SICO INC.
TSX : SIC

SICO INC.

November 01, 2005 08:30 ET

SICO Achieves Third-Quarter Net Earnings of $6.3 Million

LONGUEUIL, QUEBEC--(CCNMatthews - Nov. 1, 2005) - SICO INC. (TSX:SIC)

Net earnings for the first nine months reach $17.7 million or $1.29 per common share, up 12.8% over the previous year

For its third quarter of 2005 ending September 30, SICO INC. ("SICO" or "the Company"; ticker symbol SIC/TSX) recorded revenues of $83.4 million, compared to $83.8 million in the same quarter of 2004. This slight decline is attributable to the negative impact of the one-week shift between the two comparative periods and the divestiture of SICO's interest in the Sico-Becker S.A.S. ("Sico-Becker") European joint venture during the fourth quarter of 2004. Excluding these two factors, third-quarter revenues grew slightly, as a result particularly of higher selling prices. SICO posted net earnings of $6.3 million or $0.46 per share ($0.45 diluted), compared with net earnings of $6.6 million or $0.48 per share (basic and diluted) the previous year. Net earnings for the third quarter of 2004 included a non-recurring charge of $1.0 million (before and after taxes) relating to the impairment loss on goodwill of Sico-Becker. The Company's lower third-quarter profitability is largely attributable to inflationary pressures on its Architectural Sector's operating costs.



- The ARCHITECTURAL SECTOR's sales rose 1.0% to $74.5 million.
However, its operating earnings before financial expenses, income
taxes, depreciation and amortization ("EBITDA") decreased by 7.3%
to $14.9 million from $16.1 million in 2004, due to increased
prices or raw materials and higher distribution costs resulting
namely from rising fuel prices.

- The INDUSTRIAL SECTOR's sales amounted to $8.9 million, compared to
$10.1 million in 2004. This decline is largely attributable to the
divestiture of Sico-Becker, as well as stiff competition from U.S.
manufacturers taking advantage of their weaker currency in relation
to the Canadian dollar. However, this sector posted an improvement
in its EBITDA which rose to $0.5 million, driven mainly by the
divestiture of Sico-Becker.


For the nine-month period ended September 30, 2005, SICO recorded year-to-date net earnings of $17.7 million or $1.29 per share ($1.28 diluted), compared to net earnings of $15.7 million or $1.15 per share ($1.14 diluted) for the corresponding period in 2004. Sales rose 3.9% to $250.5 million. The growth in sales and year-to-date net earnings in 2005 compared to 2004 is partly attributable to the one-week shift between the two periods, which mostly contributed to increase first-quarter results for 2005. The effect of this shift began to reverse in the third quarter and will be completely offset in the fourth quarter.

Segmented results for the nine-month period were as follows:



- The ARCHITECTURAL SECTOR's sales grew by 6.0% to $222.6 million due
to the favourable impact, for the entire period, of the one-week
shift between 2005 and 2004, as well as the growth in sales volume
coupled with higher selling prices. Despite higher operating costs,
its EBITDA rose 5.2% to $42.7 million. This performance is
attributable to a number of factors, including the one-week shift
(whose effect was mostly felt during the first quarter) and selling
price increases implemented at the beginning of the year.

- The INDUSTRIAL SECTOR's sales amounted to $27.9 million, compared
to $31.1 million in 2004, mainly due to the divestiture of Sico-
Becker. The Industrial Sector's North American sales declined due
to increased competition resulting in particular from a weak U.S.
dollar versus the Canadian currency. This sector's EBITDA almost
doubled to $1.7 million, this improvement being mostly attributable
to the divestiture of Sico-Becker.


Outlook

"2005 was a positive year in terms of results and developments, even though under difficult economic conditions in the manufacturing industry," said Pierre Dufresne, President and Chief Executive Officer of SICO. Mr. Dufresne indicated that during the fourth quarter and first months of 2006, SICO will likely continue to face the same major challenges, namely: further increases in prices of raw materials recently announced or already introduced by suppliers, higher distribution costs resulting in particular from the high price of oil, and strong competition in the Industrial Sector. In addition to experiencing a slight slowdown in growth of the Canadian demand for architectural paint, the Architectural Sector's sales during the fourth quarter will be affected by the reversal of the one-week shift between the two years.

