Coast Wholesale Appliances Income Fund Reports 2007 Fourth Quarter and Year-End Results

    Coast Increases Sales Across Western Canada, Generates Record Annual

    Coast Wholesale Appliances Income Fund (TSX: CWA.UN) will host a
    conference call and webcast to discuss its fourth quarter and year-end
    financial results on Tuesday, March 25, 2008 at 8:00 a.m. Pacific Time
    (11:00 a.m. Eastern). The call can be accessed by dialing: 1-800-733-7560
    or 416-644-3414.

    A replay will be available through April 8, 2008 at: 1-877-289-8525 or
    416-640-1917, Passcode: 21263431 followed by the pound (No.) sign

    The live and archived webcast can be accessed at or on the Fund's
    website at

    TRADING SYMBOL: Toronto Stock Exchange - CWA.UN

    VANCOUVER, March 24 /CNW/ - Coast Wholesale Appliances Income Fund (the
Fund) today reported financial results for the three and 12 months ended
December 31, 2007. The three-month period represents the fourth quarter of its
2007 fiscal year.
    The Fund holds a 65% indirect interest in Coast Wholesale Appliances LP
(Coast), a leading independent supplier of major household appliances, and its
results are entirely dependent upon Coast's operating results. The remaining
35% interest is held by the previous owner, CWAL Investments Ltd. (CWAL).
Distributions to CWAL have been subordinated to those of the public
unitholders, subject to the Fund meeting certain EBITDA and cash distribution
targets, as set out in its June 15, 2005 prospectus. As anticipated, the
conditions for removal of the subordination have been met and the
subordination will be removed following the release of the Fund's 2007
year-end audited financial statements.

    Performance Highlights

    (in thousands of dollars except percentages and per-unit amounts)

                                      Q1       Q2       Q3       Q4      YTD
    Sales                         31,161   36,809   37,759   37,306  143,035
    Gross profit                   7,732    9,228    9,495    9,317   35,772
    As a percentage of sales        24.8%    25.1%    25.1%    25.0%    25.0%

    Net income before
     non-controlling interest      2,015    3,209    3,376    2,227   10,827
    Basic and diluted net
     income per unit               0.200    0.320    0.337    0.222    1.079

    EBITDA                         2,792    3,884    4,208    3,175   14,059
    EBITDA margin                    9.0%    10.6%    11.1%     8.5%     9.8%

    Adjusted distributable cash    2,555    3,544    3,895    2,434   12,428
    Adjusted distributable cash
     per unit                       0.25     0.36     0.39     0.24     1.24
    Distribution per unit           0.30     0.30     0.30     0.31     1.21
    Adjusted distribution ratio    117.8%    85.0%    77.3%   126.8%    97.5%

                                      Q1       Q2       Q3       Q4      YTD
    Sales                         27,717   30,802   34,674   32,762  125,955
    Gross profit                   6,659    7,710    8,717    8,570   31,656
    As a percentage of sales        24.0%    25.0%    25.1%    26.2%    25.1%

    Net income before
     non-controlling interest      1,843    2,317    3,379    2,836   10,375
    Basic and diluted net
     income per unit               0.184    0.231    0.337    0.282    1.034

    EBITDA                         2,747    3,249    4,342    3,832   14,170
    EBITDA margin                    9.9%    10.5%    12.5%    11.7%    11.3%

    Adjusted distributable cash    2,450    2,822    3,987    3,512   12,771
    Adjusted distributable cash
     per unit                       0.24     0.28     0.40     0.35     1.27
    Distribution per unit           0.30     0.30     0.30     0.30     1.20
    Adjusted distribution ratio    122.9%   106.7%    75.5%    85.7%    94.3%

