Empire Industries Ltd. reports second quarter financial results

07:00 EDT Monday, August 25, 2008

WINNIPEG, Aug. 25 /CNW/ - Empire Industries Ltd. (TSX-V: EIL) ("Empire" or the "Company"), a provider of steel fabrication and installation services and specialized engineered products, today announced its unaudited consolidated financial results for the second quarter ended June 30, 2008. The unaudited consolidated financial statements and Management's Discussion and Analysis for the second quarter are available on Empire's website at www.empind.com and have been filed on SEDAR.

    <<
    Second Quarter Highlights:
    -   Revenue of $43.7 million, an increase of 37.2%;
    -   Gross profit of $7.1 million, an increase of 33.4%;
    -   Net loss of $0.4 million ($0.00 per share), compared to earnings of
        $0.7 million ($0.01 per share) for the second quarter of 2007.
    -   Contract backlog of $110 million at the end of the second quarter, up
        from $91 million at March 31, 2008.
    >>

"Our backlog continues to grow to record levels and the breadth of our major contract negotiations and bidding activity clearly demonstrates that our acquisition strategy focused on western Canada is working," said Guy Nelson, Chairman and Chief Executive Officer, Empire Industries Ltd. "As expected, our second quarter earnings were negatively impacted by our post acquisition integration program, a series of unusual charges aggregating $1.4 million and less than optimal capacity utilization. We are pleased with the progress of our integration program which is now largely completed and we have been successful in booking new business to fill much of our added capacity."

Financial Results

Revenue increased 37.2% to $43.7 million for the second quarter and 52.1% to $82.1 million for the year-to-date compared to the same periods a year earlier. Revenue increases were driven largely by the acquisitions of Dynamic Structures and KWH Constructors during the second quarter of last year and of Tornado Technologies during the fourth quarter of last year.

Gross profit for the quarter increased to $7.1 million (16.1% of revenue) from $5.3 million (16.6% of revenue) for the second quarter of last year. For the year-to-date, gross profit increased to $13.1 million (15.9% of revenue) from $9.7 million (18.0% of revenue) for the same period last year.

Net loss for the quarter was $0.4 million, or $0.00 per share, compared to earnings of $0.7 million, or $0.01 per share, for the second quarter of 2007. For the year-to-date, net loss was $0.0 million, or $0.00 per share, compared to $1.7 million, or $0.03 per share, for the same period in 2007. The company incurred unusual charges aggregating $1.4 million in the quarter, of which $1.0 million can be considered one-time items. These charges include: warranty costs on a product line that has since been discontinued, costs for the related re-structuring, write-down of a receivable to reflect the final settlement of a long term outstanding claim, and increased provisions for accounts receivable and inventory.

The acquisitions mentioned above resulted in higher amortization and higher interest expense as a result of long term debt assumed, impacting profitability for the second quarter and year-to-date.

Net loss per share for the second quarter is based on a weighted average of 91,196,962 common shares outstanding during the quarter compared to a weighted average of 58,573,210 common shares outstanding for the second quarter of 2007.

Outlook

"With our shop and field construction capacity filling up, we look forward to posting much stronger financial results for the second half of the year," said Mr. Nelson. "Our increased scale has positioned us to compete for much larger projects. We have world-class steel fabrication and installation capabilities and are a leading designer and builder of specialized, engineered products in the niche markets we operate in. Additionally, our focus has now shifted from post acquisition integration to leveraging the growth potential of both segments of our business."