Liquor Stores N.A. Ltd. Reports Fourth Quarter and Full Year Results for 2012

Liquor Stores N.A. Ltd. Reports Fourth Quarter and Full Year Results for 2012 
Revenue Up 6.5% , 10 New Stores Added Successfully Opened Three
Large-Format Stores in Canada and the United States 
EDMONTON, ALBERTA -- (Marketwire) -- 03/05/13 -- Liquor Stores N.A.
Ltd (the "Company") (TSX:LIQ), North America's largest publicly
traded liquor retailer today reported its results for the fourth
quarter and year ended December 31, 2012. 
HIGHLIGHTS 
Three months ended December 31, 2012 


 
--  Opened or acquired 5 convenience-focused stores in Canada (2011 - 4) and
    opened 1 large-format store in Kentucky (2011 - 1) 
--  Consolidated sales increased 6.6% to $179.4 million (2011 - $168.2
    million) 
--  Same-store sales increased by 0.3% ($0.4 million) in Canada and
    decreased by 1.5% ($0.6 million) in the US 
--  Gross margin increased to 25.4% (2011 - 24.9%) 
--  Adjusted operating margin was $14.4 million (2011 - $15.7 million) 

 
Year ended December 31, 2012 


 
--  Opened 2 new concept/large-format stores in Alberta ("Wine and Beyond"),
    opened or acquired 6 convenience-focused stores in Canada (2011 - 4),
    opened 1 large-format store in Kentucky (2011-1), and acquired 1
    convenience-focused store in Kentucky 
--  Consolidated sales increased 6.5% to $630.1 million (2011 - $591.5
    million) 
--  Same-store sales increased by 3.0% in Canada and 1.1% in the US 
--  Gross margin increased to 25.3% (2011 - 24.8%) 
--  Adjusted operating margin increased by 4.9% to $49.2 million (2011 -
    $46.9 million) 

 
"We are pleased with our fiscal 2012 results and with the execution
of our strategic growth plan. During the year we added a total of ten
new stores, including one large-format store in the United States and
the introduction of two new concept/large-format stores in Canada,
branded as Wine and Beyond." said Jim Dinning, Chairman of the Board
of Directors and Interim Chief Executive Officer. "Wine and Beyond,
which has the largest selection of wine, beer and spirits in Canada,
has exceeded our expectations and has been well received by our
customers. These destination-type stores differentiate us from our
competitors and are a cornerstone of our plan to drive sales, improve
profitability and deliver shareholder value."  
T
he 6.5% sales increase for the year ended December 31, 2012 compared
to 2011 was attributable to same-store sales increases in both Canada
and the United States, and growth in the Company's store count. Gross
margin as a percentage of sales in 2012 increased to 25.4% from 24.9%
in 2011. The 'quarter over quarter' increase in gross margin
percentage represents the fifth consecutive quarterly increase.  
The Company added a total of ten (10) new stores in Alberta, British
Columbia and Kentucky in 2012 and has added fifteen (15) new stores
since the beginning of Q4 2011. This significant increase in store
count as compared to recent prior years (2011 - net 2 new stores;
2010 - net 1 new store) is the result of the successful execution of
the Company's new growth strategy.  
The ten (10) new stores in 2012 included one (1) large-format Liquor
Barn store in Kentucky that was opened in December 2012 and two (2)
new concept/large-format liquor stores in Alberta branded as "Wine
and Beyond" (each in excess of 17,000 square feet) that were opened
during the last week of September 2012. Wine and Beyond are upscale
stores that have a strong focus on wine and customer service.
Management believes that these stores carry the largest selection of
wines, spirits and beers in Canada. Fashioned similar to our
large-format stores in the US, these destination-type stores
complement the Company's convenience-focused Liquor Depot and Liquor
Barn stores in Alberta. The financial results for the Wine and Beyond
stores in the fourth quarter exceeded Management's expectations. 
UPDATE ON THE SEARCH FOR A NEW CHIEF EXECUTIVE OFFICER  
The Company's Board of Directors is presently completing a formal
search for a new Chief Executive Officer and anticipates a successful
conclusion of this search in the second quarter of 2013. Until a
candidate has been appointed by the Board, Jim Dinning, current
Chairman of the Board (and Board member since 2004), will continue to
serve as Interim Chief Executive Officer. 
SUMMARY FINANCIAL RESULTS AND ANALYSIS 


