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Danier Leather Reports Fiscal 2013 Third Quarter Results

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TORONTO, ONTARIO -- (Marketwired) -- 04/24/13 -- Danier Leather Inc. (TSX: DL) today announced its unaudited interim consolidated financial results for the 13 week and 39 week periods ended March 30, 2013.

SELECTED HIGHLIGHTS

-- Comparable store sales increased by 6% for the first nine months of fiscal 2013 as compared to the corresponding period last year-- Higher margin accessory sales on a comparable week basis increased by 27% during the third quarter of fiscal 2013 compared to the third quarter last year



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

---------------------------------------------- For the 13 Weeks Ended For the 39 Weeks Ended---------------------------------------------------------------------------- Mar. 30, Mar. 24, Mar. 30, Mar. 24, 2013 2012 2013 2012----------------------------------------------------------------------------Sales $ 37,400 $ 39,131 $ 126,626 $ 120,709----------------------------------------------------------------------------EBITDA(1) (224) 1,530 8,489 11,215----------------------------------------------------------------------------Net Earnings (Loss) (883) 395 4,063 6,093----------------------------------------------------------------------------EPS - Basic $ (0.23) $ 0.09 $ 0.95 $ 1.31----------------------------------------------------------------------------EPS - Diluted $ (0.23) $ 0.08 $ 0.91 $ 1.27----------------------------------------------------------------------------Number of Stores 89 89 89 89----------------------------------------------------------------------------Retail Square Footage 287,567 294,343 287,567 294,343----------------------------------------------------------------------------



Sales for the third quarter of fiscal 2013 decreased by 4% or $1.7 million to $37.4 million from $39.1 million in the third quarter last year. Comparable store sales(2) decreased by 6% compared to the same period last year. The decrease in sales was primarily due to the timing of Boxing Week. Last year, Boxing Week sales were included in the third quarter, whereas this year Boxing Week sales were included in the second quarter.

On a comparable week basis, which excludes Boxing Week in both periods and compares the 13 week period encompassing December 30, 2012 to March 30, 2013 to the 13 week period encompassing January 1, 2012 to March 31, 2012, sales and comparable store sales increased by 21%.

Year-to-date sales increased by 5% or $5.9 million to $126.6 million, while comparable store sales increased by 6%, compared to the corresponding period last year.

In line with Danier's stated strategy, accessory sales, which includes handbags and small leather goods, continued to perform well, increasing by 27% during the third quarter of fiscal 2013, on a comparable week basis, and by 11% for the year-to-date period, compared to the corresponding periods last year. We believe accessories will attract a new and younger customer as well as offer a wider selection of products to our existing customer base. Accessories also typically have higher margins than outerwear and can generate year-round store visits.

Gross profit as a percentage of revenue during the third quarter of fiscal 2013 decreased by 70 basis points to 47.3% compared with 48.0% during the third quarter last year. Gross profit margin during the first nine months of fiscal 2013 decreased by 120 basis points to 51.5% compared with 52.7% during the first nine months of last year.

Selling, general and administrative expenses during the third quarter of fiscal 2013 increased by $0.6 million to $18.8 million, compared with $18.2 million during the third quarter last year. Year-to-date selling, general and administrative expenses increased by $4.4 million to $59.6 million compared with $55.2 million during the first nine months of last year.

Net loss during the third quarter of fiscal 2013 was $0.9 million ($0.23 loss per diluted share) compared with net earnings of $0.4 million ($0.08 per diluted share) during the third quarter last year. For the year-to-date period, net earnings decreased by $2.0 million to $4.1 million ($0.91 per diluted share) compared with $6.1 million ($1.27 per diluted share) during the first nine months of last year.

Danier continues to maintain a strong balance sheet with cash of $23.5 million, working capital of $41.5 million, no long-term debt and a book value of $15.31 per share.

