Gendis Inc.
TSX : GDS

Gendis Inc.

December 10, 2010 16:34 ET

Gendis Inc. Announces Third Quarter Results

WINNIPEG, MANITOBA--(Marketwire - Dec. 10, 2010) - Gendis Inc. (TSX:GDS) today announced its financial results for the 3rd quarter ended October 31, 2010 of the fiscal year ending January 31, 2011.

Revenue for the 3rd quarter was $1,262,000 compared to $1,309,000 last year. Net earnings from operations for the 3rd quarter was $372,000 ($0.03 per share) compared to net earnings of $555,000 ($0.04 per share) last year. The decline in net earnings from operations quarter over quarter is primarily attributable to the decline in the market value of investments held-for-trading.

Other comprehensive income was $3,766,000 compared to income of $383,000 last year. Other comprehensive income is the change in market value of the Company's investments that are available-for-sale, primarily its flow-through entity investment in Fort Chicago. In the 3rd quarter, there was a substantial recovery in the market value of Fort Chicago.

Revenue year-to-date was $3,530,000 compared to $3,460,000 last year. Net loss from operations was $2,133,000 ($0.15 loss per share) compared to net earnings of $1,052,000 ($0.08 per share) last year. The year-to-date decline in earnings is attributable to a provision for settlement of lawsuits recorded in the 2nd quarter this year. Other comprehensive income was $4,889,000 compared to income of $2,675,000 last year.

Subsequent to the quarter end, a significant event occurred to the Company's investment in a private oil sands company. In November 2010, OSUM Oilsands Corp. closed a substantial private equity financing at a price of $13.00 per OSUM share, which compares favourably to Gendis' average cost base of $2.42 per OSUM share. Gendis owns 2.0-million shares of OSUM. The $13.00 per OSUM share financing price should only be used as a proxy for fair value of Gendis' investment in OSUM at that point in time. There is no exchange-traded market for OSUM shares to validate fair value at any future reporting period subsequent to November 2010.

Gendis Inc.

Notice – Review of Interim Financial Statements

The unaudited interim financial statements for the quarter and year-to-date ended October 31, 2010 have been reviewed and approved by the Audit Committee of Gendis Inc. The unaudited interim financial statements for the quarter and year-to-date ended October 31, 2010 have not been reviewed by the auditors of Gendis Inc.

Gendis Inc.      
Consolidated Balance Sheet      
  Oct. 31 Jan. 31 Oct. 31
(unaudited – in thousands of dollars) 2010 2010 2009
Assets      
  Cash 64 261 167
  Receivables 365 263 245
  Taxes recoverable 2 2
  Prepaid expenses 115 40 79
  546 566 491
  Investments (note 2)      
    at fair value 25,378 20,542 17,524
    at carrying value 4,946 4,946 4,946
  Property and equipment 11,830 12,125 12,250
  Future tax asset 3,172 3,172 2,732
  45,872 41,351 37,943
 
Liabilities      
  Credit facilities (note 3) 11,595 11,398 11,598
  Payables and accrued liabilities 2,477 879 1,223
  Taxes payable 42
  14,072 12,277 12,863
Post employment benefit obligations 842 872 681
       
Shareholders' equity 30,958 28,202 24,399
  45,872 41,351 37,943
 
Commitments and Contingencies (note 6)      
       
       
Gendis Inc.            
Consolidated Statement of Operations            
For the periods ended October 31            
 
(unaudited - in thousands of dollars, quarter year-to-date
  except per share) 2010   2009 2010   2009
Revenue            
  Real estate lease rental 792   840 2,625   2,476
  Investment 470   469 905   984
  1,262   1,309 3,530   3,460
Expenses            
  Property and administrative expenses 697   844 2,198   2,328
  Amortization of property and equipment 128   130 391   391
  Interest and finance expenses 93   76 237   190
  918   1,050 2,826   2,909
Earnings before the undernoted 344   259 704   551
Provision for settlement of legal claims (note 4)   (2,750 )
Change in fair value of investments held-for-trading 27   298 (88 ) 456
Gain (loss) on sale of investments available-for-sale (8 ) 9 (8 ) 9
Gain on sale of property and equipment 9   3 9   82
Earnings (loss) before taxes 372   569 (2,133 ) 1,098
Provision for income taxes   14   46
Net earnings (loss) from operations 372   555 (2,133 ) 1,052
Earnings (loss) from operations per share 0.03   0.04 (0.15 ) 0.08
             
