For Immediate Release:
WEDNESDAY, November 8, 2006
(No. 2006-11-19)
CARMANAH ANNOUNCES FINANCIAL RESULTS FOR Q3 2006
Victoria, British Columbia, Canada - WEDNESDAY, November 8, 2006 -
Carmanah Technologies Corporation (TSX: CMH) is pleased to announce
its third quarter results for the three and nine months ended
September 30, 2006 and 2005.
Highlights for the quarter:
- Record Q3 2006 revenues of $17,510,103, representing a 44% increase
over Q3 2005 revenues of $12,195,908 and 11% over Q2 2006 revenues
of $15,844,155.
- Record 2006 year-to-date revenues at $46,048,027, representing a
95% increase over the same nine-month period in 2005.
- Record Q3 2006 orders booked of $17,191,817.
- Sales order backlog of $6,363,008 carrying over into Q4 2006.
- Gross margin at 34.7% for Q3 2006 and 34.3% for the nine months
ended Sept 30, 2006.
- Record Q3 2006 EBITA in the amount of $1,061,884 representing an
increase of 37% over Q2 2006 at $773,025 and 62% over Q3 2005 at
$657,200.
- Record 2006 year-to-date EBITA of $1,963,157 representing a 39%
increase over the same period last year.
- Q3 2006 net earnings in the amount of $336,505, compared to Q2 2006
net earnings of $123,543 and net earnings of $222,470 in Q3 2005.
Download financial results:
www.carmanah.com/documents/news_releases/061108_CarmanahRelease.pdf
SUMMARY OF RESULTS
Overall, Q3 2006 continued to trend according to management's
expectations. During the quarter, Carmanah achieved record revenues
of $17,510,103, which represents growth of 44% over Q3 2005 at
$12,195,908 and 11% over Q2 2006 at $15,844,155. The Company also
booked a record $17,191,817 in sales orders and held a significant
sales order backlog of $6,363,008 going into Q4 2006. In addition,
gross margins improved from 33.8% in Q2 2006 to 34.7% in Q3 2006 and
operating expenses declined as a percentage of sales from 31% in Q2
2006 to 30.2% in Q3 2006.
"While revenues continued to grow, Carmanah's management has also
been investing significant time developing operational
infrastructure," stated Carmanah's CEO, Art Aylesworth. "These
changes will enable the Company to scale with the objectives of its
five-year business plan."
Q3 2006 saw some significant sales achievements. The highlight was
the receipt and substantial delivery of a $2.6M order for 16 complete
A704-5 wirelessly-controlled, solar-powered LED airfield lighting
systems for a large general aviation lighting project. Management
anticipates that the trend towards larger orders will continue as the
uptake from mainstream buyers increases across all vertical markets
and the receptive audience for our technology becomes more widespread.
Management is also seeing growth opportunities for the sales of our
solar power systems across a wide range of industrial sectors. With
new enabling programs coming on-stream in various jurisdictions and
the increasing applications for "off-grid" solar powered solutions,
Carmanah's Solar Power Systems Group is well positioned with its
diverse technologies and multiple regional locations. In Q3 2006,
Carmanah reinforced its position as a leading solar power systems
integrator with the unveiling of Canada's largest solar power systems
installation at Exhibition Place in Toronto, Ontario. The Company
was also contracted in Q3 2006 to supply Canada's largest
building-integrated solar power system in British Columbia.
In Q3 2006, the performance of Carmanah's LED Sign Group fell short
of expectations. In response, management has initiated new
directives targeting faster and more innovative product development
and cost competitiveness as this sector sees increased opportunity
and competition. Once implemented, management is confident that the
division will be better positioned to capitalize on the growing
market for solid state illuminated signage.
Beyond the details of this quarterly report, management is very
pleased with the amount of opportunity presenting itself across all
of Carmanah's business groups. The demand for solar-based and
energy-efficient technologies is growing at an unprecedented rate.
"All of the primary drivers, from environmental objectives, energy
concerns, popular support, improved technology efficiencies and a
reduction in capital costs, continue to bode well for the future of
the Company," states Aylesworth. "These macro trends are the basis
upon which the Company's business plan and objectives are built."
OVERVIEW OF OPERATIONS
The growth in Carmanah's operations, both organically and through
acquisition, has resulted in business activities which include the
design, manufacture and/or distribution of three technology groups:
solar powered LED lighting, solar power systems and LED-illuminated
signage.
