NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Transcription

1 Condensed Interim Consolidated Financial Statements of THE BRICK LTD. For the three months ended March 31, 2013 NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument , Part 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 and approved by the Board of Directors of the Company. The Company s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity s auditor.

2 TABLE OF CONTENTS PAGE Condensed Interim Consolidated Statements of Financial Position Condensed Interim Consolidated Statements of Comprehensive Income Condensed Interim Consolidated Statements of Changes in Equity Condensed Interim Consolidated Statements of Cash Flow

3 Condensed Interim Consolidated Statements of Financial Position (thousands of Canadian dollars) Note Mar 31, 2013 Dec 31, 2012 ASSETS Cash and cash equivalents $ 27,243 $ 85,475 Trade and other receivables 65,743 77,653 Inventories 163, ,846 Income taxes receivable Prepaid expenses and deposits 6,157 5,718 Deferred acquisition costs 8,280 8,280 TOTAL CURRENT ASSETS 270, ,024 MARKETABLE SECURITIES 13,310 12,948 DEFERRED ACQUISITION COSTS 12,927 13,338 PROPERTY, PLANT AND EQUIPMENT 3 176, ,447 INVESTMENT PROPERTY 3,107 3,142 INTANGIBLE ASSETS AND DEFERRED CHARGES 4 158, ,272 DEFERRED INCOME TAX ASSETS 2,449 2,466 TOTAL NON-CURRENT ASSETS 367, ,613 TOTAL ASSETS $ 637,908 $ 728,637 LIABILITIES Trade and other payables $ 121,628 $ 149,622 Income taxes payable 9,906 23,545 Customers' deposits 51,327 70,057 Provisions 4,993 4,855 Deferred lease inducements 1,800 1,813 Deferred warranty plan revenue and unearned insurance revenue 45,341 47,929 Finance lease liabilities 2,778 2,739 Note payable to parent ,958 - TOTAL CURRENT LIABILITIES 265, ,560 SHARE-BASED COMPENSATION PLANS 8 2,309 7,070 DEFERRED LEASE INDUCEMENTS 23,142 22,135 DEFERRED RENT LIABILITIES 24,092 24,092 DEFERRED WARRANTY PLAN REVENUE AND UNEARNED INSURANCE REVENUE 80,110 80,791 PROVISIONS LOANS AND BORROWINGS 6 31,459 31,172 FINANCE LEASE LIABILITIES 112, ,643 INCOME TAXES PAYABLE 1,058 3,118 DEFERRED INCOME TAX LIABILITIES 27,097 30,405 TOTAL NON-CURRENT LIABILITIES 301, ,954 EQUITY Common shares 258, ,996 Warrants ,896 Reserves ,196 Deficit (189,471) (163,376) Accumulated other comprehensive income TOTAL EQUITY 70, ,123 TOTAL LIABILITIES AND EQUITY $ 637,908 $ 728,637 The accompanying notes are an integral part of these condensed interim consolidated financial statements. 1

4 Condensed Interim Consolidated Statements of Comprehensive Income (thousands of Canadian dollars) Mar 31, 2013 Mar 31, 2012 Note (3 months) (3 months) REVENUE $ 302,002 $ 295,828 COST OF SALES 166, ,198 GROSS PROFIT 135, ,630 OPERATING EXPENSES 122, ,116 12,341 19,514 OTHER INCOME (EXPENSE) Finance income Finance costs (3,954) (6,938) Other income Depreciation of property, plant and equipment and investment property (5,671) (5,718) Amortization of intangible assets and deferred charges (1,411) (1,282) (10,540) (12,929) INCOME BEFORE INCOME TAXES 1,801 6,585 INCOME TAX (EXPENSE) RECOVERY 5 Current (3,858) (2,534) Deferred 3, (566) (1,837) NET INCOME $ 1,235 $ 4,748 Other comprehensive income, net of income taxes Net increase in unrealized fair value of available for sale securities COMPREHENSIVE INCOME $ 1,491 $ 4,805 The accompanying notes are an integral part of these condensed interim consolidated financial statements. 2

