Savaria Corporation
TSX : SIS

Savaria Corporation

March 13, 2008 18:17 ET

Savaria Announces Results for its Fourth Quarter and the Fiscal Year Ended December 31, 2007

LAVAL, QUEBEC--(Marketwire - March 13, 2008) - Savaria Corporation (TSX:SIS), the second largest company in the accessibility industry in North America, announces its results for the fourth quarter and the fiscal year ended December 31, 2007.

Fiscal 2007 Highlights

- Sales of $57.5 million, compared with $60.3 million the previous year

- Operating earnings of $2 million, down from $3.1 million in 2006

- Earnings before interest, income taxes and amortization ("EBITDA") of $1.4 million, down from $4.9 million in 2006

- Net loss of $324,000 for the fiscal year ended December 31, 2007, as opposed to net earnings of $1,904,000 for fiscal 2006; adjusted net earnings of $1,561,000 (see table below) for fiscal 2007 versus $1,782,000 for 2006

- Cash and cash equivalents of $4.7 million as at December 31, 2007, compared with $6 million as at December 31, 2006

- Transfer of Laval operations to Toronto on December 21, 2007, leading to annual savings of $1.5 million as of April 2008

- Increase in production area from 8,000 to 35,000 square feet at the related-party facility in Huizhou, China

- Launch in September 2007 of the "Eclipse", a new residential elevator for multiple-unit housing

- Finalization of an agreement on February 21, 2008 with the Italian company Vimec for the sale of Savaria's products in Europe and of Vimec's products in North America.

Outlook

"2007 was a difficult but satisfying year when considering the fluctuations in the Canadian dollar and the costs related to the transfer of operations from Laval to Toronto. In 2008, we intend to continue implementing operational and administrative synergies, which will arise primarily from the further outsourcing of component manufacturing to our Chinese partners," said Marcel Bourassa, Chairman of the Board, President and Chief Executive Officer of Savaria. "The purchasing volume from China has more than doubled over the past twelve months and we plan to continue in the same direction."

"We remain highly confident that the demand for accessibility products will continue growing given the aging population. We believe that the agreement with Vimec will enable us to penetrate the European and to considerably increase our sales."

Operating Results

Sales

The Corporation recorded sales of $14 million in the fourth quarter of 2007, versus $14.8 million in the same period of fiscal 2006; sales totalled $57.5 million during the fiscal year ended December 31, 2007, compared with $60.3 million for 2006.

Eliminating the impact of the discontinuance of direct sales and exchange rate fluctuations, sales increased by 2.3% in the fourth quarter of 2007. In fact, the rise in the Canadian dollar had an unfavourable impact of $948,000 on sales. Fourth-quarter sales in Canada, the United States and outside North America amounted to $6 M, $7.4 M and $0.6 M respectively. U.S. sales were recognized at an average conversion rate of 1.0072, whereas this rate stood at 1.1281 in the fourth quarter of the previous year.

For the fiscal year as a whole, after eliminating the impact of the discontinuance of direct sales and exchange rate fluctuations, sales increased by 2.7%. In fact, the discontinuance of direct sales lowered sales by $3.1 million, whereas exchange rate fluctuations had a negative impact of $1.3 million on sales. U.S. sales were recognized at an average conversion rate of 1.0909, whereas this rate stood at 1.1319 during the previous year.

Operating Earnings

Operating earnings amounted to $72,000 for the fourth quarter of 2007, down from $919,000 in the corresponding quarter of 2006. This decline is due primarily to exchange rate fluctuations ($471,000) net of gains from foreign exchange contracts ($238,000), the write-off of discontinued product inventories ($161,000) and a write-down of assets subsequent to the closure of the Laval plant ($100,000).

For fiscal 2007, operating earnings totalled $2 million, versus $3.1 million for fiscal 2006, representing margins of 3.6% and 5.1% respectively. The main reasons for this decline are the impact of exchange rate fluctuations ($651,000) net of gains from foreign exchange contracts ($440,000) and the items referred to above.

Net Earnings

The Corporation posted a net loss of $886,000 ($0.032 per share) for the fourth quarter and $324,000 ($0.011 per share) for fiscal 2007, as opposed to net earnings of $692,000 ($0.024 per share) and $1.9 M ($0.065 per share) for the same periods of the previous year. The recognition of unusual items had a negative impact on net earnings for the fourth quarter and the fiscal year as a whole.

The following table shows the impact of these unusual items and the effect of exchange rate fluctuations on net earnings for the quarter and the fiscal year in comparison with the corresponding periods of 2006.



