Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

December 31, 2009 08:00 ET

Liquidation World Announces Fiscal 2009 Results

BRANTFORD, ONTARIO--(Marketwire - Dec. 31, 2009) - Liquidation World Inc. (TSX:LQW) today announces the results of the 2009 fiscal year, representing the 52-week period ended October 4, 2009.

Revenue from continuing operations decreased 13.5% to $157.8 million from $182.4 million in the prior year. Same store sales in fiscal 2009 decreased 7.1% as compared to fiscal 2008. In 2009, the Company recorded a net loss from continuing operations of $17.6 million ($1.32 per share) compared to a net loss from continuing operations of $9.9 million ($1.20 per share) in the prior year. Including the results of discontinued operations, the Company recorded a net loss and comprehensive loss of $11.3 million ($1.37 per share) in fiscal 2008.

  2009 2008 Change
  ($ millions) ($ millions) ($millions)
Annual revenue $157.8 $182.4 ($24.6)
Gross margin - $ $47.8 $63.6 ($15.8)
Gross margin - % 30.3% 34.9% (4.6%)
Annual net loss from continuing operations ($17.6) ($9.9) ($7.7)
Annual net loss and comprehensive loss ($17.6) ($11.3) ($6.3)

In the fourth quarter, revenue from continuing operations declined 18.4% to $35.6 million from $43.6 million in the prior year, primarily as a result of the impact of historically low inventory values on sales and a smaller store count. Fourth quarter same store sales decreased 11.4% versus prior year. In fourth quarter the Company recorded a net loss from continuing operations of $3.4 million ($0.21 per share) compared to a net loss from continuing operations of $2.7 million ($0.33 per share) in the prior year.

  2009 2008 Change
  ($ millions) ($ millions) ($ millions)
Q4 revenue $35.6 $43.6 ($8.0)
Gross margin - $ $13.0 $15.5 ($2.5)
Gross margin - % 36.6% 35.6% 1.0%
Q4 net loss from continuing operations ($3.4) ($2.7) ($0.7)
Q4 net loss and comprehensive loss ($3.4) ($2.7) ($0.7)

Additional details are provided in the financial statements below.

Seth Marks, President & CEO commented:

In February 2009, when I was appointed as Chief Executive Officer of Liquidation World - or "LW" as we now commonly call Liquidation World - our collective objective was to implement a clear vision and strategy in order for LW to realize its potential. Setting the goals of unequivocally restoring the business to profitability and laying the foundation for future growth required many difficult decisions to be made.

New infrastructure needed to be built, new initiatives needed to be executed and a new attitude needed to be instilled. A revitalized and new management team was installed and empowered. This management team wholeheartedly believes in the great potential that lies ahead for Liquidation World.

As with most turnarounds, 2009 was a "discover, test and execute year." We worked relentlessly to materially improve our store presentation standards, quality of merchandise, inventory and inventory control.

We have done a comprehensive review our business and identified areas where we can improve our operating margins with a program that focuses on margin enhancing and cost savings opportunities that are sustainable and will not impact our ability to execute our short term and long term plans. We have developed a new marketing strategy that will elevate the LW brand perception, strengthen consumer awareness, and deepen the relationship with our consumers.

We are pleased with the strong performance of our five new store openings that occurred in the first quarter of fiscal 2010, and with the store renovations that occurred over this past year. In addition, we will continue to critically assess the performance of all of our stores, to ensure they are performing acceptably.

As we move forward, we continue to believe we have made substantial progress in the turnaround of this business.

The board of directors, senior management and I would like to express our sincere gratitude to every Liquidation World associate for their hard work and continued commitment throughout a transformational year and to our valued suppliers and investors for their continued support.

Forward-Looking Statements

This release includes forward-looking statements and potential future circumstances and developments. Forward-looking statements regarding future performance are subject to risks and uncertainties, and actual results may differ materially. Due to fluctuations in gross margins and expenses, an increase in revenue does not directly correlate to an increase in net earnings.

About Liquidation World

Liquidation World liquidates consumer merchandise through 96 stores in Canada and one in the United States. The Company solves asset recovery problems in a professional manner for the financial services industry, insurance companies, manufacturers, wholesalers and other organizations. Liquidation World is based in Brantford, Ontario. The Company opened its first store in Calgary, Alberta in 1986 and today, with more than 1,500 employees, is Canada's largest liquidator.

