TORONTO, Aug. 13,
2012 /CNW/ - For the three months ended June 30, 2012, total Leon's system wide sales
were $207,722,000 including
$45,627,000 of franchise sales
($209,334,000 including $45,477,000 of franchise sales in 2011), a
decrease of 0.8%. Net income was $9,004,000, 13¢ per common share ($11,224,000, 16¢ per common share in 2011), a
decrease of 18.8% per common share.
For the six months ended June 30, 2012, total Leon's system wide sales
were $408,373,000 including
$88,847,000 of franchise sales
($400,926,000 including $86,286,000 of franchise sales in 2011), an
increase of 1.9% and net income was $17,603,000, 25¢ per common share ($21,517,000, 31¢ per common share in 2011), a
decrease of 19.4% per common share.
Major renovations have just been completed at
our Sudbury and Sault Ste. Marie, Ontario corporate stores.
Construction has also started for a brand new franchise store to
replace our existing St. John, New Brunswick store. Also, the
Company has secured sites for four new corporate stores in:
Orangeville and Brantford, Ontario; Sherbrooke, Quebec; and Rocky
View County, Alberta, which is just north of Calgary. Our current
plan is to open the first of these stores in late 2012 and the
balance in 2013.
As previously announced, we paid a quarterly 10¢
dividend on July 6th,
2012. Today we are pleased to announce that the Board of Directors
have declared a quarterly dividend of 10¢ per common share payable
on the 4th day of October
2012 to shareholders of record at the close of business on
the 4th day of September
2012. As of 2007, dividends paid by Leon's Furniture Limited
are "eligible dividends" pursuant to the changes to the Income Tax
Act under Bill C-28, Canada.
The Directors have also approved, subject to
obtaining regulatory approvals, the continuation of the Company's
ongoing Normal Course Issuer Bid, which expires on September 9, 2012. Pursuant to the continued bid,
the Company intends, in the twelve months commencing September 10, 2012, to purchase up to the lesser
of 4.99% of its Common Shares outstanding on August 31, 2012, and the amount equal to 4.99% of
its Common Shares outstanding on the date the Toronto Stock
Exchange accepts the notice of intention to make a normal course
issuer bid.
Since September 10,
2011, the date on which Leon's current issuer bid commenced,
the Company has purchased 130,362 common shares at an average price
of $11.93 per share. The
Company's Board of Directors believes that the purchase of its
common shares is an appropriate use of its corporate funds, given
its very strong financial position.
EARNINGS PER SHARE FOR EACH QUARTER
| |
MARCH 31 |
JUNE 30 |
SEPT. 30 |
DEC. 31 |
YEAR
TOTAL |
| |
|
|
|
|
|
|
|
| 2012 |
-
- |
Basic
Fully Diluted |
12¢
12¢ |
13¢
12¢ |
|
|
$0.25
$0.24 |
| |
|
|
|
|
|
|
|
| 2011 |
-
- |
Basic
Fully Diluted |
15¢
14¢ |
16¢
15¢ |
22¢
21¢ |
28¢
27¢ |
$0.81
$0.78 |
| |
|
|
|
|
|
|
|
| 2010 |
-
- |
Basic
Fully Diluted |
17¢
16¢ |
17¢
16¢ |
26¢
25¢ |
30¢
29¢ |
$0.90
$0.87 |
LEON'S FURNITURE LIMITED - MEUBLES LEON
LTEE
Mark J. Leon
Chairman of the Board
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three and six months ended June
30, 2012 and 2011
Dated: August 13, 2012
The following review and analysis of Leon's
Furniture Limited's (the "Company") operations and financial
position for the three and six months ended June 30, 2012 and 2011 should be read in
conjunction with the audited consolidated financial statements of
Leon's Furniture Limited for the year ended December 31, 2011, set forth in the Company's
Annual Report for such year and incorporated by reference in the
Company's Annual Information Form dated March 30, 2012.
Cautionary Statement Regarding Forward-Looking
Statements
This Management's Discussion and Analysis
("MD&A") is intended to provide readers with the information
that management believes is required to gain an understanding of
Leon's Furniture Limited's current results and to assess the
Company's future prospects. This MD&A, and in particular the
section under heading "Outlook", includes forward-looking
statements, which are based on certain assumptions and reflect
Leon's Furniture Limited's current plans and expectations. These
forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results and future prospects
to differ materially from current expectations. Some of the factors
that can cause actual results to differ materially from current
expectations are: a continuing slowdown in the Canadian economy; a
further drop in consumer confidence; and dependency on product from
third party suppliers. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. Readers of this
report are cautioned that actual events and results may vary.
Financial Statements Governance Practice
Leon's Furniture Limited's unaudited interim
condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and incorporate the requirements of International
Accounting Standards ("IAS") 34, Interim financial
reporting. The amounts expressed are in Canadian dollars. Per
share amounts are calculated using the weighted average number of
shares outstanding for the applicable period.
The Audit Committee of the Board of Directors of Leon's
Furniture Limited reviewed the MD&A and the unaudited interim
condensed consolidated financial statements, and recommended that
the Board of Directors approve them. Following review by the full
Board, the unaudited interim condensed consolidated financial
statements and MD&A were approved on August 13, 2012.
Introduction
Leon's Furniture Limited has been in the
furniture retail business for over 100 years. The Company's 44
corporate and 32 franchise stores can be found in every province
across Canada except British Columbia. Main product lines sold at
retail include furniture, appliances and electronics.
Revenues and Expenses
For the three months ended June 30,
2012, total Leon's system wide sales were $207,722,000 including $45,627,000 of franchise sales ($209,334,000 including $45,477,000 of franchise sales in 2011), a
decrease of 0.8%.
Leon's corporate sales of $162,095,000 in the second quarter of 2012,
decreased by $1,762,000, or 1.1%,
compared to the second quarter of 2011. The decrease in sales
in the second quarter compared to the prior year reflected a
continuation of waning consumer confidence, a decrease in housing
starts, and continued high consumer debt resulting in reduced
consumer spending. Same store corporate sales decreased by 5.8%
compared to the prior year. Comparable store sales are defined as
sales generated by stores that have been open or closed for more
than 12 months on a yearly basis.
Leon's franchise sales of $45,627,000 in the second quarter of 2011 are
virtually the same as the second quarter of 2011. The franchise
division experienced modest growth in Western and Eastern Canada
and a decrease in Ontario.
Our gross margin for the second quarter 2012 of
40.85% increased slightly from the second quarter margin of
40.70%.
Net operating expenses of $54,565,000 were up $2,682,000 or 5.2% for the second quarter 2012
compared to the second quarter 2011. This increase was mostly the
result of two factors: marketing expenses were up $2,430,000 and occupancy costs were up
$1,234,000 due to four new stores
added in the fall of 2011. General and administrative expenses were
down by 3.8% in the quarter compared to the prior year's quarter.
