Teknion Corporation
TSX : TKN

Teknion Corporation

October 11, 2006 16:00 ET

Teknion Corporation Announces Third Quarter 2006 Results

TORONTO, ONTARIO--(CCNMatthews - Oct. 11, 2006) - Teknion Corporation (TSX:TKN) announced today its results for the three and nine months ended August 31, 2006.



Financial Highlights (complete statements and MD&A follow)

------------------------------------------------------------------------
------------------------------------------------------------------------
Three Months Nine Months
ended August 31 ended August 31
------------------------------------------------------------------------
(in $000 except per share
amounts) 2006 2005 2006 2005
------------------------------------------------------------------------
Sales $156,285 $145,605 $454,683 $433,048
EBITDA (1) $9,184 $2,799 $19,002 $8,957
Pre-tax earnings (loss) $3,374 $(3,022) $1,656 $(8,669)
Net earnings (loss) $3,272 $(3,246) $1,767 $(9,335)
EPS diluted $0.05 $(0.05) $0.03 $(0.15)
Shareholders' equity $214,119 $225,516 $214,119 $225,516
Common shares outstanding 64,116,131 64,116,131 64,116,131 64,116,131
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) EBITDA is defined as earnings before interest, income taxes,
depreciation and amortization.


Geographic Segmentation
------------------------------------------------------------------------
------------------------------------------------------------------------
Three Months Nine Months
ended August 31 ended August 31
------------------------------------------------------------------------
(in $000) 2006 2005 2006 2005
------------------------------------------------------------------------
Sales:
Canada $ 51,234 $ 42,049 $ 170,851 $ 147,813
United States 89,282 87,768 238,241 245,879
International 15,769 15,788 45,591 39,356
------------------------------------------------------------------------
$ 156,285 $ 145,605 $ 454,683 $ 433,048
------------------------------------------------------------------------


Sales for the third quarter of 2006 increased by 7.3% to $156.3 million as compared to $145.6 million in the same period of 2005. U.S. sales in the quarter increased by 1.7% in Canadian dollars and 9.0% in source currency. Canadian sales increased by 21.8% and international sales were consistent with the prior year quarter.

Net earnings for the quarter of $3.3 million, or $0.05 per share, is a significant improvement over the loss reported in the prior year quarter of $3.2 million, or $(0.05) per share.

"The improvement in our operating results demonstrates that our efforts to improve efficiency, while remaining focused on growing the business are paying off" commented David Feldberg, President and CEO. Mr. Feldberg continued, "The markets continue to be strong and we therefore expect fourth quarter revenue to show growth over the third quarter revenue."

Conference Call

Management will hold a conference call to discuss the third quarter results on Thursday, October 12, 2006 at 8:00 a.m. (ET). The telephone numbers for the conference call are:

Local Toronto: (416) 340-2216

Toll Free: (866) 898-9626

The conference call will also be broadcast live over the Internet. To access the webcast, please access the "Financial Reports" page of the "Investor Information" section at www.teknion.com and follow the conference call links at least 15 minutes prior to the beginning of the call.

The telephone number to listen to the call after it is completed (Instant Replay) is 416-695-5800 or 800-408-3053. The Passcode for the Instant Replay is 3199108. The Instant Replay will be available until midnight, October 19, 2006. The conference call will also be archived on Teknion's web site. Please access the "Financial Reports" page of the "Investor Information" section at www.teknion.com.

