Press release from Marketwire
Coast Wholesale Appliances Inc. Reports 2013 First Quarter Results
Strong builder sales in all markets drive 14% year-over-year revenue gain, 8% increase in gross profit dollars and 74% growth in EBITDA
Monday, May 06, 2013
Coast Wholesale Appliances Inc. Reports 2013 First Quarter Results16:05 EDT Monday, May 06, 2013
VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 6, 2013) -
Coast Wholesale Appliances Inc. (TSX:CWA) will host a conference call and webcast to discuss its 2013 first quarter financial results on Tuesday, May 7, 2013 at 8:00 am Pacific Time (11:00 am Eastern). The call can be accessed by dialing: 1-877-240-9772 or 416-340-8527 (GTA and International).
A replay will be available through May 21, 2013 at: 1-800-408-3053 or 905-694-9451, passcode 2341751.
The live and archived webcast, as well as an mp3 download, can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=170936 or on Coast's website at www.coastwholesaleappliancesinc.com.
Coast Wholesale Appliances Inc. (Coast or the company), today reported financial results for the three months ended March 31, 2013, which represents the first quarter of its 2013 fiscal year.
|(in thousands of dollars except percentages and per-share amounts)|
|As a percentage of sales||21.6%||22.9%||24.0%|
|Diluted net income (loss) per share||0.036||(0.000)||(0.049)|
|EBITDA per share||0.107||0.061||(0.004)|
|Dividends per share||0.075||0.105||0.070|
First Quarter Results
In its seventh consecutive quarter of year-over-year revenue growth, Coast recorded sales of $34.4 million for the three months ended March 31, 2013. This represented an increase of $4.3 million, or 14.4%, over Q1 2012. Sales to builders in the company's seasonally slower first quarter increased by 25.2%, while retail sales remained in line with the 2012 level, dipping by a modest 0.4%. Other revenues, generated by warranty sales, freight and installation, sales of glass products and commission sales, were up by 2.1% over the same period last year.
As in the past three quarters, revenues improved in all of Coast's geographic markets. Notably, the company achieved double-digit sales increases in both the Greater Toronto Area (GTA) of Ontario and British Columbia.
With the higher revenues, first quarter gross profit increased to $7.4 million from $6.9 million in 2012, a 7.8% improvement. Gross margin continued to be negatively affected by on-going competitive pressures and the resulting price compression in both the retail and builder segments of Coast's business, declining to 21.6% from 22.9% in Q1 2012. Tight cost control kept selling, warehouse, facility, and general and administrative (SG&A) expenses for the quarter level with last year, despite the increase in business. As a percentage of sales, SG&A expenses were reduced to 18.5% from 20.9% in 2012.
First quarter EBITDA of $1.1 million was up by $0.5 million from the $0.6 million reported in 2012, while EBITDA margin improved to 3.1% from 2.1% last year. The increase in EBITDA was due mainly to this year's higher revenues and the resulting $0.5 million gross profit gain. The company recorded net income of $0.4 million for the period, compared to a loss of $4,000 in 2012.
"Our first quarter revenues exceeded our expectations, as we had a stronger than anticipated flow of sales to single and multi-family homebuilders move through to completion," said Maurice Paquette, President, CEO and a director of Coast. "In the retail segment, given the current extremely cautious consumer spending climate, we were pleased to maintain our sales at just slightly below last year's level."
Paquette continued, "While our gross margin percentage continued to be eroded by fiercely competitive market conditions, we are encouraged by the sustained improvement in gross profit dollars and by our much stronger EBITDA performance."
During the first quarter, as part of its ongoing strategy to enhance profitability by increasing sales from its existing stores, Coast continued with renovations to its Calgary South store in Alberta and began upgrade work at its Saskatoon, Saskatchewan store. Both improvement projects are expected to be completed by mid-year.
Building on its successful national roll-out of the KitchenAid® brand in 2012, Coast proceeded with its plans to expand its Whirlpool® major appliances offering. The company is increasing the range of Whirlpool products it offers to retail customers and making this popular mid-to-higher-end product line available to its builder customers.
"We believe that having a wider range of Whirlpool models will make Coast an even more attractive shopping destination for retail customers, and particularly those discerning consumers who seek a value-added purchase experience," said Paquette. "These are customers who are not shopping on price alone. They choose Coast because of our state-of-the-art designer showrooms and working kitchens, our exceptional selection of mid-to-high-end brands and models, our highly knowledgeable sales staff, and our outstanding after-sales service."
