided indemnification commitments to certain counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. in matters such as real estate leasing transactions, director and officer indemnification agreements and certain purchases of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → such as computer software. 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 sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. one location during fiscal 2004 and has provided the landlord with a guarantee in the event the sub-tenant SUB-TENANT. The same as under-tenant. See Under-leaser; Under-tenant, and 1 Bell's Com. 76. defaults on its obligation to pay rent. The term of the guarantee is approximately 3.25 years and the Company's maximum exposure is $131. 12. COMMITMENTS - (thousands of dollars): (a) Operating leases Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. Minimum rentals for the next five fiscal years and thereafter, excluding rentals based upon revenue are as follows: 2006 $ 11,572 2007 $ 10,835 2008 $ 9,249 2009 $ 7,678 2010 $ 5,535 Thereafter $ 10,940 (b) Letters of credit The Company had outstanding letters of credit in the amount of $11,508 (September 25, 2004 - $10,175) for imports of finished goods inventories to be received. 13. SEGMENTED INFORMATION: Management has determined that the Company operates in one dominant industry and geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. segment which involves the design, manufacture and retail of fashion leather and suede apparel in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Danier Leather Inc. (TSX:DL.SV) |
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