 
LIQUIDATION WORLD INC.
Consolidated Balance Sheets
As at October 4, 2009 and October 5, 2008
(In thousands of Canadian dollars)
 
  2009 2008
  audited audited
Assets        
         
Current assets        
Accounts receivable $ 1,554 $ 119
Deposits   113   -
Inventory   33,941   44,178
Prepaid expenses   1,622   1,645
    37,230   45,942
         
Lease deposits   247   73
Property and equipment   8,613   10,459
Intangibles   653   -
  $ 46,743 $ 56,474
         
Liabilities and Shareholders' Equity        
         
Current liabilities        
Bank indebtedness $ 8,758 $ 11,426
Accounts payable and accrued liabilities   16,974   12,687
Current portion of obligations under capital leases   710   1,588
Current liabilities of discontinued operations   434   434
    26,876   26,135
Obligations under capital leases   145   470
Deferred lease inducements   2,321   551
         
Shareholders' equity        
Share capital   22,330   15,518
Contributed surplus   1,554   1,407
Retained earnings(deficit)   (6,483)   12,393
    17,401   29,318
  $ 46,743 $ 56,474
   
   
LIQUIDATION WORLD INC.  
Consolidated Statements of Loss and Comprehensive Loss and Retained Earnings(Deficit)  
For the periods ended October 4, 2009 and October 5, 2008  
(In thousands of Canadian dollars, except per share amounts)  
  13 weeks ended   13 weeks ended   52 weeks ended   52 weeks ended  
  October 4, 2009   October 5, 2008   October 4, 2009   October 5, 2008  
  unaudited   unaudited   audited   audited  
                         
Revenue $ 35,564   $ 43,560   $ 157,809   $ 182,359  
Cost of sales   22,552     28,040     109,965     118,809  
Gross margin   13,012     15,520     47,844     63,550  
Expenses                        
  Selling, general and administrative   15,037     17,022     60,877     68,430  
  Depreciation and amortization   851     956     3,345     3,997  
  Goodwill impairment charge   233     -     233     -  
  Interest                        
    Short term   177     292     582     902  
    Long term   12     33     74     180  
Foreign exchange loss (gain)   90     (76 )   314     (48 )
    16,400     18,227     65,425     73,461  
                -        
Loss before income taxes   (3,388 )   (2,707 )   (17,580 )   (9,911 )
Income taxes (recovery)               -        
  Current   -     -     -     -  
  Future   -     -     -     -  
    -     -     -     -  
Net loss from continuing operations   (3,388 )   (2,707 )   (17,581 )   (9,911 )
Net loss from discontinued operations   -     -     -     (1,428 )
Net loss and comprehensive loss   (3,388 )   (2,707 )   (17,581 )   (11,339 )
Retained earnings, beginning of period   (3,095 )   15,100     11,098     23,732  
Retained earnings(deficit), end of period $ (6,483 ) $ 12,393   $ (6,483 ) $ 12,393  
                         
                         
Basic and diluted net loss per share                        
From continuing operations $ (0.21 ) $ (0.33 ) $ (1.32 ) $ (1.20 )
From discontinued operations $ -   $ -   $ -   $ (0.17 )
  $ (0.21 ) $ (0.33 ) $ (1.32 ) $ (1.37 )
   
   
LIQUIDATION WORLD INC.  
Consolidated Statements of Cash Flows  
For the periods ended October 4, 2009 and October 5, 2008  
(In thousands of Canadian dollars)  
  13 weeks ended   13 weeks ended   52 weeks ended   52 weeks ended  
  October 4, 2009   October 5, 2008   October 4, 2009   October 5, 2008  
  unaudited   unaudited   audited   audited  
Cash provided by (used in):                        
Operating activities                        
Net loss from continuing operations $ (3,388 ) $ (2,707 ) $ (17,581 ) $ (9,911 )
Add (deduct) non-cash items:                        
Depreciation and amortization   851     956     3,345     3,997  
Goodwill impairment charge   233     -     233     -  
Leasehold inducements   (53 )   (15 )   132     (49 )
Loss (gain) on disposal of capital assets   (2 )   490     89     117  
Stock based compensation   (42 )   (26 )   147     248  
Change in non-cash working capital items   (4,589 )   (1,625 )   15,655     5,085  
    (6,990 )   (2,927 )   2,020     (513 )
               
Investment activities                        
Purchase of capital assets   (802 )   (443 )   (1,546 )   (1,520 )
Business acquisition   (140 )   -     (140 )   -  
Proceeds on disposal of capital assets   -     (2 )   5     -  
Change in non-cash working capital items   (171 )   -     (1,006 )   -  
    (1,113 )   (445 )   (2,687 )   (1,520 )
               
Financing activities                        
Increase(decrease) in bank indebtedness   7,950     3,721     (2,668 )   3,822  
Repayment of capital leases   (297 )   (349 )   (1,203 )   (1,474 )
Deposits   (50 )   -     (174 )   -  
Lease inducement   500     -     750     150  
Fees for issue of common shares   -     -     (788 )   -  
Proceeds on issuance of common shares for cash   -     -     4,750     -  
    8,103     3,372     667     2,498  
Cash applied to discontinued operations   -     -     -     (465 )
               
Increase(decrease) in cash   0     -     0     -  
               
Cash, beginning of period   -     -     -     -  
               
Cash, end of period $ 0   $ -   $ 0   $ -  
               
Supplemental disclosure of cash paid (received) for:                        
Income taxes - net $ -   $ (2,381 ) $ 5   $ (2,160 )
Interest paid   180     233     648     1,002  
  $ 180   $ (2,148 ) $ 653   $ (1,158 )

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