Bestar Inc.
TSX : BES

Bestar Inc.

February 26, 2007 08:00 ET

Bestar Inc.: 2007 Looks Promising After a Difficult 2006

LAC-MEGANTIC, QUEBEC--(CCNMatthews - Feb. 26, 2007) - Bestar Inc. (TSX:BES) Sales for the fiscal year ended December 31, 2006, were CA$33,309,000, down 13.9 % from the CA$38,672,000 posted for the fiscal year ended December 31, 2005.

A loss before other items and income taxes of CA$1,405,000 was recorded for fiscal 2006, compared to earnings of CA$252,000 for 2005. The net loss was CA$967,000 or (CA$0.07) per share in 2006 compared to a net income of CA$389,000 or CA$0.03 per share for fiscal year 2005.

In the fourth quarter of 2006, revenue totalled CA$9,818,000, a 4.5% increase over the CA$9,392,000 posted for the same period in 2005. Net income was CA$128,000 or CA$0.01 per share in 2006, compared to CA$369,000 or CA$0.03 per share in 2005.

"A substantial slow-down in sales at one of our major clients, procurement problems after a fire at our primary supplier of raw materials which led to significant additional costs and sales delays, and over CA$1M in negative impacts due to an increase in the exchange rate are the main factors that affected results in 2006," said Paulin Tardif, CEO of Bestar.

"Investment income of CA$260,000 improved 2005 results. In 2006, CA$500,000 was recorded after a claim was filed with our insurer. Of course, this amount covers only part of the costs incurred after the fire mentioned earlier," explained Paulin Tardif.

"In view of events, 2006 was a turning point in Bestar's development. We successfully launched our new business strategy, which puts new emphasis on component manufacturing. This effort has allowed us to add new customers, including some with considerable sales potential. Moreover, this line of business is expected to grow significantly during 2007. And in our traditional market, the recent introduction of a new collection at one of our major clients has already produced interesting results," Mr. Tardif added.

"We have also purchased new equipment that will increase our capacity and flexibility, and we have hired nearly 50 employees to better meet growing demand from all our clients," he continued.

"As our third quarter report stated, the company has been notified by the Toronto Stock Exchange that the market value of its publicly traded common shares was presently less than two million dollars (CA$2,000,000) and that the company had 120 days in which to meet the requirements to keep its common shares listed on the Exchange, failing which the company would then have 30 days in which to register its common shares on the TSX Venture Exchange. Bestar currently meets the requirements to be listed as a Group 1 industry on that exchange. The Toronto Stock Exchange has been asked to extend the deadline. In view of the projects presented prior to the end of 2006 and the outlook for 2007, the Exchange agreed to the request and extended the deadline to April 15, 2007," said Mr. Tardif.

"This year looks promising. For the first time since the late 90s, we expect a significant increase in sales as early as the first quarter. Moreover, various investment projects are now being considered in order to increase our production capacity and flexibility," Mr. Tardif concluded.

Interim Results Summary



(Results in thousands of dollars, except earnings per share)

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Q1 Q2 Q3 Q4 Total

Revenue 2004 11,403 9,895 12,760 9,670 43,728
2005 9,948 9,055 10,277 9,392 38,672
2006 8,535 6,619 8,338 9,818 33,309

Net earnings
(loss)(i) 2004 (246) (1,419) 1,384 (860) (1,141)
2005 (52) 235 (163) 369 389
2006 3 (599) (498) 128 (967)

Earnings (loss)
per common
share(i) 2004 (0.02) (0.12) 0.11 (0.07) (0.09)
2005 (0.00) 0.02 (0.01) 0.03 0.03
2006 0.00 (0.05) (0.04) 0.01 (0.07)

Fully diluted
earnings (loss)
per common
share(i) 2004 (0.02) (0.12) 0.11 (0.07) (0.09)
2005 (0.00) 0.02 (0.01) 0.03 0.03
2006 0.00 (0.05) (0.04) 0.01 (0.07)

Total Assets 2004 30,507 29,987 29,515 28,228 28,228
2005 28,215 28,335 28,502 27,578 27,578
2006 25,916 24,076 24,640 24,409 24,409

Total Liabilities 2004 17,506 16,479 14,774 14,256 14,256
2005 14,281 14,153 14,470 13,160 13,160
2006 11,481 10,226 11,274 10,902 10,902

Weighted average
of outstanding
shares
(in thousands) 2004 11,088 11,738 13,038 13,038 12,231
2005 13,038 13,038 13,038 13,038 13,038
2006 13,038 13,038 13,038 13,038 13,038
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(i) The Emerging Issues Committee (EIC) of Canadian Institute of Chartered Accountants has issued a draft entitled "Stock-based Compensation for retirement-Eligible Employees". These recommendations specify how to recognize a stock-based award to an employee who can continue vesting in an award without no longer providing services to the entity. In this situation, the compensation cost such an award should be recognized on the grant date and not over the vesting period.

In the past years, the Company granted certain employees options with modalities allowing them to continue vesting in these options in situations where they no longer have to render services to the Company. The Company decided to anticipate these EIC recommendations and retroactively applied them, which resulted in a decrease of the net loss for fiscal year ended December 31, 2006 by an amount of $215,000 (increase of net earnings of $215,000 in 2005). Furthermore, retained earnings as at December 31, 2006 and 2005 were decreased by $269,000 and $484,000 respectively ($699,000 as at January 1, 2005), and in counterpart the December 31, 2006 and 2005 contributed surplus was increased by $269,000 and $484,000 respectively ($699,000 as at January 1, 2005).

Corporate Profile

Founded in 1948, Bestar Inc. designs, manufactures, and distributes a vast array of furniture and ready-to-assemble furnishings that meet customer needs in terms of quality, design, and functionality. Moreover, during the year, Bestar has developed its new business plan which includes the fabrication of components.

The company was incorporated in 1986 and operates from its plant in Lac-Megantic, Quebec, Canada.

Release Declaration

This press release may contain information and declarations on the future performance of the company that are, by nature, speculative. These declarations are based on suppositions and uncertainties and the best possible evaluation of future events by management. They are subject to certain risk factors such as exchange rates, the growing competition from emerging countries as well as fluctuating costs in raw material and shipping.

Shareholder Information

Shareholders may find this press release under the CCN news file at www.ccnmatthews.com or on SEDAR at www.sedar.com . The management report and comprehensive financial statements for the fiscal year ended December 31, 2006, as well as all other regulatory documents will be available, no later than March 31, 2007, through the SEDAR database at www.sedar.com and on our website at www.bestar.ca.

Contact Information

  • Bestar Inc.
    Paulin Tardif
    Chief Executive Officer
    819-583-1017, ext. 234