Divcom Lighting Reports 2007 Third Quarter Financial Results



    MONTREAL, Oct. 15 /CNW/ - Divcom Lighting Inc. ("Divcom" or the
"Company")(TSX: DVQ), a leading manufacturer of energy efficient lighting
products throughout North America, today reported its financial results for
the three and nine-month periods ended August 31, 2007.
    "We are encouraged by our third quarter revenue results and the return of
our sales to satisfactory levels," said Aslam Khatri, CEO of Divcom Lighting
Inc. "Our year to date Canadian sales were in line with last year's sales.
Although our U.S. revenues have declined compared to the third quarter of
2006, we reported sequential revenue growth from our American operations for
the third straight quarter. The initial reaction of the U.S. Big Box stores to
significantly reduce their inventory is now over. While U.S. revenues from the
traditional incandescent lighting market will continue to decline, we are
beginning to see a growing demand for energy efficient lighting products. This
trend is already having a positive impact on the Company as we see increasing
orders for these products from our clients, especially Big Box stores. Our R&D
investments in new products designed for the energy efficient lighting market
have allowed us to be favorably positioned to increase our share in this
growing market. We are also benefiting from last year's restructuring program
which is now generating production and overhead costs reductions. We expect to
see a steady increase in our gross margins for the upcoming quarters."

    Financial Results

    Consolidated revenues for the three months ended August 31, 2007
decreased 6% to $10.5 million from restated revenues of $11.2 million in the
third quarter a year ago. This decrease is directly attributable to lower
orders from American clients and the strong Canadian dollar. Total sales
backlog at the end of the third quarter stood at $2.6 million.
    Earnings before Interest, Taxes, Depreciation and Amortization(1)
("EBITDA") for the three months ended August 31, 2007, was $438,000 compared
to EBITDA of $1.2 million in the third quarter a year ago.
    Net loss for the third quarter of 2007 was $2.4 million or ($0.0553) per
share compared to net earnings of $169,000 or $0.0039 per share in the third
quarter a year ago. The net loss for the third quarter of 2007 resulted from a
one-time charge of non cash items of $2.4 million dollars comprised of
inventory, goodwill and other intangible asset impairment.
    Selling, general and administrative expenses ("SG&A") for the third
quarter of 2007, totaled $3.1 million or 29% of sales, compared to SG&A of
$2.9 million or 26% of sales for the third quarter of 2006. Increased SG&A in
both absolute and percentage of sales basis resulted from the increased
marketing expenditures incurred with the new product launches during the
quarter.
    The Company held $1.2 million in working capital as at August 31, 2007,
compared to $3.7 million in working capital as at November 30, 2006. As at
August 31, 2007, the Company had long-term financial liabilities of
$8.5 million.

    
    (1) The Company uses earnings before income tax, depreciation and
        amortization, stock based compensation, non-recurring charges and
        foreign exchange ("EBITDA") to measure the performance of its
        acquisitions. EBITDA is not an earnings measure recognized by
        Canadian GAAP and does not have a standardized meaning prescribed by
        GAAP. Therefore, EBITDA may not be comparable to similar measures
        presented by other issuers. Investors are cautioned that EBITDA
        should not be considered an alternative to net income or loss
        determined in accordance with GAAP as indicators of the Company's
        performance or to cash flows from operating and investing activities
        as measures of liquidity and cash flows. The Company's method of
        calculating EBITDA may differ from the methods used by other issuers
        and, accordingly, the Company's EBITDA may not be comparable to
        similar measures presented by other issuers.
    

    About Divcom

    Divcom is a rapidly growing North American manufacturer of
architecturally designed energy-efficient and "eco-friendly" lighting products
for retail and commercial markets across Canada and the United States. The
Company's strategy is to seize new business opportunities in the lighting
industry and constantly improve its energy efficient product lines. Divcom's
products are distributed through its extensive North American marketing
network which includes more than 2,000 distributors and agents. The Company's
products are used for residential houses, public roads and tunnels, as well as
commercial, industrial and custom made lighting projects. For further
information, please visit www.divcomlighting.com.

