Pareto announces second quarter financial results



    Revenue of $24.3 million; 87% growth from prior year

    TORONTO, Aug. 1 /CNW/ - Pareto Corporation (TSX: PTO), a leading
marketing services company, today announced its financial results for the
three months ended June 30, 2007.

    
    Q2 2007 Highlights

      -  Revenue was $24.3 million in the second quarter of 2007, up 87% from
         $13.0 million a year earlier.
      -  On a pro forma basis, year-over-year organic revenue growth was 34%.
      -  EBITDA (earnings before amortization, net interest and finance
         charges, share-based compensation, and income taxes) was
         $2.4 million, up 90% from $1.2 million in Q2 2006.
      -  Net earnings were $1.3 million, a 78% increase from $713,000 in the
         second quarter of 2006.
      -  Diluted earnings per share were $0.03, compared to $0.02 a year
         earlier.

    Year-to-date Highlights

      -  Revenue was $39.1 million in the first half of fiscal 2007, up 73%
         from $22.6 million in 2006.
      -  Pro forma organic revenue growth was 20% in the first half of the
         year.
      -  EBITDA was $3.2 million, up 58% from $2.0 million last year.
      -  Net earnings were $1.6 million or $0.04 per share in the first half
         of 2007, compared to $1.1 million or $0.03 per share in the prior
         year period.
    

    "I am very pleased to report the largest quarter in our Company's history
in terms of both revenue and net earnings," said Kerry Shapansky, Pareto's
President and Chief Executive Officer. "Halfway through 2007 our revenues are
up 73% over last year and we have already generated more EBITDA than in all of
2006. The success of last year's acquisitions is a big part of that story, but
we also saw organic growth across our business units from both existing and
new customers."
    Mr. Shapansky continued: "At the halfway point I believe we are very well
positioned to achieve our business objectives for 2007. We have been actively
pursuing specific industry verticals, and have had recent sales success in the
grocery and pharmaceutical/healthcare sectors. We continue to believe there is
an opportunity to create a much larger business in this space. Our second
quarter shows how we are going to build it, by balancing successful
acquisitions and strong organic growth."
    "While I am very pleased with our top line growth, we continue to see
opportunity to improve our margins as we leverage operating efficiencies," Mr.
Shapansky added. "The recent addition of Chief Operating Officer Brian Warner
was indicative of this commitment as we continue to pursue our long term goal
of 15% EBITDA margins."

    Financial Review

    Pareto's revenues for the second quarter of fiscal 2007 were
$24.3 million, an increase of $11.3 million over the same period in 2006. The
increase was largely attributable to the addition of revenue from SourceLink
and Secom Plus, both acquired during the second half of fiscal 2006. The event
and Secom Plus businesses made the strongest contributions to organic growth
in the second quarter. The Company's organic revenue growth rate was 34% on a
pro forma basis, compared to the revenues earned by the same businesses in the
comparable period of 2006.
    Operating and administrative expenses were $22.0 million in the second
quarter, an increase of 86% from $11.8 million a year earlier. The increase
was proportionate to the growth in revenues. EBITDA was $2.4 million in the
second quarter, representing 9.7% of revenue, compared to $1.2 million or 9.5%
of revenue in Q2 2006.
    Pareto presents pro forma revenue and EBITDA information as supplemental
figures because management believes they provide useful information regarding
operating performance. Pro forma revenue is calculated based on the inclusion
of the actual revenues of the acquired businesses from the beginning of the
calendar year. Pro forma revenue and EBITDA (earnings before amortization, net
interest and finance charges, share based compensation, and income taxes) are
not recognized measures under Canadian generally accepted accounting
principles (GAAP), do not have standardized meaning, and are unlikely to be
comparable to similar measures used by other companies. Accordingly, investors
are cautioned that pro forma revenue and 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.
    Net earnings were $1.3 million in Q2 2007, representing a 78% increase
from $713,000 of earnings a year earlier. Earnings per share grew to $0.03
from $0.02, while the average number of diluted shares outstanding increased
by 1% to 45.80 million. On June 30, 2007, the Company had 44,726,875 shares
outstanding.
    Operating activities generated $959,000 of cash during the second quarter
of 2007, compared to $1.3 million of cash utilized a year earlier. Investing
activities used $509,000 of cash as the Company added capital assets
associated with the move of its retail fulfillment business to a new facility
in Richmond Hill, Ontario. Financing activities used $443,000 of cash.
    Pareto had $3.8 million of working capital at quarter-end. The Company
recently increased its demand credit facility with RBC from $5.5 million to
$9 million; that facility was unused at June 30, 2007. Total debt at
quarter-end represented 0.41 times EBITDA. Subsequent to quarter-end Pareto
retired in full the final $416,000 outstanding on its long-term debt facility.