Cautionary Statement

Certain of the above statements are forward-looking statements with respect to the Company's future prospects. These statements involve risks and uncertainties that could cause the Company's financial results to differ materially from stated expectations as a consequence of a number of factors, including but not limited to: fluctuations in the Company's operating results due to product demand arising from competitive and general economic and business conditions in the Company's North American and international markets and operations; significant fluctuations in exchange rates for currencies in which the Company does business; changes in the cost of raw materials; the ability to maintain the proprietary nature of the Company's intellectual property in the design and manufacturing of its products; changes in the Company's markets, including technology change, changes in customer requirements, frequent new product introductions by competitors and emerging standards; the Company's dependence on key personnel; the Company's dependence on key commitments from significant dealers and distributors; availability of financing for the Company; potential liabilities arising from product defects; environmental matters and other factors set forth in the Company's reports and filings with Canadian securities regulators. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Teknion Corporation (TSX:TKN) is a leading international designer, manufacturer and marketer of office systems and related office furniture products. Teknion's headquarters are located in Toronto, Ontario. The company has offices and facilities in Canada, the United States, the United Kingdom and the Pacific Rim, and serves clients through a network of authorized dealers worldwide. Visit Teknion at www.teknion.com.

Teknion Corporation - Q3 2006

Management's Discussion and Analysis

The following management's discussion and analysis ("MD&A") of the financial condition and results of operations for Teknion Corporation ("Teknion" or the "Company") should be read in conjunction with the Company's unaudited interim consolidated financial statements and the notes to those statements and the Company's continuous disclosure filings including the 2005 audited annual consolidated financial statements and annual MD&A, available at www.sedar.com.

Overview

The Company reported a third quarter profit before income taxes of $3.4 million and sales of $156.3 million as compared to a loss before income taxes of $3.0 million and sales of $145.6 million in the third quarter of the prior year. Despite continued weakening of the U.S. dollar relative to the Canadian dollar, the Company increased revenue and improved its overall operating performance.



Results of Operations
------------------------------------------------------------------------
Three months Nine months
ended August 31 ended August 31
------------------------------------------------------------------------
($000's except per share
amounts) 2006 2005 2006 2005
------------------------------------------------------------------------
Sales $ 156,285 $ 145,605 $ 454,683 $ 433,048
Gross margin $ 43,991 $ 37,778 $ 124,659 $ 114,240
Gross margin (% of sales) 28.1% 25.9% 27.4% 26.4%
EBITDA (1) $ 9,184 $ 2,799 $ 19,002 $ 8,957
Earnings (loss) before
income taxes $ 3,374 $ (3,022) $ 1,656 $ (8,669)
Net earnings (loss) $ 3,272 $ (3,246) $ 1,767 $ (9,335)
Earnings (loss) per share
(diluted) $ 0.05 $ (0.05) $ 0.03 $ (0.15)
------------------------------------------------------------------------


(1) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The term EBITDA is a non-GAAP financial measure and does not necessarily have a standardized meaning amongst issuers. The Company believes that EBITDA is a useful figure because it measures operating results before allocating the cost of income taxes, interest and capital investments. EBITDA is also commonly regarded as an indirect measure of operating cash flow, an important indicator of the operating performance of any business.



Geographic Segmentation
------------------------------------------------------------------------
Three months Nine months
ended August 31 ended August 31
------------------------------------------------------------------------
($000's) 2006 2005 2006 2005
------------------------------------------------------------------------
Sales:
Canada $ 51,234 $ 42,049 $ 170,851 $ 147,813
United States 89,282 87,768 238,241 245,879
International 15,769 15,788 45,591 39,356
------------------------------------------------------------------------
$ 156,285 $ 145,605 $ 454,683 $ 433,048
------------------------------------------------------------------------


Sales for the third quarter, ended August 31, 2006, increased by 7.3% to $156.3 million compared to $145.6 million in the third quarter of the prior year. As compared to the current fiscal year, third quarter sales were 16.6% higher than the first quarter and 4.9% lower than second quarter sales. The first quarter is historically weaker overall than subsequent quarters. In addition, the first quarter of 2006 was negatively affected by the extension of lead times during the fourth quarter of 2005. The decline in the third quarter as compared to the second quarter reflects the seasonally strong sales Teknion experiences in the Canadian market in the second quarter.