    Forward-Looking Statements

    Certain statements made in this press release and other statements
regarding our strategy, future operations, financial position, future
revenues, projected costs, prospects, plans and objectives other than
statements of historical facts are forward-looking statements. We cannot
guarantee that we actually will achieve the results, plans, intentions or
expectations disclosed in our forward-looking statements and you should not
place undue reliance on them. There are a number of important factors that
could cause our actual results to differ materially from those indicated or
implied by forward-looking statements including, but not limited to, the
impact of any special items or of any dispositions, monetization, mergers,
acquisitions, business combinations or other transactions that may be
announced or that may occur after the date hereof. Risks that could cause
actual results to differ materially from those projected include, but are not
limited to, the effect of general economic conditions, decreases in demand for
the Company's products, increases in costs of raw materials, changes in the
relative value of the Canadian and U.S. currencies, and fluctuations in
selling prices. For a description of material risk factors, please refer to
the Company's annual information form and to our periodic filings with
securities regulatory authorities, which are available on SEDAR at
www.sedar.com. These factors should be read as being applicable to all related
forward-looking statements wherever they appear in this press release. The
information in this press release, including any forward-looking statements,
is provided as of the date of this release and should not be relied upon as
representing our estimates as of any subsequent date. We do not assume any
obligation to update or revise any forward-looking statements except as
required by law, whether as a result of new information, future events or
otherwise.


    
    Divcom Lighting Inc.

    Consolidated Balance Sheets
    As at August 31, 2007 and November 30, 2006
    (Unaudited - Tabular amounts in thousands of dollars)
    -------------------------------------------------------------------------
                                                     August 31,  November 30,
                                                          2007          2006
                                                             $             $
    ASSETS

    Current assets
      Cash                                                   -            83
      Accounts receivable                                7,301         7,637
      Inventories                                        8,252         8,017
      Income taxes receivable                              845           589
      Prepaid expenses                                     852           867
      Future income taxes                                  526           813
    -------------------------------------------------------------------------
    Total current assets                                17,776        18,006

    Deferred financing costs                               309           336
    Loan receivable                                        374           374
    Future income taxes                                  1,497         1,026
    Property, plant and equipment                       10,570        10,953
    Definite-life and indefinite-life intangibles        3,387         3,513
    Goodwill                                             4,883         6,262
    -------------------------------------------------------------------------
    Total assets                                        38,796        40,470
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                                  9,826         6,798
      Accounts payable and accrued liabilities           5,167         6,401
      Current portions of long-term debt                   395           568
      Current portions of balances of purchases
       payable                                             890           533
      Convertible debenture                                250             -
    -------------------------------------------------------------------------
    Total current liabilities                           16,528        14,300

    Convertible debenture                                    -           250
    Long-term debt                                       6,856         6,966
    Balances of purchases payable                          350           760
    Future income taxes                                  1,290         1,386
    -------------------------------------------------------------------------
    Total liabilities                                   25,024        23,662
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock                                     14,909        15,026
      Other                                                709           607
      (Deficit) Retained earnings                       (1,846)        1,175
    -------------------------------------------------------------------------
    Total common shareholders' equity                   13,772        16,808
    -------------------------------------------------------------------------
    Total common shareholders' equity and liabilities   38,796        40,470
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Divcom Lighting Inc.

    Consolidated Statements Of Operations And Retained Earnings
    For the Period Ended August 31, 2007 and August 31, 2006
    (Unaudited - Tabular amounts in thousands of dollars)
    -------------------------------------------------------------------------
                                Three (3)   Three (3)    Nine (9)    Nine (9)
                                   month       month       month       month
                                   ended       ended       ended       ended
                               August 31,  August 31,  August 31,  August 31,
                                    2007        2006        2007        2006
                                       $           $           $           $

    Sales                         10,485      11,158      27,559      31,328
    -------------------------------------------------------------------------
    Operating
      Cost of goods sold -
       excluding inventory
       write-down                  6,963       7,103      18,100      19,677
      Inventory write-down           766           -         766           -
      Foreign exchange                53           9          78          29
      Administrative and
       selling expenses            3,084       2,882       8,233       8,449
      Goodwill and
       intangible impairment       1,528           -       1,528           -
      Stock-based compensation        30           -          90          54
      Amortization                   335         320       1,143         993
      Restructuring Costs              -         187           -         187
      Interest and bank charges      257         148         607         378
      Interest on long-term debt     185         259         638         609
    -------------------------------------------------------------------------
                                  13,201      10,908      31,183      30,376
    -------------------------------------------------------------------------
    (Loss) earnings before
     income taxes                 (2,716)        250      (3,624)        952
    -------------------------------------------------------------------------

