Danier Leather Reports Fiscal 2009 Fourth Quarter and Year End Results

TORONTO, ONTARIO--(Marketwire - Aug. 13, 2009) - Danier Leather Inc. (TSX:DL) today announced its consolidated financial results for the fourth quarter and fiscal year ended June 27, 2009.

Q4 HIGHLIGHTS

- Comparable store sales increased 2% and comparable store gross profit increased 4%

- Gross profit margin increased by 1.9% or (190 basis points) to 47.0%

- Q4 net loss decreased by approximately $254,000

- Cash increased by $4.7 million

- 267,160 shares repurchased under normal course issuer bid

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

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Quarter Ended Year Ended
---------------------------------------------------------------------------
Jun 27, 2009 Jun 28, 2008 Jun 27, 2009 Jun 28, 2008
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(13 weeks) (13 weeks) (52 weeks) (52 weeks)
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Sales $26,989 $27,497 $162,106 $163,550
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EBITDA(1) (2,415) (2,467) 4,340 3,757
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Net Earnings (Loss) (2,768) (3,022) (2,309) 12,892
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Adjusted Net
Earnings (Loss)(2) (2,755) (3,022) (989) (1,828)
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EPS - Basic ($0.45) ($0.48) ($0.37) $2.04
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EPS - Diluted ($0.45) ($0.48) ($0.37) $2.03
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Number of Stores 86 91 86 91
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Retail Square
Footage 316,337 348,504 316,337 348,504
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Fourth quarter comparable store sales increased 2% and comparable store gross profit increased 4%. With five fewer stores in operation, sales for the fourth quarter of 2009 decreased 2% or $0.5 million to $27.0 million from $27.5 million in the fourth quarter of 2008. Net loss for the fourth quarter of 2009 decreased by approximately $0.25 million to $2.8 million, or $0.45 loss per share, compared with a net loss of $3.0 million, or $0.48 loss per share, during the fourth quarter last year. EBITDA(1) loss for the fourth quarter of 2009 was $2.4 million compared with an EBITDA loss of $2.5 million during the fourth quarter last year.

Gross profit dollars during the fourth quarter of 2009 increased by $0.3 million. For the last half of the fiscal year gross profit dollars increased by $1.5 million or 5%. The increase was mainly due to less clearance activity resulting from management's decision to reduce inventory purchases during the last half of the fiscal year. Selling, general and administrative expenses ("SG&A") during the fourth quarter of 2009 decreased by $0.1 million.

Year-to-date sales decreased 1% or $1.4 million to $162.1 million while comparable store sales decreased 1%. Year-to-date net loss was $2.3 million, or $0.37 per diluted share, compared with net earnings of $12.9 million or $2.03 per diluted share last year. Year-to-date adjusted net loss(1) of $1.0 million ($0.15 loss per diluted share) was $0.8 million lower than the adjusted net loss of $1.8 million ($0.29 loss per diluted share) last year. Adjusted net loss excludes restructuring costs, goodwill impairment charge and recovery of litigation provision and related expenses. Year-to-date EBITDA was $4.3 million compared with $3.8 million last year.

Year-to-date gross profit as a percentage of revenue was 45.4% compared with 46.6% during 2008. The year-to-date gross margin rate decline was mainly due to a decline in the Canadian dollar relative to the U.S. dollar during the first half of the year, which resulted in higher merchandise costs to the Company. Year-to-date SG&A decreased by 5% or $3.9 million to $74.7 million or 46.1% of sales compared with $78.6 million or 48.0% of sales last year.

Danier repurchased 267,160 subordinate voting shares under its normal course issuer bid during the fourth quarter of 2009 and repurchased a total of 367,160 subordinate voting shares during the fiscal year.

Danier maintained a strong financial position at year-end with approximately $24.6 million in cash, a $6.4 million reduction in inventory compared with the prior year, no long-term debt and working capital of approximately $37.1 million. Book value per outstanding share at the end of the fourth quarter of fiscal 2009 was $9.59.

(1) Adjusted net earnings (loss) is defined as net earnings (loss) before litigation provision (recovery) and related expenses, restructuring costs, goodwill impairment charge and income taxes related to the litigation provision (recovery) and related expenses, goodwill impairment charge and restructuring costs. Adjusted net earnings (loss) is a financial metric used by management and some investors and allows for a more effective analysis of the ongoing operating performance of the Company. Adjusted net earnings (loss) is not a recognized measure for financial presentation under Canadian generally accepted accounting principles ("GAAP"). Non-GAAP earnings measures such as adjusted net earnings (loss) do not have any standardized meaning prescribed by Canadian GAAP 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 GAAP. Adjusted net earnings (loss) is calculated as outlined in the following table:

