Samuel Manu-Tech Inc. - Second Quarter Results



    TORONTO, Aug. 3 /CNW/ -

    RESULTS OF OPERATIONS

    In order to conform to the current year presentation, the comparative
    figures have been restated due to the discontinuance of the Company's
    U.S. distribution operations as a result of selling its subsidiary,
    Energy Steel Products, Inc.

    Net Sales

    Sales for the second quarter ended June 30, 2007 were $229.2 million,
which represents an increase of $10.2 million or 4.7% over the $219.0 million
achieved in the comparable quarter of last year. Sales for the six months to
June 30, 2007 were $463.8 million which represents an increase of
$43.0 million or 10.2% over the $420.8 million achieved in the comparable
period of last year. In both cases, the increase results from the acquisitions
completed in 2006.
    Carbon steel pricing softened in the second quarter reflecting weaker end
user demand in certain key sectors. Sales levels were also negatively impacted
by the continued strength of the Canadian dollar which increased compared to
the U.S. dollar between the first and second quarters of this year. The
average exchange rate of the U.S. dollar in the first quarter of 2007 was Cdn.
$1.17 compared to $1.10 in the second quarter of this year.
    Compared to the first quarter of this year sales are down 2.3% reflecting
weaker demand from the Canadian manufacturing sector, the impact of lower
pricing levels and the stronger Canadian dollar.
    Sales of the Packaging segment in the second quarter, at $104.7 million,
were down $1.4 million or 1.3% compared to last year due mainly to the
continued softening in the forestry and construction sectors and the change in
the exchange rate which continued to negatively impact Canadian exports and
U.S. based sales. Compared to the first quarter of this year sales of the
Packaging segment are down 1.5%. Metal Processing sales for the quarter were
$110.6 million, which is up $13.2 million or 13.6% compared to last year. This
was primarily due to higher sales of steel pressure vessels and welded tubular
assemblies reflecting the acquisitions of Silvan Industries, Inc. (Silvan)
effective May 1, 2006 and Advanced Tubing Technology, Inc. (Tube.tec)
effective June 22, 2006. In addition, higher sales of stainless steel tubular
products were positively impacted by higher surcharges and increased demand.
These increases were partially offset by lower steel pickling sales reflecting
softness in our served automotive business and the continued reduction in
Canadian steel pickling demand. Sales of roll formed products were relatively
flat compared to last year. Compared to the first quarter of this year, sales
of the Metal Processing segment are down 3.1%.
    Distribution sales from continuing operations for the quarter were
$14.0 million, which is $1.6 million or 10.5% lower than last year reflecting
the slowdown in the Southern Ontario manufacturing industries. Compared to the
first quarter of this year, sales of the Distribution segment are down 2.1%.

    Earnings

    Net earnings from continuing operations for the second quarter were
$8.0 million or $0.25 per share compared to $12.7 million or $0.39 per share
in the comparable quarter of last year. Net earnings from continuing
operations for the six months to June 30, 2007 were $14.0 million or $0.44 per
share compared to $22.6 million or $0.71 per share last year.
    On July 31, 2007, the Company sold the operations and net assets of its
subsidiary, Energy Steel Products, Inc. The results from this subsidiary,
which were previously included in the Distribution segment, have been
reclassified as discontinued operations in the accompanying interim
consolidated financial statements. Additional details are outlined in Note 6 -
Discontinued Operations to the interim consolidated financial statements.
    Net earnings for the second quarter were $9.2 million or $0.29 per share
compared to $13.0 million or $0.40 per share in the comparable quarter of last
year. Net earnings for the six months to June 30, 2007 were $16.2 million or
$0.51 per share compared to $23.1 million or $0.72 per share last year. The
results for the second quarter and six months this year include a pre-tax
restructuring charge of $1.3 and $5.0 million respectively to cover the
closure of the Scarborough, Ontario strapping manufacturing facility as
outlined in Note 4 to the interim consolidated financial statements. This
restructuring charge of $0.9 million and $3.3 million after tax negatively
impacted earnings in the quarter and first six months this year by $0.03 and
$0.10 per share respectively.
    Operating profit (see below for cautionary language regarding non-GAAP
measures) for the second quarter amounted to $15.1 million compared to
$20.1 million in the comparable quarter of last year with decreases in the
Packaging and Distribution segments.
    The Packaging segment had an operating profit of $4.8 million, which was
$4.7 million lower than the $9.5 million earned last year with decreases
occurring in both Canada and the U.S. offset in part by the contribution from
the GO Packaging acquisition in October 2006. The decreased profitability
reflects the continued slowdown in the Canadian forestry and construction
sectors, increased competition and the negative impact of the stronger
Canadian dollar. The U.S. operations were also negatively impacted by certain
start-up costs incurred related to the new steel strapping facility in Heath
County, Ohio which is not scheduled to be fully operational until the end of
the third quarter of this year. Compared to the first quarter of this year
operating profit for the Packaging segment decreased by 13.4%.
    The Metal Processing segment generated profits of $12.5 million which was
the same as the comparable quarter of last year. Profits from stainless steel
tubular products were up reflecting increased sales levels and the positive
contribution from the Mexican operations. Profits from roll formed products
were up reflecting a more favourable product mix compared to last year which
more than offset the start-up costs related to the new manufacturing facility
in Iuka, Mississippi. In addition, profits from steel pressure vessel and
tubing operations were higher reflecting the acquisitions of Silvan and
Tube.tec in 2006. These increases were offset in part by decreased profits
from the Canadian steel pickling operations reflecting lower overall volumes
as a result of the slowdown in our served automotive business. Compared to the
first quarter of this year, operating profit for the Metal Processing segment
was up 16.9%.
    The Distribution segment generated an operating profit of $0.4 million
from continuing operations compared to $0.8 million in the comparable quarter
of last year reflecting decreased volumes. Compared to the first quarter of
this year operating profit for the Distribution segment decreased by 10.5%.

