Commercial Solutions Inc.
TSX : CSA

Commercial Solutions Inc.

May 15, 2006 07:30 ET

Commercial Reports $0.15 per Share for Q2: Earnings up 150%

EDMONTON, ALBERTA--(CCNMatthews - May 15, 2006) - COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX:CSA) -

2006 2nd Quarter Highlights

- Q2 revenue growth of $11.9 million; a 52.6 percent increase over the comparative period

- EBITDA in the quarter rose to $3.8 million more than 113.9 percent up from the comparative period

- Q2 net earnings up 150.2 percent over prior year to $2.2 million

- Basic EPS in Q2 was $0.15, up 66.7 percent from the comparative period

- Diluted EPS in Q2 was $0.13, up 62.5 percent from the comparative period

- $15.0 million private placement completed



-----------------------------------------
-----------------------------------------
CAD, millions, Three Months Ended March 31
except EPS data -----------------------------------------
2006 2005 Change
-----------------------------------------

Revenue 34,485,415 22,599,686 52.6%
EBITDA 3,821,411 1,786,601 113.9%
Net Earnings 2,185,292 873,333 150.2%
Basic EPS $0.15 $0.09 66.7%
Diluted EPS $0.13 $0.08 62.5%
-----------------------------------------
-----------------------------------------
Note: EBITDA is defined as earnings before interest, taxes,
depreciation and amortization

-----------------------------------------
-----------------------------------------
CAD, millions, Six Months Ended March 31
except EPS data -----------------------------------------
2006 2005 Change
-----------------------------------------

Revenue 64,537,317 43,558,263 48.2%
EBITDA 6,452,564 3,171,431 103.5%
Net Earnings 3,584,516 1,486,852 141.1%
Basic EPS $0.25 $0.15 66.7%
Diluted EPS $0.22 $0.14 57.1%
-----------------------------------------
-----------------------------------------
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, industrial, safety, survey and resource management equipment products and services, today announced its financial results for the second quarter ended March 31, 2006. A complete copy of the Company's report is available on the Internet at www.sedar.com.

Financial highlights from the fiscal 2006 second quarter are as follows:

For the three-month period ended March 31, 2006, Commercial reported record revenue of $34.5 million compared to revenue of $22.6 million for the same period last year, representing a year-over-year increase of 53 percent. For the quarter, the Company reported a 114 percent increase in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $3.8 million versus $1.8 million for the same period last year. Net income for the quarter increased 150 percent to $2.2 million compared to $0.9 million during the second quarter of fiscal 2005.

For the six-month period ended March 31, 2006, earnings increased 141.1% to $3.6 million or $0.25 per share ($0.22 diluted) as compared to $1.5 million or $0.15 per share ($0.14 diluted) from the comparable six-month period in 2005. Consolidated revenues rose by 48.2% to $64.5 million from $43.5 million and EBITDA improved by 103.5% to $6.4 million from $3.2 million for the prior year.

For the three months and six months ended March 31, 2006, the EBITDA margins continued to improve to 11.1 percent and 10.0 percent from 7.9 percent and 7.3 percent in the comparative periods.

"The continued strong operating results are a testament to the success and validity of our business model and managements ability to execute the integration and operation of all acquired businesses", noted Jim Barker, President & CEO of Commercial. "We also intend on pressing forward with additional acquisitions to provide the Company with increased diversification, growth and profitability. The $15 million private placement in March 2006 further strengthened our balance sheet, providing additional resources to take advantage of growth opportunities."

As at March 31, 2006, the basic average number of shares outstanding was 14,519,870 (16,476,329 fully diluted) versus 10,105,404 (11,446,181 fully diluted) at the end of the same period in the year prior.

About Commercial

Headquartered in Edmonton, Alberta, Commercial is one of Canada's leading independent industrial distributors with 24 Services Centres and approximately 275 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 10,000 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.



Consolidated Balance Sheets
---------------------------------------------------------------------
---------------------------------------------------------------------

March 31 September 30
2006 2005
(unaudited) (audited)

Assets
Cash and cash equivalents (note 2) $ 9,680,488 $ -
Accounts receivable 21,453,117 18,338,534
Inventory 18,210,021 16,527,643
Prepaids 575,926 546,000
--------------------------------
49,919,552 35,412,177

Deferred costs 98,660 110,590
Future income tax 329,501 813,736
Property and equipment 2,265,670 2,085,741
Property held for sale 725,229 725,229
Intangible assets 1,083,930 1,230,153
Goodwill 11,541,281 11,590,441
--------------------------------

$ 65,963,823 $ 51,968,067
--------------------------------
--------------------------------

Liabilities
Bank indebtedness (note 2) $ - $ 4,443,374
Accounts payable and accrued
liabilities 14,224,533 13,157,390
Income taxes payable 306,450 834,958
Current portion of deferred
tenant inducement 20,000 20,000
Current portion of long-term debt 1,174,268 1,144,111
Current portion of notes payable 1,083,750 1,182,228
--------------------------------
16,809,001 20,782,061

Deferred tenant inducement 168,333 178,333
Long-term debt 5,062,606 5,657,283
Notes payable 1,047,020 993,801
Preferred shares (note 4) 968,178 968,178
--------------------------------
24,055,138 28,579,656
--------------------------------

