VICTORIA, BC, CANADA (November 10, 2010) Carmanah Technologies Corporation (TSX: CMH) (the “Company” or “Carmanah”) today reports its third quarter financial results for the three-month period ending September 30, 2010 and announces the termination of the previously announced agreement to acquire all of the outstanding shares of Lightech Electronics Industries Ltd (“Lightech”).
Sales for the quarter were $8.6 million, down $0.9 million from the same period last year. Third quarter Signals & Illumination sales increased by $0.4 million over the third quarter of the prior year, mainly due to a significant increase in marine product sales. Sales from Systems & Other decreased in the quarter by $1.3 million compared to the same period of the prior year, primarily as a result of a substantial spike in sales during the third quarter of 2009 resulting from a significant off-grid system sale and a one-time clearance of obsolete and discontinued products.
Â· Sales: $8.6 million, down from $9.5 million for the same period in 2009
Â· Gross margin: 35.1%, up from 32.8% in 2009
Â· Operating costs: $3.0 million, down from $3.2 million in 2009
Â· Net (loss)/income: $(0.1) million, down from $1.2 million in 2009
Â· Adjusted EBITDA: $0.9 million, down from $1.4 million in 2009
Â· Cash balance: $6.0 million as at September 30, 2010, down from $8.7 million at December 31, 2009
Â· Debt: Continued debt-free operations
|To view full financials, click here.|
Summary of Results
Sales for the quarter were up slightly over the first and second quarters of 2010 with growth in both the Signaling and Grid-tie segments. The increase in Signaling product sales was the result of higher sales within the Marine segment. For Grid-tie, sales increased primarily as a result of the Ontario Feed in Tariff program. Partially offsetting the increases in these segments was a decline in EverGEN™ illumination outdoor area lighting sales, reflecting the “lumpiness” of orders for this product line. Sales achieved were $0.7 million for the quarter, down $0.5 million from the second quarter, with trends suggesting some recovery towards year end. The newest EverGEN™ family member, the 1710 series with industry recognized Advanced Occupancy Sensing feature, launched in May, 2010 in
“The third quarter experienced revenue and gross margin growth over the second quarter of 2010, as well as improved gross margin over the third quarter of 2009.” stated
Sales for the third quarter of 2010 were $8.6 million, down from $9.5 million in 2009. This decrease is due primarily to a substantial spike in third quarter 2009 sales resulting from a significant off-grid system sale and a one-time clearance of obsolete and discontinued products. Also contributing to the decline were lower sales in Illumination products and aviation/obstruction sales during this period. A summary of revenues from each of the Company’s Signals & Illumination and Systems & Other business segments is displayed below:
|Sales Summary||For the three months ended September 30,|
|Signals & Illumination|
|Total Signals & Illumination||5,776||67.4%||5,396||56.8%||380||7.0%|
|Systems & Other|
|Solar Power Systems and Grid-Tie||2,790||34.6%||4,091||43.1%||(1,301)||(31.8%)|
|Total Systems & Other||2,790||34.6%||4,099||43.2%||(1,309)||(31.9%)|
The Company uses certain non-GAAP measures to assist in assessing its financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. One such non-GAAP measure used for assessing financial performance is Adjusted EBITDA, defined as net income before interest, income taxes, amortization, restructuring charges, goodwill, intangible impairments, discontinued operations and acquisition costs.
|Adjusted EBITA Reconciliation||For the three months ended|
|($ thousands)||September 30, 2010||September 30, 2009|
|Adjusted EBITA||$ (739)||$ (671)|
|Net loss||$ (52)||$ 1,244|
Throughout the third quarter of 2010, Carmanah continued to focus on supporting the success and growth of key relationships in its distribution network. Key relationships include our relationship with Sabik Oy (“Sabik”), for the global distribution of marine illumination products, ADB Airfield Solutions, LLC (“ADB”), for the global distribution of aviation illumination products, and Semex
During 2010, organic growth continued to be a focus through new and existing strategic relationships with customers, OEMs and suppliers to penetrate new regions for market share. In the third quarter of 2010, steps were taken to execute the Company’s non-organic growth strategy. On September 21, 2010, an agreement was entered into to purchase all of the outstanding shares of Lightech. The acquisition agreement has been filed by the Company on SEDAR. See “Lightech Electronic Industries Ltd. Agreement” below for additional information regarding the Lightech acquisition and the termination thereof.
