The North West Company Inc.

The North West Company Inc.

March 17, 2005 14:09 ET

North West Company Fund Reports 2004 Fourth Quarter Earnings And Declares A Distribution


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NORTH WEST COMPANY FUND

TSX SYMBOL: NWF.UN

MARCH 17, 2005 - 14:09 ET

North West Company Fund Reports 2004 Fourth Quarter
Earnings And Declares A Distribution

WINNIPEG, MANITOBA--(CCNMatthews - March 17, 2005) - North West Company
Fund (TSX:NWF.UN) (the "Fund") today reported 2004 fourth quarter
earnings for the period ended January 29, 2005 and declared a quarterly
cash distribution of $0.47 per unit to unitholders of record on March
31, 2005, distributable by April 15, 2005.

Report to Unitholders

The North West Company Fund reports fourth quarter earnings to January
29, 2005 of $10.6 million, consistent with last year's fourth quarter
earnings of $10.6 million. Diluted earnings per unit are $0.66 which is
consistent with last year.

Sales decreased 3.3% to $209.9 million on a non-comparable basis and
were down 1.7% excluding the foreign exchange impact of a stronger
Canadian dollar compared to the fourth quarter last year. The quarter
had 13 weeks compared to 14 weeks last year. On an equivalent 13-week
basis, sales increased 4.5% and on a same store basis were up 4.1%
excluding the foreign exchange impact. Strong general merchandise sales
in northern Canada stores were a major positive factor in the quarter.

"The quarter was a mixed finish to the year," commented President & CEO
Edward Kennedy. "On a comparable basis, same stores sales increased 4%
and this momentum has carried into 2005. Higher one-time costs in
Alaska, a stronger dollar and one less selling week cut into our bottom
line but results were still up for the sixth consecutive year. Our
people continue to work hard at making us the best local store to shop
at and their effort continues to earn more loyalty from our customers."

Management's Discussion & Analysis

CONSOLIDATED RESULTS

Fourth quarter consolidated sales decreased 3.3% to $209.9 million
compared to $217.0 million in 2003. On an equivalent 13-week basis,
sales increased 4.5% (up 4.1% on a same store basis excluding the
foreign exchange impact). The stronger Canadian dollar had the result of
reducing sales by $2.7 million and net earnings by $48,000.



---------------------------------------------------------------------
Sales and Sales Growth on
an Equivalent Week Basis
($ in thousands except Fourth Quarter Full Year
where otherwise 2004 2003 2004 2003
indicated) (13 weeks) (14 weeks) (52 weeks) (53 weeks)
---------------------------------------------------------------------
Sales $ 209,857 $ 216,950 $ 788,693 $ 782,720
---------------------------------------------------------------------
Sales growth -3.3% 5.8% 0.8% 4.4%
Less: (negative)/positive
impact on sales growth
of additional week
in 2003 -7.8% 6.3% -1.8% 1.7%
---------------------------------------------------------------------
Sales growth on an equivalent
13 week and 52 week basis 4.5% -0.5% 2.6% 2.7%
---------------------------------------------------------------------


Trading profit(1) or net earnings before interest, income taxes,
depreciation and amortization (EBITDA) increased 2.3% to $21.5 million
compared to $21.0 million in the fourth quarter last year. Lower
operating expenses in the northern Canada stores contributed to this
improvement. Interest expense decreased 9.1% to $1.4 million due to the
repayment of long-term debt in Alaska early in the fourth quarter.
Income taxes increased 6.2% due to higher earnings in Canada and
withholding taxes incurred on dividends received by the Company as part
of a recapitalization of its U.S. operating subsidiary, Alaska
Commercial Company. Withholding taxes paid on this dividend income
totalled Cdn $815,000 reducing earnings per unit by $0.05. Excluding the
tax impact of the dividend, fourth quarter earnings would have been
$11.4 million or an increase of 7.2% over 2003. One less week in the
quarter compared to last year also had a negative impact on earnings.

