Liquor Stores N.A. Ltd. Reports Strong Third Quarter Results

Liquor Stores N.A. Ltd. Reports Strong Third Quarter Results For 2012
Revenue Up 4.7%, Operating Margin Up 7% 
EDMONTON, ALBERTA -- (Marketwire) -- 11/06/12 -- Liquor Stores N.A.
Ltd (the "Company") (TSX:LIQ), North America's largest publicly
traded liquor retailer today reported its results for the third
quarter ended September 30, 2012. 
HIGHLIGHTS 
Three months ended September 30, 2012 


 
--  Opened two large-format, service-oriented liquor stores in Alberta (each
    in excess of 17,000 square feet), branded as "Wine & Beyond"; 
--  Consolidated sales increased 4.7% to $164.5 million (2011 - $157.1
    million); 
--  Same-store sales increased by 2.5% in Canada and decreased by 0.4% ($0.1
    million) in the US; 
--  Gross margin increased to 25.5% (2011 - 24.8%); 
--  Operating margin before non-recurring items increased by 7.0% to $14.6
    million (2011 - $13.6 million); and 
--  Net earnings were $6.5 million (2011: $11.0 million). The decrease
    relates primarily to last year's $4.9 million one-time recovery from a
    lawsuit.

 
Nine months ended September 30, 2012 


 
--  Consolidated sales increased 6.5% to $450.7 million (2011 - $423.3
    million); 
--  Same-store sales increased by 4.1% in Canada and 2.1% in the US; 
--  Gross margin increased to 25.3% (2011 - 24.7%); 
--  Operating margin before non-recurring items increased by 11.9% to $34.9
    million (2011 - $31.2 million); and 
--  Net earnings were $13.7 million (2011: $16.9 million). The decrease
    relates primarily to last year's $4.9 million one-time recovery from a
    lawsuit.

 
"Our results reflect a continuation of the strong performance we've
been driving across all regions. We've achieved significant margin
improvements in both our Canadian and US segments." said Jim Dinning,
Chair of the Board of Directors and Interim Chief Executive Officer.
"Along with our continued strong financial results, our team 'raised
the bar' when we opened two new large-format stores in Alberta in
September. The initial customer response has been overwhelmingly
positive."  
Our financial performance in the third quarter was highlighted by
strong increases in gross margin and operating margin percentages.
Consolidated gross margin increased from 24.8% to 25.5%, which
represe
nts the fourth consecutive quarter that the gross margin has
increased over the comparative quarter. Operating margin before
non-recurring items increased by 7.0% to $14.6 million, which
represents the seventh consecutive quarter that operating margin
percentage before non-recurring items has increased over the
comparative quarter. The third quarter same-store sales increase in
Canada was the eighth consecutive quarterly increase recorded by the
Company. US same-store sales experienced a $0.1 million 'quarter over
quarter' decline, however, both gross margin and operating margin in
the US increased from the comparative period.  
Management attributes these positive results primarily to our focus
on improved merchandising, category management and purchasing
strategies along with our expanded store hours program (with selected
stores open until 2 am), and a strong emphasis on cost control.  
During the last week of September 2012, the Company opened two (2)
large-format Alberta liquor stores (each in excess of 17,000 square
feet), branded as "Wine & Beyond", with a strong focus on wine and
customer service. Management believes that these upscale Wine &
Beyond stores carry the largest selection of wines, spirits and beers
in Western Canada. Fashioned similar to our large-format stores
located in the US, these destination stores will complement the
Company's convenience-focused Liquor Depot/Liquor Barn stores in
Alberta.  
Third Quarter 2012 Operating Results Compared to Third Quarter 2011
Operating Results 
Sales 
Total sales increased by $7.4 million or 4.7% to $164.5 million in
the third quarter of 2012 (2011 - $157.1 million). The increase is
primarily the result of new store expansion, same-store sales growth
in Canada, and a $0.5 million increase in the Canadian currency
equivalent for US sales as a result of foreign exchange rate
differences. 
Same-Store Sales 


 
--  Canadian same-store sales increased by $2.9 million or 2.5%. 
    --  The increase in Canadian same-store sales represents the eighth
        consecutive quarter over quarter increase. 
    --  The positive results in Canada are attributable, in part, to the
        continued success of the Company's expanded store hours program
        (with stores in selected markets open until 2 am) and continued
        management focus on the execution of operational initiatives related
        to merchandising techniques, category management and purchasing
        strategies. 
--  US same store sales decreased by $0.1 million or 0.4%, which was more
    than offset by an increase in operating margin. 
    --  Management believes the decrease in US same store sales is
        attributable primarily to unfavourable weather conditions in
        Kentucky during the month of September 2012 and downward pressure on
        sales due to certain counties in Kentucky (in proximity to certain
        of the Company's stores) going from 'dry' to 'wet' throughout 2012
        (i.e. certain counties that did not previously permit retail package
        liquor sales are now permitting these sales).