    (Recovery of) provision for
     income taxes
      Current                        (69)         42        (179)        104
      Future                        (237)         39        (433)        194
    -------------------------------------------------------------------------

                                    (306)         81        (612)        298
    -------------------------------------------------------------------------
    Net (loss) earnings           (2,410)        169      (3,012)        654

    Retained earnings,
     beginning of period             564       1,620       1,175       1,143


    Premium on redemption of
     shares                            -           -          (9)         (8)
    -------------------------------------------------------------------------
    (Deficit) Retained earnings,
     end of period                (1,846)      1,789      (1,846)      1,789
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (Loss) earnings per share

      Basic:                     (0.0553)     0.0039     (0.0690)     0.0151
      Diluted:                   (0.0553)     0.0039     (0.0690)     0.0150


    Weighted average common
     shares outstanding
      Shares used in per-share
       calculation - basic        43,571      43,421      43,652      43,375
      Shares used in per-share
       calculation - diluted      43,571      44,425      43,652      44,379
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Divcom Lighting Inc.

    Consolidated Statements Of Cash Flows
    For the Period Ended August 31, 2007 and August 31, 2006
    (Unaudited - Tabular amounts in thousands of dollars)
    -------------------------------------------------------------------------

                                Three (3)   Three (3)    Nine (9)    Nine (9)
                                   month       month       month       month
                                   ended       ended       ended       ended
                               August 31,  August 31,  August 31,  August 31,
                                    2007        2006        2007        2006
                                       $           $           $           $

    Cash flows from operating
     activities
      Net (loss) earnings         (2,410)        169      (3,012)        654
    Items not requiring an
     outlay of cash:
      Amortization                   335         320       1,143         993
      Future income taxes           (281)         42        (365)        197
      Goodwill and intangible
       impairment                  1,528           -       1,528           -
      Stock-based compensation        30           -          90          54
    -------------------------------------------------------------------------
                                    (798)        531        (616)      1,898
    Net change in non-cash
     assets and liabilities
     related to operations           618         674      (1,374)     (2,705)
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                      180       1,205      (1,990)       (807)
    -------------------------------------------------------------------------

    Cash flows from investing
     activities
      Acquisition of property,
       plant and equipment           (51)       (617)       (627)     (1,419)
      Acquisition of definite
       life intangibles                -           -           -         (50)
      Business acquisition,
       net of cash                     -          75           -      (5,116)
    -------------------------------------------------------------------------
    Cash flows from investing
     activities                      (51)       (542)       (627)     (6,585)
    -------------------------------------------------------------------------

    Cash flows from financing
     activities
      Deferred financing costs       (17)          -         (45)          -
      Bank indebtedness               19      (1,304)      3,028       2,958
      Proceeds from long-term debt     -         435           -       4,313
      Repayment of long-term debt     (8)        (45)       (283)       (165)
      Repayment of balances of
       purchases payable              (6)        (17)        (53)        (27)
      Redemption of capital stock    (21)          -        (113)        (49)
    -------------------------------------------------------------------------
    Cash flows from financing
     activities                      (33)       (931)      2,534       7,030
    -------------------------------------------------------------------------

    Decrease in cash                (264)       (268)        (83)       (362)
    Cash, beginning of period        264         526          83         620
    -------------------------------------------------------------------------
    Cash, end of period                -         258           -         258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00011838E




For further information:

For further information: Aslam Khatri, President and CEO, Divcom
Lighting, (514) 693-2117; Deric Vourantonis, C.A., VP Finance, Divcom
Lighting, (514) 693-2117; Matthieu Cardinal, Investor Relations, The Equicom
Group Inc., (514) 844-6054, mcardinal@equicomgroup.com

Organization Profile

DIVCOM LIGHTING INC.

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