Clarke Inc. Reports 2010 Year End Results

Mar. 30, 2011 (Canada NewsWire Group) --

TSX:  CKI, CKI.DB; CKI.DB.A

HALIFAX, March 30 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI CKI.DB CKI.DB.A) today announced its results for the three months and year ended December 31, 2010. In 2010 Clarke continued to consolidate its holdings and began to realize on those investments that were successfully repositioned in the preceding 2 to 3 years.

Basic earnings per share ("EPS") from continuing operations for the year ended December 31, 2010 was $1.21, compared to $0.23 for the year ended December 31, 2009, an increase of $0.98 per share. Book value per share at December 31, 2010 was $5.37, an increase of $1.30 or 31.9% from a book value per share of $4.07 on December 31, 2009. Book value per share has increased by 96% since December 31, 2008.

Comprehensive income attributable to equity holders of the Company for 2010 was $24.2 million or $1.07 per share compared with $36.1 million or $1.37 per share of comprehensive income earned in 2009.  Net income attributable to equity holders of the Company increased in 2010 to $25.3 million, compared with $15.5 million for 2009. Net income for 2009 was reduced in that year as a result of impairments taken on certain investments early in the year. The market value of the impaired investments recovered later in 2009, which was reflected in comprehensive income but not net income for the period.

Net income and comprehensive income for 2010 were driven by a series of factors and events. The Company's investment portfolio held its value notwithstanding net sales of available for sale investments of $4.5 million, but generated significantly reduced distribution income. The Freight Transportation segment earned increased income on reduced revenues. The Home Heating segment faced margin pressure as the result of the appreciation of the Canadian dollar, but completed a strategic acquisition that allowed it to deliver flat earnings. The Entertainment segment was restructured, resulting in net income being realized during the year. Clarke sold its investment in Sure Gro for a gain during 2010. In 2010, the Company reduced its overall net debt by $20.8 million and reduced its number of shares outstanding by 23%, from 26.2 million to 20.1 million.

RESULTS OF OPERATIONS

Highlights of the consolidated financial statements for the three months and year ended December 31, 2010 compared to the three months and year ended December 31, 2009 are as follows:

QUARTER ENDED DECEMBER 31, 2010

Although fourth quarter revenues and other income were down as a result of reduced freight collections and lower distributions received from public company investments, the Company generated income from continuing operations of $10.5 million in the quarter compared to a loss of $0.9 million in the prior year. This was driven largely by the accounting results of the Company's defined benefit pension plans. Specifically, a decrease in the assumed discount rate led to an increase in the defined benefit asset (as a result of the release of valuation allowance relating to an increased contribution holiday), resulting in a recovery of $6.3 million. The restructuring of the Madacy business in October also produced a favorable income tax recovery in the quarter. Income from continuing operations and net income were both reduced in 2009 by $5.5 million in other-than-temporary impairments taken on our investment in Supremex in the fourth quarter of 2009. Overall the value of our portfolio of publicly traded securities recovered in the fourth quarter of 2010 and 2009, leading to comprehensive income of $15.7 million and $7.9 million respectively.

Discontinued operations in 2010 represent the loss for the year on the Madacy CD and DVD business which was restructured and ultimately divested during the year. The results for 2009 reflect the restated comparatives of that business.

For the three months ended December 31, 2010, Clarke's basic EPS from continuing operations was $0.37 compared to a loss of $0.05 for the same quarter in 2009. This was reflective of the results of operations for each quarter respectively, combined with the reduced number of shares outstanding in 2010 after the SIB and NCIB activity in 2010.

Cash provided by operating activities was $8.5 million for the fourth quarter of 2010, compared to $10.8 million provided during the fourth quarter of 2009. The majority of this cash flow from operations was provided by the freight and home heating businesses, with combined EBITDA for the two segments in the fourth quarters of $4.0 million and $6.6 million respectively.

Clarke generated $0.4 million from investing activities in the fourth quarter of 2010, compared to $1.7 million used in 2009. As liquidity improved throughout 2010, the Company also made strategic investments in securities.  Net security sales in the fourth quarter of 2010 totalled $2.0 million, with purchases of $5.6 million and sales of $7.6 million. By comparison, $0.2 million was received in the fourth quarter of 2009, with purchases of $3.4 million and sales of $3.2 million.

Throughout 2010 we incurred additional capital expenditures in our freight and home heating segments. Our freight companies spent $1.5 million on fixed assets in the fourth quarter of 2010 compared to $1.4 million in 2009. These purchases are expected to result in improved future efficiencies.  We will continue to ensure that all subsidiaries have sufficient capital to meet their operating requirements, both in terms of working capital and fixed assets.

Throughout 2009 and 2010 we continued to reduce debt levels, repaying short term borrowings and  long term debt that is recourse to Clarke Inc, to improve borrowing costs and better insulate Clarke from refinancing and business risk. In the fourth quarter of 2010, we continued to return capital to investors through the repurchase of our own securities, returning $3.1 million to shareholders and debentureholders in the period. In 2009, we had a cash outlay of $8.7 million on the repurchase of our convertible debentures. Net cash used in financing activities for the fourth quarter of 2010 was $5.6 million compared to $12.1 million in 2009.

Discontinued operations returned nominal cash in 2010, as a result of the restructuring and disposition of the CD and DVD business of the Entertainment segment. In 2009, discontinued operations generated cash of $1.3 million as a result of the sale of the remaining assets related to the AIM business in December 2009.

