Winalta Inc. Reports Second Quarter Fiscal 2010 Results

CALGARY, June 29 /CNW/ - Winalta Inc. (TSX-V - "WTA-A") Winalta Inc. ("Winalta" or, the "Company") today announced financial results for its fiscal 2010 second quarter ended April 30, 2010. The Company reports an EBITDA for the three months ended April 30, 2010 was positive $0.1 million relative to negative $0.3 million in 2009. The Company incurred a net loss of $5.2 million on revenues of $6.0 million ($0.14 loss per share fully diluted) for the three months ended April 2010 compared to net loss of $5.2 million on revenues of $4.9 million ($0.15 loss per share fully diluted) in 2009.

On April 26, 2010, the Company applied for and obtained an order (the "Winalta Order") from the Courts granting creditor protection under the Companies' Creditor Arrangement Act ("CCAA") and a Monitor was appointed. The order applies to Winalta Inc, Winalta Homes Inc., Winalta Manufacturing Inc., Winalta Holdings Inc., Winalta Carlton Homes Inc., Winalta Oilfield Inc., Winalta Carriers Inc., Baywood Property Management Inc., Winalta Home Protection Inc., Winalta Construction Inc., 916830 Alberta Ltd. and certain non-operating subsidiaries collectively known as Winalta Inc. The Company has consulted with its primary lender and following such consultation continues to work to service and further reduce its debt by, among other things, attempting to sell its non-core assets to fund operations and meet its debt obligations. Accordingly, the interim financial results have been prepared on a going concern basis, which assumes that the future operations will allow for the realization of assets and discharge of liabilities in the normal course of business.

The Winalta Order was granted by the Court of Queen's Bench of Alberta and Deloitte and Touche Inc. were appointed as Monitor.

On May 19, 2010, the Company was granted an extension to July 2, 2010 to develop a strategy for a restructuring plan to emerge from CCAA. Further updates will be provided with respect to the CCAA proceedings at that time.

Winalta's decreased revenue and net loss for the second quarter 2009 are reflective of the following:

    
    -   Net losses associated with the divestiture of Winalta's construction
        division

    -   Continued revenue and margin pressure for homes due to reduced
        inventory levels and product selection

    -   Minimal production output from the Acheson production facility

    -   Continued General and Administrative cost reduction in the second
        quarter of 2010 will continued to be reflected in Winalta third and
        fourth quarter results
    

Artie Kos, who assumed the role of President and CEO of Winalta Inc. on May 21, 2010, immediately focused on developing a disposal plan for non-core asset sales. Mr. Kos commented that, "Winalta is actively divesting of its non-core assets and is well positioned with salable, profit generating assets. Proceeds from the sale of non-core assets and homes sales are being used to pay down debt."

    
    Three Months Ended April 30, 2009
    ($ thousands)
                                                              2010    2009(1)

    Revenue                                                $ 5,973   $ 4,875

    Gross profit                                           $ 1,763   $ 2,158

    Gross profit %                                             30%       44%

    Net earnings (loss)                                    $(5,188)  $(5,181)

    Loss per share                                         $ (0.14)  $ (0.15)

    EBITDA                                                 $   139   $  (322)

    EBITDA per share                                       $(0.004)  $ (0.01)



    Three Months Ended April 30, 2010
    ($ thousands)
                                         Homes            Oilfield
                                          2010    2009(1)     2010    2009(1)

    Revenue                             $1,671    $1,686    $4,214    $3,169

    Gross profit                           $91      $397    $2,025    $2,168

    Gross profit %                          5%       24%       48%       68%

    (1) Comparative results for 2009 have been adjusted from previous
        reported results to be consistent with the current period for certain
        reclassification of management overhead costs and earnings from
        discontinued operations
    

The Homes Division experienced a busy second quarter for home sales. Increased unit deliveries, combined with competitive price discounts from the retail sale of homes as well as the sale of manufactured homes in subdivisions resulted in flat revenue in Homes Division for the second quarter of 2010 as compared to the same period in 2009. The Manufacturing Division is currently not producing any units.

Oilfield Division revenue increased by 10% for the six months ended April 30, 2010 over the same period of 2009. Oilfield Division revenue of $4.2 million for the three months ended April 30, 2010 was comparable to $3.2 million for the same quarter in 2009. The oilfield rentals operation is looking forward to consistent profitability and has secured the rental of a number of camps into the summer seasons.

