Liquor Stores N.A. Ltd.
TSX : LIQ

March 15, 2011 20:15 ET

Liquor Stores N.A. Ltd Reports 2010 Fourth Quarter and Full Year Results

EDMONTON, ALBERTA--(Marketwire - March 15, 2011) - Liquor Stores N.A. Ltd. (the "Company") (TSX:LIQ) today reported its results for the 2010 fourth quarter and year ended December 31, 2010.

Commenting on the results, Rick Crook, President and CEO of the Company, stated "We are pleased with the 2010 fourth quarter as we saw positive increases in several key retail performance indicators:

  • Canadian same store sales for the fourth-quarter increased by 4.8%,
  • Fourth-quarter operating margin was up $0.3 million,
  • Full year sales increase of 7.2%"

Mr. Crook went on to say, "The Company achieved its highest annual sales since its inception in 2004."

Mr. Crook also pointed out "We are encouraged by the results we have seen in early 2011. Same store sales have shown an improvement and gross margins are consistent with those we achieved prior to the effects of the temporary Alberta Mark-Up. Management is also pleased about the recent upward trend in employment statistics in Alberta (our largest market) which we expect may lead to increased sales"

OPERATING RESULTS

As described in the Company's Management's Discussion and Analysis filed today, an increase in mark up's imposed by the Government of Alberta on alcoholic beverages during the period April 7 to July 7, 2009 (the "Alberta Mark Up") has affected the comparability of 2010 operating results to those of 2009. 

Three months ended December 31, 2010

Sales for the three months ended December 31, 2010 and 2009 were $163.6 million and $155.5 million, respectively, up 5.2% or $8.1 million.

  • Canadian same store sales for the three months ended December 31, 2010 and 2009 were $105.7 million and $100.9 million, respectively, up 4.8% or $4.8 million.
  • US same store sales for the three months ended December 31, 2010 and 2009 were down marginally to US$17.8 million from US$17.9 million.
  • Sales for the three months ended December 31, 2010 for the Company's Kentucky operation, acquired in the fourth quarter of 2009, and for a store opened in Alaska last year were US$21.8 million compared to US$18.0 million in the same period last year.

Operating margin before non-recurring expenses for the three months ended December 31, 2010 was $15.2 million, down $0.8 million from $16.0 million in 2009 (2009 operating margin before non-recurring items was $14.9 million including the effect of the temporary Alberta Mark Up,).

Year ended December 31, 2010

Sales for the twelve months ended December 31, 2010 and 2009 were $579.7 million and $541.0 million, respectively, up 7.1% or $38.7 million.

  • Canadian same store sales for the twelve months ended December 31, 2010 and 2009 were $370.7 million and $371.9 million, respectively, down 0.3% or $1.2 million (including the effect of the Alberta Mark Up same store sales were down 1.1%).
  • US same store sales for the twelve months ended December 31, 2010 and 2009, respectively, were US$66.7 million and US$67.9 million, down 1.8% or US$1.2 million.
  • Other US stores include stores that were opened or acquired after December 31, 2008, including one store opened in Alaska, eight stores acquired in Kentucky in the fourth quarter of 2009 and a new store opened in Kentucky in 2010. These stores accounted for US$69.7 million in sales in 2010 compared to US$18.0 million last year.

Operating margin before non-recurring expenses for the twelve months ended December 31, 2010 was $44.3 million (2009 operating margin before non-recurring items was $44.0 million including the effect of the temporary Alberta Mark Up) down $3.4 million from $47.7 million in 2009.

DISTRIBUTABLE CASH

On November 9, 2010, the Company provided guidance that distributable cash before non-recurring items was expected to be in the range of $1.62 to $1.66 for 2010. For the twelve months ended December 31, 2010 distributable cash per share before non-recurring items was $1.59. While management's expectations with respect to Canadian same store sales were met, sales for the Company's other stores were below those anticipated and expenses exceeded management's estimates.

Distributable cash before non-recurring items was $0.58 per share for the fourth quarter of 2010 compared with $0.56 per share for 2009. In the fourth quarter of 2009 the sale of inventory, that was purchased while the temporary Alberta Mark Up was in effect, represents a charge against distributable cash of $0.05 per Unit.

