CFM Corporation

CFM Corporation

March 29, 2005 19:07 ET

CFM Corporation Announces Results for the First Quarter of Fiscal Year 2005


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CFM CORPORATION

TSX SYMBOL: CFM

MARCH 29, 2005 - 19:07 ET

CFM Corporation Announces Results for the First
Quarter of Fiscal Year 2005

MISSISSAUGA, ONTARIO--(CCNMatthews - March 29, 2005) - CFM Corporation
(TSX:CFM) ("CFM" or the "Company") announced today its financial results
for the three month period ended January 1, 2005. All currency amounts
are in U.S. dollars.



Financial Highlights

---------------------------------------------------------------------
(US$ millions, except Three Months Ended
per share amounts) January 1, 2005 December 27, 2003
--------------- -----------------
Net Sales 133.0 119.1
Gross Profit 14.8 30.7
Net Income (loss) (16.8) 4.0
Earnings (loss) per share ("EPS") (0.42) 0.10
EPS before restructuring costs,
refinancing costs, loss on sale
of assets of water products
business and deferred tax
valuation allowance(a) (0.20) 0.12
EBITDA before restructuring
costs, refinancing costs and
loss on sale of assets of
water products business(b) (8.9) 11.6


(a)EPS before restructuring costs, refinancing costs, loss on sale of
assets of water products business and deferred tax valuation allowance
has been determined by taking net income for the applicable period,
adding to it the restructuring costs, refinancing costs, loss on sale of
assets of water products business and deferred tax valuation allowance,
deducting provision for income taxes applicable to the restructuring
costs, refinancing costs and loss on sale of assets of water products
business to arrive at net income (loss) before restructuring costs,
refinancing costs, loss on sale of assets of water products business and
deferred tax valuation allowance for the applicable period and dividing
net income (loss) before restructuring costs, refinancing costs, loss on
sale of assets of water products business and deferred tax valuation
allowance by the average number of shares outstanding during such
period. EPS before restructuring costs, refinancing costs, loss on sale
of assets of water products business and deferred tax valuation
allowance is presented as a measure of the normal operating performance
of the Company. A reconciliation of EPS before restructuring costs,
refinancing costs, loss on sale of assets of water products business and
deferred tax valuation adjustment to earnings (loss) per share is as
follows:



For the three For the three
months ended months ended
(US$ millions) January 1, 2005 December 27, 2003
---------------------------------------
Earnings EPS Earnings EPS

Net Income (loss) (16.8) (0.42) 4.0 0.10
Restructuring costs -- -- 1.2 0.03
Income tax related to
restructuring costs -- -- (0.5) (0.01)
Refinancing costs 2.3 0.06 -- --
Income tax related to
refinancing costs (0.9) (0.02) -- --
Loss on sale of assets of
water products business 3.0 0.07 -- --
Income tax related to loss
on sale of assets of
water products business (1.1) (0.02) -- --
Deferred tax valuation allowance 5.4 0.13 -- --
---------------------------------------
Net Income (loss) before
restructuring costs,
refinancing costs and loss
on sale of Greenway (8.1) (0.20) 4.7 0.12
---------------------------------------
---------------------------------------


EPS before restructuring costs, refinancing costs, loss on sale of water
products business and deferred tax valuation allowance is not a
recognized measure for financial statement presentation under Canadian
generally accepted accounting principles ("GAAP"). Non-GAAP measures
(such as EPS before restructuring costs, refinancing costs, loss on sale
of water products business and deferred tax valuation allowance) do not
have any standardized meaning and are therefore unlikely to be
comparable to similar measures presented by other issuers. Investors are
encouraged to consider these financial measures in the context of CFM's
GAAP results, as provided in the attached financial statements.

Operating Highlights

Sales for the first quarter increased 12% to $133.0 million from $119.1
million in the first quarter last year. Net income (loss) for the
quarter decreased to ($16.8) million or ($0.42) per share, down from
$4.0 million or $0.10 per share in the first quarter of fiscal 2004. EPS
before restructuring costs, refinancing costs, loss on sale of assets of
water products business and deferred tax valuation allowance(a) was
($0.20) for the quarter, compared to $0.12 in the first quarter of the
prior year.