5 Condensed Interim Consolidated Statements of Changes in Equity (thousands of Canadian dollars) Mar 31, 2013 Mar 31, 2012 Note (3 months) (3 months) Common shares Balance at beginning of period $ 258,996 $ 253,979 Warrants exercised Treasury shares at end of prior year - 1,426 Cancellation of shares - (2,270) Balance at end of period 258, ,501 Warrants Balance at beginning of period 10,896 17,971 Warrants exercised - (231) Cancellation of warrants (10,896) - Balance at end of period ,740 Reserves Balance at beginning of period 10,196 8,930 Equity-settled share-based payment transactions (8,825) 296 Cancellation of warrants 7.1 (1,371) - Balance at end of period 7.2-9,226 Deficit Balance at beginning of period (163,376) (189,556) Net income 1,235 4,748 Exercise of share-based compensation 8 (11,639) - Cancellation of common shares - (977) Cancellation of warrants 7.1 (15,691) - Balance at end of period (189,471) (185,785) Accumulated other comprehensive income on available for sale securities Balance at beginning of period Unrealized gain arising during the period Income taxes on unrealized (gain) arising during the period (90) (208) Reclassification of realized (gain) loss to net income (2) 25 Income taxes on reclassification of realized gain (loss) to net income 1 (20) Balance at end of period Total equity 70,192 $ 95,061 $ The accompanying notes are an integral part of these condensed interim consolidated financial statements. 3

6 Condensed Interim Consolidated Statements of Cash Flow (thousands of Canadian dollars) Mar 31, 2013 Mar 31, 2012 Note (3 months) (3 months) CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period $ 1,235 $ 4,748 Add (deduct) items not affecting cash Depreciation of property, plant and equipment and investment property 3 5,671 5,718 Amortization of intangible assets and deferred charges 4 1,411 1,282 Amortization of deferred lease inducements (476) (501) Amortization of deferred warranty and insurance revenue (18,460) (19,640) Amortization of deferred acquisition costs 2,036 2,224 Amortization of financing fee and transaction costs Accretion expense on debentures Current income tax expense 3,858 2,534 Deferred income tax recovery (3,292) (697) Gain on disposal of property, plant and equipment (18) (630) Net finance costs 3,364 5,600 Changes in equity-settled share-based compensation plans 1, Changes in cash settled share-based compensation plans 2, Cash paid for deferred acquisition costs (1,625) (1,518) Cash received on warranty and insurance revenue sales 15,192 17,886 13,150 18,958 Changes in non-cash operating working capital items 11 (16,906) (10,346) Interest and dividends received Income tax paid (19,613) (209) Net cash (used in) provided by operating activities (23,086) 8,546 FINANCING ACTIVITIES Repayment of finance leases (657) (737) Settlement of share-based compensation (29,307) - Repurchase of debentures - (1) Proceeds from the exercise of warrants Common shares repurchased for cancellation - (1,821) Loan from parent ,958 - Debenture warrants repurchased for cancellation 7.1 (27,958) - Additions to deferred charges - (556) Interest paid (2,369) (2,526) Net cash used in financing activities (32,333) (5,506) INVESTING ACTIVITIES Acquisition of property, plant and equipment 3 (310) (2,557) Proceeds on disposal of property, plant and equipment 45 4 Acquisition of intangible assets 4 (2,532) (2,260) Acquisition of marketable securities (116) (620) Proceeds from sale of marketable securities Net cash used in investing activities (2,813) (5,293) CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD (58,232) (2,253) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 85, ,144 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,243 $ 138,891 The accompanying notes are an integral part of these condensed interim consolidated financial statements. 4