The decrease was mainly the result of reduced salary costs. As a
result of the above, net income for the second quarter 2012 was
$9,004,000, 13¢ per common share
($11,224,000, 16¢ per common share in
2011), a decrease of 18.8% per common share compared with the prior
year second quarter.
For the six months ended June 30, 2012, total Leon's system wide sales
were $408,373,000 including
$88,847,000 of franchise sales
($400,926,000 including $86,286,000 of franchise sales in 2012), an
increase of 1.9% and net income was $17,603,000, 25¢ per common share ($21,517,000, 31¢ per common share in 2011), a
decrease of 19.4% per common share.
Annual Financial Information
| |
|
|
|
|
|
|
|
|
|
| ($ in thousands, except earnings per share and
dividends) |
|
|
2011 |
|
|
2010 |
|
|
2009 |
| |
|
|
|
|
|
|
|
|
|
| Net corporate sales |
|
|
682,836 |
|
|
710,435 |
|
|
703,180 |
| Leon's franchise sales |
|
|
196,725 |
|
|
197,062 |
|
|
194,290 |
| |
|
|
|
|
|
|
|
|
|
| Total Leon's system-wide sales |
|
|
879,561 |
|
|
907,497 |
|
|
897,470 |
| |
|
|
|
|
|
|
|
|
|
| Net income |
|
|
56,666 |
|
|
63,284 |
|
|
56,864 |
| Earnings per share |
|
|
|
|
|
|
|
|
|
| Basic |
|
|
$0.81 |
|
|
$0.90 |
|
|
$0.80 |
| Diluted |
|
|
$0.78 |
|
|
$0.87 |
|
|
$0.78 |
| |
|
|
|
|
|
|
|
|
|
| Total assets |
|
|
595,339 |
|
|
566,674 |
|
|
529,156 |
| |
|
|
|
|
|
|
|
|
|
| Common share dividends declared |
|
|
$0.37 |
|
|
$0.32 |
|
|
$0.28 |
| Special common share dividends declared |
|
|
$0.15 |
|
|
- |
|
|
$0.20 |
| Convertible, non-voting shares dividends
declared |
|
|
$0.20 |
|
|
$0.18 |
|
|
$0.14 |
Liquidity and Financial Resources
| |
|
|
|
|
|
|
|
|
|
| ($ in thousands, except dividends per share) |
|
|
Jun 30/12 |
|
|
Dec 31/11 |
|
|
Jun 30/11 |
| |
|
|
|
|
|
|
|
|
|
| Cash, cash equivalents, available-for-sale
financial assets |
|
|
182,722 |
|
|
221,823 |
|
|
200,018 |
| Trade and other accounts receivable |
|
|
19,369 |
|
|
28,937 |
|
|
18,615 |
| Inventory |
|
|
90,706 |
|
|
87,830 |
|
|
89,204 |
| Total assets |
|
|
557,236 |
|
|
595,339 |
|
|
559,462 |
| Working capital |
|
|
206,405 |
|
|
204,649 |
|
|
201,465 |
| |
|
|
|
|
|
|
|
|
|
| For the 3 months ended |
|
|
Current Quarter
Jun 30/12 |
|
|
Prior Quarter
Dec 31/11 |
|
|
Prior Quarter
June 30/11 |
| |
|
|
|
|
|
|
|
|
|
| Cash flow provided by operations |
|
|
1,040 |
|
|
26,230 |
|
|
12,770 |
| Purchase of property, plant and equipment |
|
|
6,900 |
|
|
6,336 |
|
|
6,401 |
| Repurchase of capital stock |
|
|
54 |
|
|
219 |
|
|
3,785 |
| Dividends paid |
|
|
6,993 |
|
|
6,292 |
|
|
6,317 |
| |
|
|
|
|
|
|
|
|
|
| Dividends paid per share |
|
|
$0.10 |
|
|
$0.09 |
|
|
$0.09 |
Cash, cash equivalents and available-for-sale
financial assets decreased by $39,101,000 for the six months ending
June 30, 2012, mainly as a result of
dividends paid (including a special dividend of $0.15 per share), the purchase of property, plant
and equipment, and the timing of payments to our suppliers.
Major renovations have just been completed at
our Sudbury and Sault Ste. Marie, Ontario corporate stores.
Construction has also started for a brand new franchise store to
replace our existing St. John, New Brunswick store. Also, the
Company has secured sites for four new corporate stores in:
Orangeville and Brantford, Ontario; Sherbrooke, Quebec; and Rocky
View County, Alberta, which is just north of Calgary. Our current
plan is to open the first of these stores in late 2012 and the
balance in 2013.
Quarterly Results (2012, 2011, 2010)
Quarterly Income Statement ($000)
- except per share data
| |
Quarter Ended
June 30 |
Quarter Ended
March 31 |
Quarter Ended
December 31 |
Quarter Ended
September 30 |
| |
2012 |
2011 |
2012 |
2011 |
2011 |
2010 |
2011 |
2010 |
| Leon's Corporate Sales |
162,095 |
163,857 |
157,431 |
150,783 |
193,823 |
197,888 |
174,373 |
182,125 |
| Leon's Franchise sales |
45,627 |
45,477 |
43,220 |
40,809 |
61,166 |
59,820 |
49,273 |
49,421 |
| Total Leon's system wide sales |
207,722 |
209,334 |
200,651 |
191,592 |
254,989 |
257,708 |
223,646 |
231,546 |
| Net Income Per Share |
$0.13 |
$0.16 |
$0.12 |
$0.15 |
$0.28 |
$0.30 |
$0.22 |
$0.26 |
| Fully Diluted Per Share |
$0.12 |
$0.15 |
$0.12 |
$0.14 |
$0.27 |
$0.29 |
$0.21 |
$0.25 |
Common Shares
At June 30, 2012, there were
69,977,812 common shares issued and outstanding. During the second
quarter of 2012, 4,402 shares were repurchased at an average cost
of $12.17 and then cancelled by the
Company through its Normal Course Issuer Bid. In addition, during
the quarter ended June 30, 2012,
24,358 convertible, non-voting series 2002 shares; 18,736
convertible, non-voting series 2005 shares and 20,000 convertible,
non-voting series 2009 shares were converted into common shares.
There were no convertible, non-voting series 2009 shares cancelled.
For details on the Company's commitments related to its redeemable
shares, please refer to note 13 of the unaudited interim condensed
consolidated financial statements.
Commitments
| |
|
| ($ in thousands) |
Payments Due by Period |
| Contractual
Obligations |
Total |
Less than
1 year |
2-3 years |
4-5 years |
After 5 years |
| Operating Leases 1 |
59,065 |
6,859 |
12,512 |
12,647 |
27,047 |
| Purchase Obligations |
2,734 |
2,734 |
|
|
|
| Total Contractual Obligations |
61,799 |
9,593 |
12,512 |
12,647 |
27,047 |
1The Company is obligated under operating leases to
future minimum rental payments for various land and building sites
across Canada.