The Company's earnings were lower compared to the prior year principally
due to a higher proportion of lower margin barbeque sales, lower margins
on electric fireplaces, increases in steel and other raw material costs,
higher distribution costs and the strengthening of the Canadian dollar
as compared to the U.S. dollar.



Sales by Product Category

---------------------------------------------------------------------
Three Months Ended
(US $millions) January 1, 2005 December 27, 2003
--------------- -----------------
Hearth and Heating Products 101.6 102.1
Barbeque and Outdoor Products 28.0 13.2
Water Products 3.4 3.8
--------------- -----------------
133.0 119.1
--------------- -----------------


Sales of hearth and heating products were $101.6 million in the quarter,
a decrease of 0.5% from the first quarter of the prior year.

Sales of barbecue and outdoor products were $28.0 million in the
quarter, an increase of $14.8 million or 112% from the first quarter of
fiscal 2004.

Sales of water products were $3.4 million, a decrease of $0.4 million
compared to the same quarter a year ago.

Gross Profit

Gross profit for the quarter ended January 1, 2005 was $14.8 million,
down $15.9 million or 52% from $30.7 million in the first quarter of
2004. As a percentage of sales, gross profit was 11.1%, down from 25.8%
in the first quarter of the prior year.

Expenses

Operating expenses, excluding the impact of currency fluctuations,
increased by $3.5 million or 18% from the first quarter of the prior
year.

EBITDA before restructuring costs, refinancing costs, and loss on sale
of assets of water products business(b)

Earnings (loss) before restructuring costs, refinancing costs, loss on
sale of assets of water products business, interest, taxes and
amortization ("EBITDA before restructuring costs, refinancing costs and
loss on sale of assets of water products business") for the quarter were
($8.9) million versus $11.6 million in the corresponding period in the
prior year.

(b) EBITDA before restructuring costs, refinancing costs, and loss on
sale of assets of water products business is defined as earnings (loss)
before the taking of any deductions in respect of interest, taxes,
amortization, restructuring costs, refinancing costs and loss on sale of
assets of water products business. EBITDA before restructuring costs,
refinancing costs and loss on sale of assets of water products business
is presented before deductions for interest expense, tax expense,
amortization and restructuring costs, refinancing costs and loss on sale
of assets of water products business as a measure of a company's normal
operating performance. EBITDA before restructuring costs, refinancing
costs, and loss on sale of assets of water products business has been
determined by taking net income for the period from the Consolidated
Statement of Operations and adding to it interest expense, amortization,
income taxes, restructuring costs, refinancing costs and loss on sale of
assets of water products business which are disclosed as individual line
items within the Consolidated Statement of Operation as follows:



Three Months Ended
($millions) January 1, 2005 December 27, 2003
------------------------------------
Net income (loss) for the period (16.8) 4.0
Restructuring costs -- 1.2
Refinancing costs 2.3 --
Loss on sale of assets of water
products business 3.0 --
Amortization 2.9 2.9
Interest income -- (0.1)
Interest expense 2.6 1.9
Income taxes (2.9) 1.7
------------------------------------
EBITDA before restructuring
costs, refinancing costs
and loss on sale of assets of
water products business (8.9) 11.6
------------------------------------
------------------------------------


EBITDA before restructuring costs, refinancing costs, loss on sale of
assets of water products business are not recognized measures for
financial statement presentation under GAAP. Non-GAAP measures (such as
EBITDA before restructuring costs, refinancing costs and loss on sale of
assets of water products business) do not have any standardized meaning
and are therefore unlikely to be comparable to similar measures
presented by other issuers. Investors are encouraged to consider these
financial measures in the context of CFM's GAAP results, as provided in
the attached financial statements.

Refinancing Costs

As previously announced, the Company undertook a strategic process to
review long-term financing alternatives and other strategic options
during the first quarter of 2005. Costs incurred during the quarter
relating to this process were $2.3 million.

Restructuring Costs

During 2004, the Company undertook a restructuring of its mass merchant
operations. This restructuring was completed by the end of the fourth
quarter of 2004, and no further costs have been incurred or are
anticipated. Restructuring costs in the first quarter of the prior year
were $1.2 million.

Interest Expenses

Net interest expense was $2.6 million for the quarter, which was $0.7
million higher than in the first quarter last year, due primarily to
higher interest rates on the Company's senior notes.

