Pareto announces first quarter financial results



    Revenue of $16.2 million; EBITDA of $1.4 million, up 20%

    TORONTO, May 8 /CNW/ - Pareto Corporation (TSX: PTO), a leading marketing
services company, today announced its financial results for the three months
ended March 31, 2009.
    "I'm pleased that we were able to grow EBITDA and earnings significantly
in a challenging economic environment. Overall, our revenue held steady, due
to the continuing strength of our retail promotions business," said Kerry
Shapansky, Pareto's President and CEO. "I believe we will continue to deliver
improved EBITDA margins in 2009 as we remain focused on cost and operational
efficiency improvements. We are working closely with new and existing
customers to develop marketing programs that will help them stand out in this
market, when driving sales lift is more important than ever. I believe we have
a good opportunity to grow our revenues over the full year."

    Financial and Operating Highlights

    
    -   Revenue was $16.2 million in the first quarter, compared to
        $16.5 million in Q1 2008.

    -   EBITDA(*) was $1.4 million, an increase of 20% from $1.2 million a
        year earlier.

    -   Net earnings were $656,770, up 44% from $456,773 in the first quarter
        of 2008.

    -   Diluted earnings per share were $0.015, compared to $0.01 a year
        earlier.
    

    Financial Review

    Pareto's revenues for the three months ended March 31, 2009 were $16.2
million, a decrease of $0.3 million from revenues of $16.5 million in the
first quarter of 2008. A revenue increase in the retail promotion business
unit was offset by decreases in the field merchandising and managed services
business units. Revenues in the Company's other business units were relatively
flat compared to the first quarter of last year.
    EBITDA in the first quarter of 2009 was $1.4 million, representing 8.7%
of revenues, compared to $1.2 million, or 7.2% of revenues a year earlier.
EBITDA growth was attributable to reduced infrastructure costs and improved
operating efficiencies. Operating and administrative expenses were $14.8
million in the quarter, a decrease of 3% from $15.3 million in Q1 2008.
    Net earnings in the first quarter were $656,770, an increase of 44% over
$456,773 of earnings in Q1 2008. Basic and diluted earnings were $0.015 per
share, compared to $0.01 per share a year earlier.
    At March 31, 2009, Pareto had net bank indebtedness of $2.0 million
compared to indebtedness of $654,573 at December 31, 2008. The Company
generated $477,433 of cash from operations in Q1 2009, compared to $231,195 a
year earlier. The Company used $1.8 million of cash for investing activities
in the first quarter, primarily for the payment of dividends, compared to $0.8
million, primarily for the repurchase of common shares, in Q1 2008.
    Pareto had 42,931,148 common shares issued and outstanding at March 31,
2009.
    As indicated last quarter, some of Pareto's event business from 2008 will
not be recurring in 2009, and therefore the Company expects revenues in the
second quarter to be down from 2008 levels. Due to efficiency improvements and
product mix, the Company expects EBITDA in the second quarter to be comparable
to last year.

    (*) Non-GAAP Measures

    Pareto presents EBITDA information as supplemental figures because
management believes they provide useful information regarding operating
performance. EBITDA (earnings before amortization, net interest and finance
charges, share based compensation, non-recurring expenses, and income taxes)
is not a recognized measure under Canadian generally accepted accounting
principles (GAAP), does not have standardized meaning, and is unlikely to be
comparable to similar measures used by other companies. Accordingly, investors
are cautioned that EBITDA should not be construed as an alternative to
revenue, net earnings or loss determined in accordance with GAAP as an
indicator of the financial performance of the Company or as a measure of the
Company's liquidity and cash flows.

    About Pareto Corporation

    Pareto Corporation is a marketing services company that offers marketing
execution solutions to leading companies in a broad range of industry sectors.
Pareto provides measurable, quantifiable services that complement our clients'
marketing and sales departments. For more information, please visit our
website at www.pareto.ca.

    This press release contains forward-looking statements related to
expected future events and financial operating results of Pareto that involve
risks and uncertainties. Actual results may differ materially from management
expectations as projected in such forward-looking statements for a variety of
reasons, including market and general economic conditions and the risks and
uncertainties detailed from time to time in Pareto's SEDAR filings.


