BOUCHERVILLE, QC, April 13 /CNW Telbec/ - Spectra Premium Industries Inc.
(TSX: SPD.sv), a North American leader in the manufacture of automobile, light-
truck and heavy-duty truck aftermarket parts and manufacturer of high-pressure
die cast magnesium alloy parts and steel fuel tanks in the Original Equipment
Manufacturer ("OEM") market, confirms that its strategic reorganization is
completed and announces today its results for fiscal 2004-2005 ended January
31st, 2005.
This Corporate reorganization undertaken more than two years ago,
following a dozen acquisitions made by the Corporation in the aftermarket
segment from 1998 to 2001, which resulted in rationalization and integration
costs of more than $18 million during the last three fiscal years, has been
completed with the transfer of radiator manufacturing activities from the
Stratford plant to that of Laval during the past months.
Fiscal 2004-2005 was thus the last fiscal year in which we recognized
rationalization and integration costs related to these acquisitions.
This vast process, which was necessary to improve the Corporation's
position in a very competitive environment in the aftermarket segment, will
have led to the closure of five plants, the discontinuation of two product
lines, the closure of two main distribution centers and about ten U.S.
regional warehouses during the last three years.
"Today, our rationalization and integration program is completed,
operational labor and productivity problems at our new Boucherville hub are
resolved and the aluminum radiator manufacturing plant in Laval will operate
at full capacity as of the second quarter of fiscal 2005-2006, as radiator
inventory levels will have returned to normal levels. All of this, coupled
with the acquisition of Trimag in the middle of last year, which will
substantially increase our sales volume in the OEM segment, in addition to
diversifying our business risks, enables us to look at the next fiscal year
with optimism and we forecast a return to profitability as of the second
quarter of the current fiscal year," commented Mr. Jacques Mombleau, President
and Chief Executive Officer of Spectra Premium.
<<
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Financial Highlights
(in thousands of dollars except for per-share
data)
Quarters ended Fiscal years ended
January 31, January 31,
2005 2004 2005 2004
(unaudited) (audited)
Sales 66,249 47,647 253,944 229,860
Operating (loss) income before
rationalization and
integration costs (2,348) (272) 7,162 12,740
Rationalization and
integration costs 2,355 2,614 6,124 5,112
Operating (loss)
income (4,703) (2,886) 1,038 7,628
Loss (gain) on the change
in the fair value of
derivative financial
instruments 83 - (1,374) -
Net (loss) income (4,147) (2,641) (1,369) 2,252
Basic and diluted
earnings per share (0.13) (0.09) (0.05) 0.06
Weighted average number of
participating shares
outstanding diluted ('000) 31,579 31,610 31,598 31,583
-------------------------------------------------------------------------
>>
Consolidated Results for Fiscal 2004-2005
-----------------------------------------
During the fiscal year, consolidated sales reached $253.9 million, up
10.5%, compared to $229.9 million for the previous fiscal year. This sales
growth was mainly generated from the OEM segment, and most particularly from
the acquisition of Trimag concluded on August 2, 2004.
Consolidated operating income stood at $1,038,000, compared to $7,628,000
a year earlier. The application of new accounting policies concerning the
recognition of forward exchange contract transactions had a negative impact on
operating income of close to $800,000, compared to a year earlier.
Rationalization and integration costs of $6,124,000 were incurred for the
fiscal year, compared to $5,112,000 the previous year. These costs mainly
result from the termination of aluminum radiator manufacturing activities at
the Stratford plant in Ontario on November 19, 2004, and the write-off of
$1.5 million in air-conditioning part inventories related to business
acquisitions made in previous years in the aftermarket.
Fiscal 2004-2005 ends with a net loss of $1,369,000, or a loss of $0.05
per share, compared to a net income of $2,252,000, or $0.06 per share a year
earlier.
