Savaria Corporation
TSX : SIS

Savaria Corporation

November 14, 2007 08:30 ET

Savaria: Third Quarter 2007-Strong Canadian Dollar Remains a Factor

Management Takes Several Initiatives to Increase Profitability

LAVAL, QUEBEC--(Marketwire - Nov. 14, 2007) - Savaria Corporation (TSX:SIS), the second largest company in the accessibility industry in North America, recorded sales of $14.7 million in the quarter ended September 30, 2007, compared with $14.5 million in the third quarter of fiscal 2006. This slight improvement was achieved despite the increase in the Canadian dollar and the discontinuance of direct sales outside the Montreal area in June 2006. In the third quarter of the current fiscal year, the Corporation recorded earnings before interest, income taxes and amortization (EBITDA) of $452,000 and an exchange loss of $387,000, bringing its net earnings to $14,000.

Sales

Eliminating the impact of the discontinued direct sales and exchange rate fluctuations, business volume rose 8.6% in the third quarter of 2007. In fact, the discontinuance of direct sales lowered total sales by $590,000, while exchange rate fluctuations had an impact of $397,000 on sales.

Sales in Canada, the United States and outside North America amounted to $5.7 million, $8.3 million and $0.7 million respectively. U.S. sales were recognized at an average conversion rate of 1.0711, whereas this rate stood at 1.1195 in the third quarter of the previous year.

For the nine-month period, sales totalled $44.3 million, down from $46.2 million for the corresponding period of fiscal 2006. Eliminating the impact of the discontinued direct sales and exchange rate fluctuations, business volume rose 3% in the first three quarters of the current fiscal year. U.S. sales were recognized at an average conversion rate of 1.1190, compared with a rate of 1.1332 in the first nine months of the previous year.

Operating Earnings

Operating earnings fluctuated very little, amounting to $565,224 in the third quarter of 2007, versus $698,223 in the same period of 2006, representing margins as a percentage of sales of 3.8% and 4.8% respectively.

For the first nine months of the current fiscal year, operating earnings also fluctuated very little, totalling $2.0 million, compared with $2.2 million for the corresponding period of fiscal 2006, representing margins as a percentage of sales of 4.5% and 4.7% respectively. The decline in gross profit was mitigated by the decrease in selling and administrative expenses and the lower amortization in 2007.

Net Earnings

Results for the third quarter of 2007 were adversely affected by an exchange loss of $387,320, whereas an exchange gain of $45,776 was realized in the equivalent quarter of the previous year. Consequently, Savaria recorded net earnings of $13,887 in the third quarter of 2007, down from $581,620 in the same period of 2006.

For the first nine months of the current fiscal year, the Corporation posted net earnings of $562,551 or $0.02 per share, compared with $1.2 million or $0.41 per share for the corresponding period of fiscal 2006. This decline is due primarily to a year-to-date exchange loss of $1.1 million in 2007, versus a cumulative exchange loss of $47,000 in 2006.

Capital Stock

Given the share repurchase and cancellation program, the average number of common shares outstanding (diluted) totalled 28,437,714 in the third quarter of 2007, down 4.3% from the same period a year earlier.

Uncertainties in Regard to Measurement

The Corporation holds investments in the amount of $2,984,400 that are invested in asset-backed commercial paper ("ABCP"). This ABCP had a "R1-(high)" rating according to Dominion Bond Rating Services ("DBRS") and met the Corporation's investment criteria at its acquisition date. The ABCP held by the Corporation matured on various dates between August 30 and September 5, 2007. The scheduled payments have not been made and there is currently no active market for this ABCP.

The Corporation is in discussions with its bank and the fund managers and is closely monitoring the situation. Given the uncertainty as to the time of the realization of these investments, the assets in question are presented on a long-term basis. In addition, the Corporation has ceased recognizing income on the investments since their maturity date.

Initiatives to Increase Profitability

"The strength of the Canadian dollar in relation to the U.S. dollar is forcing us to quickly react in order to boost our profitability," said Marcel Bourassa, Chairman of the Board, President and Chief Executive Officer of Savaria. "Two major initiatives will enable us to achieve this objective: increasing our sales and improving our productivity. The order backlog for our residential elevators is up 19% (27% at a constant exchange rate) over last year. Moreover, in January 2008, we will launch a new residential elevator sold under the "Eclipse" trademark that requires no mechanical room and is targeted to the booming multiple dwelling unit construction segment. We will also bring to market a new line of automatic door openers that fit perfectly with our elevators and platform lifts. Through these initiatives, we are confident we can increase our sales by approximately 10% in upcoming quarters.

To improve our productivity, we will continue to build operational and administrative synergies, which will stem from the consolidation of operations at our Brampton facilities, as announced on October 11, 2007, and the further manufacturing of components and sub-assemblies at our plant in China, where the floor space was recently expanded from 8,000 square feet to 35,000 square feet."

It should be noted that given the closure of the Laval plant on December 21, 2007, the integration of Van-Action's operations at the Laval facility, announced on January 18, 2007, will not take place.

Forward-Looking Statements

Certain statements in this press release may be forward-looking. Forward-looking statements involve known and unknown risks, uncertainties or other factors that may cause the Corporation's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Savaria Corporation (www.savaria.com) is Canada's leader and the second largest accessibility company in North America. The Corporation designs, manufactures and distributes products meeting the needs of people with mobility challenges, primarily stairlifts, vertical and inclined platform lifts, as well as elevators for residential and commercial use. Its sales rely on a network of some 600 retailers in North America. Savaria records approximately 60% of its sales outside Canada and employs some 350 people.

Complete financial statements and the management's report for the quarter ended September 30, 2007 will shortly be available on the Corporation's website and filed on SEDAR (www.sedar.com).



Financial Highlights
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(in thousands, Quarters Ended Nine-Month Periods Ended
except per-share September 30, September 30,
amounts and
percentages)
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2007 2006 Change 2007 2006 Change
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Sales $14,727 $14,469 1.8% $44,330 $46,193 -4.0%
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Gross profit as
a % of sales 24.5% 25.1% n/a 24.1% 25.9% n/a
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Selling and
administrative
expenses as a %
of sales 18.8% 18.6% n/a 17.9% 19.0% n/a
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Operating earnings $565 $698 -19.1% $1,977 $2,178 -9.2%
Operating earnings
as a % of sales 3.8% 4.8% n/a 4.5% 4.7% n/a
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Earnings before
interest, income
taxes and
amortization
(EBITDA) $452 $1,150 -60.7% $1,669 $3,152 -47%
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EBITDA per share
- diluted $0.016 $0.039 -59.0% $0.059 $0.106 -44.3%
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Exchange gain
(loss) $(387) $46 n/a $(1,096) $(47) 2,231.9%
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Net earnings $14 $581 -97.6% $563 $1,212 -53.5%
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Net earnings per
share basic - $0.020 -100.0% $0.020 $0.041 -51.2%
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Net earnings per
share diluted - $0.020 -100.0% $0.020 $0.041 -51.2%
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Dividends declared
per share - - n/a $0.082 $0.022 272.7%
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Weighted average
number of common
shares outstanding
diluted 28,438 29,719 -4.3% 28,629 29,864 -4.1%
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As at Sept. 30, As at Dec. 31,
2007 2006
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Total assets $36,605 $40,261
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Total liabilities $12,583 $13,924
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Shareholders' equity $24,023 $26,337
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Contact Information

  • Savaria Corporation
    Marcel Bourassa
    Chairman of the Board, President and Chief Executive Officer
    1-800-931-5655
    www.savaria.com