Year-to-date sales of $788.7 million increased 0.8%, up 2.6% on an
equivalent 52-week basis and up 1.4% on a same store basis excluding
foreign exchange impact. Trading profit increased 5.2% to $76.6 million
from $72.8 million last year. Trading profit was up 8.1% excluding an
unusual $2.0 million pre-tax insurance gain in 2003. Consolidated
earnings increased 4.3% to $37.3 million or $2.32 per unit on a diluted
basis, compared to $35.7 million or $2.22 per unit on a diluted basis in
2003. Consolidated earnings in 2004 increased 10.2% excluding the
withholding taxes of $815,000 paid in the 2004 fourth quarter and the
$1.2 million after tax insurance gain realized in 2003. The appreciation
in the Canadian dollar during 2004 further reduced the converted
earnings from Alaska by 6.4% or $0.02 per unit on a diluted basis.

CANADIAN OPERATIONS

Canadian sales for the quarter decreased 1.1% to $174.2 million but were
up 6.3% on an equivalent 13-week basis and up 4.4% on a same store
basis. Trading profit increased 9.0% to $19.5 million from $17.9 million
last year.

Canadian food sales decreased 2.4% in the fourth quarter comparing 13
weeks sales to 14 weeks last year, but increased 5.6% on an equivalent
week basis. Northern/NorthMart banner and Giant Tiger same store food
sales were up 2.9% and 13.2% respectively on an equivalent week basis.
Northern/NorthMart sales finished below expectations. This is being
addressed through more aggressive store pricing programs. Giant Tiger's
strong food sales continued to reflect a very positive market response
to low prices matched with the convenience of neighbourhood shopping.

Canadian general merchandise sales were up 1.0% in the quarter,
comparing 13 weeks this year to 14 weeks in last year's fourth quarter.
On an equivalent 13-week basis, general merchandise sales were up 7.4%.
Northern/NorthMart banner same store general merchandise sales were up
6.2% on an equivalent week basis while Giant Tiger same store general
merchandise sales were down 0.9%.

Northern/NorthMart sales were led by children's and ladies' apparel
which increased 19.7% and 9.4% respectively. Hardlines results were
mixed with housewares and toy categories up by 6.6% and 1.7%
respectively and other, bigger ticket categories were either flat in
sales or down slightly. Giant Tiger general merchandise sales were
softer than expected in part because of the impact of a decision to
de-emphasize less profitable hardlines categories.

Gross profit rates were improved in the quarter with the exception of
Northern/NorthMart general merchandise which decreased slightly due to
higher fuel-related freight expenses. Best practice training, new
in-store systems, streamlined work processes and the maturing of the
Giant Tiger store base helped lower our payroll and operating expenses,
offsetting higher fuel-related occupancy costs in northern Canada. In
the fourth quarter, expenses as a percentage of sales decreased by 168
basis points.

ALASKAN OPERATIONS (stated in U.S. dollars)

Alaska Commercial Company (AC) sales for the quarter decreased 5.6% to
$29.5 million on a non-comparable week basis. On an equivalent 13-week
basis, sales were up 3.8%, including a 2.4% increase in same store sales.

AC's retail food sales decreased 3.8% on a non-comparable week basis.
Sales were up 4.9% on a comparable week, same store basis. A major large
store renovation and market share gains across most of AC's locations
accounted for the comparable food sales growth in the quarter.

General merchandise sales in the retail stores were down 18.1% and fell
by 6.2% on a comparable week, same store basis. Sales were negatively
impacted by higher fuel-related living costs, a 16.9% decrease in the
Alaska Permanent Fund Dividend (PFD), and the timing of PFD payments
falling into the third quarter this year compared to some payments
received in the early part of the fourth quarter last year. Big-ticket
sales from home furnishing and electronic categories were most affected
by these factors.

