Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

August 09, 2006 08:00 ET

Liquidation World Inc.: Record Q3 Revenue Erases $1.3 Million Loss from Prior Year Quarter

Expansion Plans Continue with the Announcement of 5 Additional New Outlets

CALGARY, ALBERTA--(CCNMatthews - Aug. 9, 2006) - Liquidation World Inc. (TSX:LQW) today announces results for the third quarter of fiscal 2006, representing 13 weeks of operations ending July 2, 2006.

Revenue for the quarter increased 6.4% to $49.2 million from $46.3 million for the same quarter last year, and set a new Q3 record. Same store sales increased 3.8% over prior year. Earnings were $42,000 ($0.01 per share), compared to a loss of $1.3 million ($0.16 per share) in the same period last year.

Fiscal year-to-date revenue increased 13.1% to $155.3 million from $137.3 million. Cumulative earnings were $2.7 million ($0.31 per share) compared to a loss of $6.9 million ($0.82 per share) through Q3 2005.

Further detail is provided in the financial statements below.

Liquidation World's President and Chief Executive Officer, Jonathan Hill, said:

"I am pleased that our results reflect another quarter of dramatic improvement from the prior year. The Company generated record third quarter revenue and rebounded from a $1.3 million dollar loss in Q3, 2005. Although sales were strong, our planned investments in personnel and infrastructure resulted in a modest profit. I am confident that these investments will support a much larger, more profitable business in the future. With this infrastructure now largely in place, we are turning our attention to growing our business. To that end, we are pleased to announce that we have secured 5 locations in addition to the 9 recently announced for a total of 14 new stores which will open prior to the end of the calendar year. Net of expected closures associated with lease completions and non-performance, we plan to be operating 113 stores by the end of the first quarter of 2007. Our infrastructure, personnel and systems are now in place to support additional growth beyond this."

"Our sales and gross margins continue to be positively impacted by the changes we have made to our merchandising team. We have seen very strong performance in a number of key categories and a general increase in the quality, value and selection of our merchandise. Notwithstanding this, we foresee continued improvement in our mix and level of inventory as we further leverage the information available to us through our new merchandise management system."

With the completion of its third quarter, Liquidation World has experienced four consecutive quarters of improving performance. Mr. Hill commented:

"We are encouraged by these results as they continue to reinforce the appropriateness of our investments in people and infrastructure which will support our plans for growth."

About Liquidation World

Liquidation World liquidates consumer merchandise through 101 outlets across North America and also provides store-closure sales management. It 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.

Liquidation World has scheduled a conference call to begin promptly at 11:00 a.m. Calgary time (1:00 p.m. EDT) on August 9th, 2006.

Conference call dial in number is 1-877-888-3490 or 416-695-9753.

A replay of the conference call will be accessible on Liquidation World's website within twenty-four hours at www.liquidationworld.com by selecting "Investor Info", "News Releases", and "Q3 Conference Call".



LIQUIDATION WORLD INC.
Consolidated Balance Sheets

(unaudited)(In thousands of Canadian dollars)

------------------------------------------------------------------------
------------------------------------------------------------------------
July 2 October 2
2006 2005
------------------------------------------------------------------------

Assets

Current assets
Cash and equivalents $ 174 $ 177
Accounts receivable 391 621
Inventory 58,695 46,552
Prepaid expenses 1,657 2,242
Income taxes recoverable - 2,915
------------------------------------------------------------------------
60,917 52,508

Property and equipment 11,385 9,895

------------------------------------------------------------------------
$ 72,302 $ 62,403
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness $ 6,748 $ 2,265
Accounts payable and accrued liabilities 7,112 6,387
Income taxes payable 838 715
Current portion of capital lease 952 -
------------------------------------------------------------------------
15,650 9,367
Capital lease 2,732 1,997
Future income taxes 733 445

Shareholders' equity
Share capital 15,665 15,764
Contributed surplus 676 437
Retained earnings 36,846 34,393
------------------------------------------------------------------------
53,187 50,594

------------------------------------------------------------------------
$ 72,302 $ 62,403
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LIQUIDATION WORLD INC.
Consolidated Statements of Earnings and Retained Earnings
For the periods ended July 2, 2006 and July 3, 2005
(unaudited) (In thousands of Canadian dollars, except per share amounts)

------------------------------------------------------------------------
------------------------------------------------------------------------

13 weeks 13 weeks 39 weeks 39 weeks
ended ended ended ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
------------------------------------------------------------------------

Revenue $ 49,239 $ 46,286 $ 155,294 $ 137,338
Cost of sales 30,132 30,220 94,821 92,979

