VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 15, 2014) - Coast Wholesale Appliances Inc. (TSX:CWA) -

Coast Wholesale Appliances Inc. will host a conference call to discuss its 2014 first quarter financial results today at 2:30 pm Pacific Time (5:30 pm Eastern). The call can be accessed by dialing: toll-free 1-800-396-7098 or 416-340-8527 (GTA and International).

A replay will be available through 11:00 am Pacific Time on May 29, 2014 at: 1-800-408-3053 or 905-694-9451 - Pass code: 4584410.

Coast Wholesale Appliances Inc. (Coast or the company), today reported financial results for the three months ended March 31, 2014, which represents the first quarter of Coast's 2014 fiscal year.

Performance Highlights
(in thousands of dollars except percentages and per-share amounts)
2014 2013 2012
Q1Q1Q1
Sales 36,794 34,360 30,035
Gross profit 7,603 7,418 6,883
As a percentage of sales20.7%21.6%22.9%
Net Income (loss) (221 ) 359 (4 )
Basic and diluted net income (loss) per share (0.02 ) 0.04 (0.00 )
EBITDA 293 1,070 616
EBITDA margin0.8%3.1%2.1%
EBITDA per share 0.029 0.107 0.061
Dividends per share 0.075 0.075 0.105
EBITDA adjusted for other costs (1) 1,096 1,070 616
(1) Other costs include one-time legal, special committee and financial advisor expenses related to the unsolicited offer by "CWAL" to acquire all of the issued and outstanding common shares of Coast.

First Quarter Results

In its seasonally slower first quarter, Coast posted sales of $36.8 million, up by $2.4 million, or 7.1%, from $34.4 million in the same period of 2013. This represented the company's eleventh consecutive quarter of year-over-year revenue growth. Sales to builders increased by 6.5%, while retail sales grew by 7.8%. Other revenues were also up, growing by 9.7% over Q1 2013.

Coast recorded double-digit sales increases in the Greater Toronto Area (GTA), Manitoba, Alberta and Saskatchewan markets, with particularly strong growth in the GTA and Manitoba. In British Columbia, as expected, sales were down somewhat year-over-year due to project delivery timing of builder sales.

First quarter gross profit improved to $7.6 million from $7.4 million in 2013. Due to ongoing pricing compression as a result of much more competitive market conditions, particularly in Coast's core builder business segment, gross margin percentage decreased to 20.7% from 21.6% in Q1 2013.

Coast's first quarter selling, general and administrative, facilities and warehousing expenses (SG&A expenses) rose by $1.0 million to $7.3 million. The increase was primarily due to the $0.8 million in professional fees for legal and financial advice, and Special Committee costs incurred in evaluating the previously announced unsolicited cash offer made on March 4, 2014 by CWAL Investments Ltd. (CWAL) to purchase all of the issued and outstanding shares of Coast not currently held by CWAL. Without these extraordinary costs, SG&A expenses as a percentage of sales would have been reduced from 19.9% to 17.7%, compared to 18.5% in 2013.

Due primarily to the costs associated with the CWAL takeover bid and the lower gross margin percentage, first quarter EBITDA decreased by $0.8 million to $0.3 million from the $1.1 million reported in 2013, while EBITDA margin decreased to 0.8% from 3.1% last year. Without the one-time costs, EBITDA would have been $1.1 million and EBITDA margin would have been 3.0%.

"We are very pleased with our sales growth over the past two-and-a-half years, and encouraged by the increase in our retail business in Q1," said Maurice Paquette, President and CEO of Coast. "In the builder segment, we've maintained a steady flow of completed contract sales to single and multi-family homebuilders in our western Canadian and GTA markets, and a healthy backlog of contract orders for future delivery, but our margins have continued to be challenged by the fiercely competitive business environment. To help offset the erosion of our builder margins, we are actively working to increase our share of the higher-margin retail market."

Operating Highlights

During the first quarter, as part of its ongoing strategy to enhance profitability by increasing sales from its existing stores, Coast initiated planning for showroom updates at its Edmonton North store in Alberta and its Winnipeg, Manitoba location. Both store refreshes are expected to be completed during 2014.

The company continued with work on major upgrades to its inventory and pricing management systems. This IT project remains on budget and on schedule for implementation across all of Coast's locations by mid-year. These new systems will help Coast better manage its gross margins, reduce inventory levels and increase inventory turns.

CWAL Takeover Bid

After receiving CWAL's offer to purchase all of the common shares of Coast, the company formed a Special Committee comprised of independent directors to evaluate the offer and consider alternatives. Based on the recommendation of the Special Committee, and with the benefit of advice from Coast's financial and legal advisors, the Board unanimously recommended that Coast shareholders reject the offer and not tender their shares. On May 14, 2014, CWAL announced by news release that it was extending the expiry date of its offer to June 4, 2014.

Dividends

Coast declared monthly dividends of $0.025 per share from January through March of 2014, 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 6% per annum at recent Coast share trading prices. The annual dividend payout ratio for the rolling 12 months to March 31, 2014 decreased to 53.4% from 58.8% for the 12 months to March 31, 2013. Coast's Board of Directors closely monitors the company's dividend level on a continuous basis.

Outlook

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 through the balance of 2014 continues to be cautious. Coast remains vulnerable to changes in the level of housing activity, and any significant economic setbacks could have a negative impact on its sales to both builder and retail customers.

In the builder segment, the company anticipates 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 2013. Total Canadian housing starts were down year-over-year in 2013 and are not expected to increase in 2014. Given the lagging impact of housing starts on sales of major home appliances, Coast anticipates that the sustained decrease in total starts will be reflected in its revenues going forward. The company also expects 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, Coast anticipates that market conditions and pricing will remain similarly competitive through 2014 as consumers continue to be extremely careful about making major purchases. However, the company believes that opportunities exist for it to grow its retail customer base.

"Our builder-focused business model uniquely equips Coast to deliver a value-added service offering to consumers who purchase new homes from our builder customers," said Paquette. "On-going enhancements to our showrooms and the expansion of our selection of mid-to-high-end brands and models over the past several years have been key to preserving our retail sales base in a difficult market. We expect that our current focus on refining our marketing and promotional strategies will enable us to expand our share of the consumer market in the months and years to come."

Paquette added that, based on Coast's current order backlog, the company's revenue growth in 2014 will be concentrated in the GTA and Prairie markets. On the expense side, he noted that an estimated $0.3 million in additional costs related to the CWAL takeover bid were expected be incurred in the second quarter.

A more detailed discussion of Coast's financial results can be found in its 2014 First Quarter Management's Discussion and Analysis, which will be posted along with the unaudited interim condensed financial statements for the period on Coast's website (www.coastwholesaleappliancesinc.com) and SEDAR (www.sedar.com) on May 15, 2014.

Coast Profile

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 operates stores across the four western provinces and in the Greater Toronto Area of Ontario, as well as a network of warehouse distribution centres strategically situated to serve these locations.

Forward-looking Statements

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 most 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 through 2014 in both Western Canada and the Greater Toronto Area (GTA), our current markets; continued fluctuations in exchange rates; continued low interest rates through 2014; continuing relatively stable credit markets for our major builder customers; and little change to the total number of housing starts in 2014 compared to 2013. 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, EBITDA margin and Adjusted EBITDA are non-IFRS financial measures that are defined in Coast's First Quarter Management's Discussion and Analysis, to be posted on Coast's website and SEDAR on May 15, 2014.