Savaria Corporation
TSX : SIS

Savaria Corporation

November 09, 2005 11:58 ET

Savaria Increases Sales by 70% in the Third Quarter of 2005: With the Latest Acquisitions, Management Anticipates Annualized Sales of Approximately $65 Million

LAVAL, QUEBEC--(CCNMatthews - Nov. 9, 2005) - Savaria Corporation (TSX:SIS), the second largest company in the accessibility equipment industry in North America, achieved sales of $10.5 million during the quarter ended September 30, 2005, up 69.7% over the sales of $6.2 million recorded in the third quarter of 2004. This strong growth resulted from the acquisition of Van-Action's assets on June 20, 2005 and Concord Elevator Inc.'s shares on September 14, 2005, these new operations having raised third-quarter sales by $1.9 million and $2.2 million respectively.

Gross profit stood at $3.1 million in the third quarter of 2005, up 38.2% over $2.2 million in the corresponding period a year earlier. The gross profit margin thus fell to 29.3%, down from 36.0% in the third quarter of fiscal 2004. This 6.7% gross profitability decrease resulted from a reduction of approximately 4.7% related to the lower profit margins recorded by the recently acquired businesses and a reduction of approximately 2.0% related to the higher value of the Canadian dollar in relation to the U.S. dollar.

"The integration of our new operations and the implementation of synergies are progressing as planned so far," pointed out Marcel Bourassa, Chairman of the Board, President and Chief Executive Officer of Savaria. "We are banking on a number of front-line synergies, such as: better use of Concord's manufacturing capacity; centralized purchasing; the optimal use of our Asian suppliers; the combination of our retailer networks; and the pooling of our administration, sales, marketing and R&D expertise. We are therefore confident that all our operations will improve as these synergies are realized."

Whereas sales increased by 69.7%, selling and administrative expenses only rose 25.0%, from $1.4 million (23.1% of sales) in the third quarter of 2004 to $1.8 million (17.0% of sales) in the third quarter of the current fiscal year. Given the nature of the integrated operations, management expects such expenses to henceforth stand at between 18% and 20% of the Company's revenues, compared with over 20% in the past.

Operating income totalled $1.1 million in the third quarter of 2005, up 63.7% over $683,014 in the same period a year earlier. "The operating margin fluctuated very little, at 10.7% versus 11.0% in the third quarter last year. The decline in our gross margin was therefore counterbalanced by the reduction in selling and administrative expenses as a percentage of sales," indicated Jean-Marie Bourassa, Vice-President, Finance and Chief Financial Officer of Savaria.

Its forward exchange contracts having expired and the Canadian dollar having appreciated in relation to the U.S. dollar, the Company recorded an exchange loss of $243,375 in the third quarter of 2005, as opposed to an exchange gain of $499,084 in the third quarter of 2004, representing a change of $742,459.

Consequently, net earnings amounted to $644,374 or $0.027 per share (on a diluted basis), compared with $819,447 or $0.036 per share (on a diluted basis) during the third quarter of 2004, corresponding to net profit margins of 6.1% and 13.2% respectfully. This sharp decline is due mainly to exchange fluctuations.

In the third quarter of 2005, the average number of common shares issued and outstanding totalled 23,371,429 shares, versus 15,773,063 shares in the third quarter of fiscal 2004. This change can be explained primarily by the conversion of 7,000,000 preferred shares into common shares on June 1, 2005 and, to a lesser extent, the issue of 4,250,000 shares in connection with the acquisition of Concord on September 14, 2005.

Nine-Month Period Ended September 30, 2005

During the first three quarters of the current fiscal year, Savaria recorded sales of $23.4 million, up 47.7% over $15.8 million for the same period of fiscal 2004. This performance can be explained by strong internal growth, the contribution of the acquisitions of Robertson Custom Elevators and Weber Accessibility Systems Inc. finalized in the second quarter of 2004, the selling price increases applied by the Company effective March 1, 2005 and the acquisition of Van-Action's assets and Concord's shares.

Gross profit stood at $7.7 million, compared with $5.8 million for the same period a year earlier, an increase of 32.8%. Gross profit margins stood at 32.9% and 36.6% respectively.

Whereas sales increased by 47.7%, selling and administrative expenses only rose 20.4%, from $3.7 million (23.6% of sales) for the first nine months of 2004 to $4.5 million (19.3% of sales) for the same period of the current fiscal year.

Operating income grew by 58.1%, from $1.7 million for the first nine months of 2004 to $2.8 million for the same period of the current fiscal year, corresponding to operating margins of 11.0% and 11.8% respectively. Moreover, exchange gains went from $1.2 million for the first nine months of 2004 to $288,563 for the same period of the current fiscal year.