    Fourth quarter operating results

    Coast's revenues for the three months ended December 31, 2007 were
$37.3 million, up by $4.5 million, or 13.9%, from the $32.8 million recorded
in the fourth quarter of 2006. At comparable stores - locations open for more
than one year - sales increased by $2.8 million, or 8.4%. New store sales
growth during the quarter came from the two Alberta locations added in the
first quarter of 2007. Coast opened a second Edmonton store in mid-February
and its first Red Deer location at the end of March, bringing its total store
count to 15. The Fund's business is divided between direct sales to retail
customers, and contract sales to developers and builders. Retail sales growth
in the fourth quarter was comparable to the third quarter, but down from the
particularly strong growth rates experienced in the first half of 2007 due to
more cautious consumer spending. As anticipated, Coast's contract business
remained strong in the fourth quarter, particularly in BC.
    Fourth quarter cost of sales was $28.0 million, or 75.0% of sales. This
resulted in a gross profit of $9.3 million, or 25.0% of sales. By comparison,
in the fourth quarter of 2006, cost of sales was $24.2 million, or 73.8% of
sales, resulting in a gross profit of $8.6 million, or 26.2% of sales. The
lower gross margin in 2007 was mainly due to a year-over-year reduction in
annual volume-based supplier rebates. In 2006, Coast received a rebate from a
key supplier that effectively increased its fourth quarter gross margin by
1.1%. The Fund did not earn a comparable rebate in 2007, as attaining the
necessary volume levels would have required a significant increase in
purchases of slower selling merchandise in the fourth quarter.
    Coast's fourth quarter EBITDA was $3.2 million, compared to $3.8 million
in 2006, while its EBITDA margin of 8.5% was down from 11.7 % in the prior
year. The EBITDA margin reduction was due mainly to the loss of the supplier
rebate and the impact of generally higher expenses with the growth of Coast's
business. Net income before non-controlling interest for the quarter was
$2.2 million, or 6.0% of sales, down from $2.8 million, or 8.7% of sales, in

    Twelve-month operating results

    For the year ended December 31, 2007, Coast generated record annual
revenues of $143.0 million, up by $17.0 million, or 13.6%, from the
$126.0 million reported in 2006. Comparable store sales were up by $11.0
million, or 8.7%, over 2006. Similar growth levels were achieved in each of
the four western provinces. As with the quarterly result, new store sales
growth was concentrated in the Alberta retail market. With the addition of the
two new Alberta stores, Coast had expected a slight shift in its overall
business mix toward the retail sector in 2007. However, due to the slowing of
retail sales growth in the second half and the strong contract sales recorded
in the final quarter, annual revenues were again approximately evenly divided
between the two sectors.
    Cost of sales for the 12 months was $107.3 million, or 75.0% of sales,
resulting in a gross profit of $35.8 million, or 25.0% of sales. This compares
to cost of sales of $94.3 million, or 74.9% of sales, and a gross profit of
$31.7 million, or 25.1% of sales, in 2006. The slight decrease in annual gross
margin was mainly due to the lower volume rebates in 2007. This was partially
offset by the first half shift in Coast's business mix toward retail sales,
which generate a higher margin than contract business. The company also
continued to benefit from the new, higher-margin product lines it added in
early 2006.
    During 2007, Coast's EBITDA decreased slightly to $14.1 million from
$14.2 million in 2006, while its EBITDA margin decreased to 9.8% from 11.3% in
2006. As with the quarterly result, the lower EBITDA margin in 2007 was due to
reduced supplier rebates and generally higher expenses. Net income before
non-controlling interest increased to $10.8 million, or 7.6% of sales, from
$10.4 million, or 8.2% of sales, in 2006.
    "Although our revenues reached a new high in 2007, they were still below
our expectations, due to the moderate slowing of retail sales that occurred in
the second half of the year, while our expenses remained on plan," said
Blain Lawson, President and CEO of Coast. "As the year unfolded, the difficult
economic conditions in the US, coupled with a strengthening Canadian dollar,
put pressure on our major suppliers. Retail consumers have become more price
conscious, expecting to see an immediate benefit from the strong dollar across
our product offerings. However, the strength of the Canadian dollar had no
impact on pricing of products from our Asian and European suppliers, and our
US suppliers were slow to respond with pricing changes. This delay had a
negative impact on our gross margins, because products require approximately
60 days in our pipeline to see the full benefit of any supplier price
reductions. To enhance our profitability, we have been working to achieve
greater operating efficiency by streamlining our non-selling functions and
focussing on driving up our comparable store sales."
    In the third quarter of 2007, Coast relocated its Calgary warehouse to a
newer, larger facility, which became fully operational in October. During the
year, the company also moved forward with plans to relocate its Regina and
Abbotsford stores to new, larger premises in higher traffic areas. These
relocations are planned for the first and third quarters of 2008,
respectively. In addition, by year-end, Coast had substantially completed a
major upgrade of its inventory management and computer systems to support the
future growth and expansion of its business. The company also launched a new
marketing strategy focussed on building consumer awareness of the Coast brand
through targeted print and radio advertising in its major markets.

