West 49 Inc. reports stronger third quarter results
- Higher gross margin and bottom line achieved on lower sales -
Third quarter highlights:
- EBITDA(1) of $5.9 million, an improvement of $1.1 million from the
third quarter a year ago;
- Net income improved to $2.9 million, or $0.05 per share, compared to
$2.1 million, or $0.03 per share, a year ago;
- Gross margin increased 180 basis points to 27.9% of net sales. Gross
margin increased $0.5 to $16.6 million despite net sales declining
3.7% to $59.4 million;
- Selling, general and administrative ("SG&A") expense reduction of
$0.6 million. SG&A expenses as a rate to net sales improved 30 basis
points to 18.0%.
"We improved our margins and profitability despite a highly competitive and increasingly discount-oriented retail landscape," said
Financial Results
(Amounts in thousands of $ except per share amounts and weighted
averages)
Fiscal 2010 Fiscal 2009
Third Year-to- Third Year-to-
Quarter Date Quarter Date
Net sales 59,440 143,827 61,723 145,658
Gross margin 16,580 33,479 16,139 30,567
EBITDA (loss) 5,901 4,019 4,844 (120)
Net income (loss) 2,898 (673) 2,074 (3,874)
Basic income (loss) per
share $0.05 ($0.01) $0.03 ($0.06)
Weighted average common
shares outstanding
(millions) 63.8 63.8 63.5 63.5
Gross margin for the quarter increased 180 basis points to 27.9% of net sales from 26.1% of net sales for the third quarter of last year. In dollars, gross margin increased
Selling, general and administrative ("SG&A") expenses decreased
Net income for the quarter improved to
Store Real Estate Activity
During the third quarter, the Company opened a West 49 store and an Off The Wall store at CrossIron Mills, in
Subsequent to the quarter end, the Company opened a new West 49 outlet in Cambridge Smart Centres, in Cambridge, Ontario and an Amnesia store in Carrefour du Nord, in St. Jerome,
Outlook
"We are certainly encouraged by the strength and relevancy of our core business during these challenging times. In fact, we feel it is a testament to the hard work we have done and to our strong growth potential going forward," said
Notice of Conference Call
The Company will host a conference call on
A live audio webcast of the Company's second quarter results conference call will be available at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2899820. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 90 days.
About West 49 Inc.
West 49 Inc. is a leading Canadian specialty retailer of fashion and apparel, footwear, accessories and equipment related to the youth action sports lifestyle. The Company's stores, which are primarily mall-based, carry a variety of high-performance, premium brand name and private label products that fulfill the lifestyle needs of identified target markets, primarily tweens and teens. The Company currently operates 133 stores in nine provinces, under the banners West 49, Billabong, Off The Wall, Amnesia/Arsenic and D-Tox. The Company's common shares are listed on the
Follow West 49 Inc. on Twitter at http://twitter.com/West49Inc
Forward-Looking Statements
Information in this news release that is not current or historical factual information may constitute forward-looking information. Implicit in this information, particularly in respect of future operating results and economic performance of the Company are assumptions regarding projected revenue, gross margin and expenses. The assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Investors are cautioned that forward-looking information involves known and unknown risks, uncertainties and numerous other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. The following includes some of the factors that could cause actual results, performance or achievements to differ materially from those expressed in or implied by any forward-looking information made by or on behalf of the Company: competition, changes in demographic trends, changes in consumer preferences and discretionary spending patterns, changes in business and economic conditions, human resource matters, legal proceedings, challenges to intellectual property rights, and changes in laws, regulations, and accounting policies and practices. The foregoing list of factors is not exhaustive. In formulating the forward-looking information contained herein, management has assumed that business and economic conditions affecting the Company's operations will continue substantially in the ordinary course, including without limitation with respect to industry conditions, general levels of economic activity, laws, regulations, taxes, foreign exchange rates, minimum wage rates and interest rates, weather, that there will be no outbreaks of disease or public safety issues, and that there will be no unplanned material changes in its facilities, equipment, supplies, with respect to relations with customers, suppliers, landlords and employees, or with respect to credit availability, among other things. These assumptions, although considered reasonable by management at the time of preparation, may prove to be incorrect. Accordingly, investors should not place undue reliance on forward-looking information. The Company includes in publicly available documents filed from time to time with securities commissions and the
(1) EBITDA, which is defined as earnings (loss) before interest, taxes, dividends, depreciation and amortization, is not a financial measure recognized by Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. The Company believes that this Non-GAAP financial measure provides meaningful information on the Company's performance and operating results. Readers are cautioned that EBITDA has no standardized meaning as prescribed by GAAP and may not be comparable to similar measures presented by other companies. Further, readers are cautioned that EBITDA should not replace net income or loss or cash flows from operating, investing and financing activities (as determined in accordance with GAAP), as an indicator of the Company's performance.
Financial Information
For convenience, this press release includes the Company's Fiscal 2010 Third Quarter Unaudited Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss) and Statements of Cash Flows.
WEST 49 INC.