Critical Accounting Estimates and Assumptions
Please refer to Note 4 of the 2011 annual consolidated financial
statements for the Company's critical accounting estimates and
assumptions.
Pending Changes to Accounting Policies
Several new and amended standards are not yet effective for the
Company's interim condensed consolidated financial statements for
the three and six month period ended June
30, 2012. Please refer to the section heading
"Accounting standards and amendments issued but not yet adopted"
for further details, presented within Note 3 of Leon's 2011 annual
consolidated financial statements.
Risks and Uncertainties
For a complete discussion of the risks and uncertainties which
apply to the Company's business and operating results please refer
to the Company's Annual Information Form dated March 30, 2012 available on
www.sedar.com.
Disclosure Controls & Procedures
Management is responsible for establishing and
maintaining a system of disclosure controls and procedures to
provide reasonable assurance that all material information relating
to the Company is gathered and reported on a timely basis to senior
management, including the Chief Executive Officer and Chief
Financial Officer so that appropriate decisions can be made by them
regarding public disclosure.
Internal Controls over Financial
Reporting
Management is also responsible for establishing
and maintaining adequate internal control over financial reporting
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS. All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to
consolidated financial statement preparation and presentation.
Additionally, management is required to use judgment in evaluating
controls and procedures.
Changes in Internal Control over Financial
Reporting
Management has also evaluated whether there were
changes in the Company's internal control over financial reporting
that occurred during the period beginning on April 1, 2012 and ended on June 30 2012 that have materially affected, or
are reasonably likely to materially affect, the Company's internal
control over financial reporting. The Company has determined that
no material changes in internal controls have occurred during this
period.
Outlook
The slowdown in the economy continues to affect
our results and we do not see any immediate signs of improvement.
As such, we anticipate that consumer discretionary spending will
remain soft throughout 2012. To help counter this, we will continue
our strong marketing and merchandising campaign for the balance of
2012. The recent opening of four new stores in the latter part of
2011 should also aid our sales in 2012. Even with these measures in
place, growing profits in 2012 will be challenging, but our strong
financial position coupled with our experience in adjusting to
changing market conditions, provide us with the confidence to adapt
to the prevailing economic conditions.
Non-IFRS Financial Measures
In order to provide additional insight into the
business, the Company has provided the measure of same store sales,
in the revenue and expenses section above. This measure does
not have a standardized meaning prescribed by IFRS but it is a key
indicator used by the Company to measure performance against prior
period results. Comparable store sales are defined as sales
generated by stores that have been open or closed for more than 12
months on a yearly basis. The reconciliation between total
corporate sales (an IFRS measure) and comparable store sales is
provided below:
| ($ in thousands and for the 3 months ended) |
June 30, 2012 |
June 30, 2011 |
| |
|
|
| Net corporate sales |
162,095 |
163,857 |
| Adjustments for stores not in both fiscal
periods |
(7,814) |
- |
| Comparable store sales |
154,281 |
163,857 |
| |
|
|
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL
STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a),
if an auditor has not performed a review of the interim financial
statements, they must be accompanied by a notice indicating that
the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim financial statements of the
company have been prepared by and are the responsibility of the
company's management.
No auditor has performed a review of these financial
statements.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Terrence T. Leon |
|
|
|
|
|
|
|
|
|
|
|
Dominic Scarangella |
| President & Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
Vice President & Chief Financial Officer |
Dated as of the 13th day of August, 2012.
| Interim Condensed Consolidated Financial
Statements |
|
|
| |
|
|
| |
|
|
| Leon's Furniture Limited |
| INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION |
| (UNAUDITED) |
| |
|
|
| |
As at June 30, |
As at December 31, |
| ($ in thousands) |
2012 |
2011 |
| |
|
|
| ASSETS |
|
|
| Current assets |
|
|
| Cash and cash equivalents [notes 4 and
6] |
12,905 |
72,505 |
| Available-for-sale financial assets [notes 4
and 19e] |
169,817 |
149,318 |
| Trade receivables [note 4] |
19,369 |
28,937 |
| Income taxes receivable |
9,784 |
5,182 |
| Inventories [note 7] |
90,706 |
87,830 |
| Total current assets |
302,581 |
343,772 |
| Other assets |
1,325 |
1,431 |
| Property, plant and equipment [note 8] |
218,007 |
214,158 |
| Investment properties [note 9] |
8,340 |
8,366 |
| Intangible assets [note 10] |
3,534 |
3,958 |
| Goodwill |
11,282 |
11,282 |
| Deferred income tax assets |
12,167 |
12,372 |
| Total assets |
557,236 |
595,339 |
| |
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
| Current liabilities |
|
|
| Trade and other payables [notes 4 and
11] |
48,547 |
75,126 |
| Provisions [note 12] |
6,191 |
11,231 |
| Customers' deposits |
19,043 |
19,157 |
| Dividends payable [note 14] |
6,998 |
17,457 |
| Deferred warranty plan revenue |
15,397 |
16,152 |
| Total current liabilities |
96,176 |
139,123 |
| Deferred warranty plan revenue |
17,906 |
19,445 |
| Redeemable share liability [notes 4 and
13] |
594 |
382 |
| Deferred income tax liabilities |
11,313 |
10,928 |
| Total liabilities |
125,989 |
169,878 |
| |
|
|
| Shareholders' equity attributable to the
shareholders of the Company |
|
|
| Common shares [note 14] |
22,398 |
20,918 |
| Retained earnings |
407,976 |
404,647 |
| Accumulated other comprehensive income |
873 |
(104) |
| Total shareholders' equity |
431,247 |
425,461 |
| Total liabilities and shareholder's
equity |
557,236 |
595,339 |
| Commitments and contingencies [note 19] |
| The accompanying notes are an integral part of these
unaudited interim condensed consolidated financial
statements. |
| Interim Condensed Consolidated Financial
