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Press release from CNW Group

Leon's Furniture Limited - 2012 First Quarter

Monday, May 14, 2012

Leon's Furniture Limited - 2012 First Quarter12:29 EDT Monday, May 14, 2012TORONTO, May 14, 2012 /CNW/ - For the three months ended March 31, 2012, total Leon's sales were $200,651,000 including $43,220,000 of franchise sales ($191,592,000 including $40,809,000 of franchise sales in 2011), an increase of 4.7%. Same store sales were down 0.7% from the prior year first quarter. Net income was $8,599,000, $0.12 per common share ($10,293,000, $0.15 per common share in 2011). The profit decrease in the quarter compared to the prior quarter was mainly due to higher marketing expenses and opening costs related to four new stores that were opened in the latter part of 2011.Major renovations are well underway in our Sudbury and Sault Ste. Marie, Ontario corporate stores. Our Kentville franchise has recently opened a new and larger replacement store in Coldbrook, Nova Scotia. Construction has also started for a brand new franchise store to replace our existing St. John, New Brunswick store. Finally, 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 these locations during the latter part of 2012 and in 2013.As previously announced, we paid a quarterly 10¢ dividend on April 5, 2012. Today we are happy to announce that the Directors have declared a quarterly dividend of 10¢ per common share payable on the 6th day of July 2012 to shareholders of record at the close of business on the 6th day of June 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.EARNINGS PER SHARE FOR EACH QUARTER               MARCH 31   JUNE 30   SEPT. 30   DEC. 31   YEARTOTAL                            2012   --  BasicFully Diluted   12¢12¢               $0.12$0.12                            2011   --  BasicFully Diluted   15¢14¢   16¢15¢   22¢21¢   28¢27¢   $0.81$0.78                            2010   --  BasicFully Diluted   17¢16¢   17¢16¢   26¢25¢   30¢29¢   $0.90$0.87                            LEON'S FURNITURE LIMITED / MEUBLES LEON LTÉEMark J. LeonChairman of the BoardMANAGEMENT'S DISCUSSION AND ANALYSISFor the three months ended March 31, 2012 and 2011Dated: May 14, 2012The Management's Discussion and Analysis ("MD&A") for Leon's Furniture Limited/Meubles Leon Ltée (the "Company") should be read in conjunction with i) the Company's 2011 audited consolidated financial statements and the related notes and MD&A and ii) the Company's unaudited interim condensed consolidated financial statements for the three months ended March 31, 2012 and the related notes.Cautionary Statement Regarding Forward-Looking StatementsThis 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 PracticeLeon'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 IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"). 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 May 14, 2012.IntroductionLeon's Furniture Limited has been in the furniture retail business for over 100 years. The Company's 43 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 ExpensesFor the three months ended March 31, 2012, total Leon's sales were $200,651,000 including $43,220,000 of franchise sales ($191,592,000 including $40,809,000 of franchise sales in 2011), an increase of 4.7%.Leon's corporate sales of $157,431,000 in the first quarter of 2012, increased by $6,648,000, or 4.4%, compared to the first quarter of 2011.  The increase in sales in the first quarter compared to the prior year was the result of opening four new stores in the latter part of the prior year. Same store sales decreased by 0.7% compared to the prior year.Leon's franchise sales of $43,220,000 in the first quarter of 2012, increased by $2,411,000 or 5.9%, compared to the first quarter of 2011. The increase in sales in the first quarter compared to the same period in the prior year was mainly the result of opening two new stores in the latter part of 2011. Same store franchise sales increased by 1.6%.Our gross margin for the first quarter 2012 of 40.8% was down approximately 0.8% from the first quarter of 2011. The decrease in gross margin was mainly attributable to the decline in electronics margins.Net operating expenses of $53,306,000 were up $4,016,000 or 8.1% for the first quarter 2012 compared to the first quarter of 2011. The increase in operating expenses compared to the prior year were mainly due to two factors; higher costs including marketing, payroll and occupancy as a result of opening four new corporate stores in late 