7 1. REPORTING ENTITY The Brick Ltd. (the Company or The Brick ) is a company domiciled in Canada and was incorporated under the laws of the Province of Alberta, Canada on September 24, The address of the Company s registered office is Avenue, Edmonton, Alberta. The condensed interim consolidated financial statements of the Company as at March 31, 2013 (the financial statements ) include the Company and its wholly-owned subsidiaries (together referred to as the Company ). The Company s principal business activities are retail sales of furniture, mattresses, appliances and electronics, and the marketing of warranty plans and retail credit insurance plans (Note 13 Operating Segments). 100% of the Company s common shares are owned by Leon s Furniture Limited ( Leon s or the Parent ). The Company s debentures are listed for trading on the Toronto Stock Exchange ( TSX ). On November 11, 2012 Leon s and The Brick announced that they had entered into a definitive agreement (the "Arrangement Agreement" or the Leon s Arrangement ) that provided for Leon s to acquire 100% of The Brick s outstanding common shares for $5.40 per outstanding common share, and for The Brick to acquire for cancellation all outstanding common share purchase warrants for $4.40 per common share purchase warrant. Immediately upon completion of the Leon s Arrangement, which occurred on March 28, 2013, all outstanding common shares and common share purchase warrants were repurchased in accordance with the Leon s Arrangement and are no longer listed for trading on the TSX. The total consideration paid to shareholders and warrantholders of The Brick was approximately $700 million. Any Debentures which remain outstanding will continue to be listed for trading on the TSX. Upon a change of control of The Brick, The Brick was required to make an offer to repurchase the Debentures, in whole or in part, at a price equal to 110% of the principal amount of the Debentures plus accrued and unpaid interest. As at March 31, 2013, the principal amount of Debentures outstanding was $32,833, and accrued and unpaid interest on the Debentures was $985. Subsequent to March 31, 2013, The Brick received valid tenders for $17,833 principal amount of Debentures under the offer which expired on April 11, The Brick paid $20,191 comprising $19,616 in respect of principal and 10% premium over principal, and $575 in respect of accrued interest, to settle the repurchase. The Asset-Based Credit Facility was cancelled in conjunction with the closing of the Leon s Arrangement. In accordance with the terms of the Arrangement Agreement and the change of control provisions of The Brick s share-based compensation plans, all outstanding Unit Options and Chief Executive Officer Options ( CEO Options ) and certain Performance Share Units ( PSUs ) became fully vested and were cash settled immediately upon completion of the Arrangement Agreement. With respect to all outstanding Deferred Share Units ( DSUs ) held by non-management members of The Brick s board of directors, the DSUs became fully vested and were cash settled immediately upon the resignation of each director which occurred in conjunction with closing of the Arrangement. With respect to all remaining PSUs, the change of control did not result in immediate vesting. 5

8 2. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with International Accounting Standards ( IAS ) 34 - Interim Financial Reporting on a basis consistent with the accounting policies disclosed in the Company s annual audited consolidated financial statements for the fiscal year ended December 31, Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards ( IFRS ), as issued by the International Accounting Standards Board ( IASB ) have been omitted or condensed. These financial statements should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, All amounts are reported in Canadian dollars, unless otherwise noted. These financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: available-for-sale financial assets are measured at fair value; and liabilities for cash-settled share-based compensation plans are measured at fair value. These financial statements were authorized for issue by the Company s Board of Directors on May 10, PROPERTY, PLANT AND EQUIPMENT Automotive equipment Leasehold improvements Leased property Leased equipment Freehold land Buildings Equipment Total Cost Balance at December 31, 2012 $ 11,110 $ 26,567 $ 2,002 $ 60,669 $ 112,585 $ 121,509 $ 9,672 $ 344,114 Additions (1) ,748 3,059 Reclassification (24) Disposals - - (4) (315) (319) Balance at March 31, 2013 $ 11,110 $ 26,611 $ 1,998 $ 60,417 $ 112,789 $ 121,509 $ 12,420 $ 346,854 (1) Acquisitions of assets under finance leases reflect non-cash transactions and are, therefore, not included as acquisitions on the statement of cashflows. Accumulated depreciation and impairment Balance at December 31, 2012 $ - $ 10,187 $ 463 $ 30,800 $ 79,608 $ 35,046 $ 8,563 $ 164,667 Depreciation (2) ,664 2,383 1, ,637 Disposals - - (4) (288) (292) Balance at March 31, 2013 $ - $ 10,531 $ 498 $ 32,176 $ 81,991 $ 36,144 $ 8,672 $ 170,012 (2) Depreciation expense of $5,671 on the consolidated statements of comprehensive income for the three month period ended March 31, 2013 includes depreciation on investment properties of $34 which is not reflected in the table above. Net book value At December 31, 2012 $ 11,110 $ 16,380 $ 1,539 $ 29,869 $ 32,977 $ 86,463 $ 1,109 $ 179,447 At March 31, 2013 $ 11,110 $ 16,080 $ 1,500 $ 28,241 $ 30,798 $ 85,365 $ 3,748 $ 176,842 6

