Coast Wholesale Appliances Income Fund Reports Second Quarter 2009 Results

         Coast Maintains Stable Revenues, Strengthens Balance Sheet

    Coast Wholesale Appliances Income Fund (TSX: CWA.UN) will host a
    conference call and webcast to discuss its second quarter financial
    results on Tuesday, August 11, 2009 at 8:00 am Pacific Time (11:00 am
    Eastern). The call can be accessed by dialing: 1-800-731-5319 or
    416-644-3418 (GTA).

    A replay will be available through August 25, 2009 at: 1-877-289-8525 or
    416-640-1917. Passcode: 21311454, 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, Aug. 10 /CNW/ - Coast Wholesale Appliances Income Fund (the
Fund) today reported financial results for the three and six months ended June
30, 2009. The three-month period represents the second 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 and per-unit amounts)
                              2009    2008    2007    2009    2008    2007
                              Q2      Q2      Q2      YTD     YTD     YTD
    Sales                     37,913  38,250  36,809  71,092  72,126  67,970
    Gross margin               8,828   9,414   9,228  16,551  17,880  16,960
    As a percentage of sales   23.3%   24.6%   25.1%   23.3%   24.8%   25.0%
    Income before
     non-controlling interest  2,001   2,741   3,208   3,051   4,682   5,224
    Basic and diluted net
     income per unit           0.199   0.273   0.320   0.304   0.467   0.521

    EBITDA                     2,780   3,542   3,883   4,769   6,391   6,676
    EBITDA margin               7.3%    9.3%   10.5%    6.7%    8.9%    9.8%

    Maintenance capital
     expenditures                100     385     104     143     566     109
    Adjusted distributable
     cash                      2,347   2,906   3,543   3,961   5,321   6,098
    Adjusted distributable
     cash per unit             0.234   0.290   0.353   0.395   0.530   0.608
    Distribution per unit      0.125   0.308   0.300   0.291   0.615   0.600
    Adjusted distribution
     ratio                     53.3%  106.2%   85.0%   73.8%  116.0%   98.7%

    Second Quarter Operating Results

    Despite continued economic uncertainty in its key markets, Coast recorded
second quarter revenues of $37.9 million, just $0.4 million, or 0.9%, lower
than the $38.3 million reported in 2008. Contract business with developers,
designers and builders continued to benefit from strong project completions.
Retail sales, while stronger than in the first quarter of 2009, remained below
the 2008 second quarter level, due to much more cautious consumer spending. As
a result, Coast's sales blend continued to favour contract sales.
    In BC, the softening of Coast's retail business was again offset by the
strength of its contract sales. Business in Alberta remained generally down,
particularly in the contract segment. Second quarter sales in Saskatchewan
increased year-over-year, and revenues in Manitoba were in line with the 2008
level. Finally, Coast's new store in the Greater Toronto Area (GTA) continued
to perform below expectations due to the exceptionally challenging economic
conditions in southern Ontario.
    Second quarter cost of sales was $29.1 million, or 76.7% of sales. This
resulted in a gross margin of $8.8 million, or 23.3% of sales. By comparison,
in the second quarter of 2008, cost of sales was $28.8 million, equal to 75.4%
of sales, resulting in a gross margin of $9.4 million, or 24.6% 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.
    EBITDA for the second quarter was $2.8 million, down by $0.7 million from
$3.5 million in 2008, driving Coast's EBITDA margin down to 7.3% from 9.3%.
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 $2.0 million, or 5.3% of sales, from $2.7 million, or 7.2% of
sales, in the same period of 2008.
    "Our performance remains in line with our expectations, given the
continuing economic recession in Canada and globally, and the corresponding
slowdown in housing starts across the country," said Blain Lawson, President
and CEO of Coast. "In light of the challenging business environment, we are
continuing to focus on streamlining our non-selling functions and business
processes in order to increase operating efficiency as we work to enhance
profitability by increasing sales from our existing stores."
    Lawson added that the reduction in monthly distributions to unitholders
introduced in February 2009, together with the relative stability of Coast's
revenues, have enabled the Fund to strengthen its balance sheet. "At
quarter-end, we had significantly improved our cash position from the 2008
year-end and paid down our operating line. Subsequent to the end of the
quarter, we further reduced our debt by applying $1.0 million to our
acquisition term loan," he stated.
    During the second quarter, Coast also expanded its geographic coverage to
the Maritime region, entering into a sales agreement with an agent based in
Nova Scotia. Leveraging its buying power and well-established ability to serve
the needs of developers and builders, the opportunistic arrangement will allow
Coast to generate incremental contract sales revenue without adding to its
fixed costs. Sales under the agreement, initially expected to be modest, will
be administered under existing corporate systems, with deliveries flowing
though a local third-party warehouse.