"To partially offset our rising production and distribution costs, we recently announced a selling price increase that will become effective in the first quarter of 2006. It goes without saying that we will also continue to focus on operational efficiency and strict cost control throughout the Company. Finally, we remain on the lookout for business acquisitions to further consolidate SICO's position in its target markets," concluded Mr. Dufresne. In this regard, it should be pointed that on October 1, 2005, SICO acquired Mills Paint Sales Ltd., an architectural paint manufacturer and retailer located in the Vancouver area (British Columbia) with annual sales of approximately $9.0 million.

Dividends

SICO's Board of Directors has declared a quarterly dividend of $0.07 per common share and a dividend of $0.01544 per Class B preferred share. These dividends will be paid on December 16, 2005 to the Company's registered shareholders as at December 2, 2005.



CONSOLIDATED STATEMENTS OF EARNINGS
For the three-month and nine-month periods ended September 30, 2005
and September 24, 2004
(in thousands of dollars except share data) (unaudited)

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Sales 83,408 83,801 250,539 241,116
Cost of sales and
operating expenses
(Notes 3, 7 and 9) 71,574 70,628 217,769 210,218
Restructuring expenses - - - (71)
---------------------------------------------------------------------
Operating earnings
before: 11,834 13,173 32,770 30,969
---------------------------------------------------------------------
Depreciation and
amortization (Note 5) 1,884 1,504 5,355 4,536
Financial expenses
(Note 6) 854 436 1,540 1,303
Impairment loss on
goodwill of the joint
venture Sico-Becker
S.A.S. - 1,000 - 1,000
---------------------------------------------------------------------
2,738 2,940 6,895 6,839
---------------------------------------------------------------------
Earnings before income
taxes 9,096 10,233 25,875 24,130
Income taxes 2,834 3,682 8,168 8,429
---------------------------------------------------------------------
Net earnings 6,262 6,551 17,707 15,701
---------------------------------------------------------------------
---------------------------------------------------------------------

Weighted average
number of
outstanding common
shares 13,710,517 13,602,110 13,689,010 13,604,634
Basic earnings per
share (Note 4e) 0.46 0.48 1.29 1.15
Diluted earnings
per share (Note 4e) 0.45 0.48 1.28 1.14



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the nine-month periods ended September 30, 2005 and September 24,
2004
(in thousands of dollars) (unaudited)

Nine-month periods
---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
$ $
Balance, beginning of period as previously
reported 73,489 62,243
Restatement for cash discounts - (247)
Restatement for stock-based compensation cost - (120)
---------------------------------------------------------------------
Balance, beginning as restated 73,489 61,876
Net earnings 17,707 15,701
Premium on common shares redemption (Note 4b) (540) (547)
Dividends on common shares (2,877) (2,455)
---------------------------------------------------------------------
Balance, end of period 87,779 74,575
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated
financial statements.



CONSOLIDATED BALANCE SHEETS
As at September 30, 2005 and December 31, 2004
(in thousands of dollars)

2005 2004
---------------------------------------------------------------------
$ $
(unaudited) (audited)
ASSETS
Current assets
Cash and cash equivalents - 64
Accounts receivable 45,599 31,668
Inventories 50,476 41,652
Prepaid expenses 7,899 6,234
Deposit on business acquisition (Note 12) 3,900 -
Current portion of long-term receivables 559 652
---------------------------------------------------------------------
108,433 80,270

Long-term receivables 36 92
Property, plant and equipment 32,274 30,968
Deferred charges 8,065 7,363
Intangible assets 15,219 15,500
Goodwill 33,651 33,651
Future income taxes 724 841
Property held for sale (Note 3) - 2,048
---------------------------------------------------------------------
198,402 170,733
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank overdraft 1,508 -
Bank loan 2,267 129
Accounts payable and accrued liabilities 30,687 27,656
Income taxes 3,740 1,861
Current portion of long-term debt 2,375 4,750
---------------------------------------------------------------------
40,577 34,396
Long-term debt 11,625 5,250
Future income taxes 8,723 8,766
Deferred credits 407 435
Accrued benefit liability 917 694
Preferred Class B shares (Note 4a) 3,800 3,800
---------------------------------------------------------------------
66,049 53,341
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (Note 4a) 44,161 43,600
Contributed surplus 413 303
Retained earnings 87,779 73,489
---------------------------------------------------------------------
132,353 117,392
---------------------------------------------------------------------
198,402 170,733
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated
financial statements.



CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three-month and nine-month periods ended September 30, 2005
and September 24, 2004
(in thousands of dollars) (unaudited)

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
OPERATING ACTIVITIES
Net earnings 6,262 6,551 17,707 15,701
Adjustments for:
Depreciation and
amortization
(Note 5) 2,098 1,640 5,957 4,915
Future income
taxes (312) 21 74 688
Exchange loss 532 21 535 13
Loss (gain) on
disposal of assets 6 10 146 (9)
Employee future
benefits funding
lower (higher) than
expense 197 (455) 223 338
Stock-based
compensation cost 52 48 145 134
Goodwill impairment
related to the joint
venture, Sico-Becker
S.A.S. - 1,000 - 1,000
Others - 9 - 9
Net change in non-cash
working capital items
(Note 8) 11,571 17,377 (20,076) 4,524
---------------------------------------------------------------------
Cash flow from
operating activities 20,406 26,222 4,711 27,313
---------------------------------------------------------------------
INVESTING ACTIVITIES
Deposit on business
acquisition
(Note 12) (3,900) - (3,900) -
Acquisitions of
property, plant
and equipment (2,180) (1,008) (4,406) (3,936)
Deferred charges (397) (394) (3,335) (3,075)
Proceeds from
disposal of
property, plant
and equipment 19 2,122 19 2,143
Proceeds from
disposal of
property held
for sale (8) - 1,912 -
Long-term
receivables (16) 147 56 710
---------------------------------------------------------------------
Cash flow (applied
to) from investing
activities (6,482) 867 (9,654) (4,158)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Bank loan (12,730) (7,449) 2,165 (1,599)
Issuance of
long-term debt 4,000 - 4,000 -
Repayment in
long-term debt - (19,000) - (19,000)
Issue of common
shares (Note 4b) 44 15 687 899
Redemption of common
shares (Note 4b) - - (701) (763)
Dividends on common
shares (960) (817) (2,877) (2,455)
---------------------------------------------------------------------
Cash flow (applied
to) from financing
activities (9,646) (27,251) 3,274 (22,918)
---------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents 4,278 (162) (1,669) 237
Effect of exchange rate
changes on cash and
cash equivalents
denominated in foreign
currency 64 (112) 97 (89)
---------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents 4,342 (274) (1,572) 148
(Bank overdraft) cash
and cash equivalents,
beginning of period (5,850) 1,826 64 1,404
---------------------------------------------------------------------
(Bank overdraft) cash
and cash equivalents,
end of period (1,508) 1,552 (1,508) 1 552
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplementary
information
Interest paid 162 250 708 1,069
Dividends paid on
preferred shares 41 37 123 116
Income taxes paid 1,572 37 6,505 3,767

The accompanying notes are an integral part of the consolidated
financial statements.



SICO INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the three-month and nine-month periods ended September 30, 2005
and September 24, 2004
(tabular amounts are in thousands of dollars, except share data)
(unaudited)

1. BASIS OF PRESENTATION

The consolidated financial statements for the three-month and nine-
month periods ended September 30, 2005 and September 24, 2004,
included in this report are unaudited and have not been reviewed by
our auditors and reflect normal and recurring adjustments, which are,
in the opinion of the Company, considered necessary for a fair
presentation. These consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). However, they do not include all disclosures
required under Canadian GAAP for annual financial statements, and
should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest
Annual Report. The operating results for the interim period reported
are not necessarily indicative of results to be expected for the year
due to the seasonality of the business. These consolidated financial
statements follow the same accounting policies as in the most recent
annual consolidated financial statements for the year ended December
31, 2004.