Quarterly sales at Frontier Expeditors (FE), AC's wholesale business,
increased 4.5% over last year and were up 13.8% on an equivalent 13-week
basis. Food sales were flat but general merchandise sales were up due an
expanded seasonal product line.

Trading profit decreased $675,000 to $1.7 million in the fourth quarter
compared to last year due to asset write downs relating to the
replacement of the legacy point of sale system with the new in-store
systems, an increase in occupancy costs due to rising utility expenses,
higher percentage rent payments and one less week of operations in this
quarter versus 2003.

FINANCIAL CONDITION

Financial Ratios

The Fund continues to improve its financial position. The Company's
debt-to-equity ratio at the end of the quarter was .51:1 compared to
.56:1 last year.

Working capital increased $6.5 million compared to the same period in
2003. The increase in working capital is due in part to higher inventory
levels and accounts receivable, partially offset by an increase in bank
advances and short term notes, accounts and taxes payable.

Outstanding Units

The weighted average units outstanding for the quarter were 15,937,000
compared to 15,929,000 last year.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities for the quarter decreased to $19.5
million from $38.4 million. The decrease is due to higher receivables
and an increase in inventory. New accounts receivable programs offered
in the fourth quarter were well received by our customers resulting in
an increase in the year end balance. The increase in inventories is due
in part to the timing of food inventory store shipments as more
merchandise was shipped to stores by sealift and over winter roads than
last year. Another factor was a change towards direct buying of fresh
meat in Canada and increased direct importing of general merchandise.
Both initiatives should improve sales and margins but will require more
working capital to fund earlier purchasing compared to buying through
distributors and importers. Warehouse inventories also increased to
supply new Giant Tiger store openings. On a year-to-date basis, cash
flow from operating activities has decreased by $17.9 million. Cash flow
from operations in 2005 is expected to fund all distributions and
capital expenditures for the year.

Cash flow used in investing activities was lower than last year's fourth
quarter as costs associated with the development and rollout of the new
in-store system was completed in the third quarter. For the year,
capital expenditures were $22.3 million versus $33.3 million in 2003.
The decrease in capital expenditures in 2004 is due to a replacement
store project that has been deferred and energy conservation initiatives
that were completed in the first quarter of 2005.

Cash use from financing activities in the quarter was $16.9 million
compared to a use of cash of $19.7 million last year. The decrease in
distributions of $4.4 million is due to the additional distribution made
in 2003.

OTHER HIGHLIGHTS

- A new Giant Tiger store is scheduled to open in Winnipeg, Manitoba on
March 19, 2005. This will be the fifth Giant Tiger store in Winnipeg.

- A NorthMart in The Pas, Manitoba was closed at the end of January and
will be converted to a Giant Tiger store. The store is scheduled to open
in May 2005.

- A major renovation of a large AC Value Center store in Kotzebue,
Alaska was completed in November 2004. Store sales since the renovation
have exceeded expectations.

OUTLOOK

Sales momentum improved through the fourth quarter and this trend has
continued in the first quarter of 2005. An investment in
Northern/Northmart food pricing will depress food margin rates but is
expected to improve market share in road-accessible locations. General
merchandise sales will benefit from direct import programs and increased
ordering taking place at store level, tailored to local market
opportunities. Cost streamlining and productivity initiatives will
continue to be major work efforts in 2005 and are expected to deliver
lower total operating expenses despite higher utility and freight costs
tied to the price of fuel.

QUARTERLY RESULTS OF OPERATIONS

The following is a summary of selected quarterly financial information.
Each quarter represents a 13-week period except the fourth quarter in
2003 which had 14-weeks.