Consolidated Results for the Fourth Quarter of Fiscal 2004-2005
---------------------------------------------------------------
During the fourth quarter, consolidated sales reached $66.2 million, up
39.0%, compared to $47.6 million for the previous fiscal year. If we exclude
the impact of the exchange rate variations, consolidated sales would have
increased by 44.9%. This sales growth results from a sharp rise in sales in
the OEM segment, following the acquisition of Trimag, and an 8.5% sales growth
in the aftermarket segment, if we exclude the impact of the exchange rate
variations.
The operating loss amounted to $4,703,000, compared to a loss of
$2,886,000 for the same period a year earlier. Rationalization and integration
costs of $2,355,000 were incurred in the fourth quarter, compared to
$2,614,000 for the same period a year earlier.
Our operating results were strongly affected by the transition between
Stratford and Laval plants and by a drop in production volume of aluminum
radiators and components to reduce inventory levels. The application of new
accounting policies concerning the recognition of forward exchange contract
transactions had a negative impact on our operating results of close to
$600,000, compared to a year earlier.
For the fourth quarter, the net loss amounted to $4,147,000, or $0.13 per
share, compared to a loss of $2,641,000 a year earlier, or $0.09 per share.
SEGMENTED RESULTS
-----------------
Following the acquisition of Trimag, the Corporation has modified the
presentation of its segmented results. The manufacturing and distribution
segments were grouped together to form the new aftermarket segment and the
original equipment manufacturer ("OEM") segment was newly created. This new
presentation meets the objectives of Chapter 1701 of the CICA Handbook
concerning segment disclosures, following the recent organizational changes
within the Corporation.
Aftermarket Segment
-------------------
This segment generated $216.5 million in sales for fiscal 2004-2005, a
1.7% decline, compared to $220.2 million for the previous fiscal year. If we
exclude the impact of the exchange rate variations, sales increased by 1.1%.
This division registered an operating loss of $635,000 during fiscal 2004-
2005, compared to an operating income of $7,376,000 a year earlier.
Rationalization and integration costs of $6.1 million were incurred for the
fiscal year in this division, of which $1.5 million was due to inventory write
offs and the balance was mainly related to the closure of the Stratford plant.
Rationalization and integration costs amounted to $5.1 million a year earlier.
The following elements negatively affected the results of this division
during the fiscal year:
- Higher radiator production costs in this transition period between
the Stratford and Laval plants;
- Temporarily higher operating costs in the new Boucherville hub;
- Drop in radiator selling prices;
- Higher delivery costs, following a sharp rise in gas prices;
- Higher raw material costs; and
- Application of new accounting policies concerning the recognition of
forward exchange contract transactions, which had a negative impact on
operating results of close to $800,000, compared to the previous year.
During the fourth quarter, this division generated $47.7 million in
sales, up 4.1%, compared to $45.8 million a year earlier. If we exclude the
impact of the exchange rate variations, sales in this division would have
increased by 8.5%, compared to the same period a year earlier. This sales
growth would have represented 5%, if we exclude sales generated from the newly
acquired locations during the fiscal year.
The operating loss amounted to $5,326,000 in this division, compared to a
loss of $2,561,000 a year earlier. Rationalization and integration costs of
$2,355,000 were incurred in the fourth quarter in this division, compared to
$2,614,000 the previous year. The fourth quarter results in this division were
strongly affected by the inadequate absorption of manufacturing overhead costs
in the radiator manufacturing plants, following a drop in production aimed at
reducing radiator inventory levels, higher direct labor costs in this
transition period between the Stratford and Laval plants, and the application
of new accounting policies concerning the recognition of forward exchange
contract transactions.
Original Equipment Manufacturer ("OEM") Segment
-----------------------------------------------
This segment generated $37.4 million in sales for fiscal 2004-2005,
compared to $9.7 million the preceding year. This sales growth is mainly
attributable to magnesium part sales, which amounted to $26.6 million,
following the acquisition of Trimag in August 2004. Steel fuel tank and
radiator sales reached $10.8 million in the OEM segment, up 12.4%, compared to
a year earlier.