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 (loss) 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 39 Weeks Ended ------------------------------------------------ Mar 30, Mar 24, Mar 30, Mar 24, 2013 2012 2013 2012 ------------------------------------------------ ($000) ($000) ($000) ($000)Net earnings (loss) $ (883) $ 395 $ 4,063 $ 6,093Add (deduct) impact of the following: Income tax (200) 234 1,633 2,440 Interest expense 9 8 40 41 Interest income (65) (83) (168) (140) Impairment loss on property and equipment - 45 327 66 Amortization 915 931 2,594 2,715 ------------------------------------------------EBITDA $ (224) $ 1,530 $ 8,489 $ 11,215 ------------------------------------------------ ------------------------------------------------(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 outside the Company's control 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 89 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.

Investors and analysts are invited to participate in a conference call today at 4:00 PM Eastern Time to discuss the results. Please dial 416-623-0333 in the Toronto area or 1-855-353-9183 (rest of Canada and the U.S.) and enter passcode 60247# or state Danier Leather Conference Call at least five minutes prior to the call. The call will also be webcast at www.danier.com or at www.marketwire.com.

DANIER LEATHER INC.CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) & COMPREHENSIVE EARNINGS (LOSS)(thousands of Canadian dollars, except per share amounts and number of shares) - unaudited-------------------------------------------------------------------------------------------------------------------------------------------------------- For the 13 Weeks Ended For the 39 Weeks Ended ------------------------------------------------ March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ------------------------------------------------Revenue $ 37,400 $ 39,131 $ 126,626 $ 120,709Cost of sales (Note 12) 19,711 20,364 61,420 57,093 ------------------------------------------------Gross profit 17,689 18,767 65,206 63,616 Selling, general and administrative expenses (Note 12) 18,828 18,213 59,638 55,182 Interest income (65) (83) (168) (140) Interest expense 9 8 40 41 ------------------------------------------------Earnings (loss) before income taxes (1,083) 629 5,696 8,533Provision for (recovery of) income taxes (Note 13) (200) 234 1,633 2,440 ------------------------------------------------Net earnings (loss) and comprehensive earnings (loss) $ (883) $ 395 $ 4,063 $ 6,093 ------------------------------------------------ ------------------------------------------------Net earnings (loss) per share: Basic $ (0.23) $ 0.09 $ 0.95 $ 1.31 Diluted $ (0.23) $ 0.08 $ 0.91 $ 1.27Weighted average number of shares outstanding: Basic 3,861,844 4,631,835 4,292,920 4,639,290 Diluted 4,012,803 4,791,278 4,441,060 4,794,874Number of shares outstanding at period end 3,852,868 4,631,835 3,852,868 4,631,835



See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------------------------------------------- March 30, March 24, June 30, 2013 2012 2012 ---------------------------------------ASSETSCurrent Assets Cash and cash equivalents (Note 3) $ 23,476 $ 34,590 $ 34,332 Accounts receivable 1,340 855 517 Income taxes recoverable - - 426 Inventories (Note 4) 28,525 28,383 24,891 Prepaid expenses 491 502 799 --------------------------------------- 53,832 64,330 60,965Non-current Assets Property and equipment (Note 5) 16,231 14,891 15,012 Computer software (Note 6) 611 813 726 Deferred income tax asset (Note 13) 2,108 1,759 1,909 --------------------------------------- $ 72,782 $ 81,793 $ 78,612 --------------------------------------- ---------------------------------------LIABILITIESCurrent Liabilities Payables and accruals (Note 8) $ 9,896 $ 10,653 $ 10,161 Deferred revenue 1,723 1,775 1,463 Sales return provision (Note 9) 105 98 124 Income taxes payable 632 323 - --------------------------------------- 12,356 12,849 11,748Non-current LiabilitiesDeferred lease inducements and rent liability 1,429 1,423 1,373 --------------------------------------- 13,785 14,272 13,121 ---------------------------------------SHAREHOLDERS' EQUITY Share capital (Note 10) 11,558 14,959 15,040 Contributed surplus 981 946 925 Retained earnings 46,458 51,616 49,526 --------------------------------------- 58,997 67,521 65,491 --------------------------------------- $ 72,782 $ 81,793 $ 78,612 --------------------------------------- ---------------------------------------



Contingencies, Guarantees and Commitments (Notes 15 and 16)