2. FINANCIAL INSTRUMENTS

Currency risk

The Company is exposed to currency risk as a result of its purchases
of raw materials in American dollars. The risk is partially covered
by the export to the United States and Mexico of certain goods
produced in Canada. The Company may occasionally enter into forward
exchange contracts to reduce its currency risk. The following table
presents the forward exchange contracts outstanding as at September
30, 2005. Fair values are estimated by obtaining quotes from
financial institutions as at September 30, 2005.



Value of the Average rate Nominal value Fair value of
forward of forward of forward forward
Forward exchange exchange exchange exchange
exchange contracts in contracts in contracts in contracts in
contracts' Canadian Canadian American American
maturities dollars dollars dollars dollars
---------------------------------------------------------------------
$ $ $ $
Three-month
period ending
December 30, 2005 6,768 1.2086 5,600 5,827
Three-month
period ending
March 31, 2006 6,506 1.1828 5,500 5,616
Three-month
period ending
June 30, 2006 5,914 1.1829 5,000 5,116
---------------------------------------------------------------------
19,188 1.1918 16,100 16,559
---------------------------------------------------------------------
---------------------------------------------------------------------

As at September 30, 2005, the Company had no designated financial
instruments under AcG-13, Hedging Relationships. All of the contracts
have been recognized on the balance sheet at fair value and an
exchange loss of $534,000 has been recorded for the three-month and
nine-month periods ended September 30, 2005.

3. PROPERTY HELD FOR SALE

Following the operational infrastructure plan, the land and the
building where was established the Toronto customer service were
identified as available for sale. On May 31, 2005, the Company sold
the property. A loss on disposal of assets of $136,000 was recorded
in "Cost of sales and operating expenses". This property related to
the architectural segment.

4. CAPITAL STOCK

a) Issued

As at As at
September 30, 2005 December 31, 2004
---------------------------------------------------------------------
$ $
13,712,658 common shares
(13,627,772 as at
December 31, 2004) 44,161 43,600
---------------------------------------------------------------------
---------------------------------------------------------------------
2,763,638 Class B preferred
shares, classified
as liabilities 3,800 3,800
---------------------------------------------------------------------
---------------------------------------------------------------------

On May 27, 2005, the Company split all its shares on a two-for-one
basis. All share and per share information in the consolidated
financial statements have been adjusted retroactively to reflect the
stock split.

b) Summary of common share transactions

Number Amount
---------------------------------------------------------------------
$
Shares issued, December 26, 2003 13,509,268 42,577
Exercise of stock options 162,890 900
Stock purchase plan for employees,
executives and directors 26,614 349
Redemption of shares (1) (71,000) (226)
---------------------------------------------------------------------
Shares issued, December 31, 2004 13,627,772 43,600
Exercise of stock options 134,886 722
Redemption of shares (1) (50,000) (161)
---------------------------------------------------------------------
Shares issued, September 30, 2005 13,712,658 44,161
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) During the nine-month period ended September 30, 2005, the
Company redeemed and cancelled 50,000 common shares (71,000
common shares during the year ended December 31, 2004) for a net
cash consideration of $701,000 ($798,000 during the year ended
December 31, 2004), including redemption fees. The excess of
$540,000 ($572,000 during the year ended December 31, 2004) over
paid-up capital of the shares was recorded as a decrease in
retained earnings.

Under the stock option plan for senior management of the Company, the
Board of Directors may, at its discretion, grant options to purchase
common shares of the Company to certain officers and designated
executives. The exercise price is established by the Board of
Directors but may not be lower than the closing price of a regular
lot of the Company's common shares on the Toronto Stock Exchange on
the last trading day preceding the grant date. Options vest over a
four-year period from the date of grant at a rate of 20% per year and
must be exercised within a ten-year period, except in the event of
retirement, termination of employment or death. As at September 30,
2005, 259,410 common shares (296,410 common shares as at December 31,
2004) have been reserved for grant under this plan.

c) Stock option plan

The following table gives details on changes to outstanding options:

For the nine-month period For the year ended
ended September 30, 2005 December 31, 2004
--------------------------------------------------------------------
Weighted Weighted
average average
exercise exercise
Number of price Number of price
options per share options per share
--------------------------------------------------------------------
$ $
Outstanding at beginning 603,274 8.50 698,164 7.58
Granted 37,000 13.65 68,000 10.88
Exercised (134,886) 5.10 (162,890) 5.52
Cancelled (10,864) 10.91 - -
---------------------------------------------------------------------
Outstanding at end 494,524 9.76 603,274 8.50
---------------------------------------------------------------------
---------------------------------------------------------------------

