Leon's Furniture Limited - 2009 first quarter



    TORONTO, May 13 /CNW/ - For the three months ended March 31, 2009, total
Leon's sales were $195,200,000 including $42,675,000 of franchise sales
($196,441,000 including $41,864,000 of franchise sales in 2008), a decrease of
0.6%. Net income from operations for the first quarter 2009 was $8,571,000, 12
cents per common share ($9,933,000, 14 cents per common share in 2008), a
decrease of 14.3% per common share. Total net income for the first quarter
2008 was $11,068,000 or 16 cents per common share when we include the after
tax gain on sale of land ($1,135,000, 2 cents per common share).
    In the first quarter of 2009, we experienced lower sales and profits when
compared to the first quarter of 2008. This was somewhat anticipated in light
of the economic slowdown that has taken place. We continue celebrating our
100th Anniversary with an active marketing campaign along with providing good
consumer value. At the same time, we continue to look for ways to keep
expenses in check. A major renovation to our Laval, Quebec showroom and
warehouse store was just completed and a grand re-opening is scheduled for
June 2009. Progress is well on its way at a new downtown Toronto, Ontario
store known as the "Roundhouse" and we anticipate a grand opening this summer.
    As previously announced, we paid a quarterly 7 cent dividend on April 6,
2009. Today we are happy to announce that the Directors have declared a
quarterly dividend of 7 cents per common share payable on the 6th day of July
2009 to shareholders of record at the close of business on the 5th day of June
2009. 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
    -----------------------------------
                                                                        YEAR
                              MARCH 31   JUNE 30  SEPT. 30   DEC. 31   TOTAL
                              --------   -------  --------   -------   -----

    2009  -  Basic            12 cents                                 $0.12
          -  Fully Diluted    12 cents                                 $0.12

    2008  -  Basic            16 cents  16 cents  25 cents  33 cents   $0.90
          -  Fully Diluted    15 cents  16 cents  24 cents  32 cents   $0.87

    2007  -  Basic            15 cents  14 cents  23 cents  31 cents   $0.83
          -  Fully Diluted    15 cents  13 cents  22 cents  30 cents   $0.80


    LEON'S FURNITURE LIMITED

    Mark J. Leon
    Chairman of the Board
    


    MANAGEMENT'S DISCUSSION AND ANALYSIS

    May 13, 2009

    Management's Discussion and Analysis should be read in conjunction with
the unaudited consolidated interim financial statements of the Company for the
three months ended March 31, 2009, Management's Discussion and Analysis for
the year ended December 31, 2008, the audited consolidated financial
statements for the year ended December 31, 2008 and the Company's Annual
Information Form dated March 24, 2009.

    Financial Statements Governance Practice

    Leon's Furniture Limited's financial statements have been prepared in
accordance with Canadian Generally Accepted Accounting Principles and the
amounts expressed are in Canadian dollars.
    This 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.
Accordingly, sections of this report contain forward-looking statements that
are based on current plans and expectations. These forward-looking statements
are effected by risks and uncertainties that could have a material impact on
future prospects. Readers are cautioned that actual events and results will
vary.
    The Audit Committee of the Board of Directors of Leon's Furniture Limited
reviewed the Management's Discussion and Analysis ("MD&A") and the financial
statements, and recommended the Board of Directors approve them. Following
review by the full Board, the financial statements and MD&A were approved.

