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 6(th), 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 4(th) day of October 2012 to
shareholders of record at the close of business on the 4(th) 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
12¢ 13¢ $0.25 - Fully Diluted 12¢ 12¢ $0.24 2011 - Basic 15¢ 16¢
22¢ 28¢ $0.81 - Fully Diluted 14¢ 15¢ 21¢ 27¢ $0.78 2010 - Basic
17¢ 17¢ 26¢ 30¢ $0.90 - Fully Diluted 16¢ 16¢ 25¢ 29¢ $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 2011 2010
2009 per share and dividends) 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
$0.15 - $0.20 declared Convertible, non-voting shares $0.20 $0.18
$0.14 dividends declared Liquidity and Financial Resources ($ in
thousands, Jun 30/12 Dec 31/11 Jun 30/11 except dividends per
share) Cash, cash 182,722 221,823 200,018 equivalents,
available-for-sale financial assets Trade and other 19,369 28,937
18,615 accounts receivable 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 Current Prior Quarter Prior Quarter ended
Quarter Dec 31/11 June 30/11 Jun 30/12 Cash flow provided 1,040
26,230 12,770 by operations Purchase of 6,900 6,336 6,401 property,
plant and equipment Repurchase of 54 219 3,785 capital stock
Dividends paid 6,993 6,292 6,317 Dividends paid per $0.10 $0.09
$0.09 share 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 | Quarter Ended | Quarter Ended | Quarter Ended |
| | June 30 | March 31 | December 31 | September 30 |
|_________|_______________|_______________|_______________|_______________|
| | 2012 | 2011 | 2012 | 2011 | 2011 | 2010 | 2011 | 2010 |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
|Leon's
|162,095|163,857|157,431|150,783|193,823|197,888|174,373|182,125|
|Corporate| | | | | | | | | |Sales | | | | | | | | |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
|Leon's | 45,627| 45,477| 43,220| 40,809| 61,166| 59,820| 49,273|
49,421| |Franchise| | | | | | | | | |sales | | | | | | | | |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
|Total
|207,722|209,334|200,651|191,592|254,989|257,708|223,646|231,546|
|Leon's | | | | | | | | | |system | | | | | | | | | |wide | | | | |
| | | | |sales | | | | | | | | |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
|Net | $0.13| $0.16| $0.12| $0.15| $0.28| $0.30| $0.22| $0.26|
|Income | | | | | | | | | |Per Share| | | | | | | | |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
|Fully | $0.12| $0.15| $0.12| $0.14| $0.27| $0.29| $0.21| $0.25|
|Diluted | | | | | | | | | |Per Share| | | | | | | | |
|_________|_______|_______|_______|_______|_______|_______|_______|_______|
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 Less than Obligations Total 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 61,799 9,593 12,512 12,647 27,047 Obligations (1)The
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 (7,814) - periods
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 Vice President &
Chief Executive Officer Financial Officer Dated as of the 13(th)
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 12,905 72,505 and 6] Available-for-sale
financial assets 169,817 149,318 [notes 4 and 19e] 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 218,007 214,158 8] 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 48,547 75,126 11]
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 4 594 382 and 13] 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 873 (104) income Total
shareholders' equity 431,247 425,461 Total liabilities and
shareholder's 557,236 595,339 equity 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 95,885 97,170 189,103 185,235 7]
Gross profit 66,210 66,687 130,423 129,405 Operating expenses [note
16] General and administrative 24,208 25,158 47,062 47,553 expenses
Sales and 20,591 18,161 41,103 36,673 marketing expenses Occupancy
expenses 8,390 7,156 17,019 14,596 Other operating 1,376 1,408
2,687 2,351 expenses 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 12,204 15,607 23,860 29,856 income tax Income tax
expense 3,200 4,383 6,257 8,339 [note 17] Profit for the period
attributable to 9,004 11,224 17,603 21,517 the shareholders of the
Company 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 (384) (50) (334)
arising during the period Reclassification adjustment for net gains
and (losses) included in profit (170) (22) (148) for the period
