IPL Inc.
TSX : IPI.A

IPL Inc.

December 12, 2007 16:00 ET

IPL Improves its Financial Results in the Fourth Quarter of 2007

- Net earnings increase to $785,000 from $375,000 - EBITDA rises 1.0% from 10.7% to 11.7% of sales - Stronger financial and cash position

SAINT-DAMIEN, QUEBEC--(Marketwire - Dec. 12, 2007) - IPL Inc. (TSX:IPI.A), one of North America's leading manufacturers of plastic products, announced its results today for its 2007 fourth quarter and fiscal year ended September 29, 2007.



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Financial highlights Three months ended Year ended
(in thousands of September 29, September 30, September 29, September 30,
dollars except 2007 2006 2007 2006
per share data)
unaudited
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Sales 51,065 55,788 210,601 220,781
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Earnings before
interest, taxes,
depreciation
and amortization
(EBITDA) 5,957 5,965 25,376 17,421
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EBITDA margin 11.7% 10.7% 12.0% 7.9%
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Earnings (loss)
before
income taxes (EBT) 1,260 574 6,159 (3,317)
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Net earnings (loss) 785 375 4,117 (2,191)
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Net earnings (loss)
per share, fully
diluted 0.05 0.03 0.28 (0.15)
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The Company's sales totalled $51.1 million for the quarter ended September 29, 2007, compared with $55.8 million for the quarter ended September 30, 2006. The trend in sales for the fourth quarter of fiscal 2007 was largely due to the reorientation of the Company's product line, the review of its customer portfolio and the reduction in the selling prices of certain products following a decline in raw materials prices. However, the year-over-year change in the average Canadian - US dollar exchange rate had a negative impact of CAN $1.4 million on the value of consolidated sales in the fourth quarter of fiscal 2007.

On a segmented basis, packaging product sales fell 6.8% to $27.8 million from $29.8 million in the same quarter of fiscal 2006, while industrial product sales declined 10.3% to $23.3 million compared with $26.0 million in the fourth quarter of fiscal 2006.

Consolidated sales for fiscal 2007 as a whole totalled $210.6 million compared with $220.8 million for fiscal 2006. An analysis by segment reveals that packaging product sales were $110.2 million compared with $113.8 million, while industrial product sales amounted to $100.4 million compared with $107.0 million. The year-over-year change in the average Canadian-US dollar exchange rate reduced the value of consolidated sales by $2.8 million for fiscal 2007.

On a monetary basis, earnings before interest, taxes, depreciation and amortization (EBITDA) remained unchanged in the fourth quarter of 2007, at $6.0 million. However, as a percentage of sales, EBITDA was up 100 basis points at 11.7% from 10.7% for the same period a year earlier. As in the preceding quarters, EBITDA growth reflected progress made in operating efficiency, operating cost control and the reorientation of the product line to focus on differentiated, higher value-added products. The combined effect of these improvements counteracted the negative influence on profitability of greater competitive pressures across North America.

For the twelve-month period ended September 29, 2007, EBITDA totalled $25.4 million, up 45.7% from $17.4 million in fiscal 2006. EBITDA as a percentage of sales was 12.0% in 2007 compared with 7.9% in 2006. It should be noted that the Company recorded non-recurring expenses of $7.2 million in 2006 in relation to its administrative reorganization, the reorientation of its product line and a mechanical failure that temporarily shut down one of its injection presses in the winter of 2006. Excluding these non-recurring expenses, EBITDA for 2006 was $24.6 million or 11.1% of sales.

In the quarter ended September 29, 2007, the Company generated net earnings of $785,000 or $0.05 per share, fully diluted, compared with $375,000 or $0.03 per share, fully diluted, for the quarter ended September 30, 2006. For fiscal 2007 as a whole, IPL posted net earnings of $4.1 million or $0.28 per share, fully diluted, compared with a net loss of $2.2 million or $0.15 per share, fully diluted, for fiscal 2006.

In the fourth quarter of 2007, funds from operations were $3.9 million, compared with $5.2 million for the same quarter a year earlier. This decline stems from a reduction in future income taxes as well as lower depreciation of capital assets and amortization of deferred charges, somewhat offset by increased operating profitability. For the twelve-month period ended September 29, 2007, funds from operations totalled $20.4 million, up 6.5% from $19.1 million in fiscal 2006.

