Pareto announces year end financial results



    Fiscal 2007 revenue grows 46% to $74.3 million; EBITDA grows 149% to
    $6.9 million

    TORONTO, March 27 /CNW/ - Pareto Corporation (TSX: PTO), a leading
marketing services company, today announced its financial results for the
fourth quarter and the year ended December 30, 2007.
    "I am very proud to report that our efforts to resume our pattern of
organic growth in 2007 were successful," said Kerry Shapansky, Pareto's
President and Chief Executive Officer. "This was our top priority for the
year. The steps we took to reinvigorate our sales organization helped ensure
our success in both winning new customers and cross-selling to our existing
clients. Throughout the year we also implemented a range of productivity
improvements designed to increase the efficiency of our operations, and as a
result we saw EBITDA margins approaching the 10% target we had set for the
year."

    
    Fiscal 2007 Highlights

    -   Revenue was $74.3 million in fiscal 2007, up 46% from $51.1 million
        in 2006.

    -   Pro forma year-over-year organic revenue growth was 15%.

    -   EBITDA (earnings before amortization, net interest and finance
        charges, share-based compensation, and income taxes) was
        $6.9 million, up significantly from $2.7 million in 2006.

    -   Net earnings were $3.1 million, or $0.07 per share, compared to
        $1.5 million or $0.04 per share in the previous year.

    -   On fourth quarter revenues of $20.9 million, Pareto generated EBITDA
        of $3.1 million, establishing a new high for any quarter with
        14.7% EBITDA margins.

    -   Opened a 65,000-square-foot retail production and distribution
        facility in Richmond Hill, Ontario.

    -   Added key individuals to senior management team, including Senior VP
        Business Development Michael Lang, Chief Operating Officer Brian
        Warner, and Chief Financial Officer Karen Trudell.
    

    Financial Review

    Pareto's revenues for the year ended December 31, 2007 were
$74.3 million, an increase of $23.3 million or 46% over the previous year's
revenues. Approximately two thirds of the growth was attributable to
additional revenue from SourceLink and Secom Plus, both acquired in the second
half of 2006. The Company achieved an organic revenue growth rate of 15% in
2007, with revenues increasing in all of its pre-existing lines of business as
well as its Secom Plus unit.
    Operating and administrative expenses were $67.5 million in 2007, an
increase of 40% from $48.3 million the previous year. The increase resulted
from the inclusion of the expenses of the businesses acquired in the second
half of 2006, as well as a general increase in the volume of business. EBITDA
totaled $6.9 million for the year, representing 9.2% of revenue, compared to
$2.7 million or 5.4% of revenue in 2006. (Please see disclosure about Non-GAAP
Measures, below.)
    Net earnings were $3.1 million in 2007, or $0.07 per share, compared to
earnings of $1.5 million or $0.04 per share a year earlier. The Company had
43,994,648 common shares outstanding at December 31, 2007.
    At December 31, 2007, the Company had net bank indebtedness of $368,000,
compared to $4.2 million of bank indebtedness at September 30, 2007 and a cash
balance of $5.0 million on December 31, 2006. The Company generated
$0.6 million of cash from operations during the year, and used $2.2 million of
cash for investing activities, including the establishment of a new retail
production and distribution facility. The Company used $3.8 million of cash
for financing activities, including the repayment of acquisition notes
payable, the retirement of its long-term debt, and the repurchase of
1.86 million common shares under its normal course issuer bid. Subsequent to
year-end, Pareto used a combination of cash and debt to fund $3.0 million of
acquisition notes payable.

    Fourth Quarter Results

    For the three months ended December 31, 2007, Pareto's revenues were
$20.9 million, an increase of 15% from $18.2 million in Q4 2006. All of the
fourth quarter growth was organic, as Pareto's most recent acquisition was
completed at the beginning of October, 2006.
    EBITDA was $3.1 million in the fourth quarter of 2007, compared to
$41,000 in Q4 2006, when EBITDA was negatively affected by a $1.2 million
restructuring charge. EBITDA represented 14.7% of revenues in Q4 2007. The
fourth quarter EBITDA margin was the highest Pareto has ever recorded in a
single quarter, due to a combination of business mix, operational leverage,
and the Company's success throughout the year in improving its efficiency.
    Net earnings were $1.4 million in the fourth quarter of 2007, or
$0.03 per share (fully diluted), compared to earnings of $26,000 or $0.00 per
share in Q4 2006.

    Outlook

    "We will continue to focus on organic growth in 2008," said Kerry
Shapansky. "Pareto is competing for more comprehensive mandates than we could
have a couple of years ago. With the strengthened sales team in place for the
full year we should see more of those leads converted to sales. We anticipate
a continued upward trend in EBITDA margins as we grow our business and
maintain effective controls over our costs. We plan to continue to evaluate
potential acquisitions, but we believe we can deliver meaningful, profitable
growth by concentrating on the significant market opportunities currently
available to us."

