Savaria Corporation
TSX : SIS

Savaria Corporation

August 15, 2011 13:36 ET

Savaria Announces Results for the Second Quarter of 2011

LAVAL, QUEBEC--(Marketwire - Aug. 15, 2011) - Savaria Corporation (TSX:SIS), Canada's leader in the accessibility industry, today disclosed its results for the second quarter ended June 30, 2011.

Second-Quarter Highlights

  • Payment of a dividend of 10.2 cents ($0.102) per common share, as declared in the first quarter;

  • Revenue of $16 million, a decrease of 5.5% from the second quarter of 2010;

  • Operating income down by 78% due in part to unfavourable fluctuations in the Canadian dollar;

  • Earnings before interest, income tax, depreciation and amortization ("EBITDA") of $788,000, compared with $2.2 million for the second quarter of 2010.

A Word from the President

"Our second-quarter results were adversely affected by several factors. The average value of the Canadian dollar against the U.S. dollar was up by more than 6% over the same period of 2010. Also, difficult weather conditions in the first half of the quarter affected the northeast part of North America, the Corporation's primary sales territory, thereby slowing down accessibility equipment installations. Finally, the slow U.S. economic recovery continues to cause trouble for us. However, I am confident that the situation will progressively improve in the third quarter," indicated Marcel Bourassa, President and Chief Executive Officer of Savaria.

Operating Results (Comparative Analysis for the Second quarter and First Half of 2010)

  • The Corporation achieved revenue of $16 million in the second quarter of 2011, compared with $16.9 million in 2010, a decrease of 5.5% or $900,000. The unfavourable change in the U.S. dollar against the Canadian dollar accounted for $483,000 of this decline. A reduction in orders from the United States also contributed to the lower revenue. The contribution of the new subsidiaries acquired in 2010 amounted to $1.6 million, of which $275,000 for the Accessibility segment and $1.3 million for the Adapted Vehicles segment. Revenue for the first half of 2011 increased by $1.3 million or 4.4%. The contribution of the new subsidiaries acquired in 2010 totalled $3.4 million, of which $884,000 for the Accessibility segment and $2.5 million for the Adapted Vehicles segment.
  • The gross margin for the second quarter of 2011 was down by $871,000 and represented 25% of revenue, compared with 28.8% in 2010. The unfavourable effect of the change in exchange rates, combined with an unfavourable fixed cost absorption level as a result of an unusually low volume of revenue, had a negative impact on the gross margin. For the first half of 2011, the gross margin increased by $51,000 but decreased as a percentage of sales, from 28% to 27% of revenue.
  • Operating income for the second quarter of 2011 decreased by 78% or $1.1 million, from $1.4 million in 2010 to $316,000 in 2011. The $247,000 increase in operating expenses is due primarily to the addition of the expenses of the subsidiaries acquired in 2010, which expenses amounted to $506,000. For the first half, operating income declined by $868,000 or 45%. The increase in operating expenses came to $893,000, whereas the expenses of the subsidiaries acquired in 2010 represented $1.1 million.
  • Second-quarter net income for the period decreased from $1.3 million in 2010 to $140,000 in 2011. This $1.1 million decline includes a $288,000 unfavourable change in gain on foreign exchange and a $110,000 increase in finance costs resulting from the contracting of new long-term debt. For the first half, net income for the period was reduced by $1 million, from $1.3 million in 2010 to $317,000 in 2011.

Transition to International Financial Reporting Standards ("IFRS")

Due to their coming into effect on January 1, 2011, the Corporation has started to present its financial results for fiscal 2011, as well as corresponding figures for 2010, in accordance with IFRS. For further information in this regard, the reader is referred to Section 12, Significant Accounting Policies and Estimates, of the management's report for the first quarter of 2011.

Savaria Corporation (www.savaria.com) is Canada's leader and the second largest North American company in the accessibility industry focused on meeting the needs of people with mobility challenges. Savaria designs, manufactures and distributes primarily elevators for home and commercial use, as well as stairlifts and vertical and inclined platform lifts. In addition, it converts and adapts wheelchair accessible automotive vehicles and also offers scooters and motorized wheelchairs. The diversity of its product line, one of the world's most comprehensive, enables the Corporation to stand out by proposing an integrated and customized solution for its customers' mobility needs. Its operations in China have substantially grown since 2006 and the collaboration with Savaria's other Canadian facilities increases its competitive edge in the market place. The Corporation records slightly over 50% of its sales outside Canada, primarily in the United States. It has a sales network of some 600 retailers in North America and employs 400 people at its head office in Laval and at its plants in Ville Saint-Laurent (Quebec), Brampton and London (Ontario), Calgary (Alberta) and Huizhou (China).

