All figures in CAD For the three months ended December 31 2012 2011 % Change $ ChangeRevenue $ 27,405,643 $ 29,521,360 -7.2% $ (2,115,717)EBITDA (i) $ 404,220 $ 1,257,768 -67.9% $ (853,548)Net Earnings $ (160,325) $ 368,018 -143.6% $ (528,343)Basic EPS (ii) $ (0.01) $ 0.02Diluted EPS (ii) $ (0.01) $ 0.02(i) EBITDA is defined as Earnings Before Interest, Taxes, Depreciation & Amortization(ii) EPS is defined as Earnings Per Share
COMMERCIAL SOLUTIONS INC. ("Commercial" or "Company") (TSX: CSA) a leading Canadian distributor of bearings, power transmission equipment, oilfield, industrial, and safety products today announced its financial results for the three-month period ended December 31, 2012. A complete copy of the Company's report will be available on the Internet at www.sedar.com.
Financial highlights from first quarter of fiscal 2013 are as follows:
Commercial reported revenues of $27.4 million, a $2.1 million decline from the same period in the prior year. EBITDA for the quarter was $0.4 million in comparison to $1.3 million in the same period last year, representing a $0.9 million decline. The Company reported net loss of $0.2 million for the quarter compared to net earnings of $0.4 million during the same quarter of fiscal 2012 representing a $0.6 million decline.
The decrease in earnings was primarily due to lower revenues, lower gross margin rates and higher operating expenses. After normalizing for the one-time legal expenses directly related to the potential sale of the Company, operating expenses were consistent with the prior year. Lower gross margin rates were directly related to sales mix as a higher proportion of sales related to high dollar value capital equipment sold for rig building in comparison to the prior year. There were several reasons that contributed to the reduced revenues:
1. Christmas holiday timing reduced the number of business days and drove dramatic shifts in sales activity in December. Total of October and November revenues were consistent with the revenues reported in the same period of the prior year. For December 2012, sales were lower than prior year primarily due to number of billing days in the month. Normalized for this effect, first quarter sales were approximately 1.6% ($476,450) lower than the same period in the prior year.2. Reduction in drilling activity in Western Canada. The Canadian Association of Oilwell Drilling Contractors rig utilization data in the first quarter of fiscal 2013 was 43.5% compared to 60.7% in the same period of the prior year.3. United States "fiscal cliff" concerns contracted expected December customer spending.
With respect to the recent announcement of the purchase offer withdrawn by Industrial Distribution Group ("IDG"), Jim Barker, President and CEO of Commercial noted, "We are disappointed in IDG's decision to withdraw its offer to purchase Commercial Solutions. While no detailed reasons were forthcoming, we will continue to run our business to enhance profitability by maintaining a strong balance sheet and a cost structure that helps withstand the ongoing volatility in our key markets. We have built an enterprise with a fundamentally sound business model with high quality people and excellent relationships with our senior lender, key vendors, and customers. We believe that we are well positioned to continue to support ongoing operations in our business driving organic growth as well as opportunistically pursue selective acquisitions. Due to recent events, our Board of Directors and Officers of the Company will be reviewing strategic alternatives with a serious examination of options that would provide additional value to all shareholders. The review of these alternatives will start immediately and is expected to be ongoing over the next two quarters. Updates will be provided as appropriate."
Headquartered in Edmonton, Alberta, Commercial is one of Canada's leading independent industrial distributors with 23 Service s Centres and approximately 275 employees located primarily in Western Canada. Commercial offers more than 160,000 items critical to maintenance repair and operations (MRO) and original equipment manufacturer (OEM) customers. The Company represents 450 leading manufacturers and serves over 11,000 customer accounts within a broad cross-section of industries, including oil and gas, forestry, agriculture, firefighting, food processing, chemical processing, mining, utilities, manufacturing, and construction. Commercial trades under the symbol "CSA" on the Toronto Stock Exchange. For further information on the Company, please visit www.commercialsolutions.ca and for detailed financial information visit www.sedar.com.
Commercial Solutions Inc.
Commercial Solutions Inc.
Rozina Kassam, CA