    FINANCIAL CONDITION

    Liquidity and Capital Resources

    Cash flow from continuing operations before changes in non-cash working
capital for the first six months of 2007 amounted to $23.0 million which was
down $11.4 million from $34.4 million in the comparable period of last year
with the decrease attributable to lower earnings. Overall, cash flow used in
operating activities from continuing operations was $11.4 million compared to
cash flow from operating activities of $13.7 million last year. This reflects
decreased levels of profitability and increased requirements for non-cash
working capital.
    Cash used for investing activities from continuing operations at
$19.0 million was below last year's $55.8 million and is due to no spending on
business acquisitions this year offset in part by increased spending on
capital assets. Cash flow generated from financing activities amounted to
$15.9 million in the six months compared to $36.5 million last year with the
decrease in cash this year due to a lower net increase in long-term debt.
During the six months, 46,400 stock options were exercised which resulted in
the issuance of 46,400 common shares in exchange for proceeds of $0.4 million.
Dividends paid on common shares for the six months amounted to $6.4 million or
$0.20 per share which was the same as last year. Cash flow used in
discontinued operations was $2.6 million compared to cash flow from
discontinued operations of $0.2 million last year. In aggregate, the cash
position decreased by $17.0 million compared to a $5.3 million decrease last
year. The Company continues to maintain credit facilities with various banks
and, at June 30, 2007, had available unused credit facilities of approximately
$86 million.

    Capital Expenditures

    Capital expenditures in the six months to June 30, 2007 were
$19.1 million compared to $10.4 million during the comparable period last
year. Expenditures in the current six months related primarily to equipment
for our new steel strapping manufacturing facility in Heath, Ohio, and our new
roll forming facility in Iuka, Mississippi.

    Discontinued Operations

    On July 31, 2007 the Company announced the sale of its U.S. distribution
business, Energy Steel Products, Inc., for consideration of U.S. $25 million
subject to certain adjustments for working capital items, which will generate
an estimated after tax gain in the third quarter of U.S. $2.6 million.
Additional details are outlined in Note 6 - Discontinued Operations to the
interim consolidated financial statements.

    Subsequent Event

    On July 3, 2007, the Company announced the appointment of Mark C. Samuel
as the new Chairman of the Board replacing Elizabeth J. Samuel who decided to
step down from the position for health reasons.

    Working Capital

    Working capital at June 30, 2007 was $247.7 million, an increase of
$11.3 million from the year-end position due to higher receivables and
inventories offset in part by higher bank indebtedness. Overall, the working
capital ratio decreased slightly to 3.1 from the year-end position of 3.3.
This is equal to the end of the first quarter this year, but increased
compared to the end of the second quarter last year when it was 2.7.

    Net Borrowings to Capitalization

    The Company's net borrowings as at June 30, 2007 amounted to
$140.0 million, an increase of $31.6 million from $108.4 million at
December 31, 2006. This increase reflects the reduced cash flow from
operations during the first six months due to lower profits, increased
spending on capital assets, as well as a higher investment in working capital.
The net debt to capitalization ratio at the end of the quarter increased to
29.0% compared to 24.0% at year-end and 18.0% at the end of the second quarter
last year.

    Capital Stock

    Details of issued and outstanding common shares are outlined in Note 2 to
the interim consolidated financial statements. As at the date of this report
the number of outstanding common shares is 32,116,245. No stock options were
issued during the second quarter; however, 21,400 stock options were
exercised, resulting in the issuance of 21,400 common shares in exchange for
proceeds of $0.2 million.

