Savaria Corporation
TSX : SIS

Savaria Corporation

March 22, 2006 08:00 ET

Savaria Increases Sales by 78% and Operating Income by 103%

LAVAL, QUEBEC--(CCNMatthews - March 22, 2006) - Savaria Corporation (TSX:SIS), the second largest company in the accessibility equipment industry in North America, achieved sales of $39.3 million during the fiscal year ended December 31, 2005, up 77.5% over the sales of $22.1 million recorded in fiscal 2004. This strong improvement is due to internal growth of $3.7 million, combined with the integration of the business of Van-Action and Concord Elevator Inc. (Concord), which raised the year's sales by $4.3 million and $9.2 million respectively.

Savaria truly accelerated its growth-by-acquisition strategy in 2005. First, on June 20th, the Company purchased all the assets of Van-Action Inc., a company primarily offering lowered-floor mini-vans, ideal vehicles for the transportation of people in wheelchairs. Three months later, on September 14th, it acquired Concord, a designer and manufacturer of elevators and vertical platforms.

"We made the two largest acquisitions in the Company's history in very little time," explained Marcel Bourassa, Chairman of the Board, President and Chief Executive Officer of Savaria. "Today, the Company has about 400 employees and benefits from a manufacturing area of 310,000 square feet, enabling it to manufacture a full range of products that are shipped to some 600 retailers in North America."

Operating Results for Fiscal 2005

Savaria's revenues grew by 77.5% to $39.3 million in 2005, compared with $22.1 million in 2004. Sales in the United States totalled $21.2 million, up 58.1% over $13.4 million in 2004. Canadian sales rose from $8.1 million in 2004 to $16.1 million in 2005, an increase of 98.1%. Given the Company's solid domestic performance and the acquisitions made during the year, revenues from outside Canada accounted for 58.9% of its business volume, down from 63.2% in 2004.

Gross profit improved to $11.6 million for 2005 from $7.8 million in 2004. The gross profit margin stood at 29.5%, versus 35.1% the previous year. This decline is due to the lower gross profitability of the operations acquired during the year, coupled with the appreciation in the Canadian dollar in relation to the U.S. dollar.

Although the acquired groups operated under lower gross profit margins, overall cost efficiencies have been seen on selling and administrative expenses. While sales grew 77.5% versus the prior year, administrative expenses grew 32.6%. More importantly as a percentage of sales, these expenses dropped from 24.7% of sales in 2004 to 18.4% sales in 2005. Management is confident that such expenses will henceforth be maintained at less than 20% of sales.

Savaria recorded operating income of $3.7 million in 2005, up 102.7% over $1.8 million in 2004. The reduction in selling and administrative expenses more than offset the decline in the gross profit margin. The operating margin therefore rose from 8.2% in 2004 to 9.3% in 2005.

Given the appreciation in the Canadian dollar in relation to the U.S. dollar, the forward exchange contracts purchased in 2003 generated exchange gains of $1.6 million in 2004, of which $1.4 million were included in deferred revenues as at January 1, 2004. Only $457,789 of these deferred revenues remained as at December 31, 2004, which were mostly accounted for during the first half of 2005.

Net earnings attributable to holders of common shares amounted to $2.6 million or $0.11 per share on a diluted basis in 2005, compared with $2.1 million or $0.10 per share on a diluted basis the previous year. Due mainly to the decline in exchange gains, the net profit margin fell from 9.3% in 2004 to 6.7% in 2005.

The average number of common shares issued and outstanding totalled 21,139,958 in 2005, versus 15,722,110 in 2004. This 34.5% increase can be explained primarily by the conversion from management of 7,000,000 preferred shares into common shares on June 1, 2005 and, to a lesser extent, by the issue of 4,249,984 shares in connection with the acquisition of Concord on September 14, 2005.

"In order to strengthen the Company's balance sheet subsequent to the transactions over the past year, we also issued 2,786,000 shares for a total gross proceed of $6.0 million as part of private placements in the fourth quarter of 2005," added Jean-Marie Bourassa, Vice-President, Finance and Chief Financial Officer of Savaria.

Fourth Quarter of Fiscal 2005

The Company generated revenues of $15.9 million during the quarter ended December 31, 2005, up 153.1% over the sales of $6.3 million recorded in the same period the previous year. This strong growth is attributable to the recognition of the operations of Van-Action and Concord. As a result of the integration costs and especially the appreciation in the Canadian dollar, the gross profit margin stood at 24.6% in the fourth quarter of fiscal 2005, compared with 31.5% in the same period a year earlier.

Conversely, selling and administrative expenses as a percentage of sales only stood at 17.2%, compared with 27.3% in the fourth quarter of fiscal 2004. Consequently, operating income rose to $904,000 from $62,000 in the fourth quarter of 2004, representing operating margins of 5.7% and 1.0% respectively.

Net earnings amounted to $582,000 or $0.02 per share in the fourth quarter of 2005, up from $148,000 or $0.01 per share in the same period of fiscal 2004. The weighted average number of outstanding shares on a diluted basis totalled 27.8 million in the fourth quarter of 2005, versus 24.3 million in the corresponding period a year earlier.

