IFX Imaflex Inc

TICKER SYMBOL:  IFX

MONTREAL, April 17, 2013 /CNW Telbec/ - Imaflex Inc. (the "Company") (TSXV: IFX) announces results for the year ended December 31, 2012.

The results include those of Imaflex Inc. ("Imaflex") located in Montréal (Québec), its divisions Canguard Packaging ("Canguard") and Canslit ("Canslit") located in Victoriaville (Québec), and its wholly owned subsidiary, Imaflex USA Inc. ("Imaflex USA") located in Thomasville (North Carolina).

Summary - Results of Operations

The Company ended the year with a strong quarter after a sluggish beginning. Sales of existing products increased as expected increases in polyethylene prices stimulated customer demand. Moreover, operational improvements that were undertaken in 2011 and completed in 2012 as well as the integration of the acquired business helped grow sales and brought improvements to the bottom line in the fourth quarter.

The fourth quarter has proven that with strong customer demand and with the expected completion of the integration of the acquired business, Imaflex should generate additional growth and the Company will be capable of delivering positive results. Coupled with expected growth in existing mulch products, results are expected to improve in 2013.

Sales

Sales increased for the three month period ended December 31, 2012 compared to 2011 due to the additional sales generated by the acquired assets as well as an increase in Imaflex's overall sales volume. Sales increased by $ 310,160 for the year ended December 31, 2012 compared to 2011. The sales trend was relatively stable throughout 2012 whereas in 2011, the very high sales in the first quarter of the year were followed by lower sales for each of the following quarters. These variations are partly explained by the expectation of movements in polyethylene prices. The fourth quarter, although not having the highest sales in 2012, was the quarter where the variance over 2011 was most important.

The Company is still working on rebuilding the mulch film sales that were relinquished late in 2009. Although progress has been made, the Company has yet to reach sales levels achieved prior to the 2010 fiscal year.

Gross profit margin

The gross profit before amortization increased for the three-month period ended December 31, 2012 compared to 2011 mainly due to the stronger sales which generated additional profitability. The gross margin increased from 11.3% to 12.9%. During the fourth quarter of 2012, sales from the acquired assets generated increased contribution over raw material and permitted a higher utilization of the Company's assets during the period.

The amortization decreased slightly for the three-month period ended on December 31, 2012 and the gross profit increased by approximately $360,000 quarter over quarter.

The gross margin before amortization for the year ended December 31, 2012 decreased despite the increased sales mainly due to the additional costs to run the acquired operations. The Company also incurred additional expenses in its U.S. operations in order to fully complete the integration of the acquired assets and to prepare for 2013. These additional costs were required in order to be able to reach the capacity level required for 2013. Lower sales in mulch film were offset by cost reduction efforts which limited the decrease in profitability due to lower sales.

The amortization of production equipment increased slightly from $ 991,819 in 2011 to $ 1,039,086 in 2012. The gross margin after the amortization of production equipment decreased from $ 5,101,076 in 2011 to $ 4,804,417 in 2012.

Income taxes

The income tax expense was approximately $195,000 for the quarter ended December 31, 2012 given the positive net income before income taxes realized in the Canadian legal entity. It represents 396.9% of profit before taxes mainly due to the losses suffered in the US subsidiary for part of which a tax benefit was not recorded as well as the low profit before tax, which amplifies the income tax expense as a percentage of pretax income.

For the year ended December 31, 2012, the income tax expense increased from $263,827 to $298,458. This is mainly due to the increase in taxable income due to items included in profit that are not deductible for the calculation of taxable income. As a percentage of pretax income, the income tax expense represented 78.2% in 2011 compared to (110.6%) in 2012. Given the tax benefits of the taxable losses in the US operations are not entirely recognized, an income tax expense was recorded despite the consolidated pretax loss.

Net (loss) income

The Company's results improved for the fourth quarter of 2012 compared to 2011 mainly due to the increase in gross profit due to higher sales and the positive variance on foreign exchange movements. The increases were offset by a significantly higher income tax expense and slightly higher selling and administrative expenses.

The operating results for the year decreased in 2012 compared to 2011 mainly due to the increased expenses incurred following the business acquisition in the US, costs incurred in order to prepare for the growth in the US operations as well as unfavourable movements in foreign exchange and a higher income tax expense.

Capital Resources

The Company has an operating line of credit with its bankers to a maximum of $ 8,500,000 bearing interest at a rate of prime plus 2.0%.  The line of credit is secured by trade receivables and inventories. As at December 31, 2012, the Company had drawn $ 6,103,876 on its line of credit ($ 5,627,248 as at December 31 2011). The Company's working capital increased since December 31, 2011, going from $ 1,748,337 to $ 2,303,260, mainly explained by the inclusion of the long term portion of term debt in non-current liabilities. During the first quarter of 2012, the Company issued 1,935,485 units, each comprising of one common share and one common share purchase warrant entitling the holder to acquire one additional common share for $0.45, for a consideration of $735,484, of which $250,000 was received during the course of the fourth quarter of 2011. The Company also invested $ 989,500 in cash for the acquisition of operations in North Carolina during the first quarter. The Company believes it has sufficient capital to continue operating efficiently through the liquidity available in its working capital and the liquidity that will be generated by its operations. Within twelve months, only one bank debt will remain outstanding, in addition to the balance of sale on the business acquisition. The Company's current capital structure should therefore enable it to meet all of its short term obligations. As part of its normal management process, the Company continuously monitors its capital structure and considers the increase in indebtedness or the issuance of shares as possible options to optimize its capital structure.

Management Outlook

Having completed the integration of the business acquired last spring by way of an asset purchase carried-out by our US entity, management believes the fourth quarter growth is a trend which will continue in 2013.

Research and development efforts that the Company has invested in over the years are on the point of paying off with new products allowing us to open niche markets as well as allowing us to have a competitive advantage over our counterparts in competitive areas of the industry.

Management is now primarily focussed on its Canslit division. As stated in prior outlooks, management's focus has been on creating the conditions and a sales team to ensure that this division soon becomes profitable again. Management believes this is imminent and is therefore optimistic about the Company's future.

Safe Harbor Statement

Certain statements and information included in this release constitute "forward-looking statements".  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements.  Additional discussion of factors that could cause actual results to differ materially from management's projections, estimates and expectations is contained in the Company's other public filings.  Unless otherwise required by the securities authorities, we do not undertake to update any forward-looking statements that may be made from time to time by us or on our behalf.

Non-IFRS Measure

The Company's management uses a non-IFRS measure in this press release, namely EBITDA.  Management wishes to specify that in the performance of the Company's financial results, EBITDA is shown as "Earnings before interest, taxes, non-controlling interest, depreciation and amortization". While EBITDA is not a standard IFRS measure, management, analysts, investors and others use it as an indicator of the Company's financial and operating management and performance.  EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Company's performance.  The Company's method of calculating EBITDA may be different from those used by other companies.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

SOURCE Imaflex Inc.