    Outlook

    Following a relatively strong start to the year, characterized by
increasing stainless steel prices and surcharges, the North American carbon
and stainless steel industry is now entering the second half of the year on a
downward trend.
    Carbon steel pricing levels decreased in the second quarter of 2007
reflecting weaker end user demand in certain key markets. This downturn in
demand is the result of a slowdown in U.S. economic growth due to the
depressed construction sector, and weakness in the housing industry. Demand
from distributors and service centers is also soft as purchases are being
restrained in anticipation of further price reductions. Pricing levels also
remained lower than other world markets which continued to be a limiting
factor on imports entering North America. In light of the softening in demand,
the domestic mills have reacted with announced production cuts to take out
capacity and limit supply in order to bolster prices. This strategy has been
derived from international steel industry consolidation, and if successful,
could lead to a pick up in pricing in the second half of the year.
    Although stainless steel nickel surcharges continued to increase in the
second quarter, driven by high demand and low stock levels, they will decrease
significantly in the third quarter of the year as a result of higher
inventories and the slow down in the U.S. economy. In addition, continuing
concerns about the volatility of nickel prices has lead many buyers to be
reluctant to purchase stainless in any significant quantities. Instead,
customers are only purchasing based on immediate needs.
    Despite these factors, overall demand in certain of our other served
markets continues to be moderately strong, and this, coupled with good supply
side management by steel producers should generate a declining, though still
relatively high, steel pricing environment for the second half of the year.
    In addition, the Canadian dollar continued to strengthen relative to its
U.S. counterpart between the first and second quarters of this year. This
increase in the dollar, which comes at the same time as U.S. economic growth
slows down, will put additional strain on Canadian exporters. The current
expectation is for the Canadian dollar to continue to maintain its strength in
the second half of the year. The stronger Canadian dollar negatively impacts
the conversion of our sales and profits originating in the U.S. This also has
the effect of depressing profit margins on our export business to U.S.
customers and opens up our Canadian market to increased foreign competition.
    Results will also continue to be negatively impacted by the significant
unusual costs previously announced in the first quarter report to shareholders
which include the restructuring and start up costs.
    The Company is disappointed with the results for the first six months and
anticipates further challenging conditions for the balance of the year.

    
    Quarterly Results

    (in thousands of dollars except per share amounts)
    -------------------------------------------------------------------------
                                          2007      2007      2006      2006
                                            Q2        Q1        Q4        Q3
    -------------------------------------------------------------------------

    Net Sales from continuing
     operations                       $229,235  $234,608  $211,434  $226,126
    Net Earnings from continuing
     operations                          8,028     5,938     9,763    11,820
    - Basic Earnings per Share            0.25      0.19      0.30      0.37
    - Diluted Earnings per Share          0.24      0.19      0.29      0.37
    Net Earnings                         9,197     7,024    11,254    12,384
    - Basic Earnings per Share            0.29      0.22      0.35      0.39
    - Diluted Earnings per Share          0.28      0.22      0.34      0.39
    -------------------------------------------------------------------------


    Quarterly Results

    (in thousands of dollars except per share amounts)
    -------------------------------------------------------------------------
                                         2006      2006      2005      2005
                                           Q2        Q1        Q4        Q3
    -------------------------------------------------------------------------
    Net Sales from continuing
     operations                       $219,00  $201,789  $196,005  $201,746
    Net Earnings from continuing
     operations                        12,689     9,934    12,604    12,423
    - Basic Earnings per Share           0.39      0.32      0.40      0.39
    - Diluted Earnings per Share         0.39      0.31      0.40      0.39
    Net Earnings                       12,997    10,081    12,702    12,546
    - Basic Earnings per Share           0.40      0.32      0.40      0.39
    - Diluted Earnings per Share         0.40      0.31      0.40      0.39
    -------------------------------------------------------------------------
    

    Samuel Manu-Tech Inc. (SMT-TSX) is a leading North American industrial
products and technology company producing and distributing a wide range of
steel, plastic and related industrial products and services from locations in
Canada, the United States, and Mexico.

    Mark C. Samuel
    Chairman
    & CEO

    August 3, 2007

    -------------------------------------------------------------------------
    The "Second Quarter Results" utilize the term "operating profit (EBIT)"
    which is a non-GAAP measure. Securities regulations require that
    corporations caution readers that these terms do not have standardized
    meanings under GAAP and are unlikely to be comparable to similar measures
    used by other companies. Operating profit (EBIT) is defined as earnings
    from continuing operations before restructuring charge, interest and
    income taxes.

    Operating profit (EBIT) should not be construed as a substitute for net
    earnings or cash flows from operations (each as determined in accordance
    with generally accepted accounting principles) for the purpose of
    analyzing the Company's operating performance, financial position or cash
    flows. The Company believes that, in addition to cash flow from
    operations and net earnings, operating profit is a useful financial
    performance measurement for assessing operating performance as it
    provides investors with an additional basis to evaluate the ability of
    the Company to incur and service debt and to fund capital expenditures.

