Company

Carmanah Reports Fourth Quarter and Fiscal Year 2011 Results

Includes previously announced write-off non-cash tax assets

 

VICTORIA, BC, CANADA (March 15, 2012) Carmanah Technologies Corporation (TSX: CMH) (“the Company” or “Carmanah”) today reported its fourth quarter and fiscal year financial results for the period ended December 31, 2011.  
 
For the year-end December 31, 2011, the Company recorded a net loss of $8.6 million on revenues of $35.9 million which is consistent with the preliminary guidance issued on February 7, 2012.  The significant net loss is primarily due to an $8.2 million one-time non-cash impairment of deferred tax assets. The tax assets were written off upon management’s review of their recoverability of the assets based on a number of factors including Carmanah’s early stage of development, the Company’s current and anticipated revenue stream and its historical net income results. 
 
“Revenue performance of $35.9 million reflects 5.8% growth year on year.  While positive overall, we remain disappointed in revenue performance for the year and particularly our lack of headway within Outdoor Lighting.” stated Bruce Cousins, Chief Executive Officer.  “In terms of adjusted EBITDA (a non-IFRS measure), we have improved results by $0.8 million year on year.  In addition, Cash Flow from Operations continues positive."
 
Financial Condition at December 31, 2011 compared to December 31, 2010
  • Cash and cash equivalents of $4.9 million, down $0.8 million from $5.7 million
  • Working capital of $7.8 million, up $0.3 million from $7.5 million
  • Continued debt-free operations
Fourth quarter 2011 compared to fourth quarter 2010
  • Revenues: $7.1 million, down $2.2 million from $9.3 million
  • Gross margin: 27.5%, up from 26.0%
  • Operating costs: $2.9 million, down $0.7 million from $3.6 million
  • Net loss: $8.9 million, up $4.8 million from $4.1 million
  • Adjusted EBITDA (a non-IFRS measure): negative $0.4 million, up $0.1 million from negative $0.3 million
Fiscal 2011 compared to fiscal 2010
  • Sales: $35.9 million, up $2.0 million from $33.9 million
  • Gross margin: 31.4%, down from 33.3%
  • Operating costs: $11.5 million, down $2.0 million from $13.5 million
  • Net loss: $8.6 million, up $3.8 million from $4.8 million
  • Adjusted EBITDA (a non-IFRS measure): $1.3 million, up $0.8 million from $0.5 million
Summary of operations:
  • Revenues for the fourth quarter of 2011 were $7.1 million, down $2.2 million from $9.3 million in the fourth quarter of 2010. By product sector, revenues are as follows:
    • Signals, $3.1 million, down from $4.1 million
    • Illumination, $1.9 million, up from $1.2 million
    • Grid-tie, $1.0 million, down from $2.9 million
    • Mobile, $1.1 million, unchanged from $1.1 million
  • Sales for fiscal 2011 were $35.9 million, up $2.0 million from $33.9 million in fiscal 2010.  Broken down by product sector, sales are as follows:
    • Signals, $15.8 million, down from $18.5 million
    • Illumination, $5.2 million, up from $4.7 million
    • Grid-tie, $9.7 million, up from $5.6 million
    • Mobile, $5.2 million, up from $5.1 million
  • Gross margin percentages for fiscal 2011 were 31.4%, down from 33.3% for fiscal 2010.  Key drivers in margin erosion include overall sales mix, with stronger performance in lower margin segments, and foreign currency exchange rates. Broken down by product sector, gross margin percentages are as follows:
    • Signals, 41.5% up from 38.1%
    • Illumination, 24.8% down from 27.3%
    • Grid-tie, 19.3% down from 20.0%
    • Mobile, 29.8% down from 36.2%
Corporate operational highlights during 2011 included:
  • Appointment of a new Chief Executive Officer - In October 2011, we hired Bruce Cousins as our new Chief Executive Officer (“CEO”).  Bruce replaced Ted Lattimore after he had announced his departure in May 2011.  Mr. Cousins has a successful track record of delivering financial, operational and organizational performance and company profitability in the global technology industry.  Concurrent to his employment agreement, we completed a private placement with Mr Cousins which resulted in the issuance of 250,000 shares for proceeds of $0.1 million.  As a part of Ted Lattimore’s departure, we incurred a $0.3 million charge for a separation payment in the second quarter of 2011 in our Statement of Operations under the caption “Other income (expense)”.
  • Lightech Electronics Industries Inc. (“Lightech”) lawsuit settlement - In September 2011, we settled the ongoing litigation surrounding our attempted 2010 acquisition of Lightech Electronics Industries Inc.  Under the settlement, we agreed to forgo our $0.3 million investment we had made in Lightech, but received back approximately $0.3 million in funds previously held in escrow.  The agreement saw both parties release each other from all current and future claims surrounding this transaction. For the year-ended December 31, 2011, we recorded a net recovery of $0.2 million associated with these actions.  In 2010, we had recorded a $1.5 million loss, $0.9 million in legal, due diligence and financing charges and $0.6 million related to deposits for the acquisition. 
  • New head office facility - In September 2011, we moved into our new 13,000 square foot head office facility in Victoria B.C.  The new head office has a 5 year lease term and a 5 year renewal option and is located on 250 Bay Street, Victoria, B.C., Canada. During the second and third quarters of 2011, we invested approximately $0.6 million in leasehold improvements.
  • Organizational realignment within our Lighting group – In the fall of 2011, we implemented a new team based approach within the Lighting group to help focus sales and planning activities.  Under the new structure, each segment has its own leadership and supporting team and is directly responsible for the development and results of their business.  This new structure should help to maintain a constant focus on each of our markets to meet their unique objectives. 
 