Statements |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Leon's Furniture Limited |
| INTERIM CONSOLIDATED INCOME
STATEMENTS |
| (UNAUDITED) |
| |
| |
Three
months ended June 30 |
Six
months ended June 30 |
| ($ in thousands) |
2012 |
2011 |
2012 |
2011 |
| |
|
|
|
|
| Revenue [note 15] |
162,095 |
163,857 |
319,526 |
314,640 |
| Cost of sales [note 7] |
95,885 |
97,170 |
189,103 |
185,235 |
| Gross profit |
66,210 |
66,687 |
130,423 |
129,405 |
| Operating expenses [note 16] |
|
|
|
|
| General and administrative expenses |
24,208 |
25,158 |
47,062 |
47,553 |
| Sales and marketing expenses |
20,591 |
18,161 |
41,103 |
36,673 |
| Occupancy expenses |
8,390 |
7,156 |
17,019 |
14,596 |
| Other operating expenses |
1,376 |
1,408 |
2,687 |
2,351 |
| |
54,565 |
51,883 |
107,871 |
101,173 |
| Operating profit |
11,645 |
14,804 |
22,552 |
28,232 |
| Finance income |
559 |
803 |
1,308 |
1,624 |
| Profit before income tax |
12,204 |
15,607 |
23,860 |
29,856 |
| Income tax expense [note 17] |
3,200 |
4,383 |
6,257 |
8,339 |
| Profit for the period attributable to the
shareholders of the Company |
9,004 |
11,224 |
17,603 |
21,517 |
| |
|
|
|
|
| Earnings per share [note
18] |
|
|
|
|
| Basic |
$ 0.13 |
$ 0.16 |
$ 0.25 |
$ 0.31 |
| Diluted |
$ 0.12 |
$ 0.15 |
$ 0.24 |
$ 0.30 |
| The accompanying notes are an integral part of these
unaudited interim condensed consolidated
financial statements. |
| |
| Interim Condensed Consolidated
Financial Statements |
|
|
|
| |
|
|
|
| |
|
|
|
| Leon's Furniture Limited |
| INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME |
| (UNAUDITED) |
| |
| |
Three
months ended June 30 |
| |
|
|
Net of tax |
| ($ in thousands) |
2012 |
Tax effect |
2012 |
| |
|
|
|
| Profit for the period |
9,004 |
- |
9,004 |
| Other comprehensive income, net of
tax |
|
|
|
| |
Unrealized (losses) on available-for-sale
financial assets arising during the period |
(384) |
(50) |
(334) |
| |
Reclassification adjustment for net gains and
(losses) included in profit for the period |
(170) |
(22) |
(148) |
| |
Change in unrealized (losses) on
available-for-sale financial assets arising during the period |
(554) |
(72) |
(482) |
| Comprehensive
income for the period attributable to the shareholders of the
Company |
8,450 |
(72) |
8,522 |
| |
|
|
|
| |
|
|
Net of tax |
| |
2011 |
Tax effect |
2011 |
| |
|
|
|
| Profit for the period |
11,224 |
- |
11,224 |
| Other comprehensive income, net of
tax |
|
|
|
| |
Unrealized gains on available-for-sale
financial assets arising during the period |
394 |
67 |
327 |
| |
Reclassification adjustment for net gains and
(losses) included in profit for the period |
(8) |
(1) |
(7) |
| |
Change in unrealized gains on available-for-sale
financial
assets arising during the period |
386 |
66 |
320 |
| Comprehensive
income for the period attributable to the shareholders of the
Company |
11,610 |
66 |
11,544 |
| |
| |
Six months
ended June 30 |
| |
|
|
Net of tax |
| ($ in thousands) |
2012 |
Tax effect |
2012 |
| |
|
|
|
| Profit for the period |
17,603 |
- |
17,603 |
| Other comprehensive income, net of
tax |
|
|
|
| |
Unrealized gains on available-for-sale
financial assets arising during the period |
1,351 |
177 |
1,174 |
| |
Reclassification adjustment for net gains and
(losses) included in profit for the period |
(228) |
(31) |
(197) |
| |
Change in unrealized gains on available-for-sale
financial
assets arising during the period |
1,123 |
146 |
977 |
| Comprehensive
income for the period attributable to the shareholders of the
Company |
18,726 |
146 |
18,580 |
| |
|
|
|
| |
|
|
Net of tax |
| |
2011 |
Tax effect |
2011 |
| |
|
|
|
| Profit for the period |
21,517 |
- |
21,517 |
| Other comprehensive income, net of
tax |
|
|
|
| |
Unrealized gains on available-for-sale
financial assets arising during the period |
844 |
195 |
649 |
| |
Reclassification adjustment for net gains and
(losses) included in profit for the period |
(11) |
(1) |
(10) |
| |
Change in unrealized gains on available-for-sale
financial
assets arising during the period |
833 |
194 |
639 |
| Comprehensive income for the period
attributable to the shareholders of the Company |
22,350 |
194 |
22,156 |
The accompanying notes are an integral part of these unaudited
interim condensed consolidated financial statements.
|
| Interim Condensed Consolidated
Financial Statements |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Leon's Furniture Limited |
| INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY |
| (UNAUDITED) |
| |
|
|
|
|
($ in thousands) |
Common shares |
Accumulated
other
comprehensive
income |
Retained earnings |
Total |
| |
|
|
|
|
| As at January 1, 2011 |
19,177 |
480 |
390,629 |
410,286 |
| |
|
|
|
|
| Comprehensive income |
|
|
|
|
| Profit for the period |
— |
— |
21,517 |
21,517 |
Change in unrealized gains on
available-for-sale
financial assets arising during the period |
—
|
639
|
—
|
639
|
| Total comprehensive income |
— |
639 |
21,517 |
22,156 |
| |
|
|
|
|
| Transactions with shareholders |
|
|
|
|
| Dividends declared |
— |
— |
(12,622) |
(12,622) |
| Management share purchase plan [note
13] |
1,513 |
— |
— |
1,513 |
| Repurchase of common shares [note 14] |
(39) |
— |
(4,461) |
(4,500) |
| Total transactions with shareholders |
1,474 |
— |
(17,083) |
(15,609) |
| |
|
|
|
|
| As at June 30, 2011 |
20,651 |
1,119 |
395,063 |
416,833 |
| |
|
|
|
|
| As at January 1, 2012 |
20,918 |
(104) |
404,647 |
425,461 |
| |
|
|
|
|
| Comprehensive income |
|
|
|
|
| Profit for the period |
— |
— |
17,603 |
17,603 |
Change in unrealized gains on
available-for-sale
financial assets arising during the period |
—
|
977
|
—
|
977
|
| Total comprehensive income |
— |
977 |
17,603 |
18,580 |
| |
|
|
|
|
| Transactions with shareholders |
|
|
|
|
| Dividends declared |
— |
— |
(13,991) |
(13,991) |
| Management share purchase plan [note
13] |
1,483 |
— |
— |
1,483 |
| Repurchase of common shares [note 14] |
(3) |
— |
(283) |
(286) |
| Total transactions with shareholders |
1,480 |
— |
(14,274) |
(12,794) |
| |
|
|
|
|
| As at June 30, 2012 |
22,398 |
873 |
407,976 |
431,247 |
| The accompanying notes are an integral part of these
unaudited interim condensed consolidated financial
statements. |
| Interim Condensed Consolidated
Financial Statements |
|
|
| |
|
|
| |
|
|
| Leon's Furniture Limited |
| INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS |
| (UNAUDITED) |
| |
| |
Six
months ended June 30 |
| ($ in thousands) |
2012 |
2011 |
| |
|
|
| OPERATING ACTIVITIES |
|
|
| Profit for the period |
17,603 |
21,517 |
| Add (deduct) items not involving an
outlay of cash |
|
|
| |
Depreciation of property, plant and equipment and
investment properties |