    This report may contain forward-looking information that is subject to
    risks, uncertainties and assumptions. Such information represents our
    current views based on information as at the date of issuing this report.
    We do not intend to update this information and disclaim any legal
    obligation to the contrary.
    -------------------------------------------------------------------------



    

    CONSOLIDATED STATEMENTS OF EARNINGS
    -------------------------------------------------------------------------
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars except per share amounts)

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------

    NET SALES             $   229,235  $   219,001  $   463,843  $   420,790
    COSTS AND EXPENSES
     (INCOME):
      Cost of sales,
       selling &
       administration         207,559      192,697      422,615      373,361
      Depreciation and
       amortization             5,430        5,536       11,189       11,008
      Foreign exchange
       loss (gain)              1,136          673          830        1,109
      Interest on
       long-term debt           1,799          519        3,391          753
      Interest on
       short-term debt            334          104          545          153
      Interest income             (21)         (10)         (33)         (26)
    -------------------------------------------------------------------------
                              216,237      199,519      438,537      386,358

    EARNINGS FROM
     CONTINUING OPERATIONS
     BEFORE RESTRUCTURING
     CHARGE AND INCOME
     TAXES                     12,998       19,482       25,306       34,432

    RESTRUCTURING CHARGE
     (note 4)                   1,328            -        4,992            -
    -------------------------------------------------------------------------

    EARNINGS FROM
     CONTINUING OPERATIONS
     BEFORE INCOME TAXES       11,670       19,482       20,314       34,432

    INCOME TAXES:
      Current                   3,732        6,149        6,557       10,654
      Future                      (90)         644         (209)       1,155
    -------------------------------------------------------------------------
                                3,642        6,793        6,348       11,809
    -------------------------------------------------------------------------

    NET EARNINGS FROM
     CONTINUING OPERATIONS      8,028       12,689  $    13,966  $    22,623
    -------------------------------------------------------------------------
    NET EARNINGS FROM
     DISCONTINUED
     OPERATIONS (note 6)        1,169          308        2,255          455
    -------------------------------------------------------------------------

    NET EARNINGS          $     9,197  $    12,997  $    16,221  $    23,078
    -------------------------------------------------------------------------
    BASIC EARNINGS
     PER SHARE
      From continuing
       operations                0.25         0.39         0.44         0.71
      From discontinued
       operations                0.04         0.01         0.07         0.01
    -------------------------------------------------------------------------
                          $      0.29  $      0.40  $      0.51  $      0.72
    -------------------------------------------------------------------------
    DILUTED EARNINGS
     PER SHARE
      From continuing
       operations                0.24         0.39         0.43         0.70
      From discontinued
       operations                0.04         0.01         0.07         0.01
    -------------------------------------------------------------------------
                          $      0.28  $      0.40  $      0.50  $      0.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.


    SEGMENTED INFORMATION
    -------------------------------------------------------------------------
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
    NET SALES                  2007         2006         2007         2006
    -------------------------------------------------------------------------
    Packaging             $   104,676  $   106,028  $   210,908  $   209,976
    Metal Processing          110,581       97,360      224,679      179,734
    Distribution               13,978       15,613       28,256       31,080
    -------------------------------------------------------------------------
    Consolidated          $   229,235  $   219,001  $   463,843  $   420,790
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS BEFORE
     RESTRUCTURING CHARGE,
     INTEREST AND
     INCOME TAXES              2007        2006        2007        2006
    -------------------------------------------------------------------------
    Packaging             $     4,808  $     9,499  $    10,363  $    18,148
    Metal Processing           12,526       12,466       23,242       21,356
    Distribution                  392          756          830        1,509
    Corporate                  (2,616)      (2,626)      (5,226)      (5,701)
    -------------------------------------------------------------------------
    Earnings from
     continuing operations
     before restructuring
     charge, interest
     and income taxes          15,110       20,095       29,209       35,312
    Restructuring charge        1,328            -        4,992            -
    Interest on
     long-term debt             1,799          519        3,391          753
    Interest on
     short-term debt              334          104          545          153
    Interest income               (21)         (10)         (33)         (26)
    -------------------------------------------------------------------------
    Earnings from
     continuing operations
     before income taxes  $    11,670  $    19,482  $    20,314  $    34,432
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.




    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    June 30, 2007 (unaudited) and December 31, 2006 (audited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                                        June 30,     Dec. 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    ASSETS

    CURRENT ASSETS:
      Cash and cash equivalents                     $     4,892  $     5,744
      Accounts receivable                               127,398      117,068
      Inventories                                       197,137      184,134
      Prepaid expenses and sundry (note 1)                4,946        5,663
      Future income taxes                                 6,804        7,046
      Current assets of discontinued
       operations (note 6)                               23,646       20,824
    -------------------------------------------------------------------------
                                                        364,823      340,479

    CAPITAL ASSETS                                      152,024      150,343
    ASSETS HELD FOR SALE (note 4)                         1,656            -
    ACCRUED PENSION ASSET                                 9,654        7,394
    FUTURE INCOME TAXES                                     468          489
    GOODWILL                                             50,320       51,631
    INTANGIBLE ASSETS                                    12,959       15,460
    OTHER ASSETS                                          2,710        2,600
    LONG-TERM ASSETS OF DISCONTINUED
     OPERATIONS (note 6)                                  1,090        1,244
    -------------------------------------------------------------------------
                                                    $   595,704  $   569,640
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
      Bank indebtedness                             $    26,150  $    10,011
      Accounts payable and accrued liabilities           77,299       79,993
      Deferred revenue                                    4,169        4,508
      Dividends payable                                   3,247        3,234
      Income taxes payable                                  305        1,486
      Current liabilities of discontinued
       operations (note 6)                                6,000        4,935
    -------------------------------------------------------------------------
                                                        117,170      104,167