Operating Results-Consolidated

---------------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
($ in millions) 2004 2003 2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
Sales $209.9 $217.0 $197.0 $194.0 $197.5 $192.4 $184.4 $179.4
---------------------------------------------------------------------
Trading profit 21.5 21.0 21.2 20.6 19.3 18.0 14.6 13.2
---------------------------------------------------------------------
Net earnings 10.6 10.6 11.0 10.6 9.3 8.9 6.4 5.5
---------------------------------------------------------------------
Net earnings
per unit:
Basic 0.66 0.66 0.69 0.67 0.59 0.56 0.40 0.35
Diluted 0.66 0.66 0.68 0.66 0.58 0.55 0.40 0.35
---------------------------------------------------------------------


The sales decline is due to the fourth quarter last year having 14-weeks
compared to 13-weeks this year. Sales growth was also negatively
impacted by the strengthening Canadian dollar.

ACCOUNTING STANDARDS IMPLEMENTED IN 2004

Effective February 1, 2004, the Company implemented the following
accounting standards issued by the Canadian Institute of Chartered
Accountants:

Hedging Relationships

Accounting Guideline 13, "Hedging Relationships" (AcG 13), addresses the
identification, designation, documentation and effectiveness of hedging
transactions for the purposes of applying hedge accounting. It also
establishes conditions for applying or discontinuing hedge accounting.
Under the new guideline, the Company is required to document its hedging
transactions and explicitly demonstrate that the hedges are sufficiently
effective in order to continue accrual accounting for positions hedged
with derivatives. The adoption of AcG 13 had no impact on the Company's
financial position or results of operations.

Asset Retirement Obligations

Section 3110, "Asset Retirement Obligations" (CICA 3110), provides
guidance for the recognition, measurement and disclosure of liabilities
for asset retirement obligations and the associated asset retirement
costs. A liability associated with the retirement of long-lived assets
is recorded in the period in which the legal obligation is incurred at
its estimated fair value and a corresponding asset is capitalized as
part of the related asset and depreciated over its useful life.
Subsequent to the initial measurement of the asset retirement
obligation, the obligation is adjusted to reflect the passage of time
and changes in the estimated future costs underlying the obligation.

Accordingly, the Company has recognized a discounted liability
associated with obligations arising from the operation of gasoline
dispensing units and specific provisions in certain lease agreements
regarding the exiting of leased properties at the end of the respective
lease terms. This standard was implemented retroactively with
restatement of the prior year's consolidated financial statements. The
cumulative effect of implementation was a decrease to opening retained
earnings for 2003 of $287,000 (net of future income taxes recoverable of
$165,000), an increase in fixed assets of $586,000, an increase in other
liabilities of $1,033,000 and an increase in the cumulative translation
adjustment of $5,000. The impact on net earnings for each of 2003 and
2004 was not material.

Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor (EIC Abstract 144)

EIC 144 provides guidance on accounting for cash consideration received
from a vendor. EIC 144 requires a customer to record cash consideration
received from a vendor as a reduction in the price of the vendor's
products and reflect it as a reduction of cost of goods sold and related
inventory when recognized in the income statement and balance sheet.
Certain exceptions apply if the cash consideration received is a payment
for assets or services delivered to the vendor or for reimbursement of
selling costs incurred to promote the vendor's products. EIC 144 must be
applied retroactively to all financial statements for annual and interim
periods ending after August 15, 2004. Accordingly, in the fourth quarter
of 2004, the Company has implemented EIC 144 retroactively with
restatement of the consolidated financial statements.

The Company receives allowances from certain of its merchandise vendors
which it records as a reduction of cost of goods sold. EIC 144 has
changed the timing of recognition of some vendor allowances. As a result
of the retroactive application of EIC 144, the Company recorded a
decrease to opening retained earnings for 2003 of $857,000 (net of
current future income taxes recoverable of $487,000), a decrease to
inventory of $1,324,000 and an increase of $20,000 to the cumulative
translation adjustment. The impact on net earnings for each of 2003 and
2004 was not material.

UNITHOLDER DISTRIBUTIONS

The Trustees declared a quarterly cash distribution of $0.47 per unit,
which consists of $0.39 in interest income and $0.08 in dividend income
to unitholders of record on March 31, 2005, distributable by April 15,
2005.

