Reko Announces Second Quarter Results for Fiscal 2006.WINDSOR, Ontario Windsor is the southernmost city in Canada and lies at the western end of the heavily populated Quebec City-Windsor Corridor. Windsor is located directly south of Detroit and is separated from that city by the Detroit River. The city has views of the Detroit skyline. -- Reko International Group Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :REK REK Remote Equipment Kit ) - Second Quarter Report Six Months Ending January January: see month. 31, 2006 Reko International Group Inc. (TSX:REK) announces its financial results for the three months ended January 31, 2006. Sales from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the three months were $19.1 million as compared to $20.3 million last year. Revenue from the sale of moulds was relatively flat year over year, while the large machining area has improved to the extent that it is operating close to capacity. This area of strength was offset by weakness in the prototype Prototype A first or original model of hardware or software. Prototyping involves the production of functionally useful and trustworthy systems through experimentation with evolving systems. dies, metal parts and laser machining where program deferrals negatively impacted revenues. Gross margins for the quarter improved to 19.5% of sales compared to 11.5% for the same period last year. In the second quarter of 2005 the Company implemented a reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of Reko Tool and Mould mould, n See mold. mould mold. and continues to pursue cost efficiency measures on an ongoing basis. The fact that gross margins during the quarter have returned to historic levels provides evidence of the effectiveness of Reko's cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. program and our commitment to be a low cost provider. Reko's ability to outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER small mould programs to lower cost jurisdictions enables us to pass savings on to customers. Net income from continuing operations for this quarter was $642,000, or $0.09 per share compared to a net loss of $891,000, or $0.11 for last year. Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. produced a loss of $560,000 during the quarter. This compares with a net loss of $309,000 for the same period last year. Extended customer plant shutdowns over the holidays and into early January increased the loss for the period. Additional due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. by the buyer of these operations deferred the closing of the sale. The sale of Superior Plastics, Inc. and Excel A full-featured spreadsheet for Windows and the Macintosh from Microsoft. It can link many spreadsheets for consolidation and provides a wide variety of business graphics and charts for creating presentation materials. Decorating & Finishing, Inc. closed effective March 9, 2006. "After two of the most difficult and challenging years in our industry, we are seeing the results of our cost cutting initiatives," stated Steve v. t. 1. To pack or stow, as cargo in a ship's hold. See Steeve. Reko, President and Chief Executive Officer. "Our Company's ability to present a broader product offering through the Reko Tool Box differentiates us from our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. and will allow us to gain market share among key customers."
Financial Highlights (complete statements follow):
---------------------------------------------------------------------
Period Ended January 31, Three Months Six Months
(in $,000 except per share (unaudited) (unaudited)
amounts) ---------------------------------------
Fiscal Fiscal Fiscal Fiscal
2006 2005 2006 2005
---------------------------------------------------------------------
Sales $19,088 $20,319 $38,792 $37,336
Net income (loss) 642 (891) 956 (971)
EPS (basic) 0.09 (0.11) 0.13 (0.12)
Working capital 20,661 23,664
Shareholders' equity 50,245 53,661
Shareholders' Equity
per Share 6.74 6.89
-----------------------
Founded in 1976, Reko International Group (TSX:REK) is a highly integrated, technology driven engineering and manufacturing firm providing engineered solutions for the plastic and metal forming Metal forming Manufacturing processes by which parts or components are fabricated from metal stock. In the specific technical sense, metal forming involves changing the shape of a piece of metal. segment of the automotive, aerospace and consumer product markets. In its twelve production facilities in Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. and Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). , Reko designs and manufactures precision moulds, dies, metal stampings and other related industrial tooling, in addition to its own proprietary line of CNC (Computerized Numerical Control) See numerical control. CNC - Collaborative Networked Communication machining centres.