Operating income stood at $1,673,000 for fiscal 2004-2005 in this
division, compared to $252,000 for the previous year. The acquisition of
Trimag contributed significantly to this increase in operating income.
During the fourth quarter, this division generated $18.6 million in
sales, compared to $1.9 million a year earlier. Operating income amounted to
$623,000 in this division, compared to an operating loss of $325,000 a year
earlier.
OUTLOOK
-------
Aftermarket Segment
-------------------
The transition between the radiator manufacturing plants of Stratford and
Laval will be practically completed by the end of the first quarter of fiscal
2005-2006, as radiator inventory levels will have returned to desired levels.
Thus, the Laval plant will begin operating at full capacity as of the second
quarter of fiscal 2005-2006 and the Corporation will then benefit from more
than $2.0 million in annual savings, as a result of the Stratford plant
closure. The Stratford building is always available for sale and the
Corporation will generate close to an additional $1.0 million in annual
savings, following the sale of this building.
During the next fiscal year, the Corporation will pursue its intensive
aluminum radiator development program in the aftermarket, as this represents a
key element for growth within the Corporation in the aftermarket segment.
Management of the Corporation considers that savings generated from the
rationalization and integration program, coupled with the impact of the
intensive cost reduction program deployed during the previous two fiscal years
on finished product and component purchases, will enable the Corporation to
improve its results in the aftermarket, despite market conditions that will
remain difficult and a decrease in comparative operating income of more than
$4.0 million, as a result of a stronger Canadian dollar compared to previous
years.
Original Equipment Manufacturer ("OEM") Segment
-----------------------------------------------
To date, the acquisition of Trimag meets management expectations and the
integration of administrative functions and information technology systems is
completed. During the next fiscal year, the engineering and manufacturing
synergies between Trimag and the traditional operations of Spectra will be
enhanced.
Trimag is part of a restricted group of North American manufacturers of
high-pressure die cast magnesium alloy parts. The demand for magnesium parts
in the automotive industry is expected to increase by about 10% annually in
upcoming years, since automobile manufacturers are progressively confronted
with the need to reduce the weight of vehicles. Management of the Corporation
is thus confident that Trimag will increase its annual sales volume in
upcoming years, which currently stands at about $45.0 million.
As for steel fuel tanks, discussions continue to make good progress with
certain automobile manufacturers and this should soon result in the award of
additional contracts.
Sales in the OEM segment could be temporarily affected short-term by a
slowdown in production in certain General Motors plants, which at present are
faced with a surplus of inventories.
EARNINGS MEASURES NOT DEFINED BY GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
--------------------------------------------------------------
This press release is based on the reported earnings in accordance with
Canadian generally accepted accounting principles (GAAP). Financial highlights
refer to operating (loss) income before rationalization and integration costs,
a measure that is not defined based on GAAP. Management of the Corporation
considers that these non-recurring costs do not arise as part of the normal
day-to-day business operations and are excluded to evaluate profitability of
each segment of activity on an individual and consolidated basis. These
earnings measures do not have a standardized meaning prescribed by GAAP and
are therefore not readily comparable to other Corporations.
PROFILE
-------
Spectra Premium is the world leader in the manufacture of fuel tanks and
related components for the automobile and light-truck aftermarkets. The
Corporation ranks first in Canada and is a North American leader in the
aftermarket for automotive and industrial radiators, radiator components and
new and reconditioned oil pans. It also maintains a presence in such markets
as sending units, fuel pumps, body panels, condensers, compressors, complete
heater cores and other air-conditioning parts. Over the past years, the
Corporation expanded its activities in the OEM market by concluding automotive
agreements to supply steel fuel tanks and aluminum radiators and in addition,
to supply radiators for industrial applications and heavy equipment. The
Corporation has increased its presence in the OEM segment, following the
recent acquisition of Trimag, one the most important North American
manufacturers of high-pressure die cast magnesium alloy parts. It currently
employs approximately 1,600 people in its nine (9) plants and 58 distribution
centers, which are located throughout Canada, the United States and Europe.