On November 10, 2010, the Company completed restructuring activities in order to reduce its operating costs. These activities primarily consisted of staff reductions related to a planned reduction of research and development investment, as a significant amount of development projects within the illumination product roadmap have been completed or are nearing completion. In addition, this restructuring will enable the Company to focus its efforts on critical market segments and vertically align staff towards profit and loss responsibilities separately within lighting and power system divisions.
Other operational highlights (including subsequent events)
Lightech Electronic Industries Ltd. Agreement
On September 21, 2010, the Company announced that an agreement was entered into to purchase all of the outstanding shares of Lightech pursuant to a merger between Lightech and a wholly-owned subsidiary of Carmanah for aggregate consideration of $18.5 million payable to the shareholders of Lightech, consisting of $12.3 million in cash and the issuance of 8,867,276 common shares having a value of $6.2 million. The agreement provided for the payment of up to an additional $1.5 million to the securityholders of Lightech if certain revenue targets were achieved by Lightech in fiscal 2011. The Lightech agreement provided for a termination by either Lightech or Carmanah if the transaction is not completed by December 31, 2010 or the conditions to its respective obligation to complete the transaction are incapable of being satisfied by December 31, 2010. The closing of the transaction is subject to a number of conditions, including the completion by Carmanah of a public offering of its securities in an amount of not less than US$15.0 million.
On October 25, 2010, Carmanah announced that it had received a formal requisition for the calling of a special meeting of shareholders of the Company from a corporation holding approximately 9.5% of Carmanah’s issued and outstanding common shares. The requisition stated that the business to be transacted at the meeting is to consider an ordinary resolution directing the Company not to complete the proposed financing which is necessary to complete the acquisition of Lightech and to remove Carmanah’s board of directors (the “Board of Directors”) if the Board of Directors does not agree to be bound by such ordinary resolution.
Based on advice from Carmanah’s financial advisor, among other factors, the Board of Directors concluded that Carmanah could not complete the public offering necessary to finance the Lightech acquisition by December 31, 2010 because, among other reasons, of the uncertainty over the results of the shareholder meeting to approve the ordinary resolution directing the Company not to proceed with the financing and/or replace the Board of Directors. The Company has concluded that it is incapable of satisfying the financing condition by December 31, 2010 and has provided a notice of termination to Lightech terminating the agreement on that basis.
“The decision to terminate the Lightech agreement was a very difficult one, but after due deliberation, the Board of Directors determined that it was the only decision that could be made in light of the fact that the financing condition is incapable of being fulfilled by December 31, 2010” stated Rob Cruickshank, Chairman of Carmanah. “We are very disappointed with the resolve of this transaction but want to stress that we are well positioned to continue with our immediate organic investment and growth plans. We have $6.0 million in cash on our Balance Sheet and continue to be debt free” added Ted Lattimore, Chief Executive Officer.
Conference call details
To discuss the Q3 2010 results and the termination of the Lightech agreement, Carmanah has scheduled a conference call for 1:00 pm PT (4:00 pm ET) on Monday, November 15, 2010. To access this conference call by telephone, dial 1.866.200.6965 (
For more information, visit www.carmanah.com, or telephone 1.877.722.8877 (toll free in US and
Complete set of Financial Statements and Management Discussion & Analysis
A complete set of the third quarter of 2010 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.
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 carmanah.com.
Carmanah Technologies Corporation
Chief Financial Officer
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Public Relations: David Davies
Forward Looking Statements
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 which 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, 2009, as filed on SEDAR at www.sedar.com. The risk factors identified in Carmanah’s Annual Report 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.