Semcan Inc.

Semcan Inc.

November 30, 2009 17:45 ET

Semcan Inc. Reports Third Quarter Fiscal Year 2009 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 30, 2009) - Semcan Inc. ("Semcan" or the "Company") (TSX VENTURE:STT) today reported financial results for its quarter ended 30th September 2009. Semcan reports on both Continuing and Discontinued Operations as a result of decisions made by the Company in late 2008 to divest certain businesses in order to pay down debt.

Continuing Operations

The Continuing Operations are made up of Semcan Inc. and Stanco Projects Limited (formerly Semco Systems Limited), which include the following divisions: Stanco Projects (Richmond B.C.); Semco Systems, ZMI Portec Inc., Walter Equipment (all in Milton, Ontario), and Stanco Projects Inc. (formerly Transfer Bulk Systems, Inc.) (Milton, Ontario and Pittsburgh, Pennsylvania).

Continuing Operations - Financial Report

Revenues for the quarter ended 30th September 2009 were $7.2 million, an increase of 16 percent over revenues of $6.2 million for the quarter ended 30th September 2008. The net loss for the quarter was $0.046 million, compared to a net loss of $0.85 million for the comparative quarter in 2008.

Non-GAAP adjusted EBITDA for the quarter ended 30th September 2009 was $0.55 million, compared to ($0.035) million for quarter ended 30th September 2008. Semcan's gross margins were 28.5 per cent in the current quarter, compared to 27.8 percent in 2008.

At 30th September 2009 the Company's order backlog was approximately $9.1 million.

Discontinued Operations

The discontinued operations are made up of Naston Ltd, Enviro-Pro-Tech, Inc., and Nucleus Distribution Inc. These operations are classified as discontinued for the following reasons:

Naston Ltd.

Naston was acquired to give the Company an international presence in the industrial and municipal water and wastewater treatment markets. Naston has an excellent reputation for providing custom designed water treatment systems in the United Kingdom, Europe, Africa and the Middle East. While Naston had great potential, the Company could not afford to hold it given the level of debt incurred to acquire it, and the reality that Naston has been unable to service that debt. Naston's business has been in decline throughout 2009, and on 6th November 2009 announced that it would be seeking permission from its creditors to enter in a voluntary arrangement under which the remaining work would be completed for the benefit of the creditors. The Company has recorded its investment in Naston at net realizable value.

Enviro-Pro-Tech, Inc.

The sale of Enviro closed on 31st August 2009. A portion of the proceeds were used to fully repay the Company's term loan from Toronto-Dominion Bank.

Nucleus Distribution Inc.

The sale of Nucleus closed on 27th April 2009 and reduced the Company's debt by approximately $6.5 million.

Discontinued Operations - Financial Report

Revenues for the quarter ended 30th September 2009 were $1.75 million, compared with $13.75 million for the quarter ended 30th September 2008. Net loss for the quarter before provision for loss on sale of the discontinued operations was $0.477 million, compared to a net loss of $0.94 million for the comparative quarter in 2008.

Non-GAAP adjusted EBITDA for quarter ended 30th September 2009 was ($0.41) million, compared to ($0.23) million for quarter ended 30th September 2008.

Progress On Debt Reduction

The Strategic review conducted in December 2008 identified the urgent need to reduce debt to respond to the new reality in the financial marketplaces. The following summary table shows the progress made by the Company for the nine month period ended 30th September 2009 in reducing its indebtedness from that as at 31st December 2008:

As at 31 December As at 30 September
Description 2008 2009
TD operating loans and term loans $6,621,993 $950,000
Westdale Loan 3,000,000 915,000
Bridge Loan from related parties 3,892,903 4,056,039
Vendor Take Back - Enviro-Pro-Tech 351,216 321,210
Vendor Take Back - Stanco Projects nil 510,952
Nucleus promissory notes 2,718,423 nil
Other 261,122 162,680
Total bank and term debt $16,845,657 $6,915,881

In total, the Company has reduced its debt load by approximately $9,929,000 during 2009.

Working Capital - Continuing Operations.

The working capital deficiency for the continuing operations is $5,152,096, compared with $8,331,434 at 31st December 2008. The improvement to date has been significant and is largely the result of divestitures made to date; further improvement is expected through profitable operations and negotiations with lenders regarding revised repayment terms.

Commenting on the situation, Phil Jamieson, Chairman and CEO, said, "We continue to make progress in executing the plan we put in place at the beginning of 2009 to reduce debt, improve our liquidity and to concentrate on our core North American engineering business. Since embarking on the debt reduction plan, we have reduced our debt by approximately $10 million, focusing first on the secured obligations owed to arm's length parties. Now that the term loan from Toronto-Dominion Bank and the Westdale Loan have been retired, we will engage in discussions with the other lenders in an effort to set up manageable repayment plans. We are working toward the completion of our restructuring by the end of 2009 so that we may enter 2010 with a properly-financed go-forward business."

The detailed financial statements and MD&A for the quarter ended 30th September 2009 are available at

About Semcan Inc.

Semcan is a worldwide supplier of industrial processes and environmental solutions with specific emphasis on water remediation and emission control systems.

Forward-Looking Statement Disclaimer

Caution Regarding Forward-Looking Information and Non-GAAP Measures

This news release contains certain forward-looking statements. These statements relate to future events or future performance and reflect management's current expectations and assumptions regarding the growth, results of operations, performance, and business prospects and opportunities. Such forward-looking statements reflect management's current beliefs and expectations and are based on information currently available to management of Semcan. In particular, statements regarding the future operating results and economic performance are forward-looking statements. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements, including risks outlined under "Risk Factors" in our Annual Information Form, which is posted at In evaluating these statements, investors should specifically consider various factors, including such risks as Investment Risk; Business Valuations; Condition of Capital Markets; Dependence on Key Personnel; General Economic Factors; Interest Rate Risk; Competition; and Reliance on Key Suppliers. One or more of these "Risk Factors" could cause actual events or results to differ materially from any forward-looking statement. These factors should not be considered exhaustive. Although the forward-looking statements contained in this press release are based on what management of Semcan considers to be reasonable assumptions based on information currently available to them, there can be no assurance that actual events or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this press release, and none of Semcan nor its directors assumes any obligation to update or revise them to reflect new events or circumstances. Undue reliance should not be placed on forward-looking statements.

Non-GAAP Measures

The term "EBITDA" is a financial measure used in this document which is not a standard measure under Canadian generally accepted accounting principles. Semcan's method of calculating EBITDA may differ from the methods used by other issuers. Therefore, Semcan's measure of EBITDA, as presented in this press release, may not be comparable to similar measures presented by other issuers. EBITDA refers to net earnings determined in accordance with generally accepted accounting principles, before depreciation and amortization, interest expense, and income tax expense. Management believes that EBITDA is a useful supplemental measure of cash available for debt service, working capital, capital expenditures, income taxes, and distribution. Investors are cautioned that EBITDA, as a non-GAAP measure, is not an alternative to measures under GAAP and should not, on its own, be construed as an indicator of performance or cash flows, a measure of liquidity or as a measure of actual return.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy of this release.

Contact Information