Reko International Group Inc.
TSX : REK

Reko International Group Inc.

September 27, 2007 15:53 ET

Reko Announces Year-End Results for Fiscal 2007

WINDSOR, ONTARIO--(Marketwire - Sept. 27, 2007) - Reko International Group Inc. (TSX:REK) announced today the results for the quarter and year-ended July 31, 2007.

Sales from continuing operations for the quarter ended July 31, 2007 were $10.6 million compared to $12.4 million in the prior year. During the quarter, the company experienced lower sales for moulds due to delays in the release of programs by the automotive companies. We experienced improving order intake toward the end of the quarter. Sales for large machining continued to be strong. The company is completing the manufacture of another large machining center, which will positively impact sales starting in the second quarter of fiscal 2008. Sales for automation continue to grow and at July 31, 2007, backlogs were at a record level of $7.3 million.

The gross margin for the three months ended July 31, 2007 declined to $1.9 million, or 18% of revenues, compared to $2.6 million, or 21% for the prior year as fixed costs were spread over a lower revenue base. Due to the lower sales volume for moulds, the company continues to focus on cost controls to lower the break-even point. During the quarter, the company incurred restructuring costs of $584,000. These costs resulted from a reduction in employment numbers and corporate overhead as we continue to reduce manufacturing costs and streamline operations. The cost reductions should result in a yearly savings of $1.7 million on an ongoing basis going forward. In the fourth quarter of 2007, operating results were positively affected by R&D tax credits of $400,000.

Selling and administrative expenses for the three months ended July 31, 2007 were $1.7 million, or 16.3% of sales, compared to $2.1 million, or 16.8% of sales, for last year. Although actual expenses were reduced by 21%, they actually increased in relation to revenues due to the low level of demand experienced in the fourth quarter.

Net loss from continuing operations for the quarter was $456,000, or $0.06 per share, compared to net income of $899,000, or $0.12 per share, in the previous year.

Discontinued operations produced a net loss of $1.7 million, or $0.24 per share, at July 31, 2007. Discontinued operations consist of land and building for the Proto-Techniques operation, including a 49,000 sq. ft. building with 10 acres of land. An independent appraisal in April 2006 estimated a market value of $3.7 million. Since that time, the real estate market in Michigan, U.S., has weakened due to a loss of manufacturing jobs and excess inventory of industrial real estate. The reduction in market value, together with the weakening of the U.S. dollar, resulted in an impairment of discontinued assets.

For the fiscal year ended July 31, 2007, revenues from continuing operations were $49.4 million, compared to $67.5 million last year. The net loss from continuing operations was $1.6 million, or $0.22 per share, compared to net income of $3.2 million, or $0.43 per share in the previous year. The net loss from discontinued operations was $2.1 million, or $0.29 per share, for the year ended July 31, 2007, compared to a net loss of $2.3 million, or $0.31 per share in fiscal 2006.

"The automotive industry continues to go through a transformation aimed at returning to profitability by reducing excess capacity and operating costs. This restructuring is placing additional downward pressure on pricing from Reko's customers and, combined with the weak U.S. dollar, has required management at Reko to right size its operations in order to adapt to the changing environment," stated Steve Reko, President and C.E.O. "Although these decisions resulted in restructuring costs of $584,000 during the quarter the resulting cost savings will benefit operating results in future periods. The record order book for our automation group, together with the demand for our large machining, bodes well as we start our fiscal 2008. In August, we completed a long-term machining agreement with one of our important customers resulting in a total order of $32 million spread over the next 5 years. Reko is committed to make the necessary operating adjustments to return to profitability for the long term."



Financial Highlights:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Period Ended July 31,
(in $,000 except per share Three Months Fiscal Year
amounts) -----------------------------------------
Fiscal Fiscal Fiscal Fiscal
2007 2006 2007 2006
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Sales from continuing operations $10,618 $12,329 $49,377 $67,459

Sales from discontinued
operations (52) 1,965 1,059 19,813

Net (loss) income from
continuing operations (456) 899 (1,552) 3,231

Net loss from discontinued
operations (1,685) (8) (2,072) (2,303)

EPS from continuing operations (0.06) .12 (0.22) .43

EPS from discontinued
operations (0.24) .00 (0.29) (.31)

EPS from total operations (0.30) .12 (0.51) .12

Shareholders' Equity 47,704 50,986
Shareholders' Equity per Share 6.67 6.82

--------------------------------------------
--------------------------------------------


Founded in 1976, Reko International Group (TSX:REK) is a highly integrated, technology driven engineering and manufacturing firm providing engineered solutions for the plastics segment of the automotive, aerospace and consumer product markets. In its ten production facilities in Ontario, Reko designs and manufactures precision moulds and other related industrial tooling, in addition to its own proprietary line of CNC machining centres.



REKO INTERNATIONAL GROUP INC.
5390 Brendan Lane
Oldcastle, Ontario
N0R 1L0
www.rekointl.com


SUBSIDIARIES:

Canada:
- Reko Tool & Mould (1987) Inc.
Divisions -
- Reko Automation and Machine Tool
- Concorde Machine Tool

United States:

- Reko International Sales Inc.
- Reko International Holdings Inc.


Contact Information

  • Reko International Group Inc.
    Michael Dunn
    Vice President Finance
    (519) 737-6974
    Website: www.rekointl.com