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Press release from CNW Group

The Brick Group Reports Third Quarter 2010 Results

Wednesday, November 03, 2010

The Brick Group Reports Third Quarter 2010 Results20:17 EDT Wednesday, November 03, 2010/NOT FOR DISTRIBUTION THROUGH U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S./Highest third quarter and year to date EBITDA in its historyEDMONTON, Nov. 3, 2010 /CNW/ - The Brick Group Income Fund (TSX: BRK.UN) (the "Brick Group") today announced its third quarter and year to date financial results for the period ended September 30, 2010. Financial statements and Management's Discussion and Analysis are available on the Brick Group's website at www.thebrickgroup.ca and on SEDAR.Third Quarter 2010 Summary:Same store sales grew by 8.9% over Q3 2009Consolidated sales & operating revenue increased 9.8% to $367.8 millionGross margin rates increased to 42.7% from 40.8% in Q3 2009SG&A, as a percentage of sales, decreased 2.1 percentage points from 37.2% to 35.1% in Q3 2010EBITDA increased to $27.6 million from $12.1 million in Q3 2009. Q3 2010 EBITDA represents the highest third quarter EBITDA in the Brick Group's history, surpassing Q3 2007's record of $26.1 millionNet income of $16.8 million was up from $0.5 million in the same quarter in 2009Cash and cash equivalents, net of borrowings, at September 30, 2010 were $44.8 million vs. negative $10.6 million a year earlier. No borrowings were outstanding under the asset-based credit facility with $87.4 million fully margined and available for use at September 30, 2010Repurchased 408,912 trust units and 325,008 warrants for cancellation pursuant to the normal course issuer bid (NCIB) which commenced on August 10, 2010Year to date 2010 SummarySame store sales grew by 14.0% compared with the same period in the previous yearConsolidated sales & operating revenue increased 16.0% to $1.0 billionGross margin rates increased to 42.6% from 40.7% in the first nine months of 2009EBITDA of $57.8 million represents the highest reported EBITDA result for the first nine months of any year in the history of the Brick GroupNet Income of $25.6 million was up from a net loss of $175.3 million in 2009"I am very pleased with the Brick Group's third quarter and year to date 2010 financial results," said Bill Gregson, President and Chief Executive Officer of the Brick Group.  "Continuing with our strong performance reported thus far in 2010, our third quarter EBITDA of $27.6 million represents another record setting period, generating the highest third quarter EBITDA in the Brick Group's history," added Mr. Gregson. Third quarter 2010 same store sales growth was 8.9% higher than the same quarter in the prior year.  Year to date same store sales growth was 14.0% when compared to the same period in 2009.Gross margin rate increased to 42.7% of revenue from 40.8% in the third quarter last year.  The rate improvement resulted from higher profitability in the furniture category due to the relative strength of the Canadian dollar, as the majority of furniture inventory purchases are priced in U.S. dollars, and a shift in product mix towards this higher margin category.  Additionally, increased early payment discounts, a lower mix of clearance inventory and improved vendor rebate programs contributed to the higher gross margin rate.The Brick continues to enjoy a strong financial position.   The Brick Group's balance sheet holds cash and cash equivalents of $44.8 million, and there are currently no borrowings outstanding on the Company's asset-based credit facility with $87.4 million of margined borrowing capacity available. The strength of the Brick's balance sheet, combined with improved operating performance, has allowed the repurchase for cancellation of 408,912 trust units and 325,008 warrants pursuant to the normal course issuer bid which commenced on August 10, 2010.  Results Summary(000's of $ except %, and store amounts)For the three months ended September 30For the nine months ended September 3020102009$ Increase (Decrease)% Increase (Decrease)20102009$ Increase (Decrease)% Increase (Decrease)Retail Segment - Sales and operating revenue$ 345,815 $ 316,307               29,5089.3% $ 937,614 $ 808,021             129,59316.0%Financial Services Segment - Sales and operating revenue             21,941                18,573                 3,36818.1%             62,663                54,132                 8,53115.8%Consolidated - Sales and operating revenue           367,756              334,880               32,8769.8%       1,000,277             862,153             138,12416.0%Franchise sales (1)             41,107               35,954                 5,15314.3%           116,409               96,373               20,03620.8%Consolidated sales and operating revenue and franchise sales (1) $ 408,863 $ 370,834           38,02910.3%$ 1,116,686 $ 958,526          158,16016.5%Same Store Sales Growth (corporate stores)8.9%-19.0%  14.0%-24.5%  Same Store Sales Growth (corporate and franchise stores)9.1%-18.9%  13.9%-24.1%           Retail Segment - EBITDA $ 17,405 $ 3,524             13,881393.9% $ 27,704  $ (24,406)               52,110213.5%Financial Services Segment - EBITDA             10,173                 8,541                 1,63219.1%             30,086                26,385                 3,70114.0%Consolidated - EBITDA $ 27,578 $ 12,065            15,513128.6%$ 57,790  $ 1,979            55,8112820.1% EBITDA as a percentage of sales and operating revenue7.5%3.6%  5.8%0.2%           Retail Segment - Net income (loss)  (2) $ 6,734 $ (7,948)               14,682184.7% $ (4,043) $ (201,497)             197,45498.0%Financial Services Segment - Net income             10,083                  8,413                 1,67019.8%             29,636               26,244                 3,39212.9%Consolidated - Net income (loss)  (2) $ 16,817 $ 465            16,3523516.6% $ 25,593  $ (175,253)             200,845114.6%         Cash provided by operating activities before changes in non-cash working capital items            26,551                7,534               19,017252.4%            49,792              (8,524)               58,316684.1%         Stores at period end236237  236237  (1)  In this table, franchise sales figures refer to sales occurring at franchise stores which are not included in the sales and operating revenue figures presented in The Brick Group Income Fund's consolidated financial statements, or in the corporate same store sales figures presented in this table.