Coast Wholesale Appliances Income Fund Reports First Quarter 2009 Results

    Coast Maintains Revenues at Close to Q1 2008 Level, Enters Toronto

    Coast Wholesale Appliances Income Fund (TSX: CWA.UN) will host a
    conference call and webcast to discuss its first quarter financial
    results on Tuesday, May 12, 2009 at 8:00 am Pacific Time (11:00 am
    Eastern). The call can be accessed by dialing: 1-800-589-8577 or
    416-644-3430 (GTA).

    A replay will be available through May 26, 2009 at: 1-877-289-8525 or
    416-640-1917. Passcode: 21305339, followed by the pound sign.

    The live and archived webcast, as well as an mp3 download, can be
    accessed at or on
    the Fund's website at

    TRADING SYMBOL: Toronto Stock Exchange - CWA.UN

    VANCOUVER, May 11 /CNW/ - Coast Wholesale Appliances Income Fund (the
Fund) today reported financial results for the three months ended March 31,
2009. The three-month period represents the first quarter of the Fund's 2009
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 former owner of the business, CWAL Investments
Ltd. (CWAL).

    Performance Highlights

    (in thousands of dollars except percentages       2009     2008     2007
     and per-unit amounts)                              Q1       Q1       Q1
    Sales                                           33,179   33,876   31,161
    Gross margin                                     7,723    8,466    7,731
    As a percentage of sales                         23.3%    25.0%    24.8%
    Income before non-controlling interest           1,050    1,941    2,014
    Basic and diluted net income per unit            0.105    0.194    0.201

    EBITDA                                           1,990    2,849    2,793
    EBITDA margin                                     6.0%     8.4%     9.0%
    EBITDA per unit                                  0.198    0.284    0.278

    Maintenance capital expenditures                    43      181        5
    Adjusted distributable cash                      1,614    2,415    2,555
    Adjusted distributable cash per unit             0.161    0.241    0.255
    Distribution per unit                            0.166    0.308    0.300
    Adjusted distribution ratio                     103.5%   127.8%   117.8%

    First Quarter Operating Results

    Despite continued difficult market conditions, Coast's first quarter
revenues of $33.2 million were only $0.7 million, or 2.1%, lower than the
$33.9 million reported in 2008. While retail sales declined year-over-year due
to much more cautious consumer spending, Coast's contract business with
developers, designers and builders continued to benefit from strong project
completions. As a result, its sales blend continued to shift in favour of
contract sales.
    In BC, the softening of Coast's retail business was offset by the
sustained strength of its contract sales. Sales were also maintained at the
2008 levels in Saskatchewan and Manitoba. Coast's business was generally down
in Alberta, particularly in the contract segment, and its new store in the
Greater Toronto Area (GTA) had a slow start to 2009, performing slightly below
expectations due to the exceptionally challenging economic environment in the
store's market area. As previously announced, Coast acquired the assets and
business of leading independent appliance dealer Morley's Appliance Centre on
January 2, 2009, achieving its long-time strategic objective of expanding into
    First quarter cost of sales was $25.5 million, or 76.7% of sales. This
resulted in a gross margin of $7.7 million, or 23.3% of sales. By comparison,
in the first quarter of 2008, cost of sales was $25.4 million, equal to 75% of
sales, resulting in a gross margin of $8.5 million, or 25.0% of sales. The
reduction in gross margin was mainly due to the year-over-year decrease in
retail sales, which generate a higher margin than contract sales. In addition,
within the contract segment of its business, Coast saw a proportionate
increase in sales to developers of multi-family projects, which generate a
lower margin than sales to builders of single-family properties.
    EBITDA for the first quarter was $2.0 million, down by $0.8 million from
$2.8 million in 2008, driving Coast's EBITDA margin down to 6.0% from 8.4%.
The decrease in EBITDA was mainly due to the slight revenue reduction and
lower gross margin in 2009. Net income before non-controlling interest
decreased to $1.1 million, or 3.2% of sales, from $1.9 million, or 5.7% of
sales, in the same period of 2008.
    "As expected, our performance in the first quarter was impacted by
continuing economic uncertainty in Canada and worldwide, as well as by the
sustained slowdown in housing starts across the country, particularly in the
single-family residential market," said Blain Lawson, President and CEO of
Coast. "In response to these challenges, we are concentrating our sales
efforts on essential needs, such as refrigeration and laundry, while
maintaining a sharp focus on cost and inventory control."
    In response to the decline in its gross margin, Coast has eliminated all
discretionary spending outside of growth-related expenditures to support its
new GTA store. In addition, it has cut back on non-essential capital
expenditures and is continuing to work to streamline operations and trim
overhead. Coast has also reduced marketing expenditures, in part by making
more effective use of the co-op advertising dollars available from suppliers.
    "Our cost control initiatives are definitely paying off," continued
Lawson. "Even with the added costs of operating our new store in the GTA, our
first quarter selling, warehouse, facility and general and administrative
expenses were only slightly higher than in 2008."
    During the quarter, Coast also enhanced its product offering, introducing
Miele appliances under an agency agreement signed in the final quarter of
2008. The addition of this high-quality European line has created new sales
opportunities across Coast's business, and particularly in the contract
sector. Since the Miele products are sold on a consignment basis, there was no
cost to Coast to add the new line to its inventories.
    In early February, Coast opened a new warehouse to support its strategic
position in Edmonton, where it operates two stores. One of these, the Edmonton
North store, will be relocated to a smaller facility in a higher-traffic area
close to the new warehouse in the third quarter of 2009. The Edmonton North
store relocation is part of Coast's on-going strategy to drive up comparable
store sales. With this relocation, all of Coast's original stores will have
been renovated or relocated since the Fund's inception in 2005.

