Commercial Solutions Inc.
TSX : CSA

Commercial Solutions Inc.

December 17, 2007 08:00 ET

Acquisitions Drive Commercial’s Revenue Growth

EDMONTON, ALBERTA--(Marketwire - Dec. 17, 2007) -

Fiscal 2007 Highlights

- Sales increased by 14% to $157.9 million versus $138.5 million

- Completed two acquisitions to fuel 14% revenue growth

- Gross margins increased to 28.6%

- EBITDA as a percentage of sales was 5.8% in fiscal 2007 versus 10.3% in the prior year

- Net earnings amounted to $3.5 million ($0.18 diluted EPS) versus $7.9 million ($0.43 diluted EPS) last year



All figures in CAD

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Three Months Ended Sept. 30 Twelve Months Ended Sept. 30
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2007 2006 Change 2007 2006 Change
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Revenue 35,594,663 40,900,553 -13.0% 157,865,300 138,500,570 14.0%
EBITDA 1,669,633 5,109,550 -67.3% 9,210,296 14,285,017 -35.5%
Net Earnings 298,951 2,885,420 -89.6% 3,537,686 7,951,282 -55.5%
Basic EPS $0.01 $0.16 -92.7% $0.18 $0.49 -62.7%
Diluted EPS $0.02 $0.14 -86.5% $0.18 $0.43 -59.1%
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Note: EBITDA is defined as earnings before interest, taxes, depreciation
and amortization


COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX:CSA) a leading Canadian distributor of bearings, power transmission, oilfield, industrial, safety, survey and resource management equipment products and services, today announced its financial results for the three-month and twelve-month periods ended September 30, 2007. A complete copy of the Company's report is available on the Internet at www.sedar.com. Financial highlights from fiscal 2007 are as follows:

For the three-month period ended September 30, 2007, Commercial reported revenue of $35.6 million compared to revenue of $40.9 million for the same period last year, representing a year-over-year decrease of 13 percent due to the industry-wide slow down in the Western Canadian oil and gas, and forest industries. Gross margin in the quarter remained relatively the same at 30.6% from 30.0% in the fourth quarter of 2006. The Company reported Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $1.7 million versus $5.1 million for the same period last year. Net income for the quarter amounted to $0.30 million compared to $2.9 million during the fourth quarter of fiscal 2006.

For the twelve-month period ended September 30, 2007, Commercial reported revenue of $157.9 million compared to revenue of $138.5 million for the same period last year, representing a year-over-year increase of 14 percent. Gross margins improved to 28.7% from 28.5%. However, EBITDA decreased to $9.2 million versus $14.3 million during 2006. Net income decreased to $3.5 million compared to $7.9 million for the twelve months ended September 30, 2006.

"Despite fiscal 2007 proving to be a challenging year for all companies impacted by the slowdown in the Western Canadian oil and gas, and forest industries, we managed to achieve 14% revenue growth," noted James Barker, President & CEO of Commercial. "We will continue to focus on our operating costs to bring them in line with our revenues. This will enable us to be well positioned to take full advantage of further acquisitions."

As at September 30, 2007, the basic average number of shares outstanding was 19,359,381 (20,097,009 fully diluted) versus 16,328,228 (18,419,153 fully diluted) at the end of the same period in the year prior.

The Company will host a conference call to discuss the fiscal 2007 results on Monday December 17, 2007 at 4:00 p.m. Eastern Standard Time (EST). Scheduled speakers for the call will include Jim Barker, President and CEO, and Eric Sauze, CFO of Commercial Solutions Inc. Participants should dial 416-641-6125 or 1-866-542-4236 at least 10 minutes prior to the conference time of 4:00 p.m. For those unable to participate on the call, a replay will be available after 6:00 p.m. at 416-695-5800 or 1-800-408-3053 passcode 3245084 until midnight, December 24, 2007.

