Carmanah Reports First Quarter 2011 Results and Announces Resignation of CEO Ted Lattimore effective December 31, 2011

 
 
VICTORIA, BC, CANADA (May 12, 2011) Carmanah Technologies Corporation (TSX: CMH) (“the Company” or “Carmanah”) today reported its first quarter financial results for the period ended March 31, 2011 and the resignation of Ted Lattimore, CEO, effective December 31, 2011.
 
Sales for the three months ended March 31, 2011 were $9.6 million, up 18% from $8.1 million for the same quarter in 2010. Net income for the quarter was $0.2 million compared to break-even in the same period of the prior year.
 
“Revenue results for the first quarter of 2011 were ahead of plan, aligned with earlier provided guidance, the best quarterly performance in over two years; and profitability was greater than planned as the lower cost structure is already paying off,” stated Ted Lattimore, Chief Executive Officer. “Our Illumination outdoor area lighting business achieved $1.5 million revenue by way of a variety of purchase orders – approximately $0.1 million short of our all-time quarterly high - and immediate results were achieved in Latin America with the introduction of the EG300 systems. Our Signals business experienced a shortfall in the Marine sector due to the slow seasonal breakout of winter ice conditions and our Grid-tie division over-contributed as a result of continuing success with Ontario’s Feed-in-Tariff program.”
 
“We’re encouraged with the performance in first quarter of 2011 and even more so as the momentum that has been building since late 2010 is overflowing into the second quarter,” Lattimore commented. “As we highlighted in our year-end review, many bold initiatives are beginning to be rewarded: the successful partnership with ADB has created a larger market for our Aviation Signal products and provides a much broader distribution channel to reach this market as Carmanah’s products complement ADB’s portfolio of airfield lighting systems. Our Mobile business is accelerating as the recession loosens its grip on the recreational vehicle and fleet markets and new customers purchase volume of our Go Power! brand through new channels such as Amazon.com. Carmanah’s commitment to the Ontario FIT program has positioned us as the clear leader in roof-top industrial Grid-Tie in the province, with multi-million dollar contracts now being awarded. Our award winning EverGEN 1700 series Illumination outdoor area lighting is being installed in a variety of situations in North America, and the engineering platform resulting from the EverGEN allowed us to launch the lower cost EG300 series in record time in January for developing markets - with competitive pricing and immediate sales. A further boost to our Illumination outdoor area lighting effort came via a recent market assessment study published by lighting industry giant Philips. Philips estimates the global potential for solar powered outdoor LED lighting at $1.0 billion annually; two to three times larger than Carmanah’s previous estimates. In all, we’re very pleased with the performance of both the Lighting and Solar Power Systems divisions, and see returns coming from our earlier strategic investments in product development, sales and distribution re-organization and partnerships, and aligning the operational structure along functional lines. Revenue per employee for 2011 is estimated to be in excess of $0.5 million, which is an increase of almost double the revenue per employee over the prior year.” concluded Lattimore.
 
With regards to the lawsuits involving Lightech, “Management is aggressively defending its rights and taking all measures to bring the matter to an end,” Lattimore stated. “In 2010, we embarked on our previously announced non-organic growth strategy with the signing of a definitive agreement to purchase Lightech Electronics subject to several conditions precedent of which the main one was the successful completion of an equity offering. As a result of steps taken by a previously unknown significant shareholder for the Company not to proceed with the equity offering, our Board of Directors determined after careful deliberation that it had no choice but to terminate the Lightech agreement in accordance with its rights under the Lightech agreement. That unfortunately resulted in legal actions initiated by both Carmanah and Lightech. Both actions are in the early stages of the litigation process.” For a more detailed discussion on the terminated Lightech agreement, refer to the Company’s First Quarter 2011 Management’s Discussion & Analysis filed on SEDAR (www.sedar.com) and the Company’s website at www.carmanah.com/Company/Investors/Financial_Reports.aspx
 
“Our 2011 performance is very sales focused, with additional efficiencies resulting from the restructuring initiatives we completed in 2010, to allow us to grow profitably,” Lattimore continued.” For the second quarter of 2011, we are anticipating revenues in the range of $10.5 million to $11.0 million, representing an increase of approximately 35% over the same period in 2010. We further anticipate a positive pre-tax income in the range of 3-5%, as we expect to benefit from a continued increase in Illumination and Grid-tie revenues and reduced operating expenses. Now that contracts are working their way through the FIT program process in Ontario, we see an inflow of million dollar plus contracts to the Grid-tie sector of our business during at least 2011. For 2011, we anticipate corporate organic revenue to increase approximately 15%, gross margins to be in the low 30% range, and lower overall operating expenses than 2010. This should enable us to achieve profitable operating results.”
 
