Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

February 01, 2006 08:00 ET

Liquidation World Announces 107% Increase in Q1 Earnings

CALGARY, ALBERTA--(CCNMatthews - Feb. 1, 2006) -

Results reflect progress in ongoing strategic initiatives

Liquidation World Inc. (TSX:LQW) today announces the results of operations for the thirteen weeks ended January 1, 2006. Revenue increased by 10.6% to $57,146,000 from $51,685,000 while earnings increased 107% to $1,946,000 ($0.23 per share) from $939,000 ($0.11 per share).

"These results reflect our efforts to improve our business in general through a deliberate focus on sourcing and managing merchandise and improving our execution at store level", said Jonathan Hill, President & CEO. "While we continue to fully implement a number of our strategic initiatives, our customers have indicated their approval through a same store sales increase of 9.9% (10.3% before currency fluctuation) during the quarter. We have two new purchasing teams both of which were effective during the quarter. The more predictable supply of surplus merchandise from manufacturers and others was better planned and managed by this purchasing team. As well, our business development team was effective in sourcing a number of opportunistic inventories. Our purchasing was also better coordinated with promotional activities resulting in an increase in customers with less overall marketing spend. Our increased focus on expense control including the implementation of our Win-Win incentive plan began to be reflected during the quarter.

"Our execution and results in the stores continued to improve in general though results were strongest in our more mature markets in Western Canada. Our US business, which plays an important role in supporting our sourcing and logistics in that market also improved significantly on a year over year basis. While the Christmas season was generally described by many retailers as being a positive one, we believe performance outpaced the market."

"Strong sales and our continued focus on cost control reduced expenses as a percentage of revenue to its lowest level in recent years" said Andrew Searby, CFO. "We are continuing to apply more discipline in dealing with aged and non-performing inventory and, in that context, are encouraged our gross margin is near historic ranges."

Additional details are provided in the financial statements below.

Mr. Hill continued, "While we do and should always believe that we have a number of opportunities to improve our business, the results of these last two quarters are encouraging to us. We will continue our efforts to add discipline, structure, accountability and processes to a business that will always be entrepreneurial and is increasingly relevant in the marketplace."



Liquidation World has scheduled a conference call for:

Wednesday, February 1, 2006 at 11:00 MST (1:00 p.m. EST)
Conference call dial in numbers are
1-877-888-7019 in all parts of Canada, except Toronto,
or 416-695-6622 in Toronto.


A replay of the conference call will be accessible on Liquidation World's website within twenty-four hours at www.liquidationworld.com by selecting "Company/Investor Info", "News Releases", and "Q1 Conference Call".

Liquidation World will hold its Annual General and Special Meeting on February 2, 2006 at the International Hotel, 220 - 4 Avenue SW, Calgary, AB at 2:45 pm. The company will also host a lunch and presentation for interested investors in Toronto on February 8, 2006.

About Liquidation World

Liquidation World liquidates consumer merchandise through 105 outlets across North America, and also provides store-closure sales management. The company solves asset recovery problems in a professional manner for the financial services industry, insurance companies, manufacturers and other organizations. Liquidation World opened its first retail outlet in 1986 and is now the largest liquidator in Canada, with more than 1,800 employees in outlets and offices across Canada and the United States.

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 other expenses, an increase in revenue does not directly correlate to an increase in net earnings.



LIQUIDATION WORLD INC.
Consolidated Balance Sheets

(unaudited)(In thousands of Canadian dollars)
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January 1 October 2
2006 2005
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Assets

Current assets
Cash and cash equivalents $ 2,956 $ 177
Accounts receivable 275 621
Inventory 46,968 46,552
Prepaid expenses 1,814 2,242
Assets of discontinued operations 2,001 2,916
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54,014 52,508

Property and equipment 10,663 9,895

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$ 64,677 $ 62,403
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Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness $ - $ 2,265
Accounts payable and accrued liabilities 7,991 6,387
Current portion of capital lease 1,011 715
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9,002 9,367

Capital lease 2,570 1,997

Future income taxes 512 445

Shareholders' equity
Share capital 15,764 15,764
Contributed surplus 490 437
Retained earnings 36,339 34,393
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52,593 50,594

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$ 64,677 $ 62,403
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LIQUIDATION WORLD INC.
Consolidated Statements of Earnings and Retained Earnings
For the periods ended January 1, 2006 and January 2, 2005
(unaudited) (In thousands of Canadian dollars, except per share
amounts)

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13 weeks ended 13 weeks ended
January 1, 2006 January 2, 2005
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Revenue $ 57,146 $ 51,685
Cost of sales 35,270 31,520

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21,876 20,165

Expenses
Selling and store operations 16,140 16,174
General and administrative 1,971 1,898
Depreciation and amortization 746 387
Stock based compensation 53 69
Interest 50 -
Foreign exchange (20) 5
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18,940 18,533
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Earnings from continuing operations
before income taxes 2,936 1,632

Income taxes

Current 923 695
Future (recovery) 67 (2)
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990 693

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Net earnings 1,946 939

Retained earnings, beginning of period 34,393 41,220
Excess of repurchase amount over
stated capital of repurchased shares - (102)
Adjustment to reflect change in
accounting policy - (272)
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Retained earnings, end of period $ 36,339 $ 41,785
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Earnings per share
Basic $ 0.23 $ 0.11
Diluted $ 0.23 $ 0.11
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Shares outstanding at period end 8,382,942 8,370,342
Weighted average shares outstanding 8,382,942 8,394,421
Diluted shares outstanding 8,382,942 8,462,597
Options outstanding at period end 461,450 483,000
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Segmented Information
(unaudited) (In thousands of Canadian dollars)
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13 weeks ended 13 weeks ended
January 1, 2006 January 2, 2005
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Revenue
Canada $ 48,661 $ 44,298
United States 8,485 7,387
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Total $ 57,146 $ 51,685
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Property and equipment
Canada $ 10,126 $ 6,046
United States 537 515
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Total $ 10,663 $ 6,561
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LIQUIDATION WORLD INC.
Consolidated Statements of Cash Flows
For the periods ended January 1, 2006 and January 2, 2005
(unaudited) (In thousands of Canadian dollars)
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13 weeks ended 13 weeks ended
January 1, 2006 January 2, 2005
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Cash provided by (used in):

Continuing operations
Earnings from continuing operations $ 1,946 $ 939
Add (deduct) non-cash items:
Depreciation and amortization 746 387
Stock based compensation 53 69
Future income taxes (recovery) 67 (2)
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2,812 1,393

Changes in non-cash operating
working capital
Accounts receivable 346 884
Inventory (416) 5,767
Prepaid expenses 428 380
Accounts payable and accrued
liabilities 1,604 (921)
Income taxes 915 (601)
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5,689 6,902

Discontinued operations
Funds provided by (used in)
discontinued operations - -
Changes in non-cash operating
working capital
Balances of discontinued operations
Liabilities of discontinued operations - (45)
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- (45)

Investments
Purchase of capital assets (645) (1,182)

Financing
Decrease in bank indebtedness (2,265) -
Proceeds on issuance of common
shares - 4
Repurchase of common shares - (156)
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(2,265) (152)

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Increase in cash 2,779 5,523

Cash and cash equivalents, beginning
of period 177 876

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Cash and cash equivalents, end of period $ 2,956 $ 6,399
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Supplemental disclosure of cash
paid for:
Income taxes $ 7 $ 1,296
Interest 50 -

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$ 57 $ 1,296
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