Reporting Currency and Change in Accounting Standards
Unless otherwise indicated, all financial information presented in this press release is in US dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”). The conversion to IFRS from Canadian Generally Accepted Accounting Principles became effective January 1, 2011. Please refer to the Company’s most recently issued consolidated financial statements for further discussion.
 
Adjusted EBITDA
 
Three months ended December 31
Year ended December 31
(US$ in thousands)
2011
2010
2011
2010
 
 
 
 
 
Net loss
(8,888)
(4,103)
(8,553)
(4,771)
Add/(deduct):
 
 
 
 
  Interest
-
(3)
4
11
  Income tax expense/(recovery)
3,987
(1,206)
4,212
(1,482)
  Amortization
280
300
1,102
1,243
EBITDA*
(4,621)
(5,012)
(3,235)
(4,999)
  Restructuring
-
491
-
807
  Terminated Lightech agreement costs/(recovery)
-
1,228
(176)
1,470
  Impairment of Investment tax credits
4,051
-
4,051
-
  Retirement provision
-
-
261
-
  Non-cash stock based compensation
147
62
428
294
  Intangible asset impairment
-
2,969
-
2,969
Adjusted EBITDA*
(423)
(262)
1,329
541
* A Non-IFRS measure
 
Management believes that the non-IFRS measures presented provide useful information by excluding certain items that may not be indicative of Carmanah’s core operating results and that this non-IFRS measure will allow for a better evaluation of the operating performance of the Company’s business and facilitate meaningful comparison of results in the current period to those in prior periods as well as future periods. Reference to this non-IFRS measure should not be considered as a substitute for results that are presented in a manner consistent with IFRS. This non-IFRS measure is provided to enhance investors’ overall understanding of Carmanah’s current financial performance.
 
A limitation of utilizing this non-IFRS measure is that the IFRS accounting effects of the non-recurring items do in fact reflect the underlying financial results of Carmanah’s business and these effects should not be ignored in evaluating and analyzing Carmanah’s financial results. Therefore, management believes that Carmanah’s IFRS measures of net loss and the same respective non-IFRS measure should be considered together.  
 
Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. One such non-IFRS measure used for assessing financial performance is Adjusted EBITDA, defined as net income before interest, income taxes, amortization, non-cash stock-based compensation, restructuring charges, retirement provision, and terminated Lightech agreement costs.
 
 
Complete set of Financial Statements and Management Discussion & Analysis
 
A complete set of the annual 2011 Financial Statements and Management’s Discussion & Analysis are available on Carmanah's corporate website. To view these documents, visit: http://www.carmanah.com/company/financial-reports. Both documents for the year ended December 31, 2011 will also be filed on SEDAR (www.sedar.com).
 
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About Carmanah Technologies Corporation
As one of the most trusted names in solar technology, Carmanah has earned a reputation for delivering strong and effective products for industrial applications worldwide. Industry proven to perform reliably in some of the world's harshest environments, Carmanah solar LED lights and solar power systems provide a durable, dependable and cost effective energy alternative. Carmanah is a publicly traded company, with common shares listed on the Toronto Stock Exchange under the symbol "CMH”. For more information, visit www.carmanah.com.
 
For further information:
 
Investors:
Investor Relations: Roland Sartorius, CFO
Toll-Free:  1.877.722.8877
Media:
Public Relations: David Davies
Tel:  +1.250.382.4332
 
This release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “expects,” “plans,” “estimates,” “intends,” “believes,” “could,” “might,” “will” or variations of such words and phrases. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Carmanah to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. For additional information on these risks and uncertainties, see Carmanah’s most recently filed Annual Information Form (AIF) and Annual MD&A, which are available on SEDAR at www.sedar.com and on the Company’s website at www.carmanah.com. The risk factors identified in Carmanah’s AIF and MD&A are not intended to represent a complete list of factors that could affect Carmanah. Accordingly, readers should not place undue reliance on forward-looking statements. Carmanah does not assume any obligation to update the forward-looking information contained in this press release.