TICKER SYMBOL: IFX.A
MONTREAL, April 20, 2012 /CNW Telbec/ - Imaflex Inc. (the "Company") (TSXV: IFX.A) announces results for the year ended December 31, 2011.
(CDN $ thousands, except per share amounts)
|Q4 2011||Q4 2010||Year 2011||Year 2010|
|Cost of sales||9,399||11,033||40,866||41,595|
|Gross profit ($) (before amortization)||1,202||773||6,093||4,894|
|Gross profit (%)(before amortization)||11.3%||6.5%||13.0%||10.5%|
|Amortization of production equipment||264||225||992||987|
|Gross profit (%)||8.8%||4.6%||10.9%||8.4%|
|FX loss (gain)||193||182||(95)||213|
|Profit (loss) before income taxes||(340)||(963)||337||(1,675)|
|Provision for income taxes||(144)||9||264||76|
|Basic and diluted earnings (loss) per share||(0.005)||(0.025)||0.002||(0.044)|
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 remained fairly stable in 2011 over 2010, although the sales mix changed. Sales of polyethylene mulch film increased whereas sales of metallized polyester decreased. Conditions in the polyester marked varied considerably throughout the year, contributing to the decrease in sales of polyester and to lower margins. However, market share was regained in the metallized polyethylene market, offsetting part of the losses of profit for polyester.
Administrative expenses increased slightly in 2011 due to an adjustment of the provision for doubtful accounts in 2010. Despite not having experienced an important increase in sales in 2011 compared to 2010, the Company was able to generate greater profitability from its operations.
The level of sales in the fourth quarter of 2011 remained constant compared to the third quarter and decreased compared to 2010. The lower level of sales during that last six months of the year are mainly explained by the expectation of stable pricing during the second half of the year, which did not stimulate buying from customers as they increased levels of inventory in the first half of the year. The Company also sold less polyester throughout the year and decreased its sales of garbage bags in the third and fourth quarters. These lower sales were offset by the increase in sales of agricultural mulch film.
The current stability in the pricing of polyester indicates that the Company can regain part of those sales as well in 2012, which should enable sales to grow in 2012. As the Company is replacing normal customer attrition that occurred during the year and as new products are being commercialized, management expects to return to the sales levels experience during the first half of the year in 2011.
Gross profit margin
Gross profit before amortization of production equipment increased by $429,000 in the fourth quarter of 2011 compared to 2010, going from $773,000 to $1,202,000. This increase is mainly attributable to higher profit margins on the products sold as well as increased production efficiencies due to a lighter cost structure. The Company's gross margin before amortization of production equipment increased from 6.5% in 2010 to 11.3% in 2011, reflecting the considerable improvement in operations.
Over the twelve month period, the gross profit before amortization of production equipment increased by $1,199,000, to $6,093,000 up from $4,894,000 in 2010. The improvement in profitability is due to more efficient operations and better cost control. The sales mix was also more favourable as the sale of mulch film increased in 2011, regaining part of the sales lost in 2010.
The losses incurred in the fourth quarter resulted in an income tax recovery in 2011 whereas low taxable income in 2010 resulted in a $9,000 income tax provision in 2010, for a net variance of $153,000 year over year. For the twelve months ended December 31, 2011 the expenses for future income tax as well as positive net income in the Canadian entity required an income tax expense of $264,000. In 2010, the Company's losses resulted in an income tax recovery, which was more than offset by the deferred tax expense for a net expense of $76,000.
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 capital assets. At December 31, 2011, the Company had drawn $5,627,248 on its line of credit ($6,338,764 as at December 31 2010 and $5,959,204 as at January 1 2010). The Company's working capital position improved during the course of 2011 due to its increased profitability. During the second quarter, it issued 1,315,789 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 $500,000 to an insider of the Company. During the fourth quarter, the Company received $250,000 in advance for a share issuance that closed on February 1, 2012 and issued subordinated debt for $165,000. Management believes that the Company's will have sufficient liquidity to fund its operations in the short term. In order to improve its working capital position further, management continuously monitors its capital structure in order to optimize the level of borrowings and equity, managing risk and cost of capital. During the fourth quarter of 2011, a long term note came to term, with two more maturing in the first quarter of 2012. This will slowly bring the Company's indebtedness to levels closer to what its past earnings would justify and to a low level based on the earnings management expects. Moreover, it will increase the free cash flow the Company generates through operations.
During the course of 2011, management addressed the issue of low profitability and brought the Company back to a positive net profit in order to plan for growth.
Management believes that the asset purchase of the going concern in Imaflex USA should resolve the challenging issues of profitability in this subsidiary. There exists one more challenge, the return to profitability for our Canslit division, which is a goal management has set for 2012.
With the introduction of new products on the market after several years of research, the Company will finally reap the benefits of its past investments in research and development.
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-GAAP 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 GAAP 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 GAAP 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.
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