NON-GAAP MEASURES

(1) Trading Profit (EBITDA) is not a recognized measure under Canadian
generally accepted accounting principles (GAAP). Management believes
that in addition to net earnings (loss), trading profit is a useful
supplemental measure as it provides investors with an indication of the
Company's ability to generate cash flows to fund its cash requirements,
including distributions and capital investment. Investors should be
cautioned, however, that trading profit should not be construed as an
alternative to net earnings (loss) determined in accordance with GAAP as
an indicator of NWF's performance. NWF's method of calculating trading
profit may differ from other companies and, accordingly, trading profit
may not be comparable to measures used by other companies.

A reconciliation of net earnings, the closest comparable GAAP measure,
to trading profit or EBITDA for consolidated operations is provided
below.



Reconciliation of net earnings to trading profit:

Fourth Quarter Year-To-Date

($ in thousands) 2004 2003 2004 2003
----- ----- ----- -----

Net earnings $ 10,564 $ 10,614 $ 37,265 $ 35,730
Add: Amortization 6,065 5,588 23,905 22,401
Interest expense 1,398 1,538 5,761 6,299
Income taxes 3,487 3,282 9,675 8,396
----- ----- ----- -----
Trading profit $ 21,514 $ 21,022 $ 76,606 $ 72,826
-------- -------- -------- --------


For trading profit information by business segment, see note 5 Segmented
Information in the notes to the unaudited interim period consolidated
financial statements.

Forward-Looking Statements

This Quarterly Report for North West Company Fund, including
Management's Discussion and Analysis (MD&A), contains certain
forward-looking statements. Such statements relate to, among other
things, sales growth, expansion and growth of the Company's business,
future capital expenditures and the Company's business strategy.
Forward-looking statements are subject to inherent uncertainties and
risks including but not limited to: general industry and economic
conditions, changes in the Company's relationship within the communities
its serves and with its suppliers, pricing pressure and other
competitive factors, the availability and costs of merchandise, fuels
and utilities, the results of the Company's ongoing efforts to improve
cost effectiveness, the rates of return on the Company's pension plan
assets, changes in regulatory requirements affecting the Company's
business and the availability and terms of financing. Other risks are
outlined in the Risk Management section of the MD&A included in the
Fund's 2003 Annual Report. Consequently, actual results and events may
vary significantly from those included in, contemplated or implied by
such statements. In evaluating forward-looking statements, readers
should specifically consider the various factors, which could cause
actual events or results to differ materially from such forward-looking
statements.

The North West Company Inc. (NWC) is the leading retailer of food and
everyday products and services to northern communities across Canada and
Alaska. NWC operates 183 stores under a number of trading names,
including Northern, NorthMart, Giant Tiger and AC Value Center, and
provides catalogue shopping services through its Selections catalogue in
northern Canada.

The units of the Fund trade on the TSX Toronto Stock Exchange under the
symbol "NWF.UN".

(1) See Non GAAP Measures Section of Management's Discussion & Analysis




CONSOLIDATED BALANCE SHEETS
January 29 January 31
2005 2004
(unaudited, $ in thousands) (Restated Note 1)
---------------------------------------------------------------------
---------------------------------------------------------------------

ASSETS
Current assets
Cash $ 11,438 $ 16,627
Accounts receivable 69,040 59,414
Inventories 122,034 114,790
Prepaid expenses 2,663 3,083
Future income taxes 2,467 2,916
---------------------------------------------------------------------

Total Current Assets 207,642 196,830

Property and equipment 186,104 192,395
Other assets 11,959 12,153
Future income taxes 7,932 8,222
---------------------------------------------------------------------

Total Assets $ 413,637 $ 409,600
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES
Current liabilities
Bank advances and short-term notes $ 32,023 $ 30,313
Accounts payable and accrued
liabilities 51,776 50,306
Income taxes payable 3,539 1,881
Current portion of long-term debt 106 640
---------------------------------------------------------------------