9 4. INTANGIBLE ASSETS AND DEFERRED CHARGES Cost Information systems Leasehold interests Non-compete agreements Financing fees Brands Total Balance at December 31, 2012 $ 50,624 $ 8,414 $ 5,439 $ 548 $ 136,400 $ 201,425 Additions 2, ,532 Balance at March 31, 2013 $ 53,156 $ 8,414 $ 5,439 $ 548 $ 136,400 $ 203,957 Accumulated amortization Balance at December 31, 2012 $ 30,676 $ 7,970 $ 5,419 $ 88 $ - $ 44,153 Amortization ,411 Balance at March 31, 2013 $ 31,508 $ 8,081 $ 5,427 $ 548 $ - $ 45,564 Net book value At December 31, 2012 $ 19,948 $ 444 $ 20 $ 460 $ 136,400 $ 157,272 At March 31, 2013 $ 21,648 $ 333 $ 12 $ - $ 136,400 $ 158, Amortization In conjunction with the termination of the Asset-Based Credit Facility (Note 6.1) which occurred in conjunction with the closing of the Leon s Arrangement on March 28, 2013, the unamortized portion of the transaction costs relating to the Asset-Based Credit Facility of $441 was written off and is included in amortization expense on the statement of comprehensive income for the three month period ended March 31, INCOME TAXES Income tax expense can be reconciled to net income before tax as follows: Mar 31, 2013 Mar 31, 2012 (3 months) (3 months) Income before income taxes $ 1,801 $ 6,585 Income tax expense calculated at 25.94% (2012: 25.85%) (467) (1,702) Effect of income that is exempt from taxation Effect of expenses that are not deductible in determining taxable profit (113) (276) Effect on deferred income tax balances due to the change in income tax rate - (44) Other (17) 153 Income tax expense recognized in net income $ (566) $ (1,837) 6. LOANS AND BORROWINGS 6.1 Asset-Based Credit Facility In conjunction with the closing of the Leon s Arrangement on March 28, 2013, the Asset-Based Credit Facility was terminated, and was not replaced. 7

