TORONTO, Feb. 25, 2016 (GLOBE NEWSWIRE) -- Leon’s Furniture Limited (“Leon’s” or the “Company”) (TSX:LNF), today announced financial results for the fourth quarter 2015 and the full year 2015.
All figures in CAD thousands unless otherwise noted.
Highlights – Q4 2015
- Same store sales grew 1.6% in Q4-2015.
- Total system wide sales grew 1.6% to $670,357 in Q4-2015 compared to $660,120 in Q4-2014.
- Revenue grew 1.5% to $560,229 in Q4-2015 compared to $552,055 in Q4-2014.
- Diluted earnings per share of $0.38 in Q4-2015 compared to $0.38 in Q4-2014.
Highlights – Fiscal year 2015
- Same-store sales grew 1.2% in 2015.
- Total system wide sales grew 1.0% to $2,407,512 in fiscal 2015 compared to $2,383,324 in fiscal 2014.
- Revenue grew 1.2% to $2,031,718 in fiscal 2015 compared to $2,008,480 in fiscal 2014.
- Diluted earnings per share of $0.97 in fiscal 2015 compared to $0.96 in in fiscal 2014.
“Q4 marked a strong end to the year for Leon’s, with effective promotions driving solid same store sales growth in spite of a weaker economic backdrop,” said Edward Leon, President and Chief Operating Officer of Leon’s. “2016 is an important year for the Company. We expect continued growth from both our main banners this year and have just signed a deal that will introduce the Leon’s banner to the key British Columbia market. These initiatives, combined with our strong market presence and the incremental synergies we expect to continue to generate this year, position us to drive value for shareholders.”
For a full explanation of the Company’s use of non-IFRS measures, please refer to page 10 of this press release.
Consolidated results summary for the quarters ended December 31, 2015 and 2014
| For the three months ended December 31 | ||||||||||||
| (000's of $ except % and per share amounts) | 2015 | 2014 | $ Increase (Decrease) | % Increase (Decrease) | ||||||||
| Total system wide sales (1) | 670,357 | 660,120 | 10,237 | 1.6 | % | |||||||
| Franchise sales (1) | 110,128 | 108,065 | 2,063 | 1.9 | % | |||||||
| Revenue | 560,229 | 552,055 | 8,174 | 1.5 | % | |||||||
| Cost of sales | 311,428 | 308,158 | 3,270 | 1.1 | % | |||||||
| Gross profit | 248,801 | 243,897 | 4,904 | 2.0 | % | |||||||
| Gross profit margin as a percentage of revenue | 44.41 | % | 44.18 | % | ||||||||
| Selling, general and administrative expenses | 207,098 | 198,351 | 8,747 | 4.4 | % | |||||||
| SG&A as a percentage of revenue | 36.97 | % | 35.93 | % | ||||||||
| Income before net finance costs and income tax expense | 41,703 | 45,546 | (3,843 | ) | (8.4 | %) | ||||||
| Net finance costs | 4,243 | 3,836 | 407 | 10.6 | % | |||||||
| Income before income taxes | 37,460 | 41,710 | (4,250 | ) | (10.2 | %) | ||||||
| Income tax expense | 7,273 | 11,796 | (4,523 | ) | (38.3 | %) | ||||||
| Net income | 30,187 | 29,914 | 273 | 0.9 | % | |||||||
| Net income as a percentage of revenue | 5.39 | % | 5.42 | % | ||||||||
| Basic weighted average number of common shares | 71,215,941 | 71,040,021 | ||||||||||
| Basic earnings per share | $ | 0.42 | $ | 0.42 | ||||||||
| Diluted weighted average number of common shares | 82,363,520 | 82,332,550 | ||||||||||
| Diluted earnings per share | $ | 0.38 | $ | 0.38 | ||||||||
| Common share dividends declared | $ | 0.10 | $ | 0.10 | ||||||||
| Convertible, non-voting shares dividends declared | $ | 0.20 | $ | 0.20 | ||||||||
| (1) Non-IFRS financial measures. Refer to page 10 for additional information. | ||||||||||||
Revenue
For the three months ended December 31, 2015, revenue was $560,229,000 compared to $552,055,000 in the prior year’s fourth quarter. Revenue increased $8,174,000 or 1.5% between the comparative quarters as we continued to see growth in most product categories.