    Conference Call

    Pareto will host an investor conference call to discuss these results at
9:00 a.m. EDT, August 1, 2007. The call may be accessed by dialing
416-644-3427 or 1-800-595-8550. A taped replay will be available for one week
by dialing 416-640-1917 or 1-877-289-8525, reference number 21241733. The call
will be available live and for one year at www.pareto.ca ("Investor Relations"
section).

    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

                                           June 30, 2007
                                              (unaudited)   December 31,2006
    -------------------------------------------------------------------------

    Assets
    Current assets
    Cash                                    $    129,667        $  5,020,127
    Accounts receivable                       13,824,355          12,399,746
    Inventory and work in progress             2,461,297           2,457,361
    Other current assets                         662,240             540,698
    Current future income tax assets           2,063,293           2,903,293
                                           ----------------------------------
                                              19,140,852          23,321,225

    Loans receivable                             852,917             616,667
    Long-term future income tax assets         1,122,826             850,590
    Deferred costs                               491,572             513,708
    Capital assets                             2,226,998           1,722,298
    Goodwill and intangible assets            17,700,652          17,782,873
                                           ----------------------------------
                                            $ 41,535,817        $ 44,807,361
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
    Accounts payable and accrued
     liabilities                            $ 12,597,166        $ 14,059,056
    Current portion of deferred revenue        1,737,708           2,607,264
    Income taxes payable                         102,068             275,091
    Current future income tax liabilities        120,740             131,225
    Current portion of acquisition
     notes payable                                66,667           1,350,000
    Current portion of long-term debt            415,990             500,000
    Current portion of capital lease
     obligations                                 262,537             264,295
                                           ----------------------------------
                                              15,302,876          19,186,931
                                           ----------------------------------

    Long-term future income tax
     liabilities                                 566,599             625,772
    Long-term debt                                     -             165,992
    Long-term capital lease obligations          863,657             992,060
    Long-term acquisition notes payable                -             100,000
                                           ----------------------------------
    Total liabilities                         16,733,132          21,070,755
                                           ----------------------------------

    Shareholders' equity
    Share capital                             17,345,326          17,176,172
    Contributed surplus                          419,732             268,895
    Retained earnings                          7,037,627           6,291,539
                                           ----------------------------------
    Total shareholders' equity                24,802,685          23,736,606
                                           ----------------------------------
                                            $ 41,535,817        $ 44,807,361
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    For the quarter ended June 30 (unaudited)
    -------------------------------------------------------------------------
                                     Three Months                 Six Months
                              2007          2006          2007          2006
                      -------------------------------------------------------

    Revenue           $ 24,347,041  $ 13,036,822  $ 39,063,349  $ 22,569,095

    Operating and
     administrative
     expenses           21,994,494    11,880,529    35,894,109    20,568,255
                      -------------------------------------------------------

                         2,352,547     1,236,293     3,169,240     2,000,840
                      -------------------------------------------------------