             
Gendis Inc.                
Consolidated Statement of Comprehensive Income                
For the periods ended October 31                
  quarter   year-to-date  
(unaudited - in thousands of dollars) 2010   2009   2010   2009  
Other comprehensive income                
  Investments available-for-sale:                
    Change in fair value 3,766   383   4,889   2,675  
    Gain (loss) on sale (8 ) 9   (8 ) 9  
    (Gain) loss on sale transferred to the Statement of Operations 8   (9 ) 8   (9 )
Other comprehensive income 3,766   383   4,889   2,675  
                 
Net earnings (loss) from operations 372   555   (2,133 ) 1,052  
Comprehensive income 4,138   938   2,756   3,727  
                 
                 
Gendis Inc.                
Consolidated Statement of Shareholders' Equity              
For the periods ended October 31                
   
  Share   Retained          
(unaudited - in thousands of dollars) Capital   Earnings   AOCI   Total  
Balance – January 31, 2010 14,650   9,296   4,256   28,202  
                 
Earnings (loss) for the period to July 31, 2010   (2,505 ) 1,123   (1,382 )
Balance – July 31, 2010 14,650   6,791   5,379   26,820  
Earnings for the quarter   372   3,766   4,138  
Balance – October 31, 2010 14,650   7,163   9,145   30,958  
   
Balance – January 31, 2009 14,796   8,414   (2,447 ) 20,763  
Earnings for the period to July 31, 2009   497   2,292   2,789  
Shares purchased for cancellation (83 ) 18     (65 )
Balance – July 31, 2009 14,713   8,929   (155 ) 23,487  
Earnings for the quarter   555   383   938  
Shares purchased for cancellation (25 ) (1 )   (26 )
Balance – October 31, 2009 14,688   9,483   228   24,399  
 
"AOCI" refers to Accumulated Other Comprehensive Income
                 
                 
Gendis Inc.                
Consolidated Statement of Cash Flows                
For the periods ended October 31                
  quarter   year-to-date  
(unaudited - in thousands of dollars) 2010   2009   2010   2009  
By operations:                
  Net earnings (loss) from operations 372   555   (2,133 ) 1,052  
  add (deduct) items not affecting cash:                
    Amortization of property and equipment 128   130   391   391  
    Gain on sale of property and equipment (9 ) (3 ) (9 ) (82 )
    Provision for settlement of legal claims (note 4)     2,750    
    Loss (gain) on sale of investments available-for-sale 8   (9 ) 8   (9 )
    Change in fair value of investments held-for-trading (27 ) (298 ) 88   (456 )
  Cash flow from earnings 472   375   1,095   896  
  Change in working capital 134   346   170   183  
  606   721   1,265   1,079  
By investing activities:                
  Proceeds on sale of investments 290   46   345   1,087  
  Reduction to the cost of investments from a return of capital 35   21   580   508  
  Investments acquired (967 )   (967 )  
  Proceeds from sale of property and equipment 6   5   6   344  
  Expenditure for property and equipment (19 ) (16 ) (93 ) (21 )
  (655 ) 56   (129 ) 1,918  
By financing activities:                
  Increase (reduction) to borrowings under credit facilities 1,598   (645 ) 197   (2,893 )
  Post retirement benefit obligations paid (20 ) (15 ) (30 ) (25 )
  Legal claims paid (note 4) (1,500 )   (1,500 )  
  Purchase and cancellation of share capital   (26 )   (91 )
  Refundable dividend tax paid       (20 )
  78   (686 ) (1,333 ) (3,029 )
Increase (decrease) in cash 29   91   (197 ) (32 )
Cash - beginning of period 35   76   261   199  
Cash - end of period 64   167   64   167  
   
Supplementary information:                
  Taxes paid   14     66  
  Interest paid 95   78   240   184  
 
 
Gendis Inc.
Notes to Consolidated Interim Financial Statements
October 31, 2010
(unaudited – tabular amounts in thousands of dollars unless otherwise stated)
  1. Significant Accounting Policies and Basis of Presentation

    These unaudited consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in Canada. However, these interim financial statements do not contain all the disclosures that would be required under generally accepted accounting principles for annual financial statements. These interim financial statements follow the same accounting policies and methods of application as the audited annual consolidated financial statements at January 31, 2010. Certain disclosures required for annual financial statements have been condensed or omitted in these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto as presented in the Company's Annual Report for the fiscal year ended January 31, 2010. The following notes to the interim financial statements are supplemental to the notes to the annual consolidated financial statements.

