Coast Wholesale Appliances Inc.

Coast Wholesale Appliances Inc.

March 10, 2014 08:00 ET

Coast Wholesale Appliances Inc. Reports Preliminary Unaudited 2013 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - March 10, 2014) - Coast Wholesale Appliances Inc. (TSX:CWA) ("Coast") today issued an update to its news release of March 4, 2013 respecting the announcement by CWAL Investments Ltd. ("CWAL") of its intention to make an unsolicited all-cash offer for all of the issued and outstanding common shares of Coast not beneficially owned by CWAL and its joint actors at a price of $4.55 per share (the "Offer").

To enable shareholders to consider the Offer while awaiting the publication of Coast's annual financial statements and management's discussion and analysis, scheduled for March 20, 2014, and its directors' circular in response to CWAL's bid circular, Coast reported the following preliminary selected (unaudited) financial results for the year ended December 31, 2013.

Highlights for the Year Ending December 31, 2013 (Unaudited)
2013 2012 Change
(Cdn$) (Cdn$) (Cdn$) (%)
Sales 160,085,000 145,196,000 14,889,000 10.3
Gross Profit 35,887,000 33,493,000 2,394,000 7.1
Gross Margin 22.4% 23.1%
EBITDA(1) 9,211,000 7,969,000 1,242,000 15.6
Adjusted EBITDA(2) 9,421,000 7,969,000 1,452,000 18.2
Net Income 5,092,000 4,195,000 897,000 21.4
Basic and diluted net income per share 0.51 0.42 0.09 21.4
Current Assets 42,587,000 40,658,000
Current Liabilities 35,774,000 37,147,000
Working Capital 6,813,000 3,511,000
Selling, warehouse, facility and general administration expenses as % of sales 16.7% 17.6%
(1) EBITDA is defined as earnings before interest, income tax provision, depreciation and amortization.
(2) Adjusted EBITDA reflects the elimination of certain one-time restructuring charges related to the planned Red Deer, Alberta store closure in March 2014.

The above preliminary unaudited financial results are based upon management's estimates, and have not yet been approved by Coast's Audit Committee or Board of Directors or audited by Coast's auditors. The final audited financial results could differ from these preliminary unaudited financial results.

The Special Committee is in the process of reviewing and evaluating the CWAL announcement with its financial and legal advisors and will communicate further with shareholders in accordance with applicable securities laws. Coast recommends that shareholders take no action until the Special Committee has completed its full review of the Offer and the Board of Directors of Coast has provided shareholders with its recommendation in respect of the Offer in a directors' circular.

Shareholder Rights Plan

As previously announced, the Board of Directors of Coast has adopted a shareholder rights plan (the "Plan"), effective March 4, 2014.

The Plan is not intended to prevent the Offer or any other take-over bid from being accepted. Rather, it is intended to ensure that the Board of Directors has sufficient time to consider and evaluate the Offer and any other take-over bid that may be made for Coast's common shares and to properly develop and pursue alternatives to maximize value for all shareholders.

In connection with the adoption of the Plan, the Board of Directors authorized the issuance of one right in respect of each common share of Coast outstanding as of the close of business on March 4, 2014 (and each share issued thereafter, subject to the limitations set out in the Plan). Under the terms of the Plan, the rights will become exercisable (the "Separation Time") if, among other things, a person, together with its affiliates, associates and joint actors, announces an intention to acquire beneficial ownership of common shares which, when aggregated with its current holdings, total 20% or more of Coast's outstanding common shares, subject to the ability of the Board of Directors to defer the time at which the rights become exercisable and to waive the application of the Plan. The Board of Directors has resolved to defer the Separation Time until such later date as is determined by the Board of Directors.

Following the acquisition of more than 20% of the outstanding common shares by any person (and its affiliates, associates and joint actors) (a "Flip-In Event"), each right held by a person other than the acquiring person (and its affiliates, associates and joint actors) would, upon exercise, entitle the holder to purchase Coast's common shares at a substantial discount to their then prevailing market price.

CWAL is grandfathered under the Plan and its beneficial ownership of more than 20% of the outstanding common shares of Coast will not trigger a Flip-In Event. However, if CWAL becomes the beneficial owner of additional common shares subsequent to March 4, 2014 in an amount greater than 1% of the outstanding common shares of Coast, then a Flip-In Event will occur.

The Plan permits the acquisition of control of Coast through a "permitted bid" or a "competing permitted bid". A permitted bid is one that, among other things, is made to all holders of common shares of Coast, is open for a minimum of 60 days and is supported by a majority of Coast's independent shareholders.

Although the Plan is effective as of March 4, 2014, it is subject to ratification by independent shareholders of Coast at a meeting of shareholders to be held on or before June 30, 2014. If the Plan is not ratified by June 30, 2014, the Plan and all of the rights outstanding at that time will terminate.

A full copy of the Plan is available on SEDAR at

Coast Profile

Coast is a leading independent supplier of major household appliances and accessories to builders and developers of multi-family and single-family housing, and to retail customers. Founded in 1978, Coast operates stores across the four western provinces and 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 and Information

Certain statements herein may contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements and forward-looking information include, but are not limited to statements concerning the Offer from CWAL and the release of Coast's audited financial statements and management's discussion and analysis. Such statements and information include statements regarding the expectation and beliefs of management and appear in a number of places and often can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements and information include, but are not limited to statements or information with respect to known and unknown risks, uncertainties and other factors which may cause Coast's 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 and information. Such factors include, but are not limited to, the following: future actions taken by CWAL in connection with the Offer; actions taken by shareholders of Coast in respect of the Offer; the audited results for the year ended December 31, 2013; and the strategic alternatives being pursued by Coast to maximize value for all shareholders. There can be no assurance that forward-looking statements or information referenced herein will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements or information. Also, many of the factors are beyond the control of Coast. Accordingly, readers should not place undue reliance on forward-looking statements or information. All forward-looking statements and information made herein, are qualified by this cautionary statement. These forward looking-statements and forward-looking information are made as of the date of this news release, and, except as required by applicable securities law, Coast assumes no obligation to update or revise them to reflect new events or circumstances.

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