Approved by the Board of Directors

April 24, 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 39 Weeks Ended ------------------------------------------------ March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ------------------------------------------------Cash provided by (used in)OPERATING ACTIVITIES Net earnings (loss) $ (883) $ 395 $ 4,063 $ 6,093 Adjustments for: Amortization of property and equipment 823 841 2,324 2,446 Amortization of computer software 92 90 270 269 Impairment loss on property and equipment - 45 327 66 Amortization of deferred lease inducements (24) (39) (81) (115) Proceeds from deferred lease inducement - 60 - 188 Straight line rent expense 47 9 137 31 Stock-based compensation 40 1 86 18 Interest income (65) (83) (168) (140) Interest expense 9 8 40 41 Provision for (refund of) income taxes (200) 234 1,633 2,440 Changes in working capital (Note 14) (7,144) 2,090 (4,224) 441 Interest paid - - - (12) Interest received 58 77 179 146 Income taxes received (paid) 654 (467) (682) (2,475) ------------------------------------------------Net cash (used in) generated from operating activities (6,593) 3,261 3,904 9,437 ------------------------------------------------FINANCING ACTIVITIES Subordinate voting shares issued 58 - 58 12 Subordinate voting shares repurchased (328) - (10,793) (530) ------------------------------------------------Net cash used in financing activities (270) - (10,735) (518) ------------------------------------------------INVESTING ACTIVITIES Acquisition of property and equipment (393) (462) (3,870) (2,999) Acquisition of computer software (117) (12) (155) (28) ------------------------------------------------Net cash used in investing activities (510) (474) (4,025) (3,027) ------------------------------------------------Increase (decrease) in cash and cash equivalents (7,373) 2,787 (10,856) 5,892Cash and cash equivalents, beginning of period 30,849 31,803 34,332 28,698 ------------------------------------------------Cash and cash equivalents, end of period $ 23,476 $ 34,590 $ 23,476 $ 34,590 ------------------------------------------------ ------------------------------------------------



See accompanying notes to the consolidated financial statements

DANIER LEATHER INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(thousands of Canadian dollars) - unaudited-------------------------------------------------------------------------------------------------------------------------------------------------------- Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ---------------------------------------------------------Balance - June 30, 2012 $ 15,040 $ 925 $ - $ 49,526 $ 65,491 Net earnings - - - 4,063 4,063 Stock-based compensation related to stock options - 86 - - 86 Exercise of stock options 88 (30) - - 58 Share repurchases (net of tax) (3,570) - - (7,131) (10,701) ---------------------------------------------------------Balance - March 30, 2013 $ 11,558 $ 981 $ - $ 46,458 $ 58,997 --------------------------------------------------------- Accumulated Other Share Contributed Comprehensive Retained Capital Surplus Income Earnings Total ---------------------------------------------------------Balance - June 25, 2011 $ 15,160 $ 934 $ - $ 45,834 $ 61,928 Net earnings - - - 6,093 6,093 Stock-based compensation related to stock options - 18 - - 18 Exercise of stock options 18 (6) 12 Share repurchases (219) - - (311) (530) ---------------------------------------------------------Balance - March 24, 2012 $ 14,959 $ 946 $ - $ 51,616 $ 67,521 ---------------------------------------------------------



See accompanying notes to the consolidated financial statements

DANIER LEATHER INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the 13 week and 39 week periods ended March 30, 2013 and March 24, 2012 (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 39-week periods ended March 30, 2013 (including comparatives) were approved by the Board of Directors on April 24, 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 39-week periods ended March 30, 2013 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 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:

March 30, March 24, June 30, 2013 2012 2012 ---------------------------------Cash $ 23,476 $ 2,613 $ 34,332Bankers acceptances - 31,977 - ---------------------------------Cash and cash equivalents $ 23,476 $ 34,590 $ 34,332 --------------------------------- ---------------------------------