    Introduction

    Leon's Furniture Limited has been in the furniture retail business for
100 years. The Company's 35 corporate and 28 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 March 31, 2009, total Leon's sales were
$195,200,000 including $42,675,000 of franchise sales ($196,441,000 including
$41,864,000 of franchise sales in 2008), a decrease of 0.6%.
    Leon's corporate sales of $152,525,000 in the first quarter of 2009,
decreased by $2,052,000, or 1.3%, compared to the first quarter of 2008. The
decrease in sales in the first quarter compared to the prior year was the
result of a general economic slowdown which began in 2008. In order to offset
declining consumer confidence, we ran a very active marketing campaign to
coincide with the Company's 100th Anniversary. Although same store corporate
sales were down by 1.3% compared to the prior year, we feel confident that we
did increase our market share across the country.
    Leon's franchise sales of $42,675,000 in the first quarter of 2009,
increased by $811,000 or 1.9%, compared to the first quarter of 2008. The
franchise division experienced strong sales increases in Eastern Canada,
modest growth in Ontario and a significant decrease in Western Canada.
    Our gross margin for the first quarter 2009 of 39.4% has decreased 1.1%
from the first quarter 2008. We saw our gross margin on imported products
lower in the quarter due to the weakening of the Canadian dollar resulting in
higher product costs which were not all passed onto the consumer in light of a
weakening economy.
    Net operating expenses of $47,513,000 were up $216,000 or less than 1%
for the first quarter 2009 compared to the first quarter 2008. Payroll and
commission costs were down by 3.7% in the quarter compared to the prior year.
The decrease was mainly the result of a planned effort to reduce payroll costs
in response to our expectation of a slowdown in sales for 2009. Advertising
expenses increased by $812,000 or 9.7% for the first quarter compared to the
prior year. As previously mentioned, we are celebrating the Company's 100th
Anniversary this year and as such have supported this celebration with an
enhanced marketing campaign to capitalize on this once in a lifetime
opportunity. In addition further marketing funds were employed in the quarter
to help increase customer traffic given the economic slowdown. All other
operating costs in the quarter were in line with the prior year first quarter.
    As a result of the above, net income from operations for the first
quarter 2009 was $8,571,000, 12 cents per common share ($9,933,000, 14 cents
per common share in 2008), a decrease of 14.3% per common share. Total net
income for the first quarter 2008 was $11,068,000 or 16 cents per common share
when we include the after tax gain on sale of land ($1,135,000, 2 cents per
common share).


    
    Annual Financial Information
    ($ in thousands, except earnings
     per share and dividends)                       2008      2007      2006

    Net Corporate Sales                          740,376   637,456   591,286
    Leon Franchise Sales                         209,848   195,925   177,167

    Total Leon sales                             950,224   833,381   768,453

    Net Income                                    63,390    58,494    53,602
    Earnings per Share
    Basic                                         $  .90    $  .83     $0.76
    Diluted                                       $  .87    $  .80     $0.73

    Total Assets                                 513,408   475,226   439,639

    Common Share Dividends Declared                $0.38   $0.2725    $0.375
    Convertible, Non-Voting Shares Dividends
     Declared                                      $0.14     $0.14    $0.125


    Liquidity and Financial Resources
    ($ in thousands, except dividends               Mar.      Dec.      Mar.
     per share)                                    31/09     31/08     31/08

    Cash and marketable securities               126,139   139,275   121,447
    Accounts receivable                           17,967    30,291    21,258
    Inventory                                     87,738    92,904    81,997
    Total assets                                 485,867   513,408   467,556
    Working capital                              139,047   135,192   115,462



    For the 3 months ended                       Current     Prior     Prior
                                                 Quarter   Quarter   Quarter
                                                     Mar.     Dec.      Mar.
                                                   31/09     31/08     31/08

    Cash flow (used in) provided by operations    (3,166)   16,359       468
    Purchase of property, plant & equipment        1,903     7,161     1,606
    Repurchase of capital stock                      707         -     1,992
    Dividends paid                                 4,952     4,943     5,279

    Dividends paid per share                       $0.07     $0.07     $0.07
    

    Cash and marketable securities decreased by $13,136,000 in the quarter
mainly as a result of the reduction in year-end trade payables.
    Marketable securities consist primarily of bonds with maturities not
exceeding nine years with an interest rate range of 0.62% to 7.7% and are
stated at market value.
    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 $18,070,000.
    Inventory decreased by $5,166,000 from the last quarter 2008 as we made a
concentrated effort to reduce investing in light of the economic slowdown.
    Renovations have commenced at our Barrie and Whitby, Ontario stores and
are scheduled to be completed by this fall. A major renovation to our Laval,
Quebec showroom and warehouse store has just been completed and grand
re-opening is scheduled for June 2009. Progress is well on its way at a new
downtown Toronto, Ontario store known as the "Roundhouse" and we plan a grand
opening this summer. All funding for new store projects and renovations is
scheduled to come from our existing cash resources.

    Common Shares

    At March 31, 2009 there were 70,692,910 common shares issued and
outstanding. During the first quarter of 2009, 31,471 convertible, non-voting
series 2002 shares were converted to common shares, and 83,700 common shares
were repurchased at an average cost of $8.45 and cancelled by the Company,
through a normal course issuer bid.

