Royal Laser Corp.
TSX : RLC

Royal Laser Corp.

February 16, 2010 08:11 ET

Royal Laser Corp. Reports Financial Results for the Third Quarter of Fiscal 2010 Ended December 31, 2009

TORONTO, ONTARIO--(Marketwire - Feb. 16, 2010) - Royal Laser Corp. (the "Company" or "Royal Laser") (TSX:RLC) today reported its financial results for the third quarter ended December 31, 2009 ("Q3 Fiscal 2010").

The summarized financial results for the three and nine months ended December 31, 2009, as compared to three and nine months ended December 31, 2008, were:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------------------------------------------------------------
2009 2008 2009 2008
Revenues $ 58,232,477 $ 55,432,290 $ 176,511,949 $ 34,146,357
Cost of sales $ 57,413,548 $ 44,885,020 $ 168,487,344 $ 190,699,147
Gross margin $ 818,929 $ 10,547,270 $ 8,024,605 $ 43,447,210
Adjusted EBITDA(i) $ (3,090,435) $ 2,968,370 $ (89,367) $ 23,699,163
Adjusted EBITDA(i)
per share $ (0.03) $ (0.03) $ (0.00) $ 0.25
Net earnings
before taxes $(15,105,815) $(12,657,898) $ (16,561,821) $ 2,522,548
Net earnings
(loss) $(13,863,506) $(11,887,010) $ (14,424,249) $ (1,548,251)
Earnings/(loss)
per share (basic) $ (0.15) $ (0.13) $ (0.15) $ (0.02)
Earnings/(loss)
per share
(diluted) $ (0.15) $ (0.13) $ (0.15) $ (0.02)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at As at
December 31, 2009 March 31, 2009
----------------------------------------------------------------------------
Working capital $ 50,520,302 $ 46,223,794
Shareholder's equity $ 64,777,540 $ 79,450,131
Book value per share (ii) $ 0.67 $ 0.85
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) Adjusted EBITDA refers to earnings (loss) before interest, taxes,
depreciation and /amortization, non-cash stock-based compensation, and
unusual items; See reconciliation of this non-GAAP measurement below.
(ii) Book Value Per Share is defined as Shareholder's Equity divided by the
number of shares outstanding.


HIGHLIGHTS:

-- The Company's revenues for the three months ended December 31, 2009
increased to $58,232,477 compared to $55,432,290 during the three months
ended December 31, 2008. The Company's revenues for the nine months
ended December 31, 2009 decreased to $176,511,949 compared to
$234,146,357 for the nine months ended December 31, 2008. Increased
revenues for the three months ended December 2009 as compared to the
same period in Fiscal 2009 were predominately due to pent-up demand for
steel and manufactured product, predominantly in the Steel Processing
Business segment, created by the automotive shutdowns in the previous
quarter. Volumes were up by 11% in the Steel Processing Business, as
compared to the same three month period from Fiscal 2009. Decreased
revenue over the nine months ended December 31, 2009, as compared to the
same period in Fiscal 2009, occurred primarily due to lower sales
revenues in the Steel Processing Business, led by a decline in the
average price of steel during the period.
-- Gross margin percentage for the three and nine months ended December 31,
2009 was 1% and 5% compared to 19% and 19% for the three and nine months
ended December 31, 2008, representing a decrease in gross margin of 18%
and 14%. The change in margin is a direct result of diseconomies of
scale resulting from lower volumes, a drop in the market prices of steel
and the strength of the Canadian dollar and its effect on sales revenue.
A lack of consistent supply and long delivery lead times from the
producing mills also contributed to lower than anticipated margin
performance on contract business and lower spot sales volumes
-- Working Capital increased to $52,520,302 and remains strong at December
31, 2009 compared to $46,223,794 at March 31, 2009, financed through the
use of the revolving line of credit.
-- Adjusted EBITDA was ($3,090,435) and ($89,367) for the three and nine
months ended December 31, 2009 compared to $2,968,370 and $23,699,163
for the three and nine months ended December 31, 2009. The reduction in
EBITDA is due predominantly to lower gross margins, as explained above.
-- Net Income for the three and nine months ended December 31, 2009 was
negatively impacted by a non-cash impairment charge of $10,020,529
relating to the Non-VSI businesses (as defined below). See below for
more details.