EARNINGS AND EARNINGS PER SHARE

Net earnings for the three months ended December 31, 2010 were $11.0 million, up $1.2 million from earnings of $9.8 million for the same period in 2009. Net earnings were up due to a $0.9 million increase in operating margin, a $0.5 million increase in income tax recovery and a $0.3 million increase in interest expense related to fees incurred in 2010 for the renewal of the Fund's credit facility and the fourth quarter 2009 acquisition of the Fund's Kentucky operation. Amortization expense increased by $0.8 million compared to 2009. For the three months ended December 31, 2010, a foreign exchange gain, including an unrealized gain of $0.1 million, and a gain on the sale of investments aggregated $0.2 million. For the three months ended December 31, 2009, a loss on foreign exchange, including a $0.5 million unrealized loss, was $0.6 million.

Net earnings were $22.8 million for the twelve months ended December 31, 2010, down from $29.0 million for the same period in 2009. Net earnings were down due to a $3.3 million decrease in operating margin, a $0.9 million decrease in income tax recovery and an increase in interest expense of $1.8 million due primarily to fees incurred in 2009 and 2010 for the renewals of the Company's credit facility and the fourth quarter 2009 acquisition of the Fund's Kentucky operation. Amortization expense for the twelve months ended December 31, 2010 was up $1.8 million compared to 2009. For the year ended December 31, 2010, a foreign exchange gain, including an unrealized gain of $0.7 million, and a gain on the sale of investments aggregated $0.9 million. For the year ended December 31, 2009, a foreign exchange loss, including an unrealized loss of $0.5 million, less a gain on the sale of an investment resulted in a $0.6 million charge to earnings.

Basic and diluted earnings per share were $0.50 in the fourth quarter of 2010, compared with basic and diluted earnings per share of $0.45 and $0.43, respectively, a year earlier. Basic and diluted earnings per share were $1.00 for the twelve months ended December 31, 2010, compared with basic and diluted earnings per share of $1.29 and $1.24, respectively, a year earlier.

Liquor Stores Summary Financial Results, three and twelve months ended December 31, 2010 with comparisons to 2009

(expressed in thousands of Canadian dollars, except per share amounts)     Three months ended     Twelve months ended
      December 31, 2010     December 31, 2009     December 31, 2010     December 31, 2009
Sales   $ 163,556   $ 155,529   $ 579,700   $ 541,049
Operating margin before non-recurring items   $ 15,177   $ 14,946   $ 43,983   $ 47,743
Adjusted operating margin   $ 14,372   $ 14,427   $ 42,196   $ 46,607
Earnings before income taxes   $ 8,954   $ 8,236   $ 22,225   $ 27,644
Net earnings   $ 10,896   $ 9,836   $ 22,746   $ 29,048
Diluted earnings per share   $ 0.50   $ 0.43   $ 1.00   $ 1.27
Distributable cash (before non-recurring items)   $ 12,981   $ 12,579   $ 35,784   $ 40,911
Distributable cash (after non-recurring items)   $ 12,176   $ 11,909   $ 33,997   $ 39,625
Distributable cash per share (before non-recurring items)   $ 0.58   $ 0.56   $ 1.59   $ 1.81
Distributable cash per share (after non-recurring items)   $ 0.55   $ 0.53   $ 1.51   $ 1.76
Cash distributions per share   $ 0.405   $ 0.405   $ 1.62   $ 1.62
Diluted average shares outstanding     18,911     22,533     18,640     22,532
Stores in operation at December 31     237     236     237     236
  1. Net earnings have been restated in accordance with the adoption of CICA Handbook sections 1601 Consolidated Financial Statements and 1602 Non-Controlling Interests.

The Management's Discussion and Analysis (MD&A) as well as the complete financial statements and notes for the fourth quarter ended December 31, 2010 are available on the Company's website at this link: www.liquorstoresna.ca and on the SEDAR website at www.sedar.com.

Conference Call

Liquor Stores N.A Ltd. will conduct an investor conference call on Wednesday, March 16, 2011 to discuss results for the fourth quarter ended December 31, 2010. The conference call will take place at 9 a.m. MT. Participants in the call include Rick Crook, President and CEO, Pat de Grace, Chief Financial Officer and Scott Morrow, Chief Operating Officer.