"We are pleased with our fourth quarter results, which mark the end of a stimulating year during which the Company honed its operations and returned to profitability after two years of losses," said Serge Bragdon, President and Chief Executive Officer. "Our performance in the fourth quarter was all the more remarkable as market conditions for the plastics industry in general were unfavourable. Throughout the quarter, the Company devoted particular effort to improving productivity, reorienting its product line, optimizing its customer portfolio and containing operating costs. The resulting decline in the value of shipments was offset by steady improvements in execution, profitability and liquidity. At year-end, IPL enjoyed a strong, balanced financial condition that will support its commitment to sustainable, profitable growth."



The Company's US sales data is shown in the following table:

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US sales Three months ended Year ended
(unaudited) September 29, September 30, September 29, September 30,
2007 2006 2007 2006
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Thousands of
Canadian $ 20,497 27,650 93,049 95,013
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% of consolidated
sales 40.1 49.6 44.2 43.0
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In the fourth quarter of 2007, US sales in American dollars were US $19.6 million, compared with US $24.5 million for the same period a year earlier. The 20.2% decrease was attributable to the 53.9% drop in industrial products sold in the United States in US dollars following the Company's decision to reorient its product line around highly technical, higher value-added products and to competitive pressures caused by the strength of the Canadian dollar. However, fourth quarter packaging product sales remained stable at US $15.3 million. Overall, sales in the US market represented $20.5 million or 40.1% of the Company's consolidated fourth quarter sales for 2007, down 25.9% from $27.7 million or 49.6% of consolidated sales for the same period a year earlier.

For fiscal 2007 as a whole, sales to the United States slipped 2.1% to $93.0 million from $95.0 million in 2006. As a percentage of the Company's consolidated sales, however, sales to US customers grew to stand at 44.2% compared with 43.0% in 2006.

Segmented Results

Packaging Products

Stimulated by the US market's receptivity to the Company's products, packaging product sales totalled $27.8 million in the fourth quarter of fiscal 2007, compared with $29.8 million in the fourth quarter of the previous year. The 6.8% decrease in sales resulted from the Company's product line reorientation and development strategy, the reduction of selling prices following a drop in raw materials prices, and heightened pressure from foreign competitors in the Canadian and American markets. For the twelve-month period ended September 29, 2007, division sales fell 3.2% to $110.2 million from $113.8 million for the fiscal year ended September 30, 2006.

In the fourth quarter of fiscal 2007, EBITDA declined 7.9% to $3.6 million or 12.9% of sales, from $3.9 million or 13.1% of sales in the same period of fiscal 2006. This decline, both in monetary terms and as a percentage of sales, was due to heightened competition, lower selling prices arising from declining raw materials prices, and exchange rate volatility. These economic factors were partially counteracted by the Company's progress in updating its product range, optimizing productivity and controlling operating costs. For the twelve-month period ended September 29, 2007, EBITDA amounted to $15.6 million or 14.1% of sales, compared with $14.2 million or 12.5% of sales ($15.3 million or 13.5% of sales excluding the non-recurring charges described above) for fiscal 2006.

Industrial Products

Industrial product sales totalled $23.3 million in the fourth quarter of 2007, down 10.3% from $26.0 million in the same period of 2006. As in the two preceding quarters, the trend in sales in the fourth quarter resulted from the product line refinement process undertaken by management and price reductions introduced in response to falling raw materials prices. Due to recent contracts with various municipalities, the Material/Waste Handling sector contributed positively to this segment's results for the past quarter, with sales of $11.4 million. As expected, the Engineered Products sector reported lower sales for a third consecutive quarter pursuant to the Company's decision to gradually reorient its product line and review its customer portfolio. Reduced selling prices for certain products in response to falling raw materials prices also had a negative impact on the value of Engineered Products shipments in the fourth quarter. For fiscal 2007 as a whole, industrial product sales declined by 6.1% to $100.4 million from $107.0 million the previous year.

For the three months ended September 29, 2007, EBITDA grew by 14.5% to $2.4 million or 10.2% of sales compared with $2.1 million or 8.0% of sales in the fourth quarter of fiscal 2006. This improvement in EBITDA and the EBITDA margin was a direct consequence of various strategic measures instituted by the Company to optimize its activities, cut costs and gradually reorient its product line. EBITDA for the twelve-month period ended September 29, 2007, was $9.8 million or 9.8% of sales, compared with $3.2 million or 3.0% of sales ($9.3 million or 8.7% of sales excluding the non-recurring expenses mentioned above) for the financial year ended September 30, 2006.