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Fourth Quarter Ended Year Ended
--------------------- ------------------
Jun 27, Jun 28, Jun 27, Jun 28,
----------- -------- -------- --------
2009 2008 2009 2008
----------- -------- -------- --------
Net earnings (loss) ($2,768) ($3,022) ($2,309) $12,892
Litigation provision (recovery)
and related expenses - - - (20,016)
Restructuring costs 18 - 1,466 -
Goodwill impairment charge - - 342 -
Income tax provision related
to litigation provision
(recovery) and related
expenses, goodwill
impairment charge and
restructuring costs (5) - (488) 5,296
--------------------- ------------------
Adjusted net earnings (loss) ($2,755) ($3,022) ($989) ($1,828)
--------------------- ------------------
--------------------- ------------------

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(1) EBITDA is defined as net earnings (loss) before net interest expense (income), income taxes, amortization, restructuring costs, goodwill impairment charge and litigation provision (recovery) and related expenses. EBITDA is a financial metric used by management and some investors to compare companies on the basis of ongoing operating results before income taxes, net interest expense (income), amortization, restructuring costs, goodwill impairment charge and litigation provision (recovery) and related expenses and its ability to incur and service debt. EBITDA is not a recognized measure for financial presentation under Canadian GAAP. Non-GAAP earnings measures such as EBITDA do not have any standardized meaning prescribed by Canadian GAAP 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 GAAP. EBITDA is calculated as outlined in the following table:

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Fourth Quarter Ended Year Ended
------------------------------------------
Jun 27, Jun 28, Jun 27, Jun 28,
---------- -------- -------- --------
2009 2008 2009 2008
---------- -------- -------- --------
Net earnings (loss) ($2,768) ($3,022) ($2,309) $12,892
Provision for (recovery of)
income tax (1,035) (1,070) (812) 4,646
Interest expense (income)
- net 5 (46) 104 81
Amortization 1,365 1,671 5,549 6,154
Litigation provision (recovery)
and related expenses - - - (20,016)
Restructuring costs 18 - 1,466 -
Goodwill impairment charge - - 342 -
------------------------------------------
EBITDA ($2,415) ($2,467) $4,340 $3,757
------------------------------------------
------------------------------------------

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Note: This press release contains 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", "expect", "estimate", "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 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 and assumptions made by management and management's good faith belief with respect to future events, and are subject to inherent risks and uncertainties surrounding future expectations generally. Such risks and uncertainties include, but are not limited to, fashion and apparel and leather industry risks that can affect demand for the Company's products and inventory markdowns, a real or perceived slowdown in the general economy which can result in a reduction in consumer spending and can affect demand for the Company's products, changes in consumer shopping patterns, unseasonably hot weather or severe or unusual weather that prevents customers from going to the Company's stores, seasonality, heightened competition including new competitors and expansion of current competitors, foreign currency and interest rate fluctuations which result in increased costs, leather availability and prices, consumer demand, disruptions in the credit markets, risks associated with foreign sourcing and manufacturing, potential legal proceedings, ability to successfully implement the Company's business strategy, ability to realize anticipated cost savings, inability to renew or access or obtain replacement credit facilities, war and acts of terrorism, higher utility and fuel prices which can result in increased costs, the ability of the Company to attract and retain key executives and key employees, the ability of vendors to maintain, support and upgrade management information systems, catastrophic or other events that impact the use of the Company's head office and distribution centre, increased inflation and interest rates, changes or disruptions in the securities markets, the ability of the Company to obtain new locations or renew or relocate existing locations at existing or favourable lease terms, changes to the regulatory and economic environment in which the Company operates now and in the future, including changes in accounting policies or pronouncements introduced by regulatory authorities, changes in the Company's tax liabilities, either through changes in tax laws or future assessments, and performance of third party service providers, among other things.

Danier cautions readers that this list of factors is not exhaustive and that should certain risks or uncertainties materialize, or should underlying 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.

For additional information with respect to certain of these and other risks or uncertainties, reference should be made to Danier's continuous disclosure materials filed from time to time with Canadian Securities Regulatory Authorities, including the Company's annual information form, quarterly and annual reports, 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 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.

About Danier

Danier Leather Inc. is a leading integrated designer, manufacturer, and retailer of high-quality leather and suede clothing 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 power centre stores in Canada and at the Dubai Mall and the Festival City Mall in Dubai. Effective September 1, 2009, corporations and other organizations can obtain Danier products for use as incentives and premiums for employees, suppliers, and customers through Canada Sportswear. For more information about the Company and our products, see www.danier.com.

