Leon's Furniture Limited - 2012 Fourth Quarter

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Feb 21, 2013, 14:13 ET

TORONTO, Feb. 21, 2013 /CNW/ - Leon's Furniture Limited is pleased to announce its results for the full year 2012 and the fourth quarter 2012. For the year ended December 31, 2012, total Leon's system wide sales were $880,240,000 including $198,077,000 franchise sales ($879,561,000 including $196,725,000 franchise sales in 2011), a slight increase. Same store corporate sales were down 2.9% from the prior year. Net income was $46,782,000, $0.67 per common share ($56,666,000, $0.81 per common share in 2011), a decrease of 17.3% per share.

For the three months ended December 31, 2012, total Leon's system wide sales were $248,187,000 including $59,725,000 of franchise sales ($254,989,000 including $61,166,000 of franchise sales in 2011), a decrease of 2.7%. Same store corporate sales were down 2.0% from the comparable quarter. Net income was $16,121,000, $0.23 per common share ($19,872,000, $0.28 per common share in 2011), a decrease of 17.9% per share. The fourth quarter 2012 includes a net after tax cost of $1,470,000 or $0.02 per common share for professional fees relating to the acquisition of The Brick Ltd., representing an adjusted $0.25 per common share as compared to $0.28 per common share in the prior year.

2012 proved to be another challenging year where we saw continuing weakness in the economy, creating a very competitive retail environment. We want to thank all of our associates for their efforts and dedication in helping us to mitigate the impact of these challenges on our financial results.

In the third quarter of 2012, the Company celebrated grand openings of newly renovated stores in Sault Ste. Marie and Sudbury, Ontario, as well as our third Appliance Canada showroom which opened in Toronto, Ontario. In the fourth quarter of 2012, we celebrated the opening of a new franchise store that replaced an existing store in St. John, New Brunswick.

We plan to celebrate grand openings of a new 42,000 sq. ft. store in Orangeville, Ontario and a 36,000 sq. ft. store in Brantford, Ontario in the first quarter of 2013. In the second quarter of 2013, we are planning the grand opening of a new 50,000 sq, ft. store in Sherbrooke, Quebec.

On November 11, 2012, the Company entered into a definitive agreement to acquire all the outstanding shares of The Brick Ltd. which is subject to the approval of the Competition Bureau and other customary closing conditions. The total consideration for the purchase of The Brick Ltd. is approximately $700 million. We anticipate this deal closing in the first quarter of 2013.

The Directors are pleased to declare a quarterly dividend of 10¢ per common share, payable on April 5, 2013 to the shareholders of record at the close of business on March 5, 2013. Dividends paid by Leon's Furniture Limited are "eligible dividends" pursuant to the changes to the Income Tax Act under Bill C-28, Canada.

EARNINGS PER SHARE FOR EACH QUARTER

			MARCH 31	JUNE 30	SEPT. 30	DEC. 31	YEAR TOTAL
2012	- -	Basic Fully Diluted	12¢ 12¢	13¢ 12¢	19¢ 18¢	23¢ 22¢	$0.67 $0.65
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 LTÉE

Mark J. Leon
Chairman of the Board


Leon's Furniture Limited
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)

	As at December 31	As at December 31
($ in thousands)	2012	2011

ASSETS
Current assets
Cash and cash equivalents	74,949	72,505
Available-for-sale financial assets	146,735	149,318
Trade receivables	30,245	28,937
Income taxes receivable	3,644	5,182
Inventories	86,057	87,830
Deferred financing costs	1,317	-
Total current assets	342,947	343,772
Other assets	1,273	1,431
Property, plant and equipment	218,146	214,158
Investment properties	8,315	8,366
Intangible assets	3,101	3,958
Goodwill	11,282	11,282
Deferred income tax assets	528	1,444
Total assets	585,592	584,411

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade and other payables	73,542	86,357
Customers' deposits	20,386	19,157
Dividends payable	7,055	17,457
Deferred warranty plan revenue	14,743	16,152
Total current liabilities	115,726	139,123
Deferred warranty plan revenue	17,251	19,445
Redeemable share liability	428	382
Total liabilities	133,405	158,950

Shareholders' equity attributable to the shareholders of the Company
Common shares	26,693	20,918
Retained earnings	423,099	404,647
Accumulated other comprehensive income	2,395	(104)
Total shareholders' equity	452,187	425,461
Total liabilities and shareholder's equity	585,592	584,411


Leon's Furniture Limited CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

		Three months ended December 31				Year ended December 31
($ in thousands)		2012		2011		2012		2011

Revenue		188,462		193,823		682,163		682,836
Cost of sales		106,625		108,010		398,704		394,099
Gross profit		81,837		85,813		283,459		288,737
Operating expenses
General and administrative expenses		27,278		24,338		99,346		96,038
Sales and marketing expenses		22,422		22,993		83,479		78,387
Occupancy expenses		8,762		9,928		34,289		32,731
Other operating expenses		2,539		2,354		6,012		6,239
		61,001		59,613		223,126		213,395
Operating profit		20,836		26,200		60,333		75,342
Finance income		1,253		1,088		3,350		3,506
Profit before income tax		22,089		27,288		63,683		78,848
Income tax expense		5,968		7,416		16,901		22,182
Profit for the period attributable to the shareholders of the Company		16,121		19,872		46,782		56,666

Earnings per share
Basic	$	0.23	$	0.28	$	0.67	$	0.81
Diluted	$	0.22	$	0.27	$	0.65	$	0.78


Weighted average number of common shares outstanding
Basic		70,312,354		69,824,750		70,032,721		69,969,417
Diluted		72,351,313		72,152,050		72,317,598		72,305,424


Leon's Furniture Limited CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

		Three months ended December 31
				Net of tax
($ in thousands)		2012	Tax effect	2012

Profit for the period		16,121	-	16,121
Other comprehensive income, net of tax
	Unrealized gains on available-for-sale financial assets arising during the period	748	97	651
	Reclassification adjustment for net gains and (losses) included in profit for the period	(61)	(8)	(53)
	Change in unrealized gains on available-for-sale financial assets arising during the period	687	89	598
Comprehensive income for the period attributable to the shareholders of the Company		16,808	89	16,719

				Net of tax
		2011	Tax effect	2011

Profit for the period		19,872	-	19,872
Other comprehensive income, net of tax
	Unrealized gains on available-for-sale financial assets arising during the period	1,060	148	912
	Reclassification adjustment for net gains and (losses) included in profit for the period	(51)	(7)	(44)
	Change in unrealized gains on available-for-sale financial assets arising during the period	1,009	141	868
Comprehensive income for the period attributable to the shareholders of the Company		20,881	141	20,740

		Year ended December 31
				Net of tax
($ in thousands)		2012	Tax effect	2012

Profit for the year		46,782	-	46,782
Other comprehensive income, net of tax
	Unrealized gains on available-for-sale financial assets arising during the year	3,183	414	2,769
	Reclassification adjustment for net gains and (losses) included in profit for the year	(311)	(41)	(270)
	Change in unrealized gains on available-for-sale financial assets arising during the year	2,872	373	2,499
Comprehensive income for the year attributable to the shareholders of the Company		49,654	373	49,654

				Net of tax
		2011	Tax effect	2011

Profit for the year		56,666	-	56,666
Other comprehensive income, net of tax
	Unrealized (losses) on available-for-sale financial assets arising during the year	(621)	(87)	(534)
	Reclassification adjustment for net gains and (losses) included in profit for the year	(58)	(8)	(50)
	Change in unrealized (losses) on available-for-sale financial assets arising during the year	(679)	(95)	(584)
Comprehensive income for the year attributable to the shareholders of the Company		55,987	(95)	56,082


Leon's Furniture Limited 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 year	—	—	56,666	56,666
Change in unrealized (losses) on available-for-sale financial assets arising during the year	—	(584)	—	(584)
Total comprehensive income	—	(584)	56,666	56,082

Transactions with shareholders
Dividends declared	—	—	(36,371)	(36,371)
Management share purchase plan	1,798	—	—	1,798
Repurchase of common shares	(57)	—	(6,277)	(6,334)
Total transactions with shareholders	1,741	—	(42,648)	(40,907)

As at December 31, 2011	20,918	(104)	404,647	425,461

As at January 1, 2012	20,918	(104)	404,647	425,461

Comprehensive income
Profit for the year	—	—	46,782	46,782
Change in unrealized gains on available-for-sale financial assets arising during the year	—	2,499	—	2,499
Total comprehensive income	—	2,499	46,782	49,281

Transactions with shareholders
Dividends declared	—	—	(28,047)	(28,047)
Management share purchase plan	5,778	—	—	5,778
Repurchase of common shares	(3)	—	(283)	(286)
Total transactions with shareholders	5,775	—	(28,330)	(22,555)

As at December 31, 2012	26,693	2,395	423,099	452,187


Leon's Furniture Limited CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Year ended December 31
($ in thousands)		2012	2011

OPERATING ACTIVITIES
Profit for the year		46,782	56,666
Add (deduct) items not involving an outlay of cash
	Depreciation of property, plant and equipment and investment properties	14,020	12,705
	Amortization of intangible assets	866	880
	Amortization of deferred warranty plan revenue	(16,543)	(17,271)
	Gain on sale of property, plant and equipment	(15)	(21)
	Deferred income taxes	543	2,008
	Loss on sale of available-for-sale financial assets	121	35
	Cash paid for deferred financing costs	(1,317)	-
	Cash received on warranty plan sales	12,940	14,594
		57,397	69,596
Net change in non-cash working capital balances related to operations		(9,493)	(4,426)
Cash provided by operating activities		47,904	65,170

INVESTING ACTIVITIES
Purchase of property, plant & equipment		(17,897)	(24,999)
Purchase of intangible assets		(9)	64
Proceeds on sale of property, plant & equipment		23	39
Purchase of available-for-sale financial assets		(467,939)	(569,050)
Proceeds on sale of available-for-sale financial assets		473,273	559,242
Issuance of series 2012 shares		3,804	-
Decrease in employee share purchase loans		2,020	2,008
Cash used in investing activities		(6,725)	(32,696)

FINANCING ACTIVITIES
Dividends paid		(38,449)	(25,224)
Repurchase of common shares		(286)	(6,334)
Cash used in financing activities		(38,735)	(31,558)
Net increase in cash and cash equivalents during the year		2,444	916
Cash and cash equivalents, beginning of year		72,505	71,589
Cash and cash equivalents, end of year		74,949	72,505