  2. Investments

  Fair value
  Oct. 31 Jan. 31
(# of units in thousands) 2010 2010
Exchange-traded investments:    
  Available-for-sale:    
    Flow-through entities:    
      Fort Chicago – 2,000 units (Jan 31 - 1,915 units) 25,180 19,915
      Other investments 53
  Held-for-trading:    
    Other equity investments 198 574
  25,378 20,542
 
  Cost
  Oct. 31 Jan. 31
(# of shares in thousands) 2010 2010
Private investments, available-for-sale:    
  OSUM – 2,047 shares 4,946 4,946
Investments are referenced as follows - "Fort Chicago" refers to Fort Chicago Energy Partners LP; "OSUM" refers to OSUM Oil Sands Corp.
 
 
3. CREDIT FACILITIES
  Borrowing balance   Remaining borrowing availability   Carrying value of collateral
  Oct. 31 Jan. 31 Oct. 31 Jan. 31 Oct. 31 Jan. 31
  2010 2010 2010 2010   2010 2010
Banker's acceptances 10,995 10,998          
Bank demand loan 600 400          
Total for bank borrowing 11,595 11,398   400 600 23,315 19,260
Broker's margin account   1,031 465 2,063 1,282
  11,595 11,398   1,431 1,065 25,378 20,542

The available borrowing capacity for bank borrowings is determined by 70% of the market value of marketable securities, namely Fort Chicago, lodged as collateral.

  1. Settlement of legal claims

    In July 2010, the Company agreed to a release of claims against the Company and some of its directors by two suppliers and a buying agent and importer to a former subsidiary of the Company, without admission of any liability for such claims. These claims are the claims that are disclosed in the Company's annual financial statement for the year ended January 31, 2010. The Company paid the claimants $1.5-million in August 2010 and has agreed to pay the claimants $1.25-million in July 2011. Recovery amounts from the Company's insurers have yet to be determined and will be recognized in a future period once amounts can be determined.

  2. Segment Information

  quarter ended Realty Corporate   Inter-   Total
  Oct. 31       segment    
Revenue 2010 807 564   (109 ) 1,262
  2009 855 559   (105 ) 1,309
               
Expenses 2010 353 389   (45 ) 697
  2009 556 333   (45 ) 844
               
Amortization 2010 126 2     128
  2009 126 4     130
               
Interest 2010 64 93   (64 ) 93
  2009 60 76   (60 ) 76
               
Gain (loss) & fair value change 2010 6 22     28
  2009 3 307     310
               
Provision for (recovery of) 2010 94 (94 )  
  income taxes 2009 40 (26 )   14
               
Net earnings from operations 2010 176 196     372
  2009 76 479     555
               
Expenditure for property 2010 17 2     19
  and equipment 2009 15 1     16
             
  Year-to-date ended Realty Corporate   Inter-   Total  
  Oct. 31       segment      
Revenue 2010 2,671 1,172   (313 ) 3,530  
  2009 2,522 1,268   (330 ) 3,460  
                 
Expenses 2010 1,164 1,170   (136 ) 2,198  
  2009 1,351 1,113   (136 ) 2,328  
                 
Amortization 2010 381 10     391  
  2009 379 12     391  
                 
Interest 2010 177 237   (177 ) 237  
  2009 194 190   (194 ) 190  
                 
Gain (loss) & fair value change 2010 6 (93 )   (87 )
  2009 82 465     547  
                 
Provision for settlement 2010 2,750     2,750  
  of legal claims 2009      
                 
Provision for (recovery of) 2010 334 (334 )    
  income taxes 2009 238 (192 )   46  
                 
Net earnings (loss) 2010 621 (2,754 )   (2,133 )
  from operations 2009 442 610     1,052  
                 
Expenditure for property 2010 82 11     93  
  and equipment 2009 20 1     21  
                 
Total Assets 2010 12,640 40,668   (7,436 ) 45,872  
  2009 13,116 33,493   (8,666 ) 37,943  
   
  "Gain (loss) & fair value change" includes a gain (loss) on sale of investments, provision for loss on investments, changes in fair value of investments held-for-trading for the Corporate segment and a gain on sale of property and equipment for the Realty segment.
  1. Commitments & Contingencies

    Except for the release of claims against the Company and some of its directors by two suppliers and a buying agent and importer to a former subsidiary of the Company as described in note 4 above and the subsequent event as described in note 7, there have not been any material changes to commitments and contingencies as disclosed in the annual financial statements at January 31, 2010.

  2. Subsequent event

    The Company settled a claim by a landlord against a subsidiary of the Company. The Company paid the claimant $150,000 in November 2010.

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