Cash Flows

Savaria had cash, cash equivalents and temporary investments of $8.5 million as at December 31, 2005, compared with $6.1 million a year earlier. Cash flows from operating activities totalled $3.4 million or $0.16 per share in 2005, up from $2.9 million or $0.19 per share in 2004.

Savaria was active in regard to investment in 2005. First, on June 20th, it purchased Van-Action's assets for a cash consideration of $1.6 million. Then, on September 14th, the Company acquired Concord, a transaction involving a cash outlay of $1.3 million.

Furthermore, the Company contracted a $5 million long-term loan to finance its acquisition and internal development projects. It also issued shares for total gross proceeds of $6.0 million, specifically 286,000 and 2,500,000 common shares on November 25 and December 15, 2005 respectively at a price of $2.10 per share as part of two private placements.

Financial Position

Total assets amounted to $43.9 million as at December 31, 2005, compared with $17.6 million as at December 31, 2004. This 149.4% increase is due primarily to the recognition of the assets acquired during the year. Specifically, accounts receivable rose from $3.6 million in 2004 to $10.1 million in 2005, while inventories went from $2.2 million to $8.8 million.

Liabilities totalled $17.1 million at year-end 2005, compared with $4.5 million at the close of the previous fiscal year. The two acquisitions made during the year raised accounts payable to $9.7 million from $3.3 million as at December 31, 2004. The Company also contracted a $5 million long-term loan, bringing its long-term debt to $6.1 million at the end of fiscal 2005.

Savaria had working capital of $19.0 million for a current ratio of 2.79 as at December 31, 2005, as opposed to $7.8 million for a ratio of 2.79 at the close of fiscal 2004. Shareholders' equity amounted to $26.8 million or $0.90 per share at year-end 2005, compared with $13.1 million or $0.58 per share a year earlier. Cash, cash equivalents and temporary investments represented $0.29 per share at the close of 2005, versus $0.27 per share as at December 31, 2004.

Outlook

"The Company's recent acquisitions tripled its revenues on an annualized basis in 2005. Although the integration involves considerable challenges, its also offers real and significant potential synergies," confirmed Marcel Bourassa. "In fact, Concord's operations should allow us to optimize the use of our overall manufacturing capacity, to take further advantage of our supplier relationships in Mainland China, to drive cross-selling through our expanded distribution network and, finally, to benefit from the pooling of sales, marketing and R&D teams."

Savaria has achieved annual internal growth of approximately 15% over the past four years. Indeed, the acquisition of Concord consolidates its position and definitely fosters its growth. Furthermore, demand for its products is holding steady because of favourable demographic factors, solid economic conditions and the strength of the residential and institutional construction market. The demand for elevators is particularly brisk in the United States, where limited space is common and there are numerous high-end residential development projects. Consequently, Savaria has an order book of close to 700 elevators, representing total sales of approximately $9 million.

"We are confident we can generate revenues of approximately $65 million for the current fiscal year, in spite of the consolidation of some product lines. As for our operating profitability, our goal is to achieve a gross profit margin of close to 30% - an appropriate objective in light of the lower profitability of Van-Action's and Concord's business. What's more, we will benefit from Concord's loss-carry forwards of about $18 million, which will have a significant impact on the Company's cash flows as of the second quarter of the current fiscal year," concluded the Company's President.

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 600 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 Management's report for the fiscal year ended December 31, 2005 will soon be available on Savaria's web site and filed on SEDAR (www.sedar.com).



Financial Highlights
Quarters
ended
Fiscal years ended December 31, December 31,
2005 2004 Change 2005 2004
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Sales (000s) $39,254 $22,109 77.5% $15,858 $6,266
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Gross margin 29.5% 35.1% n/a 24.6% 31.5%
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Selling and administrative
expenses (000s) $7,231 $5,455 32.6% $2,727 $1,713
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Selling and administrative
expenses/sales ratio 18.4% 24.7% n/a 17.2% 27.3%
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Operating income (000s) $3,658 $1,805 102.7% $904 $62
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Operating margin 9.3% 8.2% n/a 5.7% 1.0%
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Exchange gain (loss) (000s) $285 $1,358 n/a $(4) $163
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Net earnings applicable to
common shares (000s) $2,630 $2,064 27.4% $582 $5
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Net margin 6.7% 9.3% n/a 3.7% 0.1%
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Net earnings per common
share - basic $0.12 $0.13 -5.3% $0.021 0
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Net earnings per common
share - diluted $0.11 $0.10 12.5% $0.021 0
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Average number of common
shares outstanding
- basic (000s) 21,140 15,722 34.5% 27,477 15,710
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Average number of common
shares
outstanding - diluted (000s) 24,277 23,026 5.4% 27,772 23,013
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As at December 31, 2005 As at December 31, 2004
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Total assets (000s) $43,862 $17,590
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Long-term debt (000s) $6,136 $24
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Total liabilities (000s) $17,096 $4,525
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Shareholders' equity (000s) $26,766 $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