Investors and analysts are invited to participate in a conference call today at 4:00 PM Eastern Time to discuss the results. Please dial 416-340-8018 in the Toronto area or 1-866-223-7781 (rest of Canada and the U.S.) and quote the Danier Leather Inc. conference call with chairperson Jeffrey Wortsman at least five minutes prior to the call. The call will also be webcast at www.danier.com or at www.marketwire.com.

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DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND
COMPREHENSIVE EARNINGS (LOSS)
(thousands of dollars, except per share amounts and number of shares)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Fourth Quarter Ended Year Ended
------------------------ --------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
------------------------ --------------------
(unaudited) (unaudited)
Revenue $ 26,989 $ 27,497 $ 162,106 $ 163,550
Cost of sales (Note 9) 14,307 15,092 88,589 87,365
------------------------ --------------------
Gross profit 12,682 12,405 73,517 76,185
Selling, general and
administrative expenses
(Note 9) 16,462 16,543 74,726 78,582
Interest expense (income)
- net 5 (46) 104 81
------------------------ --------------------
Earnings (loss) before
undernoted items and
income taxes (3,785) (4,092) (1,313) (2,478)
Restructuring costs (Note 10) 18 - 1,466 -
Goodwill impairment charge
(Note 6) - - 342 -
Litigation provision
(recovery) and related
expenses (Note 12) - - - (20,016)
------------------------ --------------------
Earnings (loss) before
income taxes (3,803) (4,092) (3,121) 17,538
Provision for (recovery of)
income taxes (Note 11)
Current (926) (726) (842) 192
Future (109) (344) 30 4,454
------------------------ --------------------
(1,035) (1,070) (812) 4,646
------------------------ --------------------
Net earnings (loss)
and comprehensive
earnings (loss) ($2,768) ($3,022) ($ 2,309) $ 12,892
------------------------ --------------------
------------------------ --------------------

Net earnings (loss)
per share:
Basic ($0.45) ($0.48) ($0.37) $2.04
Diluted ($0.45) ($0.48) ($0.37) $2.03

Weighted average number of
shares outstanding:
Basic 6,105,645 6,276,429 6,184,557 6,313,583
Diluted 6,106,448 6,278,399 6,184,762 6,335,873
Number of shares outstanding
at period end 5,909,269 6,276,429 5,909,269 6,276,429

See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

June 27, June 28,
2009 2008
-------- --------

ASSETS
Current Assets
Cash $ 24,628 $ 19,882
Accounts receivable 351 755
Income taxes recoverable 631 8
Inventories (Note 4) 21,045 27,404
Prepaid expenses 1,156 1,242
Future income tax asset (Note 11) 245 562
-------- --------
48,056 49,853

Other Assets
Property and equipment (Note 5) 19,339 21,312
Goodwill (Note 6) - 342
Future income tax asset (Note 11) 1,657 1,556
-------- --------
$ 69,052 $ 73,063
-------- --------
-------- --------

LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 10,601 $ 9,845
Current portion of capital lease obligation - 858
Future income tax liability (Note 11) 366 502
-------- --------
10,967 11,205
Deferred lease inducements and rent liability 1,389 1,675
Future income tax liability (Note 11) - 50
-------- --------
12,356 12,930
-------- --------

SHAREHOLDERS' EQUITY
Share capital (Note 8) 19,853 21,409
Contributed surplus 823 548
Retained earnings 36,020 38,176
-------- --------

56,696 60,133
-------- --------
$ 69,052 $ 73,063
-------- --------
-------- --------

See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(thousands of dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Fourth Quarter Ended Year Ended
------------------------- -------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
------------------------- -------------------
(unaudited) (unaudited)

OPERATING ACTIVITIES
Net earnings (loss) ($2,768) ($3,022) ($2,309) $12,892
Items not affecting cash:
-------------------------
Amortization (Note 9) 1,365 1,671 5,549 6,154
Amortization of deferred
lease inducements (88) (123) (357) (453)
Goodwill impairment charge
(Note 6) - - 342 -
Straight line rent expense 18 35 56 116
Stock-based compensation 82 36 275 117
Accrued litigation provision
(recovery) and related
expenses (Note 12) - - - (18,000)
Future income taxes (109) (344) 30 4,454
Net change in non-cash working
capital items (Note 13) 4,194 4,263 7,172 363
Proceeds from deferred lease
inducements - 107 101 107
Repayment of deferred lease
inducement - - (86) -
------------------------- -------------------
Cash flows from operating
activities 2,694 2,623 10,773 5,750
------------------------- -------------------

FINANCING ACTIVITIES
Subordinate voting
shares issued (Note 8) - - - 80
Subordinate voting shares
repurchased (Note 8) (1,133) - (1,593) (1,665)
Repayment of obligation
under capital lease (88) (249) (858) (971)
------------------------- -------------------
Cash flows used in financing
activities (1,221) (249) (2,451) (2,556)
------------------------- -------------------