About Commercial

Headquartered in Edmonton, Alberta, Commercial is one of Canada's leading independent industrial distributors with 40 Services Centres and approximately 386 employees located across Canada. Commercial offers more than 160,000 items critical to maintenance repair and operations (MRO) and original equipment manufacturer (OEM) customers. The Company represents 450 leading manufacturers and serves over 11,000 customer accounts within a broad cross-section of industries, including oil and gas, forestry, food processing, chemical processing, mining and aggregate, utilities, agriculture and construction. Commercial trades under the symbol "CSA" on the Toronto Stock Exchange. For further information on the Company, please visit www.commercialsolutions.ca and for detailed financial information visit www.sedar.com.

Forward Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as expected financial performance, business prospects, development activities and like matters. These statements involve risk and uncertainties, including but not limited to the risk factors previously described. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Commercial undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, with an exception to securities laws requirements.



Consolidated Statements of Earnings and Comprehensive Income

Years ended September 30, 2007 and 2006

Years Ended September 30 2007 2006
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Revenue $ 157,865,300 $ 138,500,570
Cost of goods distributed (Note 20(c)) 112,634,326 99,016,551
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Gross margin (28.7%, 2006 - 28.5%) 45,230,974 39,484,019
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Expenses
Salary and wages 24,479,697 16,720,570
Selling, general and administration
(Note 17) 5,181,788 3,879,400
Rent, occupancy and utilities 3,794,069 2,730,930
Advertising and promotion 1,595,962 1,239,230
Professional fees (Note 17) 969,162 628,872
Interest on short term operating
debt 968,270 125,367
Amortization on property and
equipment 943,314 735,705
Amortization on intangible assets 913,203 342,364
Interest on long term debt 624,388 922,485
Refinancing fees (Note 8) 252,016 -
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39,721,869 27,324,923
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Earnings before income taxes 5,509,105 12,159,096
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Income taxes (Note 16) 1,971,419 4,207,814
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Net earnings and comprehensive income $ 3,537,686 $ 7,951,282
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Earnings per share (Note 14)

Basic $ 0.18 $ 0.49
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Diluted $ 0.18 $ 0.43
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See accompanying notes to the consolidated financial statements.



Consolidated Balance Sheets

Years ended September 30, 2007 and 2006

September 30 2007 2006
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------------------------------------------------------------------

Assets
Current
Funds held in trust (Note 8) $ - $ 14,500,000
Accounts receivable 21,833,040 26,512,897
Inventory 29,864,554 22,256,666
Income tax receivable 850,790 -
Prepaids 811,983 789,990
------------- -------------
53,360,367 64,059,553

Deferred costs - 150,313
Future income tax asset (Note 16) 478,264 656,785
Property and equipment (Note 5) 4,568,837 3,483,575
Intangible assets (Note 6) 3,980,918 2,241,512
Goodwill (Note 7) 34,290,494 20,503,321
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$ 96,678,880 $ 91,095,059
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Liabilities
Current
Bank indebtedness (Note 8) $ 18,646,622 $ 12,117,515
Accounts payable and accrued
liabilities 15,577,796 17,576,968
Income taxes payable - 2,019,502
Current portion of deferred tenant
inducement 20,000 20,000
Current portion of long term debt
(Note 9) 349,716 2,955,533
Current portion of notes payable
(Note 10) 1,717,547 1,653,223
------------- -------------
36,311,681 36,342,741

Future income tax (Note 16) 1,404,832 712,975
Deferred tenant inducement 138,333 158,333
Long term debt (Note 9) 1,309,001 2,701,750
Notes payable (Note 10) 1,545,454 1,715,577
------------- -------------
40,709,301 41,631,376
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Shareholders' Equity
Share capital (Note 11) 37,606,675 34,789,839
Contributed surplus (Note 12) 1,323,757 1,172,383
Retained earnings 17,039,147 13,501,461
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55,969,579 49,463,683
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$ 96,678,880 $ 91,095,059
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See accompanying notes to the consolidated financial statements.



Commitments and contingencies (Note 18)

On behalf of the Board

Jim Barker, Director

Don Caron, Director

Contact Information

  • Commercial Solutions Inc.
    Eric Sauze
    Chief Financial Officer
    (780) 577-2215
    Email: esauze@csinet.ca
    or
    Genoa Management Limited
    Ali Mahdavi
    (416) 962-3300 or 1-866-430-6247
    Email: info@genoa.ca
    Website: www.genoa.ca