    LONG-TERM DEBT                                      118,789      104,164
    POST-RETIREMENT BENEFITS OTHER THAN PENSIONS          2,408        2,285
    FUTURE INCOME TAXES                                  14,431       15,033
    -------------------------------------------------------------------------
                                                        252,798      225,649

    SHAREHOLDERS' EQUITY:
      Capital stock (note 2)                             29,823       29,464
      Contributed surplus                                   162          162
      Retained earnings                                 337,272      327,472
      Accumulated other comprehensive loss (note 3)     (24,351)     (13,107)
    -------------------------------------------------------------------------
                                                        342,906      343,991
    SUBSEQUENT EVENT (note 6)
    -------------------------------------------------------------------------
                                                    $   595,704  $   569,640
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.


    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    -------------------------------------------------------------------------
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                                              2ND QUARTER
    -------------------------------------------------------------------------
                                                           2007         2006
    -------------------------------------------------------------------------

    RETAINED EARNINGS, BEGINNING OF PERIOD          $   327,472  $   293,533
    NET EARNINGS                                         16,221       23,078
    DIVIDENDS PAID ON COMMON SHARES                      (6,421)      (6,374)
    -------------------------------------------------------------------------
    RETAINED EARNINGS, END OF PERIOD                $   337,272  $   310,237
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------

    CASH FLOWS FROM
     (USED IN) OPERATING
     ACTIVITIES:
      Net earnings from
       continuing
       operations         $     8,028  $    12,689  $    13,966  $    22,623
      Items not
       involving cash:
        Depreciation and
         amortization           5,430        5,536       11,189       11,008
        Loss on disposal
         of capital assets         33           25           56           24
        Future income taxes       (90)         644         (209)       1,155
        Increase in
         accrued pension
         asset                 (1,477)        (168)      (2,301)        (386)
        Decrease in
         post-retirement
         benefits other
         than pensions            235            9          288           22
    -------------------------------------------------------------------------
                               12,159       18,735       22,989       34,446
      Change in non-cash
       operating working
       capital:
        Decrease (increase)
         in accounts
         receivable            (4,165)      (8,685)     (14,809)     (18,630)
        Decrease (increase)
         in inventories        (7,320)     (11,587)     (20,074)     (18,583)
        Decrease (increase)
         in prepaid
         expenses and
         sundry                (2,091)      (1,561)         544         (845)
        Increase (decrease)
         in accounts payable
         and accrued
          liabilities          (8,418)       5,742        1,290       19,145
        Increase (decrease)
         in deferred revenue      857          542         (100)         584
        Increase (decrease)
         in income taxes
         payable                  754       (2,269)      (1,196)      (2,382)
    -------------------------------------------------------------------------
                               (8,224)         917      (11,356)      13,735
    CASH FLOWS FROM
     (USED IN) INVESTING
     ACTIVITIES:
      Proceeds on sale
       of capital assets           39           44           91          132
      Purchase of capital
       assets                  (9,686)      (6,551)     (19,101)     (10,429)
      Business acquisitions         -      (45,474)           -      (45,474)
    -------------------------------------------------------------------------
                               (9,647)     (51,981)     (19,010)     (55,771)
    CASH FLOWS FROM
     (USED IN) FINANCING
     ACTIVITIES:
      Decrease (increase)
       in other assets           (425)      (1,169)        (354)         (28)
      Issuance of common
       shares (note 2)            180          248          359          640
      Increase in
       long-term debt          13,624       44,391       24,168       43,432
      Repayment of
       long-term debt            (271)           -       (1,809)      (1,187)
      Dividends paid on
       common shares           (3,212)      (3,189)      (6,421)      (6,374)
    -------------------------------------------------------------------------
                                9,896       40,281       15,943       36,483
    CASH FLOWS FROM
     (USED IN)
     DISCONTINUED OPERATIONS
      Operating activities      1,062        1,473       (2,557)         366
      Investing activities         (2)        (103)         (46)        (121)
    -------------------------------------------------------------------------
                                1,060        1,370       (2,603)         245

    EFFECT OF EXCHANGE
     RATE CHANGES ON CASH
     POSITION                      (2)          (6)          35           23
    -------------------------------------------------------------------------
    INCREASE (DECREASE)
     IN CASH POSITION          (6,917)      (9,419)     (16,991)      (5,285)
    CASH POSITION,
     BEGINNING OF PERIOD      (14,341)        (673)      (4,267)      (4,807)
    -------------------------------------------------------------------------
    CASH POSITION,
     END OF PERIOD        $   (21,258) $   (10,092) $   (21,258) $   (10,092)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash position is comprised of cash and cash equivalents, with maturities
    at the date of purchase of three months or less, less bank indebtedness.

    See accompanying notes to consolidated financial statements.



    CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
    -------------------------------------------------------------------------
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------

    NET EARNINGS          $     9,197  $    12,997  $    16,221  $    23,078

    OTHER COMPREHENSIVE
     INCOME (LOSS),
     net of tax:
      Unrealized gain
       (loss) on
       translation of
       net foreign
       operations             (10,378)      (7,319)     (11,260)      (5,191)
      Change in
       unrealized
       derivative gain
       (loss) on
       derivatives
       designated as
       cash flow hedges
       (net of taxes
       of $7 for
       2nd Quarter;
       $39 for the
       six months)                 14            -           75            -
      Reclassification
       of loss on cash
       flow hedges (net
       of taxes of $15
       for the 2nd Quarter;
       $220 for the
       six months)                 28            -          423            -
    -------------------------------------------------------------------------
    TOTAL OTHER
     COMPREHENSIVE
     INCOME (LOSS)            (10,336)      (7,319)     (10,762)      (5,191)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    COMPREHENSIVE
     INCOME (LOSS)       $     (1,139)  $    5,678  $     5,459  $    17,887
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Six Months ended June 30, 2007 and 2006 (unaudited)
    (in thousands of dollars except per share amounts)

    1.  SIGNIFICANT ACCOUNTING POLICIES:

    The unaudited consolidated financial statements are prepared in
    accordance with accounting principles generally accepted in Canada. These
    financial statements should be read in conjunction with the Company's
    audited annual financial statements for the year ended December 31, 2006.
    All accounting policies and methods of their application used in the
    interim financial statements are consistent with the Company's annual
    financial statements except as noted below:

    Adoption of new accounting policies On January 1, 2007, the Company
    adopted CICA Handbook Sections 1530, "Comprehensive Income", Section
    3251, "Equity", Section 3855, "Financial Instruments - Recognition and
    Measurement", Section 3861, "Financial Instruments - Disclosure and
    Presentation" and Section 3865, "Hedges". Section 1530 establishes
    standards for reporting and presenting comprehensive income, which is
    defined as the change in equity from transactions and other events from
    non-owner sources. Other comprehensive income refers to items recognized
    in comprehensive income that are excluded from net income calculated in
    accordance with generally accepted accounting principles.

    Section 3861 establishes standards for presentation of financial
    instruments and non-financial derivatives, and identifies the information
    that should be disclosed about them. Under the new standards, policies
    followed for periods prior to the effective date generally are not
    reversed and therefore, the comparative figures have not been restated
    except for the requirement to restate the currency translation adjustment
    as part of other comprehensive income. Section 3865 describes when and
    how hedge accounting can be applied as well as the disclosure
    requirements. Hedge accounting enables the recording of gains, losses,
    revenues and expenses from derivative financial instruments in the same
    period as for those related to the hedged item.

    Section 3855 prescribes when a financial asset, financial liability or
    non-financial derivative is to be recognized on the balance sheet and at
    what amount, requiring fair value or cost-based measures under different
    circumstances. Under Section 3855, financial instruments must be
    classified into one of these five categories: held-for-trading, held-to-
    maturity, loans and receivables, available-for-sale financial assets and
    other financial liabilities. All financial instruments, including
    derivatives, are measured on the balance sheet at fair value except for
    loans and receivables, held-to-maturity investments and other financial
    liabilities which are measured at amortized cost. Subsequent measurement
    and changes in fair value will depend on their initial classification, as
    follows: held-for-trading financial assets are measured at fair value and
    changes in fair value are recognized in net earnings; available-for-sale
    financial instruments are measured at fair value with changes in fair
    value recorded in other comprehensive income until the investment is
    derecognized or impaired at which time the amounts would be recorded in
    net earnings.

    Under adoption of these new standards, the Company designated its cash
    and bank indebtedness as held-for-trading, which is measured at fair
    value. Accounts receivable are classified as loans and receivables, which
    are measured at amortized cost. Accounts payable and accrued liabilities
    and long-term debt are classified as other financial liabilities, which
    are measured at amortized cost.

    All derivative instruments are recorded in the consolidated statement of
    earnings at fair value unless exempted from derivative treatment as a
    normal purchase and sale. All changes in their fair value are recorded in
    earnings unless cash flow hedge accounting is used, in which case changes
    in fair value are recorded in other comprehensive income. The Company has
    elected to apply this accounting treatment for all embedded derivatives
    in host contracts entered into on or after January 1, 2003. The impact of
    the change in accounting policy related to embedded derivatives was not
    material.

    The Company enters into foreign currency forward contracts to hedge
    foreign exchange exposure on anticipated operational cash flows. The
    effective portion of changes in the fair value of derivatives that are
    designated and qualify as cash flow hedges is recognized in other
    comprehensive income. Any gain or loss in fair value relating to the
    ineffective portion is recognized immediately in the statement of
    earnings. The impact on opening retained earnings was not material. Upon
    adoption of the new standards, the Company remeasured its cash flow hedge
    derivatives at fair value. The fair value of the hedging items as at
    January 1, 2007 was an unrealized loss of $732 ($482 net of tax). The
    fair value of the contracts as at June 30, 2007 was an unrealized gain of
    $24 ($16 net of tax) and is recorded within prepaid expenses and sundry
    on the consolidated balance sheet.

