Coast Wholesale Appliances Income Fund reports third quarter 2009 results
Coast continues to strengthen balance Sheet, reduces debt by $3.3 million Coast Wholesale Appliances Income Fund (TSX: CWA.UN) will host a conference call and webcast to discuss its third quarter and nine-month financial results on Tuesday, November 10, 2009 at 8:00 am Pacific Time (11:00 am Eastern). The call can be accessed by dialing: 1-800-814-4859 or 416-644-3418 (GTA). A replay will be available through November 24, 2009 at: 1-877-289-8525 or 416-640-1917. Passcode: 4173716, followed by the pound sign. The live and archived webcast, as well as an mp3 download, can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=151404 or on the Fund's website at www.coastincomefund.com. TRADING SYMBOL: Toronto Stock Exchange - CWA.UN
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 Q3 Q3 Q3 YTD YTD YTD ------------------------------------------------------------------------- Sales 37,341 38,547 37,759 108,433 110,673 105,729 Gross margin 8,813 9,686 9,495 25,364 27,566 26,455 As a percentage of sales 23.6% 25.1% 25.1% 23.4% 24.9% 25.0% Income before non-controlling interest 2,241 2,352 3,376 5,292 7,034 8,600 Basic and diluted net income per unit 0.223 0.234 0.336 0.527 0.701 0.857 EBITDA 3,117 2,955 4,208 7,886 9,346 10,884 EBITDA margin 8.3% 7.7% 11.1% 7.3% 8.4% 10.3% Maintenance capital expenditures 459 175 76 600 741 185 Adjusted distributable cash 2,335 2,534 3,895 6,296 7,855 9,993 Adjusted distributable cash per unit 0.233 0.253 0.388 0.627 0.783 0.996 Distribution per unit 0.125 0.308 0.300 0.416 0.923 0.900 Adjusted distribution ratio 53.6% 121.8% 77.3% 66.3% 117.9% 90.4% -------------------------------------------------------------------------
Third Quarter Operating Results
During the third quarter, Coast recorded sales revenue of
In BC, as in the first half, the softening of Coast's retail business was offset by the strength of its contract sales. Business in Alberta remained generally down, particularly in the contract segment. Third quarter sales in Saskatchewan were up once again year-over-year, while revenues in Manitoba remained in line with the 2008 level. In the Greater
Coast's third quarter cost of sales was
EBITDA for the third quarter was
"While we began to see signs of economic recovery in the third quarter, the major household appliances industry continued to be challenged by extremely difficult market conditions. Consumer confidence remained low, our builder and developer customers continued to face tight credit markets for financing of new projects, and the number of building permits issued and housing starts recorded remained below last year," said Blain Lawson, President and CEO of Coast. "In light of these factors, we have kept a tight rein on operating costs, and we are pleased to have held our sales to within 97% of the level recorded in the third quarter of 2008, the best sales quarter in our history."
As part of its strategy to drive up its comparable store sales, Coast completed the planned relocation of its
Lawson noted that the Fund has continued to make good progress in strengthening its balance sheet. "In addition to significantly improving our year-over-year cash position, we are happy to report that we paid down
Nine-Month Operating Results
Revenue for the nine months ended
Cash Distributions
For each of the months of July, August and
During the third quarter, the Fund generated adjusted distributable cash (before non-controlling interest) of
The Fund's adjusted payout ratio for the third quarter of 2009 was 53.6%, down from the 121.8% in 2008. The lower payout ratio in 2009 was due mainly to the
Outlook
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 final quarter of 2009 remains very cautious. In the contract segment, while Coast has benefited from strong project completions over the past 15 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.
"Over the near term, we do not anticipate any significant changes to the business environment. However, 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
Lawson noted that Coast will experience higher than normal inventory levels through the end of the year, due to a full product line changeover by its largest supplier. In addition to introducing technological advances and streamlined designs, the updated line responds to growing consumer demand for increased energy efficiency in major home appliances. The higher demand from end users is positively impacting Coast's sales in both the builder/developer and retail markets. In the coming months, Coast expects that its retail business will continue to benefit from provincial government rebate programs that offer consumers incentives to move to energy-saving appliances, particularly in BC and Ontario.
Lawson added that Coast will continue to evaluate opportunities to generate incremental revenue growth without adding to its fixed costs. "We expect to continue to do very well with the Miele product line we added at the beginning of this year. The Miele appliances are sold on a consignment basis and thus do not add to our inventory costs," he stated. "Similarly, on a more modest vein, we anticipate that the sales arrangement we established in the second quarter with an independent Nova Scotia-based agent will continue to contribute favourably to our contract sales revenues." This agreement has expanded Coast's geographic coverage to the Maritime region. These sales are administered under existing corporate systems, with deliveries flowing through a third-party warehouse.
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 prior to the end of the year.
A more detailed discussion of the Fund's financial results can be found in its 2009 third quarter Management's Discussion and Analysis, which will be posted with the unaudited interim consolidated financial statements at the Fund's website (www.coastincomefund.com) and at SEDAR (www.sedar.com) on or before
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
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: slow economic growth over the coming months in both Western
resumption of economic growth, as reflected in a continued reluctance on the part 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 third quarter 2009 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 protected], Website: www.coastincomefund.com
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