 
Other Sales 


 
--  Other Canadian stores include two large format stores ('Wine & Beyond')
    opened during the last week of September 2012, one store that was
    acquired in the second quarter of 2012, four stores that were opened in
    the fourth quarter of 2011 and one store that closed subsequent to June
    30, 2011; other US stores include one store that was acquired in the
    first quarter of 2012 and one store that was opened in the fourth
    quarter of 2011. Sales for all of the new stores have exceeded
    projections and management is encouraged that this will continue
    throughout the remainder of 2012.

 
MARGINS 
For the three months ended September 30, 2012, gross margin was $41.9
million, up 8.2% from $38.8 million for the same period last year.
Gross margin as a percentage of sales increased to 25.5% from 24.7%
in 2011. The quarter over quarter increase in gross margin percentage
represents the fourth consecutive quarterly increase. Gross margin as
a percentage of sales has increased primarily as a result of
continued focus on merchandising techniques, category management and
purchasing strategies, including expanding our selection and
marketing of control brands/private label and exclusive products.  
Operating margin before non-recurring items was $14.6 million for the
three months ended September 30, 2012, up 7.0% from $13.6 million in
2011. As a percentage of total sales, operating margin before
non-recurring items was 8.9%, up from 8.7% a year earlier primarily
due to an improvement in gross margin percentage. Operating margin
decreased 4.9% from $13.3 million in the prior year, primarily as a
result of non-recurring administrative expenses, which were offset by
increases in sales and gross margin percentage. 
Canadian operating margin before the $2.0 million in non-recurring
expenses primarily related to payments made to the Company's former
President and Chief Executive Officer upon his departure effective
August 31, 2012, was $12.2 million or 9.5% as a percentage of
Canadian sales. Operating margin for Canadian stores for the third
quarter of 2012 was $10.2 million or 8.0% as a percentag
e of Canadian
sales compared with $11.8 million and 9.6% as a percentage of
Canadian sales for 2011.  
The US operating margin for the third quarter of 2012 was $2.4
million or 6.6% as a percentage of US sales compared with $1.5
million and 4.3% as a percentage of US sales for 2011.  
CASH FLOW AND DIVIDENDS 
For the three months ended September 30, 2012, cash provided by
operating activities before changes in non-cash working capital and
non-recurring items was $13.0 million ($0.57 per share), an increase
of $0.9 million compared to $12.1 million ($0.54 per share) for the
same quarter in 2011. The increase results primarily from an increase
in operating margin before non-recurring items for the three months
ended September 30, 2012. Before adjusting for non-recurring items,
cash provided by operating activities before changes in non-cash
working capital for the three months ended September 30, 2012 is
$0.48 per share compared to $0.70 per share in the same period last
year.  
During the three and nine months ended September 30, 2012, the
Company declared dividends of $0.27 and $0.81 per share,
respectively. The Company's current annual dividend is $1.08. The
Company has declared a monthly dividend consecutively since going
public in 2004. 
The Company has a dividend reinvestment plan (the "DRIP") to provide
eligible shareholders with a convenient means of reinvesting monthly
dividends into additional common shares. For further information
about the DRIP and DRIP enrolment please visit the Company's website
located at www.liquorstoresna.com.  
EARNINGS AND EARNINGS PER SHARE 
Net earnings for the three months ended September 30, 2012 were $6.5
million compared to $11.0 million for the same period in 2011. The
decrease in net earnings is primarily the result of non-recurring
recoveries in 2011, which included proceeds from a litigation
settlement of $4.9 million, and non-recurring expenses in 2012 of
$1.9 million related to the departure of the Company's former
President and Chief Executive Officer, which were offset by increases
in gross margin and a decrease in income taxes.  
Basic and diluted earnings per share for the three and nine months
ended September 30, 2012 were $0.28 and $0.59 per share respectively
(2011: $0.48 and $0.74).  
Liquor Stores Summary Financial Results, three and nine months ended
September 30, 2012 with comparisons to 2011 


 
----------------------------------------------------------------------------
                                    Three months ended     Nine months ended
----------------------------------------------------------------------------
(expressed in thousands of                                                  
 Canadian dollars) except per     September  September  September  September
 share amounts)                    30, 2012   30, 2011   30, 2012   30, 2011
----------------------------------------------------------------------------
Sales                             $ 164,490  $ 157,080  $ 450,747  $ 423,258
----------------------------------------------------------------------------
Operating margin before non-                                                
 recurring items                  $  14,588  $  13,648  $  34,852  $  31,230
----------------------------------------------------------------------------
Operating margin                  $  12,635  $  13,298  $  31,656  $  30,201
----------------------------------------------------------------------------
Net earnings (note 1)             $   6,481  $  10,970  $  13,653  $  16,898
----------------------------------------------------------------------------
Diluted earnings per share                                                  
 (note 1)                         $    0.28  $    0.48  $    0.59  $    0.74
----------------------------------------------------------------------------
Cash dividends per share          $    0.27  $    0.27  $    0.81  $    0.81
----------------------------------------------------------------------------
Weighted average number of shares                                           
 outstanding - diluted (000's)       22,949     22,613     22,836     22,602
----------------------------------------------------------------------------
Stores in operation as at                                                   
 September 30                           244        236        244        236
----------------------------------------------------------------------------

