DECT Dectron International (MM)

Dectron Announces 2005 Year-End Results MONTREAL, May 3 /PRNewswire-FirstCall/ -- Dectron Internationale, Inc. (NASDAQ:DECT), engaged in the heating, ventilation and air conditioning, indoor air security and water generation markets, is pleased to announce its financial results for the fiscal year ended January 31, 2005. Dectron's sales rose 3.2% to $40,910,601 for fiscal 2005, up from $39,654,922 in 2004. The Company's sales growth reflects the revenues arising primarily from its stronger presence in the Canadian market for commercial HVAC products and related services. In fact, sales in Canada increased by 18.7%, whereas combined U.S. and international sales decreased by 9.8%. As a result, sales outside Canada accounted for 44.4% of total sales in 2005 compared with 54.4% in 2004. Gross profit declined from $14,370,980 in 2004 to $11,649,635 in 2005, while the gross profit margin went from 36.2% to 28.5% respectively. Despite certain productivity gains, the gross profit margin was adversely affected by higher raw material costs and aggressive pricing strategies in certain HVAC markets. Selling expenses were reduced by 4.2%, from $5,518,195 in 2004 to $5,288,563 in 2005. This variation is primarily due to cost-cutting measures, which continue to be implemented. Selling, general and administrative expenses as a percentage of sales stood at 21.1% in 2005, a slight improvement over 22.0% the previous year. Net restructuring costs and other non-recurring items decreased from $911,407 in fiscal 2004 to $551,607 in 2005. These charges are the result primarily of ongoing cost-cutting efforts. Depreciation and amortization declined from $1,366,592 in 2004 to $1,268,526 in 2005, due to lower capital expenditures in fiscal 2005. Financing expenses decreased by 18.6%, from $1,272,485 in 2004 to $1,036,142 in 2005. This amount includes interest expenses as well as gains and losses related to foreign currency exchanges. The lower interest expenses in 2005 are due primarily to repayments of long-term debt. Overall, operating expenses were lowered by 6.3%, from $12,292,858 in 2004 to $11,513,884 in 2005. Operating expenses as a percentage of sales stood at 28.1%, an improvement over 31.0% last year. "We have taken important initiatives to consolidate our operations and improve the Company's efficiency across the board. We have achieved definitive improvements, which would have translated into significant savings were it not for the considerable non- recurring expenses recorded in the last quarter," stated Mauro Parissi, Dectron's Chief Financial Officer. As a result of a lower gross profit margin and non-recurrent expenses, Dectron recorded earnings before income taxes and discontinued operations of $135,751 in fiscal 2005, compared with operating earnings of $2,078,122 the previous year. The loss from discontinued operations net of taxes amounted to $1,429,012 in fiscal 2005, compared with $3,630,854 in fiscal 2004, both resulting mostly from the discontinued operations of Liberty Drive Property, Inc., previously IPAC 2000. "This subsidiary has affected our results in the last four years. The situation has been resolved since we concluded an agreement in February 2005 regarding the sale of Liberty Drive Property's building and land, and the transaction is in the process of being finalized. Since all provisions regarding these activities have already been recorded, we do not anticipate any loss from discontinued operations in the current fiscal year," said Mr. Parissi. The net loss amounted to $988,407 or $0.32 per share in fiscal 2005, compared with a net loss of $1,697,504 or $0.57 per share in fiscal 2004. The weighted average number of common shares outstanding (basic and diluted) stood at 3,066,851 in fiscal 2005, an increase of 3.1% over 2,973,750 shares the previous year. This increase resulted from the exercise of 181,250 options by employees under the Company's stock option plan. Fourth Quarter of Fiscal 2004 Dectron recorded sales of $8,672,603 in the fourth quarter ended January 31, 2005, compared with $6,019,548 in the last quarter a year earlier. Although sales were exceptionally low, gross profit remained relatively stable at $2,739,635. "Despite aggressive pricing in the precision environmental control market and a spike in steel and copper prices in the last quarter, gross profit margin reached 31.6% based on the delivery of numerous custom- made systems," said Ness Lakdawala, President and Chief Executive Officer. "Our sales are now on track since orders are back to normal." Operating expenses