UNSOLICITED OFFER UPDATE:

As previously disclosed, on November 17, 2009, the Board of Directors of the Company formed a special committee of independent directors (the "Special Committee") to consider an unsolicited offer to purchase all of the issued and outstanding common shares of the Company for $30,000,000 or approximately $0.31 per Royal Laser Corp. common share. The offer was conditional upon, among other things, the disposition of the RLM, WAM, TT, SMI and EZ businesses (hereinafter referred to as the "Non-VSI" businesses), and is thus effectively for the steel processing business of VSI. A separate offer has also been received for the Non-VSI businesses from Bill Iannaci, the Co-Chief Executive Officer of the Company, pursuant two which these assets would be acquired for approximately $12,700,000, to be satisfied by the assumption of approximately $8,100,000 in short and long-term debt, $3,500,000 in capital leases and the payment of approximately $1,100,000 in cash.

On December 14, 2009, the Special Committee engaged National Bank Financial as its financial advisor to assist the committee in considering both offers and any others that may be made as a result of interest expressed by other companies which have approached the Company. The work of the Special Committee and its financial advisor is ongoing. The outcome of these offers is uncertain, and there can be no assurance that such offers, or any other potential transaction involving the Company or any of its assets, will be agreed upon or consummated.

As a direct outcome of these processes, and in accordance with the provisions of CICA HB 3063, the Company has determined that the carrying value of the long lived assets (predominantly plant and equipment and intangible assets) included in the Non-VSI businesses is not recoverable based on the probability weighted measures of undiscounted cash flows expected to result from the use of the Non-VSI assets and the eventual disposal of the Non-VSI businesses under the alternative scenarios being considered by the Company. As a result, the Company has recorded an impairment charge of $10,020,529 before taxes during the three months ended December 31, 2009 to record the assets at the estimated fair values, of which $7,018,447 relates to plant and equipment and $3,002,082 relates to intangible assets (and none of which relates to the VSI business).

Commenting on the results of this past quarter, Beric Sykes, CO-CEO states: "In a very difficult environment, after taking into consideration unusual items, Royal Laser Corp. has succeeded in maintaining a very low cost base and strengthening its market share and customer base. We therefore start the year in a good position to benefit from the progressive, albeit slow, recovery that is underway. Although 2010 will continue to be challenging, we expect a gradual recovery as demand improves."

The Company's unaudited consolidated financial statements for the quarter ended December 31, 2009, together with Management's Discussion and Analysis have been filed on SEDAR and are available at www.sedar.com.

The following table reconciles Adjusted EBITDA to net income (loss) and comprehensive income (loss) in the three and nine months ended December 31, 2009:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
December 31, December 31,
2009 2008 2009 2008
--------------------------------------------------------------------------
Adjusted EBITDA: $(3,090,435) $(2,968,370) $(89,367) $23,699,163
Deduct:
Income taxes
(recovery) (1,242,309) (770,888) (2,137,572) 4,070,799
Interest expense,
net 362,201 581,579 1,328,527 2,269,661
Depreciation
/amortization 786,599 739,598 2,416,190 2,631,278
Depreciation
/amortization -
included in cost
of sales 769,792 662,119 2,396,745 2,010,777
Non-cash stock-based
compensation 46,862 140,369 222,593 762,296
Unusual items:
Impairment of
long-lived
assets/goodwill 10,020,529 9,673,689 10,020,529 9,673,689
Legal claim expense 29,397 3,828,914 87,870 3,828,914

----------------------------------------------------------------------------
Net income (loss) and
comprehensive income
(loss) $(13,863,506) $(11,887,010) $(14,424,249) $(1,548,251)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


About Royal Laser Corp.

Royal Laser Corp., through its operations, services, processes and distributes flat-rolled steel targeted at the multi-billion dollar automotive OEM, automotive after-market, and custom fabricates products for the industrial, environmental, automotive and construction industries in Canada, the United States and recently Mexico. The Company's common shares trade on the Toronto Stock Exchange under the symbol "RLC" and there are approximately 97 million shares outstanding.

For further information on the Corporation, please visit SEDAR at www.sedar.com.

To receive Company news by email, please contact info@royallaser.com and specify "Royal Laser news" in the subject line. The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

Certain statements contained in this press release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and other factors, many of which are beyond our control, and are as discussed under the heading "Trends, Risks and Uncertainties" and in the Annual Information Form of Royal Laser dated June 29, 2009 and filed on SEDAR at www.sedar.com , as well as Royal Laser's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Except as required by law, Royal Laser Corp. disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained herein is expressly qualified by this cautionary statement.

Contact Information

  • Royal Laser Corp.
    Beric Sykes
    Co-Chief Executive Officer
    (416) 798-9396
    or
    Royal Laser Corp.
    Niral Merchant
    Chief Financial Officer
    (416) 798-9396