Its shares are traded on the Toronto Stock Exchange (ticker symbol: SPD.sv).
A conference call, covering the results of the fourth quarter and of
fiscal 2004-2005, will be webcasted on http://www.spectrapremium.com and
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)1049400 at
10:30 a.m. on April 13, 2005 and will be available thereafter on these
websites.
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PROSPECTIVE FINANCIAL INFORMATION
This press release contains implicit or explicit forecasts, as well as
forward-looking statements on the objectives, strategies, financial
position, operating results and activities of Spectra Premium. These
statements are forward-looking to the extent that they are based on
expectations relative to markets in which the Corporation exercises its
activities and on various assessments and assumptions. These expectations
seemed reasonable to us at the time when this press release was diffused.
Our actual results could however differ significantly from management's
expectations if recognized or unrecognized risks affect our results or if
our assessments or assumptions are inaccurate. That is why we cannot
guarantee the realization of these forward-looking statements. You will
find in the annual report on page 26 a non exhaustive presentation of
risks which could result in an important variance between our actual
results and our actual expectations, which can be consulted on the
following websites: http://www.sedar.com and
http://www.spectrapremium.com / .
-------------------------------------------------------------------------
<<
SPECTRA PREMIUM INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
-------------------------------------------------------------------------
January 31, January 31,
2005 2004
ASSETS (audited) (audited)
Current assets
Cash $ 5,562 $ 4,329
Accounts receivable 43,167 34,083
Income taxes receivable 2,960 3,507
Inventories(note 4) 69,547 74,921
Prepaid expenses and other assets 5,737 3,524
Derivative financial instruments(note 2a)) 1,886 -
Future income taxes 4,484 5,886
---------- ----------
133,343 126,250
Property, plant and equipment 135,001 119,342
Property, plant and equipment held for sale 235 4,638
Goodwill 18,557 19,043
Future income taxes 16,776 12,475
Other assets 4,838 2,685
---------- ----------
$ 308,750 $ 284,433
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 3,724 $ 8,806
Accounts payable and accrued liabilities 37,408 21,302
Deferred gain relating to derivative
financial instruments(note 2a)) 1,256 -
Deferred revenue 606 -
Current portion of long-term debt 11,958 753
Current portion of debt
component of the convertible debenture 325 267
---------- ----------
55,277 31,128
Long-term debt 49,776 47,176
Debt component of the convertible debenture 1,032 1,357
Liability related to the minority
interest in a subsidiary 633 -
Future income taxes 11,328 10,014
Shareholders' Equity
Share capital(note 5) 188,777 188,777
Equity component of the convertible debenture 6,498 6,094
Contributed surplus 1,745 1,521
Retained earnings 4,001 5,645
Cumulative translation adjustment (10,317) (7,279)
---------- ----------
190,704 194,758
---------- ----------
$ 308,750 $ 284,433
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements.