The outstanding stock options granted to certain members of senior
management of the Company as at September 30, 2005 are as follows:

Weighted average
Weighted average remaining
Options exercise price contractual life
Options issued exercisable per share (years)
---------------------------------------------------------------------
$
5,998 5,998 3.28 0.8
66,000 66,000 5.25 1.6
40,084 40,084 6.63 1.9
16,624 16,624 8.00 3.4
22,452 22,452 8.75 3.8
250,766 147,736 11.00 7.6
55,600 20,800 10.88 8.6
27,000 5,400 13.38 9.4
10,000 2,000 14.38 9.6
---------------------------------------------------------------------
494,524 324,094 9.76 6.2
---------------------------------------------------------------------
---------------------------------------------------------------------

The stock-based compensation cost charged to earnings only reflects
the impact of the awards granted to employees after January 1, 2002.
The stock-based compensation cost has been calculated using the Black
and Scholes option pricing model using the following assumptions:

Options granted on
---------------------------------------------------------------------
May 10, 2005 March 2, 2005 May 15, 2004
---------------------------------------------------------------------
Weighted average fair
value of options at
the grant date $2.32 $2.27 $2.42
Assumptions :
Risk-free interest rate 3.23% 3.61% 3.77%
Dividend yield 1.94% 2.09% 2.20%
Expected volatility 16.40% 17.38% 25%
Expected life 5 years 5 years 5 years

The stock-based compensation cost charged to earnings for the awards
granted to employees is as follows:

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
52 48 145 134

The counterpart has been accounted for in the contributed surplus.
The stock-based compensation related to the stock option exercised
amounted to $35,000.

d) Stock purchase plan for employees, executives and directors

The stock purchase plan was set up to allow employees, executives and
directors of the Company to purchase shares of the Company's capital
stock. The subscription price of the common shares is equal to the
average market closing price during the last five days of trading
prior to the issue date of the common shares offered. Under the plan,
the maximum number of shares offered annually is 50,000 shares, and
the remaining number of shares available for issuance under the stock
purchase plan as at September 30, 2005 and as at December 31, 2004 is
166,134 shares.

e) Earnings per share

The following table sets forth the computation of basic and diluted
earnings per share:

For the three-month For the three-month
period ended period ended
September 30, 2005 September 24, 2004
---------------------------------------------------------------------
$ $
Numerator:
Net earnings 6,262 6,551
---------------------------------------------------------------------
Denominator:
Denominator for basic earnings
per share - weighted average number
of shares 13,710,517 13,602,110
Dilutive effect of stock options (1) 133,618 177,670
---------------------------------------------------------------------
Denominator for diluted earnings
per share - weighted average number
of shares and assumed conversions 13,844,135 13,779,780
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share 0.46 0.48
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per share 0.45 0.48
---------------------------------------------------------------------
---------------------------------------------------------------------


For the nine-month For the nine-month
period ended period ended
September 30, 2005 September 24, 2004
---------------------------------------------------------------------
$ $
Numerator:
Net earnings 17,707 15,701
---------------------------------------------------------------------
Denominator:
Denominator for basic earnings per
share - weighted average number of
shares 13,689,010 13,604,634
Dilutive effect of stock options (1) 145,866 199,310
---------------------------------------------------------------------
Denominator for diluted earnings
per share - weighted average number
of shares and assumed conversions 13,834,876 13,803,944
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share 1.29 1.15
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per share 1.28 1.14
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) The calculation of the dilutive effects excludes the anti-
dilutive options that would not be exercised because their price
adjusted for the fair value of the unrecognized compensation cost
(for options granted on or after January 1, 2002) is higher than
the average market value of share for each of the periods shown.
The number of excluded options is 37,000 for the three-month and
nine-month periods ended September 30, 2005 (329,540 options
excluded for the three-month and nine-month periods ended
September 24, 2004).