4. Inventories:

March 30, March 24, June 30, 2013 2012 2012 ---------------------------------Raw materials $ 3,168 $ 1,547 $ 2,644Work-in-process 106 77 183Finished goods 25,251 26,759 22,064 --------------------------------- $ 28,525 $ 28,383 $ 24,891 --------------------------------- --------------------------------- 13 Weeks Ended 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Cost of inventory recognized as an expense $ 19,491 $ 20,137 $ 60,838 $ 56,489Write-downs of inventory due to net realizable value being lower than cost $ 557 $ 835 $ 987 $ 1,423Write-downs recognized in previous periods that were reversed - - $ 27 $ 3



5. Property and Equipment:

---------------------------------------------------------- ---------------------------------------------------------- 39 Weeks Ended March 30, 2013 ---------------------------------------------------------- ---------------------------------------------------------- Land Building Roof HVAC ----------------------------------------------------------CostAt June 30, 2012 $ 1,000 $ 6,063 $ 308 $ 793Additions - - - -Disposals - - - - ----------------------------------------------------------At March 30, 2013 $ 1,000 $ 6,063 $ 308 $ 793 ---------------------------------------------------------- ----------------------------------------------------------Accumulated amortization and impairment lossesAt June 30, 2012 - $ 2,354 $ 201 $ 578Amortization for the period - 116 11 35Impairment losses - - - -Disposals - - - - ----------------------------------------------------------At March 30, 2013 - $ 2,470 $ 212 $ 613 ---------------------------------------------------------- ----------------------------------------------------------Net carrying valueAt March 30, 2013 $ 1,000 $ 3,593 $ 96 $ 180At June 30, 2012 $ 1,000 $ 3,709 $ 107 $ 215Capital work inprogress includedaboveAt March 30, 2013 - - - - ----------------------------------------------------------- ----------------------------------------------------------- 39 Weeks Ended March 30, 2013 ----------------------------------------------------------- ----------------------------------------------------------- Leasehold Furniture & Computer Improvements Equipment Hardware Total -----------------------------------------------------------CostAt June 30, 2012 $ 22,208 $ 9,088 $ 3,386 $ 42,846Additions 2,584 1,228 58 3,870Disposals (1,941) (383) - (2,324) -----------------------------------------------------------At March 30, 2013 $ 22,851 $ 9,933 $ 3,444 $ 44,392 ----------------------------------------------------------- -----------------------------------------------------------Accumulated amortization and impairment lossesAt June 30, 2012 $ 15,875 $ 6,321 $ 2,505 $ 27,834Amortization for the period 1,249 622 291 2,324Impairment losses 277 50 - 327Disposals (1,941) (383) - (2,324) -----------------------------------------------------------At March 30, 2013 $ 15,460 $ 6,610 $ 2,796 $ 28,161 ----------------------------------------------------------- -----------------------------------------------------------Net carrying valueAt March 30, 2013 $ 7,391 $ 3,323 $ 648 $ 16,231At June 30, 2012 $ 6,333 $ 2,767 $ 881 $ 15,012Capital work inprogress includedaboveAt March 30, 2013 - - - -



---------------------------------------------------------- ---------------------------------------------------------- 39 Weeks Ended March 24, 2012 ---------------------------------------------------------- ---------------------------------------------------------- Land Building Roof HVAC ----------------------------------------------------------CostAt June 25, 2011 $ 1,000 $ 6,063 $ 308 $ 753Additions - - - 40Disposals - - - - ----------------------------------------------------------At March 24, 2012 $ 1,000 $ 6,063 $ 308 $ 793 ---------------------------------------------------------- ----------------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 - $ 2,198 $ 184 $ 531Amortization for the period - 117 12 35Impairment losses - - - -Disposals - - - - ----------------------------------------------------------At March 24, 2012 - $ 2,315 $ 196 $ 566 ---------------------------------------------------------- ----------------------------------------------------------Net carrying valueAt March 24, 2012 $ 1,000 $ 3,748 $ 112 $ 227At June 25, 2011 $ 1,000 $ 3,865 $ 124 $ 222Capital work in progress included aboveAt March 24, 2012 - - - - ----------------------------------------------------------- ----------------------------------------------------------- 39 Weeks Ended March 24, 2012 ----------------------------------------------------------- ----------------------------------------------------------- Leasehold Furniture & Computer Improvements Equipment Hardware Total -----------------------------------------------------------CostAt June 25, 2011 $ 23,453 $ 8,985 $ 3,180 $ 43,742Additions 1,870 803 286 2,999Disposals (2,823) (622) - (3,445) -----------------------------------------------------------At March 24, 2012 $ 22,500 $ 9,166 $ 3,466 $ 43,296 ----------------------------------------------------------- -----------------------------------------------------------Accumulated amortization and impairment lossesAt June 25, 2011 $ 17,968 $ 6,232 $ 2,225 $ 29,338Amortization for the period 1,306 712 264 2,446Impairment losses 62 4 - 66Disposals (2,823) (622) - (3,445) -----------------------------------------------------------At March 24, 2012 $ 16,513 $ 6,326 $ 2,489 $ 28,405 ----------------------------------------------------------- -----------------------------------------------------------Net carrying valueAt March 24, 2012 $ 5,987 $ 2,840 $ 977 $ 14,891At June 25, 2011 $ 5,485 $ 2,753 $ 955 $ 14,404Capital work in progress included aboveAt March 24, 2012 $ 9 $ 25 - $ 34