were exceptionally high in the fourth quarter of fiscal 2005. Almost $0.5 million was allocated to tradeshows, notably to promote the Company's water generation technology on the international scene. Significant non-recurring general and administration expenses were recorded for computer hardware, software and consulting expenses, and professional fees related to the ISO certification and the Company's eventual Canadian Exchange migration. Net restructuring costs and other non-recurring items of $551,607, resulting from the consolidation of the manufacturing facilities also recorded in the last quarter of fiscal 2005. All in all, Dectron incurred close to $1.4 million in non-recurring expenses in the last quarter of fiscal 2005. Consequently, the Company incurred an operating loss of $990,214 in the fourth quarter of fiscal 2005. Losses from discontinued operations net of taxes amounted to $1.1 million in that same quarter, mostly due to the discontinued operations of Liberty Drive Property, Inc. The net loss stood at $1,483,194 or $0.48 per share for the quarter ended January 31, 2005, compared with a net loss of $1,845,871 or $0.62 per share for the last quarter of fiscal 2004. Financial Position Total assets amounted to $35,687,918 as at January 31, 2005, compared with $39,129,450 as at January 31, 2004. This decrease of 8.8% is attributable mostly to the progressive sale of non-strategic assets. Dectron's balance sheet also included current assets held by discontinued operations of $3,414,543, which are subject to an agreement to sell them during the current fiscal year. Liabilities totalled $24,370,551 at the close of fiscal 2005, down from $27,309,281 at the end of the prior year. This 10.8% decrease resulted from the repayment of current and long-term debt associated mostly with divested assets. In fact, bank loans went from $13,502,219 to $11,642,981 and long-term debt from $5,154,607 to $2,370,913 at the end of fiscal 2004 and 2005 respectively. Working capital totalled $4,417,339 as at January 31, 2005, versus $4,285,338 at the end of fiscal 2004, both of which corresponded to a current ratio of 1.2. Stockholders' equity stood at $11,317,367 or $3.59 per share at the end of fiscal 2005 compared with $11,820,169 or $3.97 per share a year earlier. Outlook While the demand for its products has held steady due to a favourable economic environment in recent years, Dectron has nevertheless faced fierce competition in the North American HVAC industry, a significant appreciation in the Canadian dollar and a sharp rise in raw material costs. What's more, Dectron's results have been adversely affected by several divestitures in recent years. "We feel that the worst is behind us and that Dectron now benefits from a stronger foundation to drive sustained growth and profitability," said Mr. Lakdawala. "We have indeed consolidated various operations and sold non- strategic low-yielding assets. Based on selective price increases and further improvements in efficiency, we are confident that Dectron will increase its profit margins to historical levels as of the current fiscal year. In addition, the Company's major growth avenues, namely indoor air security and water generation, will eventually bring substantial sales, which will contribute to improving the Company's overall profitability," concluded the President. Dectron Internationale, Inc. is a global provider of custom and semi- custom IAQ (indoor air quality) and HVAC (heating, ventilation and air conditioning) products and services to the building systems, food processing, medical, petrochemical, and various industrial and commercial markets. Dectron Internationale's core businesses are conducted by its five principal subsidiaries: Dectron Inc., RefPlus Inc., Circul-Aire Inc., Thermoplus Air Inc. and International Water Makers Inc. Dectron, Circul-Aire and Thermoplus Air serve customers in commercial and residential buildings, through a network of manufacturers' representatives and dealers. Industrial facilities and OEM clients also form the customer base of these business units. RefPlus manufactures and supplies commercial refrigeration through a network of wholesalers and dealers in Canada and the United States. International Water Makers Inc. manufactures proprietary water-generation-from-air systems for industrial processes and military and commercial applications. Established in Montreal, the Company sells about 50% of its products in the United States and has 400 employees in its manufacturing facilities. Its shares are listed on the NASDAQ under the ticker symbol DECT.