Non-GAAP Measures

The Company's financial management uses a non-GAAP measure in this press release, namely earnings before interest, taxes, depreciation and amortization ("EBITDA"). However, Management wishes to specify that in the presentation of the Company's financial results, EBITDA may not be formally identified in its financial statements, but corresponds to the line preceding the one labelled "Financial expenses". The reader may refer to the table reconciling the EBITDA used by the Company and net earnings, provided in a section entitled "Non-GAAP Financial Measures" in the management discussion and analysis for the fiscal year ended September 29, 2007.

While EBITDA is not a standard GAAP measure, management, analysts, investors and others use it as an indicator of the Company's financial and operating management and performance. The Company's method of calculating EBITDA may be different from those used by other companies.

Outlook

"After two years spent improving the quality of our operations, optimizing our skills and developing our business synergies, we are now ready to enter the third and final phase of our transition plan, which will be devoted to relaunching the Company on the road to prosperity and sustainable development. With the Company's overall efficiency considerably enhanced in the past year, we now have the financial resources to make the investments required to boost the value of our product line, increase our competitiveness and meet the challenges of the current economic climate. IPL now has all the elements with which to progressively execute its business plan and achieve its objectives of innovating and creating value for its shareholders," added Serge Bragdon.

Conference Call

IPL Inc. will hold a conference call to present its results tomorrow, Thursday, December 13, 2007, at 11:00 a.m. (Eastern Standard Time). Those interested should call 1-800-732-0232 (Montreal, North America or overseas). The call can also be accessed via a direct broadcast site at the following addresses: www.cnw.ca and www.q1234.com. Those unable to participate can hear a recording of the call by dialling 1-877-289-8525 and entering the code 21254934# on the telephone keypad. This recording will be accessible from 1:00 p.m. on Thursday, December 13, 2007 until 11:59 p.m. on Thursday, December 20, 2007.

About IPL

IPL Inc. is one of the leading North American producers of moulded plastic products through injection and extrusion for various industrial manufacturing sectors. IPL employs more than 1,000 people in its four plants located in Saint-Damien, Saint-Lazare and Lawrenceville (Quebec), and Edmundston (New Brunswick). The Company manufactures and markets over 400 products for packaging and materials handling. IPL also provides highly technical value-added custom moulding services for the automotive and transport industries, as well as for various industrial uses. Further information about IPL is available at www.ipl-plastics.com.

Forward-looking statements

Except for historical information provided herein, this press release may contain statements of a forward-looking nature concerning the future performance of the Company. These statements are based on management's best possible evaluation of future events, and as such involve a number of risks and uncertainties. The factors apt to cause variances in the results include, among others, any fluctuations in quarterly results, any change in demand for the Company's products and services, any impact of competition on prices and the market in general, and any events that could have an impact on the economy. As a result, readers are advised that actual results may differ from expected results.



CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars except
per share data)
unaudited

Three months ended Year ended
September 29, September 30, September 29, September 30,
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)

Sales $51,065 $55,788 $210,601 $220,781
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Operating expenses 45,026 49,077 184,508 197,108

Other expenses, net 82 746 717 6,252
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45,108 49,823 185,225 203,360
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5,957 5,965 25,376 17,421
Financial expenses 769 1,084 3,343 4,140
--------------------------------------------------------------------------
Earnings before
depreciation and
amortization and
income taxes 5,188 4,881 22,033 13,281
Depreciation and
amortization 3,928 4,307 15,874 16,598
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Earnings (loss)
before income taxes 1,260 574 6,159 (3,317)
IIncome taxe (recovered) 475 199 2,042 (1,126)
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Net earnings (loss) $785 $375 $4,117 $(2,191)
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Net earnings per
share basic $0.05 $0.03 $0.28 $(0.15)
Net earnings per
share fully diluted $0.05 $0.03 $0.28 $(0.15)

Average shares
outstanding 14,541,746 14,543,446 14,543,234 14,509,860
Average shares
fully diluted 14,589,051 14,610,144 14,615,015 14,567,043



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands of dollars)

Three months ended Twelve months ended
September 29 September 30 September 29 September 30
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)

Balance at
beginning $53,938 $50,231 $50,606 $52,797
Changes in
accounting
policies 140 - 140 -

