Commercial Solutions Inc.
TSX : CSA

Commercial Solutions Inc.

December 18, 2006 07:00 ET

Commercial Solutions Crosses Year End Finish Line on Strengthening Earnings

EDMONTON, ALBERTA--(CCNMatthews - Dec. 18, 2006) - COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX:CSA)

2006 Fiscal Year Highlights

- Revenue growth of 42% to a record $138.5 million was achieved in fiscal
2006

- EBITDA rose to $14.3 million; more than 89% up as compared to the prior year

- Net Income increased year-over-year by 109% to $8.0 million

- Basic EPS for the year was up 49% compared to last year

- A record earnings per share of $0.43 was attained for fiscal 2006

2006 Q4 Highlights

- Sales increased by 42% to $40.9 million versus $28.9 million during the same period last year

- EBITDA increased by 105% to $5.1 million versus $2.5 million during the same period last year

- Net earnings up 108 percent over prior year to $2.9 million

- Basic EPS for the three-month period was $0.16

- Diluted EPS for the three-month period was $0.14


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CAD, except Three Months Ended Twelve Months Ended
EPS data Sept. 30 Sept. 30
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2006 2005 Change 2006 2005 Change
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Revenue 40,900,553 28,891,179 41.6% 138,500,570 97,829,311 41.6%
EBITDA 5,109,550 2,498,825 104.5% 14,285,017 7,547,524 89.3%
Net Earnings 2,885,420 1,386,444 108.1% 7,951,282 3,799,367 109.3%
Basic EPS $0.16 $0.09 77.8% $0.49 $0.33 48.5%
Diluted EPS $0.14 $0.09 55.6% $0.43 $0.30 43.3%
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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, industrial, safety, survey and resource management equipment products and services, today announced its financial results for the fourth quarter and twelve month period ended September 30, 2006. A complete copy of the Company's report is available on the Internet at www.sedar.com. Financial highlights from the fiscal 2006 fourth quarter are as follows:

For the three-month period ended September 30, 2006, Commercial reported record revenue of $40.9 million compared to revenue of $28.9 million for the same period last year, representing a year-over-year increase of 41.6 percent. For the quarter, the Company reported a 104.5 percent increase in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $5.1 million versus $2.5 million for the same period last year. Net income for the quarter increased by 108.1 percent to $2.9 million compared to $1.4 million during the fourth quarter of fiscal 2005.

For the twelve-month period ended September 30, 2006, earnings increased 109.3 percent to $8.0 million or $0.49 per share ($0.43 diluted) as compared to $3.8 million or $0.33 per share ($0.30 diluted) from the comparable twelve-month period in 2005. Consolidated revenues rose by 41.6 percent to $138.5 million from $97.8 million and EBITDA improved by 89.9 percent to $14.3 million from $7.5 million during the prior year.

For the three months and twelve months ended September 30, 2006, the EBITDA margins continued to improve to 12.5 percent and 10.3 percent from 8.6 percent and 7.7 percent in the comparative periods.

"I am very pleased with the strength of our financial results during fiscal 2006 and in the fourth quarter", said Jim Barker, President & CEO of Commercial. "We successfully grew the business through organic growth while also remaining true to our growth strategy to complete strategic, accretive acquisitions which expand our geographic reach and diversify our product offering."

As at September 30, 2006, the Company had 16,328,228 weighted average common shares on a basic basis, and 18,419,153 weighted average common shares on a fully diluted basis.

Outlook

Management remains confident in Commercial's revenue and earnings growth for fiscal 2007 and beyond. Particularly, management expects continued organic sales growth due to the opportunities afforded by Commercial's three most recent acquisitions. Specifically, the opportunity to have them sell an additional suite of products for which, previously they did not have access. In addition, as Commercial assimilates their operations, gross profit synergies should begin to emerge.

Management continues to seek growth opportunities through acquisitions to widen Commercial's geographic presence and to diversify its portfolio of products. Although there are a limited number of major industry players, the Canadian market for distribution suppliers continues to be fragmented. Many of these organizations are facing succession issues relating to an aging demographic. Assuming a continued strong economic environment, it is anticipated that within the next four quarters at least one acquisition would be completed.

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.

Consolidated Statements of Earnings

Years ended September 30, 2006 and 2005



Years Ended September 30 2006 2005
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Revenue $ 138,500,570 $ 97,829,311
Cost of goods distributed 99,016,551 70,418,138
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Gross margin (28.5%, 2005 - 28.0%) 39,484,019 27,411,173
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Expenses
Salary and wages 16,720,570 13,125,060
Selling, general and administration 3,879,400 3,290,778
Rent, occupancy and utilities 2,730,930 2,020,719
Advertising and promotion 1,239,230 918,939
Amortization 1,078,069 566,773
Interest 1,047,852 1,261,593
Professional fees 628,872 508,152
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27,324,923 21,692,014
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Earnings before income taxes 12,159,096 5,719,159
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Income taxes (Note 17) 4,207,814 1,919,792
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Net earnings $ 7,951,282 $ 3,799,367

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Earnings per share (Note 15)

Basic $ 0.49 $ 0.33
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Diluted $ 0.43 $ 0.30
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Consolidated Balance Sheets

Years ended September 30, 2006 and 2005



September 30 2006 2005
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------------------------------------------------------------------------
Assets
Current
Funds held in trust (Note 8) $ 14,500,000 $ -
Accounts receivable 26,512,897 18,338,534
Inventory 22,256,666 16,527,643
Prepaids 789,990 546,000
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64,059,553 35,412,177
Deferred costs 150,313 110,590
Future income tax (Note 17) - 813,736
Property and equipment (Note 5) 3,483,575 2,085,741
Property held for sale (Note 5) - 725,229
Intangible assets (Note 6) 2,241,512 1,230,153
Goodwill (Note 7) 20,503,321 11,590,441
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$ 90,438,274 $ 51,968,067
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------------------------------

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Liabilities
Current
Bank indebtedness (Note 8) $ 12,117,515 $ 4,443,374
Accounts payable and accrued liabilities 17,576,968 13,157,390
Income taxes payable 2,019,502 834,958
Current portion of
deferred tenant inducement 20,000 20,000
Current portion of
long term debt (Note 9) 2,955,533 1,144,111
Current portion of
notes payable (Note 10) 1,653,223 1,182,228
------------------------------
36,342,741 20,782,061

Future income tax (Note 17) 56,190 -
Deferred tenant inducement 158,333 178,333
Long term debt (Note 9) 2,701,750 5,657,283
Notes payable (Note 10) 1,715,577 993,801
Preferred shares (Note 11) - 968,178
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40,974,591 28,579,656
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Shareholders' Equity
Common shares (Note 12) 34,789,839 16,789,358
Contributed surplus (Note 13) 1,172,383 1,048,874
Retained earnings 13,501,461 5,550,179
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49,463,683 23,388,411
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$ 90,438,274 $ 51,968,067
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Commitments and contingencies (Note 19)

On behalf of the Board

Jim Barker, Director

Don Caron, Director

Contact Information

  • Commercial Solutions Inc.
    Eric Sauze
    Chief Financial Officer
    (780) 577-2215
    Email: esauze@csinet.ca
    or
    Genoa Management Limited
    Ali Mahdavi
    (416) 962-3300 or Toll Free 1-866-430-6247
    Email: info@genoa.ca
    Website: www.genoa.ca