Winnipeg, Manitoba, April 30th, 2009 – Empire Industries Ltd. (TSX-V: EIL) (“Empire” or the “Company”), today announced its audited consolidated financial results for the year ended December 31, 2008. On April 29, 2009, the Company announced restated fiscal 2007 and interim fiscal 2008 financial results. The audited consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) for the fourth quarter and year ended December 31, 2008 have been filed on SEDAR and can be viewed at www.sedar.com or on our web-site at www.empind.com.
Fiscal 2008 Financial Highlights (with comparisons to restated fiscal 2007 results):
Consolidated revenue increased to $180 million or 52.9% (4th quarter – increased to $40.2 million or 11.8%);
Consolidated gross profit increased to $26.7 million or 26.1% (4th quarter – decreased to 5.2 million or 12.7%);
Consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) decreased to $5.3 million or 39.9% (4th quarter – loss of $317,000 declined from $2.3 million in fiscal 2007);
Engineered products group revenue increased to $83.3 million from $23.9 million in fiscal 2007; gross profit increased to $16.9 million from $2.6 million; EBITDA increased to $5.9 million from a loss of $45,000;
Steel fabrication group revenue increased slightly to $96.7 million; gross profit declined to $9.7 million from $18.6 million; EBITDA declined to $1.5 million from $10.1 million;
Corporate expenses increased to $2 million from $1.2 million in fiscal 2007;
Net Loss was $1.8 million, or $0.02 loss per share, compared with net earnings of $4.0 million or $0.06 per share in fiscal 2007; and
Cash flow from operating activities improved to $840,000 for fiscal 2008 compared to cash flow used in operating activities in the prior year of $10,000.
“An especially challenging fourth quarter capped off a disappointing year for Empire Industries,” said Guy Nelson, Chairman and CEO of Empire Industries Ltd. “While we continued to grow our top line, our margins did not keep pace and we had a net loss for the year. In particular, our steel fabrication group was negatively impacted by lower realized margins on jobs in 2008 compared to 2007. On the positive side, our engineered products group had strong growth in sales and earnings following the acquisition of a number of companies in this segment in 2007 and our steel fabrication group benefited from our expansion into the maintenance services market in the Fort McMurray area through our Aboriginal partnership.”
The increase in sales, gross profit and EBITDA for the specialized engineered products segment stem largely from the annualized results of Empire Dynamic Structures Ltd. (“EDSL”)acquired April 17, 2007, Tornado Technologies Inc., acquired November 30, 2007 and Parr Metal Fabricators Ltd. acquired December 31, 2007. In addition, EDSL’s margins from the production and sale of ride systems improved in fiscal 2008 as the company refocused its product lines and transferred responsibility for the operation of its Kingsway plant to the steel fabrication segment.
The decline in gross profit and EBITDA for the steel fabrication and installation segment reflects a combination of factors including, but not limited to: unexpected escalation in material costs for steel of about $1 million on a single job, labour cost overruns and several jobs with lower contracted margins compared with fiscal 2007, higher annualized indirect and direct production costs associated with the acquisition of KWH Constructors Corp. on April 30, 2007 and additional indirect labour, plant and other production costs associated with the operation of the company’s Kingsway plant transferred to the steel fabrication and installation segment on January 1, 2008. Earnings from the company’s non-controlling interest in its Fort McMurray maintenance services operation improved $322,000 or 84.6% over fiscal 2007.
Corporate expense increases reflect a $194,000 increase in non-cash stock-based compensation expense, the addition of a Chief Financial Officer role, other executive salary adjustments and higher professional fees associated with the introduction of quarterly reviews, the transition of auditors and investor relations services.
At December 31, 2008, the Company’s long term debt (including the current portion due) of $19.7 million improved $5 million compared to long term debt of $24.7 million at December 31, 2007 while shareholders’ equity of $39.2 million reflected the loss for the year of $1.8 million.
“The current economic downturn has resulted in reduced project spending, delays and cancellations in certain markets in which we operate,” said Mr. Nelson. “We expect that the current downturn will negatively impact our steel fabrication group in 2009. However, we are somewhat encouraged by federal and provincial government announcements indicating a willingness to invest up to $21 billion in infrastructure spending over the next two years. While we will likely not benefit from this in a material way in 2009 it does provide for a potentially much brighter outlook for our steel fabrication group for 2010. Fortunately, our engineered products group and our aboriginal partnership both have relatively positive outlooks for 2009. Growth in our engineered products group is driven partly by environmental regulations which create a demand for our proprietary products. Our unique aboriginal partnership is focused on providing maintenance services to Alberta’s oilsands producers and the outlook for this business is robust.”
Mr. Nelson added, “The severity of the downturn in the capital markets that started in the latter half of 2008 contributed to Empire having a market capitalization far below its book value. The economic environment has changed dramatically, and Empire is reviewing its strategy accordingly. The Company and the board of directors are evaluating alternatives to maximize shareholder value while seeking to optimize the value and performance of the steel fabrication group. These alternatives may include the formation of a strategic partnership in our steel fabrication segment to better respond to the higher margin projects that we will be bidding on in the coming months. We will leave no stone unturned in our drive to maximize value. On that basis, other forms of restructuring, such as the sale of non-core asset debt refinancing and cost containment and reduction, are also being considered.”