    
    Commitments

    -------------------------------------------------------------------------
    ($ in thousands)          Payments Due by Period   000's
                              -----------------------------------------------
                                     Less than       2-3       4-5     After
    Contractual Obligations    Total    1 year     years     years   5 years
    -------------------------------------------------------------------------
    Operating Leases(1)       26,588     1,880     6,301     6,036    12,371
    -------------------------------------------------------------------------
    Purchase Obligations(2)    2,608     2,608         -         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Contractual
     Obligations              29,196     4,488     6,301     6,036    12,371
    -------------------------------------------------------------------------
    (1)  The Company is obligated under operating leases to future minimum
         annual rental payments for various land and building sites across
         Canada.
    (2)  The estimated cost to complete construction in progress at two
         locations in Canada.

    In addition, the Company has commitments related to redeemable shares as
follows:

                                                   As at               As at
    ($ in thousands)                      March 31, 2009   December 31, 2008

    Authorized

    2,284,000 convertible, non-voting,
     series 2002 shares
    806,000 convertible, non-voting,
     series 2005 shares

    Issued

      1,136,674 series 2002 shares
      (2008 -  1,168,145)                   $      8,170        $      8,396
        689,513 series 2005 shares
         (2007 - 689,513)                          6,510               6,511
    Less employees share purchase loans          (14,297)            (14,622)
    -------------------------------------------------------------------------
    Redeemable share liability              $        383        $        285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Under the terms of its Management Share Purchase Plan, the Company
advanced non-interest bearing loans to certain of its employees in 2002 and
2005 to allow them to acquire convertible, non-voting, series 2002 shares and
series 2005 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 and 2005 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.
The series 2002 shares may 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 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 shares at any time after the fifth
anniversary date of the issue of these shares and must redeem 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 and $9.44 per series 2005 share.
    Dividends paid to holders of series 2002 and 2005 shares of approximately
$261,000 (2008 - $329,000) have been used to reduce the respective shareholder
loans.
    During the period, no convertible, non-voting series 1998 shares (2008 -
15,349) and 31,471 series 2002 shares (2008 - 110,047) were converted into
common shares with a stated value of $nil and $226,000 (2008 - $67,000 and
$794,000), respectively.

    
    Quarterly Results (2009, 2008, 2007)

    Quarterly Income Statement ($000) - except earnings per share

    -------------------------------------------------------------------------
                                          Quarter Ended       Quarter Ended
                                             March 31          December 31
    -------------------------------------------------------------------------
                                          2009      2008      2008      2007
    -------------------------------------------------------------------------
    Leon's Corporate Sales             152,525   154,577   206,088   185,922
    -------------------------------------------------------------------------
    Leon's Franchise sale               42,675    41,864    63,803    60,931
    -------------------------------------------------------------------------
    Total Leon's sales                 195,200   196,441   269,891   246,853
    -------------------------------------------------------------------------
    Net Income Per Share                 $0.12     $0.16     $0.33     $0.31
    -------------------------------------------------------------------------
    Fully Diluted Per Share              $0.12     $0.15     $0.32     $0.30
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                          Quarter Ended       Quarter Ended
                                           September 30          June 30
    -------------------------------------------------------------------------
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------
    Leon's Corporate Sales             202,985   165,791   176,726   147,000
    -------------------------------------------------------------------------
    Leon's Franchise sale               56,219    50,434    47,962    43,437
    -------------------------------------------------------------------------
    Total Leon's sales                 259,204   216,225   224,688   190,437
    -------------------------------------------------------------------------
    Net Income Per Share                 $0.25     $0.23     $0.16     $0.14
    -------------------------------------------------------------------------
    Fully Diluted Per Share              $0.24     $0.22     $0.16     $0.14
    -------------------------------------------------------------------------
    

    Critical Accounting Policies and Estimates

    Our significant accounting policies are contained in Note 1 to the
consolidated financial statements for the year ended December 31, 2008.
Certain of these policies involve critical accounting estimates because they
require us to make particularly subjective or complex judgments about matters
that are inherently uncertain and because of the likelihood that materially
different amounts could be reported under different conditions or using
different assumptions.

    Revenue Recognition

    Sales are recognized as revenue for accounting purposes upon the customer
either picking up the merchandise or when merchandise is delivered to the
customers' home.
    The Company offers customers the option to finance purchases through
various third party financing companies. In situations where a customer elects
to take advantage of delayed payment terms, the costs of financing these sales
are deducted from sales. Finance costs deducted from sales for the first
quarter 2009 were basically flat when compared to the same period for 2008.