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 $NIL and $327 for the 13 week and 39 week periods ended March 30, 2013, respectively ($45 and $66 for the 13 week and 39 week periods ended March 24, 2012, respectively). 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 39 week periods ended March 30, 2013 would remain unchanged.

6. Computer Software:

39 Weeks Ended ---------------------- March 30, March 24, 2013 2012 ----------------------CostBeginning of period $ 3,994 $ 4,041Additions 155 28Disposals - - ----------------------End of period $ 4,149 $ 4,069 ---------------------- ----------------------Accumulated amortizationBeginning of period $ 3,268 $ 2,987Amortization for the period 270 269Impairment losses - - ----------------------End of period $ 3,538 $ 3,256 ---------------------- ----------------------Net carrying valueEnd of period $ 611 $ 813Beginning 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:

March 30, March 24, June 30, 2013 2012 2012 ---------------------------------Trade payables $ 1,355 $ 1,656 $ 1,482Accruals 4,974 5,447 5,787RSU/DSU liability 2,676 2,380 2,374Commodity and capital taxes 891 1,141 489Derivative financial instruments - 29 -Other current liabilities - - 29 --------------------------------- $ 9,896 $ 10,653 $ 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 39 week periods ended March 30, 2013 and March 24, 2012 with respect to the sales return provision:

13 Weeks Ended 39 Weeks Ended ------------------------------------------------ March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ------------------------------------------------Beginning of period $ 1,716 $ 1,451 $ 124 $ 47Amount provided during the period 105 98 1,950 1,675Utilized or released during the period (1,716) (1,451) (1,969) (1,624) ------------------------------------------------End of period $ 105 $ 98 $ 105 $ 98 ------------------------------------------------ ------------------------------------------------



10. Share Capital:

(a) Authorized

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



(b) Issued

Multiple Voting Shares Number Consideration ---------------------------Balance June 25, 2011 1,224,329 NominalBalance March 24, 2012 1,224,329 NominalBalance June 30, 2012 1,224,329 NominalBalance March 30, 2013 1,224,329 NominalSubordinate Voting Shares Number Consideration ---------------------------Balance June 30, 2012 3,422,573 $ 15,040 Shares repurchased (812,401) (3,570) Shares issued upon exercising of stock options 18,367 88 ---------------------------Balance March 30, 2013 2,628,539 $ 11,558 --------------------------- ---------------------------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 March 24, 2012 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 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Weighted average number of shares for basic earnings per share calculations 3,861,844 4,631,835 4,292,920 4,639,290Effect of dilutive options outstanding 150,959 159,443 148,140 155,584 --------------------------------------------Weighted average number of shares for diluted earnings per share calculations 4,012,803 4,791,278 4,441,060 4,794,874 -------------------------------------------- --------------------------------------------



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 March 30, 2013 and 58,000 options were excluded as at March 24, 2012.