SPECTRA PREMIUM INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except earnings per share data)
-------------------------------------------------------------------------
For the three-month periods For the years
ended January 31, ended January 31,
---------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(unaudited) (audited)
Sales $ 66,249 $ 47,647 $ 253,944 $ 229,860
Cost of goods sold 48,833 30,860 168,337 144,894
---------- ---------- ---------- ----------
17,416 16,787 85,607 84,966
Selling, distribution
and administrative expenses 16,162 13,727 65,347 60,034
Amortization(note 6) 3,602 3,332 13,098 12,192
Rationalization and
integration costs(note 7) 2,355 2,614 6,124 5,112
---------- ---------- ---------- ----------
Operating (loss) income (4,703) (2,886) 1,038 7,628
Net financial charges(note 8) 1,238 824 3,946 3,698
Loss (gain) on change in the
fair value of derivative
financial instruments(note 2a)) 83 - (1,374) -
---------- ---------- ---------- ----------
(Loss) income before
income taxes (6,024) (3,710) (1,534) 3,930
Income taxes
Current 94 97 375 378
Future (1,971) (1,166) (540) 1,300
---------- ---------- ---------- ----------
(1,877) (1,069) (165) 1,678
---------- ---------- ---------- ----------
Net (loss) income $ (4,147) $ (2,641) $ (1,369) $ 2,252
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share
(note 12)
Basic and diluted $ (0.13) $ (0.09) $ (0.05) $ 0.06
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
outstanding participating
shares (in thousands) :
Basic 31,577 31,577 31,577 31,577
Diluted 31,579 31,610 31,598 31,583
See accompanying notes to consolidated financial statements.
SPECTRA PREMIUM INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands of dollars)
-------------------------------------------------------------------------
For the three-month periods For the years
ended January 31, ended January 31,
--------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(unaudited) (audited)
Balance at
beginning of period $ 8,219 $ 8,365 $ 5,645 $ 3,600
Net (loss) income (4,147) (2,641) (1,369) 2,252
Allocation to equity component
of the convertible debenture,
net of income taxes of
$33 (three months),
$129 (twelve months) (71) (79) (275) (207)
---------- ---------- ---------- ----------
Balance at
end of period $ 4,001 $ 5,645 $ 4,001 $ 5,645
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements.
SPECTRA PREMIUM INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
-------------------------------------------------------------------------
For the three-month periods For the years
ended January 31, ended January 31,
---------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
(unaudited) (audited)
Cash flows from
operating activities:
Net (loss) income $ (4,147) $ (2,641) $ (1,369) $ 2,252
Adjustments for :
Amortization(note 6) 3,602 3,332 13,098 12,192
Amortization of
deferred financing costs 73 48 253 182
Loss on disposal of property,
plant and equipment 9 21 14 75
Write-down of assets - 1,885 1,338 1,885
Future income taxes (1,971) (1,166) (540) 1,300
Change in the fair value
of derivative
financial instruments 622 - (631) -
Rationalization and
integration costs 63 62 760 368
Others 20 (103) 127 (648)
-------------------------------------------------------------------------
(1,729) 1,438 13,050 17,606
Net change in
operating assets
and liabilities(note 9) 5,511 817 9,615 (2,162)
-------------------------------------------------------------------------
Cash flow generated
by operating activities 3,782 2,255 22,665 15,444
Cash flows from
financing activities:
Issuance of long-term debt - 99 1,000 317
Issuance of convertible
debenture - - - 7,500
Deferred financing costs (15) (14) (21) (121)
Repayment of long-term debt (6,864) (510) (1,193) (6,899)
(Repayment) issuance of
bank indebtedness (3,302) (181) (9,622) 4,970
Repayment of the debt
component of the
convertible debenture - - (261) (123)
-------------------------------------------------------------------------
Cash flow (used for) generated
by financing activities (10,181) (606) (10,097) 5,644
Cash flows from
investing activities:
Business acquisition net
of cash acquired(note 3) - - (1,611) -
Additions to property,
plant and equipment (2,147) (2,066) (11,596) (17,720)
Deferred preproduction costs (71) 109 (226) (1,277)
Proceeds from disposal of
property, plant and equipment 38 88 1,954 197
-------------------------------------------------------------------------
Cash flow used for
investing activities (2,180) (1,869) (11,479) (18,800)
Impact of exchange
rate fluctuations 353 2,087 144 198
-------------------------------------------------------------------------
Net change in cash (8,226) 1,867 1,233 2,486
Cash, beginning of period 13,788 2,462 4,329 1,843
-------------------------------------------------------------------------
Cash, end of period $ 5,562 $ 4,329 $ 5,562 $ 4,329
----------------------------------------------
----------------------------------------------
See accompanying notes to consolidated financial statements.