Change in unrealized (losses) on available-for-sale financial
assets (554) (72) (482) arising during the period Comprehensive
income for the period attributable to the shareholders of the 8,450
(72) 8,522 Company 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 394 67 327 period Reclassification adjustment for net
gains and (losses) included in profit (8) (1) (7) for the period
Change in unrealized gains on available-for-sale financial 386 66
320 assets arising during the period Comprehensive income for the
period attributable to the shareholders of the 11,610 66 11,544
Company 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 1,351 177
1,174 period Reclassification adjustment for net gains and (losses)
included in profit (228) (31) (197) for the period Change in
unrealized gains on available-for-sale financial 1,123 146 977
assets arising during the period Comprehensive income for the
period attributable to the shareholders of the 18,726 146 18,580
Company 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 844
195 649 period Reclassification adjustment for net gains and
(losses) included in profit (11) (1) (10) for the period Change in
unrealized gains on available-for-sale financial 833 194 639 assets
arising during the period Comprehensive income for the period
attributable to the shareholders of the 22,350 194 22,156 Company
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) Accumulated other comprehensive ($ in thousands) Common
shares income Retained Total earnings As at January 1, 19,177 480
390,629 410,286 2011 Comprehensive income Profit for the — — 21,517
21,517 period Change in unrealized gains on available-for-sale —
639 — 639 financial assets arising during the period Total
comprehensive — 639 21,517 22,156 income Transactions with
shareholders Dividends declared — — (12,622) (12,622) Management
share purchase plan [note 1,513 — — 1,513 13] Repurchase of common
shares [note (39) — (4,461) (4,500) 14] Total transactions 1,474 —
(17,083) (15,609) with shareholders As at June 30, 2011 20,651
1,119 395,063 416,833 As at January 1, 20,918 (104) 404,647 425,461
2012 Comprehensive income Profit for the — — 17,603 17,603 period
Change in unrealized gains on available-for-sale — 977 — 977
financial assets arising during the period Total comprehensive —
977 17,603 18,580 income Transactions with shareholders Dividends
declared — — (13,991) (13,991) Management share purchase plan [note
1,483 — — 1,483 13] Repurchase of common shares [note (3) — (283)
(286) 14] Total transactions 1,480 — (14,274) (12,794) with
shareholders 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
6,830 6,030 equipment and investment properties Amortization of
intangible assets 433 442 Amortization of deferred warranty plan
(8,329) (8,612) revenue Gain on sale of property, plant and (15)
(21) equipment Deferred income taxes 444 454 Loss on sale of
available-for-sale 171 68 financial assets 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
(29,713) (14,690) (a)] Cash (used in) provided by operating (6,541)
12,083 activities INVESTING ACTIVITIES Purchase of property, plant
& equipment (10,486) (9,277) Purchase of intangible assets (9)
- Proceeds on sale of property, plant & 24 39 equipment
Purchase of available-for-sale financial (259,904) (241,489) assets
Proceeds on sale of available-for-sale 240,357 235,408 financial
assets Issuance of series 2012 shares [note 13] 3,804 - (Increase)
decrease in employee share (2,109) 1,723 purchase loans [note 13]
Cash (used in) provided by investing (28,323) (13,596) activities
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 (59,600) (18,640) during the period Cash and cash
equivalents, beginning of 72,505 71,589 period 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 |Designation |Measurement|June 30,|December| |Instrument
| | | 2012|31, 2011|
|__________________|__________________|___________|________|________|
|Cash and cash |Available-for-sale|Fair value | 12,905| 72,505|
|equivalents | | | | |
|__________________|__________________|___________|________|________|
|Available-for-sale|Available-for-sale|Fair Value | 169,817|
149,318| |financial assets | | | | |
|__________________|__________________|___________|________|________|
|Trade receivables |Loans and |Amortized | 19,369| 28,937| |
|receivables |cost | | |
|__________________|__________________|___________|________|________|