Cash Flows Provided by Operating Activities

Cash flows generated by (used in) operating activities in the quarter
were ($5.6) million, compared to $26.4 million of cash generated in the
first quarter of 2004.

Net Bank Debt(c)

Net bank debt decreased in the quarter to $124.1 million, down $4.6
million from October 2, 2004 due primarily to lower working capital. CFM
was capitalized(c) as at January 1, 2005 with net bank debt to total
capitalization of 58%, as compared with 55% as at October 2, 2004.

(c) Net bank debt is defined as bank debt (current and long-term), plus
bank indebtedness, plus senior unsecured notes payable less cash. This
measure is widely accepted by the financial markets as a measure of
credit availability.

Capitalization is defined as net bank debt plus shareholders' equity.
Capitalization is presented as a measure of the Company's total
financing structure.

Net bank debt is not a recognized measure for financial statement
presentation under GAAP. Non-GAAP financial measures (such as net bank
debt) do not have any standardized meaning and are therefore unlikely to
be comparable to similar measures presented by other issuers. Investors
are encouraged to consider this financial measure in the context of
CFM's GAAP results, as provided in the attached summary financial
statements.

Weighted Average Shares Outstanding

The weighted average number of shares outstanding during the quarter
ended January 1, 2005 decreased by 373,000 shares to 40,031,000 as
compared to 40,404,000 shares outstanding during the first quarter of
fiscal 2004. The Company did not repurchase any common shares in the
quarter under its normal course issuer bid.

This press release contains forward looking statements that involve
certain risks and uncertainties which could cause actual results to
differ materially from future results expressed or implied by such
forward looking statements. Important factors that could affect these
statements include, without limitation, general economic conditions,
consumer confidence, the level of housing starts and demographics, CFM's
ability to develop new products, patent protection, weather and related
customer buying patterns and manufacturing issues, industry capacity,
product liability, availability of gas and gas prices, mass merchant
consolidation, credit and collections, supply and cost of raw materials,
steel availability and pricing, purchased parts and personnel, costs of
certain employee benefits, the inability to increase selling prices as
costs increase, competition, foreign currency fluctuations and
government regulation. These factors and other risks and uncertainties
are discussed in detail in CFM's Annual Information Form dated March 11,
2005 and in the reports and disclosure documents filed by CFM with
Canadian and U.S. securities regulatory authorities and commissions.
Statements made in this press release are made as of March 29, 2005 and
CFM disclaims any intention or obligation to update or revise any
statements made herein, whether as a result of new information, future
events or otherwise.

CFM is a leading integrated manufacturer of home products and related
accessories in North America and the United Kingdom. CFM designs,
develops, manufactures and distributes a complete line of hearth and
pace heating products, barbecue and outdoor products and water and air
purification products. CFM maintains an ongoing program of research and
development aimed at continually improving the quality, design, features
and efficiency of its products.



CFM CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(In thousands of U.S. dollars, unaudited)

As at Jan. 1, 2005 Dec. 27, 2003 Oct. 2, 2004
$ $ $
ASSETS
Current
Cash and cash equivalents 17,754 38,730 6,750
Accounts receivable 79,713 78,414 103,846
Inventory 121,678 84,357 110,836
Prepaid and other expenses 5,405 4,833 4,374
Income taxes recoverable 13,625 -- 12,672
Future income taxes -- 13,719 --
-------------------------------------------
Total current assets 238,175 220,053 238,478
-------------------------------------------
Capital assets, net 61,949 77,038 69,696
Other assets 2,550 5,667 2,654
Goodwill, net 45,431 166,619 44,420
Intangible assets 1,816 5,224 1,799
Future income taxes -- 717 --
-------------------------------------------
Total assets 349,921 475,318 357,047
-------------------------------------------
-------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Bank indebtedness 7,262 6,405 2,289
Accounts payable and
accrued liabilities 105,171 56,183 102,778
Current portion of
long-term debt 131,331 -- 130,036
Current portion of note
payable 6,513 3,117 5,903
Income taxes payable -- 1,034 2,516
Deferred gain on sale of
assets - current portion 718 -- 513
Future income taxes -- 1,156 --
-------------------------------------------
Total current liabilities 250,995 67,895 244,035
-------------------------------------------