Total Current Liabilities 87,444 83,140

Long-term debt 88,803 96,949
Asset retirement obligations 1,105 1,033
---------------------------------------------------------------------

Total Liabilities 177,352 181,122
---------------------------------------------------------------------

EQUITY
Capital 165,205 165,205
Unit purchase loan plan (Note 2) (4,429) (3,650)
Retained earnings 70,560 61,679
Cumulative currency translation
adjustments 4,949 5,244
---------------------------------------------------------------------

Total Equity 236,285 228,478
---------------------------------------------------------------------

Total Liabilities and Equity $ 413,637 $ 409,600
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

13 Weeks 14 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended
January 29 January 31 January 29 January 31
2005 2004 2005 2004
(unaudited, (Restated (Restated
in thousands) Note 1) Note 1)
---------------------------------------------------------------------
---------------------------------------------------------------------

SALES $ 209,857 $ 216,950 $ 788,693 $ 782,720

Cost of sales,
selling and
administrative
expenses (188,343) (195,928) (712,087) (709,894)
---------------------------------------------------------------------

Net earnings before
amortization,
interest and
income taxes 21,514 21,022 76,606 72,826
Amortization (6,065) (5,588) (23,905) (22,401)
---------------------------------------------------------------------

15,449 15,434 52,701 50,425
Interest (1,398) (1,538) (5,761) (6,299)
---------------------------------------------------------------------

14,051 13,896 46,940 44,126
Provision for
income taxes
(Note 3) (3,487) (3,282) (9,675) (8,396)
---------------------------------------------------------------------

NET EARNINGS
FOR THE PERIOD 10,564 10,614 37,265 35,730

Retained earnings,
beginning of period
as previously
reported 66,610 63,559 61,679 52,165
Accounting
changes (Note 1) - - - (1,144)
---------------------------------------------------------------------
as restated 77,174 74,173 98,944 86,751

Distributions (6,614) (12,494) (28,384) (25,072)
---------------------------------------------------------------------

RETAINED EARNINGS,
END OF PERIOD $ 70,560 $ 61,679 $ 70,560 $ 61,679
---------------------------------------------------------------------
---------------------------------------------------------------------

NET EARNINGS PER
UNIT
Basic $ 0.66 $ 0.66 $ 2.34 $ 2.24
Diluted $ 0.66 $ 0.66 $ 2.32 $ 2.22
---------------------------------------------------------------------

Weighted Average
Number of Units
Outstanding
(000's)
Basic 15,937 15,929 15,918 15,940
Diluted 16,126 16,126 16,126 16,126
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



CONSOLIDATED STATEMENTS OF CASH FLOWS

13 Weeks 14 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended
January January January January
29 2005 31 2004 29 2005 31 2004
(Restated (Restated
(unaudited, $ in thousands) Note 1) Note 1)
---------------------------------------------------------------------
---------------------------------------------------------------------

CASH PROVIDED BY (USED IN)
Operating Activities
Net earnings for the period $ 10,564 $ 10,614 $ 37,265 $ 35,730
Non-cash items
Amortization 6,065 5,588 23,905 22,401
Future income taxes 394 2,115 636 2,789
Pension (credit) expense (352) (637) (352) (637)
Amortization of deferred
financing costs 46 46 186 186
(Gain)loss on disposal of
property and equipment 413 418 1,158 (1,583)
---------------------------------------------------------------------

Cash flow from operations 17,130 18,144 62,798 58,886
Change in other non-cash
items 2,408 20,282 (13,873) 7,894
---------------------------------------------------------------------

Operating activities 19,538 38,426 48,925 66,780
---------------------------------------------------------------------

Investing Activities
Purchase of property and
equipment (5,013) (11,772) (22,323) (33,273)
Proceeds from disposal of
property and equipment 81 234 694 3,070
---------------------------------------------------------------------