As expected, inventory levels increased during the first quarter, due both to the higher sales volumes and the Whirlpool expansion. At March 31, 2013, inventory stood at $27.0 million, compared to $25.8 million at December 31, 2012.
As previously announced, the company successfully concluded its search for a new Board member during the quarter. Stephen T. Bellringer, MBA, LL.D (Hon) was appointed as a director and Chair of Coast's Board of Directors, effective March 27, 2013. Mr. Bellringer took over the leadership of Coast's board from director Donald J. A. Smith, CA, MBA who assumed the role on an interim basis at the end of November 2012. Mr. Smith remains as a director.
During the first quarter, monthly dividends of $0.025 per share were declared for each of January, February and March, payable on or about the fifth day of the month following. This dividend rate equates to $0.30 per share on an annualized basis, representing a yield of approximately 10% per annum at recent Coast share trading prices. Coast's Board of Directors closely monitors the company's dividend level on a continuous basis.
The following outlook discussion is qualified in its entirety by the forward-looking statements proviso at the end of this news release.
The outlook for Coast's business in 2013 remains cautious. In the builder segment, the company expects that its revenues will continue to grow as projects in its order backlog move into the final stages of development, particularly in the multi-family sector, but at a slower rate than in the first quarter of the year. Coast anticipates that housing starts will soften slightly in 2013 and that very competitive market conditions will continue to compress unit prices and hence margins on its builder sales for the foreseeable future. On the retail side, it expects that market conditions and pricing will remain similarly competitive through 2013 as consumers continue to be extremely cautious about making major purchases.
"We had an excellent start to the year from a sales perspective, thanks to our exceptionally robust builder business," said Paquette. "Going into the second quarter, we have a very strong backlog of contract orders for future delivery across all of our markets, but the reality is that planned residential development can be slowed by unfavourable economic conditions. The outlook for the British Columbia market is particularly cautious."
Over the balance of the year, Coast will continue to focus on controlling costs, improving its margin performance, reducing inventory and increasing inventory turns. To this end, the company will be implementing upgrades to its inventory and pricing management systems, expected to be in place by year-end.
A more detailed discussion of Coast's financial results can be found in its 2013 First Quarter Management's Discussion and Analysis, which will be posted with unaudited interim condensed financial statements for the period on Coast's website (www.coastwholesaleappliancesinc.com) and SEDAR (www.sedar.com) on or before May 7, 2013.
Coast is a leading independent supplier of major household appliances and accessories to builders and developers of multi-family and single-family housing, and to retail customers. Founded in 1978, Coast currently operates 15 stores across the four western provinces and one store in the Greater Toronto Area of Ontario, as well as a network of warehouse distribution centres strategically situated to serve these locations.
This news release includes forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Such statements may involve, but are not limited to, comments with respect to the sustainability of Coast's dividends to shareholders, the performance of the Canadian economy and the company's sales expectations. Forward-looking statements are included in all sections of this news release.
These forward-looking statements reflect current expectations of management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: sensitivity to general economic conditions; changes in consumer confidence in the economy; maintenance of profitability and management of changes to Coast's business; competition; increases to interest rates; reliance on suppliers and their ability to supply product for sale on a timely basis; changes in consumer preferences; changes in Coast's mix of product sales; fluctuations in fuel and commodity pricing; usage of extended warranty programs and the costs to deliver these services; changes to planning and supply chain processes; lack of long-term supplier agreements; reliance on key personnel; and foreign exchange rates as they relate to imported products.
Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, Coast cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available to Coast. They speak only as of the date of this news release, and reflect current assumptions regarding future events and operating performance. These assumptions include, without limitation: slow economic growth in 2013 in both Western Canada and the Greater Toronto Area (GTA), Coast's current markets; continued fluctuations in exchange rates with the Canadian dollar trading near par with the US dollar; continued low interest rates; continuing relatively stable credit markets for Coast's major builder customers; weak consumer confidence due to the slow economic recovery; and a slight softening of total housing starts in 2013 compared to 2012. These forward-looking statements are made as of the date of this news release and Coast assumes no obligation to update or revise them to reflect new events or circumstances, other than as required by law.
Non-IFRS Financial Measures
EBITDA and EBITDA margin are non-IFRS financial measures that are defined in the First Quarter Management's Discussion and Analysis to be posted on Coast's website and SEDAR on or before May 7, 2013.
FOR FURTHER INFORMATION PLEASE CONTACT:
Coast Wholesale Appliances Inc.
Chief Financial Officer