2011, being Guelph, Ontario; Mississauga, Ontario; Rosemère, Quebec; and Regina, Saskatchewan; higher sales commissions expenses as a result of higher sales for the quarter compared to the prior year quarter. Our accounting policy is to expense all new store opening costs as incurred.As a result of the above, net income for the first quarter of 2012 was $8,599,000, $0.12 per common share ($10,293,000, $0.15 per common share in 2011), a decrease of $0.03 per common share.Annual Financial Information               ($ in thousands, except earnings per share and dividends)     2011   2010   2009               Net corporate sales     682,836   710,435   703,180Leon'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   56,864Earnings per share              Basic     $0.81   $0.90   $0.80Diluted     $0.78   $0.87   $0.78               Total assets     595,339   566,674   529,156               Common share dividends declared     $0.37   $0.32   $0.28Special common share dividends declared     $0.15   -   $0.20Convertible, non-voting shares dividends declared     $0.20   $0.18   $0.14               Liquidity and Financial Resources             ($ in thousands, except dividends per share)   Mar 31/12   Dec 31/11   Mar 31/11             Cash, cash equivalents, available-for-sale financial assets   195,931   221,823   202,770Trade and other accounts receivable   17,315   28,937   17,262Inventory   91,694   87,830   78,444Total assets   563,793   595,339   544,053Working capital   208,154   204,649   202,832             For the 3 months ended   Current QuarterMar 31, 2012   Prior QuarterDec 31, 2011   Prior QuarterMar 31, 2011             Cash flow provided by (used in) operations   (7,581)   26,230   (687)Purchase of property, plant and equipment   3,586   6,336   2,876Repurchase of capital stock   232   219   715Dividends paid   17,457   6,292   6,310             Dividends paid per share   $0.25   $0.09   $0.09             Cash, cash equivalents and available-for-sale financial assets decreased by $25,892,000 in the quarter mainly as a result of dividends paid.Major renovations are well underway in our Sudbury and Sault Ste. Marie, Ontario corporate stores. Our Kentville franchise has recently opened a new and larger replacement store in Coldbrook, Nova Scotia. Construction has also started for a brand new franchise store to replace our existing St. John, New Brunswick store. Finally, 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 these locations during the latter part of 2012 and 2013. All funding for new store projects and renovations are planned to come from our existing cash resources.Quarterly Results (2012, 2011, 2010)Quarterly Income Statement ($000) - except per share data Quarter EndedMarch 31Quarter EndedDecember 31Quarter EndedSeptember 30Quarter EndedJune 30 20122011201120102011201020112010Leon's corporate sales157,431150,783193,823197,888174,373182,125163,857168,952Leon's franchise sales43,22040,80961,16659,82049,27349,42145,47745,493Total Leon's system-wide sales    200,651  191,592  254,989  257,708  223,646  231,546  209,334  214,445Net income per share$0.12$0.15$0.28$0.30$0.22$0.26$0.16$0.17Fully diluted per share$0.12$0.14$0.27$0.29$0.21$0.25$0.15$0.16Common SharesAt March 31, 2012, there were 69,919,120 common shares issued and outstanding. During the first quarter 2012, 19,104 shares were repurchased at an average cost of $12.16 and then cancelled by the Company through its Normal Course Issuer Bid. In addition, during the quarter ended March 31, 2012, 89,668 convertible, non-voting series 2002 shares and 32,822 convertible, non-voting series 2005 shares were converted into common shares. There were 12,237 convertible, non-voting series 2009 shares cancelled. For details on the Company's commitments related to its redeemable shares, please refer to note 13 of the unaudited interim condensed consolidated financial statements.Commitments                      ($ in thousands)     Payments Dueby PeriodContractual Obligations     Total   Less than1 year   2-3 years   4-5 years  After 5 yearsOperating Leases 1     59,065   6,859   12,512   12,647  27,047Purchase Obligations     4,551   4,551   -   -  -Total Contractual Obligations     63,616   11,410   12,512   12,647  27,0471The Company is obligated under operating leases to future minimum rental payments for various land and building sites across Canada.Critical Accounting Estimates and AssumptionsPlease refer to Note 4 of the 2011 annual consolidated financial statements for the Company's critical accounting estimates and assumptions.Pending Changes to Accounting PoliciesSeveral new and amended standards are not yet effective for the Company's interim condensed consolidated financial statements for the three month period ended March 31, 2012.  