Investing activities (4,932) (11,538) (21,629) (30,203)
---------------------------------------------------------------------

Financing Activities
Change in bank advances
and short-term notes (6,905) (6,970) 1,885 2,475
Net purchase of units for
unit purchase loan plan (140) 458 (779) (285)
Repayment of long-term
debt (2,542) (1,442) (4,486) (1,952)
Distributions (7,335) (11,772) (29,105) (30,639)
---------------------------------------------------------------------

Financing activities (16,922) (19,726) (32,485) (30,401)
---------------------------------------------------------------------

NET CHANGE IN CASH (2,316) 7,162 (5,189) 6,176
Cash, beginning of period 13,754 9,465 16,627 10,451
---------------------------------------------------------------------

CASH, END OF PERIOD $ 11,438 $ 16,627 $ 11,438 $ 16,627
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental disclosure
of cash paid for:
Interest expense $ 2,823 $ 2,764 $ 6,076 $ 6,410
Income taxes 2,484 1,228 7,453 4,513
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



North West Company Fund 2004 Fourth Quarter Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Presentations and Disclosures

The unaudited interim period consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting
principles (GAAP). These interim financial statements follow the same
accounting policies and their methods of application as the 2003 annual
financial statements, except as described below. Not all disclosures
required by generally accepted accounting principles for annual
financial statements are presented, and accordingly, the interim
financial statements should be read in conjunction with the 2003 Annual
Report.

Effective February 1, 2004, the Company implemented the following new
accounting standards issued by the Canadian Institute of Chartered
Accountants (CICA):

Hedging Relationships

Accounting Guideline 13 "Hedging Relationships" (AcG 13), addresses the
identification, designation, documentation and effectiveness of hedging
transactions for the purposes of applying hedge accounting. It also
establishes conditions for applying or discontinuing hedge accounting.
Under the new guideline, the Company is required to document its hedging
transactions and explicitly demonstrate that the hedges are sufficiently
effective in order to continue accrual accounting for positions hedged
with derivatives. The adoption of AcG 13 had no impact on the Company's
financial position or results of operations.

Asset Retirement Obligations

Section 3110, "Asset Retirement Obligations" (CICA 3110), provides
guidance for the recognition, measurement and disclosure of liabilities
for asset retirement obligations and the associated asset retirement
costs. A liability associated with the retirement of long-lived assets
is recorded in the period in which the legal obligation is incurred at
its estimated fair value and a corresponding asset is capitalized as
part of the related asset and depreciated over its useful life.
Subsequent to the initial measurement of the asset retirement
obligation, the obligation is adjusted to reflect the passage of time
and changes in the estimated future costs underlying the obligation.

Accordingly, the Company has recognized a discounted liability
associated with obligations arising from the operation of gasoline
dispensing units and specific provisions in certain lease agreements
regarding the exiting of leased properties at the end of the respective
lease terms. This standard was implemented retroactively with
restatement of the prior year's consolidated financial statements. The
cumulative effect of implementation was a decrease to opening retained
earnings for 2003 of $287,000 (net of future income taxes recoverable of
$165,000), an increase in fixed assets of $586,000, an increase in other
liabilities of $1,033,000 and an increase in the cumulative translation
adjustment of $5,000. The impact on net earnings for each of 2003 and
2004 was not material.

Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor (EIC Abstract 144)

EIC 144 provides guidance on accounting for cash consideration received
from a vendor. EIC 144 requires a customer to record cash consideration
received from a vendor as a reduction in the price of the vendor's
products and reflect it as a reduction of cost of goods sold and related
inventory when recognized in the income statement and balance sheet.
Certain exceptions apply if the cash consideration received is a payment
for assets or services delivered to the vendor or for reimbursement of
selling costs incurred to promote the vendor's products. EIC 144 must be
applied retroactively to all financial statements for annual and interim
periods ending after August 15, 2004. Accordingly, in the third quarter
of 2004, the Company has implemented EIC 144 retroactively with
restatement of the consolidated financial statements.

