Record Annual Revenue and Net Earnings
Victoria, British Columbia, Canada - March 9, 2005 - Carmanah Technologies Corporation (TSX Venture: CMH) is pleased to announce its audited results for the year ended December 31, 2004.
Highlights for 2004
- Annual revenue of $15,895,041, up 72% from 2003, and consistent with historical average five year revenue growth rate of 68% per year
- Net earnings of $592,823, up from a loss of $126,394 in 2003
- EBITDA of $1,005,542, up from $283,784 in 2003
- Record outstanding orders of $1.6 million at year end
- Net working capital of $11,759,089 at year end, up from $4,168,728 at 2003 year end
"2004 was another exceptional year for Carmanah, with success in each of the Company's vertical markets." states Art Aylesworth, Carmanah's CEO. "Sales in the marine market continue to be strong and we are pleased to see the significant growth in our other verticals. This provides the Company with a better balance of revenues, reducing dependence on any one market segment."
Increasing demand within the Aviation and Transit markets generated revenues in excess of $7 million in 2004, representing a 112% increase over 2003. The investment incurred to expedite the Company's rollout of new products into the roadway market was rewarded with a 223% increase in sales over 2003. Sales of Carmanah's LED signs gained momentum throughout the year with record order levels in the system at year end.
"We are very pleased to see increased sales and diversification across each of the Company's vertical markets in 2004. The increased customer base this brings will position the Company well for continued growth in 2005 and beyond," states Aylesworth.
Summary of Results for 2004
Carmanah's total revenues for the 12 months ended December 31, 2004 increased 72% to $15,895,041, compared with $9,220,018 for the preceding year. Revenues were derived from the sale of its existing product line of solar-powered LED lighting illumination products to the marine, aviation, transit and roadways markets through the Company's operating subsidiary, Carmanah Technologies, Inc. ("CTI"), as well as from the sale of LED edge-lit signs through the Company's operating subsidiary, Carmanah Signs, Inc. ("CSI"). Sales were sourced through a worldwide distribution network and direct sales efforts within these two operating subsidiaries. CTI contributed $13,305,702 to the Company's overall revenues for the 12 months ended December 31, 2004, as compared to $8,419,917 for the same period in 2003. CSI sales totaled $2,589,339 for the year.
While Carmanah is pleased with this exceptional growth in 2004, the decline of the US dollar continues to impact the Company's top line revenues. The Company worked to counteract this impact by entering into foreign exchange hedge contracts, by selling in alternative currencies, and by monitoring the volatile US dollar when preparing quotes on custom orders that provide flexibility from fixed pricing. However, despite the actions and initiatives taken, the declining US dollar reduced the Company's reported revenues for 2004 by approximately $1 million.
Also, the Company's edge-lit sign business (acquired in October 2003) was slow to ramp up its sales in early 2004. However, once the challenges facing this area of the Company were addressed (in second quarter), the Company saw positive results and increased sales momentum through the latter half of the year. Revenue increased from $1 million in the first six months of 2004, to $1.589 million in the last six months of 2004, providing a total of $2.589 million for the year.
Management is pleased to announce that outstanding orders at the end of 2004 were at a record high of $1.6 million, indicating continued sales momentum into 2005. This is an increase of 46% in the amount of outstanding orders at the end of 2004 compared to the previous year.
Cost of sales was $7,655,700 (48% of revenue) for the year ended December 31, 2004, resulting in a gross profit margin of 52%. In comparison, cost of sales was $4,455,250 (48% of revenue) for the year ended December 31, 2003 resulting in a gross profit margin of 52%. Cost of sales includes labor, material, material burden and other manufacturing costs. The Company's cost of sales and gross profit margins are affected by a number of variables, including: ratio of direct sales to distributor sales, purchasing volumes and practices, and foreign exchange fluctuations. These factors are continually monitored to maintain gross profit margins above 50%.
Wages and benefits expense represents the Company's Sales and Marketing, Operations, Finance and Administration departments. For the year ended December 31, 2004, wages and benefits increased 67% to $3,509,101, compared with $2,095,609 in 2003. The increase of $1,413,492 is the result of $555,000 in additional wage expenses from the CSI acquisition, $319,035 stock based compensation expense, and an increase in sales and administrative staff in support of overall sales growth. As a percentage of sales, total wages and benefits for the 2004 represents 22% of sales, compared to 23% for 2003.