CONSOLIDATED BALANCE SHEETS
AS AT October 31, January 31,
(Unaudited, in thousands of dollars) 2009 2009
----------- -----------
Assets
Current
Cash and cash equivalents $ 1,577 $ 6,788
Accounts receivable 1,386 1,226
Income taxes receivable - 16
Inventories 45,696 28,552
Future income taxes 1,628 1,326
Prepaid expenses 672 741
----------- -----------
50,959 38,649
Capital assets 26,315 27,399
Deferred costs 109 138
Due from related parties 35 10
Future income taxes 2,185 2,142
Goodwill 12,580 12,580
Intangible assets 13,829 13,829
----------- -----------
----------- -----------
$ 106,012 $ 94,747
----------- -----------
----------- -----------
Liabilities
Current
Accounts payable and accrued charges $ 40,152 $ 27,792
Current portion of long-term debt 6,315 6,843
Current portion of deferred lease obligations 940 942
Current preferred shares 18 33
----------- -----------
----------- -----------
47,425 35,610
Deferred lease obligations 8,398 8,293
Preferred shares 5,190 5,190
----------- -----------
61,013 49,093
----------- -----------
----------- -----------
Shareholders' Equity
Share capital 63,371 63,371
Contributed surplus 2,072 2,054
Deficit (20,444) (19,771)
----------- -----------
44,999 45,654
----------- -----------
----------- -----------
$ 106,012 $ 94,747
----------- -----------
----------- -----------
WEST 49 INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands of dollars except per share amounts)
For the 13 Week For the 39 Week
Periods Ending Periods Ending
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net sales $ 59,440 $ 61,723 $ 143,827 $ 145,658
Cost of sales 42,860 45,584 110,348 115,091
----------- ----------- ----------- -----------
Gross margin 16,580 16,139 33,479 30,567
Selling, general and
administrative expenses 10,679 11,295 29,460 30,514
----------- ----------- ----------- -----------
Income before other expenses 5,901 4,844 4,019 53
----------- ----------- ----------- -----------
Other expenses:
Dividends on preferred
shares 56 87 171 272
Interest expense on
long-term debt 126 148 447 478
Amortization 1,431 1,405 4,289 4,447
Restructuring costs - - - 173
----------- ----------- ----------- -----------
1,613 1,640 4,907 5,370
----------- ----------- ----------- -----------
Income (loss) before
income taxes 4,288 3,204 (888) (5,317)
Income tax expense (recovery) 1,390 1,130 (215) (1,443)
----------- ----------- ----------- -----------
Net income (loss) and
comprehensive income
(loss) $ 2,898 $ 2,074 $ (673) $ (3,874)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic income (loss) per
share $ 0.05 $ 0.03 $ (0.01) $ (0.06)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted income (loss) per
share $ 0.04 $ 0.03 $ (0.01) $ (0.06)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEST 49 INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands of dollars)
For the 13 Week For the 39 Week
Periods Ending Periods Ending
October 31, October 25, October 31, October 25,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Operating Activities
Net income (loss) $ 2,898 $ 2,074 $ (673) $ (3,874)
Non-cash items included
above:
Amortization of capital
assets 1,431 1,349 4,289 4,250
Amortization of deferred
costs 36 58 141 223
Amortization of deferred
lease inducements (247) (169) (733) (692)
Amortization of intangible
assets - 56 - 197
Future income taxes 1,271 468 (345) (2,203)
Impairment or disposition
of store assets - 168 123 323
Straight-line rent expense 12 58 129 236
Stock based compensation 8 78 18 225
----------- ----------- ----------- -----------
5,409 4,140 2,949 (1,315)
Changes in non-cash working
capital from operations 2,159 (1,774) (5,136) (7,368)
----------- ----------- ----------- -----------
Net cash flows from
operating activities 7,568 2,366 (2,187) (8,683)
----------- ----------- ----------- -----------
Financing Activities
Due from related parties 60 (5) (25) 27
Increase in deferred costs (32) (94) (112) (167)
Redemption of preferred
shares - - (15) (30)
Repayment of long-term debt - (202) (528) (417)
----------- ----------- ----------- -----------
Net cash flows from financing
activities 28 (301) (680) (587)
----------- ----------- ----------- -----------
Investing Activities
Additions to capital assets (788) (655) (3,105) (3,793)
Deferred lease inducements
received 82 19 761 959
----------- ----------- ----------- -----------
Net cash flows from investing
activities (706) (636) (2,344) (2,834)
----------- ----------- ----------- -----------
Net change in cash and cash
equivalents 6,890 1,429 (5,211) (12,104)
Cash and cash equivalents,
beginning of period (5,313) (5,164) 6,788 8,369
----------- ----------- ----------- -----------
Cash and cash equivalents,
end of period $ 1,577 $ (3,735) $ 1,577 $ (3,735)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental Disclosure
Interest paid $ 163 $ 167 $ 484 $ 552
Dividends paid on
preferred shares 55 89 182 285
Income taxes paid - 478 - 1,985
For further information: Rhonda Biddix, Chief Financial Officer and Corporate Secretary, West 49 Inc., (905) 336-5454 ext. 224, E-mail: [email protected]; Trevor Heisler, Investor Relations, The Equicom Group Inc., (416) 815-0700 ext. 270, E-mail: [email protected]
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