 
Note 1 - Note that the decrease in net earnings and diluted earnings
per share from 2011 to 2012 relates primarily to a $4.9 million
one-time recovery from a lawsuit recorded in 2011. 
The Management's Discussion and Analysis (MD&A) as well as the
interim consolidated financial statements and notes for the three and
nine months ended September 30, 2012 are available on the Company's
website at this link: www.liquorstoresna.com and on the SEDAR website
at www.sedar.com. 
Conference Call 
As previously announced, Liquor Stores N.A Ltd. will conduct an
investor conference call on Wednesday November 7, 2012 to discuss
results for the three and nine months ended September 30, 2012. The
conference call will take place at 9:00 a.m. MST. Participants in the
call include Jim Dinning, Chair of the Board of Directors and Interim
Chief Executive Officer, Pat de Grace, Senior Vice President and
Chief Financial Officer, Scott Morrow, Chief Operating Officer, and
Craig Corbett, Vice President Legal, General Counsel & Corporate
Secretary. 
To take part in the call, please dial toll-free 1-877-240-9772. An
archived recording of the conference call will be available
approximately one hour after the completion of the call until
November 15, 2012, by dialling 1-905-694-9451 or toll-free
1-800-408-3053. The required pass code is 6431970.  
About Liquor Stores N.A. Ltd. 
The Company currently operates 246 retail liquor stores in Alberta,
British Columbia, Alaska and Kentucky. The Company's common shares
and convertible subordinated debentures trade on the Toronto Stock
Exchange under the symbols "LIQ" and "LIQ.DB.A". 
Additional information about Liquor Stores N.A. Ltd. is available at
www.sedar.com and the Company's website at www.liquorstoresna.com.  
NON-IFRS FINANCIAL MEASURES 
Operating margin, operating margin as a percentage of sales,
operating margin before non-recurring items, EBITDA, cash provided by
operating activities before changes in working capital and
non-recurring items, cash provided by operating activities before
changes in working capital and non-recurring items on a per share
basis, and same store sales are not measures recognized by IFRS and
do not have a standardized meaning prescribed by IFRS. Investors are
cautioned that operating margin, operating margin as a percentage of
sales, EBITDA, cash provided by operating activities before changes
in working capital and non-recurring items, cash provided by
operating activities before changes in working capital and
non-recurring items on a per share basis, and same store sales should
not replace net earnings or loss (as determined in accordance with
IFRS) as an indicator of the Company's performance, of its cash flows
from operating, investing and financing activities or as a measure of
its liquidity and cash flows. The Company's method of calculating
operating margin, operating margin as a percentage
 of sales, EBITDA,
cash provided by operating activities before changes in working
capital and non-recurring items, cash provided by operating
activities before changes in working capital and non-recurring items
on a per share basis, and same store sales may differ from the
methods used by other issuers. Therefore, the Company's operating
margin, operating margin as a percentage of sales, EBITDA, cash
provided by operating activities before changes in working capital
and non-recurring items, cash provided by operating activities before
changes in working capital and non-recurring items on a per share
basis, and same store sales may not be comparable to similar measures
presented by other issuers. 
EBITDA, which is used only with reference to the calculation of
covenants under the Company's credit facility, is defined under the
amended and restated credit facility as the net income of the Company
plus the following: interest expense, provision for income taxes, any
portion of expense in respect of non-cash items including any
long-term incentive plan amounts not to be settled in cash,
depreciation, amortization, deferred taxes, and non-recurring losses
to a maximum of $3.5 million in any fiscal year, write down of
goodwill and other restructuring charges for store closures, and
amortization of inventory fair value adjustments. EBITDA is also less
any non-recurring extraordinary or one-time gains from any capital
asset sales or certain foreign currency transactions. 
Cash provided by operating activities before changes in working
capital and non-recurring items is a non-IFRS financial measure that
does not have a standardized meaning prescribed by IFRS and therefore
is unlikely to be comparable to similar measures presented by other
issuers. Investors are cautioned that this should not be construed as
an alternative measure of profitability. 
Operating margin for purposes of disclosure under "Operating Results"
has been derived by subtracting Operating and Administrative expenses
from Gross Margin. Operating margin as a percentage of sales is
calculated by dividing operating margin by sales. Operating margin
before non-recurring items has been derived by adding non-recurring
items to operating margin as described above.  
Non-recurring items include costs incurred and recoveries received by
the Company that are not part of on-going operations and that are not
expected to recur. Among others, these non-recurring items include
costs associated with a store investment that was not completed, and
professional fees paid in respect of lawsuits that originated
following and arising from the Company's acquisition of Liquor Barn
Income Fund in 2007 and the proceeds received on settlement of these
matters.
Contacts:
Liquor Stores N.A. Ltd.
Patrick de Grace, CA
Senior Vice President and Chief Financial Officer
(780) 917-4179
 
 
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