The net loss for the second quarter of $5.2 million relative to net loss of $5.2 million in 2009 is the result of reduced overall revenue combined with the losses incurred on discontinued operations and production inefficiencies related to non-production at the Acheson manufacturing facility.

The Winalta team is focused on divesting non-core assets, converting existing inventories into cash, paying down current debt and strengthening the balance sheet.

Additional information and Management's Discussion and Analysis are available on SEDAR (www.sedar.com).

Use of Non-GAAP Measures

EBITDA is a non-GAAP measurement defined as "Earnings before interest, taxes, depreciation, amortization, impairment charges, discontinued operations, loss/gain on disposal of assets and stock-based compensation." The Company reports on EBITDA because it is a key measure used by management to evaluate performance. The Company believes EBITDA assists investors in assessing our performance on a consistent basis without regard to items such as depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods or non-operating factors such as historical cost. EBITDA is not a calculation based on GAAP and is not considered an alternative to net earnings in measuring the Company's performance. EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other issuers. EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, capital expenditures, debt changes and other sources and uses of cash, which are disclosed in the consolidated statement of cash flows.

About Winalta

Winalta Inc. is an integrated company with three main operating divisions, Homes, Industrial, and Manufacturing. The Homes Division sells CSA approved homes via retail centers, communities and supply arrangements. The Oilfield Division leases portable industrial accommodations and catering services to the energy sector.

Winalta Inc. shares trade on the TSX Venture Exchange under the symbol "WTA.A".

Forward Looking Statements

The words "believe", "expect", "intend", "anticipate", or any variation of such words and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. The CCAA proceedings have had a direct impact on our business and have compounded these risks and uncertainties. Winalta has assumed that the CCAA proceedings will allow the company to continue to operate as a going concern, but the actions and decisions of our creditors and other third parties with interest in the CCAA proceedings may be inconsistent with our plans and therefore could cause actual events to differ materially from those contemplated in our forward-looking statements.

These risks, without limitation include the following:

Strategic Risks - affecting our ability to:

    
    -   Continue as a going concern;

    -   Develop a comprehensive restructuring plan in an effective and timely
        manner;

    -   Resolve ongoing issues with creditors and other third parties whose
        interest may differ from ours;

    -   Obtain Court approval with respect to motions in the Creditor
        Protection Proceedings filed from time to time;

    -   Obtain creditor, Court and any other requisite third-party approvals
        for a comprehensive restructuring plan;

    -   Successfully implement a comprehensive restructuring plan or plans of
        reorganization;

    -   Obtain Court approval for asset sales, as required.

    Financial risks - affecting our ability to:

    -   Generate cash from operations and maintain adequate cash-on-hand;

    -   Continue to maintain our cash management arrangements and obtain any
        further approvals from the Monitor, the Courts or other third
        parties, as necessary to continue such arrangements;

    -   Obtain alternative or replacement financing to replace the primary
        lender in restructuring our indebtedness and other obligations in a
        manner that allows us to obtain the approval of a plan or plans of
        reorganization form affected creditors;

    -   Realize full or fair value for any assets we may divest as part of a
        comprehensive restructuring plan.

    Operation risks - affecting our ability to:

    -   Attract and retain customers despite the uncertainty caused by the
        Creditor Protection Proceedings;

    -   Avoid reduction in, or delay or suspension of, customer orders as a
        result of the uncertainty caused by the Creditor Protection
        Proceedings;

    -   Operate our business effectively in consultation with the Monitor;

    -   Actively and adequately communicate on and respond to events
        associated with the Creditor Protection Proceedings that could
        adversely affect our relationships with customers, suppliers and
        employees.

    Procedural risks - affecting our ability to:

    -   Obtain Court orders or approvals with respect to motions we file from
        time to time;

    -   Reject, repudiate or terminate contracts.
    

These risks and uncertainties could affect our business and operations in various ways. For example, negative events associated with the CCAA proceedings could adversely affect our operations and financial condition, sales, customer relationships, employees and vendors particularly if the CCAA proceedings are retracted. The Company continually monitors and evaluates these risk factors and takes action to minimize them. However, as many of these risks are outside of Company control, it is impossible to completely mitigate these risks. Readers are accordingly cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date of this news release. Winalta undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by securities laws.

The TSX Venture Exchange has neither approved nor disapproved the contents of this news release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

%SEDAR: 00005154E

For further information: Business Contact, Artie Kos, President & CEO, Winalta Inc., [email protected], Tel: [phone], Fax: [phone], www.winaltainc.com; Austin Fraser, VP Corporate Development and Investor Relations, Tel: [phone]