5. DEPRECIATION AND AMORTIZATION

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Property, plant and
equipment 1,017 979 3,071 2,916
Deferred charges 996 577 2,632 1,746
Customer relationships 94 93 282 281
Deferred credits (9) (9) (28) (28)
---------------------------------------------------------------------
2,098 1,640 5,957 4,915

Amortization of deferred
charges applied as a
reduction of sales 214 136 602 379
---------------------------------------------------------------------
1,884 1,504 5,355 4,536
---------------------------------------------------------------------
---------------------------------------------------------------------

6. FINANCIAL EXPENSES

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Interest on long-term debt 187 263 702 1,075
Other interest 17 69 31 81
Dividends on preferred
Class B shares 41 37 123 116
Foreign currency
translation loss 609 67 684 31
---------------------------------------------------------------------
854 436 1,540 1,303
---------------------------------------------------------------------
---------------------------------------------------------------------

7. RESEARCH EXPENSES

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Research expenses 837 954 2,772 2,896
Tax credits (95) (88) (284) (264)
---------------------------------------------------------------------
742 866 2,488 2,632
---------------------------------------------------------------------
---------------------------------------------------------------------

Research expenses are included in "Cost of sales and operating
expenses". Some of these expenses qualify for tax credits, which are
applied against these expenses.

8. NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $

Accounts receivable 6,815 7,603 (13,965) (9,294)
Inventories 4,383 9,833 (8,829) 5,707
Prepaid expenses 514 503 (1,665) 1,106
Accounts payable and
accrued liabilities (1,904) (4,266) 2,504 2,869
Income taxes 1,763 3,704 1,879 4,136
---------------------------------------------------------------------
11,571 17,377 (20,076) 4,524
---------------------------------------------------------------------
---------------------------------------------------------------------

9. EMPLOYEE FUTURE BENEFITS

The Company maintains primarily defined benefit pension plans for
most of its employees. The other plans relate to other retirement
benefits, primarily life insurance, offered by the Company to its
employees. The net expense is included in cost of sales and operating
expenses.

The net expense recognized is as follows:

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Pension plans (1) 1,000 (154) 2,911 1,004
Other plans 49 46 153 135

(1) During the three-month and nine-month periods ended September 24,
2004, the Company reversed a valuation allowance of $765,000,
consequently reducing the accrued benefit liability.

10. SEGMENTED INFORMATION

The Company has two business units characterized by their products in
addition to the Head Office segment. The Company assesses the
performance of the business units based on the following items:
sales, operating earnings before depreciation and amortization,
financial expenses and income taxes and operating earnings before
financial expenses and income taxes. Each business unit, except for
the Head Office segment, includes activities related to development,
manufacturing, sales and distribution of paints and coatings.
Management of cash and cash equivalents, as well as other activities
related to the corporate strategies with regard to manufacturing and
market development are part of the Head Office segment. The
allocation of the expenses of this segment would not assist in the
evaluation of the contribution of the other segments.

The accounting policies used to determine results and measure
segmented assets are the same as those described in the most recent
annual consolidated financial statements.

Head
Architectural Industrial Office Total
$ $ $ $
--------------------------------------------------------------------
As at and for the
three-month period
ended September 30,
2005
Sales 74,459 8,949 - 83,408
Operating earnings
before depreciation
and amortization,
financial expenses
and income taxes 14,908 512 (3,586) 11,834
Depreciation and
amortization 1,468 161 255 1,884
Operating earnings
before financial
expenses and income
taxes 13,440 351 (3,841) 9,950
Total assets 159,606 33,471 5,325 198,402
Acquisitions of
property, plant
and equipment 1,849 222 109 2,180