Office and administration expenses in 2004 were $1,423,744, representing a 69% increase over 2003 at $844,706. The increase is the result of $228,000 in additional office and administrative expenses from the CSI acquisition, as well as an overall increase in support of sales and personnel growth. As a percentage of sales, office and administration expenses remained unchanged from 2003 to 2004, at 9%.
Sales and marketing expenses in 2004 were $1,341,112, representing a 78% increase over 2003 at $753,360. This increase of $587,752 is the result of $286,000 increased expenses resulting from the CSI acquisition, as well as increased investment in emerging markets such as transit, aviation, roadways and LED edge-lit signage where returns are starting to be realized. As a percentage of sales, sales and marketing expenses have remained at 8% for the years 2003 and 2004.
During 2004, research and development expenses of $959,842 (net of $71,228 grant and $316,000 SRED Investment Tax Credit) represented a 22% increase over $787,309 (net of $286,038 grant) in the previous year. The grant was from Sustainable Development Technology Canada and reimbursed up to $500,000 for certain research and development costs incurred to develop and commercialize specific projects. The final project milestone was completed on December 31, 2004 resulting in booking the final recovery of $71,228 against eligible project expenses. The SRED Investment Tax Credits in the amount of $316,000 were the result of credits generated from research and development expenses, and recoverable as an offset to income taxes payable on CTI's taxable income.
The Company's growth in research and development was the result of increased staffing levels in an effort to invest in the development of new product offerings, including solar-powered LED bus stops, shelters and crosswalks for new market sectors, as well as existing product enhancements. As a percentage of sales, gross research and development expenses were 9% of sales, down from 12% for the same period in 2003.
Income tax expense in the amount of $114 is comprised of $316,000 current tax expense on CTI taxable income, less a $315,886 recovery generated by future income tax assets.
Net earnings for 2004 were $592,823 as compared to a loss of $126,394 for the same period in 2003. In 2004, the Company retroactively adopted the fair value based method for stock-based compensation resulting in a decrease in 2003 net earnings previously reported from $22,843 to a loss of $126,394 for the year ended December 31, 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $1,005,542 for the year ended December 31, 2004 as compared to $283,784 for the year ended December 31, 2003.
Carmanah's cash and cash equivalents at December 31, 2004 were $901,411, compared to $1,693,069 at December 31, 2003. This $791,658 decrease was primarily the result of $96,809 of cash used in operating activities and $7,475,144 of cash used in investing activities, plus $6,780,295 of cash provided by financing activities. Net working capital at the end of 2004 was $11,759,089, with a current ratio of 4.6:1 and $13,755 of non-current debt obligations.
The overall performance of Carmanah for 2004 was strong despite the fluctuations in the US dollar and slower than anticipated sales in the LED edge-lit sign market during the first half. The Company's continued sales growth year after year, healthy and stable gross margins, increased net profits, and strong balance sheet offer support for the Company's ongoing strategy of aggressive business development in new markets, and position the Company to grow and expand into 2005 and beyond.
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Carmanah is an award-winning manufacturer of proprietary LED-based lighting and illumination products for the public transit, roadway, marine, aviation, industrial worksite, and illuminated signage markets. The Company has more than 100,000 solar-powered LED lighting installations and 50,000 LED-illuminated sign installations in 110 countries. The shares of Carmanah Technologies Corporation are publicly traded on the TSX Venture Exchange under the symbol "CMH" and on the Berlin and Frankfurt Stock Exchanges under the symbol "QCX". For more information, please visit www.carmanah.com.
On Behalf of the Board of Directors
Carmanah Technologies Corporation
" Praveen Varshney "
Praveen Varshney, Director
For further information, please contact:
Mr. Praveen Varshney, Director
Carmanah Technologies Corporation
Tel: (604) 629-0264
Mr. Mark Komonoski, Director
Carmanah Technologies Corporation
Tel: (403) 861-8384
Mr. David Davies
Tel: (250) 382-4332
This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are described under the caption "Note Regarding Forward-looking Statements" and "Key Information - Risk Factors" and elsewhere in Carmanah's Annual Report for the fiscal year ended December 31, 2003, as filed with the U.S. Securities and Exchange Commission and which are incorporated herein by reference. These risks and uncertainties are also described under the caption "Risk Factors" in Carmanah's Annual Information Form dated December 31, 2003, as filed with the British Columbia Securities Commission and which are incorporated herein by reference.
Carmanah does not assume any obligation to update the forward-looking information contained in this press release.