REKO INTERNATIONAL GROUP INC. Second Quarter Report
INTERIM CONSOLIDATED BALANCE SHEETS
As at January 31, 2006 with comparative figures for July 31, 2005
(in 000's)
---------------------------------------------------------------------
January 31, July 31,
(unaudited) (audited)
2006 2005
---------------------------------------------------------------------
ASSETS
Current
Accounts receivable - trade $ 26,166 $ 25,228
- sundry 3,390 3,227
Work-in-progress 23,156 29,018
Prepaid expenses and deposits 831 561
Discontinued operations (Note 3) 4,490 3,461
----------------------
58,033 61,495
----------------------
Capital assets 46,182 48,519
Discontinued operations (Note 3) 1,051 1,196
----------------------
47,233 49,715
----------------------
$ 105,266 $ 111,210
----------------------
----------------------
LIABILITIES
Current
Bank indebtedness $ 17,505 $ 19,731
Accounts payable and accrued liabilities 8,620 10,244
Income taxes payable 126 161
Future income taxes 733 1,034
Current portion of long-term debt 5,898 6,187
Discontinued operations (Note 3) 6,244 5,055
----------------------
39,126 42,412
----------------------
Long-term debt 12,236 13,911
Discontinued operations (Note 3) 1,093 1,367
----------------------
13,329 15,278
----------------------
Future income taxes 2,566 2,731
----------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 21,794 22,308
Contributed surplus 617 556
Retained earnings 29,343 29,065
Cumulative translation adjustment (1,509) (1,140)
----------------------
50,245 50,789
----------------------
$ 105,266 $ 111,210
----------------------
----------------------
INTERIM CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three months and six months ended January 31, 2006 with
comparative figures for 2005 (in 000's except per share data)
---------------------------------------------------------------------
For the three months For the six months
ended January 31, ended January 31,
(unaudited) (unaudited)
2006 2005 2006 2005
---------------------------------------------------------------------
Sales $ 19,088 $ 20,319 $ 38,792 $ 37,336
Costs and expenses
Cost of sales 14,146 16,721 29,274 29,504
Selling and
administrative 2,384 3,180 4,789 5,732
Depreciation and
amortization 1,216 1,261 2,411 2,560
---------------------------------------------
17,746 21,162 36,474 37,796
---------------------------------------------
Income (loss) from
continuing operations
before the following 1,342 (843) 2,318 (460)
---------------------------------------------
Gain on disposal of
capital assets (134) -- (134) --
Interest
Long-term debt 274 346 558 724
Other - net 233 83 431 139
---------------------------------------------
373 429 855 863
---------------------------------------------
Income (loss) before
income taxes 969 (1,272) 1,463 (1,323)
---------------------------------------------
Income taxes
Current (recovered) 439 (482) 759 715
Future (recovered) (112) 101 (252) (1,067)
---------------------------------------------
327 (381) 507 (352)
---------------------------------------------
Net income (loss)
from continuing
operations 642 (891) 956 (971)
Net loss from
discontinued
operations net of tax (560) (309) (678) (397)
---------------------------------------------
Net income (loss) for
the period 82 (1,200) 278 (1,368)
Retained earnings,
beginning of period
As previously reported 29,261 33,411 29,065 33,736
Adoption of new
accounting standard
(Note 2) -- -- -- (157)
---------------------------------------------
As restated 29,261 33,411 29,065 33,579
---------------------------------------------
Retained earnings,
end of period $ 29,343 $ 32,211 $ 29,343 $ 32,211
---------------------------------------------
---------------------------------------------
Income (loss) per
common share from
continuing operations
Basic $ 0.09 $ (0.11) $ 0.13 $ (0.12)
---------------------------------------------
---------------------------------------------
Fully diluted $ 0.09 $ (0.11) $ 0.13 $ (0.12)
---------------------------------------------
---------------------------------------------