    Amortization of
     capital assets        114,771        76,107       217,070       147,537
    Amortization of
     intangible assets
     and deferred costs     90,216        62,671       180,433       125,609
    Interest and
     finance charges,
     net                   110,951       (31,632)      185,546         1,763
    Share-based
     compensation          119,832        71,407       184,357       137,876
                      -------------------------------------------------------

                           435,770       178,553       767,406       412,785
                      -------------------------------------------------------

    Earnings before
     income taxes        1,916,777     1,057,740     2,401,834     1,588,055
    Income taxes           646,523       344,693       784,036       528,856
                      -------------------------------------------------------

    Net earnings for
     the period          1,270,254       713,047     1,617,798     1,059,199

    Retained earnings,
     beginning of
     period              5,911,606     5,755,716     6,291,539     5,409,564

    Excess price paid
     over carrying
     value on
     repurchase of
     common shares        (144,233)      (49,329)     (871,710)      (49,329)
                      -------------------------------------------------------

    Retained earnings,
     end of period    $  7,037,627  $  6,419,434  $  7,037,627  $  6,419,434
    -------------------------------------------------------------------------

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

    Average number of
     common shares
     outstanding:
    Basic               44,515,164    43,716,300    44,649,180    40,537,939
    Diluted             45,804,244    45,409,834    45,645,608    42,310,443

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



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

    For the quarter ended June 30 (unaudited)
    -------------------------------------------------------------------------

                                    Three Months                   Six Months
                              2007          2006          2007          2006
                      -------------------------------------------------------
    Operating
     activities
    Net earnings for
     the period       $  1,270,254  $    713,047  $  1,617,798  $  1,059,199
    Items not
     involving cash:
    Amortization of
     capital assets        114,771        76,107       217,070       147,537
    Amortization of
     intangible
     assets and
     deferred costs         90,216        59,390       180,433       125,609
    Non-cash interest
     and finance
     charges                 3,281         3,281         6,562         6,562
    Share-based
     compensation          119,832        71,407       184,357       137,876
    Future income tax
     provision             541,761       (22,267)      498,106       (35,430)
                      -------------------------------------------------------
                         2,140,115       900,965     2,704,326     1,441,353
    Changes in non
     cash operating
     accounts           (1,181,058)   (2,211,897)   (4,054,556)   (6,384,965)
                      -------------------------------------------------------
                           959,057    (1,310,932)   (1,350,230)   (4,943,612)
                      -------------------------------------------------------
    Investing
     activities
    Capital asset
     additions            (502,507)     (359,850)     (721,770)     (462,012)
    Other asset
     additions              17,141       (27,845)      (59,304)      (81,526)
    Acquisitions, net
     of cash acquired      (23,334)     (675,695)      (23,334)     (675,695)
                      -------------------------------------------------------

                          (508,700)   (1,063,390)     (804,408)   (1,219,233)
                      -------------------------------------------------------
    Financing
     activities
    Repayment of
     acquisition
     notes  payable       (100,000)     (335,000)   (1,383,333)     (335,000)
    Repayment of
     long-term debt       (125,001)     (125,001)     (250,002)     (250,002)
    Repayment of
     capital lease
     obligations           (64,371)            -      (130,161)            -
    Issuance of shares      72,501        85,770       110,500     8,095,136
    Share issue costs            -        (1,000)            -      (671,972)
    Repurchase of
     common shares        (225,780)      (71,990)   (1,082,826)      (71,990)
                      -------------------------------------------------------
                          (442,651)     (447,221)   (2,735,822)    6,766,172
                      -------------------------------------------------------

    Increase (decrease)
     in cash for
     the period              7,706    (2,821,543)   (4,890,460)      603,327

    Cash and cash
     equivalents,
     beginning of
     period                121,961     8,503,797     5,020,127     5,078,927
                      -------------------------------------------------------

    Cash and cash
     equivalents, end
     of period             129,667     5,682,254       129,667     5,682,254
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Kerry Shapansky, President and Chief Executive
Officer, Pareto Corporation, (416) 790-2350; Clint Becker, 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