The Company receives allowances from certain of its merchandise vendors
which it records as a reduction of cost of goods sold. EIC 144 has
changed the timing of recognition of some vendor allowances. As a result
of the retroactive application of EIC 144, the Company recorded a
decrease to opening retained earnings for 2003 of $857,000 (net of
current future income taxes recoverable of $487,000), a decrease to
inventory of $1,324,000 and an increase of $20,000 to the cumulative
currency translation adjustment. The impact on net earnings for each of
2003 and 2004 was not material.

2. Unit Purchase Loan Plan

Loans issued to officers to purchase units under the unit purchase loan
plan are treated as a reduction of equity. These loans are non-interest
bearing and repayable from the after tax distributions or if the officer
sells the units or leaves the Company. The loans are secured by a pledge
of 225,998 units of the Company with a quoted value at January 29, 2005
of $7,006,000. Loans receivable at January 29, 2005 of $4,429,000 are
recorded as a reduction of equity. The loans have a term of five years.
The maximum value of the loans under the plan will not exceed $7,500,000.

3. Income Taxes

Certain interest amounts deducted by The North West Company Inc. are
included as taxable income to unitholders of North West Company Fund
upon distribution. The income tax benefit of loss carryforwards to the
Company has been recorded in these financial statements as a future
income tax asset.

4. Employee Future Benefits

The Company's expense for employee future benefits is included in cost
of sales, selling and administrative expenses. The expense for the
defined benefit pension plan and the defined contribution pension plan
for the thirteen weeks ended January 29, 2005 was $498,000 (2004 -
$307,000) and for the fifty two weeks ended January 29, 2005 $1,872,000
(2003 - $1,555,000). The Company maintains an employee savings plan for
substantially all of its U.S. employees and recorded an expense for the
thirteen weeks ended January 29, 2005 of US$16,000 (2003 - US$16,000)
and for the fifty two weeks ended January 29, 2005 US$131,000 (2004 -
US$127,000).

5. Segmented Information ($ in thousands)

The Company operates predominantly within the retail industry in
northern Canada and Alaska. The following information is presented for
the two business segments:



13 Weeks 14 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended
January 29 January 31 January 29 January 31
2005 2004 2005 2004
Sales
Canada $ 174,186 $ 176,056 $ 629,822 $ 615,661
Alaska 35,671 40,894 158,871 167,059
-------------------------------------------------
Total $ 209,857 $ 216,950 $ 788,693 $ 782,720

Net earnings before
amortization,
interest
and income taxes
Canada $ 19,499 $ 17,893 $ 62,629 $ 57,663
Alaska 2,015 3,129 13,977 15,163
-------------------------------------------------
Total $ 21,514 $ 21,022 $ 76,606 $ 72,826

Net earnings before
interest and
income taxes
Canada $ 14,373 $ 13,248 $ 42,652 $ 39,250
Alaska 1,076 2,186 10,049 11,175
-------------------------------------------------
Total $ 15,449 $ 15,434 $ 52,701 $ 50,425

Identifiable Assets
Canada $ 293,254 $ 289,825 $ 293,254 $ 289,825
Alaska 63,963 66,555 63,963 66,555
-------------------------------------------------
Total $ 357,217 $ 356,380 $ 357,217 $ 356,380


6. Comparative Amounts

The comparative amounts have been reclassified to conform with the
current year's presentation.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    The North West Company
    Edward Kennedy
    President & CEO
    (204) 934-1482
    (204) 934-1317 (FAX)
    ekennedy@northwest.ca
    or
    The North West Company
    Leo Charriere
    Executive Vice-President, CFO and Secretary
    (204) 934-1503
    (204) 934-1455 (FAX)
    lcharriere@northwest.ca
    or visit on-line at www.northwest.ca