Commercial Solutions Inc.
TSX : CSA

Commercial Solutions Inc.

August 14, 2007 08:30 ET

Commercial Reports Revenue Growth of 9.6% in Fiscal 2007 Q3

EDMONTON, ALBERTA--(Marketwire - Aug. 14, 2007) - Commercial Solutions Inc. (TSX:CSA) -

2007 3rd Quarter Highlights

- Sales increased by 9.6% to $36.2 million versus $33.1 million during the same period last year

- Gross profit increased 0.1% to 27.5% from 27.4%

- EBITDA fell by 72.4% to $0.75 million versus $2.7 million over the comparative period

- Net loss amounted to $0.2 million versus net earnings of $1.5 million during the same period last year

- Basic and diluted EPS for the three-month period was $(0.01), a 113% and 114% decline respectively



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All figures Three Months Nine Months
in CAD Ended June 30 Ended June 30
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2007 2006 Change 2007 2006 Change
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Revenue 36,238,836 33,062,700 9.6% 122,270,637 97,600,017 25.3%
EBITDA 750,946 2,722,903 -72.4% 7,540,663 9,175,467 -17.8%
Net Earnings
(Loss) (204,624) 1,481,346 -113% 3,238,735 5,065,862 -37.8%
Basic EPS $(0.01) $0.08 -113% $0.17 $0.33 -48.5%
Diluted EPS $(0.01) $0.07 -114% $0.16 $0.29 -44.8%
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Note: EBITDA is defined as earnings before interest, taxes, depreciation
and amortization


COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX:CSA) a leading Canadian distributor of bearings, power transmission, oilfield, industrial, safety, survey and resource management equipment products and services, today announced its financial results for the third quarter ended June 30, 2007. A complete copy of the Company's report is available on the Internet at www.sedar.com. Financial highlights from the fiscal 2007 third quarters are as follows:

For the three-month period ended June 30, 2007, Commercial reported revenue of $36.2 million compared to revenue of $33.1 million for the same period last year, representing a year-over-year increase of 9.6 percent. Gross Margins in the quarter remained relatively flat, with a 0.1% increase to 27.5% from 27.4% in the third quarter of 2006. The Company reported Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $0.75 million versus $2.7 million for the same period last year. Net loss for the quarter was $0.20 million compared to a gain of $1.5 million during the third quarter of fiscal 2006.

For the nine-month period ended June 30, 2007, Commercial reported revenue of $122.3 million compared to revenue of $97.6 million for the same period last year, representing a year-over-year increase of 25.3 percent. Gross profit improved to 28.1% from 27.9%. However, EBITDA fell 17.8 percent to $7.5 million versus $9.2 million for the same period last year. Net income decreased to $3.2 million compared to $5.1 million for the nine months ended June 30, 2006.

"We are going through a difficult market period with a slowdown in the drilling industry due to poor weather and continued reductions in capital spending by oil and gas producers. In addition, the forest industry reflects the housing slowdown in the United States. As long as we anticipate the market corrections to be short term, we will continue to be committed to our core infrastructure and operating costs" noted James Barker, President & CEO of Commercial. "Going forward we will be vigilant on operating costs as we monitor developing market conditions. In addition, we will continue to seek growth opportunities through acquisitions."

As at June 30, 2007, the basic average number of shares outstanding was 19,468,416 (19,468,416 fully diluted) versus 17,531,525 (19,719,234 fully diluted) at the end of the same period in the year prior.

The Company will host a conference call to discuss the third quarter results on Tuesday August 14, 2007 at 4:00 p.m. Eastern Standard Time (EST). Scheduled speakers for the call will include Jim Barker, President and CEO, and Eric Sauze, CFO of Commercial Solutions Inc. Participants should dial 1-866-542-4236 or 416-641-6125 at least 10 minutes prior to the conference time of 4:00 p.m. For those unable to participate on the call, a replay will be available after 6:00 p.m. at 1-800-408-3053 or 416-695-5800 passcode 3230957 until midnight, August 28, 2007.

About Commercial

Headquartered in Edmonton, Alberta, Commercial is one of Canada's leading independent industrial distributors with 40 Services Centres and approximately 400 employees located across Canada. Commercial offers more than 160,000 items critical to maintenance repair and operations (MRO) and original equipment manufacturer (OEM) customers. The Company represents 450 leading manufacturers and serves over 11,000 customer accounts within a broad cross-section of industries, including oil and gas, forestry, food processing, chemical processing, mining and aggregate, utilities, agriculture and construction. Commercial trades under the symbol "CSA" on the Toronto Stock Exchange. For further information on the Company, please visit www.commercialsolutions.ca and for detailed financial information visit www.sedar.com.

Forward Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as expected financial performance, business prospects, development activities and like matters. These statements involve risk and uncertainties, including but not limited to the risk factors previously described. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Commercial undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, with an exception to securities laws requirements.