To take part in the call, please dial 416-340-8530, or toll-free 1-877-240-9772. An archived recording of the conference call will be available approximately one hour after the completion of the call until March 23, 2011, by dialling 905-694-9451, or toll-free 1-800-408-3053. The required passcode is 8042472. An archived recording of the call will also be available on the Liquor N.A Ltd. website.

About Liquor Stores N.A. Ltd.

The Company currently operates 236 retail liquor stores in Alberta, British Columbia, Alaska and Kentucky. Management believes the Company is Alberta's largest operator of private liquor stores by both number of stores and sales revenue. The Company's shares and 6.75% convertible subordinated debentures trade on the Toronto Stock Exchange under the symbols "LIQ" and "LIQ.DB", respectively.

Additional information about Liquor Stores N.A. Ltd. is available at www.sedar.com and the Company's website at www.liquorstoresna.ca.

NON-GAAP MEASURES

References to "distributable cash" are to cash available for distribution to shareholders in accordance with the dividend policies of the Company. Management believes that, in addition to income or loss, distributable cash, distributable cash before non-recurring items, and operating margin before non-recurring items are useful supplemental measures of performance. Distributable cash of the Company is a measure generally used by other issuers as an indicator of financial performance. One of the factors that may be considered relevant by shareholders and prospective investors is the cash distributed by the Company relative to the price of the Company's shares. Management believes that distributable cash of the Company is a useful supplemental measure that may assist shareholders and prospective investors in assessing an investment in the Company.

Distributable cash is not a measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Investors are cautioned that distributable cash should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Company's method of calculating distributable cash may differ from the methods used by other issuers. Therefore, the Company's distributable cash may not be comparable to similar measures presented by other issuers.

Same store sales include sales for stores that have been open 12 full months at the beginning of the reporting period. Stores which have significant wholesale business and stores where sales have shifted to closely-located stores also operated by the Company have been excluded.

Operating margin has been derived by adding amortization of inventory fair value adjustments, interest expense, non-recurring items, pre-opening and acquisition costs, and amortization of property and equipment and intangibles to net earnings. Operating margin as a percentage of sales is calculated by dividing operating margin by sales.

Operating margin and operating margin as a percentage of sales are not measures recognized by GAAP and do not have a standardized meaning prescribed by GAAP. Investors are cautioned that operating margin and operating margin as a percentage of sales should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Company's method of calculating operating margin and operating margin as a percentage of sales may differ from the methods used by other issuers. Therefore, the Company's operating margin and operating margin as a percentage of sales may not be comparable to similar measures presented by other issuers.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking information. All information other than statements of historical fact contained in this press release is forward-looking information, including, without limitation, statements regarding the future financial position and performance, dividends, distributable cash before non-recurring items, distributable cash before non-recurring items per share, business strategy, proposed or recent acquisitions and the benefits derived therefrom, budgets, projected costs and plans and objectives of or involving the Company. You can identify many of these statements by looking for words such as "believes", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues", "forecasts" or similar words or the negative thereof. These forward-looking statements include statements with respect to the amount and timing of the payment of the dividends of the Company. There is no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur and such forward-looking statements in this press release should not be unduly relied upon. Forward-looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, those discussed elsewhere in this press release. There is no assurance that such expectations will prove to be correct.

Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, those discussed under "Risk Factors" and "Financial Outlook" in the Fourth Quarter 2010 Management's Discussion and Analysis.

The information contained in this press release, including the information set forth under "Risk Factors" and "Financial Outlook" in the Fourth Quarter 2010 Management's Discussion and Analysis, identifies additional factors that could affect the operating results and performance of the Company.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect new events or circumstances except as expressly required by applicable securities law.

Contact Information

  • Liquor Stores N.A. Ltd.
    Rick Crook
    President and Chief Executive Officer
    (780) 497-3271
    or
    Liquor Stores N.A. Ltd.
    Patrick de Grace, CA
    Chief Financial Officer
    (780) 917-4179
    www.liquorstoresna.ca