McCoy Corporation
TSX : MCB

McCoy Corporation

October 27, 2005 14:15 ET

McCoy Corporation Announces Record Third Quarter Results, Quarterly Dividend and Board Appointment

EDMONTON, ALBERTA--(CCNMatthews - Oct. 27, 2005) - McCoy Corporation (TSX:MCB) ("McCoy" or the "Company") today announced consolidated financial results for the third quarter of 2005 and nine months ended September 30, 2005.



Three months ended September 30

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2005 2004
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$ $
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Total revenue 29,340,320 11,118,200
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Net earnings 2,226,017 621,113
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Basic earnings per share 0.12 0.04
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Diluted earnings per share 0.12 0.03
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EBITDA(1) per share 0.21 0.07
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(1) McCoy defines EBITDA as "Earnings before interest, taxes,
depreciation, amortization and stock based compensation".


Nine months ended September 30

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2005 2004
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$ $
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Total revenue 77,279,096 28,791,703
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Net earnings 4,823,538 1,212,284
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Basic earnings per share 0.27 0.07
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Diluted earnings per share 0.25 0.06
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EBITDA per share 0.48 0.14
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Total Assets 43,419,199 30,871,376
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Total Liabilities 26,964,603 21,061,158
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Shareholders' Equity 16,638,098 9,810,218
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The Company today announced a change to its dividend policy which now provides for a quarterly dividend of one cent per common share. The Board of Directors declared a dividend of one cent per common share payable on December 15, 2005 to shareholders of record at the close of business on December 1, 2005.

Mr. Jim Rakievich, McCoy President and Chief Executive Officer, said that the third quarter record-breaking revenue and earnings were the result of continuing strong demand for the Company's various products and services. The financial impact of the acquisitions of Peerless Limited ("Peerless") completed in September, 2004 and Rebel Metal Fabricators Ltd. ("Rebel") completed in May, 2005, is reflected in the third quarter, as is the Real McCoy Service Centre which opened in Fort St. John, British Columbia in October of last year.

All three of McCoy's operating segments, (1) Truck & Trailer Products & Services, (2) Trailer Manufacturing and (3) Oilfield Products Manufacturing increased sales over the same period last year. Cash flow from operations before net change in non-cash working capital items increased from $1,086,610 in the third quarter last year to $2,768,283 for the same period this year as a result of the growth in sales.



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3 Months Ended Sept. 30 2005 2004
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$ $
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Gross profit 8,840,718 3,668,897
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% of Total sales 30.13% 32.99%
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9 Months Ended Sept. 30 2005 2004
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$ $
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Gross profit 23,755,763 9,582,795
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% of Total sales 30.74 33.28
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The gross profit increase for both the three month and nine month periods is also directly related to the increase in revenues. Gross profit margin as a percentage of sales decreased in both periods in part because revenue produced by the Trailer Manufacturing segment, which includes the manufacturing activities of Peerless, historically generates lower margins than the other two segments. Additionally, all segments have experienced an increase in direct labor costs as the shortage of skilled tradespeople has caused the Company to raise wages for certain positions. Mr. Rakievich commented that management is very mindful of the labour shortage and is designing and implementing initiatives that are expected to assist in recruitment and retention.

Salaries and commissions for the quarter were $3,136,693, an increase of 142%. Approximately 89% of the increase is attributable to the addition of Peerless, Rebel and the Fort St. John facility, with the balance due to higher sales volumes in the remaining operations. The same factors resulted in an increase in operations expenses of $446,944, or 46%, to $1,415,720.

Amortization expense of $310,828 is an 81% increase over $172,067 in the third quarter last year, nearly 75% of which is due to the operations of Peerless, Rebel and Fort St. John. The balance of the increase is related to investment in equipment needed to increase manufacturing throughput.

Interest on debt grew by $55,624 to $88,196, or 171% over the third quarter last year. The interest relates to long-term debt, bank indebtedness and a related-party term loan, all of which existed for the full quarter in 2005 and will continue throughout the year.

Mr. Rakievich reported that early in the third quarter the Company welcomed Mr. William Traynor to the organization in the newly-created position of Director of Advanced Manufacturing. Mr. Traynor will primarily be involved in leading the manufacturing operations through the implementation of lean manufacturing processes. Mr. Traynor has considerable experience applying continuous improvement manufacturing methodologies for other companies, most recently for MCI in Winnipeg. Mr. Rakievich added that over time, he expects the lean processes to lead to increased throughput and product quality along with reduced inventory levels.

The Company also announced the appointment of Mr. Frank Burdzy to the Board of Directors effective October 26, 2005. Mr. Burdzy holds a Master of Business Administration degree from the University of Regina. Mr. Rakievich remarked that Mr. Burdzy brings additional business acumen to the Board, particularly in such areas as strategic business planning, business operations, finance and mergers and acquisitions. Mr. Burdzy is an unrelated, independent director. He is currently Vice President of Operations for Superior Propane in Calgary.

The outlook for McCoy for the remainder of the year is positive, Mr. Rakievich noted, as the robust oil and gas industry is not showing signs of slowing down in the near term. We will continue to seek new growth and acquisition opportunities, as well continuous improvement in our existing operations, he added.

The Company's main operating segments are: Truck & Trailer Products & Services, Trailer Manufacturing and Oilfield Products Manufacturing. Approximately 538 individuals are employed by the Company and its subsidiaries in Alberta and British Columbia. The Company's shares are traded on the TSX under the symbol "MCB". More information can be found on the Company's web site at www.mccoycorporation.ca.


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