Loss per common share
from discontinued
operations
Basic $ (0.08) $ (0.04) $ (0.09) $ (0.05)
---------------------------------------------
---------------------------------------------
Fully diluted $ (0.08) $ (0.04) $ (0.09) $ (0.05)
---------------------------------------------
---------------------------------------------
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months and six months ended January 31, 2006 with comparative
figures for 2005 (in 000's except per share data)
---------------------------------------------------------------------
For the three months For the six months
ended January 31, ended January 31,
(unaudited) (unaudited)
2006 2005 2006 2005
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) from
continuing operations
for the period $ 642 $ (891) $ 956 $ (971)
Add (deduct) non-cash items:
Depreciation and amortization 1,216 1,261 2,411 2,560
Future income taxes (112) 101 (252) (1,067)
Gain on disposal of capital
assets (134) -- (134) --
Stock option expense 15 10 32 16
--------------------------------------
1,627 481 3,013 538
Net change in non-cash
working capital 505 (4,587) 2,220 (3,450)
--------------------------------------
Cash provided (used)
- continuing operating
activities 2,132 (4,106) 5,233 (2,912)
--------------------------------------
FINANCING ACTIVITIES
Net (payments)/proceeds
on bank indebtedness (734) 5,937 (2,456) 8,518
Net payments on long-term debt (983) (1,230) (1,746) (4,600)
Cost of re-purchase of shares (486) (119) (491) (119)
--------------------------------------
Cash (used) provided
- continuing financing
activities (2,203) 4,588 (4,693) 3,799
--------------------------------------
INVESTING ACTIVITIES
Investment in capital assets (187) (521) (712) (824)
Proceeds on disposal of
capital assets 364 -- 364 --
--------------------------------------
Cash provided (used)
- continuing investing
activities 177 (521) (348) (824)
--------------------------------------
Effect of foreign exchange
rate changes on cash and
cash equivalents (106) 39 (192) (63)
--------------------------------------
Net change in cash and cash
equivalents during the period
from continuing operations -- -- -- --
Net change in cash and cash
equivalents during the period
from discontinued operations -- -- -- --
Cash and cash equivalents,
beginning of period -- -- -- --
--------------------------------------
Cash and cash equivalents,
end of period $ -- $ -- $ -- $ --
--------------------------------------
--------------------------------------
REKO INTERNATIONAL GROUP INC. Second Quarter Report Notes to 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 for January 31, 2006 (in 000's) (Unaudited) 1. Significant accounting policies Management prepared these interim consolidated financial statements in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with 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. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting using the historical cost basis of accounting and approximation approximation /ap·prox·i·ma·tion/ (ah-prok?si-ma´shun) 1. the act or process of bringing into proximity or apposition. 2. a numerical value of limited accuracy. and estimates based on professional judgments. These interim consolidated financial statements contain all adjustments that management believes are necessary for a fair presentation of the Company's financial position, results of operations and changes in cash flows. These statements should be used in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Company's most recent annual consolidated financial statements. The accounting policies used in preparing these interim consolidated financial statements are consistent with those used in preparing the annual consolidated financial statements. The following changes were effective beginning August 1, 2004: Stock based compensation: Effective August 1, 2004, the Company adopted the revised 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. Handbook
This article is about reference works. For the subnotebook computer, see .
CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) 3870"). The Company has adopted the fair value method of accounting for stock based compensation and recognizes compensation expense for all stock options granted to employees and directors. The Company only issues stock options to employees, including directors. The fair value of the options issued in the year is determined using the Black-Scholes option-pricing model Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. . The estimated fair value of the options is amortized to income over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. Prior to August 1, 2004, the Company disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). the pro-forma net income and earnings per share as if the fair value based accounting method had been used to account for stock-based compensation. Asset retirement obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. : Effective August 1, 2004, the Company retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3110, "Asset Retirement Obligations". The new recommendations require that the recognition of the fair value of obligations associated with the retirement of tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets be recorded in the period the asset is put into use with a corresponding increase to the carrying amount of the related asset. The obligations recognized are statutory, contractual or legal obligations. The liability is accreted over time for changes in the fair value of the liability through charges to accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the , which is included in depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able , depreciation and accretion expense In accounting, accretion expense is the expense created when updating the present value(PV) of a financial instrument. For example, if one originally recognizes the present value of a liability at $650, which has a future value (FV) of $1000, every year one must increase the . The costs capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. to the related assets are amortized to earnings in a manner consistent with the depletion and depreciation of the underlying asset. The impact of the adoption of the new standard on the financial statements is insignificant. 2. Stock-based compensation (in thousands of dollars, except per share figures) The fair value of the stock options granted since August 1, 2002 was determined using the Black-Scholes option-pricing model based on the following underlying assumptions: - 5 year risk free interest rate of 3.98%; - Average expected life of 5 years; - Average expected volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of 41.95%. Beginning August 1, 2004, the Company has adopted revised CICA 3870 retroactively and has chosen not to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state prior periods as permitted under the revised Handbook Section. The effect of the 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. was an increase in contributed surplus in the amount of $157 for the fair value of options granted after August 1, 2002 and a reduction in the balance of opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. by $157 as the cumulative effect of the change on prior periods for the amount that would have been expensed. During the period, 10,000 options were granted and, as at January 31, 2006, $15 was recorded as the compensation cost for the quarter. 3. Discontinued operations During the period, the Company continued discussions to dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose its operations in Superior Plastics, Inc. and Excel Decorating & Finishing, Inc. A formal letter of intent was entered into on August 8, 2005. The results of discontinued operations have been disclosed separately within these interim financial statements. The Company has recorded non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. in the order of $4,176 comprised of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1,998 reduction in equipment, $1,186 reduction in inventory, $70 reduction in sundry sun·dry adj. Various; miscellaneous: a purse containing keys, wallet, and sundry items. [Middle English sundri, from Old English syndrig, separate. 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 , $836 reduction in cumulative translation adjustment, and an $85 reduction in minority interest as at July July: see month. 31, 2005. The balance sheets on January 31, 2006 and July 31, 2005 include the following assets and liabilities related to the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: activities:
January 31, July 31,
(unaudited) (audited)
2006 2005
----------- ---------
Accounts Receivable - trade $3,575 $2,399
- sundry 39 38
Work-in-progress 681 942
Prepaid expense and deposits 195 82
----------- ---------
4,490 3,461
Equipment 1,051 1,196
Bank indebtedness 3,999 3,137
Accounts payable and accrued liabilities 1,932 1,566
Current portion of long-term debt 313 352
----------- ---------
6,244 5,055
Long-term debt 1,093 1,367
The sales related to discontinued activities for the period amounted to $3,542 (2005: $4,479). In addition, an amortization value of nil (2005: $272) is included in the operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. related to discontinued operations. The Company has recognized a future tax benefit of $361 (2005: $(41)) netted against the loss from discontinued operations for the period.
For the three months For the six months
ended January 31, ended January 31,
(unaudited) (unaudited)
2006 2005 2006 2005
--------------------- -------------------
Sales for the period $22,630 $24,798 $46,855 $48,097
Sales from continuing
operations 19,088 20,319 38,792 37,336
Sales from discontinued
operations 3,542 4,479 8,063 10,761
Operating expenses related
to discontinued operations 4,102 4,788 8,741 11,158
Net loss from discontinued
operations (560) (309) (678) (397)
The cash flow restatement
for discontinued
operations as follows:
Net cash used by operating
activities (377) (285) (1,500) (540)
Net cash provided by
financing activities 555 271 1,550 615
Net cash provided by
investing activities -- (43) -- (65)
Effect of foreign exchange
rate changes on cash and
cash equivalents (178) 57 (50) (10)
----------- ------- ------- -------
$ -- $ -- $ -- $ --
----------- ------- ------- -------
----------- ------- ------- -------
Long-term debt as related to discontinued operations is as follows:
January 31, July 31,
(unaudited) (audited)
2006 2005
----------- ---------
Loan payable - 3.60% plus bank spread,
repayable $24 monthly plus interest
beginning November 2004, due in full
January 2011 $1,366 $1,616
Obligations under capital leases payable
$2 monthly including interest, bearing
interest at 6.46%, expiring January 2009 -- 61
Loan payable - U.S. bank prime plus 2%,
due on demand 40 42
----------- ---------
1,406 1,719
Deduct principal portion included in
current liabilities from discontinued
operations 313 352
----------- ---------
Long-term portion $1,093 $1,367
----------- ---------
----------- ---------
As at October October: see month. 31, 2005, the Company disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) of The Mold Company resulting in a loss of $186, of which $70 was recorded at July 31, 2005. The sale of Superior Plastics, Inc. and Excel Decorating & Finishing, Inc. closed effective March 9, 2006. The estimate of the loss from discontinued operations is based on management's best estimates and assumptions with respect to a variety of items. There is a risk that the assumptions and resulting estimates may change with the passage of time and the availability of additional information and facts. Changes to the estimate of the loss on disposal will be recognized as a gain or loss on discontinued operations during the period that such changes are determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. . 4. Share capital In July 2005, the Company announced its intention to make a normal course issuer bid to re-purchase at market prices for cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. up to 382,255 common shares representing approximately 5% of the outstanding common shares as at July 31, 2005. During the period, the Company re-purchased 175,600 shares and had 2,891 stock options exercised.
Shares Amount
--------- ----------
Balance July 31, 2005 7,627,201 $22,308
Re-purchase in respect to normal course
issuer bid:
First Quarter (2,000) (5)
Second Quarter (175,600) (515)
Options Exercised 2,891 6
--------- ----------
7,452,492 $21,794
--------- ----------
--------- ----------
The share re-purchases were recorded at the stated capital stated capital See legal capital. value of $2.92 per share with the difference between the amount recorded and the amount paid credited to contributed surplus. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial The following is management's interim discussion and analysis of operations and financial position and should be read in conjunction with the consolidated financial statements and Management's Discussion and Analysis in the Company's 2005 Annual Report. This MD&A has been prepared by reference to the new MD&A disclosure requirements established under National Instrument 51-102 "Continuous Disclosure Obligations" ("NI 51-102") of the Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. . Additional information regarding, including copies of its continuous disclosure materials such as its annual information form, is available on its website at www.rekointl.com or through the SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review website at www.sedar.com. In this MD&A, reference is made to gross margin, which is not a measure of financial performance under Canadian generally accepted principles ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). The Company calculates gross margin as sales less cost of sales. The Company included information concerning this measure because it is used by management as a measure of performance, and management believes it is used by certain investors and analysts as a measure of the Company's financial performance. This measure is not necessarily comparable to similarly titled measures used by other companies. This MD&A is current to March 3, 2006. Operating Results The financial results for the second quarter ended January 31, 2006, have been restated to reflect the classification of Superior Plastics, Inc., Excel Decorating and Finishing, Inc., and The Mold Company as discontinued operations. Results from these operations have been isolated and classified as "Discontinued Operations." The Mold Company was sold on October 31, 2005, and its results included in the first quarter of the fiscal year ending July 31, 2006. The results for Superior Plastic and Excel Decorating have been included in Discontinued Operations for the first six months of fiscal 2006. Sales Revenues from continuing operations for the three months ended January 31, 2006 were $19.1 million, compared to $20.3 million for the same period last year. Sales of moulds were in line with last year's results. The Company experienced growth in its large machining sales, but this increase was offset by a large reduction in prototype dies and metal parts. This weakness in the metals area caused a decrease in total revenue compared to the second quarter of the previous year. Sales for the six months ended January 31, 2006 were $38.8 million, a 4% increase over sales of $37.3 million for the same period last year. The Company increased sales for the six-month period in moulds, automation services, and large custom machining. These increases in sales were partly offset by weakness in the prototype dies and metal parts area, which experienced program delays in the first quarter that continued throughout the second quarter. Gross Margin The gross margin for the three months ended January 31, 2006 was $3.7 million, or 19.5% of sales, compared to $2.3 million, or 11.5% of sales last year. The Company is pleased with the better margins experienced in its mould products, as well as the better margins in large machining. In the second quarter of fiscal 2005 the Company undertook a reorganization of Reko Tool and Mould aimed at reducing operating costs operating costs npl → gastos mpl operacionales . As well, we are working hard to make operations more efficient on an ongoing basis. The effectiveness of these programs is being demonstrated by the improvement in gross margins over the past three quarters. For the first six months of the current fiscal year gross margins were $7.1 million or 18.3% of sales compared to $5.2 million or 14.1% in the previous year. Again, the margin improvement demonstrates the effectiveness of Reko's cost containment program. Selling and Administration Selling and administration expenses for the quarter were $2.4 million, or 12.6% of sales, as compared to $3.2 million, or 15.7% of sales last year. For the second quarter of fiscal 2005 r, the Company incurred reorganization costs of $350,000, as well as a bad debt provision of $190,000. Excluding these costs, selling and administration costs were $2.6 million, or 13.0% of sales last year. Selling and administration expenses for the six months ended January 31, 2006 were $4.8 million, or 12.6% of sales, compared to $5.7 million, or 15.4% of sales, for the same period last year. Excluding the reorganization costs and bad debt provision, selling and administration expenses were $5.2 million, or 13.9% of sales for the last year. Reko International has programs in place to control selling and administrative expenses while, at the same time, ensuring that incentives are in place to encourage employees to achieve higher sales volumes. Earnings Overview The net income from continuing operations in the second quarter was $642,000, or $0.09 per share. This compares to a net loss of $891,000, or $0.11 per share last year. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net income from continuing operations for the six months ended January 31, 2006 was $956,000, or $0.13 per share compared to a net loss of $971,600, or $0.12 per share last year. Since undertaking the reorganization of Reko Tool and Mould in the second quarter of fiscal 2005, the Company's continuing operations have been profitable in each of the past three quarters. Discontinued Operations The net loss for the quarter ended January 31, 2006 from discontinued operations was $560,000, or $0.08 per share compared to a loss of $309,000 or $0.04 per share last year. The increased loss resulted from the lower sales of plastic parts due to the normal holiday plant shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down , which carried into the first few weeks of January. The net loss from Discontinued Operations for the six months ended January 31, 2006, was $678,000, or $0.09 per share compared to a net loss of $397,000, or $0.05 per share last year. The closing of the sale of Superior Plastics and Excel Decorating was deferred due to additional diligence Vigilant activity; attentiveness; or care, of which there are infinite shades, from the slightest momentary thought to the most vigilant anxiety. Attentive and persistent in doing a thing; steadily applied; active; sedulous; laborious; unremitting; untiring. undertaken by the buyer. The sale of Superior Plastics, Inc. and Excel Decorating & Finishing, Inc. closed effective March 9, 2006. Liquidity and Capital Resources Cash flow after working capital adjustments was $2.1 million compared to a negative cash flow in the amount of $4.1 million last year. During the quarter, long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was reduced by $983,000 under the normal repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan schedule. An additional $3.2 million of long-term debt, which became due in February February: see month. , was retired using the Company's operating line. The Company has recently entered into negotiations to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. its long-term debt with a mortgage of $12 - $13 million on its 10 manufacturing facilities located in South-western Ontario. With an amortization period of 15 years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time mortgage will reduce debt repayment by $2.0 million per year. Work-in-progress work-in-progress n (COMM) → trabajo en curso work-in-progress n (Comm) → en-cours m inv: (= value); valeur f decreased $5.9 million over last year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. as program transfers from our original customers to other suppliers produced accelerated payment. These changes resulted in an increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $938,000 and reductions in bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. of $2.2 million and a reduction of $1.6 million in accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. .
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Payments Due by Period
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After
Contractual Obligations Less than 1 - 3 4 - 5 5
($000) Total 1 year years years years
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Long-term debt $12,971 $5,178 $5,324 $2,469 $ --
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Capital lease obligations 5,163 719 3,776 668 --
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Operating leases 2,563 1,183 1,380 -- --
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Purchase obligations -- -- -- -- --
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Other long-term obligations -- -- -- -- --
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Total contractual
obligations -- -- -- -- --
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Quarterly Results The following table sets out certain financial information for each of the eight fiscal quarters up to and including the second quarter of fiscal 2006 ended January 31, 2006.
($ thousands except per share amounts)
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Apr/04 July/04 Oct/04 Jan/05
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Sales $19,143 $17,243 $17,017 $20,319
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Net income (loss) from
continuing operations (323) 1,130 (80) (891)
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Earnings (loss) per share
from continuing operations:
Basic (0.04) 0.14 (0.01) (0.11)
Diluted (0.04) 0.14 (0.01) (0.11)
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Net income (loss) (570) 634 (168) (1,200)
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Earnings (loss) per share:
Basic (0.07) 0.08 (0.02) (0.15)
Diluted (0.07) 0.08 (0.02) (0.15)
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Apr/05 July/05 Oct/05 Jan/06
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Sales $21,875 $19,942 $19,704 $19,088
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Net income (loss) from
continuing operations (37) 231 314 642
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Earnings (loss) per share
from continuing operations:
Basic (0.01) 0.03 0.04 0.09
Diluted (0.01) 0.03 0.04 0.09
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Net income (loss) (346) (3,505) 196 82
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Earnings (loss) per share:
Basic (0.04) (0.46) 0.03 0.01
Diluted (0.04) (0.46) 0.03 0.01
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Normal Course Issuer Bid Under its current normal course issuer bid, Reko International has purchased 175,600 shares at an average price of $2.93. The Company's directors believe that, from time-to-time, such purchases constitute an appropriate use of corporate funds. Outlook The North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. automotive market continues to be difficult. Some large automotive manufacturers are experiencing operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. and are seeing their credit rating being downgraded. Suppliers are being asked for price concession CONCESSION. A grant. This word is frequently used in this sense when applied to grants made by the French and Spanish governments in Louisiana. even though their costs are being negatively impacted by higher raw material costs. To help overcome these challenges, Reko International has made large strides through cost cutting efforts and improvements in efficiency. The Company's ability to outsource a percentage of small moulds to lower cost jurisdictions has enabled Reko to pass savings on to customers. These benefits, coupled with the ability to supply fixtures, automation and machining from the Reko Tool Box, differentiates us from our competitors and allows us to increase market share among key customers. During our first and second quarters, the Company has seen weak sales in prototype dies and metal parts.Higher quoting activity for new program releases were experienced at the end of our second quarter. Sales for prototype dies and metal parts are expected to benefit from the launch of new automotive programs during the balance of the year. In addition, management is looking to increase sales through value-added val·ue-add·ed adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: assemblies with small production run quantities. We are confident that Reko International Group will continue to grow its market share for the balance of its fiscal year and beyond. Information in the previous discussion relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc projected growth, changing market conditions, improvements in productivity and future results constitutes 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. .Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties including, but not limited to, economic factors, industry cyclicality and the demand for the Company's technology, products and services. REKO INTERNATIONAL GROUP INC. 5390 Brendan Lane Oldcastle, Ontario N0R 1L0 www.rekointl.com SUBSIDIARIES: Canada: - Reko Tool & Mould (1987) Inc. - Reko Automation and Machine Tool - Concorde Machine Tool United States: - Proto-Techniques, Inc. - Superior Plastics Inc. - Excel Decorating & Finishing Inc. - Novi Laser Inc. Reko International Group Inc. (TSX:REK) |
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