 
----------------------------------------------------------------------------
                         Three months ended              Year ended         
----------------------------------------------------------------------------
(expressed in                                                               
 thousands of                                                               
 Canadian dollars)                                                          
 except per share     December 31,  December 31,  December 31,  December 31,
 amounts)                     2012          2011          2012          2011
----------------------------------------------------------------------------
Sales                    $ 179,358     $ 168,244     $ 630,106     $ 591,502
----------------------------------------------------------------------------
Operating margin          $ 14,015      $ 15,662      $ 45,671      $ 45,899
----------------------------------------------------------------------------
Adjusted operating                                                          
 margin                   $ 14,358      $ 15,662      $ 49,239      $ 46,928
----------------------------------------------------------------------------
Net earnings (note                                                          
 1)                        $ 5,403       $ 7,904      $ 19,056      $ 24,802
----------------------------------------------------------------------------
Adjusted net                                                                
 earnings (note 1)         $ 7,666       $ 7,904      $ 23,555      $ 22,291
----------------------------------------------------------------------------
Diluted earnings per                                                        
 share (note 1)             $ 0.23        $ 0.35        $ 0.82        $ 1.08
----------------------------------------------------------------------------
Adjusted diluted                                                            
 earnings per share                                                         
 (note 1)                   $ 0.33        $ 0.35        $ 1.02        $ 0.96
----------------------------------------------------------------------------
Cash dividends per                                                          
 share                      $ 0.27        $ 0.27        $ 1.08        $ 1.08
----------------------------------------------------------------------------
Weighted average                                                            
 number of shares                                                           
 outstanding -                                                              
 diluted (000's)            22,911        22,651        22,816        22,614
----------------------------------------------------------------------------
Stores in operation                                                         
 as at December 31             249           239           249           239
----------------------------------------------------------------------------

 
Note 1 -The decrease in net earnings and diluted earnings per share
from 2011 to 2012 relates primarily to adjusting items that arose in
20
12 and 2011. The adjusting items include a $4.9 million one-time
recovery from a lawsuit recorded in Q3 2011, $2.0 million paid in Q3
2012 to the Company's former President and Chief Executive Officer
upon his departure effective August 31, 2012, $1.3 million expensed
in Q2 2012 for costs associated with a store investment (with a
prospective partner) that was not completed, a $2.5 million non-cash
impairment loss related to indefinite life intangible assets, and
other miscellaneous adjusting items as identified in the Management,
Discussion and Analysis (MD&A), less the income tax effect of these
adjusting items.   
Adjusting items, adjusted net earnings and adjusted diluted earnings
per share are non-IFRS measures. Refer to the Non-IFRS Measures
section of the Company's MD&A for the year ended December 31, 2012
for further discussion. Adjusted net earnings has been calculated as
net earnings less the adjusting items and related tax effect.
Adjusted diluted earnings per share has been calculated as adjusted
net earnings divided by the diluted weighted average number of shares
outstanding.  
The MD&A as well as the consolidated financial statements and notes
for the years ended December 31, 2012 and 2011 are available on the
Company's website at this link: www.liquorstoresna.com and on the
SEDAR website at www.sedar.com. 
SALES  
Sales for the three months ended December 31, 2012 increased by $11.1
million or 6.6% to $179.4 million (2011 - $168.2 million). The
increase is primarily the result of new store expansion in Canada and
the United States (10 new stores opened in 2012), offset by a $1.3
million decrease 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 $0.4 million or 0.3%. 
    --  Same-store sales for the three months ended December 31, 2012
        compared to 2011 were negatively impacted by the success of the two
        Wine and Beyond stores opened in the greater Edmonton region during
        the last week of September 2012. In addition to drawing customers
        away from our competitors, these destination-type stores also drew
        customers away from our convenience-focused stores during the fourth
        quarter due to their uniqueness in the marketplace and for seasonal
        holiday shopping as a result of their larger selection of product.
        Management believes that Canadian same-store sales were impacted in
        Q4 2012 as compared to 2011 by approximately $2.0 million to $2.5
        million as a result of opening Wine and Beyond, which was more than
        offset by the sales recorded in Wine and Beyond.  
    --  Canadian same-store sales were, to a lesser extent, impacted by: (i)
        the unfavourable calendar shift experienced for the Christmas and
        New Year's Eve holiday season (mid-week in 2012 vs. on weekends in
        2011), (ii) the delayed start of the 2012-2013 National Hockey
        League season and (iii) the impact of Alberta's new impaired driving
        legislation. 
--  US same store sales decreased by $0.6 million or 1.5%. 
    --  Same-store sales in the United States, down 1.5% or $0.6 million,
        have continued to be negatively impacted by certain counties in
        Kentucky going from 'dry' to 'wet' throughout 2012 (i.e. certain
        counties in close proximity to the Company's stores that did not
        previously permit retail package liquor sales are now permitting
        these sales). To counteract the impact of 'dry' to 'wet', the
        Company has been actively sourcing potential acquisitions or
        opportunities to develop new stores in counties that have gone 'wet'
        or in counties where we do not yet have a presence; late in the
        fourth quarter of 2012 the Company opened one large-format store in
        Bowling Green, Kentucky. 
    --  To a lesser extent, the decline was due to: (i) the unfavourable
        calendar shift experienced for the Christmas and New Year's Eve
        holiday season and (ii) unfavourable weather experienced in Kentucky
        during November 2012. 