Carmanah's Solar LED Lighting Group provides a variety of
energy-efficient LED lighting products for marine, aviation, transit,
roadway and industrial worksite applications. The Company's Solar
Power Systems Group offers a wide range of renewable energy system
solutions for industrial, residential and recreational power
applications. The Company's LED Sign Group designs and manufactures
energy-efficient LED edge-lit signs for corporate identity,
point-of-purchase and architectural applications.
Carmanah's headquarters and primary manufacturing and distribution
facilities are located in Victoria, British Columbia, Canada. The
Company also operates additional manufacturing and distribution
facilities in Calgary, Alberta, Canada, as well as regional
distribution and sub-assembly facilities in Barrie, ON; Santa Cruz,
CA; and London, England.
Carmanah currently has more than 250,000 installations in 110
countries. Carmanah's customer list includes a wide range of
government, commercial and private users worldwide, who are serviced
directly by the Company or one of its regional authorized
distributors and/or sales agents.
RESULTS OF OPERATIONS
Sales
Carmanah's total revenues for the three months ended September 30,
2006 were $17,510,103, representing a 44% increase over the same
period in 2005 at $12,195,908. Revenues for the nine months ended
September 30, 2006 were $46,048,027, representing a 95% increase over
the same period in 2005 at $23,587,957.
Solar LED Lighting Group
Revenues from the Solar LED Lighting Group were $8,583,825 in Q3
2006, representing an increase of 105% over Q3 2005 at $4,182,574.
The Solar LED Lighting Group had record bookings of $9,409,311 for
the quarter.
Revenues from the Solar LED Lighting Group for the nine months ended
September 30, 2006 were $19,681,737, representing an increase of 54%
over the same period in 2005 at $12,768,020. The Solar LED Lighting
Group entered Q4 2006 with a sales order backlog of $3,948,413.
Solar Power Systems Group
Revenues from the Solar Power Systems Group amounted to $7,581,953
for the three months ended September 30, 2006 compared to $6,893,372
in 2005, representing an increase of 10% for the quarter. Revenues
for the nine months ended September 30, 2006 were $22,357,061. This
group was acquired in July 2005 and therefore had no year-to-date
comparatives for the same period in 2005. The Solar Power Systems
Group entered Q4 2006 with a sales order backlog of $2,210,857.
LED Sign Group
Revenues from the LED Sign Group were $830,160 in sales for Q3 2006,
compared to $1,119,962 for Q3 2005. Revenues for the nine months
ended September 30, 2006 were $3,076,858, compared to $3,926,565 for
the same period in 2005. A significant portion of revenues achieved
by this group are through larger orders, and therefore
quarter-over-quarter results may vary significantly. The LED Sign
Group entered Q4 2006 with a sales order backlog of $203,738.
A summary of revenues from each of Carmanah's technology groups is as
follows:
(CAD 1,000's)
Q1 2006 Q2 2006 Q3 2006 YTD 2006
Solar LED Lighting $5,327 $5,771 $8,584 $19,682
Solar Power Systems $6,227 $8,548 $7,582 $22,357
LED Sign Group $890 $1,356 $830 $3,077
Other income $250 $168 $514 $932
TOTAL $12,694 $15,843 $17,510 $46,048
Q1 2005 Q2 2005 Q3 2005 YTD 2005
Solar LED Lighting $3,443 $5,142 $4,183 $12,768
Solar LED Lighting $- $- $6,893 $6,893
LED Sign Group $1,406 $1,400 $1,120 $3,927
Other income $- $- $- $-
TOTAL $4,849 $6,542 $12,196 $23,587
Cost of Sales and Gross Profit Margin
Carmanah's cost of sales for the Q3 2006 was $11,441,345 (65.3% of
sales), resulting in a gross profit margin of 34.7%, compared with
gross profit margin of 33.8% for Q2 2006. For the nine months ended
September 30, 2006, the Company's gross profit margin was 34.3%,
compared with 41.3% for the same period in 2005. The shift in
Carmanah's gross margin from 2005 to 2006 is primarily due to the
contribution by the Company's Solar Power Systems Group for the nine
months ended September 30, 2006 ($22,357,061 at 24% gross margin).
Carmanah offers product solutions to a variety of market sectors at
various gross profit margins. The blended gross profit margin is
significantly affected by the ratio of sales contributed by the
various technological groups, by the product mix sold, as well as the
related market sector.