These pending changes to accounting standards and amendments are the same as those discussed in Note 3 of Leon's 2011 annual consolidated financial statements.  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 UncertaintiesFor 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 & ProceduresManagement 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 ReportingManagement 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 ReportingManagement has also evaluated whether there were changes in the Company's internal control over financial reporting that occurred during the period beginning on January 1, 2012 and ended on March 31, 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.OutlookThe slowdown in the economy which began in 2009 continues to affect our results and we do not see signs of any immediate improvement. As such, we anticipate that consumer discretionary spending will remain soft throughout 2012. To help counter this, we plan an even more robust 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 MeasuresIn 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)          Mar 31, 2012   Mar 31, 2011                Net corporate sales          157,431   150,783Adjustments for stores not in both fiscal periods          7,675   -Comparable store sales          149,756   150,783                NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTSUnder 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 ScarangellaPresident & Chief Executive Officer        Vice President & Chief Financial Officer       Dated as of the 14th day of May, 2012.Interim Condensed Consolidated Financial Statements                     Leon's Furniture Limited INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(UNAUDITED)                 As at March 31   As at December 31($ in thousands)     2012   2011           ASSETS          Current  assets          Cash and cash equivalents [notes 4 and 6]     50,640   72,505Available-for-sale financial assets [notes 4 and 19e]     145,291   149,318Trade receivables [note 4]     17,315   28,937Income taxes receivable     7,427   5,182Inventories     91,694   87,830Total current assets     312,367   343,772Other assets     1,442   1,431Property, plant and equipment [note 8]     214,416   214,158Investment properties [note 9]     8,353   8,366Intangible assets [note 10]     3,751   3,958Goodwill     11,282   11,282Deferred income tax assets     12,182   12,372Total assets     563,793   595,339           LIABILITIES AND SHAREHOLDERS' EQUITY          Current liabilities          Trade and other payables [notes 4 and 11]     53,324   75,126Provisions [note 12]     9,356   11,231Customers' deposits     18,736   19,157Dividends payable [note 14]     6,993   17,457Deferred warranty plan revenue     15,804   16,152Total current liabilities     104,213   139,123Deferred warranty plan revenue      18,721   19,445Redeemable share liability [notes 4 and 13]     604   382Deferred income tax liabilities     11,007   10,928Total liabilities     134,545   169,878           Shareholders' equity attributable to the shareholders of the Company          Common shares [note 14]     21,870   20,918Retained earnings     406,023   404,647Accumulated other comprehensive income     1,355   (104)Total shareholders' equity     429,248   425,461Total liabilities and shareholder's equity     563,793   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 LimitedINTERIM CONSOLIDATED INCOME STATEMENTS(UNAUDITED)              Three months ended March 31($ in thousands)     20122011        Revenue [note 15]     157,431150,783Cost of sales [note 7]     93,21888,065Gross profit     64,21362,718Operating expenses [note 16]       General and administrative expenses     22,85422,395Sales and marketing expenses     20,51218,512Occupancy expenses     8,6297,440Other operating expenses     1,311943      53,30649,290Operating profit     10,90713,428Finance income     749821Profit before income tax     11,65614,249Income tax expense [note 17]     3,0573,956Profit for the period attributable to the shareholders of the Company     8,59910,293        Earnings per share  [note 18]       Basic     $0.12$0.15Diluted     $0.12$0.14        The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.     