(d) Issuer Bids

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, from time to time the Company has received approval from the TSX to commence various normal course issuer bids ("NCIBs"). On February 11, 2013, the Company received approval from the TSX to commence its sixth normal course issuer bid (the "2013 NCIB"). The 2013 NCIB permits the Company to acquire up to 148,211 Subordinate Voting Shares, representing approximately 10% of the "public float" of the Subordinate Voting Shares at the date of TSX acceptance of the notice in respect of the 2013 NCIB, during the period from February 14, 2013 to February 13, 2014, or such earlier date as the Company may complete its maximum purchases under the 2013 NCIB. For these purposes, the "public float" is the Company's then outstanding Subordinate Voting Shares less any such shares held by the Company's senior officers and directors and by shareholders that own 10% or more of the Subordinate Voting Shares. During the 13 week period ended March 30, 2013, the Company repurchased 25,000 Subordinate Voting Shares for cancellation at a price of $13.10 per share.

During the 13 week and 39 week periods ended March 30, 2013 and March 24, 2012, repurchases of Subordinate Voting Shares under the Company's SIB and NCIBs then in effect are presented below.

13 Weeks Ended 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Number of shares repurchased under SIB - - 787,401 -Number of shares repurchased under NCIBs 25,000 - 25,000 50,000Amount charged to share capital $ 110 - $ 3,570 $ 219Amount charged to retained earnings representing the excess over the average paid-in value $ 218 - $ 7,131 $ 311 --------------------------------------------Total cash consideration (net of tax) $ 328 - $ 10,701 $ 530 -------------------------------------------- --------------------------------------------



The amount of income tax recorded directly to Shareholders' Equity that was related to the SIB during the 13 week and 39 week periods ended March 30, 2013 was $NIL and $92, respectively.

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 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Stock option plan expense $ 40 $ 1 $ 86 $ 18RSU plan expense 163 307 720 621DSU plan expense 42 123 207 35 -------------------------------------------- $ 245 $ 431 $ 1,013 $ 674 -------------------------------------------- --------------------------------------------



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:

March 30, March 24, June 30, 2013 2012 2012 ---------------------------------Payables and accruals $ 2,676 $ 2,380 $ 2,374Contributed surplus 981 946 925 --------------------------------- $ 3,657 $ 3,326 $ 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 March 30, 2013, the Company has reserved 601,800 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 stock options outstanding under the Company's Stock Option Plan as of March 30, 2013 and March 24, 2012 and changes during the respective 39 week periods ended on those dates is presented below:

March 30, 2013 March 24, 2012 ---------------------------------------------- Weighted Weighted Average Average Exercise ExerciseStock Options Shares Price Shares Price----------------------------------------------------------------------------Outstanding at beginning of period 357,767 $ 7.14 348,434 $ 6.65 Granted 26,200 $ 12.97 - - Exercised (18,367) $ 3.15 (3,700) $ 3.15 Forfeited (58,000) $ 15.85 - - ----------------------------------------------Outstanding at end of period 307,600 $ 6.23 344,734 $ 6.69 ----------------------------------------------Options exercisable at end of period 253,300 $ 5.04 338,067 $ 6.74 ----------------------------------------------



The following table summarizes the distribution of these options and their remaining contractual life as at March 30, 2013:

Options Outstanding Options Exercisable ------------------------------------------------------------------ Weighted Average Weighted Weighted Remaining Average AverageExercise # Contractual Exercise # of Shares ExercisePrices Outstanding Life Price Exercisable Price----------------------------------------------------------------------------$3.15 139,300 5.6 years $ 3.15 139,300 $ 3.15$6.25 50,000 5.2 years $ 6.25 50,000 $ 6.25$7.80 45,000 3.8 years $ 7.80 45,000 $ 7.80$8.68 15,000 4.1 years $ 8.68 15,000 $ 8.68$10.68 28,100 9.2 years $ 10.68 - $ 10.68$10.96 4,000 0.4 years $ 10.96 4,000 $ 10.96$12.97 26,200 9.9 years $ 12.97 - $ 12.97 ------------------------------------------------------------------ 307,600 5.8 years $ 6.23 253,300 $ 5.04 ------------------------------------------------------------------ ------------------------------------------------------------------



During the 13 week and 39 week periods ended March 30, 2013, the Company granted 26,200 stock options with an exercise price of $12.97 per stock option. The Black-Scholes Option Pricing Model was used to determine the estimated fair value of the options granted on the date of grant. The fair value was estimated to be $6.57 based on the following assumptions: a risk free rate of 2.00%; expected volatility of 38%; dividend yield of 0%; previous 5 day weighted average share price of $12.97 at the date of grant; an expected life of 10 years; and 0% estimated forfeiture rate. There were no stock options granted during the 13 week and 39 week periods ended March 24, 2012.

