Coast Continues to Post Double-Digit Sales Growth
Coast Wholesale Appliances Income Fund (TSX: CWA.UN) will host a
conference call and webcast to discuss its second quarter financial
results on Thursday, August 2, 2007 at 8:00 a.m. Pacific Time (11:00 a.m.
Eastern). The call can be accessed by dialing: 1-800-590-1817 or
A replay will be available through August 16, 2007 at: 1-877-289-8525 or
416-640-1917 Passcode: 21240452 followed by the number sign.
The live and archived webcast can be accessed at
http://www.vcall.com/IC/CEPage.asp?ID=118692 or on the Fund's
website at www.coastincomefund.com.
TRADING SYMBOL: Toronto Stock Exchange - CWA.UN
VANCOUVER, Aug. 1 /CNW/ - Coast Wholesale Appliances Income Fund (the
Fund) today reported financial results for the three and six months ended
June 30, 2007. The three-month period represents the second 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 has been retained by the previous ownership. Distributions to the
retained interest are currently subordinated to those of public unitholders,
subject to the Fund meeting certain EBITDA and cash distribution targets, as
set out in its June 15, 2005 prospectus. The subordination is expected to be
removed following the Fund's next full financial audit, anticipated to be
conducted subsequent to its 2007 year-end.
Second quarter operating results
In the three months ended June 30, 2007, Coast generated sales revenues
of $36.8 million, up by $6.0 million, or 19.5%, from the $30.8 million
recorded in the second quarter of 2006. Sales at comparable stores - locations
open for more than one year - increased by $4.0 million, or 13.1%,
quarter-over-quarter, growing equally across the four western provinces. New
store sales growth came from the Calgary store Coast opened in August 2006,
its second in the city, and two other new Alberta locations added in the first
quarter of 2007. The company opened its second Edmonton store in mid-February
and its first Red Deer location at the end of March, bringing its total store
count to 15.
As in the first quarter of this year, Coast saw a slight shift in its
business mix in favour of retail sales. The company expects that its retail
sales will continue to grow at a faster rate than its contract sales to
developers and builders as its newly opened stores become more established. In
Coast's contract business, as anticipated, the sales lag that the company
experienced in British Columbia during the second half of 2006 continued to
show signs of catching up as delayed construction projects proceeded to
completion. Coast expects to realize the remainder of the deferred contract
sales in the third quarter.
Cost of sales for the second quarter was $27.6 million, or 74.9% of
sales, which resulted in a gross profit of $9.2 million, or 25.1% of sales. By
comparison, in the second quarter of 2006, cost of sales was $23.1 million, or
75.0% of sales, providing a gross profit of $7.7 million, or 25.0% of sales.
The year-over-year gross margin improvement was partially due to the shift in
Coast's business mix toward retail sales, which generate a higher margin than
its contract business. The company also continued to benefit from the new,
higher-margin product lines it added to its core offerings in early 2006 to
increase sales to the higher end of the multi-family sector.
Second quarter EBITDA was $3.9 million, compared to $3.2 million in 2006.
Coast's EBITDA margin of 10.6% for the 2007 period was up slightly from 10.5%
in the second quarter of 2006. Removing the full impact of the new stores, the
2007 second quarter EBITDA margin would have been 11.0%.
Net income before non-controlling interest was $3.2 million, or 8.7% of
sales, compared to $2.3 million, or 7.5% of sales, in the second quarter of
2006. Removing the full impact of the new stores, the 2007 net income before
non-controlling interest would have been 9.1% of sales.
Six-month operating results
Sales for the six months ended June 30, 2007 were $68.0 million, up by
$9.5 million, or 16.2%, from $58.5 million in the first half of 2006.
Comparable store sales for the six months increased by $6.6 million, or 11.2%,
Cost of sales for the first six months of 2007 was $51.0 million, or
75.0% of sales, resulting in a gross profit of $17.0 million, or 25.0% of
sales. This compares to cost of sales of $44.1 million, or 75.4% of sales, and
a gross profit of $14.4 million, or 24.6% of sales, in the first half of 2006.