On a segmented basis, compared to the prior year periods, U.S. sales in the third quarter increased by 1.7% to $89.3 million in Canadian dollars and by 9.0% in source currency. For the nine-month period, U.S. sales declined by 3.1% to $238.2 million in Canadian dollars but increased by 5.7% in source currency. The Business and Institutional Furniture Manufacturers Association (BIFMA) reported industry growth of 7.1% for the quarter and 8.9% for the nine-month period. Teknion's U.S. sales exceeded the industry growth rate in the second and third quarters of the fiscal year. Teknion's first quarter sales growth was lower than the industry for the reasons described above. Growth in the U.S. reflects strong commercial project activity from a wide variety of industries and has shown steady gains through the fiscal year as second quarter sales exceeded the first quarter by 19.9% and third quarter sales exceeded the second quarter by 9.9%.

Canadian sales increased by 21.8% to $51.2 million for the quarter and 15.6% for the nine-month period as compared to these periods in the prior year. Third quarter sales in Canada were similar to the first quarter but were 25% lower than the second quarter reflecting the traditionally strong second quarter for Teknion in the Canadian market. Teknion's growth in the Canadian market this year reflects both the strength of the Canadian economy and the Company's position as market leader.

International sales for the quarter of $15.8 million were consistent with the third quarter last year. For the nine-month period, sales increased by 15.8%. Strong growth was achieved in Latin America, the Middle East and India. As compared to the preceding quarters this year, third quarter sales were 2.1% higher than the first quarter and 9.7% higher than the second quarter. Teknion's international sales are significantly influenced quarter-to-quarter by the timing of large projects.

Gross margin, as a percentage of sales, was 28.1% for the quarter and 27.4% for the nine-month period as compared to 25.9% and 26.3% respectively in the prior year periods. This improvement in gross margin occurred despite further weakening of the U.S. dollar relative to the Canadian dollar that negatively affected gross margin by 3% of sales for the quarter and 2.5% of sales for the nine-month period. The Company's cost reduction and price realization initiatives combined with improved capacity utilization more than offset the negative impact of further weakening of the U.S. dollar relative to the Canadian dollar.

Gross margin as a percentage of sales in the current fiscal year was 23.9% in the first quarter, 29.6% in the second quarter, and as noted above, 28.1% in the third quarter. The fluctuation of gross margin between the quarters reflects the impact of capacity utilization and product mix.

Selling, general and administrative expenses ("SG&A") were $34.8 million for the quarter, 22.3% of sales, as compared to $34.8 million, 23.9% of sales, in the prior year quarter. For the nine-month period, SG&A expenses were $105.4 million, 23.2% of sales, as compared to $104.2 million, 24.1% of sales, for the nine-month period in the prior year. The prior periods included plant consolidation and moving costs of $250 thousand for the quarter and $2.1 million for the nine-month period. To support sales growth, SG&A costs have increased; however, as a percentage of sales, expenditures are lower than the prior year comparative periods.

During the current fiscal year, as a percentage of sales, SG&A expenses were 25.1%, 22.5% and 22.3% for the first, second and third quarters respectively. The first quarter, as a percentage, was higher reflecting lower sales and the fixed nature of many SG&A costs.

The Company's operating results are affected by exchange rate fluctuations between the Canadian dollar and the U.S. dollar. The exchange rate effect on Earnings Before Income Taxes primarily relates to the level of U.S. dollars received in excess of U.S. dollar expenditures. To mitigate the impact of short-term fluctuations of the exchange rate, the Company enters into foreign exchange forward contracts. The details of these arrangements are included in note 6 of the interim consolidated financial statements. These contracts together with the sale of U.S. dollars in the spot market resulted in average effective exchange rates in both the quarter and nine-month period of approximately U.S.$1.00 equals CDN. $1.19 and U.S. $1.00 equals CDN. $1.20 respectively. For the quarter and nine-month comparative periods in the prior year, the rates were approximately U.S. $1.00 equals CDN. $1.29 and U.S. $1.00 equals CDN. $1.28 respectively.

