Pareto announces second quarter financial results



    Revenue of $20.8 million; EBITDA of $2.0 million

    TORONTO, Aug. 7 /CNW/ - Pareto Corporation (TSX: PTO), a leading
marketing services company, today announced its financial results for the
three months ended June 30, 2008.
    The Company also announced a substantial issuer bid for the purchase and
cancellation of up to 11,000,000 of its common shares. Details are available
in a separate news release.
    "Second quarter results were in line with our expectations," said Kerry
Shapansky, Pareto's President and Chief Executive Officer. "Our ability to
maintain EBITDA margins this year despite lower revenues is testimony to our
improved efficiency. We anticipated that our quarterly revenue would be below
the prior year due primarily to a non-recurring project. We believe there is a
good opportunity for modest revenue growth in fiscal 2008, and we are very
confident in our ability to grow EBITDA."

    
    Q2 2008 Highlights

    -   Revenue was $20.8 million in the second quarter of 2008, compared to
        $24.3 million a year earlier.
    -   EBITDA(*) was $2.0 million compared to $2.4 million in Q2 2007.
    -   Net earnings were $914,954 in Q2 2008, compared to $1,270,254 in Q2
        2007.
    -   Diluted earnings per share were $0.02, compared to $0.03 a year
        earlier.
    -   Renewed exclusive agreement with largest retail client for a new
        four-year term.

    Year-to-Date Highlights

    -   Revenue of $37.3 million, compared to $39.1 million in the first half
        of 2007
    -   EBITDA of $3.2 million, representing 8.5% of revenue, compared to
        $3.2 million or 8.1% of revenue in the comparable period a year
        earlier
    -   Net earnings of $1.3 million, compared to $1.6 million in the first
        half of 2007
    -   Diluted earnings per share of $0.03, compared to $0.04 in the
        comparable period of 2007
    

    Financial Review

    Pareto's revenues for the three months ended June 30, 2008 were
$20.8 million compared to $24.3 million over the comparable period in 2007.
Revenues from the second quarter of 2007 included a one-time $5 million field
merchandising project. The Company has won new field merchandising business to
replace this project and allow for growth in fiscal 2008, but it is spread
throughout the year. Growth in program management services and retail in-store
marketing services helped partially offset revenue declines in other areas of
the business.
    Operating and administrative expenses were $18.9 million in the second
quarter, a decrease of 14% from $22.0 million a year earlier, consistent with
the decrease in revenue. EBITDA margins were 9.6% of revenues in Q2 2008,
compared to 9.7% in Q2 2007. EBITDA margins remained comparable despite the
decrease in revenue, due to improved business mix, greater efficiencies
realized from integration of acquisitions and operating efficiencies.
    Net earnings were $914,954 in the second quarter, or $0.02 per share,
compared to earnings of $1,270,254 or $0.03 per share a year earlier. The
Company had 42,731,148 common shares outstanding at June 30, 2008.
    At June 30, 2008, Pareto had net bank indebtedness of $4.6 million,
unchanged from three months earlier.

    Substantial Issuer Bid

    As referenced, the Company also announced a substantial issuer bid for
the purchase and cancellation of up to 11,000,000 of its common shares for a
price of $1.00 per share today.
    "The Board of Directors and management are very confident in prospects
for the business," said Mr. Shapansky. "After a broad strategic review, we
have decided to focus principally on organic growth as the most effective way
to leverage the comprehensive suite of marketing services we have assembled.
It is our view that completing a substantial issuer bid will create long-term
shareholder value while providing near-term liquidity to our investors."

    Conference Call

    Pareto will host an investor conference call to discuss these results and
its proposed substantial issuer bid at 9:00 a.m. EDT, August 7, 2008. The call
may be accessed by dialing 416-644-3427 or 1-866-250-4892. A taped replay will
be available for one week by dialing 416-640-1917 or 1-877-289-8525, reference
number 21278050 followed by the number sign. The call will be available live
and for one year at www.pareto.ca ("Investor Relations" section).

    (*) 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, income taxes, gain on acquisition and
non-controlling interest) 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
    -------------------------------------------------------------------------

    As at                                             June 30    December 31
                                                         2008           2007
                                                   (unaudited)      (audited)
    -------------------------------------------------------------------------

    Assets
    Current assets
    Accounts receivable                          $ 16,577,666   $ 17,321,405
    Inventory and work in progress                  1,963,381      2,204,311
    Prepaid expenses                                  579,500        659,683
    Current future income tax assets                  418,696        950,026
                                                -----------------------------
                                                   19,539,243     21,135,425

    Loans receivable                                1,036,250        486,250
    Long-term future income tax assets                566,021        732,603
    Deferred costs                                    256,080        335,956
    Capital assets                                  3,454,786      3,283,105
    Intangible assets                               1,449,052      1,554,607
    Goodwill                                       19,058,577     19,058,577
                                                -----------------------------
                                                 $ 45,360,009   $ 46,586,523
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
    Bank indebtedness                            $  4,574,411   $    368,291
    Accounts payable and accrued liabilities       11,140,971     13,836,117
    Deferred revenue                                1,741,779      1,897,999
    Income taxes payable                               99,309        120,022
    Current future income tax liabilities             109,588        119,541
    Current portion of acquisition notes payable            -      3,066,668
    Current portion of capital lease obligations      297,522        281,666
                                                -----------------------------
                                                   17,963,580     19,690,304