Net earnings
(loss) 785 375 4,117 (2,191)
Premium on
redemption of
multiple voting
shares (25) - (25) -

Balance at end $54,838 $50,606 $54,838 $50,606
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of dollars)

Three months ended Twelve months ended
September 29 September 30 September 29 September 30
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)

Net earnings (loss) $785 $375 $4,117 $(2,191)

Changes in gains
and losses on
derivatives
designated as cash
flow hedges

Gains and losses
for the year
(net of income
taxes of $1,431) 1,919 - 3,042 -
Reclassification
of gains and losses
realized in net
income
(net of income
taxes of $551) (1,166) - (1,166) -
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753 - 1,876 -

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Comprehensive
income $1,538 $375 $5,993 $(2,191)
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CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)

As at As at
September 29 September 30
2007 2006
ASSETS (audited) (audited)
Current assets:
Cash $4,207 $-
Accounts receivable 31,162 35,585
Inventories 22,678 32,512
Moulds for sale 462 2,112
Prepaid expenses 1,197 1,492
Income taxes recoverable 770 3,034
Future income tax assets 0 189
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60,476 74,924

Deposits on acquisition of capital assets 1,512 1,195
Property, plant and equipment 87,360 91,011
Intangible assets 2,536 3,170
Capital assets held for sale 2,399 2,399
Deferred charges 2,493 3,972
Goodwill 3,406 3,406
Other assets 1,345 23
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$161,527 $180,100
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LIABILITIES
Current liabilities:
Bank loans $- $4,561
Accounts payable and accrued liabilities 26,190 27,678
Deferred products 520 -
Stock-based compensation obligations 569 265
Income taxes payable 133 568
Future income taxes 741 -
Current portion of long-term debt 9,447 9,372
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37,600 42,444

Long-term debt 29,537 48,937
Stock-based compensation obligations 516 282
Future income tax liabilities 12,753 13,416
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80,406 105,079

SHAREHOLDER'S EQUITY
Retained earnings 54,838 50,606
Accumulated other comprehensive income 1,876 -
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56,714 50,606
Capital stock 24,407 24,415
--------------------------------------------------------------------------
81,121 75,021
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$161,527 $180,100
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)

Three months ended Twelve months ended
September 29 September 30 September 29 September 30
2007 2006 2007 2006
(unaudited) (unaudited) (audited) (audited)

Operating
activities
Net earnings (loss) $785 $375 $4,117 $(2,191)
Adjustments for:
Depreciation of
property, plant and
equipment,amortization
of intangible assets
and deferred charges 4,080 4,407 16,407 17,113
Amortization of
deferred grants (152) (100) (533) (515)
Amortization of the
non-interest-bearing
loan 72 - 72 -
Future income taxes (1,217) 265 (613) (788)
Loss on disposal of
capital assets 328 217 400 41
Loss on write-down
of capital assets - (354) - 4,961
Stock-based
compensation (20) 423 538 517
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Funds from
operations 3,876 5,233 20,388 19,138

Payments for
stock-based
compensation - - - (3)
Changes in non-cash
operating working
capital items 9,404 7,599 18,944 8,126
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Cash flow from
operating
activities 13,280 12,832 39,332 27,261
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Investing activities
Acquisition of
capital assets and
deposits on
acquisition of
capital assets (2,090) (1,777) (11,380) (7,631)
Disposal of capital
assets 14 638 1,202 1,714
Increase in
deferred charges (732) (2,881) (1,529) (3,966)
Changes in other
assets 30 6 73 (5)
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Cash flow used in
investing activities (2,778) (4,014) (11,634) (9,888)
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Financing activities
Long-term loan - 40 - 386
Repayment of
long-term debt (11,971) (1,651) (18,168) (8,879)
Repayment of
capital lease
obligations (354) (271) (1,336) (1,772)
Changes in
short-term bank
loan - (7,228) (4,561) (7,792)
Grants for capital
assets 607 292 607 292
Share issue - 0 - 392
Redemption of
multiple voting
shares (33) - (33) -
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Cash flow used in
financing
activities (11,751) (8,818) (23,491) (17,373)
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Increase in cash
and cash
equivalents (1,249) 0 4,207 0

Cash and cash
equivalents at
beginning 5,456 0 0 0
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Cash and cash
equivalents at end $4,207 $0 $4,207 $0
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