Imaflex Inc. - Difficult fourth quarter impacted by U.S. subsidiary and market conditions



    TICKER SYMBOL:  IFX.A

    MONTREAL, March 13 /CNW Telbec/ - Imaflex Inc. (the "Company") (TSX
Venture Exchange - IFX.A) announces results for the fourth quarter ended
December 31, 2006.

    
    -------------------------------------------------------------------------
    (unaudited)

    (CDN $ thousands,
      except per share amounts)        Q4 2006   Q4 2005      2006      2005
                                       -------   -------      ----      ----
    -------------------------------------------------------------------------
    Sales                               11,263    13,934    51,775    49,818
    -------------------------------------------------------------------------
    Cost of sales                        9,699    10,905    43,711    39,097
                                         -----    ------    ------    ------
    -------------------------------------------------------------------------
    Gross profit ($)                     1,564     3,029     8,064    10,721
    -------------------------------------------------------------------------
    Gross profit (%)                      13.9      21.7      15.6      21.5
    -------------------------------------------------------------------------
    Expenses                             1,885     1,361     7,382     5,477
    -------------------------------------------------------------------------
    FX loss (gain) on translation          564       (13)      176       (76)
                                           ---       ----      ---       ----
    -------------------------------------------------------------------------
    (Loss) income before income taxes
      and non-controlling interest        (885)    1,681       506     5,320
    -------------------------------------------------------------------------
    Provision for income taxes            (100)      768       737     1,527
    -------------------------------------------------------------------------
    Non-controlling interest               (29)        -      (100)        -
    -------------------------------------------------------------------------
    Net (loss) income                     (756)      913      (131)    3,793
    -------------------------------------------------------------------------
    Basic and diluted
    (loss) earnings per share           (0.020)    0.023    (0.003)    0.110
    -------------------------------------------------------------------------
    EBITDA                                 (90)    2,100     3,707     7,572
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The results include those of Imaflex Inc. ("Imaflex") located in Montréal
(Québec) and its division Canguard Packaging ("Canguard") located in Toronto
(Ontario), and its wholly owned subsidiaries, Imaflex USA, Inc. ("Imaflex
USA") located in Thomasville (North Carolina) and Canslit Inc. ("Canslit")
located in Victoriaville (Québec). Canguard was incorporated in 2006 as a
70%-owned subsidiary. On December 29, 2006, Imaflex acquired the
non-controlling interest in Canguard for a nominal amount and transferred the
assets and operations into Imaflex.

    Summary - Results of Operations
    -------------------------------

    The Company incurred a net loss of $756,000 for the three months ended
December 31, 2006, compared with net income of $913,000 for the same period in
2005. The Company continues to face significant pricing pressures as reduced
demand and excess supply, combined with the soft U.S. dollar, adversely
affected its Canadian customers' ability to export product competitively to
the USA. Meanwhile, U.S. competitors continued to penetrate aggressively the
Company's local markets. As a result, the Company's Québec operations
generated combined net income of $283,000 for the three months ended
December 31, 2006, compared with net income of $1,069,000 for the same period
in 2005. The current quarter includes a future income tax recovery of $75,000,
resulting from recently enacted decreased Federal corporate tax rates. The
previous year included a future income tax expense of $198,000 resulting from
enacted increased Quebec corporate tax rates. The Company's Toronto operation
generated net income of $3,000 (net of non-controlling interest), primarily as
a result of the recognition of loss carryforwards, the benefit of which was
$123,000. Furthermore the current quarter's results were adversely impacted by
losses at the Company's U.S. facility of $478,000, compared with $169,000 for
the same period in 2005. Lastly, the Company incurred a foreign exchange loss
on the translation of the integrated subsidiary of $564,000, as a result of a
notable appreciation in the U.S. dollar during the quarter, compared with a
foreign exchange gain of $13,000 for the same period in 2005.
    The Company incurred a net loss of $131,000 for the year ended
December 31, 2006, compared with net income of $3,793,000 for the same period
in 2005. The significant drop in earnings was caused by difficult market
conditions as previously disclosed and noted above. As a result, the Company's
Québec operations generated combined net income of $2,062,000 for the year
ended December 31, 2006, compared with net income of $3,937,000 for the same
period in 2005. Furthermore, the current period's results were adversely
impacted by losses at the Company's U.S. facility of $1,854,000, compared with
$220,000 for the same period in 2005. In addition, the Company incurred a
foreign exchange loss on the translation of the integrated subsidiary of
$176,000, compared with a foreign exchange gain of $76,000 for the same period
of 2005. Lastly, the Company's Toronto operation incurred a net loss of
$163,000 (net of non-controlling interest).