    Inventories

    During the first quarter of 2008, the Company implemented Section 3031,
"Inventories" ("Section 3031"), which replaced Section 3030 of the same title.
Section 3031 establishes that inventories should be measured at the lower of
cost and net realizable value, with guidance on the determination of cost. The
Company measures inventories at the lower of cost, determined on a first-in,
first-out basis, and net realizable value.
    The Company estimates the net realizable value as the amount at which
inventories are expected to be sold by taking into account fluctuations of
retail prices due to prevailing market conditions. If required, inventories
are written down to net realizable value when the cost of inventories is
estimated to not be recoverable due to obsolescence, damage or declining
selling prices.
    Reserves for slow moving and damaged inventory are deducted in our
evaluation of inventories. The reserve for slow moving inventory is based on
many years of historic retail experience. The reserve is calculated by
analyzing all inventory on hand older than one year. Damaged inventory is
coded as such and placed in specific locations. The amount of damaged reserve
is determined by specific product categories.
    The Company's inventory amount encompasses one category which is goods
purchased and held for resale in the ordinary course of business. The amount
of inventory recognized as an expense of $90,151,000 (2008 - $89,938,000) is
presented within cost of sales on the consolidated statements of income. There
were inventory write-downs of $220,000 (2008 - $120,000) recognized as an
expense during the period ended March 31, 2009. For the period ended March 31,
2009, the inventory markdown provision totalled $3,593,000 (2008 -
$3,745,000). There were no reversals of any write-down for the period ended
March 31, 2009. Furthermore none of the Company's inventory has been pledged
as security for any liabilities of the Company.

    Warranty Revenue

    Warranty revenues are deferred and taken into income on a straight-line
basis over the life of the warranty period. Warranty revenues included in
sales year to date 2009 are $3,978,000 compared to $3,489,000 in 2008.
Warranty expenses deducted through costs of goods sold year to date 2009 are
$1,399,000 compared to $1,011,000 in 2008. The increase in warranty expenses
over the prior period is related to the higher cost of electronic repairs.

    Franchise Royalties

    Leon's franchisees operate as independent owners. The Company charges the
franchisee a royalty fee based primarily on a percentage of the franchisees
gross sales. This royalty income is recorded by the Company on an accrual
basis under the heading, "other income" and is up 2.2% for the first quarter
2009 compared to 2008 which is in line with the increase in franchise sales
for the quarter.

    Volume Rebates

    The Company receives vendor rebates on certain products based on the
volume of purchases made during specified periods. The rebates are deducted
from the inventory value of goods received and are recognized as a reduction
of cost of goods sold as sales occur.

    Changes in Accounting Policy

    (a) Accounting Standards Implemented in 2009

    Section 3064 - Goodwill and Intangible Assets

    Effective January 1, 2009, the Company adopted the new CICA accounting
standard entitled, Section 3064 "Goodwill and Intangible Assets". Section 3064
establishes standards for the recognition, measurement, presentation and
disclosure of goodwill and intangible assets. The adoption of CICA 3064 had no
impact on the Company's consolidated financial statements.

    (b) Pending Changes to Accounting Policy

    International Financial Reporting Standards ("IFRS")

    The CICA has announced that Canadian GAAP for publicly accountable
enterprises will be replaced with International Financial Reporting Standards
(IFRS) over a transition period expected to end in 2011. We will begin
reporting our financial statements in accordance with IFRS on January 1, 2011.
We have begun planning our transition to IFRS. During 2009, the Company will
be carrying out a diagnostic evaluation of all financial statement elements
that would be impacted by the implementation of IFRS. The financial statement
elements of the Company that can or will be impacted the most by the
implementation of IFRS are property, plant and equipment, income taxes,
stock-based compensation, business combinations and goodwill although we have
not quantified that impact as at March 31, 2009. The Company anticipates
completing this phase of its plan and implementing any changes required by
this transition by December 31, 2009. The impact of the implementation of IFRS
on the Company's information systems, internal control over financial
reporting, disclosure controls and procedures or business activities has not
been determined at this time.

    Section 1582 - Business Combinations

    In January 2009, the CICA issued Section 1582, Business Combinations,
replacing Section 1581, Business Combinations. This section establishes the
standards for the accounting of business combinations, and states that all
assets and liabilities of an acquired business will be recorded at fair value
at the acquisition date. The standard also states that acquisition-related
costs will be expensed as incurred and that restructuring charges will be
expensed in the periods after the acquisition date. This new Section will be
applicable to financial statements relating to fiscal years beginning on or
after January 1, 2011. The Company is currently assessing the future impact of
this new standard on its financial statements.

    Section 1601 - Consolidated Financial Statements

    In January 2009, the CICA issued Section 1601, Consolidated Financial
Statements, which replaces the existing standards. This section establishes
the standards for preparing consolidated financial statements and is effective
for fiscal years beginning on or after January 1, 2011. The Company is
currently assessing the future impact of this new standard on its financial
statements.