6,830 |
6,030 |
| |
Amortization of intangible assets |
433 |
442 |
| |
Amortization of deferred warranty plan
revenue |
(8,329) |
(8,612) |
| |
Gain on sale of property, plant and equipment |
(15) |
(21) |
| |
Deferred income taxes |
444 |
454 |
| |
Loss on sale of available-for-sale financial
assets |
171 |
68 |
| |
Cash received on warranty plan sales |
6,035 |
6,895 |
| |
23,172 |
26,773 |
| Net change in non-cash working
capital balances related to operations [note 20(a)] |
(29,713) |
(14,690) |
| Cash (used in) provided by
operating activities |
(6,541) |
12,083 |
| |
|
|
| INVESTING ACTIVITIES |
|
|
| Purchase of property, plant &
equipment |
(10,486) |
(9,277) |
| Purchase of intangible assets |
(9) |
- |
| Proceeds on sale of property, plant
& equipment |
24 |
39 |
| Purchase of available-for-sale
financial assets |
(259,904) |
(241,489) |
| Proceeds on sale of available-for-sale
financial assets |
240,357 |
235,408 |
| Issuance of series 2012 shares
[note 13] |
3,804 |
- |
| (Increase) decrease in employee share
purchase loans [note 13] |
(2,109) |
1,723 |
| Cash (used in) provided by
investing activities |
(28,323) |
(13,596) |
| |
|
|
| FINANCING ACTIVITIES |
|
|
| Dividends paid |
(24,450) |
(12,627) |
| Repurchase of common shares [note
14] |
(286) |
(4,500) |
| Cash used in financing
activities |
(24,736) |
(17,127) |
| Net decrease in cash and cash
equivalents during the period |
(59,600) |
(18,640) |
| Cash and cash equivalents, beginning
of period |
72,505 |
71,589 |
| Cash and cash equivalents, end of
period |
12,905 |
52,949 |
| The accompanying notes are an integral part
of these unaudited interim condensed consolidated financial
statements. |
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
Leon's Furniture Limited
Tabular amounts in thousands of Canadian dollars except shares
outstanding and earnings per share
For the three and six month periods ended June 30, 2012 and 2011
1. GENERAL INFORMATION
Leon's Furniture Limited was incorporated by
Articles of Incorporation under the Business Corporations Act on
February 28, 1969. Leon's Furniture
Limited and its subsidiaries ("Leon's" or the "Company") is a
public company with its common shares listed on the Toronto Stock
Exchange and is incorporated and domiciled in Canada. The address
of the Company's head and registered office is 45 Gordon Mackay
Road, Toronto, Ontario, M9N 3X3.
Leon's is a retailer of home furnishings,
electronics and appliances across Canada from Alberta to
Newfoundland and Labrador. The Company owns a chain of forty-one
retail stores operating as Leon's Home Furnishings Super Stores,
three retail stores operating under the brand of Appliance Canada
and operates an ecommerce internet site www.leons.ca. In addition,
the Company has twenty-seven franchisees operating thirty-two
Leon's Furniture franchise stores.
2. BASIS OF PRESENTATION
The interim condensed consolidated financial
statements of the Company are prepared in accordance with IAS 34,
Interim Financial Reporting, as issued by the International
Accounting Standards Board ("IASB"). Accordingly, certain
information and note disclosure normally included in the annual
financial statements prepared in accordance with International
Financial Reporting Standards ("IFRS"), as issued by the IASB, have
been omitted or condensed. The financial statements of the
Company include the financial results of Leon's Furniture Limited
and its wholly owned subsidiaries, Murlee Holdings Limited, Leon
Holdings (1967) Limited and Ablan Insurance Corporation.
The interim condensed consolidated financial
statements have been prepared using the historical cost convention,
as modified by certain financial assets measured at fair value
through profit or loss. These interim condensed consolidated
financial statements were approved and authorized for issuance by
the Board of Directors on August 13,
2012.
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
These interim condensed consolidated financial
statements have been prepared using the same accounting policies
and methods of computation as the annual consolidated financial
statements of Leon's for the year ended December 31, 2011. The disclosure contained in
these interim condensed consolidated financial statements does not
include all requirements in IAS 1, Presentation of Financial
Statements. Accordingly, the interim condensed consolidated
financial statements should be read in conjunction with the annual
consolidated financial statements for the year ended December 31, 2011.
4. FINANCIAL RISK MANAGEMENT
Classification of financial instruments and
fair value
The classification of the Company's financial
instruments, as well as, their carrying amounts and fair values are
disclosed in the table below.
| Financial Instrument |
Designation |
Measurement |
June 30, 2012 |
December 31, 2011 |
| Cash and cash equivalents |
Available-for-sale |
Fair value |
12,905 |
72,505 |
| Available-for-sale financial assets |
Available-for-sale |
Fair Value |
169,817 |
149,318 |
| Trade receivables |
Loans and receivables |
Amortized cost |
19,369 |
28,937 |
| Trade and other payables |
Other financial liabilities |
Amortized cost |
48,547 |
75,126 |
| Redeemable share liability |
Other financial liabilities |
Amortized cost |
594 |
382
|
Fair value hierarchy
The following table classifies financial assets
and liabilities that are recognized on the consolidated statements
of financial position at fair value in a hierarchy that is based on
significance of the inputs used in making the measurements. The
levels in the hierarchy are:
| Level 1: |
Quoted prices (unadjusted) in active markets for
identical assets or liabilities |
| Level 2: |
Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices) |
| Level 3: |
Inputs for the asset or liability that are not
based on observable market data (that is, unobservable
inputs). |
| Financial Instruments at Fair Value |
Hierarchy level |
June 30, 2012 |
December 31, 2011 |
| Cash and cash equivalents |
1 |
12,905 |
72,505 |
| Available-for-sale financial assets -
Equities |
1 |
32,766 |
31,147 |
| Available-for-sale financial assets - Bonds |
2 |
137,051 |
118,171 |
Financial risks factors
The Company's activities expose it to a variety
of financial risks: market risk (including foreign currency risk,
interest rate risk, and other price risk), credit risk and
liquidity risk. Risk management is carried out by the Company
by identifying and evaluating the financial risks inherent within
its operations. The Company's overall risk management
activities seek to minimize potential adverse effects on the
Company's financial performance.