Coast's EBITDA for the six months increased to $6.7 million from
$6.0 million in 2006, while its EBITDA margin decreased to 9.8% from 10.2% in
2006. Removing the full impact of the new stores, the 2007 six-month EBITDA
margin would have been 10.5%.
Six-month net income before non-controlling interest was $5.2 million, or
7.7% of sales, up from $4.2 million, or 7.1% of sales, in the first half of
2006. Removing the full impact of the new stores, the 2007 six-month net
income before non-controlling interest would have been 8.2% of sales.
"We are pleased with our strong operating performance in the first half
of 2007," said Blain Lawson, President and CEO of Coast. "Our sales growth is
right on target, thanks largely to the sustained robust economy in Western
Canada, where all 15 of our stores are located."
The Fund declared monthly cash distributions of $0.10 per unit for each
of April, May and June 2007. By the end of the quarter, the Fund had paid a
total of 24 consecutive monthly cash distributions to its public unitholders,
as well as eight consecutive quarterly cash distributions to the subordinated
non-controlling interest held by the previous owners of the business. As
previously announced, a subsequent monthly distribution of $0.10 per unit to
public unitholders has been declared for the month of July 2007.
In the second quarter of 2007, the Fund earned $3.6 million in adjusted
distributable cash before the non-controlling interest, or $0.36 per unit.
This compares to $2.9 million, or $0.29 per unit, in the same period of 2006.
In both quarters, the Fund distributed and accrued for payment $3.0 million,
or $0.30 per unit, to unitholders and the non-controlling interest.
Adjusted distributable cash before non-controlling interest in the first
six months of the year totaled $6.2 million, or $0.62 per unit, up from
$5.4 million, or $0.54 per unit in 2006. In both years, the Fund distributed
and accrued for payment $6.0 million, or $0.60 per unit, to unitholders and
the non-controlling interest.
The Fund's adjusted distributable cash payout ratio varies throughout the
year according to the seasonality of Coast's business. While the Fund has
levelled distributions to provide a regular stream of income to unitholders,
Coast expects that the less profitable first half of the year will be offset
by historically higher earnings in the second half.
In the second quarter of 2007, Coast's adjusted payout ratio improved to
83.8% from 103.1% in the same period of 2006. For the six months, its adjusted
payout ratio improved to 97.3% from 111.0% in 2006. Removing the full impact
of the new stores, the six-month adjusted payout ratio would have been 95.0%.
On a 12-month trailing basis, the Fund succeeded in reducing its adjusted
payout ratio to 87.4% from 97.3% at June 30, 2006.
For the balance of 2007, Coast expects continued, steady sales growth
from its existing stores, as well as incremental sales gains from its ongoing
expansion in Alberta. The company is actively seeking additional locations in
both BC and Alberta, as well as acquisition targets in Eastern Canada. To
support its growth, Coast amended its credit facilities during the second
quarter to extend the maturity of its term debt from June 23, 2008 to July 31,
2010 and added a new $13.5 million acquisition facility.
Coast is also proceeding with a number of initiatives to increase sales
from existing stores and enhance profitability. "As planned, we are set to
relocate our Calgary warehouse to a newer, larger facility in the third
quarter," said Lawson. "We also now have agreements in place to relocate our
Regina and Abbotsford stores to new, larger premises in higher-traffic areas
in the first half of 2008."
Lawson said that Coast is optimistic about the outlook for its business
for the second half of 2007, and added that the Fund will continue to evaluate
the potential impact of the new tax on income trusts announced by the federal
government on October 31, 2006 and enacted into legislation on June 12, 2007.
The changes result in taxation of distributions at the trust level starting in
2011. "We will determine the most appropriate course of action for our Fund as
more information becomes available," he stated.
A more detailed discussion of the Fund's financial results can be found
in its second quarter 2007 Management's Discussion and Analysis, which will be
posted with financial statements at the Fund's website
(www.coastincomefund.com) and at SEDAR (www.sedar.com) on or before August 2,
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.
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 second quarter 2007 and year-end Management's Discussion and
Analyses filed at SEDAR (www.sedar.com). 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 second quarter 2007 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: email@example.com, Website: