Camco Announces Second Quarter Results.BURLINGTON, Ontario Burlington (2006 population 164,415) is a city located in the Golden Horseshoe, across Lake Ontario and Burlington Bay harbour from Hamilton, in Halton Region, Ontario, Canada. -- Camco (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :COC See chip on chip. ) announced net income of $3.7 million or $0.18 per share for the second quarter ending June June: see month. 25, 2005. This compares to a net loss of $1.9 million or $0.10 per share for the same period last year, due to significant provisions for Hamilton Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. plant closure costs. Total sales for the second quarter amounted to $170 million, up 2% from sales of $167 million for the second quarter of 2004. Closure-related expenses of $0.2 million related to final dismantling dis·man·tle tr.v. dis·man·tled, dis·man·tling, dis·man·tles 1. a. To take apart; disassemble; tear down. b. associated with the Hamilton plant, were recorded in the second quarter of 2005 compared to closure costs of $6.5 million for the same period last year. Income from operations, before closure costs and write-downs, in the second quarter rose to $6.0 million, compared to $4.2 million in 2004. For the first half of 2005, the Company recorded net income of $9.0 million on sales of $302 million compared to a net loss of $5.6 million on sales of $290 million in 2004. Income from operations, before closure costs and write-downs, were $3.9 million, compared to $4.8 million in 2004 as a result of recent increases in commodity prices, especially steel and plastic. As announced on July July: see month. 25, 2005, Controladora Mabe S.A. de C.V. ("Mabe") of Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. and the Company have entered into a Support Agreement pursuant to which 6295053 Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of Inc, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Mabe, will make an offer to purchase all of the common shares of the Company at a price of $3.52 per share for an aggregate value of approximately $70.4 million. James Fleck James (Jim) Douglas Fleck, O.C. (born c. 1931) is a Canadian businessman, academic, and philanthropist. Education Fleck has a Bachelor of Arts degree from the University of Western Ontario and a Doctor of Business Administration from Harvard University. , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. commented: "The market for home appliances was quite robust during the first half of the year, and this was a major contributor to Camco's strong performance. Material cost inflation continued to be a critical issue for the Company, and as a result price increases were implemented in Canada and the US. Most significantly, Camco reached an agreement with GE that effectively increases dryer prices retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin for the first half of 2005. In the event that the Mabe transaction does not close in the third quarter, the dryer supply agreement with GE will need to be renegotiated". Camco is the largest Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. manufacturer, marketer and service provider of home appliances. The Company's product line includes such popular names as GE, Profile, Monogram monogram [Gr.,=single letter], symbol of a name or names, consisting typically of a letter or several letters worked together. A famous monogram is that of Christ, consisting of X (chi) and P (rho), the first two letters of Christ in Greek. , Hotpoint Hotpoint is a major brand of electric appliances or "white goods" today owned by Indesit and General Electric. The Hotpoint Electric Heating Company was formed in 1911 in the United Kingdom. , Moffat Moffat is a former burgh and spa town in Dumfries and Galloway, Scotland, lying on the River Annan, with a population of around 2,500. The most notable building in the town is the Moffat House Hotel, designed by John Adam. , and BeefEater beefeater yeoman of the English royal guard, esp. at the Tower of London; slang for Englishman. [Br. Culture: Misc.] See : Britain beefeater popular name for a Yeoman of the Guard or Yeoman Warder of the Tower of London. [Br. Hist. . Camco manufactures clothes dryers and dishwashers at its Montreal Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. Plant, and is the primary supplier of clothes dryers to GE in the US. For information regarding Camco's products and services, please visit the Company website at www.geappliances.ca. Report to the Shareholders For the Period Ended June 25, 2005 Interim Management Discussion and Analysis (MD&A) INTRODUCTION The following discussion and analysis should be read in conjunction with the Management Discussion and Analysis, the annual audited financial statements and notes