(2)  Year to date net income for 2009 includes brand intangible asset impairment charges of $50,000, goodwill impairment charges of $108,459 and related future income tax recoveries of $14,770 recorded in the retail segment.Third Quarter and Year to Date 2010 Operating ResultsConsolidated sales and operating revenue, including franchise sales, during the third quarter were $408.9 million, representing an increase of 10.3% over the same period last year.  Same store sales growth for both corporate and franchise outlets was 9.1% compared to negative 18.9% in 2009.Consolidated sales and operating revenue totalled $367.8 million, an increase of $32.9 million or 9.8% compared to the third quarter last year.Sales at franchise stores increased by 14.3% to $41.1 million, and same store sales growth was 10.7%, compared to the third quarter last year. Sales and operating revenue increased by 9.3% in the retail segment to $345.8 million, and gained 18.1% in the financial services segment to $21.9 million. In the retail segment, third quarter same store sales growth improved to 8.9% compared to negative 19.0% in the same quarter of 2009.Selling, general and administrative expenses (SG&A) were an area of attention and continued to be closely managed during the third quarter.  These outlays were reduced to 35.1% of sales from 37.2% in the same period of 2009. Consolidated EBITDA totalled $27.6 million or $15.5 million higher than the same quarter of 2009.  Q3 2010 includes $1.5 million non-cash expenses related to newly introduced stock-based compensation plans.EBITDA increased by $1.6 million to $10.2 million in the financial services segment, and gained $13.9 million to $17.4 million in the retail segment.The quarter ended with $16.8 million consolidated net income, versus $0.5 million in the third quarter of 2009.For the first nine months of 2010, consolidated sales and operating revenues, including franchise sales, totalled $1.1 billion representing an increase of 16.5% over the same period last year.  Same store sales growth, for both corporate and franchised locations, was 13.9% compared to negative 24.1% in 2009.Consolidated sales and operating revenue totalled $1.0 billion, an increase of $138.1 million or 16.0% compared to the same nine months last year.Sales and operating revenue increased by 16.0% in the retail segment to $937.6 million, and gained 15.8% in the financial services segment to $62.7 million.  In the retail segment, the first nine months same store sales growth improved to 14.0% compared to negative 24.5% during the same period in 2009. Selling, general and administrative expenses (SG&A) were an area of attention and were closely managed in the first three quarters of 2010.  These outlays were reduced to 36.8% of sales from 40.5% in the same period of 2009. At September 30, 2010, the Brick Group's current assets exceeded current liabilities by $88.7 million, with no funds drawn under its asset-backed credit facility and $87.4 million in available borrowing capacity.The strength of our balance sheet, combined with improved operating performance, has allowed us to repurchase for cancellation 408,912 trust units and 325,008 warrants pursuant to the normal course issuer bid (NCIB) which commenced on August 10, 2010.  We will continue to make use of positive cash through the NCIB to repurchase a number of our warrants or trust units for cancelation. This repurchase is not anticipated to cause us to draw on our credit facility and will be weighed carefully against economic factors during the process.  For the remainder of 2010, management's focus remains on organic growth through improved same store sales, an enhanced customer service model, investments in both information systems and supply chain and cost control.Conference Call and Webcast The Brick Group will host its third quarter 2010 investor call at 10:00 am Eastern Time (8:00 am Alberta Time) on Thursday, November 4, 2010. The call can be accessed by calling (647) 427-7450 or (888) 231-8191. A listen-only webcast will be available at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3262160A telephone replay of the call will be available until midnight Eastern time on November 10, 2010. To access it, dial 416-849-0833 or 1-800-642-1687 and enter passcode17846251.About the Brick GroupThe Brick Group, together with its subsidiaries, is one of Canada's largest volume retailers of household furniture, mattresses, appliances and home electronics, operating under five banners: The Brick, United Furniture Warehouse, The Brick Superstore, The Brick Mattress Store, and Urban Brick. In addition, through its corporate sales division, the Brick Group services the subdivision, condominium, and high-rise builder market. The Brick Group's retail operations are located in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Nova Scotia, New Brunswick and Yukon.Forward-Looking Statements This news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws, including (but not limited to) statements about the Brick's consolidated sales and operating revenue, consolidated EBITDA, consolidated net loss, sales and operating revenue in the financial services and retail segments, same store sales growth and goodwill and indefinite life intangible asset impairment charges, the financial flexibility and capital resources necessary to manage the business in the current economic environment, and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management's current expectations and are based on information currently available to management of the Brick and its subsidiaries. The words "may", "will", "should", "believe", "expect", "plan", "anticipate", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms, or other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking matters. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Brick to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. The Brick undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.Non-GAAP Financial MeasuresAdjusted results, EBITDA, reported EBITDA and adjusted EBITDA are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP.  Therefore, adjusted results, EBITDA, reported EBITDA and adjusted EBITDA may not be comparable to similar measures presented by other issuers.  Investors are cautioned that adjusted results, EBITDA, reported EBITDA and adjusted EBITDA should not be construed as alternatives to net income as determined in accordance with GAAP, as indicators of performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.For further information:  Bill Gregson David MerkleyPresident and CEOChief Financial OfficerThe Brick GroupThe Brick Group(780) 930-6300(780) 930-6300investor@thebrickgroup.ca    investor@thebrickgroup.cawww.thebrick.com