The decline in depreciation expense in the third quarter to $4.6 million and $13.9 million in the nine-month period compared to $5.0 million and $15.0 million in the respective prior-year periods is due primarily to the lower level of capital spending in previous years.

The Company's income tax expense for the quarter of $102 thousand and recovery of $111 thousand for the nine-month period, reflect the benefit of applying tax losses from prior years to the current period earnings. The impact of this benefit on the current period's taxes is shown in the table in note 4 under the heading 'Valuation allowance.'



Quarterly Results
------------------------------------------------------------------------
($000's except per Q3 Q2 Q1 Q4
share amounts) 2006 2006 2006 2005
------------------------------------------------------------------------
Sales $ 156,285 $ 164,365 $ 134,033 $ 173,135
Earnings (loss) before
income tax $ 3,374 $ 5,753 $ (7,471) $ 9,163
Net earnings (loss) $ 3,272 $ 6,027 $ (7,532) $ (11,319)
Earnings (loss) per
share (basic and diluted) $ 0.05 $ 0.10 $ (0.12) $ (0.17)
------------------------------------------------------------------------


Quarterly Results
------------------------------------------------------------------------
($000's except per Q3 Q2 Q1 Q4
share amounts) 2005 2005 2005 2004
------------------------------------------------------------------------
Sales $ 145,605 $ 151,584 $ 135,859 $ 137,988
Earnings (loss) before
income tax $ (3,022) $ 448 $ (6,095) $ (1,715)
Net earnings (loss) $ (3,246) $ 234 $ (6,323) $ (9,909)
Earnings (loss) per
share (basic and diluted) $ (0.05) $ 0.00 $ (0.10) $ (0.16)
------------------------------------------------------------------------


A discussion of the fluctuation in the quarterly results is included in the MD&A of the Company's 2005 Annual Report. Discussion of the current quarter compared to the preceding quarters of the current year and the prior-year comparative quarter is included above.



Liquidity and Capital Resources
------------------------------------------------------------------------
Three months Nine months
ended August 31 ended August 31
------------------------------------------------------------------------
($000's) 2006 2005 2006 2005
------------------------------------------------------------------------
Cash from operations before
working capital changes $ 8,005 $ 1,852 $ 16,117 $ 6,704
Cash from operations after
non-cash working capital
changes $ 8,759 $ 10,610 $10,585 $ 4,775
Shareholders' equity $ 214,119 $ 225,516 $ 214,119 $ 225,516
Net debt-to-equity (1) 0.37:1 0.25:1 0.37:1 0.25:1
------------------------------------------------------------------------
(1) Net debt is defined as operating loans plus long-term debt and
capital lease obligations less cash.


Cash provided by operations in the quarter, before working capital changes, was $8.0 million as compared to $1.9 million in the prior year quarter, and for the nine-month period was $16.1 million as compared to $6.7 million. The increase in the periods reflects the significant improvement in the Company's operating results as compared to the prior year.

Capital additions, including amounts financed through capital leases, totaled $4.8 million for the quarter and $18.7 million for the nine-month period. Capital additions are expected to be $25 million for the year.

Outlook

Management continues to believe that, over the long term, the worldwide business environment will increasingly require that organizations utilize costly office space more effectively and improve the working environment to increase employee productivity. The Company also believes that these factors, combined with increased commercial construction and capital spending, as well as the growing use of technology and the increasing awareness of workplace health and safety, will allow growth in the contract office furniture industry to exceed growth in GDP.

The Company believes that the positive trend of growing customer demand reflected in the current BIFMA statistics bodes well for the office furniture industry. Most industry observers believe that the industry will continue to grow through 2007.

The Company remains confident that its focused growth strategies, combined with its comprehensive product lines, innovative designs and extensive dealer network, will enable the Company to capitalize on renewed demand in its markets as business conditions improve.