contained in Camco's 2004 Annual Report, and the interim financial statements and notes contained in this report. The comments and analysis contained in this MD&A are as of August 5, 2005. OVERALL PERFORMANCE Results of Operations - Overview Camco recorded net income of $3.7 million or $0.18 per share on sales of $170 million for the second quarter ended June 25, 2005. This compares with a net loss of $1.9 million or $0.10 per share on sales of $167 million for the same period last year. Minimal costs associated with the closure of the Hamilton plant of $0.2 million were recorded in the second quarter of 2005 compared to closure costs of $6.5 million recorded in the second quarter of 2004. Income from operations, before closure costs and write-downs, of $6.0 million was recorded in the second quarter of 2005 compared to income of $4.2 million for the same period in 2004. Stronger second quarter performance was driven by the $4.1 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta net impact of the agreement made between GE Consumer & Industrial (GECI) and Camco regarding the retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a pricing of dryers sold to GECI for the first half of 2005, which was recorded in the second quarter. Montreal Manufacturing All dryers manufactured by Camco are produced at the Company's plant in Montreal. While continuing to advance significant quality, productivity and cost reduction programs, the Montreal facility completed a significant capacity expansion in 2004. This capacity expansion resulted in record export shipments in the second quarter (up 30% from 2004). As announced in May 2004, a further investment of $15.2 million was approved for a program focused on a new dryer platform. Production of the new Magellan A disk management utility for PCs from Lotus that had its heyday in the late 1980s. Believed by many to be one of the top 10 utility programs of all time, Magellan searched for file names and indexed the text content of the PC's hard drive at lightning speed. dryer commenced the second quarter of 2005 and Camco has begun shipping to the US with a full product launch expected in the fall. Increased Steel and Commodity Costs Recent increases in commodity prices, especially steel and plastic have had an adverse impact on manufacturing costs in Montreal. In response, the Company implemented price increases to the domestic market that took effect in January January: see month. 2005. Although the Company has pre-determined price arrangements with its main steel supplier for 2005, cost uncertainties still exist with smaller third party parts processors, suppliers of plastic components and freight costs. Under the Company's dryer supply agreement with GECI, the prices were to be pre-determined through to December December: see month. 31, 2006 without adjustment for material cost inflation. However, given the unprecedented material cost inflation, the Company successfully reached a favourable pricing agreement for the first half of 2005 on dryers sold to GECI pursuant to the Company's dryer supply agreement. Due to the fact that the agreement is an annual contract, Camco recorded a proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. percentage of the expected volume rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. representing approximately $1.9 million in the first half of 2005 based on the estimated total year volume rebate to be earned in the second half of 2005. In the event that Mabe acquires control of the Company and takes it private, this amount will be reversed. However if Mabe's offer is not accepted by a sufficient number of shareholders, Camco will need to renegotiate re·ne·go·ti·ate tr.v. re·ne·go·ti·at·ed, re·ne·go·ti·at·ing, re·ne·go·ti·ates 1. To negotiate anew. 2. To revise the terms of (a contract) so as to limit or regain excess profits gained by the contractor. the terms of the dryer agreement for the second half of the year. Exposure to Exchange Rate Fluctuations Stronger Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents exchange rates cause US dollar sales to result in lower Canadian dollar reported revenue. Historically, the Company has experienced little net currency exposure due to sales billed in US dollars approximately equalling purchases of imported products denominated in US dollars. In 2005, however, due to the replacement of manufactured product in Hamilton with sourced products from the US, the Company's US dollar purchases will exceed sales to the US. The Company is utilizing hedging instruments in 2005 to minimize currency exposure. Results of Operations - Statement of Income Sales Primarily as a result of higher domestic and export sales, revenues for the second quarter of 2005 of $169.7 million were up 1.7% from $166.9 in 2004. Total domestic and export sales for the first half of 2005 were $185 million and $117 million, respectively compared to $181 million (domestic) and $109 million (export) in 2004. In the second quarter, the Canadian core appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. industry grew by 4.4% bringing total industry growth for the year to 4.3%. For the first six months of 2005, total industry retail sales were up 5.4%, however total sales in the builder segment were down 1.6%. This information is from the preliminary results provided by the Canadian Appliance Manufacturer's Association and is measured in units sold. Net Income The Company recorded net income in the second quarter of $3.7 million or $0.18 per share compared to a net loss of $1.9 million or $0.10 per share for the same period last year. Closure costs of $0.2 million were recorded in the second quarter of 2005 compared to closure costs of $6.5 million for the same period last year. Excluding closure costs and write-downs, higher income from operations of $6.0 million for the second quarter of 2005 compared to net income from operations of $4.2 million for the same period in 2004 is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the adjustment made in the second quarter as a result of the pricing agreement reached with GECI for the first half of the year. Total operating costs operating costs npl → gastos mpl operacionales of $163.7 million in the second quarter of 2005 were up $1.0 million from $162.7 in 2004. The increase in operating costs is attributable to higher variable costs as a result of higher volume as well as increased material costs. Combined with the net income of $5.3 million reported in the first quarter, the net income for the first half of 2005 totalled $9.0 million versus a net loss of $5.6 million reported for the first half of 2004. Interest and Other Expenses Although second quarter interest and other expenses of $0.3 million equalled that of 2004, the increase in bank charges was offset by the income generated from the redemption of preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Comerco Services Inc., Camco's joint venture service warranty business. Results of Operations - Cash Flows Cash from Operations: During the quarter, cash generated from operations amounted to $0.8 million versus $6.6 million cash generated for the same period last year. For the first half of 2005, cash used from operations equalled $15.2 million versus cash generated of $15.6 million in 2004. The variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality from 2004 is due to the Company having lower liabilities balances, driven by the $20.0 million payment of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when to Hamilton employees. Investing Activities: The Company's investing activities used $1.6 million cash in the second quarter of 2005, compared to a usage of $0.2 million expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. in the second quarter of 2004. The investing activities are primarily related to the increase in long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investments held in trust at Comerco Service Inc., in respect of service warranty obligations. Financing Activities: Principally to finance working capital needs, bank borrowings increased by $7.4 million in the second quarter of 2005 to $39.0 million versus an decrease of $10.7 million to $27.0 million for the same period last year. The Company did not declare a dividend in the second quarter of 2005. LIQUIDITY AND CAPITAL RESOURCES The Company's securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. facility under which it sells up to $60.0 million eligible trade receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed on a revolving basis was last renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. on May 30, 2003 and currently expires on September September: see month. 27, 2005. The Company's $40.0 million line of credit facility last renewed on July 10, 2004 was to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on July 9, 2005. The Company's lender has agreed to extend the credit facility until September Until September is a 1984 romantic drama set in France. It stars Karen Allen as an American tourist in Paris who falls in love with a married Frenchman (Thierry Lhermitte). External links 30, 2005. In the second quarter, the Company met all of its covenants for banking and cash. To assist with closure related expenses, the Company also has an additional credit facility of $20.0 million with its lenders, available between January 1, 2005 and September 30, 2005 to meet liquidity requirements. Management believes there are sufficient existing capital resources to meet its needs. NEW ACCOUNTING PRONOUNCEMENTS In June 2003, the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. (the "CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ") issued Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 15, "Consolidation of Variable Interest Entities" ("AcG-15"), requiring the consolidation of variable interest entities ("VIEs") by a primary beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. . In September 2003, the Accounting Standards Board The role of the Accounting Standards Board (ASB) is to issue accounting standards in the United Kingdom. It is recognised for that purpose under the Companies Act 1985. It took over the task of setting accounting standards from the Accounting Standards Committee (ASC) in 1990. of the CICA delayed the effective date of the implementation of AcG-15 until annual and interim periods beginning on or after November November: see month. 1, 2004. The standard is to be implemented on a retroactive basis, with or without restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. . A VIE is any type of legal structure in which control is determined through contractual or other financial arrangements, as opposed op·pose v. op·posed, op·pos·ing, op·pos·es v.tr. 1. To be in contention or conflict with: oppose the enemy force. 2. to traditional voting rights Voting rights The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors. voting rights The type of voting and the amount of control held by the owners of a class of stock. , if certain conditions exist. A primary beneficiary is an entity that will absorb a majority of a VIE's expected losses, receive a majority of the expected returns Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: , or both, and is therefore required to consolidate the VIE. The Company has determined that the adoption of the guideline has no impact on the Company's interim Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . OTHER Proposed Take-over Bid by Mabe On July 25, 2005, Controladora Mabe S.A. de C.V. ("Mabe") of Mexico and the Company announced that they had entered into a Support Agreement pursuant to which 6295053 Canada Inc, a wholly owned subsidiary of Mabe, will make an offer to purchase all of the common shares of the Company at a price of $3.52 (Cdn.) per share for an aggregate value of approximately $70.4 million (Cdn.). The offer is expected to be mailed to the Company's shareholders in August. The offer will be subject to conditions customary in transactions of this nature, including at least a minimum of 75.5% of the outstanding shares of Camco being tendered (which is the minimum number of shares that must be tendered to the offer in order for Mabe to be able to effect a subsequent going private transaction under the Canada Business Corporations Act The Canada Business Corporations Act, also known as Bill C-44, is a Canadian act respecting Canadian business corporations. See also
Additional Information Additional information about Camco, including Camco's Annual Information Form, is available on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. Outstanding Share Data As at the date of this report, Camco had 20,000,000 common shares outstanding. Some of the statements contained in this release may be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , such as estimates and statements that describe the corporation's future plans, objectives or goals, including words to the effect that the corporation or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ from those currently anticipated in such statements by reason of factors such as, but not limited to, changes in general economic and market conditions. Camco disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED BALANCE SHEET
Unaudited (In thousands of dollars)
June 25, December 31,
2005 2004
-----------------------
Assets
Current Assets
Cash and cash equivalents $ 31,886 $ 17,200
Accounts receivable - trade 35,746 7,231
Accounts receivable - other 4,011 5,005
Inventories 44,700 52,901
Future income taxes 19,164 19,164
Prepaid expenses and other assets 11,094 8,889
-----------------------
146,601 110,390
Long-term investments 10,621 7,915
Future income taxes 26,725 26,730
Property, plant and equipment 27,793 33,258
Other assets 12,792 12,578
Accrued benefit asset 40,601 37,535
-----------------------
$ 265,133 $ 228,406
-----------------------
-----------------------
Liabilities and Shareholders' Deficiency
Current Liabilities
Operating line of credit $ 30,000 $ 10,000
Current portion of long-term debt 3,003 3,010
Accounts payable and accrued liabilities 111,822 123,224
Due to affiliates, net 44,693 26,671
Income taxes payable 2,975 1,776
-----------------------
192,493 164,681
Accrued benefit liability 1,945 3,493
Long-term debt 6,000 6,750
Other liabilities 21,479 19,973
Post retirement benefits 57,127 56,388
-----------------------
279,044 251,285
Shareholders' Deficiency
Common shares
Authorized - unlimited
Issued and outstanding - 20 million shares 37,442 37,442
Deficit (51,353) (60,321)
-----------------------
(13,911) (22,879)
-----------------------
$ 265,133 $ 228,406
-----------------------
-----------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited (In thousands of dollars)
Six months Three months
ended ended
---------------------- ---------------------
June 25, June 19, June 25, June 19,
2005 2004 2005 2004
---------- ----------- ----------- ---------
Net sales
of products and
services $ 302,000 $ 289,891 $ 169,706 $ 166,904
---------- ----------- ----------- ---------
Operating costs
Employee compensation,
including benefits 60,530 74,040 32,081 40,918
Material, supplies,
services, and other
costs 237,570 211,046 131,634 121,777
---------- ----------- ----------- ---------
298,100 285,086 163,715 162,695
---------- ----------- ----------- ---------
Income
from operations
before restructuring
costs, closure
costs and write
down costs 3,900 4,805 5,991 4,209
Hamilton
Plant closure
costs (income) (7,605) 12,384 217 6,475
Write down of investments (30) 421 (30) 421
---------- ----------- ----------- ---------
Income (loss)
from operations 11,535 (8,000) 5,804 (2,687)
Interest and other
expenses (689) (576) (300) (260)
---------- ----------- ----------- ---------
Income before income taxes 10,846 (8,576) 5,504 (2,947)
Income taxes (1,878) 2,944 (1,840) 1,001
---------- ----------- ----------- ---------
Net Income/(loss) $ 8,968 $ (5,632) $ 3,664 $ (1,946)
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Earnings per share, basic
and diluted $ 0.45 $ (0.28) $ 0.18 $ (0.10)
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS/(Deficit)
Unaudited (In thousands of dollars)
Period Ended
-------------------------------------
June 25, 2005 June 19, 2004
----------------- ------------------
Deficit, beginning of period $ (60,321) $ (49,578)
Net income (loss) 8,968 (5,632)
----------------- ------------------
Deficit, end of period $ (51,353) $ (55,210)
----------------- ------------------
----------------- ------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (In thousands of dollars)
Six months Three months
ended ended
---------------------- ---------------------
June 25, June 19, June 25, June 19,
2005 2004 2005 2004
---------- ----------- ----------- ---------
Cash flows from
Operating Activities
Net income (loss) $ 8,968 $ (5,632) $ 3,664 $ (1,946)
Add (deduct) items not
affecting cash
Depreciation and
amortization 2,062 2,988 624 1,576
Post employment
benefits expense 6,435 9,791 3,438 5,176
Taxes 5 16 - 15
Gain on disposal of
land and capital assets (9,918) - - -
Net increase/(decrease)
in working capital
(Note 2) (14,032) 24,882 (605) 8,008
Post employment
benefits funding (10,310) (10,422) (5,928) (6,303)
Other non-current
operating activities 1,291 (5,976) (354) 109
Write down of retail
advances 327 - 4 -
---------- ----------- ----------- ---------
(15,172) 15,647 843 6,635
---------- ----------- ----------- ---------
Capital Investing
Activities
Long term investments (2,706) - (1,642) -
Property, plant &
equipment additions (1,537) (2,109) (783) (245)
Proceeds on disposal of
capital assets 14,858 - 869 -
---------- ----------- ----------- ---------
10,615 (2,109) (1,556) (245)
---------- ----------- ----------- ---------
Financing Activities
Increase/(decrease) in
short term borrowings 19,993 4,998 8,110 (10,753)
Decrease in long term
borrowings (750) (755) (750) -
---------- ----------- ----------- ---------
19,243 4,243 7,360 (10,753)
---------- ----------- ----------- ---------
Increase in cash and
cash equivalents 14,686 17,781 6,647 (4,363)
Cash and cash
equivalents, beginning
of period 17,200 9,301 25,239 31,445
---------- ----------- ----------- ---------
Cash and cash
equivalents, end of
period $ 31,886 $ 27,082 $ 31,886 $ 27,082
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Cash and cash
equivalents is
represented by:
Cash $ 10,192 $ 12,105 $ 10,192 $ 12,105
Short-term investments,
at cost which
approximates market:
Commercial Paper 21,694 14,977 21,694 14,977
---------- ----------- ----------- ---------
$ 31,886 $ 27,082 $ 31,886 $ 27,082
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Supplemental Cash Flow
Information:
Income and capital
taxes paid $ 100 $ 237 $ 40 $ 170
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Interest paid $ 938 $ 623 $ 556 $ 344
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