Consolidated Balance Sheets

June 30, 2007 September 30, 2006
(unaudited) (audited)
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Assets
Funds held in trust $ - $ 14,500,000
Accounts receivable 21,494,392 26,512,897
Inventory 29,858,886 22,256,666
Prepaids 1,078,867 789,990
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52,432,145 64,059,553

Deferred costs 15,000 150,313
Property and equipment 3,832,560 3,483,575
Intangible assets 3,562,300 2,241,512
Goodwill 31,609,233 20,503,321
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$ 91,451,238 $ 90,438,274
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Liabilities
Bank indebtedness (Note 3) $ 18,255,697 $ 12,117,515
Accounts payable and accrued
liabilities 16,077,973 17,576,968
Income taxes payable - 2,019,502
Current portion of deferred tenant
inducement 20,000 20,000
Current portion of long term debt 9,360 2,955,533
Current portion of notes payable 1,255,000 1,653,223
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35,618,030 36,342,741

Future income tax 591,908 56,190
Deferred tenant inducement 143,333 158,333
Long term debt 10,899 2,701,750
Notes payable 868,736 1,715,577
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37,232,906 40,974,591
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Shareholders' Equity
Common shares 36,081,599 34,789,839
Contributed surplus 1,396,537 1,172,383
Retained earnings 16,740,196 13,501,461
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54,218,332 49,463,683
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$ 91,451,238 $ 90,438,274
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On behalf of the Board

-------------------------- -----------------------
James Barker, Director Don Caron, Director



Consolidated Statements of Earnings and Retained Earnings
(Unaudited)

Three Months Ended June 30 Nine Months Ended June 30
2007 2006 2007 2006
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Revenue $ 36,238,836 $ 33,062,700 $ 122,270,637 $ 97,600,017
Cost of goods
distributed 26,255,138 24,005,899 87,932,347 70,384,697
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Gross margin ($) 9,983,698 9,056,801 34,338,290 27,215,320
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Gross margin (%) 27.5% 27.4% 28.1% 27.9%

Expenses
Salary and wages 6,205,710 4,219,140 18,324,782 11,817,959
Selling, general
and administration 1,411,577 1,068,311 3,785,647 3,065,273
Rent, occupancy
costs, and
utilities 958,194 628,560 2,837,400 1,960,908
Amortization 459,544 259,928 1,317,456 695,441
Advertising and
promotion 394,513 320,696 1,186,673 766,096
Interest 266,960 1,740 651,335 113,087
Professional fees 262,758 97,191 663,125 429,617
Refinancing costs
(Note 4) 252,016 - 252,016 -
Interest on long
term debt 70,863 229,619 569,637 735,329
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10,282,135 6,825,185 29,588,071 19,583,710

Earnings (loss)
before income
taxes (298,437) 2,231,616 4,750,219 7,631,610

Income taxes
(recovery) (93,813) 750,270 1,511,484 2,565,748
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Net earnings
(loss) (204,624) 1,481,346 3,238,735 5,065,862

Retained earnings,
beginning of
period 16,944,820 9,134,695 13,501,461 5,550,179
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Retained earnings,
end of period $ 16,740,196 $ 10,616,041 $ 16,740,196 $ 10,616,041
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Earnings (loss)
per share - basic $ (0.01) $ 0.08 $ 0.17 $ 0.33
Weighted average
number of shares 19,468,416 17,531,525 19,264,951 15,471,999
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Earnings (loss)
per share -
diluted $ (0.01) $ 0.07 $ 0.16 $ 0.29
Weighted average
number of shares 19,468,416 19,719,234 20,131,915 17,733,599
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Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended June 30 Nine Months Ended June 30
2007 2006 2007 2006
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Increase (decrease)
in cash and cash
equivalents

Operating
Net earnings (loss) $ (204,624) $ 1,481,346 $ 3,238,735 $ 5,065,862
Tenant inducement (5,000) (5,000) (15,000) (15,000)
Amortization of
notes payable
discount 29,908 16,497 171,603 77,739
Amortization of
property and
equipment,
deferred costs,
and intangibles 459,544 259,928 1,317,456 695,441
Refinancing costs 94,360 - 94,360 -
(Gain)/loss on
disposal of
property and
equipment (1,000) 1,524 (87,348) (10,200)
Stock based
compensation
expense 107,961 32,701 322,914 85,200
Future income tax
(recovery) expense (67,069) (252,024) (201,207) 655,715
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414,080 1,534,972 4,841,513 6,554,757
Change in non-cash
working capital 2,688,926 (52,241) (4,484,910) (4,340,493)
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3,103,006 1,482,731 356,603 2,214,264
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Financing
Banker's acceptances - (3,500,000) - (3,500,000)
Advances on credit
facility (Note 3) 20,131,836 - 35,339,068 -
Repayment on credit
facility (Note 3) (17,003,360) - (17,003,360) -
Transaction costs
on credit facility (64,222) - (91,193) -
Issuances of common
shares, net 118,400 977,259 1,193,000 1,599,630
Issuances of special
warrants, net - (79,741) - 13,806,803
Repayments of long
term debt (5,042,561) (282,286) (5,637,021) (846,806)
Proceeds from notes
payable - 805,757 - 805,757
Repayments of notes
payable (616,667) (353,250) (1,416,667) (459,750)
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(2,476,574) (2,432,261) 12,383,827 11,405,634
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Investing
Deposit on
acquisition, funds
held in trust - - 14,500,000 -
Purchase of property
and equipment (470,154) (408,239) (1,171,199) (866,280)
Deferred costs - - 30,736 -
Acquisition (Note 6) (166,667) (8,758,265) (14,735,876) (8,758,265)
Proceeds on disposal
of property and
equipment 10,389 7,175 753,424 19,650
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(626,432) (9,159,329) (622,915) (9,604,895)
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Increase (decrease)
in cash and cash
equivalents during
the period - (10,108,859) 12,117,515 4,015,003

Cash and cash
equivalents
Beginning of period - 13,180,488 (12,117,515) (943,374)
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End of period $ - $ 3,071,629 $ - $ 3,071,629
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