10 6.2 Debentures On March 11, 2013, in accordance with the terms of the Leon s Arrangement, the Company issued a tender offer to all Debenture holders to redeem their Debentures for a price of $110 per $100 of principal value (not in thousands of dollars) plus accrued and unpaid interest. The Brick received valid tenders for $17,833 aggregate principal amount of Debentures pursuant to the March 11, 2013 offer which expired on April 11, Payment for the debentures tendered in the amount of $20,191 comprised $19,616 in respect of principal and the 10% premium on principal, and $575 in respect of accrued interest. The remaining principal amount of Debentures outstanding subsequent to the April 11, 2013 repurchase is $15, CAPITAL AND OTHER COMPONENTS OF EQUITY 7.1 Warrants During the three month period ended March 31, 2013, in conjunction with the closing of the Leon s Arrangement on March 28, 2013, the Company repurchased the remaining 6,354,276 outstanding Debenture Warrants at a price of $4.40 per Debenture Warrant for a total consideration of $27,958. Warrants were reduced by their carrying value of $10,896 and the excess of the $27,958 consideration paid was applied to decrease reserves by $1,371, and increase deficit by $15, Reserves During the three month period ended March 31, 2013, reserves decreased by $10,196. This decrease was attributable to the repurchase of all outstanding Debenture Warrants (Note 7.1) which resulted in a decrease of $1,371, and to cash settlement of the CEO Options, PSOs and DSUs which resulted in a decrease of $8,825. The CEO Options, PSOs and DSUs were cash settled in accordance with the closing of the Leon s Arrangement on March 28, SHARE-BASED COMPENSATION PLANS 8.1 Unit Option Plan During the three month period ended March 31, 2013, the Company cash settled all outstanding Unit Options in accordance with the terms of the Leon s Arrangement which closed on March 28, $4,885 was paid to cash settle 1,963,237 Unit Options resulting in an expense of $1,646 recognized in the period to reflect accelerated vesting of future service, a decrease to reserves of $1,452 to reflect expense recognized in previous periods for past service, and an increase to deficit of $1,787 reflecting the excess of the settlement amount over the grant-date fair value of the Unit Options. No Unit Options were granted during the three month period ended March 31, Deferred Share Unit Plan During the three month period ended March 31, 2013, the Company cash settled all outstanding Deferred Share Units ( DSUs ) in accordance with the terms of the Leon s Arrangement which closed on March 28, $2,137 was paid to cash settle 395,682 DSUs resulting in a 8

11 decrease to reserves of $1,121 to reflect expense recognized in previous periods for past service, and an increase to deficit of $1,016 reflecting the excess of the settlement amount over the grant-date fair value of the DSUs. No DSUs were granted during the three month period ended March 31, Performance Share Unit Plan During the three month period ended March 31, 2013, the Company cash settled all vested and certain unvested Performance Share Units ( PSUs ) accordance with the terms of the Leon s Arrangement which closed on March 28, $7,197 was paid to cash settle 662,624 PSUs resulting in an expense of $1,959 recognized in the period to reflect accelerated vesting of future service and a decrease to share-based compensation plans on the statement of financial position of $5,238 to reflect settlement of liability for expense recognized in previous periods for past service. No PSUs were granted during the three month period ended March 31, CEO Options During the three month period ended March 31, 2013, the Company cash settled all outstanding CEO Options in accordance with the terms of the Leon s Arrangement which closed on March 28, $15,088 was paid to cash settle 3,400,000 CEO Options resulting in a decrease to reserves of $6,252 to reflect expense recognized in previous periods for past service, and an increase to deficit of $8,836 reflecting the excess of the settlement amount over the grant-date fair value of the Unit Options. No CEO Options were granted during the three month period ended March 31, CAPITAL MANAGEMENT The Company has not changed its objectives, policies or procedures for managing capital since December 31, 2012 and as at March 31, 2013 exceeds all external capital requirements. 10. RELATED PARTY TRANSACTIONS Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Company and other related parties are discussed below Trading transactions During the period, entities of the Company entered into trading transactions with related parties that are not members of the Company. The Company pays rent to a joint venture partially owned by an officer of the Company. Included in operating expenses is rent expense of $257 for the three month period ended March 31, 2013 (2012: $271), paid to this related party. At March 31, 2013 and December 31, 2012 no amounts were payable to or receivable from this related party. 9