    Disclosure Controls and Internal Control Over Financial Reporting

    Based on the evaluation of disclosure controls and procedures, the CEO
and the CFO have concluded that the Company's disclosure controls and
procedures were effective as at March 31, 2009.
    There have been no changes in the Company's internal control over
financial reporting during the period ended on March 31, 2009 that have
materially affected, or are reasonably likely to materially affect, its
internal control over financial reporting.

    Outlook

    In the first quarter of 2009 we saw a slight decrease in same store sales
from the prior year quarter. At this point we do not see any clear signs as to
when we will see an economic turnaround. However, we plan to open our new
"Roundhouse" store this year which should help reinforce sales. This will also
be aided by a continuation of a robust marketing campaign to coincide with
celebrating the Company's 100th Anniversary. However, even with these measures
in place, growing sales and profits for the balance of this year will be very
challenging. Despite these concerns, our strong financial position coupled
with past experience in dealing with economic slowdowns allow us to look to
the future with cautious optimism.

    Financial Statements Governance Practice

    Leon's Furniture Limited's financial statements have been prepared in
accordance with Canadian generally accepted accounting principles.
    The Audit Committee of the Board of Directors of Leon's Furniture Limited
reviewed the Management's Discussion and Analysis and the financial
statements, and recommended the Board of Directors approve them. Following
review by the full Board, the financial statements and MD&A were approved.

    Forward-Looking Statements

    This MD&A, in particular the section under heading "Outlook", includes
forward-looking statements, which are not historic facts based on certain
assumptions and reflect Leon's Furniture Limited's current expectations. These
forward-looking statements are subject to a number of risks and uncertainties
that could cause actual results 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.

    
                           Leon's Furniture Limited
                           P.O. Box 1100, Stn. "B"
                                 Weston, ON
                                   M9L 2R8
                  Phone: (416) 243-4073 Fax: (416) 243-7890
    

    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 Executive             Vice President & Chief Financial
    Officer                                 Officer

    Dated as of the 13th day of May, 2009.



    Leon's Furniture Limited-Meubles Leon Ltee
    Incorporated under the laws of Ontario

                         CONSOLIDATED BALANCE SHEETS
                                 (UNAUDITED)

                                                   As at               As at
                                                March 31         December 31
    ($ in thousands)                                2009                2008
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                     32,393              39,483
    Marketable securities                         75,676              83,194
    Restricted marketable securities              18,070              16,598
    Accounts receivable                           17,967              30,291
    Income taxes recoverable                       6,397               2,037
    Inventory                                     87,738              92,904
    Future tax assets                                380                 270
    -------------------------------------------------------------------------
    Total current assets                         238,621             264,777
    Prepaid expenses                               1,610               1,490
    Goodwill                                      11,282              11,282
    Intangibles                                    4,719               4,875
    Other receivables                                357                 419
    Future tax assets                             10,892              10,752
    Property, plant & equipment net              218,386             219,813
    -------------------------------------------------------------------------
                                                 485,867             513,408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current
    Accounts payable and accrued liabilities      64,622              95,247
    Customers' deposits                           14,523              14,119
    Dividends payable                              4,953               4,952
    Deferred warranty plan revenue                15,476              15,267
    -------------------------------------------------------------------------
    Total current liabilities                     99,574             129,585
    Deferred warranty plan revenue                21,561              21,712
    Redeemable share liability                       383                 285
    Future tax liabilities                         8,818               8,468
    -------------------------------------------------------------------------
    Total liabilities                            130,336             160,050
    -------------------------------------------------------------------------

    Shareholders' equity
    Common shares                                 16,680              16,493
    Retained earnings                            341,910             338,960
    Accumulated other comprehensive income        (3,059)             (2,095)
    -------------------------------------------------------------------------
    Total shareholders' equity                   355,531             353,358
    -------------------------------------------------------------------------
                                                 485,867             513,408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Leon's Furniture Limited-Meubles Leon Ltee

                    CONSOLIDATED STATEMENTS OF INCOME AND
                              RETAINED EARNINGS
                                 (UNAUDITED)

    Period ended March 31st
    ($ in thousands)                                    3 months ended
                                                    2009                2008