    Sales
    -----

    Sales for the three months ended December 31, 2006 totaled $11,263,000
compared with $13,934,000 for the same period in 2005. Sales for the year
ended December 31, 2006 totaled $51,775,000 compared with $49,818,000 for the
same period in 2005. With continued pricing pressures and loss of volume in
the Company's local Canadian market as a result of the factors noted above,
modest volume growth was driven exclusively by the Company's U.S. based
accounts.

    Gross profit margins
    --------------------

    Gross profit margin for the three months ended December 31, 2006 was
13.9% of sales, compared with 21.7% for the same period in 2005. Gross profit
margin for the year ended December 31, 2006 was 15.6% of sales, compared with
21.5% for the same period in 2005. The decline in gross profit margin is
primarily due to reduced margins as a result of competitive conditions. In
addition, the Company experienced production inefficiencies and lower than
expected sales volume at the Company's U.S. and Ontario facilities.

    Income taxes
    ------------

    In 2006, the income tax provision reflects the taxes on the income
generated by the Company's Québec operations. It also includes a future income
tax recovery of $75,000, resulting from enacted decreased Federal corporate
tax rates and the recognition of loss carryforwards of its Toronto operation,
the benefit of which was $123,000. No future income tax benefits have been
recorded on the Company's losses at its U.S. location.
    In 2005, the income tax provision reflected the taxes on the income
generated by the Company's Montréal facility. It also includes a future income
tax expense of $198,000 resulting from enacted increased Quebec corporate tax
rates. In 2005, the taxable income generated by the Victoriaville facility was
offset by previously unrecorded tax losses from prior periods in the amount of
$929,000, the benefit of which was recorded in the income tax provision.

    Management Outlook
    ------------------

    During the past year, management has conveyed to shareholders the
difficult, volatile and evolving conditions in the plastics packaging
industry. The impact of the weak U.S. dollar, Asian competition, reduced
demand and excess supply, continue to negatively impact the industry. Many of
these factors have stabilized, which has permitted management to concentrate
its energies and efforts on the key element affecting the Company's
profitability, the turnaround of our U.S. operation.
    As noted in our third quarter report, Imaflex USA was beset by
significant equipment problems that undermined our ability to generate
profitability in the historical time frame and manner that we had come to
expect. Management acknowledges that the profits earned by the Company's
Canadian operations were offset by losses incurred by the U.S operations,
thereby negating our goal of increasing shareholder value.
    In the second quarter of 2007, the new manufacturing equipment is
expected to come on stream. Combined with a more stable business climate, the
Company can concentrate efforts on generating the sales volume required to
reduce production inefficiencies, generate profits and enhance shareholder
value.
    With regards to our Canadian operations, management is in the process of
streamlining its Canguard operation. Once completed by the second quarter of
2007, Canguard should see the level of profitability that the Company had
envisioned.

    Safe Harbor Statement
    ---------------------

    Certain statements and information included in this release constitute
"forward-looking statements". Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied in
such forward-looking statements. Additional discussion of factors that could
cause actual results to differ materially from management's projections,
estimates and expectations is contained in the Company's other public filings.
Unless otherwise required by the securities authorities, we do not undertake
to update any forward-looking statements that may be made from time to time by
us or on our behalf.

    Non-GAAP Financial Measures - EBITDA
    ------------------------------------

    EBITDA (earnings before interest, taxes, depreciation and amortization)
is not recognized under Canadian GAAP. The Company believes that in addition
to net income, EBITDA is a useful supplemental measure as it provides
investors with an indication of cash available prior to debt service, capital
expenditures and income taxes. Investors should be cautioned, however, that
EBITDA should not be construed as an alternative to net income determined in
accordance with GAAP as an indicator of the Company's performance. The
Company's method of calculating EBITDA may differ from other companies, and,
accordingly EBITDA may not be comparable to measures used by other companies.

    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.
    %SEDAR: 00011834EF




For further information:

For further information: Imaflex Inc.: Joseph Abbandonato, President and
C.E.O; Roberto Longo, CA, VP - Finance; (514) 935-5710; Fax: (514) 935-0264;
info@imaflex.com; www.imaflex.com


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