12 Certain employees of the Company are owners of a Brick franchise. The franchise purchases inventory from the Company. Trade and other receivables include amounts for inventory sold to this franchise. During the three month period ended March 31, 2013, the Company had sales of $572 (2012: $586) to this franchise. The following balances owed by related parties were outstanding at March 31, 2013 and December 31, 2012: Amounts owed by related parties Mar 31, 2013 Dec 31, 2012 Trade and other receivables $ 339 $ 385 The amounts outstanding are unsecured and will be settled in cash and are included in trade and other receivables on the statement of financial position. No guarantees have been given or received. No expense has been recognized in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties. The above transactions are in the normal course of operations, and are measured based on commercial rates established and agreed to by the related parties Compensation of key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of an entity. The remuneration of directors and other members of key management personnel during the three month periods ended March 31, 2013 and March 31, 2012 are provided in the table below: Three months ended March 31, Short-term benefits $ 1,538 $ 1,465 Post-employment benefits Share-based compensation plans 3,967 1,023 $ 5,524 $ 2, Other related party transactions During the three month period ended March 31, 2013, in conjunction with and in accordance with the terms of the Leon s Arrangement which closed on March 28, 2013, the Company borrowed from its Parent $27,958 by way of a Promissory Note. The Company used the proceeds from this borrowing to repurchase all outstanding Debenture Warrants (Note 7.1). The Promissory Note has no terms for repayment, does not bear interest, and is repayable on demand. The Promissory Note is presented as note payable to parent and included in current liabilities on the statement of financial position. 10

13 11. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS Mar 31, 2013 Mar 31, 2012 (3 months) (3 months) Cash provided by (used in): Trade and other receivables $ 11,910 $ 17,348 Inventories 19,406 7,170 Prepaid expenses and deposits (439) (1,524) Trade and other payables (29,157) (21,361) Customers' deposits (18,730) (11,866) Provisions 104 (113) $ (16,906) $ (10,346) 12. SEASONAL NATURE OF THE BUSINESS The Company s results for any quarter are not necessarily indicative of the results that may be expected for the full year due to seasonal variations in sales levels. The Company s subsidiaries historically experience a higher level of sales during the third and fourth quarters, while the first and second quarters experience lower sales levels due to seasonal shopping patterns. Occupancy-related expenses, certain operating expenses, depreciation and amortization, and interest expense remain relatively steady throughout the year. 13. OPERATING SEGMENTS The Company s reportable segments are strategic business units that offer different products and services. The Company has two operating segments: Retail and Financial Services. The Company operates retail stores concentrating on the sales of furniture, mattresses, appliances and electronics. Retail customers are offered credit though the Brick Card which is funded and billed by an unrelated private label credit provider. The Financial Services segment is primarily engaged in providing extended warranty services on products sold to customers of The Brick and credit insurance on balances that arise from customers use of their Brick Card. Accordingly, the Financial Services segment is economically dependent on the Retail segment as the majority of its revenues are derived from sales to customers of the Retail segment. Credit insurance is provided to Brick Card customers to protect the cardholder from disability or the loss of life, property or source of income, thereby providing protection to many customers who do not carry other similar insurance policies. The Financial Services segment also offers life, property and credit insurance products to third parties. The reportable segments reflect the basis on which management measures performance and makes decisions regarding the allocation of resources. Transactions between the Retail segment and the Financial Services segment are priced at rates expected to reflect arm s-length market rates as established and agreed to by the parties. The Company does not have any reportable operations outside of Canada, and does not have any single customer that accounts for 10 per cent or more of its revenues. 11