 
Other Sales 


 
--  Sales for the other Canadian and US stores (new stores) were $14.2
    million for the year ended December 31, 2012 (2011: $1.8 million) as a
    result of the ten (10) new stores opened in 2012, including the two Wine
    and Beyond stores opened in Canada during the last week of September
    2012, and the five stores that were opened in the fourth quarter of
    2011. Sales for these new stores in the fourth quarter of 2012 exceeded
    expectations. 

 
Sales for the year ended December 31, 2012 increased by $38.6 million
or 6.5% to $630.1 million (2011 - $591.5 million). The increase is
primarily the result of new store expansion, same-store sales growth
in both Canada and the U.S., and a $1.1 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 $12.8 million or 3.0%. 
    --  The increases in same-store sales were primarily realized during the
        first three quarters of 2012. Management attributes these increases
        primarily 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 increased by $1.5 million or 1.1%. 
    --  Both regions in the US had positive results during 2012, which
        Management believes were attributable primarily to continued focus
        on the execution of operational initiatives related to merchandising
        techniques, category management, purchasing strategies and the
        enhanced customer experience at the Alaska stores arising as a
        result of store renovations. 
    --  However same-store sales in the United States have continued to be
        negatively impacted by certain counties in Kentucky going from 'dry'
        to 'wet' throughout 2012 (i.e. certain counties in close proximity
        to the Company's stores that did not previously permit retail
        package liquor sales are now permitting these sales). To a lesser
        extent, US same-store sales were also negatively impacted by
        unfavourable weather conditions in Kentucky during the months of
        September and November 2012. 

 
Other Sales 


 
--  Sales for the other Canadian and US stores (new stores added after
    December 31, 2010) were $25.1 million for the three months ended
    December 31, 2012 (2011: $2.4 million) as a result of the ten (10) new
    stores opened in 2012, including the two Wine and Beyond stores opened
    in Canada during the last week of September 2012, and the five stores
    that were opened in the fourth quarter of 2011. Sales for these new
    stores in 2012 exceeded expectations. 