Consequently, net earnings varied slightly, amounting to $2.0 million or $0.088 per share (on a diluted basis), compared with $2.1 million or $0.089 per share (on a diluted basis) for the first three quarters of the previous fiscal year. However, the net profit margin fell sharply to 8.8%, down from 13.0% for the first three quarters of 2004.

Financial Position

As at September 30, 2005, cash and cash equivalents totalled $4.7 million, compared with $6.1 million at the end of fiscal 2004. As part of the acquisition of Concord, the Company acquired current assets of $8.4 million, capital assets of $1.9 million, other long-term assets of $1.0 million and future income tax assets of $6.6 million. Consequently, Savaria's balance sheet showed total assets of $38.1 million at the close of the third quarter of 2005, up from $17.6 million at fiscal year-end 2004.

As for liabilities, they totalled $17.6 million as at September 30, 2005, compared with $4.5 million at the close of the previous year. This variation is attributable primarily to the increase in accounts payable and long-term debt arising mainly from the acquisition of Concord, and the long-term debt of $5.0 million contracted to finance the Company's projects. As part of the transaction with Concord, Savaria assumed current liabilities of $6.6 million, long-term debt of $3.4 million and a warranty provision of $399,037. Consequently, the Company had working capital of $12.5 million (current ratio of 2.2) and long-term debt of $6.3 million at the end of the third quarter of 2005.

Finally, due mainly to the issue of shares as part of the transaction with Concord, shareholders' equity went from $13.1 million or $0.58 per share as at December 31, 2004 to $20.5 million or $0.76 per share as at September 30, 2005.

Expected Annualized Revenues of $65 Million

On the strength of its latest two acquisitions, Savaria expects annualized revenues of approximately $65 million, making it the leading Canadian and the second largest North American provider of accessibility equipment for the physically challenged. Its increased scope provides it with significant resources to optimize its growth and profitability, including: a complete selection of products; a network of over 450 retailers; about 400 employees; and a manufacturing floor space totalling 310,000 square feet.

"Our operating margin is holding steady despite the higher value of the Canadian dollar. This performance is due primarily to the improvement in our manufacturing productivity, tight control over operating costs, our recent selling price increases and our careful selection of suppliers," added Marcel Bourassa. "Given the expected synergies, we are confident we can improve our operating profitability and thereby bring the current fiscal year to a strong close."

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 Company'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.

Savaria Corporation (www.savaria.com) is Canada's leader and the second largest accessibility company in North America. The Company designs, manufactures and distributes products, meeting the needs of people with mobility challenges, mainly stairlifts, vertical and inclined platform lifts, as well as elevators for residential and commercial use. Savaria annualized sales of close to $65 million rely on a network of over 450 retailers in North America. The Company records over 50% of its sales outside Canada and employs close to 400 people.

Complete financial statements and the Interim Management's report for the quarter ended September 30, 2005 will soon be available on Savaria's web site and filed on SEDAR (www.sedar.com).



Financial Highlights
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Quarters Nine-month periods
ended September 30, ended September 30,
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2005 2004 Change 2005 2004
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Sales (000s) $10,494 $6,185 69.7% $23,396 $15,843
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Gross margin 29.3% 36.0% n/a 32.9% 36.6%
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Selling and
administrative
expenses (000s) $1,789 $1,431 25.0% $4,505 $3,742
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Selling and
administrative
expenses/sales
ratio 17.0% 23.1% n/a 19.3% 23.6%
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Operating income
(000s) $1,118 $683 63.7% $2,755 $1,743
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Operating margin 10.7% 11.0% n/a 11.8% 11.0%
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Exchange gain (loss)
(000s) $(243) $499 n/a $289 $1,196
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Net earnings
applicable to
common shares (000s) $644 $819 -21.4% $2,048 $2,059
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Net margin 6.1% 13.2% n/a 8.8% 13.0%
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Net earnings
per common share
- basic $0.028 $0.052 -46.2% $0.108 $0.131
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Net earnings per
common share
- diluted $0.027 $0.036 -25.0% $0.088 $0.089
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Average number
of common shares
outstanding
- basic 23,371,429 15,773,063 48.2% 19,027,640 15,726,393
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Average number
of common shares
outstanding
- diluted 23,753,725 23,064,798 3.0% 23,298,825 23,018,128
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As at As at
September 30, September 30,
2005 2004
-----------------------------------------
Total assets
(000s) $38,074 $17,590
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Long-term debt
(000s) $6,318 $24
-----------------------------------------
Total liabilities
(000s) $17,580 $4,525
-----------------------------------------
Shareholders'
equity (000s) $20,494 $13,065
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Contact Information

  • Savaria Corporation
    Mr. Marcel Bourassa
    Chairman, President and Chief Executive Officer
    1-800-931-5655
    www.savaria.com