(a) Market risk
| (i) |
Foreign exchange risk - The Company is exposed to foreign
currency risk. Certain merchandise is paid for in U.S.
dollars. This foreign exchange cost is included in the
inventory cost. The Company does not believe it has
significant foreign currency risk with respect to its trade
payables in U.S. dollars. |
| |
The Company is also exposed to foreign currency risk on its
foreign currency denominated portfolio of available-for-sale
financial assets, primarily related to actively traded
international equities. As at June 30, 2012, the Company's
investment portfolio included 12% of foreign currency denominated
assets [as at December 31, 2011 - 10%]. This risk is monitored by
the Company's management and investment managers in an effort to
reduce the Company's exposure to foreign currency exchange rate
risk. |
| |
|
| (ii) |
Interest rate risk - The Company is exposed to interest rate
risk through its portfolio of available-for-sale financial assets
by holding cash, cash equivalents and actively traded Canadian and
international Bonds. At June 30, 2012, 82% of the Company's
investment portfolio was made up of cash, cash equivalents and
Canadian and international Bonds [as at December 31, 2011 - 86%].
This risk is monitored by the Company's management and investment
managers in an effort to reduce the Company's exposure to interest
rate risk. The exposure to this risk is minimal due to the
short-term maturities of the bonds held. The Company is not subject
to any other interest rate risk. |
| |
|
| (iii) |
Price risk - The Company is exposed to fluctuations in the
market prices of its portfolio of available-for-sale financial
assets. Changes in the fair value of the available-for-sale
financial assets are recorded, net of income taxes, in accumulated
other comprehensive income as it relates to unrecognized gains and
losses. The risk is managed by the Company and its
investment managers by ensuring a conservative asset allocation of
bonds and equities. |
(b) Credit risk
Credit risk arises from cash and cash
equivalents, available-for-sale financial assets and trade
receivables. The Company places its cash and cash equivalents and
available-for-sale financial assets with institutions of high
credit worthiness. Maximum credit risk exposure represents the loss
that would be incurred if all of the Company's counterparties were
to default at the same time.
The Company has some credit risk associated with
its trade receivables as it relates to the Appliance Canada
division that is partially mitigated by the Company's credit
management practices.
The Company's trade receivables total
$19,369,000 as at June 30, 2012 [as at December 31, 2011 - $28,937,000]. The amount of trade receivables
that the Company has determined to be past due [which is defined as
a balance that is more than 90 days past due] is $558,000 as at June 30,
2012 [as at December 31, 2011
- $191,000] which relates entirely to
the Appliance Canada division. The Company's provision for
impairment of trade receivables, established through on-going
monitoring of individual customer accounts, was $500,000 as at June 30,
2012 [as at December 31, 2011
- $500,000].
The majority of the Company's sales are paid
through cash, credit card or non-recourse third-party
finance. The Company relies on one third-party credit
supplier to supply financing to its customers.
(c) Liquidity risk
The Company has no outstanding borrowings and
does not rely upon available credit facilities to finance
operations or to finance committed capital expenditures. The
portfolio of available-for-sale financial assets consists primarily
of actively traded Canadian and international bonds. There is
no immediate need for cash by the Company from its investment
portfolio.
The Company expects to settle its trade and
other payables within 30 days of the period end date. The
redeemable share liability does not have any fixed terms of
repayment.
5. CAPITAL RISK MANAGEMENT
The Company defines capital as shareholders'
equity. The Company's objectives when managing capital are
to:
- ensure sufficient liquidity to support its financial
obligations and execute its operating and strategic plans; and
- utilize working capital to negotiate favourable supplier
agreements both in respect of early payment discounts and overall
payment terms.
The Company is not subject to any externally
imposed capital requirements.
6. CASH AND CASH EQUIVALENTS
| |
As at June 30, 2012 |
As at December 31, 2011 |
| Cash at bank and on hand |
(4,381) |
2,181 |
| Short-term investments |
17,286 |
70,324 |
| Totals |
12,905 |
72,505
|
7. INVENTORIES
The amount of inventory recognized as an expense
for the six month period ended June 30,
2012 was $185,240,000 (period
ended June 30, 2011 - $181,095,000) which is presented within cost of
sales on the interim consolidated income statements.
During the three month period ended June 30, 2012, there was $161,000 in inventory write-downs (three month
period ended June 30, 2011 -
$288,000). At June 30, 2012, the inventory markdown provision
totaled $5,132,000 (As of
December 31, 2011 - $4,846,000). There were no reversals of any
write-down for the three and six month period ended June 30, 2012 ( three and six month period ended
June 30, 2011 - nil). None of the
Company's inventory has been pledged as security for any
liabilities of the Company.
8. PROPERTY, PLANT AND EQUIPMENT
| |
Land |
Buildings |
Equipment |
Vehicles |
Computer
hardware |
Building
improvements |
Total |
As at December 31, 2011:
Opening net book value
Additions
Disposals
Depreciation |
55,331
100
—
— |
82,604
9,165
—
3,563 |
11,061
4,403
—
2,029 |
3,348
2,253
18
1,271 |
1,117
164
—
538 |
48,031
9,253
—
5,253 |
201,492
25,338
18
12,654 |
| Closing net book value |
55,431 |
88,206 |
13,435 |
4,312 |
743 |
52,031 |
214,158 |
As at December 31, 2011:
Cost
Accumulated depreciation |
55,431
— |
184,530
96,324 |
40,456
27,021 |
23,051
18,739 |
9,115
8,372 |
87,526
35,495 |
400,109
185,951 |
| Net book value |
55,431 |
88,206 |
13,435 |
4,312 |
743 |
52,031 |
214,158 |
As at June 30, 2012:
Opening net book value
Additions
Disposals
Depreciation |
55,431
(50)
—
— |
88,206
18
—
1,943 |
13,435
3,937
—
1,092 |
4,312
906
8
735 |
743
—
—
226 |
52,031
5,850
—
2,808 |
214,158
10,661
8
6,804 |
| Closing net book value |
55,381 |
86,281 |
16,280 |
4,475 |
517 |
55,073 |
218,007 |
As at June 30, 2012:
Cost
Accumulated depreciation |
55,381
— |
184,548
98,267 |
44,393
28,113 |
23,721
19,246 |
9,115
8,598 |
93,376
38,303 |
410,534
192,527 |
| Net book value |
55,381 |
86,281 |
16,280 |
4,475 |
517 |
55,073 |
218,007 |
Included in the above balances at June 30, 2012 are assets not being amortized with
a net book value of approximately $9,013,000 [as at December
31, 2011 - $2,638,000] being
construction-in-progress.
9. INVESTMENT PROPERTIES
| |
Land |
Buildings |
Building
improvements |
Total |
As at December 31, 2011:
Opening net book value
Additions
Disposals
Depreciation |
8,286
—
—
— |
—
—
—
— |
131
—
—
51 |
8,417
—
—
51 |
| Closing net book value |
8,286 |
— |
80 |
8,366 |
As at December 31, 2011:
Cost
Accumulated depreciation |
8,286
- |
8,039
8,039 |
1,457
1,377 |
17,782
9,416 |
| Net book value |
8,286 |
— |
80 |
8,366 |
As at June 30, 2012:
Opening net book value
Additions
Disposals
Depreciation |
8,286
—
—
— |
—
—
—
— |
80
—
—
26 |
8,366
—
—
26 |
| Closing net book value |
8,286 |
— |
54 |
8,340 |
As at June 30, 2012:
Cost
Accumulated depreciation |
8,286
— |
8,039
8,039 |
1,457
1,403 |
17,782
9,442 |
| Net book value |
8,286 |
— |
54 |
8,340 |
The fair value of the investment property
portfolio as at June 30, 2012 was
approximately $29,750,000 [as at
December 31, 2011 - $29,750,000]. The fair value was compiled
internally by management based on available market evidence.