Wages and Benefits
For the three months ended September 30, 2006, wage and benefit
expenses were 15.6% as a percentage of revenue compared to 17.6% for
Q3 2005 and 15.1% for Q2 2006. Wage and benefit expenses for the
nine months ended September 30, 2006 were 16.4%, compared to 18.6%
for the same period in 2005.
Wage and benefit expenses for the three months ended September 30,
2006 increased 27% to $2,727,862, compared with $2,143,824 for Q3
2005. For the nine months ended September 30, 2006, wage and benefit
expenses increased 73% to $7,552,820, compared with $4,377,094 for
the same period in 2005. This increase is primarily due to the
following:
- $1,600K in additional 2006 wage expenses resulting from the
acquisition of the Solar Power Systems Group in June 30, 2005.
- $608K in additional commissions expense resulting from overall
increased sales.
- $145K in wage and stock-based compensation expense for severance
of a senior manager.
- $348K in additional stock-based compensation expense.
The Company also increased its sales, marketing, finance and
administrative staff in support of overall growth.
Office and Administration
As a percentage of revenue, office and administration expenses for Q3
2006 were 6%, compared to 6% for Q3 2005 and 6% for Q2 2006. Office
and administration expenses for the nine months ended September 30,
2006 were also 6%, compared to 7% for the same period in 2005.
Office and administration expenses in Q3 2006 were $1,001,703,
representing a 34% increase over Q3 2005 of $746,623. Office and
administration expenses for the nine months ended September 30, 2006
were $2,803,692, representing an increase of 70% over the same period
in 2005 at $1,651,171. This increase is primarily due to:
- The acquisition of the Solar Power Systems Group in July 2005,
which has no comparatives for the same periods in 2005, contributed
to this increase with the additional costs of its four sub-assembly
and warehouse operations (Victoria, BC, Calgary, AB, Barrie, ON,
and Santa Cruz, CA).
- The expansion into Carmanah's new 28,000 square foot warehouse
facility, as well as the associated increase in overall office,
administration and information technology expenses.
- Increased public company-related costs, including a one-time
expense in Q1 2006 in the amount of $117,000 to transfer its
listing from the TSX Venture Exchange to the TSX Toronto Stock
Exchange, as well as an overall increase in regulatory fees and
expenses paid under the new listing.
Sales and Marketing
As a percentage of revenue, sales and marketing expenses for Q3 2006
were 3%, compared to 4% for Q3 2005 and 4% for Q2 2006. Sales and
marketing expenses for the nine months ended September 30, 2006 were
4%, compared to 5% for the same period 2005.
Sales and marketing expenses for Q3 2006 were $542,538, representing
a 27% increase over Q3 2005 of $425,805. Sales and marketing
expenses for the nine months ended September 30, 2006 were
$1,700,356, representing a 41% increase over $1,201,908 for the same
period in 2005. The Company continued to increase sales and
marketing activities for new and existing product lines throughout
its worldwide marketplace and is expanding its sales and marketing
efforts to include the Power Systems Group's customers and verticals.
Research and Development
As a percentage of revenue, research and development expenses for Q3
2006 were 4%, compared to 1% for Q3 2005, and 3% for Q2 2006.
Research and development expenses for the nine months ended September
30, 2006 were 3%, compared to 4% for the same period 2005.
During Q3 2006, gross research and development expenses increased to
$1,063,926 for the quarter, compared with $206,773 for Q3 2005. This
increase included contract development costs of $284,335 for
development of the Company's wireless control feature now available
on its 700 Series solar LED lighting fixtures. These contract
development costs were expensed in the quarter, compared to a
contract development recovery of $60,000 in the same quarter of the
previous year. For the nine months ended September 30, 2006, gross
research and development expenses increased 136% to $2,496,255,
compared with $1,056,785 for the same period in 2005. The increase
in gross research and development expenses is primarily due to
continued investment in new product development, cost reduction
initiatives and existing product enhancements across all of the
Company's technology groups.
During Q3 2006, a SR&ED investment tax credit in the amount of
$410,165 was booked against total research and development expenses,
resulting in net research and development expenses of $653,761. For
the nine months ended September 30, 2006, a SR&ED investment tax
credit in the amount of $936,674 booked against year-to-date research
and development expenses, resulting in net research and development
expenses of $1,559,581. In 2005, $103,000 in SR&D investment tax
credit was recorded for the three months and nine months period ended
September 30.