|Trade and other |Other financial |Amortized | 48,547| 75,126|
|payables |liabilities |cost | | |
|__________________|__________________|___________|________|________|
|Redeemable share |Other financial |Amortized | 594| 382|
|liability |liabilities |cost | | |
|__________________|__________________|___________|________|________|
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|Hierarchy level|June 30, 2012|December 31,
2011| |at Fair Value | | | |
|_____________________|_______________|_____________|_________________|
|Cash and cash | 1 | 12,905| 72,505| |equivalents | | | |
|_____________________|_______________|_____________|_________________|
|Available-for-sale | 1 | 32,766| 31,147| |financial assets - | | |
| |Equities | | | |
|_____________________|_______________|_____________|_________________|
|Available-for-sale | 2 | 137,051| 118,171| |financial assets - | |
| | |Bonds | | | |
|_____________________|_______________|_____________|_________________|
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
_______________________________________________________________________________
| | | | | |Computer| Building| | | |
Land|Buildings|Equipment|Vehicles|hardware|improvements| Total|
|____________|_______|_________|_________|________|________|____________|_______|
|As at | | | | | | | | |December 31,| 55,331| 82,604| 11,061|
3,348| 1,117| 48,031|201,492| |2011: | 100| 9,165| 4,403| 2,253|
164| 9,253| 25,338| |Opening net |—| —| —| 18| —| —| 18| |book
value |—| 3,563| 2,029| 1,271| 538| 5,253| 12,654| |Additions | | |
| | | | | |Disposals | | | | | | | | |Depreciation| | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|Closing net | 55,431| 88,206| 13,435| 4,312| 743| 52,031|214,158|
|book value | | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|As at | | | | | | | | |December 31,| 55,431| 184,530| 40,456|
23,051| 9,115| 87,526|400,109| |2011: |—| 96,324| 27,021| 18,739|
8,372| 35,495|185,951| |Cost | | | | | | | | |Accumulated | | | | |
| | | |depreciation| | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|Net book | 55,431| 88,206| 13,435| 4,312| 743| 52,031|214,158|
|value | | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|As at June | | | | | | | | |30, 2012: | 55,431| 88,206| 13,435|
4,312| 743| 52,031|214,158| |Opening net | (50)| 18| 3,937| 906| —|
5,850| 10,661| |book value |—| —| —| 8| —| —| 8| |Additions |—|
1,943| 1,092| 735| 226| 2,808| 6,804| |Disposals | | | | | | | |
|Depreciation| | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|Closing net | 55,381| 86,281| 16,280| 4,475| 517| 55,073|218,007|
|book value | | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|As at June | | | | | | | | |30, 2012: | 55,381| 184,548| 44,393|
23,721| 9,115| 93,376|410,534| |Cost |—| 98,267| 28,113| 19,246|
8,598| 38,303|192,527| |Accumulated | | | | | | | | |depreciation|
| | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
|Net book | 55,381| 86,281| 16,280| 4,475| 517| 55,073|218,007|
|value | | | | | | | |
|____________|_______|_________|_________|________|________|____________|_______|
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
_______________________________________________________________ | |
| | Building| | | | Land|Buildings|improvements| Total|
|________________________|_______|_________|____________|_______|
|As at December 31, 2011:| | | | | |Opening net book value | 8,286|
—| 131| 8,417| |Additions |—| —| —|—| |Disposals |—| —| —|—|
|Depreciation |—| —| 51| 51|
|________________________|_______|_________|____________|_______|
|Closing net book value | 8,286| —| 80| 8,366|
|________________________|_______|_________|____________|_______|
|As at December 31, 2011:| | | | | |Cost | 8,286| 8,039| 1,457|
17,782| |Accumulated depreciation| -| 8,039| 1,377| 9,416|
|________________________|_______|_________|____________|_______|
|Net book value | 8,286| —| 80| 8,366|
|________________________|_______|_________|____________|_______|
|As at June 30, 2012: | | | | | |Opening net book value | 8,286| —|
80| 8,366| |Additions |—| —| —|—| |Disposals |—| —| —|—|
|Depreciation |—| —| 26| 26|
|________________________|_______|_________|____________|_______|
|Closing net book value | 8,286| —| 54| 8,340|
|________________________|_______|_________|____________|_______|
|As at June 30, 2012: | | | | | |Cost | 8,286| 8,039| 1,457|