    Conference Call

    Pareto will host an investor conference call to discuss these results at
9:00 a.m. EDT, March 27, 2008. The call may be accessed by dialing
416-644-3417 or 1-800-732-9303. A taped replay will be available for one week
by dialing 416-640-1917 or 1-877-289-8525, reference number 21265705 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, 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
    -------------------------------------------------------------------------
    For the years ended                           December 31    December 31
                                                         2007           2006
    -------------------------------------------------------------------------
    Assets
    Current assets
    Cash                                         $          -   $  5,020,127
    Accounts receivable                            17,321,405     12,399,746
    Inventory and work in progress                  2,204,311      2,457,361
    Prepaid expenses                                  659,683        540,698
    Current future income tax assets                  950,026      2,903,293
                                                 ----------------------------
                                                   21,135,425     23,321,225

    Loans receivable                                  486,250        616,667
    Long-term future income tax assets                732,603        850,590
    Deferred costs                                    335,956        513,708
    Capital assets                                  3,283,105      1,722,298
    Intangible assets                               1,554,607      1,765,720
    Goodwill                                       19,058,577     16,017,153
                                                 ----------------------------
                                                 $ 46,586,523   $ 44,807,361
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
    Bank indebtedness                            $    368,291   $          -
    Accounts payable and accrued liabilities       13,836,117     14,059,056
    Deferred revenue                                1,897,999      2,607,264
    Income taxes payable                              120,022        275,091
    Current future income tax liabilities             119,541        131,225
    Current portion of acquisition notes payable    3,066,668      1,350,000
    Current portion of long-term debt                       -        500,000
    Current portion of capital lease obligations      281,666        264,295
                                                 ----------------------------
                                                   19,690,304     19,186,931

    Long-term future income tax liabilities           484,667        625,772
    Long-term debt                                          -        165,992
    Long-term capital lease obligations               709,279        992,060
    Long-term acquisition notes payable                     -        100,000
                                                 ----------------------------
    Total liabilities                              20,884,250     21,070,755
                                                 ----------------------------

    Shareholders' equity
    Share capital                                  16,872,129     17,176,172
    Contributed surplus                               706,513        268,895
    Retained earnings                               8,123,631      6,291,539
                                                 ----------------------------
    Total shareholders' equity                     25,702,273     23,736,606
                                                 ----------------------------
                                                 $ 46,586,523   $ 44,807,361
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Pareto Corporation
    Consolidated Statements of Operations and Retained Earnings
    -------------------------------------------------------------------------
    For the years ended                           December 31    December 31
                                                         2007           2006
    -------------------------------------------------------------------------
    Revenue                                      $ 74,340,013   $ 51,080,008

    Operating and administrative expenses          67,486,077     48,330,272
                                                 ----------------------------
                                                    6,853,936      2,749,736
                                                 ----------------------------

    Amortization of capital assets                    556,864        361,174
    Amortization of intangible assets                 211,111        118,599
    Amortization of deferred costs                    188,124        149,751
    Interest and finance charges, net                 431,404         82,617
    Gain on acquisition                                     -       (192,042)
    Share-based compensation                          480,623        134,210
                                                 ----------------------------
                                                    1,868,126        654,309
                                                 ----------------------------

    Earnings before income taxes                    4,985,810      2,095,427
    Income taxes                                    1,855,313        545,632
                                                 ----------------------------
    Net earnings and comprehensive income
     for the year                                   3,130,497      1,549,795

    Retained earnings, beginning of year            6,291,539      5,409,564

    Excess price paid over carrying value on
     repurchase of common shares                   (1,298,405)      (667,820)
                                                 ----------------------------

    Retained earnings, end of year               $  8,123,631   $  6,291,539
    -------------------------------------------------------------------------

    Basic and diluted eaernings per share        $       0.07   $       0.04
    -------------------------------------------------------------------------

    Weighted average number of common shares
     outstanding:
    Basic                                          44,564,041     42,554,794
    Diluted                                        45,931,882     44,130,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Pareto Corporation
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------
    For the years ended                           December 31    December 31
                                                         2007           2006
    -------------------------------------------------------------------------
    Operating activities
    Net earnings for the year                    $  3,130,497   $  1,549,795
    Items not involving cash:
    Amortization of capital assets                    556,864        361,174
    Amortization of intangible assets                 211,111        118,599
    Amortization of deferred costs                    188,124        149,751
    Non-cash interest and finance charges               6,347         13,124
    Share-based compensation                          480,623        134,210
    Gain on acquisition                                     -       (192,042)
    Future income tax provision                     1,918,465        435,970
                                                 ----------------------------
                                                    6,492,031      2,570,581
    Changes in non cash operating accounts         (5,874,867)    (3,670,423)
                                                 ----------------------------
                                                      617,164     (1,099,842)
                                                 ----------------------------
    Investing activities
    Capital asset additions                        (2,117,671)      (927,724)
    Other asset additions                             (21,719)       (66,792)
    Acquisitions, net of cash acquired                (36,422)    (4,861,098)
                                                 ----------------------------
                                                   (2,175,812)    (5,855,614)
                                                 ----------------------------
    Financing activities
    Proceeds from loans receivable                    366,667        683,333
    Repayment of acquisition notes payable         (1,383,332)      (335,000)
    Repayment of long-term debt                      (665,992)      (667,004)
    Repayment of capital lease obligations           (265,410)      (103,690)
    Issuance of shares                                143,500      8,724,405
    Share issue costs                                 (22,796)      (652,097)
    Repurchase of common shares                    (2,002,407)      (753,291)
                                                 ----------------------------
                                                   (3,829,770)     6,896,656
                                                 ----------------------------

    Decrease in cash for the year                  (5,388,418)       (58,800)

    Cash, beginning of year                         5,020,127       5,078,927
                                                 ----------------------------

    (Bank Indebtedness)/Cash, end of year        $   (368,291)  $   5,020,127
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





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

Organization Profile

PARETO CORPORATION

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890