(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 39 week periods ended March 30, 2013 and March 24, 2012, respectively, with respect to the RSU Plan:

13 Weeks Ended 39 Weeks Ended ----------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 -----------------------------------------------Outstanding at beginning of period 156,139 166,770 167,536 122,300 Granted - - 25,000 61,100 Redeemed - - (36,063) (16,130) Forfeited (3,134) - (3,468) (500) -----------------------------------------------Outstanding at end of period 153,005 166,770 153,005 166,770RSUs vested at end of period 37,765 16,300 37,765 16,300Liability at end of period $ 1,603 $ 1,202 $ 1,603 $ 1,202



(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 39 week periods ended March 30, 2013 and March 24, 2012, respectively, with respect to the DSU Plan:

13 Weeks Ended 39 Weeks Ended --------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ---------------------------------------------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 83,136 103,920Danier stock price at end of period $ 12.90 $ 11.34 $ 12.90 $ 11.34Liability at end of period $ 1,073 $ 1,178 $ 1,073 $ 1,178



12. Amortization and Impairment Loss:

Amortization of property and equipment and computer software and impairment loss on property and equipment included in cost of sales and SG&A is summarized as follows:

13 Weeks Ended 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Cost of sales $ 42 $ 46 $ 125 $ 142SG&A 873 930 2,796 2,639 -------------------------------------------- $ 915 $ 976 $ 2,921 $ 2,781 -------------------------------------------- --------------------------------------------



13. Income Taxes:

The Company's income tax expense is comprised as follows:

March 30, March 24, 2013 2012 ------------------------Current period income tax expense $ 1,729 $ 2,472Adjustment for prior years taxes 11 48 ------------------------Current income tax expense $ 1,740 $ 2,520Deferred tax expense (107) (80) ------------------------Income tax expense $ 1,633 $ 2,440 ------------------------ ------------------------



The estimated average annual effective rate was 28.7% during the 39 weeks ended March 30, 2013 compared with the 28.6% estimated rate for the 39 weeks ended March 24, 2012 and 27.6% for the fiscal year ended June 30, 2012. The difference between the rate for the 39 weeks ended March 30, 2013 and the rate for the 39 weeks ended March 24, 2012 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:

39 Weeks Ended ---------------------- March 30, March 24, 2013 2012 ----------------------Combined basic federal and provincial average statutory rate 26.4% 27.2%Non-deductible expenses 3.0% 0.8%Future federal and provincial rate changes - 0.7%Other (0.7%) (0.1%) ---------------------- 28.7% 28.6% ---------------------- ----------------------



14. Change in Working Capital Items:

13 Weeks Ended 39 Weeks Ended ------------------------------------------------ March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ------------------------------------------------Decrease (increase) in: Accounts receivable $ 11 $ 831 $ (823) $ (470) Inventories 3,536 8,406 (3,634) 581 Prepaid expenses (148) (77) 257 364Increase (decrease) in: Payables and accruals (8,788) (5,357) (265) (371) Deferred revenue (144) (360) 260 286 Sales return provision (1,611) (1,353) (19) 51 ------------------------------------------------ $ (7,144) $ 2,090 $ (4,224) $ 441 ------------------------------------------------ ------------------------------------------------



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.



