Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

February 11, 2010 08:00 ET

Liquidation World Announces Profitable First Quarter Results and Other Corporate Changes

BRANTFORD, ONTARIO--(Marketwire - Feb. 11, 2010) - Liquidation World Inc. (TSX:LQW) today announces results of the first quarter of fiscal 2010, representing the 13-week period ended January 3, 2010.

Revenue in the first quarter was $44.1 million as compared to $47.1 million in the first quarter of 2009 representing a decrease of $3.0 million or 6.2%. The decrease was attributable to a decline in same store sales of $3.8 million or 8.5%, offset by i) a net favourable impact of $0.6 million arising from new store openings net of store closures and, ii) a net increase in wholesale and other revenues of $0.2 million. During the first quarter of 2010 the Company opened five new stores which generated sales of $3.1 million.

Gross margin in the first quarter was $17.3 million or 39.2% of sales as compared to $15.8 million or 33.6% of sales in the first quarter of 2009. The increase in gross margin as a percentage of sales of 5.6% was attributable to a reduction in shrink and inventory valuation reserves, and improved point of sale margins realized as a result of improved product offerings and a focus on margin maximization while maintaining the optimum value proposition for customers.

During the first quarter, the Company recorded net earnings of $0.7 million or $0.05 per share as compared to a net loss of $0.8 million or $0.10 per share in the first quarter of 2009. Management estimates that one-time or unusual costs incurred in the quarter totaled $0.4 million and included, among other things, new store costs, re-modeling costs, and severance costs.

Additional details are provided in the financial statements below.

Seth Marks, President & CEO commented, "While we are encouraged with our results in the first quarter of 2010, we are cognizant that many opportunities and challenges lie ahead. Earning $1.7 million of EBITDA in the quarter serves as some measure of validation that the many changes we have implemented over the last three quarters are beginning to result in tangible improvement in our business performance. Our focus moving forward will be to continue to grow our in-store inventory per square foot, increase the number of sku's offered in our stores, improve in-store operations, and improve the quality of our inventory by continuing to cultivate new vendor relationships."

The Company is announcing that its board of directors has formed a special committee consisting of board members, David Becker, Craig Graham and Jeffrey Mandel, to consider financing proposals for the Company, including a preliminary indication received by the Company. Any financing proposals will be subject to, among other things, the approval of the Company's lender and the TSX.

The Company is also announcing its plan to close up to eight of its current 96 stores during the second quarter of 2010. This follows on first quarter store activity, which included the opening of five new stores and the closure of one store. In addition, the Company plans on opening up to three new stores in the second quarter and expects to end the second quarter with 91 stores.

Seth Marks, commented; "We have been critically assessing every area of our business with the objective of continuing to reduce costs, improving profitability and maximizing our return on capital employed. As part of this process we have recently completed an extensive review of our existing stores and have determined that it is prudent to close a number of under-performing stores in order to better deploy the capital committed to in-store inventory. Over the past several months the Company has been increasing inventory levels throughout its chain of stores and opening five new stores in the first quarter of fiscal 2010. To fully realize the opportunities that many stores present, management believes that the Company needs to continue to expand the quantity and variety of products that our stores offer to its customers on a daily basis. In addition, the strong performance of the five new stores that opened in the first quarter of fiscal 2010 under the "LW - Everybody's Outlet Store" banner, validates the Company's objective of continued expansion into key markets."

During the week of February 1, 2010 the Company commenced "Store Closing" sales in the affected locations and will fully close these locations once the inventory has been depleted.

Mr. Marks added; "In most cases we were able to take advantage of near term lease expiries or the termination of month-to-month lease agreements in order to minimize closure costs. The decision to close stores has been difficult in light of the tremendous effort that the store employees have made in these locations to assist the Company, however, the closures are a necessary step toward improved financial performance. I would like to extend my sincere thanks to our store associates, vendors and investors who have responded enthusiastically to the changes we are making at Liquidation World and for their continued support."

About Liquidation World

Liquidation World liquidates consumer merchandise through 96 stores in Canada and 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.

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.



Consolidated Financial Statements
Consolidated Balance Sheets
As at January 3, 2010 and October 4, 2009
Unaudited
(in thousands of Canadian dollars)

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2010 2009
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Assets

Current assets
Accounts receivable $ 1,294 $ 1,554
Deposits 25 113
Inventory 37,404 33,941
Prepaid expenses 1,644 1,622
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40,367 37,230

Lease deposits 223 247
Property and equipment 8,875 8,613
Intangibles 636 653
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$ 50,101 $ 46,743
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Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness $ 13,759 $ 8,758
Accounts payable and accrued liabilities 15,293 17,408
Current portion of obligations under capital leases 518 710
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29,570 26,876

Obligations under capital leases 46 145
Deferred lease inducements 2,329 2,321

Shareholders' equity
Share capital 22,330 22,330
Contributed surplus 1,590 1,554
Deficit (5,764) (6,483)
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18,156 17,401

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$ 50,101 $ 46,743
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Consolidated Statements Of Income (Loss) And Comprehensive Income (Loss)
And Retained Earnings (Deficit)
For the thirteen weeks ended January 3, 2010 and January 4, 2009
Unaudited
(in thousands of Canadian dollars, except per share amounts)

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2010 2009
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Revenue $ 44,130 $ 47,059
Cost of sales 26,852 31,234
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Gross margin 17,278 15,825

Expenses
Selling, general and administrative 15,558 15,584
Depreciation and amortization 746 855
Interest
Short term 281 183
Long term 8 30
Foreign exchange gain (34) (18)
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16,559 16,634
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Net income (loss) 719 (809)
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Net income (loss) and comprehensive income (loss) 719 (809)
Retained earnings (deficit), beginning of period (6,483) 11,098
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Retained earnings (deficit), end of period $ (5,764) $ 10,289
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Basic and diluted earnings (loss) per share $ 0.05 $ (0.10)
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Consolidated Statements Of Cash Flows
For the thirteen weeks ended January 3, 2010 and January 4, 2009
Unaudited
(in thousands of Canadian dollars)

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2010 2009
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Cash provided by (used in):

Operating activities
Net income (loss) from continuing operations $ 719 $ (809)
Add (deduct) non-cash items:
Depreciation and amortization 746 855
Amortization of leasehold inducements 5 (37)
Loss on disposal of capital assets 8 14
Stock based compensation 36 52
Change in non-cash working capital items (5,556) 4,392
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(4,042) 4,467

Investment activities
Purchase of capital assets (999) (74)
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(999) (74)

Financing activities
Increase (decrease) in bank indebtedness 5,001 (4,069)
Repayment of capital leases (291) (324)
Deposits 112 -
Lease inducement 219 -
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5,041 (4,393)
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Increase (decrease) in cash - -
Cash, beginning of period - -
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Cash, end of period $ - $ -
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Supplemental disclosure of cash paid (received) for:
Income taxes - net $ - $ 7
Interest paid 184 213
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$ 184 $ 220
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Contact Information

  • Liquidation World Inc.
    Dan Ardila, CA
    SEVP & CFO
    519-720-2553
    866-237-3778 (FAX)
    dana@lwstores.com
    or
    Liquidation World Inc.
    Seth Marks
    President & CEO
    519-758-2552
    866-237-3778 (FAX)
    sethm@lwstores.com