Gross profit
The gross margin for the fourth quarter 2015 increased slightly from 44.18% to 44.41% compared to the prior year’s fourth quarter.
Selling, general and administrative expenses
Selling, general and administrative expenses of $207,098,000 increased $8,747,000 for the fourth quarter 2015 compared to the fourth quarter of 2014. Compared to the prior year quarter, the change is due to an increase in advertising expenditures in order to further promote our brands and increase sales, the net change of the impact of annual salary increases offset by delivery expense efficiencies and primarily due to an approximately $4,000,000 non-cash decrease in the unrealized value of the Company’s financial derivatives, comprised of foreign exchange forward contracts and a fixed interest rate swap.
Income tax expense
Due to the adjustments in prior year periods, the income tax expense decreased by approximately $3,000,000.
Net income and earnings per share
As a result of the above, net income for the fourth quarter of 2015 was $30,187,000, $0.42 per common share ($29,914,000, $0.42 per common share in 2014).
Consolidated results summary for the year ended December 31, 2015 and 2014
| For the year ended December 31 | ||||||||||||
| (000's of $ except % and per share amounts) | 2015 | 2014 | $ Increase (Decrease) | % Increase (Decrease) | ||||||||
| Total system wide sales (1) | 2,407,512 | 2,383,324 | 24,188 | 1.0 | % | |||||||
| Franchise sales (1) | 375,794 | 374,844 | 950 | 0.3 | % | |||||||
| Revenue | 2,031,718 | 2,008,480 | 23,238 | 1.2 | % | |||||||
| Cost of sales | 1,145,593 | 1,131,651 | 13,942 | 1.2 | % | |||||||
| Gross profit | 886,125 | 876,829 | 9,296 | 1.1 | % | |||||||
| Gross profit margin as a percentage of revenue | 43.61 | % | 43.66 | % | ||||||||
| Selling, general and administrative expenses | 767,079 | 756,936 | 10,143 | 1.3 | % | |||||||
| SG&A as a percentage of revenue | 37.76 | % | 37.69 | % | ||||||||
| Income before net finance costs and income tax expense | 119,046 | 119,893 | (847 | ) | (0.7 | %) | ||||||
| Net finance costs | 17,627 | 16,759 | 868 | 5.2 | % | |||||||
| Income before income taxes | 101,419 | 103,134 | (1,715 | ) | (1.7 | %) | ||||||
| Income tax expense | 24,790 | 27,610 | (2,820 | ) | (10.2 | %) | ||||||
| Net income | 76,629 | 75,524 | 1,105 | 1.5 | % | |||||||
| Net income as a percentage of revenue | 3.77 | % | 3.76 | % | ||||||||
| Basic weighted average number of common shares | 71,217,958 | 70,898,590 | ||||||||||
| Basic earnings per share | $ | 1.08 | $ | 1.07 | 0.01 | 0.9 | % | |||||
| Diluted weighted average number of common shares | 82,364,539 | 82,177,519 | ||||||||||
| Diluted earnings per share | $ | 0.97 | $ | 0.96 | 0.01 | 1.0 | % | |||||
| Common share dividends declared | $ | 0.40 | $ | 0.40 | ||||||||
| Convertible, non-voting shares dividends declared | $ | 0.20 | $ | 0.20 | ||||||||
| (1) Non-IFRS financial measures. Refer to page 10 for additional information. | ||||||||||||
Revenue
For the year ended December 31, 2015, revenue was $2,031,718,000 compared to $2,008,480,000 for the prior year’s period. Revenue increased $23,238,000 or 1.2% for the comparative period.
Gross profit
The gross margin for the year ended December 31, 2015 decreased slightly from 43.66% to 43.61% compared to the prior year’s period. Since the beginning of the fiscal year there has been a significant weakening of the Canadian dollar. Currency hedging helped to minimize the effect of this on our gross profit margin.
Selling, general and administrative expenses
For the year, selling, general and administrative expenses of $767,079,000 were up $10,143,000 or 1.3% as compared to 2014. The increase was mainly the result of incremental selling costs as SG&A expenses as a percentage of revenue in 2015 were 37.76% as compared to 37.69% in the prior year’s period. Additional marketing dollars were also spent in an attempt to generate higher consumer traffic into our stores.
Net income and earnings per share
As a result of the above, net income for the year was $76,629,000, $1.08 per common share ($75,524,000, $1.07 per common share in 2014), an increase of $0.01 per common share.
Dividends
As previously announced, we paid a quarterly 10¢ dividend on January 8, 2016. Today we are happy to announce that the Directors have declared a quarterly dividend of 10¢ per common share payable on the 8th day of April 2016 to shareholders of record at the close of business on the 8th day of March 2016. 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.
Store Network
The Company has 301 retail stores from coast to coast in Canada under the various banners indicated below which also includes 103 franchise locations.
| Banner | Number of Stores |
| Leon's banner corporate stores | 44 |
| Leon's banner franchise stores | 36 |
| Appliance Canada banner stores | 3 |
| The Brick banner corporate stores1 | 113 |
| The Brick banner franchise stores2 | 67 |
| The Brick Mattress Store banner locations | 22 |
| UFW banner stores | 2 |
| UFW and The Brick Clearance Centre banner stores | 14 |
| Total number of stores | 301 |
| 1Includes the Midnorthern Appliance banner | |
| 2Includes one UFW Franchise |
Selected Consolidated Financial Information
The summary financial information set out below has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, for the three months and year ended December 31, 2015 and 2014. The unaudited financial information presented has been prepared on a basis consistent with our audited consolidated financial statements for Fiscal 2014. The information presented herein does not contain disclosures required by IFRS and should be read in conjunction with the Company’s audited consolidated financial statements available under the Company’s profile on SEDAR at www.sedar.com.
| Consolidated Statements of Income (Unaudited) | ||||||||||||
| Three months ended December 31 | Year ended December 31 | |||||||||||
| (000's of $ except per share amounts) | 2015 | 2014 | 2015 | 2014 | ||||||||
| Revenue | 560,229 | 552,055 | 2,031,718 | 2,008,480 | ||||||||
| Cost of sales | 311,428 | 308,158 | 1,145,593 | 1,131,651 | ||||||||
| Gross profit | 248,801 | 243,897 | 886,125 | 876,829 | ||||||||
| Selling, general and administrative expenses | 207,098 | 198,351 | 767,079 | 756,936 | ||||||||
| Income before net finance costs and income tax expense | 41,703 | 45,546 | 119,046 | 119,893 | ||||||||
| Net finance costs | 4,243 | 3,836 | 17,627 | 16,759 | ||||||||
| Net income before income tax | 37,460 | 41,710 | 101,419 | 103,134 | ||||||||
| Income tax expense | 7,273 | 11,796 | 24,790 | 27,610 | ||||||||
| Net income for the year | 30,187 | 29,914 | 76,629 | 75,524 | ||||||||
| Earnings per share | ||||||||||||
| Basic | $ | 0.42 | $ | 0.42 | $ | 1.08 | $ | 1.07 | ||||
| Diluted | $ | 0.38 | $ | 0.38 | $ | 0.97 | $ | 0.96 | ||||
| Consolidated Statements of Financial Position (Unaudited) | ||
| (000's of $) | As at December 31, 2015 | As at December 31, 2014 |
| Cash and cash equivalents | - | 17,941 |
| Restricted marketable securities | 18,691 | 18,310 |
| Available-for-sale financial assets | 22,960 | 22,358 |
| Trade receivables | 117,832 | 112,171 |
| Income taxes receivable | 24,920 | - |
| Inventories | 303,961 | 266,628 |
| Deferred acquisition costs | 8,329 | 4,957 |
| Deferred financing costs | 473 | 923 |
| Total current assets | 497,166 | 443,288 |
| Other assets | 6,214 | 6,192 |
| Deferred acquisition costs | 13,093 | 11,093 |
| Property, plant and equipment | 323,218 | 334,052 |
| Investment properties | 18,496 | 21,992 |
| Intangible assets | 318,214 | 321,302 |
| Goodwill | 418,079 | 418,079 |
| Deferred income tax assets | 9,083 | 7,478 |
| Total assets | 1,603,563 | 1,563,476 |
| Bank overdraft | 20,100 | - |
| Trade and other payables | 206,076 | 197,044 |
| Provisions | 5,343 | 4,576 |
| Income taxes payable | 7,266 | 34,773 |
| Customers' deposits | 112,446 | 97,705 |
| Finance lease liabilities | 1,954 | 2,002 |
| Dividends payable | 7,141 | 7,105 |
| Deferred warranty plan revenue | 49,380 | 51,111 |
| Loans and borrowings | 50,000 | 30,000 |
| Total current liabilities | 459,706 | 424,316 |
| Loans and borrowings | 237,357 | 285,363 |
| Convertible debentures | 92,628 | 91,773 |
| Finance lease liabilities | 11,895 | 13,849 |
| Deferred warranty plan revenue | 95,775 | 92,254 |
| Redeemable share liability | 880 | 401 |
| Deferred rent liabilities and lease inducements | 8,858 | 6,794 |
| Deferred income tax liabilities | 96,062 | 99,621 |
| Total liabilities | 1,003,161 | 1,014,371 |
| Common shares | 34,389 | 31,169 |
| Equity component of convertible debentures | 7,089 | 7,089 |
| Retained earnings | 558,526 | 510,398 |
| Accumulated other comprehensive income | 398 | 449 |
| Total shareholders' equity | 600,402 | 549,105 |
| Total liabilities and shareholders' equity | 1,603,563 | 1,563,476 |
Consolidated Statements of Cash Flows (Unaudited) | ||||||
| Year ended December 31 | ||||||
| (000's of $) | 2015 | 2014 | ||||
| Operating Activities | ||||||
| Net income for the year | 76,629 | 75,524 | ||||
| Add (deduct) items not involving an outlay of cash | ||||||
| Depreciation of property, plant and equipment and investment properties | 33,694 | 35,431 | ||||
| Amortization of intangible assets | 8,044 | 7,289 | ||||
| Amortization of deferred warranty plan revenue | (55,180 | ) | (61,974 | ) | ||
| Net finance costs | 17,627 | 16,759 | ||||
| Deferred income taxes | (5,317 | ) | (5,513 | ) | ||
| Gain on sale of property, plant and equipment | (1,072 | ) | (126 | ) | ||
| Loss(gain) on sale of available-for-sale financial assets | 1,514 | (399 | ) | |||
| 75,939 | 66,991 | |||||
| Net change in non-cash working capital balances related | ||||||
| to operations | (74,426 | ) | 19,180 | |||
| Cash received on warranty plan sales | 56,970 | 65,817 | ||||
| Cash provided by operating activities | 58,483 | 151,988 | ||||
| Investing Activities | ||||||
| Purchase of property, plant and equipment and investment properties | (22,756 | ) | (16,562 | ) | ||
| Purchase of intangible assets | (4,956 | ) | (3,754 | ) | ||
| Proceeds on sale of property, plant and equipment and investment properties | 4,464 | 224 | ||||
| Purchase of available-for-sale financial assets | (8,093 | ) | (12,801 | ) | ||
| Proceeds on sale of available-for-sale financial assets | 5,524 | 10,429 | ||||
| Interest received | 1,308 | 2,501 | ||||
| Cash used in investing activities | (24,509 | ) | (19,963 | ) | ||
| Financing Activities | ||||||
| Repayment of finance leases | (1,936 | ) | (1,949 | ) | ||
| Dividends paid | (28,465 | ) | (28,328 | ) | ||
| Decrease of employee loans-redeemable shares | 3,699 | 3,358 | ||||
| Repayment of debenture | - | (15,000 | ) | |||
| Repayment of term loan | (30,000 | ) | (60,000 | ) | ||
| Interest paid | (15,313 | ) | (17,997 | ) | ||
| Cash used in financing activities | (72,015 | ) | (119,916 | ) | ||
| Net (decrease) increase in cash and cash equivalents | ||||||
| during the year | (38,041 | ) | 12,109 | |||
| Cash and cash equivalents, beginning of year | 17,941 | 5,832 | ||||
| (Bank overdraft) cash and cash equivalents, end of year | (20,100 | ) | 17,941 | |||