    At June 30, 2007, the Company was committed to the sale of U.S. $12,000
    under forward exchange contracts at rates of exchange ranging from
    Cdn. $1.0594 to Cdn. $1.07455 maturing from July 3, 2007 to September 4,
    2007.

    In addition, the Company was committed to the sale of EUR 535 under
    forward exchange contracts. The contracts are at rates of exchange
    ranging from Cdn. $1.4479 to Cdn. $1.5512 maturing from July 2, 2007 to
    October 2, 2007. The Company was also committed to the sale of GBP 66
    under forward exchange contracts. The contracts are at rates of exchange
    ranging from Cdn. $2.1883 to Cdn. $2.2565 maturing from July 2, 2007 to
    October 9, 2007. The Company was also committed to the purchase of GBP 30
    under a foreign exchange contract at a rate of $1.3269 maturing between
    July 2, 2007 to August 1, 2007.

    2.  CAPITAL STOCK:

    -------------------------------------------------------------------------
                                                        June 30,     Dec. 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    Number of common shares outstanding              32,116,245   32,069,845
    Number of options outstanding                       437,900      484,300
    -------------------------------------------------------------------------

    The Company did not issue any stock options during the three months and
    six months ended June 30, 2007. During the quarter ended June 30, 2007,
    21,400 stock options were exercised, resulting in the issuance of
    21,400 common shares in exchange for proceeds of $180. During the six
    months ended June 30, 2007, 46,400 stock options were exercised,
    resulting in the issuance of 46,400 common shares in exchange for
    proceeds of $359.

    Weighted average number of shares:

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Basic shares           32,109,112   31,868,345   32,094,978   31,844,562
    Effect of dilutive
     stock options            191,372      290,294      170,228      305,707
    Diluted shares         32,300,484   32,158,639   32,265,206   32,150,269
    -------------------------------------------------------------------------

    The Company applied the settlement method of accounting for stock options
    granted to employees and directors during the year ended December 31,
    2002. Accordingly no compensation cost has been recognized for the
    177,500 stock options issued during that period. For the purposes of pro
    forma disclosures, the weighted average estimated fair value for the
    177,500 stock options granted during the year ended December 31, 2002 was
    $1.77 per share, with a total compensation cost of $314, which is
    amortized to earnings over the options' vesting period. The following
    table outlines the pro forma disclosure provisions had the compensation
    costs for the Company's stock options been determined under the fair-
    value based method of accounting for awards granted from January 1, 2002
    through to December 31, 2002.

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net earnings
     as reported          $     9,197  $    12,997  $    16,221  $    23,078
    Pro forma net
     earnings                   9,182       12,982       16,190       23,047
    Pro forma earnings
     per share - basic    $      0.28  $      0.40  $      0.50  $      0.72
               - diluted  $      0.28  $      0.40  $      0.50  $      0.71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    3.  ACCUMULATED OTHER COMPREHENSIVE LOSS:

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    CUMULATIVE TRANSLATION
     ADJUSTMENT
      Balance, beginning
       of period          $   (13,989) $   (12,213) $   (13,107) $   (14,341)
      Unrealized gain
       (loss) on
       translation of
       net foreign
       operations             (10,378)      (7,319)     (11,260)      (5,191)
    -------------------------------------------------------------------------
    Balance, end of period    (24,367)     (19,532)     (24,367)     (19,532)

    UNREALIZED DERIVATIVE
     GAIN (LOSS) ON CASH
     FLOW HEDGES, net

      Balance, beginning
       of period                  (26)           -            -            -
      Impact of new cash
       flow hedge
       accounting rules
       on January 1, 2007
       (net of taxes of $250)       -            -         (482)           -
      Changes in unrealized
       derivative gain
       (loss) on
       derivatives
       designated as cash
       flow hedges (net of
       taxes of $7 for the
       2nd quarter; $39
       for the six months)         14            -           75            -
      Reclassification of
       loss on cash flow
       hedges (net of
       taxes of $15 for
       the 2nd quarter;
       $220 for the six
       months)                     28            -          423            -
    -------------------------------------------------------------------------
    Balance, end of period         16            -           16            -

    -------------------------------------------------------------------------
    ACCUMULATED OTHER
     COMPREHENSIVE LOSS   $   (24,351) $   (19,532) $   (24,351) $   (19,532)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4.  RESTRUCTURING CHARGE:

    On January 5, 2007, the Company announced the approval of a formal plan
    to close its Warden Ave. manufacturing facility in Scarborough, Ontario.
    The Company estimates it will incur costs of $9,500 ($6,200 after income
    taxes) to provide for facility closure, disposal of certain assets,
    severance and other related items. The restructuring costs are associated
    with the Packaging segment, and are reported in the restructuring charge
    line within the consolidated statements of earnings. As of June 30, 2007,
    $4,992 of restructuring cost has been recorded. The write-off of the
    machinery and equipment and other assets results from the closure of the
    facility which commenced in May 2007. Impairment of the capital assets
    was determined based on the excess of the carrying amount, over the fair
    value of the long-lived assets calculated using the estimated future cash
    flows directly related to the capital assets. Other restructuring costs
    include inventory impairment and facility closure costs.