17,782| |Accumulated depreciation|—| 8,039| 1,403| 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| |Non-compete|Computer| | | |relationships|Brand name|
Agreement|software| Total|
|______________|_____________|__________|___________|________|_______|
| | | | | | |
|______________|_____________|__________|___________|________|_______|
|As at December| | | | | | |31, 2011: | 1,250| 1,750| 625| 1,277|
4,902| |Opening net | —| —| —| (64)| (64)| |book value | —| —| —|
—|—| |Additions | 250| 250| 125| 255| 880| |Disposals | | | | | |
|Amortization | | | | | | |for the year | | | | | |
|______________|_____________|__________|___________|________|_______|
|Net book value| 1,000| 1,500| 500| 958| 3,958|
|______________|_____________|__________|___________|________|_______|
|As at December| | | | | | |31, 2011: | 2,000| 2,500| 1,000| 4,202|
9,702| |Cost | 1,000| 1,000| 500| 3,244| 5,744| |Accumulated | | |
| | | |amortization | | | | | |
|______________|_____________|__________|___________|________|_______|
|Net book value| 1,000| 1,500| 500| 958| 3,958|
|______________|_____________|__________|___________|________|_______|
|As at June 30,| | | | | | |2012: | 1,000| 1,500| 500| 958| 3,958|
|Opening net | —| —| —| 9| 9| |book value | —| —| —| —|—|
|Additions | 125| 125| 63| 120| 433| |Disposals | | | | | |
|Amortization | | | | | | |for the year | | | | | |
|______________|_____________|__________|___________|________|_______|
|Closing net | 875| 1,375| 437| 847| 3,534| |book value | | | | | |
|______________|_____________|__________|___________|________|_______|
|As at June 30,| | | | | | |2012: | 2,000| 2,500| 1,000| 4,211|
9,711| |Cost | 1,125| 1,125| 563| 3,364| 6,177| |Accumulated | | |
| | | |amortization | | | | | |
|______________|_____________|__________|___________|________|_______|
|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| 43,788| 62,485| |Other payables| 4,759| 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| As at| | |June 30,|December 31,| | | 2012| 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| 3,980|
4,799| |- 1,115,107] | 4,624| 5,111| |306,500 series 2012 shares
[December 31, 2011 -| 9,584| 9,869| |nil] | 3,804| -| | | | | |Less
employee share purchase loans |(21,398)| (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|As at December| | | 30, 2012| 31, 2011|
|___________________________________________|__________|______________|
| | | | |Authorized -Unlimited common shares | | |
|___________________________________________|__________|______________|
| | | | |Issued | | | |69,977,812 common shares [December 31, 2011|
22,398| 20,918| |- 69,815,734] | | |
|___________________________________________|__________|______________|
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| Three month period| | |ended June 30,
2012|ended June 30, 2011|
|_____________________________|___________________|___________________|
|Sale of goods by corporate | 157,819| 159,273| |stores | 2,198|
2,386| |Income from franchise | 1,898| 2,014| |operations | 180|
184| |Extended warranty revenue | | | |Rental income from
investment| | | |property | | |
|_____________________________|___________________|___________________|
| | 162,095| 163,857|
|_____________________________|___________________|___________________|
| | Six month period| Six month period| | |ended June 30,
2012|ended June 30, 2011|
|_____________________________|___________________|___________________|
|Sale of goods by corporate | 310,402| 305,328| |stores | 4,958|
4,917| |Income from franchise | 3,797| 4,027| |operations | 369|
368| |Extended warranty revenue | | | |Rental income from
investment| | | |property | | |
|_____________________________|___________________|___________________|
| | 319,526| 314,640|
|_____________________________|___________________|___________________|
16. OPERATING EXPENSES BY NATURE
__________________________________________________________________
| | Three month period| Three month period| | |ended June 30,
2012|ended June 30, 2011|
|__________________________|___________________|___________________|
|Depreciation of property, | | | |plant and equipment and | | | |
investment properties | | | |Amortization of intangible| | |
|assets | 3,455| 3,053| |Operating lease payments | 216| 221| |Gain
on sale of property, | 1,297| 825| |plant and equipment | 13| 21|