The Company's strategies for future growth and improvement to its operating results are to: continue to develop its sales and marketing initiatives to expand its presence and market share, focusing on market segments where the Company previously did not have a strong presence; leverage the strength and economies of scale resulting from the vertical integration and recent modernization of its manufacturing facilities and processes; maintain its focus on design and innovation to ensure it can respond quickly with new and enhanced products to meet the needs of its customers; continue its focus on cost improvement and efficiency; and make prudent acquisitions that meet the Company's long-term strategic objectives.

As a result of these strategies and an anticipated improvement in the market for the Company's products, and despite the deterioration of the U.S./Canadian dollar exchange rate, management expects to generate improved financial performance in fiscal 2006 compared to fiscal 2005.

Cautionary Statement

Certain of the above statements are forward-looking statements that involve risks and uncertainties. Actual results could differ materially as a consequence of a number of factors, including: fluctuations in the Company's operating results due to product demand arising from competitive and general economic and business conditions in the Company's North American and international markets and operations; significant fluctuations in exchange rates for currencies in which the Company does business; changes in the cost of raw materials; the ability to maintain the proprietary nature of the Company's intellectual property in the design and manufacturing of its products; changes in the Company's markets, including technology change, changes in customer requirements, frequent new product introductions by competitors and emerging standards; the Company's dependence on key personnel; the Company's dependence on key commitments from significant dealers and distributors; availability of financing for the Company; potential liabilities arising from product defects; environmental matters and other factors set forth in the Company's reports and filings with Canadian securities regulators. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Teknion Corporation (TSX:TKN) is a leading international designer, manufacturer and marketer of office systems and related office furniture products. Teknion's headquarters are located in Toronto, Ontario. The company has offices and facilities in Canada, the United States, the United Kingdom, and the Pacific Rim, and serves clients through a network of authorized dealers worldwide. Visit Teknion at www.teknion.com.



TEKNION CORPORATION
Consolidated Balance Sheets
(Unaudited)

(in thousands of dollars)
------------------------------------------------------------------------
------------------------------------------------------------------------
As at As at
August 31, November 30,
2006 2005
------------------------------------------------------------------------

Assets

Current assets:
Cash $ 8,952 $ 10,435
Accounts receivable 104,007 125,505
Inventory 56,845 52,215
Prepaid expenses and other deposits 5,070 4,189
Future income taxes 1,203 1,203
-----------------------------------------------------------------------
176,077 193,547

Property, plant and equipment (Note 2) 174,150 170,426
Goodwill 30,874 30,874

------------------------------------------------------------------------
$ 381,101 $ 394,847
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
Operating loans $ 67,138 $ 63,056
Accounts payable and accrued liabilities 77,182 98,377
Income taxes payable 607 920
Due to affiliated companies 494 51
Current portion of long-term debt and
capital lease obligations (Note 3) 2,110 1,711
-----------------------------------------------------------------------
147,531 164,115

Long-term debt and capital lease
obligations (Note 3) 18,248 16,087
Future income taxes 1,203 1,203
------------------------------------------------------------------------
166,982 181,405

Shareholders' equity:
Share capital (Note 5) 107,005 107,005
Retained earnings 118,253 116,486
Contributed surplus 287 94
Currency translation adjustment (11,426) (10,143)
-----------------------------------------------------------------------
214,119 213,442

------------------------------------------------------------------------
$ 381,101 $ 394,847
------------------------------------------------------------------------
------------------------------------------------------------------------


TEKNION CORPORATION
Consolidated Interim Statements of Earnings
(Unaudited)

Periods ended August 31, 2006 and 2005

(in thousands of dollars, Three months ended Nine months ended
except per share amounts) August 31 August 31
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Sales $ 156,285 $ 145,605 $ 454,683 $ 433,048

Cost of sales 112,294 107,827 330,024 318,808

------------------------------------------------------------------------
Gross margin 43,991 37,778 124,659 114,240