    Cash distributions

    As previously announced, the Fund increased its monthly cash distribution
from $0.10 per unit to $0.1025 per unit, beginning with the October 2007
distribution. Distributions in this amount, which represents an annualized
distribution rate of $1.23 per unit, were declared for each of the final three
months of 2007. By the end of the fourth quarter, the Fund had paid a total of
30 consecutive monthly cash distributions to its public unitholders, as well
as 10 consecutive quarterly cash distributions to the subordinated
non-controlling interest held by CWAL.
    During the fourth quarter, the Fund earned $2.4 million, or $0.24 per
unit, in adjusted distributable cash (before the non-controlling interest).
This was down from $3.5 million, or $0.35 per unit, in the same period of
2006. The amount distributed and accrued for payment to unitholders and the
non-controlling interest increased in 2007 to $3.1 million, or $0.31 per unit,
from $3.0 million, or $0.30 per unit, in 2006.
    For the full 2007 fiscal year, the Fund's adjusted distributable cash
(before non-controlling interest) totaled $12.4 million, or $1.24 per unit,
compared to $12.8 million, or $1.27 per unit, in 2006. The amount distributed
and accrued for payment to unitholders and the non-controlling interest
increased in 2007 to $12.1 million, or $1.21 per unit, from $12.0 million, or
$1.20 per unit in 2006.
    The Fund's adjusted payout ratio for 2007 was 97.5%, up from the 94.3% it
achieved in 2006. The higher payout ratio in 2007 was due mainly to Coast's
increased maintenance capital expenditures in the final quarter of the year.
These expenditures were primarily for building and computer systems upgrades
necessary to support the future growth of Coast's business. These planned
expenditures exceeded the 2006 level by $0.3 million.


    In 2008, Coast expects continued sales growth from its existing stores,
as well as incremental sales gains from its two new Alberta locations. The
company is continuing to actively review opportunities for expansion by
increasing its coverage of Western Canada and potentially entering the eastern
Canadian market.
    "We are cautious, but optimistic, about the outlook for our business,"
said Lawson. "We have begun to see a strengthening in our retail sales and,
now that the dollar is a little more stable, we expect to see a return to more
normal historical margins. Although we are still seeing a slowing of
single-family housing starts in Western Canada, the multi-family market
remains robust and we expect that total housing starts will be close to the
record levels of the past two years."
    Lawson said the company is continuing to concentrate on increasing sales
from its existing stores and enhancing profitability. "We will be working this
year to improve our supply chain management in order to reduce our receivables
and inventory. We are also strengthening internal controls and further
reducing operating expenses by centralizing more of our business functions."
    He added that the Fund continues to evaluate the potential impact of the
taxation of distributions at the trust level set to begin in 2011, and will
determine the most appropriate course of action as more information relating
to transition rules becomes available.
    A more detailed discussion of the Fund's financial results can be found
in its 2007 Management's Discussion and Analysis, which will be posted with
audited financial statements at the Fund's website (
and at SEDAR ( on or before March 25, 2008.

    Company profile

    Coast Wholesale Appliances is a leading independent supplier of major
household appliances to developers and builders of multi-family and
single-family housing and to retail customers in Western Canada. Founded in
1978, Coast currently operates 15 locations and four warehouse distribution
centres across the four western provinces.

    Forward-looking statements

    This news release may contain forward-looking statements relating to
expected future events and financial and operating results of Coast that
involve risks and uncertainties. The actual results may differ materially from
management expectations as projected in such forward-looking statements for a
variety of reasons. These include market and general economic conditions, and
the risks and uncertainties detailed from time to time in Coast's continuous
disclosure materials filed with Canadian securities regulatory authorities,
including the 2007 year-end Management's Discussion and Analysis filed at
SEDAR ( These forward-looking statements are based on
assumptions that management considered reasonable at the time they were
prepared. Due to the potential impact of these factors, Coast disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, unless
required by applicable law.

    Non-GAAP Financial Measures

    EBITDA, EBITDA margin and adjusted distributable cash are non-GAAP
financial measures that are defined in the 2007 year-end Management's
Discussion and Analysis posted on the Fund's website and SEDAR.

For further information:

For further information: Jack Peck, Chief Financial Officer, Telephone:
(604) 301-3400, Email:, Website:

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