Carmanah today is also announcing the resignation of Ted Lattimore as CEO effective December 31, 2011. “With Carmanah in profitable territory, enjoying some sales momentum, a more positive economic climate and having made some very positive steps into the $1 billion market for outdoor area lighting, it is best to act now to find the leader who can commit to realizing the Company’s longer term potential” said Lattimore. Rob Cruickshank, Chairman of the Company, states “The turnaround of Carmanah, which has been the prime responsibility of Ted, is firmly in place. We’re in a position now where the Board of Directors can manage and control a transition to a new CEO and position the role as a very attractive opportunity. The Company is now profitable, has a strong statement of financial position and solid footing and growth plans in each business unit. The Board is grateful for Ted’s contribution to the Company over the last 3 ½ years and his anticipated involvement through the transition over the next few months.” Lattimore will retain the CEO position and responsibilities until December 31, 2011, or earlier, if a replacement is assigned.
 
Financial Condition at March 31, 2011 compared to December 31, 2010
  • Cash and cash equivalents of $5.8 million, up $0.1 million
  • Working capital of $8.0 million, up $0.5 million from $7.5 million
  • Continued debt-free operations
First Quarter 2011 compared to first quarter 2010
  • Sales: $9.6 million, up $1.5 million or 18% from $8.1 million
  • Gross margin : 32.4%, down from 39.3%
  • Operating costs: $2.7 million, down $0.6 million from $3.4 million
  • Net Income: $0.2 million, up $0.2 million from break-even
  • Adjusted EBITDA (a non-IFRS measure): $0.6 million, up from $0.3 million
Summary of operations:
  • Sales for the first quarter of 2011 were $9.6 million, up 18.5% from $8.1 million in the first quarter of 2010. Broken down by product sector, sales are as follows:
    • Signals, $3.8 million, down 19% from $4.7 million
    • Illumination, $1.5 million, down 7% from $1.6 million
    • Grid-tie, $2.6 million, up 444% from $0.5 million
    • Mobile, $1.7 million, up 34% from $1.3 million
  • Gross margin percentage for the first quarter of 2011 was 32.5%, down from 39.3% for the first quarter of 2010. Broken down by product sector, gross margin percentages are as follows:
    • Signals, 44.0%, up from 41.9%
    • Illumination, 30.4% down from 33.4%
    • Grid-tie, 16.6%, down from 29.7%
    • Mobile, 31.8%, down from 40.5%
  • Product development initiatives during the first quarter of 2011 included:
    • On January 19, 2011, Carmanah announced the launch of its new EG300-series solar LED outdoor streetlight; a new generation of solar-LED lighting systems designed to meet the specific roadway performance features required for customers in global sun-belt regions where core infrastructure development is underway, including regions such as Latin American and the Caribbean. The EG300-series is designed to provide high lumen performance at a competitive price to support solar lighting adoption in rapidly growing non-North American markets. Operating completely free of the grid, the EG300 solar streetlight is well-positioned for markets with developing roadway infrastructure where standalone solar lighting can offer a more cost effective alternative over hard-wired lighting systems. In situations where the electrical grid is costly, unreliable or non-existent, the EG300 becomes a viable cost-saving lighting alternative; delivering the light output equivalent to a 200-watt metal halide light (used for standard streetlight settings). The EG300-series includes two product sizes which power up to two LED fixtures. These fixtures are available in standard IES distribution types, are dark-sky friendly, and feature excellent uniformity.
    • On February 3, 2011, Carmanah announced that the Mexican National Civil Aviation Authority had approved the use of Carmanah A704-5 and A650 solar LED signal lights for obstruction marking in accordance with Annex 14 of ICAO regulations. Carmanah’s authorized distributor in Mexico, Grupo Insolar SA de CV, helped in submitting the A704-5 and A650 specifications to the civil aviation authorities for consideration and approval.
  • Significant sales that were announced during the first quarter of 2011:
Signals
  • On January 6, 2011, Carmanah announced that the ADB/Carmanah team has been awarded a $0.5 million project for solar powered aviation lights at a forward operating base in Afghanistan.
 
Illumination
  • On January 19, 2011, the Company announced the launch of the EG300 series Illumination light; a new generation of solar-LED outdoor lighting systems designed to meet the specific roadway performance features required for customers in global sun-belt regions where core infrastructure development is underway, including regions such as Latin American and the Caribbean.
  • On February 2, 2011, Carmanah announced that the City of Los Angeles has selected Carmanah EverGEN 1710 solar powered lights for a $0.5 million project to light a popular bicycle path.
  • On February 10, 2011, Carmanah announced that its EG340 series Illumination lights, the Company’s latest product was chosen by Mexico City for the Parque Caneguin, to light its historically significant heritage park located in Delegacion Miguel Hidalgo, Mexico City. This order represents one of the initial launch installations within a key market for the new EG300-series product. Parque Caneguin is also recognized by the Insistuto Nacional de Antropologia e Historia (“INAH”) as a Mexico City, Mexico heritage site as well as being valued by the community as the “lungs” of the district.
  • On March 31, 2011 Carmanah announced a sale worth over $0.6 million for Carmanah EG340 solar lights to illuminate a road network at a large industrial facility in Latin America. This sale represents the first installation of the EG340 solar lights for a roadway lighting application. According to the facility owners, the company will save hundreds of MWh of electricity per year by introducing solar powered lighting into their operations. The EG340 Carmanah solar powered lights were specifically designed to meet the cost point, lighting and performance specifications for Latin American countries. One of the key reasons the EG340 was chosen was the low maintenance requirements for the lights – another cost saving advantage. The solar light also fit in well with the national Government’s support for renewable energy products.
 