>>
SPECTRA PREMIUM INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three-month period and the year ended January 31, 2005
(Tabular amounts are expressed in thousands of dollars, except for per
share and per option data)
1. Basis of presentation
The consolidated balance sheet as at January 31, 2005 and 2004 and the
related consolidated statements of earnings, retained earnings and cash flows
ended at these dates, have been prepared in accordance with Canadian
generally accepted accounting principles and by using accounting principles
and practices consistent with those used and described in the annual financial
statements, but do not include all disclosures required by Canadian generally
accepted accounting principles. Accordingly, they should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto as at and for the year ended January 31, 2005, included in the
Company's annual report to shareholders.
2. New accounting standard
a) Hedging relationship :
In June 2003, the CICA issued amendments to Accounting Guideline 13 ("AcG-
13"), Hedging Relationship. The amendments clarify certain of the requirements
and provide additional implementation guidance related to the identification,
designation and documentation of the hedging relationship, and an assessment
of the effectiveness of the hedging relationship. The requirements of the
guideline are applicable to all hedging relationships in effect for financial
periods beginning on or after July 1, 2003. Retroactive application is not
permitted. All hedging relationships must be assessed as of the beginning of
the first year of application to determine whether the hedging criteria in the
guideline are met. Hedge accounting is to be discontinued for any hedging
relationship that does not meet the requirements of the guideline.
The Corporation has chosen not to apply the accounting for hedging
relationship and consequently, does not have to comply with the accounting
guideline requirements. Following that decision, the Corporation has to
evaluate the fair value of its derivative financial instruments based on
market value. As per the transition rules, the Corporation recorded, as at
February 1st 2004, the fair value of its derivative financial instruments for
an amount of $5.7 million.
Based on the fair value variation of its derivative financial instruments
in the year, the Corporation has recorded a $1.4 milllion gain which is
disclosed under Loss (gain) on change in the fair value of derivative
financial instruments in the consolidated statements of income. As part of
that amount, $0.8 million was realized on derivative financial instruments
that matured in the year. As at January 31, 2005, the fair value of the
remaining derivative financial instruments, recorded as assets, was
$1.9 million.
Furthermore, since a portion of the derivative financial instruments held
on February 1, 2004, matured during the year, the Corporation realized a
portion of the deferred gain in the amount of $4.4 million, which was
allocated to sales. As at January 31, 2005, the deferred gain disclosed as a
liability amounts to $1.3 million.
The derivative financial instruments are relating only to forward
exchange contracts.
b) Contracts :
The Corporation has recorded the contracts' fair value acquired through
the acquisition of Trimag, S.E.C. ("Trimag") (note.3). These contracts are
amortized using the straight line method, based on their useful life. These
contracts are disclosed under Other assets in the balance sheet.
3. Business acquisition
On August 2, 2004, the Corporation acquired for $1 the 28,952 outstanding
units of Trimag, a limited partnership involved in the manufacturing of high-
pressure die cast magnesium alloy parts in the automotive industry. At the
same time, the Corporation invested $4,999,999 (used to reimburse Trimag bank
indebtedness) in exchange for 104,721,220 new units. Investissement QuDebec
acquired 11,638,908 new units in settlement of an amount of $11,638,908 then
payable by Trimag. After these transactions, the Corporation owns 90% of the
outstanding units of Trimag and Investissement QuDebec owns the remaining 10%.
As permitted after the fifth anniversary of the Partnership Agreement,
Investissement QuDebec may force the Corporation to buy back its units, at its
fair market value. Consequently, the participation of Investissement QuDebec
will be accounted for, in the consolidated financial statements of the
Corporation, at its estimated fair value and will be presented as a Liability
related to the minority interest in a subsidiary. Any subsequent fluctuation
in the estimated fair value of the units will be recorded as a financial
expense.