 
MARGINS  
For the three months ended December 31, 2012, gross margin was $45.5
million, up 8.8% from $41.8 million for the same period last year.
Gross margin as a percentage of sales increased to 25.4% from 24.9%
in 2011. The 'quarter over q
uarter' increase in gross margin
percentage represents the fifth consecutive quarterly increase. For
the year ended December 31, 2012, gross margin was $159.5 million, up
8.9% from $146.5 million for the same period last year. Gross margin
as a percentage of sales increased to 25.3% from 24.8% in 2011. 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.  
Adjusted operating margin for the three months ended December 31,
2012 was $14.4 million, a decrease of 8.3% from $15.7 million in
2011. As a percentage of total sales, adjusted operating margin for
the fourth quarter 2012 was 8.0%, down from 9.3%. Adjusted operating
margin for the year ended December 31, 2012 was $49.2 million, up
4.9% from $46.9 million in 2011. As a percentage of total sales,
adjusted operating margin for the year ended December 31, 2012 was
7.8%, down from 7.9% a year earlier primarily due to the additional
expenditures for the new stores opened during the year. The decrease
in adjusted operating margin as a percentage of sales for the three
months and the year ended December 31, 2012 was primarily due to the
following matters that arose in the fourth quarter of 2012: a decline
in US same-store sales and the relatively flat increase in Canadian
same-store sales, inflation of operating expenses, investments being
made to the Company's information technology infrastructure and head
office staffing complement to support the Company's growth strategy,
and pre-opening costs associated with new stores.  
CASH FLOW AND DIVIDENDS  
For the three months ended December 31, 2012, cash provided by
operating activities before changes in non-cash working capital and
adjusting items was $12.4 million ($0.54 per share), a decrease of
$1.6 million compared to $13.9 million ($0.62 per share) for the same
quarter in 2011. The decrease was attributable to a decline in US
same-store sales and the relatively flat increase in Canadian
same-store sales, inflation of operating expenses, investments being
made to the Company's information technology infrastructure and head
office staffing complement to support the Company's growth strategy,
and pre-opening costs associated with new stores. Before adjusting
items, cash provided by operating activities before changes in
non-cash working capital for the three months ended December 31, 2012
is $0.52 per share compared to $0.62 per share in the same period
last year.  
During the three months and year ended December 31, 2012, the Company
declared dividends of $0.27 and $1.08 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 December 31, 2012 were $5.4
million compared to $7.9 million for the same period in 2011. The
decrease in net earnings is primarily the result of the $2.5 million
non-cash impairment loss related to indefinite life intangible assets
(relates to a change in Management's forecasted sales and
profitability for five stores on Vancouver Island, British Columbia),
a decline in US same-store sales and the relatively flat Canadian
same-store sales, inflation of operating expenses, adjusting items
associated with the Company's search for a new Chief Executive
Officer, investments being made to the Company's information
technology infrastructure and head office staffing complement to
support the Company's growth strategy, and pre-opening costs
associated with new stores, offset by lower financing costs and
income tax expense.  
Net earnings for the year ended December 31, 2012 was $19.1 million
compared to $24.8 million for the same period in 2011. The decrease
in net earnings is primarily the result of the 2011 adjusting items,
which included proceeds from a litigation settlement of $4.9 million,
expenses in 2012 of $2.0 million related to the departure of the
Company's former President and Chief Executive Officer, $1.3 million
of costs associated with a store investment not completed in Q2 2012,
the $2.5 million impairment loss related to indefinite life
intangible assets, inflation of operating expenses, investments being
made to the Company's information technology infrastructure and head
office staffing complement to support the Company's growth strategy,
and pre-opening costs associated with new stores, offset by higher
gross margin from same-stores and new stores, and lower financing
costs and income tax expense.  
Basic and diluted earnings per share for the three months and year
ended December 31, 2012 were $0.23 and $0.82 per share respectively
(2011: $0.35 and $1.08). Basic and diluted earnings per share
decreased as a result of the same factors that impacted net earnings,
as noted above. Adjusted diluted earnings per share was $0.33 for the
three months ended December 31, 2012 (2011 - $0.35) and $1.02 for the
year ended December 31, 2012 (2011 - $0.96). 
CONFERENCE CALL  
As previously announced, Liquor Stores N.A Ltd. will conduct an
investor conference call on Wednesday March 6, 2013 to discuss
results for the three months and year ended December 31, 2012. The
conference call will take place at 9:00 a.m. MST. Participants in the
call include Jim Dinning, Chairman 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, Senior Vice President, Business Development and
General Counsel.  
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 March
14, 2013, by dialling 1-905-694-9451 or toll-free 1-800-408-3053. The
required pass code is 6751954.  
ABOUT LIQUOR STORES N.A. LTD.  
The Company currently operates 247 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", respectively.  
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, adjusted
operating margin, adjusted net earnings, adjusted earnings per share,
adjusting items, cash provided by operating activities before changes
in working capital and adjusting items, cash provided by operating
activities before changes in non-cash working capital and adjusting
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, adjusted operating margin, adjusted
net earnings, adjusted earnings per share, adjusting items, cash
provided by operating activities before changes in non-cash working
capital and adjusting items, cash provided by operating activities
before changes in non-cash working capital and adjusting 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, adjusted operating margin,
adjusted net earnings, adjusted earnings per share, adjusting items,
cash provided by operating activities before changes in non-cash
working capital and adjusting items, cash provided by operating
activities before changes in non-cash working capital and adjusting
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, adjusted operating
margin, adjusted net earnings, adjusted earnings per share, adjusting
items, cash provided by operating activities before changes in
non-cash working capital and adjusting items, cash provided by
operating activities before changes in working capital and adjusting
items on a per share basis, and same-store sales may not be
comparable to similar measures presented by other issuers.   
Operating margin for purposes of disclosure 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.   
Adjusted operating margin represents operating margin adjusted for
unusual, non-recurring or non-operating factors on both a
consolidated and segmented basis. These factors, referred to as
adjusting items, are reconciled and discussed in the Highlights and
Analysis of Financial Results sections of the MD&A for the three
months and year ended December 31, 2012. Adjusted net earnings is
calculated as net earnings less the tax effected adjusting items. The
tax effect of the adjusting items is calculated by multiplying the
adjusting items by the statutory rate of income tax of the applicable
jurisdiction. Adjusted basic and diluted earnings per share is
calculated as adjusted net earnings divided by basic or diluted
weighted average number of common shares outstanding. Management
believes the presentation of adjusted operating margin, adjusted net
earnings, and adjusted basic and diluted earnings per share provides
for useful information to investors and shareholders as it provides
increased transparency and predictive value. Management uses adjusted
operating margin to set targets and assess performance of the
Company.   
Cash provided by operating activities before changes in non-cash
working capital and adjusting 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.
Contacts:
Liquor Stores N.A. Ltd.
Patrick de Grace, CA
Senior Vice President and Chief Financial Officer
(780) 917-4179
www.liquorstoresna.com