    Cash Distributions

    For the month of January 2009, the Fund declared and paid distributions
in the amount of $0.0833 per unit, representing an annualized distribution
rate of $1.00 per unit. Effective with the February 2009 distribution, the
Trustees reduced the per-unit monthly amount to $0.0416, or $0.50 per annum,
in order to match the Fund's distribution level with its forecast
distributable cash flow, thereby maintaining balance sheet strength and
financial flexibility. A distribution in the new amount was also paid in March
2009. Since its inception, the Fund has paid a total of 46 consecutive monthly
cash distributions to its public unitholders, and equivalent cash
distributions to the non-controlling interest held by CWAL.
    During the seasonally slower first quarter, the Fund generated adjusted
distributable cash (before non-controlling interest) of $1.6 million, or $0.16
per unit. This compares to $2.4 million, or $0.24 per unit, in 2008. The
amount distributed and accrued for payment to unitholders and the
non-controlling interest in the first quarter decreased to $1.7 million, or
$0.17 per unit, in 2009 from $3.1 million, or $0.31 per unit, in 2008.
    The Fund's adjusted payout ratio for the first quarter of 2009 was
103.5%, down from the 127.8% it reported in 2008. The lower payout ratio in
2008 was due mainly to the reduction in the Fund's distribution level. On a
cumulative basis, from the Fund's inception, the Fund's adjusted payout ratio
is 97.8%.


    The following discussion is qualified in its entirety by the
forward-looking statements report at the end of this news release.
    The outlook for Coast's business through the balance of 2009 remains very
cautious. The Canadian economy continues to perform poorly. Housing starts are
continuing to decline in most markets and total starts for the year are
expected to fall substantially from 2008 levels. The ability of Coast's major
contract customers to start new projects continues to be constrained by tight
credit markets, and retail customers remain cautious about major purchases due
to their general lack of confidence in the Canadian economy.
    "We remain confident of our ability to manage through the current market
challenges, thanks in large part to our balanced business model and the cost
control initiatives we have successfully implemented," said Lawson. "Over the
longer-term, with a bridgehead now established in the Greater Toronto Area, we
are well positioned to expand our presence in Canada's most populous region
when economic conditions improve."
    The Fund is continuing to evaluate its most advantageous course of action
in response to the taxation of distributions at the trust level set to begin
in 2011, as well as the timing of any such action. It expects to complete
these plans in the coming year.
    A more detailed discussion of the Fund's financial results can be found
in its 2009 first quarter Management's Discussion and Analysis, which will be
posted with the consolidated financial statements on the Fund's website
( and on SEDAR ( on or before May 12,

    Coast profile

    Coast is a leading independent supplier of major household appliances to
developers and builders of multi-family and single-family housing, and to
retail customers. Founded in 1978, Coast currently operates 15 stores across
the four western provinces and one store in the Greater Toronto Area of
Ontario, as well as a network of warehouse distribution centres strategically
situated to serve these locations.

    Forward-looking statements

    This news release includes forward-looking statements. These involve
known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These forward-looking statements
are identified by the use of terms and phrases such as "anticipate",
"believe", "estimate", "expect", "may", "plan", "will", and similar terms and
phrases, including references to assumptions. Such statements may involve, but
are not limited to, comments with respect to the sustainability of the Fund's
distributions and the level of its payout ratio in the future.
    These statements reflect current expectations of the Fund's management
regarding future events and operating performance as of the date of this news
release. Forward-looking statements involve significant risks and
uncertainties, should not be read as guarantees of future performance or
results, and will not necessarily be accurate indications of whether or not
such results will be achieved. A number of factors could cause actual results
to differ materially from the results discussed in the forward-looking
statements, including, but not limited to: sensitivity to general economic
conditions; maintenance of profitability and management of growth;
competition; fluctuations in fuel and commodity pricing, which may impact
freight and other costs; usage of extended warranty programs and the costs to
deliver these services; changes to planning and supply chain processes;
changes in consumer preferences; changes in the mix of product sales; reliance
on suppliers; lack of supplier agreements; reliance on key personnel; foreign
exchange rates as they relate to imported products; and interest rates.
    Although the forward-looking statements contained in this news release
are based upon what management believes to be reasonable assumptions, the Fund
cannot assure investors that actual results will be consistent with these
forward-looking statements. The forward-looking statements reflect
management's current beliefs and are based on information currently available
to the Fund. They are made and speak only as of the date of this news release
and reflect current assumptions regarding future events and operating
performance. These assumptions include, without limitation: a continuing
recession in the Canadian economy, including Western Canada and the Greater
Toronto Area (the Fund's current market areas); continuing access to current
credit facilities; volatility in exchange rates; low and stable interest
rates; difficult credit markets for the Fund's major builder customers to
obtain financing for their current and future building activities; reduced
consumer confidence in light of the recessionary environment and its impact on
the willingness of consumers to purchase household appliances; and a
significant reduction in new building permits compared to the last few years.
These forward-looking statements are made and speak only as of the date of
this news release and the Fund assumes no obligation to update or revise them
to reflect new events or circumstances, other than as required by law.

    Non-GAAP Financial Measures

    EBITDA, EBITDA margin, maintenance capital and adjusted distributable
cash are non-GAAP financial measures that are defined in the first quarter
2009 Management's Discussion and Analysis posted on the Fund's website and

For further information:

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

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