Non-IFRS Measures
Same Store Sales
Same store sales are defined as sales generated by stores that have been open or closed for more than 12 months on a yearly basis. Same store sales is not an earnings measure recognized by IFRS, and 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. Same store sales as discussed in this MD&A may not be comparable to similar measures presented by other issuers, however this measure is commonly used in the retail industry. We believe that disclosing this measure is meaningful to investors because it enables them to better understand the level of growth of our business.
Total System Wide Sales
Total system wide sales refer to the aggregation of revenue recognized in the Company’s consolidated financial statements plus the franchise sales occurring at franchise stores to their customers which are not included in the revenue figure presented in the Company’s consolidated financial statements. Total system wide sales is not a measure recognized by IFRS, and 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. Therefore, total system wide sales as discussed in this MD&A may not be comparable to similar measures presented by other issuers. We believe that disclosing this measure is meaningful to investors because it serves as an indicator of the strength of the Company’s overall store network, which ultimately impacts financial performance.
Franchise Sales
Franchise sales figures refer to sales occurring at franchise stores to their customers which are not included in the revenue figures presented in the Company’s consolidated financial statements, or in the same store sales figures in this MD&A. Franchise sales is not a measure recognized by IFRS, and 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. Therefore, franchise sales as discussed in this MD&A may not be comparable to similar measures presented by other issuers. Once again we believe that disclosing this measure is meaningful to investors because it serves as an indicator of the strength of the Company’s brands, which ultimately impacts financial performance.
About Leon’s Furniture Limited
Leon’s Furniture Limited is the largest retailer of furniture, appliances and electronics in Canada. Our retail banners include: Leon’s; The Brick; The Brick Mattress Store; The Brick Clearance Centre and United Furniture Warehouse (“UFW”). Finally, the addition of the Brick’s Midnorthern Appliance banner alongside with Leon’s Appliance Canada banner, makes the Company the country’s largest commercial retailer of appliances to builders, developers, hotels and property management companies. The Company has in excess of 300 retail stores from coast to coast in Canada under various banners
Forward-Looking Statements
Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, including future-oriented financial information and financial outlooks. This information is based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While the Company considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Forward-looking information is subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what the Company currently expects. These risks, uncertainties and other factors include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates, the timing and market acceptance of future products, and competition in the Company’s markets.
To the extent any forward-looking information in this press release constitutes future-oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are based on assumptions and subject to risks, uncertainties and other factors. Actual results may differ materially from what the Company currently expects. Other than as required under applicable securities laws, the Company does not undertake to update any forward-looking information at any particular time. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. All forward-looking information contained in this press release is expressly qualified in its entirety by this cautionary statement.