YEAR ENDED DECEMBER 31, 2010

Clarke's Investment segment delivered comprehensive income before income taxes of $15.0 million in 2010, down from $26.7 million in 2009.  This change was driven largely by a $6.0 million reduction in distributions received on available for sale investments, from $10.2 million in 2009 to $4.2 million in 2010, following the announcement of reduced payouts by businesses held in the portfolio.  The market value of Clarke's investment portfolio was unchanged at $106.3 million, despite net sales of available for sale securities during 2010 of $4.5 million.

The Company's Freight Transportation segment experienced continued competitive pressure throughout 2010. While revenue and other income was $11.7 million lower than revenue and other income earned in 2009, the segment continued to manage costs, generating EBITDA before certain intercompany charges of $13.5 million for the year ended December 31, 2010 compared to $12.5 million for the same period in 2009, an increase of $1.0 million.

Clarke's Home Heating segment had 2010 revenues that were up slightly when compared to 2009, notwithstanding the challenges that the business faced as a result of the appreciation of the Canadian dollar. EBITDA for 2010 was $9.0 million, the same as in 2009. The results included the one time gain of $2.3 million recognized in connection with the acquisition of a furnace manufacturing business during the year.

The Company's Entertainment segment was restructured during the year. This restructuring led to net income for Clarke of $9.2 million. As a result of the restructuring, Clarke disposed of its investment in the portion of the business that sells CD's and DVD's, while retaining a 50% interest in the portion of the business that sells music via the internet.

The Other segment consists of real estate used primarily in the freight businesses, together with IT services and human resource functions. The results of the pension plans are also reflected in the Other segment, as well as the interest charged on the two series of convertible debentures. Results in 2009 included a gain on the repurchase of convertible debentures of $5.5 million compared with $0.4 million in 2010.

OUTLOOK

Clarke continues to improve its focus by reducing the number of businesses in which it is invested and increasing the level of time and energy spent on each remaining investment. During 2010 the Company continued to provide direct support to its core businesses, by aiding managers in the freight business with efficiency improvement initiatives, assisting principals in the home heating business with a strategic acquisition and overseeing a meaningful restructuring of the home entertainment business.

In the future, management intends to continue identifying underperforming businesses with meaningful net assets and existing or potential competitive strengths, and investing in these businesses in a way that best protects Clarke's capital.  We will seek to identify, incentivize and retain strong management teams for such businesses that can develop and implement effective business plans.  We will also augment many of the functions performed by these management teams, by drawing upon our training and experience to deliver treasury, tax, real estate, valuations, accounting and IT services, particularly in the context of corporate transactions.

Given the opportunity, we will continue to repurchase the Company's convertible debentures and the Company's Common Shares at times and prices that management feels are beneficial to the Company.  We will also constantly review the Company's portfolio of investments, divesting of mature investments and increasing Clarke's position where there is an opportunity to build long-term value.

Clarke will continue to seek out investment opportunities that, in management's view, will deliver attractive returns in the long-term.  We will, where possible, invest alongside experienced operators and strategic partners in businesses that demonstrate growth or turnaround potential. Clarke will remain very active on its shareholders' behalf, utilizing the Company's investment experience and strategic relationships to build businesses that are expected to deliver long-term shareholder value.

Further information about Clarke, including Clarke's Consolidated Financial Statements and Management's Discussion & Analysis for the year ended December 31, 2010, is available at www.sedar.com and www.clarkeinc.com.

About Clarke

Halifax-based Clarke Inc. invests in undervalued businesses and participates actively where necessary to enhance performance and increase return.  Clarke's securities trade on the Toronto Stock Exchange (CKI, CKI.DB; CKI.DB.A); for more information about Clarke Inc., please visit our website at www.clarkeinc.com.

Note on Forward-Looking Statements and Risks

This press release may contain or refer to certain forward-looking statements relating, but not limited to, the Company's expectations, intentions, plans and beliefs with respect to the Company. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results, "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements include, without limitation, those with respect to the future price of  securities held by the Company, changes in these securities holdings, changes to the Company's hedging practices, currency fluctuations, requirements for additional capital, changes to government regulations and the timing and possible outcome of pending litigation. Forward-looking statements rely on certain underlying assumptions, that if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

With respect to the Company's Investment segment, such risks and uncertainties include, without limitation, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments, reliance on certain key executives, interest rates and foreign currency fluctuations and other factors. With respect to the Company's Freight Transportation segment, such risks and uncertainties include, without limitation, competition, fuel costs, expiry of certain leases, labour relations, the use of third party service providers, dependence on certain personnel, fuel costs, weather conditions, customer relationships, claims, litigation and insurance, government regulation of the transport industry and other factors.  With respect to the Company's Home Heating segment, such risks and uncertainties include, without limitation, the costs of housing and major consumer products, energy costs, alternative energy sources, foreign exchange risk, and other factors.  Other general risks and uncertainties include, without limitation, environmental considerations, use of information technology and information systems, safety issues, concentration of sales among a small number of customers, the seasonality of business cycles for certain segments, commodity market risk, risks associated with investment in derivative instruments and other factors.

Although the Company has attempted to identify important factors that could cause actual actions, events or results or cause actions, events or results not to be estimated or intended, there can be no assurance that forward- looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian securities laws, the Company does not update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements.

Ian Wilkie
Chief Financial Officer
Clarke Inc.
Telephone: (902) 442-3990