TICKER SYMBOL: IFX
MONTREAL, Nov. 20, 2012 /CNW Telbec/ - Imaflex Inc. (the "Company") (TSXV: IFX) announces results for the quarter ended September 30, 2012.
(CDN $ thousands, except per share amounts)
Cost of sales
Gross profit ($) (before amortization)
Gross profit (%)(before amortization)
Amortization of production equipment
Gross Profit ($)
Gross profit (%)
FX loss (gain)
Income (loss) before income taxes
Provision for income taxes
Net Income (loss)
Basic and diluted earnings (loss) per share
The results include those of Imaflex Inc. ("Imaflex") located in
Montréal (Québec), its divisions Canguard Packaging ("Canguard") and
Canslit ("Canslit") located in Victoriaville (Québec), and its wholly
owned subsidiary, Imaflex USA Inc. ("Imaflex USA") located in
Thomasville (North Carolina).
Summary - Results of Operations
Sales in the third quarter typically suffer in the Canadian operations.
However, the three months ended September 30, 2012 showed operational
improvements over the same period in 2011, due to a good performance
late in the quarter for all divisions as well as improved sales and
profitability in the US operations throughout the quarter. However,
these operational improvements are not reflected in the bottom line due
to very large swings in the foreign exchange as the US dollar weakened
against the Canadian dollar in 2012 whereas it strengthened in 2011. As
expected, sales decreased over the second quarter of 2012; however the
Company's gross margin did not suffer as much as it had during the
third quarter of 2011 as overall operational improvements contributed
to relatively better results.
While sales for the three-month periods in the Canadian operations were
negatively impacted by a planned two week shutdown in both 2012 and
2011, the improvements in the US operations following the business
acquisition coupled with generally stronger customer orders after
slower first and second quarters fueled the sales increase in 2012.
This was partially offset by the lower average selling price caused by
several polyethylene resin price decreases previously in the year.
Despite an increase in sales during the second and third quarters, sales
for the nine-month period decreased by approximately $1.2 million. This
is mainly explained by a lower volume of sales during the first quarter
for some of the Company's important product lines given the expectation
of lower prices. This was partially offset by higher average selling
prices earlier in the year.
Gross profit margin
Gross profit before amortization of production equipment increased for
the three-month period due to the additional volume of sales generated
by the business acquisition, which is starting to contribute to overall
profitability. These sales yielded an increased profit margin, which
went up from 10.3% in 2011 to 12.5% in 2012. Operating costs in the
existing facilities were optimized and also enabled the Company to
operate more efficiently. The slightly higher amortization of
production equipment led to an increase in gross profit of
$298 thousand year over year.
For the nine-month period ended September 30, 2012, gross profit before
amortization of production equipment decreased by approximately $603
thousand and the gross margin before amortization of production
equipment decreased from 13.5% to 12.2%. This is mainly explained by a
lower sales volume, which was only partially offset by the new business
from the acquired assets.
The loss before income taxes led to an income tax recovery of $30
thousand for the three-month period ended September 30, 2012, whereas
the profit before income taxes realized in 2011 led to an income tax
expense of $75 thousand. Due to non-deductible losses on a tax basis,
the recovery represents only 6.0% of the loss before taxes whereas the
inability of the Company to use losses generated by a foreign entity
led to an income tax expense representing 47.8% of profit before tax in
Over the nine-month period in 2012, the Company incurred a $103 thousand
income tax expense despite the net loss before income taxes due to
non-deductible losses in the Canadian entity and its inability to use
losses generated by its foreign subsidiary. In 2011, the Company
incurred a $408 thousand expense, representing 60.3% of profit before
The Company has an operating line of credit with its bankers to a
maximum of $ 8,500,000 bearing interest at a rate of prime plus 2.30%.
The line of credit is secured by trade receivables, inventories and
property, plant and equipment. At September 30, 2012, the Company had
drawn $ 5,745,551 on its line of credit ($ 5,627,248 as at December 31
2011). The Company's working capital decreased since December 31, 2011,
going from $ 1,748,337 to $ 1,072,825, however this is mainly explained
by approximately $ 689,850 of accounts receivable being applied to
complete the purchase of equipment. During the first quarter, the
Company issued 1,935,485 units, each comprising of one class A share
and one class A share purchase warrant entitling the holder to acquire
one additional common share for $0.45, for a consideration of $735,484,
of which $250,000 was received during the course of the fourth quarter
of 2011. The Company also invested $ 989,500 in cash for the
acquisition of operations in North Carolina during the first quarter.
The Company's current capital structure should enable it to meet its
short term obligations. Management continuously monitors its capital
structure and considers the increase in indebtedness or the issuance of
shares as possible options to optimize its capital structure.
At the end of the second quarter management felt confident of being able
to achieve better results for the remainder of 2012. Despite the
increase in the price of raw material which could not be fully
recovered and the increase of both administrative and sales expenses in
Imaflex USA to implement a business model focused on growth that was
set aside temporarily in 2011, management still believed that gross
profit margins would improve. Margins have improved, however the
foreign exchange movements in the third quarter, a gain in 2011 and a
loss in 2012, mask and distort the improved performance.
Although the majority of the $ 812 thousand unfavourable foreign
exchange swing relates to intercompany advances and will therefore not
have any real tangible impact on performance, it nevertheless creates
an image of poorer performance, when in fact it is better. It is for
this reason that management continues to report that the worst is over
and that it is proceeding to plan.
The asset purchase in March, which forever changed the business model in
the US, is taking root. For this reason management is confident that,
soon, Imaflex USA will contribute, rather than subtract from,
consolidated profit. Having achieved its objective in this entity, and
certain of forthcoming positive results, management's attention is
focused on the turnaround of the Canslit division in 2013. As reported
in the outlook for the second quarter of 2012, the mechanics which will
accomplish this goal are the building of the sales team, and the
launching of the new patented product. Management is pleased to report
that both objectives are going to plan.
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.
The Company's management uses a non-IFRS measure in this press release,
namely EBITDA. Management wishes to specify that in the performance of
the Company's financial results, EBITDA is shown as "Earnings before
interest, taxes, non-controlling interest, depreciation and
amortization". While EBITDA is not a standard IFRS measure,
management, analysts, investors and others use it as an indicator of
the Company's financial and operating management and performance.
EBITDA should not be construed as an alternative to net income
determined in accordance with IFRS as an indicator of the Company's
performance. The Company's method of calculating EBITDA may be
different from those used by other companies.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
SOURCE: IMAFLEX INC.
For further information:
Joseph Abbandonato, President and C.E.O
Giancarlo Santella, Corporate Controller
Tel: (514) 935-5710
Fax: (514) 935-0264