INVESTING ACTIVITIES
Acquisition of capital assets (1,440) (758) (3,576) (3,891)
------------------------- -------------------
Cash flows used in investing
activities (1,440) (758) (3,576) (3,891)
------------------------- -------------------

Increase (decrease) in cash 33 1,616 4,746 (697)
Cash, beginning of period 24,595 18,266 19,882 20,579
------------------------- -------------------
Cash, end of period $24,628 $19,882 $24,628 $19,882
------------------------- -------------------
------------------------- -------------------

Supplementary cash flow
information:
Interest paid 150 17 365 414
Income taxes paid - - 353 1,679

See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(thousands of dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Fourth Quarter Ended Year Ended
----------------------- -------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
----------------------- -------------------
(unaudited) (unaudited)

SHARE CAPITAL
Balance, beginning of period $20,985 $21,409 $21,409 $22,044
Shares repurchased (1,132) - (1,556) (715)
Shares issued on exercise of
stock options - - - 80
----------------------- -------------------
Balance, end of period $19,853 $21,409 $19,853 $21,409
----------------------- -------------------

CONTRIBUTED SURPLUS
Balance, beginning of period $741 $512 $548 $431
Stock-based compensation
related to stock options 82 36 275 117
----------------------- -------------------
Balance, end of period $823 $548 $823 $548
----------------------- -------------------

RETAINED EARNINGS
Balance, beginning of period $38,789 $41,198 $38,176 $26,234
Adjustment to opening
retained earnings due to
adoption of new inventory
accounting standard (net of
tax of $122) (Note 1) - - 190 -
Net earnings (loss) (2,768) (3,022) (2,309) 12,892
Share repurchases (1) - (37) (950)
----------------------- -------------------
Balance, end of period $36,020 $38,176 $36,020 $38,176
----------------------- -------------------

ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Balance, beginning of period $- $- $- $-
Adjustment to opening balance
due to the new accounting
policies adopted regarding
financial instruments - - - -
----------------------- -------------------
Balance, end of period $- $- $- $-
----------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY $56,696 $60,133 $56,696 $60,133
----------------------- -------------------
----------------------- -------------------

See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 27, 2009 and June 28, 2008
(dollar amounts in thousands except per share amounts and where otherwise
indicated)

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Danier Leather Inc. ("Danier" or "the Company") is incorporated under the Business Corporations Act (Ontario) and is a vertically integrated designer, manufacturer and retailer of leather apparel and accessories.

1. Implementation of New Accounting Standards:

Effective June 29, 2008, the Company adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants ("CICA").

CICA Section 1400 - General Standards of Financial Statement Presentation

The CICA amended this Handbook section to include requirements to assess and disclose an entity's ability to continue as a going concern when preparing financial statements. In assessing whether the going concern assumption is appropriate, management must take into account all available information about the future, which is at least, but is not limited to, 12 months from the balance sheet date. This section relates to disclosure and presentation only and did not have an impact on the Company's financial results.

CICA Section 3031 - Inventories

This CICA Handbook section issued in June 2007 replaces Section 3030 of the same name and substantially harmonizes the Canadian standard related to inventories with International Financial Reporting Standards ("IFRS"). This section provides changes to the measurement and more extensive guidance on the determination of cost, including an allocation of the fixed and variable overheads; narrows the permitted cost formula; and expands the disclosure requirements to increase transparency.

The transitional adjustments resulting from the implementation of Section 3031 included transportation costs incurred to bring inventories from the distribution centre to stores which were previously expensed as part of selling, general and administrative ("SG&A") expenses and are now capitalized and included in cost of sales; storage costs and certain design costs which were previously capitalized and included in cost of sales are now recorded in SG&A expenses. The transitional adjustments were recognized in opening retained earnings and prior periods have not been restated. The implementation of this standard resulted in an increase in opening inventories of $312, a decrease in income taxes recoverable of $122 and an increase of $190 to opening retained earnings.

2. Summary of Significant Accounting Policies:

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").

(a) Basis of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary companies. On consolidation, all intercompany transactions and balances have been eliminated.

(b) Year-end:

The fiscal year end of the Company consists of a 52 or 53 week period ending on the last Saturday in June each year. The fiscal year for the consolidated financial statements presented is the 52-week period ended June 27, 2009, and comparably the 52-week period ended June 28, 2008.

(c) Revenue recognition:

Revenue includes sales to customers through stores operated by the Company, sales to corporate customers through the Company's direct sales division and sales to third party licensees. Sales to customers through stores operated by the Company are recognized at the time the transaction is entered into the point-of-sale register net of returns. Sales to corporate customers and third party licensees are recognized at the time of shipment. Revenue from gi