Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

May 18, 2010 09:10 ET

Liquidation World Announces Second Quarter Results

BRANTFORD, ONTARIO--(Marketwire - May 18, 2010) - Liquidation World Inc. (TSX:LQW) today announces results of the second quarter of fiscal 2010, representing the 13-week period ended April 4, 2010.

Revenue in the second quarter was $37.9 million as compared to $38.1 million in the same quarter of 2009 representing a decrease of $257,000 or 0.7% for the period. The decrease was attributable to a variety of factors, including:

- a net favourable impact of $389,000 relating to better performance from five new store openings which generated $2.4 million in revenues versus the loss of $2.0 million in revenue attributed to eight store closures which took place during the quarter;

- an increase in same store sales of .03% or $11,000;

- a decrease in liquidation services fee revenue of $314,000; and

- a decrease of $343,000 attributable to US wholesale sales.

Gross margin as a percentage of sales increased by almost 16% to $14.2 million in Q2 2010 or 37.4% of sales versus $8.3 or 21.6% of sales in Q2 2009. On a year-to-date basis, the gross margin has increased by 10% as a percentage of sales to $31.4 million or 38.3% of sales compared to $24.1 million or 28.3% of sales in the corresponding period in fiscal 2009. The Company's gross margins continue to improve significantly as a result of a variety of factors, including new store openings, the store re-branding initiative, purchasing more desirable product and better inventory management practices.

The Company recorded a net loss for Q2 2010 of $2.9 million or $0.18 per share compared with a net loss of $7.9 million or $0.60 per share in Q2 2009. On a year-to-date basis, the Company recorded a net loss of $2.2 million or $.14 per share in fiscal 2010 compared to a net loss of $8.7 million or $0.81 per share during the same period in fiscal 2009.

In March, 2010, the Company successfully completed a private placement financing of $2 million from two of the Company's largest investor groups, Talon Mezzanine Partners LLC and Oakwest Corporation Limited. This infusion of capital provided the Company with fresh capital and resulted in the ability to fill the stores with new inventory. "By having two of our existing shareholders provide the money for the financing, we were able to complete the financing in a short time period in a cost effective manner," commented Jeffrey Mandel, the Chairman of the Special Committee, which was created to manage the transaction.

Liquidation World continues to focus on implementing its strategy to re-brand stores under the "LW - Everybody's Outlet Store" banner. During the third quarter, the Company intends to renovate and rebrand 10 existing locations and open two new locations. In addition, the company plans to close two stores in the third quarter; these closures will bring the total store closures for fiscal 2010 to 11. "The impact of the Company's rebranding strategy is demonstrating its desired effect, as our gross margins have significantly improved this quarter, as well as year to date", commented Seth Marks, President and CEO of Liquidation World.

Mr. Marks added, "I am delighted that the Q2 2010 results continue to demonstrate that our Company is achieving its objectives. We have seen a tremendous positive response from new and existing customers in our new stores, including our most recent Barrie, Ontario location. In addition to new store initiatives, during March and April 2010, we renovated and re-branded four existing locations under the "LW - Everybody's Outlet Store"; these stores have had double digit sales increases since their re-openings. We continue to explore new markets and work with our current landlords who support our re-branding initiative in upcoming quarters".

Additional details are provided in the financial statements below.

About Liquidation World

Liquidation World liquidates consumer merchandise through 90 stores in Canada. 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 April 4, 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 $ 863 $ 1,554
Deposits 39 113
Inventory 45,481 33,941
Prepaid expenses 1,634 1,622
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48,017 37,230

Lease deposits 216 247
Property and equipment 8,881 8,613
Intangibles - 653
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$ 57,114 $ 46,743
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Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness $ 15,513 $ 8,758
Accounts payable and accrued liabilities 21,630 17,408
Current portion of obligations under
capital leases 297 710
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37,440 26,876

Obligations under capital leases 41 145
Subordinated notes 1,478 -
Deferred lease inducements 2,406 2,321

Shareholders' equity
Share capital 22,330 22,330
Warrants 479 -
Contributed surplus 1,622 1,554
Deficit (8,682) (6,483)
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15,749 17,401

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$ 57,114 $ 46,743
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Consolidated Statements Of Loss And Comprehensive Loss And Deficit
For the periods ended April 4, 2010 and April 5, 2009
Unaudited

(in thousands of Canadian dollars, except per share amounts)

----------------------------------------------------------------------------
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13 weeks 13 weeks 26 weeks 26 weeks
ended ended ended ended
April 4, April 5, April 4, April 5,
2010 2009 2010 2009
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Revenue $ 37,885 $ 38,142 $ 82,015 $ 85,201
Cost of sales 23,721 29,891 50,573 61,125
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Gross margin 14,164 8,251 31,442 24,076

Expenses
Selling, general and
administrative 15,468 15,192 31,026 30,775
Depreciation and amortization 745 825 1,491 1,681
Impairment of intangibles 618 - 618 -
Interest
Short term 324 138 605 321
Long term 9 21 17 51
Foreign exchange (gain) loss (82) 2 (116) (16)
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17,082 16,178 33,641 32,812
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Net loss (2,918) (7,927) (2,199) (8,736)
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Net loss and comprehensive loss (2,918) (7,927) (2,199) (8,736)
Retained earnings (deficit),
beginning of period (5,764) 10,289 (6,483) 11,098
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Retained earnings (deficit),
end of period $ (8,682) $ 2,362 $ (8,682) $ 2,362
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Basic and diluted loss
per share $ (0.18) $ (0.60) $ (0.14) $ (0.81)
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Consolidated Statements Of Cash Flows
For the periods ended April 4, 2010 and April 5, 2009
Unaudited

(in thousands of Canadian dollars)

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13 weeks 13 weeks 26 weeks 26 weeks
ended ended ended ended
April 4, April 5, April 4, April 5,
2010 2009 2010 2009
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Cash provided by (used in):

Operating activities
Net loss $ (2,918) $ (7,927) $ (2,199) $ (8,736)
Depreciation and amortization 745 825 1,491 1,681
Impairment of intangibles 618 - 618 -
Leasehold inducements 86 37 91 -
Loss on disposal of capital
assets 51 11 59 25
Stock based compensation 32 38 68 90
Accretion on long term debt 4 - 4 -
Changes in non-cash working
capital items (2,061) 7,956 (7,616) 12,347
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(3,443) 940 (7,484) 5,407

Investment activities
Purchase of capital assets (788) (408) (1,787) (482)
Proceeds on disposal of
capital assets 4 - 4 -
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(784) (408) (1,783) (482)

Financing activities
Increase (decrease) in bank
indebtedness 1,754 (4,206) 6,755 (8,275)
Repayment of capital leases (227) (288) (518) (612)
Proceeds from subordinated
notes 2,000 - 2,000 -
Deposits (13) - 98 -
Lease inducement 760 - 979 -
Fees for issue of common shares - (788) - (788)
Fees for issue of subordinated
notes and warrants (47) - (47) -
Proceeds on issuance of common
shares for cash - 4,750 - 4,750
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4,227 (532) 9,267 (4,925)
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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 $ - $ (2) $ - $ 5
Interest paid 427 159 611 372
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$ 427 $ 157 $ 611 $ 377
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