Expenses:
Selling, general and
administrative 34,795 34,839 105,408 104,224
Depreciation and
amortization 4,635 4,958 13,908 14,980
-----------------------------------------------------------------------
39,430 39,797 119,316 119,204
------------------------------------------------------------------------

Earnings (loss) from
operations 4,561 (2,019) 5,343 (4,964)

Interest expense, net 1,175 863 3,438 2,646
Loss on disposal of property,
plant and equipment 12 140 249 1,059
------------------------------------------------------------------------
Earnings (loss) before
income taxes 3,374 (3,022) 1,656 (8,669)

Income taxes (recovery):
Current (Note 4) 102 224 (111) 666

------------------------------------------------------------------------
Net earnings (loss) $ 3,272 $ (3,246) $ 1,767 $ (9,335)
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings (loss) per share:
Basic and diluted $ 0.05 $ (0.05) $ 0.03 $ (0.15)
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Interim Statements of Retained Earnings
(Unaudited)

Periods ended August 31, 2006 and 2005

Three months ended Nine months ended
(in thousands of dollars) August 31 August 31
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Retained earnings,
beginning of period $ 114,981 $ 152,284 $ 116,486 $ 154,950

Net earnings (loss) 3,272 (5,235) 1,767 (7,901)

------------------------------------------------------------------------
Retained earnings,
end of period $ 118,253 $ 147,049 $ 118,253 $ 147,049
------------------------------------------------------------------------


TEKNION CORPORATION
Consolidated Interim Statements of Cash Flows
(Unaudited)

Periods ended August 31, 2006 and 2005

Three months ended Nine months ended
(in thousands of dollars) August 31 August 31
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Cash provided by (used in):

Operations:
Net earnings (loss) $ 3,272 $ (3,246) $ 1,767 $ (9,335)
Items not affecting cash:
Depreciation and
amortization 4,635 4,958 13,908 14,980
Loss on disposal of
property, plant and
equipment 12 140 249 1,059
Amortization of
stock-based compensation 86 - 193 -
----------------------------------------------------------------------
8,005 1,852 16,117 6,704
Change in non-cash
operating working capital 754 8,758 (5,532) (1,929)
-----------------------------------------------------------------------
8,759 10,610 10,585 4,775

Financing:
Operating loans (3,945) (6,200) 4,082 7,196
Repayment of long-term debt
and capital lease obligations (421) (385) (2,304) (2,100)
Issue of share capital - 62 - 77
-----------------------------------------------------------------------
(4,366) (6,523) 1,778 5,173

Investments:
Purchase of property,
plant and equipment (Note 2) (3,287) (3,069) (13,855) (8,256)
Proceeds on disposal of
property, plant and equipment 3 398 168 700
-----------------------------------------------------------------------
(3,284) (2,671) (13,687) (7,556)

Foreign exchange loss on
cash held in foreign
currencies (62) (595) (159) (167)
------------------------------------------------------------------------

Increase (decrease) in cash 1,047 821 (1,483) 2,225

Cash, beginning of period 7,905 12,558 10,435 11,154

------------------------------------------------------------------------
Cash, end of period $ 8,952 $ 13,379 $ 8,952 $ 13,379
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash paid for:
Interest paid $ 1,355 $ 992 $ 3,840 $ 3,009
Interest received 118 104 256 203
Income taxes paid 290 597 1,301 1,996
Income taxes recovered 277 763 701 909

Non-cash investing and
financing activities:
Acquisition of property,
plant and equipment
through capital leases $ 1,555 $ - $ 4,864 $ -



TEKNION CORPORATION
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Tabular amounts in thousands of dollars)

Periods ended August 31, 2006 and 2005


1. Basis of presentation

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles; however, they do not include all of the disclosure requirements for annual consolidated financial statements. These interim consolidated financial statements follow the same accounting policies as were used for the consolidated financial statements for the year ended November 30, 2005. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended November 30, 2005, including notes thereto.

