Commercial Solutions Inc.
TSX : CSA

Commercial Solutions Inc.

December 18, 2009 07:00 ET

Commercial Announces Fiscal 2009 Annual Results

EDMONTON, ALBERTA--(Marketwire - Dec. 18, 2009) - COMMERCIAL SOLUTIONS INC. (TSX:CSA)

Fiscal 2009 Highlights

  • Annual sales decreased by 26.1% to $106.0 million versus $143.4 million in the prior year.
  • Annual operating costs decreased by 11.3% to $32.1 million versus $36.1 million in the prior year
  • Annual basic and diluted loss per share of $0.22 after normalizing for goodwill impairment charges of $19.5 million.
  • Free cash flow was $7.5 million in the current year with a corresponding reduction to bank indebtedness by $5.9 million.
All figures in CAD Three Months Ended Sept. 30   Twelve Months Ended Sept. 30  
  2009   2008   2009   2008  
Revenue $ 20,152,690   $38,314,864   $106,023,410   $143,425,182  
EBITDA $ (1,027,640 )  $2,127,869   $(2,353,501 )  $5,554,892  
Net (Loss) Earnings $ (1,774,658 )  $819,096   $(24,015,363 )  $(13,584,808
Basic and Diluted EPS $(0.09 )  $0.04   $(1.19 )  $(0.68

Note: EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and goodwill impairment charge.

COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX:CSA) a leading Canadian distributor of bearings, power transmission, oilfield, industrial, safety products today announced its financial results for the three-month and twelve-month periods ended September 30, 2009. A complete copy of the Company's report is available on the Internet at www.sedar.com.

Financial highlights from fiscal 2009 are as follows:

For the three-month period ended September 30, 2009, Commercial reported revenue of $20.1 million compared to revenue of $38.3 million for the same period last year, representing a quarter-over-quarter decrease of 47.4 percent. The Company reported a decrease in EBITDA to a loss of $1.0 million in comparison to earnings of $2.1 million in comparable period in the prior year. Net loss for the quarter amounted to $1.8 million compared to net earnings of $0.8 million during the fourth quarter of fiscal 2008.

For the twelve-month period ended September 30, 2009, Commercial reported revenue of $106.0 million compared to revenue of $143.4 million for the same period last year, representing a year-over-year decrease of 26.1 percent. EBITDA decreased to a loss of $2.4 million versus earnings of $5.6 million during fiscal 2008. 

The business and economic environment in which Commercial operates changed dramatically in early fiscal 2009. The precipitous fall in revenue is the effect of the financial crisis and the downturn in the global economy, specifically, lower drilling activity in the natural gas industry which represents a large portion of the Company's customer base. This resulted in an operating loss in the current year compared to operating profits in the past several years. To mitigate the impact of the lower revenues, the Company has taken aggressive measures in reducing its operating costs and its investment in working capital. This resulted in a substantial decrease in its operating expenses. Annualized savings from these measures approximate $8 million. As well, through the tighter management of inventory levels, the Company has reduced its inventory by 13.1% during the year.

Jim Barker, President and CEO of Commercial noted, "The decline in revenues has been a concern and we have worked hard over the past year to implement changes to adapt to our difficult economic environment. Collectively, our management team and employees have been driven in changing our structure and processes so as to maintain our market position and our financial strength through a strong balance sheet. We view expenses as investments and continue to be vigilant about the return on all expenditures. As a result, we have reduced our operating expenses and working capital investment which in turn reduced our external borrowings by 26.7% over the year. This has positioned us favourably with our current banker, and subsequent to year end, we closed on a restated credit agreement with the bank which secures us with an operating line up to October 31, 2010."

Outlook

Management is cautious regarding the near to medium term impact of the global financial crisis and ensuing economic challenges and we expect the next several quarters to be challenging. We continue to concentrate our efforts on adjusting the Company's cost structure. We have implemented cost-cutting measures that reduce both variable and fixed costs and the impact of these measures are ongoing. Management is prepared to take additional measures should revenues continue to deteriorate. However, management believes the sharp declines in revenue experienced over the past few quarters have lessened and the budgeting plans related to the operating costs for fiscal 2010 are structured based on these reduced revenues.

Additionally, management is implementing sales and marketing initiatives to increase the top-line results. Management believes that through the emphasis of the "one-stop-shop" benefit where Commercial provides a breath of products to all customers and the vendor managed inventory program where Commercial offers expertise in materials management, Commercial will be successful in further customer engagement.

With a strong balance sheet, a strong Western Canadian market share, with operating costs being addressed, and implementation of the sales and marketing initiatives, management believes the Company is well positioned to manage through the challenging times and will be prepared to rebound strongly when the economy stabilizes. Commercial continues to be committed in the long run to growing its business in a capital efficient manner. It intends to achieve ongoing expansion through organic growth and selective acquisitions. As well, the Company continues to work on its program of diversifying its customer base within various industry sectors.

About Commercial
Headquartered in Edmonton, Alberta, Commercial is one of Canada's leading independent industrial distributors with 27 Services Centres and approximately 260 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.

Contact Information

  • Commercial Solutions Inc.
    Rozina Kassam CA
    Chief Financial Officer
    (780) 577-4360
    rkassam@csinet.ca
    or
    Commercial Solutions Inc.
    Jim Barker
    President and Chief Executive Officer
    (780) 577-2220
    jbarker@csinet.ca