    
    -------------------------------------------------------------------------
                                                          Pareto Corporation
                                                 Consolidated Balance Sheets
    -------------------------------------------------------------------------
                                                    March 31     December 31
    As at                                               2009            2008
    -------------------------------------------------------------------------

    Assets
    Current assets
    Accounts receivable                        $  13,607,256   $  16,460,617
    Inventories                                    2,209,544       1,746,355
    Prepaid expenses                                 707,957         466,040
    Current future income tax assets                  44,604          38,167
                                                -----------------------------
                                                  16,569,361      18,711,179
                                                -----------------------------

    Loans receivable and other assets              1,301,830       1,299,045
    Long-term future income tax assets               429,479         258,209
    Capital assets                                 3,233,170       3,340,697
    Intangible assets                              1,290,714       1,343,493
    Goodwill                                      21,058,577      21,058,577
                                                -----------------------------
                                               $  43,883,131   $  46,011,200
                                                -----------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
    Bank indebtedness                          $   2,029,277   $     654,573
    Accounts payable and accrued liabilities       9,391,236      12,032,039
    Dividends payable                                643,967       1,717,246
    Deferred revenue                               1,693,685       2,023,252
    Income taxes payable                           1,291,592         983,915
    Current portion of capital lease
     obligations                                     327,231         314,275
    Current portion of lease inducements              42,482          42,482
                                                -----------------------------
                                                  15,419,470      17,767,782
                                                -----------------------------

    Long-term future income tax liabilities          325,920         194,192
    Long-term capital lease obligations              306,678         395,004
    Deferred lease inducements                       332,121         342,742
                                                -----------------------------
    Total liabilities                             16,384,189      18,699,720
                                                -----------------------------

    Shareholders' equity
    Share capital                                 16,501,855      16,501,855
    Contributed surplus                            1,667,206       1,492,547
    Retained earnings and accumulated other
     comprehensive income                          9,329,881       9,317,078
                                                -----------------------------
    Total shareholders' equity                    27,498,942      27,311,480
                                                -----------------------------
                                               $  43,883,131   $  46,011,200
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                          Pareto Corporation
                 Consolidated Statements of Operations and Retained Earnings
    -------------------------------------------------------------------------
                                                    March 31,       March 31,
    For the three months ended (unaudited)              2009            2008
    -------------------------------------------------------------------------
    Revenue                                    $  16,182,996   $  16,453,170

    Operating and administrative expenses         14,771,869      15,274,092
                                                -----------------------------

                                                   1,411,127       1,179,078
                                                -----------------------------

    Amortization of capital assets                   167,050         158,952
    Amortization of intangible assets                 52,779          52,778
    Interest, net                                     12,409         106,993
    Share-based compensation                         189,659         207,780
                                                -----------------------------
                                                     421,897         526,503
                                                -----------------------------

    Earnings before income taxes                     989,230         652,575
    Income taxes                                     332,460         195,802
                                                -----------------------------

    Net earnings and comprehensive income
     for the year                                    656,770         456,773

    Retained earnings, beginning of year           9,317,078       7,877,806
    Dividends declared                              (643,967)
    Excess price paid over carrying value
     on repurchase of common shares                        -        (394,256)
                                                -----------------------------

    Retained earnings, end of year             $   9,329,881   $   7,940,323
    -------------------------------------------------------------------------

    Basic and diluted earnings per share       $       0.015   $        0.01
    -------------------------------------------------------------------------

    Weighted average number of common
     shares outstanding:
    Basic                                         42,931,148      43,408,981
    Diluted                                       44,860,685      45,036,864
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                          Pareto Corporation
                                       Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
                                                    March 31,       March 31,
    For the three months ended (unaudited)              2009            2008
    -------------------------------------------------------------------------

    Operating activities
    Net earnings for the year                  $     656,770   $     456,773
    Items not involving cash:
    Amortization of capital assets                   167,050         158,952
    Amortization of intangible assets                 52,779          52,778
    Amortization of lease inducement                 (10,621)              -
    Non-cash interest                                (27,785)              -
    Share-based compensation                         189,659         207,780
    Future income tax provision                      (45,979)        206,061
                                                -----------------------------
                                                     981,873       1,082,344

    Changes in non cash operating accounts          (504,440)       (851,149)
                                                -----------------------------
                                                     477,433         231,195
                                                -----------------------------
    Investing activities
    Capital asset additions                          (59,521)        (52,459)
    Loans receivable and other assets                      -        (550,000)
    Acquisitions, net of cash                              -      (3,000,000)
                                                -----------------------------
                                                     (59,521)     (3,602,459)
                                                -----------------------------
    Financing activities
    Dividends Paid                                (1,717,246)              -
    Repayment of capital lease obligations           (75,370)        (67,552)
    Share issue costs                                      -          (2,051)
    Repurchase of common shares                            -        (760,979)
                                                -----------------------------
                                                  (1,792,616)       (830,582)
                                                -----------------------------

    Decrease in cash for the year                 (1,374,704)     (4,201,846)

    (Bank Indebtedness)/Cash, beginning
     of year                                        (654,573)       (368,291)
                                                -----------------------------

    Bank Indebtedness, end of year             $  (2,029,277)  $  (4,570,137)
    -------------------------------------------------------------------------
    





For further information:

For further information: Kerry Shapansky, President and Chief Executive
Officer, Pareto Corporation, (416) 790-2350; Karen Trudell, Chief Financial
Officer, Pareto Corporation, (416) 790-2360; Jeff Codispodi, Investor
Relations, Equicom Group, (416) 815-0700 ext 261

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PARETO CORPORATION

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