Subsequent to March 31, 2011:
 
Signals
  • On April 12, 2011, Carmanah in partnership with ADB Airfield Solutions announced the completion of the wireless solar engine power supply (“SEPS”) for ADB airfield lights and visual navigation aid products. Carmanah internationally recognized for reliable solar-powered products and ADB Airfield Solutions, the first name in aviation lighting and safety, combined forces through the development of SEPS to improve safety of flight in some of the most demanding environments on earth. Designed by Carmanah to support ADB airfield equipment in environments where the electrical grid is difficult or impossible to access, SEPS wirelessly powers those AC- and solar-powered visual navigation aids required to improve airfield and helipad safety.
  • On April 12, 2011, Carmanah in partnership with ADB Airfield Solutions announced the release of the solar-powered Helipad Kit; the first comprehensive and stand-alone wireless helipad light and navigational aid system. The Helipad Kit features ADB wireless solar engine power systems, visual navigation aids and Carmanah wireless solar-powered airfield lighting technology. Wireless, completely stand-alone and self-contained, as well as configurable, the Helipad Kit is the ideal total helipad safety improvement system for remote locations where grid power is difficult or impossible to access. The Helipad Kit is available as a complete system of lighting and navigation aid products or configurable to a helipad’s unique mission requirements.
  • On May 3, 2011, Carmanah announced the sale of solar powered aviation lights for deployment at an airport in the Republic of Angola. The value of the contract is approximately $0.2 million and is being coordinated by authorized Carmanah distributor Infocontrol LDA out of Portugal.
Illumination
 
  • On April 14, 2011, Carmanah announced its participation as a founding member to form the Consortium for Solar Lighting (“CSL”). The CSL’s other founding members are Sharp Electronics Corporation, Inovus Solar, Inc., and SolarOne Solutions, Inc. The mission of this group is to accelerate the adoption of reliable solar lighting technology through the development of universal specifications intended to support customers’ fair and comprehensive evaluation of commercial-scale lighting systems. In the process, the group expects that these specifications will foster awareness of solar powered lighting and the applications where it is a viable alternative to conventional grid-connected lighting technology.
  • On April 27, 2011, Carmanah announced the sale of EverGEN 1520 solar powered lights to a city in the State of Nevada to light a dog park area in a newly developed public park in a deal worth $0.1 million.
  • On April 28, 2011, Carmanah announced the sale of EverGEN 1710 solar powered lights for federal government agency parking lot facility in a deal worth almost $0.2 million.
 
Grid-tie
  • On April 26, 2011, Carmanah announced that it had been awarded a second contract by the Greater Essex County District School Board (GECDSB) of Windsor, Ontario, Canada to provide a solar photovoltaic (PV) system on the new Tecumseh School. The Carmanah solar rooftop ballasted PV system, valued at approximately $0.6 million, will install on the Tecumseh Vista Academy, the School Board’s first K-12 School
  • On May 10, 2011, Carmanah announced that it had been awarded a contract valued at approximately $1.8 million to provide solar grid-tied PV systems for two elementary schools in Southern Ontario. Architects and planners for both schools considered the integration of a solar PV system early in the building’s design process. This, in combination with the School District’s continued support of sustainable energy and available funding through the Renewable Energy Funding for schools program, contributed to the District’s decision to adopt the two solar PV systems.
 
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 Internal 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 financial statements for further discussion.



 
Adjusted EBITDA
(US$ thousands)
Adjusted EBITDA reconciliation
Q1
2011
Q1
2010
 
 
 
 
Net income/(loss)
$158
$(4)
Add/(deduct):
 
 
 
Interest
4
16
 
Income taxes
103
(18)
 
Amortization
275
297
 
Terminated Lightech agreement costs
96
 
Adjusted EBITDA*
636
291
* A non-IFRS measure
 
Management believesthat 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 these non-IFRS measures 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 these non-IFRS measures should not be considered as a substitute for results that are presented in a manner consistent with IFRS. These non-IFRS measures are provided to enhance investors’ overall understanding of Carmanah’s current financial performance.
 
A limitation of utilizing these non-IFRS measures 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 on 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, restructuring charges, goodwill, intangible impairments, discontinued operations and acquisition costs.
 
 
Complete set of Financial Statements and Management Discussion & Analysis
 
A complete set of the first quarter ended March 31, 2011 Financial Statements and Management’s Discussion & Analysis are available on Carmanah's corporate website. To view these documents, visit: www.carmanah.com/Company/Investors/Financial_Reports.aspx. Both documents 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
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.