The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition. The purchase
price allocation is based upon management's best estimate of the fair values
of the identifiable assets acquired and liabilities assumed. The excess of the
initial fair value of acquired net assets was allocated to the Property, plant
and equipment and to the contracts, on a pro-rata basis, including the future
tax impact.
<<
Cash $ 4,846
Other current assets 13,142
Property, plant and equipment 16,488
Contracts 2,022
Future income taxes 1,881
Other assets 171
----------
Total assets acquired 38,550
----------
Bank indebtedness 4,259
Other current liabilities 16,047
Long-term debt 12,191
Liability related to the minority
interest in a subsidiary 633
----------
Total liabilities undertaken 33,130
----------
Net assets acquired $ 5 420
----------
----------
Consideration:
Cash $ 5,000
Costs related to the business acquisition 420
----------
$ 5,420
----------
----------
The long-term debt related to the acquisition includes amounts of
$10.5 million and $3.5 million, each bearing a 7.5 % interest rate and
maturing in July 2009.
Trimag's results have been included in the Corporation's consolidated
financial statements as of August 2, 2004.
During the first quarter, the Corporation acquired, in its aftermarket
division, some assets from Precision Certipro Warehouse Inc., a US distributor
of automotive parts for a cash consideration of $1 million.
4. Inventories
January 31, January 31,
2005 2004
(audited) (audited)
---------- ----------
Raw materials and supplies $ 15,567 $ 16,416
Work in process and finished goods 53,980 58,505
---------- ----------
$ 69,547 $ 74,921
---------- ----------
---------- ----------
5. Share capital
Authorized :
An unlimited number of subordinate voting shares, participating, no par
value, carrying one vote per share;
An unlimited number of multiple voting shares, participating, no par
value, carrying seven votes per share, convertible at any time into
subordinate voting shares on a one-to-one basis; and
An unlimited number of preferred shares, no par value, issuable in one or
several series.
January 31, January 31,
2005 2004
---------- ----------
(audited) (audited)
Issued and outstanding :
15,136,510 subordinate
voting shares $ 184,644 $ 184,644
16,440,116 multiple voting shares 4,133 4,133
---------- ----------
$ 188,777 $ 188,777
---------- ----------
---------- ----------
Stock option plan :
The Corporation maintains a stock option plan for its officers, directors
and employees. Under this plan, 2,277,450 subordinate voting shares are set
aside for their issuance.
The changes in the number of outstanding stock options over the period of
twelve months ended January 31, 2005 are as follows :
Options Weighted
average
exercise
price
---------- ----------
Number of options
as of January 31, 2004 1,506,000 $ 4.19
Granted 289,500 2.82
Cancelled (137,500) 3.70
----------
Number of options as of January 31, 2005
1,658,000 $ 4.00
----------
----------
The following table summarizes the information about outstanding stock
options as of January 31, 2005 :
Outstanding options Exercisable options
-------------------------------- ------------------------
Weighted Weighted
average Weighted average
Range of remaining average exercise
exercise contractual exercise price
price Number life price Number (in
(in dollars) outstanding (in years)(in dollars) exercisable dollars)
----------- ----------- ----------- ---------- ----------- --------
From $1.79
to $2.40 87,500 8.57 $ 1.84 13,875 $ 1.84
From $2.70
to $4.00 1,363,500 5.45 3.61 932,275 3.89
From $4.40
to $4.80 156,000 7.45 4.52 68,700 4.48
From $14.50
to $18.00 51,000 3.63 16.29 51,000 16.29
---------- ---------
1,658,000 5.75 $ 4.00 1,065,850 $ 4.49
---------- ---------
---------- ---------
The estimated fair value of each stock option award has been calculated
at the award date, based on the Black-Scholes pricing model, using the
following weighted average assumptions:
Risk-free interest rate 3.41 %
Dividend yield 0 %
Volatility of stock market valuation 72.38 %
Estimated useful life 5 years
The weighted average fair value at the grant date of the options granted
in the twelve-month period is $1.74.