14 Segmented operating results and other financial information as at and for the three month period ended March 31, 2013 are presented in the following table: Financial For the three months ended March 31, 2013 Retail Services Total Revenue from external clients (1) $ 283,469 $ 18,533 $ 302,002 Cost of sales 161,592 5, ,997 Gross profit 121,877 13, ,005 Operating expenses 122, ,664 (294) 12,635 12,341 Intersegment license fee income (expense) (2) 5,705 (5,705) - Intersegment repair services (2) 1,710 (1,710) - Finance income Other income ,770 (7,274) 496 EBITDA (3) 7,476 5,361 12,837 Other expense Finance costs (3,893) (61) (3,954) Depreciation of property, plant and equipment and investment property (5,671) - (5,671) Amortization of intangible assets and deferred charges (1,411) - (1,411) (10,975) (61) (11,036) Income before income taxes (3,499) 5,300 1,801 Income tax recovery (expense) 802 (1,368) (566) Net income $ (2,697) $ 3,932 $ 1,235 Other segment information: Significant non-cash items effecting EBITDA and net income: Share based compensation $ 3,967 $ - $ 3,967 Amortization of deferred lease inducements (476) - (476) Amortization of deferred warranty revenue and insurance revenue - (18,460) (18,460) Amortization of deferred acquisition costs - 2,036 2,036 Total assets 592,918 44, ,908 CAPEX (4) 2,842-2,842 Total liabilities 428, , ,716 (1) Intersegment revenue of $4,773 has been eliminated from the Retail segment and $148 has been eliminated from the Financial Services segment on consolidation. (2) Intersegment license fees of $5,705 are charged by the Retail segment to the Financial Services segment for the right to offer warranty and insurance products to customers of the Retail segment. These license fees are in the normal course of business and are recorded at the amounts established by the license fee agreements, which reflect market rates. Intersegment repair services of $1,710 are provided by the Retail segment to the Financial Services segment and are related to the cost of servicing extended warranty claims. These services are in the normal course of business and are recorded at the exchange amounts established by the parties, which reflect market rates. (3) References to EBITDA are to net income, or net loss, before finance costs, income taxes, depreciation, amortization, asset impairment charges and asset impairment charge reversals. EBITDA is a measure The Brick s chief decision makers use to assess The Brick s financial performance. EBITDA is not an earning measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income as determined in accordance with IFRS, as an indicator of performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. (4) CAPEX includes all expenditures on property, plant and equipment, intangible assets and investment properties. It does not include assets acquired under a finance lease. 12

15 Segmented operating results and other financial information as at and for the three month period ended March 31, 2012 are presented in the following table: Financial For the three months ended March 31, 2012 Retail Services Total Revenue from external customers (1) $ 276,141 $ 19,687 $ 295,828 Cost of sales 155,947 6, ,198 Gross profit 120,194 13, ,630 Operating expenses 113, ,116 6,442 13,072 19,514 Intersegment license fee income (expense) (2) 6,003 (6,003) - Intersegment repair services (2) 1,973 (1,973) - Finance income Other income ,874 (7,865) 1,009 EBITDA (3) 15,316 5,207 20,523 Other expense Finance costs (6,865) (73) (6,938) Depreciation of property, plant and equipment and investment property (5,717) (1) (5,718) Amortization of intangible assets and deferred charges (1,282) - (1,282) (13,864) (74) (13,938) Income before income taxes 1,452 5,133 6,585 Income tax expense (675) (1,162) (1,837) Net income $ 777 $ 3,971 $ 4,748 Other segment information: Significant non-cash items effecting EBITDA and net income: Share based compensation $ 1,023 $ - $ 1,023 Amortization of deferred lease inducements (501) - (501) Amortization of deferred warranty revenue and insurance revenue - (19,640) (19,640) Amortization of deferred acquisition costs - 2,224 2,224 Total assets 694,183 43, ,947 CAPEX (4) 4,817-4,817 Total liabilities 505, , ,886 (1) Intersegment revenue of $4,139 has been eliminated from the Retail segment and $218 has been eliminated from the Financial Services segment on consolidation. (2) Intersegment license fees of $6,003 are charged by the Retail segment to the Financial Services segment for the right to offer warranty and insurance products to customers of the Retail segment. These license fees are in the normal course of business and are recorded at the amounts established by the license fee agreements, which reflect market rates. Intersegment repair services of $1,973 are provided by the Retail segment to the Financial Services segment and are related to the cost of servicing extended warranty claims. These services are in the normal course of business and are recorded at the exchange amounts established by the parties, which reflect market rates. (3) References to EBITDA are to net income, or net loss, before finance costs, income taxes, depreciation, amortization, asset impairment charges and asset impairment charge reversals. EBITDA is a measure The Brick s chief decision makers use to assess The Brick s financial performance. EBITDA is not an earning measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA should not be construed as an alternative to net income as determined in accordance with IFRS, as an indicator of performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. (4) CAPEX includes all expenditures on property, plant and equipment, intangible assets and investment properties. It does not include assets acquired under a finance lease. 13