Deferred gain on sale of
assets 6,292 -- 4,618
Long-term debt 3,229 134,001 3,141
Note payable -- 2,161 1,650
Future income taxes -- 19,485 --
-------------------------------------------
Total liabilities 260,516 223,542 253,444


Shareholders' equity
Share capital 105,657 106,333 105,635
Contributed surplus 438 -- 233
Retained earnings (deficit) (39,674) 126,760 (22,880)
Cumulative translation
adjustment 22,984 18,683 20,615
-------------------------------------------
Total shareholders' equity 89,405 251,776 103,603
-------------------------------------------
Total liabilities and
shareholders' equity 349,921 475,318 357,047
-------------------------------------------
-------------------------------------------



CFM CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DEFICIT)
(In thousands of U.S. dollars except for earnings (loss) per
share, unaudited)



Three Months Ended
January 1, 2005 December 27, 2003
-------------------------------------
$ $
Sales 133,022 119,100
Cost of sales 118,265 88,376
-------------------------------------
Gross profit 14,757 30,724

Expenses
Selling and administrative,
research and development 23,654 19,124
Amortization 2,963 2,874
Interest income (36) (60)
Interest expense 2,634 1,922
Refinancing costs 2,311 --
Loss on sale of assets of water
products business 2,969 --
Restructuring costs -- 1,201
-------------------------------------
34,495 25,061
-------------------------------------
Income (loss) before income
taxes (19,738) 5,663
Income taxes (recovery) (2,944) 1,689
-------------------------------------
Net income (loss) for the period (16,794) 3,974
-------------------------------------
-------------------------------------
Retained earnings (deficit),
beginning of period (22,880) 122,786
-------------------------------------
Retained earnings (deficit),
end of period (39,674) 126,760
-------------------------------------
-------------------------------------
Earnings (loss) per share (0.42) 0.10

Earnings (loss) per share before
restructuring costs,
refinancing costs, loss on
sale of assets of water
products business and deferred
tax valuation allowance (0.21) 0.12

Diluted earnings (loss) per share (0.42) 0.10



CFM CORPORATION
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars, unaudited)

Three Months Ended
January 1, 2005 December 27, 2003
-------------------------------------
$ $
Cash flows from operating
activities
Net income (loss) for the period (16,794) 3,974
Add (deduct) items not
involving cash
Amortization 2,963 2,874
Future income taxes (1,072) 213
Loss on disposal of capital
assets -- 16
Loss on sale of assets of
water products business 2,969 --
Non-cash stock compensation
expense 205 --
Non-cash interest on note
payable 74 12
Restructuring costs -- 414
-------------------------------------
(11,655) 7,503

Change in non-cash working
capital 6,069 18,851
-------------------------------------
Cash flows provided by (used
in) operating activities (5,586) 26,354

Cash flows from investing
activities
Acquisitions, net of cash
acquired -- (7,427)
Purchase of capital assets (2,263) (2,011)
Development costs -- (13)
Proceeds on sale of assets
of water products business 4,085 --
Proceeds on disposal of
capital assets 10,193 --
Deferred gain on sale of assets (173) --
-------------------------------------
Cash flows provided by (used in)
investing activities 11,842 (9,451)

Cash flows from financing
activities
Proceeds from private placement
debt -- 65,000
Revolving term facility, net 863 (48,372)
Bank indebtedness 4,449 (4,452)
Repayment of note payable (1,106) (2,845)
Deferred financing costs -- (503)
Issuance of common shares 22 128
-------------------------------------
Cash flows provided by financing
activities 4,228 8,956
Effect of foreign currency
translation on cash
and cash equivalents 520 (515)
-------------------------------------
Net increase in cash and cash
equivalents during the period 11,004 25,344
Cash and cash equivalents,
beginning of period 6,750 13,386
-------------------------------------
Cash and cash equivalents,
end of period 17,754 38,730
-------------------------------------
-------------------------------------



-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    CFM Corporation
    COLIN M. ADAMSON
    Chairman and Chief Executive Officer
    (905) 670-7777
    or
    CFM Corporation
    J. DAVID WOOD
    Vice President and Chief Financial Officer
    (905) 670-7777
    (905) 670-7915 (FAX)
    cfm@cfmcorp.com
    www.cfmcorp.com