    First Half Operating Results

    Revenue for the six months ended June 30, 2009 was $71.1 million, down by
$1.0 million, or 1.4%, from $72.1 million in 2008. Cost of sales was $54.5
million, or 76.7% of sales, resulting in a gross margin of $16.6 million, or
23.3% of sales. This compares with cost of sales of $54.2 million, or 75.2% of
sales, and a gross margin of $17.9 million, or 24.8% of sales, in 2008. As
with the quarterly result, the decline in first half gross margin was due to
the shift in
    Coast's business mix in favour of contract sales. First half EBITDA was
$4.8 million, down by $1.6 million from $6.4 million in 2008, bringing Coast's
EBITDA margin down to 6.7% from 8.9% in 2008. Again, as with the quarterly
result, the decrease in EBITDA was due to the lower sales and gross margin in
2009, and the added costs associated with the new GTA store. Net income before
non-controlling interest was $3.1 million, or 4.3% of sales, compared to $4.7
million, or 6.5% of sales, in the first half of 2008.

    Cash Distributions

    For each of the months of April, May and June 2009, the Fund declared and
paid distributions in the amount of $0.0416, equating to an annualized
distribution of $0.50 per unit. Since its inception, the Fund has paid a total
of 48 consecutive monthly cash distributions to its public unitholders, and
equivalent cash distributions to the non-controlling interest held by CWAL.
    During the second quarter, the Fund generated adjusted distributable cash
(before non-controlling interest) of $2.3 million, or $0.23 per unit. This
compares to $2.9 million, or $0.29 per unit, in 2008. The amount distributed
and accrued for payment to unitholders and the non-controlling interest in the
second quarter decreased to $1.3 million, or $0.12 per unit, in 2009 from $3.1
million, or $0.31 per unit, in 2008.
    The Fund's adjusted payout ratio for the second quarter of 2009 was
53.3%, down from the 106.2% in 2008. The lower payout ratio in 2009 was due
mainly to the February 2009 reduction in the Fund's distribution level. On a
cumulative basis, from the Fund's inception, the Fund's adjusted payout ratio
is 95.6%.


    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 second half of 2009 remains
very cautious. In the contract segment, while Coast has benefited from strong
project completions over the past 12 months, the ability of its major contract
customers to start new projects continues to be restrained by tight credit
markets. On the retail side, although sales have improved in certain markets
since the beginning of the year, customers remain cautious about major
purchases due to their general lack of confidence in the Canadian economy.
    "We are continuing to benefit from the cost control initiatives we have
successfully implemented since 2008, and we believe the current level of cash 
   distributions will allow us to maintain the balance sheet strength we
require to manage through the current market downturn," said Lawson. "Over the
longer term, we remain confident of our ability to grow our business when
market conditions improve by capitalizing on our balanced business model and
our recently established foothold in the Greater Toronto Area."
    As part of its on-going strategy to drive up comparable store sales,
Coast is proceeding with final preparations for the relocation of its existing
Edmonton North store to a smaller facility in a higher-traffic area in the
third quarter of 2009. With this store move, all of Coast's original stores
will have been renovated or relocated since the Fund's inception in 2005.
    The Fund is also 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 by the end of the year.
    A more detailed discussion of the Fund's financial results can be found
in its 2009 second quarter Management's Discussion and Analysis, which will be
posted with the unaudited interim consolidated financial statements at the
Fund's website ( and at SEDAR ( on or
before August 11, 2009.

    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 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 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 second 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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