Interim Condensed Consolidated Financial Statements           Leon's Furniture Limited INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)               Three months ended March 31          Net of tax($ in thousands)   2012  Tax effect  2012           Profit for the period   8,599  -  8,599Other comprehensive income, net of tax             Unrealized gains on available-for-sale financial assets arising during the period   1,735  227  1,508   Reclassification adjustment for net gains and (losses) included in profit for the period   (57)  (8)  (49)   Change in unrealized gains on available-for-sale financial                assets arising during the period   1,678  219  1,459Comprehensive income for the period attributable to the shareholders   of the Company   10,277  219  10,058                     Net of tax    2011  Tax effect  2011           Profit for the period   10,293  -  10,293Other comprehensive income, net of tax             Unrealized gains on available-for-sale financial assets arising during the period   450  128  322   Reclassification adjustment for net gains and (losses) included in profit for the period   (3)  -  (3)   Change in unrealized gains on available-for-sale financial                assets arising during the period   447  128  319Comprehensive income for the period attributable to the shareholders   of the Company   10,740  128  10,612           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  Accumulatedothercomprehensiveincome  Retained earnings     Total                   As at December 31, 2010     19,177  480  390,629     410,286                   Comprehensive income                  Profit for the period     —  —  10,293     10,293Change in unrealized gains on available-for-sale     —  319  —     319  financial assets arising during the period                  Total comprehensive income     —  319  10,293     10,612                   Transactions with shareholders                  Dividends declared     —  —  (6,317)     (6,317)Management share purchase plan [note 13]     946  —  —     946Repurchase of common shares [note 14]     (6)  —  (709)     (715)Total transactions with shareholders     940  —  (7,026)     (6,086)                   As at March 31, 2011     20,117  799  393,896     414,812                   As at December 31, 2011     20,918  (104)  404,647     425,461                   Comprehensive income                  Profit for the period     —  —  8,599     8,599Change in unrealized gains on available-for-sale     —  1,459  —     1,459  financial assets arising during the period                  Total comprehensive income     —  1,459  8,599     10,058                   Transactions with shareholders                  Dividends declared     —  —  (6,993)     (6,993)Management share purchase plan [note 13]     954  —  —     954Repurchase of common shares [note 14]     (2)  —  (230)     (232)Total transactions with shareholders       952   —   (7,223)     (6,271)                   As at March 31, 2012     21,870  1,355  406,023     429,248                   The accompanying notes are an integral part of these unaudited interim condensedconsolidated financial statements.  Interim Condensed Consolidated Financial Statements        Leon's Furniture Limited INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)              Three months ended March 31($ in thousands)     20122011        OPERATING ACTIVITIES       Profit for the period     8,59910,293Add (deduct) items not involving an outlay of cash        Depreciation of property, plant and equipment and investment properties     3,3752,977 Amortization of intangible assets     216221 Amortization of deferred warranty plan revenue     (4,167)(4,297) Gain on sale of property, plant and equipment     (2)-  Deferred income taxes     5086 Gain (loss) on sale of available-for-sale financial assets     (115)43 Cash received on warranty plan sales     3,0953,505      11,05112,828Net change in non-cash working capital balances related        to operations [note 20(a)]     (18,632)(13,515)Cash used in operating activities     (7,581)(687)        INVESTING ACTIVITIES       Purchase of property, plant & equipment     (3,586)(2,876)Purchase of intangible assets     (9)- Proceeds on sale of property, plant & equipment     3- Purchase of available-for-sale financial assets     (129,990)(94,024)Proceeds on sale of available-for-sale financial assets     135,810104,566Decrease in employee share purchase loans [note 13]     1,1771,156Cash provided by investing activities     3,4058,822        FINANCING ACTIVITIES       Dividends paid [note 14]     (17,457)(6,310)Repurchase of common shares [note 14]     (232)(715)Cash used in financing activities     (17,689)(7,025)Net (decrease) increase in cash and cash equivalents        during the period     (21,865)1,110Cash and cash equivalents, beginning of period     72,50571,589Cash and cash equivalents, end of period     50,64072,699         The accompanying notes are an integral part of these unaudited interim condensedconsolidated financial statements. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)Leon's Furniture LimitedTabular amounts in thousands of Canadian dollars except shares outstanding and earnings per shareFor the three month periods ended March 31, 2012 and 20111.GENERAL INFORMATIONLeon'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, two 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 PRESENTATIONThe 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").  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.The preparation of interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates.  It also requires management to exercise judgment in applying the Company's accounting policies.  The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are consistent with those disclosed in the notes to the annual consolidated financial statements for the year ended December 31, 2011.  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 May 14, 2012.3.STANDARDS ISSUED BUT NOT EFFECTIVESeveral new and amended standards are not yet effective for the Company's interim condensed consolidated financial statements for the three month period ended March 31, 2012.  These pending changes to accounting standards and amendments are the same as those discussed in Note 3 of Leon's 2011 annual consolidated financial statements.  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.4.FINANCIAL RISK MANAGEMENTClassification of financial instruments and fair valueThe classification of the Company's financial instruments, as well as, their carrying amounts and fair values are disclosed in the table below.Financial InstrumentDesignationMeasurement      March 31, 2012   December 31, 2011Cash and cash equivalentsAvailable-for-saleFair value50,64072,505Available-for-sale financial assets  Available-for-saleFair Value145,291149,318Trade receivablesLoans and receivablesAmortized cost17,31528,937Trade and other payablesOther financial liabilities  Amortized cost53,32475,126Redeemable share liabilityOther financial liabilitiesAmortized cost604382Fair value hierarchyThe 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 liabilitiesLevel 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   March 31, 2012  December 31, 2011Cash and cash equivalents150,64072,505Available-for-sale financial assets - Equities  133,71831,147Available-for-sale financial assets - Bonds2111,573118,171Financial risks factorsThe 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 March 31, 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 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 March 31, 2012, 83% 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 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 riskCredit 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 $17,315,000 as at March 31, 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 $85,000 as at March 31, 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 March 31, 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 riskThe 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 MANAGEMENTThe 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; andutilize 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 March 31, 2012  As at December 31, 2011Cash at bank and on hand  Short-term investments5,07045,5702,18170,324Totals50,64072,5057. INVENTORIESThe amount of inventory recognized as an expense for the three month period ended March 31, 2012 was $91,301,000 (period ended March 31, 2011 - $85,873,000) which is presented within cost of sales on the interim consolidated income statements.During the three month period ended March 31, 2012, there was $125,000 in inventory write-downs (three month period ended March 31, 2011 - $149,000). At March 31, 2012, the inventory markdown provision totaled $4,971,000 (As at December 31, 2011 - $4,846,000). There were no reversals of any write-down for the period ended March 31, 2012 (period ended March 31, 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  ComputerhardwareBuilding  improvementsTotalAs at December 31, 2011:  Opening net book valueAdditionsDisposalsDepreciation   