Shareholders' Equity
Capital stock (note 3) 31,517,821 16,789,358
Contributed surplus 1,256,169 1,048,874
Retained earnings 9,134,695 5,550,179
--------------------------------
41,908,685 23,388,411

$ 65,963,823 $ 51,968,067
--------------------------------
--------------------------------

On behalf of the Board:

(signed) (signed)
Jim Barker, Director Don Caron, Director


Consolidated Statements of Earnings & Retained Earnings
---------------------------------------------------------------------
---------------------------------------------------------------------
Unaudited

Three Months Six Months
Ended March 31 Ended March 31
2006 2005 2006 2005
---------------------------------------------------------------------

Revenue $ 34,485,415 $ 22,599,686 $ 64,537,317 $ 43,558,263
Cost of goods
sold 24,694,317 16,098,137 46,378,798 31,154,531
-----------------------------------------------------
Gross margin ($) 9,791,098 6,501,549 18,158,519 12,403,732
-----------------------------------------------------
Gross margin (%) 28.4% 28.8% 28.1% 28.5%
-----------------------------------------------------

Expenses
Salaries and
benefits 3,846,412 3,147,440 7,598,819 6,171,985
Selling, general
& administrative 2,123,275 1,567,508 4,107,136 3,060,316
-----------------------------------------------------
5,969,687 4,714,948 11,705,955 9,232,301
-----------------------------------------------------

3,821,411 1,786,601 6,452,564 3,171,431
-----------------------------------------------------

Interest 60,710 83,903 111,591 185,728
Interest on
long term debt 247,565 214,399 505,466 422,825
Amortization of
property and
equipment 145,787 93,368 277,361 185,416
Amortization of
deferred costs 5,965 - 11,930 -
Amortization of
intangibles 69,291 - 146,222 -
-----------------------------------------------------
529,318 391,670 1,052,570 793,969
-----------------------------------------------------

Earnings before
income taxes 3,292,093 1,394,931 5,399,994 2,377,462

Income taxes 1,106,801 521,598 1,815,478 890,610
-----------------------------------------------------

Net earnings 2,185,292 873,333 3,584,516 1,486,852

Retained
earnings,
beginning of
period 6,949,403 2,464,331 5,550,179 1,850,812

-----------------------------------------------------
Retained
earnings, end
of period $ 9,134,695 $ 3,337,664 $ 9,134,695 $ 3,337,664
-----------------------------------------------------
-----------------------------------------------------

Earnings per
share - basic $ 0.15 $ 0.09 $ 0.25 $ 0.15
Weighted
average number
of shares 14,519,870 10,105,404 14,442,237 9,720,481
---------------------------------------------------------------------

Earnings per
share - diluted $ 0.13 $ 0.08 $ 0.22 $ 0.14
Weighted average
number of shares 16,476,329 11,446,181 16,260,955 10,965,143
---------------------------------------------------------------------


Consolidated Statements of Cash Flows
---------------------------------------------------------------------
---------------------------------------------------------------------
Unaudited

Three Months Six Months
Ended March 31 Ended March 31
2006 2005 2006 2005
-----------------------------------------------------
Increase
(decrease) in
cash and cash
equivalents

Operating
Net earnings $ 2,185,292 $ 873,333 $ 3,584,516 $ 1,486,852
Tennant
inducement (5,000) - (10,000) -
Amortization
of note
payable
discount 30,285 - 61,242 -
Amortization
of property
& equipment,
deferred costs
and intangibles 221,043 93,368 435,513 185,416
(Gain)/loss on
disposal of
property and
equipment (3,974) 18,633 (11,724) 10,333
Stock based
compensation
expense 27,882 40,915 52,499 78,782
Future income
tax expense 553,401 434,438 907,739 434,438
-----------------------------------------------------
3,008,929 1,460,687 5,019,785 2,195,821
Changes in
non-cash
working capital (3,039,892) (987,110) (4,288,252) (2,532,793)
-----------------------------------------------------
(30,963) 473,577 731,533 (336,972)
-----------------------------------------------------

Financing
Banker's
acceptances - (7,000,000) - (8,000,000)
Issuances of
special
warrants, net 13,886,544 - 13,886,544 -
Issuances of
common shares,
net 348,965 - 622,371 2,048,437
Repayments of
long term debt (282,268) (256,080) (564,520) (471,691)
Repayments of
notes payable (53,250) (53,250) (106,500) (106,500)
-----------------------------------------------------
13,899,991 (7,309,330) 13,837,895 (6,529,754)
-----------------------------------------------------

Investing
Purchase of
property and
equipment (209,664) (51,260) (458,041) (151,905)
Deferred costs - (62,500) - 50,089
Proceeds on
disposal of
property and
equipment 3,975 49,882 12,475 71,582
-----------------------------------------------------
(205,689) (63,878) (445,566) (30,234)
-----------------------------------------------------

Increase
(decrease) in
cash and cash
equivalents
during the
period 13,663,339 (6,899,631) 14,123,862 (6,896,960)

Cash and cash
equivalents
(note 2)
Beginning of
period (3,982,851) (2,048,624) (4,443,374) (2,051,295)
-----------------------------------------------------

End of period $ 9,680,488 $ (8,948,255) $ 9,680,488 $ (8,948,255)
-----------------------------------------------------
-----------------------------------------------------


Contact Information