Brick reports first annual loss
By Michael J. Knell -- Furniture Today, March 23, 2009
EDMONTON, Alberta — Amid a weak economy, the Brick Group Income Fund declared its first annual loss since becoming an income trust in 2004, and also took what may be one of the largest goodwill writedowns in Canadian history.
Consolidated corporate and franchise sales of C$413.3 million in the fourth quarter were down 7.5% from the same period a year earlier, with same-store sales down 11.6%.
The net loss for the quarter was C$223.6 million or C$4.13 per trust unit, compared with net earnings of C$23.4 million or 43 cents per unit for the fourth quarter of 2007.
The main reason for the loss was a goodwill and asset impairment charge of C$241.5 million, which the fund said was necessary because of the economic downturn that has resulted in “a high degree of uncertainty for the retail sector.”
The other major contributor to the writedown was a decline in the Brick Group's market capitalization, which has remained below the carrying value of the group's net assets.
Earnings before interest, taxes, depreciation and amortization totaled C$19.6 million in fourth quarter, a drop of 29.7% from a year earlier.
Retail sales fell 12% to C$348.4 million, while financial services revenues rose 25.3% to C$16.8 million.
One bright spot was the Brick's growing franchise network. That business segment saw its fourth-quarter sales climb 27% to C$48.1 million.
For the full year, corporate and franchise sales of C$1.43 billion were down 1.4% from 2007, with same-store sales declining 3.5%.
The net loss for the year was C$200.8 million or C$3.71 per unit, compared with net earnings of C$15.5 million or 29 cents per unit in 2007.
EBITDA for the year was C$69.2 million, down 14.2% decline from the prior year. Retail segment sales were C$1.37 billion, down 2.4%, while financial services gained 26.3% to C$61.9 million.
The franchise network had sales of C$145 million, a 20.8% gain from 2007.
The Brick had 230 stores at year end, including 47 franchise stores, up 20 from 2007.
Kim Yost, president and CEO, said in a conference call with analysts that management is taking measures to cope with the economic slump and is well positioned to exit the downturn strongly.
Meanwhile, the Brick also said it will not pay cash distributions to unit holders for the rest of 2009 and won't pay them in 2010 if it overdraws on its newly negotiated operating credit facilities.
The group halved its monthly payments to unit holders in November.
Yost said the renegotiation of credit facilities was a preventive measure, designed to avoid any risk of defaulting on its current covenants.