    The restructuring costs do not include any potential gain on the
    disposition of the associated land and building which have a net book
    value of $1,656 and are available for sale. The following table
    highlights the activity and balance of the restructuring charge for the
    period ended June 30, 2007.

    -------------------------------------------------------------------------
                           Total costs      Costs      Cumulative   Accrued
    Restructuring Charge   expected to     incurred     Drawdown   Balance at
                           be incurred   Year-to-date               June 30,
                                                                      2007
    -------------------------------------------------------------------------
    Severance, termination
     costs & benefits, and
     retention bonuses          3,291        2,606        1,837          769
    -------------------------------------------------------------------------
    Pension settlement
     & curtailment              4,101        1,127            -        1,127
    -------------------------------------------------------------------------
    Write-off of machinery
     and equipment and
     other assets                 537          424          424            -
    -------------------------------------------------------------------------
    Other                       1,571          835          410          425
    -------------------------------------------------------------------------
    Total Restructuring
     Charge                     9,500        4,992        2,671        2,321
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                            Balance,   Additions to     Charges      Balance,
                           March 31,  Restructuring     against      June 30,
    Restructuring Accrual     2007       Accrual     Restructuring     2007
                                      (expensed in      Accrual
                                       2nd Quarter)
    -------------------------------------------------------------------------
    Severance, termination
     costs & benefits, and
     retention bonuses    $     2,390  $       194  $     1,815  $       769
    Pension settlement
     & curtailment              1,127            -            -        1,127
    Write-off of machinery
     and equipment and
     other assets                   -          424          424            -
    Other                           -          710          285          425
    -------------------------------------------------------------------------
    Total                 $     3,517  $     1,328  $     2,524  $     2,321
    -------------------------------------------------------------------------

    5. FUTURE BENEFIT COSTS:

    The Company has incurred pension and other post-retirement benefit costs
    as noted below.

    -------------------------------------------------------------------------
                                  2ND QUARTER                SIX MONTHS
    -------------------------------------------------------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Defined benefit
     pension plans        $     1,146  $     1,332  $     3,420  $     2,665
    -------------------------------------------------------------------------
    Defined contribution
     pension plans                565          426        1,120          877
    -------------------------------------------------------------------------
    Other benefit plans            62           70          129          143
    -------------------------------------------------------------------------
    Total                 $     1,773  $     1,828  $     4,669  $     3,685
    -------------------------------------------------------------------------

    6.  DISCONTINUED OPERATIONS:

    On July 31, 2007, the Company sold the operations and net assets of its
    U.S. subsidiary, Energy Steel Products, Inc. ("ESP"), for consideration
    of U.S. $25,000, subject to certain adjustments for working capital
    items. The sale of this U.S. distribution operation, which was included
    within the distribution segment, will generate an estimated after tax
    gain in the third quarter of this year of U.S. $2,600. Accordingly, the
    results of operations and financial position of ESP have been segregated
    and presented separately as discontinued operations in the consolidated
    financial statements. The net income from the discontinued operations
    included in the consolidated financial statements is as follows:

                          ------------------------- -------------------------
                                 2ND QUARTER                SIX MONTHS
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                          ------------------------- -------------------------

    Net Sales                  12,704  $    13,170       26,213  $    24,182
    Earnings before
     income taxes               1,917          505        3,697          746
    Income taxes                  748          197        1,442          291
                          ------------------------- -------------------------
    Net income from
     discontinued
     operations           $     1,169  $       308  $     2,255  $       455

    The assets and liabilities of the discontinued operations presented on
    the balance sheet are as follows:

                                                    -------------------------
                                                      June 30,   December 31,
                                                    -------------------------
                                                        2007         2006
                                                    -------------------------

    Accounts Receivable                             $     5,777  $     3,987
    Inventories                                          17,806       16,748
    Prepaid Expenses and sundry                              63           89
                                                    -------------------------
    Total Current Assets                                 23,646       20,824
    Capital Assets                                        1,090        1,244
                                                    -------------------------
    Total Assets                                    $    24,736  $    22,068
                                                    -------------------------
    Accounts Payable and accrued liabilities              6,000        4,935
                                                    -------------------------
    Net assets of discontinued operations           $    18,736  $    17,133
                                                    -------------------------
                                                    -------------------------

    7. COMPARATIVE FIGURES

    In order to conform to the current year presentation, the comparative
    figures have been restated due to the discontinuance of the Company's
    U.S. distribution operations as a result of selling its subsidiary,
    Energy Steel Products, Inc.
    




For further information:

For further information: John D. Amodeo, Vice-President and Chief
Financial Officer, Samuel Manu-Tech Inc., 185 The West Mall, Suite 1500,
Toronto, Ontario, M9C 5L5, Telephone: (416) 626-2190, Website:
www.samuelmanutech.com, Email address: smt@samuelmanutech.com

Organization Profile

SAMUEL MANU-TECH INC.

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