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 $ 10,820Later than one year and not later than five years $ 29,497Later than 5 years $ 14,945 ----------Total $ 55,262



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

13 Weeks Ended 39 Weeks Ended ---------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 ----------------------------------------------Minimum lease payments recognized as an expense $ 2,917 $ 2,789 $ 8,646 $ 8,362Contingent rentals recognized as an expense $ (59) $ (13) $ 300 $ 229Sublease payments recognized as an expense - - - -



(b) Letters of credit:

As at March 30, 2013, the Company had outstanding letters of credit in the amount of $3,146 (March 24, 2012 - $4,189) 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:

March 30, 2013 March 24, 2012 ------------------------------------ Carrying Fair Carrying Fair Classification Maturity value value value value----------------------------------------------------------------------------Cash and cash Loans and equivalents receivables Short-term $ 23,476 $23,476 $ 34,590 $34,590Accounts Loans and receivable receivables Short-term $ 1,305 $ 1,305 $ 855 $ 855Payables and Financial accruals liabilities Short-term $ 9,896 $ 9,896 $ 10,624 $10,624Sales return Financial provision liabilities Short-term $ 105 $ 105 $ 98 $ 98Derivative financial Fair value instruments through profit (1) and loss Short-term $ 35 $ 35 $ (29) $ (29)----------------------------------------------------------------------------(1) Included in accounts receivable for the 39 week period ended March 30, 2013 and included in payables and accruals for the 39 week period ended March 24, 2012.



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 March 30, 2013, a $35 unrealized gain (March 24, 2012 - $29 unrealized loss) was recorded in SG&A for the foreign exchange contracts outstanding.- 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 39 week periods ended March 30, 2013 and March 24, 2012, 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 March 30, 2013 expire at various times between April 5, 2013 and December 20, 2013 and the foreign exchange contracts that were outstanding as at March 24, 2012 expired or will expire between June 4, 2012 and July 29, 2013.

39 Weeks Ended ------------------------ March 30, March 24, 2013 2012 ------------------------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) 24,500 20,000 Notional amount of foreign exchange contracts expired during the period (US$000) (23,500) (22,500) ------------------------Notional amount outstanding at end of period (US$000) $ 22,000 $ 16,000Fair value of foreign exchange contracts outstanding at end of period - gain/(loss) (C$000) $ 35 $ (29)



As at March 30, 2013, 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 $5 and $16 decrease or increase, respectively, in the Company's net earnings (loss) for the 13 week and 39 week periods ended March 30, 2013, 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 March 30, 2013 to determine how a change in interest rates would have impacted net earnings. As at March 30, 2013, the Company's cash balance available for investment was approximately $23.5 million. A 100 basis point change in interest rates would have increased or decreased net earnings by approximately $41 and $123 for the 13 week and 39 week periods ended March 30, 2013, 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 March 30, 2013 to determine how a change in the price of the Subordinate Voting Shares would have impacted net earnings. As at March 30, 2013, a total of 153,005 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 $165 for the 13 week and 39 week periods ended March 30, 2013. 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 March 30, 2013, the Company had $23.5 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 mainly dealing with highly-rated counterparties such as major Canadian financial institutions.

As at March 30, 2013, the Company's exposure to credit risk for these financial instruments was cash of $23.5 million, accounts receivable of $1.3 million and foreign exchange option contracts that had a notional amount of US$22.0 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 March 30, 2013 and March 24, 2012. There has been no change with respect to the overall capital risk management strategy during the 39 week period ended March 30, 2013.

19. Expenses by Nature:

13 Weeks Ended 39 Weeks Ended -------------------------------------------- March 30, March 24, March 30, March 24, 2013 2012 2013 2012 --------------------------------------------Selling and retail operating expenses $ 14,883 $ 14,443 $ 46,532 $ 43,844General and administrative expenses 3,945 3,770 13,106 11,338 -------------------------------------------- $ 18,828 $ 18,213 $ 59,638 $ 55,182 -------------------------------------------- --------------------------------------------



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.



Contacts:
Investor Relations Contact: Danier Leather Inc.
Bryan Tatoff
Senior Vice-President, Chief Financial Officer & Secretary
(416) 762-8175 ext. 328
bryan@danier.com

Danier Leather Inc.
Jeffrey Wortsman
President and Chief Executive Officer
(416) 762-8175 ext. 302
jeffreyw@danier.com



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