    Sales                                        152,525             154,577
    Cost of sales                                 92,442              91,952
    -------------------------------------------------------------------------
    Gross profit                                  60,083              62,625
    -------------------------------------------------------------------------
    Operating expenses (income)
    Salaries and commissions                      24,244              25,170
    Advertising                                    9,153               8,341
    Rent and property taxes                        2,844               2,977
    Amortization                                   3,946               3,762
    Employee profit-sharing plan                     837                 823
    Other operating expenses                      10,324              11,050
    Interest income                                 (852)             (1,279)
    Other income                                  (2,983)             (3,547)
    -------------------------------------------------------------------------
                                                  47,513              47,297
    -------------------------------------------------------------------------
    Income before gain on sale of capital
     property and income taxes                    12,570              15,328
    Gain on sale of capital property                   -               1,385
    -------------------------------------------------------------------------
    Income before income taxes                    12,570              16,713
    Provision for income taxes                     3,999               5,645
    -------------------------------------------------------------------------
    Net income for the period                      8,571              11,068
    Retained earnings, beginning of the period   338,960             307,068
    Dividends declared                            (4,953)             (4,957)
    Excess of cost of share repurchase
     over carrying value of related shares          (668)             (1,972)
    -------------------------------------------------------------------------
    Retained earnings, end of period             341,910             311,207
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of common
     shares outstanding ('000's)
    Basic                                         70,729              70,696
    Diluted                                       71,871              72,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
    Basic                                          $0.12               $0.16
    Diluted                                        $0.12               $0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends declared per share
    Common                                         $0.07               $0.07
    Convertible, non-voting                            -                   -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Leon's Furniture Limited-Meubles Leon Ltee

               CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                 (UNAUDITED)
    Three month period ended March 31th
    ($ in thousands)
                                                                         Net
                                                               Tax    of tax
                                                    2009    effect      2009

    Net income for the period                      8,571         -     8,571
    Other comprehensive income, net of tax
      Unrealized losses on available-for-sale
       financial assets arising during the
       period                                     (1,130)     (191)     (939)
      Reclassification adjustment for net gains
       and (losses) included in net income           (31)       (6)      (25)
      Change in unrealized losses on
       available-for-sale financial
       assets arising during the period           (1,161)     (197)     (964)
                                                -----------------------------
    Comprehensive income for the period            7,410      (197)    7,607
                                                -----------------------------
                                                -----------------------------



                                                                         Net
                                                               Tax    of tax
                                                    2008    effect      2008

    Net income for the period                     11,068         -    11,068
    Other comprehensive income, net of tax
      Unrealized gains on available-for-sale
       financial assets arising during the
       period                                        775       132       643
      Reclassification adjustment for net gains
       and (losses) included in net income          (625)     (106)     (519)
      Change in unrealized gains on
       available-for-sale financial
       assets arising during the period              150        26       124
                                                -----------------------------
    Comprehensive income for the period           11,218        26    11,192
                                                -----------------------------
                                                -----------------------------



    Leon's Furniture Limited-Meubles Leon Ltee

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

    Three month period ended March 31st
    ($ in thousands)                                          3 months ended
                                                    2009                2008
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net income for the period                      8,571              11,068
    Add (deduct) items not involving
     a current cash payment
      Amortization of property, plant
       & equipment                                 3,790               3,762
      Amortization of intangible assets              156                   -
      Amortization of deferred warranty
       revenue                                    (3,978)             (3,489)
      Loss (gain) on sale of marketable
       securities                                     34                (568)
      Future tax expense                             298                   1
      Gain on sale of property, plant
       & equipment                                    (1)             (1,387)
      Cash received on warranty sales              4,036               3,692
    -------------------------------------------------------------------------
                                                  12,906              13,079
    Net change in non-cash working capital
     balances related to operations              (16,072)            (12,611)
    -------------------------------------------------------------------------
    Cash (used in) provided by operating
     activities                                   (3,166)                468
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Purchase of property, plant & equipment       (1,903)             (1,606)
    Proceeds on sale of property, plant
     & equipment                                       2               2,425
    Purchase of marketable securities            (50,300)            (38,799)
    Proceeds on sale of marketable securities     55,152              47,148
    Decrease in employee share purchase loans        324                 640
    Purchase of Appliance Canada Ltd.             (1,540)            (16,206)
    -------------------------------------------------------------------------
    Cash provided by (used in) investing
     activities                                    1,735              (6,398)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Dividends paid                                (4,952)             (5,279)
    Repurchase of common shares                     (707)             (1,992)
    -------------------------------------------------------------------------
    Cash used in financing activities             (5,659)             (7,271)
    -------------------------------------------------------------------------
    Net (decrease) in cash and cash equivalents
    during the period                             (7,090)            (13,201)
    Cash and cash equivalents, beginning
     of period                                    39,483              25,699
    -------------------------------------------------------------------------
    Cash and cash equivalents,end of period       32,393              12,498
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    UNAUDITED