55,331100—— 82,6049,165—3,563 11,0614,403—2,029 3,3482,253181,271 1,117164—538 48,0319,253—5,253    201,49225,3381812,654Closing net book value55,43188,20613,4354,31274352,031214,158As at December 31, 2011:CostAccumulated depreciation 55,431— 184,53096,324 40,45627,021 23,05118,739 9,1158,372 87,52635,495 400,109185,951Net book value55,43188,20613,4354,31274352,031214,158As at March 31, 2012:Opening net book valueAdditionsDisposalsDepreciation 55,431(50)—— 88,2067—972 13,435365—535 4,3122091339 743——114 52,0313,090—1,402 214,1583,62113,362Closing net book value55,38187,24113,2654,18162953,719214,416As at March 31, 2012:CostAccumulated depreciation 55,381— 184,53797,296 40,82127,556 23,18519,004 9,1158,486 90,61636,897 403,655189,239Net book value55,38187,24113,2654,18162953,719214,416Included in the above balances at March 31, 2012 are assets not being amortized with a net book value of approximately $2,946,000 [as at December 31, 2011 - $2,638,000] being construction-in-progress.9.INVESTMENT PROPERTIES Land  BuildingsBuilding  improvementsTotalAs at December 31, 2011:  Opening net book valueAdditionsDisposalsDepreciation     8,286——— ———— 131——51 8,417——51Closing net book value8,286—808,366As at December 31, 2011:CostAccumulated depreciation 8,286- 8,0398,039 1,4571,377     17,7829,416Net book value8,286—808,366As at March 31, 2012:Opening net book valueAdditionsDisposalsDepreciation 8,286——— ———— 80——13 8,366——13Closing net book value8,286—678,353As at March 31, 2012:CostAccumulated depreciation 8,286— 8,0398,039 1,4571,390 17,7829,429Net book value8,286—678,353The fair value of the investment property portfolio as at March 31, 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-competeAgreement  ComputersoftwareTotal As at December 31, 2011:Opening net book valueAdditionsDisposalsAmortization for the year  1,250——250  1,750——250  625——125  1,277(64)—255       4,902(64)—880Net book value1,0001,5005009583,958As at December 31, 2011:  CostAccumulated amortization 2,0001,000 2,5001,000 1,000500 4,2023,244 9,7025,744Net book value1,0001,5005009583,958As at March 31, 2012:Opening net book valueAdditionsDisposalsAmortization for the year 1,000——63 1,500——62 500——31 9589—60 3,9589—216Closing net book value9371,4384699073,751As at March 31, 2012:CostAccumulated amortization 2,0001,063 2,5001,062 1,000531 4,2113,304 9,7115,960Net book value9371,4384699073,75111. TRADE AND OTHER PAYABLES   As at March 31, 2012  As at December 31, 2011Trade payables   Other payables45,4947,83062,48512,641 53,32475,12612. PROVISIONS  Profit sharing andbonuses  Vacation payTotalsAs at December 31, 201110,860371     11,231  Additional provisions  Unused amounts reversed     Utilized during the quarter2,900(1,865)(3,865)1,328— (373)4,228(1,865)(4,238)As at March 31, 20128,0301,3269,356(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    March 31,2012As at    December 31,2011 Authorized2,284,000 convertible, non-voting, series 2002 shares806,000 convertible, non-voting, series 20051,224,000 convertible, non-voting, series 2009 shares    Issued and fully paid578,080 series 2002 shares[December 31, 2011 - 667,748]508,426 series 2005 shares[December 31, 2011 - 541,248]1,102,870 series 2009 shares[December 31, 2011 - 1,115,107]Less employee share purchase loans       4,1554,8009,761(18,112)       4,7995,1119,869(19,397) 604382Under the terms of the Plan, the Company advanced non-interest bearing loans to certain of its employees in 2002, 2005 and 2009 to allow them to acquire convertible, non-voting, series 2002 shares, series 2005 shares and series 2009 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 and 2009 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 and series 2009 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 and series 2009 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 and $8.85 per series 2009 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. The preferred dividends are paid once a year during the first quarter.During the three month period ended March 31, 2012, 89,668 series 2002 shares [three month period ended March 31, 2011 - 71,198] and 32,822 series 2005 shares [three month period ended March 31, 2011 - 45,986] were converted into common shares with a stated value of approximately $644,000 [three month period ended March 31, 2011 - $512,000] and $310,000 [three month period ended March 31, 2011 - $434,000], respectively.During the three month period ended March 31, 2012, the Company cancelled 12,237 series 2009 shares [three month period ended March 31, 2011 - nil] in the amount of $108,000 [three month period ended March 31, 2011 - $nil].14.COMMON SHARES    As at March 31,2012   As at December 31,2011 Authorized - Unlimited common shares     Issued69,919,120 common shares [December 31, 2011 - 69,815,734]     21,870  20,918During the three month period ended March 31, 2012, 89,668 series 2002 shares [three month period ended March 31, 2011 - 71,198] and 32,822 series 2005 shares [three month period ended March 31, 2011 - 45,986] were converted into common shares with a stated value of approximately $644,000 [three month period ended March 31, 2011 - $512,000] and $310,000 [three month period ended March 31, 2011 - $434,000], respectively.During the three month period ended March 31, 2012, the Company repurchased 19,104 [three month period ended March 31, 2011 - 51,274] of its common shares on the open market pursuant to the terms and conditions of Normal Course Issuer Bid at a net cost of approximately $232,000 [three month period ended March 31, 2011 - $715,000].  All shares repurchased by the Company pursuant to its Normal Course Issuer Bid have been cancelled.  The repurchase of common shares resulted in a reduction of share capital in the amount of approximately $2,000 [three month period ended March 31, 2011 - $6,000].  The excess net cost over the average carrying value of the shares of approximately $230,000 [three month period ended March 31, 2011 - $709,000] has been recorded as a reduction in retained earnings.The dividends paid for the three month periods ended March 31, 2012 and March 31, 2011 were $17,457,000 [$0.25 per share] and $6,310,000 [$0.09 per share] respectively.15.REVENUE Three month period   ended March 31, 2012Three month period   ended March 31, 2011Sale of goods by corporate storesRoyalty income from franchiseesExtended warranty revenueRental income from investment property   152,5852,7601,898188146,0542,5312,014184 157,431150,78316. OPERATING EXPENSES BY NATURE Three month period   ended March 31, 2012Three month period   ended March 31, 2011Depreciation of property, plant and equipment and   investment properties3,3752,977Amortization of intangible assets216221Operating lease payments1,28079117. INCOME TAX EXPENSE Three month period   ended March 31, 2012Three month period   ended March 31, 2011Current income tax expenseDeferred income tax (recovery) expense   3,118(61)3,88571 3,0573,956Income 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 March 31, 2012 and March 31, 2011 were 26.75% and 28.5%, respectively.18.EARNINGS PER SHAREEarnings 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 69,870,782 for the three month period ended March 31, 2012 [three month period ended March 31, 2011 - 70,148,298]The following table reconciles the profit for the period and the number of shares for the basic and diluted earnings per share calculations:  Profit for the period  attributed to commonshareholders  Weighted averagenumber of shares     Per shareamountThree month period ended March 31, 2012  Basic8,59969,870,7820.12Dilutive effect (note 13)  —2,256,893—Diluted8,59972,127,6750.12Three month period ended March 31, 2011Basic10,29370,148,2980.15Dilutive effect (note 13)—2,529,283—Diluted10,29372,677,5810.1419. COMMITMENTS AND CONTINGENCIES [a]  The cost to complete all construction-in-progress as at March 31, 2012 totals $1,817,000 at three locations [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 yearLater than 1 year and no later than 5 years     Later than 5 years6,85925,159     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 yearLater than 1 year and no later than 5 years     Later than 5 years791     2,4351,291 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 $20,523,000 [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:   Three month period   ended March 31, 2012Three month period   ended March 31, 2011Trade receivablesInventoriesOther assetsTrade, other payables and provisions   Income taxes payableCustomers' deposits11,622(3,864)(11)(23,713)(2,245)(421)11,3076,97913(28,834)(3,044)64 (18,632)(13,515)[b]  Supplemental cash flow information:    Three month period   ended March 31, 2012Three month period   ended March 31, 2011Income taxes paid     5,2577,118[c]   During the three month period, property, plant and equipment were acquired at an aggregate cost of $3,621,000 [period ended March 31, 2011 - $5,524,000], of which $909,000 [2011 - $874,000] is included in trade and other payables as at December 31, 2011.      For further information: Dominic Scarangella, Tel: 416.243.4073