Compliance with IFRS

The information appearing in this press release has been prepared in accordance with IFRS. However, the Corporation uses ("EBITDA") for analysis purposes to measure its financial performance. This measure has no standardized definition in accordance with IFRS and is therefore regarded as a non-IFRS measure. This measure may therefore not be comparable to similar measures reported by other companies. A reconciliation between net income for the period and EBITDA is provided in the Financial Highlights section below.

Cautionary Notice Regarding Forward-Looking Statements

Certain information in this press release may constitute "forward-looking statements" regarding Savaria, including, without being limited thereto, understanding of the elements that might affect the Corporation's future, relating to its financial or operating performance, the costs and schedule of future acquisitions, supplementary capital expenditure requirements and legislative matters. Most frequently, but not invariably, forward-looking statements are identified by the use of such terms as "plan", "expect", "should", "could", "budget", "expected", "estimated" "forecast", "intend", "anticipate", "believe", variants thereof (including negative variants) or statements that certain events, results or shares "could", "should" or "will" occur or be achieved. Such statements involve known and unknown risks, uncertainties and other factors liable to cause Savaria's actual results, performance or achievements to differ materially from those set forth in or underlying the forward-looking statements. Such factors notably include general, economic, competitive, political and social uncertainties. Although Savaria has attempted to identify the key elements liable to cause actual measures, events or results to differ from those described in the forward-looking statements, other factors could have an impact on the reality and produce unexpected results. The forward-looking statements contained herein are valid at the date of this press release. As there can be no assurance that these forward-looking statements will prove accurate, actual future results and events could differ materially from those anticipated therein. Accordingly, readers are strongly advised not to unduly rely on these forward-looking statements.

Complete financial statements and the management's report for quarter ended June 30, 2011 will be available shortly on Savaria's website and on SEDAR (www.sedar.com).

Financial Highlights

(in thousands, except per-share amounts, percentages and exchange rates – unaudited) Quarters Ended
June 30,
Six-Month Periods Ended
June 30,
2011 2010 Change 2011 2010 Change
Average effective exchange rate (1) 1.0342 1.0936 (5.4 )% 1.0610 1.0892 (2.6 )%
Revenue $16,008 $16,940 (5.5 )% $31,521 $30,182 4.4 %
Gross margin as a % of revenue 25 % 28.8 % n/a 27 % 28 % n/a
Operating costs $3,690 $3,443 7.2 % $7,465 $6,572 13.6 %
As a % of revenue 23.1 % 20.3 % n/a 23.7 % 21.8 % n/a
Operating income $316 $1,433 (78 )% $1,051 $1,919 (45 )%
As a % of revenue 2 % 8.5 % n/a 3.3 % 6.4 % n/a
EBITDA (2) $788 $2,156 (64 )% $1,597 $2,677 (40 )%
EBITDA per share – diluted $0.03 $0.09 (67 )% $0.07 $0.11 (36 )%
Gain (loss) on foreign change $51 $339 (85 )% $(198 ) $153 (229 )%
Net income for the period $140 $1,254 (89 )% $317 $1,313 (76 )%
Earnings per share – diluted $0.006 $0.05 (88 )% $0.014 $0.06 (77 )%
Dividends declared per share - - n/a $0.102 $0.084 n/a
Weighted average number of common
shares outstanding – diluted
23,445 23,517 (0.3 )% 23,184 23,453 (1.1 )%
As at June 30, 2011 As at Dec. 31, 2010
Total assets $43,207 $47,275
Total liabilities $24,180 $25,198
Shareholders' equity $19,027 $22,077
(1) Rate at which revenue is recorded, being the exchange rate calculated considering foreign exchange contracts applied to the periods in question
(2) Reconciliation of EBITDA with net income for the period provided in the following table

Although EBITDA is not recognized according to IFRS, it is used by management, investors and analysts to assess the Corporation's financial and operating performance.

Reconciliation of EBITDA with Net Income for the Period

(in thousands of dollars – unaudited) Quarters Ended
June 30,
Six-Month Periods Ended June 30,
2011 2010 2011 2010
Net income for the period $140 $1,254 $317 $1,313
Plus:
Interest on long-term debt 138 88 281 178
Interest expense and banking fees 87 27 130 67
Income tax expense 40 492 152 609
Amortization of fixed assets 183 117 353 228
Amortization of intangible assets 205 185 387 318
Less:
Interest and dividend income 5 7 23 36
EBITDA $788 $2,156 $1,597 $2,677

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