------------------------------------------------------------------------
19,107 16,066 60,473 44,359
Expenses
Selling and store
operations 15,939 15,089 47,698 45,609
General and
administrative 2,108 1,608 6,073 6,045
Depreciation and
amortization 807 598 2,312 1,436
Stock based
compensation 126 70 239 209
Interest 110 57 251 70
Foreign exchange (73) (15) (105) (1)
------------------------------------------------------------------------
19,017 17,407 56,468 53,368
------------------------------------------------------------------------
Earnings (loss)
before income taxes 90 (1,341) 4,005 (9,009)
Income taxes
Current (190) (121) 1,066 (2,249)
Future 238 80 288 112
------------------------------------------------------------------------
48 (41) 1,354 (2,137)
------------------------------------------------------------------------
Net earnings (loss) 42 (1,300) 2,651 (6,872)

Retained earnings,
beginning of period 36,989 35,274 34,393 41,220
Excess of repurchase
amount over stated
capital of repurchased
shares (185) - (198) (102)
Adjustment to reflect
change in accounting
policy - - - (271)
------------------------------------------------------------------------
Retained earnings, end
of period $ 36,846 $ 33,974 $ 36,846 $ 33,975
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings per share
Basic $ 0.01 $ (0.16) $ 0.32 $ (0.82)
Fully diluted $ 0.00 $ (0.16) $ 0.31 $ (0.82)
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average shares
outstanding 8,370,652 8,382,810 8,378,810 8,383,799
Diluted shares
outstanding 8,468,305 8,395,765 8,425,857 8,420,153
------------------------------------------------------------------------
------------------------------------------------------------------------


Segmented Information

(unaudited) (In thousands of Canadian dollars)

------------------------------------------------------------------------
------------------------------------------------------------------------

13 weeks 13 weeks 39 weeks 39 weeks
ended ended ended ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
------------------------------------------------------------------------

Revenue
Canada $ 42,544 $ 40,643 $ 132,575 $ 118,433
United States 6,695 5,643 22,719 18,905
------------------------------------------------------------------------
Total $ 49,239 $ 46,286 $ 155,294 $ 137,338
------------------------------------------------------------------------
------------------------------------------------------------------------

As at As at
July 2, October 2,
2006 2005
------------------------
Property and equipment
Canada $ 10,758 $ 8,463
United States 627 491
------------------------------------------------------------------------
Total $ 11,385 $ 8,954
------------------------------------------------------------------------
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LIQUIDATION WORLD INC.
Consolidated Statements of Cash Flows
For the periods ended July 2, 2006 and July 3, 2005
(unaudited) (In thousands of Canadian dollars)
------------------------------------------------------------------------
------------------------------------------------------------------------

13 weeks 13 weeks 39 weeks 39 weeks
ended ended ended ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
------------------------------------------------------------------------

Cash provided by
(used in):

Continuing operations
Net earnings (loss) $ 42 $ (1,300) $ 2,651 $ (6,872)
Add (deduct) non-cash
items:
Depreciation and
amortization 807 598 2,312 1,436
Stock based
compensation 126 70 239 209
Future income taxes 238 80 288 112
------------------------------------------------------------------------
1,213 (552) 5,490 (5,115)
Changes in non-cash
operating working
capital
Accounts receivable (5) 18 230 926
Inventory (6,291) (2,381) (12,143) 5,967
Prepaid expenses (40) (624) 585 (146)
Accounts payable and
accrued liabilities (566) 609 725 (395)
Income taxes 2,536 (124) 3,754 (3,888)
------------------------------------------------------------------------
(3,153) (3,054) (1,359) (2,651)
Discontinued operations
Changes in liabilities
of discontinued
operations - - - (45)

Investments
Purchase of capital
assets (930) (1,902) (2,369) (4,624)

Financing
Increase (decrease) in
bank indebtedness 4,594 4,962 4,483 6,752
Repayment of capital
lease obligation (236) - (461) -
Proceeds on issuance of
common shares - - - 56
Repurchase of common
shares (277) - (297) (156)
------------------------------------------------------------------------
4,081 4,962 3,725 6,652

------------------------------------------------------------------------
Increase (decrease) in
cash (2) 6 (3) (668)

Cash and cash
equivalents, beginning
of period 176 202 177 876

------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $ 174 $ 208 $ 174 $ 208
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplemental disclosure
of cash paid
(recovered) for:
Income taxes $ (2,702) $ 327 $ (2,695) 1,615
Interest 94 57 253 70

------------------------------------------------------------------------
$ (2,608) $ 384 $ (2,442) $ 1,685
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