Sales & Net Income Rise At Leon's Furniture

Furniture World News

For the three months ended September 30, 2007, total Leon's sales were $216,225,000 including $50,434,000 of franchise sales ($203,632,000 including $46,500,000 franchise sales in 2006), an increase of 6.2%. Net income was $16,174,000, 23 cents per common share ($14,886,000, 21 cents per common share in 2006), an increase of 9.5% per common share. For the nine months ended September 30, 2007, total Leon's sales were $586,459,000 including $134,925,000 of franchise sales ($531,687,000 including $120,509,000 of franchise sales in 2006), an increase of 10.3% and net income was $36,884,000, 52 cents per common share ($32,890,000, 47 cents per common share in 2006), an increase of 10.6% per common share. The first quarter of 2006 includes a net after tax gain from sale of property of $1,500,000 or 2 cents per common share. Although sales did not increase at the same pace as the first half of the year, overall, the company said, they are pleased with the improvement in financial results in the third quarter of 2007. They just completed a successful grand opening of a new showroom and warehouse in Longueuil, Quebec and renovations are substantially complete at existing stores in Calgary, Alberta and Kitchener, Ontario. As well, they purchased land for a new showroom and warehouse in Thunder Bay, Ontario with construction anticipated to commence in the spring of 2008. Land has also been secured in North Calgary for a new showroom and warehouse. Leon's continues to proceed with finalizing the purchase of Appliance Canada Ltd. whose annual sales average close to $100,000,000 a year. This purchase will give them a significant entry into the wholesale distribution of major home appliances to the building and apartment trade, and entry into selling high end appliances to the public. Share Split All common share data and earnings per share amounts for all periods presented in this MD&A have been restated to reflect the four-for-one subdivision of common shares effective June 27, 2007. Revenues and Expenses For the three months ended September 30, 2007, total Leon's sales were $216,225,000 including $50,434,000 of franchise sales ($203,632,000 including $46,500,000 of franchise sales in 2006), an increase of 6.2%. Leon's corporate sales of $165,791,000 in the third quarter of 2007, increased by $8,659,000 or 5.5%, compared to the third quarter of 2006. Part of our increase in sales was related to their new store and warehouse locations in Saskatoon, Saskatchewan opened in November 2006 and Newmarket, Ontario opened in March 2007. All regions had increased sales in the quarter with Western Canada showing the most improvement. Same store corporate sales were up 1.5 % in the third quarter compared to the same quarter in 2006. Leon's franchise sales of $50,434,000 in the third quarter of 2007, increased by $3,934,000, or 8.5% store for store, compared to the third quarter of 2006. They saw good growth in all regions of Canada. Their gross margin of 41.9% for the third quarter 2007 increased marginally from the third quarter 2006. Net operating expenses of $44,503,000 were up $1,885,000 or 4.4% for the third quarter 2007 compared to the third quarter 2006. Payroll and commission costs were up 7.5% in the third quarter compared to the prior year. These costs were in line with the increase in sales of 5.5% for the quarter as well as higher payroll costs related to new store operations in 2007. We saw advertising expenses decrease by $524,000 or 7.2% for the third quarter compared to the prior year. A large portion of the decrease in advertising dollars was due to fewer grand openings in the quarter compared to the prior year. Overall, operating expenses were up by 4.4% over the prior year which is well in line with the increase in sales in the third quarter 2007 and as a percentage of sales fell below prior year levels. As a result of the above, net income for the third quarter 2007 was $16,174,000, 23 cents per common share (as compared to $14,886,000, 21 cents per common share in 2006), an increase of 9.5% per common share. For the nine months ended September 30, 2007, total Leon's sales were $586,459,000 including $134,925,000 of franchise sales ($531,687,000 including $120,509,000 of franchise sales in 2006), an increase of 10.3% and net income was $36,884,000, 52 cents per common share ($32,890,000, 47 cents per common share in 2006), an increase of 10.6% per common share. Cash investments and marketable securities increased by $19,011,000 in the quarter. In the third quarter of 2007, $7,025,000 of the Company's financial resources were used for the acquisition of land and buildings. Marketable securities consist primarily of bonds with maturities not exceeding eight years with an interest rate range of 4.09% to 7.6% and are stated at market value. The Company does not own any asset backed commercial paper in its portfolio. As part of the warranty reinsurance agreement with a subsidiary, the Company has pledged assets, which are part of the investment portfolio. The pledged assets are for the benefit of the primary insurance company for the purposes of insuring customer product warranty sales. The assets are in the form of a trust with a financial institution amounting to $13,380,000 Inventory decreased by $2,928,000 from the second quarter 2007. The decrease in inventory is mainly attributable to higher sales in the quarter and some delays in receiving foreign products. The cash provided by operating activities of $35,442,000 is principally the result of the net changes in non-cash working capital balances. About Leon's: Leon's Furniture Limited has been in the furniture retail business for close to 100 years. The company's 35 corporate and 28 franchise stores can be found across Canada. Main product lines sold at retail include furniture, appliances and electronics.