-------------------------------------------------------------------------
(in thousands Fourth Quarter Fiscal Year
--------------------------------------------------
of dollars) 2007 2006 2007 2006
-------------------------------------------------------------------------
Net earnings (loss) $(886) $692 $(324) $1,904
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Unusual items :

Write-down of
ABCP
investments (1) $254 - $254 -

Inclusion in
earnings of the
loss of a variable
interest entity $164 - $164 -
Stock-based
compensation
following the
issue of a loan
to an employee $108 - $108 -

Restructuring
costs $224 - $224 -

Write-down of
assets subsequent
to the closure
of the Laval plant $100 - $100 -

Write-off of
intangible assets - - $10 $197
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Total of unusual
items $850 - $860 $197
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Effect of exchange
rate fluctuations
without foreign
exchange contracts $641 $(398) $2,243 $(351)

(Gain) loss on
foreign exchange
contracts $(306) $33 $(636) $29
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Total effect of
exchange rate
fluctuations $335 $(365) $1,607 $(322)
-------------------------------------------------------------------------
Unusual items and
effect of exchange
rate fluctuations,
before income taxes $1,185 $(365) $2,467 $(125)

Income taxes on the
items above $(248) $81 $(582) $(3)
-------------------------------------------------------------------------
Unusual items and
effect of exchange
rate fluctuations,
after income taxes $937 $(284) $1,885 $(122)
-------------------------------------------------------------------------
Adjusted net
earnings $51 $408 $1,561 $1,782
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(1) The Corporation recognized a provision for potential loss of $254,000
($220,000 after tax) as a result of the liquidity problems related to
investments in asset-backed commercial paper ("ABCP").


"Were it not for the above unusual items and the effect of exchange rate fluctuations, net earnings would have amounted to $51,000 for the fourth quarter of 2007, compared with $408,000 for the same period of 2006, and to $1,561,000 for the twelve-month period ended December 31, 2007, compared with $1,782,000 for the fiscal year ended December 31, 2006," concluded Mr. Bourassa.

Capital Stock

Due to the share repurchase and cancellation program, the average number of common shares outstanding (diluted) totalled 28,076,441 in the fourth quarter of 2007, down from 29,091,264 shares in the same quarter a year earlier.

Forward-Looking Statements

Certain statements in this press release may be forward-looking. Forward-looking statements involve known and unknown risks, uncertainties or other factors that may cause the Corporation's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Compliance with Canadian Generally Accepted Accounting Principles

Information included in this press release has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). However, the Corporation uses earnings before interest, income taxes and amortization ("EBITDA") and adjusted net earnings for analysis purposes to measure its financial performance. These measures have no standardized definition in accordance with GAAP and are therefore regarded as non-GAAP measures. These measures may therefore not be comparable to similar measures reported by other companies.

Savaria Corporation (www.savariaconcord.com) is Canada's leader and the second largest accessibility company in North America. The Corporation designs, manufactures and distributes products meeting the needs of people with mobility challenges, primarily stairlifts, vertical and inclined platform lifts, as well as elevators for residential and commercial use. Its sales rely on a network of some 600 retailers in North America. Savaria records approximately 55% of its sales outside Canada and employs some 300 people.

Complete financial statements and the management's report for the fiscal year ended December 31, 2007 will shortly be available on the Corporation's website and filed on SEDAR (www.sedar.com).



Financial Highlights
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands, except Quarters Ended Fiscal Years Ended
per-share amounts December 31, December 31,
and percentages) -------------------------------------------------------
2007 2006 Change 2007 2006 Change
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales $14,006 $14,801 -5.4% $57,520 $60,298 -4.6%
-------------------------------------------------------------------------
Gross profit as
a % of sales 20.5% 27.5% n/a 23.5% 26.6% n/a
-------------------------------------------------------------------------
Selling and
administrative
expenses
as a % of sales 17.9% 18.1% n/a 18.1% 19.0% n/a
-------------------------------------------------------------------------
Operating
earnings $72 $919 -92.2% $2,049 $3,097 -33.8%

Operating
earnings as
a % of sales 0.5% 6.2% n/a 3.6% 5.1% n/a
-------------------------------------------------------------------------
Earnings before
interest, income
taxes and
amortization
(EBITDA) $(318) $1,705 -118.7% $1,351 $4,857 -72.2%
-------------------------------------------------------------------------
EBITDA per share
- diluted $(0.011) $0.059 -113.6% $0.047 $0.164 -69.5%
-------------------------------------------------------------------------
Exchange gain
(loss) $169 $398 -57.5% $(927) $351 -364.1%
-------------------------------------------------------------------------
Net earnings
(loss) $(886) $692 -228.0% $(324) $1,904 -117%
-------------------------------------------------------------------------
Net earnings
(loss) per
share - basic $(0.032) $0.024 -233.3% $(0.011) $0.065 -116.9%
-------------------------------------------------------------------------
Net earnings
(loss) per
share -
diluted $(0.032) $0.024 -233.3% $(0.011) $0.064 -117.2%
-------------------------------------------------------------------------
Dividends
declared per
share - - n/a $0.082 $0.022 272.7%
-------------------------------------------------------------------------
Weighted average
number of
common shares
outstanding
- diluted 28,076 29,091 -3.5% 28,371 29,669 -4.4%
-------------------------------------------------------------------------
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As at Dec. 31, As at Dec. 31,
2007 2006
--------------------------------------------
Total assets $38,705 $40,261
--------------------------------------------
Total liabilities $16,082 $13,924
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Shareholders' equity $22,623 $26,337
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Contact Information

  • Savaria Corporation
    Marcel Bourassa
    Chairman of the Board, President and Chief Executive Officer
    1-800-931-5655
    www.savariaconcord.com