As at and for the
three-month period
ended September 24,
2004
Sales 73,710(1) 10,091(1) - 83,801(1)
Operating earnings
before depreciation
and amortization,
financial expenses,
impairment loss on
goodwill of the
joint venture and
income taxes 16,088(1) 298(1) (3,213)(1) 13,173(1)
Depreciation and
amortization 1,085 160 259 1,504
Operating earnings
before financial
expenses,
impairment loss
on goodwill of the
joint venture and
income taxes 15,003(1) 138(1) (3,472)(1) 11,669(1)
Impairment loss on
goodwill of the
joint venture - 1,000 - 1,000
Total assets 144,220(1) 33,491(1) 9,247(1) 186,958(1)
Acquisitions of
property, plant
and equipment 556 227 225 1,008
As at and for the
nine-month period
ended September 30,
2005
Sales 222,609 27,930 - 250,539
Operating earnings
before depreciation
and amortization,
financial expenses
and income taxes 42,745 1,704 (11,679) 32,770
Depreciation and
amortization 4,081 490 784 5,355
Operating earnings
before financial
expenses and income
taxes 38,664 1,214 (12,463) 27,415
Total assets 159,606 33,471 5,325 198,402
Acquisitions of
property, plant
and equipment 3,495 671 240 4,406

As at and for the
nine-month period
ended September 24,
2004
Sales 209,990(1) 31,126(1) - 241,116(1)
Restructuring
expenses (62) (9) - (71)
Operating earnings
before depreciation
and amortization,
financial expenses,
impairment loss on
goodwill of the
joint venture and
income taxes 40,626(1) 932(1)(10,589)(1) 30,969(1)
Depreciation and
amortization 3,269 480 787 4,536
Operating earnings
before financial
expenses,
impairment loss
on goodwill of the
joint venture and
income taxes 37,357(1) 452(1)(11,376)(1) 26,433(1)
Impairment loss on
goodwill of the
joint venture - 1,000 - 1,000
Total assets 144,220(1) 33,491(1) 9,247(1) 186,958(1)
Acquisitions of
property, plant
and equipment 2,488 629 819 3,936


Geographical Information

Three-month periods Nine-month periods
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
$ $ $ $
Sales
Canada 81,517 80,502(1) 244,309 230,352(1)
Other countries 1,891 3,299(1) 6,230 10,764(1)
---------------------------------------------------------------------
83,408 83,801(1) 250,539 241,116(1)
---------------------------------------------------------------------
---------------------------------------------------------------------


As at September 30, 2005
--------------------------------------------------------------------
Property,
Total plant and
assets equipment Goodwill
--------------------------------------------------------------------
$ $ $

Canada 189,533 31,490 27,680
United States 7,184 642 5,943
France 559 - -
Other countries 1,126 142 28
---------------------------------------------------------------------
198,402 32,274 33,651
---------------------------------------------------------------------
---------------------------------------------------------------------


As at September 24, 2004
--------------------------------------------------------------------
Property,
Total plant and
assets equipment Goodwill
--------------------------------------------------------------------
$ $ $

Canada 173,077(1) 31,832 27,749
United States 8,329 676 5,943
France 4,511 61 2,271
Other countries 1,041 131 28
---------------------------------------------------------------------
186,958(1) 32,700 35,991
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Restated as described in Note 3 and Note 31 of the most recent
annual consolidated financial statements.

11. WEATHER AND SEASONALITY

Exterior architectural paint products are subject to specific
application requirements related to weather conditions. The sales of
such products, which account for approximately 20% of the paint sales
of the Company's Architectural Sector, are dependent upon weather
conditions and may be materially adversely affected by unfavourable
weather conditions continuing for several days or several weeks.

Furthermore, the sale of exterior products is seasonal in nature.
Sales of such products in the second and third quarters are
historically significantly higher than sales in the first and fourth
quarters and, consequently, net earnings are significantly higher in
those quarters. Variable costs may be managed according to the
seasonal pattern. However, a significant portion of the Company's
costs may not be adjusted for seasonality.

12. SUBSEQUENT EVENT

On October 1, 2005, the Company acquired all shares of Mills Paint
Sales Ltd. for a total consideration of $5,400,000 subject to
adjustments. Mills Paint Sales Ltd. operates a network of eleven
speciality paint stores across British Colombia and Alberta. As at
September 30, 2005, a deposit of $3,900,000 was disbursed to secure
this acquisition.

13. COMPARATIVE FIGURES

Certain comparative figures have been reclassified in order to
conform to the presentation adopted in 2005.


Contact Information

  • SICO INC.
    Pierre Dufresne, CA
    President and Chief Executive Officer
    (514) 527-5111
    or
    SICO INC.
    Jean Ouellet, CA
    Vice President, Finance and Treasurer
    (514) 527-5111
    www.sico.com