NOTES TO INTERIM FINANCIAL STATEMENTS For the six months ended June 25, 2005 and June 19, 2004 Unaudited (In thousands of dollars) 1. As a result of the Hamilton Plant Closure Costs recorded in 2003 and 2004 (see note 6), the Company has a Shareholders' Deficit as at June 25, 2005. The Company expects significant long-term cost savings as a result of the closure of the Hamilton plant. In addition, the Company reached an agreement with GE Consumer & Industrial (GECI), a division of GE, to extend the dryer supply agreement for the Montreal plant through December 31, 2006 and has also entered into outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. arrangements with third parties to supply refrigerators and ranges to the Canadian market. From a financing perspective, the Company has an agreement with its lender whereby an additional $20,000 operating facility is available from January 1, 2005 - September 30, 2005. Although the Company did not have the need to draw upon these funds during the first quarter of 2005, a portion of the facility was utilized in the second quarter of 2005. 2. Changes in working capital includes changes in the following accounts:
Six months Three months
ended ended
---------------------- ---------------------
June 25, June 19, June 25, June 19,
2005 2004 2005 2004
---------- ----------- ----------- ---------
Accounts receivable -
Trade $ (28,842) $ (24,066) $ (31,311) $ (8,948)
Accounts receivable -
Other (excluding
writedown of retail
advances) 994 (4,130) 2,493 (3,978)
Inventories 8,202 (11,012) 7,074 (5,583)
Prepaid and other
assets (2,205) 1,088 (3,149) (226)
Income taxes
payable/recoverable 1,199 (3,119) 1,680 (1,010)
Accounts payable and
accrued liabilities (11,402) 54,602 8,931 29,261
Due to affiliates, net 18,022 11,519 13,677 (1,508)
---------------------- ---------------------
Net change in working
capital $ (14,032) $ 24,882 $ (605) $ 8,008
3. In the second quarter of 2005, the Company retroactively adopted the new CICA Accounting Guideline 15 (AcG-15), "Consolidation of Variable Interest Entities." AcG-15 requires that an enterprise holding other than a voting interest Voting interest in business and accounting is a percentage of voting stock owned. This notion is different from economic interest that refers to a percentage of all the equity issued, including preferred stock, warrants, and so on. in a variable interest entity ("VIE") could, subject to certain conditions, be required to consolidate the VIE if it is considered its primary beneficiary whereby it would absorb the majority of the VIE's expected losses and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. receive the majority of its expected residual returns Residual Return Return independent of the benchmark. The residual return is the return relative to beta times the benchmark return. To be exact, an asset's residual return equals its excess return minus beta times the benchmark excess return. . The adoption of the guideline had no impact on the Company's interim Consolidated Financial Statements. 4. The Company has a dryer supply agreement with GECI. Under the agreement, Camco will export to GECI certain models of dryers through to December 31, 2006. Camco currently has an agreement with GECI as part of its existing dryer supply contract, which stipulates that Camco will provide a rebate to GECI on all dryer sales to them in 2005 provided that GECI purchases a minimum quantity. Camco recorded a rebate accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of $1,763 in the first quarter of 2005 based on first quarter dryer sales, however this amount was subsequently reduced in the second quarter as one component of the pricing agreement that was reached in the second quarter with GECI removed this requirement for the first six months of 2005. The Company was required to record a rebate accrual of $1,860 in June to reflect the anticipated annual rebate owed to GECI based on dryer sales to be made in the second half of 2005 due to the fact that the dryer contract is an annual agreement (effectively spreading the rebate to be earned in the second half over the entire year). The total pre-tax net impact of the agreement reached with GECI in the first half of 2005 was approximately $4.1 million. 5. Concurrent At the same time. It implies that multiple processes are taking place simultaneously. See concurrent operation. with the extension in 2003 of the dryer supply contract with GECI, the Company announced two new investment programs in the Montreal facility. Under the first program, announced April 15, 2003, the Company invested $13,900 over a period of 18 months during 2003 and 2004 to expand plant capacity. The Company financed the plant expansion through a $10,000 equipment operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. with GE Canada. Under the second program, announced May 17, 2004, the Company is investing $15,200 in the design and production of a new, leading edge dryer platform. The Company is financing this program through a second $10,000 equipment operating lease with GE Canada. The remainder of the financing for both of these projects ($9,100) is being funded through internal sources and with Investissement Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. (up to $5,000). 6. As a result of the closure of the Hamilton manufacturing and distribution facility, the Company recorded a recovery of costs of $7,605 primarily from the sale of the Hamilton facility. The components of the recorded Hamilton plant closure as at June 25, 2005, December 31, 2004 and December 31, 2003 are as follows:
2005 2004 2003
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Land sale $ (10,529) $ - $ -
Write down of plant & Equipment 635 - 34,969
Pension plan curtailment expense - 2,933 33,080
Employee severance - 18,692 9,051
Other 2,289 2,442 527
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Total $ (7,605) $ 24,067 $ 77,627
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Camco concluded the sale to McMaster University McMaster University, at Hamilton, Ont., Canada; nondenominational; founded 1887. It has faculties of humanities, science, social sciences, business, engineering, and health sciences, as well as a school of graduate studies and a divinity college. of its 36.7 acres of land on Longwood Longwood may refer to: United States
The Company reduced the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the Hamilton plant and equipment to its estimated fair value (net of disposal costs) of $4,124 as at October October: see month. 2003, resulting in an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $34,969 in 2003. This reduced carrying value was depreciated Depreciated may refer to:
or·der·ly n. An attendant in a hospital. liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy and auction of the equipment. The loss on the sale of assets recorded in the first quarter of 2005 was $635. The Company is in the process of winding up the pension plan for the hourly Hamilton workforce. In 2004, an additional charge of $2,933 was recorded to the pension expense as a result of the improvements in pension and benefits in the closure contract agreement dated January 14, 2004. An actuarially determined pension plan curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. provision of $33,080 had been recorded as at December 31, 2003. A pension settlement cost will be funded over the next four years and will be recorded upon final settlement of the plan obligations. As at December 31, 2004 this settlement cost was actuarially estimated to be $19,800 (2003 - $11,506). The actual amount of the settlement and the future funding requirements will be dependent upon future interest rates and plan asset returns. The Company incurred severance costs of $27,743 in 2003 and 2004 to be paid to the Hamilton plant employees as a result of the closure. The majority of the severance payments were made in the first quarter of 2005. 7. Employee Future Benefits: the net benefit expense included in the results for the 12 and 24 week periods ended June 25, 2005 for benefits provided under pension plans was $2,166 and $3,990 (2004 - $4,038 and $7,603), respectively, and for benefits provided under other benefit plans was $1,271 and $2,444 (2004 - $1,138 and $2,188), respectively. 8. Subsequent Event - On July 25, 2005, Controladora Mabe S.A. de C.V. ("Mabe") of Mexico and the Company announced that they had entered into a Support Agreement pursuant to which 6295053 Canada Inc, a wholly owned subsidiary of Mabe, will make an offer to purchase all of the common shares of the Company at a price of $3.52 (Cdn.) per share for an aggregate value of approximately $70.4 million (Cdn.). The offer is expected to be mailed to the Company's shareholders in August. The offer will be subject to conditions customary in transactions of this nature, including at least a minimum of 75.5% of the outstanding shares of Camco being tendered (which is the minimum number of shares that must be tendered to the offer in order for Mabe to be able to effect a subsequent going private transaction under the Canada Business Corporations Act and Rule 61-501 of the Ontario Securities Commission). 9. The interim consolidated financial statements should be read in conjunction with the most recent annual consolidated financial statements. The Company's accounting policies and methods of application are consistent with the annual financial statements ended December 31, 2004. CORPORATE INFORMATION Camco Inc. 5420 North Service Rd Suite 300/P.O. Box 5345 Burlington, Ontario L7R 5B6 Website: http://www.geappliances.ca Share Transfer Agent: CIBC Mellon Trust Company Auditors: Deloitte and Touche LLP Major Facility Locations: Burlington, Montreal, and Moncton Camco Inc. (TSX:COC) |
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