|__________________________|___________________|___________________|
| | Six month period| Six month period| | |ended June 30,
2012|ended June 30, 2011|
|__________________________|___________________|___________________|
|Depreciation of property, | | | |plant and equipment and | | | |
investment properties | | | |Amortization of intangible| | |
|assets | 6,830| 6,030| |Operating lease payments | 433| 442| |Gain
on sale of property, | 2,578| 1,616| |plant and equipment | 15| 21|
|__________________________|___________________|___________________|
17. INCOME TAX EXPENSE
__________________________________________________________________
| | Three month period| Three month period| | |ended June 30,
2012|ended June 30, 2011|
|__________________________|___________________|___________________|
|Current income tax expense| 3,271| 4,425| |Deferred income tax |
(71)| (42)| |(recovery) expense | | |
|__________________________|___________________|___________________|
| | 3,200| 4,383|
|__________________________|___________________|___________________|
| | Six month period| Six month period| | |ended June 30,
2012|ended June 30, 2011|
|__________________________|___________________|___________________|
|Current income tax expense| 6,394| 8,353| |Deferred income tax |
(137)| (14)| |(recovery) expense | | |
|__________________________|___________________|___________________|
| | 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| Three month| Six month| Six month| | | period
ended| period ended| period ended| period ended| | |June 30,
2012|June 30, 2011|June 30, 2012|June 30, 2011|
|_____________|_____________|_____________|_____________|_____________|
|Profit for | 9,004| 11,224| 17,603| 21,517| |the period | | | | |
|for basic | | | | | |earnings per | | | | | |share | | | | |
|_____________|_____________|_____________|_____________|_____________|
|Profit for | 9,004| 11,224| 17,603| 21,517| |the period | | | | |
|for diluted | | | | | |earnings per | | | | | |share | | | | |
|_____________|_____________|_____________|_____________|_____________|
|Weighted | 69,945,113| 69,962,673| 69,920,127| 70,162,709|
|average | | | | | |common shares| | | | | |outstanding | | | | |
|_____________|_____________|_____________|_____________|_____________|
|Dilutive | 2,452,174| 2,444,189| 2,354,533| 2,486,500| |effect
(note | | | | | |13) | | | | |
|_____________|_____________|_____________|_____________|_____________|
|Diluted | 72,397,287| 72,406,862| 72,274,660| 72,649,209|
|weighted | | | | | |average | | | | | |common shares| | | | |
|outstanding | | | | |
|_____________|_____________|_____________|_____________|_____________|
|Basic | 0.13| 0.16| 0.25| 0.31| |earnings per | | | | | |share | |
| | |
|_____________|_____________|_____________|_____________|_____________|
|Diluted | 0.12| 0.15| 0.24| 0.30| |earnings per | | | | | |share |
| | | |
|_____________|_____________|_____________|_____________|_____________|
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 | 6,859| |Later than 1 year and no later than 5 years|25,159|
|Later than 5 years |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 | 791| |Later than 1 year and no later than 5 years|2,435|
|Later than 5 years |1,291|
|___________________________________________|_____| | |4,517|
|___________________________________________|_____| The Company has
issued approximately $255,000 in letters of credit [d] 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| Six month period| | |ended June 30, 2012|ended
June 30, 2011|
|_________________________|___________________|___________________|
|Trade receivables | 9,568| 9,954| |Inventory | (2,876)| (3,781)|
|Other assets | 106| 62| |Trade, other payables and| (31,795)|
(14,511)| |provisions | (4,602)| (6,108)| |Income taxes payable |
(114)| (306)| |Customers' deposits | | |
|_________________________|___________________|___________________|
| | (29,713)| (14,690)|
|_________________________|___________________|___________________|
[b] Supplemental cash flow information:
_______________________________________________________________ |
|Six month period ended|Six month period ended| | | June 30, 2012|
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. Leon's Furniture Limited
CONTACT: Dominic Scarangella, Tel: 416.243.4073
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