Income Tax
Income tax expense for Q3 2006 totaled $490,216. This amount is
comprised of current tax expense of $511,227 and future income tax
recovery of $21,011. The current tax expense relates to taxable
income generated by Carmanah in the normal course of operations.
Current tax expense as a percentage of pre-tax earnings is high due
to non-deductible expenses, primarily stock-based compensation along
with other adjustments related to future tax estimates.
Earnings
Earnings before interest, taxes and amortization (EBITA) for Q3 2006
were $1,061,884, compared to $657,200 for Q3 2005. For the nine
months ended September 30, 2006, EBITA were $1,963,157, compared to
$1,411,242 for the same period in 2005.
Non-GAAP measures - 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 EBITA. EBITA is calculated as net earnings
before interest income, taxes and amortization. A reconciliation of
EBITA to net earnings is as follows:
Three months ended September 30,
2006 2005
Net earnings - as reported $336,505 $222,470
Add back (deduct):
Interest Income (41,913) (29,127)
Income taxes 490,216 227,405
Amortization of equipment
and leaseholds 214,351 192,730
Amortization of intangibles 62,725 43,722
EBITA $1,061,884 $657,200
Nine months ended September 30,
2006 2005
Net earnings - as reported $436,758 $873,109
Add back (deduct):
Interest Income (160,803) (115,037)
Income taxes 896,993 227,405
Amortization of equipment
and leaseholds 599,542 359,922
Amortization of intangibles 190,667 65,843
EBITA $1,963,157 $1,411,242
Net earnings for Q3 2006 were $336,505, compared with $222,470 for Q3
2005. For the nine months ended September 30, 2006, net earnings
were $436,758 compared with $873,109 for the same period in 2005.
Carmanah is focused on maintaining or increasing the gross margins
across all of its technology groups, and continuing to reduce overall
operating expenses as a percentage of sales.
Balance Sheet Highlights
Carmanah's cash, cash equivalents, and short-term investments at
September 30, 2006 were $6,294,411, compared to $4,444,241 at June
30, 2006 and $11,662,214 at December 31, 2005.
Net cash usage from operations for the nine months ended September
30, 2006 was $4,676,522. This is primarily due to:
- $4,901,064 in increased inventory levels in support of increased
sales forecasts, particularly in areas of solar panel supply.
- $1,137,038 in prepayments to suppliers to secure solar panel
product.
- $3,374,151 in increased accounts receivables due to increased sales
growth, particularly through the latter part of third quarter.
- $2,433,744 increase in accounts payable and accrued liabilities due
to increased sales growth and inventory purchases.
During the nine months ended September 30, 2006, Carmanah also
invested $1,642,688 in leasehold improvements and equipment related
to setup and completion of the Company's new production and
warehousing facility, as well as to improvements to its head office
facility in anticipation of physically integrating Soltek and
Carmanah sales and administration staff. These projects were
effectively completed by the end of Q2 2006. These improvements have
prepared Carmanah's facilities for the anticipated growth over the
next two years. The Company anticipates no further significant
facilities-related investments in the foreseeable future.
As per the December 2005 financing, management advised that funds
raised would be primarily used for significant infrastructure
improvements, as well as pro-active inventory investment related to
potential supply-side challenges in the photovoltaics market. With
the availability of dollars to invest in inventory, management was
able to negotiate supply contracts through to the end of 2007. As a
result, current inventory levels are being monitored and reduced
where appropriate.
Net working capital as at September 30, 2006 was $27,568,076 with a
current ratio of 4.4:1.
ABOUT CARMANAH TECHNOLOGIES CORPORATION
Carmanah is an award-winning manufacturer specializing in renewable
and energy-efficient technology solutions. The Company is currently
focused on three technology groups: solar-powered LED lighting, solar
power systems & equipment and LED illuminated signage.
Carmanah is headquartered in Victoria, British Columbia, Canada and
has branch offices and/or sales representation in 11 cities across
Canada, the United States and the United Kingdom. With more than
250,000 installations worldwide, Carmanah is one of the world's
premier suppliers of energy-efficient products.
The shares of Carmanah Technologies Corporation are publicly traded
on the Toronto Stock Exchange under the symbol "CMH" and on the
Berlin and Frankfurt Stock Exchanges under the symbol "QCX". For
more information, please visit www.carmanah.com. |
