WINNIPEG, November 29, 2010 – Empire Industries Ltd. (TSX-V: EIL) today reported its financial results for the third quarter ended September 30, 2010. The consolidated financial statements and MD&A for the third quarter of 2010 have been filed on SEDAR and can be viewed at www.sedar.com or at www.empind.com.
Summary of quarterly and 9 month period results
- Quarterly revenue increased by $1.1 million over the prior year to $19.9 million;
- Gross profit of $2.0 million in the third quarter of 2010 (10% of revenue) decreased from $3.9 million (21% of revenue) in the third quarter of 2009;
- OG&A expenses of $3.1 million in the second quarter decreased by $0.9 million or 23% over the same quarter last year;
- Net loss of $13.4 million ($0.15 loss per share) for the 9 month period increased from the net loss of $8.3 million ($0.09 loss per share) for the same nine months in 2009, primarily due to:
EBIT loss from continuing operations of $0.7 million ($0.01 loss per share)
a goodwill impairment charge in the quarter of $8.2 million ($0.09 loss per share);
a loss from discontinued operations of $2.2 million ($0.02 loss per share);
an unrealized loss on foreign exchange hedges of $2.2 million ($0.02 loss per share) in the period (resulting from the reversal of the unrealized gain recorded in the prior year).
The Company has exited its Petrofield process equipment business. Accordingly, the financial statements present the $2.2 million net loss associated with this business as a loss from discontinued operations for the 9 month period.
The Company has made the decision to close its steel fabrication facility located in Burnaby, BC by the end of the year. Accordingly, the Company has incurred a non-cash goodwill writedown of $8.2 million, and a preliminary provision of $0.1 million for exit and disposal costs. The Company expects to complete the closure of this business in the fourth quarter of 2010 at which point it will become a discontinued operation.
The Company incurred an unrealized loss on foreign exchange hedges in the quarter. This is the result of a reversal of an unrealized gain recorded in the prior year. In accordance with the Company’s foreign exchange risk policies, the Company purchases the appropriate foreign exchange forward contracts to protect itself against fluctuations in currencies. Therefore, these non-cash gains and losses in a particular period represent timing differences in foreign exchange rates that net out at the end of the contract.
Excluding these non-recurring items, the net loss in the nine month period would have been $0.9 million instead of $13.4 million. ($1.0 million instead of $9.4 million for the quarter).
“With the discontinuance of the Petrofield process business and the decision to close our Burnaby steel fabrication facility, we have turned the corner operationally,” said Guy Nelson, Chief Executive Officer of Empire Industries Ltd. “The past two years have been very challenging to aggressively and successfully reduce our debt and our fixed costs and our excess capacity to match the current market realities. The company is in the process of strengthening its balance sheet to exploit profitable growth in 2011 and beyond.”