2. Property, plant and equipment additions

The Company acquired $4.8 million and $18.7 million of property, plant and equipment during the quarter and year-to-date respectively. These additions include assets acquired through capital leases of $1.6 million and $4.9 million for the quarter and year-to-date respectively.

3. Obligations under capital leases

During the year, the Company entered into capital lease arrangements for machinery and equipment totalling $1.6 million for the quarter and $4.9 million year-to-date. The obligations are repayable over 5 years and the interest rates are fixed and range from 5.79% to 5.96%.



Annual minimum lease payments are as follows:
2006 $ 227
2007 1,036
2008 1,036
2009 1,036
2010 1,036
2011 1,177
---------
5,548
Amount representing interest (789)
---------
Balance of the obligation $ 4,759
---------
---------


4. Income Taxes

Income taxes have been determined in accordance with the legislation prevailing in Canada and the applicable foreign jurisdictions. The effective income tax rate differs from the basic Canadian combined federal and provincial tax rates as follows:



Three months ended Nine months ended
August 31 August 31
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
Earnings (loss) before
income taxes $ 3,374 $ (3,022) $ 1,656 $ (8,669)
------------------------------------------------------------------------
Combined statutory
tax rate 36.1% 36.1% 36.1% 36.1%
------------------------------------------------------------------------
Computed income taxes
(recovery) $ 1,218 $ (1,091) $ 598 $ (3,130)
Increase (decrease)
resulting from:
Canadian Federal and
Provincial rate
reductions (48) 37 (123) 10
International rate
differences (25) (120) (495) (95)
Valuation allowance (1,036) 1,061 (28) 3,216
Corporate minimum
taxes 17 92 21 338
Other differences (24) 245 (84) 327
------------------------------------------------------------------------
$ 102 $ 224 $ (111) $ 666
------------------------------------------------------------------------


5. Share capital

The Company has 64,116,131 issued and outstanding shares as at August 31, 2006. There are 39,919,846 multiple voting shares which carry 10 votes per share and are convertible into subordinate voting shares on a one-for-one basis. The Company also has 24,196,285 subordinate voting shares which carry one vote per share. In addition, as at August 31, 2006, there are 3,302,670 subordinate voting shares issuable pursuant to outstanding stock options. There were no stock options exercised in the quarter. As at September 29, 2006, there were no changes to the number of shares issued and outstanding reported above.

6. Foreign exchange contracts

The Company enters into foreign exchange contracts to limit its exposure to foreign exchange fluctuations on future revenue and expenditure streams. As at August 31, 2006, the Company had outstanding foreign exchange contracts for the remainder of 2006 to sell U.S. $25 million at an average rate of exchange of $1.22 and for 2007, contracts to sell U.S. $47 million at an average exchange rate of $1.13. In addition for 2007, the Company holds foreign exchange options totaling U.S. $4 million. These options have an average rate of exchange of $1.16. However, if at any time the exchange rate falls below $1.00 U.S. equals $1.05 Canadian prior to the exercise date, these options are cancelled.



7. Geographic segmented information

Three months ended Nine months ended
August 31 August 31
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
Sales:
Canada $ 51,234 $ 42,049 $ 170,851 $ 147,813
United States 89,282 87,768 238,241 245,879
International 15,769 15,788 45,591 39,356
------------------------------------------------------------------------
$ 156,285 $ 145,605 $ 454,683 $ 433,048
------------------------------------------------------------------------
------------------------------------------------------------------------


8. Comparative figures

Certain 2005 comparative figures have been reclassified to conform with the financial statement presentation adopted in 2006.

Contact Information

  • Teknion Corporation
    Steven E. Cohen
    Senior Vice President, Corporate Development
    (416) 661-1577, ext. 2456
    or
    Teknion Corporation
    Scott E. Bond
    Senior Vice President, Chief Financial Officer & Secretary
    (416) 661-1577, ext. 2391
    Website: www.teknion.com