6. Amortization
For the three-month periods For the years
ended January 31, ended January 31,
------------------- ------------------
2005 2004 2005 2004
------------------- ------------------
(unaudited) (audited)
Amortization of property,
plant, equipment $ 3,418 $ 3,222 $ 12,501 $ 11,912
Amortization of deferred
preproduction costs 95 89 376 196
Amortization of contracts 68 - 137 -
Amortization of deferred
development costs 21 21 84 84
----- ----- ------ ------
$ 3,602 $ 3,332 $ 13,098 $ 12,192
----- ----- ------ ------
----- ----- ------ ------
>>
7. Rationalization and integration costs
2005
-----
During the fiscal year, the Corporation recorded rationalization and
integration costs of $6.1 million. These costs are related to the
discontinuation of certain manufacturing operations and to the continuation of
the Corporation's business acquisition integration plan for the aftermarket
segment.
Reorganization of the Stratford plant:
On September 21, 2004, the Corporation announced that its aluminum
radiator manufacturing operations at its Stratford (Ontario) plant,
aftermarket segment, would cease on November 19, 2004. Following this
decision, the Corporation incurred expenses of $2.1 million, which consisted
of $1.3 million for the write-down of the building, based on an external
evaluation, as well as $0.8 million for termination of employment benefits. To
date, $0.2 million of termination benefits remain unpaid and the Corporation
expects to pay these amounts at the beginning of fiscal year 2006. Until such
time as the Stratford building is disposed of, it will continue to be used as
a warehouse.
Previous reorganizations:
During the fiscal year, the Corporation has also pursued its
rationalization and integration measures and registered charges of
$2.5 million. Those charges relate to the discontinuation of operations in
certain plants and warehouses of the aftermarket segment, for which the
Corporation continues to incur fixed charges for buildings as well as the
payment for severance packages under its rationalization program. Furthermore,
the Corporation proceeded with the write down of inventory overage in the
aftermarket segment for an amount of $1.5 million.
The Corporation has also disposed of two facilities located in Debert,
Nova Scotia, which were recorded as property, plant and equipment held for
sale. These transactions generated gains on disposal for a total of $111,000
which reduced the rationalization and integration costs. Following the review
of its strategic business plan in the aftermarket segment, the Corporation
reintegrate, at its fair value of $2.6 million, a building located in the
United States.
Taking these transactions into account, the property, plant and equipment
held for sale amount to $0.2 million, (2004 - $4.6 million) and consist of
material and tooling.
The Stratford plant closure constitutes the last important step of our
rationalization and integration plan undertaken a few years ago in the
aftermarket segment and thus brings to a close the accounting of
rationalization and integration costs concerning this plan.
2004
-----
During the fiscal year ended January 31, 2004, the Corporation recorded
rationalization and integration costs of $5.1 million. These costs are mainly
related to the termination of certain manufacturing operations, namely the
brass and copper radiator manufacturing operations at the Stratford (Ontario)
plant. Such termination of operations also had an impact on the brass and
copper radiator component manufacturing operations at the Debert (Nova Scotia)
plant, which led to the termination of approximately 40 employees during the
period. Furthermore the Corporation ceased its reconditioned compressor
manufacturing operations at the Laval (Quebec) plant, which led to the
termination of approximately 15 employees. The other costs are related to the
continuation of the business acquisition integration plan of the Corporation.
During fiscal year 2004, a devaluation charge of $1.9 million was
accounted for with regard to buildings identified as being surplus buildings,
firstly, $1.4 million for a building located in the United States and $0.5
million for a new building. The Corporation also reinstated, at their
recoverable value, two buildings that were identified for sale last year.
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