    Long-term future income tax liabilities           433,294        484,667
    Long-term capital lease obligations               556,445        709,279
                                                -----------------------------
    Total liabilities                              18,953,319     20,884,250
                                                -----------------------------

    Shareholders' equity
    Share capital                                  16,390,038     16,872,129
    Contributed surplus                             1,104,311        706,513
    Retained earnings                               8,912,341      8,123,631
                                                -----------------------------
    Total shareholders' equity                     26,406,690     25,702,273
                                                -----------------------------
                                                 $ 45,360,009   $ 46,586,523
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                          Pareto Corporation
                 Consolidated Statements of Operations and Retained Earnings
    -------------------------------------------------------------------------

                            Three months ended              Six months ended
                                       June 30                       June 30
                           2008           2007           2008           2007
    -------------------------------------------------------------------------

    Revenue        $ 20,853,852   $ 24,347,041   $ 37,307,022   $ 39,063,349

    Operating and
     administrative
     expenses        18,859,644     21,994,494     34,133,736     35,894,109
                  -----------------------------------------------------------

                      1,994,208      2,352,547      3,173,286      3,169,240
                  -----------------------------------------------------------

    Amortization
     of capital
     assets             155,988        114,771        312,590        217,070
    Amortization
     of intangible
     assets              52,777         52,778        105,555        105,555
    Amortization
     of deferred
     costs               35,086         37,438         74,875         74,878
    Interest and
     finance
     charges, net       167,110        110,951        276,453        185,546
    Share-based
     compensation       193,811        119,832        401,591        184,357
                  -----------------------------------------------------------
                        604,772        435,770      1,171,064        767,406
                  -----------------------------------------------------------

    Earnings
     before income
     taxes            1,389,436      1,916,777      2,002,222      2,401,834
    Income taxes        474,482        646,523        683,415        784,036
                  -----------------------------------------------------------

    Net earnings
     and
     comprehensive
     income
     for the period     914,954      1,270,254      1,318,807      1,617,798

    Retained
     earnings,
     beginning of
     period           8,133,228      5,911,606      8,123,631      6,291,539

    Excess price
     paid over
     carrying
     value on
     repurchase of
     common shares     (135,841)      (144,233)      (530,097)      (871,710)
                  -----------------------------------------------------------

    Retained
     earnings,
     end of period $  8,912,341   $  7,037,627   $  8,912,341   $  7,037,627
    -------------------------------------------------------------------------

    Basic and
     diluted
     earnings per
     share         $       0.02   $       0.03   $       0.03   $       0.04
    -------------------------------------------------------------------------

    Weighted
     average
     number of
     common shares
     outstanding:
    Basic            42,897,760     44,515,164     43,234,245     44,649,180
    Diluted          44,735,332     45,804,244     44,965,913     45,645,608

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                          Pareto Corporation
                                       Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------

                            Three months ended              Six months ended
                                       June 30                       June 30
                           2008           2007           2008           2007
    -------------------------------------------------------------------------

    Operating
     activities
    Net earnings
     for the year  $    914,953   $  1,270,254   $  1,318,806   $  1,617,798
    Items not
     involving
     cash:
    Amortization
     of capital
     assets             155,988        114,771        312,590        217,070
    Amortization
     of intangible
     assets              52,777         52,778        105,555        105,555
    Amortization
     of deferred
     costs               35,086         37,438         74,875         74,878
    Non-cash
     interest and
     finance
     charges              2,651          3,281          5,001          6,562
    Share-based
     compensation       193,811        119,832        401,591        184,357
    Future income
     tax provision      417,394        541,761        636,586        498,106
                  -----------------------------------------------------------
                      1,772,660      2,140,115      2,855,004      2,704,326
    Changes in non
     cash operating
     accounts          (956,077)    (1,181,058)    (1,807,226)    (4,054,556)
                  -----------------------------------------------------------
                        816,583        959,057      1,047,778     (1,350,230)
                  -----------------------------------------------------------
    Investing
     activities
    Capital asset
     additions         (431,812)      (502,507)      (484,271)      (721,770)
    Other asset
     additions                -         17,141              -        (59,304)
    Loans
     receivable               -        (23,334)      (550,000)       (23,334)
                  -----------------------------------------------------------
                       (431,812)      (508,700)    (1,034,271)      (804,408)
                  -----------------------------------------------------------
    Financing
     activities
    Repayment of
     acquisition
     notes payable      (66,668)      (100,000)    (3,066,668)    (1,383,333)
    Repayment of
     long-term debt           -       (125,001)             -       (250,002)
    Repayment of
     capital lease
     obligations        (69,426)       (64,371)      (136,978)      (130,161)
    Issuance of
     shares              12,500         72,501         12,500        110,500
    Share issue
     costs                    -              -         (2,051)             -
    Repurchase
     of common
     shares            (265,451)      (225,780)    (1,026,430)    (1,082,826)
                  -----------------------------------------------------------
                       (389,045)      (442,651)    (4,219,627)    (2,735,822)
                  -----------------------------------------------------------

    Decrease in
     cash for the
     period              (4,274)         7,706     (4,206,120)    (4,890,460)

    (Bank
     Indebtedness)
     /Cash,
     beginning of
     period          (4,570,137)       121,961       (368,291)     5,020,127
                  -----------------------------------------------------------

    (Bank
     Indebtedness)
     /Cash, end of
     period        $ (4,574,411)  $    129,667   $ (4,574,411)  $    129,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





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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