10. INTANGIBLE ASSETS
| |
Customer
relationships |
Brand name |
Non-compete
Agreement |
Computer
software |
Total |
| |
|
|
|
|
|
As at December 31, 2011:
Opening net book value
Additions
Disposals
Amortization for the year |
1,250
—
—
250 |
1,750
—
—
250 |
625
—
—
125 |
1,277
(64)
—
255 |
4,902
(64)
—
880 |
| Net book value |
1,000 |
1,500 |
500 |
958 |
3,958 |
As at December 31, 2011:
Cost
Accumulated amortization |
2,000
1,000 |
2,500
1,000 |
1,000
500 |
4,202
3,244 |
9,702
5,744 |
| Net book value |
1,000 |
1,500 |
500 |
958 |
3,958 |
As at June 30, 2012:
Opening net book value
Additions
Disposals
Amortization for the year |
1,000
—
—
125 |
1,500
—
—
125 |
500
—
—
63 |
958
9
—
120 |
3,958
9
—
433 |
| Closing net book value |
875 |
1,375 |
437 |
847 |
3,534 |
As at June 30, 2012:
Cost
Accumulated amortization |
2,000
1,125 |
2,500
1,125 |
1,000
563 |
4,211
3,364 |
9,711
6,177 |
| Net book value |
875 |
1,375 |
437 |
847 |
3,534 |
11. TRADE AND OTHER PAYABLES
| |
As at June 30, 2012 |
As at December 31, 2011 |
Trade payables
Other payables |
43,788
4,759 |
62,485
12,641 |
| |
48,547 |
75,126 |
12. PROVISIONS
| |
Profit sharing
and bonuses |
Vacation pay |
Totals |
| As at December 31, 2011 |
10,860 |
371 |
11,231 |
| Additional provisions |
4,840 |
1,359 |
6,199 |
| Unused amounts reversed |
(1,903) |
— |
(1,903) |
| Utilized during the quarter |
(8,957) |
(379) |
(9,336) |
| As at June 30, 2012 |
4,840 |
1,351 |
6,191 |
| (a) |
The provision for profit sharing and bonuses is payable within
the first half of the following fiscal year. |
| (b) |
The provision for vacation pay represents employee entitlements
to untaken vacation at each reporting date. |
13. REDEEMABLE SHARE LIABILITY
| |
As at
June 30,
2012 |
As at
December 31,
2011 |
Authorized
2,284,000 convertible, non-voting, series 2002 shares
806,000 convertible, non-voting, series 2005 shares
1,224,000 convertible, non-voting, series 2009 shares
306,500 convertible, non-voting, series 2012 shares
Issued and fully paid
553,722 series 2002 shares [December 31, 2011 - 667,748]
489,690 series 2005 shares [December 31, 2011 - 541,248]
1,082,870 series 2009 shares [December 31, 2011 - 1,115,107]
306,500 series 2012 shares [December 31, 2011 - nil]
Less employee share purchase loans |
3,980
4,624
9,584
3,804
(21,398) |
4,799
5,111
9,869
-
(19,397) |
| |
594 |
382 |
Under the terms of the Plan, the Company
advanced non-interest bearing loans to certain of its employees in
2002, 2005, 2009 and 2012 to allow them to acquire convertible,
non-voting, series 2002 shares, series 2005 shares, series 2009
shares and series 2012 shares, respectively, of the Company.
These loans are repayable through the application against the loans
of any dividends on the shares, with any remaining balance
repayable on the date the shares are converted to common
shares. Each issued and fully paid for series 2002, 2005,
2009 and 2012 share may be converted into one common share at any
time after the fifth anniversary date of the issue of these shares
and prior to the tenth anniversary of such issue.
Series 2002 shares may also be redeemed at the option of the holder
or by the Company at any time after the fifth anniversary date of
the issue of these shares and must be redeemed prior to the tenth
anniversary of such issue. The series 2005, series 2009 and
series 2012 shares are redeemable at the option of the holder for a
period of one business day following the date of issue of such
shares. The Company has the option to redeem the series 2005,
series 2009 and series 2012 shares at any time after the fifth
anniversary date of the issue of these shares and must redeem them
prior to the tenth anniversary of such issue. The redemption
price is equal to the original issue price of the shares adjusted
for subsequent subdivisions of shares plus accrued and unpaid
dividends. The purchase prices of the shares are $7.19 per series 2002 share, $9.44 per series 2005 share, $8.85 per series 2009 share and $12.41 per series 2012 share.
Dividends paid to holders of series 2002, 2005
and 2009 shares of approximately $465,000 [2011 - $470,000] have been used to reduce the respective
shareholder loans.
During the six month period ended June 30, 2012, 114,026 series 2002 shares [six
month period ended June 30,
2011 - 130,679], 51,558 series 2005 shares [six
month period ended June 30,
2011 - 60,746] and 20,000 series 2009 shares [six month
period ended June 30, 2011 -
nil] were converted into common shares with a stated value of
approximately $819,000 [six month
period ended June 30, 2011 -
$939,000], $487,000 [six month period ended June 30, 2011 - $574,000] and $177,000 [six month period ended June 30, 2011 - $nil], respectively.
During the six month period ended June 30, 2012, the Company cancelled 12,237
series 2009 shares [six month period ended June 30, 2011 - 4,820] in the amount of
$108,000 [six month period ended
June 30, 2011 - $43,000].
14. COMMON SHARES
| |
As at June
30, 2012 |
As at December
31, 2011 |
Authorized - Unlimited common shares |
|
|
Issued
69,977,812 common shares [December 31, 2011 - 69,815,734] |
22,398 |
20,918 |
During the three month period ended June 30, 2012, 24,358 series 2002 shares [three
month period ended June 30, 2011 -
59,481], 18,736 series 2005 shares [three month period ended
June 30, 2011 - 14,760] and 20,000
series 2009 shares [three month period ended June 30, 2011 - nil] were converted into common
shares with a stated value of approximately $175,000 [three month period ended June 30, 2011 - $427,000], $177,000
[three month period ended June 30,
2011 - $139,000] and
$177,000 [three month period ended
June 30, 2011 - $nil],
respectively.