    1.  BASIS OF PREPARATION

    These unaudited interim consolidated financial statements have been
    prepared by management in accordance with Canadian generally accepted
    accounting principles ("GAAP") for interim financial statements. They do
    not include all of the disclosures required by Canadian generally
    accepted accounting principles for annual financial statements and
    accordingly, the interim financial information should be read in
    conjunction with the Company's annual consolidated financial statements.
    Except for the adoption of the accounting standards discussed in note 2
    (a) below, the interim financial information has been prepared using the
    same accounting policies as set out in note 1 to the consolidated
    financial statements for the year ended December 31, 2008.

    2. CHANGES IN ACCOUNTING POLICIES

    (a) Accounting Standards Implemented in 2009

    Section 3064 - Goodwill and Intangible Assets

    Effective January 1, 2009, the Company adopted the new CICA accounting
    standard entitled, Section 3064 "Goodwill and Intangible Assets". Section
    3064 establishes standards for the recognition, measurement, presentation
    and disclosure of goodwill and intangible assets. The adoption of CICA
    3064 had no impact on the Company's consolidated financial statements.

    (b) Pending Changes to Accounting Policy

    International Financial Reporting Standards ("IFRS")

    The CICA has announced that Canadian GAAP for publicly accountable
    enterprises will be replaced with International Financial Reporting
    Standards (IFRS) over a transition period expected to end in 2011. The
    Company will begin reporting the financial statements in accordance with
    IFRS on January 1, 2011. During 2009, the Company will be carrying out a
    diagnostic evaluation of all financial statement elements that would be
    impacted by the implementation of IFRS. The financial statement elements
    of the Company that can or will be impacted the most by the
    implementation of IFRS are property, plant and equipment, income taxes,
    stock-based compensation, business combinations and goodwill although we
    have not quantified that impact as at March 31, 2009. The Company
    anticipates completing this phase of its plan and implementing any
    changes required by this transition by December 31, 2009. The impact of
    the implementation of IFRS on the Company's information systems, internal
    control over financial reporting, disclosure controls and procedures or
    business activities has not been determined at this time.

    Section 1582 - Business Combinations

    In January 2009, the CICA issued Section 1582, Business Combinations,
    replacing Section 1581, Business Combinations. This section establishes
    the standards for the accounting of business combinations, and states
    that all assets and liabilities of an acquired business will be recorded
    at fair value at the acquisition date. The standard also states that
    acquisition-related costs will be expensed as incurred and that
    restructuring charges will be expensed in the periods after the
    acquisition date. This new Section will be applicable to financial
    statements relating to fiscal years beginning on or after January 1,
    2011. The Company is currently assessing the future impact of this new
    standard on its financial statements.

    Section 1601 - Consolidated Financial Statements

    In January 2009, the CICA issued Section 1601, Consolidated Financial
    Statements, which replaces the existing standards. This section
    establishes the standards for preparing consolidated financial statements
    and is effective for fiscal years beginning on or after January 1, 2011.
    The Company is currently assessing the future impact of this new standard
    on its financial statements.

    3.  ACCUMULATED OTHER COMPREHENSIVE INCOME

    As at March 31, 2009 accumulated other comprehensive income was comprised
    of the unrealized losses on marketable securities of $3,692,000
    ($3,059,000 net of tax)

                                                    2009                2008

    Balance, beginning of period                $ (2,095)           $    917
    Changes in unrealized (losses) gains on
     available-for-sale financial assets
     arising during the period                      (964)                124

    Balance, end of period                      $ (3,059)           $  1,041

    4.  INCOME TAXES

    The Company's total cash payments for income taxes paid in the three
    month period ending March 31, 2009 were $8,619,000 (2008 - $10,580,000).

    5.  SHARE CAPITAL

    During the quarter, 83,700 common shares were repurchased (2008 -
    171,200) on the open market pursuant to the terms and conditions of
    Normal Course Issuer Bids at a net cost of approximately $707,000 (2008 -
    $ 1,992,000). 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 $39,000 (2008 - $20,000). The excess net cost over the
    carrying value of the shares of approximately $668,000 (2008 -
    $1,972,000) has been recorded as a reduction in retained earnings.