During the six month period ended June 30, 2012, the Company repurchased 23,506
[six month period ended June 30, 2011
- 330,843] of its common shares on the open market pursuant to the
terms and conditions of Normal Course Issuer Bids at a net cost of
approximately $286,000 [six month
period ended June 30, 2011 -
$4,500,000]. All shares
repurchased by the Company pursuant to its Normal Course Issuer
Bids have been cancelled. The repurchase of common shares
resulted in a reduction of share capital in the amount of
approximately $3,000 [six month
period ended June 30, 2011 -
$39,000]. The excess net cost
over the average carrying value of the shares of approximately
$283,000 [six month period ended
June 30, 2011 - $4,461,000] has been recorded as a reduction in
retained earnings.
The dividends paid for the three month periods
ended June 30, 2012 and June 30, 2011 were $6,993,000 [$0.10
per share] and $6,317,000
[$0.09 per share], respectively. The
dividends paid for the six month periods end June 30, 2012 and June 30,
2011 were $24,450,000
[$0.35 per share] and $12,627,000 [$0.18
per share], respectively.
15. REVENUE
| |
Three month period
ended June 30, 2012 |
Three month period
ended June 30, 2011 |
Sale of goods by corporate stores
Income from franchise operations
Extended warranty revenue
Rental income from investment property |
157,819
2,198
1,898
180 |
159,273
2,386
2,014
184 |
| |
162,095 |
163,857 |
| |
Six month period
ended June 30, 2012 |
Six month period
ended June 30, 2011 |
Sale of goods by corporate stores
Income from franchise operations
Extended warranty revenue
Rental income from investment property |
310,402
4,958
3,797
369 |
305,328
4,917
4,027
368 |
| |
319,526 |
314,640 |
16. OPERATING EXPENSES BY NATURE
| |
Three month
period
ended June 30, 2012 |
Three month
period
ended June 30, 2011 |
Depreciation of property, plant and equipment
and
investment properties
Amortization of intangible assets
Operating lease payments
Gain on sale of property, plant and equipment |
3,455
216
1,297
13 |
3,053
221
825
21 |
| |
Six month period
ended June 30, 2012 |
Six month period
ended June 30, 2011 |
Depreciation of property, plant and equipment
and
investment properties
Amortization of intangible assets
Operating lease payments
Gain on sale of property, plant and equipment |
6,830
433
2,578
15 |
6,030
442
1,616
21 |
17. INCOME TAX EXPENSE
| |
Three month period
ended June 30, 2012 |
Three month period
ended June 30, 2011 |
Current income tax expense
Deferred income tax (recovery) expense |
3,271
(71) |
4,425
(42) |
| |
3,200 |
4,383 |
| |
Six month period
ended June 30, 2012 |
Six month period
ended June 30, 2011 |
Current income tax expense
Deferred income tax (recovery) expense |
6,394
(137) |
8,353
(14) |
| |
6,257 |
8,339 |
Income tax expense is recognized based on
management's best estimate of the weighted average annual income
tax rate expected for the full financial year. The estimated
average annual rates used for the three month periods ended
June 30, 2012 and June 30, 2011 were 26.8% and 28.5%,
respectively.
18. EARNINGS PER SHARE
Earnings per share are calculated using the
weighted average number of shares outstanding. The weighted average
number of shares used in the basic earnings per share calculations
amounted to 69,945,113 for the three month period ended
June 30, 2012 [three month period
ended June 30, 2011 -
69,962,673]. The following table reconciles the profit for
the period and the number of shares for the basic and diluted
earnings per share calculations:
| |
Three month
period ended
June 30, 2012 |
Three month
period ended
June 30, 2011 |
Six month
period ended
June 30, 2012 |
Six month
period ended
June 30, 2011 |
| Profit for the period for basic earnings per
share |
9,004 |
11,224 |
17,603 |
21,517 |
| Profit for the period for diluted earnings per
share |
9,004 |
11,224 |
17,603 |
21,517 |
| Weighted average common shares outstanding |
69,945,113 |
69,962,673 |
69,920,127 |
70,162,709 |
| Dilutive effect (note 13) |
2,452,174 |
2,444,189 |
2,354,533 |
2,486,500 |
| Diluted weighted average common shares
outstanding |
72,397,287 |
72,406,862 |
72,274,660 |
72,649,209 |
| Basic earnings per share |
0.13 |
0.16 |
0.25 |
0.31 |
| Diluted earnings per share |
0.12 |
0.15 |
0.24 |
0.30 |
19. COMMITMENTS AND CONTINGENCIES
| [a] |
The cost to complete all construction-in-progress as at June
30, 2012 totals $2,734,000 at one location [December 31, 2011 - to
complete at two locations at an approximate cost of
$4,407,000]. |
| [b] |
The Company is obligated under operating leases for future
minimum annual rental payments for certain land and buildings as
follows: |
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years |
6,859
25,159
27,047 |
| |
59,065 |
| [c] |
The future minimum lease payments receivable under
non-cancellable operating leases for certain land and buildings
classified as investment property are as follows: |
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years |
791
2,435
1,291 |
| |
4,517 |
| [d] |
The Company has issued approximately $255,000 in letters of
credit primarily with respect to buildings under construction or
being completed. |
| [e] |
Pursuant to a reinsurance agreement relating to the extended
warranty sales, the Company has pledged available-for-sale
financial assets amounting to $20,151,000 [as at December 31,
2011 - $20,257,000] and provided a letter of credit of
$1,500,000 [as at December 31, 2011 - $1,500,000] for the
benefit of the insurance company. |
20. INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS
| [a] |
The net change in non-cash working capital balances related to
operations consists of the following: |
| |
Six month period
ended June 30, 2012 |
Six month period
ended June 30, 2011 |
Trade receivables
Inventory
Other assets
Trade, other payables and provisions
Income taxes payable
Customers' deposits |
9,568
(2,876)
106
(31,795)
(4,602)
(114) |
9,954
(3,781)
62
(14,511)
(6,108)
(306) |
| |
(29,713) |
(14,690) |
| [b] |
Supplemental cash flow information: |
| |
Six month period ended
June 30, 2012 |
Six month period ended
June 30, 2011 |
| Income taxes paid |
10,421 |
13,693 |
| [c] |
During the six month period, property, plant and equipment were
acquired at an aggregate cost of $10,661,000 [2011 - $11,989,000],
of which $1,050,000 [2011 - $874,000] is included in trade and
other payables as at December 31, 2011. |
21. SUBSEQUENT EVENT
The Directors have also approved, subject to
obtaining regulatory approvals, the continuation of the Company's
ongoing Normal Course Issuer Bid, which expires on September 9, 2012. Pursuant to the continued bid,
the Company intends, in the twelve months commencing September 10, 2012, to purchase up to the lesser
of 4.99% of its Common Shares outstanding on August 31, 2012, and the amount equal to 4.99% of
its Common Shares outstanding on the date the Toronto Stock
Exchange accepts the notice of intention to make a normal course
issuer bid.
SOURCE Leon's Furniture Limited