    During the quarter ended March 31, 2009, no convertible, non-voting,
    series 1998 shares (2008 - 15,349) and 31,471 series 2002 shares (2008 -
    110,473) were converted into common shares with a stated value of
    approximately $nil and $226,000 (2008 - $67,000 and $ 794,000)
    respectively.

    Subsequent to the period end, the Company issued to certain employees
    1,207,000 convertible, non-voting series 2009 shares at a total value of
    $10,683,050.

    6.  CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS

    As March 31, 2009, the classification of the Company's financial
    instruments is as follows:

    March 31, 2009
                                                     Other
                                            Loans  Financ-
                                  Avail-      and      ial
                                    able  Receiv-  Liabil-
                       Held for      for    ables    ities    Total
                        Trading     Sale  (amort-  (amort-   Carry-
    Financial             (fair    (fair     ized     ized      ing     Fair
     Assets               value)   value)    cost)    cost)  Amount    Value
    Cash and cash
     equivalents         32,393        -        -        -   32,393   32,393
    Accounts receivable       -        -   17,967        -   17,967   17,967
    Marketable
     securities               -   75,676        -        -   75,676   75,676
    Restricted
     marketable
     securities               -   18,070        -        -   18,070   18,070
    Income taxes
     recoverable              -        -    6,397        -    6,397    6,397
    Other receivables         -        -      357        -      357      357

    Financial
     Liabilities
    Accounts payable
     and accrued
     liabilities              -        -        -   64,622   64,622   64,622
    Redeemable share
     liability                -        -        -      383      383      383


    December 31, 2008
                                                     Other
                                            Loans  Financ-
                                  Avail-      and      ial
                                    able  Receiv-  Liabil-
                       Held for      for    ables    ities    Total
                        Trading     Sale  (amort-  (amort-   Carry-
    Financial             (fair    (fair     ized     ized      ing     Fair
     Assets               value)   value)    cost)    cost)  Amount    Value
    Cash and cash
     equivalents         39,483        -        -        -   39,483   39,483
    Accounts receivable       -        -   30,291        -   30,291   30,291
    Marketable
     securities               -   83,194        -        -   83,194   83,194
    Restricted
     marketable
     securities               -   16,598        -        -   16,598   16,598
    Income taxes
     recoverable              -        -    2,037        -    2,037    2,037
    Other receivables         -        -      419        -      419      419

    Financial Liabilities
    Accounts payable and
     accrued liabilities      -        -        -   95,247   95,247   95,247
    Redeemable share
     liability                -        -        -      285      285      285


    RISK MANAGEMENT

    The Company is exposed to various risks associated with its financial
    instruments. These risks are summarized as credit risk, liquidity risk
    and market risk. The significant risks for the Company's financial
    instruments are:

    i)  Credit risk
        The Company believes at this point in time, it has some credit risk
        associated to its accounts receivable as it relates to the Appliance
        Canada division. The majority of the Company's sales are paid through
        cash, credit card or third party finance. The Company relies on two
        third party credit suppliers to supply financing alternatives to our
        customers.

    ii) Liquidity risk
        The Company has no outstanding debt and does not rely upon available
        credit facilities to finance operations or to finance committed
        capital expenditures. The portfolio of marketable securities consists
        primarily of Canadian and International bonds for which there is
        minimum exposure to U.S. financial companies affected by the credit
        crisis and corporate failures. There is no immediate need for cash
        from our investment portfolio.

        Working capital requirements are expected to increase. Terms with our
        suppliers are being reviewed and when there is an opportunity to
        increase the purchase discount, we are making the offer to secure the
        inventory supply.

    iii) Foreign currency risk

        The Company is exposed to foreign currency exchange rate risk. Some
        merchandise is paid for in U.S. dollars. The foreign currency cost is
        included in the inventory cost. The Company does not believe it has
        significant foreign currency risk with respect to its accounts
        payable in U.S. dollars.

    iv) Market price risk

        The Company is exposed to fluctuations in the market prices of its
        marketable securities that are classified as available-for-sale.
        Changes in the fair value of marketable securities are recorded, net
        of income taxes, in accumulated other comprehensive income (note 3).
        The risk is managed by ensuring a relatively conservative asset
        allocation of bonds and equities.

    7.  CAPITAL 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;
    -   maintain financial capacity and access to capital to support future
        development of the business while taking into consideration current
        and future industry, market and economic risks and conditions; and
    -   utilize short-term funding sources to manage its working capital
        requirements.
    





For further information:

For further information: Dominic Scarangella, tel: (416) 243-4073


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